AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 17, 1998
REGISTRATION STATEMENT NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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FINE AIR SERVICES CORP.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 4522 65-083857
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
<TABLE>
<S> <C>
BARRY H. FINE
PRESIDENT AND CHIEF EXECUTIVE OFFICER
2261 N.W. 67TH AVENUE FINE AIR SERVICES CORP.
BUILDING 700 2261 N.W. 67TH AVENUE, BUILDING 700
MIAMI, FLORIDA 33122 MIAMI, FLORIDA 33122
(305) 871-6606 (305) 871-6606
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES) INCLUDING AREA CODE, OF AGENT FOR SERVICE)
</TABLE>
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COPIES OF COMMUNICATIONS TO:
KENNETH C. HOFFMAN, ESQ.
GREENBERG TRAURIG HOFFMAN LIPOFF ROSEN & QUENTEL, P.A.
1221 BRICKELL AVENUE
MIAMI, FLORIDA 33131
FACSIMILE: (305) 579-0717
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<TABLE>
<CAPTION>
EXACT NAME OF JURISDICTION OF PRIMARY STANDARD INDUSTRIAL I.R.S. EMPLOYER
ADDITIONAL REGISTRANTS* ORGANIZATION CLASSIFICATION CODE NUMBER IDENTIFICATION NUMBER
<S> <C> <C> <C>
Fine Air Services, Inc. ........... Florida 4522 65-0140639
Agro Air Associates, Inc. ......... Florida 7359 59-2184485
</TABLE>
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* Address and telephone number of principal executive offices are the same as
those of Fine Air Service Corp.
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this Registration Statement becomes effective.
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. [ ]
CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
OF SECURITIES TO BE REGISTERED REGISTERED PER UNIT(1) OFFERING PRICE(1) REGISTRATION FEE
<S> <C> <C> <C> <C>
9 7/8% Senior Notes due 2008 ....... $200,000,000 100% $200,000,000 $59,000
Guarantees of 9 7/8% Senior
Notes due 2008 ................... $200,000,000 (2) (2) None
</TABLE>
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(1) Estimated pursuant to Rule 457 solely for the purpose of calculating the
registration fee.
(2) No further fee is payable pursuant to Rule 457(n).
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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 THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED JULY 17, 1998
PROSPECTUS
FINE AIR SERVICES CORP.
OFFER TO EXCHANGE ITS 9 7/8% SENIOR NOTES DUE 2008 FOR ANY AND ALL OF
ITS OUTSTANDING 9 7/8% SENIOR NOTES DUE 2008 THE EXCHANGE OFFER AND WITHDRAWAL
RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON , 1998, UNLESS EXTENDED
---------------
Fine Air Services Corp., a Delaware corporation (the "Company"), hereby
offers, upon the terms and subject to the conditions set forth in this
Prospectus (as the same may be amended or supplemented from time to time, the
"Prospectus") and in the accompanying Letter of Transmittal (which together
constitute the "Exchange Offer"), to exchange up to $200,000,000 aggregate
principal amount of its 9 7/8% Senior Notes due 2008 (the "New Notes") for a
like principal amount of its outstanding 9 7/8% Senior Notes due 2008 (the "Old
Notes", and together with the New Notes, the "Senior Notes"), of which
$200,000,000 aggregate principal amount are outstanding. The New Notes are being
offered to satisfy certain obligations of the Company under the Registration
Rights Agreement, dated as of June 5, 1998 (the "Registration Rights
Agreement"), between the Company, Fine Air Services, Inc. ("Fine Air"), Agro Air
Associates, Inc. ("Agro Air") and SBC Warburg Dillon Read Inc. (the "Initial
Purchaser"). The terms of the New Notes are identical in all material respects
to the respective terms of the Old Notes, except that (i) the New Notes have
been registered under the Securities Act of 1933, as amended (the "Securities
Act"), and therefore will not be subject to certain restrictions on transfer
applicable to the Old Notes and (ii) holders of the New Notes will generally not
be entitled to certain rights, including the payment of Liquidated Damages (as
defined herein), pursuant to the Registration Rights Agreement. In the event
that the Exchange Offer is consummated, any Old Notes which remain outstanding
after consummation of the Exchange Offer and the New Notes issued in the
Exchange Offer will vote together as a single class for purposes of determining
whether holders of the requisite percentage in outstanding principal amount
thereof have taken certain actions or exercised certain rights under the
Indenture (as defined herein). For a description of the principal terms of the
New Notes, see "Description of Senior Notes." The New Notes will bear interest
from June 5, 1998 or from the most recent Interest Payment Date (as defined
herein) to which interest has been paid or provided for on the Old Notes.
Holders of Old Notes whose Old Notes are accepted for exchange will be deemed to
have waived the right to receive any payment in respect of interest on the Old
Notes accrued up until the date of issuance of the New Notes. Such waiver will
not result in the loss of interest income to such holders, since the New Notes
will bear interest from the issue date of the Old Notes.
The New Notes will bear interest at the rate of 9 7/8% per annum,
payable semiannually on June 1 and December 1 of each year, commencing December
1, 1998. The New Notes will be redeemable at the option of the Company, in whole
or in part, at any time on or after June 1, 2003, at the redemption prices set
forth herein. The Company may also redeem up to 35% of the aggregate principal
amount of Senior Notes at the Company's option, at any time on or prior to June
1, 2001, at a redemption price equal to 109.875% of the principal amount
thereof, plus accrued and unpaid interest to the redemption date, with the net
cash proceeds of one or more Public Equity Offerings (as defined herein);
provided, that at least 65% of the aggregate principal amount of Senior Notes
originally issued remains outstanding after such redemption. Upon the occurrence
of a Change of Control (as defined herein), the Company will be required to make
an offer to repurchase all or any part of each holder's Senior Notes at a price
equal to 101% of the aggregate principal amount thereof, plus accrued and unpaid
interest to the date of purchase.
The New Notes will be general unsecured obligations of the Company and will
be fully and unconditionally guaranteed, on a joint and several, senior
unsecured basis (the "Subsidiary Guarantees"), by Fine Air and Agro Air and any
future Subsidiary Guarantor (as defined herein) to the extent set forth in the
Indenture. The New Notes and each Subsidiary Guarantee will be effectively
subordinated to all secured obligations of the Company and the applicable
Subsidiary Guarantor to the extent of the assets securing such obligations. The
Indenture permits the Company and its subsidiaries (including the Subsidiary
Guarantors) to incur additional indebtedness, subject to certain limitations.
This Prospectus and the Letter of Transmittal are first being mailed to all
holders of Old Notes on , 1998.
SEE "RISK FACTORS" BEGINNING ON PAGE 17 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY HOLDERS IN DECIDING WHETHER TO TENDER OLD NOTES IN
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 , 1998.
<PAGE>
The Company is making the Exchange Offer of the New Notes in reliance on
the position of the staff of the Division of Corporation Finance of the
Securities and Exchange Commission (the "Commission") as set forth in certain
interpretive letters addressed to third parties in other transactions. However,
the Company has not sought its own interpretive letter and there can be no
assurance that the staff of the Division of Corporation Finance of the
Commission would make a similar determination with respect to the Exchange
Offer as it has in such interpretive letters to third parties. Based on these
interpretations by the staff of the Division of Corporation Finance of the
Commission, and subject to the two immediately following sentences, the Company
believes that New Notes issued pursuant to this Exchange Offer in exchange for
Old Notes may be offered for resale, resold and otherwise transferred by a
holder thereof (other than a holder who is a broker-dealer) without further
compliance with the registration and prospectus delivery requirements of the
Securities Act, provided that such New Notes are acquired in the ordinary
course of such holder's business and that such holder is not participating, and
has no arrangement or understanding with any person to participate, in a
distribution (within the meaning of the Securities Act) of such New Notes.
However, any holder of Old Notes who is an "affiliate" of the Company or who
intends to participate in the Exchange Offer for the purpose of distributing
New Notes, or any broker-dealer who purchased Old Notes from the Company to
resell pursuant to Rule 144A under the Securities Act ("Rule 144A") or any
other available exemption under the Securities Act, (a) will not be able to
rely on the interpretations of the staff of the Division of Corporation Finance
of the Commission set forth in the above-mentioned interpretive letters, (b)
will not be permitted or entitled to tender such Old Notes in the Exchange
Offer and (c) must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any sale or other
transfer of such Old Notes unless such sale is made pursuant to an exemption
from such requirements. In addition, as described below, if any broker-dealer
holds Old Notes acquired for its own account as a result of market-making or
other trading activities and exchanges such Old Notes for New Notes, then such
broker-dealer must deliver a prospectus meeting the requirements of the
Securities Act in connection with any resales of such New Notes.
Each holder of Old Notes who wishes to exchange Old Notes for New Notes in
the Exchange Offer will be required to represent that (i) it is not an
"affiliate" of the Company, (ii) any New Notes to be received by it are being
acquired in the ordinary course of its business, (iii) it has no arrangement or
understanding with any person to participate in a distribution (within the
meaning of the Securities Act) of such New Notes, and (iv) if such holder is
not a broker-dealer, such holder is not engaged in, and does not intend to
engage in, a distribution (within the meaning of the Securities Act) of such
New Notes. In addition, the Company may require such holder, as a condition to
such holder's eligibility to participate in the Exchange Offer, to furnish to
the Company (or an agent thereof) in writing information as to the number of
"beneficial owners" (within the meaning of Rule 13d-3 under the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) on behalf of whom such
holder holds the Notes to be exchanged in the Exchange Offer. Each
broker-dealer that receives New Notes for its own account pursuant to the
Exchange Offer must acknowledge that it acquired the Old Notes for its own
account as the result of market-making activities or other trading activities
and must agree that it will deliver a prospectus meeting the requirements of
the Securities Act in connection with any resale of such New 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. Based on the position taken by the staff of
the Division of Corporation Finance of the Commission in the interpretive
letters referred to above, the Company believes that broker-dealers who
acquired Old Notes for their own accounts, as a result of market-making
activities or other trading activities ("Participating Broker-Dealers"), may
fulfill their prospectus delivery requirements with respect to the New Notes
received upon exchange of such Old Notes (other than Old Notes which represent
an unsold allotment from the original sale of the Old Notes) with a prospectus
meeting the requirements of the Securities Act, which may be the prospectus
prepared for an exchange offer so long as it contains a description of the plan
of distribution with respect to the resale of such New Notes. Accordingly, this
Prospectus, as it may be amended or supplemented from time to time, may be used
by a Participating Broker-Dealer during the period referred to below in
connection with resales of New Notes received in exchange for Old Notes where
such Old Notes were acquired by such Participating
2
<PAGE>
Broker-Dealer for its own account as a result of market-making or other trading
activities. A Participating Broker-Dealer who intends to use this Prospectus in
connection with the resale of New Notes received in exchange for Old Notes
pursuant to the Exchange Offer must notify the Company, or cause the Company to
be notified, on or prior to the Expiration Date, that it is a Participating
Broker-Dealer. Such notice may be given in the space provided for that purpose
in the Letter of Transmittal or may be delivered to the Exchange Agent at one
of the addresses set forth herein under "The Exchange Offer--Exchange Agent."
Any Participating Broker-Dealer who is an "affiliate" of the Company may not
rely on such interpretive letters and must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with any
resale transaction. See "The Exchange Offer--Resales of New Notes."
In that regard, each Participating Broker-Dealer who surrenders Old Notes
pursuant to the Exchange Offer will be deemed to have agreed, by execution of
the Letter of Transmittal, that, upon receipt of notice from the Company of the
occurrence of any event or the discovery of any fact which makes any statement
contained or incorporated by reference in this Prospectus untrue in any
material respect or which causes this Prospectus to omit to state a material
fact necessary in order to make the statements contained or incorporated by
reference herein, in light of the circumstances under which they were made, not
misleading or of the occurrence of certain other events specified in the
Registration Rights Agreement, such Participating Broker-Dealer will suspend
the sale of New Notes pursuant to this Prospectus until the Company has amended
or supplemented this Prospectus to correct such misstatement or omission and
has furnished copies of the amended or supplemented Prospectus to such
Participating Broker-Dealer or the Company has given notice that the sale of
the New Notes may be resumed, as the case may be.
Prior to the Exchange Offer, there has been only a limited secondary
market and no public market for the Old Notes. The New Notes will be a new
issue of securities for which there currently is no market. Although the
Initial Purchaser has informed the Company that it currently intends to make a
market in the New Notes, it is not obligated to do so, and any such market
making may be discontinued at any time without notice. Accordingly, there can
be no assurance as to the development or liquidity of any market for the New
Notes. The Company currently does not intend to apply for listing of the New
Notes on any securities exchange or for quotation through the National
Association of Securities Dealers Automated Quotation System.
Any Old Notes not tendered and accepted in the Exchange Offer will remain
outstanding and will be entitled to all the same rights and will be subject to
the same limitations applicable thereto under the Indenture (except for those
rights which terminate upon consummation of the Exchange Offer). Following
consummation of the Exchange Offer, the holders of Old Notes will continue to
be subject to all of the existing restrictions upon transfer thereof and the
Company will not have any further obligation to such holders (other than under
certain limited circumstances) to provide for registration under the Securities
Act of the Old Notes held by them. To the extent that Old Notes are tendered
and accepted in the Exchange Offer, a holder's ability to sell untendered Old
Notes could be adversely affected. See "Risk Factors--Consequences of a Failure
to Exchange Old Notes."
THIS PROSPECTUS AND THE RELATED LETTER OF TRANSMITTAL CONTAIN IMPORTANT
INFORMATION. HOLDERS OF OLD NOTES ARE URGED TO READ THIS PROSPECTUS AND THE
RELATED LETTER OF TRANSMITTAL CAREFULLY BEFORE DECIDING WHETHER TO TENDER THEIR
OLD NOTES PURSUANT TO THE EXCHANGE OFFER.
Old Notes may be tendered for exchange on or prior to 5:00 p.m., New York
City time, on , 1998 (such time on such date being hereinafter called
the "Expiration Date"), unless the Exchange Offer is extended by the Company
(in which case the term "Expiration Date" shall mean the latest date and time
to which the Exchange Offer is extended). Tenders of Old Notes may be withdrawn
at any time on or prior to the Expiration Date. The Exchange Offer is not
conditioned upon any minimum principal amount of Old Notes being tendered for
exchange. However, the Exchange Offer is
3
<PAGE>
subject to certain events and conditions which may be waived by the Company and
to the terms and provisions of the Registration Rights Agreement. Old Notes may
be tendered in whole or in part in denominations of $1,000 and integral
multiples thereof. The Company has agreed to pay all expenses of the Exchange
Offer. See "The Exchange Offer--Fees and Expenses." Holders of the Old Notes
whose Old Notes are accepted for exchange will not receive interest on such Old
Notes and will be deemed to have waived the right to receive any interest on
such Old Notes accrued from and after June 5, 1998. See "The Exchange
Offer--Interest on New Notes."
The Company will not receive any cash proceeds from the issuance of the
New Notes offered hereby. No dealer-manager is being used in connection with
this Exchange Offer. See "Use of Proceeds" and "Plan of Distribution."
AVAILABLE INFORMATION
The Company has filed with the Commission a registration statement on Form
S-4 (herein, together with all amendments and exhibits, referred to as the
"Registration Statement") under the Securities Act with respect to the New
Notes offered hereby. This Prospectus, which forms a part of the Registration
Statement, does not contain all of the information set forth in the
Registration Statement and the exhibits thereto, certain parts of which are
omitted in accordance with the rules and regulations of the Commission. For
further information with respect to the Company and the New Notes offered
hereby, reference is made to the Registration Statement. Any statements made in
this Prospectus concerning the provisions of certain documents are not
necessarily complete and, in each instance, reference is made to the copy of
such document filed as an exhibit to the Registration Statement otherwise filed
with the Commission.
Upon the effectiveness of the Registration Statement, the Company will
become subject to the informational requirements of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), and in accordance therewith will file
reports and other information with the Commission. The Registration Statement,
the exhibits forming a part thereof and the reports and other information filed
by the Company with the Commission in accordance with the Exchange Act may be
inspected, without charge, at the Public Reference Section of the Commission
located at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549 and at the
following Regional Offices of the Commission: 7 World Trade Center, 13th Floor,
New York, New York 10048; and 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies of all or any portion of the material may be obtained
from the Public Reference Section of the Commission upon payment of the
prescribed fees. The Commission also maintains a site on the World Wide Web
that contains reports, proxy and information statements and other information
at http://www.sec.gov.
In the event that the Company is not required to be subject to the
reporting requirements of the Exchange Act in the future, as required under the
Indenture pursuant to which the Old Notes were, and the New Notes will be,
issued, the Company has agreed that, for so long as any of the Senior Notes
remain outstanding, it will file with the Commission (unless the Commission
will not accept such a filing) (i) all quarterly and annual financial
information that would be required to be contained in a filing with the
Commission on Forms 10-Q and 10-K if the Company were required to file such
forms, including a "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and, with respect to the annual information only, a
report thereon by the Company's certified independent accountants and (ii) all
reports that would be required to be filed with the Commission on Form 8-K if
the Company were required to file such reports. In addition, for so long as any
of the Senior Notes remain outstanding, the Company has agreed to make
available to any prospective purchaser of the Senior Notes or beneficial owner
of the Senior Notes in connection with any sale thereof the information
required by Rule 144A(d)(4) under the Securities Act.
4
<PAGE>
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This Prospectus contains certain forward-looking statements regarding the
intent, belief and current expectations of the Company's management. Although
the Company believes that the expectations reflected in such forward-looking
statements are reasonable, it can give no assurance that such expectations will
prove to be correct. Generally, these statements relate to business plans or
strategies, projected or anticipated benefits or other consequences of such
plans or strategies, or projections involving anticipated revenues, expenses,
earnings, levels of capital expenditures or other aspects of operating results.
The operations of the Company are subject to a number of uncertainties, risks
and other influences, many of which are outside the control of the Company and
any one of which, or a combination of which, could materially affect the
results of the Company's operations and whether the forward-looking statements
made by the Company ultimately prove to be accurate. Important factors that
could cause actual results to differ materially from the Company's expectations
are disclosed in "Risk Factors" and elsewhere in this Prospectus. The Company
assumes no obligation to update any forward-looking statements.
5
<PAGE>
SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE READ
IN CONJUNCTION WITH, THE MORE DETAILED INFORMATION AND FINANCIAL DATA,
INCLUDING THE CONSOLIDATED FINANCIAL STATEMENTS OF THE COMPANY AND NOTES
THERETO, APPEARING ELSEWHERE IN THIS PROSPECTUS. UNLESS OTHERWISE INDICATED,
REFERENCES TO THE "COMPANY" SHALL MEAN FINE AIR SERVICES CORP. TOGETHER WITH
ITS WHOLLY OWNED SUBSIDIARIES FINE AIR SERVICES, INC. ("FINE AIR") AND AGRO AIR
ASSOCIATES, INC. ("AGRO AIR"), AND REFERENCES TO THE "SUBSIDIARY GUARANTORS"
SHALL MEAN FINE AIR AND AGRO AIR.
THE COMPANY
The Company is a leading provider of air cargo services between the United
States and South and Central America and the Caribbean. Since 1994, the Company
has been the largest international air cargo carrier serving Miami
International Airport ("MIA"), based on tons of cargo transported to and from
that airport. MIA is the largest international cargo airport in the United
States and the third largest international cargo airport in the world. The
Company's services include: (i) integrated air and truck cargo transportation
and other logistics services ("scheduled cargo services"); (ii) long- and
short-term ACMI (aircraft, crew, maintenance and insurance) services and AD HOC
charters ("ACMI services"); and (iii) third party aircraft and engine
maintenance, repairs and overhauls, training and other services. The Company's
scheduled cargo services provide seamless transportation through its MIA hub
linking North America, Europe, Asia and the Pacific Rim with 25 South and
Central American and Caribbean cities as of June 30, 1998. The Company's
customers include international and domestic freight forwarders, integrated
carriers, passenger and cargo airlines, major shippers and the United States
Postal Service.
On August 6, 1997, the Company commenced an initial public offering of its
common stock (the "IPO"), which valued the Company's equity at approximately
$310 million. The following day, one of the Company's aircraft crashed
immediately following takeoff from MIA. The aircraft, en route to Santo
Domingo, Dominican Republic, was carrying unassembled denim on an ACMI flight.
Five persons died as a result of the accident. Due to management's concerns
that the accident would adversely affect the market price of the Company's
newly issued common stock, the Company voluntarily rescinded the IPO and all
funds raised were returned to investors. Prior to the accident, for the twelve
months ended June 30, 1997, the Company had revenue of $107.3 million and
EBITDA of $28.2 million, representing compound annual growth rates of 33.4% and
38.6%, respectively, from 1993.
Immediately following the accident, the Company's operations were placed
under heightened scrutiny by the U.S. Federal Aviation Administration (the
"FAA"). As a result of concerns expressed by the FAA, the Company voluntarily
ceased operations on September 4, 1997, and entered into a Consent Agreement
(the "Consent Agreement") with the FAA on September 12, 1997. As part of the
Consent Agreement, the Company agreed not to resume operations until the FAA
approved new cargo handling and hazardous materials procedures to be
implemented by the Company. Partly as a consequence of findings during its
inspections of the Company, the FAA subsequently implemented new cargo handling
inspection procedures for all carriers under its jurisdiction. The Company
resumed operations on a limited basis on October 28, 1997, approximately seven
weeks after suspending operations. Since that time, the Company gradually has
increased the number of hours flown in both its scheduled cargo services and
ACMI services. Management believes that the Company's operations have returned
to historical revenue and profitability levels. See "--Recent Results."
According to published industry sources, the worldwide air freight market
had revenues of $64 billion in 1995 and has grown at a 9.1% compound annual
rate since 1985 (measured in revenue ton kilometers). According to reports
prepared by Boeing, the world air cargo market is expected to more than triple
over the next 20 years. The United States/Latin America air freight market is
forecasted, by published industry sources, to be the fifth fastest growing air
freight market in the world from 1995 to
6
<PAGE>
2005, with an average annual growth rate of approximately 7.1%, as measured in
tons. MIA is the largest air gateway to South and Central America and the
Caribbean, with more than 60 all-cargo flights to the region per day. MIA is
the primary transshipment point for goods moving by air between North America
and South and Central America. During 1997, more than 77% of all air import
cargo and more than 83% of all air export cargo between the United States and
Latin America moved through MIA. MIA's air trade with South America quadrupled
from $3.1 billion in 1990 to $13.1 billion in 1997.
As of June 30, 1998, the Company marketed its scheduled cargo services
through a sales network consisting of seven domestic sales offices serving 57
major U.S. cities, six international sales offices serving over 30 cities in
Europe, Canada, Asia and the Pacific Rim and 23 sales offices in South and
Central America and the Caribbean. The Company receives cargo at its MIA hub
and its foreign operations stations (i) through its domestic and international
sales network, (ii) from other airlines pursuant to interline agreements and
(iii) directly from freight forwarders and other shippers. See
"Business--Customers." The Company utilizes its own fleet of 14 DC-8 aircraft
and the services of other airlines through interline and other contractual
relationships to provide reliable air cargo service between MIA and South and
Central America and the Caribbean. The Company has interline relationships with
over 50 airlines, including Air France, China Airlines, Continental Airlines,
Iberia, Korean Air and Virgin Atlantic. The Company's scheduled cargo services
transported approximately 32,000 tons of freight in 1994 and approximately
68,900 tons of freight in 1997, a compound annual increase of 29.1%. The
Company has acquired and is in the process of becoming certified to operate an
L-1011 aircraft and plans to expand its scheduled cargo services by acquiring
additional widebody and DC-8 aircraft.
The Company's customers utilize the Company's ACMI services to obtain lift
capacity without acquiring their own aircraft. Under a typical ACMI contract,
the Company supplies an aircraft, crew, maintenance and insurance, either on a
regularly scheduled or AD HOC basis, while the customer bears all other
aircraft operating expenses, including fuel, landing and parking fees and
ground and cargo handling expenses. The Company's ACMI customers also bear the
risk of utilizing the cargo capacity of the Company's aircraft. By offering
ACMI services in addition to scheduled cargo services, the Company is able to
schedule its fleet to satisfy demand on its own routes while improving
utilization and generating additional revenue from ACMI services.
The Company's FAA-approved repair stations perform a full range of
maintenance, repair and overhaul services for DC-8 aircraft and Pratt & Whitney
JT3D-3B aircraft engines. The Company also operates professional pilot and
mechanic training schools. In 1996, the Company moved into a new hangar and
maintenance facility at MIA, which enables the Company to expand its third
party repair and maintenance services while performing all necessary repairs
and maintenance on its own aircraft. The Company began marketing its third
party repair and maintenance capabilities in 1996 and intends to seek
certification to provide similar services for other types of aircraft and
engines.
COMPETITIVE STRENGTHS
The Company believes that the following strengths will provide the basis
for its continued growth and profitability:
/bullet/ ESTABLISHED MARKET POSITION. Since 1994, the Company has
transported more international air cargo to and from MIA, the principal air
gateway for South and Central America and the Caribbean, than any other
carrier. Management believes that the Company has achieved its market position
as a result of the frequency of the Company's flights and its excellent
reputation for reliability and service to its customers, which include freight
forwarders, integrated carriers, passenger and cargo airlines and major
shippers. The Company believes that regulatory and other restrictions imposed
by U.S. and foreign governmental authorities would make it difficult for a new
airline entrant to obtain the necessary operating authority and route rights to
duplicate the Company's business. Management also
7
<PAGE>
believes that the scarcity of available facilities at MIA will inhibit
potential competitors seeking to duplicate the Company's operations.
/bullet/ LOW AIRCRAFT AND OPERATING COST STRUCTURE. The Company maintains
a low cost structure through: (i) the opportunistic acquisition of used
aircraft, engines and spare parts, (ii) the elimination of duplicative costs by
maintaining favorable labor rates and other operating costs associated with the
centralizing of its principal flight and maintenance operations in Miami, (iii)
the "in-sourcing" of activities such as training, aircraft and engine repairs
and maintenance, and (iv) the use of its own ground and cargo handling
personnel and equipment. The Company also seeks to increase its profitability
and enhance aircraft utilization by maintaining an optimum balance of scheduled
cargo services and ACMI services for third parties. The Company's uniform
aircraft fleet has allowed it to standardize its spare part inventories, and
maintenance and training operations, thereby increasing operating efficiencies
and improving the reliability of the Company's air cargo services. The
Company's low cost structure also enables it to utilize its aircraft profitably
in lower yielding freight markets.
/bullet/ ASSET OWNERSHIP. The Company has made a substantial investment to
acquire the assets necessary to support its operations, including 14 DC-8 and
one L-1011 aircraft, 20 used spare aircraft engines, an extensive inventory of
spare parts and aircraft components, maintenance and engine repair equipment
and substantially all of the equipment and vehicles for its aircraft ground and
cargo handling requirements. See "Business--Aircraft Fleet." Management
believes that the value of the Company's operating assets is substantially in
excess of their book value. The Company has also made a substantial commitment
of capital and resources to obtain required governmental authorizations,
develop its sales and marketing network and build the infrastructure necessary
to support its scheduled cargo and ACMI services.
/bullet/ EXPERIENCED MANAGEMENT TEAM. The Company is led by an experienced
management team, headed by Messrs. Frank and Barry Fine, who together have over
50 years of experience in the air cargo industry and whose knowledge of the
South and Central American and Caribbean business environment has been a key
element of the Company's success. The other key members of the Company's
management team, including those responsible for the Company's flight
operations, maintenance and repair facilities, as well as marketing and sales
activities, each have over 20 years of industry experience, including
significant experience in the Company's markets.
/bullet/ DIVERSITY OF CUSTOMER BASE. The Company offers a wide range of
air cargo services to a diverse customer base of over 1,200 customers that
includes international and domestic freight forwarders, integrated carriers,
passenger and cargo airlines, major shippers and the United States Postal
Service. Because the Company is able to provide its customers a broad range of
services tailored to their particular needs, management believes that the
Company is well positioned to benefit from the expected growth in demand for
air freight transportation between the United States and South and Central
America and the Caribbean.
GROWTH STRATEGY
The Company believes that as a result of its position as a leading
provider of air cargo services between the United States and South and Central
America and the Caribbean and strong air cargo industry fundamentals, the
Company is well positioned to increase revenue and operating cash flow. The
Company's strategy for continued growth is to (i) increase lift capacity, (ii)
expand its sales network and transportation logistics services, (iii) expand
its ACMI services and (iv) pursue strategic acquisitions.
/bullet/ INCREASE LIFT CAPACITY. The Company intends to increase the
number of markets it can serve and its capacity in existing markets by adding
both widebody and additional DC-8 aircraft to its fleet. Widebody aircraft have
longer range and significantly larger volume capacity than DC-8s and will
8
<PAGE>
permit the Company to extend its route structure to serve the southernmost
countries of South America and to more economically serve high cargo volume
routes on which the Company currently operates multiple daily flights. DC-8s
that are utilized on these routes will be redeployed to increase capacity to
existing markets and to develop service to new destinations that are more
efficiently served with narrowbody aircraft. Management believes that the
Company's existing infrastructure will support a larger aircraft fleet and that
the Company can achieve greater economies of scale as it expands its lift
capacity.
/bullet/ EXPAND SALES NETWORK AND TRANSPORTATION LOGISTICS SERVICES. The
Company plans to expand its domestic and international sales network by opening
new domestic sales offices, adding sales personnel, increasing the number of
general sales agents who market the Company's services domestically and
internationally and expanding the Company's interline relationships. The
Company also plans to increase the scope of its transportation logistics
services, particularly in South and Central America and the Caribbean, where
other airlines and freight forwarders play a much smaller role in arranging for
these services.
/bullet/ EXPAND ACMI SERVICES. Management believes that the Company's
acquisition of widebody aircraft will enable it to market its ACMI services to
a broader range of customers, including those who require the longer range
and/or larger volume capacity of these aircraft. The Company also plans to
utilize its existing and any newly acquired DC-8s to increase its ACMI
capabilities.
/bullet/ PURSUE STRATEGIC ACQUISITIONS. The Company intends to pursue
strategic acquisitions that are complementary to the Company's business.
Management's criteria for identifying attractive acquisition opportunities
include: (i) expanding fleet size at a favorable cost, (ii) diversifying and
expanding the Company's customer base, (iii) increasing economies of scale
related to maintenance and cargo handling and (iv) adding operating and route
authority.
The Company was incorporated in Delaware in May 1998. Fine Air and Agro
Air are Florida corporations incorporated in 1989 and 1982, respectively, which
became wholly owned subsidiaries of the Company on June 3, 1998. See "Certain
Transactions." The Company's principal executive offices are located at 2261
N.W. 67th Avenue, Building 700, Miami, Florida, 33122 and its telephone number
is (305) 871-6606.
RECENT RESULTS
The cessation of operations during September and October 1997 resulted in
a significant decrease in the Company's revenue for the third and fourth
quarters of 1997 compared to 1996. The impact of the temporary cessation of
operations continued to affect the Company's revenues and profitability during
the first few months of 1998. During the first quarter of 1998, the Company
continued to emphasize rebuilding the service level of its scheduled cargo
services. By the end of the quarter, the Company's scheduled cargo operations
served most of the destinations which had been served during the first half of
1997, and revenues from scheduled cargo services had returned to historical
levels. ACMI block hours remained at lower than historical levels during the
first quarter of 1998, due primarily to the Company's emphasis on rebuilding
its scheduled cargo services. During March and April 1998, both revenue and
operating income showed significant improvement as the Company's scheduled
cargo services and ACMI services returned to pre-September 1997 levels.
Management believes that the Company's operations have returned to historical
revenue and profitability levels.
9
<PAGE>
The tables below set forth selected unaudited quarterly financial and
operating data for 1996 and 1997 and monthly financial and operating data for
the three months ended March 31, 1998 (dollars in thousands):
<TABLE>
<CAPTION>
1996 FISCAL QUARTER ENDED
---------------------------------------------------
MARCH 31 JUNE 30 SEPT. 30 DEC. 31
---------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
Revenues:
Scheduled cargo services ..................................... $ 11,693 $ 12,099 $ 13,333 $ 17,650
ACMI services ................................................ 5,430 7,347 6,841 15,902
Repairs, training and other .................................. 1,796 818 542 797
Total revenues .............................................. 18,919 20,264 20,716 34,349
EBITDA(1) ..................................................... 3,894 3,734 3,731 12,025
Operating income .............................................. 1,305 1,434 1,264 9,205
Tons of freight transported--scheduled cargo services ......... 18,360 17,153 19,093 21,317
ACMI block hours flown ........................................ 2,146 2,743 3,005 4,395
</TABLE>
<TABLE>
<CAPTION>
1997 FISCAL QUARTER ENDED
-----------------------------------------------------
MARCH 31 JUNE 30 SEPT. 30 DEC. 31
---------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
Revenues:
Scheduled cargo services ..................................... $ 16,174 $ 17,480 $ 12,111 $ 10,647
ACMI services ................................................ 9,126 8,220 6,540 7,194
Repairs, training and other .................................. 626 577 706 593
Total revenues .............................................. 25,926 26,277 19,357 18,434
EBITDA(1) ..................................................... 6,242 6,232 (1,317) (314)
Operating income (loss) ....................................... 3,349 3,314 (4,423) (3,267)
Tons of freight transported--scheduled cargo services ......... 19,404 20,570 15,933 12,937
ACMI block hours flown ........................................ 3,346 3,092 2,537 1,737
</TABLE>
<TABLE>
<CAPTION>
1998 MONTH ENDED
------------------------------------ 1ST QUARTER
JAN. 31 FEB. 28 MARCH 31 TOTAL
----------- --------- ---------- ------------
<S> <C> <C> <C> <C>
Revenues:
Scheduled cargo services ..................................... $ 5,068 $ 5,359 $ 6,798 $ 17,225
ACMI services ................................................ 2,119 2,454 2,938 7,511
Repairs, training and other .................................. 104 164 140 408
Total revenues .............................................. 7,291 7,977 9,876 25,144
EBITDA(1) ..................................................... 453 1,233 2,411 4,098
Operating income (loss) ....................................... (587) 188 1,157 758
Tons of freight transported--scheduled cargo services ......... 6,438 6,713 8,815 21,966
ACMI block hours flown ........................................ 719 882 1,085 2,686
</TABLE>
- ----------------
(1) For the definition of EBITDA, see footnote 1 to "Summary Combined Financial
and Operating Data."
Preliminary operating results for the month of April 1998 continue to
reflect the Company's return to historical revenue and profitability levels.
Revenues increased 12.4% to $10.0 million in April 1998 from $8.9 million in
April 1997, due to increases in revenues from both scheduled cargo and ACMI
services. Total block hours flown increased 17.1% to 2,230 in April 1998 from
1,905 in April 1997. EBITDA increased 10.0% to $2.3 million in April 1998 from
$2.1 million in April 1997.
10
<PAGE>
THE EXCHANGE OFFER
The Exchange Offer......... Up to $200,000,000 aggregate principal amount of
New Notes are being offered in exchange for a like
aggregate principal amount of Old Notes. Old Notes
may be tendered for exchange in whole or in part
in denominations of $1,000 or any integral
multiple thereof. The Company is making the
Exchange Offer in order to satisfy its obligations
under the Registration Rights Agreement relating
to the Old Notes. For a description of the
procedures for tendering Old Notes, see "The
Exchange Offer--Procedures for Tendering Old
Notes."
Expiration Date............ 5:00 p.m., New York City time, on ,
1998, unless the Exchange Offer is extended by the
Company (in which case the Expiration Date will be
the latest date and time to which the Exchange
Offer is extended). See "The Exchange Offer--Terms
of the Exchange Offer."
Conditions to the
Exchange Offer............. The Exchange Offer is subject to certain
conditions, which may be waived by the Company in
its sole discretion. The Exchange Offer is not
conditioned upon any minimum principal amount of
Old Notes being tendered. See "The Exchange
Offer--Conditions to the Exchange Offer."
Offer...................... The Company reserves the right in its sole and
absolute discretion, subject to applicable law, at
any time and from time to time, (i) to delay the
acceptance of the Old Notes for exchange, (ii) to
terminate the Exchange Offer if certain specified
conditions have not been satisfied, (iii) to
extend the Expiration Date of the Exchange Offer
and retain all Old Notes tendered pursuant to the
Exchange Offer, subject, however, to the right of
holders of Old Notes to withdraw their tendered
Old Notes, and (iv) to waive any condition or
otherwise amend the terms of the Exchange Offer in
any respect. See "The Exchange Offer--Terms of the
Exchange Offer."
Withdrawal Rights.......... Tenders of Old Notes may be withdrawn at any
time on or prior to the Expiration Date by
delivering a written notice of such withdrawal to
the Exchange Agent (as defined herein) in
conformity with certain procedures set forth below
under "The Exchange Offer--Withdrawal Rights."
Procedures for Tendering
Old Notes................. Brokers, dealers, commercial banks, trust
companies and other nominees who hold Old Notes
through DTC (as defined herein) may effect tenders
by book-entry transfer in accordance with DTC's
Automated Tender Offer Program ("ATOP"). Holders
of such Old Notes registered in the name of a
broker, dealer, commercial bank, trust company or
other nominee are urged to contact such person
promptly if they wish to tender Old Notes. In
order for Old Notes to be tendered by a means
other than by book-entry transfer, a Letter of
Transmittal must be completed
11
<PAGE>
and signed in accordance with the instructions
contained herein. The Letter of Transmittal and
any other documents required by the Letter of
Transmittal must be delivered to the Exchange
Agent by mail, facsimile, hand delivery or
overnight carrier and either such Old Notes must
be delivered to the Exchange Agent or specified
procedures for guaranteed delivery must be
complied with. See "The Exchange
Offer--Procedures for Tendering Old Notes."
Letters of Transmittal and certificates
representing Old Notes should not be sent to the
Company. Such documents should only be sent to
the Exchange Agent. See "The Exchange
Offer--Exchange Agent."
Resales of New Notes....... The Company is making the Exchange Offer in
reliance on the position of the staff of the
Division of Corporation Finance of the Commission
as set forth in certain interpretive letters
addressed to third parties in other transactions.
The Company has not sought its own interpretive
letter and there can be no assurance that the
staff of the Division of Corporation Finance of
the Commission would make a similar determination
with respect to the Exchange Offer as it has in
such interpretive letters to third parties. Based
on these interpretations by the staff of the
Division of Corporation Finance of the Commission,
and subject to the two immediately following
sentences, the Company believes that New Notes
issued pursuant to this Exchange Offer in exchange
for Old Notes may be offered for resale, resold
and otherwise transferred by a holder thereof
(other than a holder who is a broker-dealer)
without further compliance with the registration
and prospectus delivery requirements of the
Securities Act, provided that such New Notes are
acquired in the ordinary course of such holder's
business and that such holder is not
participating, and has no arrangement or
understanding with any person to participate, in a
distribution (within the meaning of the Securities
Act) of such New Notes. However, any holder of Old
Notes who is an "affiliate" of the Company or who
intends to participate in the Exchange Offer for
the purpose of distributing the New Notes, or any
broker-dealer who purchased the Old Notes from the
Company to resell pursuant to Rule 144A or any
other available exemption under the Securities
Act, (a) will not be able to rely on the
interpretations of the staff of the Division of
Corporation Finance of the Commission set forth in
the above-mentioned interpretive letters, (b) will
not be permitted or entitled to tender such Old
Notes in the Exchange Offer and (c) must comply
with the registration and prospectus delivery
requirements of the Securities Act in connection
with any sale or other transfer of such Old Notes
unless such sale is made pursuant to an exemption
from such requirements. In addition, as described
below, if any broker-dealer holds Old Notes
acquired for its own account as a result of
market-making or other trading activities and
exchanges such Old Notes for New
12
<PAGE>
Notes, then such broker-dealer must deliver a
prospectus meeting the requirements of the
Securities Act in connection with any resales of
such New Notes.
Each holder of Old Notes who wishes to exchange
Old Notes for New Notes in the Exchange Offer
will be required to represent that (i) it is not
an "affiliate" of the Company, (ii) any New Notes
to be received by it are being acquired in the
ordinary course of its business, (iii) it has no
arrangement or understanding with any person to
participate in a distribution (within the meaning
of the Securities Act) of such New Notes, and
(iv) if such holder is not a broker-dealer, such
holder is not engaged in, and does not intend to
engage in, a distribution (within the meaning of
the Securities Act) of such New Notes. Each
broker-dealer that receives New Notes for its own
account pursuant to the Exchange Offer must
acknowledge that it acquired the Old Notes for
its own account as the result of market-making
activities or other trading activities and must
agree that it will deliver a prospectus meeting
the requirements of the Securities Act in
connection with any resale of such New 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. Based on the position taken by
the staff of the Division of Corporation Finance
of the Commission in the interpretive letters
referred to above, the Company believes that
Participating Broker-Dealers who acquired Old
Notes for their own accounts as a result of
market-making activities or other trading
activities may fulfill their prospectus delivery
requirements with respect to the New Notes
received upon exchange of such Old Notes (other
than Old Notes which represent an unsold
allotment from the original sale of the Old
Notes) with a prospectus meeting the requirements
of the Securities Act, which may be the
prospectus prepared for an exchange offer so long
as it contains a description of the plan of
distribution with respect to the resale of such
New Notes. Accordingly, this Prospectus, as it
may be amended or supplemented from time to time,
may be used by a Participating Broker-Dealer in
connection with resales of New Notes received in
exchange for Old Notes where such Old Notes were
acquired by such Participating Broker-Dealer for
its own account as a result of market-making or
other trading activities. Any Participating
Broker-Dealer who is an "affiliate" of the
Company may not rely on such interpretive letters
and must comply with the registration and
prospectus delivery requirements of the
Securities Act in connection with any resale
transaction. See "The Exchange Offer--Resales of
New Notes."
Exchange Agent............. The exchange agent with respect to the Exchange
Offer is The Bank of New York (the "Exchange
Agent"). The Exchange Agent is also the Trustee
under the Indenture. The addresses, and telephone
and facsimile numbers, of the Exchange Agent
13
<PAGE>
are set forth in "The Exchange Offer--Exchange
Agent" and in the Letter of Transmittal.
Use of Proceeds............ The Company will not receive any cash proceeds
from the issuance of the New Notes offered hereby.
See "Use of Proceeds."
United States Federal Income
Tax Considerations........ Holders of Old Notes should review the information
set forth under "United States Federal Income Tax
Considerations" prior to tendering Old Notes in
the Exchange Offer.
SUMMARY OF TERMS OF THE NEW NOTES
The form and terms of the New Notes are the same as the form and terms of
the Old Notes, except that the New Notes will be registered under the
Securities Act and, therefore, will not bear legends restricting their transfer
and generally will not be entitled to registration rights or other rights under
the Registration Rights Agreement. The New Notes will evidence the same debt as
the Old Notes and both the Old Notes and the New Notes are and will be governed
by the same Indenture. For more complete information regarding the New Notes,
including definitions of certain capitalized terms used above, see "Description
of Senior Notes."
Issuer..................... Fine Air Services Corp.
Securities Offered......... $200,000,000 aggregate principal amount of 97/8%
Senior Notes due 2008.
Interest Rate and
Payment Dates.............. The New Notes will bear interest at a rate of
9 7/8% per annum. Interest on the New Notes will
accrue from June 5, 1998 or from the most recent
Interest Payment Date (as defined herein) to which
interest has been paid or provided for on the Old
Notes, payable semiannually in cash in arrears on
June 1 and December 1 of each year, commencing
December 1, 1998.
Maturity Date.............. June 1, 2008.
Ranking.................... The New Notes will be senior unsecured
obligations of the Company and will rank PARI
PASSU in right of payment with all other existing
and future unsecured and unsubordinated
Indebtedness (as defined herein) of the Company
and senior to all existing and future Subordinated
Indebtedness (as defined herein) of the Company.
The Subsidiary Guarantees (as defined herein) will
be senior unsecured obligations of the Subsidiary
Guarantors and will rank PARI PASSU in right of
payment with all other existing and future
unsecured and unsubordinated Indebtedness of the
Subsidiary Guarantors, and senior to all existing
and future Subordinated Indebtedness of the
Subsidiary Guarantors. The New Notes and
Subsidiary Guarantees, however, will be
effectively subordinated to secured Indebtedness
of the Company and the Subsidiary Guarantors with
respect to the assets securing that Indebtedness.
Subject to
14
<PAGE>
certain limitations, the Company and its
Subsidiaries (including the Subsidiary
Guarantors) may incur additional Indebtedness in
the future. See "Description of Senior
Notes--Ranking" and "--Certain
Covenants--Limitation on Additional Indebtedness
and Disqualified Capital Stock."
Subsidiary Guarantors...... The New Notes will be fully and unconditionally
guaranteed on a joint and several, senior
unsecured basis by Fine Air, Agro Air and any
future Subsidiary Guarantors (as defined herein).
Optional Redemption........ The Company may, at its option, redeem the New
Notes in whole or from time to time in part, on or
after June 1, 2003, at the redemption prices set
forth herein, together with accrued and unpaid
interest thereon to the date of redemption. At any
time on or prior to June 1, 2001, the Company may
redeem up to 35% of the aggregate principal amount
of Senior Notes originally issued with the net
cash proceeds of one or more Public Equity
Offerings (as defined herein), at a redemption
price equal to 109.875% of the principal amount
thereof, together with accrued and unpaid interest
thereon to the date of redemption, provided that
at least 65% of the aggregate principal amount of
Senior Notes originally issued remains outstanding
immediately after that redemption. See
"Description of Senior Notes--Optional
Redemption."
Change of Control.......... If a Change of Control (as defined herein)
occurs, the Company must make an offer to purchase
all the then-outstanding Senior Notes, and
purchase all such Senior Notes validly tendered
pursuant to such offer, at a purchase price equal
to 101% of the principal amount thereof, together
with accrued and unpaid interest thereon to the
date of purchase. See "Description of Senior
Notes--Certain Covenants--Change of Control."
Certain Covenants.......... The Indenture contains certain covenants,
including covenants that limit (i) incurrence of
certain Indebtedness; (ii) Restricted Payments (as
defined herein); (iii) issuances and sales of
equity interests by Restricted Subsidiaries (as
defined herein); (iv) sale/ leaseback
transactions; (v) transactions with affiliates;
(vi) liens; (vii) asset sales; (viii) dividend
and other payment restrictions affecting
Restricted Subsidiaries; and (ix) mergers,
consolidations and sales of assets. See
"Description of Senior Notes--Certain Covenants"
and "--Merger, Consolidation and Sale of Assets."
RISK FACTORS
See "Risk Factors" beginning on page 17 for a discussion of certain
factors that should be considered by holders in deciding whether to tender Old
Notes in the Exchange Offer.
15
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL AND OPERATING DATA
(DOLLARS IN THOUSANDS)
The balance sheet data set forth below as of December 31, 1994, 1995, 1996
and 1997 and the statement of operations data for each of the years in the
four-year period ended December 31, 1997 have been derived from the Company's
audited consolidated financial statements. The balance sheet data as of
December 31, 1993 and the statement of operations data for the year then ended
have been derived from unaudited financial statements of the Company not
included herein. The balance sheet data as of March 31, 1997 and 1998 and June
30, 1997 and the selected statements of operations data for the three months
ended March 31, 1997 and 1998 and the twelve months ended June 30, 1997 have
been derived from the unaudited consolidated financial statements of the
Company which, in the opinion of management, include all adjustments
(consisting of only normal recurring adjustments) necessary for a fair
presentation of the information set forth therein. The results of operations
for the three months ended March 31, 1998 are not necessarily indicative of the
results for the full year. The following data should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results
of Operations" and the Company's Consolidated Financial Statements and Notes
thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------------------------
1993 1994 1995 1996 1997(1)
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Scheduled cargo services ............... $ -- $ 19,941 $ 40,124 $ 54,775 $ 56,412
ACMI services .......................... 29,025 44,420 35,340 35,520 31,080
Repairs, training and other ............ -- 492 885 3,953 2,502
-------- -------- -------- -------- --------
Total revenues ........................ 29,025 64,853 76,349 94,248 89,994
-------- -------- -------- -------- --------
Total operating expenses ................ 25,136 52,714 64,646 81,040 91,021
-------- -------- -------- -------- --------
Operating income (loss) ................. 3,889 12,139 11,703 13,208 (1,027)
Interest expense ........................ (1,035) (1,111) (985) (966) (1,091)
Interest and other income, net .......... 274 3,170 320 786 2,233
-------- -------- -------- -------- --------
Net income .............................. $ 3,128 $ 14,198 $ 11,038 $ 13,028 $ 115
======== ======== ======== ======== ========
SELECTED FINANCIAL DATA:
EBITDA(2) ............................... $ 6,373 $ 16,969 $ 18,947 $ 23,384 $ 10,843
Depreciation and amortization ........... 2,210 3,887 6,924 9,390 11,470
Capital expenditures .................... 9,714 14,843 15,164 14,108 32,836
OPERATING DATA:
Destinations served (end of period)...... -- 9 21 27 29
Tons of freight transported--
scheduled cargo services ............... -- 32,072 64,906 75,923 68,844
ACMI block hours flown .................. 12,943 15,280 12,068 12,289 10,712
Aircraft in service (end of period) ..... 13 13 14 15 14
BALANCE SHEET DATA (AT PERIOD END):
Working capital ......................... $ 3,917 $ 4,861 $ 9,735 $ 13,710 $ 2,970
Total assets ............................ 29,502 45,313 57,026 65,886 82,846
Total debt .............................. 17,274 13,946 13,129 11,357 30,084
<CAPTION>
TWELVE THREE MONTHS ENDED
MONTHS ENDED MARCH 31,
JUNE 30, -----------------------
1997(1) 1997 1998
------------- ----------- -----------
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Scheduled cargo services ............... $ 64,636 $ 16,174 $ 17,225
ACMI services .......................... 40,089 9,126 7,511
Repairs, training and other ............ 2,542 626 408
-------- -------- --------
Total revenues ........................ 107,267 25,926 25,144
-------- -------- --------
Total operating expenses ................ 90,135 22,577 24,386
-------- -------- --------
Operating income (loss) ................. 17,132 3,349 758
Interest expense ........................ (902) (225) (655)
Interest and other income, net .......... 436 46 3,586
-------- -------- --------
Net income .............................. $ 16,666 $ 3,170 $ 3,689
======== ======== ========
SELECTED FINANCIAL DATA:
EBITDA(2) ............................... $ 28,230 $ 6,242 $ 4,098
Depreciation and amortization ........... 10,662 2,847 3,143
Capital expenditures .................... 17,190 4,157 6,789
OPERATING DATA:
Destinations served (end of period)...... 29 29 23
Tons of freight transported--
scheduled cargo services ............... 80,384 19,404 21,966
ACMI block hours flown .................. 13,841 3,346 2,686
Aircraft in service (end of period) ..... 15 15 14
BALANCE SHEET DATA (AT PERIOD END):
Working capital ......................... $ 13,829 $ 16,162 $ 2,014
Total assets ............................ 66,236 65,341 85,372
Total debt .............................. 9,323 9,581 29,271
</TABLE>
- ----------------
(1) The Company's 1997 results were adversely affected by the temporary
cessation of operations for seven weeks during September and October 1997.
The Company gradually resumed operations during the remainder of 1997. See
"Management's Discussion and Analysis of Financial Condition and Results
of Operations--Recent Results." The twelve months ended June 30, 1997 data
has been presented to illustrate the Company's operating results for the
most recent twelve month period prior to the cessation of operations.
(2) EBITDA represents earnings before interest expense, income taxes,
depreciation and amortization and non-recurring items. EBITDA is presented
to provide additional information relating to the Company's ability to
service indebtedness. EBITDA is a measure of financial performance not
considered in generally accepted accounting principles and should not be
considered in isolation or as a substitute for other measures of financial
performance or liquidity. Other companies may define EBITDA differently, and
as a result, such measures may not be comparable to the Company's EBITDA.
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RISK FACTORS
AN INVESTMENT IN THE NEW NOTES OFFERED HEREBY INVOLVES A HIGH DEGREE OF
RISK. PROSPECTIVE PURCHASERS OF THE NEW NOTES SHOULD CONSIDER CAREFULLY ALL OF
THE INFORMATION SET FORTH IN THIS PROSPECTUS AND, IN PARTICULAR, THE RISK
FACTORS SET FORTH BELOW BEFORE MAKING AN INVESTMENT IN THE NEW NOTES.
SUBSTANTIAL LEVERAGE; ABILITY TO SERVICE DEBT
The Company is highly leveraged and has significant debt service
requirements. At March 31, 1998, on a pro forma basis adjusted for the sale of
the Old Notes and the application of the net proceeds therefrom, the total
consolidated indebtedness of the Company would have been approximately $211
million and the ratio of total consolidated indebtedness to total
capitalization would have been approximately 82%. The degree to which the
Company is leveraged will have important consequences to holders of the Senior
Notes, including: (i) the ability of the Company to obtain additional
financing, whether for working capital, capital expenditures or other purposes,
may be impaired; (ii) a substantial portion of the Company's cash flow from
operations will be required for debt service, thereby reducing funds available
to the Company for its operations; (iii) the Company's flexibility in planning
for or reacting to changes in market conditions may be limited; (iv) the
Company may be more vulnerable upon a downturn in its business; and (v) to the
extent that the Company incurs any indebtedness at variable rates, including
under the Existing Credit Facility (as defined herein), the Company will be
vulnerable to increases in interest rates.
The Company's ability to pay interest and principal on the Senior Notes
and to satisfy its other debt obligations will depend upon its future operating
performance. Future operating performance will be affected by prevailing
economic conditions and financial, business, regulatory and other factors, many
of which are beyond the Company's control. Based on its current level of
operations and anticipated future growth, the Company believes that it will be
able to meet the debt service requirements on its indebtedness, meet its
working capital needs and fund its capital expenditures and other operating
expenses out of cash flow from operations, proceeds of the sale of the Old
Notes and available borrowings under the Existing Credit Facility. However,
there can be no assurance that the Company's business will generate sufficient
cash flow to meet these requirements or that anticipated future growth can be
achieved. If the Company is unable to generate sufficient cash flow from
operations to service its debt obligations and to meet other cash requirements,
it may be required to sell assets, reduce capital expenditures, refinance all
or a portion of its existing debt (including the Senior Notes) or obtain
additional financing. There can be no assurance that any such asset sales or
refinancing would be possible or that any additional financing would be
available on terms acceptable to the Company.
RANKING OF SENIOR NOTES
Although the Old Notes are, and the New Notes will be, senior unsecured
obligations of the Company and rank pari passu in right of payment with all
other existing and future unsecured and unsubordinated indebtedness of the
Company, the Old Notes are, and the New Notes will be, effectively subordinated
to secured indebtedness of the Company, including any amounts that may be
borrowed under the Existing Credit Facility. The Company's indebtedness under
the Existing Credit Facility is secured by substantially all of the Company's
assets and certain of the Company's other indebtedness is secured by aircraft
and other assets. Accordingly, the Senior Notes are effectively subordinated to
the extent of such security interests. Although the Indenture contains limits
on the amount of additional indebtedness that the Company may incur, under
certain circumstances the amount of such indebtedness could be substantial and
may be secured. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital Resources,"
"Description of Senior Notes--Ranking," "--Certain Covenants--Limitations on
Additional Indebtedness and Disqualified Capital Stock" and "--Certain
Covenants--Limitation on Liens."
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DEPENDENCE ON EARNINGS OF SUBSIDIARIES
The Company's ability to repay its indebtedness, including the Senior
Notes, will depend on the earnings of Fine Air and Agro Air and on its ability
to receive funds from Fine Air and Agro Air through dividends, repayment of
intercompany notes or other payments. The ability of Fine Air and Agro Air to
pay dividends, repay intercompany notes or make other advances to the Company
is subject to restrictions imposed by applicable law, tax considerations and
the terms of the Existing Credit Facility.
RESTRICTIONS IMPOSED BY CERTAIN COVENANTS
The Existing Credit Facility and the Indenture contain a number of
significant covenants that, among other things, will restrict the ability of
the Company to dispose of assets, incur additional indebtedness, incur liens on
property or assets, repay other indebtedness, pay dividends, enter into certain
investments or transactions, repurchase or redeem debt or equity securities,
engage in mergers or consolidations or engage in certain transactions with
subsidiaries and affiliates and otherwise restrict business activities. There
can be no assurance that such restrictions will not adversely affect the
Company's ability to finance its future operations or capital needs or engage
in other business activities that may be in the interest of the Company. A
breach of any of these covenants could result in a default under the Existing
Credit Facility. If any such default occurred, the lender under the Existing
Credit Facility could elect to declare the outstanding borrowings under the
Existing Credit Facility, together with accrued interest and other fees, to be
due and payable, and the holders of the Senior Notes could elect to declare the
outstanding principal of the Senior Notes, together with accrued interest, to
be due and payable. If the Company were unable to repay any such borrowings
when due, the lender under the Existing Credit Facility could proceed against
its collateral. If the indebtedness under the Existing Credit Facility or the
Senior Notes were to be accelerated, there can be no assurance that the assets
of the Company would be sufficient to repay such indebtedness in full. Any such
default may have a material adverse effect on the Company's financial condition
and results of operations. See "Description of Existing Credit Facility" and
"Description of Senior Notes."
INTERNATIONAL BUSINESS RISKS
The Company derives a majority of its revenues from providing air cargo
services and ACMI services to South and Central America and the Caribbean. The
risks of doing business in foreign countries include potential adverse changes
in the diplomatic relations of foreign countries with the United States,
hostility from local populations, adverse effects of currency exchange
controls, restrictions on the withdrawal of foreign investment and earnings,
government policies against businesses owned by non-nationals, expropriations
of property, the potential instability of foreign governments and the risk of
insurrections that could result in losses against which the Company is not
insured. The Company's international operations also are subject to economic
uncertainties, including, among others, risks of renegotiation or modification
of existing agreements or arrangements with governmental authorities,
exportation and transportation tariffs, foreign exchange restrictions and
changes in taxation structure. At some foreign airports, the Company is
required by local governmental authorities or market conditions to contract
with third parties for maintenance, ground and cargo handling and other
services. The performance by these third parties of such services is beyond the
Company's control, and any operating difficulties experienced by these third
parties could adversely affect the Company's reputation or business. In
addition, traffic rights to many foreign countries are subject to bilateral air
services agreements between the United States and the foreign countries, are
allocated only to a limited number of U.S. carriers and are subject to approval
by the applicable foreign regulators. Consequently, the Company's ability to
provide air cargo service in some foreign markets depends in part on the
willingness of the U.S. Department of Transportation (the "DOT") to allocate
limited traffic rights to the Company rather than to competing U.S. airlines
and on the approval of the applicable foreign regulators. See
"Business--Government Regulation."
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GROWTH STRATEGY IMPLEMENTATION; ABILITY TO MANAGE GROWTH
The Company's growth strategy includes (i) increasing its scheduled cargo
services to South and Central America and the Caribbean as well as the possible
expansion of such services to other international markets such as Europe, (ii)
increasing its ACMI services and (iii) possible acquisitions. The Company's
ability to execute its growth strategy will depend on a number of factors,
including existing and emerging competition, the ability to maintain profit
margins in the face of competitive pressures, the continued recruitment,
training and retention of operating employees, the strength of demand for its
services and the availability of capital to support its growth. Expanded
international operations may involve increased costs and risks including those
related to foreign regulation, intensified competition, currency fluctuations
and exchange controls. In addition, future growth may place strains on the
Company's management resources, management information systems and financial
and accounting systems. There can be no assurance that the Company will be
successful in implementing its growth strategy, and the Company's failure to do
so effectively could have a material adverse effect on the Company's financial
condition and results of operations. See "Business--Growth Strategy."
COMPETITION
The air freight industry is highly competitive. The Company's cargo
services compete for cargo volume principally with other all-cargo airlines,
integrated carriers and scheduled and non-scheduled passenger airlines which
have substantial belly cargo capacity. To a lesser extent, the Company's cargo
services also compete for freight forwarding business with fully integrated
carriers, some of which are also customers of the Company. The Company's ACMI
services compete primarily with other airlines that operate all-cargo aircraft
and have lift capacity in excess of their own needs. Many of the Company's
competitors have substantially greater financial and other resources and more
extensive facilities and equipment than the Company. There can be no assurance
that the Company will be able to continue to compete successfully with existing
or new competitors. See "Business--Competition."
CAPITAL INTENSIVE NATURE OF AIRCRAFT OWNERSHIP AND OPERATION
The airline business is highly capital-intensive. The Company has made
significant capital investments to acquire the aircraft, ground and cargo
handling equipment and an inventory of spare parts necessary for the operation
of its business. The Company historically has purchased, and intends to
continue to purchase, used aircraft, which tend to require more maintenance
than newer generation aircraft. Older aircraft tend to be subject to more
Airworthiness Directives ("ADs") promulgated by the FAA than newer aircraft,
and are required to undergo extensive structural inspections on an ongoing
basis. Currently, the Company's fleet consists of a single aircraft type, and
an AD requiring significant modifications to that aircraft type could require
the Company to invest significant additional funds in its aircraft or ground
its fleet pending compliance with the AD. The Company cannot predict when and
whether new ADs covering its aircraft will be promulgated, and there can be no
assurance that compliance with ADs will not adversely affect the Company's
business, financial condition or results of operations. In addition, to satisfy
FAA rules regarding allowable noise levels, prior to December 31, 1999, the
Company must install "hushkits" on its DC-8 aircraft. The Company estimates
that the average cost of such hushkits will be approximately $2.25 million per
aircraft, and that the aggregate cost to the Company to hushkit its 14 DC-8s
and to acquire two spare hushkits will be $36.0 million, approximately $14.0
million of which had been incurred as of March 31, 1998. The Company intends to
purchase hushkits for this purpose from Quiet Technology Venture, Limited
("QTV, Ltd."), a related party, which received a Supplemental Type Certificate,
a certification from the FAA that authorizes the use of a particular process to
perform a major modification to a United States registered aircraft ("STC"),
meeting the FAA's Stage III noise emission requirements for its hushkits on
June 30, 1997. The current STC subjects any aircraft on which the approved
hushkit is installed to certain weight restrictions. Subsequent to receiving
the STC, QTV, Ltd. has improved the hushkit design so that when installed, the
aircraft will be able to carry the maximum cargo capacity (as originally
designed by the manufacturer), while being in compliance with FAA noise level
requirements. The modified hushkit
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design is in final phases of the testing process. Management anticipates that
QTV, Ltd. will receive an additional STC for the upgraded hushkit model during
the third quarter of 1998 although there can be no assurance that this will
occur. Management has not determined the financial impact, if any, to the
Company should its aircraft be limited with respect to cargo capacity. See
"Certain Transactions." There can be no assurance that the costs of acquiring
and installing hushkits on the Company's aircraft will not exceed management's
estimates or that the installation can be completed on a timely basis. See
"Business--Government Regulation."
AVAILABILITY OF ADDITIONAL AIRCRAFT AND AIRCRAFT PARTS
The Company's growth strategy depends in large part upon its ability to
acquire additional aircraft to increase its lift capacity. The Company's
strategy has been to acquire used aircraft that formerly were in passenger
service and to convert such aircraft to cargo use. The market for used aircraft
can be affected by a number of factors, including increased demand from other
cargo carriers, which could limit the number of available aircraft and increase
the acquisition cost thereof. Certain parts and components required for the
operation of the Company's existing aircraft may not be readily available in
the marketplace when the Company requires them, and the inability of the
Company to obtain necessary components or parts in a timely manner could
adversely affect the Company's operations. There can also be no assurance that
any aircraft acquired in passenger configuration can be converted to cargo
configuration on a timely basis. See "Business--Growth Strategy."
CYCLICAL NATURE OF AIR FREIGHT INDUSTRY; SEASONALITY AND FLUCTUATIONS IN
QUARTERLY RESULTS
The air freight industry is highly sensitive to general economic and
political conditions, and the results of operations and financial condition of
air cargo carriers such as the Company can be adversely affected by economic
downturns in global or regional economies that result in decreased demand for
air freight transportation. Any prolonged general reduction in the world air
freight market could have a material adverse effect on the Company's growth or
financial performance. The Company's business has been, and is expected to
continue to be, seasonal in nature, with a majority of the Company's revenues
and operating income falling in the second half of the year (principally the
fourth quarter). The Company's fourth quarter revenues and operating income are
typically higher due to an increase in cargo transported in anticipation of and
during the holiday season. An interruption in the Company's operations during
this period due to unanticipated maintenance, compliance with ADs, severe
weather or other factors beyond the Company's control could have a material
adverse effect on the Company's results of operations. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Seasonality."
COST AND AVAILABILITY OF FUEL
Fuel is a major expense for all airlines, and the cost and availability of
aviation fuel are subject to economic and political factors and events which
the Company can neither control nor accurately predict. Higher fuel prices
resulting from fuel shortages or other factors could adversely affect the
Company's profitability if the Company is unable to pass on the full amount of
fuel price increases to its customers through fuel surcharges or higher rates.
In addition, a shortage of supply could have a material adverse effect on the
air freight industry in general and the financial condition and results of
operations of the Company. See "Business--Aircraft Fleet--Fuel."
CONTRABAND RISK
Customers may not inform the Company, despite the requirement to do so,
when their cargo includes hazardous materials. In addition, the Company's own
checks and searches for hazardous materials, weapons, explosive devices and
illegal freight may not reveal the presence of such materials or substances in
its customers' cargo. The transportation of unmanifested hazardous materials or
of contraband could result in fines, penalties, flight bans or possible damage
to the Company's aircraft. In one such instance, the government of Peru has
alleged that the Company supplied a chartered aircraft,
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which transported weapons to Ecuador in February 1995 during the Ecuador-Peru
conflict, and has revoked the Company's right to fly commercially into Peru.
The particular flight at issue was a chartered aircraft, and the Company denies
any wrongdoing. The FAA found after an investigation of the matter that there
was not sufficient evidence to support a conclusion that the Company violated
regulations governing the transportation of hazardous materials by air.
However, the Company continues to be subject to the Peruvian flight ban and is
unable to predict when this ban will be lifted. There can be no assurance the
Company will not be subject to fines, penalties or flight bans in the future,
any of which could have a material adverse effect on the Company's business,
financial condition and results of operations. See "Business--Security and
Safety."
DEPENDENCE UPON MANAGEMENT AND KEY PERSONNEL
The Company's success depends to a significant degree upon the continued
services of J. Frank Fine and Barry H. Fine, as well as the Company's ability
to retain other members of the Company's senior management team and key
personnel. The Company does not have employment agreements with either Frank or
Barry Fine and does not maintain "key man" life insurance. The loss of services
of Messrs. Frank or Barry Fine or certain other officers or key personnel could
have a material adverse effect on the Company's results of operations and its
future prospects. See "Management."
EMPLOYEE RELATIONS
Many airline industry employees are represented by labor unions. The
Company's employees have been subject to union organization efforts from time
to time, and the Company is likely to be subject to future unionization efforts
as its operations expand. On October 3, 1997, the International Brotherhood of
Teamsters (the "Teamsters") was certified to represent the Company's Flight
Deck Crew Members for collective bargaining purposes. Although the Teamsters
has been certified by the National Mediation Board, negotiations regarding a
collective bargaining agreement have only recently commenced. The unionization
of the Company's workforce could result in higher employee compensation and
working condition demands that could increase the Company's operating costs or
constrain its operating flexibility. See "Business--Employees."
GOVERNMENT REGULATION
The Company is subject to extensive government regulation under U.S. laws
and the laws of the various countries which it serves as well as bilateral and
multilateral agreements between the United States and foreign governments. The
Company is subject to the jurisdiction of the FAA with respect to aircraft
maintenance and operations and other matters affecting air safety. The FAA has
the authority to suspend temporarily or revoke permanently the authority of the
Company or its licensed personnel for failure to comply with FAA regulations
and to assess civil penalties for such failures. The DOT and FAA have authority
under the Aviation Safety Noise Abatement Act of 1979, as amended, and under
the Airport Noise and Capacity Act of 1990 ("ANCA") to monitor and regulate
aircraft engine noise and exhaust emissions. ANCA requires the elimination of
Stage II aircraft, pursuant to which airlines such as the Company must bring
their fleets into compliance with certain FAA Stage III noise emissions
standards in the contiguous 48 states by December 31, 1999. The FAA has
promulgated under the ANCA regulations establishing interim compliance dates
and phase-out requirements. The Company must currently have at least 50% of its
fleet in compliance with the FAA's Stage III noise level requirements.
Seventy-five percent of the Company's fleet must be in compliance by December
31, 1998, and the Company's entire fleet must be in full compliance by December
31, 1999. In order to meet the FAA's Stage III requirements, the Company
currently intends to install hushkits on between six and eight of its aircraft
in 1998 and the balance by December 31, 1999. The Company intends to purchase
hushkits for this purpose from a related party. See "Certain Transactions." The
Company estimates that the average cost of such hushkits will be approximately
$2.25 million per aircraft, and that the aggregate cost to the Company to
hushkit its 14 DC-8s and to acquire two spare hushkits will be $36.0 million,
of which approximately $14.0 million had been incurred as of March 31, 1998. To
date, however, the Company has not installed hushkits on any of its aircraft,
and has met the Stage III requirements
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applicable to it through interchange agreements with other carriers. Pursuant
to such interchange agreements and under current rules promulgated by the FAA,
the Company leases aircraft that meet the Stage III standards from these other
carriers, which has allowed the Company to comply with the FAA's Stage III
requirements. The Company is capable and has the authority, right and approval
from the FAA to operate, under such interchange agreements, third party
aircraft. The Company's current interchange agreement expires in late December
1998 and the Company's ability to continue to meet Stage III requirements
through interchange agreements will depend upon its ability to renew such
agreement or enter into new interchange agreements with other airlines. There
can be no assurance that the FAA will continue to permit or recognize the
validity of such interchange agreements. The Company must also remain "fit"
under applicable DOT regulations governing, among other things, air carriers'
financial health, record of compliance with DOT regulations and U.S.
citizenship requirements. The FAA also exercises regulatory jurisdiction over
the transportation of hazardous materials. To provide scheduled service to
foreign countries, the Company must obtain permission for such operations from
both the DOT and the applicable foreign government authorities and comply with
all applicable rules and regulations imposed by these foreign government
authorities.
The failure of the Company or its employees to comply with applicable
government regulations could subject the Company to substantial fines or
penalties or could result in the suspension or loss of the Company's licenses,
permits or authority to operate its aircraft or routes. In 1991, Agro Air paid
approximately $107,000 in penalties and signed a consent order with the DOT,
agreeing that Agro Air was able to lease aircraft and to provide maintenance
and insurance, but not to lease or provide aircraft crews to third parties.
This consent order has not adversely impacted the Company's operations and the
Company has been able to provide ACMI services to third parties. In March 1997,
the Company agreed to settle with the FAA and pay civil penalties in the amount
of $30,000 for violation of the Federal Aviation Regulations for failing to
properly document certain training of some of its crew members.
Following the August 7, 1997 crash of one of the Company's aircraft, the
Company's operations were placed under heightened scrutiny by the FAA. As a
result of concerns expressed by the FAA, the Company voluntarily ceased
operations on September 4, 1997, and on September 12, 1997 the Company entered
into the Consent Agreement. As part of the Consent Agreement, the Company
agreed not to resume operations until the FAA approved new cargo handling and
hazardous materials procedures to be implemented by the Company. Under the
Consent Agreement, the Company agreed to make a remedial payment of $1.5
million to the FAA for the costs of the FAA's investigation, review and
re-inspection of the Company. Pursuant to the Consent Agreement, $500,000 of
this assessment was waived as a result of the Company's compliance with certain
requirements prior to December 31, 1997. The Company resumed operations on a
limited basis on October 28, 1997, approximately seven weeks after suspending
operations. The Company is in full compliance with the terms of the Consent
Agreement.
Before the Company can operate a new aircraft type, including the L-1011
it owns, it must demonstrate to the FAA that it can safely operate and maintain
the aircraft. This includes the preparation by the Company of detailed
operational, training and maintenance manuals which must be accepted by the
FAA. Furthermore, the Company must demonstrate that it can implement and comply
with such manuals, properly train its crews and successfully operate proving
flights for the FAA before introducing the new aircraft type into revenue
service. There can be no assurance that the FAA will certify the Company for
operation of any new aircraft types the Company may seek to operate, including
the L-1011 aircraft the Company is currently seeking certification to operate.
In addition to the foregoing, the adoption of new laws, policies, or
regulations, amendments to existing laws or regulations, including ANCA, or
changes in the interpretation or application of existing laws, policies or
regulations, whether by the FAA, the DOT, the U.S. government or any foreign,
state or local government to whose authority the Company is subject could have
a material adverse impact on the Company and its operations. See
"Business--Government Regulation."
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UNINSURED LOSSES; COST OF INSURANCE
The Company is subject to potential losses as a result of third party
claims arising from accidents involving the Company's aircraft or an aircraft
that the Company has repaired or maintained. Substantial claims resulting from
such an accident could exceed the Company's policy limits and have a material
adverse effect on the business, financial condition and results of operations
of the Company. Aviation insurance premiums historically have fluctuated based
on factors that include the loss history of the industry in general and the
insured carrier, and the ability of the Company to maintain adequate insurance
coverage on economical terms could be adversely affected by general industry
conditions or losses incurred by the Company.
CHANGE OF CONTROL
Upon a Change of Control (as defined herein), the Company must make an
offer to purchase all the then outstanding Senior Notes, and purchase all such
Senior Notes validly tendered pursuant to such offer, at a purchase price equal
to 101% of the principal amount thereof, plus accrued and unpaid interest
thereon to the date of purchase. There can be no assurance that the Company
will have sufficient funds available or will be permitted by its other debt
agreements to purchase the Senior Notes upon the occurrence of a Change of
Control. In addition, a Change of Control may cause a default under the
Existing Credit Facility. The inability to purchase all of the tendered Senior
Notes would constitute an Event of Default (as defined herein) under the
Indenture. See "Description of Senior Notes--Change of Control."
CONTROLLING STOCKHOLDERS
Frank and Barry Fine beneficially own all of the outstanding voting stock
of the Company and, by virtue of such stock ownership, have the power to
control all matters submitted to the stockholders of the Company and to elect
all directors of the Company. The interests of Frank and Barry Fine as equity
holders may differ from the interests of the holders of the Senior Notes. See
"Ownership" and "Certain Transactions."
ABSENCE OF PUBLIC MARKET FOR NOTES
The Old Notes have not been registered under the Securities Act or any
state securities law and, unless so registered, may not be offered or sold
except pursuant to an exemption from, or in a transaction not subject to, the
registration requirements of the Securities Act and any applicable state
securities laws.
Although the New Notes may be resold or otherwise transferred by the
holders thereof (who are not affiliates of the Company) without compliance with
the registration requirements under the Securities Act, they will be new
securities for which there is currently no established trading market. The
Company does not intend to apply for listing of the New Notes on a national
securities exchange or for quotation of the New Notes on an automated dealer
quotation system. Although the Initial Purchaser has informed the Company that
it currently intends to make a market in the New Notes, it is not obligated to
do so, and any such market-making, if initiated, may be discontinued at any
time without notice. The liquidity of any market for the New Notes will depend
upon the number of holders of the Notes, the interest of securities dealers in
making a market in the New Notes and other factors. Accordingly, there can be
no assurance as to the development or liquidity of any market for the New
Notes. If an active trading market for the New Notes does not develop, the
market price and liquidity of the New Notes may be adversely affected. If the
New Notes are traded, they may trade at a discount from their face value,
depending upon prevailing interest rates, the market for similar securities,
the performance of the Company and certain other factors. The liquidity of, and
trading markets for, the New Notes may also be adversely affected by general
declines in the market for non-investment grade debt. Such declines may
adversely affect the liquidity of, and trading markets for, the New Notes
independent of the financial performance of, or prospects for, the Company.
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Notwithstanding the registration of the New Notes in the Exchange Offer,
holders who are "affiliates" (as defined under Rule 405 of the Securities Act)
of the Company may publicly offer for sale or resell the New Notes only in
compliance with provisions of Rule 144 under the Securities Act.
Historically, the market for non-investment grade debt has been subject to
disruptions that have caused substantial volatility in the prices of securities
similar to the New Notes. There can be no assurance that the market, if any,
for the New Notes will not be subject to similar disruptions. Any such
disruptions may have an adverse effect on the holders of the New Notes.
CONSEQUENCES OF A FAILURE TO EXCHANGE OLD NOTES
The Old Notes have not been registered under the Securities Act or any
state securities laws and therefore may not be offered, sold or otherwise
transferred except in compliance with the registration requirements of the
Securities Act and any other applicable securities laws, or pursuant to an
exemption therefrom or in a transaction not subject thereto, and in each case
in compliance with certain other conditions and restrictions. Old Notes which
remain outstanding after consummation of the Exchange Offer will continue to
bear a legend reflecting such restrictions on transfer. In addition, upon
consummation of the Exchange Offer, holders of Old Notes which remain
outstanding will not be entitled to any rights to have such Old Notes
registered under the Securities Act or to any similar rights under the
Registration Rights Agreement (subject to certain limited exceptions). The
Company does not intend to register under the Securities Act any Old Notes
which remain outstanding after consummation of the Exchange Offer (subject to
such limited exceptions, if applicable). To the extent that Old Notes are
tendered and accepted in the Exchange Offer, a holder's ability to sell
untendered Old Notes could be adversely affected.
The New Notes and any Old Notes which remain outstanding after
consummation of the Exchange Offer will vote together as a single class for
purposes of determining whether holders of the requisite percentage in
outstanding principal amount thereof have taken certain actions or exercised
certain rights under the Indenture.
EXCHANGE OFFER PROCEDURES
Subject to the conditions set forth under "The Exchange Offer--Conditions
to the Exchange Offer," delivery of New Notes in exchange for Old Notes
tendered and accepted for exchange pursuant to the Exchange Offer will be made
only after timely receipt by the Exchange Agent of (i) certificates for Old
Notes or a book-entry confirmation of a book-entry transfer of Old Notes into
the Exchange Agent's account at DTC, including an Agent's Message (as defined
under "The Exchange Offer--Acceptance for Exchange and Issuance of New Notes")
if the tendering holder does not deliver a Letter of Transmittal, (ii) a
completed and signed Letter of Transmittal (or facsimile thereof), with any
required signature guarantees or, in the case of a book-entry transfer, an
Agent's Message in lieu of the Letter of Transmittal, and (iii) any other
documents required by the Letter of Transmittal. Therefore, holders of Old
Notes desiring to tender such Old Notes in exchange for New Notes should allow
sufficient time to ensure timely delivery. The Company is not under a duty to
give notification of defects or irregularities with respect to the tenders of
Old Notes for exchange.
FRAUDULENT CONVEYANCE; UNENFORCEABILITY OF SUBSIDIARY GUARANTEES
The Company believes that the indebtedness represented by the Subsidiary
Guarantees was incurred for proper purposes and in good faith and the
Subsidiary Guarantors are, and at the time of the consummation of the sale of
the Old Notes were, solvent, have sufficient capital for carrying on their
businesses and are able to pay their debts as they mature. If a court of
competent jurisdiction in a suit by a creditor or representative of creditors
of a Subsidiary Guarantor (such as a trustee in bankruptcy or a
debtor-in-possession) were to find that, at the time of the incurrence of the
indebtedness represented by a Subsidiary Guarantee, such Subsidiary Guarantor
was insolvent, was rendered insolvent by reason of the incurrence of such
guarantee, was engaged in a business or
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transaction for which its remaining assets constituted unreasonably small
capital, intended to incur, or believes that it would incur, debts beyond its
ability to pay such debts as they matured, or intended to hinder, delay or
defraud its creditors, and that the indebtedness was incurred for less than
fair consideration or reasonably equivalent value, then such court could, among
other things, (i) void all or a portion of such Subsidiary Guarantor's
obligations to the holders of the Senior Notes, the effect of which could be
that the holders of the Senior Notes may not be repaid in full and/or (ii)
subordinate such Subsidiary Guarantor's obligations to the holders of the
Senior Notes to other existing and future indebtedness of such Subsidiary
Guarantor, the effect of which would be to entitle such other creditors to be
paid in full before any payment could be made on the Senior Notes. See
"Description of Senior Notes--Subsidiary Guarantees."
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THE EXCHANGE OFFER
PURPOSE OF THE EXCHANGE OFFER
In connection with the sale of the Old Notes, the Company and the
Subsidiary Guarantors entered into the Registration Rights Agreement with the
Initial Purchaser, pursuant to which the Company agreed to file and to use its
commercially reasonable efforts to cause to become effective with the
Commission a registration statement with respect to the exchange of the Old
Notes for notes with terms identical in all material respects to the terms of
the Old Notes. A copy of the Registration Rights Agreement has been filed as an
exhibit to the Registration Statement of which this Prospectus is a part, and
the description of the terms of the Registration Rights Agreement is qualified
in its entirety by reference thereto.
The Exchange Offer is being made to satisfy the contractual obligations of
the Company under the Registration Rights Agreement. The form and terms of the
New Notes are the same as the form and terms of the Old Notes except that the
New Notes have been registered under the Securities Act and will not provide
for any increase in the interest rate thereon. In that regard, the Old Notes
provide, among other things, that, if a registration statement relating to the
Exchange Offer has not been filed by August 3, 1998 and declared effective by
November 2, 1998, increased cash interest ("Liquidated Damages") will be
payable on the Old Notes. Upon consummation of the Exchange Offer, holders of
Old Notes will not be entitled to any Liquidated Damages thereon or any further
registration rights under the Registration Rights Agreement, except under
limited circumstances. See "Risk Factors--Consequences of a Failure to Exchange
Old Notes."
The Exchange Offer is not being made to, nor will the Company accept
tenders for exchange from, holders of Old Notes in any jurisdiction in which
the Exchange Offer or the acceptance thereof would not be in compliance with
the securities or blue sky laws of such jurisdiction.
Unless the context requires otherwise, the term "holder" with respect to
the Exchange Offer means any person in whose name the Old Notes are registered
on the books of the Company or any other person who has obtained a properly
completed bond power from the registered holder, or any person whose Old Notes
are held of record by The Depository Trust Company ("DTC") who desires to
deliver such Old Notes by book-entry transfer at DTC.
TERMS OF THE EXCHANGE OFFER
The Company hereby offers, upon the terms and subject to the conditions
set forth in this Prospectus and in the accompanying Letter of Transmittal, to
exchange up to $200,000,000 aggregate principal amount of New Notes for a like
aggregate principal amount of Old Notes properly tendered on or prior to the
Expiration Date and not properly withdrawn in accordance with the procedures
described below. The Company will issue, promptly after the Expiration Date, an
aggregate principal amount of up to $200,000,000 of New Notes in exchange for a
like principal amount of outstanding Old Notes tendered and accepted in
connection with the Exchange Offer. Holders may tender their Old Notes in whole
or in part in denominations of $1,000 or any integral multiple thereof.
The Exchange Offer is not conditioned upon any minimum principal amount of
Old Notes being tendered. As of the date of this Prospectus, $200,000,000
aggregate principal amount of the Old Notes are outstanding.
Holders of Old Notes do not have any appraisal or dissenters' rights in
connection with the Exchange Offer. Old Notes which are not tendered for or are
tendered but not accepted in connection with the Exchange Offer will remain
outstanding and be entitled to the benefits of the Indenture, but will not be
entitled to any further registration rights under the Registration Rights
Agreement, except under limited circumstances. See "Risk Factors--Consequences
of a Failure to Exchange Old Notes."
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If any tendered Old Notes are not accepted for exchange because of an
invalid tender, the occurrence of certain other events set forth herein or
otherwise, certificates for any such unaccepted Old Notes will be returned,
without expense, to the tendering holder thereof promptly after the Expiration
Date.
Holders who tender Old Notes in connection with the Exchange Offer will
not be required to pay brokerage commissions or fees or, subject to the
instructions in the Letter of Transmittal, transfer taxes with respect to the
exchange of Old Notes in connection with the Exchange Offer. The Company will
pay all charges and expenses, other than certain applicable taxes described
below, in connection with the Exchange Offer. See "--Fees and Expenses."
NEITHER THE COMPANY NOR THE BOARD OF DIRECTORS OF THE COMPANY MAKES ANY
RECOMMENDATION TO HOLDERS OF OLD NOTES AS TO WHETHER TO TENDER OR REFRAIN FROM
TENDERING ALL OR ANY PORTION OF THEIR OLD NOTES PURSUANT TO THE EXCHANGE OFFER.
IN ADDITION, NO ONE HAS BEEN AUTHORIZED TO MAKE ANY SUCH RECOMMENDATION.
HOLDERS OF OLD NOTES MUST MAKE THEIR OWN DECISIONS WHETHER TO TENDER PURSUANT
TO THE EXCHANGE OFFER AND, IF SO, THE AGGREGATE AMOUNT OF OLD NOTES TO TENDER
BASED ON SUCH HOLDERS OWN FINANCIAL POSITIONS AND REQUIREMENTS.
The term "Expiration Date" means 5:00 p.m., New York City time, on
, 1998 unless the Exchange Offer is extended by the Company (in which case
the term "Expiration Date" shall mean the latest date and time to which the
Exchange Offer is extended).
The Company expressly reserves the right in its sole and absolute
discretion, subject to applicable law, at any time and from time to time, (i)
to delay the acceptance of the Old Notes for exchange, (ii) to terminate the
Exchange Offer (whether or not any Old Notes have theretofore been accepted for
exchange) if the Company determines, in its sole and absolute discretion, that
any of the events or conditions referred to under "--Conditions to the Exchange
Offer" have occurred or exist or have not been satisfied, (iii) to extend the
Expiration Date of the Exchange Offer and retain all Old Notes tendered
pursuant to the Exchange Offer, subject, however, to the right of holders of
Old Notes to withdraw their tendered Old Notes as described under "--Withdrawal
Rights," and (iv) to waive any condition or otherwise amend the terms of the
Exchange Offer in any respect. If the Exchange Offer is amended in a manner
determined by the Company to constitute a material change, or if the Company
waives a material condition of the Exchange Offer, the Company will promptly
disclose such amendment by means of a prospectus supplement that will be
distributed to the holders of the Old Notes, and the Company will extend the
Exchange Offer to the extent required by Rule 14e-1 under the Exchange Act.
Any such delay in acceptance, extension, termination or amendment will be
followed promptly by oral or written notice thereof to the Exchange Agent and
by making a public announcement thereof, and such announcement in the case of
an extension will be made no later than 9:00 a.m., New York City time, on the
next business day after the previously scheduled Expiration Date. Without
limiting the manner in which the Company may choose to make any public
announcement and subject to applicable law, the Company shall have no
obligation to publish, advertise or otherwise communicate any such public
announcement other than by issuing a release to an appropriate news agency.
ACCEPTANCE FOR EXCHANGE AND ISSUANCE OF NEW NOTES
Upon the terms and subject to the conditions of the Exchange Offer, the
Company will exchange, and will issue to the Exchange Agent, New Notes for Old
Notes validly tendered and not withdrawn (pursuant to the withdrawal rights
described under "--Withdrawal Rights") promptly after the Expiration Date.
Subject to the conditions set forth under "--Conditions to the Exchange
Offer," delivery of New Notes in exchange for Old Notes tendered and accepted
for exchange pursuant to the Exchange Offer
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will be made only after timely receipt by the Exchange Agent of (i)
certificates for Old Notes or a book-entry confirmation of a book-entry
transfer of Old Notes into the Exchange Agent's account at DTC, including an
Agent's Message if the tendering holder does not deliver a Letter of
Transmittal, (ii) a completed and signed Letter of Transmittal (or facsimile
thereof), with any required signature guarantees, or, in the case of a
book-entry transfer, an Agent's Message in lieu of the Letter of Transmittal,
and (iii) any other documents required by the Letter of Transmittal.
Accordingly, the delivery of New Notes might not be made to all tendering
holders at the same time, and will depend upon when certificates for Old Notes,
book-entry confirmations with respect to Old Notes and other required documents
are received by the Exchange Agent.
The term "book-entry confirmation" means a timely confirmation of a
book-entry transfer of Old Notes into the Exchange Agent's account at DTC. See
"--Procedures for Tendering Old Notes; Book-Entry Transfer." The term "Agent's
Message" means a message transmitted by DTC to and received by the Exchange
Agent and forming a part of a book-entry confirmation, which states that DTC
has received an express acknowledgment from the tendering participant, which
acknowledgment states that such participant has received and agrees to be bound
by the Letter of Transmittal and that the Company may enforce such Letter of
Transmittal against such participant.
Subject to the terms and conditions of the Exchange Offer, the Company
will be deemed to have accepted for exchange, and thereby exchanged, Old Notes
validly tendered and not withdrawn as, if and when the Company gives oral or
written notice to the Exchange Agent of the Company's acceptance of such Old
Notes for exchange pursuant to the Exchange Offer. The Exchange Agent will act
as agent for the Company for the purpose of receiving tenders of Old Notes,
Letters of Transmittal and related documents, and as agent for tendering
holders for the purpose of receiving Old Notes, Letters of Transmittal and
related documents and transmitting New Notes to validly tendering holders. Such
exchange will be made promptly after the Expiration Date. If for any reason
whatsoever, acceptance for exchange or the exchange of any Old Notes tendered
pursuant to the Exchange Offer is delayed (whether before or after the
Company's acceptance for exchange of Old Notes) or the Company extends the
Exchange Offer or is unable to accept for exchange or exchange Old Notes
tendered pursuant to the Exchange Offer, then, without prejudice to the
Company's rights set forth herein, the Exchange Agent may, nevertheless, on
behalf of the Company and subject to Rule 14e-1(c) under the Exchange Act,
retain tendered Old Notes and such Old Notes may not be withdrawn except to the
extent tendering holders are entitled to withdrawal rights as described under
"--Withdrawal Rights."
Pursuant to the Letter of Transmittal, or the Agent's Message, as the case
may be, a holder of Old Notes will warrant and agree in the Letter of
Transmittal or pursuant to the Agent's Message that it has full power and
authority to tender, exchange, sell, assign and transfer Old Notes, that the
Company will acquire good, marketable and unencumbered title to the tendered
Old Notes, free and clear of all liens, restrictions, charges and encumbrances,
and the Old Notes tendered for exchange are not subject to any adverse claims
or proxies. The holder also will warrant and agree that it will, upon request,
execute and deliver any additional documents deemed by the Company or the
Exchange Agent to be necessary or desirable to complete the exchange, sale,
assignment, and transfer of the Old Notes tendered pursuant to the Exchange
Offer.
PROCEDURES FOR TENDERING OLD NOTES
VALID TENDER
Except as set forth below, in order for Old Notes to be validly tendered
by book-entry transfer, an Agent's Message or a completed and signed Letter of
Transmittal (or facsimile thereof), with any required signature guarantees and
in either case any other documents required by the Letter of Transmittal, must
be delivered to the Exchange Agent by mail, facsimile, hand delivery or
overnight carrier at one of the Exchange Agent's addresses set forth under
"--Exchange Agent" on or prior to the Expiration Date and either (i) such Old
Notes must be tendered pursuant to the procedures for book-entry transfer set
forth below or (ii) the guaranteed delivery procedures set forth below must be
complied with.
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Except as set forth below, in order for Old Notes to be validly tendered
by a means other than by book-entry transfer, a completed and signed Letter of
Transmittal (or facsimile thereof), with any required signature guarantees and
any other documents required by the Letter of Transmittal, must be delivered to
the Exchange Agent by mail, facsimile, hand delivery or overnight carrier at
one of the Exchange Agent's addresses set forth under "--Exchange Agent" on or
prior to the Expiration Date and either (i) such Old Notes must be delivered to
the Exchange Agent on or prior to the Expiration Date or (ii) guaranteed
delivery procedures set forth below must be complied with.
If less than all of the Old Notes are tendered, a tendering holder should
fill in the amount of Old Notes being tendered in the appropriate box on the
Letter of Transmittal. The entire amount of Old Notes delivered to the Exchange
Agent will be deemed to have been tendered unless otherwise indicated.
THE METHOD OF DELIVERY OF CERTIFICATES, THE LETTER OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS IS AT THE OPTION AND SOLE RISK OF THE TENDERING
HOLDER, AND DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE
EXCHANGE AGENT. IF DELIVERY IS BY MAIL, REGISTERED MAIL, RETURN RECEIPT
REQUESTED, PROPERLY INSURED, OR AN OVERNIGHT DELIVERY SERVICE IS RECOMMENDED.
IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
BOOK-ENTRY TRANSFER
The Exchange Agent and DTC have confirmed that any Direct Participant (as
defined in "Description of Senior Notes--Book-Entry, Delivery and Form") in
DTC's book-entry transfer facility system may utilize DTC's book-entry
procedures to tender Old Notes. The Exchange Agent will establish an account
with respect to the Old Notes at DTC for purposes of the Exchange Offer within
two business days after the date of this Prospectus. Any Direct Participant may
make a book-entry delivery of the Old Notes by causing DTC to transfer such Old
Notes into the Exchange Agent's account at DTC in accordance with DTC's ATOP
procedures for transfer. However, although delivery of Old Notes may be
effected through book-entry transfer into the Exchange Agent's account at DTC,
an Agent's Message or a completed and signed Letter of Transmittal (or
facsimile thereof), with any required signature guarantees and any other
documents required by the Letter of Transmittal must in any case be delivered
to and received by the Exchange Agent at one of its addresses set forth under
"--Exchange Agent" on or prior to the Expiration Date, or the guaranteed
delivery procedure set forth below must be complied with.
DELIVERY OF DOCUMENTS TO DTC IN ACCORDANCE WITH DTC'S PROCEDURES DOES NOT
CONSTITUTE DELIVERY TO THE EXCHANGE AGENT.
SIGNATURE GUARANTEES
Certificates for the Old Notes need not be endorsed and signature
guarantees on the Letter of Transmittal are unnecessary unless (a) a
certificate for the Old Notes is registered in a name other than that of the
person surrendering the certificate or (b) such holder completes the box
entitled "Special Issuance Instructions" or "Special Delivery Instructions" in
the Letter of Transmittal. In the case of (a) or (b) above, such certificates
for Old Notes must be duly endorsed or accompanied by a properly executed bond
power, with the endorsement or signature on the bond power and on the Letter of
Transmittal guaranteed by a firm or other entity identified in Rule 17Ad-15
under the Exchange Act as an "eligible guarantor institution," including (as
such terms are defined therein): (i) a bank; (ii) a broker, dealer, municipal
securities broker or dealer or government securities broker or dealer; (iii) a
credit union; (iv) a national securities exchange, registered securities
association or clearing agency; or (v) a savings association that is a
participant in a Securities Transfer Association (an "Eligible Institution"),
unless surrendered on behalf of such Eligible Institution. See Instruction 1 to
the Letter of Transmittal.
