As filed with the Securities and Exchange Commission on January 25, 2000
Registration No. [ ]
________________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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AMTRAN, INC.
(Exact name of registrant as specified in its charter)
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Indiana 6719 35-1617970
(State or other jurisdiction (Primary Standard (I.R.S. Employer
of incorporation of Industrial Classification Identification
organization) Code Number) Number)
7337 West Washington Street
Indianapolis, Indiana 46231
(317) 247-4000
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
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Mr. Kenneth K. Wolff
Chief Financial Officer
Amtran, Inc.
7337 West Washington Street
Indianapolis, Indiana 46231
(317) 247-4000
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
---------------------------
Copy to:
William P. Rogers, Jr, Esq.
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, NY 10019
(212) 474-1000
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Approximate date of commencement of proposed sale of the securities to
the public: As soon as practicable after the effective date of this
Registration Statement.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. __ .....
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. __ .....
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. __ .....
---------------------------
The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the
Registrant shall file a further amendment which specifically states that
this Registration Statement shall thereafter become effective in accordance
with Section 8(a) of the Securities Act of 1933 or until this Registration
Statement shall become effective on such date as the Commission, acting
pursuant to said Section 8(a), may determine.
CALCULATION OF REGISTRATION FEE
Title of each class Amount to be Proposed maximum Proposed maximum aggregate Amount of
of securities to be registered registered offering price per unit offering price registration fee
10 1/2% Senior Notes due 2004 $75,000,000 100% $75,000,000 $19,800
PROSPECTUS
Amtran, Inc.
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OFFER TO EXCHANGE
UP TO $75,000,000 PRINCIPAL AMOUNT OUTSTANDING
10 1/2% SENIOR NOTES DUE 2004
FOR
A LIKE PRINCIPAL AMOUNT OF REGISTERED
10 1/2% SENIOR NOTES DUE 2004
The Exchange Offer will expire at midnight, New York
City time on [ ], unless extended.
---------------------------
The terms of the new Exchange Notes are substantially the same as
those of the Outstanding Notes except for certain transfer restrictions and
registration rights that relate only to the Outstanding Notes. Also, if the
exchange offer is not consummated on or prior to [May 19, 2000], the interest
rate borne by the Outstanding Notes will increase by a certain amount until
the exchange offer is consummated. This offer will expire at [ ], New York
City time, on [ ], 2000, unless we extend it. The new Exchange Notes will not
trade on any established exchange. Amtran, Inc. currently has outstanding
$100,000,000 preferred amount of Exchange Notes that were issued under a
previous registration statement.
---------------------------
Please See "Risk Factors" beginning on page 11 for a description of
certain factors that you should consider in connection with the exchange
offer.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
---------------------------
The date of this prospectus is [ ].
TABLE OF CONTENTS
Page
Where You Can Find More Information................................... 3
Incorporation of Certain Documents by
Reference.......................................................... 3
Disclosure Regarding Forward-Looking
Statements......................................................... 4
Prospectus Summary.................................................... 5
Summary Description of the Exchange Notes............................. 8
Risk Factors.......................................................... 11
The Exchange Offer.................................................... 22
Use of Proceeds....................................................... 29
Capitalization........................................................ 30
Selected Historical Financial Data.................................... 31
Description of Other Principal Indebtedness........................... 34
Description of the Notes.............................................. 35
Book-Entry; Delivery and Form......................................... 66
Certain United States Federal Income
Tax Considerations................................................. 67
Plan of Distribution.................................................. 69
Legal Matters......................................................... 70
Experts............................................................... 70
2
WHERE YOU CAN FIND MORE INFORMATION
We are subject to the informational requirements of the Securities Exchange
Act of 1934 and, therefore, must file periodic reports, proxy statements and
other information with the Commission. In addition, pursuant to the Indenture
and the First Supplemental Indenture covering the Notes, we have agreed to
file with the Commission the annual reports and the information, documents and
other reports otherwise required by Section 13 of the Exchange Act. All such
information is available to the public over the Internet at the SEC's web site
at http://www.sec.gov and may be inspected and copied at the public reference
facilities:
Public Reference Room New York Regional Office Chicago Regional Office
450 Fifth Street, N.W. 7 World Trade Center Citicorp Center
Judiciary Plaza Suite 1300 500 West Madison Street
Washington, D.C. 20549 New York, NY 10048 Suite 1400
Chicago, IL 60661-2511
Copies of these documents can also be obtained at prescribed rates by writing
to the Commission, Public Reference Section, 450 Fifth Street, N.W.,
Washington, D.C. 20549.
This prospectus constitutes a part of a registration statement on Form S-4
filed by Amtran, Inc. with the Commission under the Securities Act. As
permitted by the rules and regulations of the Commission, this prospectus does
not contain all of the information contained in the registration statement and
the exhibits and schedules thereto. Reference is hereby made to the
registration statement and its exhibits and schedules for further information
with respect to Amtran, Inc. and the securities offered through this exchange
offer. Statements contained in this prospectus concerning the provisions of
any documents filed as an exhibit to the registration statement or otherwise
filed with the Commission are not necessarily complete, and in each instance
reference is made to the copy of such document so filed. Each such statement
is qualified in its entirety by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The SEC allows us to "incorporate by reference" the information we file
with them into this prospectus, which means that:
o incorporated documents are considered part of this prospectus;
o we can disclose important business and financial information about us,
that is not included in or delivered with this prospectus, to you by
referring you to those other documents; and
We incorporate by reference into this prospectus the documents listed
below, as amended and supplemented, and all documents filed by us with the SEC
under Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934
after the date of this prospectus and prior to the date on which the exchange
offer made hereby is consummated:
o Our Annual Report on Form 10-K for the fiscal year ended December 31,
1998;
o Our Quarterly Report on Form 10-Q for the period ended March 31, 1999;
o Our Quarterly Report on Form 10-Q for the period ended June 30, 1999, as
amended;
o Our Quarterly Report on Form 10-Q for the period ended September 30,
1999; and
o Our Definitive Proxy Statement, dated April 9, 1999.
You can obtain any of the filings incorporated by reference into this
document through us or from the SEC through the SEC's web site or at the
addresses listed above. Documents incorporated by reference into this
prospectus, except for any exhibits to those documents that are not expressly
incorporated by reference into
3
those documents, are available from us without charge by requesting them in
writing or by telephone at the following address and telephone number:
Amtran Inc.
7337 West Washington Street
Indianapolis, Indiana 46231
Attention: Kenneth K. Wolff, Chief Financial Officer
Telephone: (317) 247-4000
If you request any incorporated documents from us, we will mail them to you
by first-class mail, or by another equally prompt means, within one business
day after we receive your request. However, in order to obtain timely delivery
of these documents, you must make your request no later then five business
days before the expiration date of the exchange offer.
Unless the context requires otherwise, all references in this document to
"This Prospectus" include all documents incorporated by reference into this
prospectus.
FORWARD-LOOKING STATEMENTS
This prospectus includes and incorporates by reference forward-looking
statements within the meaning of the Private Securities Litigation Reform Act
of 1995. These statements relate to analyses and other information which are
based on forecasts of future results and estimates of amounts not yet
determinable. These statements also relate to our future prospects,
developments and business strategies.
These forward-looking statements are indentifiable by their use of terms
and phrases such as "anticipate," "believe," "could," "estimate," "expect,"
"intend," "may," "plan," "predict," "project," "will" and similar terms and
phrases, including references to assumptions. These statements are contained
in sections entitled "Summary", "Risk Factors" and other sections of this
prospectus and in the documents incorporated by reference in this prospectus.
Such forward-looking statements involve known and unknown risks,
uncertainties and other factors that may cause actual results to be materially
different. Such factors include, but are not limited to, the following:
o economic conditions;
o labor costs;
o aviation fuel costs;
o competitive pressures on pricing;
o weather conditions;
o governmental legislation;
o consumer perceptions of our products;
o demand for air transportation in the markets in which we operate;
o other operational matters discussed in this offering memorandum; and
o other risks and uncertainties listed from time to time in reports we
periodically file with the SEC.
We do not undertake to update our forward-looking statements to reflect
future events or circumstances.
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Amtran is an Indiana corporation which was organized in 1984. The Company's
executive offices are located at 7337 West Washington Street, Indianapolis,
Indiana 46231, and its telephone number is (317) 247- 4000. Amtran's common
stock is traded through the facilities of the Nasdaq Stock Market under the
symbol "AMTR."
4
PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this prospectus
or incorporated by reference into this prospectus. This summary does not
contain all the information that is important to you. We encourage you to read
this entire prospectus including the "Risk Factors" section, and the documents
we incorporate by reference carefully. All references to "Company," "we" or
"our" in this prospectus refer to Amtran, Inc. and its subsidiaries
collectively, unless the context otherwise requires.
The Company
Amtran owns American Trans Air, Inc. ("ATA"), the eleventh largest
passenger airline in the U.S. (based on 1998 revenues) and a leading provider
of airline services in selected market segments. We are also the largest
commercial charter airline in the U.S. and the largest charter provider of
passenger airline services to the U.S. military, in each case based on
revenues. For the nine months ended September 30, 1999 our revenues consisted
of 55.6% scheduled service, 24.4% commercial charter service and 10.6%
military charter service, with the balance derived from related travel
services.
Scheduled Service
We provide scheduled service through ATA to selected destinations primarily
from gateways at Chicago-Midway and Indianapolis, and we also provide
transpacific services between the western U.S. and Hawaii. In the second and
third quarters of 1998, we added scheduled service between Chicago-Midway and
the Dallas-Ft. Worth, Denver, New York-LaGuardia and San Juan. We focus on
routes where we believe we can be a leading provider of non-stop jet service
and target leisure and value-oriented business travelers.
Commercial Charter Service
We are the largest commercial charter airline in the U.S. and provide
services throughout the world, primarily to U.S. and European tour operators.
We seek to maximize the profitability of these operations by leveraging our
leading market position, diverse aircraft fleet and worldwide operating
capability. Our management believes our commercial charter services are a
predictable source of revenues and operating profits. In part, this is because
our commercial charter contracts require tour operators to assume capacity,
yield and fuel price risk, and also because of our ability to re-deploy assets
into favorable markets. Our commercial charter services are marketed and
distributed through a network of domestic and international sales offices.
Military/Government Charter Service
We have provided passenger airline services to the U.S. military since 1983
and are currently the largest charter provider of these services. Our
management believes that because these operations are generally less seasonal
than leisure travel, they have tended to have a stabilizing impact on our
operating margins. The U.S. government awards one year contracts for its
military charter business and pre-negotiates contract prices for each type of
aircraft that a carrier makes available. We believe that our fleet of aircraft
is well suited to the needs of the military for long-range service.
SUMMARY OF TERMS OF THE EXCHANGE OFFER
In the exchange offer we will accept for exchange up to $75,000,000
aggregate principal amount of Outstanding Notes for an equal aggregate
principal amount of Exchange Notes. The Exchange Notes are our obligations
entitled to the benefits of the Indenture, as supplemented, relating to the
Outstanding Notes. The form and terms of the Exchange Notes are the same as
the form of the Outstanding Notes except that the Exchange Notes have been
registered under the Securities Act.
Background................... On December 21, 1999, we completed a
private placement of $75,000,000 aggregate
principal amount of our 10 1/2% Senior Notes
under an Indenture dated July 24, 1997 as
supplemented by the First Supplemental
Indenture, dated December 21, 1999. In
connection with that private placement, we
entered into a registration rights agreement in
which we agreed, among other things, to deliver
this prospectus to you and to complete an
exchange offer.
5
Securities Offered........ Up to $75,000,000 aggregate principal amount of
10 1/2% Senior Exchange Notes due August 1, 2004,
which have been registered under the Securities
Act. The terms of the Exchange Notes are
substantially the same as the terms of the
Outstanding Notes except for certain transfer
restrictions and registration rights relating to
the Outstanding Notes and except that, if the
exchange offer is not consummated on or prior to
[May 19, 2000], the interest rate borne by the
Outstanding Notes will increase by a certain
amount until the exchange offer is consummated.
See "Description of the Notes--Registration
Rights for Outstanding Notes."
We currently have outstanding $100,000,000
aggregate principal amount of Exchange Notes that
we issued in 1997. The Exchange Notes offered by
this prospectus are part of the same series of
Exchange Notes that we issued in 1997.
The Exchange Offer........ We are offering to accept for exchange your
unregistered, old Outstanding Notes for our new
Exchange Notes that have been registered under
the Securities Act of 1933. As of the date
hereof, $75,000,000 in aggregate principal amount
of Outstanding Notes are outstanding. On or
promptly after the expiration date we will issue
the Exchange Notes to those of you who hold
Outstanding Notes and wish to tender them. The
issuance of the Exchange Notes is intended to
satisfy our obligation contained in the
registration rights agreement. For procedures on
tendering, see "The Exchange Offer" and
"Description of the Notes--Registration Rights
for Outstanding Notes."
Expiration of the Exchange Midnight, New York City time, on [ ], unless we
Offer..................... extended it. See "The Exchange Offer--Terms of the
Exchange Offer, Period for Tendering Outstanding
Notes."
Tenders; Withdrawal....... You may withdraw your tender of Outstanding Notes
at any time before the offer expires. If for any
reason any Outstanding Notes are not accepted for
exchange, they will be returned as soon as
practicable after the expiration or termination
of the exchange offer.
Conditions to the Exchange The exchange offer is subject to the condition
Offer..................... that it does not violate applicable law or any
applicable interpretation of the staff of the
Commission. There is no guarantee that any such
condition will not occur. You will have certain
rights against us under the registration rights
agreement if we fail to consummate the exchange
offer.
Federal Income Tax The exchange pursuant to the exchange offer should
Considerations............ not be a taxable event for federal income tax
purposes. See "Certain United States Federal
Income Tax Considerations."
Exchange Agent............ First Security Bank, N.A., the Trustee under the
Indenture, is serving as the Exchange Agent in
connection with the exchange offer.
Use of Proceeds........... We will not receive any cash proceeds from the
issuance of the Exchange Notes in connection with
the exchange offer. See "Use of Proceeds" for a
description of the use of proceeds from the
issuance of the Outstanding Notes.
6
Consequences If You Do
Not Exchange Your Outstanding Notes that are not tendered in the
Outstanding Notes......... exchange offer or are not accepted for exchange
will continue to accrue interest, but will not
retain any rights under the registration rights
agreement and will bear legends restricting their
transfer. You will not be able to offer or sell the
Outstanding Notes unless:
o pursuant to an exemption from the requirements
of the Securities Act of 1933;
o the old notes are registered under the
Securities Act of 1933; or
o the transaction requires neither such an
exemption nor registration.
We do not currently anticipate that we will
register Outstanding Notes under the Securities
Act. See "Risk Factors--Consequences of Failure to
Exchange and Requirements for Transfer of Exchange
Notes."
7
Summary Description of the Exchange Notes
The terms of the Exchange Notes are identical in all material
respects to the terms of the Outstanding Notes, except for certain transfer
restrictions and registration rights relating to the Outstanding Notes and
except that, if an exchange offer with respect to the Exchange Notes is not
consummated by May 19, 2000, 150 days after the Closing Date of the
December 21, 1999 private placement, the rate per annum at which the
Outstanding Notes bear interest will be increased temporarily. See
"Registration Rights for Outstanding Notes."
Holders of Outstanding Notes whose Outstanding Notes are accepted
for exchange will not receive any payment of interest on the Outstanding
Notes to be exchanged instead. Holders will receive a full semi-annual
interest payment on August 1, 2000, which is the next regularly scheduled
interest payment date on the Exchange Notes.
Securities Offered........ Up to $75,000,000 aggregate principal amount of 10
1/2% Senior Exchange Notes due August 1, 2004,
which have been registered under the Securities
Act, issued by the Company.
Interest.................. Interest on the Notes is payable semiannually in
cash on February 1 and August 1.
Optional Redemption On or after August 1, 2002, we may redeem some or
by the Company............ all of the Notes at the redemption prices listed
in the section entitled "Description of the
Notes--Optional Redemption." Prior to such date,
we may not redeem the Notes, except as described
in the following paragraph.
At any time prior to August 1, 2002, we may redeem
up to 35% of the aggregate principal amount of
the Notes with the proceeds of certain sales of
common stock at a redemption price equal to
110.50% of the principal amount thereof, plus
accrued interest, so long as at least 65% of the
aggregate amount of the Notes remains
outstanding after each such redemption.
Ranking................... The Exchange Notes will be unsecured and:
o will rank equally with all of our unsecured,
unsubordinated indebtedness existing or created
in the future; and
o will be effectively subordinated to all of our
obligations under secured indebtedness to the
extent of such security and will be senior to
all of our subordinated indebtedness created in
the future.
At September 30, 1999, on a pro forma basis after
giving effect to the December 21, 1999 private
placement, on a consolidated basis, we would
have had outstanding approximately $359.4
million of indebtedness, approximately $55.0
million of which would have been secured. See
"Description of the Notes--Ranking."
Guarantee................. All payments with respect to the Notes (including
principal and interest) are unconditionally
guaranteed on an unsecured unsubordinated basis,
jointly and severally, by each of the following
subsidiaries (the Guarantors):
o American Trans Air, Inc.;
8
o Ambassadair Travel Club, Inc.;
o ATA Leisure Corp. (formerly ATA Vacations,
Inc.);
o Amber Travel, Inc.;
o American Trans Air Training Corporation;
o American Trans Air Execujet, Inc.;
o Amber Air Freight Corporation; and
o Chicago Express Airlines, Inc.
Such guarantees:
o will rank equally with all existing and future
unsecured unsubordinated indebtedness of the
Guarantors;
o will be effectively subordinated to secured
indebtedness of the Guarantors to the extent of
such security; and
o will be senior in right of payment to all future
subordinated indebtedness of the Guarantors.
At September 30, 1999, on a pro forma basis after
giving effect to the December 21, 1999 private
placement, the Guarantors (on a consolidated
basis excluding indebtedness owed to us and our
indebtedness) would have had approximately
$359.4 million of indebtedness outstanding
(other than the Guarantees), $55.0 million of
which would have been secured indebtedness.
Certain Covenants......... The Indenture, as supplemented, contains certain
covenants for your benefit, including, among other
things,
o covenants limiting the incurrence of
indebtedness;
o restricted payments;
o dividend and other payment restrictions
affecting restricted subsidiaries;
o the issuance and sale of capital stock of
restricted subsidiaries;
o the issuance of guarantees by restricted
subsidiaries;
o transactions with shareholders and affiliates;
o liens;
o sale-leaseback transactions;
o asset sales; and
o certain mergers and consolidations.
See "Description of the Notes--Covenants."
9
Change of Control......... Upon a change of control you will have the right,
subject to certain conditions, to require us to
purchase your Notes at a purchase price equal to
101% of the principal amount plus accrued and
unpaid interest, if any, to the date of purchase.
There can be no assurance that we will have the
financial resources necessary to purchase the
Notes upon a change of control. See "Description
of the Notes--Repurchase of Notes upon a Change
of Control."
Registration Rights....... We are obligated to consummate this exchange offer
pursuant to an effective registration statement
or cause the Outstanding Notes to be registered
under the Securities Act pursuant to a shelf
registration statement. If such exchange offer
is not filed, has not been declared effective,
or is not consummated or such shelf registration
statement is not filed or declared effective
within the time periods specified in
"Description of the Notes--Registration Rights,"
you will be entitled to receive additional
interest on the Outstanding Notes until such
exchange offer is entered into or such shelf
registration statement is declared effective. If
you choose not to participate in the exchange
offer or shelf registration, you may thereafter
hold a less liquid security. See "Risk
Factors--Lack of Public Market for the Notes"
and "Description of the Notes--Registration
Rights for Outstanding Notes."
Book-Entry; Delivery The Exchange Notes will be represented by one or
and Form.................. more permanent global Exchange Notes in
definitive, fully registered form deposited with
a custodian for, and registered in the name of a
nominee of The Depository Trust Company. See
"Description of the Notes--Book- Entry; Delivery
and Form."
USE OF PROCEEDS
We will receive no cash proceeds from the exchange offer.
The exchange offer is intended to satisfy certain of our obligations
under the registration rights agreement. Your Outstanding Notes tendered in
exchange for Exchange Notes will be retired and canceled and cannot be
reissued. Accordingly, the issuance of the Exchange Notes will not result in
any increase or decrease in the indebtedness of the Company.
The net proceeds from the December 21, 1999 private placement were
approximately $73.0 million. These proceeds were used by the Company for
general corporate purposes, including to fund working capital requirements and
fleet acquisitions and improvements.
RISK FACTORS
For a description of certain factors that should be considered by
Holders who tender their Outstanding Notes in the exchange offer, see "Risk
Factors" beginning on page 12.
10
RISK FACTORS
You should carefully consider the risks described below, as well as
other information included in this prospectus, when evaluating your
participation in the exchange offer. This list may not be exhaustive, and
these or other factors could adversely impact our ability to service our
indebtedness.
Risk Factors Relating to Amtran
Our high proportion of debt compared to our equity capital may
impair our flexibility.
We have a higher proportion of debt compared to our equity capital
than some of our principal competitors. We need substantial cash resources to
meet scheduled debt and lease payments and to finance day-to-day operations.
As a result, we may be less able than some of our competitors to withstand a
prolonged recession in the airline industry or respond to changing economic
and competitive conditions. We may be restricted in our ability to exploit new
business opportunities. In addition, our ability to obtain additional
financing in the future for working capital, capital expenditures,
acquisitions or other purposes may be impaired.
As of September 30, 1999, on a pro forma consolidated basis after
giving effect to the private placement, we had:
o $182.0 million of cash, cash equivalents and short-term
investments;
o $359.4 million of indebtedness outstanding (approximately $55.0
million of which was secured); and
o $148.8 million of shareholders' equity.
As a result, at that date, total consolidated debt was 70.7% of total
capitalization, which represents significant financial leverage, even in
the highly leveraged airline industry. In addition, ATA has substantial
obligations under operating leases for 25 aircraft, which are not recorded
as indebtedness and expects to lease additional aircraft in the future.
On a pro forma basis, after giving effect to the Original Offering
as if it had occurred at the beginning of the period, we would have had
interest expense of approximately:
o $20.7 million for the year ended December 31, 1998; and
o $21.3 million for the nine months ended September 30, 1999.
This would have resulted in an EBITDA to interest expense ratio
of approximately:
o 7.9 times for the year ended December 31, 1998; and
o 7.9 times for the nine months ended September 30, 1999.
Similarly, the ratio of EBITDAR to the sum of interest (net of
capitalized interest) plus aircraft rentals would have been:
o 2.9 for the year ended December 31, 1998; and
o 3.3 for the nine months ended September 30, 1999.
Our ability to satisfy our obligations will be dependent upon our future
performance, which is subject to general economic conditions and to
financial, business and other factors, including factors beyond our
control. Our operating results and cash flow could be adversely affected by
such factors as price competition, increases in fuel costs, a downturn in
general economic conditions and adverse regulatory changes.
The degree to which we are leveraged could have important
consequences to you, including the following:
(i) our ability to obtain additional financing in the future for
working capital, capital expenditures, acquisitions or other purposes may
be impaired;
11
(ii) our degree of leverage and related debt service obligations, as
well as our obligations under operating leases for aircraft, may make us
more vulnerable than some of our competitors in a prolonged economic
downturn; and
(iii) our financial position may restrict our ability to exploit new
business opportunities and limit our flexibility to respond to changing
business conditions. Our competitive positions may also be affected by
the fact that we may be more highly leveraged than some of our
competitors.
We generally operate with a working capital deficit and we may
require additional financing to meet our obligations.
Although we, like most other airlines, generally operate with a
working capital deficit, we have met our obligations as they have become due.
In order to meet short-term cash needs, ATA maintains bank credit facilities.
At September 30, 1999, our current assets were $208.3 million, and our current
liabilities were $232.9 million.
In addition, we require significant levels of capital investment for
aircraft, engine and airframe maintenance and acquisition to maintain our
competitive position and to expand our operations. For the year ended December
31, 1999, we expect that:
o capital expenditures for scheduled maintenance will total
approximately $110.4 million;
o capital expenditures for acquisitions of additional aircraft
and renovations of both the Chicago-Midway terminal and hanger
and the Indianapolis maintenance and operations center will
total approximately $154.4 million; and
o additional capital expenditures will total approximately $11.5
million.
We also generally expect to refinance our long-term debt at or prior
to its maturity.
We may seek to supplement our current sources of financing with
other sources of long-term financing, including obtaining vendor financing,
entering into sale-leaseback transactions and making public and private debt
offerings. We may also seek additional equity financing. We cannot assure you
that any such financing would be available on satisfactory terms.
Our earnings have been volatile.
For the year ended December 31,1996, we incurred a net loss of $26.7
million. For the years ended December 31, 1997 and 1998, we had net income of
$1.6 million and $40.1 million, respectively. For the nine months ended
September 30, 1999, we had net income of $46.9 million. Although we recorded
net income in 1997 and 1998 and for the nine months ended September 30, 1999,
we cannot assure you that this profitability will continue in future years.
Moreover, because of the cyclicality of the airline industry, our results of
operations may continue to be volatile.
Among other things, our earnings are significantly affected by
changes in fuel costs. These costs have been escalating during the first nine
months of 1999. See "Risk Factors Relating to the Airline
Industry--Significant additional increases in the cost of aircraft fuel could
adversely impact our operating results."
We may pursue strategic alternatives that result in a change of
control, and we may not be able to satisfy all of
our obligations upon the occurrence of a chance of control.
We have previously considered possible business combinations with
air carriers and others, and it is possible that in the future we will
enter into a transaction that will result in a change of control of Amtran.
All borrowings outstanding under the bank credit facilities maintained by
ATA, which are guaranteed by Amtran, and all amounts due under the Exchange
10 1/2% senior notes due 2004 and the 9 5/8% senior notes due 2005 issued
by Amtran may be accelerated upon a change of control of Amtran. See
"--Risk Factors Relating to the Notes--Payment Upon a Change of Control."
We cannot assure you that we would be able to satisfy all of our
obligations under the bank credit facilities and the Exchange Notes upon
acceleration. The failure to satisfy our obligations would materially
adversely affect our business, operations and financial results.
12
Our existing financing agreements and operating leases contain
restrictive covenants that may limit our flexibility.
Our existing debt financing agreements and our operating leases
relating to some of our aircraft contain restrictive covenants that impose
significant operating and financial restrictions on us. For example, the bank
credit facilities maintained by ATA and the indenture relating to the Exchange
Notes prohibit or restrict our ability to:
o incur additional indebtedness;
o create material liens on our assets;
o sell assets or engage in mergers or consolidations;
o redeem or repurchase outstanding debt;
o make specified investments;
o pay cash dividends; and
o engage in other significant transactions.
The indenture relating to our 9 5/8% senior notes due 2005 contains similar
restrictions. In addition, our financing agreements and our operating
leases require us to maintain compliance with specified financial ratios
and other financial and operating tests.