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GUARANTEED DELIVERY
If a holder desires to tender Old Notes pursuant to the Exchange Offer and
the certificates for such Old Notes are not immediately available or time will
not permit all required documents to reach the Exchange Agent on or prior to
the Expiration Date, or the procedure for book-entry transfer cannot be
completed on a timely basis, such Old Notes may nevertheless be tendered,
provided that all of the following guaranteed delivery procedures are complied
with:
(a) such tenders are made by or through an Eligible Institution;
(b) a properly completed and duly executed Notice of Guaranteed Delivery,
substantially in the form accompanying the Letter of Transmittal, is received
by the Exchange Agent, as provided below, on or prior to the Expiration Date;
and
(c) the certificates (or a book-entry confirmation) representing all
tendered Old Notes, in proper form for transfer, together with a properly
completed and duly executed Letter of Transmittal (or 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, are received by the
Exchange Agent within three New York Stock Exchange trading days after the date
of execution of such Notice of Guaranteed Delivery.
The Notice of Guaranteed Delivery may be delivered by hand, or transmitted
by facsimile or mail to the Exchange Agent and must include a guarantee by an
Eligible Institution in the form set forth in such notice.
Notwithstanding any other provision hereof, the delivery of New Notes in
exchange for Old Notes tendered and accepted for exchange pursuant to the
Exchange Offer will in all cases be made only after timely receipt by the
Exchange Agent of Old Notes, or of a book-entry confirmation with respect to
such Old Notes, and a properly completed and duly executed Letter of
Transmittal (or facsimile thereof), or an Agent's Message in lieu thereof,
together with any required signature guarantees and any other documents
required by the Letter of Transmittal. Accordingly, the delivery of New Notes
might not be made to all tendering holders at the same time, and will depend
upon when Old Notes, book-entry confirmations with respect to Old Notes and
other required documents are received by the Exchange Agent.
The Company's acceptance for exchange of Old Notes tendered pursuant to
any of the procedures described above will constitute a binding agreement
between the tendering holder and the Company upon the terms and subject to the
conditions of the Exchange Offer.
DETERMINATION OF VALIDITY
All questions as to the form of documents, validity, eligibility
(including time of receipt) and acceptance for exchange of any tendered Old
Notes will be determined by the Company, in its sole discretion, whose
determination shall be final and binding on all parties. The Company reserves
the absolute right, in its sole and absolute discretion, to reject any and all
tenders determined by it not to be in proper form or the acceptance of which,
or exchange for, may, in the opinion of counsel to the Company, be unlawful.
The Company also reserves the absolute right, subject to applicable law, to
waive any of the conditions of the Exchange Offer as set forth under
"--Conditions to the Exchange Offer" or any condition or irregularity in any
tender of Old Notes of any particular holder whether or not similar conditions
or irregularities are waived in the case of other holders.
The interpretation by the Company of the terms and conditions of the
Exchange Offer (including the Letter of Transmittal and the instructions
thereto) will be final and binding. No tender of Old Notes will be deemed to
have been validly made until all irregularities with respect to such tender
have been cured or waived. Neither the Company, any affiliates or assigns of
the Company, the Exchange Agent
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nor any other person shall be under any duty to give any notification of any
irregularities in tenders or incur any liability for failure to give any such
notification.
If any Letter of Transmittal, endorsement, bond power, power of attorney,
or any other document required by the Letter of Transmittal is signed by a
trustee, executor, administrator, guardian, attorney-in-fact, officer of a
corporation or other person acting in a fiduciary or representative capacity,
such person should so indicate when signing, and unless waived by the Company,
proper evidence satisfactory to the Company, in its sole discretion, of such
person's authority to so act must be submitted.
A beneficial owner of Old Notes that are held by or registered in the name
of a broker, dealer, commercial bank, trust company or other nominee or
custodian is urged to contact such entity promptly if such beneficial holder
wishes to participate in the Exchange Offer.
RESALES OF NEW NOTES
The Company is making the Exchange Offer for the New Notes in reliance on
the position of the staff of the Division of Corporation Finance of the
Commission as set forth in certain interpretive letters addressed to third
parties in other transactions. However, the Company has not sought its own
interpretive letter and there can be no assurance that the staff of the
Division of Corporation Finance of the Commission would make a similar
determination with respect to the Exchange Offer as it has in such interpretive
letters to third parties. Based on these interpretations by the staff of the
Division of Corporation Finance of the Commission, and subject to the two
immediately following sentences, the Company believes that New Notes issued
pursuant to this Exchange Offer in exchange for Old Notes may be offered for
resale, resold and otherwise transferred by a holder thereof (other than a
holder who is a broker-dealer) without further compliance with the registration
and prospectus delivery requirements of the Securities Act, provided that such
New Notes are acquired in the ordinary course of such holder's business and
that such holder is not participating, and has no arrangement or understanding
with any person to participate, in a distribution (within the meaning of the
Securities Act) of such New Notes. However, any holder of Old Notes who is an
"affiliate" of the Company or who intends to participate in the Exchange Offer
for the purpose of distributing New Notes, or any broker-dealer who purchased
Old Notes from the Company to resell pursuant to Rule 144A or any other
available exemption under the Securities Act, (a) will not be able to rely on
the interpretations of the staff of the Division of Corporation Finance of the
Commission set forth in the above-mentioned interpretive letters, (b) will not
be permitted or entitled to tender such Old Notes in the Exchange Offer and (c)
must comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any sale or other transfer of such Old Notes
unless such sale is made pursuant to an exemption from such requirements. In
addition, as described below, if any broker-dealer holds Old Notes acquired for
its own account as a result of market-making or other trading activities and
exchanges such Old Notes for New Notes, then such broker-dealer must deliver a
prospectus meeting the requirements of the Securities Act in connection with
any resales of such New Notes.
Each holder of Old Notes who wishes to exchange Old Notes for New Notes in
the Exchange Offer will be required to represent that (i) it is not an
"affiliate" of the Company, (ii) any New Notes to be received by it are being
acquired in the ordinary course of its business, (iii) it has no arrangement or
understanding with any person to participate in a distribution (within the
meaning of the Securities Act) of such New Notes, and (iv) if such holder is
not a broker-dealer, such holder is not engaged in, and does not intend to
engage in, a distribution (within the meaning of the Securities Act) of such
New Notes. In addition, the Company may require such holder, as a condition to
such holder's eligibility to participate in the Exchange Offer, to furnish to
the Company (or an agent thereof) in writing information as to the number of
"beneficial owners" (within the meaning of Rule 13d-3 under the Exchange Act)
on behalf of whom such holder holds the Notes to be exchanged in the Exchange
Offer. Each broker-dealer that receives New Notes for its own account pursuant
to the Exchange Offer must acknowledge that it acquired the Old Notes for its
own account as the result of market-making activities or other trading
activities and must agree that it will deliver a prospectus meeting the
requirements of
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the Securities Act in connection with any resale of such New 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. Based on the position taken by the staff of
the Division of Corporation Finance of the Commission in the interpretive
letters referred to above, the Company believes that Participating
Broker-Dealers who acquired Old Notes for their own accounts as a result of
market-making activities or other trading activities may fulfill their
prospectus delivery requirements with respect to the New Notes received upon
exchange of such Old Notes (other than Old Notes which represent an unsold
allotment from the original sale of the Old Notes) with a prospectus meeting
the requirements of the Securities Act, which may be the prospectus prepared
for an exchange offer so long as it contains a description of the plan of
distribution with respect to the resale of such New Notes. Accordingly, this
Prospectus, as it may be amended or supplemented from time to time, may be used
by a Participating Broker-Dealer during the period referred to below in
connection with resales of New Notes received in exchange for Old Notes where
such Old Notes were acquired by such Participating Broker-Dealer for its own
account as a result of market-making or other trading activities. A
Participating Broker-Dealer who intends to use this Prospectus in connection
with the resale of New Notes received in exchange for Old Notes pursuant to the
Exchange Offer must notify the Company, or cause the Company to be notified, on
or prior to the Expiration Date, that it is a Participating Broker-Dealer. Such
notice may be given in the space provided for that purpose in the Letter of
Transmittal or may be delivered to the Exchange Agent at one of the addresses
set forth herein under "--Exchange Agent." Any Participating Broker-Dealer who
is an "affiliate" of the Company may not rely on such interpretive letters and
must comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any resale transaction.
In that regard, each Participating Broker-Dealer who surrenders Old Notes
pursuant to the Exchange Offer will be deemed to have agreed, by execution of
the Letter of Transmittal, that, upon receipt of notice from the Company of the
occurrence of any event or the discovery of any fact which makes any statement
contained or incorporated by reference in this Prospectus untrue in any
material respect or which causes this Prospectus to omit to state a material
fact necessary in order to make the statements contained or incorporated by
reference herein, in light of the circumstances under which they were made, not
misleading or of the occurrence of certain other events specified in the
Registration Rights Agreement, such Participating Broker-Dealer will suspend
the sale of New Notes pursuant to this Prospectus until the Company has amended
or supplemented this Prospectus to correct such misstatement or omission and
has furnished copies of the amended or supplemented Prospectus to such
Participating Broker-Dealer or the Company has given notice that the sale of
the New Notes may be resumed, as the case may be.
WITHDRAWAL RIGHTS
Except as otherwise provided herein, tenders of Old Notes may be withdrawn
at any time on or prior to the Expiration Date.
In order for a withdrawal to be effective a written, telegraphic or
facsimile transmission of such notice of withdrawal must be timely received by
the Exchange Agent at one of its addresses set forth under "--Exchange Agent"
on or prior to the Expiration Date. Any such notice of withdrawal must specify
the name of the person who tendered the Old Notes to be withdrawn, the
aggregate principal amount of Old Notes to be withdrawn, and (if certificates
for such Old Notes have been tendered) the name of the registered holder of the
Old Notes as set forth on the Old Notes, if different from that of the person
who tendered such Old Notes. If Old Notes have been delivered or otherwise
identified to the Exchange Agent, then prior to the physical release of such
Old Notes, the tendering holder must submit the serial numbers shown on the
particular Old Notes to be withdrawn and the signature on the notice of
withdrawal must be guaranteed by an Eligible Institution, except in the case of
Old Notes tendered for the account of an Eligible Institution. If Old Notes
have been tendered pursuant to the procedures for book-entry transfer set forth
in "--Procedures for Tendering Old Notes," the notice of withdrawal must
specify the name and number of the account at DTC to be credited with the
withdrawal of Old Notes, in which case a notice of withdrawal will be effective
if delivered to the
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Exchange Agent by written, telegraphic or facsimile transmission. Withdrawals
of tenders of Old Notes may not be rescinded. Old Notes properly withdrawn will
not be deemed validly tendered for purposes of the Exchange Offer, but may be
retendered at any subsequent time on or prior to the Expiration Date by
following any of the procedures described above under "--Procedures for
Tendering Old Notes."
All questions as to the validity, form and eligibility (including time of
receipt) of such withdrawal notices will be determined by the Company, in its
sole discretion, whose determination shall be final and binding on all parties.
Neither the Company, any affiliate or assign of the Company, the Exchange Agent
nor any other person shall be under any duty to give any notification of any
irregularities in any notice of withdrawal or incur any liability for failure
to give any such notification. Any Old Notes which have been tendered but which
are withdrawn will be returned to the holder thereof promptly after withdrawal.
INTEREST ON NEW NOTES
Holders of Old Notes whose Old Notes are accepted for exchange will not
receive interest on such Old Notes and will be deemed to have waived the right
to receive any interest on such Old Notes accrued from and after June 5, 1998
or from the most recent Interest Payment Date to which interest has been paid
or provided for on the Old Notes. Accordingly, such holders of Old Notes as of
the record date for the next succeeding Interest Payment Date will be entitled
to receive interest on the New Notes issued in exchange therefor accrued from
and after June 5, 1998 or from the most recent Interest Payment Date to which
interest has been paid or provided for on the Old Notes.
CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provisions of the Exchange Offer, or any
extension of the Exchange Offer, the Company will not be required to accept for
exchange, or to exchange, any Old Notes for any New Notes, and, as described
below, may terminate the Exchange Offer (whether or not any Old Notes have
theretofore been accepted for exchange) or may waive any conditions to or amend
the Exchange Offer, if any of the following conditions have occurred or exist
or have not been satisfied:
(a) there shall occur a change in the current interpretation by the staff
of the Commission which permits the New Notes issued pursuant to the Exchange
Offer in exchange for Old Notes to be offered for resale, resold and otherwise
transferred by holders thereof (other than broker-dealers and 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 New Notes are
acquired in the ordinary course of such holders' business and such holders have
no arrangement or understanding with any person to participate in the
distribution of such New Notes; or
(b) any law, statute, rule or regulation shall have been adopted or
enacted which, in the judgment of the Company, would reasonably be expected to
impair its ability to proceed with the Exchange Offer; or
(c) a stop order shall have been issued by the Commission or any state
securities authority suspending the effectiveness of the Registration Statement
or proceedings shall have been initiated or, to the knowledge of the Company,
threatened for that purpose or any governmental approval has not been obtained,
which approval the Company shall, in its sole discretion, deem necessary for
the consummation of the Exchange Offer as contemplated hereby.
If the Company determines in its sole and absolute discretion that any of
the foregoing events or conditions has occurred or exists or has not been
satisfied, it may, subject to applicable law, terminate the Exchange Offer
(whether or not any Old Notes have theretofore been accepted for exchange) or
may waive any such condition or otherwise amend the terms of the Exchange Offer
in any respect. If
33
<PAGE>
such waiver or amendment constitutes a material change to the Exchange Offer,
the Company will promptly disclose such waiver or amendment by means of a
prospectus supplement that will be distributed to the registered holders of the
Old Notes and will extend the Exchange Offer to the extent required by Rule
14e-1 under the Exchange Act.
EXCHANGE AGENT
The Bank of New York has been appointed as Exchange Agent for the Exchange
Offer. Delivery of the Letters of Transmittal and any other required documents,
questions, requests for assistance, and requests for additional copies of this
Prospectus or of the Letter of Transmittal should be directed to the Exchange
Agent as follows:
<TABLE>
<S> <C>
BY MAIL: BY OVERNIGHT DELIVERY OR HAND:
The Bank of New York The Bank of New York
101 Barclay Street, 7E 101 Barclay Street
New York, New York 10286 Corporate Trust Services Window
Attention: Reorganization Section Ground Level
(Registered or Certified Mail Recommended) New York, New York 10286
Attention: Reorganization Section
</TABLE>
TO CONFIRM BY TELEPHONE OR FOR INFORMATION:
(212) 815-6337
FACSIMILE TRANSMISSIONS:
(212) 815-6339
(Eligible Institutions Only)
Delivery to other than the above addresses or facsimile number will not
constitute a valid delivery.
FEES AND EXPENSES
The Company has agreed to pay the Exchange Agent reasonable and customary
fees for its services and will reimburse it for its reasonable out-of-pocket
expenses in connection therewith. The Company will also pay brokerage houses
and other custodians, nominees and fiduciaries the reasonable out-of-pocket
expenses incurred by them in forwarding copies of this Prospectus and related
documents to the beneficial owners of Old Notes, and in handling or tendering
for their customers.
Holders who tender their Old Notes for exchange will not be obligated to
pay any transfer taxes in connection therewith. If, however, New Notes are to
be delivered to, or are to be issued in the name of, any person other than the
registered holder of the Old Notes tendered, or if a transfer tax is imposed
for any reason other than the exchange of Old Notes in connection with the
Exchange Offer, then the amount of any such transfer taxes (whether imposed on
the registered holder or any other persons) will be payable by the tendering
holder. If satisfactory evidence of payment of such taxes or exemption
therefrom is not submitted with the Letter of Transmittal, the amount of such
transfer taxes will be billed directly to such tendering holder.
The Company will not make any payment to brokers, dealers or other
nominees soliciting acceptances of the Exchange Offer.
34
<PAGE>
UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
For U.S. federal income tax purposes, the exchange of Old Notes for New
Notes pursuant to the Exchange Offer should not be treated as a taxable
exchange for U.S. Federal income tax purposes. In that event, holders who
exchange their Old Notes for New Notes would not recognize income, gain or loss
for U.S. federal income tax purposes. In addition, a holder's tax basis in the
New Notes would be equal to its adjusted basis in the Old Notes, and its
holding period would include the period during which it held the Old Notes.
Persons considering the exchange of Old Notes for New Notes pursuant to the
Exchange Offer should consult their own tax advisers concerning the application
of the U.S. federal tax laws to their particular situation as well as the
consequences arising under the laws of any other taxing jurisdiction.
The following summary sets forth certain U.S. federal income and estate
tax consequences of the purchase, ownership and disposition of a Note, whether
an Old Note or a New Note. It does not purport to consider all of the possible
tax consequences of the purchase, ownership and disposition of a Note and is
not intended to reflect the individual tax position of any holder. It deals
only with Notes held as capital assets. Except as expressly indicated, it is
addressed only to initial holders who purchased Old Notes at their issue price
(as defined below) and does not deal with holders with a special tax status or
special tax situation, including financial institutions, insurance companies,
tax-exempt organizations, dealers in securities or currencies, persons who hold
Notes as part of a straddle, hedge, synthetic security or conversion
transaction, persons whose functional currency is not the U.S. dollar or
expatriates or former long-term residents of the United States. This discussion
is based on the U.S. federal tax laws and regulations as now in effect and as
currently interpreted and does not take into account possible changes in those
laws or interpretations, any of which may be applied retroactively. This
discussion does not include any description of the tax laws of any state or
local government within the United States or of any foreign government that may
be applicable to the Notes or holders thereof.
For purposes of this discussion, a "United States person" means a
beneficial owner of a Senior Note that is, for U.S. federal income tax
purposes, a citizen or resident of the United States, a corporation or
partnership created or organized in or under the laws of the United States or
any political subdivision thereof or an estate or trust that is a United States
person within the meaning of Section 7701(a)(30)(D) or (E) of the Internal
Revenue Code of 1986, as amended. The term "U.S. Holder" includes any United
States person or any other person to the extent that income with respect to a
Note is effectively connected with that person's conduct of trade or business
within the United States (or, in the case of a beneficial owner to whom an
income tax treaty applies, is attributable to a permanent establishment of the
beneficial owner in the United States). The term "Non-U.S. Holder" generally
refers to any person other than a U.S. Holder. The "issue price" of an Old
Note, which was the first price to public (not including bond houses, brokers
or similar persons acting in the capacity of underwriters, placement agents or
wholesalers) at which a substantial amount of Old Notes was sold for money, is
$984.49.
TAXATION OF U.S. HOLDERS
INTEREST PAYMENTS. Interest on a Note will be includible in the gross
income of a U.S. Holder as ordinary U.S. source interest income at the time it
accrues or is received in accordance with the U.S. Holder's method of
accounting for U.S. federal income tax purposes.
SALE OR OTHER DISPOSITION. Upon a sale or other disposition of a Note, a
U.S. Holder generally will recognize capital gain or loss equal to the
difference between the amount realized on the sale or other disposition and the
U.S. Holder's adjusted tax basis in the Note, except to the extent of any
amount attributable to accrued interest, which will be taxable as ordinary
interest income. A U.S. Holder's tax basis in a Note generally will be the U.S.
Holder's U.S. dollar cost for the Old Note, reduced by any principal payments
received by the U.S. Holder on the Old Note or the New Note. The gain or loss
will be long-term capital gain or loss if, at the time of the sale or other
disposition, the Note has been held for more than one year. Under current law,
net capital gains of individual taxpayers are taxed at lower rates than items
of ordinary income.
35
<PAGE>
BRANCH PROFITS TAX. A U.S. Holder that is a foreign corporation generally
will be subject to a branch profits tax at a rate of 30 percent (or a lower
rate if prescribed by a tax treaty) of its effectively connected earnings and
profits that are treated as repatriated during the taxable year.
ESTATE TAX. A Note will be includible in the gross estate of an individual
U.S. Holder.
TAXATION OF NON-U.S. HOLDERS
INTEREST PAYMENTS. Payments of interest (including original issue
discount, if any) on a Note to a Non-U.S. Holder will not be subject to U.S.
federal income tax, whether by withholding or otherwise, provided that (i) the
Non-U.S. Holder (a) does not own, actually or constructively, ten percent or
more of the total combined voting power of all classes of voting stock in the
Company, (b) is not a controlled foreign corporation related, directly or
indirectly, to the Company through stock ownership and (c) is not a bank
holding the Note as a result of an extension of credit made pursuant to a loan
agreement entered into in the ordinary course of its trade or business and (ii)
either the beneficial owner of the Note or 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") and that
is holding the Note on behalf of the beneficial owner files a statement with
the withholding agent to the effect that the beneficial owner of the Note is
not a United States person. Under temporary U.S. Treasury regulations that
apply both to stated interest and to proceeds of a sale or other disposition of
a Note, if paid on or before December 31, 1999, the statement may be made by
(i) the beneficial owner of the Note certifying on Internal Revenue Service
("IRS") Form W-8, under penalties of perjury, that it is not a United States
person and providing its name and address or (ii) any Financial Institution
holding the Note on behalf of the beneficial owner filing a statement with the
withholding agent to the effect that it has received such a statement from the
beneficial owner and furnishing a copy thereof to the withholding agent.
Recently issued final Treasury regulations (the "Final Regulations"), which
apply to interest and sale or other disposition proceeds paid after December
31, 1999, also provide that the statement filing requirement generally will be
satisfied if the beneficial owner (including partners of certain foreign
partnerships), as well as certain foreign partnerships, meet the conditions set
forth in the preceding sentence. However, a beneficial owner that is a foreign
estate or trust (or fiduciary thereof), a foreign partnership that has entered
into a withholding agreement with the IRS, or a Non-U.S. Holder holding a Note
through its U.S. branch will be required to provide its "taxpayer
identification number" in addition to its name and address on Form W-8. Foreign
partnerships and their partners should consult their tax advisers regarding
possible additional reporting requirements.
SALE OR OTHER DISPOSITION. A Non-U.S. Holder will not be subject to U.S.
federal income tax on gain recognized on a sale or other disposition of a Note
unless the Non-U.S. Holder is an individual who is present in the United States
for 183 days or more in the taxable year of the disposition and certain other
conditions are met. Certain exceptions may apply, and an individual Non-U.S.
Holder should consult his tax adviser.
ESTATE TAX. A Note will not be includible in the estate of an individual
Non-U.S. Holder unless the beneficial owner is a direct or indirect ten percent
or greater shareholder of the Company.
INFORMATION REPORTING AND BACKUP WITHHOLDING
U.S. HOLDERS. Information reporting will apply, and backup withholding of
tax at a rate of 31 percent may apply, to a payment of principal of or interest
or premium, if any, on a Note or the proceeds from a sale or other disposition
of a Note, unless the U.S. Holder is a corporation or other exempt recipient. A
non-exempt U.S. Holder generally will be subject to backup withholding unless
it provides certain identifying information (including its taxpayer
identification number) in the manner required.
NON-U.S. HOLDERS. Generally, information reporting and backup withholding
of federal income tax at a rate of 31 percent may apply to payments of
principal of and interest and premium, if any, on a
36
<PAGE>
Note to a Non-U.S. Holder if the payee fails to certify that the beneficial
owner of the Note is a Non-U.S. Holder. The payment of the proceeds of a
disposition of a Note to or through the U.S. office of a U.S. or foreign broker
will be subject to information reporting and backup withholding, unless the
Non-U.S. Holder certifies that the beneficial owner is not a United States
person or otherwise establishes an exemption. The proceeds of a disposition by
a Non-U.S. Holder of a Note to or through a foreign office of a broker will not
be subject to backup withholding. However, if a foreign broker is a United
States person, a controlled foreign corporation for U.S. federal income tax
purposes or a foreign person 50 percent or more of whose gross income from all
sources for certain periods is effectively connected with a U.S. trade or
business, information reporting will apply unless the broker has documentary
evidence in its files of the owner's foreign status and has no actual knowledge
to the contrary or unless the owner otherwise establishes an exemption.
Any amount withheld under the backup withholding rules is allowable as a
refund or credit against the beneficial owner's U.S. federal income tax,
provided the required information is provided to the IRS.
The Final Regulations modify the backup withholding and information
reporting requirements in certain respects for payments made after December 31,
1999. A prospective investor is urged to consult its tax adviser regarding the
application of the backup withholding and information reporting rules.
37
<PAGE>
USE OF PROCEEDS
The Company will not receive any cash proceeds from the issuance of the
New Notes transferred hereby. In consideration for issuing the New Notes in
exchange for the Old Notes as described in the Prospectus, the Company will
receive Old Notes in like principal amount. The Old Notes surrendered in
exchange for the New Notes will be retired and canceled.
The net proceeds to the Company from the sale of the Old Notes were
approximately $193.5 million. Of such amount, the Company used approximately
$40.5 million to repay indebtedness, including approximately $30.1 million of
indebtedness under the Existing Credit Facility. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations--Liquidity and
Capital Resources" and "Description of Existing Credit Facility."
Of the remaining proceeds, the Company intends to use (i) approximately
$19.0 million to acquire and install hushkits on the Company's aircraft and
(ii) approximately $134.0 million to acquire additional DC-8 and widebody
aircraft, spare parts, equipment and tooling, to make strategic acquisitions
and for working capital and other general corporate purposes.
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
March 31, 1998 (i) on an actual basis and (ii) as adjusted to reflect the sale
by the Company of the Old Notes and the application of the estimated net
proceeds therefrom as described under "Use of Proceeds." This table should be
read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations," the Company's Consolidated Financial
Statements and related Notes thereto and the other financial information
appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
MARCH 31, 1998
-------------------------
ACTUAL AS ADJUSTED
---------- ------------
(IN THOUSANDS)
<S> <C> <C>
Cash and cash equivalents ......................................... $ 2,166 $155,201
======= ========
Debt(1)(2):
Existing Credit Facility(2) ...................................... $19,048 $ --
9 7/8% Senior Notes due 2008 ..................................... -- 200,000
Capital lease obligations ........................................ 325 325
Other debt(2) .................................................... 9,898 575
------- --------
Total debt ...................................................... $29,271 $200,900
------- --------
Stockholders' equity:
Common stock, $0.01 par value, 3,000 shares authorized, issued and
outstanding actual and as adjusted ............................. -- --
Retained earnings ................................................ 45,322 45,322
Net unrealized holding gain on investment securities ............. 21 21
------- --------
Total stockholders' equity ...................................... 45,343 45,343
------- --------
Total capitalization ........................................... $74,614 $246,243
======= ========
</TABLE>
- ----------------
(1) For a description of the Company's long-term debt, see Note 8 of Notes to
the Company's Consolidated Financial Statements.
(2) On June 5, 1998, the date of the consummation of the sale of the Old Notes,
the Company had approximately $30.1 million outstanding under the Existing
Credit Facility, which amount was repaid in full with a portion of the net
proceeds of the sale of the Old Notes. In addition, on June 5, 1998, the
Company had approximately $10.9 million in principal and accrued interest
of other debt outstanding, of which approximately $10.3 million was repaid
with a portion of the net proceeds of the sale of the Old Notes.
38
<PAGE>
SELECTED FINANCIAL DATA
The balance sheet data set forth below as of December 31, 1994, 1995, 1996
and 1997 and the statement of operations data for each of the years in the
four-year period ended December 31, 1997 have been derived from the Company's
audited consolidated financial statements. The balance sheet data as of
December 31, 1993 and the statement of operations data for the year then ended
have been derived from unaudited financial statements of the Company not
included herein. The balance sheet data as of March 31, 1997 and 1998 and June
30, 1997 and the selected statements of operations data for the three months
ended March 31, 1997 and 1998 and the twelve months ended June 30, 1997 have
been derived from the unaudited consolidated financial statements of the
Company which, in the opinion of management, include all adjustments
(consisting of only normal recurring adjustments) necessary for a fair
presentation of the information set forth therein. The results of operations
for the three months ended March 31, 1998 are not necessarily indicative of the
results for the full year. The following data should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results
of Operations" and the Company's Consolidated Financial Statements and Notes
thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------------------------------
1993 1994 1995 1996 1997(1)
----------- ------------ ------------ ------------ --------------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Scheduled cargo services ................. $ -- $ 19,941 $ 40,124 $ 54,775 $ 56,412
ACMI services ............................ 29,025 44,420 35,340 35,520 31,080
Repairs, training and other .............. -- 492 885 3,953 2,502
-------- -------- -------- -------- --------
Total revenues .......................... 29,025 64,853 76,349 94,248 89,994
-------- -------- -------- -------- --------
Total operating expenses .................. 25,136 52,714 64,646 81,040 91,021
-------- -------- -------- -------- --------
Operating income (loss) ................... 3,889 12,139 11,703 13,208 (1,027)
Interest expense .......................... (1,035) (1,111) (985) (966) (1,091)
Interest and other income, net ............ 274 3,170 320 786 2,233
-------- -------- -------- -------- --------
Net income ................................ $ 3,128 $ 14,198 $ 11,038 $ 13,028 $ 115
======== ======== ======== ======== ========
SELECTED FINANCIAL DATA:
EBITDA(2) ................................. $ 6,373 $ 16,969 $ 18,947 $ 23,384 $10,843
Depreciation and amortization ............. 2,210 3,887 6,924 9,390 11,470
Capital expenditures ...................... 9,714 14,843 15,164 14,108 32,836
Ratio of earnings to fixed charges(3) ..... 3.5x 10.7x 8.2x 8.5x --(4)
OPERATING DATA:
Destinations served (end of period) ....... -- 9 21 27 29
Tons of freight transported--scheduled
cargo services ........................... -- 32,072 64,906 75,923 68,844
ACMI block hours flown .................... 12,943 15,280 12,068 12,289 10,712
Aircraft in service (end of period) ....... 13 13 14 15 14
BALANCE SHEET DATA (AT PERIOD END):
Working capital ........................... $ 3,917 $ 4,861 $ 9,735 $ 13,710 $ 2,970
Total assets .............................. 29,502 45,313 57,026 65,886 82,846
Total debt ................................ 17,274 13,946 13,129 11,357 30,084
<CAPTION>
TWELVE THREE MONTHS ENDED
MONTHS ENDED MARCH 31,
JUNE 30, -----------------------
1997(1) 1997 1998
------------- ----------- -----------
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Scheduled cargo services ................. $ 64,636 $ 16,174 $ 17,225
ACMI services ............................ 40,089 9,126 7,511
Repairs, training and other .............. 2,542 626 408
-------- -------- --------
Total revenues .......................... 107,267 25,926 25,144
-------- -------- --------
Total operating expenses .................. 90,135 22,577 24,386
-------- -------- --------
Operating income (loss) ................... 17,132 3,349 758
Interest expense .......................... (902) (225) (655)
Interest and other income, net ............ 436 46 3,586
-------- -------- --------
Net income ................................ $ 16,666 $ 3,170 $ 3,689
======== ======== ========
SELECTED FINANCIAL DATA:
EBITDA(2) ................................. $ 28,230 $ 6,242 $ 4,098
Depreciation and amortization ............. 10,662 2,847 3,143
Capital expenditures ...................... 17,190 4,157 6,789
Ratio of earnings to fixed charges(3) ..... 10.2x 7.6x 5.0x
OPERATING DATA:
Destinations served (end of period) ....... 29 29 23
Tons of freight transported--scheduled
cargo services ........................... 80,384 19,404 21,966
ACMI block hours flown .................... 13,841 3,346 2,686
Aircraft in service (end of period) ....... 15 15 14
BALANCE SHEET DATA (AT PERIOD END):
Working capital ........................... $ 13,829 $ 16,162 $ 2,014
Total assets .............................. 66,236 65,341 85,372
Total debt ................................ 9,323 9,581 29,271
</TABLE>
- ----------------
(1) The Company's 1997 results were adversely affected by the temporary
cessation of operations for seven weeks during September and October 1997.
The Company gradually resumed operations during the remainder of 1997. See
"Management's Discussion and Analysis of Financial Condition and Results
of Operations--Recent Results." The twelve months ended June 30, 1997 data
has been presented to illustrate the Company's operating results for the
most recent twelve month period prior to the cessation of operations.
(2) EBITDA represents earnings before interest expense, income taxes,
depreciation and amortization and non-recurring items. EBITDA is presented
to provide additional information relating to the Company's ability to
service indebtedness. EBITDA is a measure of financial performance not
considered in generally acccepted accounting principles and should not be
considered in isolation or as a substitute for other measures of financial
performance or liquidity. Other companies may define EBITDA differently,
and as a result, such measures may not be comparable to the Company's
EBITDA.
(3) In calculating the ratio of earnings to fixed charges, earnings consists of
income before income taxes and fixed charges (excluding capitalized
interest for the period). Fixed charges consists of interest expense
(including amounts capitalized), amortization of debt issue costs and
one-third of rental expenses under operating leases (such one-third
portion is deemed by the Company to be the equivalent of the interest
portion of such payments).
(4) Earnings were insufficient to cover fixed charges by approximately $325,000
for the year ended December 31, 1997.
39
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The Company derives its revenues from three sources: scheduled cargo
services, ACMI services and repairs, training and other services provided to
third parties. During the past four years, the Company's revenues increased at
a compound annual rate of 32.7% to $90.0 million in 1997 from $29.0 million in
1993. The Company's revenue growth during this period has been substantially
the result of the introduction and expansion of scheduled cargo services. The
Company began offering scheduled cargo services at the beginning of 1994 and
has expanded its service to include 23 South and Central American and Caribbean
destinations as of March 31, 1998. Revenues from scheduled cargo services
increased at a compound annual rate of 41.4% from 1994 to 1997 and represented
62.7% of total revenues in 1997, compared to 30.7% of total revenues in 1994.
The shift in mix of the Company's revenues during the past three years has
impacted its operating margins, as the Company has committed significant
resources to build the infrastructure to support its scheduled cargo services,
including moving to a new cargo warehouse and new MIA hangar facilities in
1996, opening additional domestic and foreign sales offices, and adding sales,
flight, warehouse, cargo and ground handling personnel. Management believes
that the Company will be able to utilize its existing infrastructure and fleet,
as well as the additional aircraft it intends to acquire, to expand its
scheduled cargo services to new destinations in South and Central America and
the Caribbean. Management plans to continue to emphasize the development of
scheduled cargo services for future revenue growth while at the same time
expanding the Company's ACMI services. ACMI services have been more profitable
than scheduled cargo services primarily because increased demand for ACMI
services during the fourth quarter generally has resulted in higher aircraft
utilization and more profitable ACMI rates.
Revenues from scheduled cargo services consist principally of charges for
freight transported on the Company's scheduled cargo routes and charges for
transportation logistics services, such as truck and interline transportation
of freight, local pick-up and delivery, warehousing and assistance in document
preparation and processing. The Company sells air cargo services to
destinations its serves directly, destinations served by its ACMI and AMI
(aircraft, maintenance and insurance) customers and destinations served by
other airlines on an interline basis. Freight rates are structured based upon
the type of freight, weight or volume, delivery service and the destination.
Beginning in the third quarter of 1996, the Company's revenues from scheduled
cargo services include fuel surcharges that the Company instituted following
significant increases in fuel prices during the year. During the first quarter
of 1997, fuel prices began to decline, and the Company removed its fuel
surcharges in certain markets in the second quarter of 1997.
Revenues from ACMI services are derived from both ACMI and AMI contracts
under which the Company supplies its aircraft for specified cargo operations or
on an AD HOC basis and charges its customers for such services on a per block
hour basis subject, in certain instances, to specified minimum charges. The
Company's ACMI customers are responsible for substantially all other aircraft
operating expenses, including fuel, landing and parking fees and ground and
cargo handling expenses. The Company's AMI customers are responsible for the
same operating costs as ACMI customers and also provide their own crews.
Revenues from repairs, training and other are comprised principally of
charges for third party maintenance services, including airframe, component and
engine maintenance, repairs and overhauls, as well as spare parts sales,
leasing and training.
Flying operations expenses are comprised principally of fuel costs, crew
costs, overflight, landing and parking fees, aircraft rental expenses, expenses
for transporting freight to and from the Company's MIA hub from its sales
offices and interline transportation expenses. Flying operations expenses
40
<PAGE>
associated with ACMI services, such as fuel, overflight, landing and parking
fees, are either paid directly by the Company's customer or billed to the
customer on a direct pass-through basis. Most of the Company's ACMI customers
purchase their own fuel.
Aircraft and traffic servicing expenses are comprised principally of
personnel and equipment repair expenses associated with the Company's cargo
warehouse, cargo handling and ground handling operations and communications,
personnel and third party expenses related to flight planning. Aircraft and
traffic servicing expenses have increased over the past three years as the
Company has added personnel to handle the increase in scheduled cargo services.
Maintenance expenses are comprised principally of labor, parts and
supplies associated with the maintenance, repair and overhaul of the Company's
aircraft and engines and third party maintenance services. Costs associated
with major maintenance ("C" and "D") checks are capitalized when incurred and
amortized over their expected useful lives, ranging from 3 years for "C" checks
and engine repairs to 8 years for "D" checks. Other maintenance expenses,
including expenses associated with routine maintenance checks, are expensed
when incurred. Because the Company pays for maintenance whether its aircraft
are used in scheduled cargo service or ACMI service, maintenance expenses are
not affected by changes in the mix of revenues from these two services.
General and administrative expenses are comprised principally of salaries
and benefits for executive and administrative personnel, insurance, security
expenses and rent, utilities and other occupancy expenses associated with the
Company's cargo warehouse and MIA hangar facilities and domestic and
international operations stations and sales offices.
Selling expenses are comprised principally of salaries and benefits for
sales personnel, commissions paid to third party general sales agents,
advertising and marketing expenses and provision for bad debts.
Depreciation and amortization expenses are comprised principally of
depreciation on aircraft, aircraft components and ground equipment, and the
amortization of capitalized major airframe and engine maintenance, repairs and
overhauls.
Immediately prior to the consummation of the sale of the Old Notes, each
of Messrs. Frank and Barry Fine contributed his interest in Fine Air and Agro
Air to the Company, and Fine Air and Agro Air became wholly owned subsidiaries
of the Company. The Company's Consolidated Financial Statements included in
this Prospectus reflect the consolidated results of the Company, Fine Air and
Agro Air for all periods presented. The Company, Fine Air and Agro Air are S
corporations and, accordingly, were not subject to federal and certain state
corporate income taxes.
RECENT RESULTS
On September 4, 1997, the Company temporarily suspended operations. During
the first half of 1997, the Company had experienced increases over the prior
year in revenues from both scheduled cargo services and ACMI services. The
Company resumed operations on a limited basis on October 28, 1997,
approximately seven weeks after suspending operations. During the remainder of
1997, the Company focused principally on rebuilding service to its scheduled
cargo destinations. The cessation of operations resulted in a significant
decrease in revenue for the third and fourth quarters of 1997. Although the
Company was able to reduce certain overhead expenses during this period,
expenses associated with maintaining the infrastructure and personnel necessary
to recommence operations and complying with the FAA's requirements resulted in
significant operating losses during the second half of 1997.
The impact of the temporary cessation of operations continued to affect
the Company's revenues and profitability during the three months ended March
31, 1998. During the first quarter of 1998, the Company continued to emphasize
rebuilding the service level of its scheduled cargo services. By the end of the
quarter, the Company's scheduled cargo operations served most of the
destinations which
41
<PAGE>
had been served during the first half of 1997, and revenues from scheduled
cargo services had returned to historical levels. ACMI block hours remained at
lower than historical levels during the first quarter of 1998, due primarily to
the Company's emphasis on rebuilding its scheduled cargo services. During March
and April 1998, both revenue and operating income showed significant
improvement as the Company's scheduled cargo services and ACMI services
returned to pre-September 1997 levels.
Management believes that the Company's operations have returned to
historical revenue and profitability levels. Revenues increased 12.5% to $9.9
million in March 1998 from $8.8 million in 1997, due to increased revenues from
scheduled cargo services. Total block hours flown increased 24.3% to 2,218 in
March 1998 from 1,785 in March 1997. Operating income was approximately $1.2
million in both March 1998 and March 1997. Excluding a $3.4 million gain on
litigation settlement in March 1998, EBITDA increased to $2.4 million, or 24.2%
of total revenues, in March 1998 from $2.3 million, or 26.1% of total revenues
in March 1997.
Preliminary operating results for the month of April 1998 continue to
reflect the Company's return to historical revenue and profitability levels.
Revenues increased 12.4% to $10.0 million in April 1998 from $8.9 million in
April 1997, due to increases in revenues from both scheduled cargo and ACMI
services. Total block hours flown increased 17.1% to 2,230 in April 1998 from
1,905 in April 1997. EBITDA increased 10.0% to $2.3 million in April 1998 from
$2.1 million in April 1997.
The tables below sets forth selected unaudited quarterly financial and
operating data for 1996 and 1997 and monthly financial and operating data for
the three months ended March 31, 1998 (dollars in thousands):
<TABLE>
<CAPTION>
1996 FISCAL QUARTER ENDED
---------------------------------------------------
MARCH 31 JUNE 30 SEPT. 30 DEC. 31
---------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
Revenues:
Scheduled cargo services ..................................... $ 11,693 $ 12,099 $ 13,333 $ 17,650
ACMI services ................................................ 5,430 7,347 6,841 15,902
Repairs, training and other .................................. 1,796 818 542 797
Total revenues .............................................. 18,919 20,264 20,716 34,349
EBITDA(1) ..................................................... 3,894 3,734 3,731 12,025
Operating income .............................................. 1,305 1,434 1,264 9,205
Tons of freight transported--scheduled cargo services ......... 18,360 17,153 19,093 21,317
ACMI block hours flown ........................................ 2,146 2,743 3,005 4,395
</TABLE>
<TABLE>
<CAPTION>
1997 FISCAL QUARTER ENDED
-----------------------------------------------------
MARCH 31 JUNE 30 SEPT. 30 DEC. 31
---------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
Revenues:
Scheduled cargo services ..................................... $ 16,174 $ 17,480 $ 12,111 $ 10,647
ACMI services ................................................ 9,126 8,220 6,540 7,194
Repairs, training and other .................................. 626 577 706 593
Total revenues .............................................. 25,926 26,277 19,357 18,434
EBITDA(1) ..................................................... 6,242 6,232 (1,317) (314)
Operating income (loss) ....................................... 3,349 3,314 (4,423) (3,267)
Tons of freight transported--scheduled cargo services ......... 19,404 20,570 15,933 12,937
ACMI block hours flown ........................................ 3,346 3,092 2,537 1,737
</TABLE>
42
<PAGE>
<TABLE>
<CAPTION>
1998 MONTH ENDED
------------------------------------ 1ST QUARTER
JAN. 31 FEB. 28 MARCH 31 TOTAL
----------- --------- ---------- ------------
<S> <C> <C> <C> <C>
Revenues:
Scheduled cargo services ..................................... $ 5,068 $ 5,359 $ 6,798 $ 17,225
ACMI services ................................................ 2,119 2,454 2,938 7,511
Repairs, training and other .................................. 104 164 140 408
Total revenues .............................................. 7,291 7,977 9,876 25,144
EBITDA(1) ..................................................... 453 1,233 2,411 4,098
Operating income (loss) ....................................... (587) 188 1,157 758
Tons of freight transported--scheduled cargo services ......... 6,438 6,713 8,815 21,966
ACMI block hours flown ........................................ 719 882 1,085 2,686
</TABLE>
- ----------------
(1) EBITDA represents earnings before interest expense, income taxes,
depreciation and amortization and non-recurring items. EBITDA is presented
to provide additional information relating to the Company's ability to
service indebtedness. EBITDA is a measure of financial performance not
considered in generally accepted accounting principles and should not be
considered in isolation or as a substitute for other measures of financial
performance or liquidity. Other companies may define EBITDA differently,
and as a result, such measures may not be comparable to the Company's
EBITDA.
RESULTS OF OPERATIONS
The following table sets forth, for the periods presented, certain
revenue, expense and income items as a percentage of total operating revenues:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, MARCH 31,
------------------------------------ -----------------------
1995 1996 1997 1997 1998
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Revenues:
Scheduled cargo services ............... 52.6% 58.1% 62.7% 62.4% 68.5%
ACMI services .......................... 46.3 37.7 34.5 35.2 29.9
Repairs, training and other ............ 1.1 4.2 2.8 2.4 1.6
----- ----- ----- ----- -----
Total operating revenues .............. 100.0% 100.0% 100.0% 100.0% 100.0%
===== ===== ===== ===== =====
Operating expenses:
Flying operations ...................... 34.0% 38.8% 38.0% 36.5% 35.4%
Aircraft and traffic servicing ......... 9.8 8.4 9.7 8.2 10.1
Maintenance ............................ 10.9 10.5 16.9 11.1 14.9
General and administrative ............. 15.0 15.0 17.9 15.4 18.6
Selling ................................ 5.8 3.3 5.9 4.9 5.5
Depreciation and amortization .......... 9.1 10.0 12.7 11.0 12.5
----- ----- ----- ----- -----
Total operating expenses .............. 84.6 86.0 101.1 87.1 97.0
----- ----- ----- ----- -----
Operating income ........................ 15.4 14.0 ( 1.1) 12.9 3.0
Interest and other income, net .......... ( 0.9) ( 0.2) 1.2 ( 0.7) 11.7
----- ----- ----- ----- -----
Net income .............................. 14.5% 13.8% 0.1% 12.2% 14.7%
===== ===== ===== ===== =====
</TABLE>
THREE MONTHS ENDED MARCH 31, 1998 COMPARED TO THREE MONTHS ENDED MARCH 31, 1997
REVENUES.
Revenues decreased 3.1% to $25.1 million in the first quarter of 1998 from
$25.9 million in the first quarter of 1997, due to a decrease in revenues from
ACMI services of $1.6 million partially offset by an increase in revenues from
scheduled cargo services of $1.0 million. During the first quarter of 1998, the
Company was still recovering from the temporary cessation of operations during
the last half of 1997. Total block hours flown by the Company's fleet increased
0.8% to 5,556 in the first quarter of 1998 from 5,514 in the first quarter of
1997, due to an increase of 702 hours in block hours flown for scheduled cargo
services partially offset by a 660 hour decrease in ACMI block hours.
43
<PAGE>
Revenues from scheduled cargo services increased 6.2% to $17.2 million in
the first quarter of 1998 from $16.2 million in the first quarter of 1997, due
to increases in tons of freight transported to existing markets, increases in
cargo rates and the introduction of a new market (Brazil). Revenue associated
with the higher level of scheduled cargo service operations was offset somewhat
by $1.5 million of fuel surcharges assessed in the first quarter of 1997. Tons
of freight transported increased 13.2% to 21,966 in the first quarter of 1998
from 19,404 in the first quarter of 1997, primarily as a result of increased
sales efforts by the Company's domestic and international sales network.
Revenues from ACMI services decreased 17.6% to $7.5 million in the first
quarter of 1998 from $9.1 million in the first quarter of 1997, due primarily
to the Company's emphasis on scheduled service during the first quarter of
1998. Total block hours flown for ACMI services decreased 19.8% to 2,686 in the
first quarter 1998 from 3,349 in the first quarter of 1997.
Revenues from repairs, training and other decreased to $408,000 in the
first quarter of 1998 from $626,000 in the first quarter of 1997, due primarily
to a decrease in third party engine and airframe repairs.
OPERATING EXPENSES.
Flying operations expenses decreased 6.3% to $8.9 million in the first
quarter 1998 from $9.5 million in the first quarter of 1997, due primarily to
decreased fuel prices. As a percentage of total revenues, flying operations
expenses decreased to 35.4% in the first quarter of 1998 from 36.5% in the
first quarter of 1997.
Aircraft and traffic servicing expenses increased 23.8% to $2.6 million in
the first quarter of 1998 from $2.1 million in the first quarter of 1997, due
primarily to the addition of personnel to handle the increase in scheduled
cargo services, as well as the implementation of new cargo handling and loading
procedures. As a percentage of total revenues, aircraft and traffic servicing
expenses increased to 10.1% in the first quarter 1998 from 8.2% in the first
quarter 1997, due to the Company's emphasis on scheduled cargo services.
Maintenance expenses increased 27.6% to $3.7 million in the first quarter
of 1998 from $2.9 million in the first quarter of 1997, due primarily to costs
associated with personnel training after the resumption of services and an
increase in field line maintenance requirements associated with new domestic
ACMI contracts. As a percentage of total revenues, maintenance expenses
increased to 14.9% in the first quarter of 1998 from 11.1% in the first quarter
of 1997.
General and administrative expenses increased 17.5% to $4.7 million in the
first quarter of 1998 from $4.0 million in the first quarter of 1997, due
primarily to increased salary expense and professional fees to support the
expansion of operations and the build-up of the Company's infrastructure. As a
percentage of total revenues, general and administrative expenses increased to
18.6% in the first quarter of 1998 from 15.4% in the first quarter of 1997.
Selling expenses increased 7.7% to $1.4 million in the first quarter of
1998 from $1.3 million in the first quarter 1997, primarily due to an increase
in commissions and other selling expenses in the first quarter of 1998
associated with the increase in scheduled cargo revenues. As a percentage of
total revenues, selling expenses increased to 5.5% in the first quarter of 1998
from 4.9% in the first quarter of 1997.
Depreciation and amortization expense increased 10.7% to $3.1 million in
the first quarter of 1998 from $2.8 million in the first quarter of 1997, due
primarily to increases in equipment and increased amortization of capitalized
maintenance costs. As a percentage of total revenues, depreciation and
amortization expenses increased to 12.5% in the first quarter 1998 from 11.0%
in the first quarter 1997.
OPERATING INCOME. Operating income decreased 75.8% to $0.8 million in the
first quarter 1998 from $3.3 million in the first quarter 1997. The Company's
operating margin decreased to 3.0% in the
44
<PAGE>
first quarter 1998 from 12.9% in the first quarter of 1997. The temporary
cessation of operations in the second half of 1997 continued to adversely
impact the Company during the first quarter of 1998.
INTEREST AND OTHER INCOME, NET. Interest and other income, net increased
$3.1 million in the first quarter of 1998 compared to the first quarter 1997,
due primarily to a gain of $3.4 million related to a lawsuit judgment. Interest
expense increased to $655,000 in the first quarter of 1998 from $225,000 in the
first quarter of 1997 due primarily to additional borrowings.
NET INCOME. As a result of the above factors, net income increased 15.6%
to $3.7 million in the first quarter of 1998 from $3.2 million in the first
quarter of 1997.
FISCAL 1997 COMPARED TO 1996
REVENUES.
Revenues decreased 4.5% to $90.0 million in 1997 from $94.2 million in
1996, due primarily to the cessation of operations for seven weeks and the
subsequent effects of such temporary interruption of services during the second
half of 1997. In the first half of 1997, revenues increased 33.2% to $52.2
million from $39.2 million in the first half of 1996 due to increases in
revenues from both scheduled cargo services and ACMI services. Total block
hours flown by the Company's fleet decreased 10.5% to 19,372 in 1997 from
21,642 in 1996, due primarily to the temporary cessation of operations during
the second half of 1997.
Revenues from scheduled cargo services increased 2.9% to $56.4 million in
1997 from $54.8 million in 1996, due to significant increases in cargo rates,
partially offset by a decrease in scheduled block hours of 7.4% as a result of
the temporary cessation of operations. Tons of freight transported decreased
9.3% to 68,844 in 1997 from 75,923 in 1996.
Revenues from ACMI services decreased 12.4% to $31.1 million in 1997 from
$35.5 million in 1996, due primarily to a decrease in ACMI block hours in the
second half of 1997. Total block hours flown for ACMI services decreased 12.8%
to 10,712 in 1997 from 12,288 in 1996. The significant decrease in ACMI hours
was primarily the result of the temporary cessation of operations, as well as
the Company's strategy to reestablish and focus on normal scheduled cargo
services when operations recommenced. In the first half of 1997, revenues from
ACMI services increased 35.2% to $17.3 million from $12.8 million in the first
half of 1996, due primarily to an increase in block hours flown as a result of
the addition of new ACMI customers and increased aircraft utilization.
Revenues from repairs, training and other decreased 37.5% to $2.5 million
in 1997 from $4.0 million in 1996, due primarily to $1.2 million of airframe
repairs performed on a single aircraft during the first half of 1996. The
aircraft was subsequently purchased from a company owned by a stockholder of
the Company.
OPERATING EXPENSES.
Flying operations expenses decreased 6.6% to $34.2 million in 1997 from
$36.6 million in 1996, due primarily to a 7.4% decrease in scheduled cargo
services block hours. As a percentage of total revenues, flying operations
expenses decreased to 38.0% in 1997 from 38.8% in 1996.
Aircraft and traffic servicing expenses increased 10.1% to $8.7 million in
1997 from $7.9 million in 1996, due primarily to the addition of personnel to
handle the increase in scheduled cargo services in the first half of 1997 and
the Company's reluctance to reduce key personnel during the cessation of
operations. As a percentage of total revenues, aircraft and traffic servicing
expenses increased to 9.7% in 1997 from 8.4% in 1996, due primarily to the
increase in the proportion of total revenues generated from scheduled cargo
services. Scheduled cargo tonnage increased 12.6% in the first half of 1997
compared to the first half of 1996.
45
<PAGE>
Maintenance expenses increased 53.5% to $15.2 million in 1997 from $9.9
million in 1996, due primarily to the increase in block hours operated during
the first half of 1997. In addition, during the second half of 1997, the
Company continued to perform maintenance during the temporary cessation of
operations. As a percentage of total revenues, maintenance expenses increased
to 16.9% in 1997 from 10.5% in 1996.
General and administrative expenses increased 14.2% to $16.1 million in
1997 from $14.1 million in 1996, due to increased legal and professional fees
associated with issues surrounding the temporary cessation of operations, rent
and payroll related expenses. As a percentage of total revenues, general and
administrative expenses increased to 17.9% in 1997 from 15.0% in 1996.
Selling expenses increased 71.0% to $5.3 million in 1997 from $3.1 million
in 1996, due primarily to increased commissions and selling expenses to support
anticipated growth in scheduled cargo services. Commissions and other selling
expenses related to scheduled cargo services increased $916,000 in 1997
compared to 1996. In addition, provision for bad debts increased $866,000 in
1997 compared to 1996. During 1996, reserves for bad debts were reduced by a
$391,000 recovery of previously written-off accounts receivable. As a
percentage of total revenues, selling expenses increased to 5.9% in 1997 from
3.3% in 1996.
Depreciation and amortization expense increased 22.3% to $11.5 million in
1997 from $9.4 million in 1996, due primarily to increases in equipment and
leasehold improvements as well as increased amortization of capitalized
airframe and engine repair and maintenance costs. As a percentage of total
revenues, depreciation and amortization expenses increased to 12.7% in 1997
from 10.0% in 1996.
OPERATING INCOME (LOSS). Operating income (loss) decreased to a $1.0
million loss in 1997 from a $13.2 million profit in 1996 due to the temporary
cessation of operations during the last half of 1997.
INTEREST AND OTHER INCOME, NET. Interest and other income, net increased
$1.3 million in 1997 compared to 1996, due primarily to a gain on insurance
settlement of $3.9 million partially offset by $1.0 million of initial public
offering expenses and a $1.0 million remedial expense payable to the FAA
pursuant to the Consent Agreement.
NET INCOME. As a result of the above factors, net income decreased to
$115,000 in 1997 from $13.0 million in 1996.
FISCAL 1996 COMPARED TO 1995
REVENUES.
Revenues increased 23.5% to $94.2 million in 1996 from $76.3 million in
1995, primarily due to an increase in revenues from scheduled cargo services.
Total block hours flown by the Company's fleet increased 11.9% to 21,642 in
1996 from 19,340 in 1995 due to the addition of one aircraft placed into
service in 1996 and increased utilization of the existing fleet.
Revenues from scheduled cargo services increased 36.7% to $54.8 million in
1996 from $40.1 million in 1995, due primarily to increases in tons of freight
transported and cargo rates and to a lesser extent to fuel surcharges collected
during the fourth quarter of 1996. Freight tonnage increased 17.0% to 75,923 in
1996 from 64,906 in 1995, primarily as a result of increases in freight
transported to and from destinations already served by the Company (principally
in Ecuador, El Salvador, Puerto Rico and Venezuela), and to a lesser extent
from sales of air cargo service to new destinations (Colombia, the Dominican
Republic and Jamaica). As of December 31, 1996, the Company offered scheduled
cargo service to 27 destinations, compared to 21 destinations as of December
31, 1995. Management believes that increased load factors were largely the
result of expansion of the Company's domestic and international sales network.
During 1995 and 1996, the Company added domestic sales offices in Atlanta and
Chicago and entered into general sales agent relationships for the marketing of
the
46
<PAGE>
Company's scheduled cargo services in the western United States and portions of
Canada and Europe. Cargo rates increased approximately 15% during the third and
fourth quarters of 1996. Due to significant increases in fuel prices, fuel
surcharges were instituted in most markets during the third quarter of 1996 and
accounted for approximately $1.5 million of revenues from scheduled cargo
services in 1996.
Revenues from ACMI services increased slightly to $35.5 million in 1996
from $35.3 million in 1995. Revenues from ACMI services in 1995 reflected
higher than normal ACMI rates received for several emergency relief cargo
flights after a Caribbean hurricane and additional ACMI business that the
Company obtained during the temporary discontinuation of air cargo service by a
competitor. Total block hours flown for ACMI services increased 1.8% to 12,289
in 1996 from 12,068 in 1995.
Revenues from repairs, training and other increased to $4.0 million in
1996 from $885,000 in 1995, due primarily to increased airframe and engine
overhauls and repairs, including $1.7 million of airframe repairs performed on
a single aircraft during 1996. The Company's move during 1996 to a new hangar
facility at MIA provided the Company the capability to accomplish a wider range
of third party maintenance services, including airframe repairs and
maintenance.
OPERATING EXPENSES.
Flying operations expenses increased 40.8% to $36.6 million in 1996 from
$26.0 million in 1995 due primarily to increased fuel costs and to a lesser
extent increased intermodal and interline transportation and other costs
associated with scheduled cargo services. As a percentage of total revenues,
flying operations expenses increased to 38.8% in 1996 from 34.0% in 1995 as a
result of the increase in revenues from scheduled cargo services as a
percentage of revenues to 58.1% of total revenues in 1996 from 52.6% in 1995.
Aircraft and traffic servicing expenses increased 5.3% to $7.9 million in
1996 from $7.5 million in 1995, due primarily to the increase in 1996 in the
number of flights operated for scheduled cargo services. As a percentage of
total revenues, aircraft and traffic servicing expenses improved to 8.4% in
1996 from 9.8% in 1995, as the Company was able to achieve economies of scale
associated with its new cargo warehouse facilities.
Maintenance expenses increased 19.3% to $9.9 million in 1996 from $8.3
million in 1995, due primarily to the increase in block hours operated during
1996. Despite the significant increase in maintenance services for third
parties and the increase in the number of block hours flown during 1996, as a
percentage of total revenues, maintenance expenses improved to 10.5% in 1996
from 10.9% in 1995 due to operational economies as a result of the
consolidation of the Company's maintenance operations at its new MIA hangar
facility.
General and administrative expenses increased 22.6% to $14.1 million in
1996 from $11.5 million in 1995, due primarily to increases in expenses
associated with the expansion of scheduled cargo services as well as increased
rent related to the Company's new cargo warehouse, new MIA hangar facility and
operations stations and sales office facilities added during 1996, as well as
the addition of personnel. Nevertheless, as a percentage of total revenues,
general and administrative expenses remained constant at 15.0% in 1996 and
1995.
Selling expenses decreased 31.1% to $3.1 million in 1996 from $4.5 million
in 1995, due primarily to an increase in reserves for bad debts in 1995. The
Company provided reserves of approximately $891,000 for bad debts in 1995
compared to only $16,000 in 1996. Commissions and other selling expenses
related to scheduled cargo services increased from $2.5 million in 1995 to $3.2
million in 1996. As a percentage of total revenues, selling expenses declined
to 3.3% in 1996 from 5.8% in 1995, as the Company realized increased revenues
from scheduled cargo services without a corresponding increase in sales
personnel.
Depreciation and amortization expense increased 36.2% to $9.4 million in
1996 from $6.9 million in 1995, primarily due to increased depreciation related
to the acquisition of an additional aircraft during
47
<PAGE>
the second quarter of 1995 and the amortization of capitalized airframe engine
repair and maintenance costs. As a percentage of total revenues, depreciation
and amortization expenses increased to 10.0% in 1996 from 9.1% in 1995.
OPERATING INCOME. As a result of the above factors, operating income
increased 12.8% to $13.2 million in 1996 from $11.7 million in 1995. The
Company's operating margin decreased to 14.0% in 1996 from 15.4% in 1995, due
largely to costs associated with the development of scheduled cargo services.
INTEREST AND OTHER INCOME, NET. Interest and other income, net increased
$486,000 in 1996 compared to 1995. Other income in 1996 included a $364,000
gain on the sale of four surplus aircraft engines. Interest expense decreased
slightly to $966,000 in 1996 from $985,000 in 1995 due primarily to lower
average outstanding indebtedness during 1996 as a result of scheduled principal
payments on long-term debt.
NET INCOME. As a result of the above factors, net income increased 18.2%
to $13.0 million in 1996 from $11.0 million in 1995.
LIQUIDITY AND CAPITAL RESOURCES
Over the past three years, the Company has funded its operations and the
expansion of its business primarily through cash flows from operating
activities. At March 31, 1998, the Company had cash and cash equivalents of
$2.2 million compared to $2.3 million at December 31, 1997. The Company had
working capital of $2.0 million at March 31, 1998, compared to $3.0 million at
December 31, 1997.
The Company has a $45 million credit facility with NationsCredit
Commercial Corporation (the "Existing Credit Facility"), which expires in
November 2000. Borrowings under the Existing Credit Facility bear interest at
the bank's prime rate plus 0.75%. The unused portion of the line of credit is
subject to a fee at the rate of .30% per annum. Borrowings under the Existing
Credit Facility are collateralized by substantially all of the Company's
assets. On June 5, 1998, the date of the consummation of the sale of the Old
Notes, the Company had approximately $30.1 million outstanding under the
Existing Credit Facility, all of which was repaid in full with a portion of the
net proceeds from the sale of the Old Notes. See "Description of the Existing
Credit Facility."
As of December 31, 1997 and March 31, 1998, the balance outstanding under
the Consent Agreement was $690,000 and $575,000, respectively, and included in
accrued expenses and other liabilities.
Net cash provided by operating activities was $7.4 million and $10.1
million in the three months ended March 31, 1998 and 1997, respectively. This
decrease in cash flow from operating activities was due primarily to lower
credit sales in December 1997 compared to December 1996. Net cash provided by
operating activities was $13.4 million, $14.8 million and $17.3 million in
1997, 1996 and 1995, respectively.
Net cash used in investing activities was $6.7 million and $4.2 million in
the three months ended March 31, 1998 and 1997, respectively. Net cash used in
investing activities was approximately $26.4 million, $11.9 million and $15.3
million in 1997, 1996 and 1995, respectively. Net cash used in investing
activities in each period primarily represented additional flight equipment
acquired and capitalized airframe and engine maintenance, repairs and
overhauls. Net cash used in investing activities in 1996 also included
property, equipment and leasehold improvements associated with Company's move
to its new MIA hangar facility.
Net cash used in financing activities was $914,000 and $2.1 million in the
three months ended March 31, 1998 and 1997, respectively. Net cash provided by
financing activities in 1997 was $14.3 million and primarily represented
borrowings under the Existing Credit Facility. Net cash used in financing
activities was $2.4 million and $2.1 million in 1996 and 1995, respectively.
Cash used in
48
<PAGE>
financing activities in 1996 and 1995 and the three months ended March 31, 1998
and 1997 primarily represented principal repayments of indebtedness incurred
for the acquisition of aircraft. The Company made distributions to its
shareholders of $167,000, $324,000, $3.4 million, $1.1 million and $1.2 million
in the three months ended March 31, 1998 and 1997 and the years ended December
31, 1997, 1996 and 1995, respectively, primarily to enable the shareholders to
pay income taxes related to the Company's income. During May 1998, the Company
made a distribution to its shareholders of approximately $3.5 million in excess
of amounts required by the shareholders to pay income taxes. See "Certain
Transactions."
The Company's tax returns for the years ended December 31, 1993 and 1994
are currently under examination by the Internal Revenue Service ("IRS"). The
examination relates specifically to the Company's treatment of certain repairs
and maintenance, including safety checks mandated by the FAA, as expenses for
tax purposes. The Company believes that its treatment of such costs as
deductible for tax purposes is proper and is prepared to defend its position
vigorously, if it becomes necessary. Should the IRS take the position that
these costs should have been capitalized and subsequently depreciated, a
substantial assessment could result. Any such assessment will be taxable
directly to the S Companies' shareholders, rather than to the Company, and the
Company will be required to indemnify such shareholders for the amount of the
assessment and any taxes incurred by them on account of the receipt of such
indemnity payment. Because the examination is in process, the amount of such an
assessment is not presently determinable. See "Certain Transactions" and Note 2
of Notes to the Company's Consolidated Financial Statements.
The Company has no material commitments for future capital expenditures,
apart from normal scheduled major airframe and engine repairs and maintenance
and the hushkitting of its DC-8 aircraft. The Company will be required to
install hushkits on its existing fleet of 14 DC-8 aircraft by December 31, 1999
to comply with noise abatement regulations. The Company estimates that the
average cost of such hushkits will be approximately $2.25 million per aircraft,
and that the aggregate cost to the Company to hushkit its 14 DC-8s and to
acquire two spare hushkits will be $36.0 million, approximately $14.0 million
of which had been incurred as of March 31, 1998. The Company intends to
purchase hushkits for this purpose from a related party. See "Certain
Transactions." Management believes that the cost of the hushkits to be
purchased from the related party will be significantly lower than the cost of
other hushkits available in the market.
The Company believes that the net proceeds from the sale of the Old Notes,
together with cash flows expected to be generated by operations, will be
sufficient to meet its anticipated cash needs for working capital and capital
expenditures for at least the next 18 months.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board issued SFAS No.
131, "Disclosures About Segments of an Enterprise and Related Information."
SFAS No. 131 requires that public entities report financial and descriptive
information about its reportable operating segments, generally on the basis
that it is used internally for evaluating segment performance. Required
disclosure includes segment profit or loss, certain specific revenue and
expense items and segment assets. It requires reconciliations of disclosed
segment information to the entity's financial statements. Management is
currently evaluating the requirements of SFAS No. 131, which will be
implemented for the year ending December 31, 1998.
SEASONALITY
The Company's business has been, and is expected to continue to be,
seasonal in nature, with a majority of the Company's revenues and operating
income falling in the second half of the year (principally the fourth quarter).
The Company's fourth quarter revenues and operating income are typically higher
due to an increase in freight transported in anticipation of and during the
holiday season. In addition to increased fourth quarter revenues from scheduled
cargo services, the Company typically has realized a majority of its ACMI
service revenues from flights conducted during this period.
49
<PAGE>
YEAR 2000 COMPLIANCE
The Company is currently assessing its management information systems and
plans to upgrade or replace its existing systems, as necessary, within the next
18 months in order to meet the requirements of the Company's anticipated
growth. The Company recognizes the need to ensure its operations will not be
adversely impacted by Year 2000 software failures. As such, as part of its
overall assessment of its management information systems, the Company will seek
to ensure that its software systems are Year 2000 compliant. The Company does
not presently believe that the costs related to Year 2000 compliance will have
a material adverse effect on the Company's financial position or results of
operations.
50
<PAGE>
INDUSTRY OVERVIEW
According to published industry sources, the worldwide air freight market
had revenues of $64 billion in 1995 and has grown at a 9.1% compound annual
rate since 1985 (measured in revenue ton kilometers). According to reports
prepared by Boeing, the world air cargo market is expected to more than triple
over the next 20 years. The United States/Latin America air freight market is
forecasted, by published industry sources, to be the fifth fastest growing air
freight market in the world from 1995 to 2005, with an average annual growth
rate of approximately 7.1%, as measured in tons. MIA is the largest air gateway
to South and Central America and the Caribbean, with more than 60 all-cargo
flights to the region per day. MIA is the primary transshipment point for
moving goods by air between North America and South and Central America. During
1997, more than 77% of all air import cargo and more than 83% of all air export
cargo between the United States and Latin America moved through MIA. MIA's air
trade with South America quadrupled from $3.1 billion in 1990 to $13.1 billion
in 1997.
South and Central American and Caribbean countries are gaining increasing
importance in worldwide trade, much of which has been driven by the region's
improved economies, increased political stability, upgraded infrastructures,
expanding middle class, dismantled tariff barriers and the privatization of
state monopolies. South and Central American and Caribbean trade has become
global, with consumer and industrial goods being imported from North America,
Europe and Asia, and South and Central American and Caribbean products
increasingly finding new export markets, especially in the United States.
Between 1988 and 1994, United States exports to South America nearly doubled
from $14.7 billion to $27.3 billion.
Air cargo demand in South and Central America and the Caribbean is
expected to increase as these markets continue to grow and as trade between the
southernmost countries of South America increases, fostered by the 1995 free
trade pact between Argentina, Brazil, Uruguay, Paraguay and Chile (the
"Mercosur" countries). The Mercosur countries have a population of 200 million
people, a combined GDP of $850 billion and comprise 70% of the total land area
of South America. The Company believes that continued economic development in
the Mercosur countries will further increase demand for widebody air freight
services to this region from Europe and the United States through MIA.
Air cargo traffic between the United States and South and Central America
and the Caribbean flows nearly equally northbound and southbound, although it
does not flow evenly into and out of each country due to trade imbalances.
Limited air freight service by passenger carriers and restraints on their
transportation of hazardous cargo have led to the growth of all-cargo carriers
in these markets. Providing air cargo service to South and Central America and
the Caribbean requires special skills to deal with the varied requirements of
numerous foreign government authorities and to transport goods through
relatively inefficient and ill-equipped customs and cargo handling operations
at many foreign airports.
As multinational corporations have demanded more sophisticated and
customized transportation logistics services and increasingly sought to
outsource their transportation logistics functions, freight forwarders have
emerged as important participants in the domestic and international air freight
markets. Major international freight forwarders increasingly have become
reluctant to arrange transportation of their customers' freight with integrated
cargo carriers (such as FedEx, UPS or DHL) because these carriers compete with
the freight forwarders for the same cargo customers. A majority of southbound
air freight to South and Central America and the Caribbean is handled by
freight forwarders, which seek low-cost, reliable service to fulfill their
customers' varied shipping requirements.
The growth of the worldwide air freight market depends partially on the
availability of freighter aircraft. Many air freight carriers operate aircraft
that have been converted from passenger to cargo configurations. The Company
believes that, over the next five years, an adequate supply of used DC-8s and
widebody aircraft will be available, principally due to refleetings by
passenger carriers to newer generation aircraft, resulting in "cascading" of
used aircraft to the air freight industry.
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BUSINESS
COMPANY OVERVIEW
The Company is a leading provider of air cargo services between the United
States and South and Central America and the Caribbean. Since 1994, the Company
has been the largest international air cargo carrier serving Miami
International Airport ("MIA"), based on tons of cargo transported to and from
that airport. MIA is the largest international cargo airport in the United
States and the third largest international cargo airport in the world. The
Company's services include: (i) integrated air and truck cargo transportation
and other logistics services ("scheduled cargo services"); (ii) long- and
short-term ACMI (aircraft, crew, maintenance and insurance) services and AD HOC
charters ("ACMI services"); and (iii) third party aircraft and engine
maintenance, repairs and overhauls, training and other services. The Company's
scheduled cargo services provide seamless transportation through its MIA hub
linking North America, Europe, Asia and the Pacific Rim with 25 South and
Central America and Caribbean cities as of June 30, 1998. The Company's
customers include international and domestic freight forwarders, integrated
carriers, passenger and cargo airlines, major shippers and the United States
Postal Service.
As of June 30, 1998, the Company marketed its scheduled cargo services
through a sales network consisting of seven domestic sales offices serving 57
major U.S. cities, six international sales offices serving over 30 cities in
Europe, Canada, Asia and the Pacific Rim and 23 sales offices in South and
Central America and the Caribbean. The Company receives cargo at its MIA hub
and its foreign operations stations (i) through its domestic and international
sales network, (ii) from other airlines pursuant to interline agreements and
(iii) directly from freight forwarders and other shippers. See
"Business--Customers." The Company utilizes its own fleet of 14 DC-8 aircraft
and the services of other airlines through interline and other contractual
relationships to provide reliable air cargo service between MIA and South and
Central America and the Caribbean. The Company has interline relationships with
over 50 airlines, including Air France, China Airlines, Continental Airlines,
Iberia, Korean Air and Virgin Atlantic. The Company's scheduled cargo services
transported approximately 32,000 tons of freight in 1994 and approximately
68,900 tons of freight in 1997, a compound annual increase of 29.1%. The
Company plans to expand its scheduled cargo services by acquiring both widebody
and additional DC-8 aircraft.
The Company's customers utilize the Company's ACMI services to obtain lift
capacity without acquiring their own aircraft. Under a typical ACMI contract,
the Company supplies an aircraft, crew, maintenance and insurance, either on a
regularly scheduled or AD HOC basis, while the customer bears all other
aircraft operating expenses, including fuel, landing and parking fees and
ground and cargo handling expenses. The Company's ACMI customers also bear the
risk of utilizing the cargo capacity of the Company's aircraft. By offering
ACMI services in addition to scheduled cargo services, the Company is able to
schedule its fleet to satisfy demand on its own routes while improving
utilization and generating additional revenue from ACMI services.
The Company's FAA-approved repair stations perform a full range of
maintenance, repair and overhaul services for DC-8 aircraft and Pratt & Whitney
JT3D-3B aircraft engines. The Company also operates professional pilot and
mechanic training schools. In 1996, the Company moved into a new hangar and
maintenance facility at MIA, which enables the Company to expand its third
party repair and maintenance services while performing all necessary repairs
and maintenance on its own aircraft. The Company began marketing its third
party repair and maintenance capabilities in 1996 and intends to seek
certification to provide similar services for other types of aircraft and
engines.
COMPANY HISTORY
For approximately 20 years prior to founding the Company's predecessor in
1976, J. Frank Fine owned farming operations in 12 different Latin American and
Caribbean countries and, as a result, had depended on the airlines serving
these countries for timely delivery of his products to processing plants
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located primarily in the United States. Many of these airlines did not maintain
adequate capacity to handle the seasonal needs of growers or were ill-equipped
to handle the special requirements of doing business in Latin American and
Caribbean markets. Perceiving a need for reliable transport, in 1976 Mr. Fine
acquired two early model Boeing 707 aircraft which he leased to airlines
serving those markets. In 1982, Barry H. Fine joined the Company, which at the
time owned three aircraft which it leased primarily to international airlines
serving South and Central America and the Caribbean. To maintain control over
its operating costs and improve the turn-around time and reliability of its
aircraft, the Company developed its own maintenance and repair capabilities,
and was certified in 1986 as an FAA repair station for DC-8 aircraft, and in
1987, as an FAA repair station for Pratt & Whitney JT3D-3B aircraft engines.
These certifications allowed the Company to lease and provide its aircraft on
an AMI (aircraft, maintenance and insurance) basis. By 1989, the Company's
fleet consisted of five DC-8 aircraft, which it leased on an AMI basis to a
number of domestic and foreign airlines for both regular and AD HOC cargo
service throughout South and Central America and the Caribbean. The Company
received its U.S. air carrier operating certificate in November 1992. The
Company began developing its own cargo routes in 1994 and has expanded the
coverage of its scheduled cargo services from nine destinations as of December
31, 1994 to 25 cities in 17 countries in South and Central America and the
Caribbean as of June 30, 1998. The Company opened its first regional sales
offices in Houston and New York in 1994. Since that time, the Company has
expanded its sales network to include additional regional sales offices in
Chicago and Atlanta, 16 cargo sales offices in South and Central America and
the Caribbean and general sales agents that represent the Company in the
western United States, Canada, Europe, Asia and the Pacific Rim and in seven
South and Central American and Caribbean cities as of June 30, 1998.
COMPETITIVE STRENGTHS
Management believes that the Company's success has largely been the result
of the following strengths:
/bullet/ ESTABLISHED MARKET POSITION. Since 1994, the Company has
transported more international air cargo to and from MIA, the principal air
gateway for South and Central America and the Caribbean, than any other
carrier. Management believes that the Company has achieved its market position
as a result of the frequency of the Company's flights and its excellent
reputation for reliability and service to its customers, which include freight
forwarders, integrated carriers, passenger and cargo airlines and major
shippers. The Company believes that regulatory and other restrictions imposed
by U.S. and foreign governmental authorities would make it difficult for a new
airline entrant to obtain the necessary operating authority and route rights to
duplicate the Company's business. Management also believes that the scarcity of
available facilities at MIA will inhibit potential competitors seeking to
duplicate the Company's operations.
/bullet/ LOW AIRCRAFT AND OPERATING COST STRUCTURE. The Company maintains
a low cost structure through: (i) the opportunistic acquisition of used
aircraft, engines and spare parts, (ii) the elimination of duplicative costs by
maintaining favorable labor rates and other operating costs associated with the
centralizing of its principal flight and maintenance operations in Miami, (iii)
the "in-sourcing" of activities such as training, aircraft and engine repairs
and maintenance, and (iv) the use of its own ground and cargo handling
personnel and equipment. The Company also seeks to increase its profitability
and enhance aircraft utilization by maintaining an optimum balance of scheduled
cargo services and ACMI services for third parties. The Company's uniform
aircraft fleet has allowed it to standardize its spare part inventories, and
maintenance and training operations, thereby increasing operating efficiencies
and improving the reliability of the Company's air cargo services. The
Company's low cost structure also enables it to utilize its aircraft profitably
in lower yielding freight markets.
/bullet/ ASSET OWNERSHIP. The Company has made a substantial investment to
acquire the assets necessary to support its operations, including 14 DC-8 and
one L-1011 aircraft, 20 used spare aircraft engines, an extensive inventory of
spare parts and aircraft components, maintenance and engine repair equipment
and substantially all of the equipment and vehicles for its aircraft ground and
cargo handling
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<PAGE>
requirements. See "Business--Aircraft Fleet." Management believes that the
value of the Company's operating assets is substantially in excess of their
book value. The Company has also made a substantial commitment of capital and
resources to obtain required governmental authorizations, develop its sales and
marketing network and build the infrastructure necessary to support its
scheduled cargo and ACMI services.
/bullet/ EXPERIENCED MANAGEMENT TEAM. The Company is led by an experienced
management team, headed by Messrs. Frank and Barry Fine, who together have over
50 years of experience in the air cargo industry and whose knowledge of the
South and Central American and Caribbean business environment has been a key
element of the Company's success. The other key members of the Company's
management team, including those responsible for the Company's flight
operations, maintenance and repair facilities, as well as marketing and sales
activities, each have over 20 years of industry experience, including
significant experience in the Company's markets.
/bullet/ DIVERSITY OF CUSTOMER BASE. The Company offers a wide range of
air cargo services to a diverse customer base of over 1,200 customers that
includes international and domestic freight forwarders, integrated carriers,
passenger and cargo airlines, major shippers and the United States Postal
Service. Because the Company is able to provide its customers a broad range of
services tailored to their particular needs, management believes that the
Company is well positioned to benefit from the expected growth in demand for
air freight transportation between the United States and South and Central
America and the Caribbean.
GROWTH STRATEGY
The Company's growth strategy revolves around capitalizing on its position
as a leading provider of air freight transportation services between the United
States and South and Central America and the Caribbean. Principal elements of
the Company's strategy are as follows:
/bullet/ INCREASE LIFT CAPACITY. The Company believes that there are
opportunities to expand its air cargo services to South and Central America and
the Caribbean and intends to strengthen its market position by utilizing both
the capabilities and capacity of its existing aircraft and the increased range
and capacity of the widebody aircraft. Management believes that the Company's
existing DC-8 fleet will accommodate expected growth in air freight service
demand in the Company's existing markets and can also be employed effectively
to commence service to new markets within South and Central America and the
Caribbean. The Company intends to increase the number of markets it can serve
and its capacity in existing markets by adding both widebody and additional
DC-8 aircraft to its fleet. In December 1997, the Company acquired an L-1011
aircraft, which it expects to place into service during the second half of
1998. Widebody aircraft have longer range and significantly larger volume
capacity than DC-8s and will permit the Company to extend its route structure
to serve the southernmost countries of South America, such as the Mercosur
countries, and to more economically serve high cargo volume routes on which the
Company currently operates multiple daily flights. DC-8s that are utilized on
these routes will be redeployed to increase capacity to existing markets and to
develop service to new destinations that are more efficiently served with
narrowbody aircraft. Management believes that increasing the number of
destinations the Company serves will enhance its ability to develop and broaden
relationships with freight forwarders, airlines and other shippers.
/bullet/ EXPAND SALES NETWORK AND TRANSPORTATION LOGISTICS SERVICES. The
Company plans to expand its domestic and international sales network by opening
new domestic sales offices, adding sales personnel, increasing the number of
general sales agents who market the Company's services domestically and
internationally and expanding the Company's interline relationships with major
international airlines. The Company has general sales agents that market its
air cargo services in the western United States, Canada, Europe, Asia and the
Pacific Rim. The Company supplements the air cargo sales efforts of its own
personnel and general sales agents by entering into interline relationships
with international airlines that sell air freight services to destinations
served by the Company. The Company intends to expand the number of such
relationships and the amount of air freight it transports
54
<PAGE>
for these airlines. The Company also plans to increase the scope of its
transportation logistics services, particularly in South and Central America
and the Caribbean, where other airlines and freight forwarders play a much
smaller role in arranging for these services. The Company already offers its
customers intermodal services, such as local freight pick-up and delivery, in
El Salvador and the Dominican Republic.
/bullet/ EXPAND ACMI SERVICES. Management believes that demand for ACMI
services will continue to increase, from South and Central America, Caribbean
and domestic carriers seeking to increase their lift capacity without
committing to purchase or lease additional aircraft. Management further
believes that the Company's acquisition of widebody aircraft will enable it to
market its ACMI services to a broader range of customers, including those who
require the longer range and/or larger volume capacity of these aircraft. The
Company also plans to utilize its existing and any newly acquired DC-8s to
increase its ACMI capabilities. By continuing to provide ACMI services with its
existing and any newly-acquired aircraft, the Company believes that it can
further increase aircraft utilization at the same time it expands its scheduled
cargo services.
/bullet/ PURSUE STRATEGIC ACQUISITIONS. The Company intends to pursue
strategic acquisitions that are complementary to the Company's business.
Management's criteria for identifying attractive acquisition opportunities
include: (i) expanding fleet size at a favorable cost, (ii) diversifying and
expanding the Company's customer base, (iii) increasing economies of scale
related to maintenance and cargo handling and (iv) adding operating and route
authority.
AIR CARGO SERVICES
The Company's scheduled cargo services provide seamless transportation
through its MIA hub linking North America, Europe, Asia and the Pacific Rim
with South and Central America and the Caribbean to serve the varied needs of
international and domestic freight forwarders, integrated carriers, passenger
and cargo airlines, major shippers and the United States Postal Service. The
Company offers its customers a number of services, including scheduled cargo
services, ACMI services, AD HOC charters and transportation logistics services,
such as warehousing, local pick-up and intermodal transportation of freight.
SCHEDULED CARGO SERVICES
As of June 30, 1998, the Company offered regular air cargo service between
its MIA hub and 25 cities in South and Central America and the Caribbean, of
which 19 are served directly by Company routes, three are served by customers
that utilize the Company's aircraft on an ACMI or AMI basis to service such
routes and three are served by other airlines pursuant to interline
relationships. Cargo service is offered on a pre-booked, priority or
space-available basis, and the Company imposes no size or weight restrictions
on shipments, except limitations necessitated by the capacity of the aircraft
serving the particular route. The Company does not dedicate a particular
aircraft to any one route and maintains the flexibility to adjust its flight
services, number of daily flights and the cargo capacity of the aircraft
serving each destination and to add intermediate stops to pick up or deliver
additional cargo based on variations in demand. The Company has operated as
many as six flights per day to a particular destination to meet the demand for
air cargo service to such destination. The Company's scheduled cargo services
transported approximately 32,000 tons of freight in 1994 and approximately
68,900 tons of freight in 1997, a compound annual increase of 29.1%.
The Company's freight rates are based upon the type of freight, weight or
volume, delivery service and destination. Rates vary depending on the type of
freight and, in most instances, durable goods command higher rates than
perishable or dry goods. The Company offers priority next day delivery service
at double the Company's normal rates and second day delivery service which is
billed on a space-available basis. Rates on longer routes generally are higher
than short-haul destinations. Freight is priced on a per kilogram basis and is
adjusted for low weight, high volume freight in accordance with industry
standards. The Company also offers pallet rates for larger shipments. From time
to time, the
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Company's customers require the shipment of hazardous or restricted materials
or oversized pieces which require additional handling, and the customer is
charged higher rates. The Company charges a base rate plus prevailing second
carrier agreement rates for its interline services.
As of June 30, 1998, the Company offered scheduled cargo services to and
from MIA and the following destinations:
<TABLE>
<CAPTION>
DESTINATION
- ------------------------------------------- DAYS OF SERVICE ROUND-TRIP FLIGHTS
COUNTRY CITY PER WEEK(1) PER WEEK(1)
- ------------------------ ---------------- ----------------- -------------------
<S> <C> <C> <C>
Brazil Guarulhos 2 2
Brazil Viracopos 2 2
British Virgin Islands Tortola(2) 1 1
Colombia Bogota(3) 6 18
Costa Rica San Jose 5 5
Dominican Republic Santo Domingo 6 6
Dominican Republic Puerto Plata 3 3
Ecuador Guayaquil 6 9
Ecuador Quito 6 9
Ecuador Manta 2 2
El Salvador San Salvador 5 5
Guatemala Guatemala City 7 7
Haiti Port-au-Prince 2 2
Honduras San Pedro Sula 4 4
Jamaica Montego Bay(3) 3 3
Jamaica Kingston(3) 3 3
Nicaragua Managua 5 5
Panama Panama City 6 6
Puerto Rico San Juan 5 5
Trinidad and Tobago Port-of-Spain 2 2
U.S. Virgin Islands St. Thomas(2) 5 5
U.S. Virgin Islands St. Croix(2) 5 5
Venezuela Caracas 6 12
Venezuela Maracaibo 3 3
Venezuela Valencia 7 7
</TABLE>
- ----------------
(1) Represents the typical number of days of service and round-trip flights per
week that the Company offers air cargo services to and from each
destination. The actual number of days of service and round-trip flights
per week to a destination varies depending on demand.
(2) The Company sells air cargo services for these destinations, which it does
not directly serve. Customers' cargo is transferred pursuant to an
interline arrangement at the Company's Puerto Rico hub.
(3) The Company sells air cargo services on these routes, on which other
carriers provide service utilizing the Company's aircraft, either on an
ACMI or AMI basis.
The Company transports a broad range of goods and commodities. Generally,
a majority of the southbound freight consists of durable goods, such as
industrial equipment and parts, electronic and computer equipment, medical
instruments, pharmaceuticals, vehicles, oilfield equipment, magazines,
newspapers and mail, consumer durables and textiles. Northbound freight is
comprised mainly of finished textiles, pharmaceuticals, handicrafts, seafood,
flowers and fruits and vegetables. Many of the items that the Company
transports northbound to the United States are perishable commodities, and its
customers rely on the dependability of the Company's cargo service and its
ability to accommodate seasonal and variable air freight requirements.
CARGO SALES NETWORK AND MARKETING
CARGO SALES NETWORK. As of June 30, 1998, the Company's sales network was
comprised of the Company's Miami headquarters, six regional sales offices in
major U.S. cities (four of which are Company operated and two of which are
operated by general sales agents), 23 sales offices in South and
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Central America and the Caribbean (16 of which are Company operated and seven
of which are operated by general sales agents) and general sales agents in
Europe, Canada, Asia and the Pacific Rim. The Company's sales efforts are
designed to maximize utilization of the Company's scheduled cargo service by
seeking to achieve a balance between southbound and northbound air cargo
shipments.
Each of the Company's sales offices markets the Company's air cargo
services to customers within its region. The Company's U.S. sales offices, as
well as its offices in El Salvador and the Dominican Republic, have
transportation logistics capabilities, including intermodal relationships with
major trucking companies for local pick-up and delivery of customers' freight.
Company personnel solicit shipment orders and process air waybills and other
documentary requirements for customers' shipments. In areas not covered
directly by the Company's own sales personnel, the Company engages general
sales agents on a commission basis to sell its air cargo services. Most of
these general sales agents represent the Company on an exclusive basis to
destinations served by the Company. Air cargo sales made by general sales
agents are based on the Company's published rate sheets and are documented
utilizing the Company's air waybills.
The following table sets forth certain information concerning the location
of the Company's and its general sales agents' offices and the major cities
served by such offices as of June 30, 1998:
<TABLE>
<CAPTION>
DOMESTIC INTERNATIONAL
- ---------------------------------------------- ---------------------------------------------
LOCATION AND CITIES SERVED DATE OPENED LOCATION AND CITIES SERVED DATE OPENED
- ---------------------------- --------------- ---------------------------- --------------
<S> <C> <C> <C>
MIAMI 1st Qtr. 1994 Caracas, Venezuela 1st Qtr. 1994
Ft. Lauderdale, FL Guatemala City, Guatemala 1st Qtr. 1994
Jacksonville, FL Managua, Nicaragua 1st Qtr. 1994
Orlando, FL Maracaibo, Venezuela 1st Qtr. 1994
Tallahassee, FL San Pedro Sula, Honduras 1st Qtr. 1994
Tampa, FL San Salvador, El Salvador 1st Qtr. 1994
Panama City, Panama 3rd Qtr. 1994
HOUSTON, TX 1st Qtr. 1994 San Jose, Costa Rica 3rd Qtr. 1994
Austin, TX Guayaquil, Ecuador 2nd Qtr. 1995
Albuquerque, NM Port of Spain, Trinidad(1) 2nd Qtr. 1995
Dallas, TX Port Au Prince, Haiti(1) 2nd Qtr. 1995
Laredo, TX Quito, Ecuador 2nd Qtr. 1995
Little Rock, AK British Virgin Islands(1) 3rd Qtr. 1995
New Orleans, LA San Juan, Puerto Rico 3rd Qtr. 1995
Memphis, TN U.S. Virgin Islands(1) 3rd Qtr. 1995
Oklahoma City, OK
San Antonio, TX LONDON, ENGLAND(1) 4th Qtr. 1995
Tulsa, OK Amsterdam, Holland
Brussels, Belgium
NEW YORK, NY 1st Qtr. 1994 Dublin, Ireland
Albany, NY Frankfurt, Germany
Baltimore, MD Paris, France
Boston, MA Prestwick, Scotland
Buffalo, NY Milan, Italy
Hartford, CT Madrid, Spain
Newark, NJ Copenhagen, Denmark
Norfolk, VA Zurich, Switzerland
Philadelphia, PA Lisbon, Portugal
Pittsburgh, PA
Providence, RI Bogota, Colombia 1st Qtr. 1996
Richmond, VA Kingston, Jamaica(1) 1st Qtr. 1996
Rochester, NY Montego Bay, Jamaica(1) 1st Qtr. 1996
Syracuse, NY Puerto Plata, D.R. 1st Qtr. 1996
Washington, D.C. Santo Domingo, D.R. 1st Qtr. 1996
</TABLE>
57
<PAGE>
<TABLE>
<CAPTION>
DOMESTIC INTERNATIONAL
- ---------------------------------------------- -------------------------------------------------
LOCATION AND CITIES SERVED DATE OPENED LOCATION AND CITIES SERVED DATE OPENED
- ---------------------------- --------------- -------------------------------- --------------
<S> <C> <C> <C>
SAN FRANCISCO, CA(1) 1st Qtr. 1995 TORONTO, ONTARIO(1) 1st Qtr. 1997
Denver, CO Calgary
Portland, OR Regina
Salt Lake City, UT Vancouver
Seattle, WA Winnipeg
CHICAGO, IL 1st Qtr. 1995 MONTREAL, QUEBEC(1) 1st Qtr. 1997
Cleveland, OH Halifax
Cincinnati, OH Ottawa
Columbus, OH Quebec City
Detroit, MI
Indianapolis, IN HONG KONG AND BEIJING(1) 2nd Qtr. 1997
Kansas City, MO Bangkok, Thailand
Lincoln, NE Djakarta, Indonesia
Louisville, KY Ho Chi Min City, Vietnam
Milwaukee, WI Kuala Lumpur, Malaysia
Minneapolis, MN Osaka, Japan
Omaha, NE Seoul, Korea
St. Louis, MO Shanghai, Peoples Republic of
China
LOS ANGELES, CA(1) 1st Qtr. 1995 Singapore
Las Vegas, NV Taipei, Taiwan
Phoenix, AZ Tokyo, Japan
San Diego, CA
Sao Paulo, Brazil 2nd Qtr. 1997
ATLANTA, GA 1st Qtr. 1995
Birmingham, AL SYDNEY/MELBOURNE, AUSTRALIA(1) 1st Qtr. 1998
Charlotte, NC
Columbia, SC JOHANNESBURG, SOUTH AFRICA(1) 1st Qtr. 1998
Greensboro, SC
Jackson, MS Manta, Ecuador 2nd Qtr. 1998
Knoxville, TN Valencia, Venezuela 2nd Qtr. 1998
Nashville, TN
Savannah, GA
Winston-Salem, NC
</TABLE>
- ----------------
(1) Represents the office of a general sales agent or interline sales agent.
MARKETING. The Company's sales personnel and general sales agents market
the Company's air cargo services directly to freight forwarders, integrated
carriers, passenger and cargo airlines and major shippers. The Company
participates in international air cargo trade shows and advertises its services
in industry trade journals. General sales agents directly market the Company's
air cargo services to potential customers within their territories using the
Company's trade name. In addition, some of the Company's general sales agents,
such as Air Cargo Partners (an affiliate of Virgin Atlantic), which represents
the Company in Europe and Asia, include the Company's air cargo services in
their sales literature and published rate sheets.
TRANSPORTATION LOGISTICS SERVICES
Freight forwarders, integrated carriers and airlines generally deliver
their cargo to the Company's facility at the point of departure. Accordingly,
most of the freight transported by the Company is either delivered to the
Company's MIA hub for shipment to South or Central America or the Caribbean, or
to a Company operations station in South or Central America or the Caribbean
for shipment to the United States or beyond. Smaller freight forwarders with
less developed logistics capabilities often rely
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on the Company to arrange for truck or air transportation of their cargo
between the Company's MIA hub and the point of origin and/or destination. In
addition, some major freight forwarders request the Company to arrange for
shipment, generally by truck carrier, of their customers' freight from the
point of origin to expedite shipment and minimize administrative and handling
costs.
When the Company provides transportation logistics services, Company
personnel determine the best means of, and then arrange for, the transportation
of the freight between the Company's warehouse facilities in Miami and the
customers points of origin and destination. Whenever possible, the Company
seeks to achieve cost savings for its customers by consolidating shipments and
using major truckload carriers to transport the consolidated freight.
Southbound shipments that are more time-sensitive or which have a value that
justifies the cost of expedited delivery usually are transported by air on
scheduled passenger or cargo airlines to Miami. Each Company sales office
maintains warehouse capabilities for storage and consolidation of freight,
generally through arrangements with local third party warehouse operators.
The Company offers its customers a variety of ancillary services tailored
to their particular needs. These services include arranging for local pick-up
and delivery, warehousing of cargo shipments, expedited document delivery for
customs clearance and priority notification to consignees of cargo arrival. The
Company also assists in the preparation of air waybills and shipping documents
(including customs export declarations, pro forma and foreign consular invoices
and other customs documentary requirements), assists its customers in obtaining
export or import licenses and arranges for cargo insurance. The Company
generally charges its customers additional fees for each of these services.
CUSTOMERS
FREIGHT FORWARDERS. Freight forwarders are important participants in the
domestic and international air freight markets. Major international freight
forwarders increasingly have become reluctant to arrange transportation of
their customers' freight through integrated cargo carriers (such as FedEx, UPS
or DHL) because these carriers compete with the freight forwarders for the same
cargo customers. As a result, management believes that air cargo service
companies such as the Company, who can provide reliable air cargo services and
handle the air and truck cargo transportation requirements of both large and
small freight forwarders, have an opportunity to capture an increasing share of
the air freight market. Management estimates that sales to freight forwarders
in 1997 accounted for approximately 85% of the Company's revenues from
scheduled cargo services. Freight forwarder customers include major
international freight forwarders (such as Air Express International, Danzas,
Eagle USA, Expeditors International, Fritz Companies and Nippon Express) as
well as smaller regional freight forwarders.
INTERLINE CUSTOMERS. Many major international airlines sell air cargo
services to destinations they do not serve directly and utilize other airlines
or cargo carriers to transport their customers' cargo from the cities they
serve to the ultimate destination. For example, most of the Company's European
interline customers fly to Miami or one or more major South and Central
American or Caribbean destinations but sell air cargo services to other
destinations to which they have no direct flights. These airlines will deliver
cargo to the Company at its MIA hub or a regional sales office for
transportation at a fixed rate to the Company's South and Central American or
Caribbean scheduled destinations. The Company also transports cargo at a fixed
rate from its South and Central American and Caribbean scheduled destinations
to interline customers at its MIA hub to be distributed by interline customers
to destinations throughout the world. As of June 30, 1998, the Company handled
interline freight for the following airlines:
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<TABLE>
<S> <C> <C> <C>
Aerolineas Argentinas B.W.I.A. LACSA South African Airways
Aeromar Cargolux Lan Chile Airlines Surinam Airways
Aero Transcolombiana Challenge Lauda Swiss World
Air Canada China Airlines Laparkan Taca International Airlines
Air France Continental Airlines L.T.U. Int'l Airways Tampa Airlines S.A.
Air Haiti Copa Airlines Lufthansa Tolair
Air Jamaica Delta Airlines Malev Tower Air
Alitalia El Al MAS Air TransWorld Airlines
ALM Antillean Airlines Fast Air Martinair Turks Air
Amerijet Finnair Midas Airlines United Airlines
Austrian Airlines Four Star Cargo NICA U.S. Airways
Avensa/Servivensa Iberia Northwest Orient Varig Brazilian Airlines
Aviateca Interamericana Polar Air Cargo Virgin Atlantic Airways
British Airways Korean Air Qantas Airways Limited
</TABLE>
OTHER CUSTOMERS. The Company's customers also include the United States
Postal Service, the U.S. Department of State, industrial manufacturers,
distributors and other large corporations that arrange for the shipment of
their own air freight. Because of the Company's reliability, reputation and
position in its South and Central American and Caribbean markets, several major
multinational corporations have also either directed their independent freight
forwarders to use the Company's air cargo services or designated the Company as
their air carrier of choice for shipments to or from these markets.
During the year ended December 31, 1997 and the three months ended March
31, 1998, Aero Transcolombiana accounted for 13.5% and 11.2%, respectively of
the Company's total revenues. The Company had no single customer that accounted
for more than 10% of its total revenues in 1995 or 1996.
ACMI SERVICES
The Company's customers utilize the Company's ACMI services to obtain lift
capacity without acquiring their own aircraft. The Company currently has ACMI
contracts with eight unaffiliated customers, most of which are international
airlines. Under these contracts, the Company provides its aircraft from as
infrequently as one flight per week to as many as twelve flights per week, or
on an AD HOC basis. In addition, two of the Company's aircraft currently are
dedicated exclusively to service under AMI contracts that expire in 1999. The
Company also provides ACMI services for the seasonal or peak demands of Latin
American produce and flower growers and domestic delivery services such as the
United States Postal Service and United Parcel Service. Additionally, the
Company has received certification to fly equipment and cargo for the U.S.
Department of Defense.
A typical ACMI contract requires the Company to supply the aircraft, crew,
maintenance and insurance for specified cargo operations, while the customer is
responsible for substantially all other aircraft operating expenses, including
fuel, landing and parking fees and ground and cargo handling expenses. Under
the contract, the Company has exclusive operating control and direction of its
aircraft and its customer must obtain any government authorizations and permits
required to service the designated routes. See "--Government Regulation." Most
of the Company's ACMI contracts do not require the Company to operate a
specific aircraft for its customer. Generally, the Company's ACMI contracts are
for a two-year term but are cancelable by either party upon five days' written
notice.
With the exception of two aircraft operated by AMI customers, all of the
Company's aircraft are operated both on its own cargo flights and for ACMI
customers. This enables the Company to schedule its fleet to satisfy demand on
its own routes while improving fleet utilization and generating additional
revenue from ACMI services.
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AIRCRAFT FLEET
The Company's operating fleet is comprised of 14 narrowbody DC-8s, which
are short- to medium-range (2,000 to 3,000 nautical miles), medium cargo volume
(72,000 to 93,000 pounds) aircraft. The Company's fleet includes two "stretch"
DC-8s, which have a longer fuselage and more cargo volume capacity and are
generally utilized by the Company to serve higher volume routes. The Company
maintains flexibility to adjust on a daily basis the aircraft it uses for its
own cargo routes based on demand. For example, the Company may respond to low
demand on a particular route by utilizing the same aircraft to handle two or
more destinations or to satisfy higher demand on another route by utilizing its
stretch aircraft or adding additional flights. Similarly, although the Company
may commit to provide a cargo flight for an ACMI customer at a particular time
or date, the Company maintains the flexibility to utilize whichever of its
aircraft best serves the capacity and distance required for the flight.
The Company's aircraft range in age from 27 to 39 years, with an average
age of approximately 33 years. Based on the DC-8's useful life estimated by the
FAA and McDonnell Douglas and the Company's current maintenance program, the
Company expects to be able to operate its DC-8 aircraft for at least 10 more
years.
The following table contains information concerning the Company's
operating fleet at May 1, 1998:
<TABLE>
<CAPTION>
NO. OF PALLETS APPROX. CARGO MOST RECENT MAJOR
AIRCRAFT TYPE UPPER/LOWER CAPACITY (LBS) MAINTENANCE CHECK(1)
- --------------- ---------------- ---------------- ---------------------
<S> <C> <C> <C>
DC-8-61F 18/4 91,300 June 1997
DC-8-61F 18/4 91,800 April 1998
DC-8-55JT 13/2 92,700 October 1996(2)
DC-8-54JT 13/2 92,300 in progress
DC-8-54JT 13/2 91,700 May 1997
DC-8-54JT 13/2 92,300 November 1996
DC-8-54JT 13/2 92,200 July 1996
DC-8-54JT 13/2 89,200 August 1995
DC-8-54JT 13/2 92,600 December 1995
DC-8-54FM 13/2 91,500 March 1998
DC-8-51F 13/2 77,200 August 1997
DC-8-51F 13/2 75,200 February 1998
DC-8-51F 13/2 75,300 October 1997
DC-8-51F 13/2 72,300 in progress
</TABLE>
- ----------------
(1) The most recent major maintenance check for each aircraft was a "C" check,
unless otherwise indicated. See "--Maintenance."
(2) The most recent major maintenance check for this aircraft was a "D" check.
The Company intends to increase its lift capacity by acquiring widebody
aircraft and additional DC-8 aircraft. In December 1997, the Company acquired
one L-1011 aircraft. The Company is in the process of becoming certified to
operate L-1011 aircraft and currently expects to place this aircraft in service
during the second half of 1998. As it has in the past, the Company expects to
acquire aircraft from a variety of sources, including airlines, aircraft
leasing companies, banks and other financial institutions and individual
aircraft owners.
Widebody aircraft, such as the McDonnell Douglas DC-10 or the Lockheed
L-1011, are capable of mid-range and long-range flights carrying a larger
volume cargo, resulting in operating efficiencies and economies of scale. The
Company believes that operating widebody aircraft will allow it to commence
service to more distant destinations which cannot be effectively served by the
Company at present due to the cargo capacity and range of its current fleet, as
well as increase its flexibility to serve current markets where air freight
demand is strong. To the extent the Company utilizes widebody aircraft to
service existing routes, it will redeploy the DC-8s currently serving those
markets to increase capacity to other markets, develop service to new markets
which are more efficiently serviced by narrowbody aircraft and increase its
ACMI services.
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FLIGHT OPERATIONS AND CONTROL. The Company's flight operations (including
aircraft dispatching, flight following and crew scheduling) are planned and
controlled by the Company's dispatch and flight operations personnel from the
Company's MIA base. The Company's flight control office is manned 24 hours per
day, seven days per week. Logistical support necessary for operations into the
airports served by the Company's flights also are coordinated from the
Company's MIA base.
To enhance the reliability of its service, the Company seeks, when
possible, to maintain at least one spare aircraft at all times. The spare
aircraft can be dispatched on short notice to most locations served by the
Company when a substitute aircraft is needed. Maintaining one or more spare
aircraft allows the Company to better ensure the availability of aircraft for
its regular cargo flights and to provide its ACMI customers with a high
dispatch reliability.
MAINTENANCE. The Company performs at its own facilities substantially all
of the inspections, maintenance and repairs required to keep the Company's
aircraft in operation and in compliance with the Company's FAA-approved
maintenance program. Whenever possible, the Company also utilizes its own
employees to perform line maintenance, such as correcting irregularities noted
by flight crews and maintaining aircraft log books, at the foreign airports
served by the Company. By maintaining its own fleet, the Company believes that
it reduces the maintenance costs, minimizes out-of service time for its
aircraft and achieves a high level of reliability.
Maintenance required by the FAA includes: routine daily maintenance;
maintenance every 150 hours or six months, whichever comes first (an "A
Check"), at an approximate cost of $500; scheduled maintenance every 425 hours
or 12 months, whichever comes first (a "B Check"), at an approximate cost of
$7,000; scheduled major maintenance work every 3,300 hours or 36 months,
whichever comes first (a "C Check"), at an approximate cost of $500,000; and a
major maintenance overhaul every 25,000 hours or 12 years, whichever comes
first (a "D Check"), at an approximate cost of between $1.3 million and $1.6
million. The Company generally schedules major maintenance on its aircraft
during periods of lower utilization. The Company estimates that, at current
rates of operation, six scheduled C Checks will be completed on the Company's
aircraft in 1998 and six will be completed in 1999 and that, on average, one of
its aircraft will require a D Check each year.
Since 1986, the Company's maintenance facility has been certificated as an
FAA repair station to perform maintenance on DC-8 series aircraft and their
related avionics and accessories, including all required airframe maintenance,
ranging from routine inspections to major airframe overhauls, as well as ADs
and service bulletin compliance. The Company also operates an FAA certified
repair station for Pratt & Whitney JT3D-3B aircraft engines, which performs
complete repair services on all Company aircraft engines. The Company's MIA
facility accommodates up to two large widebody aircraft (such as Boeing 747s),
three medium widebody aircraft (such as McDonnell Douglas DC-10s or Lockheed
L-1011s) or three narrowbody aircraft (such as DC-8s) simultaneously for
repairs and maintenance. See "--Facilities."
The Company's maintenance and engineering personnel coordinate all routine
and non-routine maintenance operations, including tracking the maintenance
status of each aircraft, communicating with maintenance personnel in connection
with every arrival and departure, consulting with manufacturers and vendors
about procedures to correct irregularities and training the Company's line
maintenance personnel on the requirements of the Company's FAA-approved
maintenance program. The Company conducts virtually all of its own maintenance
training.
The Company owns 20 used spare Pratt & Whitney JT3D-3B aircraft engines
and an extensive inventory of spare aircraft parts and consumable materials
required to support line maintenance, scheduled airframe maintenance and engine
maintenance and repairs. The Company purchased its spare aircraft engines at
various times between 1987 and 1995 and has maintained its spare aircraft
engines in accordance with FAA standards. All spare aircraft engines are
continually overhauled and refurbished to extend their useful life and are used
in the Company's normal operations on an as-needed basis. In addition, the
Company owns larger aircraft components, such as airframe structures,
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landing gears and flight controls. The Company also owns three DC-8s that are
used solely for parts and has a supply of parts from four disassembled
aircraft. The Company opportunistically purchases spare parts, spare engines,
entire inventories and other aircraft components when "bulk" purchases of these
items have been available or market conditions are otherwise favorable.
Generally, bulk purchase opportunities have arisen when airlines or
manufacturers of parts sell large amounts of inventory in a single transaction
or in conjunction with a bankruptcy. Opportunistic inventory purchases have
allowed the Company to obtain a large inventory of spare parts at a lower cost
than could have been obtained by purchasing on an individual basis. From time
to time, parts may become unavailable or be in short supply. In the past, the
Company has been able to design and manufacture from manufacturers' drawings
structural parts pursuant to a limited license granted by the manufacturer. The
Company believes that such practices will continue to be available within the
industry in the near future.
TRAINING. The FAA mandates initial and recurrent training for most flight,
maintenance and engineering personnel. Initial pilot training consists of a
two-month program that involves FAA regulations and licensing exams, emergency
and security procedures, handling of hazardous materials, systems, flight
simulator sessions and actual operating experience with the Company's aircraft.
The Company generally hires pilots whom it has "pre-screened" as a result of
such training. The Company pays for all of the recurrent training required for
its pilots and pays for most of the training of its ground service and
maintenance personnel. The Company's training programs have received all
required FAA approvals.
The Company operates its own professional training schools at its
FAA-approved MIA facility, where it conducts all of the training programs
required for its personnel. In addition, the Company offers training to
third-party individuals in an effort to control its overhead costs related to
training. Generally at least 25% of each training class is comprised of
third-party individuals.
GROUND HANDLING. The Company utilizes its own ground handling personnel
and equipment for loading, servicing and maintaining the Company's aircraft at
MIA and at most of the other airports served by the Company.
FUEL. Fuel is a significant operating cost. The Company generally
purchases bonded fuel which is tax-free to the Company because the fuel is
utilized for international flights. The Company's exposure to fuel risk is
reduced to the extent that it provides air cargo services under ACMI contracts,
under which the customer is responsible for providing fuel. In the winter
months, the Company engages in a limited amount of market hedging against
possible winter price increases. The Company does not believe that fluctuations
in the price of fuel have had a significant impact on its results of operations
in recent years because it has been able to pass on increases to customers in
the form of fuel surcharges.
INFORMATION SYSTEMS
The Company has invested significant management and financial resources in
the development of information systems to facilitate its cargo, flight and
maintenance operations, provide its personnel accurate and timely information
and increase the level of service and information provided to its customers.
The Company is currently assessing its management information systems and plans
to upgrade or replace its existing systems, as necessary, within the next 18
months in order to meet the requirements of the Company's anticipated growth.
Information concerning the status of shipments currently is available only
to the Company's personnel, but the Company intends to increase the amount of
information available on-line to its customers. The Company also utilizes the
U.S. Customs Department's Automated Manifest System, which was first made
available at MIA, to expedite customs clearance for its customers' air freight.
This system allows the Company to electronically transfer its cargo manifest to
customs while a flight is in transit and "pre-clear" much of the cargo, thereby
reducing transfer delays, promptly releasing freight and allowing it to be
transported to its destination more quickly.
The Company's maintenance operations utilize information systems with bar
coding to track and control spare parts inventory and costs associated with
each maintenance task. In addition to
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maintaining records concerning the maintenance status and history of each major
aircraft part or component, as required by FAA regulations, the Company
utilizes its information systems to track the labor and parts cost of each
maintenance task performed by its personnel.
The Company's flight operations dispatch department utilizes
Company-developed software to coordinate the Company's flight and crew
schedules, track flight time (both for scheduling of aircraft and parts
maintenance and overhauls and for invoicing the Company's ACMI customers for
their flights) and provide Company personnel and customers with flight status
information.
SECURITY AND SAFETY
SECURITY. The Company conducts various security procedures to comply with
FAA regulations. The Company's customers are required to inform the Company in
writing of the nature and composition of their air freight. The Company also
conducts daily cargo searches, x-rays its customers' air freight and conducts
searches for hazardous materials, weapons, explosive devices and illegal
freight. The Company uses search dogs in Miami to seek out explosives and
controlled substances. The Company also conducts searches for contraband in
foreign countries at the point of origin prior to departure for the United
States. Notwithstanding these procedures, the Company could unknowingly
transport contraband or hazardous materials for its customers, which could
result in fines, penalties, flight bans or possible damage to the Company's
aircraft. The Company believes it maintains an excellent cooperative
relationship with U.S. Customs, the U.S. Department of Agriculture and the U.S.
Drug Enforcement Agency.
SAFETY AND INSPECTIONS. Management is committed to the safe operation of
the Company's aircraft. In compliance with FAA regulations, the Company's
aircraft are subject to various levels of scheduled maintenance or "checks" and
periodically go through complete overhauls. See "--Aircraft Fleet--Maintenance."
The Company's maintenance efforts are monitored closely by the FAA, with FAA
representatives often being on-site to observe maintenance being performed. The
Company also conducts extensive safety checks and audits on a regular basis.
All of the Company's flight operations and maintenance manuals are FAA
approved.
In 1996, the Company underwent a Regional Aviation Safety Inspection
Program (RASIP) inspection, during which a team of regional FAA inspectors
conducted a focused inspection over a one-week period. The FAA advised the
Company that there were no material adverse findings as a result of the RASIP
inspection. In connection with the Company's move to its new hangar facility,
the Company underwent an audit by the local FAA Flight Standards District
Office, which resulted in the reissuance of the Company's repair station
certificate for that facility. In accordance with national FAA policy and
procedures, in April 1997, the Company passed a National Aviation Safety
Inspection Program (NASIP) inspection, the most stringent and in-depth FAA
inspection, in which a team of national FAA inspectors thoroughly audited and
inspected the Company's entire maintenance and flight operations for a period
of three weeks.
Following the August 7, 1997 crash of one of the Company's aircraft, the
Company's operations were placed under heightened scrutiny by the FAA. As a
result of concerns expressed by the FAA, the Company voluntarily ceased
operations on September 4, 1997, and on September 12, 1997 the Company entered
into the Consent Agreement. As part of the Consent Agreement, the Company
agreed not to resume operations until the FAA approved new cargo handling and
hazardous materials procedures to be implemented by the Company. Under the
Consent Agreement, the Company agreed to make a remedial payment of $1.5
million to the FAA for the costs of the FAA's investigation, review and
re-inspection of the Company. Pursuant to the Consent Agreement, $500,000 of
this assessment was waived as a result of the Company's compliance with certain
requirements prior to December 31, 1997. The Company resumed operations on a
limited basis on October 28, 1997, approximately seven weeks after suspending
operations. The Company is in full compliance with the terms of the Consent
Agreement.
Other than the August 1997 accident involving a Company aircraft, during
the last 10 years, the Company's aircraft, while being operated by the Company,
have not been involved in any accidents.
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According to the National Transportation Safety Board Regulations, an "aircraft
accident" is an occurrence associated with the operation of an aircraft which
takes place between the time any person boards the aircraft with the intention
of flight and all said persons have disembarked, and in which any person
suffers death or serious injury, or in which the aircraft receives substantial
damage. In May 1994, one of the Company's aircraft, while being leased and
operated by a non-affiliated foreign airline, was involved in a non-fatal
aircraft accident. The aircraft sustained significant damage during take-off
due to the failure of the aircraft's nose gear component and was declared a
total loss by the insurers.
RISK MANAGEMENT
The Company is exposed to potential losses that may be incurred in the
event of an aircraft accident. An accident could result in substantial cost to
repair or replace a damaged aircraft or claims for damaged or destroyed cargo
and significant potential liability for claims for injury or death to third
parties and Company crew members. The Company purchases hull insurance for its
aircraft on an agreed value basis to provide coverage for total losses and
repair expenses in the event of a partial loss, subject to a $500,000
deductible in the event of partial losses. The DOT requires airlines to carry
at least $20 million of liability insurance. The Company currently maintains
public liability insurance in the amount of $500 million per occurrence. With
the exception of claims relating to the August 1997 crash of a Company
aircraft, the Company has had a low claim experience and believes that it
enjoys a good reputation with its insurance providers.
To insure against risks associated with its maintenance and engine repair
operations, the Company maintains aviation and airline products liability,
premises and hangarkeepers insurance in amounts and on terms generally
consistent with industry practice. To date, the Company has not experienced any
significant uninsured or insured claims related to its maintenance or engine
repair services.
The Company is legally responsible to its customers for the safe delivery
of cargo to its ultimate destination, subject to contractual and legal
limitations on liability of $20.00 per kilogram ($9.07 per pound) for
international flights. The Company carries insurance for these claims.
COMPETITION
The air freight industry is highly competitive. The Company's scheduled
cargo services compete for cargo volume principally with other all-cargo
airlines, integrated carriers and scheduled and non-scheduled passenger
airlines which have substantial belly cargo capacity. To a lesser extent, the
Company's scheduled cargo services also compete for freight forwarding business
with fully integrated carriers, some of which are also customers of the
Company. The Company's ACMI services compete primarily with other airlines that
operate all-cargo aircraft and have lift capacity in excess of their own needs.
The Company believes that the most important competitive factors in the air
freight transportation industry are price, flexibility and the quality and
reliability of the cargo transportation service. Competition in the ACMI
business is dependent principally on the payload and cubic capacities of
available aircraft, price and reliability. Many of the Company's competitors
have substantially greater financial and other resources and more extensive
facilities and equipment than the Company.
FACILITIES
All of the Company's aircraft loading, unloading, maintenance, flight
operations and ground handling are accomplished at its MIA hangar facility,
which consists of approximately 130,000 square feet of hangar space,
maintenance shops, work areas, and parts storage areas; approximately 448,000
square feet of aircraft ramp space; 20,000 square feet of administrative
offices; and approximately 50,000 square feet of expansion space which the
Company can employ in the future for offices or additional work shops. The
hangar facility accommodates up to two large widebody aircraft (such as Boeing
747s), three medium widebody aircraft (such as McDonnell Douglas DC-10s or
Lockheed L-1011s) or three narrowbody aircraft (such as DC-8s) simultaneously.
Management believes that the Company's maintenance facilities are more than
adequate to meet the Company's own maintenance needs for at
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least the next several years and will permit the Company to take advantage of
opportunities to provide third party maintenance and airframe repair work.
The Company maintains two cargo facilities at MIA. The Company's main
cargo facility consists of 56,600 square feet of warehouse space, which is
utilized primarily to process air freight for export and 14,500 square feet of
office space, at which the Company's executive offices and Miami sales offices
are located. The Company's other cargo facility consists of 22,500 square feet
of warehouse space and 3,360 square feet of office space.
The Company leases its MIA hangar facility from Metropolitan Dade County
under a lease that expires in 2001, with two five-year renewal options. The
Company's MIA cargo facilities are also leased from Metropolitan Dade County.
The lease for the Company's main cargo facility expires in 1999 and the other
cargo facility is leased on a month-to-month basis.
The Company leases approximately 33,000 square feet for its engine repair
facilities from an unrelated third party under leases which expire in September
2001.
The Company maintains regional sales and administrative offices for its
scheduled cargo services operations located at or near airports in four major
U.S. cities and 14 South and Central American and Caribbean cities. See
"Business--Cargo Sales Network and Marketing--Cargo Sales Network." All of such
properties are leased from unrelated third parties.
EMPLOYEES
As of April 1, 1998, the Company had 864 employees, including 111 flight
operations personnel, 386 maintenance, technical and security personnel, 188
cargo handling personnel and 179 executive, administrative, sales and financial
personnel. The Company considers its relations with its employees to be
satisfactory.
On October 3, 1997, the Teamsters was certified to represent the Company's
Flight Deck Crew Members for collective bargaining purposes. Although the
Teamsters has been certified by the National Mediation Board, negotiations
regarding a collective bargaining agreement have only recently commenced. The
unionization of the Company's workforce could result in higher employee
compensation and working condition demands that could increase the Company's
operating costs or constrain its operating flexibility. None of the Company's
other employees are subject to a collective bargaining agreement. However, many
airline industry employees are represented by labor unions, and the Company
believes that, as it continues to expand, other of its employees may be subject
to union organizing efforts.
FAA regulations require the Company's pilots to be licensed as commercial
pilots, with specific ratings for the aircraft type to be flown, and to be
medically certified as physically fit to fly aircraft. Licenses and medical
certification are subject to periodic continuation requirements, including
recurrent training and minimum amounts of recent flying experience. Mechanics
and quality control inspectors must also be licensed and qualified for specific
aircraft. Under the Company's supplemental certification status flight
dispatchers do not need to be licensed. The Company routinely performs employee
background checks for a ten-year period prior to employment and conducts more
pre-employment screening than mandated by FAA regulations. In addition, the
Company's management personnel who are directly involved in the supervision of
flight operations, training, maintenance and aircraft inspection must meet
experience standards prescribed by FAA regulations. All of the Company's
employees are subject to pre-employment drug and alcohol testing, and employees
holding certain positions are subject to subsequent random testing.
GOVERNMENT REGULATION
GENERAL. The Company is subject to regulation under U.S. laws and the laws
of the various countries to which it flies its aircraft. The Company is also
subject to various international bilateral air
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services agreements between the United States and the countries to which the
Company provides scheduled cargo services and must obtain permission from the
applicable foreign government to provide service to that country.
DOMESTIC REGULATION. The Company is subject to the jurisdiction of the FAA
with respect to aircraft maintenance and operations, including flight
operations, equipment, aircraft noise, ground facilities, dispatch,
communications, training, weather observation, flight time, crew
qualifications, aircraft registration, and other matters affecting air safety.
The FAA has the authority to suspend temporarily or revoke permanently the
authority of the Company or its licensed personnel for failure to comply with
regulations promulgated by the FAA and to assess substantial civil penalties
for such failure. The Company's aircraft, flight personnel and flight and
emergency procedures are subject to periodic inspections and tests by the FAA.
The FAA also conducts safety audits and has the power to impose fines and other
sanctions for violations of airline safety regulations. The FAA also has
jurisdiction over the transportation of hazardous materials. Shippers and air
carriers of hazardous materials generally share responsibility for compliance
with these regulations, and shippers are responsible for proper packaging and
labeling. Substantial monetary penalties can be imposed on both shippers and
air carriers for infractions of these regulations as well as possible criminal
penalties.
The FAA has promulgated under the ANCA regulations certain Stage III noise
requirements, pursuant to which airlines such as the Company must bring their
fleets into compliance with allowable noise levels in phases, with full
compliance required by December 31, 1999. In order to meet the Stage III
requirements, the Company currently intends to install hushkits on between six
and eight of its aircraft in 1998 and the balance by December 31, 1999. The
Company intends to purchase hushkits for this purpose from a related party. See
"Certain Transactions." The Company estimates that the average cost of such
hushkits will be approximately $2.25 million per aircraft, and that the
aggregate cost to the Company to hushkit its 14 DC-8s and to acquire two spare
hushkits will be $36.0 million, of which approximately $14.0 million had been
incurred as of March 31, 1998. To date, however, the Company has not installed
hushkits on any of its aircraft, and has met the Stage III requirements
applicable to it through interchange agreements with other carriers. Pursuant
to such interchange agreements and under current rules promulgated by the FAA,
the Company leases aircraft that meet the Stage III standards, at a flat rate
cost of $6,000 per month per aircraft and between $2,200 and $2,700 per block
hour, from these other carriers, which has allowed the Company to comply with
the FAA's Stage III requirements. The Company is capable and has the authority,
right and approval from the FAA to operate, under such interchange agreements,
third party aircraft.
The DOT maintains authority over domestic and international aviation and
has jurisdiction over international routes. In order to engage in its air
transportation business, the Company is required to maintain a Certificate of
Public Convenience and Necessity ("CPCN"). Prior to issuing a CPCN, DOT
examines a company's managerial competence, financial resources and plans and
compliance disposition in order to determine whether the carrier is fit,
willing and able to engage in the transportation services it has proposed to
undertake. Among other things, a company holding a CPCN must qualify as a
United States citizen, which requires that it be organized under the laws of
the United States or a State, territory or possession thereof; that its chief
executive officer and at least two-thirds of its Board of Directors and other
managing officers be United States citizens; that not more than 25% of its
voting stock be owned or controlled, directly or indirectly, by foreign
nationals; and that it not otherwise be subject to foreign control. A CPCN
confers no proprietary rights on the holder and DOT may impose conditions or
restrictions on such a CPCN. The DOT has issued the Company (i) a CPCN to
engage in interstate and overseas charter air transportation, (ii) a CPCN to
engage in foreign charter air transportation and (iii) a CPCN to engage in
scheduled air transportation between Miami, Florida and Santo Domingo,
Dominican Republic. By virtue of the CPCNs to engage in interstate, overseas
and foreign charter air transportation of property and mail, the Company is
vested with authority from the U.S. government to conduct all-cargo operations
worldwide. In addition, the DOT has granted the Company numerous "exemptions"
from the federal transportation statute to permit the Company to engage in
scheduled foreign air transportation to 26 cities in 17 countries. Many
carriers operate under such exemption authority, which is granted for up to a
period of two years and is typically renewed by
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the DOT upon timely requests to do so. CPCNs and grants of exemption authority
are subject to standard DOT terms, conditions and limitations and may be
conditioned, suspended or withdrawn. The Company is also required to obtain
separate DOT authorization for each long-term (over 60 days) ACMI arrangement.
Several aspects of airline operations are subject to regulation or
oversight by Federal agencies other than the FAA or the DOT. For instance,
labor relations in the air transportation industry are generally regulated
under the Railway Labor Act, which vests in the National Mediation Board
certain regulatory powers with respect to disputes between airlines and labor
unions arising under collective bargaining agreements. In addition, the Company
is subject to the jurisdiction of other governmental entities, including the
FCC regarding its use of radio facilities pursuant to the Federal
Communications Act of 1934, as amended; the Commerce Department regarding the
Company's interstate transportation of cargo; the Customs Service regarding
inspection of cargo imported from the Company's international destinations; the
Immigration and Naturalization Service regarding the citizenship of the
Company's employees; the Animal and Plant Health Inspection Service of the
Department of Agriculture regarding the inspection of animals, plants and
produce imported from the Company's international destinations regarding the
Company's international operations; the Environmental Protection Agency
regarding shipment of hazardous materials and compliance with standards for
aircraft exhaust and noise emissions; and the Department of Labor regarding the
Company's employees. The Company believes that it is in material compliance
with all applicable laws and regulations of such governmental entities.
FOREIGN REGULATION. To the extent required to do so, the Company obtains
authority to conduct foreign operations from applicable aeronautical and other
governmental authorities. As with the certificates and license obtained from
U.S. authorities, the Company must comply with all applicable rules and
regulations imposed by foreign governmental authorities or be subject to the
suspension, amendment or modification of its operating authorities.
LEGAL PROCEEDINGS
As a result of the August 1997 accident, the Company is currently subject
to lawsuits brought by the families of the individuals who died and several
businesses that were affected by the accident and is aware of other claims
pending which have not reached litigation. All such litigation is being
defended by the Company's insurance carrier, without reservation of rights, and
management has no reason to believe that the Company's liability insurance
coverage will not be sufficient to cover all claims arising from the accident.
While the Company is from time to time involved in litigation in the
ordinary course of its business, there are no material legal proceedings
currently pending against the Company or to which any of its property is
subject.
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MANAGEMENT
DIRECTORS, EXECUTIVE OFFICERS AND CERTAIN KEY EMPLOYEES
The following table sets forth certain information regarding the
directors, executive officers and certain key employees of the Company:
<TABLE>
<CAPTION>
NAME AGE POSITION
- -------------------------------- ----- ------------------------------------------------------
<S> <C> <C>
DIRECTORS AND EXECUTIVE OFFICERS
J. Frank Fine .................. 73 Chairman of the Board
Barry H. Fine .................. 45 President, Chief Executive Officer and Director
John D. Zappia ................. 46 Senior Vice President and Chief Operating Officer
Orlando M. Machado ............. 39 Senior Vice President and Chief Financial Officer
CERTAIN KEY EMPLOYEES
Celeste A. Lipworth ............ 35 Vice President, General Counsel
Terence T. Sullivan ............ 36 Vice President, Director of Finance
Nanci Adels .................... 41 Vice President, Director of Sales
Hugh P. Nash ................... 57 Vice President, Marketing and Sales
Anthony D. Phillips ............ 53 Vice President, Interline and International Marketing
Daniel L. Stemen ............... 30 Vice President, Director of ACMI Services
</TABLE>
J. FRANK FINE founded the Company's predecessor in 1976 and has served as
the Company's Chairman of the Board since its inception. Mr. Fine also served
as the Company's President and Chief Executive Officer from its inception until
June 1997. Mr. Fine also served as Vice President, North America and General
Sales Agent of Alas de Transporte International, S.A., a Dominican all-cargo
airline ("Alas"), from 1988 to 1992; Vice President, North America and General
Sales Agent of Interamericana de Aviacion, C.A., a Venezuelan all-cargo airline
("Interamericana"), from 1988 to 1992; Vice President, North America and
General Sales Agent of Aerochago, S.A., a Dominican all-cargo airline
("Aerochago"), from 1985 to 1988; and President, North America and General
Manager of Aeromar C. por A., a Dominican all-cargo carrier ("Aeromar"), from
1978 to 1985. Mr. Fine is the father of Barry H. Fine.
BARRY H. FINE has served as the Company's President and Chief Executive
Officer since June 1997 and has served as a director of the Company since its
inception. Mr. Fine served as Vice President and General Manager of the Company
from its inception until June 1997. Mr. Fine served as Vice President, North
America, U.S. General Counsel and U.S. General Sales Agent of Alas from 1988 to
1992; Vice President, North America and U.S. General Sales Agent of
Interamericana from 1988 to 1992; Vice President, North America and General
Counsel of Aerochago from 1985 to 1988; and Vice President, North America and
General Counsel of Aeromar from 1982 to 1985.
JOHN D. ZAPPIA has served as the Company's Senior Vice President and Chief
Operating Officer since June 1997. Mr. Zappia served as Senior Vice President,
Maintenance and Operations of the Company from November 1992 until June 1997.
Since 1991, Mr. Zappia has been a member of the Miami Maintenance Management
Council, an association of maintenance companies and was its President from
1991 to 1995. From March 1984 to November 1992, Mr. Zappia served as Vice
President of Maintenance of Agro Air. Prior to joining the Company, Mr.
Zappia's experience in the airline industry includes: Electrical and Avionic
Lead Mechanic of Air Florida (1980-1984); Technical Consultant to Aviation
Components and Accessories, Inc., an FAR 145 repair station (1981-1984); Lead
Avionics and Electrical Mechanic of Airlift International, Inc. (1979-1980);
Supervisor, FAA Accessory Overhaul Shop of Marco Island Airways (1977-1979);
and Accessory Mechanic of Dixie Air Parts Inc. (1972-1979).
ORLANDO M. MACHADO has served as the Company's Senior Vice President and
Chief Financial Officer since July 1997. From December 1987 to June 1997, Mr.
Machado held various positions at Greenwich Air Services, Inc., a diversified
independent gas turbine engine repair and overhaul company
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<PAGE>
("Greenwich"), and most recently served as Vice President of Finance. Prior to
joining Greenwich, Mr. Machado, who is a certified public accountant, was
employed by Coopers & Lybrand, L.L.P., as an audit manager.
CELESTE A. LIPWORTH has served as a Vice President of the Company since
November 1997 and as the Company's General Counsel since November 1996. From
1993 to 1996, Ms. Lipworth was an associate at the law firm of Popham, Haik,
Schnobrich & Kaufman, Ltd. From 1991 to 1992, Ms. Lipworth was an associate at
the law firm of Crowell & Moring.
TERENCE T. SULLIVAN has served as the Company's Vice President, Director
of Finance since July 1997. From June 1994 to July 1997, Mr. Sullivan served as
Controller of the Company. From May 1993 to May 1994, Mr. Sullivan served as
Controller of Aeromar. From September 1991 to May 1993, Mr. Sullivan served as
Controller of Miami Aircraft Support, Inc., a ground support services company.
From August 1988 to August 1991, Mr. Sullivan served as Controller and was a
partner of International Futures Strategists, an investment brokerage company.
From April 1984 to July 1988, Mr. Sullivan was an accountant with the firm of
Samuels & Company.
NANCI ADELS has served as Fine Air's Vice President, Director of Sales
since July 1996. From 1991 to 1996, Ms. Adels served as Regional Manager for
Fine Air's S.W. Region in Houston, Texas. From 1980 to 1987, Ms. Adels held
various positions at British Caledonian Airways, an international passenger and
cargo airline company, and most recently served as Cargo Sales Manager.
HUGH P. NASH has served as Fine Air's Vice President, Marketing and Sales
since November 1994, and served as Vice President, Northeast Region of Fine Air
from November 1993 to November 1994. Mr. Nash's experience in the air cargo
industry includes: Regional Manager, Southwest United States of Stair Cargo
Services/Intertrans Corp., a multinational forwarding company (1984-1993);
President of DCA, an airline general sales agency (1992-1994); Sales Manager,
Cargo of British Caledonian Airways (1980-1982); various positions, including
Agency Administrator, North America and Director, National Accounts, with MSAS,
a multinational air and ocean forwarding company (1971-1980); and various
positions, including International Sales Specialist/Eastern Region, with Emery
Air Freight (1965-1971).
ANTHONY D. PHILLIPS has served as Fine Air's Vice President, Interline and
International Marketing since October 1994. Mr. Phillips' experience in the air
cargo industry includes: General Manager, North America of Belize Air
International (1988-1994); various positions, including Director, Industry
Affairs and Director, Reservations, with Northeastern International Airways
(1983-1986); various positions, including Director, Caribbean and Director,
European Operations, with Air Florida (1977-1983); Regional Sales Manager of
Olympic Airways and Sabena World Belgian Airlines (1973-1977); and various
positions, including Systems Trainer, with Pan American Airways.
DANIEL L. STEMEN has served as Fine Air's Vice President, Director of ACMI
Services since January 1998 and as Assistant Director of Operations since
January 1995. From October 1992 until January 1995, Mr. Stemen served as the
Manager of Flight Operations of the Company. Since 1993, Mr. Stemen has also
been licensed as a DC-8 First Officer. From 1986 to 1992, Mr. Stemen served as
a technical adviser and FAA Liaison for several small airlines operating out of
MIA and from 1988 to 1992 he served as Vice President of Operations for Trans
International Crew Leasing.
Officers of the Company serve at the pleasure of the Board of Directors.
Except as noted above, there are no family relationships among any of the
Company's executive officers and directors. Following the completion of the
Offering, the Company intends to increase the size of its Board of Directors
and add at least one independent director.
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<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE. The following table sets forth all
compensation awarded to, earned by or for services rendered to the Company in
all capacities during the year ended December 31, 1997 by the Chief Executive
Officer and the other executive officers of the Company whose salary and bonus
during 1997 exceeded $100,000 (the "Named Officers").
<TABLE>
<CAPTION>
ANNUAL COMPENSATION(1)
------------------------------------------
OTHER ANNUAL ALL OTHER
NAME AND PRINCIPAL POSITION SALARY BONUS COMPENSATION(2) COMPENSATION
- ------------------------------------------------ ------------ ------- ----------------- -------------
<S> <C> <C> <C> <C>
J. Frank Fine,
Chairman of the Board ......................... $ 164,742 $ -- $11,079 $ --
Barry H. Fine,
President and Chief Executive Officer ......... 199,842 -- 23,095 --
John D. Zappia,
Chief Operating Officer ....................... 134,762 -- -- --
</TABLE>
- ----------------
(1) Does not include cash dividends paid to the Named Officers of which
approximately $652,000 for J. Frank Fine and approximately $201,000 for
Barry H. Fine was in excess of amounts of funds required to pay tax
obligations for the Company's income. See "Certain Transaction." Messrs.
Frank and Barry Fine currently receive annual salaries of $250,000.
(2) Represents amounts related to the Named Officers' personal use of Company
automobiles and a portion of the premiums for health insurance provided to
Named Officers.
EMPLOYMENT AGREEMENT
Effective July 7, 1997, the Company entered into a three-year employment
agreement with Orlando M. Machado, pursuant to which he will serve as Chief
Financial Officer. Mr. Machado will receive an annual base salary of $150,000
and such bonuses as may be awarded from time to time in the discretion of the
Board or any compensation committee thereof. If the agreement is terminated
prior to the expiration of the term other than by reason of death, Disability
(as defined) or Cause (as defined), or by him for Good Reason (generally
defined as the diminution of his duties or other breach by the Company of the
agreement), Mr. Machado (or his estate or beneficiaries) will receive, in
addition to accrued salary and other benefits to which he may be entitled, his
base salary for a period of two years following such termination. The agreement
prohibits Mr. Machado from competing with the Company during the term of the
agreement and for a period of one year after termination of his employment,
other than a termination by him for Good Reason or a termination by the Company
without Cause.
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<PAGE>
OWNERSHIP
The following table sets forth information as of the date of this
Prospectus concerning the beneficial ownership of the Company's outstanding
Common Stock.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED
---------------------
NAME AND ADDRESS OF BENEFICIAL OWNER(1) NUMBER PERCENT
- ----------------------------------------- -------- ----------
<S> <C> <C>
J. Frank Fine ........................... 1,500 50.0%
Barry H. Fine ........................... 1,500 50.0%
</TABLE>
- ----------------
(1) The address of each person or entity listed is c/o Fine Air Services, Inc.,
2261 N.W. 67th Avenue, Bldg. 700, Miami, Florida 33152.
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<PAGE>
CERTAIN TRANSACTIONS
J. Frank Fine, the Company's Chairman, and Barry H. Fine, the Company's
President and Chief Executive Officer (collectively, the "Principal
Shareholders"), each own 50% of the capital stock of the Company. The Principal
Shareholders also each owned 50% of the capital stock of Fine Air and Agro Air.
On June 3, 1998, each of the Principal Shareholders contributed to the Company
his interest in Fine Air and Agro Air, each of which became a wholly owned
subsidiary of the Company. The Principal Shareholders received no additional
consideration for contributing their interests in Fine Air and Agro Air to the
Company.
The Company has been subject to taxation under Subchapter S of the Code
and comparable provisions of state income tax laws. As a result, the net income
of the Company, for federal and certain state income tax purposes, was reported
by and taxable directly to the Company's shareholders during that time rather
than to the Company. The Company has paid cash dividends to their shareholders
in amounts at least sufficient to provide them funds for tax obligations
payable by them on account of the Company's income. During 1995, 1996 and 1997
and the first quarter of 1998, the Company made aggregate cash distributions to
its shareholders of $1,248,655, $1,110,091, $3,370,212 and $166,630,
respectively. Frank and Barry Fine received 63% and 37%, respectively, of the
aggregate cash distributions made by the Company during 1995, 1996, 1997 and
the three months ended March 31, 1998. During May 1998, the Company made a
distribution to its shareholders of approximately $3.5 million in excess of
amounts required by the shareholders to pay income taxes.
At December 31, 1996 and 1997 and March 31, 1998, the Company had advanced
$150,000, $352,000 and $364,000, respectively, to several related parties
affiliated with the Company's stockholders.
In December 1996, the Company purchased a cargo aircraft from Frank Fine
Company, a corporation owned by J. Frank Fine. The purchase price was
$2,859,000 consisting of (i) forgiveness of accounts receivable from Frank Fine
Company, related to an overhaul performed on the aircraft, in the amount of
$1,700,000, (ii) forgiveness of loans and advances to Mr. Fine of $481,000 and
(iii) forgiveness of loans, interest receivable and accounts receivable from
parties related to Mr. Fine of $678,000.
The Principal Shareholders own 30% of the capital stock of Quiet Nacelle
Corporation ("QNC") and 100% of the capital stock of Quiet Technology, Inc.
("QTI") and Quiet Technology DC-8, Inc. ("QTD"). Quiet Technology Venture,
Limited ("QTV, Ltd."), a partnership engaged in the development of hushkits for
DC-8-50 series and DC-8-61 aircraft (the aircraft used by the Company), in
which (i) QTD is the general partner and has a 1% interest, (ii) QTI is a
limited partner and has a priority return on capital and 94.83% interest and
(iii) QNC is a limited partner and has a 4.16% interest. During 1996, 1997 and
the three months ended March 31, 1998, the Company performed approximately
$1,886,000, $1,121,000 and $176,000 of services for QTV, Ltd. The Company's
services consisted of supplying parts and labor to build and test prototype
hushkit components in support of QTV, Ltd.'s research and development efforts.
At December 31, 1997 and March 31, 1998, the balances of Company's accounts
receivable due from QTV, Ltd. were $1,753,000 and $1,929,000, respectively.
QTV, Ltd.'s hushkit received a STC for its hushkits on June 30, 1997. The
current STC subjects any aircraft on which the approved hushkit is installed to
certain weight restrictions. Subsequent to receiving the STC, QTV, Ltd. has
improved the hushkit design so that when installed, the aircraft will be able
to carry the maximum cargo capacity (as originally designed by the
manufacturer), while being in compliance with FAA noise level requirements. The
modified hushkit design is in final phases of the testing process and
management anticipates that QTV, Ltd. will receive an additional STC for the
upgraded hushkit model during the third quarter of 1998. Management has not
determined the financial impact, if any, to the Company should its aircraft be
limited with respect to cargo capacity.
The Company intends to purchase from QTV, Ltd. at least 16 hushkits
(including 14 for its existing DC-8 aircraft and two spares). The purchase
price for these hushkits will be (i) for the first 10 hushkits, QTV, Ltd.'s
cost plus $125,000 and (ii) for any additional hushkits, QTV, Ltd.'s cost. The
Company has
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<PAGE>
paid QTV, Ltd. a non-refundable $750,000 deposit. In addition, as of December
31, 1996 and 1997 and March 31, 1998, the Company had cumulative advances to
QTV, Ltd. of $1,619,000, $8,804,000 and $12,245,000, respectively, for the
manufacture of hushkits on its behalf. Management estimates that the average
cost of such hushkits will be approximately $2.25 million, which management
believes will be significantly lower than the cost of other hushkits available
in the market.
Management believes that the terms of the Company's transactions with
Frank Fine Company and QTV, Ltd. were at least as favorable to the Company as
those that could have been obtained from unaffiliated third parties.
DESCRIPTION OF EXISTING CREDIT FACILITY
The Company has a $45 million credit facility with NationsCredit
Commercial Corporation (the "Existing Credit Facility"), which expires in
November 2000. Borrowings under the Existing Credit Facility bear interest at
the bank's prime rate plus 0.75%. The unused portion of the line of credit is
subject to a fee at the rate of .30% per annum. Borrowings under the Existing
Credit Facility are collateralized by substantially all of the Company's
existing assets; provided, that the lender's security interest does not cover
four of the Company's DC-8 aircraft and aircraft and engines acquired in the
future would not collaterize the Existing Credit Facility. The Existing Credit
Facility contains no maintenance covenants.
On June 5, 1998, the date of the consummation of the sale of the Old
Notes, the Company had approximately $30.1 million outstanding under the
Existing Credit Facility, all of which was paid in full with a portion of the
net proceeds from the sale of the Old Notes.
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<PAGE>
DESCRIPTION OF SENIOR NOTES
The Old Notes were, and the New Notes will be, issued under an Indenture,
date as of June 5, 1998, among the Company, as issuer, the Subsidiary
Guarantors and The Bank of New York, as trustee (the "Trustee"), a copy of
which is filed as an exhibit to the Registration Statement of which this
Prospecuts forms a part. The following is a summary of the material terms and
provisions of the Senior Notes. The terms of the Senior Notes include those set
forth in the Indenture and those made part of the Indenture by reference to the
Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"). The Senior
Notes are subject to all such terms, and prospective purchasers of the Senior
Notes are referred to the Indenture and the Trust Indenture Act for a statement
thereof. The following summary does not purport to be a complete description of
the Senior Notes and is subject to the detailed provisions of, and qualified in
its entirety by reference to, the Senior Notes and the Indenture. The
definitions of certain capitalized terms used in the following summary are set
forth below under "--Certain Definitions." Capitalized terms that are used but
not otherwise defined herein have the meanings assigned to them in the
Indenture, and those definitions are incorporated herein by reference. For
purposes of this "Description of Senior Notes," "Senior Notes" refers to the
Old Notes and the New Notes. Copies of the proposed form of the Indenture are
available from the Company or the Initial Purchaser on request.
GENERAL
The Old Notes are, and the New Notes will be, (i) senior unsecured
obligations of the Company, (ii) fully and unconditionally guaranteed by the
Subsidiary Guarantors on a joint and several basis and (iii) limited to $200
million aggregate principal amount. The Senior Notes will be issued only in
registered form, without coupons, in denominations of $1,000 and integral
multiples thereof. The Senior Notes will mature on June 1, 2008 and bear
interest at the rate of 9 7/8% per annum from June 5, 1998 or from the most
recent Interest Payment Date to which interest has been paid or provided for,
payable semiannually in cash in arrears on June 1 and December 1 of each year,
commencing December 1, 1998, to the Persons in whose names the Senior Notes are
registered at the close of business on the preceding May 15 or November 15, as
the case may be (whether or not a business day). Interest on the Senior Notes
will be computed on the basis of a 360-day year comprised of twelve 30-day
months.
Principal of, and premium, if any, and interest on the Senior Notes will
be payable (i) in same-day funds on or prior to the payment dates with respect
to those amounts in the case of Senior Notes held of record by the Depositary
or its nominee and (ii) at the corporate trust office of the Trustee in New
York, New York, in the case of Senior Notes held of record by Holders other
than the Depositary or its nominee, and the Senior Notes may be surrendered for
registration of transfer or exchange at the corporate trust office of the
Trustee in New York, New York. The Company may, at its option, pay interest on
Senior Notes held of record by Holders other than the Depositary or its nominee
by check mailed to the addresses of the Persons entitled thereto as they appear
in the Note Register on the Regular Record Date for that interest or by wire
transfer of immediately available funds to an account located in the United
States designated by the Holder.
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<PAGE>
OPTIONAL REDEMPTION
The Company may, at its option, redeem the Senior Notes in whole or from
time to time in part, on or after June 1, 2003, upon not less than 30 nor more
than 60 days' notice, at the redemption prices (expressed as percentages of
principal amount) set forth below, together with accrued and unpaid interest to
the date of redemption (subject to the right of Holders of record on the
relevant record date to receive interest due on an interest payment date that
is on or prior to the date of redemption), if redeemed during the twelve-month
period beginning on June 1 of the applicable year indicated below:
<TABLE>
<CAPTION>
YEAR OPTIONAL REDEMPTION PRICE
- --------------------------------- --------------------------
<S> <C>
2003 ......................... 104.938%
2004 ......................... 103.292%
2005 ......................... 101.646%
2006 and thereafter .......... 100.000%
</TABLE>
Notwithstanding the foregoing, from time to time prior to June 1, 2001,
the Company may redeem up to 35% of the aggregate principal amount of the
Senior Notes originally issued with the net cash proceeds of one or more Public
Equity Offerings at a redemption price equal to 109.875% of the principal
amount thereof, together with accrued and unpaid interest to the date of
redemption; provided that (i) at least 65% of the principal amount of the
Senior Notes originally issued remains outstanding immediately after any such
redemption and (ii) the Company effects such redemption within 60 days after
the Public Equity Offering closes.
If less than all of the Senior Notes are to be redeemed, the Trustee will,
not less than 30 nor more than 60 days prior to the redemption date, select the
particular Senior Notes (or any portion thereof that is an integral multiple of
$1,000) to be redeemed, PRO RATA, by lot or by any other method permitted in
the Indenture. Notice of redemption will be mailed at least 30 days but not
more than 60 days before the redemption date to each Holder whose Senior Notes
are to be redeemed at the registered address of such Holder. On and after the
redemption date, interest will cease to accrue on the Senior Notes or portions
thereof called for redemption.
No sinking fund or mandatory redemption is provided for the Senior Notes.
MANDATORY OFFER TO REPURCHASE
The net proceeds from the sale of the Old Notes shall be utilized for the
purposes set forth under "Use of Proceeds." In the event that on the date that
is 18 months from the date of the issuance of the Old Notes, all of the
proceeds of the sale of the Old Notes have not been utilized for such purposes
and the amount of the unutilized net proceeds exceeds $15 million, the Company
shall, within five business days of such day, either (i) make an offer (the
"Mandatory Repurchase Offer") to purchase Senior Notes having an aggregate
principal amount equal to the Unutilized Proceeds Amount at a purchase price of
101% of the principal amount thereof plus accrued and unpaid interest to the
purchase date or (ii) purchase Senior Notes having an aggregate principal
amount equal to the Unutilized Proceeds Amount in the open market and deliver
such Senior Notes to the Trustee for cancellation. If the Company elects to
make the Mandatory Repurchase Offer, the Mandatory Repurchase Offer shall
remain open for not less than 20 business days and be otherwise made in
accordance with the requirements of the Indenture. The Company will comply with
Rule 14e-1 under the Exchange Act and any other securities laws and regulations
thereunder, if applicable, if there is an Unutilized Proceeds Amount and the
Company is obligated to repurchase Senior Notes as described above.
RANKING
The Senior Notes are senior unsecured obligations of the Company and rank
PARI PASSU in right of payment with all other existing and future unsecured and
unsubordinated Indebtedness of the Company and senior to all existing and
future Subordinated Indebtedness of the Company. The Senior Notes and
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<PAGE>
Subsidiary Guarantees, however, will be effectively subordinated to secured
Indebtedness of the Company and the Subsidiary Guarantors with respect to the
assets securing that Indebtedness. At March 31, 1998, on a pro forma basis
assuming that the sale of the Old Notes and the application of the net proceeds
therefrom had occurred on such date, the Company and the Subsidiary Guarantors
would have had approximately $11 million of Indebtedness outstanding other than
the Senior Notes, substantially all of which Indebtedness is secured. Subject
to certain limitations, the Company and its Subsidiaries (including the
Subsidiary Guarantors) may incur additional Indebtedness in the future. See
"--Certain Covenants--Limitations on Additional Indebtedness and Disqualified
Capital Stock".
SUBSIDIARY GUARANTEES
The Company's payment obligations under the Senior Notes will be jointly
and severally guaranteed (the "Subsidiary Guarantees") by each Subsidiary
Guarantor. Each Subsidiary Guarantee will be a senior unsecured obligation of
the applicable Subsidiary Guarantor and will rank PARI PASSU in right of
payment with all other existing and future unsecured and unsubordinated
Indebtedness of such Subsidiary Guarantor. As of the Issue Date, all of the
Company's Subsidiaries will be Subsidiary Guarantors.
The obligations of each Subsidiary Guarantor under a Subsidiary Guarantee
are limited to the maximum amount that, after giving effect to any collections
from or payments made by or on behalf of any other Subsidiary Guarantor in
respect of the obligations of that other Subsidiary Guarantor under its
Subsidiary Guarantee or pursuant to its contribution obligations under the
Indenture, will result in the obligations of that Subsidiary Guarantor under
the Subsidiary Guarantee not constituting a fraudulent conveyance or fraudulent
transfer under federal law or state law. Each Subsidiary Guarantor that makes a
payment or distribution under a Subsidiary Guarantee will be entitled to a pro
rata contribution from each other Subsidiary Guarantor based on the net assets
of each Subsidiary Guarantor, determined in accordance with GAAP.
Each Subsidiary Guarantor may consolidate with or merge with or into or
sell or otherwise dispose of all or substantially all of its property and
assets to the Company or another Subsidiary Guarantor without limitation,
except to the extent any such transaction is subject to the covenant described
in "--Certain Covenants--Limitations on Mergers and Certain Other Transactions"
below. The Indenture provides that no Subsidiary Guarantor may consolidate with
or merge with or into (whether or not such Subsidiary Guarantor is the
surviving Person) another Person other than the Company or another Subsidiary
Guarantor (whether or not affiliated with the Subsidiary Guarantor) unless (i)
subject to the provisions of the following paragraph, the Person formed by or
surviving any such consolidation or merger (if other than such Subsidiary
Guarantor) assumes all of the obligations of such Subsidiary Guarantor under
the Senior Notes and the Indenture, pursuant to a supplemental indenture, in
form and substance satisfactory to the Trustee, (ii) immediately after giving
effect to such transaction, no Default or Event of Default exists; and (iii)
immediately after giving effect to such transaction, the Company could incur at
least $1.00 of additional Indebtedness not constituting Permitted Indebtedness
in accordance with the Consolidated Fixed Charge Coverage Ratio test described
under "--Certain Covenants--Limitations on Additional Indebtedness and
Disqualified Capital Stock" below.
The Indenture provides that in the event of a sale or other disposition of
all or substantially all of the assets of a Subsidiary Guarantor to a third
party or an Unrestricted Subsidiary in a transaction that does not violate any
of the covenants of the Indenture, by way of merger, consolidation or
otherwise, or a sale or other disposition of all of the Capital Stock of a
Subsidiary Guarantor, then such Subsidiary Guarantor (in the event of a sale or
other disposition, by way of such a merger, consolidation or otherwise, of all
of the Capital Stock of such Subsidiary Guarantor) or the Person acquiring the
property (in the event of a sale or other disposition of all or substantially
all of the assets of such Subsidiary Guarantor) will be released and relieved
of any obligation under its Subsidiary Guarantee; PROVIDED that, in the case of
a sale of such Capital Stock not constituting a sale governed by the covenant
in the Indenture described under "--Certain Covenants--Limitations on Mergers
and Certain Other Transactions" below, the Net Available Proceeds of such sale
or other disposition are applied in
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accordance with the applicable provisions of the Indenture. See "--Certain
Covenants--Limitations on Asset Sales". In addition, any Subsidiary Guarantor
that is designated by the Board of Directors as an Unrestricted Subsidiary in
accordance with the terms and conditions of the Indenture will be released and
relieved of any obligation under its Subsidiary Guarantee. As of the date of
this Prospecuts, the Company has no Unrestricted Subsidiaries.
Separate financial statements of the Subsidiary Guarantors have not been
provided because the Subsidiary Guarantors are jointly and severally liable for
the obligations of the Company under the Senior Notes and the aggregate assets,
earnings and equity of the Subsidiary Guarantors are substantially equivalent
to the consolidated assets, earnings and equity of the Company.
CHANGE OF CONTROL
Upon the occurrence of a Change of Control, the Company is obligated to
make an offer to each Holder of the Senior Notes to repurchase (a "Change of
Control Offer") such Holder's outstanding Senior Notes and will purchase, on a
business day not more than 60 days nor less than 30 days following the date
notice is mailed, as provided below (such purchase date being the "Change of
Control Purchase Date"), all Senior Notes properly tendered pursuant to such
offer to purchase and not withdrawn, at a purchase price (the "Change of
Control Purchase Price") equal to 101% of the principal amount thereof, plus
accrued and unpaid interest to the Change of Control Purchase Date, all in
accordance with the following paragraph.
Within 30 days following any Change of Control, the Company shall notify
the Trustee thereof and send to each Holder of Senior Notes by first-class
mail, postage prepaid, at the address of such Holder appearing in the Note
Register, a notice (i) describing the transaction or transactions that
constitute the Change of Control, (ii) offering to repurchase, pursuant to the
procedures required by the Indenture and described in such notice, on the
Change of Control Purchase Date specified in such notice and for the Change of
Control Purchase Price, all Senior Notes properly tendered by such Holder
pursuant to such offer to purchase for the Change of Control Purchase Price;
(iii) that any Senior Note not tendered will continue to accrue interest; (iv)
that, unless the Company defaults in the payment of the Change in Control
Purchase Price, any Senior Notes accepted for payment pursuant to Change of
Control Offer shall cease to accrue interest on the Change of Control Purchase
Date; and (v) describing the procedures that Holders must follow to accept the
Change of Control Offer or to withdraw such acceptance. The Change of Control
Offer shall remain open for at least 20 business days (or such longer period as
is required by law).
The occurrence of the events constituting a Change of Control under the
Indenture may result in an event of default in respect of other Indebtedness of
the Company and its Restricted Subsidiaries and, consequently, the lenders
thereof may have the right to require repayment of such Indebtedness in full.
If a Change of Control occurs there can be no assurance that the Company will
have available funds sufficient to pay the Change of Control Purchase Price for
all of the Senior Notes that might be tendered by Holders of Senior Notes
seeking to accept the Change of Control Offer and other amounts that might
become due and payable in respect of other Indebtedness of the Company. The
Company's obligation to make a Change of Control Offer will be satisfied if a
third party makes the Change of Control Offer in the manner and at the times
and otherwise in compliance with the requirements applicable to a Change of
Control Offer made by the Company and purchases all Senior Notes properly
tendered and not withdrawn under such Change of Control Offer. The failure of
the Company to make or consummate the Change of Control Offer or pay the Change
of Control Purchase Price when due would result in an Event of Default and
would give the Trustee and the Holders of the Senior Notes the rights described
under "--Events of Default."
The Change of Control feature of the Senior Notes, by requiring a Change
of Control Offer, may in certain circumstances make more difficult or
discourage a sale or takeover of the Company, and, thus, the removal of
incumbent management. The Change of Control feature, however, is not part of a
plan by management to adopt a series of anti-takeover provisions. Instead, the
Change of Control feature is
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a result of negotiations between the Company and the Initial Purchaser. Subject
to the limitations discussed below, the Company could, in the future, enter
into certain transactions, including acquisitions, refinancings or other
recapitalizations, that would not constitute a Change of Control under the
Indenture, but that could increase the amount of Indebtedness outstanding at
such time or otherwise affect the Company's capital structure or credit
ratings.
The Company will comply with Rule l4e-1 under the Exchange Act and any
other securities laws and regulations thereunder, if applicable, if a Change of
Control occurs and the Company is required to offer to repurchase Senior Notes
as described above.
CERTAIN COVENANTS
The Indenture contains, among others, the covenants described below.
LIMITATIONS ON ADDITIONAL INDEBTEDNESS AND DISQUALIFIED CAPITAL STOCK. The
Company will not, and will not permit any Restricted Subsidiary to, directly or
indirectly, (a) incur any Indebtedness (including, without limitation, Acquired
Indebtedness), or (b) issue any Disqualified Capital Stock; PROVIDED that, the
Company and its Restricted Subsidiaries may incur Permitted Indebtedness and
may incur other Indebtedness or issue Disqualified Capital Stock, if after
giving effect thereto, the Company's Consolidated Fixed Charge Coverage Ratio
on the date thereof would be at least 2.75 to 1.0.
LIMITATION ON PREFERRED STOCK OF SUBSIDIARIES. The Company will not permit
any Restricted Subsidiary to issue any Preferred Stock (other than to the
Company or to a Wholly-Owned Restricted Subsidiary) or permit any Person (other
than the Company or a Wholly-Owned Restricted Subsidiary) to own any Preferred
Stock of any Restricted Subsidiary.
LIMITATION ON THE ISSUANCE OF CAPITAL STOCK OF RESTRICTED SUBSIDIARIES.
The Company will not permit any Restricted Subsidiary, directly or indirectly,
to issue or sell any shares of its Capital Stock (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) the issuance and sale of
all, but not less than all, of the issued and outstanding Capital Stock of any
Restricted Subsidiary in compliance with the other provisions of the Indenture
or (iii) to the extent such shares represent directors' qualifying shares or
shares required by applicable law to be held by a Person other than the Company
or a Wholly-Owned Restricted Subsidiary. The proceeds of any sale of Capital
Stock permitted hereunder and referred to in clauses (ii) and (iii) above will
be treated as Net Available Proceeds and must be applied in a manner consistent
with the provisions of the covenant described under "--Limitations on Asset
Sales".
LIMITATIONS ON RESTRICTED PAYMENTS. The Company will not, and will not
permit any Restricted Subsidiary to, directly or indirectly, make any
Restricted Payment unless, at the time of and after giving effect to the
proposed Restricted Payment:
(i) no Default or Event of Default has occurred and is continuing;
(ii) the Company would be permitted to incur at least $1.00 of additional
Indebtedness not constituting Permitted Indebtedness in accordance
with the Consolidated Fixed Charge Coverage Ratio test described under
"--Limitations on Additional Indebtedness and Disqualified Capital
Stock" above; and
(iii) the amount of such Restricted Payment, when added to the aggregate
amount of all other Restricted Payments made after the Issue Date
does not exceed the sum (without duplication) of the following: (A)
50% of (x) the Company's Consolidated Net Income (taken as one
accounting period) less (y) Permitted Income Tax Distributions, in
each case accrued on a cumulative basis during the period beginning
on January 1, 1998 and ending on the last day of the Company's most
recently ended fiscal quarter for which financial statements are
available at the time of such
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Restricted Payment (or, if such aggregate Consolidated Net Income less
Permitted Tax Distributions shall be a deficit, minus 100% of such
aggregate deficit) plus (B) the aggregate net cash proceeds received by the
Company after the Issue Date from the issuance and sale (other than to a
Subsidiary of the Company) of (1) shares of the Company's Capital Stock
other than Disqualified Capital Stock or (2) debt securities of the Company
that have been converted into the Company's Capital Stock that is not
Disqualified Capital Stock (and is not then held by a Subsidiary of the
Company), plus (C) to the extent that any Restricted Investment that was
made after the Issue Date is sold for cash or otherwise liquidated or
repaid for cash, the cash proceeds of the sale, liquidation or repayment
received by the Company or a Restricted Subsidiary net of the fees and
expenses actually incurred in connection with such sale, liquidation or
repayment plus (D) the amount of Restricted Investment outstanding in an
Unrestricted Subsidiary at the time such Unrestricted Subsidiary is
designated a Restricted Subsidiary of the Company in accordance with the
definition of "Unrestricted Subsidiary".
The foregoing provisions will not prohibit: (1) the payment of any
dividend by the Company or any Restricted Subsidiary within 60 days after the
date of declaration thereof, if at said date of declaration such payment would
have complied with the provisions of the Indenture; (2) the redemption,
repurchase, retirement or other acquisition of any Capital Stock of the Company
in exchange for, or out of the proceeds of, the substantially concurrent sale
(other than to a Subsidiary of the Company) of, other Capital Stock of the
Company (other than any Disqualified Capital Stock); (3) the defeasance,
redemption, repurchase or other retirement of Subordinated Indebtedness in
exchange for, or out of the proceeds of, the substantially concurrent issue and
sale of (a) Subordinated Indebtedness so long as the new Subordinated
Indebtedness has (1) a Weighted Average Life to Maturity equal to or longer
than the Weighted Average Life to Maturity of the Subordinated Indebtedness
being defeased, redeemed, repurchased or otherwise retired and (2) terms of
subordination no less favorable to the Holders of the Senior Notes than those
applicable to the Subordinated Indebtedness being defeased, redeemed,
repurchased or otherwise retired or (b) Capital Stock of the Company (other
than to any Restricted Subsidiary); (4) the repurchase, redemption or other
acquisition or retirement for value of any Capital Stock held by any member of
the Company's management pursuant to any management equity subscription
agreement, employment agreement, stock option agreement or other compensation
agreement in an amount not to exceed $500,000 in the aggregate in any fiscal
year of the Company; (5) Restricted Investments the amount of which, together
with the amount of all other Restricted Investments made pursuant to this
clause (5) after the Issue Date, does not exceed $5.0 million; PROVIDED that,
in the case of this clause (5), 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; (6) any Restricted Investment made with the net cash
proceeds received by the Company after the Issue Date from a Public Equity
Offering; PROVIDED that no Default or Event of Default has occurred or is
continuing at the time of such payment; or (7) amounts paid in respect of a
Permitted Income Tax Distribution.
The Restricted Payment permitted pursuant to clauses (1), (2), (3), (4)
and (6) of the immediately preceding paragraph shall be included as Restricted
Payments in any computation made pursuant to clause (iii) of the second
preceding paragraph with respect to any subsequent Restricted Payments.
Not later than 10 business days after the date of making any Restricted
Payment, the Company shall deliver to the Trustee an Officers' Certificate
stating that such Restricted Payment is permitted by and complies with the
Indenture and setting forth in reasonable detail the basis upon which the
required calculations were computed, which calculations will be based upon the
Company's latest available consolidated financial statements.
LIMITATIONS ON RESTRICTIONS ON DISTRIBUTIONS FROM RESTRICTED SUBSIDIARIES.
The Company will not, and will not permit any of its Restricted Subsidiaries
to, create or otherwise cause or suffer to exist or become effective any
consensual Payment Restriction with respect to any of its Restricted
Subsidiaries, except for (a) any such Payment Restriction under any agreement
evidencing any Acquired Indebtedness that was permitted to be incurred pursuant
to the Indenture in effect at the time of such incurrence and not created in
contemplation of such event, provided that such Payment Restriction is
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not extended to apply to any of the assets of the entities not previously
subject thereto; (b) any such Payment Restriction arising in connection with
Existing Indebtedness (provided such Payment Restrictions are no more
restrictive than those existing on the Issue Date) and Refinancing
Indebtedness, PROVIDED that any such Payment Restrictions that arise under such
Refinancing Indebtedness are not, taken as a whole, materially more restrictive
than those under the agreement creating or evidencing the Indebtedness being
refunded or refinanced; (c) purchase money obligations for property acquired in
the ordinary course of business that impose restrictions on the property so
acquired; (d) the entering into of a contract for the sale or other disposition
of assets, directly or indirectly, so long as such restrictions do not extend
to assets that are not subject to such sale or other disposition; (e) the terms
of any agreement evidencing any Indebtedness of Restricted Subsidiaries that
was permitted by the Indenture to be incurred that only restrict the transfer
of the assets purchased with the proceeds of such Indebtedness; (f) customary
restrictions imposed on the transfer of copyrighted or patented materials; (g)
the terms of any merger agreement, stock purchase agreement, asset sale
agreement or similar agreement that limit the transfer of properties and assets
pending consummation of the subject transaction; (h) Permitted Liens which are
customary limitations on the transfer of collateral; and (i) any such Payment
Restriction existing or by reason of applicable law or customary provisions
restricting assignments, subletting or other transfers contained in leases,
licenses and other agreements entered into in the ordinary course of business.
LIMITATION ON SALE/LEASEBACK TRANSACTIONS. The Company will not, and will
not permit any Restricted Subsidiary to, directly or indirectly, enter into,
assume, guarantee or otherwise become liable with respect to any Sale/Leaseback
transaction unless (i) the Company would be permitted to incur Indebtedness not
constituting Permitted Indebtedness in accordance with the Consolidated Fixed
Charge Coverage Ratio test described under "--Limitations on Additional
Indebtedness and Disqualified Capital Stock" above in an amount equal to the
Attributable Indebtedness arising from the Sale/Leaseback Transaction, (ii) the
Company or the Restricted Subsidiary receives proceeds from the Sale/Leaseback
Transaction at least equal to the fair market value of the property or assets
subject thereto (as determined in good faith by the Board of Directors, whose
determination in good faith and evidenced by a Board Resolution will be
conclusive), (iii) the Company applies an amount in cash equal to the Net
Available Proceeds of the Sale/Leaseback Transaction in accordance with the
provisions of the covenant described under "--Limitations on Asset Sales" below
as if the Sale/Leaseback Transaction were an Asset Sale and (iv) the
Sale/Leaseback Transaction would not result in a violation of the covenant
described under "--Limitations on Liens" below.
LIMITATIONS ON TRANSACTIONS WITH AFFILIATES. The Company will not, and
will not permit any of Restricted Subsidiary to, enter into, renew or extend
any contract, agreement, transaction or arrangement with or for the benefit of
an Affiliate of the Company (including, without limitation the sale, purchase
or lease of assets, property or services from or to any Affiliate of the
Company) (each of the foregoing, an "Affiliate Transaction"), unless (i) such
Affiliate Transaction is on terms that are no less favorable to the Company or
the relevant Restricted Subsidiary than those that would have been obtained in
a comparable transaction by the Company or such Restricted Subsidiary with an
unrelated Person and (ii) the Company delivers to the Trustee (a) with respect
to any Affiliate Transaction (or series of related transactions) involving
aggregate payments in excess of $1.0 million, an Officers' Certificate
certifying that such Affiliate Transaction complies with clause (i) above and a
Board Resolution that has been adopted by a vote of a majority of the
Independent Directors approving such Affiliate Transaction or, if at the time
there are no Independent Directors then in office, an Officers' Certificate
executed by the Chief Financial Officer, Chief Operating Officer or the General
Counsel of the Company and (b) with respect to any Affiliate Transaction (or
series of related transactions) involving aggregate payments of $5.0 million or
more, the certificates or documentation described in the preceding clause (a)
and an opinion as to the fairness to the Company or such Restricted Subsidiary
from a financial point of view issued by an Independent Financial Advisor;
PROVIDED, HOWEVER, that the following shall not be deemed to be Affiliate
Transactions: (i) transactions exclusively between or among (1) the Company and
one or more Wholly-Owned Restricted Subsidiaries or (2) Wholly-Owned Restricted
Subsidiaries; (ii) transactions between the Company or any Restricted
Subsidiary and any qualified employee stock ownership plan established for the
benefit of the Company's employees, or the
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establishment or maintenance of any such plan; (iii) reasonable director,
officer and employee compensation and other benefits, and indemnification
arrangements existing on the Issue Date, and with respect to any material
modification of such arrangements after the Issue Date, as approved by a
majority of the Independent Directors or in the event there are no Independent
Directors, as certified by the Chief Financial Officer, Chief Operating Officer
or the General Counsel of the Company pursuant to an Officers' Certificate;
(iv) transactions permitted by the provisions described under "Limitations on
Restricted Payments"; (v) the existing relationships and transactions between
the Company and its Restricted Subsidiaries, on one hand, and QTV, Ltd., and
Quiet Technologies, Inc., ("QTI"), on the other hand, including but not limited
to, the purchase of hushkits and the funding by the Company or its Restricted
Subsidiaries of the research and development costs of QTV, Ltd. and QTI (as
described under "Certain Transactions") or any new relationships or
transactions (other than continuations, including future hushkit purchases and
research and development funding, of such existing relationships or
transactions as described under "Certain Transactions" above) between the
Company and its Restricted Subsidiaries, on the one hand, and QTV, Ltd. and
QTI, on the other hand ("New Transactions"), so long as the total amount paid
by the Company and any Restricted Subsidiary of the Company with respect to
such New Transactions does not exceed the fair market value of the services and
equipment delivered in connection therewith as determined by a majority of the
Independent Directors, or in the event there are no Independent Directors, as
certified by the Chief Financial Officer, the Chief Operating Officer or the
General Counsel of the Company pursuant to an Officers' Certificate; PROVIDED,
HOWEVER, with respect to New Transactions between the Company and QTV, Ltd. or
QTI such determination shall only be made on an annual basis on the anniversary
date of the Indenture.
LIMITATIONS ON LIENS. The Company shall not, and shall not permit any
Restricted Subsidiary to, directly or indirectly, create, incur assume, affirm
or suffer to exist or become effective any Lien of any nature whatsoever on any
property of the Company or any Restricted Subsidiary (including Capital Stock
of a Restricted Subsidiary), whether owned at the Issue Date or thereafter
acquired, or upon any income or profits therefrom, except Permitted Liens,
unless prior thereto or simultaneously therewith, the Senior Notes or the
Subsidiary Guarantee, as the case may be, are equally and ratably secured, or
effective provision is made to secure the Senior Notes with (or if such Lien
secures Subordinated Indebtedness, prior to) the Indebtedness secured by that
Lien.
LIMITATIONS ON ASSET SALES. The Company will not, and will not permit any
Restricted Subsidiary to, consummate any Asset Sale unless (i) the Company or
the Restricted Subsidiary, as the case may be, receives consideration at the
time of such Asset Sale at least equal to the fair market value of the assets
and properties sold or otherwise disposed of pursuant to such Asset Sale (as
determined by the Board of Directors, whose determination in good faith will be
conclusive and evidenced by a Board Resolution), (ii) at least 80% of the
consideration received by the Company or the Restricted Subsidiary, as the case
may be, in respect of the Asset Sale consists of cash or Cash Equivalents and
(iii) the Company delivers to the Trustee an Officers' Certificate certifying
that the Asset Sale complies with clauses (i) and (ii) of this sentence. The
amount (without duplication) of any Indebtedness (other than Subordinated
Indebtedness) of the Company or any Restricted Subsidiary that is expressly
assumed by the transferee in an Asset Sale and with respect to which the
Company or such Restricted Subsidiary, as the case may be, is unconditionally
released by the holder of that Indebtedness will be deemed to be cash for
purposes of clause (ii) of the preceding sentence and will also be deemed to
constitute a repayment of, and a permanent reduction in, the amount of such
Indebtedness for purposes of the following paragraph. If at any time any
non-cash consideration received by the Company or any Restricted Subsidiary, as
the case may be, in connection with any Asset Sale is converted into or sold or
otherwise disposed of for cash (other than interest received with respect to
any such non-cash consideration), then such conversion or disposition will
constitute an Asset Sale and the Net Available Proceeds therefrom must shall be
applied in accordance with this covenant. A transfer of assets by the Company
to a Wholly-Owned Restricted Subsidiary or by a Restricted Subsidiary to the
Company or to another Wholly-Owned Restricted Subsidiary will not constitute an
Asset Sale, and a transfer of assets that constitutes a Restricted Investment
and that is permitted under covenant described under "--Limitations on
Restricted Payments" above will not constitute an Asset Sale.
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If the Company or any Restricted Subsidiary consummates an Asset Sale, the
Company or that Restricted Subsidiary, as the case may be, may either, no later
than 270 days after such Asset Sale, (i) apply all or any of the Net Available
Proceeds therefrom to repay Indebtedness (other than Subordinated Indebtedness)
of the Company or any Restricted Subsidiary, PROVIDED, in each case, that the
related loan commitment (if any) is thereby permanently reduced by the amount
of the Indebtedness so repaid or (ii) invest all or any part of the Net
Available Proceeds thereof in the purchase of properties or assets that replace
the properties or assets that were the subject of the Asset Sale or in other
properties or assets that are being, or will be, used in the business of the
Company and its Restricted Subsidiaries or in a Related Business (together with
any short-term assets incidental thereto). The amount of the Net Available
Proceeds not applied or invested as provided in this paragraph will constitute
"Excess Proceeds." Pending application of such Net Available Proceeds pursuant
to this paragraph, the Company or such Restricted Subsidiary may invest such
Net Available Proceeds in Cash Equivalents, or temporarily reduce amounts
outstanding under any revolving credit facility of the Company or any
Restricted Subsidiary.
If substantially all (but not all) the property and assets of the Company
and its Restricted Subsidiaries are transferred as an entirety to a Person in a
transaction permitted under the covenant described under "--Certain
Covenants--Limitations on Mergers and Certain Other Transactions" below, and
the Company or a Restricted Subsidiary received cash or Cash Equivalents in
such transaction, then the successor entity will be deemed to have sold the
properties and assets of the Company and its Subsidiaries not so transferred
for purposes of this covenant and cash at least equal to the fair market value
of the assets deemed to be sold must be applied in accordance with the
preceding paragraph.
NET PROCEEDS OFFER. When the aggregate amount of Excess Proceeds equals or
exceeds $5.0 million, the Company will be required to make an offer to
purchase, from all Holders of the Senior Notes, an aggregate principal amount
of Senior Notes equal to the amount of such Excess Proceeds, as follows:
(i) The Company will make an offer to purchase (a "Net Proceeds Offer")
from all Holders of the Senior Notes in accordance with the procedures
set forth in the Indenture the maximum principal amount (expressed as a
multiple of $1,000) of Senior Notes that may be purchased out of the
amount (the "Payment Amount") of such Excess Proceeds.
(ii) The offer price for the Senior Notes will be payable in cash in an
amount equal to 100% of the principal amount of the Senior Notes
tendered pursuant to a Net Proceeds Offer, plus accrued and unpaid
interest to the date such Net Proceeds Offer is consummated (the
"Offered Price"), in accordance with the procedures set forth in the
Indenture. To the extent that the aggregate Offered Price of Senior
Notes tendered pursuant to a Net Proceeds Offer is less than the
Payment Amount relating thereto (such shortfall constituting a "Net
Proceeds Deficiency"), the Company may use such Net Proceeds
Deficiency, or a portion thereof, for general corporate purposes,
subject to the limitations of the covenant described under
"--Limitations on Restricted Payments" above.
(iii) If the aggregate Offered Price of Senior Notes validly tendered and
not withdrawn by Holders thereof exceeds the Payment Amount, the
Trustee will select the Senior Notes to be purchased on a PRO RATA
basis in accordance with the relative aggregate principal amounts of
the Senior Notes so tendered and not withdrawn.
(iv) When a Net Proceeds Offer is completed in accordance with the
foregoing provisions, the amount of Excess Proceeds with respect to
which such Net Proceeds Offer was made shall be deemed to be zero.
The Company will not, and will not permit any Restricted Subsidiary to,
enter into or suffer to exist any agreement that would place any restriction of
any kind (other than pursuant to law or regulation) on the ability of the
Company to make a Net Proceeds Offer following any Asset Sale. The Company
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will comply with Rule 14e-1 under the Exchange Act and any other securities
laws and regulations thereunder, if applicable, in the event that an Asset Sale
occurs and the Company is required to offer to repurchase Senior Notes as
described above.
LIMITATIONS ON MERGERS AND CERTAIN OTHER TRANSACTIONS. The Company will
not, in a single transaction or a series of related transactions, (i)
consolidate or merge with or into (other than a merger with a Wholly-Owned
Restricted Subsidiary solely for the purpose of changing the Company's
jurisdiction of incorporation to another State of the United States), or sell,
lease, transfer, convey or otherwise dispose of or assign all or substantially
all of the assets of the Company or the Company and its Subsidiaries (taken as
a whole), or assign any of its obligations under the Senior Notes and the
Indenture, to any Person or (ii) adopt a Plan of Liquidation unless, in either
case: (a) the Person formed by or surviving such consolidation or merger (if
other than the Company) or to which such sale, lease, conveyance or other
disposition or assignment shall be made (or, in the case of a Plan of
Liquidation, any Person to which assets are transferred) (collectively, the
"Successor"), is a corporation organized and existing under the laws of any
State of the United States of America or the District of Columbia, and the
Successor assumes by supplemental indenture in a form satisfactory to the
Trustee all of the obligations of the Company under the Senior Notes and the
Indenture; (b) immediately prior to and immediately after giving effect to such
transaction and the assumption of the obligations as set forth in clause (a)
above and the incurrence of any Indebtedness to be incurred in connection
therewith, no Default or Event of Default shall have occurred and be
continuing; and (c) except in the case of the consolidation or merger of the
Company with or into a Restricted Subsidiary or any Restricted Subsidiary with
or into the Company or another Restricted Subsidiary, or the Company or a
Restricted Subsidiary with or into any other Person that has no other
Indebtedness outstanding immediately after and giving effect to such
transaction and the assumption of the obligations set forth in clause (a) above
and the incurrence of any Indebtedness to be incurred in connection therewith,
and the use of any net proceeds therefrom on a pro forma basis, (1) the
Consolidated Net Worth of the Company or the Successor, as the case may be,
would be at least equal to the Consolidated Net Worth of the Company
immediately prior to such transaction and (2) the Company or the Successor, as
the case may be, would be able to incur $1.00 of additional Indebtedness not
constituting Permitted Indebtedness at such specified time pursuant to the
Consolidated Fixed Charge Coverage Ratio test set forth in the covenant
described under "--Certain Covenants--Limitations on Additional Indebtedness
and Disqualified Capital Stock" above; and (d) each Subsidiary Guarantor,
unless it is the other party to the transactions described above, shall have by
supplemental indenture confirmed that its Subsidiary Guarantee shall apply to
the obligations of the Company or the Successor under the Senior Notes and the
Indenture. For purposes of this covenant, any Indebtedness of the Successor
which was not Indebtedness of the Company immediately prior to the transaction
shall be deemed to have been incurred in connection with such transaction.
ADDITIONAL SUBSIDIARY GUARANTEES. If the Company or any Restricted
Subsidiary acquires or creates another Subsidiary after the Issue Date, such
newly acquired or created Subsidiary must execute a Subsidiary Guarantee in
accordance with the terms of the Indenture, unless the Board of Directors has
duly designated that Subsidiary as an Unrestricted Subsidiary in accordance
with the definition of Unrestricted Subsidiary under the caption "--Certain
Definitions" below.
REPORTS. Whether or not required by the rules and regulations of the
Commission, so long as any Senior Notes are outstanding, the Company will file
with the Commission, to the extent such filings are accepted by the Commission,
all quarterly and annual reports and other information, documents and reports
that the Company would be required to file if it were subject to Section 13 or
15(d) of the Exchange Act. The Company will also (i) file with the Trustee
(with exhibits), and provide to each Holder (without exhibits), without cost to
that Holder, copies of such reports and documents within 15 days after the date
on which the Company files such reports and documents with the Commission or
the date on which the Company would be required to file such reports and
documents if the Company were subject to Section 13 or 15(d) of the Exchange
Act and (ii) if filing such reports and documents with the Commission is not
accepted by the Commission or is prohibited under the Exchange Act, supply at
its cost copies of such reports and documents (including any exhibits thereto)
to any Holder promptly on
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its written request. For so long as any Senior Notes remain outstanding, the
Company will also furnish to the Holders and beneficial holders of Senior Notes
and to prospective purchasers of Senior Notes designated by the Holders of
Transfer Restricted Securities (as defined in the Registration Rights
Agreement) and to broker-dealers, on their request, the information required to
be delivered pursuant to Rule 144A(d)(4) under the Securities Act.
EVENTS OF DEFAULT
The following will be "Events of Default" under the Indenture:
(i) any default in the payment of the principal of or premium, if any,
on any of the Senior Notes, whether such payment is due at Stated Maturity or
on redemption, repurchase pursuant to a Change of Control Offer, a Net Proceeds
Offer, a Mandatory Repurchase Offer, acceleration or otherwise; or
(ii) any default in the payment of any installment of interest on any
Senior Note, when due, and the continuance of that default for a period of 30
days; or
(iii) any default in the performance or breach by the Company or any
Restricted Subsidiary of the covenants described under "--Certain
Covenants--Limitations on Mergers and Certain Other Transactions" above, or any
failure of the Company to make or consummate either a Change of Control Offer,
a Net Proceeds Offer, a Mandatory Repurchase Offer or the other repurchases
described under "Mandatory Offer to Repurchase," in accordance with the
applicable provisions of the Indenture; or
(iv) any failure of the Company or any Restricted Subsidiary to perform
or observe any other term, covenant or agreement applicable to it and contained
in the Senior Notes, the Indenture (other than a default specified in clause
(i), (ii) or (iii) above) or the Subsidiary Guarantees, as the case may be, for
a period of 30 days after written notice of that failure is given (a) to the
Company or the Restricted Subsidiary, as the case may be, by the Trustee or (b)
to the Company or the Restricted Subsidiary, as the case may be, and the
Trustee by the Holders of at least 25% in aggregate principal amount of the
Senior Notes then outstanding; or
(v) the occurrence and continuation beyond any applicable grace period
of any default in the payment of the principal of any Indebtedness of the
Company (other than the Senior Notes) or any Restricted Subsidiary for money
borrowed when due at final Stated Maturity, or any other default resulting in
acceleration of any Indebtedness of the Company or any Restricted Subsidiary
for money borrowed, PROVIDED that the aggregate principal amount of such
Indebtedness exceeds $5.0 million; or
(vi) one or more final judgments or orders rendered against the Company
or any Restricted Subsidiary that are unsatisfied and require the direct
payment by the Company in money (I.E., in excess of applicable insurance
coverage), either individually or in an aggregate amount, in excess of $5.0
million are not paid, discharged or stayed for a period of 30 days; or
(vii) certain events of bankruptcy or insolvency with respect to the
Company or any Restricted Subsidiary; or
(viii) except as permitted by the Indenture and the Senior Notes, the
cessation of the effectiveness of any Subsidiary Guarantee or the repudiation
by any Subsidiary Guarantor (or by any Person acting on behalf of any
Subsidiary Guarantor) of its obligations under its Subsidiary Guarantee.
If an Event of Default (other than an Event of Default specified in clause
(vii) above) occurs and is continuing, the Trustee, by written notice to the
Company, or the Holders of at least 25% in aggregate principal amount of the
Senior Notes then outstanding by written notice to the Company and the Trustee
may, and the Trustee on the request of the Holders of not less than 25% in
aggregate principal amount of the Senior Notes then outstanding will declare
the principal of and premium, if any, and
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accrued and unpaid interest on all the Senior Notes due and payable
immediately, on which declaration all amounts payable in respect of the Senior
Notes will be immediately due and payable declare all amounts owing under the
Senior Notes to be due and payable immediately. If an Event of Default of any
type described in clause (vii) occurs, then the principal of and premium, if
any, and accrued and unpaid interest on all Senior Notes will become due and
payable without any declaration, notice or other act in the part of the Trustee
or any Holder.
After a declaration of acceleration under the Indenture, but before the
Trustee obtains a judgment or decree for payment of the money due, the Holders
of a majority in aggregate principal amount of the outstanding Senior Notes, by
written notice to the Company and the Trustee, may, under certain
circumstances, rescind and annual that declaration and its consequences if all
Events of Default, other than the nonpayment of principal of and premium, if
any, or interest on the Senior Notes that has become due solely because of that
declaration, have been cured or waived. No such rescission will affect any
subsequent Default or Event of Default or impair any right consequent thereto.
No Holder will have any right to institute any proceeding with respect to
the Indenture or any remedy thereunder, unless (i) that Holder has notified the
Trustee of a continuing Event of Default and the Holders of at least 25% in
aggregate principal amount of the outstanding Senior Notes have made written
request, and offered reasonable indemnity, to the Trustee to institute that
proceeding as Trustee under the Senior Notes and the Indenture, (ii) the
Trustee has failed to institute that proceeding within 60 days after receipt of
that notice and offer and (iii) the Trustee, within that 60-day period, has not
received directions inconsistent with that written request by Holders of a
majority in aggregate principal amount of the outstanding Senior Notes. These
limitations will not apply, however, to a suit instituted by any Holder to
enforce the payment of the principal of and premium, if any, or interest on
that Holder's Senior Note on or after the respective due dates expressed in
that Senior Note.
The Holders of a majority in principal amount of the Senior Notes may
waive any existing Default or Event of Default under the Indenture and its
consequences, except a default (i) in the payment of the principal of or
premium, if any, or interest on any Senior Notes or (ii) in respect of any
provision that cannot be modified or amended without the consent of the Holder
of each Senior Note.
The Company is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture and, upon any Officer of the Company
becoming aware of any Default or Event of Default, a statement specifying such
Default or Event of Default and what action the Company is taking or proposes
to take with respect thereto.
LEGAL DEFEASANCE OR COVENANT DEFEASANCE OF INDENTURE
The Company may, at its option and at any time, terminate its obligations
respecting the outstanding Senior Notes (that action being a "legal
defeasance"). If legal defeasance occurs, the Company will be deemed to have
paid and discharged the entire Indebtedness represented by the outstanding
Senior Notes and to have been discharged from all its other obligations with
respect to the Senior Notes (and the Subsidiary Guarantors will be deemed to be
released from the Subsidiary Guarantees), except for (i) the rights of Holders
to receive payment from the trust described below in respect of the principal
of and premium, if any, and interest on their outstanding Senior Notes when
those payments are due, (ii) the Company's obligations to replace any temporary
Senior Notes, register the transfer or exchange of any Senior Notes, replace
mutilated, destroyed, lost or stolen Senior Notes and maintain an office or
agency for payments in respect of the Senior Notes, (iii) rights, powers,
trusts, duties and immunities of the Trustee and (iv) the legal defeasance
provisions of the Indenture. In addition, the Company may, at its option and at
any time, elect to terminate its obligation to comply with certain covenants in
the Indenture, some of which are described under "--Certain Covenants" above,
and any omission to comply with those covenants will not constitute a Default
or an Event of Default respecting the Senior Notes (that action being a
"covenant defeasance"). If covenant defeasance occurs, certain events (not
including nonpayment, bankruptcy, insolvency and reorganization events)
described under "Events of Default" will no longer constitute Events of Default
respecting the Senior Notes.