These restrictions and requirements may limit our financial and
operating flexibility. In addition, if we fail to comply with these
restrictions or to satisfy these requirements, our obligations under our debt
and operating leases may be accelerated. We cannot assure you that we would be
able to satisfy all of these obligations upon acceleration. The failure to
satisfy these obligations would materially adversely affect our business,
operations and financial results.
Compliance with Department of Transportation regulations could reduce our
liquidity.
Under current Department of Transportation regulations regarding
charter transportation originating in the U.S., all charter airline tickets
must generally be paid for in cash and all funds received from the sale of
charter seats and, in some cases, the costs of land arrangements, must be put
in escrow by the tour operator or protected by a surety bond satisfying
certain prescribed standards. Currently, we provide a third-party bond that is
unlimited in amount to satisfy our obligations under these regulations. Under
the terms of our bonding arrangements, the issuer of the bond has the right to
terminate the bond at any time on 30 days' notice. We provide a $1.5 million
letter of credit to secure our potential obligations to the issuer of the
bond. If the bond were to be materially limited or canceled, we, like all
other U.S. charter airlines, would be required to escrow funds to comply with
the Department of Transportation regulations. Compliance with these
regulations would reduce our liquidity and require us to fund higher levels of
working capital range up to $16.9 million based on 1998's peak pre-paid
bookings and up to $32.0 million based on peak pre-paid bookings for the first
nine months of 1999.
We may incur substantial losses in the event of an aircraft accident.
We may incur substantial losses in the event of an aircraft
accident. These losses may include the repair or replacement of a damaged
aircraft, and the consequent temporary or permanent loss of the aircraft from
service, as well as claims of injured passengers and other persons.
We are required by the Department of Transportation to carry
liability insurance on each of our aircraft. We maintain public liability
insurance in the amount of $1.5 billion. Although we believe our insurance
coverage is adequate, we cannot assure you that the amount of our insurance
coverage will not be changed or that we will not be forced to bear substantial
losses from accidents. Substantial claims resulting from an accident could
have a material adverse effect on our business, operations and financial
results and could seriously inhibit passenger acceptance of our services.
13
Customers
Our customers may cancel or default on their contracts with us.
Customers who have contracted with us may cancel or default on their
contracts, and we may not be able to obtain other business to cover the
resulting loss in revenues. If customers with large contracts cancel or
default and we are not able to obtain other businesses, our financial position
could be materially adversely impacted.
Our largest customer during each of the last three years was the
U.S. military, which accounted for 11.2% of our total operating revenues in
1996, 16.8% of our total operating revenues in 1997 and 13.3% of our total
operating revenues in 1998. We expect that during 1999 the U.S. military will
continue to be our largest customer and will account for approximately 11.4%
of operating revenues.
In 1998, our five largest non-military customers accounted for
approximately 14.4% of total operating revenues, and our ten largest
non-military customers accounted for approximately 17.5% of total operating
revenues. No single non-military customer accounted for more than 10% of total
operating revenues during this period.
Effects of Seasonality of Business on the Company
Our airline business is significantly affected by seasonal
factors, and our results of operations for any one quarter are
not necessarily indicative of our annual results of operations.
Our airline businesses are significantly affected by seasonal
factors. Historically, we have experienced reduced demand during the fourth
quarter as demand for leisure airline services during this period is lower
relative to other times of the year. Our results of operations for any one
quarter are not necessarily indicative of our annual results of operations.
In 1998 and 1999, our results for the first three quarters were
significantly stronger than we have experienced in any comparable first three
quarters of any prior year. Also in 1998, we experienced our first profitable
fourth quarter since becoming a public company in 1993. We cannot assure you
that the level of profitability achieved in 1998 and for the nine months ended
September 30, l999 will be maintained in subsequent years.
Employee Relations
Many of our employees are represented by unions, and a
prolonged dispute with our employees could
have an adverse impact on our operations.
Our flight attendants are represented by the Association of Flight
Attendants and our cockpit crews are represented by the Air Line Pilots
Association. A prolonged dispute with our employees who are represented by
either of these unions, or any sizable number of our employees, could have an
adverse impact on our operations.
Our current collective bargaining agreement with the Association of
Flight Attendants became subject to amendment, but did not expire, in December
1998. Our current collective bargaining agreement with the Air Line Pilots
Association will be subject to amendment, but will not expire, in September
2000. We commenced negotiations with the Association of Flight Attendants in
the third quarter of 1998 to amend our existing collective bargaining
agreement, but we cannot assure you that there will not be work stoppages or
other disruptions.
Our flight dispatchers elected the Transport Workers Union to
represent them in October 1999. Due to the small number of our dispatchers,
the election is expected to have a minimal impact on our operations.
14
Reliance on Travel Agents and Tour Operators for Ticket Sales
Our revenues could be adversely impacted by our relationship with
travel agents and tour operators.
Our revenues could be adversely impacted if travel agents and tour
operators elect to favor other airlines or to disfavor us. Our relationship
with travel agents and tour operators may be affected by:
o the size of override commissions offered by other airlines;
o changes in our arrangements with other distributors of airline
tickets; and
o the introduction of new methods of selling tickets.
In 1998, approximately 68% of our revenues were derived from tickets
sold by travel agents or tour operators, and, in 1997, approximately 71% of
our revenues were derived from tickets sold by travel agents or tour
operators. Although we will continue to strive to offer competitive products
to travel agencies and tour operators, we cannot assure you that we will be
able to maintain favorable relationships with these ticket sellers.
Risk Factors Relating to the Airline Industry
Because the airline industry is characterized by low gross
profit margins and high fixed costs, a minor shortfall
from expected revenue could have a significant impact on earnings.
The airline industry as a whole and scheduled service in particular
are characterized by low gross profit margins and high fixed costs. The costs
of operating each flight do not vary significantly with the number of
passengers carried and, therefore, a relatively small change in the number of
passengers or in fare pricing or traffic mix could, in the aggregate, have a
significant effect on operating and financial results. Accordingly, a minor
shortfall from expected revenue levels could have a significant impact on
earnings.
Our products and services face varying degrees of competition.
Competition for Scheduled Services. In scheduled service, we compete
against both the large U.S. scheduled service airlines and, from time to time,
against smaller regional or start-up airlines. Competition is generally based
on price, schedule, quality of service and convenience. All of the major U.S.
scheduled airlines are larger than we are, and most of them have greater
financial resources than we do. Where we seek to expand our service by adding
routes or frequency, competing airlines may respond with intense price
competition. In addition, when other airlines seek to establish a presence
over new routes, they may engage in significant price discounting. Because of
our size and financial resources relative to the major airlines, we are less
able to absorb losses from these activities than many of our competitors.
Competition for Commercial Charter Services. In commercial charger
service, we compete against both the major U.S. scheduled airlines and smaller
U.S. charter airlines, including Sun Country and Miami Air. We also compete
against several European and Mexican charter and scheduled airlines, some of
which are larger than we are and have substantially greater financial
resources than we do.
The scheduled carriers compete for leisure travel customers with our
commercial charter operations in a variety of ways, including by:
o wholesaling discounted seats on scheduled flights to tour
operators;
o promoting packaged tours to travel agents for sale to retail
customers; and
o selling discounted, excursion airfare-only products to the
public.
As a result, all charter airlines, including ATA, generally compete for
customers against the lowest revenue-generating seats of the scheduled
airlines. During periods of dramatic rate cuts by other scheduled airlines,
we are forced to respond competitively to these deeply discounted prices.
We also compete directly against other charter airlines. In the
U.S., these charter airlines are smaller in size than we are. In Europe,
several charter airlines are as large or larger than we are. As a result, in
15
addition to their greater access to financial resources, these charter
airlines may have greater distribution capabilities, including, in some cases,
exclusive or preferential relationships with affiliated tour operators.
Competition for Military and other Government Charter Services. We
generally compete for military and other government charters with primarily
smaller U.S. airlines. The allocation of U.S. military air transportation
contracts is based upon the number and type of aircraft a carrier, alone or
through a teaming arrangement, makes available for use to the military. The
formation of competing teaming arrangements that have larger partners than
those in which we participate, an increase by other air carriers in their
commitment of aircraft to the military or the withdrawal of our current
partners or a change in the manner of awarding future contracts could
adversely affect our U.S. military charter business.
Significant additional increases in the cost of
aircraft fuel could adversely impact our operating results.
Fuel costs are a significant portion of our operating costs,
comprising approximately 16.3% of our operating costs in 1998 and
approximately 15.9% of our operating costs in the first nine months of 1999.
In the first nine months of 1999 our monthly average fuel cost has risen
approximately 45.2% and over the subsequent two months, fuel costs have risen
an additional 5.3%. If fuel prices continue to rise significantly, we would
expect to suffer a significant adverse impact on our operating results,
particularly for our scheduled service and our charter contracts that do not
contain fuel cost escalation provisions. In addition, substantial increases in
fuel costs and any resulting increase in air fares would likely cause a
reduction in leisure travel or the cancelation or renegotiation of previously
booked commitments from tour operators.
Fuel prices are affected by, among other factors, political and
economic influences that we cannot control. In the event of a fuel supply
shortage resulting from a disruption of oil imports or other events, higher
fuel prices or the curtailment of scheduled service could result.
We have worked to reduce some of the risks associated with a rise in
fuel costs. In 1998, approximately 45.0% of our total operating revenues were
derived from contracts that enable us to pass through increases in fuel costs,
including contracts with the U.S. military, and, in the first nine months of
1999, approximately 36.0% of our total operating revenues were derived from
these types of contracts. We are, however, exposed to increases in fuel costs
that occur with 14 days of flight time, to most increases associated with our
scheduled service and to increases affecting contracts that do not include
fuel cost escalation provisions.
The profitability of our operations is influenced by economic conditions
as demand for leisure travel diminishes during economic downturns.
The profitability of our operations is influenced by the condition
of the U.S. and European economies, including fluctuations in currency
exchange rates, that may impact the demand for leisure travel and our
competitive pricing position. The majority of our charter and scheduled
airline business, other than military, is leisure travel. Because leisure
travel is discretionary, we have historically tended to experience somewhat
weaker financial results during economic downturns and other events affecting
international leisure travel, such as the Persian Gulf War. Nevertheless, our
performance during these periods have been significantly better than that of
the U.S. airline industry as a whole.
The airline industry is heavily regulated, and changes in our
governmental authorizations or certificates, or changes in governmental
regulations, could adversely impact our business.
We are subject to a wide range of governmental regulation, including
regulation by the Department of Transportation and the Federal Aviation
Administration. A modification, suspension or revocation of any of our
Department of Transportation or Federal Aviation Administration authorizations
or certificates could adversely impact our business.
The Department of Transportation principally regulates economic
matters affecting air service, including:
o air carrier certification and fitness;
o insurance;
16
o leasing arrangements;
o allocation of route rights and authorization of proposed
scheduled and charter operations;
o allocation of landing slots and departure slots;
o consumer protection; and
o competitive practices.
The Federal Aviation Administration primarily regulates flight operations,
especially matters affecting air safety, including airworthiness
requirements for each type of aircraft and pilot and crew certification.
Under the Airport Noise and Capacity Act of 1990 and related Federal
Aviation Administration regulations, our aircraft must comply with specified
Stage 3 noise restrictions by specified deadlines. The regulations required
that we achieve a 75% Stage 3 fleet by December 31, 1998, and will prohibit us
from operating any Stage 2 aircraft after December 31, 1999. As of December
31, 1998, 83.3% of our fleet met Stage 3 requirements. We expect to meet
future Stage 3 requirements through Boeing 727-200 hushkit modifications,
combined with additional future deliveries of Stage 3 aircraft. We believe we
are in compliance with all requirements necessary to maintain in good standing
our operating authority granted by the Department of Transportation and our
air carrier operating certificate issued by the Federal Aviation
Administration.
The Federal Aviation Administration has issued a series of
airworthiness directives under its aging aircraft program. These directives
are applicable to our Lockheed L-1011 and Boeing 727-200 aircraft. We do not
currently expect that the cost of compliance with these directives will be
material.
Changes in governmental regulation could also adversely impact our
business. In recent years, for example, the Federal Aviation Administration
has issued or proposed mandates relating to, among other things:
o collision avoidance systems;
o airborne windshear avoidance systems;
o noise abatement; and
o increased inspections and maintenance procedures.
We expect to incur expenses as we try to comply with changes in
Federal Aviation Administration regulations, particularly those relating to
noise and aging aircraft. The Federal Aviation Administration requires each
carrier to obtain an operating certificate and operations specifications
authorizing the carrier to fly to specific airports using specified equipment.
Several aspects of airline operations are subject to regulation or
oversight by federal agencies other than the Department of Transportation and
the Federal Aviation Administration. For example, the U.S. Postal Service has
jurisdiction over certain aspects of the transportation of mail and related
services that we provide through our cargo affiliate. Labor relations in the
air transportation industry are generally regulated under the Railway Labor
Act, which vests in the National Mediation Board regulatory powers with
respect to disputes between airlines and labor unions arising under collective
bargaining agreements.
We are also subject to the jurisdiction of the Federal
Communications Commission regarding the use of radio facilities. In addition,
we are subject to regulation on international flights by the Commerce
Department, the Customs Service, the Immigration and Naturalization Service
and the Animal and Plant Health Inspection Service of the Department of
Agriculture. Also, while our aircraft are in foreign countries, we must comply
with the requirements of similar authorities in those countries. We are also
subject to compliance with standards for aircraft exhaust emissions
promulgated by the Environmental Protection Agency and with regulations
adopted by various local authorities that operate the airports we serve
throughout our route network, including aircraft noise regulations and
curfews. The Commerce Department also regulates the export and re-export of
our U.S. manufactured aircraft and equipment. While we intend
17
to maintain all appropriate government licenses and to comply with all
appropriate standards, we cannot assure you that we will be successful.
In addition to various federal regulations, local governments and
authorities in certain markets have adopted regulations governing various
aspects of aircraft operations, including noise abatement, curfews and use of
airport facilities. Many U.S. airports have adopted or are considering
adopting a passenger facility charge of up to $3.00 generally payable by each
passenger departing from the airport. This charge must be collected from
passengers by transporting air carriers and must be remitted to the applicable
airport authority. Airport operators must obtain approval of the Federal
Aviation Administration before they may implement a passenger facility charge.
The $3.00 maximum on passenger facility charges must be raised if Congress
enacts an amendment to the legislation authorizing these charges.
We are subject to biennial inspections by the Department of Defense
as a condition of retaining our eligibility to perform military charter
flights. The last such inspection was completed in September of 1999. As a
result of our military business, we have been required from time to time to
meet operational standards beyond those normally required by the Department of
Transportation, the Federal Aviation Administration and other government
agencies.
At our aircraft line maintenance facilities, we use materials that
are regulated as hazardous under federal, state and local laws. We are
required to maintain programs to protect the safety of our employees who use
these materials and to manage and dispose of any waste generated by the use of
these materials in compliance with these laws. More generally, we are also
subject at these facilities to federal, state and local regulations relating
to protection of the environment and to discharge of materials in the
environment. We do not expect that the costs associated with ongoing
compliance with any of these regulations will have a material impact upon our
capital expenditures, earnings, or competitive position. Additional laws and
regulations have been proposed from time to time that could significantly
increase the cost of airline operations by, for instance, imposing additional
requirements or restrictions or operations. In addition, laws and regulations
have been considered from time to time that would prohibit or restrict the
ownership and/or transfer of airline routes or takeoff and landing slots.
Based upon bilateral aviation agreements between the U.S. and other
nations, and, in the absence of such agreements, comity and reciprocity
principles, we, as a charter carrier, are generally not restricted as to the
frequency of our flights to and from most foreign destinations. However, these
agreements generally restrict us to the carriage of passengers and cargo on
flights which either originate in the U.S. and terminate in a single foreign
nation or which originate in a single foreign nation and terminate in the U.S.
Proposals for any additional charter service must generally be specifically
approved by the civil aeronautics authorities in the relevant countries.
Approval of these requests is typically based on considerations of comity and
reciprocity and cannot be guaranteed.
Risk Factors Relating to the Notes
Your Exchange Notes will be effectively subordinated to secured obligations
of our subsidiaries.
Claims of secured creditors of our subsidiaries have priority to
the extent of the security interests granted in the assets of those
subsidiaries over our claims and claims of the Holders of our indebtedness,
including your Exchange Notes. ATA is presently the borrower under a $100.0
million secured revolving credit facility, which provides for a $100.0
million (including up to $50.0 million for stand-by letters of credit)
revolving line of credit for general working capital purposes. Amounts owed
under our bank credit facility are secured by a first priority perfected
security interest in certain aircraft and related engines. Accordingly, the
lenders under our bank credit facility have priority over your claims and
claims of other Holders of the Exchange Notes with respect to, and to the
extent of, the pledged assets. Thus, the Exchange Notes are effectively
subordinated to such secured indebtedness, and to any other secured
indebtedness, of our subsidiaries.
In addition the Exchange Notes will be effectively subordinated to
the claims of creditors of any of our subsidiaries that are not Guarantors.
We may be unable to purchase your Notes upon a change of control.
Upon the occurrence of a change of control, you may require us to
repurchase all or a portion of your Exchange Notes at 101% of the principal
amount of the Notes, together with accrued and unpaid interest to
18
the date of repurchase. If a change of control were to occur, we may not have
the financial resources to repay the Notes, our credit facilities and any
other indebtedness that would become payable upon the occurrence of such
change of control. The "Repurchase of Notes upon a Change of Control" covenant
requiring us to repurchase the Notes will, unless consents are obtained,
require us to repay all indebtedness then outstanding in the event of a change
of control. There can be no assurance that we will have sufficient funds
available at the time of any change of control to make any debt payment
(including repurchase of Notes) required by this covenant. See "Description of
the Notes-Repurchase of Notes upon a Change of Control" and "Description of
the New Credit Facility."
The Notes and the Note Guarantees are subject to fraudulent transfer laws.
Under federal or state fraudulent transfer laws, if a court were to
find, in a lawsuit by an unpaid creditor or a representative of creditors, a
trustee in bankruptcy or a debtor-in-possession, that we issued the Notes with
the intent to hinder, delay or defraud present or future creditors, or
received less than a reasonably equivalent value or fair consideration for any
such indebtedness, and at the time of such incurrence:
o were insolvent;
o were rendered insolvent by reason of such incurrence;
o were engaged or about to engage in a business or transaction
for which its remaining assets constituted unreasonably small
capital to carry on its business; or
o intended to incur, or believed or reasonably should have
believed that we would incur, debts beyond our ability to pay
as such debts matured,
such court could avoid our obligations to you under the Notes, subordinate
our obligations to you to all other indebtedness or take other action
detrimental to you. In that event, there can be no assurance that any
repayment of principal and accrued interest on the Notes could ever be
recovered by you. Any Guarantee may also be subject to challenge under
fraudulent transfer laws and, in any case, will be limited to amounts that
any such Guarantor can guarantee without violating such laws. See
"Description of the Notes-Guarantee."
There is no public market for the Notes
We are obligated to complete this exchange offer for the Notes or to
register the Notes under the Securities Act prior to May 19, 2000, 150 days
after the Closing Date of the December 21, 1999 private placement. However,
there can be no assurance that such exchange or registration will occur in the
required time period. The Securities and Exchange Commission (the
"Commission") has broad discretion to determine whether any registration
statement will be declared effective and may delay or deny effectiveness of
any such registration statement filed by us for a variety of reasons. Failure
to have the registration statement declared effective could adversely affect
the liquidity and price of the Notes. See "Description of the Notes" and
"Transfer Restrictions."
Exchange Offer Procedures
Issuance of the Exchange Notes to you in exchange for your
Outstanding Notes pursuant to the exchange offer will be made only after our
timely receipt of Outstanding Notes, a properly completed and duly executed
Letter of Transmittal or an Agent's Message (as defined herein) in lieu
thereof and all other required documents. Therefore, if you desire to tender
your Outstanding Notes in exchange for Exchange Notes you should allow
sufficient time to ensure timely delivery. We are not required to give
notification of defects or irregularities with respect to the tenders of
Outstanding Notes for exchange. Outstanding Notes that are not tendered or are
tendered but not accepted will, following the consummation of the exchange
offer, continue to be subject to the existing restrictions on transfer
thereof. See "The Exchange Offer."
Consequences of Failure to Exchange and Requirements
for Transfer of Exchange Notes
Holders of Outstanding Notes who do not exchange them for Exchange
Notes in the exchange offer will continue to be subject to the provisions in
the Indenture regarding transfer and exchange of the Outstanding Notes and the
restrictions on transfer of such Outstanding Notes as set forth in the legend
thereon as a consequence of the issuance of the Outstanding Notes pursuant to
exemptions from, or in
19
transactions not subject to, the registration requirements of the
Securities Act and applicable state securities laws.
In general, the Outstanding Notes may not be offered or sold, unless
registered under the Securities Act, except pursuant to an exemption from, or
in a transaction not subject to, the Securities Act and applicable state
securities laws. We do not currently anticipate that we will register
Outstanding Notes under the Securities Act.
Based on interpretations by the staff of the Commission, as set
forth in no-action letters issued to third parties, we believe that Exchange
Notes issued in the exchange offer in exchange for Outstanding Notes may be
offered for resale, resold or otherwise transferred by Holders thereof (other
than any such Holder which is an "affiliate" of the Company within the meaning
of Rule 405 under the Securities Act) without compliance with the registration
and prospectus delivery provisions of the Securities Act, if Exchange Notes
are acquired in the ordinary course of the Holders' business and such Holders
have no arrangement with any person to participate in the distribution of such
Exchange Notes.
However, the Company does not intend to request the Commission to
consider, and the Commission has not considered, the exchange offer in the
context of a no-action letter and there can be no assurance that the staff of
the Commission would make a similar determination with respect to the exchange
offer as in such other circumstances.
Each Holder, other than a broker-dealer, must acknowledge that:
(i) the Exchange Notes received by such Holder will be acquired in
the ordinary course of its business;
(ii) at the time of the consummation of the exchange offer such
Holder will have not engaged in, and does not intend to engage in, a
distribution of Exchange Notes and has no arrangement or understanding to
participate in a distribution of Exchange Notes; and
(iii) such Holder is not an affiliate of the Company within the
meaning of Rule 405 of the Securities Act or if it is such an affiliate,
that it will comply with the registration and prospectus delivery
requirements of the Securities Act, to the extent applicable.
If any Holder is an affiliate of the Company, is engaged in or
intends to engage in or has any arrangement or understanding with respect to
the distribution of the Exchange Notes to be acquired pursuant to the exchange
offer, such Holder
(i) could not rely on the applicable interpretations of the staff of
the Commission; and
(ii) must comply with the registration and prospectus delivery
requirement of the Securities Act in connection with any resale
transaction.
Each broker-dealer that receives Exchange Notes for its own account
in the exchange offer must acknowledge that it will deliver a prospectus in
connection with any resale of such Exchange Notes. The Letter of Transmittal
states that by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within
the meaning of the Securities Act.
This prospectus, as it may be amended or supplemented from time to
time, may be used by a broker-dealer in connection with resales of Exchange
Notes received in exchange for Outstanding Notes, where such Outstanding Notes
were acquired by such broker-dealer as a result of market-making activities or
other trading activities. We have agreed that, for a period of 180 days after
the expiration date, it will make this prospectus available to any
broker-dealer for use in connection with any such resale. See "Plan of
Distribution."
However, to comply with state securities laws, the Exchange Notes
may not be offered or sold in any state unless they have been registered or
qualified for sale in such state or an exemption from registration or
qualification is available and is complied with. The offer and sale of the
Exchange Notes to "qualified institutional buyers" (as such term is defined
under Rule 144A of the Securities Act) is generally exempt from registration
or qualification under state securities laws. The Company currently does not
intend to register or qualify the sale of the Exchange Notes in any state
where an exemption from registration or
20
qualification is required and not available. See "The Exchange
Offer--Consequences of Failure to Exchange and Requirements for Transfer for
Exchange Notes."
21
THE EXCHANGE OFFER
Terms of the Exchange Offer; Period for Tendering Outstanding Notes
Subject to the terms and conditions in this prospectus and in the
accompanying Letter of Transmittal, we will exchange unregistered Outstanding
Notes properly tendered on before the expiration date and not withdrawn for
registered Exchange Notes. The expiration date is midnight, New York City
time, on [ ] unless we extend it.
As of the date of this prospectus, $75,000,000 aggregate principal
amount of the Outstanding Notes is outstanding. This prospectus, together with
the Letter of Transmittal, is first being sent on or about [ ], to all Holders
of Outstanding Notes known to us. Our obligation to accept Outstanding Notes
for exchange is subject to certain conditions as set forth below under
"--Certain Conditions to the Exchange Offer."
We may, at any time or from time to time, extend the expiration
date, by giving oral or written notice of such extension in the manner
described below. During any such extension, all Outstanding Notes previously
tendered will remain subject to the exchange offer and we may accept them for
exchange. Any Outstanding Notes that we do not accept for exchange for any
reason will be returned to you without cost as promptly as practicable after
the expiration or termination of the exchange offer.
Outstanding Notes tendered in the exchange offer must be in
denominations of principal amounts of $1,000 and any integral multiples
thereof.
We expressly reserve the right to amend or terminate the exchange
offer. We also reserve the right to refuse for exchange any Outstanding Notes
not theretofore accepted for exchange, if any of the events specified below
under "--Certain Conditions to the Exchange Offer" occur. We will give oral or
written notice of any extension, amendment, non-acceptance or termination to
you as promptly as practicable any notice with respect to any extension will
be issued by means of press release or other public announcement no later than
9:00 a.m., New York City time, on the next business day after the previously
scheduled expiration date.
Procedures for Tendering Outstanding Notes
Certificates for such Outstanding Notes must be received by:
(i) the Exchange Agent along with the Letter of Transmittal; or
(ii) a timely confirmation of a book-entry transfer of the
Outstanding Notes, if such procedure is available, into the Exchange
Agent's account at The Depository Trust Company pursuant to the procedure
for book-entry transfer described below, must be received by the Exchange
Agent prior to the expiration date with the Letter of Transmittal or
Agent's Message in lieu of such Letter of Transmittal; or
(iii) the Holder must comply with the guaranteed delivery procedures
described below.
The term Agent's Message means a message, transmitted by the
Book-Entry Transfer Facility to and received by the Exchange Agent. It forms a
part of a Book-Entry Confirmation, which states that the Book-Entry Transfer
Facility has received an express acknowledgment from the tendering
participant, which states that the participant has received and agrees to be
bound by the Letter of Transmittal and that we may enforce the Letter of
Transmittal against such participant. THE METHOD OF DELIVERY OF THE
OUTSTANDING NOTES, THE LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS
IS AT THE ELECTION AND RISK OF THE HOLDERS. IF SUCH DELIVERY IS BY MAIL, IT IS
RECOMMENDED THAT REGISTERED MAIL, PROPERLY INSURED, WITH RETURN RECEIPT
REQUESTED, BE USED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE
TIMELY DELIVERY. DELIVERY OF DOCUMENTS TO DTC IN ACCORDANCE WITH ITS
PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE AGENT. NO LETTER OF
TRANSMITTAL OR OUTSTANDING NOTES SHOULD BE SENT TO US.