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In order to exercise either the legal defeasance or the covenant
defeasance option: (i) the Company must irrevocably deposit with the Trustee,
in trust, for the benefit of the Holders, cash in United States dollars,
Government Securities (as defined in the Indenture), or a combination thereof,
in such amounts as will be sufficient, in the opinion of a nationally
recognized firm of independent public accountants, to pay the principal of and
premium, if any, and interest on the outstanding Senior Notes to redemption or
maturity; (ii) the Company must deliver to the Trustee an opinion of counsel to
the effect that the Holders of the outstanding Senior Notes will not recognize
income, gain or loss for federal income tax purposes as a result of such legal
defeasance or covenant defeasance and will be subject to federal income tax on
the same amounts, in the same manner and at the same times as would have been
the case if such legal defeasance or covenant defeasance had not occurred (in
the case of legal defeasance, this opinion must refer to and be based on a
published ruling of the Internal Revenue Service or a change in applicable
federal income tax laws); (iii) no Default or Event of Default shall have
occurred and be continuing on the date of such deposit or insofar as clauses
(vii) and (viii) under the first paragraph of "--Events of Default" above are
concerned, at any time during the period ending on the 91st day after the date
of deposit; (iv) such legal defeasance or covenant defeasance or covenant
defeasance must not cause the Trustee to have a conflicting interest under the
Indenture or the Trust Indenture Act with respect to any securities of the
Company; (v) such legal defeasance or covenant defeasance will not result in a
breach or violation of, or constitute a default under, any material agreement
or instrument to which the Company or any Restricted Subsidiary is a party or
by which the Company or any Restricted Subsidiary is bound; (vi) the Company
must deliver to the Trustee an opinion of counsel experienced in bankruptcy
matters to the effect that the use of the trust funds to pay the principal of
and premium, if any, and interest on the outstanding Senior Notes would not be
avoidable as a preferential payment under Section 547 of the Bankruptcy Law or
recoverable under Section 550 of the Bankruptcy Law in the event the Company
became a debtor in a proceeding commenced thereunder; (vii) the Company must
deliver to the Trustee an Officers' Certificate stating that the deposit was
not made by the Company with the intent of preferring the Holders over other
creditors of the Company with the interest of defeating, hindering, delaying or
defrauding creditors of the Company or others; and (viii) the Company must
deliver to the Trustee an Officers' Certificate and an opinion of counsel,
satisfactory to the Trustee, each stating that all conditions precedent under
the Indenture to either legal defeasance or covenant defeasance, as the case
may be, have been complied with.
SATISFACTION AND DISCHARGE
The Indenture will be discharged and will cease to be of further effect
(except as to surviving rights of registration of transfer or exchange of the
Senior Notes, as expressly provided for in the Indenture) as to all outstanding
Senior Notes when: (i) either (a) all the Senior Notes theretofore
authenticated and delivered (except lost, stolen, mutilated or destroyed Senior
Notes that have been replaced or paid and Senior Notes for whose payment money
or certain Government Securities have been deposited in trust or segregated and
held in trust by the Company and thereafter repaid to the Company or discharged
from such trust) have been delivered to the Trustee for cancellation or (b) all
Senior Notes not theretofore delivered to the Trustee for cancellation have
become due and payable or will become due and payable at their Stated Maturity
within one year, or are to be called for redemption within one year under
arrangements satisfactory to the Trustee for the serving of notice of
redemption by the Trustee in the name, and at the expense, of the Company, and
the Company has irrevocably deposited or caused to be deposited with the
Trustee funds in an amount sufficient to pay and discharge the entire
Indebtedness on the Senior Notes not theretofore delivered to the Trustee for
cancellation, for principal of and premium, if any, and interest on the Senior
Notes to the date of deposit (in the case of Senior Notes that have become due
and payable) or to the Stated Maturity or redemption date, as the case may be,
together with instructions from the Company irrevocably directing the Trustee
to apply such funds to the payment thereof at maturity or redemption, as the
case may be; (ii) the Company has paid all other sums payable under the
Indenture by the Company; and (iii) the Company has delivered to the
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Trustee an Officers' Certificate stating and an opinion of counsel opining that
all conditions precedent under the Indenture relating to the satisfaction and
discharge of the Indenture have been complied with.
TRANSFER AND EXCHANGE
A Holder will be able to register the transfer of or exchange Senior Notes
only in accordance with the provisions of the Indenture. The Registrar may
require a Holder, among other things, to furnish appropriate endorsements and
transfer documents and to pay any taxes and fees required by law or permitted
by the Indenture. Without the prior consent of the Company, neither the Trustee
nor the Registrar is required (i) to register the transfer of or exchange any
Senior Note selected for redemption, (ii) to register the transfer of or
exchange any Senior Note for a period of 15 days before a selection of Senior
Notes to be redeemed or (iii) to register the transfer or exchange of a Senior
Note between a record date and the next succeeding interest payment date. The
registered Holder of a Senior Note will be treated as the owner of such Senior
Note for all purposes.
AMENDMENT, SUPPLEMENT AND WAIVER
Subject to certain exceptions, the Indenture or the Senior Notes may be
amended or supplemented with the consent (which may include consents obtained
in connection with a tender offer or exchange offer for Senior Notes) of the
Holders of at least a majority in principal amount of the Senior Notes then
outstanding, and any existing Default under, or compliance with any provision
of, the Indenture may be waived (other than any continuing Default or Event of
Default in the payment of the principal of, premium, if any, or interest on the
Senior Notes) with the consent (which may include consents obtained in
connection with a tender offer or exchange offer for Senior Notes) of the
Holders of a majority in principal amount of the Senior Notes then outstanding;
PROVIDED that:
(A) no such modification or amendment may, without the consent of the
Holders of 75% in aggregate principal amount of such series of Senior Notes
then outstanding, amend or modify the obligations of the Company under the
caption "Change of Control" or the definitions related thereto that could
adversely affect the rights of any Holder of the Senior Notes; and
(B) without the consent of each Holder affected, the Company, the
Subsidiary Guarantors and the Trustee may not: (i) extend the maturity of any
Senior Note; (ii) affect the terms of any scheduled payment of interest on or
principal of the Senior Notes (including, without limitation any redemption
provisions); (iii) take any action that would expressly subordinate in right of
payment the Senior Notes or the Subsidiary Guarantees to any other Indebtedness
of the Company or any of the Subsidiary Guarantors, respectively, or otherwise
affect the ranking of the Senior Notes or the Subsidiary Guarantees; or (iv)
reduce the percentage of Holders necessary to consent to an amendment,
supplement or waiver to the Indenture.
Without the consent of any Holder, the Company, the Subsidiary Guarantors
and the Trustee may amend or supplement the Indenture or the Senior Notes to
cure any ambiguity, defect or inconsistency, to provide for uncertificated
Senior Notes in addition to or in place of certificated Senior Notes, to
provide for the assumption of the Company's obligations to Holders in the case
of a merger or acquisition, to make any change that does not adversely affect
the rights of any Holder, to secure the Senior Notes pursuant to the
requirements of the covenant described under the caption "--Certain
Covenants--Limitations on Liens", to add any additional Subsidiary Guarantor or
to release any Subsidiary Guarantor from its Subsidiary Guarantee, in each case
as provided in the Indenture, or to comply with requirements of the Commission
in order to effect or maintain the qualification of the Indenture under the
Trust Indenture Act.
NO PERSONAL LIABILITY
The Indenture provides that no recourse for the payment of the principal
of, premium, if any, or interest on any of the Senior Notes or for any claim
based thereon or otherwise in respect thereof, and
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no recourse under or upon any obligation, covenant or agreement of the Company
or the Subsidiary Guarantors in the Indenture or in any of the Senior Notes or
the Subsidiary Guarantees or because of the creation of any Indebtedness
represented thereby, shall be had against any incorporator, officer, director,
employee or controlling person of the Company or of any successor Person
thereof. Each Holder, by accepting the Senior Notes, waives and releases all
such liability.
CONCERNING THE TRUSTEE
The Bank of New York is the Trustee under the Indenture and has been
appointed by the Company as Registrar and Paying Agent with regard to the
Senior Notes. The Indenture (including the provisions of the Trust Indenture
Act incorporated therein) contains certain limitations on the rights of the
Trustee, if it becomes a creditor of the Company, to obtain payment of claims
in certain cases, or to realize on certain property received in respect of any
such claim as security or otherwise. The Indenture will permit the Trustee to
engage in other transactions; PROVIDED, HOWEVER, if it acquires any conflicting
interest (as defined in the Trust Indenture Act), it must eliminate such
conflict or resign.
The Holders of a majority in principal amount of the then outstanding
Senior Notes will have the right to direct the time, method and place of
conducting any proceeding for exercising any remedy available to the Trustee,
subject to certain exceptions. The Indenture provides that, in case an Event of
Default occurs and is not cured, the Trustee will be required, in the exercise
of its power, to use the degree of care of a prudent person in similar
circumstances in the conduct of his own affairs. Subject to such provisions,
the Trustee will be under no obligation to exercise any of its rights or powers
under the Indenture at the request of any Holder, unless such Holder shall have
offered to the Trustee security and indemnity satisfactory to the Trustee.
GOVERNING LAW
Each of the Indenture, the Senior Notes and the Subsidiary Guarantees
provides that it is to be governed by, and construed in accordance with, the
laws of the State of New York, without regard to the principles of conflicts of
laws. The Company and the Subsidiary Guarantors have expressly submitted to the
nonexclusive jurisdiction of the State of New York and the U.S. federal courts
sitting in The City of New York for the purposes of any suit, action or
proceeding with respect to the Indenture, the Senior Notes and the Subsidiary
Guarantees and for actions brought under federal or state securities laws with
respect to the Senior Notes. The Company and the Subsidiary Guarantors have
appointed CT Corporation System as their agent upon which process may be served
in any such action or proceeding with respect to the Indenture, the Senior
Notes or the Subsidiary Guarantees.
BOOK-ENTRY, DELIVERY AND FORM
The Old Notes sold to Qualified Institutional Buyers initially were in the
form of one or more registered global notes without interest coupons
(collectively, the "Rule 144A Global Notes"). Upon issuance, the Rule 144A
Global Notes were deposited with the Trustee, as custodian for The Depository
Trust Company ("DTC"), and registered in the name of DTC or its nominee for
credit to the accounts of DTC's Direct and Indirect Participants (as defined
below). The Old Notes sold in offshore transactions in reliance on Regulation S
initially were in the form of one or more temporary registered, global
book-entry notes without interest coupons (the "Regulation S Temporary Global
Notes"). The Regulation S Temporary Global Notes were deposited with the
Trustee, as custodian for DTC, in New York, New York and registered in the name
of a nominee of DTC for credit to the accounts of Indirect Participants
participating in DTC through the Euroclear System ("Euroclear") and Cedel Bank,
societe anonyme ("CEDEL"). All registered global notes are referred to herein
collectively as "Global Notes." DTC will maintain the Senior Notes in
denominations of $1,000 and integral multiples thereof through its book entry
facilities.
Transfer of beneficial interests in any Global Notes will be subject to
the applicable rules and procedures of DTC and its Direct or Indirect
Participants (including, if applicable, those of Euroclear
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and CEDEL), which may change from time to time. In addition, beneficial
interests in the Regulation S Global Notes and the Rule 144A Global Notes are
subject to restrictions on transfer.
The Global Notes may be transferred, in whole and not in part, only to
another nominee of DTC or to a successor of DTC or its nominee in certain
limited circumstances. Beneficial interests in the Global Notes may be
exchanged for Notes in certificated form in certain limited circumstances.
Initially, the Trustee will act as Paying Agent and Registrar. The Senior
Notes may be presented for registration of transfer and exchange at the offices
of the Registrar.
DTC has advised the Company as follows: It is a limited-purpose trust
company that was created to hold securities for its participating organizations
(collectively, the "Participants") and to facilitate the clearance and
settlement of transactions in such securities between Participants through
electronic book-entry changes in accounts of its Participants. Participants
include securities brokers and dealers (including the Initial Purchaser), banks
and trust companies, clearing corporations and certain other organizations.
Access to DTC's system is also available to other entities, such as banks,
brokers, dealers and trust companies (collectively, the "Indirect
Participants") that clear through or maintain a custodial relationship with a
Participant, either directly or indirectly. Persons who are not Participants
may beneficially own securities held by or on behalf of the DTC only through
Participants or Indirect Participants.
The Company expects that pursuant to procedures established by DTC (i)
upon deposit of the Global Notes, DTC will credit the accounts of Participants
designated by the Initial Purchaser with portions of the principal amount of
the Global Notes and (ii) ownership of the Senior Notes evidenced by the Global
Notes will be shown on, and the transfer of that ownership will be effected
only through, records maintained by DTC (with respect to the interests of the
Participants), the Participants and the Indirect Participants.
The laws of some states require that certain persons take physical
delivery in definitive form of securities that they own. Consequently, the
ability to transfer the Senior Notes will be limited to such extent.
Investors in the Global Note may hold their interests directly through
DTC, if they are Participants in such system, or indirectly through
organizations that are Participants in such system.
So long as a nominee of DTC is the registered owner of the Global Notes,
such nominee will be considered the sole Holder of outstanding Senior Notes
represented by such Global Notes under the Indenture. Except as provided below,
beneficial owners of Senior Notes evidenced by the Global Notes will not be
entitled to have Senior Notes registered in their names and will not be
considered the owners or Holders thereof under the Indenture for any purpose,
including with respect to the giving of any direction, instructions or
approvals to the Trustee thereunder. None of the Company, the Subsidiary
Guarantors or the Trustee will have any responsibility or liability for any
aspect of the records relating to or payments made on account of Senior Notes
by DTC, or for maintaining, supervising or reviewing any records of DTC
relating to such Senior Notes.
Payments in respect of the principal of, premium, if any, and interest on
any Senior Notes registered in the name of DTC's nominee on the applicable
record date will be payable by the Trustee to or at the direction of DTC's
nominee in its capacity as the registered Holder under the Indenture. Under the
terms of the Indenture, the Company and the Trustee will treat the persons in
whose names any Senior Notes, including the Global Notes, are registered as the
owners thereof for the purpose of receiving such payments and for any and all
other purposes whatsoever. Consequently, none of the Company, the Subsidiary
Guarantors or the Trustee has or will have any responsibility or liability for
the payment of such amounts to beneficial owners of Senior Notes (including
principal, premium, if any, and interest). The Company believes, however, that
it is currently the policy of DTC to immediately credit the accounts of the
relevant Participants with such payments, in amounts proportionate to their
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respective beneficial interests in the relevant security as shown on the
records of DTC. Payments by the Participants and the Indirect Participants to
the beneficial owners of Senior Notes will be governed by standing instructions
and customary practice and will be the responsibility of the Participants or
the Indirect Participants.
Subject to certain conditions, any person having a beneficial interest in
the Global Notes may, upon request to the Trustee, exchange such beneficial
interest for Senior Notes in definitive form. Upon any such issuance, the
Trustee is required to register such Senior Notes in the name of, and cause the
same to be delivered to, such person (or the nominee thereof). In addition, if
(i) the Company notifies the Trustee in writing that DTC is no longer willing
or able to act as a depositary and the Company is unable to locate a qualified
successor within 90 days or (ii) the Company, at its option, notifies the
Trustee in writing that it elects to cause the issuance of Senior Notes in
definitive form under the Indenture, then, upon surrender by DTC's nominee of
its Global Note, Senior Notes in such form will be issued to each person that
such Global Note Holder or DTC identifies as being the beneficial owner of the
related Senior Notes.
Neither the Company nor the Trustee will be liable for any delay by DTC's
nominee or DTC in identifying the beneficial owners of Senior Notes and the
Company and the Trustee may conclusively rely on, and will be protected in
relying on, instructions from DTC's nominee or DTC for all purposes.
The Indenture requires that payments in respect of the Senior Notes
represented by a Global Note (including principal, premium, if any, and
interest, if any) be made in same-day funds. The interests in the Global Note
trade in DTC's Same-Day Funds Settlement System, and any permitted secondary
market trading activity in the Senior Notes is, therefore, required by DTC to
be settled in same-day funds. Transfers between Participants will be effected
in accordance with DTC procedures and will be settled in same-day funds.
PAYMENT
Payment of principal of and interest on the Notes represented by the
Global Notes will be made by the Company in U.S. dollars through the Paying
Agent to Cede & Co., the nominee for DTC, as the registered holder of the
Global Notes.
Payment by DTC Participants and Indirect DTC Participants (as defined
herein) to owners of beneficial interests in the Global Notes will be governed
by standing instructions and customary practices, as is now the case with
securities held by the accounts of customers registered in "street name", and
will be the responsibility of the DTC Participants and Indirect DTC
Participants. Neither the Trustee nor the Paying Agent will have any
responsibility or liability for any aspect of the records of the DTC relating
to or payments made by DTC on account of beneficial interests in the Global
Notes or for maintaining, supervisiing or reviewing any records of DTC relating
to such beneficial interests.
CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in the
Indenture. Reference is made to the Indenture for the full definition of all
such terms.
"ACQUIRED INDEBTEDNESS" means (a) with respect to any Person, Indebtedness
of such Person existing at the time such other Person becomes a Restricted
Subsidiary, including Indebtedness incurred in connection with, or in
contemplation of, such Person becoming a Restricted Subsidiary and (b) with
respect to the Company or any of its Restricted Subsidiaries, any Indebtedness
of a Person (other than the Company or a Restricted Subsidiary) existing at the
time such Person merges or consolidates with or into the Company or a
Restricted Subsidiary, or Indebtedness assumed by the Company or any of its
Restricted Subsidiaries in connection with the acquisition of properties or
assets from another Person, which Indebtedness, including Indebtedness incurred
by such other Person in connection with, or in contemplation of, such merger or
acquisition.
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"AFFILIATE" means, with respect to any specified Person, any other Person
directly or indirectly controlling or controlled by, or under direct or
indirect common control with, the specified Person. For purposes of this
definition: (i) "control," when used with respect to any Person, means the
power to direct the management and policies of that Person, directly or
indirectly, whether through the ownership of voting securities, by contract or
otherwise, and the terms "controlling" and "controlled" have meanings
correlative to the foregoing; (ii) beneficial ownership at any time of 10% or
more of the outstanding voting common equity of a Person (including voting
common equity subject to being acquired pursuant to the exercise of options,
warrants or other rights exercisable within 60 days of that time) will be
deemed to constitute control of that Person at that time; (iii) without
limiting other Persons who may be deemed to control a limited partnership, the
general partner of a limited partnership and each limited partner holding 10%
or more of the limited partnership interests in such limited partnership will
be deemed to control such limited partnership; or (iv) with respect to an
individual, any immediate family member (i.e., spouse, parent or child) of such
Person.
"ASSET SALE" means any sale, issuance, conveyance, transfer, lease,
assignment or other disposition to any Person other than the Company or a
Wholly--Owned Restricted Subsidiary (including, without limitation, by means of
a Sale/Leaseback Transaction or a merger or consolidation) (collectively, for
purposes of this definition, a "transfer"), directly or indirectly, in one
transaction or a series of related transactions, of (a) any Capital Stock of
any Restricted Subsidiary held by the Company or any other Restricted
Subsidiary or (b) any other properties or assets of the Company or any
Restricted Subsidiary. Notwithstanding the preceding sentence, the following do
not constitute "Asset Sales": (i) any transfer of properties or assets
(including Capital Stock) that is governed by, and made in accordance with, the
provisions described under "--Certain Covenants--Limitations on Mergers and
Certain Other Transactions"; (ii) any transfer of properties or assets
constituting a Restricted Investment, if permitted under the covenant described
under "--Certain Covenants--Limitations on Restricted Payments"; (iii) any
transfer of properties or assets from the Company to a Restricted Subsidiary to
another Restricted Subsidiary or any Person if such transfer to a Restricted
Subsidiary or other Person is permitted under the covenant described under
"--Certain Covenants--Limitations on Restricted Payments"; (iv) any transfer of
properties or assets relating to aircraft engines, aircraft components,
aircraft parts or spare parts pursuant to customary pooling, exchange or other
similar agreements; (v) any asset swap involving aircraft engines, aircraft
components, aircraft parts or spare parts (provided that the assets received by
the Company or Restricted Subsidiary have a fair market value at least equal to
the asset transferred (provided with respect to any asset swap or series of
related asset swaps involving assets with a fair market value exceeding $3.0
million, such determination shall be made by the Board of Directors)); and (vi)
transfers of damaged, worn-out or obsolete equipment, inventory or assets that,
in the Company's reasonable judgment, are no longer useful in the business of
the Company and the Restricted Subsidiaries; and (vii) any transfers that, but
for this clause (viii), would be Asset Sales, if after giving effect to such
transfers, the aggregate fair market value of the properties or assets
transferred in such transaction or any such series of related transactions does
not exceed $500,000.
"ATTRIBUTABLE INDEBTEDNESS," when used with respect to any Sale/Leaseback
Transaction, means, as at the time of determination, the present value
(discounted at a rate equivalent to the Company's then current weighted average
cost of funds for borrowed money as at the time of determination, compounded on
a semiannual basis) of the total obligations of the lessee for rental payments
during the remaining term of the lease included in any such Sale/Leaseback
Transaction.
"BOARD RESOLUTION" means a duly adopted resolution of the Board of
Directors of the Company.
"CAPITAL STOCK" of any Person means (i) any and all shares or other equity
interests (including without limitation common stock, preferred stock and
partnership interests) in such Person and (ii) all rights to purchase, warrants
or options (whether or not currently exercisable), participations or other
equivalents of or interests in (however designated) such shares or other
interests in such Person.
"CAPITALIZED LEASE OBLIGATION" of any Person means the obligations of such
Person to pay rent or other amounts under a lease that is required to be
capitalized for financial reporting purposes in
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accordance with GAAP, and, for purposes of the Indenture, the amount of such
obligation at any date shall be the capitalized amount thereof at that date
determined in accordance with GAAP.
"CASH EQUIVALENTS" means (i) marketable obligations with a maturity of 180
days or less issued or directly and fully guaranteed or insured by the United
States of America or any agency or instrumentality thereof, provided that the
full faith and credit of the United States of America is pledged in support
thereof; (ii) U.S. dollar denominated demand and time deposits and certificates
of deposit or acceptances of any financial institution (a) that is a member of
the Federal Reserve System and has combined capital and surplus and undivided
profits of not less than $500 million or (b) whose short-term commercial paper
rating or that of its parent company is at least A-1 or the equivalent thereof
from S&P or P-1 or the equivalent thereof from Moody's (any such bank, an
"Approved Bank"), in each case with a maturity of 180 days or less from the
date of acquisition; (iii) commercial paper issued by any Approved Bank or by
the parent company of any Approved Bank and commercial paper issued by, or
guaranteed by, any Person with a short-term commercial paper rating of at least
A-1 or the equivalent-thereof by S&P or at least P-1 or the equivalent thereof
by Moody's, and in each case maturing no more than 180 days from the date of
acquisition; (iv) repurchase obligations with a term of not more than seven
days for underlying securities of the types described in clause (i) above
entered into with any Approved Bank; and (v) investments in money market or
other mutual funds substantially all of whose assets comprise securities of the
types described in clauses (i) through (iv) above.
"CHANGE OF CONTROL" means the occurrence of any of the following events
(whether or not otherwise in compliance with the provisions of the Indenture):
(i) any Person or group (as such term is used in Section 13(d)(3) of the
Exchange Act) other than the Principals is or becomes the beneficial owner (as
defined in Rule 13d-3 of the Exchange Act), directly or indirectly, of more
than 50% of the total voting power of the Voting Stock of the Company, (ii) the
Company sells, assigns, conveys, transfers, leases or otherwise disposes of all
or substantially all of the assets of the Company and its Subsidiaries to any
Person (other than a Restricted Subsidiary), (iii) the Company or any of its
Subsidiaries consolidates with, or merges with or into, any Person, and as a
result of such consolidation or merger the Voting Stock of the Company
outstanding prior to such consolidation or merger does not represent (either by
remaining outstanding or by being converted into Voting Stock of the surviving
Person or any parent thereof) at least a majority of the total voting power of
the outstanding Voting Stock of the Company or the surviving Person or any
parent thereof outstanding immediately after such consolidation or merger, or
(iv) the replacement of a majority of the Board of Directors of the Company
over a two-year period from the directors who constituted the Board of
Directors of the Company at the beginning of such period, and such replacement
shall not have been approved by a vote of at least a majority of the Board of
Directors of the Company then still in office who either were members of such
Board of Directors at the beginning of such period or whose election as a
member of such Board of Directors was previously so approved.
"CONSOLIDATED AMORTIZATION EXPENSE" for any period means the amortization
expense of the Company and its Restricted Subsidiaries for such period (to the
extent included in the computation of Consolidated Net Income), determined on a
consolidated basis in accordance with GAAP.
"CONSOLIDATED DEPRECIATION EXPENSE" for any period means the depreciation
expense of the Company and its Restricted Subsidiaries for such period (to the
extent included in the computation of Consolidated Net Income), determined on a
consolidated basis in accordance with GAAP.
"CONSOLIDATED FIXED CHARGE COVERAGE RATIO" means, with respect to any
determination date, the ratio for the four full fiscal quarters immediately
preceding the determination date (for any determination, the "Reference
Period"), of (a) EBITDA to (b) Consolidated Interest Expense for such Reference
Period. In making such computations, (i) EBITDA and Consolidated Interest
Expense shall be calculated on a PRO FORMA basis assuming that (A) the
Indebtedness to be incurred or the Disqualified Capital Stock to be issued (and
all other Indebtedness incurred or Disqualified Capital Stock issued after the
first day of such Reference Period referred to in the covenant described under
"--Certain Covenants--Limitations on Additional Indebtedness and Disqualified
Capital Stock"
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through and including the date of determination), and (if applicable) the
application of the net proceeds therefrom (and from any other such Indebtedness
or Disqualified Capital Stock), including the refinancing of other
Indebtedness, had been incurred on the first day of such Reference Period and,
in the case of Acquired Indebtedness, on the assumption that the related
transaction (whether by means of purchase, merger or otherwise) also had
occurred on such date with the appropriate adjustments with respect to such
acquisition being included in such PRO FORMA calculation and (B) any
acquisition or disposition by the Company or any Restricted Subsidiary of any
properties of assets outside the ordinary course of business or any repayment
of any principal amount of any Indebtedness of the Company or any Restricted
Subsidiary prior to the stated maturity thereof, in either case since the first
day of such Reference Period through and including the date of determination,
had been consummated on such first day of such Reference Period; (ii) the
Consolidated Interest Expense attributable to interest on any Indebtedness
required to be computed on a PRO FORMA basis in accordance with the covenant
described under "--Certain Covenants--Limitations on Additional Indebtedness
and Disqualified Capital Stock" and (A) bearing a floating interest rate shall
be computed as if the rate in effect on the date of computation had been the
applicable rate for the entire period and (B) which was not outstanding during
the period for which the computation is being made but which bears, at the
option of the Company, a fixed or floating rate of interest, shall be computed
by applying, at the option of the Company, either the fixed or floating rate;
(iii) the Consolidated Interest Expense attributable to interest on any
Indebtedness under a revolving credit facility required to be computed on a PRO
FORMA basis in accordance with the covenant described under "--Certain
Covenants--Limitations on Additional Indebtedness and Disqualified Capital
Stock" shall be computed based upon the average daily balance of such
Indebtedness during the applicable period, PROVIDED that such average daily
balance shall be reduced by the amount of any repayment of Indebtedness under a
revolving credit facility during the applicable period; (iv) notwithstanding
the foregoing clauses (ii) and (iii), interest on Indebtedness determined on a
floating rate basis, to the extent such interest is covered by agreements
relating to Hedging Obligations, shall be deemed to have accrued at the rate
per annum resulting after giving effect to the operation of such agreements;
and (v) if after the first day of the applicable Reference Period and before
the date of determination, the Company has permanently retired any Indebtedness
out of the net proceeds of the issuance and sale of shares of Capital Stock
(other than Disqualified Capital Stock) of the Company within 60 days of such
issuance and sale, Consolidated Interest Expense shall be calculated on a PRO
FORMA basis as if such Indebtedness had been retired on the first day of such
period.
"CONSOLIDATED INCOME TAX EXPENSE" for any period means the provision, if
any, for federal, state, local and foreign income taxes based on income and
profits of the Company and its Restricted Subsidiaries to the extent such
income or profits were included in computing Consolidated Net Income for such
period.
"CONSOLIDATED INTEREST EXPENSE" for any period means the sum, without
duplication, of the total interest expense of the Company and its consolidated
Restricted Subsidiaries for such period, determined on a consolidated basis in
accordance with GAAP and including, without limitation (i) imputed interest on
Capitalized Lease Obligations and Attributable Indebtedness, (ii) commissions,
discounts and other fees and charges owed with respect to letters of credit
securing financial obligations and bankers' acceptance financing, (iii) the net
costs associated with Hedging Obligations, (iv) amortization of other financing
fees and expenses, (v) the interest portion of any deferred payment
obligations, (vi) amortization of debt discount or premium, if any, (vii) all
other non-cash interest expense, (viii) capitalized interest, (ix) all cash
dividend payments (and non-cash dividend payments in the case of a Restricted
Subsidiary) on any series of preferred stock of the Company or any Restricted
Subsidiary, (x) all interest payable with respect to discontinued operations,
and (xi) all interest paid by the Company or any Restricted Subsidiary under
any guarantee of Indebtedness (including a guarantee of principal, interest or
any combination thereof) of any other Person.
"CONSOLIDATED NET INCOME" for any period means the net income (or loss) of
the Company and its consolidated Restricted Subsidiaries for such period
determined on a consolidated basis in accordance with GAAP; PROVIDED that there
shall be excluded from such net income or loss (to the extent otherwise
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included therein), without duplication (i) the net income (or loss) of any
Person (other than a Restricted Subsidiary) in which any Person other than the
Company and its Restricted Subsidiaries has an ownership interest, except to
the extent that any such income has actually been received by the Company and
its Restricted Subsidiaries in the form of dividends or other distributions
during such period; (ii) except to the extent includable in the consolidated
net income of the Company pursuant to the foregoing clause (i), the net income
(or loss) of any Person that accrued prior to the date that (a) such Person
becomes a Restricted Subsidiary or is merged into or consolidated with the
Company or any Restricted Subsidiary or (b) the assets of such Person are
acquired by the Company or any Restricted Subsidiary; (iii) the net income of
any Restricted Subsidiary during such period to the extent that the declaration
or payment of dividends or similar distributions by such Restricted Subsidiary
of that income (a) is not permitted by operation of the terms of its charter or
any agreement, instrument, judgment, decree, order, statute, rule or
governmental regulation applicable to that Subsidiary during such period or (b)
would be subject to any taxes payable on such dividend or distribution; (iv)
any gain (or, only in the case of a determination of Consolidated Net Income as
used in EBITDA, any loss), together with any related provisions for taxes, if
any, on any such gain (or if applicable, the tax effects of such loss),
realized during such period by the Company or any Restricted Subsidiary upon
(a) the acquisition of any securities, or the extinguishment of any
Indebtedness, of the Company or any Restricted Subsidiary or (b) any Asset Sale
by the Company or any of its Restricted Subsidiaries; (v) any extraordinary
gain (or, only in the case of a determination of Consolidated Net Income as
used in EBITDA, any extraordinary loss), together with any related provision
for taxes, if any, on any such extraordinary gain (or, if applicable, the tax
effects of such extraordinary loss), realized by the Company or any Restricted
Subsidiary during such period; and (vi) in the case of a successor to the
Company by consolidation, merger or transfer of its assets, any earnings of the
successor prior to such merger, consolidation or transfer of assets; AND
PROVIDED, FURTHER, that any gain referred to in clauses (iv) and (v) above that
relates to a Restricted Investment and which is received in cash by the Company
or a Restricted Subsidiary during such period shall be included in the
consolidated net income of the Company. For purposes of clause (i) above, the
amount of any distribution of property or assets shall be deemed to be equal to
the fair market value of such property or assets as determined in good faith by
the Board of Directors as evidenced by a Board Resolution.
"CONSOLIDATED NET WORTH" means, with respect to any Person as of any date,
the consolidated equity of the common stockholders of such Person and its
consolidated Subsidiaries as of such date, as determined in accordance with
GAAP.
"CONSOLIDATED TANGIBLE ASSETS" means, at any date, the total of all assets
appearing on a consolidated balance sheet of the Company and its consolidated
Subsidiaries as of that date prepared in accordance with GAAP, after deducting
therefrom, without duplication, all amounts shown on such balance sheet in
respect of goodwill, trade names, trademarks, patents, patent applications,
licenses and rights in any thereof, and similar intangibles, and any other
items which are treated as intangibles in conformity with GAAP.
"DEFAULT" means any event, act or condition that is, or after notice or
the passage of time or both would become, an Event of Default.
"DISQUALIFIED CAPITAL STOCK" of any specified Person means any Capital
Stock of such Person that, by its terms, by the terms of any agreement related
thereto or by the terms of any security into which it is convertible, puttable
or exchangeable, is, or upon the happening of any event or the passage of time
would be, required to be redeemed or repurchased by such Person, whether or not
at the option of the holder thereof, or matures or is mandatorily redeemable,
pursuant to a sinking fund obligation or otherwise, in whole or in part, on or
prior to the Stated Maturity of the Senior Notes; PROVIDED, however, that any
class of Capital Stock of such Person that, by its terms, authorizes such
Person to satisfy in full its obligations with respect to the payment of
dividends or upon maturity, redemption (pursuant to a sinking fund or
otherwise) or repurchase thereof or otherwise by the delivery of Capital Stock
that is not Disqualified Capital Stock, and that is not convertible, puttable
or exchangeable for Disqualified Capital Stock or any other Indebtedness, shall
not be deemed to be Disqualified Capital
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Stock so long as such Person satisfies its obligations with respect thereto
solely by the delivery of Capital Stock that is not Disqualified Capital Stock.
"EBITDA" for any period means without duplication, the sum of the amounts
for such period of (i) Consolidated Net Income PLUS (ii) in each case to the
extent deducted in determining Consolidated Net Income for such period (and
without duplication), (A) Consolidated Income Tax Expense, (B) Consolidated
Amortization Expense (but only to the extent not included in Consolidated
Interest Expense), (C) Consolidated Depreciation Expense (D) Consolidated
Interest Expense and (E) all other non-cash items reducing the Consolidated Net
Income (excluding any such non-cash charge that results in an accrual of a
reserve for cash charges in any future period) for such period, in each case
determined on a consolidated basis in accordance with GAAP and MINUS (iii) the
aggregate amount of all non-cash items, determined on a consolidated basis, to
the extent such items increased Consolidated Net Income for such period
(excluding any such non-cash items resulting from changes in accrued
liabilities in the ordinary course of business, but only to the extent such
non-cash items reduced Consolidated Net Income for a prior period).
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"EXISTING INDEBTEDNESS" means all of the Indebtedness of the Company and
its Subsidiaries that is outstanding on the Issue Date after giving effect to
the issuance of the Senior Notes.
"FAIR MARKET VALUE" of any asset or items means the fair market value of
such asset or items as determined in good faith by the Board of Directors and
evidenced by a Board Resolution.
"GAAP" means generally accepted accounting principles, consistently
applied, that are set forth in (i) the opinions and pronouncements of the
Accounting Principles Board of the American Institute of Certified Public
Accountants, (ii) the statements and pronouncements of the Financial Accounting
Standards Board or (iii) in such other statements by such other entity as may
be approved by a significant segment of the accounting profession of the United
States.
"HEDGING OBLIGATIONS" of any Person means the obligations of such Person
pursuant to (i) any interest rate swap agreement, interest rate collar
agreement or other similar agreement or arrangement designed to protect such
Person against fluctuations in interest rates, or (ii) agreements or
arrangements designed to protect such Person against fluctuations in foreign
currency exchange rates or fuel prices, in each case, entered into in the
ordinary course of business for BONA FIDE hedging purposes and not for the
purpose of speculation.
The term "INCUR" means, with respect to any Indebtedness, incur, create,
issue, assume, guarantee or otherwise become directly or indirectly liable,
contingently or otherwise with respect to such Indebtedness; PROVIDED that (i)
the Indebtedness of a Person existing at the time such Person became a
Restricted Subsidiary shall be deemed to have been incurred by such Restricted
Subsidiary and (ii) neither the accrual of interest nor the accretion of
accreted value shall be deemed to be an incurrence of Indebtedness.
"INDEBTEDNESS" of any Person at any date means, without duplication: (i)
all liabilities, contingent or otherwise, of such Person for borrowed money
(whether or not the recourse of the lender is to the whole of the assets of
such Person or only to a portion thereof); (ii) all obligations of such Person
evidenced by bonds, debentures, notes or other similar instruments (or
reimbursement obligations with respect thereto); (iii) all obligations of such
Person in respect of letters of credit or other similar instruments (or
reimbursement obligations with respect thereto); (iv) all obligations of such
Person to pay the deferred and unpaid purchase price of property or services,
except trade payables and accrued expenses incurred by such Person in the
ordinary course of business in connection with obtaining goods, materials or
services; (v) the maximum fixed redemption or repurchase price of all
Disqualified Capital Stock of such Person; (vi) all Capitalized Lease
Obligations of such Person; (vii) all Indebtedness of others secured by a Lien
on any asset of such Person, whether or not such Indebtedness is assumed by
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such Person; (viii) all Indebtedness of others guaranteed by such Person to the
extent of such guarantee; PROVIDED that Indebtedness of the Company or its
Subsidiaries that is guaranteed by the Company or the Company's Subsidiaries
shall only be counted once in the calculation of the amount of Indebtedness of
the Company and its Subsidiaries on a consolidated basis; (ix) all Attributable
Indebtedness of such Person; and (x) to the extent not otherwise included in
this definition, Hedging Obligations of such Person. 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, the maximum liability of such
Person for any such contingent obligations at such date and, in the case of
clause (vii), the lesser of (A) the fair market value of any asset subject to a
Lien securing the Indebtedness of others on the date that the Lien attaches and
(B) the amount of the Indebtedness secured. For purposes of the preceding
sentence, the "maximum fixed redemption or repurchase price" of any
Disqualified Capital Stock that does not have a fixed redemption or repurchase
price shall be calculated in accordance with the terms of such Disqualified
Capital Stock as if such Disqualified Capital Stock were purchased or redeemed
on any date on which Indebtedness shall be required to be determined pursuant
to the Indenture, and if such price is based upon, or measured by, the fair
market value of such Disqualified Capital Stock (or any equity security for
which it may be exchanged or converted), such fair market value shall be
determined in good faith by the Board of Directors of such Person, which
determination shall be evidenced by a Board Resolution.
"INDEPENDENT DIRECTOR" means a director of the Company who has not and
whose Affiliates have not, at any time during the twelve months prior to the
taking of any action hereunder, directly or indirectly, received, or entered
into any understanding or agreement to receive, any compensation, payment or
other benefit, of any type or form, from the Company or any of its Affiliates,
if such compensation, payment or benefit would require disclosure pursuant to
Item 404 of Regulation S-K in a registration statement filed under the
Securities Act or a proxy statement filed under the Exchange Act, other than
customary directors fees for serving on the Board of Directors of the Company
or any Affiliate and reimbursement of out-of-pocket expenses for attendance at
the Company's or Affiliate's board and board committee meetings.
"INDEPENDENT FINANCIAL ADVISOR" means an accounting, appraisal or
investment banking firm of nationally recognized standing that is disinterested
and independent with respect to the Company and its Affiliates and, in the
reasonable judgment of a majority of the Company's Board of Directors, is
qualified to perform the task for which it has been engaged.
"INTEREST PAYMENT DATE" means the Stated Maturity of an installment of
interest on the Senior Notes.
"INVESTMENTS" of any Person means (i) all investments by such Person in
any other Person in the form of loans, advances or capital contributions
(excluding (A) commission, travel and similar advances to officers and
employees made in the ordinary course of business and (B) other loans and
advances to officers and employees made in the ordinary course of business not
to exceed $1.0 million at any time outstanding) or similar credit extensions
constituting Indebtedness of such Person, (ii) all purchases (or other
acquisitions for consideration) by such Person of Indebtedness, Capital Stock
or other securities of any other Person (other than the Company or its
Restricted Subsidiaries) and (iii) all other items that would be classified as
investments (including without limitation purchases of assets outside the
ordinary course of business) on a balance sheet of such Person prepared in
accordance with GAAP. The following are not "Investments": (i) extensions of
trade credit or other advances to customers on commercially reasonable terms in
accordance with the Company's normal practices; (ii) Hedging Obligations, but
only to the extent that the same constitute Permitted Indebtedness; and (iii)
endorsements of negotiable instruments and documents in the ordinary course of
business.
"ISSUE DATE" means the date the Old Notes were initially issued.
"LIEN" means any mortgage, charge, pledge, deed of trust, lien (statutory
or other), security interest, hypothecation, assignment for security, claim or
encumbrance (including, without limitation,
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any agreement to give or grant any lease, conditional sale or other title
retention agreement having substantially the same economic effect as any of the
foregoing) upon or with respect to any property or assets of any kind. A Person
will be deemed to own subject to a Lien any property or assets that the Person
has acquired or holds subject to the interest of a vendor or lessor under any
conditional sale agreement, capital lease or other title retention agreement.
"MOODY'S" means Moody's Investors Service, Inc., and its successors.
"NET AVAILABLE PROCEEDS" means, with respect to any Asset Sale, the
proceeds thereof in the form of cash or Cash Equivalents including payments in
respect of deferred payment obligations when received in the form of cash or
Cash Equivalents (except to the extent that such obligations are financed or
sold with recourse to the Company or any Restricted Subsidiary), net of (i)
brokerage commissions and other fees and expenses (including fees and expenses
of legal counsel, accountants and investment banks) related to such Asset Sale,
(ii) provisions for all taxes payable as a result of such Asset Sale (after
taking into account any available tax credits or deductions and any tax sharing
arrangements), (iii) amounts required to be paid to any Person (other than the
Company or any Restricted Subsidiary) (a) owning a beneficial interest in the
properties or assets subject to the Asset Sale, (b) having a Lien on such
properties or assets or (c) requiring such payment as a condition to providing
any consent necessary to consummate the Asset Sale and (iv) appropriate amounts
to be provided by the Company or any Restricted Subsidiary, as the case may be,
as a reserve required in accordance with GAAP against any liabilities
associated with such Asset Sale and retained by the Company or any Restricted
Subsidiary, as the case may be, after such Asset Sale, including, without
limitation, pensions and other post-employment benefit liabilities, liabilities
related to environmental matters and liabilities under any indemnification
obligations associated with such Asset Sale, all as reflected in an Officers'
Certificate; provided, however, that any amounts remaining after adjustments,
revaluations or liquidations of such reserves shall constitute Net Available
Proceeds.
"OFFICER" means any of the following of the Company: the Chairman of the
Board, the Chief Executive Officer, the Chief Financial Officer, the President,
the Chief Operating Officer or the General Counsel.
"OFFICERS' CERTIFICATE" means a certificate signed by any two Officers.
"PAYMENT RESTRICTION" with respect to any Subsidiary, any consensual
encumbrance, restriction or limitation, whether by operation of the terms of
its charter or by reason of any agreement, instrument, judgment, decree, order,
statute, rule or governmental regulation, on the ability of (i) such Restricted
Subsidiary to (a) pay dividends or make other distributions on its Capital
Stock or make payments on any obligation, liability or Indebtedness owed to the
Company or any other Restricted Subsidiary, (b) make loans or advances to the
Company or any other Restricted Subsidiary, (c) guarantee any Indebtedness of
the Company or any Restricted Subsidiary or (d) transfer any of its properties
or assets to the Company or any other Restricted Subsidiary (other than
customary restrictions on transfers of property subject to a Lien permitted
under the Indenture) or (ii) the Company or any other Restricted Subsidiary to
receive or retain any such dividends, distributions or payments, loans or
advances, guarantee, or transfer of properties or assets.
"PERMITTED INCOME TAX DISTRIBUTIONS" means, for all taxable periods
commencing with 1998 (or 1997, to the extent sufficient distributions, in
accordance with the principles set forth below, have not yet been made to the
Company's shareholders with respect to the Company's taxable income for such
period) during which the Company qualifies as an "S" corporation under
Subchapter S of the Internal Revenue Code of 1986, as amended, distributions to
the Company's shareholders which do not exceed an amount equal to the sum of
(i) the product of (a) the Company's taxable income for federal income tax
purposes for such period (reduced by the Company's taxable loss for federal
income tax purposes for any prior taxable period to the extent such losses have
not previously been taken into account in determining taxable income in prior
periods or Permitted Income Tax Distributions) minus the amount determined
pursuant to clause (ii) below for such period and (b) the highest marginal
individual federal
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income tax rate (taking into account the reduction of itemized deductions based
on gross income) for each such period plus (ii) if the Company's shareholders
are obligated to pay any state or local income taxes on account of the
Company's income, the product of (a) the Company's taxable income for state or
local income tax purposes for each such period (reduced by the Company's
taxable loss for state or local income tax purposes for any prior taxable
period to the extent such losses have not previously been taken into account in
determining taxable income in prior periods or Permitted Income Tax
Distributions) and (b) the highest applicable marginal individual state or
local income tax rate (taking into account any differences in applicable state
and local income tax rates) for each such period; PROVIDED, HOWEVER, (A) that
such amount shall be increased to the extent that the Company's shareholders
are subject to the federal alternative minimum tax for any such taxable period
in respect of the Company's income; (B) that such amount shall be reduced by
the Company's tax credits for each such period for federal and applicable state
and local income tax purposes (or, if applicable, alternative minimum tax
credits or carryforwards); and (C) an amount representing that portion of the
projected Permitted Income Tax Distribution that the Company reasonably
estimates to be payable by the Company's shareholders in order to avoid
penalties for the underpayment of estimated taxes may be distributed not more
than ten (10) business days prior to the due date for such payment of estimated
tax (except that the estimated tax payment otherwise due in January shall be
deemed to be due prior to December 31). All computations shall be made as if
the Company's shareholders' only income or loss is the net income or loss of
the Company. In the event that the Company's taxable income for any prior
taxable period is adjusted by any taxing authority or as a result of the filing
of any amended tax return, the Company may distribute as an additional
Permitted Income Tax Distribution to all shareholders (current and former)
impacted by the adjustment an amount equal to the liability resulting from such
adjustment. Notwithstanding any other provision in the Indenture, the Company
may take any action it determines to be necessary to cause the Company to be in
compliance with any federal, state and local withholding requirements with
respect to any allocation or distribution by the Company to any shareholder.
All amounts so withheld shall be treated as Permitted Income Tax Distributions
to the applicable shareholders.
"PERMITTED INDEBTEDNESS" means any of the following:
(i) Indebtedness of the Company and any Restricted Subsidiary under any
revolving credit facility entered into by the Company in an aggregate
principal amount at any time outstanding not to exceed the greater of (a)
$45.0 million, or (b) the sum of 80% of the consolidated accounts
receivable of the Company plus 15% of the consolidated net property, plant
and equipment of the Company, calculated as of the end of the most recent
fiscal quarter for which financial statements are available, determined in
accordance with GAAP;
(ii) Indebtedness under the Old Notes, the New Notes, the Subsidiary
Guarantees, and the Indenture;
(iii) Existing Indebtedness;
(iv) Indebtedness under Hedging Obligations, provided that (1) such
Hedging Obligations are related to payment obligations on Permitted
Indebtedness or Indebtedness otherwise permitted by the Consolidated Fixed
Charge Coverage Ratio test described under "--Certain Covenants--
Limitations on Additional Indebtedness and Disqualified Capital Stock"
above, and (2) the notional principal amount of such Hedging Obligations at
the time incurred does not exceed the principal amount of such Indebtedness
to which such Hedging Obligations relate;
(v) Indebtedness of the Company to a Wholly-Owned Restricted Subsidiary
and Indebtedness of any Wholly-Owned Restricted Subsidiary to the Company
or any other Wholly-Owned Restricted Subsidiary; PROVIDED, HOWEVER, that
upon either (1) the subsequent issuance (other than directors' qualifying
shares), sale, transfer or other disposition of any Capital Stock or any
other event which results in any such Wholly-Owned Restricted Subsidiary
ceasing to be a Wholly-Owned Restricted Subsidiary or (2) the transfer or
other disposition of any such Indebtedness
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(except to the Company or a Wholly-Owned Restricted Subsidiary), the
provisions of this clause (v) shall no longer be applicable to such
Indebtedness and such Indebtedness shall be deemed, in each case, to be
incurred and shall be treated as an incurrence for purposes of the
Consolidated Fixed Charge Coverage Ratio test described under "--Certain
Covenants--Limitation on Additional Indebtedness and Disqualified Capital
Stock" above at the time the Wholly-Owned Restricted Subsidiary in question
ceased to be a Wholly-Owned Restricted Subsidiary or the time such transfer
or other disposition occurred;
(vi) Indebtedness in respect of bid, performance or surety bonds issued
for the account of the Company or any Restricted Subsidiary in the ordinary
course of business, including guarantees or obligations of the Company or
any Restricted Subsidiary with respect to letters of credit supporting such
bid, performance or surety obligations (in each case other than for an
obligation for money borrowed);
(vii) Refinancing Indebtedness;
(viii) Indebtedness, in addition to Indebtedness incurred pursuant to the
other clauses of this definition, with an aggregate principal amount at any
time outstanding for all such Indebtedness incurred pursuant to this clause
not in excess of $5.0 million; and
(ix) Indebtedness incurred prior to June 1, 2001 in connection with (i)
the assumption of Acquired Indebtedness of a Related Business; (ii) the
acquisition of, or a business combination transaction with, a Related
Business; or (iii) the purchase of aircraft, engines or aircraft-related or
engine-related parts, supplies and equipment, or other fixed assets to be
used in the business of the Company and its Restricted Subsidiaries,
PROVIDED that (A) if, after giving effect thereto, the Company's
Consolidated Fixed Charge Coverage Ratio on the date thereof would be
greater than 2.0 to 1.0 but less than 2.25 to 1.0, the amount of such
Indebtedness shall not exceed 60% of the total cost of the related
transaction; or (B) if, after giving effect thereto, the Company's
Consolidated Fixed Charge Coverage Ratio would be greater than 2.25 to 1.0
but less than 2.75 to 1.0, the amount of such Indebtedness shall not exceed
80% of the total cost of the related transaction; or (C) if, after giving
effect thereto, the Company's Consolidated Fixed Charge Coverage Ratio
would be at least equal to 2.75 to 1.0, there shall be no percentage
limitation on the amount of such Indebtedness in relation to the total cost
of the related transaction; PROVIDED, FURTHER, in each case that the
Consolidated Fixed Charge Coverage Ratio shall be determined on a PRO FORMA
basis as if such incurrence or issuance and the application of the net
proceeds therefrom had occurred at the beginning of the four-quarter period
used to calculate such Consolidated Fixed Charge Coverage Ratio. If, after
giving effect to the incurrence of Indebtedness pursuant to this clause
(ix), the Consolidated Fixed Charge Coverage Ratio would be less than 2.0
to 1.0, the Company may not incur such Indebtedness under this clause (ix).
"PERMITTED LIENS" means the following types of Liens:
(i) Liens securing the Senior Notes or the Subsidiary Guarantees;
(ii) Liens in favor of the Company or, with respect to a Restricted
Subsidiary, Liens in favor of another Restricted Subsidiary;
(iii) Liens for taxes, assessments or governmental charges or claims
either (a) not delinquent or (b) contested in good faith by appropriate
proceedings and as to which the Company or a Restricted Subsidiary, as the
case may be, has set aside on its books such reserves, or has made such
other appropriate provision, if any, as is required by GAAP;
(iv) Liens of landlords, carriers, warehousemen, mechanics, suppliers,
materialmen, repairmen and other similar Liens incurred in the ordinary
course of business for sums not delinquent or being contested in good
faith, and as to which the Company or a Restricted Subsidiary, as the case
may be, has set aside on its books such reserves, or has made such other
appropriate provision, if any, as is required by GAAP;
100
<PAGE>
(v) Liens incurred or deposits made in the ordinary course of business in
connection with workers' compensation, unemployment insurance and other
types of social security, or to secure the payment or performance of
tenders, statutory or regulatory obligations, surety and appeal bonds,
bids, government contracts and leases, performance and return of money
bonds and other similar obligations (exclusive of obligations for the
payment of borrowed money);
(vi) Liens securing any judgment not giving rise to a Default or Event of
Default and so long as any appropriate legal proceedings that may have been
duly initiated for the review of the judgment has not been finally
terminated or the period within which those proceedings may be initiated
has not expired;
(vii) easements, rights-of-way, reservations, zoning and other
restrictions and other similar encumbrances not interfering in any
material, respect with the ordinary conduct of business of the Company or
any Restricted Subsidiary;
(viii) leases or subleases granted to others that do not interfere with
the ordinary conduct of business of the Company or any Restricted
Subsidiary;
(ix) rights of a common owner of any interest in property held by the
Company or any Restricted Subsidiary and that common owner as tenants in
common or through other common ownership;
(x) Liens or equitable encumbrances deemed to exist by reason of (a)
fraudulent conveyance or transfer laws or (b) negative pledge or other
agreements to refrain from giving Liens; and
(xi) Liens, other than Liens referred to in clauses (i) through (x)
above, on assets not to exceed (a) the Company's Consolidated Tangible
Assets, plus (b) $20.0 million, less (c) the total amount of outstanding
Senior Unsecured Debt.
"PERSON" means any individual, corporation, partnership, limited liability
company, joint venture, incorporated or unincorporated association, joint-stock
company, trust, unincorporated organization or government or other agency or
political subdivision thereof or other entity of any kind.
"PLAN OF LIQUIDATION" with respect to any Person, means a plan that
provides for, contemplates or the effectuation of which is preceded or
accompanied by (whether or not substantially contemporaneously, in phases or
otherwise): (i) the sale, lease, conveyance or other disposition of all or
substantially all of the assets of such Person otherwise than as an entirety or
substantially as an entirety; and (ii) the distribution of all or substantially
all of the proceeds of such sale, lease, conveyance or other disposition and
all or substantially all of the remaining assets of such Person to holders of
Capital Stock of such Person.
"PREFERRED STOCK" means, with respect to any Person, any and all share,
interests, participations and other equivalents (however designated) of that
Person's preferred or preference Capital Stock, whether outstanding on or after
the Issue Date, including, without limitation, all classes and series of
preferred or preference Capital Stock of that Person.
"PRINCIPALS" means, collectively, J. Frank Fine, Barry H. Fine, any
immediate family member of either of the foregoing and any probate estate of
any such individual and any trust, so long as one or more of the foregoing
individuals, or members of their immediate families, are the principal
beneficiaries of such trust, and any other partnership, corporation, or other
entity all of the partners, shareholders, members or owners of which are any
one or more of the foregoing.
"PUBLIC EQUITY OFFERING" means an underwritten primary offering of Capital
Stock of the Company (other than Disqualified Capital Stock or Preferred Stock)
pursuant to a registration statement filed with the Commission in accordance
with the Securities Act and declared effective by the staff of the
101
<PAGE>
Commission, or a private placement of primary shares of the Capital Stock of
the Company pursuant to an available exemption from registration and, in the
case of any such private placement, a majority of such placement of which is
sold to Persons that are not then and were not at the Issue Date Affiliates of
the Company.
"REFINANCING INDEBTEDNESS" means Indebtedness of the Company or a
Restricted Subsidiary issued in exchange for, or the proceeds from the issuance
and sale or disbursement of which are used substantially concurrently to repay,
redeem, refund, refinance, discharge or otherwise retire for value, in whole or
in part (collectively, "repay"), or constituting an amendment, modification or
supplement to or a deferral or renewal of (collectively, an "amendment"), any
Indebtedness of the Company or any Restricted Subsidiary (the "Refinanced
Indebtedness") in a principal amount not in excess of the principal amount of
the Refinanced Indebtedness (or, if such Refinancing Indebtedness refinances
Indebtedness under a revolving credit facility or other agreement providing a
commitment for subsequent borrowings, with a maximum commitment not to exceed
the maximum commitment under such revolving credit facility or other
agreement), plus the amount of any premium required to be paid in connection
with such refinancing pursuant to the terms of the Refinanced Indebtedness or
the amount of any premium reasonably determined by the Company or such
Restricted Subsidiary as necessary to accomplish such refinancing, plus the
amount of expenses of the Company or such Restricted Subsidiary incurred in
connection with such refinancing; PROVIDED that: (i) the Refinancing
Indebtedness is the obligation of the same Person as that of the Refinanced
Indebtedness; (ii) if the Refinanced Indebtedness was subordinated to or PARI
PASSU with the Senior Notes, then such Refinancing Indebtedness, by its terms,
is expressly PARI PASSU with (in the case of Refinanced Indebtedness that was
PARI PASSU with) the Senior Notes, or subordinate in right of payment to (in
the case of Refinanced Indebtedness that was subordinated to) the Senior Notes
at least to the same extent as the Refinanced Indebtedness; (iii) the portion,
if any, of the Refinancing Indebtedness that is scheduled to mature on or prior
to the maturity date of the Senior Notes has a Weighted Average Life to
Maturity at the time such Refinancing Indebtedness is incurred that is equal to
or greater than the Weighted Average Life to Maturity of the portion of the
Refinanced Indebtedness being repaid that is scheduled to mature on or prior to
the maturity date of the Senior Notes; and (iv) the Refinancing Indebtedness is
secured only to the extent, if at all, that the Refinanced Indebtedness is
secured.
"RELATED BUSINESS" means any business in which the Company and its
Restricted Subsidiaries operate on the Issue Date and any business related,
ancillary or complementary to the business of the Company and the Restricted
Subsidiaries on that date.
"RESTRICTED DEBT PAYMENT" means any purchase, redemption, defeasance
(including without limitation in substance or legal defeasance) or other
acquisition or retirement for value, directly or indirectly, by the Company or
a Restricted Subsidiary, prior to the scheduled maturity or prior to any
scheduled repayment of principal or sinking fund payment, as the case may be,
in respect of Subordinated Indebtedness.
"RESTRICTED INVESTMENT" means any Investment by the Company or any
Restricted Subsidiary (other than investments in Cash Equivalents) in any
Person that is not the Company or a Restricted Subsidiary, including in any
Unrestricted Subsidiary.
"RESTRICTED PAYMENT" means with respect to any Person: (i) any declaration
or payment of any dividend (other than a dividend declared and paid by a
Restricted Subsidiary to the Company or a Wholly-Owned Restricted Subsidiary),
or any other distribution with respect to any shares of Capital Stock of that
Person (but excluding dividends or distributions payable solely in shares of
Capital Stock (other than Disqualified Capital Stock) of that Person); (ii) any
purchase, redemption, retirement or other acquisition for value of (A) the
Capital Stock of the Company or (B) the Capital Stock of any Restricted
Subsidiary, or any other payment or distribution made in respect thereof,
either directly or indirectly (other than a payment solely in Capital Stock
that is not Disqualified Capital Stock, and excluding any such payment to the
extent actually received by the Company or a Restricted Subsidiary); (iii) any
Restricted Investment; or (iv) any Restricted Debt Payment.
102
<PAGE>
"RESTRICTED SUBSIDIARY" means any Subsidiary of the Company, whether
existing on or after the Issue Date, other than an Unrestricted Subsidiary.
"S&P" means Standard & Poor's Ratings Services, a division of The
McGraw-Hill Companies, Inc., and its successors.
"SALE/LEASEBACK TRANSACTIONS" means with respect to any Person an
arrangement with any bank, insurance company or other lender or investor or to
which such lender or investor is a party, providing for the leasing by such
Person of any property or asset of such Person which has been or is being sold
or transferred by such Person to such lender or investor or to any Person to
whom funds have been or are to be advanced by such lender or investor on the
security of such property or asset.
"SECURITIES ACT" means the U.S. Securities Act of 1933, as amended.
"SENIOR UNSECURED DEBT" means Indebtedness of the Company or any
Restricted Subsidiary which is not (i) Subordinated Indebtedness or (ii)
secured by any Lien.
"STATED MATURITY" means, when used with respect to any Indebtedness or any
installment of interest thereon, the date specified in the instrument
evidencing or governing such Indebtedness as the fixed date on which the
principal of that Indebtedness or that installment of interest is due and
payable.
"SUBORDINATED INDEBTEDNESS" means Indebtedness of the Company or any
Restricted Subsidiary that is subordinated in right of payment to the Senior
Notes or the Subsidiary Guarantee of such Restricted Subsidiary, respectively.
"SUBSIDIARY" of any Person means (i) any corporation of which at least a
majority of the aggregate voting power of all classes of the Voting Stock is
owned by such Person directly or through one or more other Subsidiaries of such
Person and (ii) any entity other than a corporation in which such Person,
directly or indirectly, owns at least a majority of the Voting Stock of such
entity entitling the holder thereof to vote or otherwise participate in the
selection of the governing body, partners, managers or others that control the
management and policies of such entity. Unless otherwise specified,
"Subsidiary" means a Subsidiary of the Company.
"SUBSIDIARY GUARANTOR" means each Restricted Subsidiary of the Company and
each other Person who is required to become (or whom the Company otherwise
causes to become) a Subsidiary Guarantor by the terms of the Indenture.
"UNRESTRICTED SUBSIDIARY" means (i) any Subsidiary that at the time of
determination shall be designated an Unrestricted Subsidiary by the Board of
Directors of the Company in the manner provided below and (ii) any Subsidiary
of an Unrestricted Subsidiary. The Board of Directors of the Company may
designate any Restricted Subsidiary other than the Subsidiary Guarantor,
existing on the date of the Indenture to be an Unrestricted Subsidiary, and any
such designation shall be deemed to be a Restricted Investment at the time of
and immediately upon such designation by the Company and its Restricted
Subsidiaries in the amount of the greater of the Consolidated Net Worth or the
fair market value of such designated Subsidiary and its consolidated
Subsidiaries at such time, PROVIDED that such designation shall be permitted
only if (A) the Company and its Restricted Subsidiaries would be able to make
the Restricted Investment deemed made pursuant to such designation at such
time, (B) no portion of the Indebtedness or any other obligation (contingent or
otherwise) of such Subsidiary (x) is Guaranteed by the Company or any
Restricted Subsidiary, (y) is recourse to the Company or any Restricted
Subsidiary or (z) subjects any property or asset of the Company or any
Restricted Subsidiary, directly or indirectly, contingently or otherwise, to
the satisfaction thereof and (C) no default or event of default with respect to
any Indebtedness of such Subsidiary would permit any holder of any Indebtedness
of the Company or any Restricted Subsidiary to declare such Indebtedness of the
Company or any Restricted Subsidiary due and payable prior to its maturity. The
Board of Directors of the Company may designate any Unrestricted Subsidiary to
be a Restricted Subsidiary, and any such
103
<PAGE>
designation shall be deemed to be an incurrence by the Company and its
Subsidiaries of the Indebtedness (if any) of such Subsidiary so designated for
purposes of the Consolidated Fixed Charge Coverage Ratio test described under
"--Certain Covenants--Limitations on Additional Indebtedness and Disqualified
Capital Stock" above as of the date of such designation, PROVIDED that such
designation shall be permitted only if immediately after giving effect to such
designation and the incurrence of any such additional Indebtedness deemed to
have been incurred thereby (x) the Company would be able to incur $1.00 of
additional Indebtedness not constituting Permitted Indebtedness at such
specified time pursuant to the Consolidated Fixed Charge Coverage Ratio test
set forth in the covenant described under "--Certain Covenants--Limitations on
Additional Indebtedness and Disqualified Capital Stock" above and (y) no
Default or Event of Default shall be continuing. Any such designation by the
Board of Directors described in the two preceding sentences shall be evidenced
to the Trustee by the filing with the Trustee of a certified copy of the Board
Resolution giving effect to such designation and an Officers' Certificate
certifying that such designation complied with the foregoing conditions and
setting forth the underlying calculations of such certificate.
"UNUTILIZED PROCEEDS AMOUNT" shall mean an amount equal to the difference
between (i) the amount by which net proceeds from the sale of the Old Notes not
utilized for the purposes set forth under "Use of Proceeds" as of the date 18
months after the Issue Date exceeds $15 million, minus (ii) the aggregate
principal amount of Senior Notes that, prior to such date, have been
repurchased by the Company in the open market and delivered to the Trustee for
cancellation in the 90 day period prior to the date 18 months after the Issue
Date.
"VOTING STOCK" with respect to any Person, means securities of any class
of Capital Stock of such Person entitling the holders thereof (whether at all
times or only so long as no senior class of stock or other relevant equity
interest has voting power by reason of any contingency) to vote in the election
of members of the board of directors of such Person.
"WEIGHTED AVERAGE LIFE TO MATURITY", when applied to any Indebtedness at
any date, means the number of years obtained by dividing (i) the sum of the
products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payment of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse
between such date and the making of such payment by (ii) the then outstanding
principal amount of such Indebtedness.
"WHOLLY-OWNED RESTRICTED SUBSIDIARY" means a Restricted Subsidiary of
which 100% of the Capital Stock (except for directors' qualifying shares or
certain minority interests owned by other Persons solely due to local law
requirements that there be more than one stockholder, but which interest is not
in excess of what is required for such purpose) is owned directly by the
Company or through one or more Wholly-Owned Restricted Subsidiaries.
104
<PAGE>
PLAN OF DISTRIBUTION
Each broker-dealer that receives New Notes for its own account in
connection with the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such New Notes. This Prospectus, as
it may be amended or supplemented from time to time, may be used by
Participating Broker-Dealers during the period referred to below in connection
with resales of New Notes received in exchange for Old Notes if such Old Notes
were acquired by such Participating Broker-Dealers for their own accounts as a
result of market-making activities or other trading activities. A Participating
Broker-Dealer who intends to use this Prospectus in connection with the resale
of New Notes received in exchange for Old Notes pursuant to the Exchange Offer
must notify the Company, or cause the Company to be notified, on or prior to
the Expiration Date, that it is a Participating Broker-Dealer. Such notice may
be given in the space provided for that purpose in the Letter of Transmittal or
may be delivered to the Exchange Agent at one of the addresses set forth herein
under "The Exchange Offer--Exchange Agent." See "The Exchange Offer--Resales of
New Notes."
The Company will not receive any cash proceeds from the issuance of the
New Notes offered hereby. New Notes received by broker-dealers for their own
accounts in connection with 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 New 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 at 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 New Notes.
Any broker-dealer that resells New Notes that were received by it for its
own account in connection with the Exchange Offer and any broker or dealer that
participates in a distribution of such New Notes may be deemed to be an
"underwriter" within the meaning of the Securities Act, and any profit on any
such resale of New 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.
LEGAL MATTERS
The validity of the New Notes offered hereby will be passed upon for the
Company by Greenberg Traurig Hoffman Lipoff Rosen & Quentel, P.A., Miami,
Florida.
EXPERTS
The consolidated financial statements as of December 31, 1996 and 1997,
and for each of the three years in the period ended December 31, 1997, included
in this Prospectus, have been included herein in reliance on the report of
PricewaterhouseCoopers LLP, Independent Accountants, given on the authority of
said firm as experts in auditing and accounting.
105
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Report of Independent Accountants ........................................................ F-2
Consolidated Balance Sheets as of December 31, 1996 and 1997 and March 31, 1998 .......... F-3
Consolidated Statements of Operations for the Years Ended December 31, 1995, 1996 and 1997
and the Three Months Ended March 31, 1997 and 1998 ...................................... F-4
Consolidated Statements of Changes in Stockholders' Equity for the Years Ended
December 31, 1995, 1996 and 1997 and the Three Months Ended March 31, 1998 .............. F-5
Consolidated Statements of Cash Flows for the Years Ended December 31, 1995, 1996 and 1997
and the Three Months Ended March 31, 1997 and 1998 ...................................... F-6
Notes to Consolidated Financial Statements ............................................... F-8
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and Directors of
Fine Air Services Corp.
We have audited the accompanying consolidated balance sheets of Fine Air
Services Corp. and subsidiaries as of December 31, 1996 and 1997 and the
related consolidated statements of operations, stockholders' equity, and cash
flows for each of the three years in the period ended December 31, 1997. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Fine Air Services Corp. and subsidiaries as of December 31, 1996 and 1997,
and the consolidated results of their operations and their cash flows for each
of the three years in the period ended December 31, 1997 in conformity with
generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Miami, Florida
March 3, 1998, except for the last paragraph of Note 2,
as to which the date is March 31, 1998
F-2
<PAGE>
FINE AIR SERVICES CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------
1996 1997 MARCH 31, 1998
---------------- ---------------- ---------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents .............................................. $ 972,058 $ 2,276,912 $ 2,165,758
Investment securities .................................................. 224,668 56,602 64,321
Accounts receivable, net of allowance for losses of $1,309,000,
$1,247,000 and $1,346,000, respectively .............................. 22,517,818 14,847,410 14,036,404
Loans receivable, current portion ...................................... -- 430,669 430,669
Expendable parts ....................................................... 781,498 545,998 487,123
Prepaid expenses and other current assets .............................. 747,278 639,042 351,167
------------- ------------- -------------
Total current assets .................................................. 25,243,320 18,796,633 17,535,442
------------- ------------- -------------
Property and equipment:
Flight equipment ....................................................... 58,977,975 78,085,073 80,654,491
Other .................................................................. 5,062,243 13,942,209 18,123,285
------------- ------------- -------------
64,040,218 92,027,282 98,777,776
Less accumulated depreciation and amortization ......................... (26,230,950) (35,446,183) (38,550,606)
------------- ------------- -------------
Net property and equipment ............................................. 37,809,268 56,581,099 60,227,170
------------- ------------- -------------
Other assets:
Restricted cash ........................................................ 181,673 709,012 715,845
Accounts receivable, non-current ....................................... 1,886,000 1,753,000 1,929,000
Loans receivable, less current portion ................................. -- 3,569,331 3,465,230
Deposits and other assets .............................................. 766,057 1,436,640 1,499,229
------------- ------------- -------------
Total assets .......................................................... $ 65,886,318 $ 82,845,715 $ 85,371,916
============= ============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Line of credit ......................................................... $ 700,000 $ -- $ --
Current portion of long-term debt ...................................... 1,334,369 4,305,045 4,305,045
Accounts payable ....................................................... 6,634,586 5,448,188 4,435,766
Interest payable ....................................................... 666,775 801,256 1,009,330
Accrued expenses ....................................................... 2,197,639 5,158,986 5,658,235
Capital lease obligation, current portion .............................. -- 113,014 113,014
------------- ------------- -------------
Total current liabilities ............................................. 11,533,369 15,826,489 15,521,390
Capital lease obligation, less current portion .......................... -- 196,400 211,965
Long-term debt, less current portion .................................... 9,322,770 24,779,630 24,065,344
Other debt .............................................................. -- 230,000 230,000
------------- ------------- -------------
Total liabilities ..................................................... 20,856,139 41,032,519 40,028,699
------------- ------------- -------------
Commitments and contingencies (Notes 9, 11, 12, 13, 14 and 17)
Stockholders' equity:
Common stock, $0.01 par value; 3,000 shares authorized, issued
and outstanding ...................................................... 30 30 30
Retained earnings ...................................................... 45,054,666 41,799,668 45,321,970
Net unrealized holding (losses) gains on investment securities ......... (24,517) 13,498 21,217
------------- ------------- -------------
Total stockholders' equity ............................................ 45,030,179 41,813,196 45,343,217
------------- ------------- -------------
Total liabilities and stockholders' equity ............................ $ 65,886,318 $ 82,845,715 $ 85,371,916
============= ============= =============
</TABLE>
The accompanying notes are an integral part of these financial
statements.
F-3
<PAGE>
FINE AIR SERVICES CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
----------------------------------------------- -------------------------------
1995 1996 1997 1997 1998
--------------- --------------- --------------- --------------- ---------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues:
Scheduled cargo services .................. $ 40,123,759 $ 54,774,892 $ 56,412,349 $ 16,174,090 $ 17,225,189
ACMI services ............................. 35,340,514 35,519,906 31,079,449 9,125,902 7,510,656
Repairs, training and other ............... 885,183 3,953,131 2,502,372 625,906 408,183
------------ ------------ ------------ ------------ ------------
Total operating revenues ................. 76,349,456 94,247,929 89,994,170 25,925,898 25,144,028
------------ ------------ ------------ ------------ ------------
Operating expenses:
Flying operations ......................... 25,971,028 36,609,604 34,198,136 9,467,104 8,895,716
Aircraft and traffic servicing ............ 7,475,080 7,938,513 8,709,798 2,117,863 2,555,745
Maintenance ............................... 8,340,343 9,894,441 15,247,112 2,888,609 3,740,235
General and administrative ................ 11,481,798 14,110,869 16,131,561 3,994,253 4,667,864
Selling ................................... 4,454,051 3,095,842 5,264,365 1,262,580 1,383,666
Depreciation and amortization ............. 6,923,711 9,390,396 11,469,954 2,846,571 3,142,885
------------ ------------ ------------ ------------ ------------
Total operating expenses ................. 64,646,011 81,039,665 91,020,926 22,576,980 24,386,111
------------ ------------ ------------ ------------ ------------
Operating income (loss) .................. 11,703,445 13,208,264 (1,026,756) 3,348,918 757,917
------------ ------------ ------------ ------------ ------------
Other income (expense):
Interest income ........................... 92,085 94,651 225,017 14,726 118,752
Interest expense, net of interest
capitalized of $440,000 in 1997 ......... (985,201) (966,058) (1,090,838) (224,658) (654,727)
Gain on insurance settlement .............. -- -- 3,905,373 -- --
Litigation settlement ..................... -- -- -- -- 3,388,574
Initial public offering costs ............. -- -- (978,243) -- --
Other, net ................................ 227,293 691,414 (919,339) 30,645 78,416
------------ ------------ ------------ ------------ ------------
Total other, net ......................... (665,823) (179,993) 1,141,970 (179,287) 2,931,015
------------ ------------ ------------ ------------ ------------
Net income ................................. $ 11,037,622 $ 13,028,271 $ 115,214 $ 3,169,631 $ 3,688,932
============ ============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial
statements.
F-4
<PAGE>
FINE AIR SERVICES CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
UNREALIZED
HOLDING
COMMON STOCK GAIN (LOSS) LOANS AND
----------------- RETAINED ON INVESTMENT ADVANCES TO
SHARES AMOUNT EARNINGS SECURITIES STOCKHOLDERS TOTAL
-------- -------- --------------- --------------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Balances at December 31, 1994 ......... 3,000 $ 30 $ 23,347,519 $ (112,633) $ (481,097) $ 22,753,819
Net income ............................ -- -- 11,037,622 -- -- 11,037,622
Distributions ......................... -- -- (1,248,655) -- -- (1,248,655)
Change in unrealized loss on
investment securities ................ -- -- -- 80,902 -- 80,902
----- ---- ------------ ---------- ---------- ------------
Balances at December 31, 1995 ......... 3,000 30 33,136,486 (31,731) (481,097) 32,623,688
Net income ............................ -- -- 13,028,271 -- -- 13,028,271
Distributions ......................... -- -- (1,110,091) -- -- (1,110,091)
Reimbursement of advances to
stockholders ......................... -- -- -- -- 481,097 481,097
Change in unrealized loss on
investment securities ................ -- -- -- 7,214 -- 7,214
----- ---- ------------ ---------- ---------- ------------
Balances at December 31, 1996 ......... 3,000 30 45,054,666 (24,517) -- 45,030,179
Net income ............................ -- -- 115,214 -- -- 115,214
Distributions ......................... -- -- (3,370,212) -- -- (3,370,212)
Change in unrealized gain (loss) on
investment securities ................ -- -- -- 38,015 -- 38,015
----- ---- ------------ ---------- ---------- ------------
Balances at December 31, 1997 ......... 3,000 30 41,799,668 13,498 -- 41,813,196
Net income (unaudited) ................ -- -- 3,688,932 -- -- 3,688,932
Distributions (unaudited) ............. -- -- (166,630) -- -- (166,630)
Change in unrealized gain on
investment securities (unaudited) -- -- -- 7,719 -- 7,719
----- ---- ------------ ---------- ---------- ------------
Balances at March 31, 1998
(unaudited) .......................... 3,000 $ 30 $ 45,321,970 $ 21,217 $ -- $ 45,343,217
===== ==== ============ ========== ========== ============
</TABLE>
The accompanying notes are an integral part of these financial
statements.
F-5
<PAGE>
FINE AIR SERVICES CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
----------------------------------------------- -----------------------------
1995 1996 1997 1997 1998
--------------- --------------- --------------- -------------- --------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income ....................................... $ 11,037,622 $ 13,028,271 $ 115,214 $ 3,169,631 $ 3,688,932
------------- ------------- ------------- ------------ ------------
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization ................... 6,923,711 9,390,396 11,469,954 2,846,571 3,142,885
Bad debt expense ................................ 890,573 16,266 882,546 219,197 99,000
Excess of insurance proceeds over net
book value of assets destroyed ................ -- -- (3,905,373) -- --
Gain on disposal of property and
equipment ..................................... -- (668,116) (32,000) 47,138 --
Loss on sales of investment securities .......... -- 76,937 86,916 -- --
Changes in operating assets and liabilities:
Accounts receivable ............................ (3,734,503) (4,746,594) 2,920,862 4,768,828 536,006
Expendable parts ............................... (160,000) (29,760) 235,500 58,875 58,875
Prepaid expenses and other assets .............. (349,251) (472,519) (562,347) 537,435 225,286
Accounts payable ............................... 2,028,654 (2,023,765) (1,186,398) (1,733,524) (1,012,422)
Interest payable ............................... 387,901 (268,179) 134,481 (639,163) 208,074
Accrued expenses ............................... 243,643 517,707 2,961,347 840,961 499,249
Other liabilities .............................. -- -- 230,000 -- --
------------- ------------- ------------- ------------ ------------
Total adjustments ............................. 6,230,728 1,792,373 13,235,488 6,946,318 3,756,953
------------- ------------- ------------- ------------ ------------
Net cash provided by operating activities 17,268,350 14,820,644 13,350,702 10,115,949 7,445,885
------------- ------------- ------------- ------------ ------------
Cash flows from investing activities:
Purchases of property and equipment .............. (15,164,405) (14,107,612) (32,500,061) (4,156,832) (6,740,566)
Proceeds from sales of property and
equipment ...................................... -- 2,238,758 32,000 -- --
Increase in restricted cash ...................... (124,332) (40,390) (527,339) -- (6,833)
Purchases of investment securities ............... -- (146,128) -- -- --
Proceeds from sales of investment securities ..... -- 140,734 119,165 -- --
(Increase) decrease in loans receivable .......... (54,253) 25,000 -- -- --
Proceeds from insurance settlement ............... -- -- 6,500,000 -- --
Principal payment on notes receivable ............ -- -- -- -- 104,101
------------- ------------- ------------- ------------ ------------
Net cash used in investing activities .......... (15,342,990) (11,889,638) (26,376,235) (4,156,832) (6,643,298)
------------- ------------- ------------- ------------ ------------
Cash flows from financing activities:
Proceeds from long-term debt ..................... -- -- 20,000,000 -- --
Principal payments on long-term debt ............. (1,417,659) (1,871,546) (1,572,464) (1,075,724) (714,286)
Proceeds from (payment on) line of credit ........ 600,000 100,000 (700,000) (700,000) --
Distributions to stockholders .................... (1,248,655) (1,110,091) (3,370,212) (324,137) (166,630)
Reimbursement of advances to stockholders -- 481,097 -- -- --
Payments of capital lease obligations ............ -- -- (26,937) -- (32,825)
------------- ------------- ------------- ------------ ------------
Net cash (used in) provided by financing
activities ................................... (2,066,314) (2,400,540) 14,330,387 (2,099,861) (913,741)
------------- ------------- ------------- ------------ ------------
(Decrease) increase in cash and cash
equivalents ...................................... (140,954) 530,466 1,304,854 3,859,256 (111,154)
Cash and cash equivalents, beginning of period 582,546 441,592 972,058 972,058 2,276,912
------------- ------------- ------------- ------------ ------------
Cash and cash equivalents, end of period .......... $ 441,592 $ 972,058 $ 2,276,912 $ 4,831,314 $ 2,165,758
============= ============= ============= ============ ============
</TABLE>
The accompanying notes are an integral part of these financial
statements.
F-6
<PAGE>
FINE AIR SERVICES CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS--(CONTINUED)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------
1995 1996 1997
-------------- -------------- --------------
<S> <C> <C> <C>
Supplemental disclosures of cash flow information:
Cash paid during the period for interest ..................... $ 597,300 $ 1,234,237 $ 956,357
========== =========== ==========
Supplemental disclosures of non-cash investing activities (also
see Note 11):
Change in unrealized holding gain on available for sale
investment securities ...................................... $ (80,902) $ (7,214) $ (38,015)
========== =========== ==========
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-------------------------
1997 1998
------------ ------------
(UNAUDITED)
<S> <C> <C>
Supplemental disclosures of cash flow information:
Cash paid during the period for interest ..................... $ 863,821 $ 603,024
========= =========
Supplemental disclosures of non-cash investing activities (also
see Note 11):
Change in unrealized holding gain on available for sale
investment securities ...................................... $ 83,060 $ (7,719)
========= =========
</TABLE>
During 1997, the Company converted $4,000,000 of accounts receivable into a
note receivable.
Supplemental disclosure of non-cash financing activities:
During the year ended December 31, 1997 and the three months ended March 31,
1998, the Company entered into capital leases in the amounts of $336,351
and $48,390, respectively.
The accompanying notes are an integral part of these financial
statements.
F-7
<PAGE>
FINE AIR SERVICES CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. NATURE OF BUSINESS:
The Company is primarily engaged in interstate, overseas and foreign
charter and scheduled air transportation of cargo and mail pursuant to
authority granted by the United States Department of Transportation and
operates in the United States, South and Central America, and the Caribbean.
The Company has worldwide charter authority granted by the United States
Department of Transportation and is also engaged in aircraft leasing and repair
and maintenance.
The percentage of revenues derived from each of the Company's primary
business activities was as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
------------------------------ -------------------
1995 1996 1997 1997 1998
-------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Scheduled cargo services ............ 53% 58% 62% 62% 68%
ACMI services ....................... 46 38 35 35 30
Repairs, training and other ......... 1 4 3 3 2
-- -- -- -- --
100% 100% 100% 100% 100%
=== === === === ===
</TABLE>
The fixed assets of the Company consist primarily of aircraft, engines,
rotable parts, ground equipment and furniture and office equipment,
substantially all of which are physically located or based at the Miami
International Airport.
The Company operates principally in Latin America (including Puerto Rico
and the U.S. Virgin Islands) and the United States. For the years ended
December 31, 1995, 1996 and 1997 and the three months ended March 31, 1997 and
1998, Latin America sales accounted for 88%, 89%, 91%, 93% and 87% of total
revenues, respectively. Foreign sales were conducted in U.S. dollars.
2. SIGNIFICANT ACCOUNTING POLICIES:
BASIS OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiaries, Fine Air Services, Inc. ("Fine Air") and
Agro Air Associates, Inc. ("Agro Air"). All significant intercompany accounts
and transactions have been eliminated.
REVENUE RECOGNITION
Aircraft, crew, maintenance and insurance ("ACMI") services revenue is
generally recognized on a flight by flight basis, although revenue derived from
certain long term ACMI contracts is recognized on a pro rata basis according to
block hour usage specified in such contracts. Revenue from scheduled cargo
services is recognized when the related cargo reaches its point of destination.
Revenue from repairs, training and other is recognized as services are
performed.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and
F-8
<PAGE>
FINE AIR SERVICES CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
2. SIGNIFICANT ACCOUNTING POLICIES:--(CONTINUED)
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. The Company uses estimates principally with
respect to the allowance for losses on receivables, the economic useful lives
of property and equipment and salvage value on owned aircraft. Actual results
could differ from those estimates.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of cash (both interest bearing and
non-interest bearing) and certificates of deposit and other highly liquid
instruments having maturities of three months or less from the date of
purchase. At times cash and cash equivalents in a depository institution may be
in excess of the FDIC insurance limit.
RESTRICTED CASH
Restricted cash consists of certificates of deposit required to
collateralize various letters of credit (Note 12).
INVESTMENT SECURITIES
Securities that the Company does not have the intent or ability to hold to
maturity are classified as either "available-for-sale" or as "trading" and are
carried at fair value. Unrealized gains and losses on available for sale
securities are classified as a separate component of stockholders' equity.
Unrealized gains and losses on trading securities would be recognized in
current earnings. As of December 31, 1996 and 1997 and March 31, 1998, all
securities have been classified as available for sale.
EXPENDABLE PARTS
Flight equipment expendable parts are stated at the lower of average cost
or market value.
PROPERTY AND EQUIPMENT
Owned aircraft are stated at cost. Expenditures for additions,
improvements, flight equipment modifications, engine overhauls and major
maintenance costs are capitalized. Other maintenance and repairs are charged to
expense when incurred. The Company performs a substantial portion of flight
equipment modifications, engine repairs, major maintenance as well as normal
repairs and maintenance. Owned aircraft are depreciated over their estimated
useful lives of 10 years using the straight line method, net of the estimated
salvage value of 10%. Major maintenance and overhaul costs are depreciated over
their estimated useful lives, which range from 3 to 8 years.
At the time assets are retired or otherwise disposed of, the cost and
accumulated depreciation are removed from the related accounts, and the
difference, net of proceeds, if any, is recorded as a gain or loss.
Long-lived assets to be held and used are reviewed for impairment whenever
changes in circumstances indicate that the related carrying amounts may not be
recoverable. When required,
F-9
<PAGE>
FINE AIR SERVICES CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
2. SIGNIFICANT ACCOUNTING POLICIES:--(CONTINUED)
impairment losses on assets to be held and used are recognized based on the
fair value of the asset. The Company does not believe impairment charges are
warranted as of December 31, 1996 and 1997 or as of March 31, 1998.
INCOME TAXES
Fine Air and Agro Air have elected to be taxed as, respectively, an S
corporation and a qualified sub-chapter S subsidiary under provisions of the
Internal Revenue Code. Accordingly, the Company is not subject to Federal and
State income taxes. Instead, the taxable income is included in the individual
income tax returns of the stockholders.
The Company's tax returns for the years ended December 31, 1993 and 1994
are currently under examination by the Internal Revenue Service. The
examination relates specifically to the Company's treatment of certain repairs
and maintenance, including safety checks mandated by the Federal Aviation
Administration, as expenses for tax purposes. Should the Internal Revenue
Service take the position that these costs should have been capitalized and
subsequently depreciated, a substantial assessment could result. Because the
examination is in process, the amount of such an assessment is not presently
determinable. The Company believes that its treatment of such costs as
deductible for tax purposes is proper and is prepared to defend its position
vigorously, if it becomes necessary.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's financial instruments consist of investment securities, a
loan receivable, borrowings under a bank line of credit and long-term debt
agreements. Investment securities have been classified as available for sale
and are recorded at fair value. The fair values of the loan receivable, the
line of credit and long-term debt have been estimated based on interest rates
available for similar debt instruments and approximate their carrying values.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board issued SFAS No.
131, "Disclosures About Segments of an Enterprise and Related Information."
SFAS No. 131 requires that public entities report financial and descriptive
information about its reportable operating segments, generally on the basis
that it is used internally for evaluating segment performance. Required
disclosure includes segment profit or loss, certain specific revenue and
expense items and segment assets. It requires reconciliations of disclosed
segment information to the entity's financial statements. Management is
currently evaluating the requirements of SFAS No. 131, which will be
implemented for the year ending December 31, 1998.
INTERIM FINANCIAL STATEMENTS
The financial statements for the three-month periods ended March 31, 1997
and 1998, and all related footnote information for these periods, are
unaudited, and reflect all normal and recurring adjustments which are, in the
opinion of management, necessary for a fair presentation of the financial
position, operating results and cash flows for the interim periods. The results
of operation for the three months ended March 31, 1998 are not necessarily
indicative of the results to be achieved for the entire fiscal year ending
December 31, 1998.
F-10
<PAGE>
FINE AIR SERVICES CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
2. SIGNIFICANT ACCOUNTING POLICIES:--(CONTINUED)
SIGNIFICANT CUSTOMERS AND CONCENTRATION OF CREDIT RISK
For the year ended December 31, 1997 and the three months ended March 31,
1998, sales to the Company's largest customer comprised 13.5% and 11.2%,
respectively, of total operating revenues. This customer also accounted for
25%, 20% and 29% of net accounts receivables as of December 31, 1996 and 1997
and March 31, 1998, respectively. Another customer accounted for 25% and 23% of
the net accounts receivable balance at December 31, 1996 and 1997,
respectively. The Company also has a note receivable from its largest customer
in the amount of $4,000,000 and $3,895,899 as of December 31, 1997 and March
31, 1998, respectively (See Note 6).
On March 31, 1998, the Company and its largest ACMI customer entered into
a security agreement, whereby the customer granted the Company an unconditional
and continuing security interest in all of the customer's tangible and
intangible assets (the "Collateral"). The Company has historically offered
extended ACMI lease payments to this customer. It is management's intent to
continue to provide this customer with sufficient aircraft so that the customer
is able to operate at the same or at an increased level of operations.
Management believes that the Collateral is sufficient to ensure the
recoverability of the customer's accounts and note receivable balances (See
Note 6).
3. INVESTMENT SECURITIES:
The cost and fair values of investments in equity securities at December
31, 1996 and 1997 and at March 31, 1998 were as follows:
<TABLE>
<CAPTION>
GROSS GROSS
UNREALIZED UNREALIZED MARKET
COST GAINS (LOSSES) VALUE
------------ ------------ -------------- ------------
<S> <C> <C> <C> <C>
Equity securities at December 31, 1996 .................. $ 249,185 $ 43,920 $ (68,437) $ 224,668
========= ======== ========== =========
Equity securities at December 31, 1997 .................. $ 43,104 $ 14,347 $ (849) $ 56,602
========= ======== ========== =========
Equity securities at March 31, 1998 (unaudited) ......... $ 43,104 $ 21,217 $ -- $ 64,321
========= ======== ========== =========
</TABLE>
Gains and losses resulting from sales of securities are determined using
the specific identification method.
F-11
<PAGE>
FINE AIR SERVICES CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
4. ACCOUNTS RECEIVABLE:
Activity in the allowance for doubtful accounts was as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, THREE MONTHS
------------------------------------------------ ENDED
1995 1996 1997 MARCH 31, 1998
-------------- -------------- -------------- ---------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Balance, beginning of period ......... $ 394,221 $ 1,044,821 $ 1,308,976 $ 1,246,863
Provision ............................ 890,573 16,266 882,546 99,000
Receivables charged off .............. (239,973) (143,129) (944,659) --
Recoveries ........................... -- 391,018 -- --
---------- ----------- ----------- -----------
Balance, end of period ............... $1,044,821 $ 1,308,976 $ 1,246,863 $ 1,345,863
========== =========== =========== ===========
</TABLE>
5. PROPERTY AND EQUIPMENT:
Property and equipment consisted of the following at:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------- MARCH 31,
1996 1997 1998
--------------- --------------- ---------------
(UNAUDITED)
<S> <C> <C> <C>
Aircraft, engines and betterments ...................... $ 58,977,975 $ 78,085,073 $ 80,654,491
Automobile and trucks .................................. 493,296 416,719 416,719
Leasehold improvements, furniture and fixtures ......... 957,279 1,112,499 1,202,931
Machinery and equipment ................................ 1,516,318 2,272,562 2,351,879
Rotable parts (see Note 11) ............................ 2,095,350 10,140,429 14,151,756
------------- ------------- -------------
64,040,218 92,027,282 98,777,776
Accumulated depreciation and amortization .............. (26,230,950) (35,446,183) (38,550,606)
------------- ------------- -------------
$ 37,809,268 $ 56,581,099 $ 60,227,170
============= ============= =============
</TABLE>
6. LOANS RECEIVABLE:
During November 1997, the Company converted $4,000,000 of accounts
receivable from its largest customer into a 9% interest bearing note. Principal
and interest are payable in 11 quarterly installments of $194,101 beginning in
February 1998. A balloon payment in the amount of $2,778,000, representing
remaining principal and any unpaid interest, is due on November 1, 2000.
7. LINE OF CREDIT:
The Company has $12,500,000 available through a revolving line of credit,
which expires in November 2000. The revolving line of credit was subsequently
increased to $13 million (see Note 17). Interest under this line is determined
at the time of borrowing based on the bank's prime rate plus 0.75% (9.25% at
March 31, 1998). Borrowings under the line are collateralized by eligible
accounts receivable. The unused portion of the line of credit is subject to a
fee at the rate of .50% per annum. At December 31, 1997 and March 31, 1998,
there were no borrowings outstanding under the line of credit.
The Company had a $2,000,000 revolving line of credit with a bank which
matured in May 1997. The Company did not renew the credit facility. Outstanding
borrowings under the facility, which were
F-12
<PAGE>
FINE AIR SERVICES CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
7. LINE OF CREDIT:--(CONTINUED)
collateralized by certain assets of the Company, bore interest, payable
monthly, at the prime rate plus 1% (9.25% at December 31, 1996). The
outstanding borrowings under the line of credit as of December 31, 1996 were
$700,000.
8. LONG-TERM DEBT:
Long-term debt was as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------- MARCH 31,
1996 1997 1998
-------------- -------------- --------------
(UNAUDITED)
<S> <C> <C> <C>
Note payable, interest at 8.75%; payable in annual
installments of principal and interest totaling $1,935,110
through March 2003; collateralized by aircraft(a) ............. $ 9,821,554 $ 8,745,830 $ 8,745,830
Note payable, interest at 7.5%; payable in annual
installments of principal and interest totaling $321,314
through July 1999; collateralized by aircraft ................. 835,585 576,941 576,941
Term note, interest at .75% above prime rate (9.25% at
December 31, 1997 and March 31, 1998); payable in
monthly principal installments of $214,286 plus interest
through November 1, 2000 with a balloon payment on the
unpaid principal balance due November 17, 2000;
collateralized by aircraft, engines and rotable parts ......... -- 17,785,714 17,142,856
Term note, interest at .75% above prime rate (9.25% at
December 31, 1997 and March 31, 1998); payable in
monthly principal installments of $23,810 plus interest
through November 1, 2000 with a balloon payment on the
unpaid principal balance due November 17, 2000;
collateralized by aircraft, engines and rotable parts ......... -- 1,976,190 1,904,762
------------ ------------ ------------
Total long-term debt ............................................ 10,657,139 29,084,675 28,370,389
Current portion of long-term debt ............................... (1,334,369) (4,305,045) (4,305,045)
------------ ------------ ------------
Long-term debt, less current portion ............................ $ 9,322,770 $ 24,779,630 $ 24,065,344
============ ============ ============
</TABLE>
- ----------------
(a) On February 28, 1998, an amendment was entered into whereby the maturity
of the note payable was extended through June 2003.
F-13
<PAGE>
FINE AIR SERVICES CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
8. LONG-TERM DEBT:--(CONTINUED)
Required principal maturities on long-term debt are as follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
- --------------------------
<S> <C>
1998 ................... $ 4,305,045
1999 ................... 4,428,242
2000 ................... 15,431,148
2001 ................... 1,504,589
2002 ................... 1,636,240
Thereafter ............. 1,779,411
------------
Total ................ $ 29,084,675
============
</TABLE>
9. LEASE COMMITMENTS:
The Company leases office, hanger and warehouse space at the Miami
International Airport from Metropolitan Dade County. The office and warehouse
facilities lease expires in September 1999. The hanger lease expires in March
2001. The Company also leases a building for its engine repair operations. The
building lease was to expire in May 1998 but was subsequently extended for a 40
month period (see Note 17). Minimum non-cancellable lease commitments are as
follows:
<TABLE>
<S> <C>
1998 ................ $ 2,413,000
1999 ................ 2,187,000
2000 ................ 1,697,000
2001 ................ 442,000
-----------
Total ............. $ 6,739,000
===========
</TABLE>
Rent expense for the years ended December 31, 1995, 1996 and 1997 was
approximately $1,663,000, $2,305,000 and $2,865,000, respectively. Rent expense
for the three months ended March 31, 1997 and 1998 was approximately $768,000
and $772,000, respectively.
CAPITAL LEASES
Assets under capital leases are capitalized using interest rates
appropriate at the inception of each lease. Future minimum payments for assets
under capital leases at December 31, 1997 are as follows:
<TABLE>
<S> <C>
1998 ................................................. $ 131,923
1999 ................................................. 131,923
2000 ................................................. 76,955
----------
Total minimum obligations .......................... 340,801
Interest .......................................... (31,387)
----------
Net minimum lease payments ......................... 309,414
Current portion ................................... (113,014)
----------
Long-term obligations less current portion ......... $ 196,400
==========
</TABLE>
F-14
<PAGE>
FINE AIR SERVICES CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
10. GAIN ON INSURANCE SETTLEMENT:
During 1997, an aircraft was declared a total loss by the Company's
insurance underwriters as a result of an accident. The total insurance proceeds
received for the aircraft were $6,500,000. A gain of $3,905,373 was recognized
during 1997, which represented the excess of insurance proceeds over the net
book value of the aircraft.
11. RELATED PARTY TRANSACTIONS:
By December 31, 1999, the Company will be required to install hushkits on
all of its existing fleet of 14 DC-8 aircraft to comply with noise abatement
regulations issued by the Federal Aviation Administration (the "FAA").
Management intends to acquire at least 16 hushkits (including 14 for its
existing DC-8 aircraft and two spares) at an estimated average cost of
approximately `$2.25 million per hushkit or approximately $36.0 million in the
aggregate as of December 31, 1997. The Company intends to purchase the hushkits
from Quiet Technology Venture, Ltd. ("QTV"), an entity in which its
stockholders have a controlling interest. There can be no assurance that the
costs of acquiring and installing the hushkits on the Company's fleet will not
exceed this estimate or that this installation will be completed on a timely
basis.
During the fourth quarter of 1996, the Company began funding QTV's
production of the hushkits on behalf of the Company through the purchase of
parts on behalf of QTV and through direct cash advances.
On June 30, 1997, QTV received (subject to certain weight restrictions) a
Supplemental Type Certificate ("STC") from the FAA approving the installation
of the hushkits on the Company's fleet of DC-8's. Subsequent to receiving the
STC, QTV has improved the hushkit design so that when installed, the aircraft
will be able to carry the maximum cargo capacity (as originally designed by the
manufacturer), while being in compliance with FAA noise level requirements. The
modified hushkit design is in final phases of the testing process and
management anticipates receiving an STC for the upgraded hushkit model during
the third quarter of 1998. However, there can be no assurance that QTV will
ultimately receive the STC for the upgraded hushkit model. Management has not
determined the financial impact, if any, to the Company should its aircraft be
limited with respect to cargo capacity.
As of December 31, 1996 and 1997 and March 31, 1998, the Company had
cumulative advances to QTV of $1,619,000, $8,804,000 and $12,245,000,
respectively, for the manufacture of hushkits on its behalf. Such advances
represent the cost basis of the hushkits manufactured (finished goods, work-in-
process and raw materials). The costs of the hushkits have been recorded by the
Company as rotable parts within property and equipment since QTV has deeded
title for all such hushkits and related parts to the Company. Depreciation will
commence on the hushkits as they are installed on the aircraft.
For the years ended December 31, 1996 and 1997 and the three months ended
March 31, 1998, the Company recorded revenues (repairs, training and other) of
approximately $1,886,000, $1,121,000 and $176,000, respectively, relating to
work performed for QTV. At December 31, 1996 and 1997 and March 31, 1998,
$1,886,000, $1,753,000 and $1,929,000 relating to those revenues were included
in accounts receivable, non-current, respectively. The receivable outstanding
as of March 31, 1998 is expected to be realized through the installation of
hushkits produced by QTV.
At December 31, 1996 and 1997 and March 31, 1998, the Company had advanced
$150,000, $352,000 and $364,000, respectively, to several related parties
affiliated with the Company's
F-15
<PAGE>
FINE AIR SERVICES CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
11. RELATED PARTY TRANSACTIONS:--(CONTINUED)
stockholders. Also, as of December 31, 1996 and 1997 and March 31, 1998, the
Company had outstanding advances to a Company officer in the amount of $25,000.
In December 1996, the Company purchased a cargo aircraft from a company
owned by a stockholder of the Company in exchange for $2,859,000, consisting of
$1,700,000 due the Company from overhaul services performed on the aircraft,
loans and advances to stockholders of $481,000 and loans, interest receivable
and receivables from parties related to the stockholders of $678,000. An
independent appraiser valued the aircraft at approximately $3,800,000. The
maintenance performed in the amount of $1,700,000 was included in
revenues--repairs, training and other.
12. FINANCIAL INSTRUMENTS WITH OFF BALANCE SHEET RISK:
At December 31, 1996 and 1997 and March 31, 1998, the Company had
outstanding $578,000, $678,000 and $678,000, respectively, of irrevocable
standby letters of credit to guarantee landing fees in certain countries and to
guarantee rent at the Miami Airport corporate offices and hangar facilities. Of
these letters of credit, $181,700, $678,000 and $678,000 have been
collateralized by restricted cash on deposit at the bank issuing such letters
of credit as of December 31, 1996 and 1997 and March 31, 1998, respectively.
13. COMMITMENTS AND CONTINGENCIES:
As a result of the accident described in Note 10, the Company is currently
subject to litigation and is aware of other claims pending which have not
reached litigation. All such litigation is being defended by the Company's
insurance carrier, without reservation of rights. Management believes that the
Company is fully insured for all litigation related to this accident.
The Company and its combined affiliate are involved in legal proceedings,
claims and litigation arising in the ordinary course of business. In the
opinion of management, the outcome of this litigation will not have a material
impact on the Company's financial position, results of operations, or
liquidity.
14. CONSENT AGREEMENT:
As a result of an accident involving one of the Company's DC-8 aircraft,
the Company entered into a Consent Agreement with the Federal Aviation
Administration (the "FAA"), whereby the Company committed to improve its
loading procedures on both ACMI and cargo flights, and to reimburse the FAA up
to $1,500,000 for the costs of their investigation and supervision subsequent
to the accident. The Consent Agreement specified that if, by December 1997, the
Company had established improved loading practices, and was current with
respect to payments required by the reimbursement schedule, $500,000 of the
total assessment would be waived. As of December 31, 1997, the FAA had waived
the $500,000 and had concluded that the Company had improved their loading
procedures to their satisfaction. The net $1,000,000 assessment was charged to
other expense during 1997. As of December 31, 1997 and March 31, 1998, $690,000
and $575,000, respectively, was outstanding and, accordingly, was accrued in
the financial statements.
15. INITIAL PUBLIC OFFERING COSTS:
During 1997, the Company incurred costs of $978,243 in connection with a
proposed initial public offering of its common stock. These costs have been
expensed since the offering was not completed.
F-16
<PAGE>
FINE AIR SERVICES CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
16. LITIGATION SETTLEMENT:
In January 1997, the Company obtained a $3,400,000 judgment against a
former insurance carrier. The judgment was appealed, and final adjudication was
made in February 1998. On March 3, 1998, the Company received the full amount
of the judgment, which was recognized as other income during the three months
ended March 31, 1998.
17. SUBSEQUENT EVENTS (UNAUDITED):
As discussed in Note 9, on May 7, 1998, the Company extended its building
lease for a period of 40 months commencing on June 1, 1998.
On April 25, 1998, the Company entered into a $12 million term note with
interest at 0.75% above the prime rate. Principal payments of $200,000 are due
monthly through November 1, 2000 with a balloon payment on the unpaid principal
balance due November 17, 2000. The term loan is collateralized by an L-1011
aircraft and its engines. On June 5, 1998, the Company repaid the outstanding
balance of the term note.
On June 5, 1998, the Company consummated the sale of $200,000,000 9 7/8%
Senior Notes due June 1, 2008. Interest on the Senior Notes is payable on a
semi-annual basis on June 1 and December 1 of each year, commencing December 1,
1998. The Senior Notes are general unsecured obligations of Fine Air Services
Corp. and are fully and unconditionally guaranteed by Fine Air and Agro Air on
a joint and several basis.
On June 3, 1998, each of the 50% shareholders contributed to Fine Air
Services Corp. their respective interests in Fine Air and Agro Air, which
became wholly owned subsidiaries of Fine Air Services Corp.
F-17
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
No dealer, salesman or other person has been authorized to give any information
or to make any representation in connection with this offering other than those
contained in this Prospectus, and, if given or made, such information or
representations must not be relied upon as having been authorized by the
Company. This Prospectus does not constitute an offer to sell or a solicitation
of an offer to buy any of the securities offered hereby to any person or by
anyone in any jurisdiction in which 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 any implication that the
information contained herein is correct as of any time subsequent to the date
hereof or that there has been no change in the affairs of the Company since the
date hereof.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----------
<S> <C>
Available Information ............................ 4
Summary .......................................... 6
Risk Factors ..................................... 17
The Exchange Offer ............................... 26
United States Federal Income Tax
Considerations ................................ 35
Use of Proceeds .................................. 38
Capitalization ................................... 38
Selected Financial Data .......................... 39
Management's Discussion and Analysis
of Financial Condition and Results of
Operations .................................... 40
Industry Overview ................................ 51
Business ......................................... 52
Management ....................................... 69
Ownership ........................................ 72
Certain Transactions ............................. 73
Description of Existing Credit Facility .......... 74
Description of Senior Notes ...................... 75
Plan of Distribution ............................. 105
Legal Matters .................................... 105
Experts .......................................... 105
Index to Financial Statements .................... F-1
</TABLE>
$200,000,000
[LOGO]
9 7/8% SENIOR NOTES DUE 2008
-----------------------------------
PROSPECTUS
-----------------------------------
, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law (the "DGCL") provides
that a corporation may indemnify directors and officers, as well as other
employees and individuals, against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement in connection with specified
actions, suits or proceedings, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation--a
"derivative action"), if they acted in good faith and in a manner they
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe their conduct was unlawful. A similar standard is
applicable in the case of derivative actions, except that indemnification only
extends to expenses (including attorneys' fees) incurred in connection with the
defense or settlement of such actions, and the statute requires court approval
before there can be any indemnification where the person seeking
indemnification has been found liable to the corporation. The statute provides
that it is not exclusive of other indemnification that may be granted by a
corporation's charter, bylaws, disinterested director vote, stockholder vote,
agreement or otherwise. Article VII of the registrant's Certificate of
Incorporation requires indemnification to the full extent permitted under
Delaware law as it now exists or may hereafter be amended.
Section 102(b)(7) of the DGCL permits a corporation to provide in its
certificate of incorporation that a director of the corporation shall not be
personally liable to the corporation or its stockholders for monetary damages
for breach of fiduciary duty as a director, except for liability for (i) any
breach of the director's duty of loyalty to the corporation or its
stockholders,(ii) acts or omissions not in good faith or that involve
intentional misconduct or a knowing violation of law, (iii) payments of
unlawful dividends or unlawful stock repurchases or redemptions, or (iv) any
transaction from which the director derived an improper personal benefit.
ArticleVII of the registrant's Certificate of Incorporation provides that to
the full extent that the DGCL, as it now exists or may hereafter be amended,
permits the limitation or elimination of the liability of directors, a director
of the registrant shall not be liable to the registrant or its stockholders for
monetary damages for breach of fiduciary duty as a director.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits:
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
- --------- --------------------------------------------------------------------------------------------
<S> <C>
3.1 Registrant's Certificate of Incorporation
3.2 Registrant's Bylaws
4.1 Indenture, dated as of June 5, 1998, between the Registrant and The Bank of New York, as
Trustee
4.2 Form of 9 7/8% Senior Notes due 2008 (included in Exhibit 4.1)
4.3 Registration Rights Agreement dated June 5, 1998, between the Registrant, the Subsidiary
Guarantors named therein and SBC Warburg Dillon Read Inc.
5.1 Opinion of Greenberg, Traurig, Hoffman, Lipoff, Rosen & Quentel, P.A. as to the validity of
the 9 7/8% Senior Notes due 2008
12.1 Computation of ratio of earnings to fixed charges
23.1 Consent of Greenberg, Traurig, Hoffman, Lipoff, Rosen & Quentel, P.A. (included in its
opinion to be filed as Exhibit 5.1)
23.2 Consent of PricewaterhouseCoopers LLP
24.1 Power of Attorney (contained on signature page)
25.1 Form T-1 Statement of Eligibility of The Bank of New York to act as trustee under the
Indenture.
99.1 Form of Letter of Transmittal
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
- ----------- --------------------------------------
<S> <C>
99.2 Form of Notice of Guaranteed Delivery
99.3 Form of Tender Instruction
</TABLE>
(b) Financial Statement Schedules:
All schedules for which provision is made in the applicable accounting
regulations of the Commission are not required under the related instructions
or are not applicable, and therefore have been omitted.
ITEM 22. UNDERTAKINGS.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
The undersigned registrant hereby undertakes as follows: that prior to any
public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other items of the applicable form.
The registrant undertakes that every prospectus (i) that is filed pursuant
to the immediately preceding paragraph, or (ii) that purports to meet the
requirements of section 10(a)(3) of the Act and is used in connection with an
offering of securities subject to Rule 415, will be filed as a part of an
amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 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 Securities and Exchange
Commission such indemnification is against public policy as expressed in the
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 Act and
will be governed by the final adjudication of such issue.
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 documents 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.
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.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended
(the "Act"), the registrant certifies that it has reasonable grounds to believe
that it meets all of the requirements for filing on Form S-4 and has duly
caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Miami, State of Florida,
on July 17, 1998.
FINE AIR SERVICES CORP.
By: /s/ BARRY H. FINE
----------------------------
Barry H. Fine
President and Chief Executive
Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints Barry H. Fine and Orlando M. Machado his
true and lawful attorneys-in-fact, each acting alone, with full powers of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any or all amendments, including any
post-effective amendments, to this registration statement, and any registration
statement filed pursuant to Rule 462(b) of the Act prepared in connection
therewith, and to file the same, with exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, hereby
ratifying and confirming all that said attorneys-in-fact or their substitutes,
each acting alone, may lawfully do or cause to be done by virtue hereof.
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 date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------ --------------------------------- --------------
<S> <C> <C>
/s/ J. FRANK FINE Chairman of the Board July 17, 1998
- ----------------------
J. Frank Fine
/s/ BARRY H. FINE President, Chief Executive July 17, 1998
- ---------------------- Officer and Director
Barry H. Fine
/s/ ORLANDO M. MACHADO Senior Vice President and July 17, 1998
- ---------------------- Chief Financial Officer
Orlando M. Machado (principal financial officer and
principal accounting officer)
</TABLE>
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended
(the "Act"), the registrant certifies that it has reasonable grounds to believe
that it meets all of the requirements for filing on Form S-4 and has duly
caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Miami, State of Florida,
on July 17, 1998.
FINE AIR SERVICES, INC.
By: /s/ BARRY H. FINE
------------------------------
Barry H. Fine
President and Chief Executive
Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints Barry H. Fine and Orlando M. Machado his
true and lawful attorneys-in-fact, each acting alone, with full powers of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any or all amendments, including any
post-effective amendments, to this registration statement, and any registration
statement filed pursuant to Rule 462(b) of the Act prepared in connection
therewith, and to file the same, with exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, hereby
ratifying and confirming all that said attorneys-in-fact or their substitutes,
each acting alone, may lawfully do or cause to be done by virtue hereof.
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 date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------ --------------------------------- --------------
<S> <C> <C>
/s/ J. FRANK FINE Chairman of the Board July 17, 1998
- -----------------------
J. Frank Fine
/s/ BARRY H. FINE President, Chief Executive July 17, 1998
- ----------------------- Officer and Director
Barry H. Fine
/s/ ORLANDO M. MACHADO Senior Vice President and July 17, 1998
- ----------------------- Chief Financial Officer
Orlando M. Machado (principal financial officer and
principal accounting officer)
</TABLE>
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended
(the "Act"), the registrant certifies that it has reasonable grounds to believe
that it meets all of the requirements for filing on Form S-4 and has duly
caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Miami, State of Florida,
on July 17, 1998.
AGRO AIR ASSOCIATES, INC.
By: /s/ BARRY H. FINE
-----------------------------
Barry H. Fine
President and Chief Executive
Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints Barry H. Fine and Orlando M. Machado his
true and lawful attorneys-in-fact, each acting alone, with full powers of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any or all amendments, including any
post-effective amendments, to this registration statement, and any registration
statement filed pursuant to Rule 462(b) of the Act prepared in connection
therewith, and to file the same, with exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, hereby
ratifying and confirming all that said attorneys-in-fact or their substitutes,
each acting alone, may lawfully do or cause to be done by virtue hereof.
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 date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------ --------------------------------- --------------
<S> <C> <C>
/s/ J. FRANK FINE Chairman of the Board July 17, 1998
- ----------------------
J. Frank Fine
/s/ BARRY H. FINE President, Chief Executive July 17, 1998
- ----------------------- Officer and Director
Barry H. Fine
/s/ ORLANDO M. MACHADo Senior Vice President and July 17, 199
- ---------------------- Chief Financial Officer
Orlando M. Machado (principal financial officer and
principal accounting officer)
</TABLE>
II-5
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
- --------- --------------------------------------------------------------------------------------------
<S> <C>
3.1 Registrant's Certificate of Incorporation
3.2 Registrant's Bylaws
4.1 Indenture, dated as of June 5, 1998, between the Registrant and The Bank of New York, as
Trustee
4.3 Registration Rights Agreement dated June 5, 1998, between the Registrant, the Subsidiary
Guarantors named therein and SBC Warburg Dillon Read Inc.
5.1 Opinion of Greenberg, Traurig, Hoffman, Lipoff, Rosen & Quentel, P.A. as to the validity of
the 9 7/8% Senior Notes due 2008
12.1 Computation of ratio of earnings to fixed charges
23.2 Consent of PricewaterhouseCoopers LLP
25.1 Form T-1 Statement of Eligibility of The Bank of New York to act as trustee under the
Indenture.
99.1 Form of Letter of Transmittal
99.2 Form of Notice of Guaranteed Delivery
99.3 Form of Tender Instruction
</TABLE>
EXHIBIT 3.1
CERTIFICATE OF INCORPORATION
OF
FINE AIR SERVICES CORP.
ARTICLE I
The name of the corporation is FINE AIR SERVICES CORP., hereinafter
called the "Corporation").
ARTICLE II
The address of the Corporation's registered office in the State of
Delaware is 1013 Centre Road, City of Wilmington, County of New Castle and the
name of its registered agent at such address is CORPORATION SERVICE COMPANY.
ARTICLE III
The purpose for which the Corporation is formed is to engage in any
lawful act or activity for which corporations may be organized under the General
Corporation Law of Delaware.
ARTICLE IV
The capital stock authorized, the par value thereof, and the
characteristics of such stock shall be as follows:
NUMBER OF SHARES PAR VALUE CLASS OF
AUTHORIZED PER SHARE STOCK
---------------- --------- --------
3,000 $ .01 Common
ARTICLE V
The name of the Incorporator is Jane S. Krayer and the address of the
Incorporator is 1013 Centre Road, City of Wilmington, County of New Castle.
<PAGE>
ARTICLE VI
The Board of Directors of the Corporation shall consist of at least one
director, with the exact number to be fixed from time to time in the manner
provided in the bylaws of the Corporation. The number of directors constituting
the initial Board of Directors is two and the names and addresses of the members
of the initial Board of Directors, who are to serve as the Corporation's
directors until their successors are duly elected and qualified are:
J. Frank Fine
2261 N.W. 67th Avenue
Building 700
Miami, Florida 33122
Barry H. Fine
2261 N.W. 67th Avenue
Building 700
Miami, Florida 33122
ARTICLE VII
No director of the Corporation shall be liable to the Corporation or
its stockholders for monetary damages for breach of fiduciary duty as a
director, except for liability (i) for any breach of the director's duty of
loyalty to the Corporation or its stockholders, (ii) for acts or omissions not
in good faith or that involve intentional misconduct or a knowing violation of
law, (iii) under ss.174 of the Delaware General Corporation Law, or (iv) for any
transaction from which the director derived an improper personal benefit. It is
the intent that this provision be interpreted to provide the maximum protection
against liability afforded to directors under the Delaware General Corporation
Law in existence either now or hereafter.
ARTICLE VIII
This Corporation shall indemnify and shall advance expenses on behalf
of its officers and directors to the fullest extent not prohibited by law in
existence either now or hereafter.
ARTICLE IX
The directors of the Corporation shall have the power to adopt, amend
or repeal the bylaws of the Corporation.
IN WITNESS WHEREOF, the undersigned, being the Incorporator named
above, for the purpose of forming a corporation pursuant to the General
Corporation Law of the State of Delaware, has signed this Certificate of
Incorporation this 11th day of May, 1998.
/S/ JANE S. KRAYER
-----------------------------------
Jane S. Krayer
Sole Incorporator
- 2 -
EXHIBIT 3.2
BYLAWS
OF
FINE AIR SERVICES CORP.
(A DELAWARE CORPORATION)
<PAGE>
INDEX
PAGE
NUMBER
------
ARTICLE ONE - OFFICES....................................................... 1
1. Registered Office....................................... 1
2. Other Offices........................................... 1
ARTICLE TWO - MEETINGS OF STOCKHOLDERS...................................... 1
1. Place................................................... 1
2. Time of Annual Meeting.................................. 1
3. Call of Special Meetings................................ 1
4. Conduct of Meetings..................................... 1
5. Notice and Waiver of Notice............................. 1
6. Business of Special Meeting............................. 2
7. Quorum.................................................. 2
8. Required Vote........................................... 2
9. Voting of Shares........................................ 2
10. Proxies................................................. 2
11. Stockholder List........................................ 2
12. Action Without Meeting.................................. 3
13. Fixing Record Date...................................... 3
14. Inspectors and Judges................................... 3
ARTICLE THREE - DIRECTORS................................................... 4
1. Number, Election and Term............................... 4
2. Vacancies............................................... 4
3. Powers.................................................. 4
4. Place of Meetings....................................... 4
5. Annual Meeting.......................................... 4
6. Regular Meetings........................................ 4
7. Special Meetings and Notice............................. 4
8. Quorum and Required Vote................................ 5
9. Action Without Meeting.................................. 5
10. Telephone Meetings...................................... 5
11. Committees.............................................. 5
12. Compensation of Directors............................... 5
13. Chairman of the Board................................... 6
<PAGE>
ARTICLE FOUR - OFFICERS..................................................... 6
1. Positions............................................... 6
2. Election of Specified Officers
by Board................................................ 6
3. Election or Appointment of Other
Officers................................................ 6
4. Salaries................................................ 6
5. Term.................................................... 6
6. President............................................... 6
7. Vice Presidents......................................... 7
8. Secretary............................................... 7
9. Treasurer............................................... 7
ARTICLE FIVE - CERTIFICATES FOR SHARES...................................... 7
1. Issue of Certificates................................... 7
2. Legends for Preferences and8
Restrictions on Transfer................................ 7
3. Facsimile Signatures.................................... 8
4. Lost Certificates....................................... 8
5. Transfer of Shares...................................... 8
6. Registered Stockholders................................. 8
ARTICLE SIX - GENERAL PROVISIONS .......................................... 9
1. Dividends............................................... 9
2. Reserves................................................ 9
3. Checks.................................................. 9
4. Fiscal Year............................................. 9
5. Seal.................................................... 9
ARTICLE SEVEN - AMENDMENTS OF BYLAWS........................................ 9
- ii -
<PAGE>
FINE AIR SERVICES CORP.
BYLAWS
ARTICLE ONE
OFFICES
Section 1. REGISTERED OFFICE. The registered office of FINE AIR
SERVICES CORP., a Delaware corporation (the "Corporation"), shall be located in
the City of Wilmington, State of Delaware.
Section 2. OTHER OFFICES. The Corporation may also have offices at such
other places, either within or without the State of Delaware, as the Board of
Directors of the Corporation (the "Board of Directors") may from time to time
determine or as the business of the Corporation may require.
ARTICLE TWO
MEETINGS OF STOCKHOLDERS
Section 1. PLACE. All annual meetings of stockholders shall be held at
such place, within or without the State of Delaware, as may be designated by the
Board of Directors and stated in the notice of the meeting or in a duly executed
waiver of notice thereof. Special meetings of stockholders may be held at such
place, within or without the State of Delaware, and at such time as shall be
stated in the notice of the meeting or in a duly executed waiver of notice
thereof.
Section 2. TIME OF ANNUAL MEETING. Annual meetings of stockholders
shall be held on such date and at such time fixed, from time to time, by the
Board of Directors, provided, that there shall be an annual meeting held every
calendar year at which the stockholders shall elect a board of directors and
transact such other business as may properly be brought before the meeting.
Section 3. CALL OF SPECIAL MEETINGS. Special meetings of the
stockholders may be called by the President, the Board of Directors or by the
Secretary on the written request of the holders of not less than a majority of
all shares entitled to vote at the meeting.
Section 4. CONDUCT OF MEETINGS. The Chairman of the Board (or in his
absence, the President or such other designee of the Chairman of the Board)
shall preside at the annual and special meetings of stockholders and shall be
given full discretion in establishing the rules and procedures to be followed in
conducting the meetings, except as otherwise provided by law or in these Bylaws.
Section 5. NOTICE AND WAIVER OF NOTICE. Written or printed notice
stating the place, day and hour of the meeting and, in the case of a special
meeting, the purpose or purposes for which the meeting is called, shall be
delivered not less than ten (10) nor more than sixty (60) days before the day of
the meeting, either personally or by first-class mail, by or at the direction of
the President, the Secretary, or the officer or person calling the meeting, to
each stockholder of record
<PAGE>
entitled to vote at such meeting. If the notice is mailed, such notice shall be
deemed to be delivered when deposited in the United States mail addressed to the
stockholder at his address as it appears on the stock transfer books of the
Corporation, with postage thereon prepaid. If a meeting is adjourned to another
time and/or place, and if an announcement of the adjourned time and/or place is
made at the meeting, it shall not be necessary to give notice of the adjourned
meeting unless the Board of Directors, after adjournment, fixes a new record
date for the adjourned meeting or if the adjournment is for more than 30 days.
Notice need not be given to any stockholder who submits a written waiver of
notice by him before or after the time stated therein. Attendance of a person at
a meeting of stockholders shall constitute a waiver of notice of such meeting,
except when a stockholder attends a meeting for the express purpose of
objecting, at the beginning of the meeting, to the transaction of any business
because the meeting is not lawfully called or convened. Neither the business to
be transacted at, nor the purpose of, any regular or special meeting of the
stockholders need be specified in any written waiver of notice.
Section 6. BUSINESS OF SPECIAL MEETING. Business transacted at any
special meeting shall be confined to the purposes stated in the notice thereof.
Section 7. QUORUM. The holders of a majority of the shares entitled to
vote, represented in person or by proxy, shall constitute a quorum at meetings
of stockholders except as otherwise provided in the Corporation's certificate of
incorporation (the "Certificate of Incorporation"). If, however, a quorum shall
not be present or represented at any meeting of the stockholders, the
stockholders present in person or represented by proxy shall have the power to
adjourn the meeting from time to time, without notice other than announcement at
the meeting, until a quorum shall be present or represented. At such adjourned
meeting at which a quorum shall be present or represented, any business may be
transacted that might have been transacted at the meeting as originally notified
and called. The stockholders present at a duly organized meeting may continue to
transact business notwithstanding the withdrawal of some stockholders prior to
adjournment, but in no event shall a quorum consist of the holders of less than
one-third (1/3) of the shares entitled to vote and thus represented at such
meeting.
Section 8. REQUIRED VOTE. The vote of the holders of a majority of the
shares entitled to vote and represented at a meeting at which a quorum is
present shall be the act of the Corporation's stockholders, unless the vote of a
greater number is required by law, the Certificate of Incorporation, or these
Bylaws.
Section 9. VOTING OF SHARES. Each outstanding share, regardless of
class, shall be entitled to vote on each matter submitted to a vote at a meeting
of stockholders, except to the extent that the voting rights of the shares of
any class are limited or denied by the Certificate of Incorporation or the
General Corporation Law of Delaware.
Section 10. PROXIES. A stockholder may vote in person or by proxy
executed in writing by the stockholder or by his duly authorized
attorney-in-fact. No proxy shall be voted or acted upon after three (3) years
from the date of its execution unless otherwise provided in the proxy. Each
proxy shall be revocable unless expressly provided therein to be irrevocable,
and unless otherwise made irrevocable by law.
Section 11. STOCKHOLDER LIST. The officer or agent having charge of the
Corporation's stock transfer books shall make, at least ten (10) days before
each meeting of stockholders, a complete list of the stockholders entitled to
vote at such meeting or any
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<PAGE>
adjournment thereof, arranged in alphabetical order, with the address of, and
the number and class and series, if any, of shares held by each. Such list, for
a period of ten (10) days prior to such meeting, shall be subject to inspection
by any stockholder at any time during the usual business hours at the place
where the meeting is to be held. Such list shall also be produced and kept open
at the time and place of the meeting and shall be subject to the inspection of
any stockholder during the whole time of the meeting. The original stock
transfer books shall be prima facie evidence as to who are the stockholders
entitled to examine such list or transfer book or to vote at any such meeting of
stockholders.
Section 12. ACTION WITHOUT MEETING. Any action required by the statutes
to be taken at a meeting of stockholders, or any action that may be taken at a
meeting of the stockholders, may be taken without a meeting or notice if a
consent, or consents, in writing, setting forth the action so taken, shall be
signed by the holders of outstanding stock having not less than the minimum
number of votes that would be necessary to authorize or take such action at a
meeting at which all shares entitled to vote thereon were present and voted with
respect to the subject matter thereof, and such consent shall be delivered to
the Corporation by delivery to its registered office, its principal place of
business, or an officer or agent of the Corporation, having custody of the book
in which proceedings of meetings of stockholders are recorded. Delivery made to
the Corporation's registered office shall be by hand or certified mail, return
receipt requested. Such consent shall have the same force and effect as a vote
of stockholders taken at such a meeting.
Section 13. FIXING RECORD DATE. For the purpose of determining
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or entitled to receive payment of any dividend, or in
order to make a determination of stockholders for any other proper purposes, the
Board of Directors may fix in advance a date as the record date for any such
determination of stockholders, such date in any case to be not more than sixty
(60) days, and, in case of a meeting of stockholders, not less than ten (10)
days, prior to the date on which the particular action requiring such
determination of stockholders is to be taken. If no record date is fixed for the
determination of stockholders entitled to notice of or to vote at a meeting of
stockholders, or stockholders entitled to receive payment of a dividend, the
date on which the notice of the meeting is mailed or the date on which the
resolutions of the Board of Directors declaring such dividend is adopted, as the
case may be, shall be the record date for such determination of stockholders.
When a determination of stockholders entitled to vote at any meeting of
stockholders has been made as provided in this Section, such determination shall
apply to any adjournment thereof, except where the Board of Directors fixes a
new record date for the adjourned meeting.
Section 14. INSPECTORS AND JUDGES. The Board of Directors in advance of
any meeting may, but need not, appoint one or more inspectors of election or
judges of the vote, as the case may be, to act at the meeting or any adjournment
thereof. If any inspector or inspectors, or judge or judges, are not appointed,
the person presiding at the meeting may, but need not, appoint one or more
inspectors or judges. In case any person who may be appointed as an inspector or
judge fails to appear or act, the vacancy may be filled by the Board of
Directors in advance of the meeting, or at the meeting by the person presiding
thereat. The inspectors or judges, if any, shall determine the number of shares
of stock outstanding and the voting power of each, the shares of stock
represented at the meeting, the existence of a quorum, the validity and effect
of proxies, and shall receive votes, ballots and consents, hear and determine
all challenges and questions arising in connection with the right to vote, count
and tabulate votes, ballots and consents, determine the result, and do such acts
as are proper to conduct the election or vote with fairness to all
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<PAGE>
stockholders. On request of the person presiding at the meeting, the inspector
or inspectors or judge or judges, if any, shall make a report in writing of any
challenge, question or matter determined by him or them, and execute a
certificate of any fact found by him or them.
ARTICLE THREE
DIRECTORS
Section 1. NUMBER, ELECTION AND TERM. The number of directors of the
Corporation shall be fixed from time to time, within the limits specified by the
Certificate of Incorporation, by resolution of the Board of Directors; provided,
however, no director's term shall be shortened by reason of a resolution
reducing the number of directors. The directors shall be elected at the annual
meeting of the stockholders, except as provided in Section 2 of this Article,
and each director elected shall hold office for the term for which he is elected
and until his successor is elected and qualified. Directors need not be
residents of the State of Delaware, stockholders of the Corporation or citizens
of the United States. Unless provided otherwise by law, any director may be
removed at any time, with or without cause, at a special meeting of the
stockholders called for that purpose.
Section 2. VACANCIES. A director may resign at any time by giving
written notice to the Board of Directors or the Chairman of the Board. Such
resignation shall take effect at the date of receipt of such notice or at any
later time specified therein; and, unless otherwise specified therein, the
acceptance of such resignation shall not be necessary to make it effective. Any
vacancy occurring in the Board of Directors and any directorship to be filled by
reason of an increase in the size of the Board of Directors shall be filled by
the affirmative vote of a majority of the current directors though less than a
quorum of the Board of Directors, or may be filled by an election at an annual
or special meeting of the stockholders called for that purpose. A director
elected to fill a vacancy shall be elected for the unexpired term of his
predecessor in office, or until the next election of one or more directors by
stockholders if the vacancy is caused by an increase in the number of directors.
Section 3. POWERS. The business and affairs of the Corporation shall be
managed by its Board of Directors, which may exercise all such powers of the
Corporation and do all such lawful acts and things as are not by statute or by
the Certificate of Incorporation or by these Bylaws directed or required to be
exercised and done by the stockholders.
Section 4. PLACE OF MEETINGS. Meetings of the Board of Directors,
regular or special, may be held either within or without the State of Delaware.
Section 5. ANNUAL MEETING. The first meeting of each newly elected
Board of Directors shall be held, without call or notice, immediately following
each annual meeting of stockholders.
Section 6. REGULAR MEETINGS. Regular meetings of the Board of Directors
may also be held without notice at such time and at such place as shall from
time to time be determined by the Board of Directors.
Section 7. SPECIAL MEETINGS AND NOTICE. Special meetings of the Board
of
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<PAGE>
Directors may be called by the President and shall be called by the Secretary on
the written request of any two directors. Written notice of special meetings of
the Board of Directors shall be given to each director at least twenty-four (24)
hours before the meeting. Except as required by statute, neither the business to
be transacted at, nor the purpose of, any regular or special meeting of the
Board of Directors need be specified in the notice or waiver of notice of such
meeting. Notices to directors shall be in writing and delivered personally or
mailed to the directors at their addresses appearing on the books of the
Corporation. Notice by mail shall be deemed to be given at the time when the
same shall be received. Notice to directors may also be given by telegram, and
shall be deemed delivered when the same shall be deposited at a telegraph office
for transmission and all appropriate fees therefor have been paid. Whenever any
notice is required to be given to any director, a waiver thereof in writing
signed by the person or persons entitled to such notice, whether before or after
the time stated therein, shall be equivalent to the giving of such notice.
Attendance of a director at a meeting shall constitute a waiver of notice of
such meeting for the express purpose of objecting to the transaction of any
business on the ground that the meeting is not lawfully called or convened.
Section 8. QUORUM AND REQUIRED VOTE. A majority of the directors shall
constitute a quorum for the transaction of business and the act of the majority
of the directors present at a meeting at which a quorum is present shall be the
act of the Board of Directors, unless a greater number is required by the
Certificate of Incorporation. If a quorum shall not be present at any meeting of
the Board of Directors, the directors present thereat may adjourn the meeting
from time to time, without notice other than announcement at the meeting, until
a quorum shall be present. At such adjourned meeting at which a quorum shall be
present, any business may be transacted that might have been transacted at the
meeting as originally notified and called.
Section 9. ACTION WITHOUT MEETING. Any action required or permitted to
be taken at a meeting of the Board of Directors or committee thereof may be
taken without a meeting if a consent in writing, setting forth the action taken,
is signed by all of the members of the Board of Directors or the committee, as
the case may be, and such consent shall have the same force and effect as a
unanimous vote at a meeting.
Section 10. TELEPHONE MEETINGS. Directors and committee members may
participate in and hold a meeting by means of conference telephone or similar
communication equipment by means of which all persons participating in the
meeting can hear each other. Participation in such a meetings shall constitute
presence in person at the meeting, except where a person participates in the
meeting for the express purpose of objecting to the transaction of any business
on the ground the meeting is not lawfully called or convened.
Section 11. COMMITTEES. The Board of Directors, by resolution adopted
by a majority of the whole Board of Directors, may designate from among its
members an executive committee and one or more other committees, each of which,
to the extent provided in such resolution, shall have and may exercise all of
the authority of the Board of Directors in the business and affairs of the
Corporation except where the action of the full Board of Directors is required
by statute. Vacancies in the membership of a committee shall be filled by the
Board of Directors at a regular or special meeting of the Board of Directors.
The executive committee shall keep regular minutes of its proceedings and report
the same to the Board of Directors when required. The designation of any such
committee and the delegation thereto of authority shall not operate to relieve
the Board of Directors, or any member thereof, of any responsibility imposed
upon it or him by law.
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<PAGE>
Section 12. COMPENSATION OF DIRECTORS. The directors may be paid their
expenses, if any, of attendance at each meeting of the Board of Directors and
may be paid a fixed sum for attendance at each meeting of the Board of Directors
or a stated salary as director. No such payment shall preclude any director from
serving the Corporation in any other capacity and receiving compensation
therefor. Members of special or standing committees may be allowed like
compensation for attending committee meetings.
Section 13. CHAIRMAN OF THE BOARD. The Board of Directors may, in its
discretion, choose a chairman of the board who shall preside at meetings of the
stockholders and of the directors and shall be an ex officio member of all
standing committees. The Chairman of the Board shall have such other powers and
shall perform such other duties as shall be designated by the Board of
Directors. The Chairman of the Board shall be a member of the Board of Directors
but no other officers of the Corporation need be a director. The Chairman of the
Board shall serve until his successor is chosen and qualified, but he may be
removed at any time by the affirmative vote of a majority of the Board of
Directors.
ARTICLE FOUR
OFFICERS
Section 1. POSITIONS. The officers of the Corporation shall consist of
a President, one or more Vice Presidents, a Secretary and a Treasurer, and, if
elected by the Board of Directors by resolution, a Chairman of the Board. Any
two or more offices may be held by the same person.
Section 2. ELECTION OF SPECIFIED OFFICERS BY BOARD. The Board of
Directors at its first meeting after each annual meeting of stockholders shall
elect a President, one or more Vice Presidents, a Secretary and a Treasurer.
Section 3. ELECTION OR APPOINTMENT OF OTHER OFFICERS. Such other
officers and assistant officers and agents as may be deemed necessary may be
elected or appointed by the Board of Directors, or, unless otherwise specified
herein, appointed by the President of the Corporation. The Board of Directors
shall be advised of appointments by the President at or before the next
scheduled Board of Directors meeting.
Section 4. SALARIES. The salaries of all officers of the Corporation to
be elected by the Board of Directors pursuant to Article Four, Section 2 hereof
shall be fixed from time to time by the Board of Directors or pursuant to its
discretion. The salaries of all other elected or appointed officers of the
Corporation shall be fixed from time to time by the President of the Corporation
or pursuant to his direction.
Section 5. TERM. The officers of the Corporation shall hold office
until their successors are chosen and qualified. Any officer or agent elected or
appointed by the Board of Directors or the President of the Corporation may be
removed, with or without cause, by the Board of Directors whenever in its
judgment the best interests of the Corporation will be served thereby, but such
removal shall be without prejudice to the contract rights, if any, of the person
so removed. Any officers or agents appointed by the President of the Corporation
pursuant to Section 3 of this Article Four may also be removed from such officer
positions by the President, with or without
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<PAGE>
cause. Any vacancy occurring in any office of the Corporation by death,
resignation, removal or otherwise shall be filled by the Board of Directors, or,
in the case of an officer appointed by the President of the Corporation, by the
President or the Board of Directors.
Section 6. PRESIDENT. The President shall be the Chief Executive
Officer of the Corporation, shall have general and active management of the
business of the Corporation and shall see that all orders and resolutions of the
Board of Directors are carried into effect. In the absence of the Chairman of
the Board or in the event the Board of Directors shall not have designated a
chairman of the board, the President shall preside at meetings of the
stockholders and the Board of Directors.
Section 7. VICE PRESIDENTS. The Vice Presidents in the order of their
seniority, unless otherwise determined by the Board of Directors, shall, in the
absence or disability of the President, perform the duties and exercise the
powers of the President. They shall perform such other duties and have such
other powers as the Board of Directors shall prescribe or as the President may
from time to time delegate.
Section 8. SECRETARY. The Secretary shall attend all meetings of the
Board of Directors and all meetings of the stockholders and record all the
proceedings of the meetings of the stockholders and of the Board of Directors in
a book to be kept for that purpose and shall perform like duties for the
standing committees when required. He shall give, or cause to be given, notice
of all meetings of the stockholders and special meetings of the Board of
Directors, and shall perform such other duties as may be prescribed by the Board
of Directors or President, under whose supervision he shall be. He shall keep in
safe custody the seal of the Corporation and, when authorized by the Board of
Directors, affix the same to any instrument requiring it.
Section 9. TREASURER. The Treasurer shall have the custody of corporate
funds and securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the Corporation and shall deposit all moneys
and other valuable effects in the name and to the credit of the Corporation in
such depositories as may be designated by the Board of Directors. He shall
disburse the funds of the Corporation as may be ordered by the Board of
Directors, taking proper vouchers for such disbursements, and shall render to
the President and the Board of Directors at its regular meetings or when the
Board of Directors so requires an account of all his transactions as treasurer
and of the financial condition of the Corporation.
ARTICLE FIVE
CERTIFICATES FOR SHARES
Section 1. ISSUE OF CERTIFICATES. The shares of the Corporation shall
be represented by certificates, provided that the Board of Directors of the
Corporation may provide by resolution or resolutions that some or all of any or
all classes or series of its stock shall be uncertificated shares. Any such
resolution shall not apply to shares represented by a certificate until such
certificate is surrendered to the Corporation. Notwithstanding the adoption of
such a resolution by the Board of Directors, every holder of stock represented
by certificates (and upon request every holder of uncertificated shares) shall
be entitled to have a certificate signed by, or in the name of the Corporation
by the chairman or vice-chairman of the Board of Directors, or the President or
Vice President, and by the Treasurer or an Assistant Treasurer, or the Secretary
or an Assistant Secretary
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<PAGE>
of the Corporation, representing the number of shares registered in certificate
form.
Section 2. LEGENDS FOR PREFERENCES AND RESTRICTIONS ON TRANSFER. If the
Corporation shall be authorized to issue more than one class of stock or more
than one series of any class, the powers, designations, preferences and
relative, participating, optional, or other special rights of each class of
stock or series thereof and the qualifications or restrictions of such
preferences and/or rights shall be set forth in full or summarized on the face
or back of the certificate which the Corporation shall issue to represent such
class or series of stock, provided that, except as otherwise provided by law, in
lieu of the foregoing requirements, there may be set forth on the face or back
of the certificate which the Corporation shall issue to represent such class or
series of stock, a statement that the Corporation will furnish without charge to
each stockholder who so requests the powers, designations, preferences and
relative, participating, optional, or other special rights of each class of
stock or series thereof and the qualifications, limitations or restrictions of
such preferences and/or rights.
A written restriction on the transfer or registration of transfer of a
security of the Corporation, if permitted by law and noted conspicuously on the
certificate representing the security may be enforced against the holder of the
restricted security or any successor or transferee of the holder including an
executor, administrator, trustee, guardian or other fiduciary entrusted with
like responsibility for the person or estate of the holder. Unless noted
conspicuously on the certificate representing the security, a restriction, even
though permitted by law, is ineffective except against a person with actual
knowledge of the restriction. If the Corporation issues any shares that are not
registered under the Securities Act of 1933, as amended, and registered or
qualified under the applicable state securities laws, the transfer of any such
shares shall be restricted substantially in accordance with the following
legend:
"THESE SHARES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 OR UNDER ANY APPLICABLE STATE LAW. THEY MAY NOT BE OFFERED
FOR SALE, SOLD, TRANSFERRED OR PLEDGED WITHOUT (1) REGISTRATION UNDER
THE SECURITIES ACT OF 1933 AND ANY APPLICABLE STATE LAW, OR (2) AT
HOLDER'S EXPENSE, AN OPINION (SATISFACTORY TO THE CORPORATION) OF
COUNSEL (SATISFACTORY TO THE CORPORATION) THAT REGISTRATION IS NOT
REQUIRED."
Section 3. FACSIMILE SIGNATURES. Any and all signatures on the
certificate may be a facsimile. In case any officer, transfer agent or registrar
who has signed or whose facsimile signature has been placed upon such
certificate shall have ceased to be such officer, transfer agent or registrar
before such certificate is issued, it may be issued by the Corporation with the
same effect as if he were such officer, transfer agent or registrar at the date
of the issue.
Section 4. LOST CERTIFICATES. The Corporation may issue a new
certificate of stock in place of any certificate therefore issued by it, alleged
to have been lost, stolen or destroyed, and the Corporation may require the
owner of the lost, stolen, or destroyed certificate, or his legal representative
to give the Corporation a bond sufficient to indemnify it against any claim that
may be made against it on account of the alleged loss, theft or destruction of
any such certificate or the issuance of such new certificate.
Section 5. TRANSFER OF SHARES. Upon surrender to the Corporation or the
transfer
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agent of the Corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, it shall be the duty of the Corporation to issue a new certificate to
the person entitled thereto, cancel the old certificate and record the
transaction upon its books.
Section 6. REGISTERED STOCKHOLDERS. The Corporation shall be entitled
to recognize the exclusive rights of a person registered on its books as the
owner of shares to receive dividends, and to vote as such owner, and shall not
be bound to recognize any equitable or other claim to or interest in such share
or shares on the part of any other person, whether or not it shall have express
or other notice thereof, except as otherwise provided by the laws of the State
of Delaware.
ARTICLE SIX
GENERAL PROVISIONS
Section 1. DIVIDENDS. The Board of Directors may from time to time
declare, and the Corporation may pay, dividends on its outstanding shares in
cash, property, or its own shares pursuant to law and subject to the provisions
of the Certificate of Incorporation.
Section 2. RESERVES. The Board of Directors may by resolution create a
reserve or reserves out of earned surplus for any proper purpose or purposes,
and may abolish any such reserve in the same manner.
Section 3. CHECKS. All checks or demands for money and notes of the
Corporation shall be signed by such officer or officers or such other person or
persons as the Board of Directors may from time to time designate.
Section 4. FISCAL YEAR. The fiscal year of the Corporation shall end on
December 31 of each year, unless otherwise fixed by resolution of the Board of
Directors.
Section 5. SEAL. The corporate seal shall have inscribed thereon the
name and state of incorporation of the Corporation. The seal may be used by
causing it or a facsimile thereof to be impressed or affixed or in any other
manner reproduced.
ARTICLE SEVEN
AMENDMENTS OF BYLAWS
These Bylaws may be altered, amended or repealed or new Bylaws may be
adopted at any meeting of the Board of Directors at which a quorum is present,
by the affirmative vote of a majority of the directors present at such meeting.
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EXHIBIT 4.1
================================================================================
FINE AIR SERVICES CORP.,
AS ISSUER
THE SUBSIDIARY GUARANTORS
NAMED HEREIN
AND
THE BANK OF NEW YORK,
AS TRUSTEE
$200,000,000
SERIES A AND SERIES B
9-7/8% SENIOR NOTES DUE 2008
INDENTURE
DATED AS OF JUNE 5, 1998
================================================================================
<PAGE>
ARTICLE I DEFINITIONS AND INCORPORATION BY REFERENCE..........................1
Section 1.01. Definitions................................................1
Section 1.02. Other Definitions.........................................21
Section 1.03. Incorporation by Reference of TIA.........................22
Section 1.04. Rules of Construction.....................................23
ARTICLE II THE NOTES.........................................................23
Section 2.01. Form and Dating...........................................23
Section 2.02. Execution and Authentication; Authentication Agent........26
Section 2.03. Registrar and Paying Agent................................26
Section 2.04. Paying Agent to Hold Money in Trust.......................27
Section 2.05. Holder Lists..............................................27
Section 2.06. Transfer and Exchange.....................................27
Section 2.07. Book-Entry Provisions for Global Notes....................29
Section 2.08. Special Transfer Provisions...............................30
Section 2.09. Replacement Notes.........................................32
Section 2.10. Outstanding Notes.........................................33
Section 2.11. Treasury Notes............................................33
Section 2.12. Temporary Notes...........................................33
Section 2.13. Cancellation..............................................33
Section 2.14. Defaulted Interest........................................34
Section 2.15. Record Date...............................................34
Section 2.16. CUSIP and CINS Numbers....................................34
ARTICLE III REDEMPTIONS AND OFFERS TO PURCHASE...............................34
Section 3.01. Notices to Trustee........................................34
Section 3.02. Selection of Notes to Be Redeemed or Purchased............35
Section 3.03. Notice of Redemption......................................36
Section 3.04. Effect of Notice of Redemption............................36
Section 3.05. Deposit of Redemption Price...............................37
Section 3.06. Notes Redeemed in Part....................................37
Section 3.07. Redemption Provisions.....................................37
Section 3.08. Mandatory Offers..........................................38
ARTICLE IV COVENANTS.........................................................40
Section 4.01. Payment of Notes..........................................40
Section 4.02. Reports...................................................40
Section 4.03. Compliance Certificate....................................41
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Section 4.04. Stay, Extension and Usury Laws............................41
Section 4.05. Limitation on Restricted Payments.........................42
Section 4.06. Corporate Existence.......................................43
Section 4.07. Limitations on Additional Indebtedness and
Disqualified Capital Stock...........................................44
Section 4.08. Limitation on the Issuance of Capital Stock of
Restricted Subsidiaries..............................................44
Section 4.09. Limitation on Preferred Stock of Subsidiaries.............44
Section 4.10. Limitation on Transactions with Affiliates................44
Section 4.11. Limitations on Liens......................................45
Section 4.12. Taxes.....................................................46
Section 4.13. Limitations on Restrictions on Distributions from
Restricted Subsidiaries..............................................46
Section 4.14. Limitation on Sale/Leaseback Transactions.................47
Section 4.15. Change of Control.........................................47
Section 4.16. Limitations on Asset Sales................................48
Section 4.17. Mandatory Offer to Repurchase.............................50
Section 4.18. Additional Subsidiary Guarantees..........................51
ARTICLE V SUCCESSORS.........................................................51
Section 5.01. Limitations on Mergers and Certain Other Transactions.....51
ARTICLE VI DEFAULTS AND REMEDIES.............................................52
Section 6.01. Events of Default.........................................52
Section 6.02. Acceleration..............................................54
Section 6.03. Other Remedies............................................54
Section 6.04. Waiver of Past Defaults...................................55
Section 6.05. Control by Majority of Holders............................55
Section 6.06. Limitations on Suits by Holders...........................55
Section 6.07. Rights of Holders to Receive Payment......................56
Section 6.08. Collection Suit by Trustee................................56
Section 6.09. Trustee May File Proofs of Claim..........................56
Section 6.10. Priorities................................................57
Section 6.11. Undertaking for Costs.....................................57
Section 6.12. Willful Default...........................................57
Section 6.13. Restoration of Rights and Remedies........................58
ARTICLE VII TRUSTEE..........................................................58
Section 7.01. Duties of Trustee.........................................58
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Section 7.02. Rights of Trustee.........................................59
Section 7.03. Individual Rights of Trustee..............................60
Section 7.04. Trustee's Disclaimer......................................60
Section 7.05. Notice to Holders of Defaults and Events of Default.......60
Section 7.06. Reports by Trustee to Holders.............................60
Section 7.07. Compensation and Indemnity................................61
Section 7.08. Replacement of Trustee....................................62
Section 7.09. Successor Trustee by Merger, Etc..........................62
Section 7.10. Eligibility; Disqualification.............................63
Section 7.11. Preferential Collection of Claims Against Company.........63
ARTICLE VIII DISCHARGE OF INDENTURE..........................................63
Section 8.01. Discharge of Liability on Notes; Defeasance...............63
Section 8.02. Conditions to Defeasance..................................64
Section 8.03. Application of Trust Money................................65
Section 8.04. Repayment to Company......................................66
Section 8.05. Indemnity for Government Securities.......................66
Section 8.06. Reinstatement.............................................66
ARTICLE IX AMENDMENTS........................................................67
Section 9.01. Amendments and Supplements Permitted without
Consent of Holders...................................................67
Section 9.02. Amendments and Supplements Requiring Consent of Holders...67
Section 9.03. Compliance with TIA.......................................68
Section 9.04. Revocation and Effect of Consents.........................68
Section 9.05. Notation or Exchange of Notes.............................69
Section 9.06. Trustee Protected.........................................69
ARTICLE X GUARANTEE OF NOTES.................................................69
Section 10.01. Unconditional Guarantee..................................69
Section 10.02. Trustee to Include Paying Agent..........................71
Section 10.03. Limitations on Guarantees................................71
Section 10.04. Subsidiary Guarantors May Consolidate, Etc., on
Certain Terms........................................................71
Section 10.05. Releases of Subsidiary Guarantors........................72
ARTICLE XI MISCELLANEOUS.....................................................73
Section 11.01. Trust Indenture Act Controls.............................73
Section 11.02. Notices..................................................73
Section 11.03. Communication by Holders with Other Holders..............74
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Section 11.04. Certificate and Opinion as to Conditions Precedent.......74
Section 11.05. Statements Required in Certificate or Opinion............74
Section 11.06. Rules by Trustee and Agents..............................74
Section 11.07. Legal Holidays...........................................75
Section 11.08. No Recourse Against Others...............................75
Section 11.09. Counterparts.............................................75
Section 11.10. Table of Contents, Headings, Etc.........................75
Section 11.11. Governing Law............................................75
Section 11.12. No Adverse Interpretation of Other Agreements............76
Section 11.13. Successors...............................................76
Section 11.14. Severability.............................................76
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INDENTURE, dated as of June 5, 1998, is by and among Fine Air Services
Corp., a Delaware corporation (as further defined below, the "Company"), the
Subsidiary Guarantors (as hereinafter defined) and The Bank of New York, a New
York banking corporation and trust company, as trustee (the "TRUSTEE").
The Company has duly authorized the creation of an issue of 9-7/8%
Senior Notes due 2008, Series A (the "OLD NOTES") to be issued in the principal
amount of $200,000,000 and 9-7/8% Senior Notes due 2008, Series B (the "NEW
NOTES"), to be issued in exchange for the Old Notes, pursuant to a Registration
Rights Agreement (as defined herein) and, to provide therefor, the Company has
duly authorized the execution and delivery of this Indenture. All things
necessary to make the Old Notes and the New Notes (collectively, the "NOTES"),
when duly issued and executed by the Company and authenticated and made
available for delivery hereunder, the valid and binding obligations of the
Company, and to make this Indenture a valid and binding agreement of the
Company, have been done.
The Company, the Subsidiary Guarantors and the Trustee agree as follows
for the benefit of each other and for the equal and ratable benefit of the
Holders of the Notes, without preference of one series of Notes over the other:
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. DEFINITIONS.
"ACQUIRED INDEBTEDNESS" means (a) with respect to any Person,
Indebtedness of such Person existing at the time such other Person becomes a
Restricted Subsidiary, including Indebtedness incurred in connection with, or in
contemplation of, such Person becoming a Restricted Subsidiary and (b) with
respect to the Company or any of its Restricted Subsidiaries, any Indebtedness
of a Person (other than the Company or a Restricted Subsidiary) existing at the
time such Person merges or consolidates with or into the Company or a Restricted
Subsidiary, or Indebtedness assumed by the Company or any of its Restricted
Subsidiaries in connection with the acquisition of properties or assets from
another Person, including Indebtedness incurred by such other Person in
connection with, or in contemplation of, such merger or acquisition.
"AFFILIATE" means, with respect to any specified Person, any other
Person directly or indirectly controlling or controlled by, or under direct or
indirect common control with, the specified Person. For purposes of this
definition: (i) "control," when used with respect to any Person, means the power
to direct the management and policies of that Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise,
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing; (ii) beneficial ownership at any time of 10% or more of the
outstanding voting common equity of a Person
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(including voting common equity subject to being acquired pursuant to the
exercise of options, warrants or other rights exercisable within 60 days of that
time) will be deemed to constitute control of that Person at that time; (iii)
without limiting other Persons who may be deemed to control a limited
partnership, the general partner of a limited partnership and each limited
partner holding 10% or more of the limited partnership interests in such limited
partnership will be deemed to control such limited partnership; or (iv) with
respect to an individual, any immediate family member (i.e., spouse, parent or
child) of such Person.
"AGENT" means any Registrar, Paying Agent, or co-Registrar appointed
pursuant to Section 2.03.
"ASSET SALE" means any sale, issuance, conveyance, transfer, lease,
assignment or other disposition to any Person other than the Company or a
Wholly-Owned Restricted Subsidiary (including, without limitation, by means of a
Sale/Leaseback Transaction or a merger or consolidation) (collectively, for
purposes of this definition, a "transfer"), directly or indirectly, in one
transaction or a series of related transactions, of (a) any Capital Stock of any
Restricted Subsidiary held by the Company or any other Restricted Subsidiary or
(b) any other properties or assets of the Company or any Restricted Subsidiary.
Notwithstanding the preceding sentence, the following do not constitute "Asset
Sales": (i) any transfer of properties or assets (including Capital Stock) that
is governed by, and made in accordance with, the provisions of Article V; (ii)
any transfer of properties or assets constituting a Restricted Investment, if
permitted under Section 4.05; (iii) any transfer of properties or assets from
the Company to a Restricted Subsidiary to another Restricted Subsidiary or any
Person if such transfer to a Restricted Subsidiary or other Person is permitted
under Section 4.05; (iv) any transfer of properties or assets relating to
aircraft engines, aircraft components, aircraft parts or spare parts pursuant to
customary pooling, exchange or other similar agreements; (v) any asset swap
involving aircraft engines, aircraft components, aircraft parts or spare parts
(provided that the assets received by the Company or Restricted Subsidiary have
a fair market value at least equal to the asset transferred (provided with
respect to any asset swap or series of related asset swaps involving assets with
a fair market value exceeding $3.0 million, such determination shall be made by
the Board of Directors)); and (vi) transfers of damaged, worn-out or obsolete
equipment, inventory or assets that, in the Company's reasonable judgment, are
no longer useful in the business of the Company and the Restricted Subsidiaries;
and (vii) any transfers that, but for this clause (vii) would be Asset Sales, if
after giving effect to such transfers, the aggregate fair market value of the
properties or assets transferred in such transaction or any such series of
related transactions does not exceed $500,000.
"ATTRIBUTABLE INDEBTEDNESS," when used with respect to any
Sale/Leaseback Transaction, means, as at the time of determination, the present
value (discounted at a rate equivalent to the Company's then current weighted
average cost of funds for borrowed money as at the time of determination,
compounded on a semiannual basis) of the total obligations of the lessee for
rental payments during the remaining term of the lease included in any such
Sale/Leaseback Transaction.
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"BANKRUPTCY CODE" means Title 11 of the United States Code, as amended.
"BANKRUPTCY LAW" means the Bankruptcy Code or any similar federal or
state law for the relief of debtors.
"BOARD OF DIRECTORS" means, with respect to any Person, the board of
directors of such Person, or any authorized committee of the board of directors
of such Person.
"BOARD RESOLUTION" means a duly adopted resolution of the Board of
Directors of the Company.
"BUSINESS DAY" means any day other than a Saturday, a Sunday or a day
on which banking institutions in The City of New York or the city in which the
Trustee is located or at a place of payment are required or authorized by law,
regulation or executive order to remain closed.
"CAPITAL STOCK" of any Person means (i) any and all shares or other
equity interests (including without limitation common stock, preferred stock and
partnership interests) in such Person and (ii) all rights to purchase, warrants
or options (whether or not currently exercisable), participations or other
equivalents of or interests in (however designated) such shares or other
interests in such Person.
"CAPITALIZED LEASE OBLIGATION" of any Person means the obligations of
such Person to pay rent or other amounts under a lease that is required to be
capitalized for financial reporting purposes in accordance with GAAP, and, for
purposes of this Indenture, the amount of such obligation at any date shall be
the capitalized amount thereof at that date determined in accordance with GAAP.
"CASH EQUIVALENTS" means (i) marketable obligations with a maturity of
180 days or less issued or directly and fully guaranteed or insured by the
United States of America or any agency or instrumentality thereof, PROVIDED that
the full faith and credit of the United States of America is pledged in support
thereof; (ii) U.S. dollar denominated demand and time deposits and certificates
of deposit or acceptances of any financial institution (a) that is a member of
the Federal Reserve System and has combined capital and surplus and undivided
profits of not less than $500 million or (b) whose short-term commercial paper
rating or that of its parent company is at least A-1 or the equivalent thereof
from S&P or P-1 or the equivalent thereof from Moody's (any such bank, an
"APPROVED BANK"), in each case with a maturity of 180 days or less from the date
of acquisition; (iii) commercial paper issued by any Approved Bank or by the
parent company of any Approved Bank and commercial paper issued by, or
guaranteed by, any Person with a short-term commercial paper rating of at least
A-1 or the equivalent-thereof by S&P or at least P-1 or the equivalent thereof
by Moody's, and in each case maturing no more than 180 days from the date of
acquisition; (iv) repurchase obligations with a term of not more than seven days
for underlying securities of the types described in clause (i) above entered
into with any
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<PAGE>
Approved Bank; and (v) investments in money market or other mutual funds
substantially all of whose assets comprise securities of the types described in
clauses (i) through (iv) above.
"CHANGE OF CONTROL" means the occurrence of any of the following events
(whether or not otherwise in compliance with the provisions of this Indenture):
(i) any Person or group (as such term is used in Section 13(d)(3) of the
Exchange Act) other than the Principals is or becomes the beneficial owner (as
defined in Rule 13d-3 of the Exchange Act), directly or indirectly, of more than
50% of the total voting power of the Voting Stock of the Company, (ii) the
Company sells, assigns, conveys, transfers, leases or otherwise disposes of all
or substantially all of the assets of the Company and its Subsidiaries to any
Person (other than a Restricted Subsidiary), (iii) the Company or any of its
Subsidiaries consolidates with, or merges with or into, any Person, and as a
result of such consolidation or merger the Voting Stock of the Company
outstanding prior to such consolidation or merger does not represent (either by
remaining outstanding or by being converted into Voting Stock of the surviving
Person or any parent thereof) at least a majority of the total voting power of
the outstanding Voting Stock of the Company or the surviving Person or any
parent thereof outstanding immediately after such consolidation or merger, or
(iv) the replacement of a majority of the Board of Directors of the Company over
a two-year period from the directors who constituted the Board of Directors of
the Company at the beginning of such period, and such replacement shall not have
been approved by a vote of at least a majority of the Board of Directors of the
Company then still in office who either were members of such Board of Directors
at the beginning of such period or whose election as a member of such Board of
Directors was previously so approved.
"COMMISSION" means the Securities and Exchange Commission.
"COMPANY" means Fine Air Services Corp., a Delaware corporation, unless
and until a subsequent successor replaces it in accordance with Article V and
thereafter means such successor.
"CONSOLIDATED AMORTIZATION EXPENSE" for any period means the
amortization expense of the Company and its Restricted Subsidiaries for such
period (to the extent included in the computation of Consolidated Net Income),
determined on a consolidated basis in accordance with GAAP.
"CONSOLIDATED DEPRECIATION EXPENSE" for any period means the
depreciation expense of the Company and its Restricted Subsidiaries for such
period (to the extent included in the computation of Consolidated Net Income),
determined on a consolidated basis in accordance with GAAP.
"CONSOLIDATED FIXED CHARGE COVERAGE RATIO" means, with respect to any
determination date, the ratio for the four full fiscal quarters immediately
preceding the determination date (for any determination, the "Reference
Period"), of (a) EBITDA to (b) Consolidated Interest Expense for such Reference
Period. In making such computations, (i) EBITDA and Consolidated Interest
Expense shall be calculated on a PRO FORMA basis assuming
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that (A) the Indebtedness to be incurred or the Disqualified Capital Stock to be
issued (and all other Indebtedness incurred or Disqualified Capital Stock issued
after the first day of such Reference Period referred to in Section 4.07 through
and including the date of determination), and (if applicable) the application of
the net proceeds therefrom (and from any other such Indebtedness or Disqualified
Capital Stock), including the refinancing of other Indebtedness, had been
incurred on the first day of such Reference Period and, in the case of Acquired
Indebtedness, on the assumption that the related transaction (whether by means
of purchase, merger or otherwise) also had occurred on such date with the
appropriate adjustments with respect to such acquisition being included in such
PRO FORMA calculation and (B) any acquisition or disposition by the Company or
any Restricted Subsidiary of any properties of assets outside the ordinary
course of business or any repayment of any principal amount of any Indebtedness
of the Company or any Restricted Subsidiary prior to the stated maturity
thereof, in either case since the first day of such Reference Period through and
including the date of determination, had been consummated on such first day of
such Reference Period; (ii) the Consolidated Interest Expense attributable to
interest on any Indebtedness required to be computed on a PRO FORMA basis in
accordance with Section 4.07 and (A) bearing a floating interest rate shall be
computed as if the rate in effect on the date of computation had been the
applicable rate for the entire period and (B) which was not outstanding during
the period for which the computation is being made but which bears, at the
option of the Company, a fixed or floating rate of interest, shall be computed
by applying, at the option of the Company, either the fixed or floating rate;
(iii) the Consolidated Interest Expense attributable to interest on any
Indebtedness under a revolving credit facility required to be computed on a PRO
FORMA basis in accordance with Section 4.07 shall be computed based upon the
average daily balance of such Indebtedness during the applicable period,
PROVIDED that such average daily balance shall be reduced by the amount of any
repayment of Indebtedness under a revolving credit facility during the
applicable period; (iv) notwithstanding the foregoing clauses (ii) and (iii),
interest on Indebtedness determined on a floating rate basis, to the extent such
interest is covered by agreements relating to Hedging Obligations, shall be
deemed to have accrued at the rate per annum resulting after giving effect to
the operation of such agreements; and (v) if after the first day of the
applicable Reference Period and before the date of determination, the Company
has permanently retired any Indebtedness out of the net proceeds of the issuance
and sale of shares of Capital Stock (other than Disqualified Capital Stock) of
the Company within 60 days of such issuance and sale, Consolidated Interest
Expense shall be calculated on a PRO FORMA basis as if such Indebtedness had
been retired on the first day of such period.
"CONSOLIDATED INCOME TAX EXPENSE" for any period means the provision,
if any, for federal, state, local and foreign income taxes based on income and
profits of the Company and its Restricted Subsidiaries to the extent such income
or profits were included in computing Consolidated Net Income for such period.
"CONSOLIDATED INTEREST EXPENSE" for any period means the sum, without
duplication, of the total interest expense of the Company and its consolidated
Restricted Subsidiaries for such period, determined on a consolidated basis in
accordance with GAAP and including, without
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limitation (i) imputed interest on Capitalized Lease Obligations and
Attributable Indebtedness, (ii) commissions, discounts and other fees and
charges owed with respect to letters of credit securing financial obligations
and bankers' acceptance financing, (iii) the net costs associated with Hedging
Obligations, (iv) amortization of other financing fees and expenses, (v) the
interest portion of any deferred payment obligations, (vi) amortization of debt
discount or premium, if any, (vii) all other non-cash interest expense, (viii)
capitalized interest, (ix) all cash dividend payments (and non-cash dividend
payments in the case of a Restricted Subsidiary) on any series of preferred
stock of the Company or any Restricted Subsidiary, (x) all interest payable with
respect to discontinued operations, and (xi) all interest paid by the Company or
any Restricted Subsidiary under any guarantee of Indebtedness (including a
guarantee of principal, interest or any combination thereof) of any other
Person.
"CONSOLIDATED NET INCOME" for any period means the net income (or loss)
of the Company and its consolidated Restricted Subsidiaries for such period
determined on a consolidated basis in accordance with GAAP; PROVIDED that there
shall be excluded from such net income or loss (to the extent otherwise included
therein), without duplication (i) the net income (or loss) of any Person (other
than a Restricted Subsidiary) in which any Person other than the Company and its
Restricted Subsidiaries has an ownership interest, except to the extent that any
such income has actually been received by the Company and its Restricted
Subsidiaries in the form of dividends or other distributions during such period;
(ii) except to the extent includable in the consolidated net income of the
Company pursuant to the foregoing clause (i), the net income (or loss) of any
Person that accrued prior to the date that (a) such Person becomes a Restricted
Subsidiary or is merged into or consolidated with the Company or any Restricted
Subsidiary or (b) the assets of such Person are acquired by the Company or any
Restricted Subsidiary; (iii) the net income of any Restricted Subsidiary during
such period to the extent that the declaration or payment of dividends or
similar distributions by such Restricted Subsidiary of that income (a) is not
permitted by operation of the terms of its charter or any agreement, instrument,
judgment, decree, order, statute, rule or governmental regulation applicable to
that Subsidiary during such period or (b) would be subject to any taxes payable
on such dividend or distribution; (iv) any gain (or, only in the case of a
determination of Consolidated Net Income as used in EBITDA, any loss), together
with any related provisions for taxes, if any, on any such gain (or if
applicable, the tax effects of such loss), realized during such period by the
Company or any Restricted Subsidiary upon (a) the acquisition of any securities,
or the extinguishment of any Indebtedness, of the Company or any Restricted
Subsidiary or (b) any Asset Sale by the Company or any of its Restricted
Subsidiaries; (v) any extraordinary gain (or, only in the case of a
determination of Consolidated Net Income as used in EBITDA, any extraordinary
loss), together with any related provision for taxes, if any, on any such
extraordinary gain (or, if applicable, the tax effects of such extraordinary
loss), realized by the Company or any Restricted Subsidiary during such period;
and (vi) in the case of a successor to the Company by consolidation, merger or
transfer of its assets, any earnings of the successor prior to such merger,
consolidation or transfer of assets; AND PROVIDED, FURTHER, that any gain
referred to in clauses (iv) and (v) above that relates to a Restricted
Investment and which is received in cash by the Company or a Restricted
Subsidiary during such period shall be included in the consolidated net
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income of the Company. For purposes of clause (i) above, the amount of any
distribution of property or assets shall be deemed to be equal to the fair
market value of such property or assets as determined in good faith by the Board
of Directors as evidenced by Board Resolution.
"CONSOLIDATED NET WORTH" means, with respect to any Person as of any
date, the consolidated equity of the common stockholders of such Person and its
consolidated Subsidiaries as of such date, as determined in accordance with
GAAP.
"CONSOLIDATED TANGIBLE ASSETS" means, at any date, the total of all
assets appearing on a consolidated balance sheet of the Company and its
consolidated Subsidiaries as of that date prepared in accordance with GAAP,
after deducting therefrom, without duplication, all amounts shown on such
balance sheet in respect of goodwill, trade names, trademarks, patents, patent
applications, licenses and rights in any thereof, and similar intangibles, and
any other items which are treated as intangibles in conformity with GAAP.
"CORPORATE TRUST OFFICE" shall be at the address of the Trustee
specified in Section 11.02 or such other address as the Trustee may give notice
to the Company.
"CUSTODIAN" means any custodian, receiver, trustee, assignee,
liquidator or similar official under any Bankruptcy Law.
"DEFAULT" means any event, act or condition that is, or after notice or
the passage of time or both would become, an Event of Default.
"DEPOSITARY" means, with respect to the Notes issuable or issued in
whole or in part in global form, The Depository Trust Company, until a successor
shall have been appointed and becomes such Depositary, and, thereafter,
"Depositary" shall mean or include such successor.
"DISQUALIFIED CAPITAL STOCK" of any specified Person means any Capital
Stock of such Person that, by its terms, by the terms of any agreement related
thereto or by the terms of any security into which it is convertible, puttable
or exchangeable, is, or upon the happening of any event or the passage of time
would be, required to be redeemed or repurchased by such Person, whether or not
at the option of the holder thereof, or matures or is mandatorily redeemable,
pursuant to a sinking fund obligation or otherwise, in whole or in part, on or
prior to the Stated Maturity of the Notes; PROVIDED, HOWEVER, that any class of
Capital Stock of such Person that, by its terms, authorizes such Person to
satisfy in full its obligations with respect to the payment of dividends or upon
maturity, redemption (pursuant to a sinking fund or otherwise) or repurchase
thereof or otherwise by the delivery of Capital Stock that is not Disqualified
Capital Stock, and that is not convertible, puttable or exchangeable for
Disqualified Capital Stock or any other Indebtedness, shall not be deemed to be
Disqualified Capital Stock so long as such Person satisfies its obligations with
respect thereto solely by the delivery of Capital Stock that is not Disqualified
Capital Stock.
"DOLLARS" and "$" means lawful money of the United States of America.
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"EBITDA" for any period means without duplication, the sum of the
amounts for such period of (i) Consolidated Net Income PLUS (ii) in each case to
the extent deducted in determining Consolidated Net Income for such period (and
without duplication), (A) Consolidated Income Tax Expense, (B) Consolidated
Amortization Expense (but only to the extent not included in Consolidated
Interest Expense), (C) Consolidated Depreciation Expense (D) Consolidated
Interest Expense and (E) all other non-cash items reducing the Consolidated Net
Income (excluding any such non-cash charge that results in an accrual of a
reserve for cash charges in any future period) for such period, in each case
determined on a consolidated basis in accordance with GAAP and MINUS (iii) the
aggregate amount of all non-cash items, determined on a consolidated basis, to
the extent such items increased Consolidated Net Income for such period
(excluding any such non-cash items resulting from changes in accrued liabilities
in the ordinary course of business, but only to the extent such non-cash items
reduced Consolidated Net Income for a prior period).
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"EXCHANGE OFFER" means the offer that may be made by the Company
pursuant to the Registration Rights Agreement and the Exchange Offer
Registration Statement to exchange New Notes for the Old Notes.
"EXCHANGE OFFER REGISTRATION STATEMENT" shall mean a registration
statement relating to an Exchange Offer on an appropriate form and all
amendments and supplements to such registration statement, in each case
including the Prospectus contained therein, all exhibits thereto and all
material incorporated by reference therein.
"EXISTING INDEBTEDNESS" means all of the Indebtedness of the Company
and its Subsidiaries that is outstanding on the Issue Date after giving effect
to the issuance of the Notes.
"FAIR MARKET VALUE" of any asset or items means the fair market value
of such asset or items as determined in good faith by the Board of Directors and
evidenced by a Board Resolution.
"GAAP" means generally accepted accounting principles, consistently
applied, that are set forth in (i) the opinions and pronouncements of the
Accounting Principles Board of the American Institute of Certified Public
Accountants, (ii) the statements and pronouncements of the Financial Accounting
Standards Board or (iii) in such other statements by such other entity as may be
approved by a significant segment of the accounting profession of the United
States.
"GLOBAL NOTE" means a global note, without coupons, representing all or
a portion of the Notes deposited with, or on behalf of, the Depositary
substantially in the form of Exhibit A attached hereto.
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"GOVERNMENT SECURITIES" means direct obligations of, or obligations
guaranteed by, the United States of America for the payment of which guarantee
or obligations the full faith and credit of the United States of America is
pledged.
The term "GUARANTEE" means a guarantee (other than by endorsement of
negotiable instruments for collection in the ordinary course of business),
direct or indirect, in any manner (including, without limitation, letters of
credit and reimbursement agreements in respect thereof), of all or any part of
any Indebtedness.
"HEDGING OBLIGATIONS" of any Person means the obligations of such
Person pursuant to (i) any interest rate swap agreement, interest rate collar
agreement or other similar agreement or arrangement designed to protect such
Person against fluctuations in interest rates, or (ii) agreements or
arrangements designed to protect such Person against fluctuations in foreign
currency exchange rates or fuel prices, in each case, entered into in the
ordinary course of business for BONA FIDE hedging purposes and not for the
purpose of speculation.
"HOLDER" means a Person in whose name a Note is registered on the
Registrar's books.
The term "INCUR" means, with respect to any Indebtedness, incur,
create, issue, assume, guarantee or otherwise become directly or indirectly
liable, contingently or otherwise with respect to such Indebtedness; PROVIDED
that (i) the Indebtedness of a Person existing at the time such Person became a
Restricted Subsidiary shall be deemed to have been incurred by such Restricted
Subsidiary and (ii) neither the accrual of interest nor the accretion of
accreted value shall be deemed to be an incurrence of Indebtedness.
"INDEBTEDNESS" of any Person at any date means, without duplication:
(i) all liabilities, contingent or otherwise, of such Person for borrowed money
(whether or not the recourse of the lender is to the whole of the assets of such
Person or only to a portion thereof); (ii) all obligations of such Person
evidenced by bonds, debentures, notes or other similar instruments (or
reimbursement obligations with respect thereto); (iii) all obligations of such
Person in respect of letters of credit or other similar instruments (or
reimbursement obligations with respect thereto); (iv) all obligations of such
Person to pay the deferred and unpaid purchase price of property or services,
except trade payables and accrued expenses incurred by such Person in the
ordinary course of business in connection with obtaining goods, materials or
services; (v) the maximum fixed redemption or repurchase price of all
Disqualified Capital Stock of such Person; (vi) all Capitalized Lease
Obligations of such Person; (vii) all Indebtedness of others secured by a Lien
on any asset of such Person, whether or not such Indebtedness is assumed by such
Person; (viii) all Indebtedness of others guaranteed by such Person to the
extent of such guarantee; PROVIDED that Indebtedness of the Company or its
Subsidiaries that is guaranteed by the Company or the Company's Subsidiaries
shall only be counted once in the calculation of the amount of Indebtedness of
the Company and its Subsidiaries on a consolidated basis; (ix) all Attributable
Indebtedness of such Person; and (x) to the extent not otherwise included in
this definition, Hedging Obligations of such Person. 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,
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the maximum liability of such Person for any such contingent obligations at such
date and, in the case of clause (vii), the lesser of (A) the fair market value
of any asset subject to a Lien securing the Indebtedness of others on the date
that the Lien attaches and (B) the amount of the Indebtedness secured. For
purposes of the preceding sentence, the "maximum fixed redemption or repurchase
price" of any Disqualified Capital Stock that does not have a fixed redemption
or repurchase price shall be calculated in accordance with the terms of such
Disqualified Capital Stock as if such Disqualified Capital Stock were purchased
or redeemed on any date on which Indebtedness shall be required to be determined
pursuant to this Indenture, and if such price is based upon, or measured by, the
fair market value of such Disqualified Capital Stock (or any equity security for
which it may be exchanged or converted), such fair market value shall be
determined in good faith by the Board of Directors of such Person, which
determination shall be evidenced by a Board Resolution.
"INDENTURE" means this Indenture as amended or supplemented from time
to time.
"INDEPENDENT DIRECTOR" means a director of the Company who has not and
whose Affiliates have not, at any time during the twelve months prior to the
taking of any action hereunder, directly or indirectly, received, or entered
into any understanding or agreement to receive, any compensation, payment or
other benefit, of any type or form, from the Company or any of its Affiliates,
if such compensation, payment or benefit would require disclosure pursuant to
Item 404 of Regulation S-K in a registration statement filed under the
Securities Act or a proxy statement filed under the Exchange Act, other than
customary directors fees for serving on the Board of Directors of the Company or
any Affiliate and reimbursement of out-of-pocket expenses for attendance at the
Company's or Affiliate's board and board committee meetings.
"INDEPENDENT FINANCIAL ADVISOR" means an accounting, appraisal or
investment banking firm of nationally recognized standing that is disinterested
and independent with respect to the Company and its Affiliates and, in the
reasonable judgment of a majority of the Company's Board of Directors, is
qualified to perform the task for which it has been engaged.
"INTEREST PAYMENT DATE" means the Stated Maturity of an installment of
interest on the Notes.
"INVESTMENTS" of any Person means (i) all investments by such Person in
any other Person in the form of loans, advances or capital contributions
(excluding (A) commission, travel and similar advances to officers and employees
made in the ordinary course of business and (B) other loans and advances to
officers and employees made in the ordinary course of business not to exceed
$1.0 million at any time outstanding) or similar credit extensions constituting
Indebtedness of such Person, (ii) all purchases (or other acquisitions for
consideration) by such Person of Indebtedness, Capital Stock or other securities
of any other Person (other than the Company or its Restricted Subsidiaries) and
(iii) all other items that would be classified as investments (including without
limitation purchases of assets outside the ordinary course of business) on a
balance sheet of such Person prepared in accordance with GAAP. The following are
not "Investments": (i) extensions of trade credit or other advances to customers
on
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commercially reasonable terms in accordance with the Company's normal practices;
(ii) Hedging Obligations, but only to the extent that the same constitute
Permitted Indebtedness; and (iii) endorsements of negotiable instruments and
documents in the ordinary course of business.
"ISSUE DATE" means the date the Notes are initially issued.
"LIEN" means any mortgage, charge, pledge, deed of trust, lien
(statutory or other), security interest, hypothecation, assignment for security,
claim or encumbrance (including, without limitation, any agreement to give or
grant any lease, conditional sale or other title retention agreement having
substantially the same economic effect as any of the foregoing) upon or with
respect to any property or assets of any kind. A Person will be deemed to own
subject to a Lien any property or assets that the Person has acquired or holds
subject to the interest of a vendor or lessor under any conditional sale
agreement, capital lease or other title retention agreement.
"LIQUIDATED DAMAGES" has the meaning set forth in the Notes.
"MOODY'S" means Moody's Investors Service, Inc., and its successors.
"NET AVAILABLE PROCEEDS" means, with respect to any Asset Sale, the
proceeds thereof in the form of cash or Cash Equivalents including payments in
respect of deferred payment obligations when received in the form of cash or
Cash Equivalents (except to the extent that such obligations are financed or
sold with recourse to the Company or any Restricted Subsidiary), net of (i)
brokerage commissions and other fees and expenses (including fees and expenses
of legal counsel, accountants and investment banks) related to such Asset Sale,
(ii) provisions for all taxes payable as a result of such Asset Sale (after
taking into account any available tax credits or deductions and any tax sharing
arrangements), (iii) amounts required to be paid to any Person (other than the
Company or any Restricted Subsidiary) (a) owning a beneficial interest in the
properties or assets subject to the Asset Sale, (b) having a Lien on such
properties or assets or (c) requiring such payment as a condition to providing
any consent necessary to consummate the Asset Sale and (iv) appropriate amounts
to be provided by the Company or any Restricted Subsidiary, as the case may be,
as a reserve required in accordance with GAAP against any liabilities associated
with such Asset Sale and retained by the Company or any Restricted Subsidiary,
as the case may be, after such Asset Sale, including, without limitation,
pensions and other post-employment benefit liabilities, liabilities related to
environmental matters and liabilities under any indemnification obligations
associated with such Asset Sale, all as reflected in an Officers' Certificate;
PROVIDED, HOWEVER, that any amounts remaining after adjustments, revaluations or
liquidations of such reserves shall constitute Net Available Proceeds.
"NON-U.S. PERSON" means a Person that is not a U.S. Person, as defined
in Regulation S.
"OBLIGATION" means any principal, interest, penalties, fees,
indemnification, reimbursements, costs, expenses, damages and other liabilities
payable under the documentation governing any Indebtedness.
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"OFFER" means a Change of Control Offer, a Net Proceeds Offer or a
Mandatory Repurchase Offer, as the context requires.
"OFFER PERIOD" means a Change of Control Offer Period, a Net Proceeds
Offer Period or a Mandatory Repurchase Offer Period, as the context requires.
"OFFERING MEMORANDUM" means the Offering Memorandum dated June 2, 1998,
in the form used in connection with the original sale of the Notes.
"OFFICER" means any of the following of the Company: the Chairman of
the Board, the Chief Executive Officer, the Chief Financial Officer, the
President, the Chief Operating Officer or the General Counsel.
"OFFICERS' CERTIFICATE" means a certificate signed by any two Officers.
"OPINION OF COUNSEL" means a written opinion from legal counsel who is
reasonably acceptable to the Trustee complying with the requirements of Sections
11.04 and 11.05, as they relate to the giving of an Opinion of Counsel.
"PAYMENT RESTRICTION" with respect to any Subsidiary, any consensual
encumbrance, restriction or limitation, whether by operation of the terms of its
charter or by reason of any agreement, instrument, judgment, decree, order,
statute, rule or governmental regulation, on the ability of (i) such Restricted
Subsidiary to (a) pay dividends or make other distributions on its Capital Stock
or make payments on any obligation, liability or Indebtedness owed to the
Company or any other Restricted Subsidiary, (b) make loans or advances to the
Company or any other Restricted Subsidiary, (c) guarantee any Indebtedness of
the Company or any Restricted Subsidiary or (d) transfer any of its properties
or assets to the Company or any other Restricted Subsidiary (other than
customary restrictions on transfers of property subject to a Lien permitted
under this Indenture) or (ii) the Company or any other Restricted Subsidiary to
receive or retain any such dividends, distributions or payments, loans or
advances, guarantee, or transfer of properties or assets.
"PERMITTED INCOME TAX DISTRIBUTIONS" means, for all taxable periods
commencing with 1998 (or 1997, to the extent sufficient distributions in
accordance with the principles set forth below, have not yet been made to the
Company's shareholders with respect to the Company's taxable income for such
period) during which the Company qualifies as an "S" corporation under
Subchapter S of the Internal Revenue Code of 1986, as amended, distributions to
the Company's shareholders which do not exceed an amount equal to the sum of (i)
the product of (a) the Company's taxable income for federal income tax purposes
for each such period (reduced by the Company's taxable loss for federal income
tax purposes for any prior taxable period to the extent such losses have not
previously been taken into account in determining taxable income in prior years
or Permitted Income Tax Distributions) minus the amount determined pursuant to
clause (ii) below for such period and (b) the highest marginal individual
federal income tax rate (taking into account the reduction of itemized
deductions based on gross income) for each such period
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plus (ii) if the Company's shareholders are obligated to pay any state or local
income taxes on account of the Company's income, the product of (a) the
Company's taxable income for any state or local income tax purposes for each
such period (reduced by the Company's taxable loss for state or local income tax
purposes for any prior taxable period to the extent such losses have not
previously been taken into account in determining taxable income in prior
periods or Permitted Income Tax Distributions) and (b) the highest applicable
marginal individual state or local income tax rate (taking into account any
differences in applicable state and local income tax rates) for each such
period; PROVIDED, HOWEVER, (A) that such amount shall be increased to the extent
that the Company's shareholders are subject to the federal alternative minimum
tax for any such taxable period in respect of the Company's income; (B) that
such amount shall be reduced by the Company's tax credits for each such period
for federal and applicable state and local income tax purposes (or, if
applicable, alternative minimum tax credits or carryforwards); and (C) an amount
representing that portion of the projected Permitted Income Tax Distribution
that the Company reasonably estimates to be payable by the Company's
shareholders in order to avoid penalties for the underpayment of estimated taxes
may be distributed not more than ten (10) business days prior to the due date
for such payment of estimated tax (except that the estimated tax payment
otherwise due in January shall be deemed to be due prior to December 31). All
computations shall be made as if the Company's shareholders' only income or loss
is the net income or loss of the Company. In the event that the Company's
taxable income for any prior taxable period is adjusted by any taxing authority
or as a result of the filing of any amended tax return, the Company may
distribute as an additional Permitted Income Tax Distribution to all
shareholders (current and former) impacted by the adjustment an amount equal to
the liability resulting from such adjustment. Notwithstanding any other
provision in this Indenture, the Company may take any action it determines to be
necessary to cause the Company to be in compliance with any federal, state and
local withholding requirements with respect to any allocation or distribution by
the Company to any shareholder. All amounts so withheld shall be treated as
Permitted Income Tax Distributions to the applicable shareholders.
"PERMITTED INDEBTEDNESS" means any of the following:
(i) Indebtedness of the Company and any Restricted Subsidiary
under any revolving credit facility entered into by the Company in an
aggregate principal amount at any time outstanding not to exceed the
greater of (a) $45.0 million, or (b) the sum of 80% of the consolidated
accounts receivable of the Company plus 15% of the consolidated net
property, plant and equipment of the Company, calculated as of the end
of the most recent fiscal quarter for which financial statements are
available, determined in accordance with GAAP;
(ii) Indebtedness under the Notes, the Subsidiary Guarantees,
and this Indenture;
(iii) Existing Indebtedness;
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(iv) Indebtedness under Hedging Obligations, provided that (1)
such Hedging Obligations are related to payment obligations on
Permitted Indebtedness or Indebtedness otherwise permitted under
Section 4.07 and (2) the notional principal amount of such Hedging
Obligations at the time incurred does not exceed the principal amount
of such Indebtedness to which such Hedging Obligations relate;
(v) Indebtedness of the Company to a Wholly-Owned Restricted
Subsidiary and Indebtedness of any Wholly-Owned Restricted Subsidiary
to the Company or any other Wholly-Owned Restricted Subsidiary;
PROVIDED, HOWEVER, that upon either (1) the subsequent issuance (other
than directors' qualifying shares), sale, transfer or other disposition
of any Capital Stock or any other event which results in any such
Wholly-Owned Restricted Subsidiary ceasing to be a Wholly-Owned
Restricted Subsidiary or (2) the transfer or other disposition of any
such Indebtedness (except to the Company or a Wholly-Owned Restricted
Subsidiary), the provisions of this clause (v) shall no longer be
applicable to such Indebtedness and such Indebtedness shall be deemed,
in each case, to be incurred and shall be treated as an incurrence for
purposes of Section 4.07 hereof at the time the Wholly-Owned Restricted
Subsidiary in question ceased to be a Wholly-Owned Restricted
Subsidiary or the time such transfer or other disposition occurred;
(vi) Indebtedness in respect of bid, performance or surety
bonds issued for the account of the Company or any Restricted
Subsidiary in the ordinary course of business, including guarantees or
obligations of the Company or any Restricted Subsidiary with respect to
letters of credit supporting such bid, performance or surety
obligations (in each case other than for an obligation for money
borrowed);
(vii) Refinancing Indebtedness;
(viii) Indebtedness, in addition to Indebtedness incurred
pursuant to the other clauses of this definition, with an aggregate
principal amount at any time outstanding for all such Indebtedness
incurred pursuant to this clause not in excess of $5.0 million; and
(ix) Indebtedness incurred prior to June 1, 2001 in connection
with (i) the assumption of Acquired Indebtedness of a Related Business;
(ii) the acquisition of, or a business combination transaction with, a
Related Business; or (iii) the purchase of aircraft, engines or
aircraft-related or engine-related parts, supplies and equipment, or
other fixed assets to be used in the business of the Company and its
Restricted Subsidiaries, PROVIDED that (A) if, after giving effect
thereto, the Company's Consolidated Fixed Charge Coverage Ratio on the
date thereof would be greater than 2.0 to 1.0 but less than 2.25 to
1.0, the amount of such Indebtedness shall not exceed 60% of the total
cost of the related transaction; or (B) if, after giving effect
thereto, the Company's Consolidated Fixed Charge Coverage Ratio would
be greater than 2.25 to 1.0 but less than 2.75 to 1.0, the amount of
such Indebtedness shall not exceed 80% of the total cost of the related
transaction; or (C) if, after giving effect thereto, the Company's
Consolidated Fixed Charge Coverage Ratio would be at least equal to
2.75 to 1.0, there
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shall be no percentage limitation on the amount of such Indebtedness in
relation to the total cost of the related transaction; PROVIDED,
FURTHER in each case that the Consolidated Fixed Charge Coverage Ratio
shall be determined on a PRO FORMA basis as if such incurrence or
issuance and the application of the net proceeds therefrom had occurred
at the beginning of the four-quarter period used to calculate such
Consolidated Fixed Charge Coverage Ratio. If, after giving effect to
the incurrence of Indebtedness pursuant to this clause (ix), the
Consolidated Fixed Charge Coverage Ratio is less than 2.0 to 1.0, the
Company may not incur such Indebtedness under this clause (ix).