22
Signatures on a Letter of Transmittal or a notice of withdrawal, as
the case may be, must be guaranteed by:
o a member firm of a registered national securities exchange or
of the National Association of Securities Dealers, Inc.;
o a commercial bank; or
o a trust company having an office or correspondent in the United
States (collectively, Eligible Institutions);
unless the Outstanding Notes tendered are tendered:
(i) by a registered Holder of the Outstanding Notes who has not
completed the box entitled "Special Issuance Instructions" or "Special
Delivery Instructions" on the Letter of Transmittal; or
(ii) for the account of an Eligible Institution.
If Outstanding Notes are registered to a person who did not sign the
Letter of Transmittal, the Outstanding Notes surrendered for exchange must
be endorsed by, or be accompanied by a written transfer or exchange, duly
executed by the registered Holder with the signature guaranteed by an
Eligible Institution. All questions of satisfaction of the form of the
writing will be determined by us in our sole discretion.
If the Letter of Transmittal is signed by a person other than the
registered Holder of any Outstanding Notes listed therein, such Outstanding
Notes must be endorsed or accompanied by appropriate powers of attorney,
signed exactly as the name of the registered Holder appears on the Outstanding
Notes.
If the Letter of Transmittal or any Outstanding Notes or powers of
attorney are signed by trustees, executors, administrators, guardians,
attorneys-in-fact, officers of corporations or others acting in a fiduciary or
representative capacity, such persons should so indicate when signing, and
unless waived by us, evidence satisfactory to us of their authority to so act
must be submitted with the Letter of Transmittal.
We will determine all questions as to the validity, form,
eligibility (including time of receipt), acceptance and withdrawal of the
tendered Outstanding Notes. Our determination will be final and binding. We
reserve the absolute right to reject any and all tenders of any particular
Outstanding Notes not properly tendered or to not accept any particular
Outstanding Notes our acceptance of which would, in our opinion or in the
opinion of our counsel, be unlawful. We also reserve the absolute right to
waive any defects or irregularities or conditions of the exchange offer as to
any particular Outstanding Notes either before or after the expiration date.
Our interpretation of the terms and conditions of the exchange offer
(including the instructions in the Letter of Transmittal) will be final and
binding on all parties. Unless waived, any defects or irregularities in
connection with tenders of Outstanding Notes must be cured within a time
period we determine. Neither we, the Exchange Agent nor any other person is
under any duty to give notification of defects or irregularities with respect
to tenders of Outstanding Notes nor shall any of them incur any liability for
failure to give such notification. Any Outstanding Notes will not be
considered to have been properly tendered until such defects or irregularities
have been cured or waived. Any Outstanding Notes received by the Exchange
Agent that are not properly tendered and as to which the defects or
irregularities have not been cured or waived will be returned without cost by
the Exchange Agent to the tendering Holders unless otherwise provided in the
Letter of Transmittal as soon as practicable following the expiration date.
In addition, we reserve the right in our sole discretion to:
(i) purchase or make offers for any Outstanding Notes that remain
outstanding subsequent to the expiration date, or, as set forth under
"--Certain Conditions to the Exchange Offer," to terminate the exchange
offer; and
(ii) to the extent permitted by applicable law, purchase Outstanding
Notes in the open market, in privately negotiated transactions or
otherwise. The terms of any such purchases or offers may differ from the
terms of the exchange offer.
23
By tendering, each Holder of Outstanding Notes will represent to us, among
other things that:
o the Exchange Notes acquired pursuant to the exchange offer are
being obtained in the ordinary course of business of the person
receiving the Exchange Notes, whether or not that person is the
Holder;
o neither the Holder nor any other person has any arrangement or
understanding with any person to participate in the
distribution of the Exchange Notes; and
o such Holder is not engaged in, or intends to engage in, a
distribution of the Exchange Notes.
If any Holder or any such other person is an "affiliate," as defined
under Rule 405 of the Securities Act, of the Company, or is engaged in or
intends to engage in or has an arrangement or understanding with any person to
participate in a distribution of such Exchange Notes to be acquired in the
exchange offer, such Holder or any such other person:
(i) could not rely on the applicable interpretations of the staff of
the Commission; and
(ii) must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any resale
transaction. Each broker-dealer that receives Exchange Notes for its own
account in exchange for Outstanding Notes, where such Outstanding Notes
were acquired by the broker-dealer as a result of market-making
activities or other trading activities, must acknowledge that it will
deliver a prospectus in connection with any resale of such Exchange
Notes. See "Plan of Distribution."
Acceptance of Outstanding Notes for Exchange; Delivery of Exchange Notes
Upon satisfaction or waiver of the conditions to the exchange offer,
we will accept, promptly, all Outstanding Notes properly tendered and will
issue the Exchange Notes. See "--Certain Conditions to the Exchange Offer."
We are deemed to have accepted properly tendered Outstanding Notes
for exchange if or when we give oral or written notice of acceptance to the
Exchange Agent, with written confirmation of any oral notice to follow
promptly.
For each Outstanding Note accepted for exchange, Holders of that
Outstanding Note will receive an Exchange Note having a principal amount equal
to that of the surrendered Outstanding Note. Interest on the Outstanding Notes
will accrue from the most recent interest payment date or if no interest has
been paid, from December 21, 1999. Interest on the Outstanding Notes and the
Exchange Notes is payable semi-annually on February 1 and August 1. Holders of
Outstanding Notes whose Outstanding Notes are accepted for exchange will be
deemed to have waived the right to receive any payment in respect of accrued
and unpaid interest on the Outstanding Notes accrued from the most recent
interest payment date or if no interest has been paid, from December 21, 1999
to the date of the issuance of the Exchange Notes. The Exchange Notes will
entitle Holders to receive any interest payment that would have otherwise been
payable with respect to the Outstanding Notes. Consequently, Holders who
exchange their Outstanding Notes for Exchange Notes will receive the same
interest payment on August 1, 2000 (the first interest payment date with
respect to the Outstanding Notes and the Exchange Notes occurring after the
closing of the exchange offer) that they would have received had they not
accepted the exchange offer.
In all cases, issuance of Exchange Notes for Outstanding Notes that
are accepted for exchange will be made only after timely receipt by the
Exchange Agent of:
(i) certificates for such Outstanding Notes or a timely Book-Entry
Confirmation of such Outstanding Notes into the Exchange Agent's account
at the Book-Entry Transfer Facility;
(ii) a properly completed and duly executed Letter of Transmittal or
an Agent's Message in lieu thereof; and
(iii) all other required documents.
If any tendered Outstanding Notes are not accepted for any reason set forth
in the terms and conditions of the exchange offer or if Outstanding Notes
are submitted for a greater principal amount than the Holder
24
desired to exchange, the unaccepted or non-exchanged Outstanding Notes will
be returned without expense to the tendering Holder (or, in the case of
Outstanding Notes tendered by book-entry transfer into the Exchange Agent's
account at the Book-Entry Transfer Facility pursuant to the book-entry
procedures described below, the non-exchanged Outstanding Notes will be
credited to an account maintained with such Book-Entry Transfer Facility)
as promptly as practicable after the expiration or termination of the
exchange offer.
Book-Entry Transfer
The Exchange Agent will make a request to establish an account with
respect to the Outstanding Notes at the Book-Entry Transfer Facility for
purposes of the exchange offer within two business days after the date of this
prospectus. Any financial institution that is a participant in the Book-Entry
Transfer Facility's systems may make book-entry delivery of Outstanding Notes
by causing the Book-Entry Transfer Facility to transfer the Outstanding Notes
into the Exchange Agent's account at the Book-Entry Transfer Facility in
accordance with the Book-Entry Transfer Facility's procedures for transfer.
However, although delivery of Outstanding Notes may be effected through
book-entry transfer at the Book-Entry Transfer Facility, the Letter of
Transmittal (or a facsimile thereof or an Agent's Message in lieu thereof),
with any required signature guarantees and any other required documents, must
still be transmitted to and received by the Exchange Agent at one of the
addresses set forth below, under "--Exchange Agent" on or prior to the
expiration date or the guaranteed delivery procedures described below must be
complied with.
Guaranteed Delivery Procedures
A Holder who wishes to tender its Outstanding Notes; and
(i) whose Outstanding Notes are not immediately available; or
(ii) who cannot deliver their Outstanding Notes, the Letter of
Transmittal, or any other required documents to the Exchange Agent prior
to the expiration date; or
(iii) who cannot complete the procedure for book-entry transfer on a
timely basis, may effect a tender if:
(a) the tender is made through an Eligible Institution; and
(b) before the expiration date, the Exchange Agent receives
from the Eligible Institution:
o a properly completed and duly executed Notice of
Guaranteed Delivery (by facsimile transmission, mail
or hand delivery) setting forth the name and address
of the Holder of the Outstanding Notes;
o the certificate number or numbers of such Outstanding
Notes and the principal amount of Outstanding Notes
tendered, stating that the tender is being made
thereby, and guaranteeing that the certificates for
all physically tendered Outstanding Notes, in proper
form for transfer, or a Book-Entry Confirmation, as
the case may be, together with a properly completed
and duly executed Letter of Transmittal (or a
facsimile thereof or an Agent's Message in lieu
thereof) with any required signature guarantees, and
all other documents required by the Letter of
Transmittal are received by the Exchange Agent within
three NYSE trading days after the date of execution
of the Notice of Guaranteed Delivery; and
o the certificates for all physically tendered
Outstanding Notes, in proper form for transfer, or a
Book-Entry Confirmation, as the case may be, together
with a properly completed and duly executed Letter of
Transmittal (or a facsimile thereof or an Agent's
Message in lieu thereof), with any required signature
guarantees and any other documents required by the
Letter of Transmittal, that will be deposited by the
Eligible Institution with the Exchange Agent within
three New York Stock Exchange trading days after the
date of execution of the Notice of Guaranteed
Delivery.
25
Withdrawal of Rights
Except as otherwise provided herein, tenders of Outstanding Notes may be
withdrawn at any time prior to midnight, New York City time, on the expiration
date.
To withdraw a tender of outstanding Notes, a written notice of
withdrawal must be received by the Exchange Agent at its address set forth
herein prior to midnight, New York City time, on the expiration date. Any
such notice of withdrawal must:
(i) specify the name of the person having tendered the Outstanding
Notes to be withdrawn (the Depositor);
(ii) include a statement that the Depositor is withdrawing its
election to have Outstanding Notes exchanged, and identify the
Outstanding Notes to be withdrawn (including the certificate number or
numbers and principal amount of such Outstanding Notes); and
(iii) where certificates for Outstanding Notes have been
transmitted, specify the name in which such Outstanding Notes are
registered, if different from that of the withdrawing Holder.
If certificates for Outstanding Notes have been delivered or otherwise
identified to the Exchange Agent, then, prior to the release of such
certificates the withdrawing Holder must also submit:
(i) the serial numbers of the particular certificates to be
withdrawn; and
(ii) signed notice of withdrawal with signatures guaranteed by an
Eligible Institution unless such Holder is an Eligible Institution.
If Outstanding Notes have been tendered pursuant to the procedure for
book-entry transfer described above, any notice of withdrawal must specify the
name and number of the account at the Book-Entry Transfer Facility to be
credited with the withdrawn Outstanding Notes and otherwise comply with the
procedures of the facility.
We will determine all questions as to the validity, form and eligibility
(including time of receipt) for such withdrawal notices. Our determination
shall be final and binding on all parties.
Any Outstanding Notes so withdrawn will be considered not to have been
validly tendered for purposes of the exchange offer and no Exchange Notes will
be issued with respect thereto unless the Outstanding Notes so withdrawn are
validly retendered.
Any Outstanding Notes which have been tendered but which are not
accepted for exchange for any reason will be returned to the Holder without
cost (or, in the case of Outstanding Notes tendered by book-entry transfer
into the Exchange Agent's account at the Book-Entry Transfer Facility
pursuant to the book-entry transfer procedures described above, such
Outstanding Notes will be credited to an account maintained with such
Book-Entry Transfer Facility for the Outstanding Notes) as soon as
practicable after withdrawal, rejection of tender or termination of the
exchange offer. Properly withdrawn Outstanding Notes may be retendered by
following one of the procedures described above under "--Procedures for
Tendering Outstanding Notes" at any time prior to midnight, New York City
time, on the expiration date.
Certain Conditions to the Exchange Offer
The exchange offer is not subject to any conditions, other than that the
exchange offer does not violate applicable law or any applicable
interpretation of the staff of the Commission. We cannot assure you that any
such condition will not occur. Holders of Outstanding Notes will have certain
rights against us under the registration rights agreement should we fail to
consummate the exchange offer.
If we determine that we may terminate the exchange offer, as set forth
above, we may:
(i) refuse to accept any Outstanding Notes and return any
Outstanding Notes that have been tendered;
26
(ii) extend the exchange offer and retain all Outstanding Notes
tendered prior to the expiration date, subject to the rights of such
Holders of tendered Outstanding Notes to withdraw their tendered
Outstanding Notes; or
(iii) waive a termination event with respect to the exchange offer
and accept all properly tendered Outstanding Notes that have not been
withdrawn. If such waiver constitutes a material change in the exchange
offer, we will disclose that change through a supplement to this
prospectus that will be distributed to each registered Holder of
Outstanding Notes. In addition, we will extend the exchange offer for a
period of five to ten business days, depending upon the significance of
the waiver and the manner of disclosure to the registered Holders of the
Outstanding Notes, if the exchange offer would otherwise expire during
such period.
Exchange Agent
First Security Bank, N.A., the Trustee under the Indenture, has been
appointed as Exchange Agent for the exchange offer. All executed Letters of
Transmittal and written notices of withdrawal should be directed to the
Exchange Agent at one of the addresses set forth below. Questions and requests
for assistance and requests for additional copies of this prospectus or of the
Letter of Transmittal should be directed to the Exchange Agent addressed as
follows:
By Mail or Overnight Courier Facsimile Transmission Number
First Security Bank, N.A. (801) 246-5053 [ ]
Corporate Trust Services (For Eligible
79 South Main Street Institutions Only)
Salt Lake City, UT 84111
Attention: [Mr. Larry Montgomery] Confirm by Telephone
Personal and Confidential (801) 246-5822
(If by Mail, Registered or
Certified Mail Recommended)
DELIVERY OF THE LETTER OF TRANSMITTAL OR OF WRITTEN NOTICES OF
WITHDRAWAL TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION OF
INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE A
VALID DELIVERY OF SUCH LETTER OF TRANSMITTAL.
Fees and Expenses
We will not make any payments to brokers, dealers or other persons
soliciting acceptances of the exchange offer.
The estimated cash expenses to be incurred in connection with the
exchange offer will be paid by us and are estimated to be [$200,000].
Transfer Taxes
Holders who tender their Outstanding Notes for exchange will not be
obligated to pay any transfer taxes in connection with the exchange. However
Holders who instruct us to register Exchange Notes in the name of, or request
that Outstanding Notes not tendered or not accepted in the exchange offer be
returned to, a person other than the registered tendering Holder will be
responsible for the payment of any applicable transfer tax thereon.
Consequences of Exchanging Outstanding Notes
Holders of Outstanding Notes who do not exchange them for Exchange
Notes in the exchange offer will continue to be subject to the provisions in
the Indenture regarding their transfer and exchange. Any outstanding Notes not
exchanged will continue to accrue interest, but will not retain any rights
under the registration rights agreement and will bear the legend which sets
forth the restrictions on transfer to which they are subject as a consequence
of the issuance of the Outstanding Notes pursuant to exemptions from, or in
transactions not subject to, the registration requirements of the Securities
Act and applicable state securities laws.
27
In general, the Outstanding Notes may not be offered or sold, unless
registered under the Securities Act, except pursuant to an exemption from, or
in a transaction not subject to, the Securities Act and applicable state
securities laws. We do not currently anticipate that we will register
Outstanding Notes under the Securities Act. See "Registration Rights for
Outstanding Notes."
Based on interpretations by the staff of the Commission, as set
forth in no-action letters issued to third parties, we believe that Exchange
Notes issued in the exchange offer in exchange for Outstanding Notes may be
offered for resale, resold or otherwise transferred by Holders thereof (other
than any such Holder which is an "affiliate" of the Company within the meaning
of Rule 405 under the Securities Act) without compliance with the registration
and prospectus delivery provisions of the Securities Act, provided that such
Exchange Notes are acquired in the ordinary course of such Holders' business
and such Holders have no arrangement with any person to participate in the
distribution of such Exchange Notes.
However, we do not intend to request the Commission to consider, and
the Commission has not considered, the exchange offer in the context of a
no-action letter and there can be no assurance that the staff of the
Commission would make a similar determination with respect to the exchange
offer as in such other circumstances. Each Holder, other than a broker-dealer,
must acknowledge that:
(i) the Exchange Notes received by such Holder will be acquired in
the ordinary course of its business;
(ii) at the time of the consummation of the exchange offer such
Holder will have not engaged in, and does not intend to engage in, a
distribution of Exchange Notes and has no arrangement or understanding to
participate in a distribution of Exchange Notes; and
(iii) such Holder is not an affiliate of the Company within the
meaning of Rule 405 of the Securities Act or if it is such an affiliate,
that it will comply with the registration and prospectus delivery
requirements of the Securities Act, to the extent applicable.
If any Holder is an affiliate of the Company, is engaged in or
intends to engage in or has any arrangement or understanding with respect to
the distribution of the Exchange Notes to be acquired pursuant to the exchange
offer, such Holder:
(i) could not rely on the applicable interpretations of the staff of
the Commission; and
(ii) must comply with the registration and prospectus delivery
requirement of the Securities Act in connection with any resale
transaction.
Each broker-dealer that receives Exchange Notes for its own account
in exchange for Outstanding Notes must acknowledge that such Outstanding Notes
were acquired by such broker-dealer as a result of market-making activities or
other trading activities and that it will deliver a prospectus in connection
with any resale of such Exchange Notes.
The Letter of Transmittal states that by so acknowledging and by
delivering a prospectus, a broker-dealer will not be deemed to admit that it
is an "underwriter" within the meaning of the Securities Act.
This prospectus, as it may be amended or supplemented from time to
time, may be used by a broker-dealer in connection with resales of Exchange
Notes received in exchange for Outstanding Notes, where such Outstanding Notes
were acquired by such broker-dealer as a result of market-making activities or
other trading activities.
We have agreed that for a period of 180 days after the expiration
date, we will make this prospectus available to any broker-dealer for use in
connection with any such resale. See "Plan of Distribution."
In addition, to comply with state securities laws, the Exchange
Notes may not be offered or sold in any state unless they have been registered
or qualified for sale in such state or an exemption from registration or
qualification is available and is complied with.
The offer and sale of the Exchange Notes to "Qualified Institutional
Buyers" (as such term is defined under Rule 144A of the Securities Act) is
generally exempt from registration or qualification under state
28
securities laws. We currently do not intend to register or qualify the sale
of the Exchange Notes in any state where an exemption from registration or
qualification is required and not available.
USE OF PROCEEDS
There will be no cash payable proceeds to us from the exchange
offer. The exchange offer is intended to satisfy certain of our obligations
under the registration rights agreement.
In consideration for issuing the Exchange Notes contemplated in this
prospectus, we will receive Outstanding Notes in like principal amount, the
form and terms of which are the same as the form and terms of the Exchange
Notes (which they replace), except as otherwise described herein. The
Outstanding Notes surrendered in exchange for Exchange Notes will be retired
and canceled and cannot be reissued. Accordingly, the issuance of the Exchange
Notes will not result in any increase or decrease in the indebtedness of the
Company.
The net proceeds of the private placement were approximately $73.0
million and were used by the Company to repay bank indebtedness and for
general corporate purposes, which may include the purchase of additional
aircraft and the refinancing of existing aircraft.
29
CAPITALIZATION
The following table sets forth (i) our unaudited actual
consolidated capitalization and (ii) our unaudited consolidated
capitalization as adjusted after giving effect to the December 21, 1999
Offering, in each case as of September 30, 1999.
At September 30, 1999
Historical As Adjusted
(Unaudited)
(Dollars in thousands)
Cash(1)(2)................................ $ 109,151 $181,951
========= ========
Short-term debt (consisting of current
maturities of long-term debt)............. $ 1,476 $ 1,476
----------- -----------
Long-term debt
Secured bank debt, due 2003(1)......... 31,000 31,000
Tax-exempt mortgage bonds, due 2020.... 6,000 6,000
Tax-exempt mortgage bonds, due 2000.... 10,000 10,000
10 1/2% Senior Notes due 2004.......... 100,000 175,000
9 5/8% Senior Notes due 2005............ 125,000 125,000
8.3% Mortgage due 2014................. 7,955 7,955
Unsecured debt......................... 2,939 2,939
----------- -----------
Total long-term debt............... 282,894 357,894
----------- -----------
Total debt.................... 284,370 359,370
----------- -----------
Total shareholders'
equity............ 148,832 148,832
----------- -----------
Total capitalization.. $433,202 508,202
========= ========
- ----------
(1) At September 30, 1999, the Company had borrowed $31 million against its
credit facility, all of which was repaid October 1, 1999.
(2) On December 9, 1999, the Company issued $17 million in Special
Facility Revenue Bonds to finance the construction of certain
facilities at Chicago-Midway Airport.
30
SELECTED HISTORICAL FINANCIAL DATA
The following selected consolidated financial data is derived from
our audited consolidated financial statements. The selected consolidated
financial data for the nine months ended September 30, 1999 and 1998 is
derived from our unaudited consolidated financial statements. The unaudited
financial statements include all adjustments, consisting of normal recurring
accruals, that we consider necessary for the fair presentation of our
financial position and results of operations for these periods. Operating
results for the nine months ended September 30, 1999 are not necessarily
indicative of the results that may be expected for the year ending December
31, 1999. The data should be read in conjunction with the consolidated
financial statements, related notes and the information presented under the
heading "Management's Discussion and Analysis of Financial Condition and
Results of Operations" incorporated by reference herein.
Year Ended December 31, Nine Months Ended
September 30,
1994 1995 1996 1997 1998 1998 1999
------ ------ ------ ------ ------ ------ -----
(Dollars in thousands, except ratios and per share amounts)
Statement of Operations Data:
Operating revenues:
Scheduled service............. $240,675 $361,967 $386,488 $371,762 $511,254 $384,456 $480,877
Charter....................... 295,890 307,091 310,569 359,177 344,482 277,763 302,731
Ground package................ 20,248 20,421 22,302 22,317 23,186 17,629 46,565
Other......................... 23,709 25,530 31,492 29,937 40,447 30,335 35,371
----------------------------------------------------------------------
Total operating revenues.... 580,522 715,009 750,851 783,193 919,369 710,183 865,544
--------- --------- --------- --------- --------- --------- ---------
Operating expenses:
Salaries, wages and benefits.. 113,789 141,072 163,990 172,499 211,304 155,795 187,309
Fuel and oil.................. 106,057 129,636 161,226 153,701 137,401 107,639 124,233
Handling, landing and navigation
fees........................ 60,872 74,400 70,122 69,383 74,640 57,503 70,929
Passenger service............. 29,804 34,831 32,745 32,812 34,031 26,871 30,283
Aircraft rentals.............. 48,155 55,738 65,427 54,441 53,128 39,249 43,402
Aircraft maintenance, materials
and repairs................. 46,092 55,423 55,175 51,465 53,655 41,641 42,432
Depreciation and amortization. 46,178 55,827 61,661 62,468 78,665 58,293 72,467
Other......................... 121,160 150,146 176,561 172,940 201,172 152,242 208,030
--------- --------- --------- --------- --------- --------- ---------
Total operating expenses.... 572,107 697,073 786,907 769,709 843,996 639,233 779,085
--------- --------- --------- --------- --------- --------- ---------
Operating income (loss)(1).... 8,415 17,936 (36,056) 13,484 75,373 70,950 86,459
--------- --------- --------- --------- --------- --------- ---------
Other income (expense):
Interest income............... 191 410 617 1,584 4,433 3,324 4,526
Interest (expense)............ (3,656) (4,163) (4,465) (9,454) (12,808) (9,671) (15,413)
Other......................... 929 470 323 413 212 165 1,882
--------- --------- --------- --------- --------- --------- ---------
Other income (expense), net. (2,536) (3,283) (3,525) (7,457) (8,163) (6,182) (9,005)
--------- --------- --------- --------- --------- --------- ---------
Income (loss) before income taxes 5,879 14,653 (39,581) 6,027 67,210 64,768 77,454
Income taxes (credits)........... 2,393 6,129 (12,907) 4,455 27,129 26,141 30,509
--------- --------- --------- --------- --------- --------- ---------
Net income (loss)................ $ 3,486 $ 8,524 $ (26,674) $ 1,572 $ 40,081 $ 38,627 $ 46,945
========= ======== ========== ========= ======== ========= =========
Net income (loss) per share-- $ 0.30 0.74 (2.31) 0.14 3.41 3.31 3.83
basic (2) ========= ======== ========== ========= ======== ========= =========
Net income (loss) per share-- 0.30 0.74 (2.31) 0.13 3.07 2.99 3.47
diluted(2).................... ========= ======== ========== ========= ======== ========= =========
(footnotes on next page)
31
Year Ended December 31, Nine Months Ended
September 30,
1994 1995 1996 1997 1998 1998 1999
------ ------ ------ ------ ------ ------ -----
(Unaudited)
(Dollars in thousands, except ratios and per share amounts)
Balance Sheet Data (at end of period):
Cash............................. $ 61,752 $ 92,741 $ 73,382 $104,196 $172,936 $110,807 $109,151
Non-cash working capital
(deficiency)(3)............... (68,166) (80,639) (65,472) (100,731) (112,276) (115,171) (132,257)
Property and equipment, net...... 223,104 240,768 224,540 267,681 329,332 323,880 476,238
Total assets..................... 346,288 413,137 370,287 450,857 594,549 520,411 746,782
Short-term debt (including current
maturities)................... 8,447 3,606 30,271 8,975 1,476 6,477 1,476
Long-term debt................... 109,659 134,641 119,786 182,829 245,195 174,262 282,894
Total debt....................... 118,106 138,247 150,057 191,804 246,671 180,739 284,370
Shareholders' equity(4).......... 72,753 81,185 54,744 56,990 102,751 97,955 148,832
Other Financial Data:
EBITDAR(5)....................... $103,868 $130,381 $ 91,972 $132,390 $211,811 $171,982 $208,736
EBITDA(5)........................ 55,713 74,643 26,545 77,949 158,683 132,733 165,334
Net cash provided by operating
activities.................... 75,297 87,078 32,171 99,936 151,812 131,870 141,493
Net cash used in investing activitie (80,400) (44,032) (63,161) (76,055) (142,352) (115,640) (239,659)
Net cash provided by (used in)
financing activities.......... 21,831 (12,057) 11,631 6,933 59,280 (9,619) 34,381
Ratio of earnings to fixed charges(6) 1.32 1.60 -- 1.19 3.03 3.73 3.25
Deficiency of earnings available to -- -- $ 40,931 -- -- -- --
cover fixed charges(6)........