"PERMITTED LIENS" means the following types of Liens:
(i) Liens securing the Notes or the Subsidiary Guarantees;
(ii) Liens in favor of the Company or, with respect to a
Restricted Subsidiary, Liens in favor of another Restricted Subsidiary;
(iii) Liens for taxes, assessments or governmental charges or
claims either (a) not delinquent or (b) contested in good faith by
appropriate proceedings and as to which the Company or a Restricted
Subsidiary, as the case may be, has set aside on its books such
reserves, or has made such other appropriate provision, if any, as is
required by GAAP;
(iv) Liens of landlords, carriers, warehousemen, mechanics,
suppliers, materialmen, repairmen and other similar Liens incurred in
the ordinary course of business for sums not delinquent or being
contested in good faith, and as to which the Company or a Restricted
Subsidiary, as the case may be, has set aside on its books such
reserves, or has made such other appropriate provision, if any, as is
required by GAAP;
(v) Liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment
insurance and other types of social security, or to secure the payment
or performance of tenders, statutory or regulatory obligations, surety
and appeal bonds, bids, government contracts and leases, performance
and return of money bonds and other similar obligations (exclusive of
obligations for the payment of borrowed money);
(vi) Liens securing any judgment not giving rise to a Default
or Event of Default and so long as any appropriate legal proceedings
that may have been duly initiated for the review of the judgment has
not been finally terminated or the period within which those
proceedings may be initiated has not expired;
(vii) easements, rights-of-way, reservations, zoning and other
restrictions and other similar encumbrances not interfering in any
material, respect with the ordinary conduct of business of the Company
or any Restricted Subsidiary;
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(viii) leases or subleases granted to others that do not
interfere with the ordinary conduct of business of the Company or any
Restricted Subsidiary;
(ix) rights of a common owner of any interest in property held
by the Company or any Restricted Subsidiary and that common owner as
tenants in common or through other common ownership;
(x) Liens or equitable encumbrances deemed to exist by reason
of (a) fraudulent conveyance or transfer laws or (b) negative pledge or
other agreements to refrain from giving Liens; and
(xi) Liens, other than Liens referred to in clauses (i)
through (x) above, on assets not to exceed (a) the Company's
Consolidated Tangible Assets, plus (b) $20.0 million, less (c) the
total amount of outstanding Senior Unsecured Debt.
"PERSON" means any individual, corporation, partnership, limited
liability company, joint venture, incorporated or unincorporated association,
joint-stock company, trust, unincorporated organization or government or other
agency or political subdivision thereof or other entity of any kind.
"PLAN OF LIQUIDATION" with respect to any Person, means a plan that
provides for, contemplates or the effectuation of which is preceded or
accompanied by (whether or not substantially contemporaneously, in phases or
otherwise): (i) the sale, lease, conveyance or other disposition of all or
substantially all of the assets of such Person otherwise than as an entirety or
substantially as an entirety; and (ii) the distribution of all or substantially
all of the proceeds of such sale, lease, conveyance or other disposition and all
or substantially all of the remaining assets of such Person to holders of
Capital Stock of such Person.
"PREFERRED STOCK" means, with respect to any Person, any and all share,
interests, participations and other equivalents (however designated) of that
Person's preferred or preference Capital Stock, whether outstanding on or after
the Issue Date, including, without limitation, all classes and series of
preferred or preference Capital Stock of that Person.
"PRINCIPALS" means, collectively, J. Frank Fine, Barry H. Fine, any
immediate family member of either of the foregoing and any probate estate of any
such individual and any trust, so long as one or more of the foregoing
individuals or members of their immediate families, are the principal
beneficiaries of such trust, and any other partnership, corporation, or other
entity all of the partners, shareholders, members or owners of which are any one
or more of the foregoing.
"PUBLIC EQUITY OFFERING" means an underwritten primary offering of
Capital Stock of the Company (other than Disqualified Capital Stock or Preferred
Stock) pursuant to a registration statement filed with the Commission in
accordance with the Securities Act and declared effective by the staff of the
Commission, or a private placement of primary shares of the Capital Stock of the
Company pursuant to an available exemption from registration and, in the case of
any such
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private placement, a majority of such placement of which is sold to Persons that
are not then and were not at the Issue Date Affiliates of the Company.
"PURCHASE DATE" means the Change of Control Purchase Date, the Net
Proceeds Purchase Date or the Mandatory Repurchase Date, as the context
requires.
"QIB" means a "qualified institutional buyer" as defined in Rule 144A
under the Securities Act.
"RECORD DATE" has the meaning set forth in the Notes.
"REFINANCING INDEBTEDNESS" means Indebtedness of the Company or a
Restricted Subsidiary issued in exchange for, or the proceeds from the issuance
and sale or disbursement of which are used substantially concurrently to repay,
redeem, refund, refinance, discharge or otherwise retire for value, in whole or
in part (collectively, "repay"), or constituting an amendment, modification or
supplement to or a deferral or renewal of (collectively, an "amendment"), any
Indebtedness of the Company or any Restricted Subsidiary (the "Refinanced
Indebtedness") in a principal amount not in excess of the principal amount of
the Refinanced Indebtedness (or, if such Refinancing Indebtedness refinances
Indebtedness under a revolving credit facility or other agreement providing a
commitment for subsequent borrowings, with a maximum commitment not to exceed
the maximum commitment under such revolving credit facility or other agreement),
plus the amount of any premium required to be paid in connection with such
refinancing pursuant to the terms of the Refinanced Indebtedness or the amount
of any premium reasonably determined by the Company or such Restricted
Subsidiary as necessary to accomplish such refinancing, plus the amount of
expenses of the Company or such Restricted Subsidiary incurred in connection
with such refinancing; PROVIDED that: (i) the Refinancing Indebtedness is the
obligation of the same Person as that of the Refinanced Indebtedness; (ii) if
the Refinanced Indebtedness was subordinated to or PARI PASSU with the Notes,
then such Refinancing Indebtedness, by its terms, is expressly PARI PASSU with
(in the case of Refinanced Indebtedness that was PARI PASSU with) the Notes, or
subordinate in right of payment to (in the case of Refinanced Indebtedness that
was subordinated to) the Notes at least to the same extent as the Refinanced
Indebtedness; (iii) the portion, if any, of the Refinancing Indebtedness that is
scheduled to mature on or prior to the maturity date of the Notes has a Weighted
Average Life to Maturity at the time such Refinancing Indebtedness is incurred
that is equal to or greater than the Weighted Average Life to Maturity of the
portion of the Refinanced Indebtedness being repaid that is scheduled to mature
on or prior to the maturity date of the Notes; and (iv) the Refinancing
Indebtedness is secured only to the extent, if at all, that the Refinanced
Indebtedness is secured.
"REGISTRATION" means a registered exchange offer for the Notes by the
Company or other registration of the Notes under the Securities Act pursuant to
and in accordance with the terms of the Registration Rights Agreement.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights
Agreement, dated as of the Issue Date, by and among the Company, Fine Air
Services, Inc., Agro Air Associates, Inc.
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and SBC Warburg Dillon Read Inc., as such agreement may be amended, modified or
supplemented from time to time.
"REGISTRATION STATEMENT" means the Registration Statement pursuant to
and as defined in the Registration Rights Agreement.
"REGULATION S" means Regulation S under the Securities Act.
"RELATED BUSINESS" means any business in which the Company and its
Restricted Subsidiaries operate on the Issue Date and any business related,
ancillary or complementary to the business of the Company and the Restricted
Subsidiaries on that date.
"RESTRICTED DEBT PAYMENT" means any purchase, redemption, defeasance
(including without limitation in substance or legal defeasance) or other
acquisition or retirement for value, directly or indirectly, by the Company or a
Restricted Subsidiary, prior to the scheduled maturity or prior to any scheduled
repayment of principal or sinking fund payment, as the case may be, in respect
of Subordinated Indebtedness.
"RESTRICTED INVESTMENT" means any Investment by the Company or any
Restricted Subsidiary (other than investments in Cash Equivalents) in any Person
that is not the Company or a Restricted Subsidiary, including in any
Unrestricted Subsidiary.
"RESTRICTED PAYMENT" means with respect to any Person: (i) any
declaration or payment of any dividend (other than a dividend declared and paid
by a Restricted Subsidiary to the Company or a Wholly-Owned Restricted
Subsidiary), or any other distribution with respect to any shares of Capital
Stock of that Person (but excluding dividends or distributions payable solely in
shares of Capital Stock (other than Disqualified Capital Stock) of that Person);
(ii) any purchase, redemption, retirement or other acquisition for value of (A)
the Capital Stock of the Company or (B) the Capital Stock of any Restricted
Subsidiary, or any other payment or distribution made in respect thereof, either
directly or indirectly (other than a payment solely in Capital Stock that is not
Disqualified Capital Stock, and excluding any such payment to the extent
actually received by the Company or a Restricted Subsidiary); (iii) any
Restricted Investment; or (iv) any Restricted Debt Payment.
"RESTRICTED SUBSIDIARY" means any Subsidiary of the Company, whether
existing on or after the Issue Date, other than an Unrestricted Subsidiary.
"RULE 144A" means Rule 144A under the Securities Act.
"S&P" means Standard & Poor's Ratings Services, a division of The
McGraw-Hill Companies, Inc., and its successors.
"SALE/LEASEBACK TRANSACTION" means with respect to any Person an
arrangement with any bank, insurance company or other lender or investor or to
which such lender or investor is a party, providing for the leasing by such
Person of any property or asset of such Person which has
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been or is being sold or transferred by such Person to such lender or investor
or to any Person to whom funds have been or are to be advanced by such lender or
investor on the security of such property or asset.
"SECURITIES ACT" means the U.S. Securities Act of 1933, as amended.
"SENIOR UNSECURED DEBT" means Indebtedness of the Company or any
Restricted Subsidiary which is not (i) Subordinated Indebtedness or (ii) secured
by any Lien.
"SHELF REGISTRATION STATEMENT" shall mean a Shelf Registration
Statement of the Company pursuant to the Registration Rights Agreement.
"STATED MATURITY" means, when used with respect to any Indebtedness or
any installment of interest thereon, the date specified in the instrument
evidencing or governing such Indebtedness as the fixed date on which the
principal of that Indebtedness or that installment of interest is due and
payable.
"SUBORDINATED INDEBTEDNESS" means Indebtedness of the Company or any
Restricted Subsidiary that is subordinated in right of payment to the Notes or
the Subsidiary Guarantee of such Restricted Subsidiary, respectively.
"SUBSIDIARY" of any Person means (i) any corporation of which at least
a majority of the aggregate voting power of all classes of the Voting Stock is
owned by such Person directly or through one or more other Subsidiaries of such
Person and (ii) any entity other than a corporation in which such Person,
directly or indirectly, owns at least a majority of the Voting Stock of such
entity entitling the holder thereof to vote or otherwise participate in the
selection of the governing body, partners, managers or others that control the
management and policies of such entity. Unless otherwise specified, "Subsidiary"
means a Subsidiary of the Company.
"SUBSIDIARY GUARANTOR" means each Restricted Subsidiary of the Company
and each other Person who is required to become (or whom the Company otherwise
causes to become) a Subsidiary Guarantor by the terms of this Indenture.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. ss.ss.
77AAA-77BBBB) as in effect on the Issue Date (except as otherwise provided in
Section 1.03 hereof); PROVIDED, HOWEVER, that, in the event the Trust Indenture
Act of 1939 is amended after such date, "Trust Indenture Act" means, to the
extent required by any such amendments, the Trust Indenture Act of 1939 as so
amended.
"TRUSTEE" means The Bank of New York until a successor replaces it in
accordance with the applicable provisions of this Indenture and thereafter means
such successor.
"TRUST OFFICER" when used with respect to the Trustee means any officer
or assistant officer of the Trustee assigned by the Trustee to administer this
Indenture; and also means, with
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respect to a particular corporate trust matter, any other officer to whom such
matter is referred because of such officer's knowledge of and familiarity with
the particular subject.
"UNRESTRICTED SUBSIDIARY" means (i) any Subsidiary that at the time of
determination shall be designated an Unrestricted Subsidiary by the Board of
Directors of the Company in the manner provided below and (ii) any Subsidiary of
an Unrestricted Subsidiary. The Board of Directors of the Company may designate
any Restricted Subsidiary other than the Subsidiary Guarantors existing on the
date of this Indenture to be an Unrestricted Subsidiary, and any such
designation shall be deemed to be a Restricted Investment at the time of and
immediately upon such designation by the Company and its Restricted Subsidiaries
in the amount of the greater of the Consolidated Net Worth or the fair market
value of such designated Subsidiary and its consolidated Subsidiaries at such
time, PROVIDED that such designation shall be permitted only if (A) the Company
and its Restricted Subsidiaries would be able to make the Restricted Investment
deemed made pursuant to such designation at such time, (B) no portion of the
Indebtedness or any other obligation (contingent or otherwise) of such
Subsidiary (x) is Guaranteed by the Company or any Restricted Subsidiary, (y) is
recourse to the Company or any Restricted Subsidiary or (z) subjects any
property or asset of the Company or any Restricted Subsidiary, directly or
indirectly, contingently or otherwise, to the satisfaction thereof and (C) no
default or event of default with respect to any Indebtedness of such Subsidiary
would permit any holder of any Indebtedness of the Company or any Restricted
Subsidiary to declare such Indebtedness of the Company or any Restricted
Subsidiary due and payable prior to its maturity. The Board of Directors of the
Company may designate any Unrestricted Subsidiary to be a Restricted Subsidiary,
and any such designation shall be deemed to be an incurrence by the Company and
its Subsidiaries of the Indebtedness (if any) of such Subsidiary so designated
for purposes of Section 4.07 as of the date of such designation, PROVIDED that
such designation shall be permitted only if immediately after giving effect to
such designation and the incurrence of any such additional Indebtedness deemed
to have been incurred thereby (x) the Company would be able to incur $1.00 of
additional Indebtedness not constituting Permitted Indebtedness at such
specified time under Section 4.07 and (y) no Default or Event of Default shall
be continuing. Any such designation by the Board of Directors described in the
two preceding sentences shall be evidenced to the Trustee by the filing with the
Trustee of a certified copy of the Board Resolution giving effect to such
designation and an Officers' Certificate certifying that such designation
complied with the foregoing conditions and setting forth the underlying
calculations of such certificate.
"UNUTILIZED PROCEEDS AMOUNT" shall mean an amount equal to the
difference between (i) the amount by which net proceeds from the sale of the
Notes not utilized (A) to repay the Company's existing indebtedness
(approximately $18.4 million), (B) to acquire and install hushkits on the
Company's aircraft (approximately $22.0 million) and (C) to acquire additional
DC-8 and widebody aircraft, spare parts, equipment and tooling, to make
strategic acquisitions and for working capital and other general corporate
purposes (approximately $151.1 million), as of the Mandatory Repurchase Trigger
Date exceeds $15.0 million, minus (ii) the aggregate principal amount of Notes
that, prior to such date, have been repurchased by the Company in the
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open market and delivered to the Trustee for cancellation in the 90 day period
prior to the Mandatory Repurchase Trigger Date.
"VOTING STOCK" with respect to any Person, means securities of any
class of Capital Stock of such Person entitling the holders thereof (whether at
all times or only so long as no senior class of stock or other relevant equity
interest has voting power by reason of any contingency) to vote in the election
of members of the board of directors of such Person.
"WEIGHTED AVERAGE LIFE TO MATURITY", when applied to any Indebtedness
at any date, means the number of years obtained by dividing (i) the sum of the
products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payment of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment by (ii) the then outstanding principal
amount of such Indebtedness.
"WHOLLY-OWNED RESTRICTED SUBSIDIARY" means a Restricted Subsidiary of
which 100% of the Capital Stock (except for directors' qualifying shares or
certain minority interests owned by other Persons solely due to local law
requirements that there be more than one stockholder, but which interest is not
in excess of what is required for such purpose) is owned directly by the Company
or through one or more Wholly-Owned Restricted Subsidiaries.
SECTION 1.02. OTHER DEFINITIONS.
TERM DEFINED IN
SECTION
"AFFILIATE TRANSACTION".......................................... 4.08
"AGENT MEMBERS".................................................. 2.07
"AFFILIATE TRANSACTION".......................................... 4.10
"AGENT MEMBERS".................................................. 2.07(a)(iii)
"ASSET SALE TRIGGER DATE"........................................ 4.16(c)
"CEDEL BANK"..................................................... 2.01(a)
"CERTIFICATED NOTE".............................................. 2.01(a)
"CHANGE OF CONTROL OFFER"........................................ 4.15(b)(ii)
"CHANGE OF CONTROL OFFER PERIOD"................................. 4.15(c)
"CHANGE OF CONTROL PURCHASE DATE"................................ 4.15(c)
"CHANGE OF CONTROL PURCHASE PRICE"............................... 4.15(a)
"CHANGE OF CONTROL TRIGGER DATE"................................. 4.15(a)
"COVENANT DEFEASANCE"............................................ 8.01(b)(ii)
"EVENT OF DEFAULT"............................................... 6.01(a)
"EUROCLEAR"...................................................... 2.01(a)
"EXCESS PROCEEDS"................................................ 4.16(b)(ii)
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"GLOBAL NOTE HOLDER"............................................. 2.01(a)
"LEGAL DEFEASANCE"............................................... 8.01(b)(i)
"MANDATORY REPURCHASE DATE"...................................... 4.17(b)
"MANDATORY REPURCHASE OFFER"..................................... 4.17(a)
"MANDATORY REPURCHASE OFFERED PRICE"............................. 4.17(b)
"MANDATORY REPURCHASE OFFER PERIOD".............................. 4.17(b)
"MANDATORY REPURCHASE TRIGGER DATE".............................. 4.17(a)
"NET PROCEEDS DEFICIENCY"........................................ 4.16(c)(ii)
"NET PROCEEDS OFFEr"............................................. 4.16(c)(i)
"NET PROCEEDS OFFER PERIOD"...................................... 4.16(c)(iii)
"NET PROCEEDS PURCHASE DATE"..................................... 4.16(c)(iii)
"NEW TRANSACTIONS"............................................... 4.10
"NOTICE OF DEFAULT".............................................. 6.01(a)
"OFFERED PRICE".................................................. 4.16(c)(ii)
"OFFSHORE CERTIFICATED NOTE"..................................... 2.01(a)
"PAYING AGENT"................................................... 2.03
"PAYMENT AMOUNT"................................................. 4.16(c)(i)
"QTI"............................................................ 4.10
"QTV"............................................................ 4.10
"REGULATION S GLOBAL NOTE"....................................... 2.02(a)
"REGULATION S NOTES"............................................. 2.01(a)
"RESTRICTED GLOBAL NOTE"......................................... 2.01(a)
"REGISTRAR"...................................................... 2.03
"REPURCHASE DEFICIENCY".......................................... 4.17(b)
"RULE 144A NOTES"................................................ 2.01(a)
"SECURITIES ACT LEGEND".......................................... 2.01(a)
"SUBSIDIARY GUARANTEE"........................................... 10.01(a)
"SUCCESSOR"...................................................... 5.01(a)(ii)
"TRUSTEE EXPENSES"............................................... 6.08
SECTION 1.03. INCORPORATION BY REFERENCE OF TIA.
Whenever this Indenture refers to a provision of the TIA, the portion
of the provision required to be incorporated herein in order for this Indenture
to be qualified under the TIA is incorporated by reference in, and made a part
of, this Indenture. Any terms incorporated by reference in this Indenture that
are defined by the TIA, defined by the TIA by reference to another statute or
defined by the Commission in a rule under the TIA have the meanings so assigned
to them therein.
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SECTION 1.04. RULES OF CONSTRUCTION.
Unless the context otherwise requires: (1) a term has the meaning
assigned to it in this Indenture; (2) an accounting term not otherwise defined
herein has the meaning assigned to it under GAAP; (3) "or" is not exclusive; (4)
words in the singular include the plural, and in the plural include the
singular; (5) provisions apply to successive events and transactions; and (6)
any reference to a Section or Article refers to such Section or Article of this
Indenture.
ARTICLE II
THE NOTES
SECTION 2.01. FORM AND DATING.
(a) The Notes and the certificate of authentication of the Trustee or
an authenticating agent appointed on its behalf pursuant to Section 2.02 shall
be substantially in the form of Exhibit A hereto, bearing such legends as are
required pursuant to this Section 2.01. The Notes may have notations, legends or
endorsements required by this Indenture, law, stock exchange rule or usage. Each
Note shall be dated the date of its authentication. The Notes shall be in
denominations of $1,000 principal amount and integral multiples thereof.
The Old Notes and the New Notes shall be considered collectively to be
a single class for all purposes of this Indenture, including, without
limitation, waivers, amendments, redemptions and offers to purchase. Any Old
Notes that remain outstanding after the Exchange Offer will be aggregated with
the New Notes, and the Holders of such Old Notes and the New Notes will vote
together as a single series for all such purposes. Accordingly, all references
herein to specified percentages in aggregate principal amount of the outstanding
Notes shall be deemed to mean, at any time after the Exchange Offer is
consummated, such percentages in aggregate principal amount of the Old Notes and
the New Notes then outstanding.
The terms and provisions contained in the Notes shall constitute, and
are hereby expressly made, a part of this Indenture and to the extent
applicable, the Company, the Subsidiary Guarantors and the Trustee, by their
execution and delivery of this Indenture, expressly agree to such terms and
provisions and to be bound thereby.
Old Notes offered and sold to QIBs in reliance on Rule 144A ("RULE 144A
NOTES") shall be issued initially in the form of one or more Global Notes in
definitive, fully registered form, without interest coupons, substantially in
the form of Exhibit A hereto, bearing such legends as are required pursuant to
this Section 2.01 (the "RESTRICTED GLOBAL NOTES"), will be deposited on the
Issue Date with, or on behalf of, the Depositary and registered in the name of
Cede & Co., as nominee of the Depositary (such nominee being referred to herein
as the "GLOBAL NOTE HOLDER"), duly executed by the Company and authenticated by
the Trustee as herein provided. The aggregate principal amount of the Restricted
Global Notes may from time to time be increased or
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decreased by adjustments made on the records of the Trustee, as custodian for
the Depositary or its nominee, as hereinafter provided.
Old Notes offered and sold in offshore transactions in reliance on
Regulation S under the Securities Act ("REGULATION S NOTES") will be issued
initially in the form of one or more Global Notes in definitive fully registered
form, without interest coupons, substantially in the form of Exhibit A hereto,
bearing such legends as are required pursuant to this Section 2.01(the
"REGULATION S GLOBAL NOTES") and will be deposited on the Issue Date with the
Trustee as custodian for, and registered in the name of Cede & Co., as nominee
of the Depositary for the accounts of Morgan Guaranty Trust Company of New York,
Brussels office, as operator of the Euroclear System ("EUROCLEAR"), and Cedel
Bank, societe anonyme ("CEDEL BANK"). The aggregate principal amount of the
Regulation S Global Notes may from time to time be increased or decreased by
adjustments made on the records of the Trustee, as custodian for the nominee of
the Depositary for the Regulation S Global Notes, for the accounts of Euroclear
and Cedel Bank, as hereinafter provided.
Any Person having a beneficial interest in the Global Notes may, upon
request to the Trustee, exchange such beneficial interest for Notes in
definitive form (each a "CERTIFICATED NOTE"). Certificated Notes issued in
exchange for interests in any Regulation S Global Note are sometimes referred to
as the "OFFSHORE CERTIFICATED NOTES." Upon any such issuance, the Trustee is
required to register such Notes in the name of, and cause the same to be
delivered to, such Persons or Persons (or the nominee of any thereof). Such
Notes will be issued in fully registered form and will be subject to transfer
restrictions. In addition, if (i) the Company notifies the Trustee in writing
that the Depositary is no longer willing or able to act as a depository and the
Company is unable to locate a qualified successor within 90 days or (ii) the
Company, at its option, notifies the Trustee in writing that it elects to cause
the issuance of Certificated Notes, then, upon surrender by the relevant Global
Note Holder of its Global Note in accordance with Section 2.07(e), Notes in such
form will be issued to each Person that such Global Note Holder and the
Depositary identify as being the beneficial owner of the related Notes.
Except as otherwise provided in Section 2.08(e), each Restricted Global
Note, each Regulation S Global Note and each Certificated Note shall bear the
legend (the "SECURITIES ACT LEGEND") set forth below on the face thereof:
"THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY
ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE
U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND THE
SECURITY EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE
EXEMPTION THEREFROM. EACH PURCHASER OF THE SECURITY EVIDENCED HEREBY
(1) BY ITS ACQUISITION HEREOF REPRESENTS THAT (A) IT IS A "QUALIFIED
INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE
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SECURITIES ACT) OR (B) IT IS NOT A U.S. PERSON AND IS ACQUIRING THE
SECURITY EVIDENCED HEREBY IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH
REGULATION S UNDER THE SECURITIES ACT AND (2) IS HEREBY NOTIFIED THAT
THE SELLER MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF
SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER OR
ANOTHER EXEMPTION UNDER THE SECURITIES ACT. THE HOLDER OF THE SECURITY
EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE ISSUER THAT (X) SUCH
SECURITY MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY (i) (a)
TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED
INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT)
IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (b) IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES
ACT, (c) OUTSIDE THE UNITED STATES TO A PERSON THAT IS NOT A U.S.
PERSON (AS DEFINED IN RULE 902 UNDER THE SECURITIES ACT) IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 UNDER THE SECURITIES
ACT OR (d) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF
COUNSEL IF THE COMPANY SO REQUESTS), (ii) TO THE COMPANY OR (iii)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT AND, IN EACH CASE, IN ACCORDANCE WITH ANY APPLICABLE SECURITIES
LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE
JURISDICTION AND (Y) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS
REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF THE SECURITY EVIDENCED
HEREBY OF THE RESALE RESTRICTIONS SET FORTH IN (X) ABOVE."
(b) Each Global Note, whether or not a New Note, shall also bear the
following legend on the face thereof:
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE
COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT,
AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR
IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF
DTC (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER
ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO
ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE &
CO., HAS AN INTEREST HEREIN.
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TRANSFERS OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS IN WHOLE,
BUT NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR THEREOF OR
SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL NOTE
SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS
SET FORTH IN SECTIONS 2.06, 2.07 AND 2.08 OF THE INDENTURE.
SECTION 2.02. EXECUTION AND AUTHENTICATION; AUTHENTICATION AGENT.
The President, any Vice President, the Treasurer or any Assistant
Treasurer of the Company shall sign each Note for the Company by manual or
facsimile signature. If an Officer whose signature is on a Note no longer holds
that office at the time the Note is authenticated, the Note shall nevertheless
be valid.
A Note shall not be valid until authenticated by the manual signature
of the Trustee, and the Trustee's signature shall be conclusive evidence that
the Note has been authenticated under this Indenture. The form of Trustee's
certificate of authentication to be borne by the Notes shall be substantially as
set forth in Exhibit A. The Trustee may appoint an authenticating agent
acceptable to the Company to authenticate the Notes. Unless limited by the terms
of such appointment, an authenticating agent may authenticate Notes whenever the
Trustee may do so. Each reference in this Indenture to authentication by the
Trustee includes authentication by such agent. An authenticating agent has the
same rights as an Agent to deal with the Company or any of its Affiliates. If an
appointment of an authenticating agent is made pursuant to this Section 2.02,
the Notes may have endorsed thereon, in lieu of the Trustee's certificate of
authentication, an alternative certificate of authentication substantially in
the form set forth in Exhibit A.
The Trustee shall, upon receipt of a written order signed by an Officer
of the Company, authenticate (i) Old Notes for issuance on the Issue Date in the
aggregate principal amount of $200,000,000 and (ii) New Notes for issuance only
in exchange for a like principal amount of Old Notes. Notwithstanding anything
to the contrary contained in this Indenture, the Notes or otherwise, the
aggregate principal amount of outstanding Notes may not exceed $200,000,000 at
any time, except as provided in Section 2.10.
SECTION 2.03. REGISTRAR AND PAYING AGENT.
The Company shall maintain an office or agency (the "REGISTRAR") where
Notes may be presented for registration of transfer or for exchange (subject to
Sections 2.06, 2.07 and 2.08) and an office or agency within The City and State
of New York (the "PAYING AGENT") where Notes may be presented for payment and an
office or agency where notices to or upon the Company in respect of the Notes or
this Indenture may be served. The Registrar shall keep a register of the Notes
and of their transfer and exchange. The Company may appoint one or more
co-Registrars and one or more additional paying agents. The term "Paying Agent"
includes any additional paying agent. The Company may change the Paying Agent,
Registrar or co-Registrar without
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prior notice to any Holder. The Company shall notify the Trustee in writing and
the Trustee shall notify the Holders of the name and address of any Agent not a
party to this Indenture. The Company shall enter into an appropriate agency
agreement with any Agent not a party to this Indenture, and such agreement shall
incorporate the provisions of the TIA and implement the provisions of this
Indenture that relate to such Agent. The Company initially appoints the Trustee
as Registrar (subject to Section 2.06), Paying Agent and agent for service of
notices and demands in connection with the Notes. The Company or any of its
Affiliates may act as Paying Agent, Registrar or co-Registrar. If the Company
fails to appoint or maintain a Registrar and/or Paying Agent, subject to Section
2.06, the Trustee shall act as such, and shall be entitled to appropriate
compensation in accordance with Section 7.07.
SECTION 2.04. PAYING AGENT TO HOLD MONEY IN TRUST.
The Company shall require each Paying Agent other than the Trustee to
agree in writing that the Paying Agent will hold in trust for the Holders'
benefit or the Trustee all money the Paying Agent holds for the redemption or
purchase of the Notes or for the payment of principal of, or premium, if any, or
interest including Liquidated Damages, if any, on the Notes, and will notify the
Trustee of any default by the Company in providing the Paying Agent with
sufficient funds to redeem or purchase Notes or make any payment on the Notes as
and to the extent required to be redeemed, purchased or paid under the terms of
this Indenture. While any such default continues, the Trustee may require the
Paying Agent to pay all money it holds to the Trustee and account for any funds
disbursed. The Company at any time may require the Paying Agent to pay all money
it holds to the Trustee. Upon payment over to the Trustee, the Paying Agent (if
other than the Company or any of its Affiliates) shall have no further liability
for the money it delivered to the Trustee. If the Company or any of its
Subsidiaries acts as Paying Agent, it shall segregate and hold in a separate
trust fund for the Holders' benefit all money it holds as Paying Agent.
SECTION 2.05. HOLDER LISTS.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
Holders and shall otherwise comply with section 312(a) of the TIA. If the
Trustee is not the Registrar, the Company shall furnish to the Trustee, at least
seven Business Days before each Interest Payment Date and at such other times as
the Trustee may request in writing, a list in such form and as of such date as
the Trustee may reasonably require that sets forth the names and addresses of,
and the aggregate principal amount of Notes held by, each Holder, and the
Company shall otherwise comply with section 312(a) of the TIA.
SECTION 2.06. TRANSFER AND EXCHANGE.
(a) The Company appoints the Trustee as transfer and exchange agent for
the purpose of any transfer or exchange of the Notes.
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(b) Without the prior consent of the Company, neither the Trustee nor
the Registrar shall be required (i) to register the transfer of or exchange any
Note selected for redemption, (ii) to register the transfer of or exchange any
Note for a period of 15 days before the mailing of a notice of redemption ending
on the date of such mailing, (iii) to register the transfer or exchange of a
Note between a Record Date and the next succeeding Interest Payment Date.
(c) No service charge shall be made for any registration of transfer or
exchange (except as otherwise expressly permitted herein), but the Registrar may
require a Holder to furnish appropriate endorsements and transfer documents and
payment of a sum sufficient to cover any transfer tax or similar governmental
charge payable in connection therewith (other than any such transfer tax or
similar governmental charge payable upon exchanges pursuant to Section 2.12,
3.06 or 9.05, which the Company shall pay).
(d) Prior to due presentment for registration of transfer of any Note
to the Trustee, the Trustee, any Agent and the Company shall deem and treat the
Person in whose name any Note is registered as the absolute owner of such Note
(whether or not such Note shall be overdue and notwithstanding any notation of
ownership or other writing on such Note made by anyone other than the Company,
the Registrar, or any co-Registrar) for the purpose of receiving payment of
principal of, premium, if any, interest and Liquidated Damages, if any, on such
Note and for all other purposes, and notice to the contrary shall not affect the
Trustee, any Agent or the Company.
(e) A Holder may transfer a Note only by written application to the
Registrar stating the name of the proposed transferee and otherwise complying
with the terms of this Indenture. No such transfer shall be effected until, and
such transferee shall succeed to the rights of a Holder only upon, final
acceptance and registration of the transfer by the Registrar. Furthermore, any
Holder of a Global Note shall, by acceptance of such Global Note, be deemed to
agree that transfers of beneficial interests in such Global Note may be effected
through a book entry system maintained by the Holder of such Global Note (or its
agent) and that ownership of a beneficial interest in the Note shall be required
to be reflected in a book entry. When Notes are presented to the Registrar or a
co-Registrar with a request to register the transfer or to exchange them for an
equal principal amount of Notes of other authorized denominations (including an
exchange of Old Notes for New Notes), the Registrar or co-Registrar, as
relevant, shall register the transfer or make the exchange as requested if the
requirements for such transactions set forth herein are met; PROVIDED, HOWEVER,
that no exchanges of Old Notes for New Notes shall occur except pursuant to the
Exchange Offer or otherwise pursuant to a Registration of Notes; AND PROVIDED,
FURTHER that any Old Notes that are so exchanged for New Notes shall be
cancelled by the Trustee. To permit registrations of transfers and exchanges,
the Company shall execute and the Trustee shall authenticate Notes at the
Registrar's written request.
All Notes issued upon any registration of transfer or exchange of Notes
shall be valid obligations of the Company, evidencing the same debt, and
entitled to the same benefits under this Indenture, as the Notes surrendered
upon such registration of transfer or exchange.
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SECTION 2.07. BOOK-ENTRY PROVISIONS FOR GLOBAL NOTES.
(a) The Restricted Global Notes and Regulation S Global Notes initially
shall (i) be registered in the name of the Depositary for such Global Notes or
the nominee of such Depositary, (ii) be delivered to the Trustee as custodian
for such Depositary and (iii) bear legends as set forth in Section 2.01.
Members of, or participants in, the Depositary ("AGENT MEMBERS") shall
have no rights under this Indenture with respect to any Restricted Global Note
or Regulation S Global Note held on their behalf by the Depositary, or the
Trustee as its custodian, or under such Restricted Global Note or Regulation S
Global Note, and the Depositary may be treated by the Company, the Trustee and
any agent of the Company or the Trustee as the absolute owner of such Global
Note for all purposes whatsoever. Notwithstanding the foregoing, nothing herein
shall prevent the Company, the Trustee or any agent of the Company or the
Trustee, from giving effect to any written certification, proxy or other
authorization furnished by the Depositary or shall impair, as between the
Depositary and its Agent Members, the operation of customary practices governing
the exercise of the rights of a Holder of any Note.
(b) Transfers of a Restricted Global Note or Regulation S Global Note
shall be limited to transfers of such Global Note in whole, but not in part, to
the Depositary, its successors or their respective nominees. Interests of
beneficial owners in a Restricted Global Note or Regulation S Global Note may be
transferred in accordance with the rules and procedures of the Depositary and
the provisions of Section 2.08.
(c) Any beneficial interest in one of the Global Notes that is
transferred to a Person who takes delivery in the form of an interest in the
other Global Note will, upon transfer, cease to be an interest in such Global
Note and become an interest in the other Global Note and, accordingly, will
thereafter be subject to all transfer restrictions, if any, and other procedures
applicable to beneficial interests in such other Global Note for as long as it
remains such an interest.
(d) In connection with any exchange of a portion of the beneficial
interests in the Global Notes for Certificated Notes by the beneficial owners
pursuant to Section 2.01(a), the Registrar shall reflect on its books and
records the date and a decrease in the principal amount of the Global Notes in
an amount equal to the principal amount of the beneficial interest in the Global
Notes to be transferred, and the Company shall execute, and the Trustee shall
authenticate and make available for delivery, one or more Certificated Notes of
like tenor and amount.
(e) In connection with the transfer of all of the Restricted Global
Notes or Regulation S Global Notes to beneficial owners pursuant to Section
2.01(a), the Restricted Global Notes or Regulation S Global Notes, as the case
may be, shall be deemed to be surrendered to the Trustee for cancellation, and
the Company shall execute, and the Trustee shall authenticate and make available
for delivery, to each beneficial owner identified by the relevant Global Note
Holder and the Depositary in exchange for its beneficial interest in the
Restricted
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Global Notes or Regulation S Global Notes, as the case may be, an equal
aggregate principal amount of Certificated Notes or Offshore Certificated Notes,
as the case may be, of authorized denominations.
(f) Any Certificated Notes delivered in exchange for an interest in a
Restricted Global Note pursuant to Section 2.01(a) or paragraph (d) of this
Section shall, except as otherwise provided by paragraph (e) of Section 2.08,
bear the legend regarding transfer restrictions applicable to the Certificated
Notes set forth in Section 2.01(a).
(g) Any Offshore Certificated Note delivered in exchange for an
interest in a Regulation S Global Note pursuant to Section 2.01(a) or paragraph
(d) of this Section shall, except as otherwise provided by paragraph (e) of
Section 2.08, bear the legend regarding transfer restrictions applicable to the
Offshore Certificated Note set forth in Section 2.01(a).
(h) The registered holder of a Global Note may grant proxies and
otherwise authorize any Person, including Agent Members and Persons that may
hold interests through Agent Members, to take any action which a Holder is
entitled to take under this Indenture or the Notes.
SECTION 2.08. SPECIAL TRANSFER PROVISIONS.
Unless and until a Note is exchanged for a New Note in connection with
an effective Registration pursuant to the Registration Rights Agreement or the
Note is no longer required by Section 2.08(e) to bear a Securities Act Legend,
the following provisions shall apply:
(a) TRANSFERS TO QIBS. The following provisions shall apply with
respect to the registration of any proposed transfer of a Certificated Note or
an interest in a Restricted Global Note to a QIB (excluding Non-U.S. Persons):
(i) If the Note to be transferred consists of (x) Certificated
Notes, the Registrar shall register the transfer, if such transfer is
being made by a proposed transferor who has checked the box provided
for on the form of Note stating, or has otherwise advised the Company
and the Registrar in writing, that the sale has been made in compliance
with the provisions of Rule 144A to a transferee who has signed the
certification provided for on the form of Note stating, or has
otherwise advised the Company and the Registrar, that it is purchasing
the Note for its own account or an account with respect to which it
exercises sole investment discretion and that it and any such account
is a QIB within the meaning of Rule 144A, and is aware that the sale to
it is being made in reliance on Rule 144A and acknowledges that it has
received such information regarding the Company as it has requested
pursuant to Rule 144A or has determined not to request such information
and that it is aware that the transferor is relying upon its foregoing
representation in order to claim the exemption from registration
provided for by Rule 144A or (y) an interest in the Restricted Global
Note, the transfer of such interest may be effected only through the
book entry system maintained by the Depositary.
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(ii) If the proposed transferee is an Agent Member, and the
Note to be transferred consists of Certificated Notes, upon receipt by
the Registrar of the documents referred to in clause (i) and
instructions given in accordance with the Depositary's and the
Registrar's procedures, the Registrar shall reflect on its books and
records the date and an increase in the principal amount of the
Restricted Global Notes in an amount equal to the principal amount of
the Certificated Notes to be transferred and the Trustee shall cancel
the Certificated Notes so transferred.
(b) TRANSFERS OF INTERESTS IN THE REGULATION S GLOBAL NOTES OR OFFSHORE
CERTIFICATED NOTES TO U.S. PERSONS. The following provisions shall apply with
respect to any transfer of interests in any Regulation S Global Note or Offshore
Certificated Notes to U.S. Persons:
(i) prior to the removal of the Securities Act Legend from any
Regulation S Global Note or Offshore Certificated Notes in accordance
with Section 2.01(e), the Registrar shall refuse to register such
transfer; and
(ii) after such removal, the Registrar shall register the
transfer of any such Note without requiring any additional
certification.
(c) TRANSFERS TO NON-U.S. PERSONS AT ANY TIME. The following provisions
shall apply with respect to any transfer of a Note to a Non-U.S. Person:
(i) Prior to the first anniversary of the Issue Date, the
Registrar shall register any proposed transfer of a Note to a Non-U.S.
Person upon receipt of a certificate substantially in the form of
Exhibit B hereto from the proposed transferor.
(ii) On and after the first anniversary of the Issue Date, the
Registrar shall register any proposed transfer to any Non-U.S. Person
if the Note to be transferred is a Certificated Note or an interest in
the Global Note, upon receipt of a certificate substantially in the
form of Exhibit B from the proposed transferor.
(iii) (A) If the proposed transferor is an Agent Member
holding a beneficial interest in a Restricted Global Note, upon receipt
by the Registrar of (x) the documents, if any, required by paragraph
(ii) and (y) instructions in accordance with the Depositary's and the
Registrar's procedures, the Registrar shall reflect on its books and
records the date and a decrease in the principal amount of the
Restricted Global Notes in an amount equal to the principal amount of
the beneficial interest in the Restricted Global Notes to be
transferred, and (B) if the proposed transferee is an Agent Member,
upon receipt by the Registrar of instructions given in accordance with
the Depositary's and the Registrar's procedures, the Registrar shall
reflect on its books and records the date and an increase in the
principal amount of the Regulation S Global Notes in an amount equal to
the principal amount of the Certificated Notes or the Restricted Global
Notes, as the case may be, to be transferred, and the Trustee shall
cancel the Certificated Notes, if any, so transferred or decrease the
amount of the Restricted Global Notes, as the case may be.
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(d) SECURITIES ACT LEGEND. Upon the registration of transfer, exchange
or replacement of Notes not bearing the Securities Act Legend, the Registrar
shall deliver Notes that do not bear the Securities Act Legend. Upon the
registration of transfer, exchange or replacement of Notes bearing the
Securities Act Legend, the Registrar shall deliver only Notes that bear the
Securities Act Legend unless (i) the Note being delivered is a New Note issued
in the Exchange Offer pursuant to the Exchange Offer Registration Statement or
(ii) there is delivered to the Registrar an Opinion of Counsel reasonably
satisfactory to the Company and the Trustee to the effect that neither such
legend nor the related restrictions on transfer are required in order to
maintain compliance with the provisions of the Securities Act.
(e) GENERAL. By its acceptance of any Note bearing the Securities Act
Legend, each Holder of such a Note acknowledges the restrictions on transfer of
such Note set forth in this Indenture and in the Securities Act Legend and
agrees that it will transfer such Note only as provided in this Indenture. The
Registrar shall not register a transfer of any Note unless such transfer
complies with the restrictions on transfer of such Note set forth in this
Indenture. In connection with any transfer of Notes, each Holder agrees by its
acceptance of the Notes to furnish the Registrar or the Company such
certifications, legal opinions or other information as either of them may
reasonably require to confirm that such transfer is being made pursuant to an
exemption from, or a transaction not subject to, the registration requirements
of the Securities Act; PROVIDED that the Registrar shall not be required to
determine (but may rely on a determination made by the Company with respect to)
the sufficiency of any such certifications, legal opinions or other information.
The Registrar shall retain copies of all letters, notices and other
written communications received pursuant to Section 2.07 or this Section 2.08.
The Company shall have the right to inspect and make copies of all such letters,
notices or other written communications at any reasonable time upon the giving
of reasonable written notice to the Registrar.
SECTION 2.09. REPLACEMENT NOTES.
Holders shall surrender mutilated Notes to the Trustee. If any
mutilated Note is surrendered to the Trustee, or if the Company and the Trustee
receive evidence to their satisfaction of the destruction, loss or theft of any
Note, the Company shall issue and the Trustee shall authenticate, upon receipt
of a written order signed by two Officers of the Company, a replacement Note if
the Trustee's requirements are met, and each such replacement Note shall be an
additional obligation of the Company. If the Trustee or the Company requires,
the Holder must supply an indemnity bond that is sufficient, in the reasonable
judgment of the Trustee and the Company, to protect the Company, the Trustee,
any Agent or any authenticating agent from any loss that any of them may suffer
if a Note is replaced. The Company and the Trustee may charge for its reasonable
expenses in replacing a Note.
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SECTION 2.10. OUTSTANDING NOTES.
The Notes outstanding at any time are all the Notes the Trustee has
authenticated except for those it has cancelled, those delivered to it for
cancellation, and those described in this Section 2.10 as not outstanding. If a
Note is replaced pursuant to Section 2.09, it ceases to be outstanding unless
the Trustee receives proof satisfactory to it that a protected purchaser holds
the replaced Note. If the entire principal of, premium, if any, and accrued
interest and Liquidated Damages, if any, on any Note is considered paid under
Section 2.04, it ceases to be outstanding and interest on it ceases to accrue.
Subject to Section 2.11, a Note does not cease to be outstanding because the
Company or any Affiliate of the Company holds such Note.
SECTION 2.11. TREASURY NOTES.
In determining whether the Holders of the required principal amount of
Notes have concurred in any direction, waiver or consent, Notes owned by the
Company or any Affiliate of the Company shall be considered as though they are
not outstanding; PROVIDED, HOWEVER, that for the purposes of determining whether
the Trustee shall be protected in relying on any such direction, waiver or
consent, only Notes that the Trustee actually knows are so owned shall be so
disregarded. Notwithstanding the foregoing, Notes that the Company or any
Affiliate of the Company offers to purchase or acquires pursuant to an exchange
offer, tender offer or otherwise shall not be deemed to be owned by the Company
or any Affiliate of the Company until legal title to such Notes passes to the
Company or such Affiliate, as the case may be.
SECTION 2.12. TEMPORARY NOTES.
Until definitive Notes are ready for delivery, the Company may prepare
and the Trustee on its behalf shall authenticate temporary Notes. Temporary
Notes shall be substantially in the form of definitive Notes but may have
variations that the Company considers appropriate for temporary Notes. Without
unreasonable delay, the Company shall prepare and the Trustee on its behalf,
upon receipt of a written order signed by two Officers of the Company, shall
authenticate definitive Notes in exchange for temporary Notes. Until such
exchange, temporary Notes shall be entitled to the same rights, benefits and
privileges as definitive Notes.
SECTION 2.13. CANCELLATION.
Holders shall surrender Notes for cancellation to the Trustee. The
Company at any time may deliver Notes to the Trustee for cancellation. The
Registrar, any co-Registrar, the Paying Agent, the Company and its Subsidiaries
shall forward to the Trustee any Notes surrendered to them for registration of
transfer, exchange, replacement, payment (including all Notes called for
redemption and all Notes accepted for payment pursuant to an Offer) or
cancellation, and the Trustee shall cancel all such Notes and shall return all
cancelled Notes to the Company. The Company may not issue new Notes to replace
any Notes that have been cancelled by the Trustee or that have been delivered to
the Trustee for cancellation. If the Company or any Affiliate of the
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Company acquires any Notes (other than by redemption pursuant to Section 3.07 or
an Offer pursuant to Section 4.15 or 4.16), such acquisition shall not operate
as a redemption or satisfaction of the Indebtedness represented by such Notes
unless and until such Notes are delivered to the Trustee for cancellation.
SECTION 2.14. DEFAULTED INTEREST.
If the Company defaults in a payment of interest on the Notes, it shall
pay the defaulted interest in any lawful manner plus, to the extent lawful,
interest payable on the defaulted interest, to Holders on a subsequent special
record date, in each case at the rate provided in the Notes and Section 4.01.
The Company shall, with the Trustee's consent, fix or cause to be fixed each
such special record date and payment date. At least 15 days before the special
record date, the Company (or, at the request of the Company, the Trustee in the
name of, and at the expense of, the Company) shall mail a notice that states the
special record date, the related payment date and the amount of interest to be
paid.
SECTION 2.15. RECORD DATE.
The record date for purposes of determining the identity of Holders of
Notes entitled to vote or consent to any action by vote or consent authorized or
permitted under this Indenture shall be determined as provided for in section
316(c) of the TIA.
SECTION 2.16. CUSIP AND CINS NUMBERS.
A "CUSIP" or "CINS" number will be printed on the Notes and the Trustee
shall use CUSIP or CINS numbers, as the case may be, in notices of redemption,
purchase or exchange as a convenience to Holders; PROVIDED that any such notice
may state that no representation is made as to the correctness or accuracy of
such numbers printed in the notice or on the Notes and that reliance may be
placed only on the other identification numbers printed on the Notes. The
Company will promptly notify the Trustee of any change in the CUSIP or CINS
number, as the case may be.
ARTICLE III
REDEMPTIONS AND OFFERS TO PURCHASE
SECTION 3.01. NOTICES TO TRUSTEE.
If the Company elects to redeem Notes pursuant to Section 3.07, it
shall furnish to the Trustee, at least 45 but not more than 60 days before the
redemption date (or such shorter time as may be satisfactory to the Trustee),
(x) an Officers' Certificate stating (i) that the Company has elected to redeem
Notes pursuant to Section 3.07(a) or (b), as the case may be, (ii) the date the
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notice of redemption is to be mailed to Holders, (iii) the redemption date, (iv)
the aggregate principal amount of Notes to be redeemed, (v) the redemption price
for such Notes and, (vi) the amount, if any, of accrued and unpaid interest and
Liquidated Damages, if any, on such Notes as of the redemption date and (y) in
the case of any redemption pursuant to Section 3.07(b), an Opinion of Counsel
that the Company is entitled to redeem the Notes. If the Trustee is not the
Registrar, the Company shall, concurrently with delivery of its notice to the
Trustee of a redemption, cause the Registrar to deliver to the Trustee a
certificate (upon which the Trustee may rely) setting forth the name of, and the
aggregate principal amount of the Notes held by, each Holder.
If the Company is required to offer to purchase Notes pursuant to
Section 4.15, 4.16 or 4.17, it shall furnish to the Trustee, at least two
Business Days before notice of the Offer is to be mailed to Holders, an
Officers' Certificate setting forth (i) that the Offer is being made pursuant to
Section 4.15, 4.16 or 4.17, as the case may be, (ii) the proposed Purchase Date,
(iii) the maximum principal amount of Notes the Company is offering to purchase
pursuant to the Offer, (iv) the purchase price for such Notes and (v) the
amount, if any, of accrued and unpaid interest and Liquidated Damages, if any,
on such Notes as of the proposed Purchase Date.
The Company will also provide the Trustee with any additional
information that the Trustee reasonably requests in connection with any
redemption or Offer.
SECTION 3.02. SELECTION OF NOTES TO BE REDEEMED OR PURCHASED.
If less than all outstanding Notes are to be redeemed or if less than
all Notes tendered pursuant to an Offer are to be accepted for payment, the
Trustee shall select the outstanding Notes to be redeemed or accepted for
payment on a PRO RATA basis, by lot or by any other method that the Trustee
deems fair and appropriate. If the Company elects to mail notice of a redemption
to Holders, the Trustee shall at least 15 days prior to the date notice of
redemption is to be mailed (i) select the Notes to be redeemed from Notes
outstanding not previously called for redemption in the manner specified by the
Trustee and (ii) notify the Company of the names of each Holder of Notes
selected for redemption, the principal amount of Notes held by each such Holder
and the principal amount of such Holder's Notes that are to be redeemed. If less
than all Notes tendered pursuant to an Offer are to be accepted for payment, the
Trustee shall select on or prior to the Purchase Date for such Offer the Notes
to be accepted for payment. The Trustee shall select for redemption or purchase
Notes or portions of Notes in principal amounts at maturity of $1,000 or
integral multiples thereof; except that if all of the Notes of a Holder are
selected for redemption or purchase, the aggregate principal amount of the Notes
held by such Holder, even if not an integral multiple of $1,000, may be redeemed
or purchased. Except as provided in the preceding sentence, provisions of this
Indenture that apply to Notes called for redemption or tendered pursuant to an
Offer also apply to portions of Notes called for redemption or tendered pursuant
to an Offer. The Trustee shall notify the Company promptly of the Notes or
portions of Notes to be called for redemption or selected for purchase.
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SECTION 3.03. NOTICE OF REDEMPTION.
(a) At least 30 days but not more than 60 days before any redemption
date the Company shall mail by first class mail a notice of redemption to the
Holders and the Trustee. With respect to any redemption of Notes, the notice
shall identify the Notes or portions thereof to be redeemed, including CUSIP or
CINS numbers, and shall state: (1) the redemption date; (2) the redemption price
for the Notes and the amount, if any, of unpaid and accrued interest on such
Notes as of the redemption date and the premium, if any, and Liquidated Damages,
if any, on the Notes as of the redemption date; (3) the section of this
Indenture pursuant to which the Notes called for redemption are being redeemed;
(4) if any Note is being redeemed in part, the portion of the principal amount
of such Note to be redeemed and that, after the redemption date, upon surrender
of such Note, a new Note or Notes in principal amount equal to the unredeemed
portion will be issued; (5) the name and address of the Paying Agent; (6) that
Notes called for redemption must be surrendered to the Paying Agent to collect
the redemption price for, and any accrued and unpaid interest and Liquidated
Damages, if any, on such Notes as of the date of redemption; (7) that, unless
the Company defaults in making such redemption payment, interest on Notes called
for redemption ceases to accrete or accrue, as the case may be, on, and after
the redemption date; and (8) that no representation is made as to the
correctness or accuracy of the CUSIP or CINS number (as applicable) listed in
such notice and printed on the Notes. If any of the Notes to be redeemed is in
the form of a Global Note, then the Company shall modify such notice to the
extent necessary to accord with the procedures of the Depositary applicable to
redemptions.
(b) At the request of the Company, the Trustee shall (at the Company's
expense and in the Company's name) give the notice of any redemption to Holders;
PROVIDED, HOWEVER, that the Company shall deliver to the Trustee, at least 45
days prior to the date of redemption and at least 15 days prior to the date that
notice of the redemption is to be mailed to Holders, an Officers' Certificate
that (i) requests the Trustee to give notice of the redemption to Holders, (ii)
sets forth the information to be provided to Holders in the notice of
redemption, as set forth in the preceding paragraph, and (iii) sets forth the
aggregate principal amount of Notes to be redeemed and the amount, if any, of
accrued and unpaid interest and Liquidated Damages, if any, thereon as of the
date of redemption. If the Trustee is not the Registrar, the Company shall,
concurrently with any such request, cause the Registrar to deliver to the
Trustee a certificate (upon which the Trustee may rely) setting forth the name
of, the address of, and the aggregate principal amount of Notes held by, each
Holder; PROVIDED, FURTHER that any such Officers' Certificate may be delivered
to the Trustee on a date later than permitted under this Section 3.03(b) if such
later date is acceptable to the Trustee.
SECTION 3.04. EFFECT OF NOTICE OF REDEMPTION.
Once notice of redemption is mailed, Notes called for redemption become
due and payable on the redemption date at the price set forth in the Note.
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SECTION 3.05. DEPOSIT OF REDEMPTION PRICE.
(a) Prior to 10:00 a.m., New York City time, on any redemption date,
the Company shall deposit with the Paying Agent money sufficient to pay the
redemption price of, and the amount, if any, of accrued interest and unpaid
interest and Liquidated Damages, if any, on all Notes to be redeemed in
immediately available funds as of the date of redemption. After any redemption
date, the Paying Agent shall promptly return to the Company any money that the
Company deposited with the Paying Agent in excess of the amounts necessary to
pay the redemption price of, and any accrued interest and Liquidated Damages, if
any, on all Notes to be redeemed.
(b) If the Company complies with the preceding paragraph, interest on
the Notes to be redeemed will cease to accrue on such Notes on the applicable
redemption date, whether or not such Notes are presented for payment. If a Note
is redeemed on an Interest Payment Date, then any accrued and unpaid interest
shall be paid to the Person in whose name such Note was registered at the close
of business on the related Record Date, but, in all other circumstances, such
interest shall be paid to the Holder of such Note. If any Note called for
redemption shall not be so paid upon surrender for redemption because of the
failure of the Company to comply with the preceding paragraph, interest will be
paid on the unpaid principal, premium, if any, and unpaid interest and
Liquidated Damages, if any, which has accrued to the redemption date, from the
redemption date until such amounts are paid, at the rate of interest provided in
the Notes and Section 4.01.
SECTION 3.06. NOTES REDEEMED IN PART.
Upon surrender of a Note that is redeemed in part, the Company shall
issue and the Trustee shall authenticate, upon receipt of a written order signed
by two Officers of the Company, for the Holder at the Company's expense a new
Note equal in principal amount to the unredeemed portion of the Note
surrendered.
SECTION 3.07. REDEMPTION PROVISIONS.
(a) The Notes will not be redeemable, either in whole or in part, at
the Company's option prior to June 1, 2003, except as described below in
subsection (b) with the proceeds of an Public Equity Offering. Thereafter, the
Notes will be subject to redemption at the option of the Company, in whole or
from time to time in part, upon not less than 30 nor more than 60 days' notice
to the Holders and the Trustee, at the redemption prices (expressed as
percentages of principal amount) set forth below, together with accrued and
unpaid interest and Liquidated Damages, if any, to the redemption date (subject
to the right of Holders of record on the relevant Record Date to receive
interest due on an Interest Payment Date that is on or prior to the redemption
date), if redeemed during the twelve-month period beginning on June 1 of the
applicable year indicated below:
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YEAR PERCENTAGE
---- ----------
2003...................................... 104.938%
2004...................................... 103.292%
2005...................................... 101.646%
2006 and thereafter....................... 100.000%
(b) In addition to the Company's right to redeem the Notes as set forth
in subsection (a) above, from time to time prior to June 1, 2001, the Company
may redeem up to 35% of the aggregate principal amount of the Notes outstanding
on the Issue Date at a redemption price of 109.875% of the principal amount
thereof, in each case plus accrued and unpaid interest and Liquidated Damages,
if any, to the redemption date, with the net cash proceeds of one or more Public
Equity Offerings; PROVIDED that (i) at least 65% of the principal amount of the
Notes originally issued remains outstanding immediately after any such
redemption and (ii) the Company effects such redemption within 60 days after the
Public Equity Offering closes.
SECTION 3.08. MANDATORY OFFERS.
(a) Within 30 days after any Change of Control Trigger Date, any Asset
Sale Trigger Date or the Mandatory Repurchase Trigger Date, the Company shall
mail to the Trustee (who shall mail to each Holder at the Company's expense) a
notice stating: (1) that an Offer to repurchase Notes is being made pursuant to
Section 4.15, 4.16 or 4.17, as the case may be, and describing the transaction
or transactions that constitute the Change of Control, Asset Sale or failure to
expend the net proceeds of the offering of the Notes made pursuant to the
Offering Memorandum, as the case may be, and the length of time the Offer shall
remain open and the maximum aggregate principal amount of Notes that the Company
is offering to purchase pursuant to such Offer; (2) the purchase price for the
Notes (as set forth in Section 4.15, 4.16 or 4.17, as the case may be), the
amount (if any) of accrued and unpaid interest on such Notes as of the Purchase
Date, and the Purchase Date; (3) that any Note not accepted for payment will
continue to accrue interest; (4) that, unless the Company defaults in making
such payment, any Note accepted for payment pursuant to the Offer will cease to
accrue interest after the relevant Purchase Date; (5) that Holders may tender
all or any portion of the Notes registered in the name of such Holder and that
any portion of a Note tendered must be tendered in a principal amount of $1,000
or an integral multiple thereof; (6) that Holders electing to tender any Note or
portion thereof will be required to surrender their Note, with the form therein
entitled "Option of Holder to Elect Purchase" completed, or transfer by
book-entry transfer, to the Company, a Depositary, if appointed by the Company,
or a Paying Agent at the address specified in the notice at least three days
prior to the Purchase Date; (7) that Holders will be entitled to withdraw their
election to tender Notes if the Company, the Depositary or the Paying Agent, as
the case may be, receives, not later than the close of business on the last day
of the relevant Offer Period, a facsimile transmission or letter setting forth
the name of the Holder, the principal amount of Notes delivered for purchase,
and a statement that such Holder is withdrawing his election to have such Note
purchased; and (8) that Holders whose Notes are accepted for payment in part
will be issued new Notes equal in principal amount to the unpurchased portion of
Notes
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surrendered; PROVIDED that only Notes in a principal amount of $1,000 or
integral multiples thereof will be accepted for payment in part.
(b) On the Purchase Date for any Offer, the Company will (i) to the
extent lawful, (x) in the case of an Offer resulting from a Change of Control,
accept for payment all Notes or portions thereof properly tendered pursuant to
such Offer, (y) in the case of an Offer resulting from one or more Asset Sales
accept for payment, on a PRO RATA basis to the extent necessary, the Payment
Amount of Notes or portions thereof pursuant to the Net Proceeds Offer or if
less than the Payment Amount has been tendered, all Notes tendered, and will
deliver to the Trustee an Officers' Certificate stating that such Notes or
portions thereof were accepted for payment by the Company in accordance with the
terms of Sections 3.08 and 4.16, or (z) in the case of a Mandatory Repurchase
Offer accept for payment, on a PRO RATA basis to the extent necessary, the
Unutilized Proceeds Amount of Notes or portions thereof pursuant to the
Mandatory Repurchase Offer or if less than the Unutilized Proceeds Amount has
been tendered, all Notes tendered, and will deliver to the Trustee an Officers'
Certificate stating that such Notes or portions thereof were accepted for
payment by the Company in accordance with the terms of Sections 3.08 and 4.17,
(ii) deposit with the Paying Agent in immediately available funds the aggregate
purchase price of all Notes or portions thereof accepted for payment any accrued
and unpaid interest and Liquidated Damages, if any, on such Notes as of the
Purchase Date, and (iii) deliver, or cause to be delivered, to the Trustee all
Notes or portions thereof so accepted together with an Officers' Certificate
setting forth the name of each Holder that tendered Notes and the principal
amount of the Notes, as the case may be, or portions thereof tendered by each
such Holder.
(c) With respect to any Offer, (i) if less than all of the Notes
tendered pursuant to an Offer are to be accepted for payment by the Company for
any reason, the Trustee shall select on or prior to the Purchase Date the Notes
or portions thereof to be accepted for payment pursuant to Section 3.02, and
(ii) if the Company deposits with the Paying Agent on the Purchase Date an
amount sufficient to purchase all Notes accepted for payment, interest shall
cease to accrue on such Notes on the Purchase Date; PROVIDED, HOWEVER, that if
the Company fails to deposit an amount sufficient to purchase all Notes accepted
for payment, the deposited funds shall be used to purchase on a PRO RATA basis
all Notes accepted for payment and interest shall continue to accrue, as the
case may be, on all Notes not purchased.
(d) Promptly after consummation of an Offer, (i) the Paying Agent shall
mail to each Holder of Notes or portions thereof accepted for payment an amount
equal to the Change of Control Purchase Price, Offered Price or Mandatory
Repurchase Offered Price, as the case may be, (ii) with respect to any tendered
Note not accepted for payment in whole or in part, the Trustee shall return such
Note to the Holder thereof, and (iii) with respect to any Note accepted for
payment in part, the Company shall issue and the Trustee shall authenticate,
upon receipt of a written order signed by two Officers of the Company, and mail
to each such Holder a new Note equal in principal amount to the unpurchased
portion of the tendered Note.
(e) The Company will (i) announce the results of the Offer to Holders
on or as soon as practicable after the Purchase Date, and (ii) comply with Rule
14e-1 under the Exchange Act
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and any other securities laws and regulations to the extent such laws and
regulations are applicable to any Offer.
(f) If any of this Section 3.08, Section 4.15, Section 4.16 or Section
4.17 conflict with duties imposed upon the Company or the Subsidiary Guarantors
by virtue of any applicable United States securities laws or regulations, the
Company or such Subsidiary Guarantor, as the case may be, shall comply with such
securities laws or regulations and will not be deemed to have breached its
obligations under this Indenture.
ARTICLE IV
COVENANTS
SECTION 4.01. PAYMENT OF NOTES.
The Company shall pay the principal of, and premium, if any, and
interest and Liquidated Damages, if any, on the Notes on the dates and in the
manner provided in the Notes. Holders must surrender their Notes to the Paying
Agent to collect principal payments. The Notes will be payable as to principal,
premium, if any, and interest and Liquidated Damages, if any, at the office or
agency of the Company maintained for such purpose within the City and State of
New York or, at the option of the Company, by wire transfer of immediately
available funds or, in the case of Certificated Notes or Offshore Certificated
Notes only, by mailing a check to the registered address of the Holder.
Principal, premium or interest and Liquidated Damages, if any, shall be
considered paid on the date due if, by 10:00 a.m., New York City time, on such
date, the Company has deposited with the Paying Agent money in immediately
available funds designated for and sufficient to pay such principal, premium or
interest and Liquidated Damages, if any. The Paying Agent shall return to the
Company, no later than five days following the date of payment, any money that
exceeds the amount then due and payable on the Notes.
SECTION 4.02. REPORTS.
Following the earlier of the effective date of the Exchange Offer
Registration Statement and the effective date of the Shelf Registration
Statement (if any), whether or not required by the rules and regulations of the
Commission, so long as any Notes are outstanding, the Company will file with the
Commission, to the extent such filings are accepted by the Commission, all
quarterly and annual reports and other information, documents and reports that
the Company would be required to file if it were subject to Section 13 or 15(d)
of the Exchange Act. The Company will also (i) file with the Trustee (with
exhibits), and provide to each Holder (without exhibits), without cost to that
Holder, copies of such reports and documents within 15 days after the date on
which the Company files such reports and documents with the Commission or the
date on which the Company would be required to file such reports and documents
if the
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Company were subject to Section 13 or 15(d) of the Exchange Act and (ii) if
filing such reports and documents with the Commission is not accepted by the
Commission or is prohibited under the Exchange Act, supply at its cost copies of
such reports and documents (including any exhibits thereto) to any Holder
promptly on its written request. For so long as any Notes remain outstanding,
the Company will also furnish to the Holders and beneficial holders of Notes and
to prospective purchasers of Notes designated by the Holders of Transfer
Restricted Securities (as defined in the Registration Rights Agreement) and to
broker-dealers, on their request, the information required to be delivered
pursuant to Rule 144A(d)(4) under the Securities Act.
SECTION 4.03. COMPLIANCE CERTIFICATE.
The Company and each Subsidiary Guarantor shall deliver to the Trustee,
within 120 days after the end of each fiscal year of the Company, beginning with
the fiscal year ending December 31, 1998, an Officers' Certificate stating that
(i) a review of the activities of the Company and its Subsidiaries during the
preceding fiscal year without regard to any grace period has been made to
determine whether the Company and each Subsidiary Guarantor has kept, observed,
performed and fulfilled all of its obligations under this Indenture and the
Notes, (ii) such review was supervised by the Officers of the Company and each
Subsidiary Guarantor signing such certificate, and (iii) that to the best
knowledge of each Officer signing such certificate, (a) the Company has kept,
observed, performed and fulfilled each and every covenant contained in this
Indenture and is not in default in the performance or observance of any of the
terms, provisions and conditions of this Indenture (or, if a Default or Event of
Default occurred, describing all such Defaults or Events of Default of which
each such Officer may have knowledge and what action the Company and each
Subsidiary Guarantor has taken or proposes to take with respect thereto), and
(b) no event has occurred and remains in existence by reason of which payments
on account of the principal of, or premium, if any, or interest or Liquidated
Damages, if any, on the Notes are prohibited or if such event has occurred, a
description of the event and what action the Company and each Subsidiary
Guarantor is taking or proposes to take with respect thereto.
The Company will, so long as any of the Notes are outstanding, deliver
to the Trustee, promptly after any Officer of the Company becomes aware of any
Default or Event of Default, an Officers' Certificate specifying such Default or
Event of Default and what action the Company is taking or proposes to take with
respect thereto.
SECTION 4.04. STAY, EXTENSION AND USURY LAWS.
Each of the Company and the Subsidiary Guarantors covenant (to the
extent that they may lawfully do so) that they will not at any time insist upon,
plead, or in any manner whatsoever claim or take the benefit or advantage of,
any stay, extension or usury law wherever enacted, now or at any time hereafter
in force, that might affect the covenants or the performance of their
obligations under this Indenture and Notes; and each of the Company and the
Subsidiary Guarantors (to the extent they may lawfully do so) hereby expressly
waive all benefit or
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advantage of any such law, and covenant that they will not, by resort to any
such law, hinder, delay or impede the execution of any power granted to the
Trustee pursuant to this Indenture, but will suffer and permit the execution of
every such power as though no such law has been enacted.
SECTION 4.05. LIMITATION ON RESTRICTED PAYMENTS.
The Company will not, and will not permit any Restricted Subsidiary to,
directly or indirectly, make any Restricted Payment unless, at the time of and
after giving effect to the proposed Restricted Payment:
(i) no Default or Event of Default has occurred and is
continuing;
(ii) the Company would be permitted to incur at least $1.00 of
additional Indebtedness not constituting Permitted Indebtedness under
Section 4.07; and
(iii) the amount of such Restricted Payment, when added to the
aggregate amount of all other Restricted Payments made after the Issue
Date does not exceed the sum (without duplication) of the following:
(A) 50% of (x) the Company's Consolidated Net Income (taken as one
accounting period) less (y) Permitted Income Tax Distributions, in each
case accrued on a cumulative basis during the period beginning on
January 1, 1998 and ending on the last day of the Company's most
recently ended fiscal quarter for which financial statements are
available at the time of such Restricted Payment (or, if such aggregate
Consolidated Net Income less Permitted Tax Distributions shall be a
deficit, minus 100% of such aggregate deficit) plus (B) the aggregate
net cash proceeds received by the Company after the Issue Date from the
issuance and sale (other than to a Subsidiary of the Company) of (1)
shares of the Company's Capital Stock other than Disqualified Capital
Stock or (2) debt securities of the Company that have been converted
into the Company's Capital Stock that is not Disqualified Capital Stock
(and is not then held by a Subsidiary of the Company), plus (C) to the
extent that any Restricted Investment that was made after the Issue
Date is sold for cash or otherwise liquidated or repaid for cash, the
cash proceeds of the sale, liquidation or repayment received by the
Company or a Restricted Subsidiary net of the fees and expenses
actually incurred in connection with such sale, liquidation or
repayment plus (D) the amount of Restricted Investment outstanding in
an Unrestricted Subsidiary at the time such Unrestricted Subsidiary is
designated a Restricted Subsidiary of the Company in accordance with
the definition of "Unrestricted Subsidiary".
The foregoing provisions will not prohibit: (1) the payment of any
dividend by the Company or any Restricted Subsidiary within 60 days after the
date of declaration thereof, if at said date of declaration such payment would
have complied with the provisions of this Indenture; (2) the redemption,
repurchase, retirement or other acquisition of any Capital Stock of the Company
in exchange for, or out of the proceeds of, the substantially concurrent sale
(other than to a Subsidiary of the Company) of other Capital Stock of the
Company (other than any
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Disqualified Capital Stock); (3) the defeasance, redemption, repurchase or other
retirement of Subordinated Indebtedness in exchange for, or out of the proceeds
of, the substantially concurrent issue and sale of (a) Subordinated Indebtedness
so long as the new Subordinated Indebtedness has (i) a Weighted Average Life to
Maturity equal to or longer than the Weighted Average Life to Maturity of the
Subordinated Indebtedness being defeased, redeemed, repurchased or otherwise
retired and (ii) terms of subordination no less favorable to the Holders of the
Notes than those applicable to the Subordinated Indebtedness being defeased,
redeemed, repurchased or otherwise retired or (b) Capital Stock of the Company
(other than to any Restricted Subsidiary); (4) the repurchase, redemption or
other acquisition or retirement for value of any Capital Stock held by any
member of the Company's management pursuant to any management equity
subscription agreement, employment agreement, stock option agreement or other
compensation agreement in an amount not to exceed $500,000 in the aggregate in
any fiscal year of the Company; (5) Restricted Investments the amount of which,
together with the amount of all other Restricted Investments made pursuant to
this clause (5) after the Issue Date, does not exceed $5.0 million; PROVIDED
that, in the case of this clause (5), 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; (6) any Restricted Investment made with the net cash proceeds
received by the Company after the Issue Date from a Public Equity Offering;
PROVIDED that no Default or Event of Default has occurred or is continuing at
the time of such payment; or (7) amounts paid in respect of a Permitted Income
Tax Distribution.
The Restricted Payment permitted pursuant to clauses (1), (2), (3), (4)
and (6) of the immediately preceding paragraph shall be included as Restricted
Payments in any computation made pursuant to clause (iii) of the second
preceding paragraph with respect to any subsequent Restricted Payments.
Not later than ten (10) Business Days after the date of making any
Restricted Payment, the Company shall deliver to the Trustee an Officers'
Certificate stating that such Restricted Payment is permitted by and complies
with this Indenture and setting forth in reasonable detail the basis upon which
the calculations required by this Section 4.05 were computed, which calculations
shall be based upon the Company's latest available consolidated financial
statements.
SECTION 4.06. CORPORATE EXISTENCE.
Subject to Article V, the Company will do or cause to be done all
things necessary to preserve and keep in full force and effect its corporate
existence and the corporate, partnership or other existence of each of its
Restricted Subsidiaries in accordance with the respective organizational
documents of each of its Restricted Subsidiaries and the rights (charter and
statutory), licenses and franchises of the Company and each of its Restricted
Subsidiaries; PROVIDED, HOWEVER, that the Company shall not be required to
preserve any such right, license or franchise, or the corporate, partnership or
other existence of any Restricted Subsidiary, if the Board of Directors of the
Company shall determine that the preservation thereof is no longer
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desirable in the conduct of the business of the Company and its Subsidiaries
taken as a whole, and that the loss thereof is not adverse in any material
respect to the Holders.
SECTION 4.07. LIMITATIONS ON ADDITIONAL INDEBTEDNESS AND DISQUALIFIED
CAPITAL STOCK.
The Company will not, and will not permit any Restricted Subsidiary to,
directly or indirectly, (a) incur any Indebtedness (including, without
limitation, Acquired Indebtedness), or (b) issue any Disqualified Capital Stock;
PROVIDED that, the Company and its Restricted Subsidiaries may incur Permitted
Indebtedness and may incur other Indebtedness or issue Disqualified Capital
Stock, if after giving effect thereto, the Company's Consolidated Fixed Charge
Coverage Ratio on the date thereof would be at least 2.75 to 1.0.
SECTION 4.08. LIMITATION ON THE ISSUANCE OF CAPITAL STOCK OF RESTRICTED
SUBSIDIARIES.
The Company will not permit any Restricted Subsidiary, directly or
indirectly, to issue or sell any shares of its Capital Stock (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) the issuance and sale
of all, but not less than all, of the issued and outstanding Capital Stock of
any Restricted Subsidiary in compliance with the other provisions of this
Indenture or (iii) to the extent such shares represent directors' qualifying
shares or shares required by applicable law to be held by a Person other than
the Company or a Wholly-Owned Restricted Subsidiary. The proceeds of any sale of
Capital Stock permitted hereunder and referred to in clauses (ii) and (iii)
above will be treated as Net Available Proceeds and must be applied in a manner
consistent with the provisions of Section 4.16.
SECTION 4.09. LIMITATION ON PREFERRED STOCK OF SUBSIDIARIES.
The Company will not permit any Restricted Subsidiary to issue any
Preferred Stock (other than to the Company or to a Wholly-Owned Restricted
Subsidiary) or permit any Person (other than the Company or a Wholly-Owned
Restricted Subsidiary) to own any Preferred Stock of any Restricted Subsidiary.
SECTION 4.10. LIMITATION ON TRANSACTIONS WITH AFFILIATES.
The Company will not, and will not permit any of Restricted Subsidiary
to, enter into, renew or extend any contract, agreement, transaction or
arrangement with or for the benefit of an Affiliate of the Company (including,
without limitation the sale, purchase or lease of assets, property or services
from or to any Affiliate of the Company) (each of the foregoing, an "AFFILIATE
TRANSACTION"), unless (i) such Affiliate Transaction is on terms that are no
less favorable to the Company or the relevant Restricted Subsidiary than those
that would have been obtained in a comparable transaction by the Company or such
Restricted Subsidiary with an
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unrelated Person and (ii) the Company delivers to the Trustee (a) with respect
to any Affiliate Transaction (or series of related transactions) involving
aggregate payments in excess of $1.0 million, an Officers' Certificate
certifying that such Affiliate Transaction complies with clause (i) above and a
Board Resolution adopted by a vote of a majority of the Independent Directors
approving such Affiliate Transaction or, if at the time there are no Independent
Directors then in office, an Officers' Certificate executed by the Chief
Financial Officer, Chief Operating Officer or the General Counsel of the Company
and (b) with respect to any Affiliate Transaction (or series of related
transactions) involving aggregate payments of $5.0 million or more, the
certificates or documentation described in the preceding clause (a) and an
opinion as to the fairness to the Company or such Restricted Subsidiary from a
financial point of view issued by an Independent Financial Advisor; PROVIDED,
HOWEVER, that the following shall not be deemed to be Affiliate Transactions:
(i) transactions exclusively between or among (1) the Company and one or more
Wholly-Owned Restricted Subsidiaries or (2) Wholly-Owned Restricted
Subsidiaries; (ii) transactions between the Company or any Restricted Subsidiary
and any qualified employee stock ownership plan established for the benefit of
the Company's employees, or the establishment or maintenance of any such plan;
(iii) reasonable director, officer and employee compensation and other benefits,
and indemnification arrangements existing on the Issue Date, and with respect to
any material modification of such arrangements after the Issue Date, as approved
by a majority of the Independent Directors or in the event there are no
Independent Directors, as certified by the Chief Financial Officer, the Chief
Operating Officer or the General Counsel of the Company pursuant to an Officers'
Certificate; (iv) transactions permitted under Section 4.05; (v) the existing
relationships and transactions between the Company and its Restricted
Subsidiaries, on one hand, and QTV, Ltd. ("QTV"), and Quiet Technologies, Inc.,
("QTI"), on the other hand, including but not limited to, the purchase of
hushkits and the funding by the Company or its Restricted Subsidiaries of the
research and development costs of QTV and QTI in connection with hushkit
development projects or any new relationships or transactions (other than
continuations, including future hushkit purchases and research and development
funding, of such existing relationships or transactions) between the Company and
its Restricted Subsidiaries, on the one hand, and QTV, and QTI, on the other
hand ("NEW TRANSACTIONS"), so long as the total amount paid by the Company and
any Restricted Subsidiary of the Company with respect to such New Transactions
does not exceed the fair market value of the services and equipment delivered in
connection therewith as determined by a majority of the Independent Directors,
or in the event there are no Independent Directors, as certified by the Chief
Financial Officer, the Chief Operating Officer or the General Counsel of the
Company pursuant to an Officers' Certificate; PROVIDED, HOWEVER, with respect to
New Transactions between the Company and QTV, or QTI, such determination shall
only be made on an annual basis on the anniversary date of this Indenture.
SECTION 4.11. LIMITATIONS ON LIENS.
The Company shall not, and shall not permit any Restricted Subsidiary
to, directly or indirectly, create, incur assume, affirm or suffer to exist or
become effective any Lien of any nature whatsoever on any property of the
Company or any Restricted Subsidiary (including
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Capital Stock of a Restricted Subsidiary), whether owned at the Issue Date or
thereafter acquired, or upon any income or profits therefrom, except Permitted
Liens, unless prior thereto or simultaneously therewith, the Notes or the
Subsidiary Guarantee, as the case may be, are equally and ratably secured, or
effective provision is made to secure the Notes with (or if such Lien secures
Subordinated Indebtedness, prior to) the Indebtedness secured by that Lien.
SECTION 4.12. TAXES.
The Company shall, and shall cause each of its Subsidiaries to, pay
prior to delinquency all taxes, assessments and governmental levies the failure
of which to pay could reasonably be expected to result in a material adverse
effect on the condition (financial or otherwise), business or results of
operations of the Company and its Subsidiaries taken as a whole, except for
those taxes contested in good faith by appropriate proceedings.
SECTION 4.13. LIMITATIONS ON RESTRICTIONS ON DISTRIBUTIONS FROM
RESTRICTED SUBSIDIARIES.
The Company will not, and will not permit any of its Restricted
Subsidiaries to, create or otherwise cause or suffer to exist or become
effective any consensual Payment Restriction with respect to any of its
Restricted Subsidiaries, except for (a) any such Payment Restriction under any
agreement evidencing any Acquired Indebtedness that was permitted to be incurred
pursuant to this Indenture in effect at the time of such incurrence and not
created in contemplation of such event, PROVIDED that such Payment Restriction
is not extended to apply to any of the assets of the entities not previously
subject thereto; (b) any such Payment Restriction arising in connection with
Existing Indebtedness (provided such Payment Restrictions are no more
restrictive than those existing on the Issue Date) and Refinancing Indebtedness,
PROVIDED that any such Payment Restrictions that arise under such Refinancing
Indebtedness are not, taken as a whole, materially more restrictive than those
under the agreement creating or evidencing the Indebtedness being refunded or
refinanced; (c) purchase money obligations for property acquired in the ordinary
course of business that impose restrictions on the property so acquired; (d) the
entering into of a contract for the sale or other disposition of assets,
directly or indirectly, so long as such restrictions do not extend to assets
that are not subject to such sale or other disposition; (e) the terms of any
agreement evidencing any Indebtedness of Restricted Subsidiaries that was
permitted by this Indenture to be incurred that only restrict the transfer of
the assets purchased with the proceeds of such Indebtedness; (f) customary
restrictions imposed on the transfer of copyrighted or patented materials; (g)
the terms of any merger agreement, stock purchase agreement, asset sale
agreement or similar agreement that limit the transfer of properties and assets
pending consummation of the subject transaction; (h) Permitted Liens which are
customary limitations on the transfer of collateral; and (i) any such Payment
Restriction existing or by reason of applicable law or customary provisions
restricting assignments, subletting or other transfers contained in leases,
licenses and other agreements entered into in the ordinary course of business.
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SECTION 4.14. LIMITATION ON SALE/LEASEBACK TRANSACTIONS.
The Company will not, and will not permit any Restricted Subsidiary to,
directly or indirectly, enter into, assume, guarantee or otherwise become liable
with respect to any Sale/Leaseback transaction unless (i) the Company would be
permitted to incur Indebtedness not constituting Permitted Indebtedness in
accordance with the Consolidated Fixed Charge Coverage Ratio test under Section
4.07 in an amount equal to the Attributable Indebtedness arising from the
Sale/Leaseback Transaction, (ii) the Company or the Restricted Subsidiary
receives proceeds from the Sale/Leaseback Transaction at least equal to the fair
market value of the property or assets subject thereto (as determined in good
faith by the Board of Directors, whose determination in good faith and evidenced
by a Board Resolution will be conclusive), (iii) the Company applies an amount
in cash equal to the Net Available Proceeds of the Sale/Leaseback Transaction in
accordance with the provisions of Section 4.16 as if the Sale/Leaseback
Transaction were an Asset Sale and (iv) the Sale/Leaseback Transaction would not
result in a violation of Section 4.11.
SECTION 4.15. CHANGE OF CONTROL.
(a) Upon the occurrence of a Change of Control (the "CHANGE OF CONTROL
TRIGGER DATE"), each Holder of Notes may require the Company to repurchase all
or any part (equal to $1,000 or an integral multiple thereof) of such Holder's
Notes pursuant to the offer described below at an offer price in cash equal to
101% of the aggregate principal amount of the Notes thereof plus accrued and
unpaid interest and Liquidated Damages, if any, to the date of repurchase (the
"CHANGE OF CONTROL PURCHASE PRICE").
(b) Within 30 days following any Change of Control, the Company will
mail to the Trustee (who shall mail to each Holder at the Company's expense) a
notice (i) describing the transaction or transactions that constitute the Change
of Control, (ii) offering to repurchase, pursuant to the procedures required by
Section 3.08 of this Indenture and described in such notice (a "CHANGE OF
CONTROL OFFER"), on a date specified in such notice (which shall be a Business
Day not earlier than 30 days or later than 60 days from the date notice is
mailed) and for the Change of Control Purchase Price, all Notes properly
tendered by such Holder pursuant to such offer to purchase for the Change of
Control Purchase Price and (iii) describing the procedures that Holders must
follow to accept the Change of Control Offer.
(c) The Change of Control Offer will remain open for a period of at
least 20 Business Days following its commencement (or such longer period as is
required by law)(the "CHANGE OF CONTROL OFFER PERIOD"). No later than five
Business Days after the termination of the Change of Control Offer Period (the
"CHANGE OF CONTROL PURCHASE DATE"), the Company will purchase all Notes tendered
in response to the Change of Control Offer. Payment for any Notes so purchased
will be made in the same manner as interest payments are made.
(d) The Company's obligation to make a Change of Control Offer will be
satisfied if a third party makes the Change of Control Offer in the manner and
at the times and otherwise in
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compliance with the requirements applicable to a
Change of Control Offer made by the Company and purchases all Notes properly
tendered and not withdrawn under such Change of Control Offer.
(e) The Company will comply with the applicable tender offer rules,
including the requirements of Rule 14e-1 under the Exchange Act and any other
applicable laws and regulations in connection with any offer to repurchase Notes
pursuant to a Change of Control Offer.
SECTION 4.16. LIMITATIONS ON ASSET SALES.
(a) The Company will not, and will not permit any Restricted Subsidiary
to, consummate any Asset Sale unless (i) the Company or the Restricted
Subsidiary, as the case may be, receives consideration at the time of such Asset
Sale at least equal to the fair market value of the assets and properties sold
or otherwise disposed of pursuant to such Asset Sale (as determined by the Board
of Directors, whose determination in good faith will be conclusive and evidenced
by a Board Resolution), (ii) at least 80% of the consideration received by the
Company or the Restricted Subsidiary, as the case may be, in respect of the
Asset Sale consists of cash or Cash Equivalents and (iii) the Company delivers
to the Trustee an Officers' Certificate certifying that the Asset Sale complies
with clauses (i) and (ii) of this sentence. The amount (without duplication) of
any Indebtedness (other than Subordinated Indebtedness) of the Company or any
Restricted Subsidiary that is expressly assumed by the transferee in an Asset
Sale and with respect to which the Company or such Restricted Subsidiary, as the
case may be, is unconditionally released by the holder of that Indebtedness will
be deemed to be cash for purposes of clause (ii) of the preceding sentence and
will also be deemed to constitute a repayment of, and a permanent reduction in,
the amount of such Indebtedness for purposes of the following paragraph. If at
any time any non-cash consideration received by the Company or any Restricted
Subsidiary, as the case may be, in connection with any Asset Sale is converted
into or sold or otherwise disposed of for cash (other than interest received
with respect to any such non-cash consideration), then such conversion or
disposition will constitute an Asset Sale and the Net Available Proceeds
therefrom shall be applied in accordance with this Section 4.16. A transfer of
assets by the Company to a Wholly-Owned Restricted Subsidiary or by a Restricted
Subsidiary to the Company or to another Wholly-Owned Restricted Subsidiary will
not constitute an Asset Sale, and a transfer of assets that constitutes a
Restricted Investment and that is permitted under Section 4.05 will not
constitute an Asset Sale.
(b) If the Company or any Restricted Subsidiary consummates an Asset
Sale, the Company or that Restricted Subsidiary, as the case may be, may either,
no later than 270 days after such Asset Sale, (i) apply all or any of the Net
Available Proceeds therefrom to repay Indebtedness (other than Subordinated
Indebtedness) of the Company or any Restricted Subsidiary, PROVIDED, in each
case, that the related loan commitment (if any) is thereby permanently reduced
by the amount of the Indebtedness so repaid or (ii) invest all or any part of
the Net Available Proceeds thereof in the purchase of properties or assets that
replace the
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properties or assets that were the subject of the Asset Sale or in other
properties or assets that are being, or will be, used in the business of the
Company and its Restricted Subsidiaries or in a Related Business (together with
any short-term assets incidental thereto). The amount of the Net Available
Proceeds not applied or invested as provided in this paragraph will constitute
"EXCESS PROCEEDS." Pending application of such Net Available Proceeds pursuant
to this paragraph, the Company or such Restricted Subsidiary may invest such Net
Available Proceeds in Cash Equivalents, or temporarily reduce amounts
outstanding under any revolving credit facility of the Company or any Restricted
Subsidiary.
If substantially all (but not all) the property and assets of the
Company and its Restricted Subsidiaries are transferred as an entirety to a
Person in a transaction permitted under the covenant described under Section
5.01 and the Company or a Restricted Subsidiary received cash or Cash
Equivalents in such transaction, then the successor entity will be deemed to
have sold the properties and assets of the Company and its Subsidiaries not so
transferred for purposes of this covenant and cash at least equal to the fair
market value of the assets deemed to be sold must be applied in accordance with
the preceding paragraph.
(c) When the aggregate amount of Excess Proceeds equals or exceeds $5.0
million (each date, an "ASSET SALE TRIGGER DATE"), the Company will be required
to make an offer to purchase, from all Holders of the Notes, an aggregate
principal amount of Notes equal to the amount of such Excess Proceeds as
follows:
(i) The Company will make an offer to purchase (a "NET
PROCEEDS OFFER") from all Holders of the Notes, in accordance with the
procedures set forth in Section 3.08, the maximum principal amount
(expressed as a multiple of $1,000) of Notes that may be purchased out
of the amount (the "PAYMENT Amount") of such Excess Proceeds.
(ii) The offer price for the Notes will be payable in cash in
an amount equal to 100% of the principal amount of the Notes tendered
pursuant to a Net Proceeds Offer, plus accrued and unpaid interest and
Liquidated Damages, if any, to the date such Net Proceeds Offer is
consummated (the "OFFERED PRICE"), in accordance with the procedures
set forth in this Indenture. To the extent that the aggregate Offered
Price of Notes tendered pursuant to a Net Proceeds Offer is less than
the Payment Amount relating thereto (such shortfall constituting a "NET
PROCEEDS DEFICIENCY"), the Company may use such Net Proceeds
Deficiency, or a portion thereof, for general corporate purposes,
subject to the limitations in Section 4.05.
(iii) If the aggregate Offered Price of Notes validly tendered
and not withdrawn by Holders thereof exceeds the Payment Amount, Notes
to be purchased will be selected on a PRO RATA basis (with such
adjustments as may be deemed appropriate by the Company so that only
Notes in denominations of $1,000, or integral multiples thereof, will
be purchased). The Net Proceeds Offer shall remain open for a period of
at least 20 Business Days following its commencement (the "NET PROCEEDS
OFFER PERIOD"). No later than five Business Days after the termination
of the Offer Period (the "NET PROCEEDS
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PURCHASE Date"), the Company will purchase the principal amount of
Notes required to be purchased pursuant to this covenant. Payment for
any Notes so purchased will be made in the same manner as interest
payments are made.
(iv) Upon completion of such Net Proceeds Offer in accordance
with the foregoing provisions, the amount of Excess Proceeds with
respect to which such Net Proceeds Offer was made shall be deemed to be
zero.
The Company will not, and will not permit any Restricted Subsidiary to
enter into or suffer to exist any agreement that would place any restriction of
any kind (other than pursuant to law or regulation) on the ability of the
Company to make a Net Proceeds Offer following any Asset Sale. The Company will
comply with Rule 14e-1 under the Exchange Act and any other securities laws and
regulations thereunder, if applicable, in the event that an Asset Sale occurs
and the Company is required to offer to repurchase Notes as described above.
SECTION 4.17. MANDATORY OFFER TO REPURCHASE.
(a) In the event that on that date which is 18 months from the Issue
Date of the Notes ("MANDATORY REPURCHASE TRIGGER DATE"), (1) the Unutilized
Proceeds Amount is greater than $0 the Company shall, within five Business Days
of such day, either (i) make an offer (the "MANDATORY REPURCHASE OFFER") to
purchase Notes having an aggregate principal amount equal to the Unutilized
Proceeds Amount at a purchase price of 101% of the principal amount thereof plus
accrued and unpaid interest and Liquidated Damages, if any, to the purchase date
as set forth in subsection (b) below or (ii) purchase Notes having an aggregate
principal amount equal to the Unutilized Proceeds Amount in the open market and
deliver such Notes to the Trustee for cancellation in accordance with Section
2.13.
(b) If the Company has not, prior to the close of business on the fifth
Business Day after the Mandatory Repurchase Trigger Date applied an amount equal
to the Unutilized Proceeds Amount to purchase Notes in the open market and
delivered such Notes to the Trustee for cancellation as described in clause (ii)
of subsection (a) above, prior to the close of business on such Business Day the
Company will be required to make an offer to purchase, from all Holders of the
Notes, an aggregate principal amount of Notes equal to the Unutilized Proceeds
Amount as follows:
(i) The Company will make a Mandatory Repurchase Offer from
all Holders of the Notes, in accordance with the procedures set forth
in Section 3.08, for Notes in an aggregate principal amount (expressed
as a multiple of $1,000) equal to the Unutilized Proceeds Amount.
(ii) The offer price for the Notes will be payable in cash in
an amount equal to 101% of the principal amount of the Notes tendered
pursuant to the Mandatory Repurchase Offer, plus accrued and unpaid
interest and Liquidated Damages, if any, to the date such Mandatory
Repurchase Offer is consummated (the "MANDATORY
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REPURCHASE OFFERED PRICE"), in accordance with the procedures set forth
in this Indenture. To the extent that the aggregate Mandatory
Repurchase Offered Price of Notes tendered pursuant to the Mandatory
Repurchase Offer is less than the Unutilized Proceeds Amount (such
shortfall constituting the "REPURCHASE DEFICIENCY"), the Company may
use such Repurchase Deficiency for general corporate purposes, subject
to the limitations in Section 4.05.
(iii) If the aggregate Mandatory Repurchase Offered Price of
Notes validly tendered and not withdrawn by Holders thereof exceeds the
Unutilized Proceeds Amount, Notes to be purchased will be selected on a
PRO RATA basis (with such adjustments as may be deemed appropriate by
the Company so that only Notes in denominations of $1,000, or integral
multiples thereof, will be purchased). The Mandatory Repurchase Offer
shall remain open for a period of at least 20 Business Days following
its commencement (the "MANDATORY REPURCHASE OFFER PERIOD"). No later
than five Business Days after the termination of the Mandatory
Repurchase Offer Period (the "MANDATORY REPURCHASE DATE"), the Company
will purchase the principal amount of Notes required to be purchased
pursuant to this Section. Payment for any Notes so purchased will be
made in the same manner as interest payments are made.
The Company will comply with Rule 14e-1 under the Exchange Act and any
other securities laws and regulations thereunder, if applicable, in the event
that the Company is required to offer to repurchase Notes as described above.