(1) Amtran has reclassified gain (loss) on the sale of operating assets
for 1994-1995 from non-operating gain (loss) to operating income
(loss) to be consistent with the 1996-1999 presentations. Also, in
the third quarter of 1996, Amtran recorded a $4.7 million loss on
the disposal of leased assets associated with the reconfiguration of
its fleet.
(2) In 1997, Amtran adopted Financial Accounting Standards Board
Statement 128, "Earnings per Share," which established new standards
for the calculation and disclosure of earnings per share. All prior
period amounts disclosed in this five-year summary have been
restated to conform to the new standards under Statement 128.
(3) Non-cash working capital consists of total current assets (excluding
cash) less total current liabilities (excluding current maturities
of long-term debt).
(4) No dividends were paid in any of the periods presented.
(5) EBITDAR represents net income plus interest expense (net of
capitalized interest), income tax expense, depreciation,
amortization and aircraft rentals. EBITDA represents net income plus
interest expense (net of capitalized interest), income tax expense,
depreciation and amortization. EBITDAR and EBITDA are presented
because each is a widely accepted financial indicator of a company's
ability to incur and service debt. However, EBITDAR and EBITDA
should not be considered in isolation, as a substitute for net
income or cash flow data prepared in accordance with generally
accepted accounting principles or as a measure of a company's
profitability or liquidity.
(6) The "ratio of earnings to fixed charges" represents earnings divided
by fixed charges, as defined in the following paragraph. The
"deficiency" represents the amount of fixed charges in excess of
earnings.
For purposes of these computations, earnings consist of income
(loss) before income taxes, plus fixed charges, adjusted to exclude
the amount of any interest capitalized during the period. Fixed
charges include the total of: (i) interest, whether expensed or
capitalized; (ii) amortization of debt expense relating to any
indebtedness, whether expensed or capitalized; and (iii) such
portion of rental expense as can be demonstrated to be
representative of the interest factor.
32
The following summarized financial data (unaudited) in this table
has been derived from the financial statements of ATA for each of the
respective periods presented. ATA is the principal subsidiary of Amtran. The
following financial data excludes the other subsidiaries of Amtran
(Ambassadair, ATA Leisure Corp., Amber Travel, Execujet and ATA Training
Academy) as ATA is the principal operating subsidiary of Amtran. Amtran
allocates certain expenses, such as income taxes, to the various subsidiaries
as if they were operating on a stand-alone basis.
Year Ended December 31, Nine Months Ended
September 30,
1994 1995 1996 1997 1998 1998 1999
------ ------ ------ ------ ------ ------ -----
(Dollars in thousands) (Unaudited)
Statement of Operations Data:
Operating revenues:.............. $549,630 $682,106 $712,915 $744,153 $877,187 $678,892 $776,853
Depreciation and amortization.... 45,593 55,056 61,267 62,281 78,595 58,247 71,043
Operating income (loss)(1)....... 4,157 14,819 (40,674) 10,325 80,920 75,184 91,894
Interest expense, net............ 3,497 3,773 4,466 9,454 12,808 9,671 15,418
Income (loss) before income taxes 1,513 11,389 (44,416) 2,627 72,528 68,834 82,604
Net income (loss)................ (206) 6,006 (31,509) 69 43,329 42,694 52,096
At December 31, At September 30,
--------------- -----------------
1994 1995 1996 1997 1998 1998 1999
------ ------ ------ ------ ------ ------ -----
(Dollars in thousands) (Unaudited)
Balance Sheet Data (at end of period):
Working capital (deficiency)(2).. $(69,272) $(49,710) $(86,207) $(51,939)$ 10,768 $(54,933) $(43,474)
Property and equipment, net...... 210,791 239,864 224,232 267,556 328,661 323,303 472,143
Total assets..................... 345,710 409,354 369,086 466,923 593,489 515,582 748,505
Short-term debt (including current
maturities)................... 8,447 3,606 30,271 8,975 1,476 6,477 1,476
Long-term debt................... 109,659 134,641 119,786 182,829 245,195 174,262 282,894
Total debt....................... 118,106 138,247 150,057 191,804 246,671 180,739 284,370
Shareholder's equity(3).......... 24,366 30,372 (9,934) 6,762 50,091 49,456 102,186
(1) ATA has reclassified gain (loss) on the sale of operating assets for
1994-1995 from non-operating gain (loss) to operating income (loss)
to be consistent with the 1996-1999 presentations. Also, in the
third quarter of 1996, ATA recorded a $4.7 million loss on the
disposal of leased assets associated with the reconfiguration of its
fleet.
(2) Working capital consists of total current assets less current
liabilities.
(3) No dividends were paid in any of the periods presented.
33
DESCRIPTION OF OTHER PRINCIPAL INDEBTEDNESS
Revolving Credit Facilities
We maintain revolving credit facilities to assist us in managing
our working capital and in meeting our short-term cash needs.
1998 Credit Facility. Under our 1998 credit facility, ATA is
designated as the borrower. The credit facility provides for maximum
borrowings of $50.0 million, including stand-by letters of credit in a maximum
amount of $25.0 million. All borrowings under the 1998 credit facility are
guaranteed by Amtran and all of its other operating subsidiaries and secured
by some of Amtran's L-1011 aircraft and engines, as well as specified
additional assets as may be required to provide a loan-to-value ratio not in
excess of 75%. The credit facility will mature, and all borrowings under the
credit facility will become due and payable, on April 1, 2001.
So long as no event of default is continuing, borrowings under the
1998 credit facility bear interest, at the option of ATA, at either:
o LIBOR plus 1.50% to 2.50%, depending upon specified financial
ratios; or
o the agent bank's prime rate.
In addition, ATA incurs a quarterly commitment fee ranging from 0.25% to
0.50% per annum on the average unused portion of the commitment, depending
upon specified ratios.
1999 Credit Facility. In December 1999, we revised our 1998 credit
facility to provide for maximum borrowings of $100.0 million, including
stand-by letters of credit in a maximum amount of $50.0 million. All
borrowings under the 1999 credit facility are guaranteed by Amtran and all of
its other operating subsidiaries and secured by some of Amtran's L-1011
aircraft and engines, as well as specified additional assets as may be
required to provide a loan-to-value ratio not in excess of 75%. The 1999
credit facility will mature, and all borrowings under the credit facility will
become due and payable, on January 2, 2003.
So long as no event of default is continuing, borrowings under the
1999 credit facility bear interest, at the option of ATA, at either:
o LIBOR plus 1.25% to 2.50%, depending upon specified financial
ratios; or
o the agent bank's prime rate.
In addition, ATA incurs a quarterly commitment fee ranging from 0.25% to
0.50% per annum on the average unused portion of the commitment, depending
upon specified ratios.
The credit facility contains covenants that, absent the prior
written consent of the lenders, limit the ability of ATA, Amtran and the other
guarantors to, among other things:
o incur debt;
o grant liens;
o make capital expenditures;
o pay dividends, distributions and other payments to
stockholders;
o engage in mergers and similar business combinations;
o dispose of assets; and
o prepay debt.
34
In addition, for a specified period, ATA must maintain a number of
specified ratios, including minimum net worth, cash flow to interest
expense after rentals and total adjusted liabilities to tangible net worth.
An event of default will occur if, among other things, a reduction
below 51% occurs in:
o Mr. Mikelsons' or his heirs' beneficial ownership of Amtran's
outstanding capital stock;
or
o Amtran's beneficial ownership of ATA's outstanding capital
stock.
9 5/8% Notes
In 1998, Amtran issued $125.0 million principal amount of 9 5/8%
senior notes due 2005. All of Amtran's obligations under the 9 5/8% notes are
guaranteed by all of its operating subsidiaries, including ATA.
Principal, Maturity and Interest. The 9 5/8% notes are limited in
aggregate principal amount to $125.0 million and will mature on December 15,
2005. Interest on the 9 5/8% notes accrues at 9 5/8% per annum and is payable
semiannually in cash on June 15 and December 15 of each year. Interest is
computed on the basis of a 360-day year comprised of twelve 30-day months.
Ranking. The 9 5/8% notes are unsecured obligations of Amtran, rank
pari passu in right of payment with all existing and future unsecured
unsubordinated obligations of Amtran and rank senior in right of payment to
all existing and future subordinated obligations of Amtran. The 9 5/8% notes
are also effectively subordinated to all existing and future secured
indebtedness of Amtran and the guarantors to the extent of the security.
Redemption. The 9 5/8% notes are redeemable, at Amtran's option, in
whole or in part, at any time on or after June 15, 2003, at the redemption
prices (expressed as percentages of principal amount) set forth below plus
accrued and unpaid interest thereon to the applicable redemption date, if
redeemed during the 12-month period beginning on June 15 of the year indicated
below:
Year Percentage
- ---- ----------
2003...................................... 104.81%
2004...................................... 102.41%
In addition, at any time prior to June 15, 2001, Amtran may redeem
up to 35% of the original aggregate principal amount of the 9 5/8% notes with
the proceeds of one or more sales of common stock, at a redemption price equal
to 109.625% of their principal amount plus accrued and unpaid interest, so
long as at least $81.25 million of aggregate principal amount of 9 5/8% notes
remains outstanding immediately after the redemption.
Covenants. The indenture governing the 9 5/8% notes contains
covenants substantially identical to the covenants contained in the indenture
governing the 10 1/2% notes.
Events of Default. The indenture governing the 9 5/8% notes contains
events of default substantially similar to those contained in the indenture
governing the 10 1/2% notes.
DESCRIPTION OF THE NOTES
The Outstanding Notes were, and the Exchange Notes will be issued
under the Indenture, dated as of July 24, 1997, among the Company, as issuer,
American Trans Air, Inc., Ambassadair Travel Club, Inc., ATA Leisure Corp.
(formerly ATA Vacations, Inc.), Amber Travel, Inc., American Trans Air
Training Corporation, American Trans Air ExecuJet, Inc., Amber Air Freight
Corporation, and Chicago Express Airlines, Inc., as guarantors (collectively,
the Guarantors), and First Security Bank, N.A., as trustee (the Trustee), as
supplemented by the First Supplemental Indenture dated as of December 21, 1999
among the Company, the Guarantors and the Trustee (references in this
Description of Notes to the "Indenture" shall
35
mean the Indenture as so supplemented). The following summary of certain
provisions of the Indenture and the Exchange Notes does not purport to be
complete and is subject to, and is qualified in its entirety by reference
to, all the provisions of the Indenture, including the definitions of
certain terms therein and those terms made a part thereof by the Trust
Indenture Act of 1939, as amended (the Trust Indenture Act). A copy of the
Indenture and the Notes is available upon request from the Company.
Whenever particular defined terms of the Indenture not otherwise defined
herein are referred to, such defined terms are incorporated herein by
reference. For definitions of certain capitalized terms used in the
following summary, see "--Certain Definitions." For purposes of this
summary, unless the context indicates otherwise, the term "Notes" means the
Exchange Notes Holders will receive if they participate in this exchange
offer Notes.
General Aspects of the Exchange Notes
Amtran, Inc. currently has outstanding $100,000,000 principal amount
of Exchange Notes that was issued in 1997 under a previous registered
statement. The Exchange Notes offered by this prospectus are part of the same
series of Exchange Notes that were issued in 1997.
The Notes will be unsecured senior obligations of the Company, and
will mature on August 1, 2004. Each Note will initially bear interest at 10
1/2% per annum from the Closing Date, payable semiannually (to Holders of
record at the close of business on the January 15 or July 15 immediately
preceding the Interest Payment Date) on February 1 and August 1 of each year,
commencing February 1, 2000.
If we have not (i) consummated a registered exchange offer for the
New Notes, or (ii) filed or caused a shelf registration statement with respect
to resales of the Notes to be declared effective within the time period
specified below, Holders will be entitled to certain additional interest. See
"--Registration Rights for Outstanding Notes."
Principal of, premium, if any, and interest on the Notes will be
payable, and the Notes may be exchanged or transferred, at the office or
agency of the Company in the Borough of Manhattan, the City of New York;
provided that, at our option, payment of interest may be made by check mailed
to the Holders at their addresses as they appear in the Security Register.
The Notes will be issued only in fully registered form, without
coupons, in denominations of $1,000 of principal amount and any integral
multiple thereof. See "-Book-Entry; Delivery and Form." No service charge will
be made for any registration of transfer or exchange of Notes, but we may
require payment of a sum sufficient to cover any transfer tax or other similar
governmental charge payable in connection therewith.
Subject to the covenants described below under "Covenants" and
applicable law, we may issue additional Notes under the Indenture. The
Outstanding Notes, the Exchange Notes and any additional Notes subsequently
issued will be treated as a single class for all purposes under the Indenture.
Optional Redemption
If more than 98% of the outstanding principal amount of the Notes
are tendered pursuant to an Offer to Purchase, as required by the "Limitation
on Asset Sales" or "Repurchase of Notes upon a Change of Control" covenant, we
have the option to redeem the balance of the Notes, in whole or in part, at
any time or from time to time thereafter up to maturity. Holders must be given
between 30 to 60 days' prior notice mailed by first class mail to each
Holder's last address as it appears in the Security Register, and the
Redemption Price will equal to the price specified in the Offer to Purchase
plus accrued and unpaid interest, if any, to the Redemption Date (subject to
the right of Holders of record on the relevant Regular Record Date that is on
or prior to the Redemption Date to receive interest due on an Interest Payment
Date).
The Notes will also be redeemable, at our option, in whole or in
part, at any time or from time to time, on or after August 1, 2002 up to
maturity. Holders must be given between 30 to 60 days' prior notice mailed by
first class mail to each Holders' last address as it appears in the Security
Register, at the following Redemption Prices (expressed in percentages of
principal amount), plus accrued and unpaid interest, if any, to the Redemption
Date (subject to the right of Holders of record on the relevant Regular Record
Date that
36
is on or prior to the Redemption Date to receive interest due on an
Interest Payment Date), if redeemed during the 12-month period commencing
August 1 of the years set forth below:
Redemption
Year Price
2002................................. 105.250%
2003................................. 102.625%
In addition, at any time prior to August 1, 2000, we may redeem up
to 35% of the principal amount of the Notes with the proceeds of one or more
sales of its Common Stock, at any time or from time to time in part, at a
Redemption Price (expressed as a percentage of principal amount) of 110.500%,
plus accrued and unpaid interest to the Redemption Date (subject to the rights
of Holders of record on the relevant Regular Record Date that is prior to the
Redemption Date to receive interest due on an Interest Payment Date); so long
as at least 65% of the aggregate principal amount of Notes remains outstanding
after each such redemption.
In the case of any partial redemption, selection of the Notes for
redemption will be made by the Trustee in compliance with the requirements of
the principal national securities exchange, if any, on which the Notes are
listed. If the Notes are not listed on a national securities exchange, the
redemption will be made by lot or by such other method as the Trustee in its
sole discretion shall deem to be fair and appropriate; so long as no Note of
$1,000 in principal amount or less shall be redeemed in part. If any Note is
to be redeemed in part only, the notice of redemption relating to such Note
must state the portion of the principal amount of the Note to be redeemed. A
new Note in principal amount equal to the unredeemed portion thereof will be
issued in the name of the Holder upon cancelation of the original Note.
Sinking Fund
There will be no sinking fund payments for the Notes.
Registration Rights for Outstanding Notes
The Company and the Guarantors have agreed for the benefit of the
Holders, that they will use their best efforts, at their cost,
(i) within 45 days after the Closing Date (the "Filing Date") of the
original offering, to file a registration statement (the exchange offer
registration statement) with respect to a registered offer (the exchange
offer) to exchange the Outstanding Notes for Exchange Notes with terms
identical to the Outstanding Notes (except that the Exchange Notes will not
bear legends restricting the transfer thereof); and
(ii) cause the exchange offer registration statement to be declared
effective within 150 days after the Closing Date.
Once the registration statement is declared effective, the Company and the
Guarantors will offer the Exchange Notes in return for surrender of the
Outstanding Notes. The offer will remain open for at least 20 business days
after the date notice of the exchange offer is mailed to Holders. For each
Outstanding Note surrendered to us under the exchange offer, the Holder
will receive an Exchange Note of equal principal amount. Interest on each
Exchange Note shall accrue from the last Interest Payment Date on which
interest was paid on the Outstanding Notes so surrendered or, if no
interest has been paid on such Outstanding Notes, from the Closing Date.
In the event that applicable interpretations of the staff of the
Commission do not permit the Company and the Guarantors to effect the exchange
offer, or under certain other circumstances, the Company and the Guarantors
shall, at their cost, use their best efforts to cause to become effective a
shelf registration statement (the "Shelf Registration Statement") with respect
to resales of the Notes and to keep such Shelf Registration Statement
effective until the expiration of the time period referred to in Rule 144(k)
under the Securities Act after the Closing Date, or such shorter period that
will terminate when all Outstanding Notes covered by the Shelf Registration
Statement have been sold pursuant to the Shelf Registration Statement. The
Company
37
and the Guarantors shall, in the event of such a shelf registration,
provide to each Holder copies of the prospectus, notify each Holder when
the Shelf Registration Statement for the Outstanding Notes has become
effective and take certain other actions as are required to permit resales
of the Outstanding Notes.
A Holder that sells its Outstanding Notes pursuant to the Shelf
Registration Statement generally will be required to be named as a selling
security Holder in the related prospectus and to deliver a prospectus to
purchasers, will be subject to certain of the civil liability provisions under
the Securities Act in connection with such sales and will be bound by the
provisions of the registration rights agreement that are applicable to such a
Holder (including certain indemnification obligations).
If we fail to comply with the above provisions or if the exchange
offer registration statement or the Shelf Registration Statement fails to
become effective, then additional interest shall become payable in respect of
the Outstanding Notes as follows:
(1) if:
(A) neither the exchange offer registration statement nor the
Shelf Registration Statement is filed with the Commission on or prior to 45 days
after the Closing Date; or
(B) notwithstanding that we have consummated or will consummate
an exchange offer, we are required to file a Shelf Registration Statement and
such Shelf Registration Statement is not filed on or prior to the date
required by the registration rights agreement, then commencing on the day
after either such required filing date, additional interest shall accrue on
the principal amount of the Outstanding Notes at a rate of 0.50% per annum for
the first 90 days immediately following each such filing date, such additional
interest rate increasing by an additional 0.50% per annum at the beginning of
each subsequent 90- day period; or
(2) if:
(A) neither the exchange offer registration statement nor a
Shelf Registration Statement is declared effective by the Commission on or
prior to 150 days after the Closing Date; or
(B) notwithstanding that we have consummated or will consummate
an exchange offer, we are required to file a Shelf Registration Statement and
such Shelf Registration Statement is not declared effective by the Commission
on or prior to the 60th day following the date such Shelf Registration
Statement was filed, then, commencing on the day after either such required
effective date, additional interest shall accrue on the principal amount of
the Outstanding Notes at a rate of 0.50% per annum for the first 90 days
immediately following such date, such additional interest rate increasing by
an additional 0.50% per annum at the beginning of each subsequent 90-day
period; or
(3) if:
(A) we have not exchanged exchange notes for all Outstanding
Notes validly tendered in accordance with the terms of the exchange offer on or
prior to the 30th day after the date on which the exchange offer registration
statement was declared effective; or
(B) if applicable, the Shelf Registration Statement has been
declared effective and such Shelf Registration Statement ceases to be
effective at any time prior to the second anniversary of its effective date
(other than after such time as all Outstanding Notes have been disposed of
thereunder),
then additional interest shall accrue on the principal amount of the
Outstanding Notes at a rate of 0.50% per annum for the first 90 days
commencing on:
(x) the 31st day after such effective date, in the case of
(A) above; or
(y) the day such Shelf Registration Statement ceases to be
effective, in the case of (B) above, such additional interest rate increasing
by an additional 0.50% per annum at the beginning of each subsequent 90-day
period; provided, however, that the additional interest rate on the notes may
not exceed in the aggregate 2.0% per annum; provided, further, however, that:
38
(a) upon the filing of the exchange offer registration
statement or a Shelf Registration Statement (in the case of clause (1) above);
(b) upon the effectiveness of the exchange offer
registration statement or a shelf registration (in the case of clause (2)
above); or
(c) upon the exchange of exchange notes for all Outstanding
Notes tendered (in the case of clause (3) (A) above), or upon the effectiveness
of the Shelf Registration Statement which had ceased to remain effective (in the
case of clause (3)(B) above), additional interest on the Outstanding Notes
as a result of such clause (or the relevant subclause thereof), as the case
may be, shall cease to accrue.
If the Company and the Guarantors effect the exchange offer, the
Company will be entitled to close the exchange offer 20 business days after
the commencement thereof, provided that it has accepted all Outstanding Notes
theretofore validly surrendered in accordance with the terms of the exchange
offer. Outstanding Notes not tendered in the exchange offer shall bear
interest at the rate set forth on the cover page of this Prospectus and be
subject to all of the terms and conditions specified in the Indenture and to
the transfer restrictions described in the Transfer Restrictions section of
the Offering Memorandum, dated December 16, 1999.
Guarantee
The Company's obligations under the Notes are fully and
unconditionally guaranteed on an unsecured, unsubordinated basis, jointly and
severally, by the Guarantors; so long as no Note Guarantee is enforceable
against any Guarantor in an amount in excess of the net worth of such
Guarantor at the time that determination of that net worth is, under
applicable law, relevant to the enforceability of such Note Guarantee. The net
worth will include any claim of the Guarantor against the Company for
reimbursement and any claim against any other Guarantor for contribution.
Each Note Guarantee, other than the Note Guarantee provided by ATA,
will provide by its terms that it will be automatically and unconditionally
released and discharged if any sale, exchange or transfer to any Person that
is not an Affiliate of the Company, of all of the Company's and each
Restricted Subsidiary's Capital Stock issued by, or all or substantially all
the assets of, the Guarantor (which sale, exchange or transfer is not
prohibited by the Indenture).
Ranking
The indebtedness evidenced by the Notes and the Note Guarantees will
rank equally in right of payment with all existing and future unsubordinated
indebtedness of the Company and the Guarantors, respectively, and senior in
right of payment to all existing and future subordinated indebtedness of the
Company and the Guarantors, respectively. The Notes and Note Guarantees will
also be effectively subordinated to all existing and future secured
indebtedness of the Company and the Guarantors, to the extent of such
security.
At September 30, 1999, after giving pro forma effect to the private
placement and the application of the net proceeds thereof, the Company (on a
consolidated basis) would have had outstanding approximately $359.4 million of
indebtedness (including the Notes), approximately $55.0 million of which would
have been secured. At September 30, 1999, after giving pro forma effect to the
Offering and the application of the net proceeds thereof, the Guarantors (on a
consolidated basis excluding indebtedness owed to the Company and indebtedness
of Amtran) would have had approximately $359.4 million of indebtedness
outstanding (other than the Note Guarantees, approximately $55.0 million of
which would have been secured indebtedness. See "Capitalization."
The Credit Agreement is secured by certain L-1011 aircraft and
related engines, including spares, and may be secured by other assets as
provided thereunder. See "Description of Other Indebtedness." The Notes will
be effectively subordinated to such indebtedness to the extent of such
security interests. See "Risk Factors--Effective Subordination of Notes to
Secured Obligations of Subsidiaries."
Certain Definitions
Set forth below is a summary of certain of the defined terms used
in the covenants and other provisions of the Indenture. Reference is made
to the Indenture for the full definition of all terms as well
39
as any other capitalized term used herein for which no definition is provided.
"Acquired Indebtedness" means Indebtedness of a Person existing at
the time such Person becomes a Restricted Subsidiary or assumed in connection
with an Asset Acquisition by a Restricted Subsidiary and not Incurred in
connection with, or in anticipation of, such Person becoming a Restricted
Subsidiary or such Asset Acquisition; provided that Indebtedness of such
Person which is redeemed, defeased, retired or otherwise repaid at the time of
or immediately upon consummation of the transactions by which such Person
becomes a Restricted Subsidiary or such Asset Acquisition shall not be
Acquired Indebtedness.
"Adjusted Consolidated Net Income" means, for any period, the
aggregate net income (or loss) of the Company and its Restricted Subsidiaries
for such period determined in conformity with GAAP; provided that the
following items shall be excluded in computing Adjusted Consolidated Net
Income (without duplication):
(i) the net income of any Person that is not a Restricted
Subsidiary, except to the extent of the amount of dividends or other
distributions actually paid to the Company or any of its Restricted
Subsidiaries by such Person during such period;
(ii) solely for the purposes of calculating the amount of
Restricted Payments that may be made pursuant to clause (C) of the
first paragraph of the "Limitation on Restricted Payments" covenant
described below (and in such case, except to the extent includable
pursuant to clause (i) above), the net income (or loss) of any
Person accrued prior to the date it becomes a Restricted Subsidiary
or is merged into or consolidated with the Company or any of its
Restricted Subsidiaries or all or substantially all of the property
and assets of such Person are acquired by the Company or any of its
Restricted Subsidiaries;
(iii) the net income of any Restricted Subsidiary which is not
a Guarantor to the extent that the declaration or payment of
dividends or similar distributions by such Restricted Subsidiary of
such net income is not at the time permitted by the operation of the
terms of its charter or any agreement, instrument, judgment, decree,
order, statute, Rule or governmental regulation applicable to such
Restricted Subsidiary;
(iv) any gains or losses (on an after-tax basis) attributable
to Asset Sales;
(v) except for purposes of calculating the amount of Restricted
Payments that may be made pursuant to clause (C) of the first
paragraph of the "Limitation on Restricted Payments" covenant
described below, any amount paid or accrued as dividends on
Preferred Stock of the Company or any Restricted Subsidiary owned by
Persons other than the Company and any of its Restricted
Subsidiaries; and
(vi) all extraordinary gains and extraordinary losses.
"Adjusted Consolidated Net Tangible Assets" means the total amount
of assets of the Company and its Restricted Subsidiaries (less applicable
depreciation, amortization and other valuation reserves), except to the extent
resulting from write-ups of capital assets (excluding writeups in connection
with accounting for acquisitions in conformity with GAAP), after deducting
therefrom
(i) all current liabilities of the Company and its Restricted
Subsidiaries (excluding intercompany items) and
(ii) all goodwill, trade names, trademarks, patents,
unamortized debt discount and expense and other like intangibles,
all as set forth on the most recent quarterly or annual consolidated
balance sheet of the Company and its Restricted Subsidiaries,
prepared in conformity with GAAP and filed with the Commission or
provided to the Trustee pursuant to the "Commission Reports and
Reports to Holders" covenant.
"Affiliate" means, as applied to any Person, any other Person
directly or indirectly controlling, controlled by, or under direct or indirect
common control with, such Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled
by" and "under common control with"), as applied to any Person, means the
possession, directly or indirectly, of the power to direct
40
or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities, by contract or
otherwise.
"Asset Acquisition" means
(i) an investment by the Company or any of its Restricted
Subsidiaries in any other Person pursuant to which such Person shall
become a Restricted Subsidiary or shall be merged into or
consolidated with the Company or any of its Restricted Subsidiaries;
provided that such Person's primary business is related, ancillary
or complementary to the businesses of the Company and its Restricted
Subsidiaries on the date of such investment or
(ii) an acquisition by the Company or any of its Restricted
Subsidiaries of the property and assets of any Person other than the
Company or any of its Restricted Subsidiaries that constitute
substantially all of a division or line of business of such Person;
provided that the property and assets acquired are related,
ancillary or complementary to the businesses of the Company and its
Restricted Subsidiaries on the date of such acquisition.
"Asset Disposition" means the sale or other disposition by the
Company or any of its Restricted Subsidiaries (other than to the Company or
another Restricted Subsidiary) of
(i) all or substantially all of the Capital Stock of any
Restricted Subsidiary of the Company
or
(ii) all or substantially all of the assets that constitute a
division or line of business of the Company or any of its Restricted
Subsidiaries.
"Asset Sale" means any sale, transfer or other disposition
(including by way of merger, consolidation or sale-leaseback transaction) in
one transaction or a series of related transactions by the Company or any of
its Restricted Subsidiaries to any Person other than the Company or any of its
Restricted Subsidiaries of
(i) all or any of the Capital Stock of any Restricted
Subsidiary (other than directors' qualifying shares),
(ii) all or substantially all of the property and assets of an
operating unit or business of the Company or any of its Restricted
Subsidiaries or
(iii) any other property and assets of the Company or any of
its Restricted Subsidiaries outside the ordinary course of business
of the Company or such Restricted Subsidiary and, in each case, that
is not governed by the provisions of the Indenture applicable to
mergers, consolidations and sales of assets of the Company; provided
that "Asset Sale" shall not include
(a) sales or other dispositions of inventory, receivables
and other current assets,
(b) sales or other dispositions of assets for
consideration at least equal to the fair market value of the
assets sold or disposed of, to the extent that the
consideration received would satisfy clause (B) of the
"Limitation on Asset Sales" covenant or
(c) sales or other dispositions of assets in a single
transaction or series of related transactions having a fair
market value, as determined in good faith by the Board of
Directors, of $2 million or less.
"Average Life" means, at any date of determination with respect to
any debt security, the quotient obtained by dividing
(i) the sum of the products of (a) the number of years
from such date of determination to the dates of each successive
scheduled principal payment of such debt security and (b) the
amount of such principal payment by
(ii) the sum of all such principal payments.
41
"Capital Stock" means, with respect to any Person, any and all
shares, interests, participations or other equivalents (however designated,
whether voting or non-voting) in equity of such Person, whether outstanding on
the Closing Date or issued thereafter, including, without limitation, all
Common Stock and Preferred Stock.
"Capitalized Lease" means, as applied to any Person, any lease of
any property (whether real, personal or mixed) of which the discounted present
value of the rental obligations of such Person as lessee, in conformity with
GAAP, is required to be capitalized on the balance sheet of such Person.
"Capitalized Lease Obligations" means the discounted present value
of the rental obligations under a Capitalized Lease.
"Change of Control" means such time as
(i) (x) a "person" or "group" (within the meaning of
Sections 13(d) and 14(d)(2) of the Exchange Act) becomes the
ultimate "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act) of more than 35% of the total voting power of the
Voting Stock of the Company on a fully diluted basis and such
ownership represents a greater percentage of the total voting
power of the Voting Stock of the Company, on a fully diluted
basis, than is held by the Existing Stockholders and their
Affiliates on such date and (y) immediately following the
occurrence of the events specified in subsection (x), there shall
have occurred any downgrading, or notice shall have been given of
any intended or potential downgrading, in the rating accorded any
of the Company's securities or
(ii) individuals who on the Closing Date constitute the
Board of Directors (together with any new directors whose election
by the Board of Directors or whose nomination by the Board of
Directors for election by the Company's stockholders was approved
by a vote of at least two-thirds of the members of the Board of
Directors then in office who either were members of the Board of
Directors on the Closing Date or whose election or nomination for
election was previously so approved) cease for any reason to
constitute a majority of the members of the Board of Directors
then in office.
"Closing Date" means the date on which the Outstanding Notes are
originally issued under the Indenture.
"Consolidated EBITDA" means, for any period, Adjusted Consolidated
Net Income for such period plus, to the extent such amount was deducted in
calculating such Adjusted Consolidated Net Income,
(i) Consolidated Interest Expense,
(ii) income taxes (other than income taxes (either
positive or negative) attributable to extraordinary and
non-recurring gains or losses arising out of sales of assets),
(iii) depreciation expense,
(iv) amortization expense and
(v) all other non-cash items reducing Adjusted
Consolidated Net Income (other than items that will require
cash payments and for which an accrual or reserve is, or is
required by GAAP to be, made), less all non-cash items
increasing Adjusted Consolidated Net Income, all as determined
on a consolidated basis for the Company and its Restricted
Subsidiaries in conformity with GAAP; provided that, if any
Restricted Subsidiary is not a Wholly Owned Restricted
Subsidiary, Consolidated EBITDA shall be reduced (to the extent
not otherwise reduced in the calculation of Adjusted
Consolidated Net Income in accordance with GAAP) by an amount
equal to
(A) the amount of the Adjusted Consolidated Net
Income attributable to such Restricted Subsidiary
multiplied by
(B) the quotient of (1) the number of shares of
outstanding Common Stock of such Restricted Subsidiary not
owned on the last day of such period by the Company or any
of
42
its Restricted Subsidiaries divided by (2) the total
number of shares of outstanding Common Stock of such
Restricted Subsidiary on the last day of such period.
"Consolidated Interest Expense" means, for any period, the aggregate
amount of interest in respect of Indebtedness (including, without limitation
but without duplication, amortization of original issue discount on any
Indebtedness and the interest portion of any deferred purchase price payment
obligation, calculated in accordance with the effective interest method of
accounting; all commissions, discounts and other fees and charges owed with
respect to letters of credit and bankers' acceptance financing; the net costs
associated with Interest Rate Agreements; and Indebtedness that is Guaranteed
or secured by the Company or any of its Restricted Subsidiaries) and the
interest component of rentals in respect of Capitalized Lease Obligations
paid, accrued or scheduled to be paid or to be accrued by the Company and its
Restricted Subsidiaries during such period; excluding, however,
(i) any amount of such interest of any Restricted Subsidiary if
the net income of such Restricted Subsidiary is excluded in the
calculation of Adjusted Consolidated Net Income pursuant to clause
(iii) of the definition thereof (but only in the same proportion as
the net income of such Restricted Subsidiary is excluded from the
calculation of Adjusted Consolidated Net Income pursuant to clause
(iii) of the definition thereof),
(ii) any premiums, fees and expenses (and any amortization
thereof) payable in connection with the offering of the Notes or the
Credit Agreement, all as determined on a consolidated basis (without
taking into account Unrestricted Subsidiaries) in conformity with
GAAP, and
(iii) any interest or other financing costs associated with
loans to students of the Company's training academy, unless such
costs are paid by the Company or any Restricted Subsidiary.
"Consolidated Net Worth" means, at any date of determination,
stockholders' equity as set forth on the most recently available quarterly or
annual consolidated balance sheet of the Company and its Restricted
Subsidiaries (which shall be as of a date not more than 90 days prior to the
date of such computation, and which shall not take into account Unrestricted
Subsidiaries), less any amounts attributable to Disqualified Stock or any
equity security convertible into or exchangeable for Indebtedness, the cost of
treasury stock and the principal amount of any promissory notes receivable
from the sale of the Capital Stock of the Company or any of its Restricted
Subsidiaries, each item to be determined in conformity with GAAP (excluding
the effects of foreign currency exchange adjustments under Financial
Accounting Standards Board Statement of Financial Accounting Standards No.
52).
"Credit Agreement" means the credit agreement among ATA, NBD Bank,
N.A., as agent, the lenders named therein, the Company and the other
Guarantors, as guarantors, together with all other loan or credit agreements
entered into from time to time with one or more banks or other institutional
lenders and all instruments and documents executed or delivered pursuant
thereto, in each case as such agreements, instruments or documents may be
amended (including any amendment and restatement thereof), supplemented,
replaced or otherwise modified from time to time in one or more successive
transactions (including any such transaction that changes the amount
available, replaces the relevant agreement or changes one or more lenders).
"Currency Agreement" means any foreign exchange contract, currency
swap agreement or other similar agreement or arrangement.
"Default" means any event that is, or after notice or passage of
time or both would be, an Event of Default.
"Disqualified Stock" means any class or series of Capital Stock of
any Person that by its terms or otherwise is
(i) required to be redeemed prior to the Stated Maturity of the
Notes,
(ii) redeemable at the option of the Holder of such class or
series of Capital Stock at any time prior to the Stated Maturity of
the Notes or (iii) convertible into or exchangeable for Capital
Stock referred to in clause (i) or (ii) above or Indebtedness having
a scheduled maturity prior to the Stated Maturity of the Notes:
provided that any Capital Stock that would not constitute
Disqualified Stock but for provisions thereof giving Holders thereof
the right to require such Person to repurchase
43
or redeem such Capital Stock upon the occurrence of an "asset
sale" or "change of control" occurring prior to the Stated
maturity of the Notes shall not constitute Disqualified Stock if
the "asset sale" or "change of control" provisions applicable to
such Capital Stock are no more favorable to the Holders of such
Capital Stock than the provisions contained in "Limitation on
Asset Sales" and "Repurchase of Notes upon a Change of Control"
covenants described below and such Capital Stock specifically
provides that such Person will not repurchase or redeem any such
stock pursuant to such provision prior to the Company's repurchase
of such Notes as are required to be repurchased pursuant to the
"Limitation on Asset Sales" and "Repurchase of Notes upon a Change
of Control" covenants described below.
"Exchange Note" means the registered 10 1/2% Senior Notes due 2004
being offered in exchange for the unregistered 10 1/2% Senior Notes due 2004
pursuant to the Exchange Offer.
"Existing Stockholders" means J. George Mikelsons, his spouse, his
issue, any trust for any of the foregoing and any Affiliate of any of the
foregoing.
"Fair Market Value" means the price that would be paid in an
arm's-length transaction between an informed and willing seller under no
compulsion to sell and an informed and willing buyer under no compulsion to
buy, as determined in good faith by the Board of Directors, whose
determination shall be conclusive if evidenced by a Board Resolution.
"GAAP" means generally accepted accounting principles in the United
States of America as in effect as of the Closing Date, including, without
limitation, those set forth in the opinions and pronouncements of the
Accounting Principles Board of the American Institute of Certified Public
Accountants and statements and pronouncements of the Financial Accounting
Standards Board or in such other statements by such other entity as approved
by a significant segment of the accounting profession. All ratios and
computations contained or referred to in the Indenture
(i) shall be computed in conformity with GAAP applied on a
consistent basis, except that calculations made for purposes of
determining compliance with the terms of the covenants and with
other provisions of the Indenture shall be made without giving
effect to (A) the amortization of any expenses incurred in
connection with the offering of the Notes and (B) except as
otherwise provided, the amortization of any amounts required or
permitted by Accounting Principles Board Opinion Nos. 16 and 17 and
(ii) shall, insofar as they involve the treatment for financial
reporting purposes of amounts incurred with engine overhauls,
reflect the accounting policy of the Company as in effect as of the
Closing Date.
"Guarantee" means, without duplication, any obligation, contingent
or otherwise, of any Person directly or indirectly guaranteeing any
Indebtedness of any other Person and, without limiting the generality of the
foregoing, any obligation, direct or indirect, contingent or otherwise, of
such Person
(i) to purchase or pay (or advance or supply funds for the
purchase or payment of) such Indebtedness of such other Person
(whether arising by virtue of partnership arrangements, or by
agreements to keep-well, to purchase assets, goods, securities or
services (unless such purchase arrangements are on arm's-length
terms and are entered into in the ordinary course of business), to
take-or-pay, or to maintain financial statement conditions or
otherwise) or
(ii) entered into for purposes of assuring in any other manner
the obligee of such Indebtedness of the payment thereof or to
protect such obligee against loss in respect thereof (in whole or in
part); provided that the term "Guarantee" shall not include
endorsements for collection or deposit in the ordinary course of
business. The term "Guarantee" used as a verb has a corresponding
meaning.
"Incur" means, with respect to any Indebtedness, to incur, create.
issue, assume, Guarantee or otherwise become liable for or with respect to, or
become responsible for, the payment of, contingently or otherwise, such
Indebtedness, including an "Incurrence" of Acquired Indebtedness: provided
that neither the accrual of interest nor the accretion of original issue
discount shall be considered an Incurrence of Indebtedness.
44
"Indebtedness" means, with respect to any Person at any date of
determination (without duplication),
(i) all indebtedness of such Person for borrowed money,
(ii) all obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments,
(iii) all obligations of such Person in respect of letters of
credit or other similar instruments (including reimbursement
obligations with respect thereto, but excluding obligations with
respect to letters of credit (including trade letters of credit)
securing obligations (other than obligations described in (i) or
(ii) above or (v), (vi) or (vii) below) entered into in the ordinary
course of business of such Person to the extent such letters of
credit are not drawn upon or, if drawn upon, to the extent such
drawing is reimbursed no later than the third Business day following
receipt by such Person of a demand for reimbursement),
(iv) all obligations of such Person to pay the deferred and
unpaid purchase price of property or services, which purchase price
is due more than six months after the date of placing such property
in service or taking delivery and title thereto or the completion of
such services, except Trade Payables,
(v) all Capitalized Lease Obligations,
(vi) all Indebtedness of other Persons secured by a Lien on any
asset of such Person, whether or not such Indebtedness is assumed by
such Person; provided that the amount of such Indebtedness shall be
the lesser of (A) the fair market value of such asset at such date
of determination and (B) the amount of such Indebtedness,
(vii) all Indebtedness of other Persons Guaranteed by such
Person to the extent such Indebtedness is Guaranteed by such Person,
and
(viii) to the extent not otherwise included in this definition,
obligations under Currency Agreements and Interest Rate Agreements.
The amount of Indebtedness of any Person at any date shall be the
outstanding balance at such date of all unconditional obligations as
described above and, with respect to contingent obligations, the
maximum liability upon the occurrence of the contingency giving rise
to the obligation, provided (A) that the amount outstanding at any
time of any Indebtedness issued with original issue discount is the
face amount of such Indebtedness less the remaining unamortized
portion of the original issue discount of such Indebtedness at the
time of its issuance as determined in conformity with GAAP, (B) that
money borrowed and set aside at the time of the Incurrence of any
Indebtedness in order to prefund the payment of the interest on such
Indebtedness shall not be deemed to be "Indebtedness" and (C) that
Indebtedness shall not include any liability for federal, state,
local or other taxes.
"Interest Coverage Ratio" means, on any Transaction Date, the ratio
of (i) the aggregate amount of Consolidated EBITDA for the then most recent
four fiscal quarters prior to such Transaction Date for which reports have
been filed with the Commission (the "Four Quarter Period") to (ii) the
aggregate Consolidated Interest Expense during such Four Quarter Period. In
making the foregoing calculation,
(A) pro forma effect shall be given to any Indebtedness
Incurred or repaid during the period (the "Reference Period")
commencing on the first day of the Four Quarter Period and ending on
the Transaction Date (other than Indebtedness Incurred or repaid
under a revolving credit or similar arrangement to the extent of the
commitment thereunder (or under any predecessor revolving credit or
similar arrangement) in effect on the last day of such Four Quarter
Period unless any portion of such Indebtedness is projected, in the
reasonable judgment of the senior management of the Company, to
remain outstanding for a period in excess of 12 months from the date
of the Incurrence thereof), in each case as if such Indebtedness had
been Incurred or repaid on the first day of such Reference Period;
(B) Consolidated Interest Expense attributable to interest on
any Indebtedness (whether existing or being Incurred) computed on a
pro forma basis and bearing a floating interest rate shall be
computed as if the rate in effect on the Transaction Date (taking
into account any Interest Rate Agreement applicable to such
Indebtedness if such Interest Rate Agreement has a remaining term
45
in excess of 12 months or, if shorter, at least equal to the
remaining term of such Indebtedness) had been the applicable rate
for the entire period:
(C) pro forma effect shall be given to Asset Dispositions and
Asset Acquisitions (including giving pro forma effect to the
application of proceeds of any Asset Disposition) that occur during
such Reference Period as if they had occurred and such proceeds had
been applied on the first day of such Reference Period; and
(D) pro forma effect shall be given to asset dispositions and
asset acquisitions (including giving pro forma effect to the
application of proceeds of any asset disposition) that have been
made by any Person that has become a Restricted Subsidiary or has
been merged with or into the Company or any Restricted Subsidiary
during such Reference Period and that would have constituted Asset
Dispositions or Asset Acquisitions had such transactions occurred
when such Person was a Restricted Subsidiary as if such asset
dispositions or asset acquisitions were Asset Dispositions or Asset
Acquisitions that occurred on the first day of such Reference
Period; provided that to the extent that clause (C) or (D) of this
sentence requires that pro forma effect be given to an Asset
Acquisition or Asset Disposition, such pro forma calculation shall
be based upon the four full fiscal quarters immediately preceding
the Transaction Date of the Person, or division or line of business
of the Person, that is acquired or disposed for which financial
information is available.
"Interest Rate Agreement" means any interest rate protection
agreement, interest rate future agreement, interest rate option agreement,
interest rate swap agreement, interest rate cap agreement, interest rate
collar agreement, interest rate hedge agreement, option or future contract or
other similar agreement or arrangement.
"Investment" in any Person means any direct or indirect advance,
loan or other extension of credit (including, without limitation, by way of
Guarantee or similar arrangement; but excluding advances to customers in the
ordinary course of business that are, in conformity with GAAP, recorded as
accounts receivable on the balance sheet of the Company or its Restricted
Subsidiaries) or capital contribution to (by means of any transfer of cash or
other property to others or any payment for property or services for the
account or use of others), or any purchase or acquisition of Capital Stock,
bonds, notes, debentures or other similar instruments issued by, such Person
and shall include (i) the designation of a Restricted Subsidiary as an
Unrestricted Subsidiary and (ii) the fair market value of the Capital Stock
(or any other Investment), held by the Company or any of its Restricted
Subsidiaries, of (or in) any Person that has ceased to be a Restricted
Subsidiary, including without limitation, by reason of any transaction
permitted by clause (iii) of the "Limitation on the Issuance and Sale of
Capital Stock of Restricted Subsidiaries" covenant; provided that the fair
market value of the Investment remaining in any Person that has ceased to be a
Restricted Subsidiary shall not exceed the aggregate amount of Investments
previously made in such Person valued at the time such Investments were made
less the net reduction of such Investments. For purposes of the definition of
"Unrestricted Subsidiary" and the "Limitation on Restricted Payments" covenant
described below, (i) "Investment" shall include the fair market value of the
assets (net of liabilities (other than liabilities to the Company or any of
its Restricted Subsidiaries)) of any Restricted Subsidiary at the time that
such Restricted Subsidiary is designated an Unrestricted Subsidiary, (ii) the
fair market value of the assets (net of liabilities (other than liabilities to
the Company or any of its Restricted Subsidiaries)) of any Unrestricted
Subsidiary at the time that such Unrestricted Subsidiary is designated a
Restricted Subsidiary shall be considered a reduction in outstanding
Investments and (iii) any property transferred to or from an Unrestricted
Subsidiary shall be valued at its fair market value at the time of such
transfer.
"Lien" means any mortgage, pledge, security interest, encumbrance,
lien or charge of any kind (including, without limitation, any conditional
sale or other title retention agreement or lease in the nature thereof or any
agreement to give any security interest).
"Moody's" means Moody's Investors Service, Inc. and its successors.
"Net Cash Proceeds" means,
(a) with respect to any Asset Sale, the proceeds of such Asset
Sale in the form of cash or cash equivalents, including payments in
respect of deferred payment obligations (to the extent corresponding
to the principal, but not interest, component thereof) when received
in the form of cash or cash equivalents (except to the extent such
obligations are financed or sold with recourse to
46
the Company or any Restricted Subsidiary) and proceeds from the
conversion of other property received when converted to cash or
cash equivalents, net of
(i) brokerage commissions and other fees and expenses
(including fees and expenses of counsel and investment bankers)
related to such Asset Sale,
(ii) provisions for all taxes (whether or not such taxes will
actually be paid or are payable) as a result of such Asset Sale
without regard to the consolidated results of operations of the
Company and its Restricted Subsidiaries, taken as a whole,
(iii) payments made to repay Indebtedness or any other
obligation outstanding at the time of such Asset Sale that either
(A) is secured by a Lien on the property or assets sold or (B) is
required to be paid as a result of such sale and
(iv) appropriate amounts to be provided by the Company or any
Restricted Subsidiary as a reserve against any liabilities
associated with such Asset Sale, including, without limitation,
pension and other post-employment benefit liabilities, liabilities
related to environmental matters and liabilities under any
indemnification obligations associated with such Asset Sale, all as
determined in conformity with GAAP and
(b) with respect to any issuance or sale of Capital Stock, the
proceeds of such issuance or sale in the form of cash or cash
equivalents, including payments in respect of deferred payment
obligations (to the extent corresponding to the principal, but not
interest, component thereof) when received in the form of cash or
cash equivalents (except to the extent such obligations are financed
or sold with recourse to the Company or any Restricted Subsidiary)
and proceeds from the conversion of other property received when
converted to cash or cash equivalents, net of attorney's fees,
accountants' fees, underwriters' or placement agents' fees,
discounts or commissions and brokerage, consultant and other fees
incurred in connection with such issuance or sale and net of taxes
paid or payable as a result thereof.
"Note Guarantee" means any Guarantee of the Notes by a Guarantor.
"Offer to Purchase" means an offer to purchase Notes by the Company
from the Holders commenced by mailing a notice to the Trustee and each Holder
stating:
(i) the covenant pursuant to which the offer is being made and
that all Notes validly tendered will be accepted for payment on a
pro rata basis;
(ii) the purchase price and the date of purchase (which shall
be a Business day no earlier than 30 days nor later than 60 days
from the date such notice is mailed) (the "Payment Date");
(iii) that any Note not tendered will continue to accrue
interest pursuant to its terms;
(iv) that, unless the Company defaults in the payment of the
purchase price, any Note accepted for payment pursuant to the Offer
to Purchase shall cease to accrue interest on and after the Payment
Date;
(v) that Holders electing to have a Note purchased pursuant to
the Offer to Purchase will be required to surrender the Note,
together with the form entitled "Option of the Holder to Elect
Purchase" on the reverse side of the Note completed, to the Paying
Agent at the address specified in the notice prior to the close of
business on the Business Day immediately preceding the Payment Date;
(vi) that Holders will be entitled to withdraw their election
if the Paying Agent receives, not later than the close of business
on the third Business Day immediately preceding the Payment Date, a
telegram, facsimile transmission or letter setting forth the name of
such Holder, the principal amount of Notes delivered for purchase
and a statement that such Holder is withdrawing his election to have
such Notes purchased;
(vii) that Holders whose Notes are being purchased only in part
will be issued new Notes equal in principal amount to the
unpurchased portion of the Notes surrendered; provided that each
47
Note purchased and each new Note issued shall be in a principal
amount of $1,000 or integral multiples thereof; and
(viii) if more than 98% of the outstanding principal amount of
the Notes is tendered pursuant to an Offer to Purchase, the Company
shall have the right to redeem the balance of the Notes at the
purchase price specified in such Offer to Purchase, plus (without
duplication) accrued and unpaid interest, if any, to the Redemption
Date on the principal amount of the Notes to be redeemed.
On the Payment Date, the Company shall
(i) accept for payment on a pro rata basis Notes or portions
thereof tendered pursuant to an Offer to Purchase;
(ii) deposit with the Paying Agent money sufficient to pay the
purchase price of all Notes or portions thereof so accepted; and
(iii) deliver, or cause to be delivered, to the Trustee all
Notes or portions thereof so accepted together with an Officers'
Certificate specifying the Notes or portions thereof accepted for
payment by the Company. The Paying Agent shall promptly mail to the
Holders of Notes so accepted payment in an amount equal to the
purchase price, and the Trustee shall promptly authenticate and mail
to such Holders a new Note equal in principal amount to any
unpurchased portion of the Note surrendered; provided that each Note
purchased and each new Note issued shall be in a principal amount of
$1,000 or integral multiples thereof. The Company will publicly
announce the results of an Offer to Purchase as soon as practicable
after the Payment Date. The Trustee shall act as the Paying Agent
for an Offer to Purchase. The Company will comply with Rule 14e-1
under the Exchange Act and any other securities laws and regulations
thereunder to the extent such laws and regulations are applicable,
in the event that the Company is required to repurchase Notes
pursuant to an Offer to Purchase.
"Outstanding Note" means the unregistered 10 1/2% Senior Notes due
2004 being accepted for exchange pursuant to the exchange offer.
"Permitted Investment" means
(i) an Investment in the Company or a Restricted Subsidiary or
a Person which will, upon the making of such Investment, become a
Restricted Subsidiary or be merged or consolidated with or into or
transfer or convey all or substantially all its assets to, the
Company or a Restricted Subsidiary; provided that such Person's
primary business is related, ancillary or complementary to the
businesses of the Company and its Restricted Subsidiaries on the
date of such Investment;
(ii) Temporary Cash Investments;
(iii) payroll, travel and similar advances to cover matters
that are expected at the time of such advances ultimately to be
treated as expenses in accordance with GAAP;
(iv) stock, obligations or securities received in settlement or
satisfaction of judgments or claims;
(v) loans or advances to employees in the ordinary course of
business; and
(vi) the non-cash portion of the consideration received for any
Asset Sale.