SECTION 4.18. ADDITIONAL SUBSIDIARY GUARANTEES.
If the Company or any Restricted Subsidiary acquires or creates another
Subsidiary after the Issue Date, within 10 days after acquiring or creating such
Subsidiary, the Company will cause each such Subsidiary to execute and deliver
to the Trustee a supplement to this Indenture, substantially in the form of
Exhibit C hereto, as a Subsidiary Guarantor, unless the Board of Directors has
duly designated that Subsidiary as an Unrestricted Subsidiary in accordance with
the definition of Unrestricted Subsidiary.
ARTICLE V
SUCCESSORS
SECTION 5.01. LIMITATIONS ON MERGERS AND CERTAIN OTHER TRANSACTIONS.
The Company will not, in a single transaction or a series of related
transactions, (i) consolidate or merge with or into (other than a merger with a
Wholly-Owned Restricted Subsidiary solely for the purpose of changing the
Company's jurisdiction of incorporation to another State of the United States),
or sell, lease, transfer, convey or otherwise dispose of or assign all or
substantially all of the assets of the Company or the Company and its
Subsidiaries
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(taken as a whole), or assign any of its obligations under the Notes and this
Indenture, to any Person or (ii) adopt a Plan of Liquidation unless, in either
case: (a) the Person formed by or surviving such consolidation or merger (if
other than the Company) or to which such sale, lease, conveyance or other
disposition or assignment shall be made (or, in the case of a Plan of
Liquidation, any Person to which assets are transferred) (collectively, the
"SUCCESSOR"), is a corporation organized and existing under the laws of any
State of the United States of America or the District of Columbia, and the
Successor assumes by supplemental indenture in a form satisfactory to the
Trustee all of the obligations of the Company under the Notes and this
Indenture; (b) immediately prior to and immediately after giving effect to such
transaction and the assumption of the obligations as set forth in clause (a)
above and the incurrence of any Indebtedness to be incurred in connection
therewith, no Default or Event of Default shall have occurred and be continuing;
and (c) except in the case of the consolidation or merger of the Company with or
into a Restricted Subsidiary or any Restricted Subsidiary with or into the
Company or another Restricted Subsidiary, or the Company or a Restricted
Subsidiary with or into any other Person that has no other Indebtedness
outstanding immediately after and giving effect to such transaction and the
assumption of the obligations set forth in clause (a) above and the incurrence
of any Indebtedness to be incurred in connection therewith, and the use of any
net proceeds therefrom on a pro forma basis, (1) the Consolidated Net Worth of
the Company or the Successor, as the case may be, would be at least equal to the
Consolidated Net Worth of the Company immediately prior to such transaction and
(2) the Company or the Successor, as the case may be, would be able to incur
$1.00 of additional Indebtedness not constituting Permitted Indebtedness at such
specified time pursuant to Section 4.07; and (d) each Subsidiary Guarantor,
unless it is the other party to the transactions described above, shall have by
supplemental indenture confirmed that its Subsidiary Guarantee shall apply to
the obligations of the Company or the Successor under the Notes and this
Indenture. For purposes of this covenant, any Indebtedness of the Successor
which was not Indebtedness of the Company immediately prior to the transaction
shall be deemed to have been incurred in connection with such transaction.
ARTICLE VI
DEFAULTS AND REMEDIES
SECTION 6.01. EVENTS OF DEFAULT.
(a) Each of the following constitutes an event of default (an "EVENT OF
DEFAULT"):
(i) any default in the payment of the principal of or
premium, if any, on any of the Notes, whether such payment is due at
Stated Maturity or on redemption, repurchase pursuant to a Change of
Control Offer, a Net Proceeds Offer, a Mandatory Repurchase Offer,
acceleration or otherwise; or
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(ii) any default in the payment of any installment of
interest or Liquidated Damages, if any, on any Note, when due, and the
continuance of that default for a period of 30 days; or
(iii) any default in the performance or breach by the
Company or any Restricted Subsidiary of Article V or any failure of the
Company to make or consummate either a Change of Control Offer, a Net
Proceeds Offer, a Mandatory Repurchase Offer or the other repurchases
contemplated under Section 4.17, (as described in Sections 4.15, 4.16
and 4.17, respectively); or
(iv) any failure of the Company or any Restricted
Subsidiary to perform or observe any other term, covenant or agreement
applicable to it and contained in the Notes, this Indenture (other than
a default specified in clause (i), (ii) or (iii) above) or the
Subsidiary Guarantees, as the case may be, for a period of 30 days
after written notice of that failure is given (a) to the Company or the
Restricted Subsidiary, as the case may be, by the Trustee or (b) to the
Company or the Restricted Subsidiary, as the case may be, and the
Trustee by the Holders of at least 25% in aggregate principal amount of
the Notes then outstanding; or
(v) the occurrence and continuation beyond any
applicable grace period of any default in the payment of the principal
of any Indebtedness of the Company (other than the Notes) or any
Restricted Subsidiary for money borrowed when due at final Stated
Maturity, or any other default resulting in acceleration of any
Indebtedness of the Company or any Restricted Subsidiary for money
borrowed, PROVIDED that the aggregate principal amount of such
Indebtedness exceeds $5.0 million; or
(vi) one or more final judgments or orders rendered
against the Company or any Restricted Subsidiary that are unsatisfied
and require the direct payment by the Company in money (i.e., in excess
of applicable insurance coverage), either individually or in an
aggregate amount, in excess of $5.0 million are not paid, discharged or
stayed for a period of 30 days; or
(vii) if under any Bankruptcy Law, (A) the Company,
or any Restricted Subsidiary commences a voluntary case, consents to
the entry of an order for relief against it in an involuntary case,
consents to the appointment of a Custodian of it or for all or
substantially all of its property, or makes a general assignment for
the benefit of its creditors, or (B) a court of competent jurisdiction
enters an order or decree, and such order or decree remains unstayed
and in effect for 60 days, that is for relief against the Company or
any Restricted Subsidiary in an involuntary case, appoints a Custodian
of the Company or any Restricted Subsidiary or for all or substantially
all of the property of the Company or any Restricted Subsidiary, or
orders the liquidation of the Company or any Restricted Subsidiary; or
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(viii) except as permitted by this Indenture and the
Notes, the cessation of the effectiveness of any Subsidiary Guarantee
or the repudiation by any Subsidiary Guarantor (or by any Person acting
on behalf of any Subsidiary Guarantor) of its obligations under its
Subsidiary Guarantee.
(b) Any notice of default delivered to the Company by the Trustee or by
Holders of Notes with a copy to the Trustee must specify the Default, demand
that it be remedied and state that the notice is a "NOTICE OF DEFAULT."
SECTION 6.02. ACCELERATION.
(a) If an Event of Default (other than an Event of Default under
Section 6.01(a)(vii)) occurs and is continuing, the Trustee, by written notice
to the Company, or the Holders of at least 25% in aggregate principal amount of
the Notes then outstanding by written notice to the Company and the Trustee may,
and the Trustee on the request of the Holders of not less than 25% in aggregate
principal amount of the Notes then outstanding will declare the principal of and
premium, if any, accrued and unpaid interest and Liquidated Damages, if any, on
all the Notes due and payable immediately, on which declaration all amounts
payable in respect of the Notes will be immediately due and payable declare all
amounts owing under the Notes to be due and payable immediately.
(b) Notwithstanding anything to the contrary in this Indenture, if an
Event of Default arises under Section 6.01(a)(vii), then the principal of and
premium, if any, accrued and unpaid interest and Liquidated Damages, if any, on
all Notes will become due and payable without any declaration, notice or other
act in the part of the Trustee or any Holder.
(c) The Holders of a majority in principal amount of the then
outstanding Notes by notice to the Trustee may rescind any declaration of
acceleration of such Notes and its consequences if (i) the rescission would not
conflict with any judgment or decree, (ii) all existing Defaults and Events of
Default (other than the nonpayment of principal of, or premium, if any, or
interest or Liquidated Damages, if any, on the Notes which shall have become due
by such declaration) shall have been cured or waived and (iii) the Trustee has
been paid all amounts due to it pursuant to Section 7.07; PROVIDED that no such
rescission shall affect any subsequent or other Default or Event of Default or
impair any right consequent thereon.
SECTION 6.03. OTHER REMEDIES.
If an Event of Default occurs and is continuing, the Trustee may pursue
any available remedy to collect the payment of principal of, or premium, if any,
or interest and Liquidated Damages, if any, on, the Notes or to enforce the
performance of any provision of the Notes or this Indenture. The Trustee may
maintain a proceeding even if it does not possess any of the Notes or does not
produce any of them in the proceeding. A delay or omission by the Trustee or any
Holder in exercising any right or remedy accruing upon an Event of Default shall
not impair
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the right or remedy or constitute a waiver of or acquiescence in the Event of
Default. All remedies are cumulative to the extent permitted by law.
SECTION 6.04. WAIVER OF PAST DEFAULTS.
The Holders of a majority in aggregate principal amount of the then
outstanding Notes by notice to the Trustee may on behalf of all Holders waive
any existing Default or Event of Default and its consequences under this
Indenture, except a Default or Event of Default (i) in the payment of the
principal of, premium, if any, interest or Liquidated Damages, if any, on any
Note or (ii) in respect of any provision that cannot be modified or amended
without the consent of the Holder of each Note. Upon any such waiver, such
Default shall cease to exist, and any Event of Default arising therefrom shall
be deemed to have been cured for every purpose of this Indenture; PROVIDED that
no such waiver shall extend to any subsequent or other Default or Event of
Default or impair any right consequent thereon.
SECTION 6.05. CONTROL BY MAJORITY OF HOLDERS.
Subject to Section 7.01(e), the Holders of a majority in aggregate
principal amount of the then 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 it by this Indenture. However, the
Trustee may refuse to follow any direction that conflicts with law or this
Indenture, that the Trustee determines may be unduly prejudicial to the rights
of other Holders, or would involve the Trustee in personal liability. The
Trustee may take any other action deemed proper by the Trustee that is not
inconsistent with such direction. Notwithstanding any provision to the contrary
in this Indenture, the Trustee shall not be obligated to take any action with
respect to the provisions of Section 6.12 hereof unless directed to do so
pursuant to this Section 6.05.
SECTION 6.06. LIMITATIONS ON SUITS BY HOLDERS.
No Holder will have any right to institute any proceeding with respect
to this Indenture or any remedy thereunder, unless (i) that Holder has given the
Trustee written notice of a continuing Event of Default; (ii) the Holders of at
least 25% in principal amount of the then outstanding Notes make a written
request to the Trustee to pursue the remedy; (iii) such Holder or Holders offer
to the Trustee indemnity satisfactory to the Trustee against any loss, liability
or expense; (iv) the Trustee does not comply with the request within 60 days
after receipt of the request and the offer of indemnity; and (v) the Trustee,
within that 60-day period, has not received directions inconsistent with that
written request by Holders of a majority in aggregate principal amount of the
outstanding Notes. These limitations will not apply, however, to a suit
instituted by any Holder to enforce the payment of the principal of and premium,
if any, interest or Liquidated Damages, if any, on that Holder's Note on or
after the respective due dates expressed in that Note or in the Registration
Rights Agreement.
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A Holder may not use this Indenture to prejudice the rights of another
Holder or to obtain a preference or priority over another Holder. Holders of the
Notes may not enforce this Indenture or the Notes, except as provided herein.
SECTION 6.07. RIGHTS OF HOLDERS TO RECEIVE PAYMENT.
Notwithstanding any other provision of this Indenture, the right of any
Holder to receive payment of principal of, and premium, if any, and interest and
Liquidated Damages, if any, on, a Note, on or after a respective due date
expressed in the Note, or to bring suit for the enforcement of any such payment
on or after such respective date, shall not be impaired or affected without the
consent of the Holder.
SECTION 6.08. COLLECTION SUIT BY TRUSTEE.
If an Event of Default specified in Section 6.01(a)(i) or (a)(ii)
occurs and is continuing, the Trustee is authorized to recover judgment in its
own name and as trustee of an express trust against the Company (or any
Subsidiary Guarantor or other obligor under the Notes) for (i) principal,
premium, if any, interest, if any, and Liquidated Damages, if any, remaining
unpaid on the Notes, (ii) interest on overdue principal and premium, if any,
and, to the extent lawful, interest, and (iii) such further amount as shall be
sufficient to cover the costs and expenses of collection, including the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel ("TRUSTEE EXPENSES").
SECTION 6.09. TRUSTEE MAY FILE PROOFS OF CLAIM.
The Trustee may file such proofs of claim and other papers or documents
as may be necessary or advisable to have the claims of the Trustee (including
any claim for Trustee Expenses and for amounts due under Section 7.07) and the
Holders allowed in any insolvency or liquidation proceeding or other judicial
proceeding relative to the Company (or any Subsidiary Guarantor or other obligor
upon the Notes), its creditors or its property and shall be entitled and
empowered to collect, receive and distribute to Holders any money or other
property payable or deliverable on any such claims and each Holder authorizes
any Custodian in any such insolvency or liquidation proceeding or other judicial
proceeding to make such payments to the Trustee, and if the Trustee shall
consent to the making of such payments directly to the Holders any such
Custodian is hereby authorized to make such payments directly to the Holders,
and to pay to the Trustee any amount due to it hereunder for Trustee Expenses,
and any other amounts due the Trustee or any predecessor Trustee under Section
7.07; PROVIDED, HOWEVER, that the Trustee shall not be authorized to (i) consent
to, accept or adopt on behalf of any Holder any plan of reorganization,
arrangement, adjustment or composition affecting the Notes or the rights of any
Holder or (ii) vote in respect of the claim of any Holder in any such insolvency
or liquidation proceeding or other judicial proceeding. To the extent that the
payment of any such Trustee Expenses, and any other amounts due the Trustee
under Section 7.07 out of the estate in any such proceeding, shall be denied for
any reason, payment of the same shall be secured by a Lien on,
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and shall be paid out of, any and all distributions, dividends, money, Notes and
other properties which the Holders may be entitled to receive in such
proceeding, whether in liquidation or under any plan of reorganization or
arrangement or otherwise.
SECTION 6.10. PRIORITIES.
If the Trustee collects any money pursuant to this Article VI, it shall
pay out the money in the following order:
FIRST: to the Trustee for all Trustee Expenses and for all
amounts due under Section 7.07;
SECOND: to Holders for amounts due and unpaid on the Notes
for principal, premium, if any, interest, Liquidated
Damages, if any, ratably, without preference or
priority of any kind, according to the amounts due
and payable on the Notes for principal, premium, if
any, interest and Liquidated Damages, if any,
respectively; and
THIRD: to the Company or to such party as a court of
competent jurisdiction shall direct.
The Trustee may fix a record date and payment date for any payment to
Holders.
SECTION 6.11. UNDERTAKING FOR COSTS.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as a Trustee, a court in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the suit, having due regard to
the merits and good faith of the claims or defenses made by the party litigant.
This Section 6.11 does not apply to a suit by the Trustee, a suit by a Holder
pursuant to Section 6.06, or a suit by Holders of more than 10% in principal
amount of the then outstanding Notes.
SECTION 6.12. WILLFUL DEFAULT.
In the case of an Event of Default occurring by reason of any willful
action (or inaction) taken (or not taken) by or on behalf of the Company with
the intention of avoiding payment of the premium that the Company would have had
to pay if the Company then had elected to redeem the Notes under the provisions
of Article III and under the Notes, an equivalent premium shall also become and
be immediately due and payable, to the extent permitted by law, upon the
acceleration of the Notes. If an Event of Default occurs prior to June 1, 2003
by reason of any willful action (or inaction) taken (or not taken) by or on
behalf of the Company with the intention of avoiding the prohibition on
redemption of the Notes prior to June 1, 2003, then, upon
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acceleration of the Notes, an additional premium shall also become and be
immediately due and payable, to the extent permitted by law, in an amount equal
to 10.0%.
SECTION 6.13. RESTORATION OF RIGHTS AND REMEDIES.
If the Trustee or any Holder has instituted any proceeding to enforce
any right or remedy under this Indenture or any Note and such proceeding has
been discontinued or abandoned for any reason, or has been determined adversely
to the Trustee or to such Holder, then and in every such case the Company, the
Trustee and the Holders shall, subject to any determination in such proceeding,
be restored severally and respectively to their former positions hereunder, and
thereafter all rights and remedies of the Trustee and the Holders shall continue
as though no such proceeding had been instituted.
ARTICLE VII
TRUSTEE
SECTION 7.01. DUTIES OF TRUSTEE.
(a) If an Event of Default occurs (and has not been cured) the Trustee
shall (i) exercise the rights and powers vested in it by this Indenture, and
(ii) use the same degree of care and skill in exercising such rights and powers
as a prudent person would exercise or use under the circumstances in the conduct
of his own affairs.
(b) Except during the continuance of an Event of Default: (i) the
Trustee's duties shall be determined solely by the express provisions of this
Indenture and the Trustee need perform only those duties that are specifically
set forth in this Indenture and no others, and no implied covenants or
obligations shall be read into this Indenture against the Trustee; and (ii) in
the absence of bad faith on its part, the Trustee may conclusively rely, as to
the truth of the statements and the correctness of the opinions expressed
therein, upon certificates or opinions furnished to the Trustee and conforming
to the requirements of this Indenture. However, the Trustee shall examine the
certificates and opinions to determine whether they conform to this Indenture's
requirements (but need not confirm the mathematical accuracy thereof).
(c) The Trustee shall not be relieved from liability for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that: (i) this Section 7.01(c) does not limit the effect of
Section 7.01(b); (ii) the Trustee shall not be liable for any error of judgment
made in good faith by a Trust Officer, unless it is proved that the Trustee was
negligent in ascertaining the pertinent facts; and (iii) the Trustee shall not
be liable with respect to any action it takes or omits to take in good faith in
accordance with a direction it receives pursuant to Section 6.05.
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(d) Every provision of this Indenture that in any way relates to the
Trustee shall be subject to paragraphs (a), (b) and (c) of this Section.
(e) No provision of this Indenture shall require the Trustee to expend
or risk its own funds or incur any liability. The Trustee shall be under no
obligation to exercise any of its rights and powers or to perform any duty under
this Indenture at the request of any Holders, including, without limitation, the
provisions of Section 6.05 hereof, unless such Holders shall have offered to the
Trustee security and indemnity satisfactory to it against any loss, liability or
expense that might be incurred by it in complying with such request.
(f) The Trustee shall not be liable for interest on any money received
by it except as it may agree in writing with the Company. Money held in trust by
the Trustee need not be segregated from other funds except to the extent
required by law.
SECTION 7.02. RIGHTS OF TRUSTEE.
(a) The Trustee may rely on any document it believes to be genuine and
to have been signed or presented by the proper Person. The Trustee need not
investigate any fact or matter stated in any such document.
(b) Before the Trustee acts or refrains from acting, it may require an
Officers' Certificate or an Opinion of Counsel, or both. The Trustee shall not
be liable for any action it takes or omits to take in good faith in reliance on
such Officers' Certificate or Opinion of Counsel. The Trustee may consult with
counsel and advice of such counsel or any Opinion of Counsel shall be full and
complete authorization and protection in respect of any action taken, suffered
or omitted by it under this Indenture in good faith and in reliance on such
advice or opinion.
(c) The Trustee may act through agents and shall not be responsible for
the misconduct or negligence of any agent appointed with due care.
(d) The Trustee shall not be liable for any action it takes or omits to
take in good faith that it believes to be authorized or within its rights or
powers.
(e) Unless otherwise specifically provided in this Indenture, any
demand, request, direction or notice from the Company shall be sufficient if
signed by an Officer of the Company.
(f) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction of
any of the Holders, unless such Holders shall have offered to the Trustee
reasonable security or indemnity against the costs, expenses and liabilities
that might be incurred by it in compliance with such request or direction.
(g) The Trustee shall not be charged with knowledge of any Default or
Event of Default with respect to the Notes unless either (1) a Trust Officer
shall have actual knowledge of
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such Default or Event of Default or (2) written notice of such Default or Event
of Default shall have been given to the Trustee by the Company or any other
obligor on the Notes or by any Holder of the Notes.
SECTION 7.03. INDIVIDUAL RIGHTS OF TRUSTEE.
The Trustee in its individual or any other capacity may become the
owner or pledgee of Notes and may otherwise deal with the Company or any of its
Affiliates with the same rights it would have if it were not Trustee. The
Trustee shall at all times comply with Section 310(b) of the TIA as in effect
from time to time. Each Agent shall have the same rights as the Trustee under
this Section 7.03.
SECTION 7.04. TRUSTEE'S DISCLAIMER.
The Trustee shall not be responsible for and makes no representation as
to the validity or adequacy of this Indenture, the Notes or any Subsidiary
Guarantee; it shall not be accountable for the Company's use of the proceeds
from the Notes, and it shall not be responsible for any statement or recital in
this Indenture or any statement in the Notes or any other document executed in
connection with the sale of the Notes or pursuant to this Indenture other than
its certificate of authentication.
SECTION 7.05. NOTICE TO HOLDERS OF DEFAULTS AND EVENTS OF DEFAULT.
If a Default or Event of Default occurs and is continuing and if it is
known to the Trustee, the Trustee shall mail to the Holders a notice of the
Default or Event of Default within 30 days after the occurrence thereof. Except
in the case of a Default or Event of Default in payment of principal or interest
or Liquidated Damages, if any, on any Note (including any failure to redeem
Notes called for redemption or any failure to purchase Notes that are tendered
pursuant to an Offer and that are required to be purchased by the terms of this
Indenture), the Trustee may withhold the notice if and so long as a committee of
its Trust Officers determines in good faith that withholding such notice is in
the Holders' interests.
SECTION 7.06. REPORTS BY TRUSTEE TO HOLDERS.
Within 60 days after each May 15 beginning with May 15, 1999, the
Trustee shall mail to the Holders a brief report dated as of such reporting date
that complies with section 313(a) of the TIA (but if no event described in
section 313(a) of the TIA has occurred within the twelve months preceding the
reporting date, no report need be transmitted). The Trustee also shall comply
with section 313(b)(2) of the TIA. The Trustee shall also transmit by mail all
reports as required by section 313(c) of the TIA.
Commencing at the time this Indenture is qualified under the TIA, a
copy of each report at the time of its mailing to Holders shall be filed with
the Commission and each stock exchange
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on which the Notes are listed. The Company shall notify the Trustee when the
Notes are listed on any stock exchange.
SECTION 7.07. COMPENSATION AND INDEMNITY.
The Company shall pay to the Trustee from time to time such
compensation for its services hereunder as the parties shall agree to from time
to time. The Trustee's compensation shall not be limited by any law on
compensation of a trustee of an express trust. The Company shall reimburse the
Trustee upon request for all reasonable disbursements, advances and expenses it
incurs or makes in addition to the compensation for its services. Such expenses
shall include the reasonable compensation, disbursements and expenses of the
Trustee's agents and counsel.
The Company shall indemnify the Trustee and any predecessor Trustee
for, from and against any and all losses, liabilities or expenses the Trustee
Incurs arising out of or in connection with the acceptance or administration of
its duties under this Indenture (including any expenses Incurred in connection
with the performance of its duties under Section 6.08), except as set forth
below. The Trustee shall notify the Company promptly of any claim for which it
may seek indemnity; PROVIDED, HOWEVER, that failure by the Trustee to provide
the Company with any such notice shall not relieve the Company of any of its
obligations under this Section 7.07 except to the extent that the Company has
been prejudiced by such failure. The Company need not pay for any settlement
made without its consent, which consent shall not be unreasonably withheld.
The Company's obligations under this Section 7.07 shall survive the
resignation or removal of the Trustee and the satisfaction and discharge of this
Indenture. The Company need not reimburse any expense or indemnify against any
loss or liability the Trustee Incurs through the Trustee's negligence or bad
faith.
To secure payment of the Company's obligations under this Section 7.07,
the Trustee shall have a Lien prior to the Notes on all money or property the
Trustee holds or collects, except that held in trust to pay principal of, and
premium, if any, interest and Liquidated Damages, if any, on, particular Notes.
Such Lien shall survive the satisfaction and discharge of this Indenture.
When the Trustee Incurs expenses or renders services after an Event of
Default specified in Section 6.01(a)(vii) occurs, the expenses and the
compensation for the services (including the fees and expenses of its agents and
counsel) are intended to constitute administrative expenses under any Bankruptcy
Law without any need to demonstrate substantial contribution under Bankruptcy
Law.
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SECTION 7.08. REPLACEMENT OF TRUSTEE.
A resignation or removal of the Trustee and appointment of a successor
Trustee shall become effective only upon the successor Trustee's acceptance of
appointment as provided in this Section 7.08.
The Trustee may resign and be discharged from the trust hereby created
by so notifying the Company in writing. The Holders of a majority in aggregate
principal amount of the then outstanding Notes may remove the Trustee by so
notifying the Trustee and the Company in writing. The Company may remove the
Trustee if: (i) the Trustee fails to comply with Section 7.10; (ii) the Trustee
is adjudged a bankrupt or an insolvent or an order for relief is entered with
respect to the Trustee under any Bankruptcy Law; (iii) a Custodian or public
officer takes charge of the Trustee or its property or (iv) the Trustee becomes
incapable of performing the services of the Trustee hereunder.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Company shall promptly appoint a successor
Trustee; PROVIDED that within one year after such appointment the Holders of a
majority in aggregate principal amount of the then outstanding Notes may appoint
a successor Trustee to replace any successor Trustee appointed by the Company.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or the
Holders of at least 10% in principal amount of the then outstanding Notes may
petition any court of competent jurisdiction for the appointment of a successor
Trustee.
If the Trustee fails to comply with Section 7.10, any Holder may
petition any court of competent jurisdiction for the removal of the Trustee and
the appointment of a successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon, the
resignation or removal of the retiring Trustee shall become effective and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. The successor Trustee shall mail a notice of its
appointment to Holders. The retiring Trustee shall promptly transfer all
property it holds as Trustee to the successor Trustee, subject to its rights
under Section 7.07 and PROVIDED that all sums owing to the retiring Trustee
hereunder have been paid. Notwithstanding replacement of the Trustee pursuant to
this Section 7.08, the Company's obligations under Section 7.07 shall continue
for the retiring Trustee's benefit with respect to expenses and liabilities
relating to the retiring Trustee's activities prior to being replaced.
SECTION 7.09. SUCCESSOR TRUSTEE BY MERGER, ETC.
If the Trustee consolidates, merges or converts into, or transfers all
or substantially all of its corporate trust business to, another corporation,
subject to Section 7.10, the successor
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corporation without any further act shall be the successor Trustee. As soon as
practicable, the successor Trustee shall give notice of its succession to the
Company and the Holders of the Notes.
SECTION 7.10. ELIGIBILITY; DISQUALIFICATION.
The Trustee shall at all times (i) be a corporation organized and doing
business under the laws of the United States of America, of any state thereof,
or the District of Columbia authorized under such laws to exercise corporate
trustee power, (ii) be subject to supervision or examination by federal or state
authority, (iii) have a combined capital and surplus of at least $50 million as
set forth in its most recent published annual report of condition, and (iv)
satisfy the requirements of sections 310(a)(1), (2) and (5) and 310(b) of the
TIA.
SECTION 7.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY.
The Trustee is subject to section 311(a) of the TIA, excluding any
creditor relationship listed in section 311(b) of the TIA. A Trustee who has
resigned or been removed shall be subject to section 311(a) of the TIA to the
extent indicated therein.
ARTICLE VIII
DISCHARGE OF INDENTURE
SECTION 8.01. DISCHARGE OF LIABILITY ON NOTES; DEFEASANCE.
(a) Subject to Sections 8.01(c) and 8.06, this Indenture shall cease to
be of any further effect after (i) either the Company has delivered to the
Trustee all outstanding Notes (other than Notes replaced pursuant to Section
2.09) for cancellation or all outstanding Notes have become due and payable and
the Company has irrevocably deposited with the Trustee or a Paying Agent money
and/or Government Securities in an amount sufficient (without reinvestment
thereof) to pay when due all principal of, premium, if any, and interest and
Liquidated Damages, if any, on, all outstanding Notes (other than Notes replaced
pursuant to Section 2.09), and (ii) the Company pays all other sums payable
under this Indenture.
(b) Subject to Sections 8.01(c), 8.02, and 8.06, the Company at any
time may terminate all its obligations under this Indenture and the Notes
("LEGAL DEFEASANCE"), or its obligations under Sections 4.02, 4.03, 4.05, 4.06,
4.07, 4.08, 4.09, 4.10, 4.11, 4.12, 4.13, 4.15, 4.16, 4.17, 4.18 and 5.01
("COVENANT DEFEASANCE"). The Company may exercise Legal Defeasance
notwithstanding its prior exercise of Covenant Defeasance.
If the Company exercises Legal Defeasance, payment of the Notes may not
be accelerated because of an Event of Default. If the Company exercises Covenant
Defeasance, payment of the
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Notes may not be accelerated because of an Event of Default specified in
6.01(a)(iii), (iv), (v), (vi), (vii) or (viii).
Upon satisfaction of the conditions set forth in Section 8.02 and upon
the Company's request (and at the Company's expense), the Trustee shall
acknowledge in writing the discharge of those obligations that the Company has
terminated. Upon discharge of the Company's obligations as a result of the
exercise by the Company of its Covenant Defeasance the obligations of the
Subsidiary Guarantors under the Subsidiary Guarantees and under this Indenture
shall terminate.
(c) Notwithstanding Sections 8.01(a) and (b), the Company's obligations
under Sections 2.03, 2.04, 2.05, 2.06, 2.07, 2.08, 2.09, 4.01, 4.04, 7.07, 7.08,
8.04, 8.05, and 8.06, and the obligations of the Trustee and the Paying Agent
under Section 8.04 shall survive until the Notes have been paid in full.
Thereafter, the Company's obligations under Sections 7.07 and 8.05 and the
obligations of the Company, Trustee and Paying Agent under Section 8.04 shall
survive.
SECTION 8.02. CONDITIONS TO DEFEASANCE.
The Company may exercise either Legal Defeasance or Covenant Defeasance
only if:
(i) the Company irrevocably deposits with the Trustee, in
trust, for the benefit of the Holders of the Notes, cash in U.S.
dollars, non-callable Government Securities, or a combination thereof,
in such amounts as will be sufficient, (x) in the opinion of a
nationally recognized firm of independent public accountants, to pay
the principal of, premium, if any, and interest and Liquidated Damages,
if any, on the outstanding Notes on the stated maturity or the date
such payments are due in accordance with the terms of the Notes or on
the applicable, redemption date, as the case may be, and (y) in the
opinion of the Company as stated in an Officers' Certificate, to pay
the Trustee Expenses. In addition, the Company specifies whether the
Notes are being defeased to maturity or to a particular redemption
date,
(ii) in the case of Legal Defeasance, the Company shall have
delivered to the Trustee (1) an Opinion of Counsel reasonably
acceptable to the Trustee confirming that (x) the Company has received
from, or there has been published by, the Internal Revenue Service a
ruling or (y) since the date of this Indenture, there has been a change
in the applicable federal income tax law, in either case to the effect
that, and based thereon such Opinion of Counsel will confirm that, the
Holders of the outstanding Notes will not recognize income, gain or
loss for federal income tax purposes as a result of such Legal
Defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been
the case if such Legal Defeasance had not occurred, (2) an Opinion of
Counsel to the effect that (x) the deposit of the trust funds does not
violate the Investment Company Act of 1940 and (y) the trust funds will
not be subject to the effect of Section 547 of the United States
Bankruptcy Code or Section 15
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of the New York Debtor and Creditor Law in a case commenced by or
against the Company under either such statute,
(iii) in the case of Covenant Defeasance, the Company shall
have delivered to the (1) Trustee an Opinion of Counsel in the United
States reasonably acceptable to the Trustee confirming that the Holders
of the outstanding Notes will not recognize income, gain or loss for
federal income tax purposes as a result of such Covenant Defeasance and
will be subject to federal income tax on the same amounts, in the same
manner at the same times as would have been the case if such Covenant
Defeasance had not occurred, (2) an Opinion of Counsel to the effect
that (x) the deposit of the trust funds does not violate the Investment
Company Act of 1940 and (y) the trust funds will not be subject to the
effect of Section 547 of the United States Bankruptcy Code or Section
15 of the New York Debtor and Creditor Law in a case commenced by or
against the Company under either such statute,
(iv) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit (other than a Default or Event
of Default resulting from the borrowing of funds to be applied to such
deposit) or insofar as Events of Default from bankruptcy or insolvency
events are concerned, at any time in the period ending on the 91st day
after the date of deposit,
(v) such Legal Defeasance or Covenant Defeasance shall not
result in a breach or violation of, or constitute a Default under any
material agreement or instrument (other than this Indenture) to which
the Company or any of its Subsidiaries is a party or by which the
Company or any of its Subsidiaries is bound,
(vi) the Company shall have delivered to the Trustee an
Officers' Certificate stating that the deposit was not made by the
Company with the intent of preferring the Holders of Notes over the
other creditors of the Company with the intent of defeating, hindering,
delaying or defrauding creditors of the Company or others, and
(vii) the Company shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that all
conditions precedent relating to the Legal Defeasance or the Covenant
Defeasance, as the case may be, have been complied with.
SECTION 8.03. APPLICATION OF TRUST MONEY.
The Trustee or Paying Agent shall hold in trust money and/or Government
Securities deposited with it pursuant to this Article VIII. The Trustee or
Paying Agent shall apply the deposited money and the money from Government
Securities in accordance with this Indenture to the payment of principal of, and
premium, if any, interest or Liquidated Damages, if any, on, the Notes.
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SECTION 8.04. REPAYMENT TO COMPANY.
After the Notes have been paid in full, the Trustee and the Paying
Agent shall promptly turn over to the Company any excess money or Notes held by
them.
Any money deposited with the Trustee or a Paying Agent pursuant to this
Article VIII for the payment of the principal of, premium, if any, interest or
Liquidated Damages, if any, on, any Note that remains unclaimed for two years
after becoming due and payable shall be paid to the Company on its request; and
the Holder of such Note shall thereafter, as an unsecured general creditor, look
only to the Company for payment thereof, and all liability of the Trustee or
such Paying Agent with respect to such money shall cease; PROVIDED, HOWEVER,
that the Trustee or such Paying Agent, before being required to make any such
repayment, may at the expense of the Company cause to be published once, in THE
NEW YORK TIMES and THE WALL STREET JOURNAL (National Edition), notice that such
money remains unclaimed and that, after a date specified therein, which shall
not be less than 30 days from the date of such notification or publication, any
unclaimed balance of such money then remaining will be repaid to the Company.
SECTION 8.05. INDEMNITY FOR GOVERNMENT SECURITIES.
The Company shall pay and shall indemnify the Trustee and any Paying
Agent against any tax, fee or other charge imposed on or assessed against cash
and/or Government Securities deposited with it pursuant to this Article VIII or
the principal and interest received on such cash and/or Government Securities.
SECTION 8.06. REINSTATEMENT.
If the Trustee or Paying Agent is unable to apply any money or
Government Securities in accordance with this Article VIII by reason of any
legal proceeding or by reason of any order or judgment of any court or
governmental authority enjoining, restraining or otherwise prohibiting such
application, the Company's Obligations under this Indenture and the Notes and
the Subsidiary Guarantors' Obligations under the Subsidiary Guarantees shall be
revived and reinstated as though no deposit had occurred pursuant to this
Article VIII until such time as the Trustee or Paying Agent is permitted to
apply all such money or Government Securities in accordance with this Article
VIII; PROVIDED, HOWEVER, that if the Company or any Subsidiary Guarantor has
made any payment of principal of, or premium, if any, interest, or Liquidated
Damages, if any, on, any Notes because of the reinstatement of its Obligations
under this Indenture and the Notes or the Subsidiary Guarantees, the Company or
such Subsidiary Guarantor, as the case may be, shall be subrogated to the
Holders' rights to receive such payment from the money or Government Securities
held by the Trustee or Paying Agent.
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ARTICLE IX
AMENDMENTS
SECTION 9.01. AMENDMENTS AND SUPPLEMENTS PERMITTED WITHOUT CONSENT OF
HOLDERS.
Notwithstanding Section 9.02, the Company, the Subsidiary Guarantors
and the Trustee may amend or supplement this Indenture or the Notes without the
consent of any Holder to: (i) cure any ambiguity, defect or inconsistency; (ii)
provide for uncertificated Notes in addition to or in place of Certificated
Notes; (iii) provide for the assumption of the obligations to the Holders of the
Company or a Subsidiary Guarantor, as the case may be, in the event of a merger
or consolidation; (iv) make any change that (1) would provide any additional
rights or benefits to Holders or (2) does not adversely affect the legal rights
under this Indenture of any Holder; (v) comply with Section 4.18 or Article X;
(vi) secure the Notes pursuant to the requirements of Section 4.11; or (vii)
comply with the requirements of the Commission in order to effect or maintain
the qualification of this Indenture under the TIA.
SECTION 9.02. AMENDMENTS AND SUPPLEMENTS REQUIRING CONSENT OF HOLDERS.
(a) Except as otherwise provided in Sections 9.01, this Indenture and
the Notes may be amended or supplemented with the written consent of the Holders
of at least a majority in aggregate principal amount of the Notes then
outstanding (including consents obtained in connection with a tender offer or
exchange offer for the Notes), and any existing Default or Event of Default or
compliance with any provision of this Indenture or the Notes may be waived
(other than any continuing Default or Event of Default in the payment of the
principal of, premium, if any, or interest on the Notes) with the consent of
Holders of at least a majority in aggregate principal amount of the then
outstanding Notes (including consents obtained in connection with a tender offer
or exchange offer for the Notes); PROVIDED that:
(i) no such modification or amendment may, without the consent
of the Holders of at least 75% in aggregate principal amount of Notes
then outstanding, amend or modify the obligations of the Company under
Section 4.15 (or the definitions related thereto) that could adversely
affect the rights of any holder of the Notes; and
(ii) without the consent of each Holder affected, the Company
and the Trustee may not: (w) extend the maturity of any Note; (x)
affect the terms of any scheduled payment of interest on or principal
of the Notes (including without limitation any redemption provisions);
(y) take any action that would expressly subordinate in right of
payment the Notes or the Subsidiary Guarantees to any other
Indebtedness of the Company or any of Subsidiary Guarantors,
respectively, or otherwise affect the ranking of the Notes or the
Subsidiary Guarantees; or (z) reduce the percentage of Holders
necessary to consent to an amendment, supplement or waiver to this
Indenture.
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(b) It shall not be necessary for the consent of the Holders under this
Section 9.02 to approve the particular form of any proposed amendment,
supplement or waiver, but it shall be sufficient if such consent approves the
substance thereof. After an amendment, supplement or waiver under this Section
becomes effective, the Company shall mail to each Holder affected thereby a
notice briefly describing the amendment, supplement or waiver. Any failure of
the Company to mail such notice, or any defect therein, shall not, however, in
any way impair or affect the validity of any such amended or supplemental
indenture or waiver.
SECTION 9.03. COMPLIANCE WITH TIA.
Every amendment or supplement to this Indenture or the Notes shall be
set forth in an amended supplemental indenture that complies with the TIA as
then in effect.
SECTION 9.04. REVOCATION AND EFFECT OF CONSENTS.
(a) Until an amendment, supplement or waiver becomes effective, a
consent to it by a Holder of a Note is a continuing consent by the Holder and
every subsequent Holder of a Note or portion of a Note that evidences the same
Indebtedness as the consenting Holder's Note, even if notation of the consent is
not made on any Note. However, any such Holder or subsequent Holder may revoke
the consent as to his or her Note or portion of a Note if the Trustee receives
the notice of revocation before the date on which the Trustee receives an
Officers' Certificate certifying that the Holders of the requisite principal
amount of Notes have consented to the amendment, supplement or waiver.
(b) The Company may, but shall not be obligated to, fix a record date
for the purpose of determining the Holders of Notes entitled to consent to any
amendment or waiver. If a record date is fixed, then notwithstanding the
provisions of the immediately preceding paragraph, those Persons who were
Holders of Notes at such record date (or their duly designated proxies), and
only those Persons, shall be entitled to consent to such amendment or waiver or
to revoke any consent previously given, whether or not such Persons continue to
be Holders of Notes after such record date. No consent shall be valid or
effective for more than 90 days after such record date unless consents from
Holders of the principal amount of Notes required hereunder for such amendment
or waiver to be effective shall have also been given and not revoked within such
90-day period.
(c) After an amendment, supplement or waiver becomes effective, it
shall bind every Holder, unless it is of the type described in clause (ii) of
Section 9.02(a), in which case the amendment, supplement or waiver shall only
bind each Holder that consented to it and every subsequent holder of a Note that
evidences the same debt as the consenting Holder's Note.
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SECTION 9.05. NOTATION OR EXCHANGE OF NOTES.
The Trustee may place an appropriate notation about an amendment,
supplement or waiver on any Note thereafter authenticated. The Company in
exchange for all Notes may issue and the Trustee shall authenticate New Notes
that reflect the amendment, supplement or waiver. Failure to make the
appropriate notation or issue a New Note shall not affect the validity and
effect of such amendment, supplement or waiver.
SECTION 9.06. TRUSTEE PROTECTED.
Upon the Company's request, after receipt by the Trustee of a
resolution of the Board of Directors of the Company authorizing the execution of
any amended or supplemental indenture described in Section 9.02, the Trustee
shall join with the Company and the Subsidiary Guarantors in the execution of
any amended or supplemental indenture authorized or permitted by the terms of
this Indenture, but the Trustee shall not be obligated to enter into an amended
or supplemental indenture that adversely affects its own rights, duties or
immunities under this Indenture or otherwise. In signing such amended or
supplemental indenture, the Trustee shall be entitled to receive and, subject to
Section 7.01, shall be fully protected in relying upon, an Officers' Certificate
and Opinion of Counsel pursuant to Sections 11.04 and 11.05 as conclusive
evidence that such amended or supplemental indenture is authorized or permitted
by this Indenture, that it is not inconsistent herewith, and that it will be
valid and binding upon the Company and the Subsidiary Guarantors in accordance
with its terms.
ARTICLE X
GUARANTEE OF NOTES
SECTION 10.01. UNCONDITIONAL GUARANTEE.
(a) Each Subsidiary Guarantor hereby unconditionally, jointly and
severally, guarantees, on a senior unsecured basis (each, a "SUBSIDIARY
GUARANTEE"), to each Holder of a Note authenticated and delivered by the Trustee
and to the Trustee and its successors and assigns, that: (i) the principal of,
premium, interest and Liquidated Damages, if any, on the Notes will be promptly
paid in full when due, whether at maturity, by acceleration, redemption or
otherwise, and interest on the overdue principal of and interest and Liquidated
Damages, if any, and premium, if any, on the Notes, if any, to the extent
lawful, and all other Obligations of the Company to the Holders or the Trustee
under this Indenture and the Notes will be promptly paid in full, all in
accordance with the terms of this Indenture and the Notes; and (ii) in case of
any extension of time of payment or renewal of any Notes or any of such other
Obligations, that the Notes will be promptly paid in full when due in accordance
with the terms of such extension or renewal, whether at stated maturity, by
acceleration or otherwise. Failing payment when due of any amount so guaranteed,
or failing performance of any other Obligation of the Company to the
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Holders under this Indenture or under the Notes, for whatever reason, each
Subsidiary Guarantor shall be obligated to pay, or to perform or cause the
performance of, the same immediately. Any Event of Default under this Indenture
or the Notes shall constitute an event of default under this Subsidiary
Guarantee, and shall entitle the Holders of Notes to accelerate the Obligations
of the Subsidiary Guarantors hereunder in the same manner and to the same extent
as the Obligations of the Company.
Each Subsidiary Guarantor hereby further agrees that its Obligations
under this Indenture and the Notes shall, subject to Section 10.04, be
unconditional, regardless of the validity, legality or enforceability of this
Indenture or the Notes, the absence of any action to enforce this Indenture or
the Notes, any waiver or consent by any Holder with respect to any provisions
this Indenture or the Notes, any modification or amendment of, or supplement of,
this Indenture or the Notes, the recovery of any judgment against the Company or
any action to enforce any such judgment, or any other circumstance that might
otherwise constitute a legal or equitable discharge or defense of such
Subsidiary Guarantor. Each Subsidiary Guarantor hereby waives diligence,
presentment, demand of payment, filing of claims with a court in the event of
insolvency or bankruptcy of the Company, any right to require a proceeding first
against the Company, protest, notice and all demands whatsoever and covenants
that its Subsidiary Guarantee will not be discharged except by complete
performance by the Company of such Obligations. If any Holder or the Trustee is
required by any court or otherwise to return to the Company, such Subsidiary
Guarantor or a Custodian of the Company or such Subsidiary Guarantor any amount
paid by the Company or such Subsidiary Guarantor to the Trustee or such Holder,
its Subsidiary Guarantee shall, to the extent previously discharged as a result
of any such payment, be immediately reinstated and be in full force and effect.
Each Subsidiary Guarantor hereby acknowledges and agrees that, as between it, on
the one hand, and the Holders and the Trustee, on the other hand, (x) the
maturity of the Company's Obligations under this Indenture and the Notes may be
accelerated as provided in Article VI for purposes of its Subsidiary Guarantee,
notwithstanding any stay, injunction or other prohibition preventing such
acceleration, and (y) in the event of any declaration of acceleration of the
Company's Obligations under this Indenture and the Notes as provided in Article
VI, such Obligations (whether or not due and payable) shall forthwith become due
and payable by such Subsidiary Guarantor for the purpose of its Subsidiary
Guarantee.
(b) Upon making any payment with respect to the Company hereunder, a
Subsidiary Guarantor shall be subrogated to the rights of the payee against the
Company with respect to such payment; PROVIDED that no Subsidiary Guarantor
shall enforce any payment by way of subrogation or contribution until all
Obligations of the Company under this Indenture have been paid in full.
(c) Each Subsidiary Guarantor that makes a payment or distribution
under its Subsidiary Guarantee shall be entitled to a PRO RATA contribution from
each other Subsidiary Guarantor, based on the net assets of each Subsidiary
Guarantor, determined in accordance with GAAP.
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SECTION 10.02. TRUSTEE TO INCLUDE PAYING AGENT.
In case at any time any Paying Agent other than the Trustee shall have
been appointed by the Company, the term "Trustee" as used in this Article X
shall (unless the context shall otherwise require) be construed as extending to
and including such Paying Agent within its meaning as fully and for all intents
and purposes as if such Paying Agent were named in this Article X in place of
the Trustee.
SECTION 10.03. LIMITATIONS ON GUARANTEES.
Notwithstanding anything to the contrary in this Article X, the
aggregate amount of the Obligations guaranteed under this Indenture by each
Subsidiary Guarantor shall be limited in amount to the lesser of (a) the maximum
amount that would not render such Subsidiary Guarantor's obligations subject to
avoidance under applicable fraudulent conveyance provisions of the United States
Bankruptcy Code or any comparable provision of any applicable state law and (b)
the maximum amount that would not render the Subsidiary Guarantee an improper
corporate distribution by such Subsidiary Guarantor under applicable state law.
SECTION 10.04. SUBSIDIARY GUARANTORS MAY CONSOLIDATE, ETC., ON
CERTAIN TERMS.
No Subsidiary Guarantor may consolidate with or merge with or into
(whether or not such Subsidiary Guarantor is the surviving Person), another
Person, whether or not affiliated with such Subsidiary Guarantor, unless:
(a) subject to the provisions of Section 10.06 hereof, the Person
formed by or surviving any such consolidation or merger (if other than such
Subsidiary Guarantor) assumes all the obligations of such Subsidiary Guarantor
pursuant to a supplemental indenture in form reasonably satisfactory to the
Trustee in respect of the Notes, this Indenture and such Subsidiary Guarantor's
Subsidiary Guarantee;
(b) immediately after giving effect to such transaction, no Default or
Event of Default exists; and
(c) immediately after giving effect to such transaction, the Company
would be able to incur $1.00 of additional Indebtedness that is not Permitted
Indebtedness pursuant to the Consolidated Fixed Charge Coverage Ratio test set
forth in Section 4.07.
Notwithstanding the foregoing, none of the Subsidiary Guarantors shall
be permitted to consolidate with or merge with or into (whether or not such
Subsidiary Guarantor is the surviving Person), another corporation, Person or
entity pursuant to the preceding sentence if such consolidation or merger would
not be permitted by Section 5.01 hereof.
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In case of any such consolidation or merger and upon the assumption by
the successor corporation, by supplemental indenture, executed and delivered to
the Trustee and satisfactory in form to the Trustee, and the due and punctual
performance of all of the covenants and conditions of this Indenture to be
performed by such Subsidiary Guarantor, such successor corporation shall succeed
to and be substituted for such Subsidiary Guarantor with the same effect as if
it had been named herein as a Subsidiary Guarantor.
Except as set forth in Articles IV and V hereof, nothing contained in
this Indenture or in any of the Notes shall prevent any consolidation or merger
of any Subsidiary Guarantor with or into the Company or another Subsidiary
Guarantor, or shall prevent any sale or conveyance of the property of any
Subsidiary Guarantor as an entirety or substantially as an entirety to the
Company or any Subsidiary Guarantor.
SECTION 10.05. RELEASES OF SUBSIDIARY GUARANTORS.
If no Default or Event of Default exists under this Indenture or would
be caused thereby, in the event of a sale or other disposition of all or
substantially all of the assets of any Subsidiary Guarantor or a sale or other
disposition of all of the Capital Stock of any Subsidiary Guarantor, to any
corporation or other Person (including an Unrestricted Subsidiary) by way of
merger, consolidation, or otherwise, then such Subsidiary Guarantor (in the
event of a sale or other disposition, by way of such merger, consolidation or
otherwise, of all the Capital Stock of such Subsidiary Guarantor) shall be
released and relieved of any obligations under its Subsidiary Guarantee and such
acquiring corporation or other Person (in the event of a sale or other
disposition of all or substantially all of the assets of such Subsidiary
Guarantor), if other than a Subsidiary Guarantor, shall have no obligation to
assume or otherwise become liable under such Subsidiary Guarantee; PROVIDED,
that the Net Available Proceeds of such sale or other disposition are applied in
accordance with Section 4.16 hereof. Upon delivery by the Company to the Trustee
of an Officers' Certificate and an Opinion of Counsel to the effect that such
sale or other disposition was made by the Company in accordance with the
provisions of this Indenture, including without limitation Section 4.16, the
Trustee shall execute any documents reasonably required in order to evidence the
release of any Subsidiary Guarantor from its obligations under its Subsidiary
Guarantee.
Any Subsidiary Guarantor not released from its obligations under its
Subsidiary Guarantee shall remain liable for the full amount of principal of and
interest on the Notes and for the other obligations of such Subsidiary Guarantor
under this Indenture as provided in Article X.
Any Subsidiary Guarantor that is designated an Unrestricted Subsidiary
in accordance with the terms of this Indenture shall be released from and
relieved of its obligations under its Subsidiary Guarantee and any Unrestricted
Subsidiary that becomes a Restricted Subsidiary and any newly created or newly
acquired Subsidiary that is or becomes a Subsidiary shall be required to execute
a supplemental indenture in accordance with the terms of this Indenture.
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ARTICLE XI
MISCELLANEOUS
SECTION 11.01. TRUST INDENTURE ACT CONTROLS.
If any provision of this Indenture limits, qualifies, or conflicts with
the duties imposed by operation of Section 318(c) of the TIA, the imposed duties
shall control.
SECTION 11.02. NOTICES.
Any notice or communication by the Company, the Guarantors or the
Trustee to the others is duly given if in writing in the English language and
delivered in person, mailed by first-class mail, postage prepaid, return receipt
requested or delivered by telecopier or overnight air courier guaranteeing next
day delivery to the following address:
If to the Company or the Subsidiary Guarantors:
Fine Air Services Corp.
2261 N.W. 67th Avenue
Building 700
Miami, Florida 33122
Telecopier: (305) 871-4232
Attention: Orlando M. Machado
Copy to: Kenneth C. Hoffman
Telecopier: (305) 579-0717
If to the Trustee:
The Bank of New York
101 Barclay Street, Floor 21W
New York, New York 10286
Telecopier: (212) 815-5915
Attention: Corporate Trust Administration
The Company, the Subsidiary Guarantors or the Trustee by notice to the
others may designate additional or different addresses for subsequent notices or
communications.
All notices and communications (other than those sent to Holders) shall
be deemed to have been duly given: (i) at the time delivered by hand, if
personally delivered; (ii) the date receipt is acknowledged, if mailed by
first-class mail; and (iii) the next Business Day after timely delivery to the
courier, if sent by overnight air courier guaranteeing next day delivery.
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Any notice or communication to a Holder shall be mailed by first-class
mail to his or her address shown on the register maintained by the Registrar.
Failure to mail a notice or communication to a Holder or any defect in it shall
not affect its sufficiency with respect to other Holders. If a notice or
communication is mailed in the manner provided above within the time prescribed,
it is duly given, whether or not the addressee receives it. If the Company or
any Subsidiary Guarantor mails a notice or communication to Holders, it shall
mail a copy to the Trustee and each Agent at the same time.
SECTION 11.03. COMMUNICATION BY HOLDERS WITH OTHER HOLDERS.
Holders may communicate pursuant to section 312(b) of the TIA with
other Holders with respect to their rights under this Indenture or the Notes.
The Company, the Trustee, the Registrar and any other Person shall have the
protection of section 312(c) of the TIA.
SECTION 11.04. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.
Upon any request or application by the Company to the Trustee to take
any action under this Indenture, the Company shall furnish to the Trustee: (a)
an Officers' Certificate (which shall include the statements set forth in
Section 11.05) stating that, in the opinion of the signers, all conditions
precedent and covenants, if any, provided for in this Indenture relating to the
proposed action have been complied with; and (b) an Opinion of Counsel (which
shall include the statements set forth in Section 11.05) stating that, in the
opinion of such counsel, all such conditions precedent provided for in this
Indenture relating to the proposed action have been complied with.
SECTION 11.05. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION.
Each certificate or opinion with respect to compliance with a condition
or covenant provided for in this Indenture (other than a certificate provided
pursuant to section 314(a)(4) of the TIA) shall include: (1) a statement that
the Person making such certificate or opinion has read such covenant or
condition; (2) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based; (3) a statement that, in the opinion of such
Person, he has made such examination or investigation as is necessary to enable
him to express an informed opinion as to whether or not such covenant or
condition has been complied with, and (4) a statement as to whether, in such
Person's opinion, such condition or covenant has been complied with.
SECTION 11.06. RULES BY TRUSTEE AND AGENTS.
The Trustee may make reasonable rules for action by or at a meeting of
Holders. The Registrar or Paying Agent may make reasonable rules and set
reasonable requirements for its functions.
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<PAGE>
SECTION 11.07. LEGAL HOLIDAYS.
If a payment date is a not a Business Day at a place of payment,
payment may be made at that place on the next succeeding day that is a Business
Day, and no interest shall accrue for the intervening period.
SECTION 11.08. NO RECOURSE AGAINST OTHERS.
No director, officer, employee, incorporator or direct or indirect
stockholder or Affiliate of the Company or any Subsidiary Guarantor (other than
the Company and any Subsidiary Guarantor), as such, shall have any liability for
any obligation of the Company or any Subsidiary Guarantor under this Indenture,
the Subsidiary Guarantees or the Notes or for any claim based on, in respect of,
or by reason of, any such obligation or the creation of any such obligation.
Each Holder by accepting a Note waives and releases such Persons from all such
liability and such waiver and release is part of the consideration for the
issuance of the Notes.
SECTION 11.09. COUNTERPARTS.
This Indenture may be executed in any number of counterparts and by the
parties hereto in separate counterparts, each of which when so executed shall be
deemed to be an original and all of which taken together shall constitute one
and the same agreement.
SECTION 11.10. TABLE OF CONTENTS, HEADINGS, ETC.
The Table of Contents and headings of the Articles and Sections of this
Indenture have been inserted for convenience of reference only, are not to be
considered a part of this Indenture, and shall in no way modify or restrict any
of the terms or provisions of this Indenture.
SECTION 11.11. GOVERNING LAW.
The laws of the State of New York shall govern this Indenture, the
Subsidiary Guarantees and the Notes, without regard to the principles of
conflicts of laws. The Company and the Subsidiary Guarantors expressly submit to
the nonexclusive jurisdiction of the State of New York and the U.S. federal
courts sitting in The City of New York for the purposes of any suit, action or
proceeding with respect to the Indenture, the Notes and the Subsidiary
Guarantees and for actions brought under federal or state securities laws with
respect to the Notes. The Company and the Subsidiary Guarantors hereby appoint
CT Corporation System as their agent upon which process may be served in any
such action or proceeding with respect to the Indenture, the Notes or the
Subsidiary Guarantees.
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<PAGE>
SECTION 11.12. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.
This Indenture may not be used to interpret another indenture, loan or
debt agreement of the Company or any of its Subsidiaries, and no other
indenture, loan or debt agreement may be used to interpret this Indenture.
SECTION 11.13. SUCCESSORS.
All agreements of the Company and the Subsidiary Guarantors in this
Indenture and the Notes shall bind any successors of the Company and such
Subsidiary Guarantors, respectively. All agreements of the Trustee in this
Indenture shall bind its successor.
SECTION 11.14. SEVERABILITY.
If any provision in this Indenture or in the Notes shall be invalid,
illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
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<PAGE>
IN WITNESS WHEREOF, the parties have caused this Indenture to be duly
executed as of the date and year first written above.
FINE AIR SERVICES CORP.
By: /S/ BARRY H. FINE
--------------------------------------------
Name: Barry H. Fine
Title: President and Chief Executive Officer
THE BANK OF NEW YORK,
as Trustee
By: /S/ MARY LA GUMINA
--------------------------------------------
Name: Mary La Gumina
Title: Assistant Vice President
SUBSIDIARY GUARANTORS:
FINE AIR SERVICES, INC.
By: /S/ BARRY H. FINE
--------------------------------------------
Name: Barry H. Fine
Title: President and Chief Executive Officer
AGRO AIR ASSOCIATES, INC.
By: /S/ BARRY H. FINE
--------------------------------------------
Name: Barry H. Fine
Title: President and Chief Executive Officer
- 77 -
<PAGE>
EXHIBIT A
(FORM OF FACE OF NOTE)
[Securities Act Legend]
THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY
ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE
U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND THE
SECURITY EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE
EXEMPTION THEREFROM. EACH PURCHASER OF THE SECURITY EVIDENCED HEREBY
(1) BY ITS ACQUISITION HEREOF REPRESENTS THAT (A) IT IS A "QUALIFIED
INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT)
OR (B) IT IS NOT A U.S. PERSON AND IS ACQUIRING THE SECURITY EVIDENCED
HEREBY IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER
THE SECURITIES ACT AND (2) IS HEREBY NOTIFIED THAT THE SELLER MAY BE
RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE
SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER OR ANOTHER EXEMPTION
UNDER THE SECURITIES ACT. THE HOLDER OF THE SECURITY EVIDENCED HEREBY
AGREES FOR THE BENEFIT OF THE ISSUER THAT (X) SUCH SECURITY MAY BE
RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY (i) (a) TO A PERSON WHO
THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS
DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING
THE REQUIREMENTS OF RULE 144A, (b) IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, (c) OUTSIDE THE
UNITED STATES TO A PERSON THAT IS NOT A U.S. PERSON (AS DEFINED IN RULE
902 UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS
OF RULE 904 UNDER THE SECURITIES ACT OR (d) IN ACCORDANCE WITH ANOTHER
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND
BASED UPON AN OPINION OF COUNSEL IF THE COMPANY SO REQUESTS), (ii) TO
THE COMPANY OR (iii) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT AND, IN EACH CASE, IN ACCORDANCE WITH ANY
APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY
OTHER APPLICABLE JURISDICTION AND (Y) THE HOLDER WILL, AND EACH
SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF THE
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<PAGE>
SECURITY EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET FORTH IN (X)
ABOVE.
[Additional Legend if Note is a Global Note]
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE
COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT,
AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR
IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF
DTC (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER
ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO
ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE &
CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS IN WHOLE,
BUT NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR THEREOF OR
SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL NOTE
SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS
SET FORTH IN SECTIONS 2.06, 2.07 AND 2.08 OF THE INDENTURE.
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<PAGE>
CUSIP NO.
FINE AIR SERVICES CORP.
9-7/8% [SERIES A] [SERIES B] SENIOR NOTE DUE 2008
No. ____________ $__________
Fine Air Services Corp., a corporation duly organized and existing
under the laws of the State of Delaware (herein called the "Company", which term
includes any successor Person under the Indenture hereinafter referred to), for
value received, hereby promises to pay to [__________], or registered assigns,
the principal sum of [__________] Dollars on June 1, 2008.
Interest Payment Dates: June 1 and December 1, commencing
December 1, 1998
Record Dates: May 15 and November 15
Pursuant to the Indenture, the payment of principal of and premium, if
any, and interest and, if applicable, Liquidated Damages on this Note is
unconditionally guaranteed by the Subsidiary Guarantors referred to on the
reverse hereof.
Reference is hereby made to the further provisions of this Note set
forth on the reverse hereof and as more fully specified in the Indenture, which
further provisions shall for all purposes have the same effect as if set forth
at this place.
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<PAGE>
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed.
FINE AIR SERVICES CORP.
By:
------------------------
Name:
Title:
SUBSIDIARY GUARANTORS:
FINE AIR SERVICES, INC.
By:
------------------------
Name:
Title:
AGRO AIR ASSOCIATES, INC.
By:
------------------------
Name:
Title:
Dated:_________________
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<PAGE>
FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes referred to in the within-mentioned Indenture.
Dated: The Bank of New York,
as Trustee
By:
---------------------------------
Authorized Signatory
FORM OF ALTERNATIVE CERTIFICATE OF AUTHENTICATION
This is one of the Notes referred to in the within-mentioned Indenture.
Dated: The Bank of New York,
as Trustee
By:
---------------------------------
as Authenticating Agent
By:
---------------------------------
Authorized Signatory
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<PAGE>
FORM OF REVERSE OF NOTE
1. INTEREST. Fine Air Services Corp. (the "COMPANY") promises to pay
interest on the principal amount of this Note at the rate and in the manner
specified below. Cash interest will accrue at 9-7/8% per annum until maturity
and will be payable semi-annually in arrears in cash on June 1 and December 1 of
each year commencing December 1, 1998, or if any such day is not a Business Day
on the next succeeding Business Day (each an "INTEREST PAYMENT DATE"). Interest
on this Note will accrue from the most recent date on which interest has been
paid or, if no interest has been paid, from the original date of issue. To the
extent lawful, the Company shall pay interest on overdue principal, premium, if
any, interest and Liquidated Damages, if any, from time to time on demand at the
rate of 9-7/8% per annum, compounded semi-annually. Interest will be computed on
the basis of a 360-day year of twelve 30-day months.
[In the event that a Registration Default occurs under the Registration
Rights Agreement, then Liquidated Damages (as defined therein) (in addition to
the interest otherwise due hereon) will accrue on the principal amount of the
Notes and the New Notes (in addition to the stated interest on the Notes and the
New Notes) from and including the date on which any such Registration Default
shall occur to but excluding the date on which any such Registration defaults
have been cured. Liquidated Damages will accrue at a rate of $.05 per week per
$1,000 principal amount of Notes during the 90-day period immediately following
the occurrence of any Registration Default and shall increase by $.05 per week
per $1,000 principal amount of Notes at the end of each subsequent 90-day
period, but in no event shall such rate exceed $.30 per week per $1,000
principal of Notes. All accrued Liquidated Damages, if any, will be paid by the
Company or the Subsidiary Guarantors, in arrears, on each Interest Payment Date,
commencing December 1, 1998. Upon the cure of all Registration Defaults, the
accrual of Liquidated Damages will cease.](1)
[There shall also be payable in respect of this Note all Liquidated
Damages that may have accrued on the Note for which this Note was exchanged (as
defined in such Note) pursuant to the Exchange Offer or otherwise pursuant to a
Registration of such Note, such Liquidated Damages to be payable in accordance
with the terms of such Note.](2)
2. METHOD OF PAYMENT. The Company will pay interest on this Note to the
Person who is the registered Holder of this Note at the close of business on the
record date for the next Interest Payment Date, which record date shall be May
15 and November 15 of each year (each a "RECORD DATE") even if such Note is
cancelled after such Record Date and on or before such Interest Payment Date.
Holders must surrender Notes to a Paying Agent, as defined below, to
- ----------
(1) To be included in Old Notes but not New Notes.
(2) To be included in New Notes.
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<PAGE>
collect principal payments on such Notes. Principal of, premium, if any,
interest and Liquidated Damages, if any, on, the Notes will be payable (i) in
same-day funds on or prior to the payment dates with respect to such amounts in
the case of Notes held of record by The Depository Trust Company (the
"DEPOSITARY") or its nominee and (ii) at the corporate trust office of the
Trustee in New York, New York, in the case of Notes held of record by Holders
other than the Depositary or its nominee, and the Notes may be surrendered for
registration of transfer or exchange at the corporate trust office of the
Trustee in New York, New York. The Company may, at its option, pay interest on
Notes held of record by Holders other than the Depositary or its nominee by
check mailed to the addresses of the registered Holders on the Record Date for
that interest or by wire transfer of immediately available funds to an account
located in the United States designated by the Holder.
3. PAYING AGENT AND REGISTRAR. (a) The Bank of New York (the "TRUSTEE")
will initially act as the Paying Agent and Registrar. The Company may appoint
additional paying agents or co-Registrars, and change the Paying Agent, any
additional paying agent, the Registrar or any co-Registrar without prior notice
to any Holder. The Company or any of its Subsidiaries may act in any such
capacity.
(b) Pursuant to the Indenture, the Company has appointed the Trustee as
transfer and exchange agent for the purpose of any transfer or exchange of the
Notes.
(c) Holders shall present Notes to the Trustee, as transfer and
exchange agent.
4. INDENTURE. The Company has issued the Notes under an Indenture,
dated as of June 5, 1998 (the "INDENTURE"), among the Company, as issuer of the
Notes, the Subsidiary Guarantors party thereto and the Trustee. The terms of the
Notes include those stated in the Indenture and those made part of the Indenture
by reference to the Trust Indenture Act of 1939 (15 U.S. Code /sections/
77aaa-77bbbb) as in effect on the date of the original issuance of the Notes
(the "TRUST INDENTURE ACT"). The Notes are subject to, and qualified by, all
such terms, certain of which are summarized herein, and Holders are referred to
the Indenture and the Trust Indenture Act for a statement of such terms (all
capitalized terms not defined herein shall have the meanings assigned to them in
the Indenture). The Notes are senior unsecured obligations of the Company
limited to $200,000,000 in aggregate principal amount.
5. REDEMPTION PROVISIONS. (a) The Notes are not subject to any
mandatory sinking fund redemption prior to maturity.
(b) Except as set forth below in this Section 5, the Notes may not be
redeemed, either in whole or in part, at the option of the Company prior to June
1, 2003. On June 1, 2003 and thereafter, the Notes will be subject to redemption
at the option of the Company, in whole or in part, upon not less than 30 nor
more than 60 days' notice to the Holders and the Trustee, at the redemption
prices (expressed as percentages of the principal amount of the Notes) set forth
below, together with accrued and unpaid interest and Liquidated Damages, if any,
to the redemption date (subject to the right of Holders of record on the
relevant Record Date to receive
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<PAGE>
interest due on an Interest Payment Date that is on or prior to the redemption
date), if redeemed during the twelve-month period beginning on June 1 of the
applicable year indicated below:
YEAR PERCENTAGE
---- ----------
2003.................................. 104.938%
2004.................................. 103.292%
2005.................................. 101.646%
2006 and thereafter................... 100.000%
(c) In addition to the Company's right to redeem the Notes as set forth
in Section 5(b), from time to time prior to June 1, 2001, the Company may redeem
up to 35% of the aggregate principal amount of the Notes outstanding on the
Issue Date at a redemption price equal to 109.875% of the principal amount
thereof, in each case plus accrued and unpaid interest and Liquidated Damages,
if any, thereon, if any, to the redemption date, with the net cash proceeds of
one or more Public Equity Offerings; PROVIDED that (i) at least 65% of the
principal amount of the Notes originally issued remains outstanding immediately
after any such redemption and (ii) the Company effects such redemption within 60
days after the Public Equity Offering closes.
(d) If less than all of the Notes are to be redeemed at any time,
selection of the Notes to be redeemed will be made by the Trustee from among the
outstanding Notes on a PRO RATA basis, by lot or by any other method permitted
in the Indenture. Notice of redemption will be mailed at least 30 days but not
more than 60 days before any redemption date to each Holder whose Notes are to
be redeemed at the registered address of such Holder. On and after the
redemption date, interest will cease to accrue on the Notes or portions thereof
called for redemption.
6. MANDATORY OFFERS. (a) Within 30 days after any Change of Control
Trigger Date, any Asset Sale Trigger Date or a Mandatory Repurchase Trigger
Date, the Company shall mail to the Trustee (who shall mail to each Holder) a
notice stating certain details as set forth in Section 3.08 of the Indenture in
connection with the Offer that the Company is obligated under the Indenture to
make to Holders in such circumstances.
(b) Holders may tender all or, subject to Section 8 below, any portion
of their Notes by completing the attachment hereto entitled "OPTION OF HOLDER TO
ELECT PURCHASE" in an Offer.
(c) Upon a Change of Control, the Company is obligated to make an offer
to repurchase Notes as provided in the Indenture. Any Holder of Notes may tender
Notes of such Holder for repurchase, in whole or in part in integral multiples
of aggregate principal amount of $1,000, at a purchase price in cash equal to
101% of the principal amount thereof plus accrued and unpaid interest and
Liquidated Damages, if any, to the date of repurchase, as provided in, and
subject to, the terms of the Indenture.
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<PAGE>
(d) Upon there being at least $5.0 million in Excess Proceeds relating
to one or more Asset Sales, the Company is obligated to make an offer to
repurchase Notes, equal in principal amount to the amount of such Excess
Proceeds. Any Holder of Notes may tender Notes of such Holder for repurchase, in
whole or in part in integral multiples of aggregate principal amount of $1,000,
at a purchase price in cash equal to 100% of the principal amount thereof plus
accrued and unpaid interest, if any, and Liquidated Damages, if any, to the date
such Net Proceeds Offer is consummated, as provided in, and subject to, the
terms of the Indenture.
(e) In the event that on the Mandatory Repurchase Trigger Date, the
Unutilized Proceeds Amount is greater than $0, the Company is obligated to
either (i) make an offer to repurchase Notes, equal in principal amount to such
Unutilized Proceeds Amount (the "MANDATORY REPURCHASE OFFER") or (ii) repurchase
Notes having an aggregate principal amount equal to the Unutilized Proceeds
Amount in the open market. If the Company elects to make the Mandatory
Repurchase Offer, any Holder of Notes may tender Notes of such Holder for
repurchase, in whole or in part in integral multiples of aggregate principal
amount of $1,000, at a purchase price in cash equal to 101% of the principal
amount thereof plus accrued and unpaid interest, and Liquidated Damages, if any,
to the date such Mandatory Repurchase Offer is consummated, as provided in, and
subject to, the terms of the Indenture.
(f) Promptly after consummation of an Offer, (i) the Paying Agent shall
mail or wire transfer, if permitted under the Indenture, to each Holder of Notes
or portions thereof accepted for payment an amount equal to the Change of
Control Purchase Price, Offered Price, or Mandatory Repurchase Offered Price, as
the case may be, (ii) with respect to any tendered Note not accepted for payment
in whole or in part, the Trustee shall return such Note to the Holder thereof,
and (iii) with respect to any Note accepted for payment in part, the Company
shall issue and the Trustee shall authenticate and mail to each such Holder a
new Note equal in principal amount to the unpurchased portion of the tendered
Note.
(g) The Company will (i) announce the results of the Offer to Holders
on or as soon as practicable after the Purchase Date, and (ii) comply with Rule
14e-1 under the Securities Exchange Act of 1934, as amended, and any other
securities laws and regulations to the extent such laws and regulations are
applicable to any Offer.
7. NOTES TO BE REDEEMED OR PURCHASED. The Notes may be redeemed or
purchased in part, but only in multiples of $1,000 principal amount unless all
Notes held by a Holder are to be redeemed or purchased. On or after any date on
which Notes are redeemed or purchased, interest ceases to accrete or accrue, as
the case may be, on the Notes or portions thereof called for redemption or
accepted for purchase on such date.
8. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in registered form,
without coupons, in denominations of $1,000 principal amount and integral
multiples thereof. The transfer of Notes may be registered and Notes may be
exchanged as provided in the Indenture. Holders seeking to transfer or exchange
their Notes may be required, among other things, to furnish appropriate
endorsements and transfer documents and to pay any taxes and fees required
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<PAGE>
by law or permitted by the Indenture. The Registrar need not exchange or
register the transfer of any Note or portion of a Note selected for redemption
or tendered pursuant to an Offer. Neither the Trustee or the Registrar shall be
required to issue, register the transfer of or exchange any Note to register the
transfer of or exchange any Note selected for redemption, to register the
transfer of or exchange any Note for a period of 15 days before the mailing of a
notice of redemption ending on the date of such mailing, to register the
transfer or exchange of a Note between a Record Date and the next succeeding
Interest Payment Date.
9. PERSONS DEEMED OWNERS. The registered Holder of a Note shall be
treated as the owner of the Note for all purposes.
10. AMENDMENTS AND WAIVERS. (a) Subject to certain exceptions, the
Indenture and the Notes may be amended or supplemented with the written consent
of the Holders of at least a majority in aggregate principal amount of the then
outstanding Notes (including consents obtained in connection with a tender offer
or exchange offer for the Notes), and any existing Default or Event of Default
or compliance with any provision of the Indenture or the Notes may be waived
with the consent of the Holders of at least a majority in aggregate principal
amount of the then outstanding Notes (including consents obtained in connection
with a tender offer or exchange offer for the Notes); PROVIDED THAT: (i) no such
modification or amendment may, without the consent of the Holders of at least
75% in aggregate principal amount of such series of Notes then outstanding,
amend or modify the obligations of the Company under Section 4.15 of the
Indenture (or the definitions related thereto) that could adversely affect the
rights of any holder of the Notes; and (ii) without the consent of each holder
affected, the Company and the Trustee may not: (w) extend the maturity of any
Note; (x) affect the terms of any scheduled payment of interest on or principal
of the Notes (including without limitation any redemption provisions); (y) take
any action that would subordinate the Notes or the Subsidiary Guarantees to any
other Indebtedness of the Company or any of Subsidiary Guarantors, respectively,
or otherwise affect the ranking of the Notes or the Subsidiary Guarantees; or
(z) reduce the percentage of Holders necessary to consent to an amendment,
supplement or waiver to this Indenture.
(b) Notwithstanding section 10(a) above, the Company, the Subsidiary
Guarantors and the Trustee may amend or supplement the Indenture or the Notes,
without the consent of any Holder, to: cure any ambiguity, defect or
inconsistency; provide for uncertificated Notes in addition to or in place of
Certificated Notes; provide for the assumption of the obligations to the Holders
of the Company or a Subsidiary Guarantor, as the case may be, in the event of a
merger or consolidation; make any change that would provide any additional
rights or benefits to Holders or does not adversely affect the legal rights
under the Indenture of any Holder; comply with Section 4.18 or Article X of the
Indenture; secure the Notes pursuant to the requirements of Section 4.11 of the
Indenture; comply with the requirements of the Commission in order to effect or
maintain the qualification of the Indenture under the Trust Indenture Act.
(c) Certain provisions of the Indenture cannot be amended, supplemented
or waived without the consent of each Holder of Notes affected.
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<PAGE>
11. DEFAULTS AND REMEDIES. Events of Default include: (a) Each of the
following constitutes an event of default (an "EVENT OF DEFAULT"): (i) any
default in the payment of the principal of or premium, if any, on any of the
Notes, whether such payment is due at Stated Maturity or on redemption,
repurchase pursuant to a Change of Control Offer, a Net Proceeds Offer, a
Mandatory Repurchase Offer, acceleration or otherwise; or (ii) any default in
the payment of any installment of interest or Liquidated Damages, if any, on any
Note, when due, and the continuance of that default for a period of 30 days; or
(iii) any default in the performance or breach by the Company or any Restricted
Subsidiary of Article V of the Indenture or any failure of the Company to make
or consummate either a Change of Control Offer, a Net Proceeds Offer or a
Mandatory Repurchase Offer (or the other repurchases contemplated in Section
4.17) described in Sections 4.15, 4.16 and 4.17, respectively, of the Indenture;
or (iv) any failure of the Company or any Restricted Subsidiary to perform or
observe any other term, covenant or agreement applicable to it and contained in
the Notes, the Indenture (other than a default specified in clause (i), (ii) or
(iii) above) or the Subsidiary Guarantees, as the case may be, for a period of
30 days after written notice of that failure is given (a) to the Company or the
Restricted Subsidiary, as the case may be, by the Trustee or (b) to the Company
or the Restricted Subsidiary, as the case may be, and the Trustee by the Holders
of at least 25% in aggregate principal amount of the Notes then outstanding; or
(v) the occurrence and continuation beyond any applicable grace period of any
default in the payment of the principal of any Indebtedness of the Company
(other than the Notes) or any Restricted Subsidiary for money borrowed when due
at final Stated Maturity, or any other default resulting in acceleration of any
Indebtedness of the Company or any Restricted Subsidiary for money borrowed,
PROVIDED that the aggregate principal amount of such Indebtedness exceeds $5.0
million; or (vi) one or more final judgments or orders rendered against the
Company or any Restricted Subsidiary that are unsatisfied and require the direct
payment by the Company in money, either individually or in an aggregate amount,
in excess of $5.0 million are not paid, discharged or stayed for a period of 30
days; or (vii) certain events of bankruptcy, insolvency or reorganization
involving the Company or any Restricted Subsidiary; or (viii) except as
permitted by the Indenture, the cessation of the effectiveness of any Subsidiary
Guarantee or the repudiation by any Subsidiary Guarantor (or by any Person
acting on behalf of any Subsidiary Guarantor) of its obligations under its
Subsidiary Guarantee.
If an Event of Default (other than an Event of Default specified in
clause (vii) above involving the Company), occurs and is continuing under the
Indenture, the Trustee, by written notice to the Company, or the Holders of at
least 25% in aggregate principal amount of the Notes then outstanding by written
notice to the Company and the Trustee may declare all amounts owing under the
Notes to be due and payable immediately. Upon such declaration of acceleration,
the aggregate principal of, premium, if any, and interest on the outstanding
Notes shall immediately become due and payable. If an Event of Default results
from bankruptcy, insolvency or reorganization involving the Company, all
outstanding Notes shall become due and payable without any further action or
notice. In certain cases, the Holders of a majority in aggregate principal
amount of the Notes then outstanding may waive an existing Default or
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<PAGE>
Event of Default and its consequences, except a default in the payment of
principal of, premium, if any, and interest on the Notes.
The Holders may not enforce the provisions of the Indenture or the
Notes except as provided in the Indenture. Subject to certain limitations,
Holders of a majority in principal amount of the Notes then outstanding may
direct the Trustee in its exercise of any trust or power; PROVIDED, HOWEVER,
that such direction does not conflict with the terms of the Indenture. The
Trustee may withhold from the Holders notice of any continuing Default or Event
of Default (except any Default or Event of Default in payment of principal of,
premium, if any, or interest on the Notes) if the Trustee determines that
withholding such notice is in the holders' interest.
12. GUARANTEE. Each Subsidiary Guarantor unconditionally, jointly and
severally, guarantees (each a "SUBSIDIARY GUARANTEE") to each Holder of a Note
authenticated and delivered by the Trustee that: (i) the principal of, premium,
interest and Liquidated Damages, if any, on the Notes will be promptly paid in
full when due, whether at maturity, by acceleration, redemption or otherwise,
and interest on the overdue principal of and interest and Liquidated Damages, if
any, and premium, if any, on the Notes, if any, to the extent lawful, and all
other Obligations of the Company to the Holders or the Trustee under this
Indenture and the Notes will be promptly paid in full, all in accordance with
the terms of this Indenture and the Notes; and; (ii) in case of any extension of
time of payment or renewal of any Notes or any of such other Obligations, that
the Notes will be promptly paid in full when due in accordance with the terms of
such extension or renewal, whether at stated maturity, by acceleration or
otherwise; PROVIDED that notwithstanding anything to the contrary herein or in
Article X of the Indenture, the aggregate amount of the Obligations guaranteed
under the Indenture by any Subsidiary Guarantor shall be limited in amount to
the lesser of (x) the maximum amount that would not render such Subsidiary
Guarantor's obligations subject to avoidance under applicable fraudulent
conveyance provisions of the United States Bankruptcy Code or any comparable
provision of any applicable state law and (y) the maximum amount that would not
render the Subsidiary Guarantee of such Subsidiary Guarantor an improper
corporate distribution by such Subsidiary Guarantor under applicable state law.
The Subsidiary Guarantees are subject to release as and to the extent provided
in the Indenture.
13. ADDITIONAL SUBSIDIARY GUARANTEES. If the Company or any Restricted
Subsidiary acquires or creates another Subsidiary, such newly acquired or
created Subsidiary must execute a Subsidiary Guarantee in accordance with the
terms of the Indenture, unless the Board of Directors has duly designated that
Subsidiary as an Unrestricted Subsidiary as permitted in the Indenture.
14. TRUSTEE DEALINGS WITH COMPANY. The Trustee in its individual or any
other capacity may become the owner or pledgee of Notes and may otherwise deal
with the Company or any of its Affiliates with the same rights it would have if
it were not Trustee.
15. NO RECOURSE AGAINST OTHERS. No director, officer, employee,
incorporator or direct or indirect stockholder or Affiliate of the Company or
any Subsidiary Guarantor (other
A-12
<PAGE>
than the Company and any Subsidiary Guarantor), as such, shall have any
liability for any obligation of the Company or such Subsidiary Guarantor under
the Indenture, the Subsidiary Guarantees, or the Notes or for any claim based
on, in respect of, or by reason of, any such obligation or the creation of any
such obligation. Each Holder by accepting a Note waives and releases such
Persons from all such liability, and such waiver and release is part of the
consideration for the issuance of the Notes.
16. MERGERS AND CERTAIN OTHER TRANSACTIONS. The Company will not, in a
single transaction or a series of related transactions, (i) consolidate or merge
with or into (other than a merger with a Wholly-Owned Restricted Subsidiary
solely for the purpose of changing the Company's jurisdiction of incorporation
to another State of the United States), or sell, lease, transfer, convey or
otherwise dispose of or assign all or substantially all of the assets of the
Company or the Company and its Subsidiaries (taken as a whole), or assign any of
its obligations under the Notes and the Indenture, to any Person or (ii) adopt a
Plan of Liquidation unless, in either case: (a) the Person formed by or
surviving such consolidation or merger (if other than the Company) or to which
such sale, lease, conveyance or other disposition or assignment shall be made
(or, in the case of a Plan of Liquidation, any Person to which assets are
transferred) (collectively, the "SUCCESSOR"), is a corporation organized and
existing under the laws of any State of the United States of America or the
District of Columbia, and the Successor assumes by supplemental indenture in a
form satisfactory to the Trustee all of the obligations of the Company under the
Notes and the Indenture; (b) immediately prior to and immediately after giving
effect to such transaction and the assumption of the obligations as set forth in
clause (a) above and the incurrence of any Indebtedness to be incurred in
connection therewith, no Default or Event of Default shall have occurred and be
continuing; and (c) immediately after and giving effect to such transaction and
the assumption of the obligations set forth in clause (a) above and the
incurrence of any Indebtedness to be incurred in connection therewith, and the
use of any net proceeds therefrom on a PRO FORMA basis, (1) the Consolidated Net
Worth of the Company or the Successor, as the case may be, would be at least
equal to the Consolidated Net Worth of the Company immediately prior to such
transaction and (2) the Company or the Successor, as the case may be, could
incur $1.00 of additional Indebtedness other than Permitted Indebtedness
pursuant to the Consolidated Fixed Charge Coverage Ratio test set forth in
Section 4.07 of the Indenture; and (d) each Subsidiary Guarantor, unless it is
the other party to the transactions described above, shall have confirmed, by a
supplemental indenture, that its Subsidiary Guarantee shall apply to the
obligations of the Company or the Successor under the Notes and the Indenture;
and (e) the Company will have delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that such consolidation, merger or
transfer and such supplemental indenture (if any) comply with the provisions of
Section 5.01 of the Indenture. For purposes of this paragraph, any Indebtedness
of the Successor which was not Indebtedness of the Company immediately prior to
the transaction shall be deemed to have been incurred in connection with such
transaction.
A-13
<PAGE>
17. GOVERNING LAW. This Note shall be will be governed by, and
construed in accordance with, the laws of the State of New York, without regard
to the principles of conflicts of laws.
18. AUTHENTICATION. This Note shall not be valid until authenticated by
the manual signature of the Trustee or an authenticating agent.
19. CUSIP/CINS NUMBERS. Pursuant to a recommendation promulgated by the
Committee on Uniform Note Identification Procedures, the Company has caused
CUSIP and CINS numbers, as applicable, to be printed on the Notes and has
directed the Trustee to use CUSIP and CINS numbers, as applicable, in notices of
redemption, purchases or exchanges as a convenience to Holders. No
representation is made as to the accuracy of such numbers either as printed on
the Notes or as contained in any notice of redemption and reliance may be placed
only on the other identification numbers printed on the Notes.
The Company will furnish to any Holder upon written request and without
charge a copy of the Indenture. Request may be made to: Fine Air Services Corp.,
2261 N.W. 67th Avenue, Building 700, Miami, Florida 33122, Attention: Corporate
Secretary.
A-14
<PAGE>
SCHEDULE OF EXCHANGES OF CERTIFICATED NOTES(3)
The following exchanges of a part of this Global Note for Certificated Notes
have been made:
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT OF
AMOUNT OF DECREASE IN AMOUNT OF INCREASE IN THIS GLOBAL NOTE SIGNATURE OF
DATE OF PRINCIPAL AMOUNT OF PRINCIPAL AMOUNT FOLLOWING SUCH DECREASE AUTHORIZED OFFICER OF
EXCHANGE THIS GLOBAL NOTE OF THIS GLOBAL NOTE (OR INCREASE) TRUSTEE OR NOTES
-------- ---------------- ------------------- ------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
</TABLE>
- ----------
(3) This schedule should only be added if the Note is issued in global form.
A-15
<PAGE>
[FORM OF TRANSFER NOTICE]
FOR VALUE RECEIVED the undersigned registered Holder hereby sell(s),
assign(s) and transfer(s) unto
INSERT TAXPAYER IDENTIFICATION NO.: ________________________________
Please print or typewrite name and address including zip code of assignee:
- ------------------------------------------------------------
- ------------------------------------------------------------
the within Note and all rights thereunder, hereby irrevocably constituting and
appointing ____________________ attorney to transfer said Note on the books of
the Company with full power of substitution in the premises.
[THE FOLLOWING PROVISION TO BE INCLUDED ON ALL NOTES OTHER THAN EXCHANGE NOTES,
REGULATION S GLOBAL NOTES AND OFFSHORE CERTIFICATED NOTES:]
In connection with any transfer of this Note occurring prior to the
date which is the earlier of (i) the date of an effective Registration or (ii)
one year after the later of the original issuance of this Note or the last date
on which this Note was held by the Company or an Affiliate of the Company, the
undersigned confirms, without utilizing any general solicitation or general
advertising, that:
[CHECK ONE]
[ ] (a) this Note is being transferred in compliance with the
exemption from registration under the Securities Act of 1933, as amended,
provided by Rule 144A thereunder.
OR
[ ] (b) this Note is being transferred other than in accordance with
(a) above and documents are being furnished which comply with the conditions of
transfer set forth in this Note and the Indenture.
If neither of the foregoing boxes is checked, the Registrar shall not
be obligated to register this Note in the name of any Person other than the
Holder hereof unless and until the conditions to any such transfer or
registration set forth herein and in Section 2.08 of the Indenture shall have
been satisfied.
A-16
<PAGE>
Date: _______________ Signature: __________________________________
NOTICE: The signature to this assignment must
correspond with the name as written upon the face of
the within-mentioned instrument in every particular,
without alteration or any change whatsoever.
TO BE COMPLETED BY PURCHASER IF (a), ABOVE, IS CHECKED:
The undersigned represents and warrants that it is purchasing this Note
for its own account or an account with respect to which it exercises sole
investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act of
1933, as amended, and is aware that the sale to it is being made in reliance on
Rule 144A and acknowledges that it has received such information regarding the
Company as the undersigned has requested pursuant to Rule 144A or has determined
not to request such information and that it is aware that the transferor is
relying upon the undersigned's foregoing representations in order to claim the
exemption from registration provided by Rule 144A.
Dated: ___________ Signature: __________________________________
NOTICE: To be executed by an executive
officer of the transferee
Signature Guarantee: _______________________________
(Signature must be guaranteed by a financial institution that is a
member of the Securities Transfer Agent Medallion Program ("STAMP"), in
accordance with the Securities Exchange Act of 1934, as amended.)
A-17
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you elect to have this Note purchased by the Company pursuant to
Section 4.15 of the Indenture, check the box: [ ]
If you elect to have this Note purchased by the Company pursuant to
Section 4.16 of the Indenture, check the box: [ ]
If you elect to have this Note purchased by the Company pursuant to
Section 4.17 of the Indenture, check the box: [ ]
If you elect to have only part of the principal amount of this Note
purchased by the Company pursuant to Section 4.15, 4.16 or 4.17 of the
Indenture, state the portion of such amount (multiples of $1,000 principal
amount only):
$_________________________.
Dated: Your signature:
- -----------------. --------------------------------------
(Sign exactly as name appears on the other
side of this Note)
Signature Guarantee:
(Signature must be guaranteed by a financial institution that is a
member of the Securities Transfer Agent Medallion Program ("STAMP"), in
accordance with the Securities Exchange Act of 1934, as amended.)
A-18
<PAGE>
EXHIBIT B
Form of Certificate to be Delivered
in Connection with Transfers
Pursuant to Regulation S
------, ----
The Bank of New York
101 Barclay Street, Floor 21W
New York, New York 10286
Attention: Corporate Trust Administration
Re: Fine Air Services Corp. (the "Company")
9-7/8% SENIOR NOTES DUE 2008 (THE "NOTES")
Dear Sirs:
In connection with our proposed sale of $200,000,000 aggregate
principal amount of the Notes, we confirm that such sale has been effected
pursuant to and in accordance with Regulation S under the Securities Act of
1933, as amended, and, accordingly, we represent that:
(1) the offer of the Notes was not made to a person in the United
States;
(2) at the time the buy order was originated, the transferee was
outside the United States or we and any person acting on our behalf reasonably
believed that the transferee was outside the United States;
(3) no directed selling efforts have been made by us in the United
States in contravention of the requirements of Rule 903(b) or Rule 904(b) of
Regulation S, as applicable; and
(4) the transaction is not part of a plan or scheme to evade the
registration requirements of the Securities Act of 1933.
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceedings or official inquiry with
respect to the matters covered hereby. Terms used in this certificate have the
meanings set forth in Regulation S.
Very truly yours,
[Name of Transferor]
By:
---------------------------------
Authorized Signatory
B-1
<PAGE>
EXHIBIT C
================================================================================
FINE AIR SERVICES CORP.,
AS ISSUER
AND
THE SUBSIDIARY GUARANTORS
NAMED HEREIN
AND
THE BANK OF NEW YORK,
AS TRUSTEE
$200,000,000
SERIES A AND SERIES B
9-7/8% SENIOR NOTES DUE 2008
FORM OF SUPPLEMENTAL INDENTURE
DATED AS OF [_______], 1998
================================================================================
<PAGE>
This SUPPLEMENTAL INDENTURE, dated as of __________ ___, ____, is among
Fine Air Services Corp., a Delaware corporation (the "COMPANY"), each of the
parties identified under the caption "Subsidiary Guarantors" on the signature
page hereto (the "SUBSIDIARY GUARANTORS") and The Bank of New York, as Trustee.
RECITALS
WHEREAS, the Company, the initial Subsidiary Guarantors and the Trustee
entered into an Indenture, dated as of June 5, 1998 (the "INDENTURE"), pursuant
to which the Company has originally issued $200,000,000 in principal amount of
9-7/8% Senior Notes due 2008 (the "NOTES"); and
WHEREAS, Section 9.01 of the Indenture provides that the Company and
the Trustee may amend or supplement the Indenture in order to execute and
deliver a guarantee (a "SUBSIDIARY GUARANTEE") to comply with Section 4.18
thereof without the consent of the Holders of the Notes; and
WHEREAS, all acts and things prescribed by the Indenture, by law and by
the charter and the bylaws (or comparable constituent documents) of the Company,
of the Subsidiary Guarantors and of the Trustee necessary to make this
Supplemental Indenture a valid instrument legally binding on the Company, the
Subsidiary Guarantors and the Trustee, in accordance with its terms, have been
duly done and performed;
NOW, THEREFORE, to comply with the provisions of the Indenture and in
consideration of the above premises, the Company, the Subsidiary Guarantors and
the Trustee covenant and agree for the equal and proportionate benefit of the
respective Holders of the Notes as follows:
ARTICLE I
SECTION 1.01. This Supplemental Indenture is supplemental to the
Indenture and does and shall be deemed to form a part of, and shall be construed
in connection with and as part of, the Indenture for any and all purposes.
SECTION 1.02. This Supplemental Indenture shall become effective
immediately upon its execution and delivery by each of the Company, the
Subsidiary Guarantors and the Trustee.
ARTICLE II
From this date, in accordance with Section 4.18 and by executing this
Supplemental Indenture, the Subsidiary Guarantors whose signatures appear below
are subject to the provisions of the Indenture to the extent provided for in
Article X thereunder.
C-2
<PAGE>
ARTICLE III
SECTION 3.01. Except as specifically modified herein, the Indenture and
the Notes are in all respects ratified and confirmed (MUTATIS MUTANDIS) and
shall remain in full force and effect in accordance with their terms with all
capitalized terms used herein without definition having the same respective
meanings ascribed to them as in the Indenture.