"Permitted Liens" means
(i) Liens for taxes, assessments, governmental charges or
claims that are being contested in good faith by appropriate legal
proceedings promptly instituted and diligently conducted and for
which a reserve or other appropriate provision, if any, as shall be
required in conformity with GAAP shall have been made;
(ii) statutory and common law Liens of landlords and carriers,
warehousemen, mechanics, suppliers, materialmen, repairmen or other
similar Liens arising in the ordinary course of business and with
respect to amounts not yet delinquent or being contested in good
faith by appropriate legal
48
proceedings promptly instituted and diligently conducted and for
which a reserve or other appropriate provision, if any, as shall be
required in conformity with GAAP shall have been made;
(iii) Liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment
insurance and other types of social security;
(iv) Liens incurred or deposits made to secure the performance
of tenders, bids, leases, statutory or regulatory obligations,
bankers' acceptances, surety and appeal bonds, government contracts,
performance and return-of-money bonds and other obligations of a
similar nature incurred in the ordinary course of business
(exclusive of obligations for the payment of borrowed money);
(v) easements, rights-of-way, municipal and zoning ordinances
and similar charges, encumbrances, title defects or other
irregularities that do not materially interfere with the ordinary
course of business of the Company or any of its Restricted
Subsidiaries;
(vi) Liens (including extensions and renewals thereof) upon
real or personal property acquired after the Closing Date; provided
that (a) each such Lien is created solely for the purpose of
securing Indebtedness Incurred to finance the costs (including
transaction costs and the costs of improvement or construction) of
the item of property or assets subject thereto and such Lien is
created prior to, at the time of or within twelve months after, the
later of the acquisition, the completion of construction or the
commencement of full operation of such property or assets (b) the
principal amount of the Indebtedness secured by such Lien does not
exceed 100% of such costs and (c) any such Lien shall not extend to
or cover any property or assets other than such item of property or
assets and any improvements on such item;
(vii) Liens upon aircraft, engines and buyer-furnished
equipment attached thereto or incorporated therein other than as
permitted by the foregoing clause (vi); provided that, after giving
effect thereto and the Indebtedness secured thereby, the book value
of assets of the Company not subject to any Lien (other than Liens
described in clauses (i) through (v), (xiii) and (xvi) of the
definition of "Permitted Liens") shall be not less than $125
million;
(viii) leases or subleases granted to others that do not
materially interfere with the ordinary course of business of the
Company and its Restricted Subsidiaries, taken as a whole;
(ix) Liens encumbering property or assets under construction
arising from progress or partial payments by a customer of the
Company or its Restricted Subsidiaries relating to such property or
assets;
(x) any interest or title of a lessor in the property subject
to any Capitalized Lease or operating lease;
(xi) Liens arising from filing Uniform Commercial Code
financing statements regarding leases;
(xii) Liens on property of, or on shares of Capital Stock or
Indebtedness of, any Person existing at the time such Person
becomes, or becomes a part of, any Restricted Subsidiary; provided
that such Liens do not extend to or cover any property or assets of
the Company or any Restricted Subsidiary other than the property or
assets acquired;
(xiii) Liens with respect to the assets of a Restricted
Subsidiary granted by such Restricted Subsidiary to the Company or a
Wholly Owned Restricted Subsidiary to secure Indebtedness owing to
the Company or such other Restricted Subsidiary;
(xiv) Liens arising from the rendering of a final judgment or
order against the Company or any Restricted Subsidiary that does not
give rise to an Event of Default;
(xv) Liens securing reimbursement obligations with respect to
letters of credit that encumber documents and other property
relating to such letters of credit and the products and proceeds
thereof;
(xvi) Liens in favor of customs and revenue authorities arising
as a matter of law to secure payment of customs duties in connection
with the importation of goods;
49
(xvii) Liens encumbering customary initial deposits and margin
deposits, and other Liens that are within the general parameters
customary in the industry and incurred in the ordinary course of
business, in each case, securing Indebtedness under Interest Rate
Agreements and Currency Agreements and forward contracts, options,
future contracts, futures options or similar agreements or
arrangements designed solely to protect the Company or any of its
Restricted Subsidiaries from fluctuations in interest rates,
currencies or the price of commodities;
(xviii) Liens arising out of conditional sale, title retention,
consignment or similar arrangements for the sale of goods entered
into by the Company or any of its Restricted Subsidiaries in the
ordinary course of business in accordance with the past practices of
the Company and its Restricted Subsidiaries prior to the Closing
Date; and
(xix) Liens on or sales of receivables.
"Restricted Subsidiary" means any Subsidiary of the Company other
than an Unrestricted Subsidiary.
"S&P" means Standard & Poor's Ratings Service and its successors.
"Significant Subsidiary" means, at any date of determination, any
Restricted Subsidiary that, together with its Subsidiaries,
(i) for the most recent fiscal year of the Company, accounted
for more than 10% of the consolidated revenues of the Company and
its Restricted Subsidiaries or
(ii) as of the end of such fiscal year, was the owner of more
than 10% of the consolidated assets of the Company and its
Restricted Subsidiaries, all as set forth on the most recently
available consolidated financial statements of the Company for such
fiscal year.
"Stated Maturity" means,
(i) with respect to any debt security, the date specified in
such debt security as the fixed date on which the final installment
of principal of such debt security is due and payable and
(ii) with respect to any scheduled installment of principal of
or interest on any debt security, the date specified in such debt
security as the fixed date on which such installment is due and
payable.
"Subsidiary" means, with respect to any Person, any corporation,
association or other business entity of which more than 50% of the voting
power of the outstanding Voting Stock is owned, directly or indirectly, by
such Person and one or more other Subsidiaries of such Person.
"Temporary Cash Investment" means any of the following:
(i) direct obligations of the United States of America or any
agency thereof or obligations fully and unconditionally guaranteed
by the United States of America or any agency thereof,
(ii) time deposit accounts, certificates of deposit and money
market deposits maturing within 180 days of the date of acquisition
thereof issued by a bank or trust company which is organized under
the laws of the United States of America, any state thereof or any
foreign country recognized by the United States of America, and
which bank or trust company has capital, surplus and undivided
profits aggregating in excess of $50 million (or the foreign
currency equivalent thereof) and has outstanding debt which is rated
"N' (or such similar equivalent rating) or higher by at least one
nationally recognized statistical rating organization (as defined in
Rule 436 under the Securities Act) or any money-market fund
sponsored by a registered broker dealer or mutual fund distributor,
(iii) repurchase obligations with a term of not more than 30
days for underlying securities of the types described in clause (i)
above entered into with a bank meeting the qualifications described
in clause (ii) above,
(iv) commercial paper, maturing not more than 90 days after the
date of acquisition issued by a corporation (other than an Affiliate
of the Company) organized and in existence under the laws
50
of the United States of America, any state thereof or any foreign
country recognized by the United States of America with a rating at
the time as of which any investment therein is made of "P-1" (or
higher) according to Moody's or A-l (or higher) according to S&P,
and
(v) securities with maturities of six months or less from the
date of acquisition issued or fully and unconditionally guaranteed
by any state, commonwealth or territory of the United States of
America, or by any political subdivision or taxing authority
thereof, and rated at least "A" by S&P or Moody's.
"Trade Payables" means, with respect to any Person, any accounts
payable or any other indebtedness or monetary obligation to trade creditors
created, assumed or Guaranteed by such Person or any of its Subsidiaries
arising in the ordinary course of business in connection with the acquisition
of goods or services.
"Transaction Date" means, with respect to the Incurrence of any
Indebtedness by the Company or any of its Restricted Subsidiaries, the date
such Indebtedness is to be Incurred and with respect to any Restricted
Payment, the date such Restricted Payment is to be made.
"Unrestricted Subsidiary" means
(i) any Subsidiary of the Company that at the time of
determination shall be designated an Unrestricted Subsidiary by the
Board of Directors in the manner provided below; and
(ii) any Subsidiary of an Unrestricted Subsidiary. The Board of
Directors may designate any Restricted Subsidiary (including any
newly acquired or newly formed Subsidiary of the Company) to be an
Unrestricted Subsidiary unless such Subsidiary owns any Capital
Stock of, or owns or holds any Lien on any property of, the Company
or any Restricted Subsidiary; provided that:
(A) any Guarantee by the Company or any Restricted
Subsidiary of any Indebtedness of the Subsidiary being so
designated shall be deemed an "Incurrence" of such Indebtedness
and an "Investment" by the Company or such Restricted
Subsidiary (or both, if applicable) at the time of such
designation;
(B) either (I) the Subsidiary to be so designated has
total assets of $1,000 or less or (II) if such Subsidiary has
assets greater than $1,000, such designation would be permitted
under the "Limitation on Restricted Payments" covenant
described below; and
(C) if applicable, the Incurrence of Indebtedness and the
Investment referred to in clause (A) of this proviso would be
permitted under the "Limitation on Indebtedness" and
"Limitation on Restricted Payments" covenants described below.
The Board of Directors may designate any Unrestricted Subsidiary to be a
Restricted Subsidiary; provided that
(i) no Default or Event of Default shall have occurred and be
continuing at the time of or after giving effect to such designation
and (ii) all Liens and Indebtedness of such Unrestricted Subsidiary
outstanding immediately after such designation would, if Incurred at
such time, have been permitted to be Incurred (and shall be deemed
to have been Incurred) for all purposes of the Indenture. Any such
designation by the Board of Directors shall be evidenced to the
Trustee by promptly filing with the Trustee a copy of the Board
Resolution giving effect to such designation and an Officers'
Certificate certifying that such designation complied with the
foregoing provisions.
"Voting Stock" means with respect to any Person, Capital Stock of
any class or kind ordinarily having the power to vote for the election of
directors, managers or other voting members of the governing body of such
Person.
"Wholly Owned" means, with respect to any Subsidiary of any Person
the ownership of all of the outstanding Capital Stock of such Subsidiary
(other than any director's qualifying shares or Investments by foreign
nationals mandated by applicable law) by such Person or one or more Wholly
Owned Subsidiaries of such Person.
51
Covenants
Limitation on Indebtedness
(a) The Company will not, and will not permit any of its Restricted
Subsidiaries to, Incur any Indebtedness (other than the Notes, the Note
Guarantees and Indebtedness existing on the Closing Date); provided that the
Company may Incur Indebtedness if, after giving effect to the Incurrence of
such Indebtedness and the receipt and application of the proceeds therefrom,
the Interest Coverage Ratio would be greater than 3:1.
Notwithstanding the foregoing, the Company and any Restricted
Subsidiary (except as specified below) may Incur each and all of the
following:
(i) Indebtedness of the Company or any Restricted Subsidiary
that is a Guarantor outstanding at any time under the Credit
Agreement; provided, that after giving effect to the Incurrence of
any such Indebtedness, the book value of assets of the Company not
subject to any Lien (other than Liens described in clauses (i)
through (v), (xiii) and (xvi) of the definition of "Permitted
Liens") shall not be less than $125 million;
(ii) Indebtedness owed (A) to the Company evidenced by an
unsubordinated promissory note or (B) to any of its Restricted
Subsidiaries; provided that any event which results in any such
Restricted Subsidiary ceasing to be a Restricted Subsidiary or any
subsequent transfer of such Indebtedness (other than to the Company
or another Restricted Subsidiary) shall be deemed, in each case, to
constitute an Incurrence of such Indebtedness not permitted by this
clause (ii);
(iii) Indebtedness issued in exchange for, or the net proceeds
of which are used to refinance or refund, then outstanding
Indebtedness Incurred under clause (v) of this paragraph and any
refinancings thereof in an amount not to exceed the amount so
refinanced or refunded (plus premiums, accrued interest, fees and
expenses); provided that Indebtedness the proceeds of which are used
to refinance or refund the Notes or Indebtedness that is pari passu
with, or subordinated in right of payment to, the Notes or Note
Guarantees shall only be permitted under this clause (iii) if:
(A) in case the Notes are refinanced in part or the
Indebtedness to be refinanced is pari passu with the Notes
or Note Guarantees, such new Indebtedness, by its terms or
by the terms of any agreement or instrument pursuant to
which such new Indebtedness is outstanding, is expressly
made pari passu with, or subordinate in right of payment
to, the remaining Notes or Note Guarantees, as the case
may be;
(B) in case the Indebtedness to be refinanced is
subordinated in right of payment to the Notes or Note
Guarantees, as the case may be, such new Indebtedness, by
its terms or by the terms of any agreement or instrument
pursuant to which such new Indebtedness is issued or
remains outstanding, is expressly made subordinate in
right of payment to the Notes or the Note Guarantees, as
the case may be, at least to the extent that the
Indebtedness to be refinanced is subordinated to the Notes
or the Note Guarantees, as the case may be; and
(C) such new Indebtedness, determined as of the date of
Incurrence of such new Indebtedness, does not mature prior
to the Stated Maturity of the Indebtedness to be
refinanced or refunded, and the Average Life of such new
Indebtedness is at least equal to the remaining Average
Life of the Indebtedness to be refinanced or refunded;
and provided further that in no event may Indebtedness of the Company be
refinanced by means of any Indebtedness of any Restricted Subsidiary
pursuant to this clause (iii) (other than pursuant to an Offer to
Purchase);
(iv) Indebtedness:
(A) in respect of performance, surety or appeal bonds
provided in ordinary course of business;
52
(B) under Currency Agreements and Interest Rate Agreements
provided that such agreements (a) are designed solely to protect the Company or
its Restricted Subsidiaries against fluctuations in foreign currency exchange
rates or interest rates and (b) do not increase the Indebtedness of the
obligor outstanding at any time other than as a result of fluctuations in
foreign currency exchange rates or interest rates or by reason of fees,
indemnities and compensation payable thereunder; and
(C) arising from agreements providing for indemnification,
adjustment of purchase price or similar obligations, or from Guarantees or
letters of credit, surety bonds or performance bonds securing any obligations
of the Company or any of its Restricted Subsidiaries pursuant to such
agreements,
in any case Incurred in connection with the disposition of any business,
assets or Restricted Subsidiary (other than Guarantees of Indebtedness
Incurred by any Person acquiring all or any portion of such business,
assets or Restricted Subsidiary for the purpose of financing such
acquisition), in a principal amount not to exceed the gross proceeds
actually received by the Company or any Restricted Subsidiary in connection
with such disposition;
(v) Indebtedness of the Company, to the extent the net proceeds
thereof are promptly (A) used to purchase Notes tendered in an Offer
to Purchase made as a result of a Change in Control or (B) deposited
to defease the Notes as described below under "Defeasance";
(vi) Guarantees of the Notes, Guarantees by the Company or
Restricted Subsidiaries of Indebtedness of ATA under the Credit
Agreement, and Guarantees of Indebtedness of the Company by any
Restricted Subsidiary provided the Guarantee of such Indebtedness is
permitted by and made in accordance with the "Limitation on Issuance
of Guarantees by Restricted Subsidiaries" covenant described below;
(vii) Indebtedness of the Company or any Restricted Subsidiary
Incurred to finance the cost of aircraft, engines and
buyer-furnished equipment attached thereto or incorporated therein;
provided, that such Indebtedness is created solely for the purpose
of financing the costs (including transaction costs and the costs of
improvement or construction) of property or assets and is incurred
prior to, at the time of or within 12 months after, the later of the
acquisition, the completion of construction or the commencement of
full operation of such property or assets, and (b) the principal
amount of such Indebtedness does not exceed 100% of such costs; and
(viii) Indebtedness of the Company (in addition to Indebtedness
permitted under clauses (i) through (vii) above in an aggregate
principal amount outstanding at any time not to exceed $10 million.
(b) Notwithstanding any other provision of this "Limitation on
Indebtedness" covenant, the maximum amount of Indebtedness that the Company or
a Restricted Subsidiary may Incur pursuant to this "Limitation on
Indebtedness" covenant shall not be deemed to be exceeded, with respect to any
outstanding Indebtedness due solely to the result of fluctuations in the
exchange rates of currencies.
(c) For purposes of determining any particular amount of
Indebtedness under this "Limitation on Indebtedness" covenant,
(i) Indebtedness Incurred under the Credit Agreement on or
prior to the Closing Date shall be treated as Incurred pursuant to
clause (i) of the second paragraph of this "Limitation on
Indebtedness" covenant;
(ii) Guarantees, Liens or obligations with respect to letters
of credit supporting Indebtedness otherwise included in the
determination of such particular amount shall not be included; and
(iii) any Liens granted pursuant to the equal and ratable
provisions referred to in the "Limitation on Liens" covenant
described below shall not be treated as Indebtedness.
For purposes of determining compliance with this "Limitation on
Indebtedness" covenant, in the event that an item of Indebtedness meets the
criteria of more than one of the types of Indebtedness described in the above
clauses (other than Indebtedness referred to in clause (1) of the preceding
sentence), the
53
Company, in its sole discretion shall classify such item of Indebtedness
and only be required to include the amount and type of such Indebtedness in
one of such clauses.
Limitation on Restricted Payments
The Company will not, and will not permit any Restricted Subsidiary
to, directly or indirectly:
(i) declare or pay any dividend or make any distribution on or
with respect to its Capital Stock (other than (x) dividends or
distributions payable solely in shares of its Capital Stock (other
than Disqualified Stock) or in options, warrants or other rights to
acquire shares of such Capital Stock and (y) pro rata dividends or
distributions on Common Stock of Restricted Subsidiaries held by
minority stockholders) held by Persons other than the Company or any
of its Restricted Subsidiaries;
(ii) purchase, redeem, retire or otherwise acquire for value
any shares of Capital Stock of (A) the Company or an Unrestricted
Subsidiary (including options, warrants or other rights to acquire
such shares of Capital Stock) held by any Person or (B) a Restricted
Subsidiary (including options, warrants or other rights to acquire
such shares of Capital Stock) held by any Affiliate of the Company
(other than a Wholly Owned Restricted Subsidiary) or any Holder (or
any Affiliate of such Holder) of 5% or more of the Capital Stock of
the Company;
(iii) make any voluntary or optional principal payment, or
voluntary or optional redemption, repurchase, defeasance, or other
acquisition or retirement for value, of Indebtedness of the Company
or any Guarantor that is subordinated in right of payment to the
Notes or to a Guarantor's Note Guarantee, as the case may be; or
(iv) make any Investment, other than a Permitted Investment, in
any Person (such other actions described in clauses (i) through (iv)
above being collectively payments or any "Restricted Payments") if,
at the time of, and after giving effect to, the proposed Restricted
Payment:
(A) a Default or Event of Default shall have occurred
and be continuing;
(B) the Company could not Incur at least $1.00 of
Indebtedness under the first paragraph of the "Limitation on Indebtedness"
covenant; or
(C) the aggregate amount of all Restricted Payments
(the amount, if other than in cash, to be determined in good faith by the Board
of Directors, whose determination shall be conclusive and evidenced by a Board
Resolution) made after the Closing Date shall exceed the sum of
(1) 50% of the aggregate amount of the Adjusted
Consolidated Net Income (or, if the Adjusted Consolidated
Net Income is a loss, minus 100% of the amount of such
loss) (determined by excluding income resulting from
transfers of assets by the Company or a Restricted
Subsidiary to an Unrestricted Subsidiary) accrued on a
cumulative basis during the period (taken as one
accounting period) beginning on the first day of the
fiscal quarter immediately following the Closing Date and
ending on the last day of the last fiscal quarter
preceding the Transaction Date for which reports have been
filed with the Commission or provided to the Trustee
pursuant to the "Commission Reports and Reports to
Holders" covenant; plus
(2) the aggregate Net Cash Proceeds received by the
Company after the Closing Date from the issuance and sale
permitted by the Indenture of its Capital Stock (other
than Disqualified Stock) to a Person who is not a
Subsidiary of the Company, including an issuance or sale
permitted by the Indenture of Indebtedness of the Company
for cash subsequent to the Closing Date upon the
conversion of such Indebtedness into Capital Stock (other
than Disqualified Stock) of the Company, or from the
issuance to a Person who is not a Subsidiary of the
Company of any options, warrants or other rights to
acquire Capital Stock of the Company (in each case,
exclusive of any Disqualified Stock or any options,
warrants or other rights that are redeemable at the option
of the Holder, or are required to be redeemed, prior to
the Stated Maturity of the Notes); plus
54
(3) an amount equal to the net reduction in
Investments (other than reductions in Permitted
Investments) in any Person resulting from payments of
interest on Indebtedness, dividends, repayments of loans
or advances, or other transfers of assets, in each case to
the Company or any Restricted Subsidiary or from the Net
Cash Proceeds from the sale of any such Investment
(except, in each case, to the extent any such payment or
proceeds are included in the calculation of Adjusted
Consolidated Net Income), or from redesignations of
Unrestricted Subsidiaries as Restricted Subsidiaries
(valued in each case as provided in the definition of
"Investments"); not to exceed, in each case, the amount of
Investments previously made by the Company or any
Restricted Subsidiary in such Person or Unrestricted
Subsidiary; minus
(4) the sum of the amounts by which the Pro Forma
Consolidated Net Worth after giving effect to each
consolidation, merger and sale of assets effectuated
pursuant to clause (iii) under the "Consolidation, Merger
and Sale of Assets" covenant was less than the Base
Consolidated Net Worth immediately prior to such
consolidation, merger and sale of assets; plus
(5) $5 million.
The foregoing provision shall not be violated by reason of:
(i) the payment of any dividend within 60 days after the date
of declaration thereof if, at said date of declaration, such payment
would comply with the foregoing paragraph;
(ii) the redemption, repurchase, defeasance or other
acquisition or retirement for value of Indebtedness that is
subordinated in right of payment to the Notes including premium, if
any and accrued and unpaid interest, with the proceeds of, or in
exchange for, Indebtedness Incurred under clause (iii) of the second
paragraph of part (a) of the "Limitation on Indebtedness" covenant;
(iii) the repurchase, redemption or other acquisition of
Capital Stock of the Company or an Unrestricted Subsidiary (or
options, warrants or other rights to acquire such Capital Stock) in
exchange for, or out of the proceeds of a substantially concurrent
offering of, shares of Capital Stock (other than Disqualified Stock)
of the Company (or options, warrants or other rights to acquire such
Capital Stock);
(iv) the making of any principal payment or the repurchase,
redemption, retirement, defeasance or other acquisition for value of
Indebtedness of the Company or any Guarantor which is subordinated
in right of payment to the Notes or the Note Guarantees, as the case
may be, in exchange for, or out of the proceeds of, a substantially
concurrent offering of, shares of the Capital Stock (other than
Disqualified Stock) of the Company or any Guarantor (or options,
warrants or other rights to acquire such Capital Stock);
(v) payments or distributions, to dissenting stockholders
pursuant to applicable law, pursuant to or in connection with a
consolidation, merger or transfer of assets that complies with the
provisions of the Indenture applicable to mergers, consolidations
and transfers of all or substantially all of the property and assets
of the Company;
(vi) Investments acquired in exchange for Capital Stock (other
than Disqualified Stock) of the Company; provided that, except in
the case of clauses (i) and (iii), no Default or Event of Default
shall have occurred and be continuing or occur as a consequence of
the actions or payments set forth therein; or
(vii) the purchase or redemption of subordinated Indebtedness
pursuant to asset sale or change of control provisions contained in
the Indenture or other governing instrument relating thereto;
provided, however, that (a) no offer or purchase obligation may be
triggered in respect of such Indebtedness unless a corresponding
obligation also arises for the Notes and (b) in all events, no
repurchase or redemption of such Indebtedness may be consummated
unless and until the Company shall have satisfied all repurchase
obligations with respect to any required purchase offer made with
respect to the Notes.
55
Each Restricted Payment permitted pursuant to the preceding
paragraph (other than the Restricted Payment referred to in clause (ii)
thereof, an exchange of Capital Stock for Capital Stock or Indebtedness
referred to in clause (iii) or (iv) thereof and an Investment referred to in
clause (vi) thereof), and the Net Cash Proceeds from any issuance of Capital
Stock referred to in clauses (iii) and (iv), shall be included in calculating
whether the conditions of clause (C) of the first paragraph of this
"Limitation on Restricted Payments" covenant have been met with respect to any
subsequent Restricted Payments. In the event the proceeds of an issuance of
Capital Stock of the Company are used for the redemption, repurchase or other
acquisition of the Notes, or Indebtedness that is pari passu with the Notes,
then the Net Cash Proceeds of such issuance shall be included in clause (C) of
the first paragraph of this "Limitation on Restricted Payments" covenant only
to the extent such proceeds are not used for such redemption, repurchase or
other acquisition of Indebtedness.
Limitation on Dividend and Other Payment Restrictions Affecting Restricted
Subsidiaries
The Company will not, and will not permit any Restricted Subsidiary
to, create or otherwise cause or suffer to exist or become effective any
consensual encumbrance or restriction of any kind on the ability of any
Restricted Subsidiary that is not a Guarantor to:
(i) pay dividends or make any other distributions permitted by
applicable law on any Capital Stock of such Restricted Subsidiary
owned by the Company or any other Restricted Subsidiary;
(ii) pay any Indebtedness owed to the Company or any other
Restricted Subsidiary;
(iii) make loans or advances to the Company or any other
Restricted Subsidiary; or
(iv) transfer any of its property or assets to the Company or
any other Restricted Subsidiary.
The foregoing provisions shall not restrict any encumbrances or
restrictions:
(i) existing on the Closing Date in the Credit Agreement, the
Indenture or any other agreements in effect on the Closing Date, and
any extensions, refinancings, renewals or replacements of such
agreements; provided that the encumbrances and restrictions in any
such extensions, refinancings, renewals or replacements are no less
favorable in any material respect to the Holders than those
encumbrances or restrictions that are then in effect and that are
being extended, refinanced, renewed or replaced;
(ii) existing under or by reason of applicable law;
(iii) existing with respect to any Person or the property or
assets of such Person acquired by the Company or any Restricted
Subsidiary, existing at the time of such acquisition and not
incurred in contemplation thereof, which encumbrances or
restrictions are not applicable to any Person or the property or
assets of any Person other than such Person or the property or
assets of such Person so acquired;
(iv) in the case of clause (iv) of the first paragraph of this
"Limitation on Dividend and Other Payment Restrictions Affecting
Restricted Subsidiaries" covenant, (A) that restrict in a customary
manner the subletting, assignment or transfer of any property or
asset that is a lease, license, conveyance or contract or similar
property or asset, (B) existing by virtue of any transfer of,
agreement to transfer, option or right with respect to, or Lien on,
any property or assets of the Company or any Restricted Subsidiary
not otherwise prohibited by the Indenture or (C) arising or agreed
to in the ordinary course of business, not relating to any
Indebtedness, and that do not, individually or in the aggregate,
detract from the value of property or assets of the Company or any
Restricted Subsidiary in any manner material to the Company or any
Restricted Subsidiary;
(v) with respect to a Restricted Subsidiary and imposed
pursuant to an agreement that has been entered into for the sale or
disposition of all or substantially all of the Capital Stock of, or
property and assets of, such Restricted Subsidiary; or
(vi) contained in the terms of any Indebtedness or any
agreement pursuant to which such Indebtedness was issued if:
56
(A) the encumbrance or restriction applies only
in the event of a payment default or a default with respect to a
financial covenant contained in such Indebtedness or agreement;
(B) the encumbrance or restriction is not
materially more disadvantageous to the Holders of the Notes than
is customary in comparable financings (as determined by the
Company); and
(C) the Company determines that any such
encumbrance or restriction will not materially affect the
Company's ability to make principal or interest payments on the
Notes. Nothing contained in this "Limitation on Dividend and Other
Payment Restrictions Affecting Restricted Subsidiaries" covenant
shall prevent the Company or any Restricted Subsidiary from:
(1) creating, incurring, assuming or suffering to
exist any Liens otherwise permitted in the "Limitation on
Liens" covenant; or
(2) restricting the sale or other disposition of
property or assets of the Company or any of its Restricted
Subsidiaries that secure Indebtedness of the Company or
any of its Restricted Subsidiaries.
Limitation on the Issuance and Sale of Capital Stock of Restricted Subsidiaries
The Company will not sell, and will not permit any Restricted
Subsidiary, directly or indirectly, to issue or sell, any shares of Capital
Stock of a Restricted Subsidiary (including options, warrants or other rights
to purchase shares of such Capital Stock) except:
(i) to the Company or a Wholly Owned Restricted
Subsidiary;
(ii) issuances of director's qualifying shares or sales to
foreign nationals of shares of Capital Stock of foreign
Restricted Subsidiaries, to the extent required by applicable
law; or
(iii) if, immediately after giving effect to such issuance
or sale, such Restricted Subsidiary would no longer constitute
a Restricted Subsidiary and any Investment in such Person
remaining after giving effect to such issuance or sale would
have been permitted to be made under the "Limitation on
Restricted Payments" covenant if made on the date of such
issuance or sale.
Limitation on Issuances of Guarantees by Restricted Subsidiaries
The Company will not permit any Restricted Subsidiary that is not a
Guarantor, directly or indirectly, to Guarantee any Indebtedness of the
Company which is pari passu with or subordinate in right of payment to the
Notes ("Guaranteed Indebtedness"), unless:
(i) such Restricted Subsidiary simultaneously executes and
delivers a supplemental indenture to the Indenture providing
for a Guarantee (a "Subsidiary Guarantee") of payment of the
Notes by such Restricted Subsidiary; and
(ii) such Restricted Subsidiary waives and will not in any
manner whatsoever claim or take the benefit or advantage of,
any rights of reimbursement, indemnity or subrogation or any
other rights against the Company or any other Restricted
Subsidiary as a result of any payment by such Restricted
Subsidiary under its Subsidiary Guarantee; provided that this
paragraph shall not be applicable to any Guarantee of any
Restricted Subsidiary that existed at the time such Person
became a Restricted Subsidiary and was not Incurred in
connection with, or in contemplation of, such Person becoming a
Restricted Subsidiary. If the Guaranteed Indebtedness is:
(A) pari passu with the Notes or the Note
Guarantees, then the Guarantee of such Guaranteed
Indebtedness shall be pari passu with, or subordinated
to, the Subsidiary Guarantee or
(B) subordinated to the Notes or the Note
Guarantees, then the Guarantee of such Guaranteed
Indebtedness shall be subordinated to the Subsidiary
Guarantee at least to the extent that the Guaranteed
Indebtedness is subordinated to the Notes or the Note
Guarantees, as the case may be.
57
Notwithstanding the foregoing, any Subsidiary Guarantee by a
Restricted Subsidiary may provide by its terms that it shall be automatically
and unconditionally released and discharged upon
(i) any sale, exchange or transfer, to any Person not an
Affiliate of the Company, of all of the Company's and each
Restricted Subsidiary's Capital Stock in, or all or
substantially all the assets of, such Restricted Subsidiary
(which sale, exchange or transfer is not prohibited by the
Indenture) or
(ii) the release or discharge of the Guarantee which
resulted in the creation of such Subsidiary Guarantee, except a
discharge or release by or as a result of payment under such
Guarantee.
Limitation on Transactions with Shareholders and Affiliates
The Company will not, and will not permit any Restricted Subsidiary
to, directly or indirectly, enter into, renew or extend any transaction
(including, without limitation, the purchase, sale, lease or exchange of
property or assets, or the rendering of any service) with any Holder (or any
Affiliate of such Holder) of 5% or more of any class of Capital Stock of the
Company or with any Affiliate of the Company or any Restricted Subsidiary,
except upon fair and reasonable terms no less favorable to the Company or such
Restricted Subsidiary than could be obtained, at the time of such transaction
or, if such transaction is pursuant to a written agreement, at the time of the
execution of the agreement providing therefor, in a comparable arm's-length
transaction with a Person that is not such a Holder or an Affiliate.
The foregoing limitation does not limit, and shall not apply to:
(i) transactions (A) approved by a majority of the
disinterested members of the Board of Directors, or (B) for
which the Company or a Restricted Subsidiary delivers to the
Trustee a written opinion of a nationally recognized investment
banking firm stating that the transaction is fair to the
Company or such Restricted Subsidiary from a financial point of
view;
(ii) any transaction solely between the Company and any of
its Wholly Owned Restricted Subsidiaries or solely between
Wholly Owned Restricted Subsidiaries;
(iii) the payment of reasonable and customary regular
compensation (whether in cash or securities) and expense
reimbursements to directors of the Company who are not
employees of the Company;
(iv) any payments or other transactions pursuant to any
tax-sharing agreement between the Company and any other Person
with which the Company files a consolidated tax return or with
which the Company is part of a consolidated group for tax
purposes; or
(v) any Restricted Payments not prohibited by the
"Limitation on Restricted Payments" covenant. Notwithstanding
the foregoing, any transaction or series of related
transactions covered by the first paragraph of this "Limitation
on Transactions with Shareholders and Affiliates" covenant and
not covered by clauses (ii) through (v) of this paragraph;
(a) the aggregate amount of which exceeds $1 million in value, must
be approved or determined to be fair in the manner provided for in clause
(i)(A) or (B) above; and
(b) the aggregate amount of which exceeds $3 million in value, must
be determined to be fair in the manner provided for in clause (i)(B) above.
Limitation on Liens
The Company will not, and will not permit any Restricted Subsidiary
to, create, incur, assume or suffer to exist any Lien on any of its assets or
properties of any character, or any shares of Capital Stock or Indebtedness of
any Restricted Subsidiary, without making effective provision for all of the
Notes (or in the case of a Lien on assets or properties of a Guarantor, the
Note Guarantee of such Guarantor) and all other amounts due under the
Indenture to be directly secured equally and ratably with (or, if the
obligation or liability to be secured by such Lien is subordinated in right of
payment to the Notes or the Note Guarantee, prior to) the obligation or
liability secured by such Lien.
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The foregoing limitation does not apply to:
(i) Liens existing on the Closing Date, including Liens
securing obligations under the Credit Agreement;
(ii) Liens granted after the Closing Date on any assets or
Capital Stock of the Company or its Restricted Subsidiaries created
in favor of the Holders;
(iii) Liens with respect to the assets of a Restricted
Subsidiary granted by such Restricted Subsidiary to the Company or a
Wholly Owned Restricted Subsidiary to secure Indebtedness owing to
the Company or such other Restricted Subsidiary;
(iv) Liens securing Indebtedness which is Incurred to refinance
secured Indebtedness which is permitted to be Incurred under clause
(iii) of the second paragraph of the "Limitation on Indebtedness"
covenant; provided that such Liens do not extend to or cover any
property or assets of the Company or any Restricted Subsidiary other
than the property or assets securing the Indebtedness being
refinanced;
(v) Liens on any property or assets of a Restricted Subsidiary
securing Indebtedness of such Restricted Subsidiary permitted under
the "Limitation on Indebtedness" covenant; or
(vi) Permitted Liens.
Limitation on Sale-Leaseback Transactions
The Company will not, and will not permit any Restricted Subsidiary
to, enter into any sale-leaseback transaction involving any of its assets or
properties whether now owned or hereafter acquired, whereby the Company or a
Restricted Subsidiary sells or transfers such assets or properties and then or
thereafter leases such assets or properties or any part thereof or any other
assets or properties which the Company or such Restricted Subsidiary, as the
case may be, intends to use for substantially the same purpose or purposes as
the assets or properties sold or transferred.
The foregoing restriction does not apply to any sale-leaseback
transaction if:
(i) the lease is for a period, including renewal rights, of not
in excess of three years;
(ii) the lease secures or relates to industrial revenue or
pollution control bonds;
(iii) the transaction is solely between the Company and any
Wholly Owned Restricted Subsidiary or solely between Wholly Owned
Restricted Subsidiaries; or
(iv) the Company or such Restricted Subsidiary, within 12
months after the sale or transfer of any assets or properties is
completed, applies an amount not less than the net proceeds received
from such sale in accordance with clause (A) or (B) of the first
paragraph of the "Limitation on Asset Sales" covenant described
below.
Limitation on Asset Sales
The Company will not, and will not permit any Restricted Subsidiary
to, consummate any Asset Sale, unless:
(i) the consideration received by the Company or such
Restricted Subsidiary is at least equal to the fair market value of
the assets sold or disposed of; and
(ii) at least 75% of the consideration received (including the
fair market value, as determined in good faith by the Board of
Directors, of any non-cash consideration) consists of (w) cash, (x)
Temporary Cash Investments, (y) marketable securities which are
liquidated for cash within 90 days following the consummation of
such Asset Sale, and (z) the assumption of Indebtedness of the
Company or any Restricted Subsidiary (other than the Notes and the
Note Guarantees); provided, that:
59
(1) such Indebtedness is not subordinate in right of
payment to the Notes and the Note Guarantees; and
(2) the Company or such Restricted Subsidiary is
irrevocably released and discharged from such Indebtedness.
In the event and to the extent that the Net Cash Proceeds received
by the Company or any of its Restricted Subsidiaries from one or more Asset
Sales occurring on or after the Closing Date in any period of 12 consecutive
months exceed 10% of Adjusted Consolidated Net Tangible Assets (determined as
of the date closest to the commencement of such 12-month period for which a
consolidated balance sheet of the Company and its Subsidiaries has been filed
with the Commission) then the Company shall or shall cause the relevant
Restricted Subsidiary to:
(i) within twelve months after the date Net Cash
Proceeds so received exceed 10% of Adjusted Consolidated Net
Tangible Assets:
(A) apply an amount equal to such excess Net
Cash Proceeds to permanently repay unsubordinated Indebtedness of
the Company, or any Restricted Subsidiary providing a Subsidiary
Guarantee pursuant to the "Limitation on Issuances of Guarantees
by Restricted Subsidiaries" covenant described above or
Indebtedness of any other Restricted Subsidiary, in each case
owing to a Person other than the Company or any of its Restricted
Subsidiaries; or
(B) invest an equal amount, or the amount not so
applied pursuant to clause (A) (or enter into a definitive
agreement committing to so invest within 12 months after the date
of such agreement), in property or assets (other than current
assets) of a nature or type or that are used in a business (or in
a company having property and assets of a nature or type, or
engaged in a business) similar or related to the nature or type of
the property and assets of, or the business of, the Company and
its Restricted Subsidiaries existing on the date of such
investment; and
(ii) apply (no later than the end of the 12-month period
referred to in clause (i)) such excess Net Cash Proceeds (to the
extent not applied pursuant to clause (i) as provided in the
following paragraph of this "Limitation on Asset Sales" covenant.
The amount of such excess Net Cash Proceeds required to be applied
(or to be committed to be applied) during such 12-month period as set forth in
clause (i) of the preceding sentence and not applied as so required by the end
of such period shall constitute "Excess Proceeds."
If, as of the first day of any calendar month, the aggregate amount
of Excess Proceeds not theretofore subject to an Offer to Purchase pursuant to
this "Limitation on Asset Sales" covenant totals at least $10 million, the
Company must commence, not later than the fifteenth Business day of such
month, and consummate an Offer to Purchase from the Holders on a pro rata
basis an aggregate principal amount of Notes equal to the Excess Proceeds on
such date, at a purchase price equal to 100% of the principal amount of the
Notes, plus, in each case, accrued interest (if any) to the Payment Date.
In the event that more than 98% of the outstanding principal amount
of the Notes are tendered pursuant to such Offer to Purchase, the balance of
the Notes will be redeemable, at the Company's option, in whole or in part, at
any time or from time to time thereafter, at a Redemption Price equal to the
price specified in such Offer to Purchase plus accrued and unpaid interest, if
any, to the Redemption Date (subject to the right of Holders of record on the
relevant Regular Record Date that is on or prior to the Redemption Date to
receive interest due on an Interest Payment Date).
Repurchase of Notes upon a Change of Control
The Company must commence, within 30 days of the occurrence of a
Change of Control, and consummate an Offer to Purchase for all Notes then
outstanding, at a purchase price equal to 101% of the principal amount
thereof, plus accrued interest (if any) to the Payment Date. In the event that
more than 98% of the outstanding principal amount of the Notes are tendered
pursuant to such Offer to Purchase, the balance of the Notes will be
redeemable, at the Company's option, in whole or in part, at any time or from
time to time thereafter, at a Redemption Price equal to the price specified in
such Offer to Purchase plus accrued and unpaid interest, if any, to the
Redemption Date (subject to the right of Holders of record on the relevant
60
Regular Record Date that is on or prior to the Redemption Date to receive
interest due on an Interest Payment Date).
There can be no assurance that the Company will have sufficient
funds available at the time of any Change of Control to make any debt payment
(including repurchases of Notes) required by the foregoing covenant (as well
as may be contained in other securities of the Company which might be
outstanding at the time). The above covenant requiring the Company to
repurchase the Notes will, unless consents are obtained, require the Company
to repay all indebtedness then outstanding which by its terms would prohibit
such Note repurchase.
Commission Reports and Reports to Holders
Whether or not the Company or any Guarantor is then required to file
reports with the Commission, the Company and each Guarantor shall file with
the Commission all such reports and other information as they would be
required to file with the Commission by Sections 13(a) or 15(d) under the
Exchange Act if they were subject thereto. The Company shall supply the
Trustee and each Holder or shall supply to the Trustee for forwarding to each
such Holder, without cost to such Holder, copies of such reports and other
information.
Events of Default
The following events will be defined as "Events of Default" in the
Indenture:
(a) default in the payment of principal of (or premium, if any,
on) any Note when the same becomes due and payable at maturity, upon
acceleration, redemption or otherwise;
(b) default in the payment of interest on any Note when the
same becomes due and payable, and such default continues for a
period of 30 days;
(c) default in the performance or breach of the provisions of
the Indenture applicable to mergers, consolidations and transfers of
all or substantially all of the assets of the Company or a Guarantor
or the failure to make or consummate an Offer to Purchase in
accordance with the "Limitation on Asset Sales" or "Repurchase of
Notes upon a Change of Control" covenant;
(d) the Company or a Guarantor defaults in the performance of
or breaches any other covenant or agreement of the Company or a
Guarantor in the Indenture or under the Notes (other than a default
specified in clause (a), (b) or (c) above) and such default or
breach continues for a period of 30 consecutive days after written
notice by the Trustee or the Holders of 25% or more in aggregate
principal amount of the Notes;
(e) there occurs with respect to any issue or issues of
Indebtedness of the Company, any Guarantor or any Significant
Subsidiary having an outstanding principal amount of $10 million or
more in the aggregate for all such issues of all such Persons,
whether such Indebtedness now exists or shall hereafter be created,
(1) an event of default that has caused the Holder thereof to
declare such Indebtedness to be due and payable prior to its Stated
Maturity and such Indebtedness has not been discharged in full or
such acceleration has not been rescinded or annulled within 30 days
of such acceleration and/or (2) the failure to make a principal
payment at the final (but not any interim) fixed maturity and such
defaulted payment shall not have been made, waived or extended
within 30 days of such payment default;
(f) any final judgment or order (not covered by insurance) for
the payment of money in excess of $10 million in the aggregate for
all such final judgments or orders against all such Persons
(treating any deductibles, self-insurance or retention as not so
covered) shall be rendered against the Company, any Guarantor or any
Significant Subsidiary and shall not be paid or discharged, and
there shall be any period of 30 consecutive days during which a stay
of enforcement of such final judgment or order, by reason of a
pending appeal or otherwise, shall not be in effect;
(g) a court having jurisdiction in the premises enters a
decree or order for (A) relief in respect of the Company or any
Significant Subsidiary in an involuntary case under any applicable
bankruptcy, insolvency or other similar law now or hereafter in
effect, (B) appointment of a receiver, liquidator, assignee,
custodian, trustee, sequestrator or similar official of the
Company or any
61
Significant Subsidiary or for all or substantially all of the
property and assets of the Company or any Significant Subsidiary
or (C) the winding up or liquidation of the affairs of the Company
or any Significant Subsidiary and, in each case, such decree or
order shall remain unstayed and in effect for a period of 30
consecutive days;
(h) the Company or any Significant Subsidiary (A) commences a
voluntary case under any applicable bankruptcy, insolvency or other
similar law now or hereafter in effect, or consents to the entry of
an order for relief in an involuntary case under any such law, (B)
consents to the appointment of or taking possession by a receiver,
liquidator, assignee, custodian, trustee, sequestrator or similar
official of the Company or any Significant Subsidiary or for all or
substantially all of the property and assets of the Company or any
Significant Subsidiary or (C) effects any general assignment for the
benefit of creditors or
(i) any Note Guarantee ceases to be in full force and effect
(except pursuant to its terms) or is declared null and void or any
Guarantor denies that it has any further liability under any Note
Guarantee, or gives notice to such effect.
If an Event of Default (other than an Event of Default specified in
clause (g) or (h) above that occurs with respect to the Company or any
Guarantor) occurs and is continuing under the Indenture, the Trustee or the
Holders of at least 25% in aggregate principal amount of the Notes, then
outstanding, by written notice to the Company (and to the Trustee if such
notice is given by the Holders), may, and the Trustee at the request of such
Holders shall, declare the principal of, premium, if any, and accrued interest
on the Notes to be immediately due and payable.
Upon a declaration of acceleration, such principal of, premium, if
any, and accrued interest shall be immediately due and payable. In the event
of a declaration of acceleration because an Event of Default set forth in
clause (e) above has occurred and is continuing, such declaration of
acceleration shall be automatically rescinded and annulled if the event of
default triggering such Event of Default pursuant to clause (e) shall be
remedied or cured by the Company, any Guarantor or the relevant Significant
Subsidiary or waived by the Holders of the relevant Indebtedness within 60
days after the declaration of acceleration with respect thereto. If an Event
of Default specified in clause (g) or (h) above occurs with respect to the
Company or any Significant Subsidiary, the principal of, premium, if any, and
accrued interest on the Notes then outstanding shall ipso facto become and be
immediately due and payable without any declaration or other act on the part
of the Trustee or any Holder. The Holders of at least a majority in principal
amount of the outstanding Notes by written notice to the Company and to the
Trustee, may waive all past defaults and rescind and annul a declaration of
acceleration and its consequences if:
(i) all existing Events of Default, other than the nonpayment
of the principal of, premium, if any, and interest on the Notes that
have become due solely by such declaration of acceleration, have
been cured or waived and
(ii) the rescission would not conflict with any judgment or
decree of a court of competent jurisdiction. For information as to
the waiver of defaults, see "--Modification and Waiver."
The Holders of at least a majority in aggregate principal amount of
the outstanding Notes may direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or exercising any trust or
power conferred on the Trustee. However, the Trustee may refuse to follow any
direction that conflicts with law or the Indenture, that may involve the
Trustee in personal liability, or that the Trustee determines in good faith
may be unduly prejudicial to the rights of Holders of Notes not joining in the
giving of such direction and may take any other action it deems proper that is
not inconsistent with any such direction received from Holders of Notes. A
Holder may not pursue any remedy with respect to the Indenture or the Notes
unless:
(i) the Holder gives the Trustee written notice of a continuing
Event of Default;
(ii) the Holders of at least 25% in aggregate principal amount
of outstanding Notes make a written request to the Trustee to pursue
the remedy;
(iii) such Holder or Holders offer the Trustee indemnity
satisfactory to the Trustee against any costs, liability or expense;
62
(iv) the Trustee does not comply with the request within 60
days after receipt of the request and the offer of indemnity; and
(v) during such 60-day period, the Holders of a majority in
aggregate principal amount of the outstanding Notes do not give the
Trustee a direction that is inconsistent with the request. However,
such limitations do not apply to the right of any Holder of a Note
to receive payment of the principal of, premium, if any, or interest
on, such Note or to bring suit for the enforcement of any such
payment, on or after the due date expressed in the Notes, which
right shall not be impaired or affected without the consent of the
Holder.
The Indenture will require certain officers of the Company and each
Guarantor to deliver to the Trustee on or before a date not more than 90 days
after the end of each fiscal year, an Officers' Certificate stating whether or
not such officers know of any Default or Event of Default that occurred during
such fiscal year. The Company and each Guarantor will also be obligated to
notify the Trustee of any default or defaults in the performance of any
covenants or agreements under the Indenture.
Consolidation, Merger and Sale of Assets
Neither the Company nor any Guarantor will consolidate with, merge
with or into, or sell, convey, transfer, lease or otherwise dispose of all or
substantially all of its property and assets (as an entirety or substantially
an entirety in one transaction or a series of related transactions) to, any
Person or permit any Person to merge with or into the Company or any Guarantor
unless:
(i) the Company or the Guarantor shall be the continuing
Person, or the Person (if other than the Company or the Guarantor)
formed by such consolidation or into which the Company or the
Guarantor is merged or that acquired or leased such property and
assets of the Company or the Guarantor shall be a corporation
organized and validly existing under the laws of the United States
of America or any jurisdiction thereof and shall expressly assume,
by a supplemental indenture, executed and delivered to the Trustee,
all of the obligations of the Company or the Guarantor, as the case
may be, on all of the Notes or the Note Guarantees, as the case may
be, and under the Indenture;
(ii) immediately after giving effect to such transaction, no
Default or Event of Default shall have occurred and be continuing;
(iii) immediately after giving effect to such transaction on a
pro forma basis, the Company or any Guarantor, as the case may be,
or any Person becoming the successor obligor of the Notes or the
Note Guarantees, as the case may be, shall have a Consolidated Net
Worth (a "Pro Forma Consolidated Net Worth") which is equal to or
greater than the Consolidated Net Worth of the Company or the
Guarantor, as the case may be, immediately prior to such transaction
(the "Base Consolidated Net Worth"), or if the Pro Forma
Consolidated Net Worth is less than the Base Consolidated Net Worth,
the amount by which the Pro Forma Consolidated Net Worth is less
than the Base Consolidated Net Worth shall, if considered as a
Restricted Payment, be permitted to be paid at the time under the
"Limitation on Restricted Payments" covenant;
(iv) immediately after giving effect to such transaction on a
pro forma basis the Company or any Guarantor, as the case may be, or
any Person becoming the successor obligor of the Notes or the Note
Guarantees, as the case may be, could Incur at least $1.00 of
Indebtedness under the first paragraph of the "Limitation on
Indebtedness" covenant; provided that this clause (iv) shall not
apply to a consolidation or merger with or into a Wholly Owned
Restricted Subsidiary with a positive net worth; and provided
further that, in connection with any such merger or consolidation,
no consideration (other than Capital Stock (other than Disqualified
Stock) in the surviving Person, the Company or any Guarantor) shall
be issued or distributed to the stockholders of the Company or the
Guarantor; and
(v) the Company delivers to the Trustee an Officers'
Certificate (attaching the arithmetic computations to demonstrate
compliance with clauses (iii) and (iv)) and Opinion of Counsel, in
each case stating that such consolidation, merger or transfer and
such supplemental indenture complies with this provision and that
all conditions precedent provided for herein relating to such
transaction have been complied with; provided, however, that
clauses (iii) and (iv) above do not apply if, in the good faith
determination of the Board of Directors of the Company, whose
determination shall be evidenced by a Board Resolution, the
principal purpose of such transaction is to change the state of
63
incorporation of the Company or any Guarantor; and provided
further that any such transaction shall not have as one of its
purposes the evasion of the foregoing limitations.
Defeasance
Defeasance and Discharge. The Indenture provides that the Company
and each Guarantor will be deemed to have paid and will be discharged from any
and all obligations in respect of the Notes and the Note Guarantees on the
123rd day after the deposit referred to below, and the provisions of the
Indenture will no longer be in effect with respect to the Notes and the Note
Guarantees (except for, among other matters, certain obligations to register
the transfer or exchange of the Notes, to replace stolen, lost or mutilated
Notes, to maintain paying agencies and to hold monies for payment in trust)
if, among other things,
(A) the Company or the Guarantors have deposited with the
Trustee, in trust, money and/or U.S. Government Obligations that
through the payment of interest and principal in respect thereof
in accordance with their terms will provide money in an amount
sufficient to pay the principal of, premium, if any, and accrued
interest on the Notes on the Stated Maturity of such payments in
accordance with the terms of the Indenture and the Notes,
(B) the Company has delivered to the Trustee (i) either
(x) an Opinion of Counsel to the effect that Holders will not
recognize income, gain or loss for federal income tax purposes as
a result of the Company's exercise of its option under this
"Defeasance" provision and will be subject to federal income tax
on the same amount and in the same manner and at the same times as
would have been the case if such deposit, defeasance and discharge
had not occurred, which Opinion of Counsel must be based upon (and
accompanied by a copy of) a ruling of the Internal Revenue Service
to the same effect unless there has been a change in applicable
federal income tax law after the Closing Date such that a ruling
is no longer required or (y) a ruling directed to the Trustee
received from the Internal Revenue Service to the same effect as
the aforementioned Opinion of Counsel and (ii) an Opinion of
Counsel to the effect that the creation of the defeasance trust
does not violate the Investment Company Act of 1940,
(C) immediately after giving effect to such deposit on a
pro forma basis, no Event of Default, or event that after the
giving of notice or lapse of time or both would become an Event of
Default, shall have occurred and be continuing on the date of such
deposit or during the period ending on the 123rd day after the
date of such deposit, and such deposit shall not result in a
breach or violation of, or constitute a default under, any other
agreement or instrument to which the Company or any of its
Subsidiaries is a party or by which the Company or any of its
Subsidiaries is bound; and
(D) if at such time the Notes are listed on a national
securities exchange, the Company has delivered to the Trustee an
Opinion of Counsel to the effect that the Notes will not be
delisted as a result of such deposit, defeasance and discharge.
Defeasance of Certain Covenants and Certain Events of Default. The
Indenture further will provide that the provisions of the Indenture will no
longer be in effect with respect to clauses (iii) and (iv) under
"Consolidation, Merger and Sale of Assets" and all the covenants described
herein under "Covenants," clause (c) under "Events of Default" with respect to
such clauses (iii) and (iv) under "Consolidation, Merger and Sale of Assets,"
clause (d) with respect to such other covenants and clauses (e) and (f) under
"Events of Default" shall be deemed not to be Events of Default upon, among
other things, the deposit with the Trustee, in trust, of money and/or U.S.
Government Obligations that through the payment of interest and principal in
respect thereof in accordance with their terms will provide money in an amount
sufficient to pay the principal of, premium, if any, and accrued interest on
the Notes on the Stated Maturity of such payments in accordance with the terms
of the Indenture and the Notes, the satisfaction of the provisions described
in clauses (B)(ii), (C) and (D) of the preceding paragraph and the delivery by
the Company to the Trustee of an Opinion of Counsel to the effect that, among
other things, the Holders will not recognize income, gain or loss for federal
income tax purposes as a result of such deposit and defeasance of certain
covenants and Events of Default and will be subject to federal income tax on
the same amount and in the same manner and at the same times as would have
been the case if such deposit and defeasance had not occurred.
Defeasance and Certain Other Events of Default. In the event the
Company exercises its option to omit compliance with certain covenants and
provisions of the Indenture with respect to the Notes as described in the
immediately preceding paragraph and the Notes are declared due and payable
because of
64
the occurrence of an Event of Default that remains applicable, the amount
of money and/or U.S. Government Obligations on deposit with the Trustee
will be sufficient to pay amounts due on the Notes at the time of their
Stated Maturity but may not be sufficient to pay amounts due on the Notes
at the time of the acceleration resulting from such Event of Default.
However, the Company will remain liable for such payments and the
Guarantors' Note Guarantees with respect to such payments will remain in
effect.
Modification and Waiver
Modifications and amendments of the Indenture may be made by the
Company, the Guarantors and the Trustee with the consent of the Holders of not
less than a majority in aggregate principal amount of the outstanding Notes;
provided, however, that no such modification or amendment may, without the
consent of each Holder affected thereby,
(i) change the Stated Maturity of the principal of, or any
installment of interest on, any Note,
(ii) reduce the principal amount of, or premium, if any, or
interest on, any Note,
(iii) change the place or currency of payment of principal of,
or premium, if any, or interest on, any Note,
(iv) impair the right to institute suit for the enforcement of
any payment on or after the Stated Maturity (or, in the case of a
redemption, on or after the Redemption Date) of any Note,
(v) reduce the above-stated percentage of outstanding Notes the
consent of whose Holders is necessary to modify or amend the
Indenture,
(vi) waive a default in the payment of principal of, premium,
if any, or interest on the Notes,
(vii) reduce the percentage or aggregate principal amount of
outstanding Notes the consent of whose Holders is necessary for
waiver of compliance with certain provisions of the Indenture or for
waiver of certain defaults, or
(viii) release any Guarantor from its Note Guarantee or
otherwise modify the term the Note Guarantees in a material respect
adverse to the Holders.
Modifications and amendments of the Indenture may be made by the
Company, the Guarantors and the Trustee without notice to or the consent of
any Holder
(i) to cure any ambiguity, defect or inconsistency,
(ii) to comply with the "Consolidation, Merger and Sale of
Assets" covenant,
(iii) to comply with any requirements of the Commission in
connection with the qualification of the Indenture under the Trust
Indenture Act,
(iv) to evidence and provide for the acceptance of appointment
by a successor Trustee,
(v) to provide for uncertificated Notes in addition to or in
place of certificated Notes,
(vi) to add one or more Subsidiary Guarantees on the terms
required by the Indenture,
(vii) to make any change that does not adversely affect the
rights of any Holder in any material respect.
No Personal Liability of Incorporators, Stockholders, Officers, Directors, or
Employees
The Indenture provides that no recourse for the payment of the
principal of, premium, if any or interest on any of the Notes or for any claim
based thereon or otherwise in respect thereof, and no recourse under or upon
any obligation, covenant or agreement of the Company or the Guarantors in the
Indenture, or in any of the Notes or because of the creation of any
Indebtedness represented thereby, shall be had against any incorporator,
stockholder, officer, director, employee or controlling person of the Company
or the
65
Guarantors or of any successor Person thereof. Each Holder, by accepting
the Notes, waives and releases all such liability.
Concerning the Trustee
The Indenture provides that, except during the continuance of a
Default, the Trustee will not be liable, except for the performance of such
duties as are specifically set forth in such Indenture. If an Event of Default
has occurred and is continuing, the Trustee will use the same degree of care
and skill in its exercise as a prudent person would exercise under the
circumstances in the conduct of such person's own affairs.
The Indenture and provisions of the Trust Indenture Act incorporated
by reference therein contain limitations on the rights of the Trustee, should
it become a creditor of the Company or a Guarantor, to obtain payment of
claims in certain cases or to realize on certain property received by it in
respect of any such claims, as security or otherwise. The Trustee is permitted
to engage in other transactions; provided, however, that if it acquires any
conflicting interest, it must eliminate such conflict or resign.
BOOK-ENTRY; DELIVERY AND FORM
Exchange Notes will be represented by one or more permanent global
Notes in definitive, fully registered form without interest coupons (each a
"Global Note") and will be deposited with the Trustee as custodian for, and
registered in the name of a nominee of, DTC.
Ownership of beneficial interests in a Global Exchange Note will be
limited to persons who have accounts with DTC ("participants") or persons who
hold interests through participants. Ownership of beneficial interests in a
Global Note will be shown on, and the transfer of that ownership will be
effected only through, records maintained by DTC or its nominee (with respect
to interests of participants) and the records of participants (with respect to
interests of persons other than participants). Beneficial Owners may hold
their interests in a Restricted Global Note directly through DTC if they are
participants in such system, or indirectly through organizations which are
participants in such system.
So long as DTC, or its nominee, is the registered owner or Holder of
a Global Note, DTC or such nominee, as the case may be, will be considered the
sole owner or Holder of the Notes represented by such Global Note for all
purposes under the Indenture and the Notes. No beneficial owner of an interest
in a Global Note will be able to transfer that interest except in accordance
with DTC's applicable procedures, in addition to those provided for under the
Indenture.
Payments of the principal of, and interest on, a Global Note will be
made to DTC or its nominee, as the case may be, as the registered owner
thereof. Neither the Company, the Trustee nor any Paying Agent will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests in a Global Note or
for maintaining, supervising or reviewing any records relating to such
beneficial ownership interests.
The Company expects that DTC or its nominee, upon receipt of any
payment of principal or interest in respect of a Global Note, will credit
participants' accounts with payments in amounts proportionate to their
respective beneficial interests in the principal amount of such Global Note as
shown on the records of DTC or its nominee. The Company also expects that
payments by participants to owners of beneficial interests in such Global Note
held through such participants will be governed by standing instructions and
customary practices, as is now the case with securities held for the accounts
of customers registered in the names of nominees for such customers. Such
payments will be the responsibility of such participants.
Transfers between participants in DTC will be effected in the
ordinary way in accordance with DTC rules and will be settled in same-day
funds.
The Company expects that DTC will take any action permitted to be
taken by a Holder of Notes (including the presentation of Notes for exchange
as described below) only at the direction of one or more participants to whose
account the DTC interests in a Global Note is credited and only in respect of
such portion of the aggregate principal amount of Notes as to which such
participant or participants has or have given such direction. However, if
there is an Event of Default under the Notes, DTC will exchange the
66
applicable Global Note for Certificated Notes, which it will distribute to
its participants and which may be legended as set forth under the heading
"Transfer Restrictions."
The Company understands that: DTC is a limited purpose trust company
organized under the laws of the State of New York, a "banking organization"
within the meaning of New York Banking Law, a member of the Federal Reserve
System, a "clearing corporation" within the meaning of the Uniform Commercial
Code and a "Clearing Agency" registered pursuant to the provisions of Section
17A of the Exchange Act. DTC was created to hold securities for its
participants and facilitate the clearance and settlement of securities
transactions between participants through electronic book-entry changes in
accounts of its participants, thereby eliminating the need for physical
movement of certificates and certain other organizations. Indirect access to
the DTC system is available to others such as banks, brokers, dealers and
trust companies that clear through or maintain a custodial relationship with a
participant, either directly or indirectly ("indirect participants").
Although DTC is expected to follow the foregoing procedures in order
to facilitate transfers of interests in a Global Note among participants of
DTC, it is under no obligation to perform or continue to perform such
procedures, and such procedures may be discontinued at any time. Neither the
Company nor the Trustee will have any responsibility for the performance by
DTC or its respective participants or indirect participants of its obligations
under the rules and procedures governing its operations.
If DTC is at any time unwilling or unable to continue as a
depositary for the Global Notes and a successor depositary is not appointed by
the Company within 90 days, the Company will issue Certificated Notes.
CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS
The following is a general discussion of the principal U.S.
federal income tax consequences of the purchase, ownership and disposition
of the Notes to initial purchasers of Outstanding Notes who are U.S.
Holders (as defined below) and the principal U.S. federal income and estate
tax consequences of the purchase, ownership, exchange and disposition of
the Notes to initial purchasers of Outstanding Notes who are Foreign
Holders (as defined below).
This discussion is based on currently existing provisions of the
Code, existing, temporary and proposed Treasury regulations promulgated
thereunder, and administrative and judicial interpretations thereof, all as in
effect or proposed on the date hereof and all of which are subject to change,
possibly with retroactive effect, or different interpretations. This
discussion does not address the tax consequences to subsequent purchasers of
Outstanding Notes and is limited to purchasers who hold the Notes as capital
assets, within the meaning of Section 1221 of the Code.
This discussion also does not address the tax consequences to
Foreign Holders that are subject to U.S. federal income tax on a net basis on
income realized with respect to a Note because such income is effectively
connected with the conduct of a U.S. trade or business. Such Foreign Holders
are generally taxed in a similar manner to U.S. Holders, but certain special
rules do apply. Moreover, this discussion is for general information only and
does not address all of the tax consequences that may be relevant to
particular initial purchasers in light of their personal circumstances or to
certain types of initial purchasers (such as certain financial institutions,
insurance companies, tax-exempt entities, dealers in securities or persons who
have hedged the risk of owning a Note).
PROSPECTIVE HOLDERS OF EXCHANGE NOTES ARE URGED TO CONSULT THEIR OWN
TAX ADVISORS AS TO THE PARTICULAR TAX CONSEQUENCES TO THEM OF THE EXCHANGE
OFFER AND THE OWNERSHIP AND DISPOSITION OF THE EXCHANGE NOTES, INCLUDING THE
APPLICABILITY OF ANY FEDERAL TAX LAWS OR ANY STATE, LOCAL OR FOREIGN TAX LAWS,
AND ANY CHANGES (OR PROPOSED CHANGES) IN APPLICABLE TAX LAWS OR
INTERPRETATIONS THEREOF.
U.S. Federal Income Taxation of U.S. Holders
As used herein, the term "U.S. Holder" means a Holder of a Note that
is, for U.S. federal income tax purposes, (a) a citizen or resident of the
U.S., (b) a corporation, partnership or other entity created or organized in
or under the laws of the U.S. or any political subdivision thereof, (c) an
estate the income of
67
which is subject to U.S. federal income taxation regardless of source, or
(d) a trust subject to the primary supervision of a court within the U.S.
and the control of a U.S. fiduciary, as described in the Code.
If a partnership holds a Note, the tax treatment of a partner will
generally depend upon the status of the partner and upon the activities of the
partnership. If you are a partner of a partnership holding a Note, we suggest
that you consult your tax advisor.
Payment of Interest on Notes. Interest paid or payable on a Note
will be taxable to a U.S. Holder as ordinary interest income, generally at the
time it is received or accrued, in accordance with such Holder's regular
method of accounting for U.S. federal income tax purposes.
Failure of the Company to file or cause to be declared effective an
exchange offer registration statement or Shelf Registration Statement or to
consummate the exchange offer as described under "Description of the
Notes--Registration Rights" will cause additional interest to accrue on the
Notes in the manner described therein. Such additional interest may be treated
as original issue discount, includible by a Holder in income as such interest
accrues, in advance of receipt of any cash payment thereof. The Notes will not
be issued with original issue discount.
Sale, Exchange or Retirement of the Notes. Upon the sale, exchange,
redemption, retirement at maturity or other disposition of a Note, a U.S.
Holder generally will recognize taxable gain or loss equal to the difference
between the sum of cash plus the fair market value of all other property
received on such disposition (except to the extent such cash or property is
attributable to accrued but unpaid interest, which will be taxable as ordinary
income) and such U.S. Holder's adjusted tax basis in the Note. A U.S. Holder's
adjusted tax basis in a Note generally will equal the cost of the Note to such
U.S. Holder, less any principal payments received by such U.S. Holder.
Gain or loss recognized on the disposition of a Note generally will
be capital gain or loss and will be long-term capital gain or loss if, at the
time of such disposition, the U.S. Holder's holding period for the Note is
more than one year.
The exchange of a Note by a U.S. Holder for an Exchange Note should
not constitute a taxable exchange and a U.S. Holder will have the same tax
basis and holding period in the Exchange Notes as the Notes. Any increase in
the interest rate of the Notes resulting from an exchange offer not being
consummated, or a Shelf Registration Statement not being declared effective,
would not be treated as a taxable exchange.
Backup Withholding and Information Reporting. Backup withholding and
information reporting requirements may apply to certain payments of principal,
premium, if any, and interest on a Note, and to proceeds of the sale or
redemption of a Note before maturity. The Company, its agent, a broker, the
Trustee or any paying agent, as the case may be, will be required to withhold
from any payment that is subject to backup withholding a tax equal to 31% of
such payment if a U.S. Holder fails to furnish his taxpayer identification
number (social security or employer identification number), certify that such
number is correct, certify that such Holder is not subject to backup
withholding or otherwise comply with the applicable requirements of the backup
withholding rules. Certain U.S. Holders, including all corporations, are not
subject to backup withholding and information reporting requirements. Any
amounts withheld under the backup withholding rules from a payment to a U.S.
Holder will be allowed as a credit against such U.S. Holder's U.S. federal
income tax and may entitle the Holder to a refund, provided that the required
information is furnished to the Internal Revenue Service ("IRS").
U.S. Federal Income Taxation of Foreign Holders
As used herein, the term "Foreign Holder" means a Holder of a Note
that is, for U.S. federal income tax purposes, (a) a nonresident alien
individual, (b) a corporation organized or created under non-U.S. law, (c) an
estate that is not taxable in the U.S. on its worldwide income, or (d) a trust
that is either not subject to primary supervision over its administration by a
U.S. court or not subject to the control of a U.S. person with respect to
substantial trust decisions.
Payment of Interest on Notes. In general, payments of interest
received by a Foreign Holder will not be subject to U.S. withholding tax if
(a) the Foreign Holder does not actually or constructively own 10% or more of
the total combined voting power of all classes of stock of the Company
entitled to vote, (b) the Foreign Holder is not a controlled foreign
corporation that is related to the Company actually or
68
constructively through stock ownership, (c) the Foreign Holder is not a
bank receiving interest described in Section 881(c)(3)(A) of the Code, and
(d) either (i)(I) the beneficial owner of the Note, under penalties of
perjury, provides the Company or its agents with such beneficial owner's
name and address and certifies on IRS Form W-8 (or a suitable substitute
form) that it is not a U.S. Holder or (II) a securities clearing
organization, bank or other financial institution that holds customers'
securities in the ordinary course of its trade or business (a "financial
institution") holds the Note and provides a statement to the Company or its
agent under penalties of perjury in which it certifies that such an IRS
Form W-8 (or a suitable substitute) has been received by it from the
beneficial owner of the Notes or qualifying intermediary and furnishes the
Company or its agent a copy thereof or (ii) the Foreign Holder is entitled
to the benefits of an income tax treaty under which interest on the Notes
is exempt from U.S. withholding tax and the Foreign Holder or such Foreign
Holder's agent provides a properly executed IRS Form 1001 (or a suitable
substitute) claiming the exemption. Payments of interest not exempt from
U.S. federal withholding tax as described above will be subject to such
withholding tax at the rate of 30% (subject to reduction under an
applicable income tax treaty).
Sale, Exchange or Retirement of the Notes. A Foreign Holder
generally will not be subject to U.S. federal income tax (and generally no tax
will be withheld) with respect to gain realized on the sale, exchange,
redemption, retirement at maturity or other disposition of a Note unless (a)
the Foreign Holder is an individual who is present in the U.S. for a period or
periods aggregating 183 or more days in the taxable year of the disposition
and, generally, either has a "tax home" or an "office or other place of
business" in the U.S. or (b) the Foreign Holder is subject to tax pursuant to
the provisions of U.S. federal income tax law applicable to certain
expatriates.
We suggest that you consult your tax advisor about the specific
methods for satisfying these requirements. These procedures will change on
January 1, 2001. In addition, a claim for exemption will not be valid if the
person receiving the applicable form has actual knowledge that the statements
on the form are false.
Backup Withholding and Information Reporting. Backup withholding and
information reporting requirements do not apply to payments of interest made
by the Company or a paying agent to Foreign Holders if the certification
described above under "--U.S. Federal Income Taxation of Foreign
Holders--Payment of Interest on Notes" is received, provided that the payor
does not have actual knowledge that the Holder is a U.S. Holder. If any
payments of principal and interest are made to the beneficial owner of a Note
by or through the foreign office of a foreign custodian, foreign nominee or
other foreign agent of such beneficial owner, or if the foreign office of a
foreign "broker" (as defined in applicable Treasury regulations) pays the
proceeds of the sale of a Note or a coupon to the seller thereof, backup
withholding and information reporting will not apply. Information reporting
requirements (but not backup withholding) will apply, however, to a payment by
a foreign office of a broker that is a U.S. person, that derives 50% or more
of its gross income for certain periods from the conduct of a trade or
business in the U.S., or that is a "controlled foreign corporation"
(generally, a foreign corporation controlled by certain U.S. shareholders)
with respect to the United States unless the broker has documentary evidence
in its records that the Holder is a Foreign Holder and certain other
conditions are met or the Holder otherwise establishes an exemption. Payment
by a U.S. office of a broker is subject to both backup withholding at a rate
of 31% and information reporting unless the Holder certifies under penalties
of perjury that the Holder is a Foreign Holder or otherwise establishes an
exemption.
Federal Estate Taxes. Subject to applicable estate tax treaty
provisions, Notes held at the time of death (or Notes transferred before death
but subject to certain retained rights or powers) by an individual who at the
time of death is a Foreign Holder will not be included in such Foreign
Holder's gross estate for U.S. federal estate tax purposes provided that the
individual does not actually or constructively own 10% or more of the total
combined voting power of all classes of stock of the Company entitled to vote
or hold the Notes in connection with a U.S. trade or business.
PLAN OF DISTRIBUTION
A broker-dealer that is the Holder of Outstanding Notes that were
acquired for the account of such broker-dealer as a result of market-making or
other trading activities (other than Outstanding Notes acquired directly from
the Company or any affiliate of the Company) may exchange such Outstanding
Notes for Exchange Notes pursuant to the exchange offer; provided, however,
that each broker-dealer that receives Exchange Notes for its own account
pursuant to the exchange offer must acknowledge that it will deliver a
69
prospectus in connection with any resale of such Exchange Notes. This
prospectus, as it may be amended or supplemented from time to time, may be
used by a broker-dealer in connection with resales of Exchange Notes
received in exchange for Outstanding Notes where such Outstanding Notes
were acquired as a result of market-making activities or other trading
activities. The Company has agreed that for a period of 180 days after the
expiration date, it will make this prospectus, as amended or supplemented,
available to any broker-dealer for use in connection with any such resales.
The Company will not receive any proceeds from any sale of Exchange
Notes by broker-dealers or any other Holder of Exchange Notes. Exchange Notes
received by broker-dealers for their own account pursuant to the exchange
offer may be sold from time to time in one or more transactions in the
over-the-counter market, in negotiated transactions, through the writing of
options on the Exchange Notes or a combination of such methods of resale, at
market prices prevailing at the time of resale, at prices related to such
prevailing market prices or negotiated prices. Any such resale may be made
directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
broker-dealer and/or the purchasers of any such Exchange Notes. Any
broker-dealer that resells Exchange Notes that were received by it for its own
account pursuant to the exchange offer and any broker or dealer that
participates in a distribution of such Exchange Notes may be deemed to be an
"underwriter" within the meaning of the Securities Act and any profit on any
such resale of Exchange Notes and any commissions or concessions received by
any such persons may be deemed to be underwriting compensation under the
Securities Act. The Letter of Transmittal states that by acknowledging that it
will deliver and by delivering a prospectus, a broker-dealer will not be
deemed to admit that it is an "underwriter" within the meaning of the
Securities Act.
For a period of 180 days after the expiration date the Company will
promptly send additional copies of this prospectus and any amendment or
supplement to this prospectus to any broker-dealer that requests such
documents in the Letter of Transmittal. The Company has agreed to pay all
expenses incident to the exchange offer other than commissions or concessions
of any brokers or dealers and will indemnify the Holders of the Notes
(including any broker-dealers) against certain liabilities, including
liabilities under the Securities Act.
LEGAL MATTERS
Certain legal matters in connection with the Offering are being
passed upon for the Company by Cravath, Swaine & Moore, New York, New York.
William P. Rogers, Jr., a partner at Cravath, Swaine & Moore, is a director of
the Company, and beneficially owns 5,000 shares of common stock of the Company
and options to purchase 4,000 shares of such common stock.
EXPERTS
The consolidated financial statements of Amtran, Inc. and
subsidiaries incorporated by reference in Amtran, Inc.'s Annual Report
(Form 10-K) for the year ended December 31, 1998, have been audited by
Ernst & Young LLP, independent auditors, as set forth in their report
thereon included therein and incorporated herein by reference in reliance
upon such reports given on the authority of such firm as experts in
accounting and auditing.
WHERE TO FIND MORE INFORMATION
The Company is subject to the informational requirements of the
Exchange Act and in accordance therewith files reports, proxy statements and
other information with the Commission. Such reports, proxy statements and
other information filed by the Company with the Commission can be inspected
and copied at the public reference facilities maintained by the Commission and
Judiciary Plaza, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549,
and at the Commission's regional offices at Northwestern Atrium Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661 and at 7 World Trade
Center, Suite 1300, New York, New York 10048. The Commission maintains a World
Wide Web site on the Internet at http://www.sec.gov that contains reports,
proxy and information statements and other information regarding registrants,
including the Company, that file electronically with the Commission. Copies of
such material can also be obtained at prescribed rates upon request from the
Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549.
70
No dealer, salesperson or other person has been authorized to give any
information or to make any representations in connection with the offer
contained herein other than those contained in this prospectus, and, if
given or made, such information or representation must not be relied upon
as having been authorized by the Company. This prospectus does not
constitute an offer to sell or the solicitation of an offer to buy to any
person in any jurisdiction in which such offer or solicitation is not
authorized or in which the person making such offer or solicitation is not
qualified to do so or to any person to whom it is unlawful to make such
offer or solicitation. Neither the delivery of this prospectus nor any sale
made hereunder shall under any circumstances create an implication that
there has been no change in the affairs of the Company since the date
hereof or that the information contained herein is correct as of any time
subsequent to the date hereof.
------------------
$75,000,000
$75,000,000
Amtran, Inc.
10 1/2% Senior Exchange
Notes due 2004
------------------
PROSPECTUS
------------------
[January ],
71
Part II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
Item 20. Indemnification of Directors and Officers.
Information relating to indemnification of directors and officers is
incorporated by reference herein from Item 14 of the Company's Registration
Statement on Form S-1 (No. 33-59630).
Item 21. Exhibits.
Exhibit
Number+ Description
*3.1-- Restated Articles of Incorporation of the Company.
*3.2-- By-laws of the Company.
4.1-- Indenture, dated as of July 24, 1997, and First Supplemental
Indenture, dated as of December 21, 1999 between the Company,
the Guarantors and First Security Bank, NA., as trustee.
4.2-- Form of 10 1/2% Senior Exchange Note due 2004 (included in
Exhibit 4.1). 4.3-- Purchase Agreement, dated December 16, 1999,
between the Company, the Guarantors and Deutsche Bank Securities Inc.
4.3-- Purchase Agreement, dated December 16, 1999, between the Company, the
Guarantors' and Deutsche Bank Securities Inc.
4.4-- Registration Rights Agreement, dated December 21, 1999, between
the Company, the Guarantors and Deutsche Bank Securities Inc.
5.1-- Opinion of Brian T. Hunt, General Counsel of the Company. 5.2--
Opinion of Cravath, Swaine & Moore.
5.2-- Opinion of Cravath, Swaine & Moore.
10.1-- Credit Agreement, dated July 24,1997, among ATA, the Company,
NBD Bank, N.A., as agent, and the banks party thereto.
10.2-- Guarantee Agreement, dated July 24, 1997, among the Company,
Ambassadair Travel Club, Inc., ATA Leisure Corp. (formerly ATA
Vacations, Inc.), Amber Travel, Inc., American Trans Air
Training Corporation, American Trans Air ExecuJet, Inc., Amber
Air Freight Corporation, Chicago Express Airlines, Inc. and the
lenders party thereto.
10.3-- Security Agreement, dated July 24, 1997, between ATA and NBD
Bank, N.A. as agent. ** 11.1-- Statement re computation of per share
earnings.
**12.1-- Statements re computation of ratios.
23.1-- Consent of Ernst & Young LLP.
23.2-- Consent of Brian T. Hunt, General Counsel of the Company
(included in Exhibit 5.1). 23.3-- Consent of Cravath, Swaine & Moore
(included in Exhibit 5.2).
23.3-- Consent of Cravath, Swaine & Moore (included in Exhibit 5.2)
24.1-- Powers of Attorney (contained on signature page).
**25.1-- Statement of Eligibility under the Trust Indenture Act of 1939, as
amended, of First Security Bank, N.A. on Form T-1.
99.1-- Form of Letter of Transmittal.
99.2-- Form of Notice of Guaranteed Delivery.
99.3-- Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies
and Other Nominees.
99.4-- Form of Letter to Clients.
- ----------
+ Unless otherwise indicated, the exhibits have been previously
filed as part of this Registration Statement.
* Previously filed as an exhibit to the Company's Registration Statement on
Form S-1 (File No. 33-59630), and incorporated herein by reference.
** To be filed by Amendment.
Item 22. Undertakings.
(a) The undersigned registrant hereby undertakes to deliver or cause
to be delivered with the prospectus, to each person to whom the prospectus is
sent or given, the latest annual report to security holders that is
incorporated by reference in the prospectus and furnished pursuant to and
meeting the requirements of Rule 14a-3 or Rule 14c-3 under the Securities
Exchange Act of 1934; and, where interim financial information required to be
presented by Article 3 of Regulation S-X are not set forth in the prospectus,
to deliver, or cause to be delivered to each person to whom the prospectus is
sent or given,
72
the latest quarterly report that is specifically incorporated by reference
in the prospectus to provide such interim financial information.
(b) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or
otherwise, the registrant has been advised that in the opinion of the
Commission such indemnification is against public policy as expressed in
the Securities Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment
by the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
(c) The undersigned registrant hereby undertakes to respond to
requests for information that is incorporated by reference into the
prospectus pursuant to Items 4, 10(b), 11 or 13 of this Form, within one
business day of receipt of such request, and to send the incorporated
document by first class mail or other equally prompt means. This includes
information contained in documents filed subsequent to the effective date
of the registration statement through the date of responding to the
request.
(d) The undersigned registrant hereby undertakes to supply by means of
a post-effective amendment all information concerning a transaction, and
the company being acquired involved therein, that was not the subject of
and included in the registration statement when it became effective.
73
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of
Indianapolis, State of Indiana, on this 21st day of January, 2000.
AMTRAN, INC.
By /s/ J. George Mikelsons
--------------------------------
J. George Mikelsons
Chairman of the Board of Directors
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
Signatures Titles Dates
/s/ J. George Mikelsons Chairman of the Board January 21, 2000
------------------------ of Directors
(J. George Mikelsons)
/s/ John P. Tague President and Chief January 21, 2000
------------------------ Executive officer and
(John P. Tague) Director (Principal
Executive Officer)
/s/ James W. Hlavacek Executive Vice President January 21, 2000
------------------------ and Chief Operating Officer
(James W. Hlavacek) and Director
/s/ Kenneth K. Wolff Executive Vice President January 21, 2000
------------------------ and Chief Financial Officer
(Kenneth K. Wolff) and Director (Principal Financial
and Accounting Officer)
Director January 21, 2000
------------------------
(Robert A. Abel)
/s/ William P. Rogers, Jr. Director January 21, 2000
------------------------
(William P. Rogers, Jr.)
/s/ Andrejs P. Stipnieks Director January 21, 2000
------------------------
(Andrejs P. Stipnieks)
74