SECTION 3.02. Except as otherwise expressly provided herein, no duties,
responsibilities or liabilities are assumed, or shall be construed to be
assumed, by the Trustee by reason of this Supplemental Indenture. This
Supplemental Indenture is executed and accepted by the Trustee subject to all
the terms and conditions set forth in the Indenture with the same force and
effect as if those terms and conditions were repeated at length herein and made
applicable to the Trustee with respect hereto.
SECTION 3.03. THIS SUPPLEMENTAL INDENTURE WILL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD
TO THE PRINCIPLES OF CONFLICTS OF LAWS.
SECTION 3.04. The parties may sign any number of copies of this
Supplemental Indenture. Each signed copy shall be an original, but all of such
executed copies together shall represent the same agreement.
[NEXT PAGE IS SIGNATURE PAGE]
C-3
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed, all as of the date first written above.
FINE AIR SERVICES CORP.
By:
------------------------------------
Name:
Title:
SUBSIDIARY GUARANTORS:
FINE AIR SERVICES, INC.
By:
------------------------------------
Name:
Title:
AGRO AIR ASSOCIATES, INC.
By:
------------------------------------
Name:
Title:
[ADDITIONAL SUBSIDIARY GUARANTORS]
By:
------------------------------------
Name:
Title:
THE BANK OF NEW YORK,
as Trustee
By:
------------------------------------
Name:
Title:
C-4
EXHIBIT 4.3
================================================================================
REGISTRATION RIGHTS AGREEMENT
Dated as of June 5, 1998
by and among
FINE AIR SERVICES CORP.
THE SUBSIDIARY GUARANTORS NAMED HEREIN
and
SBC WARBURG DILLON READ INC.
================================================================================
<PAGE>
This Registration Rights Agreement (the "AGREEMENT") is made and
entered into as of June 5, 1998 by and among FINE AIR SERVICES CORP. (the
"ISSUER"), the SUBSIDIARY GUARANTORS (as defined herein) and SBC WARBURG DILLON
READ INC. (the "INITIAL PURCHASER"). The execution and delivery of this
Agreement is a condition to the obligations of the Initial Purchaser to purchase
$200,000,000 of the 9-7/8% Senior Notes due 2008 of the Issuer under the
Purchase Agreement, dated as of June 2, 1998 (the "PURCHASE AGREEMENT"), by and
among the Issuer, the Subsidiary Guarantors and the Initial Purchaser.
The Issuer, the Subsidiary Guarantors and the Initial Purchaser hereby
agree as follows:
SECTION 1. DEFINITIONS.
As used in this Agreement, the following capitalized terms shall have
the following meanings:
ACT: The Securities Act of 1933, as amended, and the rules and
regulations promulgated by the Commission pursuant thereto.
ACTION: As defined in Section 8(c) of this Agreement.
BROKER-DEALER: Any broker or dealer registered under the Exchange Act.
BUSINESS DAY: As that term is defined in the Indenture.
CLOSING DATE: The date that the Old Notes are purchased by the Initial
Purchaser pursuant to the Purchase Agreement.
COMMISSION: The Securities and Exchange Commission.
CONSUMMATE: A Registered Exchange Offer shall be deemed "Consummated"
for purposes of this Agreement upon the occurrence of (i) the filing and
effectiveness under the Act of the Exchange Offer Registration Statement
relating to the Notes to be issued in the Exchange Offer, (ii) the maintenance
of such Registration Statement continuously effective and the keeping of the
Exchange Offer open for a period not less than the minimum period required
pursuant to Section 3(b) of this Agreement and (iii) the delivery by the Issuer
to the Registrar under the Indenture of New Notes in the same aggregate
principal amount as the aggregate principal amount of Old Notes that were
tendered prior to the expiration of the Exchange Offer.
DAMAGES PAYMENT DATE: With respect to the Notes, each Interest Payment
Date.
EFFECTIVENESS TARGET DATE: As defined in Section 5 of this Agreement.
EXCHANGE ACT: The Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated by the Commission pursuant thereto.
<PAGE>
EXCHANGE OFFER: The registration under the Act by the Issuer and the
Subsidiary Guarantors of the New Notes pursuant to a Registration Statement
pursuant to which the Issuer and the Subsidiary Guarantors offer the Holders of
all outstanding Transfer Restricted Securities the opportunity to exchange all
such outstanding Old Notes that are Transfer Restricted Securities held by such
Holders for New Notes in an aggregate principal amount equal to the aggregate
principal amount of the Old Notes that are Transfer Restricted Securities
tendered in such exchange offer by such Holders.
EXCHANGE OFFER EFFECTIVE DATE: The date on which the Exchange Offer
Registration Statement is declared effective by the Commission.
EXCHANGE OFFER REGISTRATION STATEMENT: The Registration Statement
relating to the Exchange Offer, including the related Prospectus.
EXEMPT RESALES: The transactions in which the Initial Purchaser
proposes to sell the Notes to (i) certain "qualified institutional buyers," as
such term is defined in Rule 144A under the Act, and (ii) other eligible
purchasers pursuant to Regulation S under the Act.
HOLDERS: As defined in Section 2(b) of this Agreement.
INDENTURE: The Indenture, dated as of June 5, 1998, by and among the
Issuer, the Subsidiary Guarantors and The Bank of New York, as trustee (the
"TRUSTEE"), pursuant to which the Notes are to be issued, as such Indenture is
amended or supplemented from time to time in accordance with its terms.
INITIAL PURCHASER: SBC Warburg Dillon Read Inc.
INTEREST PAYMENT DATE: As defined in the Notes.
NASD: National Association of Securities Dealers, Inc.
NEW NOTES: The Series B 9-7/8% Senior Notes due 2008 of the Issuer to
be issued pursuant to the Indenture in connection with the Exchange Offer and
evidencing the same indebtedness as the Old Notes, including the guarantees by
the Subsidiary Guarantors.
NOTES: Old Notes and New Notes.
OLD NOTES: The Series A 9-7/8% Senior Notes due 2008 of the Issuer to
be issued pursuant to the Indenture on the Closing Date, including the
guarantees by the Subsidiary Guarantors.
PARTICIPATING BROKER DEALER: As defined in Section 6(a)(iii) of this
Agreement.
- 2 -
<PAGE>
PERSON: An individual, partnership, corporation, trust or
unincorporated organization, or a government or agency or political subdivision
thereof.
PROSPECTUS: The prospectus included in a Registration Statement, as
amended or supplemented by any prospectus supplement and by all other amendments
and supplements thereto, including post-effective amendments, and all material
incorporated by reference or deemed to be incorporated by reference, if any, in
such Prospectus.
REGISTRATION DEFAULT: As defined in Section 5 of this Agreement.
REGISTRATION STATEMENT: Any registration statement of the Issuer and
the Subsidiary Guarantors relating to (a) an offering of New Notes pursuant to
an Exchange Offer or (b) the registration for resale of Transfer Restricted
Securities pursuant to the Shelf Registration Statement that is filed pursuant
to the provisions of this Agreement, in each case, including the Prospectus
included therein, all amendments and supplements thereto (including pre- and
post-effective amendments) and all exhibits and material incorporated by
reference or deemed to be incorporated by reference, if any, therein.
SHELF FILING DEADLINE: As defined in Section 4(a) of this Agreement.
SHELF REGISTRATION STATEMENT: As defined in Section 4(a) of this
Agreement.
SUBSIDIARY: With respect to any Person, any other Person of which a
majority of the equity ownership or the voting securities is at the time owned,
directly or indirectly, by such Person or by one or more other subsidiaries of
such Person or a combination thereof.
SUBSIDIARY GUARANTORS: Each Subsidiary of the Issuer that, pursuant to
the Indenture, is, or is required to become, a guarantor of the obligations of
the Issuer under the Notes and the Indenture.
TIA: The Trust Indenture Act of 1939, as amended (15 U.S.C. Section
77aaa-77bbbb), as in effect on the date of the Indenture.
TRANSFER RESTRICTED SECURITIES: Each Old Note until the earliest to
occur of (i) the date on which each such Old Note has been exchanged by a person
other than a Broker-Dealer for a New Note in the Exchange Offer, (ii) following
the exchange by a Broker-Dealer in the Exchange Offer of an Old Note for a New
Note, the date on which such New Note is sold to a purchaser who receives from
such Broker-Dealer on or prior to the date of such sale a copy of the prospectus
contained in the Exchange Offer Registration Statement, (iii) the date on which
such Old Note has been effectively registered under the Act and disposed of in
accordance with the Shelf
- 3 -
<PAGE>
Registration Statement or (iv) the date on which such Old Note is saleable to
the public pursuant to Rule 144 under the Act or is sold pursuant to Rule 144(k)
under the Act.
UNDERWRITTEN REGISTRATION OR UNDERWRITTEN OFFERING: A registration in
which securities of the Issuer are sold to an underwriter for reoffering to the
public pursuant to an effective Registration Statement.
SECTION 2. SECURITIES SUBJECT TO THIS AGREEMENT.
(A) TRANSFER RESTRICTED SECURITIES. The securities entitled to the
benefits of this Agreement are the Transfer Restricted Securities.
(B) HOLDERS OF TRANSFER RESTRICTED SECURITIES. A Person is deemed to be
a holder of Transfer Restricted Securities (each, a "HOLDER") whenever such
Person beneficially owns Transfer Restricted Securities.
SECTION 3. REGISTERED EXCHANGE OFFER.
(A) Unless, due to a change in law or Commission policy after the date
hereof, the Exchange Offer shall not be permissible under applicable federal law
or Commission policy, the Issuer and the Subsidiary Guarantors shall (i) cause
to be filed with the Commission as soon as practicable on or prior to 60 days
after the Closing Date, a Registration Statement under the Act relating to the
New Notes and the Exchange Offer and (ii) use their best efforts to cause such
Registration Statement to be declared effective by the Commission as soon as
practicable on or prior to 150 days after the Closing Date. In connection with
the foregoing, the Issuer and the Subsidiary Guarantors shall (A) file all
pre-effective amendments to such Registration Statement as may be necessary to
cause such Registration Statement to become effective, (B) if applicable, file a
post-effective amendment to such Registration Statement pursuant to Rule 430A
under the Act, (C) cause all necessary filings in connection with the
registration and qualification of the New Notes to be made under the Blue Sky
laws of such jurisdictions as are necessary to permit Consummation of the
Exchange Offer (PROVIDED, HOWEVER, that the Issuer and the Subsidiary Guarantors
shall not be obligated to qualify as foreign corporations in any jurisdiction in
which they are not so qualified or to take any action that would subject them to
general service of process or taxation in any jurisdiction where they are not so
subject, except service of process with respect to the offering and sale of the
Notes) and (D) upon the effectiveness of such Registration Statement, commence
the Exchange Offer and use their best efforts to issue on or prior to 45 days
after the Exchange Offer Effective Date, New Notes in exchange for all Old Notes
tendered in the Exchange Offer. The Exchange Offer shall be on the appropriate
form permitting registration of the New Notes to be offered in exchange for the
Transfer Restricted Securities and to permit resales of New Notes held by
Broker-Dealers as contemplated by Section 3(c) below. If, after such Exchange
Offer Registration Statement initially is declared effective by the Commission,
the Exchange Offer or the issuance of New Notes under the
- 4 -
<PAGE>
Exchange Offer or the resale of New Notes received by Broker-Dealers in the
Exchange Offer as contemplated by Section 3(c) below is interfered with by any
stop order, injunction or other order or requirement of the Commission or any
other governmental agency or court, such Registration Statement shall be deemed
not to have become effective for purposes of this Agreement during the period
that such stop order, injunction or other similar order or requirement shall
remain in effect.
(B) The Issuer and the Subsidiary Guarantors shall cause the Exchange
Offer Registration Statement to be effective continuously and shall keep the
Exchange Offer open for a period of not less than the minimum period required
under applicable federal and state securities laws to Consummate the Exchange
Offer; PROVIDED, HOWEVER, that in no event shall such period be less than 20
business days. The Issuer and the Subsidiary Guarantors shall cause the Exchange
Offer to comply with all applicable federal and state securities laws. The
Issuer and the Subsidiary Guarantors shall only offer to exchange New Notes for
Old Notes in the Exchange Offer, and only the New Notes shall be registered
under the Exchange Offer Registration Statement.
(C) The Issuer shall indicate in a "Plan of Distribution" section
contained in the Prospectus included in the Exchange Offer Registration
Statement that any Broker-Dealer that holds Old Notes that are Transfer
Restricted Securities and that were acquired for its own account as a result of
market-making activities or other trading activities (other than Transfer
Restricted Securities acquired directly from the Issuer), may exchange such Old
Notes pursuant to the Exchange Offer; PROVIDED, HOWEVER, that such Broker-Dealer
may be deemed to be an "underwriter" within the meaning of the Act and must,
therefore, deliver a prospectus meeting the requirements of the Act in
connection with any resales of the New Notes received by such Broker-Dealer in
the Exchange Offer. Such "Plan of Distribution" section shall allow the use of
the Prospectus by all Persons subject to the prospectus delivery requirements of
the Act, including Participating Broker-Dealers, and shall also contain all
other information with respect to such resales by Broker-Dealers that the
Commission may require to permit such resales pursuant thereto, but such "Plan
of Distribution" shall not name any such Broker-Dealer or disclose the amount of
Notes held by any such Broker-Dealer except to the extent required by the
Commission.
The Issuer and the Subsidiary Guarantors shall use their best efforts
to keep the Exchange Offer Registration Statement continuously effective,
supplemented and amended as required by the provisions of Section 6(c) below to
the extent necessary to ensure that it is available for resales of Notes
acquired by Broker-Dealers for their own accounts as a result of market-making
activities or other trading activities, and to ensure that it conforms with the
requirements of this Agreement, the Act and the policies, rules and regulations
of the Commission as announced from time to time for such period of time as such
Broker-Dealers must comply with prospectus delivery requirements of the Exchange
Act in order to resell the Notes, but in no event longer than 180 days. The
Issuer shall provide sufficient copies of the latest version of such Prospectus
to
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Broker-Dealers promptly upon request at any time during such period in order to
facilitate such resales.
SECTION 4. SHELF REGISTRATION.
(a) SHELF REGISTRATION. If (i) the Issuer and the Subsidiary Guarantors
are not required to file an Exchange Offer Registration Statement or to
consummate the Exchange Offer because the Exchange Offer is not permitted by
applicable law or Commission policy or (ii) any Holder of Transfer Restricted
Securities shall notify the Issuer within 20 business days of the commencement
of the Exchange Offer that such Holder (A) is prohibited by applicable law or
Commission policy from participating in the Exchange Offer, or (B) may not
resell the New Notes acquired by it in the Exchange Offer to the public without
delivering a prospectus and the Prospectus contained in the Exchange Offer
Registration Statement is not appropriate or available for such resales by such
Holder or (C) is a Broker-Dealer and holds Old Notes (including the Initial
Purchaser who holds Old Notes as part of an unsold allotment from the original
offering of the Notes) acquired directly from the Issuer or one of its
affiliates, then the Issuer and the Subsidiary Guarantors shall (x) cause to be
filed a shelf registration statement pursuant to Rule 415 under the Act, which
may be an amendment to the Exchange Offer Registration Statement (in either
event, the "SHELF REGISTRATION STATEMENT"), on or prior to the earliest to occur
of (1) the 60th day after the date on which the Issuer determines that it is not
required to file the Exchange Offer Registration Statement or (2) the 60th day
after the date on which the Issuer receives notice from a Holder of Transfer
Restricted Securities as contemplated by clause (ii) above (such earliest date
being the "SHELF FILING DEADLINE"), which Shelf Registration Statement shall
provide for resales of all Transfer Restricted Securities the Holders of which
shall have provided the information required pursuant to Section 4(b) of this
Agreement, and (y) use its best efforts to cause such Shelf Registration
Statement to be declared effective by the Commission on or before the 150th day
after the Shelf Filing Deadline. The Issuer and the Subsidiary Guarantors shall
use their best efforts to keep such Shelf Registration Statement continuously
effective, supplemented and amended as required by the provisions of Sections
6(b) and (c) of this Agreement to the extent necessary to ensure that it is
available for resales of Notes by the Holders of Transfer Restricted Securities
entitled to the benefit of this Section 4(a) and to ensure that it conforms with
the requirements of this Agreement, the Act and the policies, rules and
regulations of the Commission as announced from time to time, for a continuous
period of one year following the date on which such Shelf Registration Statement
becomes effective under the Act or such shorter period that will terminate when
all the Notes covered by the Shelf Registration Statement have been sold
pursuant to such Shelf Registration Statement.
(b) PROVISION BY HOLDERS OF CERTAIN INFORMATION IN CONNECTION WITH THE
SHELF REGISTRATION Statement. No Holder of Transfer Restricted Securities may
include any of its Transfer Restricted Securities in any Shelf Registration
Statement pursuant to this Agreement unless and until such Holder furnishes to
the Issuer in writing, within 15 business days after receipt of a request
therefor, such information regarding such Holder as the Issuer may reasonably
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request for use in connection with any Shelf Registration Statement or
Prospectus or preliminary Prospectus included in such Shelf Registration
Statement. Each Holder as to which any Shelf Registration Statement is being
effected agrees to furnish promptly to the Issuer all information required to be
disclosed to make the information previously furnished to the Issuer by such
Holder not materially misleading.
SECTION 5. LIQUIDATED DAMAGES.
If (i) any of the Registration Statements required by this Agreement is
not filed with the Commission on or prior to the date specified for such filing
in this Agreement (or, if such date is not a Business Day, the next succeeding
Business Day), (ii) any of such Registration Statements has not been declared
effective by the Commission on or prior to the date specified for such
effectiveness in this Agreement (the "EFFECTIVENESS TARGET DATE"), (iii) the
Exchange Offer has not been Consummated within 195 days after the Closing Date
(or, if such date is not a Business Day, the next succeeding Business Day) or
(iv) any Registration Statement required by this Agreement is filed and declared
effective but shall thereafter cease to be effective or usable in connection
with resales of Transfer Restricted Securities during the periods required by
this Agreement (each such event referred to in clauses (i) through (iv), a
"REGISTRATION DEFAULT"), the Issuer and the Subsidiary Guarantors hereby agree,
jointly and severally, to pay liquidated damages to each Holder of Transfer
Restricted Securities with respect to the first 90-day period immediately
following the occurrence of such Registration Default, at a rate equal to $.05
per week per $1,000 principal amount of Old Notes constituting Transfer
Restricted Securities held by such Holder for the period of the Registration
Default. The amount of the liquidated damages shall increase by an additional
$.05 per week per $1,000 principal amount of Old Notes constituting Transfer
Restricted Securities with respect to each subsequent 90-day period until all
Registration Defaults have been cured, up to a maximum amount of liquidated
damages of $.30 per week per $1,000 principal amount of Old Notes constituting
Transfer Restricted Securities. Notwithstanding the foregoing, the Issuer and
the Subsidiary Guarantors shall not be required to pay liquidated damages to
each Holder of Transfer Restricted Securities if the Registration Default arises
from the failure of the Issuer and the Subsidiary Guarantors to file, or cause
to become effective, a Shelf Registration Statement within the time period
required by Section 4 of this Agreement and such Registration Default is by
reason of the failure of any Holder to provide the information regarding such
Holder reasonably requested by the Issuer, the NASD or any other regulatory
agency having jurisdiction over any of the Holders at least 10 business days
prior to such Registration Default. All accrued liquidated damages shall be paid
by the Issuer and the Subsidiary Guarantors on each Damages Payment Date to the
registered Holders by wire transfer of immediately available funds or by federal
funds check and to the registered Holders of certificated securities by mailing
a check to such Holders' registered addresses. Following the cure of all
Registration Defaults relating to any particular Transfer Restricted Securities,
the accrual of liquidated damages with respect to such Transfer Restricted
Securities will cease.
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All obligations of the Issuer and the Subsidiary Guarantors set forth
in the preceding paragraph that are outstanding with respect to any Transfer
Restricted Security at the time such security ceases to be a Transfer Restricted
Security shall survive until such time as all such obligations with respect to
such Transfer Restricted Security shall have been satisfied in full.
SECTION 6. REGISTRATION PROCEDURES.
(a) EXCHANGE OFFER REGISTRATION STATEMENT. In connection with the
Exchange Offer, the Issuer and the Subsidiary Guarantors shall comply with all
of the provisions of Section 6(c) below, shall use their best efforts to effect
such exchange to permit the sale of Transfer Restricted Securities being sold in
accordance with the intended method or methods of distribution thereof, and
shall comply with all of the following provisions:
(i) If, due to a change in law or Commission policy after the
date hereof, in the reasonable opinion of counsel to the Issuer there
is a question as to whether the Exchange Offer is permitted by
applicable federal law or Commission policy, the Issuer hereby agrees
to seek a no-action letter or other favorable decision from the
Commission allowing the Issuer and the Subsidiary Guarantors to
Consummate an Exchange Offer for the Old Notes. The Issuer hereby
agrees to pursue the issuance of such a no-action letter or favorable
decision to the Commission staff level but shall not be required to
take commercially unreasonable action to effect a change of Commission
policy. The Issuer hereby agrees, however, to (A) participate in
telephonic conferences with the Commission, (B) deliver to the
Commission an analysis prepared by special counsel to the Issuer
setting forth the legal bases, if any, upon which such counsel has
concluded that such an Exchange Offer should be permitted and (C)
diligently pursue a resolution (which need not be favorable) by the
Commission of such submission. The Initial Purchaser shall be given
prior notice of any action taken by the Issuer under this clause (i).
(ii) As a condition to its participation in the Exchange Offer
pursuant to the terms of this Agreement, each Holder of Transfer
Restricted Securities shall furnish, upon the request of the Issuer,
prior to the Consummation of the Exchange Offer, a written
representation to the Issuer (which may be contained in the letter of
transmittal contemplated by the Exchange Offer Registration Statement)
to the effect that (A) it is not an affiliate of the Issuer or any of
the Subsidiary Guarantors, (B) it is not engaged in, and does not
intend to engage in, and has no arrangement or understanding with any
person to participate in, a distribution of the New Notes to be issued
in the Exchange Offer and (C) it is acquiring the New Notes in its
ordinary course of business. In addition, all such Holders of Transfer
Restricted Securities shall otherwise cooperate in the Issuer's
preparations for the Exchange Offer.
(iii) The Issuer, the Subsidiary Guarantors and the Initial
Purchaser acknowledge that the staff of the Commission has taken the
position that any
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broker-dealer that owns New Notes that were received by such
broker-dealer for its own account in the Exchange Offer (a
"PARTICIPATING BROKER-DEALER") may be deemed to be an "underwriter"
within the meaning of the Act and must deliver a prospectus meeting the
requirements of the Act in connection with any resale of such New Notes
(other than a resale of an unsold allotment resulting from the original
offering of the Notes).
The Issuer, the Subsidiary Guarantors and the Initial Purchaser also
acknowledge that it is the Commission staff's position that if the Prospectus
contained in the Exchange Offer Registration Statement includes a plan of
distribution containing a statement to the above effect and the means by which
Participating Broker-Dealers may resell the New Notes, without naming the
Participating Broker-Dealers or specifying the amount of New Notes owned by
them, such Prospectus may be delivered by Participating Broker-Dealers to
satisfy their prospectus delivery obligations under the Act in connection with
resales of New Notes for their own accounts, so long as the Prospectus otherwise
meets the requirements of the Act.
(b) SHELF REGISTRATION STATEMENT. In the event that a Shelf
Registration Statement is required by this Agreement, the Issuer and the
Subsidiary Guarantors shall comply with all the provisions of Section 6(c) of
this Agreement and shall use their best efforts to effect such registration to
permit the sale of the Transfer Restricted Securities being sold in accordance
with the intended method or methods of distribution of such Transfer Restricted
Securities and, in connection therewith, the Issuer and the Subsidiary
Guarantors will as expeditiously as possible prepare and file with the
Commission a Shelf Registration Statement relating to the registration on any
appropriate form under the Act, which form shall be available for the sale of
the Transfer Restricted Securities in accordance with the intended method or
methods of distribution of such Transfer Restricted Securities.
(c) GENERAL PROVISIONS. In connection with any Registration Statement
and any Prospectus required by this Agreement to permit the sale or resale of
Transfer Restricted Securities (including, without limitation, any Registration
Statement and the related Prospectus, to the extent that the same are required
to be available to permit resales of Notes by Broker-Dealers), the Issuer and
the Subsidiary Guarantors shall:
(i) use their best efforts to keep such Registration Statement
continuously effective for the applicable time period required
hereunder and provide all requisite financial statements (including, if
required by the Act or any regulation thereunder, financial statements
of the Subsidiary Guarantors) for the period specified in Section 3 or
4 of this Agreement, as applicable; upon the occurrence of any event
that would cause any such Registration Statement or the Prospectus
contained therein (A) to contain a material misstatement or omission or
(B) with respect to the Shelf Registration Statement, not to be
effective and usable for resale of Transfer Restricted Securities
during the period required by this Agreement, the Issuer shall promptly
notify the Holders to suspend use of the Prospectus, and the Holders
shall suspend use of the Prospectus, and such Holders
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shall not communicate non-public information to any third party, in
violation of the securities laws, until the Issuer and the Subsidiary
Guarantors have made an appropriate amendment to such Registration
Statement, in the case of clause (A), correcting any such material
misstatement or omission, and, in the case of either clause (A) or (B),
the Issuer and the Subsidiary Guarantors shall use their best efforts
to cause such amendment to be declared effective and such Registration
Statement and the related Prospectus to become usable for their
intended purpose(s) as soon as practicable thereafter;
(ii) prepare and file with the Commission such amendments and
post-effective amendments to such Registration Statement as may be
necessary to keep the Registration Statement effective for the
applicable period set forth in Section 3 or 4 of this Agreement, as
applicable, or such shorter period as will terminate when all Transfer
Restricted Securities covered by such Registration Statement have been
sold; cause the Prospectus to be supplemented by any required
Prospectus supplement, and as so supplemented to be filed pursuant to
Rule 424 under the Act during the applicable time period required
hereunder and to comply fully with the applicable provisions of Rules
424 and 430A under the Act in a timely manner; and comply with the
provisions of the Act and the Exchange Act with respect to the
disposition of all Transfer Restricted Securities covered by such
Registration Statement during such period in accordance with the
intended method or methods of distribution by the sellers of such
securities set forth in such Registration Statement as so amended or in
such Prospectus as so supplemented;
(iii) advise the underwriter(s), if any, the Initial
Purchaser, and, in the case of a Shelf Registration Statement, each of
the selling Holders promptly and, if requested by such Persons, to
confirm such advice in writing, (A) when the Prospectus or any
prospectus supplement or post-effective amendment has been filed and,
with respect to any Registration Statement or any post-effective
amendment thereto, when the same has become effective, (B) of any
request by the Commission for amendments to the Registration Statement
or amendments or supplements to the Prospectus or for additional
information relating to such Registration Statement or Prospectus, (C)
of the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement under the Act or of the
suspension by any state securities commission of the qualification of
the Transfer Restricted Securities for offering or sale in any
jurisdiction, or the initiation of any proceeding for any of the
preceding purposes, (D) of the existence of any condition, the
happening of any event or any information becoming known that makes any
statement of a material fact made in the Registration Statement, the
Prospectus, any amendment or supplement to such Registration Statement
or Prospectus, as the case may be, or any document incorporated by
reference in such Registration Statement or Prospectus untrue in any
material respect, or that requires the making of any additions to or
changes in the Registration Statement or the Prospectus so that, in the
case of the Registration Statement, it will not contain any untrue
statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements
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<PAGE>
therein not misleading and that in the case of the Prospectus, it will
not contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make
the statements therein, in the light of the circumstances under which
they were made, not misleading. If at any time the Commission shall
issue any stop order suspending the effectiveness of the Registration
Statement, or any state securities commission or other regulatory
authority shall issue an order suspending the qualification or
exemption from qualification of the Transfer Restricted Securities
under state securities or Blue Sky laws, the Issuer and the Subsidiary
Guarantors shall use their best efforts to obtain the withdrawal or
lifting of such order at the earliest possible time;
(iv) furnish to each of the underwriter(s), if any, the
Initial Purchaser and, in the case of a Shelf Registration Statement,
each of the selling Holders before filing with the Commission, copies
of any Registration Statement or any Prospectus included in such
Registration Statement or Prospectus or any amendments or supplements
to any such Registration Statement or Prospectus (including all
documents incorporated by reference after the initial filing of such
Registration Statement), which documents will be subject to the
reasonable review of such underwriter(s), if any, the Initial
Purchaser, and such Holders for a period of at least five business
days, and the Issuer and the Subsidiary Guarantors will not file any
such Registration Statement or Prospectus or any amendment or
supplement to any such Registration Statement or Prospectus, as the
case may be, (including all such documents incorporated by reference)
to which any underwriter, Initial Purchaser or selling Holder shall
reasonably object within five business days after the receipt of such
Registration Statement or Prospectus. A selling Holder or underwriter,
if any, shall be deemed to have reasonably objected to such filing if
such Registration Statement, Prospectus, amendment or supplement, as
applicable, as proposed to be filed, contains a material misstatement
or omission;
(v) make available at reasonable times for inspection by the
selling Holders, any underwriter participating in any disposition
pursuant to such Registration Statement and any attorney or accountant
retained by such selling Holders or any of the underwriter(s), if any,
at the offices where normally kept, during reasonable business hours,
all relevant financial and other records, pertinent corporate documents
and properties of the Issuer and the Subsidiary Guarantors and cause
the Issuer's and the Subsidiary Guarantors' officers, directors and
employees to supply all information reasonably requested by any such
Holder, underwriter, attorney or accountant in connection with such
Registration Statement subsequent to the filing thereof and prior to
its effectiveness; PROVIDED, HOWEVER, that such persons shall first
agree in writing with the Issuer that any information that is
reasonably and in good faith designated by the Issuer in writing as
confidential at the time of delivery of such information shall be kept
confidential by such persons, unless and to the extent that (i)
disclosure of such information is required by court or administrative
order or is necessary to respond to inquiries of regulatory
authorities, (ii) disclosure of such information is required by law
(including any disclosure
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requirements pursuant to federal securities laws in connection with the
filing of the Shelf Registration Statement or the use of any
Prospectus), (iii) such information becomes generally available to the
public other than as a result of a disclosure or failure to safeguard
such information by such person or (iv) such information becomes
available to such person from a source other than the Issuer and its
Subsidiaries and such source is not bound by a confidentiality
agreement;
(vi) if requested by a majority in aggregate principal amount
of Transfer Restricted Securities being sold in connection with an
underwritten offering or the underwriter(s), if any, promptly
incorporate in any Registration Statement or Prospectus, pursuant to a
supplement or post-effective amendment if necessary, such information
relating to such selling Holders or such underwriters as such selling
Holders and underwriter(s), if any, may reasonably request to have
included therein, including, without limitation, information relating
to the "Plan of Distribution" of the Transfer Restricted Securities,
information with respect to the principal amount of Transfer Restricted
Securities being sold to such underwriter(s), the purchase price being
paid for Transfer Restricted Securities and any other terms of the
offering of the Transfer Restricted Securities to be sold in such
offering; and make all required filings of such Prospectus supplement
or post-effective amendment as soon as practicable after the Issuer is
notified of the matters to be incorporated in such Prospectus
supplement or post-effective amendment; PROVIDED, HOWEVER, that the
Issuer shall not be required to take any action pursuant to this
Section 6(c)(vii) that would, in the opinion of counsel for the Issuer,
violate applicable law;
(vii) furnish to each underwriter, if any, the Initial
Purchaser and upon request to the Issuer, to a selling Holder without
charge, at least one conformed copy of the Registration Statement, as
first filed with the Commission, and of each amendment thereto,
including, upon the request of such Person, all documents incorporated
by reference therein and all exhibits to the extent requested
(including exhibits incorporated therein by reference);
(viii) deliver to each selling Holder, each of the
underwriter(s), if any, and the Initial Purchaser, without charge, as
many copies of the Prospectus (including each preliminary prospectus)
and any amendment or supplement thereto as such Persons may reasonably
request; the Issuer and the Subsidiary Guarantors hereby consent to the
use of the Prospectus and any amendment or supplement to the Prospectus
by each of the selling Holders and each of the underwriter(s), if any,
in connection with the offering and the sale of the Transfer Restricted
Securities in accordance with the terms thereof and with U.S. Federal
securities laws and Blue Sky laws covered by the Prospectus or any
amendment or supplement thereto;
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(ix) enter into such agreements (including an underwriting
agreement in form, scope and substance as is customary in underwritten
offerings of securities of this type) and take all such other
reasonable actions in connection therewith in order to expedite or
facilitate the disposition of the Transfer Restricted Securities
pursuant to any Registration Statement contemplated by this Agreement,
all as may be reasonably requested by any Holder of Transfer Restricted
Securities or the underwriter(s), if any, in connection with any sale
or resale of Transfer Restricted Securities pursuant to any
Registration Statement contemplated by this Agreement; and whether or
not an underwriting agreement is entered into and whether or not the
registration is an Underwritten Registration, the Issuer and the
Subsidiary Guarantors shall (i) make such representations and
warranties to the Holders of such Transfer Restricted Securities and
the underwriters, if any, with respect to the business of the Issuer
and its Subsidiaries (including with respect to businesses or assets
acquired or to be acquired by any of them), and the Shelf Registration
Statement, Prospectus and documents, if any, incorporated or deemed to
be incorporated by reference therein, in each case, in form, substance
and scope as are customarily made by Issuer to underwriters in
underwritten offerings, and confirm the same if and when customarily
requested; (ii) obtain opinions of counsel to the Issuer and the
Subsidiary Guarantors and updates thereof (which counsel and opinions
(in form, scope and substance) shall be reasonably satisfactory to the
underwriters, if any, and special counsel to the Holders of the
Transfer Restricted Securities being sold), addressed to each selling
Holder of Transfer Restricted Securities and each of the underwriters,
if any, covering the matters customarily covered in opinions requested
in underwritten offerings and such other matters as may be reasonably
requested by such underwriters, if any, and special counsel to Holders
of Transfer Restricted Securities; (iii) use their best efforts to
obtain customary "cold comfort" letters and updates thereof from the
independent certified public accountants of the Issuer (and, if
necessary, any other independent certified public accountants of any
subsidiary of the Issuer or of any business acquired by the Issuer or
any such subsidiary for which financial statements and financial data
is, or is required to be, included in the Registration Statement),
addressed (where reasonably possible) to each selling Holder of
Transfer Restricted Securities and each of the underwriters, if any,
such letters to be in customary form and covering matters of the type
customarily covered in "cold comfort" letters in connection with
underwritten offerings; (iv) if an underwriting agreement is entered
into, the same shall contain indemnification provisions and procedures
no less favorable to the selling Holders and the underwriters, if any,
than those set forth in Section 8 hereof (or such other provisions and
procedures acceptable to Holders of a majority in aggregate principal
amount of Transfer Restricted Securities covered by such Shelf
Registration Statement and the underwriters, if any); and (v) deliver
such documents and certificates as may be reasonably requested by the
Holders of a majority in aggregate principal amount of the Transfer
Restricted Securities being sold and the underwriters, if any, to
evidence the continued validity of the representations and warranties
made pursuant to clause (i) above and to evidence compliance with any
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customary conditions contained in the underwriting agreement or other
agreement entered into by the Issuer;
If at any time the representations and warranties of the
Issuer and the Subsidiary Guarantors contemplated in clause (x)(i)
above cease to be true and correct, the Issuer shall so advise the
Initial Purchaser and the underwriter(s), if any, and each selling
Holder promptly and, if requested by any of them, shall confirm such
advice in writing;
(x) prior to any public offering of Transfer Restricted
Securities, cooperate with and cause the Subsidiary Guarantors to
cooperate with the selling Holders, the underwriter(s), if any, and
their respective counsel in connection with the registration and
qualification (or exemption from such registration or qualification) of
the Transfer Restricted Securities for offer and sale under the
securities or Blue Sky laws of such jurisdictions as the selling
Holders and underwriter(s), if any, may reasonably request in writing
and do any and all other acts or things necessary or advisable to
enable the disposition in such jurisdictions of the Transfer Restricted
Securities covered by the Registration Statement; PROVIDED, HOWEVER,
that neither the Issuer nor the Subsidiary Guarantors shall be required
to register or qualify as a foreign corporation where it is not now so
qualified or to take any action that would subject it to the service of
process or to taxation, other than as to matters and transactions
relating to the Registration Statement, in any jurisdiction where it is
not now so subject;
(xi) if a Shelf Registration is filed pursuant to Section
2(b), cooperate with the selling Holders of Registrable Securities and
the managing Underwriters, if any, to facilitate the timely preparation
and delivery of certificates representing Transfer Restricted
Securities to be sold, which certificates shall not bear any
restrictive legends and shall be in a form eligible for deposit with
The Depository Trust Company; and enable such Transfer Restricted
Securities to be in such denominations and registered in such names as
the managing Underwriters, if any, or Holders may reasonably request;
(xii) in connection with any sale or transfer of Transfer
Restricted Securities that will result in such securities no longer
being Transfer Restricted Securities, cooperate with and cause the
Subsidiary Guarantors to cooperate with the selling Holders and the
underwriter(s), if any, to facilitate the timely preparation and
delivery of certificates representing Transfer Restricted Securities to
be sold and not bearing any restrictive legends; and enable such
Transfer Restricted Securities to be in such denominations and
registered in such names as the Holders or the underwriter(s), if any,
may request at least two business days prior to any sale of Transfer
Restricted Securities made by such underwriter(s);
(xiii) use their best efforts to cause the Transfer Restricted
Securities covered by the Registration Statement to be registered with
or approved by such other governmental
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agencies or authorities as may be necessary to enable the seller or
sellers of such Transfer Restricted Securities or the underwriter(s),
if any, to consummate the disposition of such Transfer Restricted
Securities, subject to the proviso contained in clause (xi) above;
(xiv) if any fact or event contemplated by Section
6(c)(iii)(D) of this Agreement shall exist or have occurred, prepare a
supplement or post-effective amendment to the Registration Statement or
related Prospectus or any document incorporated in such Registration
Statement or Prospectus by reference or file any other required
document so that, as thereafter delivered to the purchasers of Transfer
Restricted Securities, the Registration Statement will not contain an
untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein not misleading and the
Prospectus will not contain an untrue statement of a material fact or
omit to state any material fact required to be stated therein or
necessary to make the statements contained therein, in the light of the
circumstances under which they were made, not misleading;
(xv) provide a CUSIP number for all Transfer Restricted
Securities not later than the effective date of the Registration
Statement and provide the Trustee under the Indenture with printed
certificates for the Transfer Restricted Securities that are in a form
eligible for deposit with The Depository Trust Company;
(xvi) cooperate and assist in any filings required to be made
with the NASD and in the performance of any due diligence investigation
by any underwriter (including any "qualified independent underwriter"
that is required to be retained in accordance with the rules and
regulations of the NASD);
(xvii) otherwise use their best efforts to comply with all
applicable rules and regulations of the Commission in regard to any
Registration Statement, and make generally available to its
securityholders, as soon as practicable, a consolidated earning
statement of the Issuer meeting the requirements of Rule 158 (which
need not be audited) for the twelve-month period (A) commencing at the
end of any fiscal quarter in which Transfer Restricted Securities are
sold to underwriters in a firm commitment or reasonable best efforts
Underwritten Offering or (B) if not sold to underwriters in such an
offering, beginning with the first month of the Issuer's first fiscal
quarter commencing after the effective date of the Registration
Statement; and
(xviii) cause the Indenture to be qualified under the TIA not
later than the effective date of the first Registration Statement
required by this Agreement, and, in connection therewith, cooperate
with the Trustee and the Holders to effect such changes to the
Indenture, if any, as may be required for such Indenture to be so
qualified in accordance with the terms of the TIA; and execute, and use
its best efforts to cause the Trustee to execute, all customary
documents that may be required to effect such changes
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and all other forms and documents required to be filed with the
Commission to enable such Indenture to be so qualified in a timely
manner.
Each Holder agrees by acquisition of a Transfer Restricted Security
that, upon receipt of any notice from the Issuer of the existence of any fact of
the kind described in Section 6(c)(iii)(D) of this Agreement, such Holder will
forthwith discontinue disposition of Transfer Restricted Securities pursuant to
the applicable Registration Statement until such Holder's receipt of the copies
of the supplemented or amended Prospectus contemplated by Section 6(c)(xv) of
this Agreement, or until it is advised in writing (the "ADVICE") by the Issuer
that the use of the Prospectus may be resumed, and has received copies of any
additional or supplemental filings that are incorporated by reference in the
Prospectus. If so directed by the Issuer, each Holder will deliver to the Issuer
(at the Issuer's expense) all copies, other than permanent file copies then in
such Holder's possession, of the Prospectus covering such Transfer Restricted
Securities that was current at the time of receipt of such notice. In the event
that the Issuer shall give any such notice, the time period regarding the
effectiveness of such Registration Statement set forth in Section 3 or 4 of this
Agreement, as applicable, shall be extended by the number of days during the
period from and including the date of the giving of such notice pursuant to
Section 6(c)(iii)(D) of this Agreement to and including the date when each
selling Holder covered by such Registration Statement shall have received the
copies of the supplemented or amended Prospectus contemplated by Section
6(c)(xv) of this Agreement or shall have received the Advice.
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SECTION 7. REGISTRATION EXPENSES.
(a) All fees and expenses incident to the Issuer and the Subsidiary
Guarantors' performance of or compliance with this Agreement will be borne by
the Issuer regardless of whether a Registration Statement becomes effective,
including without limitation: (i) all registration and filing fees and expenses
(including filings made with the NASD); (ii) all fees and expenses of compliance
with federal securities and state Blue Sky or securities laws; (iii) all
expenses of printing (including printing certificates for the New Notes to be
issued in the Exchange Offer and printing of Prospectuses); (iv) all fees and
disbursements of counsel for the Issuer, the Subsidiary Guarantors and, subject
to Section 7(b) below, the Holders of Transfer Restricted Securities; and (v)
all fees and disbursements of independent certified public accountants of the
Issuer and the Subsidiary Guarantors (including the expenses of any special
audit and comfort letters required by or incident to such performance).
The Issuer and the Subsidiary Guarantors will, in any event, bear their
internal expenses (including, without limitation, all salaries and expenses of
their officers and employees performing legal or accounting duties), the
expenses of any annual audit and the fees and expenses of any Person, including
special experts, retained by them.
Notwithstanding the foregoing or anything in this Agreement to the
contrary, each Holder of Transfer Restricted Notes shall pay all underwriting
discounts and commissions of any underwriters with respect to any Notes sold by
or on behalf of it.
(b) In connection with any Registration Statement required by this
Agreement (including, without limitation, the Exchange Offer Registration
Statement and the Shelf Registration Statement), the Issuer will reimburse the
Initial Purchaser and the Holders of Transfer Restricted Securities being
tendered in the Exchange Offer and/or resold pursuant to the "Plan of
Distribution" contained in the Exchange Offer Registration Statement or
registered pursuant to the Shelf Registration Statement, as applicable, for the
reasonable fees (not to exceed $25,000) and disbursements of not more than one
counsel, who shall be Piper & Marbury L.L.P. or such other counsel as may be
chosen by the Holders of a majority in principal amount of the Transfer
Restricted Securities for whose benefit such Registration Statement is being
prepared.
SECTION 8. INDEMNIFICATION.
(A) Each of the Issuer and the Subsidiary Guarantors, on a joint and
several basis, agrees to indemnify and hold harmless (i) the Initial Purchaser,
each Holder of Transfer Restricted Securities and each Participating Broker
Dealer, (ii) each person, if any, who controls any of the foregoing within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act (any of the
persons referred to in this clause (ii) being hereinafter referred to as a
"CONTROLLING PERSON") and (iii) its agents, employees, officers and directors
and the agents, employees, officers and directors of any such controlling person
(collectively, the "INDEMNIFIED PERSONS") from and
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against any and all losses, liabilities, claims, damages and expenses whatsoever
(including but not limited to reasonable attorneys' fees and any and all
reasonable expenses whatsoever incurred in investigating, preparing or defending
against any litigation, commenced or threatened, or any claim whatsoever, and
any and all reasonable amounts paid in settlement of any claim or litigation) to
which they or any of them may become subject under the Act, the Exchange Act or
otherwise, insofar as such losses, liabilities, claims, damages or expenses (or
actions in respect thereof) arise out of or are based upon any untrue statement
or alleged untrue statement of a material fact contained in the Registration
Statement or Prospectus, or in any amendment thereof or supplement thereto, or
arise out of or are based upon the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; PROVIDED, HOWEVER, that the Issuer and the Subsidiary
Guarantors will not be liable in any such case to the extent, but only to the
extent, that any such loss, liability, claim, damage or expense arises out of or
is based upon any such untrue statement or alleged untrue statement or omission
or alleged omission made therein in reliance upon and in conformity with written
information furnished to the Issuer by or on behalf of any Indemnified Person
relating to such Indemnified Person expressly for use therein; PROVIDED FURTHER,
that such indemnity with respect to any preliminary prospectus shall not inure
to the benefit of any Indemnified Person if the person asserting such loss,
claim, damage or liability purchased the Notes which are the subject thereof and
did not receive a copy of a final prospectus (or a final prospectus as amended
or supplemented) at or prior to the confirmation of the sale of such Notes to
such person (and a final prospectus or any such amended or supplemented final
prospectus, as applicable, shall have been delivered by the Issuer to any
Indemnified Person a reasonable amount of time prior to the mailing or delivery,
as applicable, of such confirmation and any such untrue statement or omission or
alleged untrue statement or omission of a material fact contained in such
preliminary prospectus was corrected in the final prospectus or the final
prospectus as amended or supplemented). This indemnity agreement will be in
addition to any liability that the Issuer and the Subsidiary Guarantors may
otherwise have, including, but not limited to, liability under this Agreement.
If any action is brought against any Indemnified Persons or any such
person in respect of which indemnity may be sought against the Issuer and the
Subsidiary Guarantors pursuant to the foregoing paragraph, such Indemnified
Persons or such person shall promptly notify the indemnifying party in writing
of the institution of such action and the indemnifying party shall assume the
defense of such action, including the employment of counsel reasonably
satisfactory to such indemnified party and payment of all fees and expenses;
PROVIDED, HOWEVER, except to the extent that the indemnifying party shall be
materially prejudiced thereby (through the forfeiture of substantive rights or
defenses), that the omission to so notify the indemnifying party shall not
relieve the indemnifying party from any liability which they may have to the
Indemnified Persons or any such person or otherwise. Such Indemnified Persons
shall have the right to employ its own counsel in any such case, but the fees
and expenses of such counsel shall be at the expense of such Indemnified Persons
unless the employment of such counsel shall have been authorized in writing by
the indemnifying party in connection with the defense of such action or the
indemnifying party shall not have employed counsel to have charge of the defense
of such action or such indemnified party or parties shall have reasonably
concluded that there may be defenses available to it or them which are different
from or additional to those available to the indemnifying party (in which case
the indemnifying party
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<PAGE>
shall not have the right to direct the defense of such action on behalf of the
indemnified party or parties, but the indemnified parties may employ counsel and
participate in the defense thereof, but the fees and expenses of such counsel
shall be at the expense of the indemnifying parties), in any of which events
such fees and expenses shall be borne by the indemnifying party and paid as
incurred (it being understood, however, that the indemnifying party shall not be
liable for the expenses of more than one separate counsel (together with
appropriate local counsel) in any one action or series of related actions in the
same jurisdiction representing the indemnified parties who are parties to such
action). The indemnifying party shall not be liable for any settlement of any
such claim or action effected without its written consent but if settled with
the written consent of the indemnifying party, the indemnifying party agrees to
indemnify and hold harmless any Indemnified Persons and any such person from and
against any loss or liability by reason of such settlement. Notwithstanding the
foregoing sentence, if at any time an indemnified party shall have requested an
indemnifying party to reimburse the indemnified party for fees and expenses of
counsel as contemplated by the second sentence of this paragraph, then the
indemnifying party agrees that it shall be liable for any settlement of any
proceeding effected without its written consent if (i) such settlement is
entered into more than 60 business days after receipt by such indemnifying party
of the aforesaid request, (ii) such indemnifying party shall not have reimbursed
the indemnified party in accordance with such request prior to the date of such
settlement and (iii) such indemnified party shall have given the indemnifying
party at least 30 days' prior written notice of its intention to settle. No
indemnifying party shall, without the prior written consent of the indemnified
party, effect any settlement of any pending or threatened proceeding in respect
of which any indemnified party is or could have been a party and indemnity could
have been sought hereunder by such indemnified party, unless such settlement
includes an unconditional release of such indemnified party from all liability
on claims that are the subject matter of such proceeding.
(B) In connection with any Registration Statement pursuant to which a
Holder of Transfer Restricted Securities offers or sells Transfer Restricted
Securities, such Holder agrees, severally and not jointly, to indemnify and hold
harmless the Issuer and the Subsidiary Guarantors, their respective directors
and officers and any person controlling the Issuer or any Subsidiary Guarantor
within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act, and each of their agents, employees, officers and directors and
the agents, employees, officers and directors of such controlling person from
and against any losses, liabilities, claims, damages and expenses whatsoever
(including but not limited to reasonable attorneys' fees and any and all
reasonable expenses whatsoever incurred in investigating, preparing or defending
against any litigation, commenced or threatened, or any claim whatsoever and any
and all reasonable amounts paid in settlement of any claim or litigation) to
which they or either of them may become subject under the Act, the Exchange Act
or otherwise insofar as such losses, liabilities, claims, damages or expenses
(or actions in respect thereof) arise out of or are based upon any untrue
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<PAGE>
statement or alleged untrue statement of a material fact contained in the
Registration Statement, or in any amendment thereof or supplement thereto, or
arise out of or are based upon the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, in each case to the extent, but only to the extent, that
any such loss, liability, claim, damage or expense arises out of or is based
upon any untrue statement or alleged untrue statement or omission or alleged
omission made therein in reliance upon and in conformity with written
information relating to such Holder furnished to the Issuer by such Holder
expressly for use in such Registration Statement. This indemnity agreement will
be in addition to any liability that a Holder may otherwise have, including, but
not limited to, liability under this Agreement.
If any action is brought against the Issuer or the Subsidiary
Guarantors or any such person in respect of which indemnity may be sought
against any Holder of Transfer Restricted Securities pursuant to foregoing
paragraph, the Issuer, the Subsidiary Guarantors or such person shall promptly
notify such Holder in writing of the institution of such action and such Holder
shall assume the defense of such action, including the employment of counsel
reasonably satisfactory to such indemnified party and payment of all fees and
expenses; PROVIDED, HOWEVER, except to the extent that the indemnifying party
shall be materially prejudiced thereby (through the forfeiture of substantive
rights or defenses), that the omission to so notify such Holder shall not
relieve such Holder from any liability which they may have to the Issuer the
Subsidiary Guarantors or any such person or otherwise. The Issuer, the
Subsidiary Guarantors or such person shall have the right to employ its own
counsel in any such case, but the fees and expenses of such counsel shall be at
the expense of the Issuer or such person unless the employment of such counsel
shall have been authorized in writing by such Holder of Transfer Restricted
Securities in connection with the defense of such action or such Holder shall
not have employed counsel to have charge of the defense of such action or such
indemnified party or parties shall have reasonably concluded that there may be
defenses available to it or them which are different from or additional to those
available to such Holder (in which case such Holder shall not have the right to
direct the defense of such action on behalf of the indemnified party or parties,
but such Holder may employ counsel and participate in the defense thereof but
the fees and expenses of such counsel shall be at the expense of such Holder),
in any of which events such fees and expenses shall be borne by such Holder and
paid as incurred (it being understood, however, that such Holder shall not be
liable for the expenses of more than one separate counsel (together with
appropriate local counsel) in any one action or series of related actions in the
same jurisdiction representing the indemnified parties who are parties to such
action). Anything in this paragraph to the contrary notwithstanding, any Holder
of Transfer Restricted Securities shall not be liable for any settlement of any
such claim or action effected without the written consent of such Holder but if
settled with the written consent of such Holder, such Holder agrees to indemnify
and hold harmless the Issuer, the Subsidiary Guarantors and any such person from
and against any loss or liability by reason of such settlement. Notwithstanding
the foregoing sentence, if at any time an indemnified party shall have requested
an indemnifying party to reimburse the indemnified party for fees and expenses
of
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<PAGE>
counsel as contemplated by the second sentence of this paragraph, then the
indemnifying party agrees that it shall be liable for any settlement of any
proceeding effected without its written consent if (i) such settlement is
entered into more than 60 business days after receipt by such indemnifying party
of the aforesaid request, (ii) such indemnifying party shall not have reimbursed
the indemnifying party in accordance with such request prior to the date of such
settlement and (iii) such indemnified party shall have given the indemnifying
party at least 30 days' prior notice of its intention to settle. No indemnifying
party shall, without the prior written consent of the indemnified party, effect
any settlement of any pending or threatened proceeding in respect of which any
indemnified party is or could have been a party and indemnity could have been
sought hereunder by such indemnified party, unless such settlement includes an
unconditional release of such indemnified party from all liability on claims
that are the subject matter of such proceeding.
(C) In order to provide for contribution in circumstances in which the
indemnification provided for in paragraphs (a) and (b) of this Section 8 is for
any reason held to be unavailable from the indemnifying party, or is
insufficient to hold harmless a party indemnified under this Section 8, the
Issuer, the Subsidiary Guarantors and the Indemnified Parties shall contribute
to the aggregate losses, claims, damages, liabilities and expenses of the nature
contemplated by such indemnification provision (including any investigation,
legal and other expenses incurred in connection with, and any amount paid in
settlement of, any action or any claims asserted) to which the Issuer and/or the
Subsidiary Guarantors and the Indemnified Parties may be subject, (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Issuer and the Subsidiary Guarantors, on the one hand, and the Indemnified
Parties, on the other hand, from the offering of the Old Notes or, (ii) if such
allocation is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of the Issuer and the Subsidiary Guarantors,
on the one hand, and the Indemnified Parties, on the other hand, in connection
with the statements or omissions that resulted in such losses, claims, damages,
liabilities or expenses, as well as any other relevant equitable considerations.
The relative benefits received by the Issuer and the Subsidiary Guarantors, on
the one hand, and the Indemnified Parties, on the other hand, shall be deemed to
be in the same proportion as the total proceeds from the offering of Old Notes
(net of discounts but before deducting expenses) received by the Issuer as set
forth in the table on the cover page of the Offering Memorandum bear to the
total proceeds received by such Holder with respect to its sale of Transfer
Restricted Securities or New Notes. The relative fault of the Issuer and the
Subsidiary Guarantors, on the one hand, and the Indemnified Parties, on the
other hand, shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the Issuer,
the Subsidiary Guarantors or the Indemnified Parties and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission.
The Issuer, the Subsidiary Guarantors and the Initial Purchaser agree
that it would not be just and equitable if contribution pursuant to this
paragraph (c) of this Section 8 were determined
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<PAGE>
by pro rata allocation or by any other method of allocation that does not take
into account the equitable considerations referred to above. Notwithstanding the
provisions of paragraph (c) of this Section 8, (i) in no case shall an
Indemnified Party be required to contribute any amount in excess of the amount
by which the total received by such Indemnified Party with respect to its sale
of its Transfer Restricted Securities or New Notes, as the case may be, exceeds
the amount of any damages that such Indemnified Party has otherwise been
required to pay by reason of any untrue or alleged untrue statement or omission
or alleged omission and (ii) no person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. For purposes of this paragraph (c) of this Section 8, each
person, if any, who controls an Indemnified Party within the meaning of Section
15 of the Act or Section 20 of the Exchange Act shall have the same rights to
contribution as such Indemnified Party, and each person, if any, who controls
the Issuer or the Subsidiary Guarantors within the meaning of Section 15 of the
Act or Section 20 of the Exchange Act shall have the same rights to contribution
as the Issuer or the Subsidiary Guarantors, subject in each case to clauses (i)
and (ii) of this paragraph. Any party entitled to contribution will, promptly
after receipt of notice of commencement of any Action against such party in
respect of which a claim for contribution may be made against another party or
parties under this paragraph 8(c), notify such party or parties from whom
contribution may be sought, but, except to the extent that the indemnifying
party shall be materially prejudiced thereby (through the forfeiture of
substantive rights and defenses), the omission to so notify such party or
parties shall not relieve the party or parties from whom contribution may be
sought from any obligation it or they may have under this paragraph (c) or
otherwise. No party shall be liable for contribution with respect to any action
or claim settled without its written consent; PROVIDED, HOWEVER, that such
written consent was not unreasonably withheld.
SECTION 9. RULE 144A.
The Issuer and the Subsidiary Guarantors shall use their best efforts,
for so long as any Transfer Restricted Securities remain outstanding, to make
available to any Holder or beneficial owner of Transfer Restricted Securities in
connection with any sale of such securities and any prospective purchaser of
such Transfer Restricted Securities from such Holder or beneficial owner, the
information required by Rule 144A(d)(4) under the Act in order to permit resales
of such Transfer Restricted Securities pursuant to Rule 144A.
SECTION 10. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS.
No Holder may participate in any Underwritten Registration under this
Agreement unless such Holder (a) agrees to sell such Holder's Transfer
Restricted Securities on the basis provided in any underwriting arrangements
approved by the Persons entitled under this Agreement to approve such
arrangements and (b) completes and executes all reasonable questionnaires,
powers of attorneys, indemnities, underwriting agreements, lock-up letters and
other documents required under the terms of such underwriting arrangements.
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<PAGE>
SECTION 11. SELECTION OF UNDERWRITERS.
The Holders of Transfer Restricted Securities covered by the Shelf
Registration Statement who desire to do so may sell such Transfer Restricted
Securities in an Underwritten Offering. In any such Underwritten Offering, the
investment banker or investment bankers and manager or managers that will
administer the offering will be selected by the Holders of a majority in
aggregate principal amount of the Transfer Restricted Securities included in
such offering; PROVIDED, that such investment bankers and managers must be
reasonably satisfactory to the Issuer.
SECTION 12. MISCELLANEOUS.
(A) REMEDIES. Each Holder, in addition to being entitled to exercise
all rights provided in this Agreement, in the Indenture, the Purchase Agreement
or granted by law, including recovery of liquidated or other damages, will be
entitled to specific performance of its rights under this Agreement. The Issuer
and the Subsidiary Guarantors agree that monetary damages would not be adequate
compensation for any loss incurred by reason of a breach by it of the provisions
of this Agreement and hereby agree to waive the defense in any Action for
specific performance that a remedy at law would be adequate. The obligations of
the Issuer and the Subsidiary Guarantors under this Agreement are joint and
several and, in any proceedings against any of such Persons arising out of this
Agreement, it shall not be necessary to join any other such Person.
(B) NO INCONSISTENT AGREEMENTS. Each of the Issuer and the Subsidiary
Guarantors will not on or after the date of this Agreement enter into any
agreement with respect to its securities that is inconsistent with the rights
granted to the Holders in this Agreement or otherwise conflicts with the
provisions of this Agreement. The rights granted to the Holders under this
Agreement do not in any way conflict with and are not inconsistent with the
rights granted to the holders of the securities of the Issuer under any
agreement in effect on the date of this Agreement.
(C) ADJUSTMENTS AFFECTING THE NOTES. Without the written consent of the
Holders of a majority in aggregate principal amount of outstanding Transfer
Restricted Notes, the Issuer and the Subsidiary Guarantors will not take any
action, or permit any change to occur, with respect to the Notes that would
materially and adversely affect the ability of the Holders to Consummate any
Exchange Offer.
(D) AMENDMENTS AND WAIVERS. The provisions of this Agreement may not be
amended, modified or supplemented, and waivers or consents to or departures from
the provisions of this Agreement may not be given unless the Issuer has obtained
the written consent of Holders of a majority of the outstanding principal amount
of Transfer Restricted Securities.
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<PAGE>
Notwithstanding the foregoing, a waiver or consent to departure from the
provisions of this Agreement that relates exclusively to the rights of Holders
whose securities are being sold or tendered pursuant to a Registration Statement
and that does not affect directly or indirectly the rights of other Holders
whose securities are not being sold or tendered pursuant to such Registration
Statement may be given by the Holders of a majority of the outstanding principal
amount of Transfer Restricted Securities being so sold or tendered.
(E) NOTICES. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivering, first-class
mail (registered or certified, return receipt requested), telex, telecopier or
air courier guaranteeing overnight delivery:
(I) if to a Holder, at the address set forth on the records of
the Registrar under the Indenture, with a copy to the Registrar under
the Indenture; and
(II) if to the Issuer or the Subsidiary Guarantors, at:
Fine Air Services Corp.
2261 NW 67th Avenue, Building 700
Miami, Florida 33122
Facsimile: (305) 871-4232
Attention: Orlando M. Machado, Chief Financial Officer
with a copy to:
Greenberg Traurig Hoffman Lipoff Rosen & Quentel, P.A.
1221 Brickell Avenue
Miami, Florida 33131
Facsimile: (305) 579-0500
Attention: Kenneth C. Hoffman, Esquire
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<PAGE>
(iii) if to the Initial Purchaser, at:
SBC Warburg Dillon Read Inc.
535 Madison Avenue
New York, New York 10022
Facsimile: (212) 593-0164
Attention: Corporate Finance Department
with a copy to:
Piper & Marbury L.L.P.
36 South Charles Street
Baltimore, Maryland 21201
Facsimile: (410) 539-0489
Attention: Stephen A. Riddick, Esquire
All such notices and communications shall be deemed to have been duly
given: (i) at the time delivered by hand, if personally delivered; (ii) five
business days after being deposited in the mail, postage prepaid, if mailed;
(iii) when answered back, if telexed; (iv) when receipt acknowledged, if
telecopied; and (v) on the next business day, if timely delivered to an air
courier guaranteeing overnight delivery.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee at the
address specified in the Indenture.
(F) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit
of and be binding upon the successors and permitted assigns of each of the
parties, including without limitation and without the need for an express
assignment, subsequent Holders of Transfer Restricted Securities.
(G) COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by the parties to this Agreement in separate counterparts, each
of which when so executed shall be deemed to be an original and all of which
taken together shall constitute one and the same agreement.
(H) CAPTIONS. The captions included in this Agreement are included
solely for convenience of reference and are not to be considered a part of this
Agreement.
(I) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE
CONFLICT OF LAW RULES THEREOF.
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<PAGE>
(J) SUBMISSION TO JURISDICTION. The Issuer and the Subsidiary
Guarantors irrevocably submit to the nonexclusive jurisdiction of any State or
Federal court sitting in New York over any suit, action or proceeding arising
out of or relating to this agreement. The Issuer and the Subsidiary Guarantors
irrevocably waive, to the fullest extent permitted by law, any objection it may
now or thereafter have to the laying of venue of any such court and any claim
that any such suit, action or proceeding brought in such a court has been
brought in an inconvenient forum. The Issuer and the Subsidiary Guarantors agree
that a final judgment in any such suit, action or proceeding brought in any such
court shall be conclusive and binding upon the Issuer and the Subsidiary
Guarantors and may be enforced in any other courts to the jurisdiction of which
the Issuer and the Subsidiary Guarantors are or may be subject, by suit upon
such judgment. The Issuer and the Subsidiary Guarantors hereby appoint, without
power of revocation, CT Corporation System as its agent to accept and
acknowledge on its behalf service of any and all process which may be served in
any suit, action or proceeding arising out of or relating to this letter.
(K) SEVERABILITY. In the event that any one or more of the provisions
contained in this Agreement, or the application of any such provision in any
circumstance, is held invalid, illegal or unenforceable, the validity, legality
and enforceability of any such provision in every other respect and of the
remaining provisions contained in this Agreement shall not be affected or
impaired thereby.
(L) ENTIRE AGREEMENT. This Agreement together with the other Operative
Documents (as defined in the Purchase Agreement) is intended by the parties as a
final expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties to this Agreement in
respect of the subject matter contained in this Agreement. There are no
restrictions, promises, warranties or undertakings, other than those set forth
or referred to in this Agreement with respect to the registration rights granted
by the Issuer with respect to the Transfer Restricted Securities. This Agreement
supersedes all prior agreements and understandings between the parties with
respect to such subject matter.
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first written above.
FINE AIR SERVICES CORP.
By: /S/ BARRY H. FINE
--------------------------------------------
Name: Barry H. Fine
Title: President and Chief Executive Officer
SUBSIDIARY GUARANTORS:
FINE AIR SERVICES, INC.
AGRO AIR ASSOCIATES, INC.
By: /S/ BARRY H. FINE
--------------------------------------------
Name: Barry H. Fine
Title: President and Chief Executive Officer
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<PAGE>
SBC WARBURG DILLON READ INC.
By: /S/ VINCENT LU
--------------------------------------------
Name: Vincent Lu
Title: Executive Director
By: /S/ MATTHEW STOPNICK
--------------------------------------------
Name: Matthew Stopnick
Title: Associate Director
- 28 -
EXHIBIT 5.1
July 17, 1998
Fine Air Services Corp.
Fine Air Services, Inc.
Argo Air Associates, Inc.
2261 N.W. 67th Avenue
Building 700
Miami, Florida 33122
Ladies and Gentlemen:
We have acted as special counsel to Fine Air Services Corp., a Delaware
corporation (the "Company"), Fine Air Services, Inc., a Florida corporation, and
Argo Air Associates, Inc., a Florida corporation, (each of the foregoing
entities other than the Company are collectively referred to herein as the
"Subsidiary Guarantors") in connection with the preparation of a Registration
Statement on Form S-4, including the Prospectus constituting a part thereof (the
"Registration Statement"), to be filed with the Securities and Exchange
Commission under the Securities Act of 1933, as amended (the "Securities Act"),
relating to an offer to exchange (the "Exchange Offer") the Company's new 9 7/8%
Senior Notes due 2008 (the "New Notes") for an equal principal amount of the
Company's outstanding 9 7/8% Senior Notes due 2008 (the "Notes"). The New Notes
will be guaranteed (the "New Note Guarantees") by the Subsidiary Guarantors.
The Notes were issued, and the New Notes will be issued, pursuant to an
Indenture (the "Indenture") dated as of June 5, 1998, by and among the Company,
the Subsidiary Guarantors and The Bank of New York, as Trustee (the "Trustee").
In connection with our opinion, we have examined: (a) the Registration
Statement, including the Prospectus; (b) the Indenture; (c) the form of the New
Notes; (d) the form of the New Note Guarantees; and (e) such other proceedings,
documents and records as we have deemed necessary to enable us to render this
opinion.
In our examinations of the above referenced documents, we have assumed
the genuineness of all signatures, the authenticity of all documents,
certificates and instruments submitted to us as originals and the conformity
with the originals of all documents submitted to us as copies.
Based upon the foregoing, assuming that the Indenture has been duly
authorized, executed and delivered by, and represents the valid and binding
obligation of, the Trustee, and when the Registration Statement, including any
amendments thereto, shall have become effective under the Securities Act and the
Indenture shall have been duly qualified under the Trust Indenture Act
<PAGE>
of 1939, as amended, and having regard for such legal considerations as we deem
relevant, we are of the opinion that:
1. The New Notes, when duly executed and delivered by or on behalf of
the Company in the form contemplated by the Indenture upon the terms set forth
in the Exchange Offer and authenticated by the Trustee or an authenticating
agent appointed by the Trustee in accordance with the terms of the Indenture,
will be legally issued and valid and binding obligations of the Company
enforceable in accordance with their terms; and
2. The New Note Guarantees, when duly executed and delivered by or on
behalf of the Subsidiary Guarantors in the form contemplated by the Indenture
upon the terms set forth in the Exchange Offer, will be legally issued and valid
and binding obligations of the Subsidiary Guarantors enforceable in accordance
with their terms;
except, in each case, as enforcement thereof may be limited by bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium or other comparable
laws affecting the enforcement of creditors' rights generally or the application
of equitable principles (regardless of whether such enforceability is considered
in a proceeding in equity or at law) and subject, in each case, to the
qualification that certain provisions thereof may be unenforceable in whole or
in part under the laws of the State of Florida, Delaware and New York, as
applicable, but the inclusion of such provision does not affect the validity of
the New Notes or the New Note Guarantees and each of them contain legally
adequate provisions for the realization of the principal legal rights and
benefits afforded thereby.
We are qualified to practice law in the State of Florida and we do not
purport to be experts on the law other than that of the State of Florida and the
federal laws of the United States of America. In rendering our opinions with
respect to the New Notes and the New Note Guarantees, we have assumed with your
permission, and without independent investigation, that the applicable laws of
the States of Delaware and New York are identical in all relevant respects to
the substantive laws of the State of Florida. We express no opinion and make no
representation with respect to the law of any other jurisdiction.
2
<PAGE>
This opinion is for your benefit and it may not be reprinted, reproduced
or distributed to any other person for any purpose without our prior written
consent, except that we hereby consent to the reference to our firm under the
caption "Legal Matters" in the Prospectus which is filed as part of the
Registration Statement, and to the filing of this opinion as an exhibit to such
Registration Statement. In giving this consent, we do not admit that we are
experts within the meaning of Section 11 of the Securities Act or within the
category of persons whose consent is required by Section 7 of the Securities
Act. Our opinion is expressly limited to the matters set forth above and we
render no opinion, whether by implication or otherwise, as to any other matters
relating to the Company, the Subsidiary Guarantors or any other person, or any
other document or agreement involved with the transactions contemplated by the
Exchange Offer. We assume no obligation to advise you of facts, circumstances,
events or developments which hereafter may be brought to our attention and which
may alter, affect or modify the opinions expressed herein.
Sincerely,
GREENBERG TRAURIG HOFFMAN
LIPOFF ROSEN & QUENTEL, P.A.
3
EXHIBIT 12.1
FINE AIR SERVICES CORP
RATIO OF EARNINGS TO FIXED CHARGES
The following illustrates the computation of the historical ratio of earnings to
fixed charges.
<TABLE>
<CAPTION>
TWELVE THREE MONTHS ENDED
FISCAL YEAR ENDED DECEMBER 31, MONTHS MARCH 31,
------------------------------------------------------ ENDED --------------------
1993 1994 1995 1996 1997 JUNE 30, 1997 1997 1998
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net income $3,128 $14,198 $11,038 $13,028 $ 115 $16,666 $3,170 $3,689
Capitalized interest - - - - ($440) - - -
Fixed charges 1,265 1,470 1,539 1,734 2,486 1,812 481 932
------------------------------------------------------------------------------------------------
Total earnings $4,393 $15,668 $12,577 $14,762 $2,161 $18,478 $3,651 $4,621
================================================================================================
Interest expense(1) $1,035 $ 1,111 $ 985 $ 966 $1,531 $ 902 $ 225 $ 655
Rental expense 230 359 554 768 955 910 256 257
Amortization of debt costs - - - - - - - 20
------------------------------------------------------------------------------------------------
Total fixed charges $1,265 $ 1,470 $ 1,539 $ 1,734 $2,486 $ 1,812 $ 481 $ 932
================================================================================================
Ratio of earnings to fixed charges 3.5 10.7 8.2 8.5 -(2) 10.2 7.6 5.0
================================================================================================
</TABLE>
- ----------
(1) Includes capitalized interest of $440,000 for the year ended December
31, 1997.
(2) Earnings were insufficient to cover fixed charges by approximately
$325,000 for the year ended December 31, 1997.
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-4 of our
report dated March 3, 1998, except for the last paragraph of Note 2, as to which
the date is March 31, 1998, on our audits of the consolidated financial
statements of Fine Air Services Corp. We also consent to the reference to our
firm under the caption "Experts."
PricewaterhouseCoopers L.L.P.
Miami, Florida
July 17, 1998
EXHIBIT 25.1
===============================================================================
FORM T-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) [ ]
---------------------
THE BANK OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-5160382
(State of incorporation (I.R.S. employer
if not a U.S. national bank) identification no.)
48 Wall Street, New York, N.Y. 10286
(Address of principal executive offices) (Zip code)
---------------------
FINE AIR SERVICES CORP.
(Exact name of obligor as specified in its charter)
Delaware 65-083857
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
TABLE OF ADDITIONAL REGISTRANTS
Fine Air Services, Inc. Florida 65-0140639
Agro Air Associates, Inc. Florida 59-2184485
2261 N.W. 67th Avenue
Building 700
Miami, Florida 33122
(Address of principal executive offices) (Zip code)
---------------------
9-7/8% Senior Notes due 2008
(Title of the indenture securities)
===============================================================================
<PAGE>
1. GENERAL INFORMATION. FURNISH THE FOLLOWING INFORMATION AS TO THE
TRUSTEE:
(A) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING AUTHORITY TO
WHICH IT IS SUBJECT.
- --------------------------------------------------------------------------------
Name Address
- --------------------------------------------------------------------------------
Superintendent of Banks of the State of 2 Rector Street, New York,
New York N.Y. 10006, and Albany,
N.Y. 12203
Federal Reserve Bank of New York 33 Liberty Plaza, New York,
N.Y. 10045
Federal Deposit Insurance Corporation Washington, D.C. 20429
New York Clearing House Association New York, New York 10005
(B) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
Yes.
2. AFFILIATIONS WITH OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
None.
16. LIST OF EXHIBITS.
EXHIBITS IDENTIFIED IN PARENTHESES BELOW, ON FILE WITH THE COMMISSION,
ARE INCORPORATED HEREIN BY REFERENCE AS AN EXHIBIT HERETO, PURSUANT TO
RULE 7A-29 UNDER THE TRUST INDENTURE ACT OF 1939 (THE "ACT") AND 17
C.F.R. 229.10(D).
1. A copy of the Organization Certificate of The Bank of New York
(formerly Irving Trust Company) as now in effect, which
contains the authority to commence business and a grant of
powers to exercise corporate trust powers. (Exhibit 1 to
Amendment No. 1 to Form T-1 filed with Registration Statement
No. 33-6215, Exhibits 1a and 1b to Form T-1 filed with
Registration Statement No. 33-21672 and Exhibit 1 to Form T-1
filed with Registration Statement No. 33-29637.)
4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to
Form T-1 filed with Registration Statement No. 33-31019.)
6. The consent of the Trustee required by Section 321(b) of the
Act. (Exhibit 6 to Form T-1 filed with Registration Statement
No. 33-44051.)
7. A copy of the latest report of condition of the Trustee
published pursuant to law or to the requirements of its
supervising or examining authority.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New
York, a corporation organized and existing under the laws of the State of New
York, has duly caused this statement of eligibility to be signed on its behalf
by the undersigned, thereunto duly authorized, all in The City of New York, and
State of New York, on the 13th day of July, 1998.
THE BANK OF NEW YORK
By: /S/MARY JANE SCHMALZEL
------------------------------
Name: MARY JANE SCHMALZEL
Title: VICE PRESIDENT
<PAGE>
EXHIBIT 7
- --------------------------------------------------------------------------------
Consolidated Report of Condition of
THE BANK OF NEW YORK
of 48 Wall Street, New York, N.Y. 10286
And Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System, at the close of business March 31, 1998,
published in accordance with a call made by the Federal Reserve Bank of this
District pursuant to the provisions of the Federal Reserve Act.
DOLLAR AMOUNTS
ASSETS IN THOUSANDS
- ------ --------------
Cash and balances due from depos-
itory institutions:
Noninterest-bearing balances and
currency and coin ................. $ 6,397,993
Interest-bearing balances .......... 1,138,362
Securities:
Held-to-maturity securities ........ 1,062,074
Available-for-sale securities ...... 4,167,240
Federal funds sold and Securities pur-
chased under agreements to resell... 391,650
Loans and lease financing
receivables:
Loans and leases, net of unearned
income ........................... 36,538,242
LESS: Allowance for loan and
lease losses ..................... 631,725
LESS: Allocated transfer risk
reserve........................... 0
Loans and leases, net of unearned
income, allowance, and reserve 35,906,517
Assets held in trading accounts ...... 2,145,149
Premises and fixed assets (including
capitalized leases) ................ 663,928
Other real estate owned .............. 10,895
Investments in unconsolidated
subsidiaries and associated
companies .......................... 237,991
Customers' liability to this bank on
acceptances outstanding ............ 992,747
Intangible assets .................... 1,072,517
Other assets ......................... 1,643,173
-----------
Total assets ......................... $55,830,236
===========
LIABILITIES
Deposits:
In domestic offices ................ $24,849,054
Noninterest-bearing ................ 10,011,422
Interest-bearing ................... 14,837,632
In foreign offices, Edge and
Agreement subsidiaries, and IBFs ... 15,319,002
Noninterest-bearing ................ 707,820
Interest-bearing ................... 14,611,182
Federal funds purchased and Securities
<PAGE>
sold under agreements to repurchase. 1,906,066
Demand notes issued to the U.S.
Treasury ........................... 215,985
Trading liabilities .................. 1,591,288
Other borrowed money:
With remaining maturity of one year
or less .......................... 1,991,119
With remaining maturity of more than
one year through three years...... 0
With remaining maturity of more than
three years ...................... 25,574
Bank's liability on acceptances exe-
cuted and outstanding .............. 998,145
Subordinated notes and debentures .... 1,314,000
Other liabilities .................... 2,421,281
-----------
Total liabilities .................... 50,631,514
-----------
EQUITY CAPITAL
Common stock ......................... 1,135,284
Surplus .............................. 731,319
Undivided profits and capital
reserves ........................... 3,328,050
Net unrealized holding gains
(losses) on available-for-sale
securities ......................... 40,198
Cumulative foreign currency transla-
tion adjustments ................... ( 36,129)
------------
Total equity capital ................. 5,198,722
------------
Total liabilities and equity
capital ............................ $ 55,830,236
============
I, Robert E. Keilman, Senior Vice President and Comptroller of the
above-named bank do hereby declare that this Report of Condition has been
prepared in conformance with the instructions issued by the Board of Governors
of the Federal Reserve System and is true to the best of my knowledge and
belief.
Robert E. Keilman
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
)
Thomas A. Renyi )
Alan R. Griffith ) Directors
J. Carter Bacot )
)
EXHIBIT 99.1
LETTER OF TRANSMITTAL
FINE AIR SERVICES CORP.
OFFER TO EXCHANGE ITS
9 7/8% SENIOR NOTES DUE 2008
FOR ANY AND ALL OF ITS OUTSTANDING
9 7/8% SENIOR NOTES DUE 2008
PURSUANT TO THE PROSPECTUS DATED ________________, 1998 THE EXCHANGE
OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
________________, 1998, UNLESS THE OFFER IS EXTENDED. TENDERS MAY BE WITHDRAWN
PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE.
THE EXCHANGE AGENT FOR THE EXCHANGE OFFER IS:
THE BANK OF NEW YORK
<TABLE>
<S> <C> <C>
BY HAND DELIVERY: BY MAIL DELIVERY: BY COURIER DELIVERY:
THE BANK OF NEW YORK THE BANK OF NEW YORK THE BANK OF NEW YORK
101 BARCLAY STREET 101 BARCLAY STREET, 7E 101 BARCLAY STREET
CORPORATE TRUST SERVICES WINDOW NEW YORK, NEW YORK 10286 CORPORATE TRUST SERVICES WINDOW
GROUND LEVEL ATTENTION: REORGANIZATION SECTION GROUND LEVEL
NEW YORK, NEW YORK 10286 (REGISTERED OR CERTIFIED MAIL NEW YORK, NEW YORK 10286
ATTENTION: REORGANIZATION SECTION RECOMMENDED) ATTENTION: REORGANIZATION SECTION
</TABLE>
FACSIMILE TRANSMISSIONS
(ELIGIBLE INSTITUTIONS ONLY):
(212) 815-6339
TO CONFIRM BY TELEPHONE
OR FOR INFORMATION CALL:
(212) 815-6337
---------------------------------
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE OR TRANSMISSION OF THIS LETTER OF TRANSMITTAL VIA FACSIMILE TO A
NUMBER OTHER THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE A VALID DELIVERY.
THE INSTRUCTIONS CONTAINED HEREIN SHOULD BE READ CAREFULLY BEFORE THIS
LETTER OF TRANSMITTAL IS COMPLETED.
Capitalized terms used but not defined herein shall have the same
meaning given them in the Prospectus (as defined below).
This Letter of Transmittal is to be completed either if (a)
certificates are to be forwarded herewith or (b) tenders are to be made pursuant
to the procedures for tender by book-entry transfer set forth under "The
Exchange Offer -- Procedures for Tendering Old Notes" in the Prospectus and an
Agent's Message (as defined below) is not delivered. Certificates, or book-entry
confirmation of a book-entry transfer of such Old Notes into the Exchange
Agent's account at The Depository Trust Company ("DTC"), as well as this Letter
of Transmittal (or facsimile thereof), properly completed and duly executed,
with any required signature guarantees, and any other documents required by this
Letter of Transmittal, must be received by the Exchange Agent at its address set
forth herein on or prior to the Expiration Date. Tenders by book-entry transfer
may also be made by delivering an Agent's Message in lieu of this Letter of
Transmittal. The term "book-entry confirmation" means a confirmation of a
book-entry transfer of Old Notes into the Exchange Agent's account at DTC. The
term "Agent's Message" means a message, transmitted by DTC to and received by
the Exchange Agent and forming a part of a book-entry confirmation, which states
that DTC has received an express acknowledgment from the tendering participant,
which acknowledgment states that such participant has received and agrees to be
bound by this Letter of Transmittal and that Fine Air Services Corp., a Delaware
corporation (the "Company"), may enforce this Letter of Transmittal against such
participant.
Holders (as defined below) of Old Notes whose certificates (the
"Certificates") for such Old Notes are not immediately available or who cannot
deliver their Certificates and all other required documents to the Exchange
Agent on or prior to the Expiration Date (as defined in the Prospectus) or who
cannot complete the procedures for book-entry transfer on a timely basis, must
tender their Old Notes according to the guaranteed delivery procedures set forth
in "The Exchange Offer -- Procedures for Tendering Old Notes" in the Prospectus.
DELIVERY OF DOCUMENTS TO THE BOOK-ENTRY TRANSFER FACILITY DOES NOT
CONSTITUTE DELIVERY TO THE EXCHANGE AGENT.
<PAGE>
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
ALL TENDERING HOLDERS COMPLETE THIS BOX:
DESCRIPTION OF OLD NOTES
<TABLE>
<CAPTION>
OLD NOTES
IF BLANK, PRINT NAME AND ADDRESS OF REGISTERED HOLDER(S) (ATTACH ADDITIONAL LIST IF NECESSARY)
- -------------------------------------------------------------- -----------------------------------------------------------
AGGREGATE PRINCIPAL AMOUNT OF
CERTIFICATE PRINCIPAL AMOUNT OLD NOTES TENDERED
NUMBER(S)* OF OLD NOTES (IF LESS THAN ALL)**
--------------- ------------------- ---------------------
<S> <C> <C> <C> <C> <C>
--------------- ------------------- ---------------------
--------------- ------------------- ---------------------
--------------- ------------------- ---------------------
--------------- ------------------- ---------------------
--------------- ------------------- ---------------------
</TABLE>
* Need not be completed by book-entry Holders.
** Old Notes may be tendered in whole or in part in multiples of $1,000.
All Old Notes held shall be deemed tendered unless a lesser number is
specified in this column. See Instructions 4.
(BOXES BELOW TO BE CHECKED BY ELIGIBLE INSTITUTIONS ONLY)
[ ] CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH DTC AND COMPLETE
THE FOLLOWING:
Name of Tendering Institution___________________________________________________
DTC Account Number________________________Transaction Code Number_______________
[ ] CHECK HERE AND ENCLOSE A PHOTOCOPY OF THE NOTICE OF GUARANTEED DELIVERY IF
TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED
DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE THE FOLLOWING
(SEE INSTRUCTION 1):
Name(s) of Registered Holder(s)_________________________________________________
Window Ticket Number (if any)___________________________________________________
Date of Execution of Notice of Guaranteed Delivery______________________________
Name of Institution which Guaranteed Delivery___________________________________
If Guaranteed Delivery is to be made by Book-Entry Transfer:
Name of Tendering Institution___________________________________________________
DTC Account Number________________________Transaction Code Number_______________
[ ] CHECK HERE IF TENDERED BY BOOK-ENTRY TRANSFER AND NON-EXCHANGED OLD NOTES
ARE TO BE RETURNED BY CREDITING THE DTC ACCOUNT NUMBER SET FORTH ABOVE.
[ ] CHECK HERE IF YOU ARE A BROKER-DEALER WHO ACQUIRED THE OLD NOTES FOR ITS
OWN ACCOUNT AS A RESULT OF MARKET MAKING OR OTHER TRADING ACTIVITIES (A
"PARTICIPATING BROKER-DEALER") AND WISH TO RECEIVE 10 ADDITIONAL COPIES OF
THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO.
Name:___________________________________________________________________________
Address:________________________________________________________________________
2
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to Fine Air Services Corp., a Delaware
corporation (the "Company"), the above described principal amount of the
Company's 9 7/8% Senior Notes due 2008 (the "Old Notes") in exchange for
equivalent amount of the Company's 9 7/8% Senior Notes due 2008 (the "New
Notes") which have been registered under the Securities Act of 1933 (the
"Securities Act"), upon the terms and subject to the conditions set forth in the
Prospectus dated __________________, 1998 (as the same may be amended or
supplemented from time to time, the "Prospectus"), receipt of which is hereby
acknowledged, and in this Letter of Transmittal (which, together with the
Prospectus, constitute the "Exchange Offer").
Subject to and effective upon the acceptance for exchange of all or any
portion of the Old Notes tendered herewith in accordance with the terms and
conditions of the Exchange Offer (including, if the Exchange Offer is extended
or amended, the terms and conditions of any such extension or amendment), the
undersigned hereby sells, assigns and transfers to or upon the order of the
Company all right, title and interest in and to such Old Notes as are being
tendered herewith. The undersigned hereby irrevocably constitutes and appoints
the Exchange Agent as its agent and attorney-in-fact (with full knowledge that
the Exchange Agent is also acting as agent of the Company in connection with the
Exchange Offer) with respect to the tendered Old Notes, with full power of
substitution (such power of attorney being deemed to be an irrevocable power
coupled with an interest) subject only to the right of withdrawal described in
the Prospectus, to (i) deliver Certificates for Old Notes to the Company
together with all accompanying evidences of transfer and authenticity to, or
upon the order of, the Company, upon receipt by the Exchange Agent, as the
undersigned's agent, of the New Notes to be issued in exchange for such Old
Notes, (ii) present Certificates for such Old Notes for transfer, and to
transfer the Old Notes on the books of the Company, and (iii) receive for the
account of the Company all benefits and otherwise exercise all rights of
beneficial ownership of such Old Notes, all in accordance with the terms and
conditions of the Exchange Offer.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, exchange, sell, assign and transfer the Old
Notes tendered hereby and that, when the same are accepted for exchange, the
Company will acquire good, marketable and unencumbered title thereto, free and
clear of all liens, restrictions, charges and encumbrances, and that the Old
Notes tendered hereby are not subject to any adverse claims or proxies. The
undersigned will, upon request, execute and deliver any additional documents
deemed by the Company or the Exchange Agent to be necessary or desirable to
complete the exchange, assignment and transfer of the Old Notes tendered hereby,
and the undersigned will comply with its obligations under the Registration
Rights Agreement. The undersigned has read and agrees to all of the terms of the
Exchange Offer.
The name(s) and address(es) of the registered Holder(s) of the Old
Notes tendered hereby should be printed above, if they are not already set forth
above, as they appear on the Certificates representing such Old Notes. The
Certificate number(s) and the Old Notes that the undersigned wishes to tender
should be indicated in the appropriate boxes above.
If any tendered Old Notes are not exchanged pursuant to the Exchange
Offer for any reason, or if Certificates are submitted for more Old Notes than
are tendered or accepted for exchange, Certificates for such nonexchanged or
nontendered Old Notes will be returned (or, in the case of Old Notes tendered by
book-entry transfer, such Old Notes will be credited to an account maintained at
DTC), without expense to the tendering Holder, promptly following the expiration
or termination of the Exchange Offer.
The undersigned understands that tenders of Old Notes pursuant to any
one of the procedures described in "The Exchange Offer--Procedures for Tendering
Old Notes" in the Prospectus and in the instructions attached hereto will, upon
the Company's acceptance for exchange of such tendered Old Notes, constitute a
binding agreement between the undersigned and the Company upon the terms and
subject to the conditions of the Exchange Offer. The undersigned recognizes
that, under certain circumstances set forth in the Prospectus, the Company may
not be required to accept for exchange any of the Old Notes tendered hereby.
Unless otherwise indicated herein in the box entitled "Special Issuance
Instructions" below, the undersigned hereby directs that the New Notes be issued
in the name(s) of the undersigned or, in the case of a book-entry transfer of
Old Notes, that such New Notes be credited to the account indicated above
maintained at DTC. If applicable, substitute Certificates representing Old Notes
not exchanged or not accepted for exchange will be issued to the undersigned or,
in the case of a book-entry transfer of Old Notes, will be credited to the
account indicated above maintained at DTC. Similarly, unless otherwise indicated
under "Special Delivery Instructions," please deliver New Notes to the
undersigned at the address shown below the undersigned's signature.
3
<PAGE>
By tendering Notes and executing this Letter of Transmittal or
effecting delivery of an Agent's Message in lieu thereof, the undersigned hereby
represents and agrees that (i) the undersigned is not an "affiliate" of the
Company, (ii) any New Notes to be received by the undersigned are being acquired
in the ordinary course of its business, (iii) the undersigned has no arrangement
or understanding with any person to participate in a distribution (within the
meaning of the Securities Act) of New Notes to be received in the Exchange
Offer, and (iv) if the undersigned is not a broker-dealer, the undersigned is
not engaged in, and does not intend to engage in, a distribution (within the
meaning of the Securities Act) of such New Notes. The Company may require the
undersigned, as a condition to the undersigned's eligibility to participate in
the Exchange Offer, to furnish to the Company (or an agent thereof) in writing
information as to the number of "beneficial owners" within the meaning of Rule
13d-3 under the Exchange Act on behalf of whom the undersigned holds the Old
Notes to be exchanged in the Exchange Offer. By tendering Old Notes pursuant to
the Exchange Offer and executing this Letter of Transmittal or effecting
delivery of an Agent's Message in lieu thereof, a Holder of Old Notes which is a
broker-dealer represents and agrees, consistent with certain interpretive
letters issued by the staff of the division of corporation finance of the
Securities and Exchange Commission to third parties, that such Old Notes were
acquired by such broker-dealer for its own account as a result of market-making
activities or other trading activities, and it will deliver a Prospectus (as
amended or supplemented from time to time) meeting the requirements of the
Securities Act in connection with any resale of such New Notes (provided that,
by so acknowledging and by delivering a Prospectus, such broker-dealer will not
be deemed to admit that it is an "underwriter" within the meaning of the
Securities Act).
The Company has agreed that, subject to the provisions of the
Registration Rights Agreement, the Prospectus, as it may be amended or
supplemented from time to time, may be used by a participating broker-dealer (as
defined below) in connection with resales of New Notes received in exchange for
Old Notes. In that regard, each broker-dealer who acquired Old Notes for its own
account as a result of market-making or other trading activities (a
"participating broker-dealer"), by tendering such Old Notes and executing this
Letter of Transmittal or effecting delivery of an Agent's Message in lieu
thereof, agrees that, upon receipt of notice from the Company of the occurrence
of any event or the discovery of any fact which makes any statement contained or
incorporated by reference in the Prospectus untrue in any material respect or
which causes the Prospectus to omit to state a material fact necessary in order
to make the statements contained or incorporated by reference therein, in light
of the circumstances under which they were made, not misleading or of the
occurrence of certain other events specified in the Registration Rights
Agreement, such participating broker-dealer will suspend the sale of New Notes
pursuant to the Prospectus until the Company has amended or supplemented the
Prospectus to correct such misstatement or omission and has furnished copies of
the amended or supplemented Prospectus to the participating broker-dealer or the
Company has given notice that the sale of the New Notes may be resumed, as the
case may be.
As a result, a participating broker-dealer who intends to use the
Prospectus in connection with resales of New Notes received in exchange for Old
Notes pursuant to the Exchange Offer must notify the Company, or cause the
Company to be notified, on or prior to the Expiration Date, that it is a
participating broker-dealer. Such notice may be given in the space provided
above or may be delivered to the Exchange Agent at the address set forth in the
Prospectus under "The Exchange Offer--Exchange Agent."
The undersigned will, upon request, execute and deliver any additional
documents deemed by the Company to be necessary or desirable to complete the
sale, assignment and transfer of the Old Notes tendered hereby. All authority
herein conferred or agreed to be conferred in this Letter of Transmittal shall
survive the death or incapacity of the undersigned and any obligation of the
undersigned hereunder shall be binding upon the heirs, executors,
administrators, personal representatives, trustees in bankruptcy, legal
representatives, successors and assigns of the undersigned. Except as stated in
the Prospectus, this tender is irrevocable.
The undersigned, by completing the box entitled "Description of Old
Notes" above and signing this letter, will be deemed to have tendered the Old
Notes as set forth in such box.
4
<PAGE>
HOLDER(S) SIGN HERE
(SEE INSTRUCTIONS 2, 5 AND 6)
(PLEASE COMPLETE SUBSTITUTE FORM W-9 ON PAGE 11)
(NOTE: SIGNATURE(S) MUST BE GUARANTEED IF REQUIRED
BY INSTRUCTION 2)
Must be signed by registered Holder(s) exactly as name(s) appear(s) on
Certificate(s) for the Old Notes hereby tendered or on the register of Holders
maintained by the Company, or by any person(s) authorized to become the
registered Holder(s) by endorsements and documents transmitted herewith
(including such opinions of counsel, certifications and other information as may
be required by the Company or the Trustee for the Old Notes to comply with the
restrictions on transfer applicable to the Old Notes). If signature is by an
attorney-in-fact, executor, administrator, trustee, guardian, officer of a
corporation or another acting in a fiduciary capacity or representative
capacity, please set forth the signer's full title. See Instruction 5.
________________________________________________________________________________
________________________________________________________________________________
(SIGNATURE(S) OF HOLDER(S))
Date: ______________, 1998
Name(s)_________________________________________________________________________
________________________________________________________________________________
(PLEASE PRINT)
Capacity (full title)___________________________________________________________
Address_________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(INCLUDE ZIP CODE)
Area Code and Telephone Number__________________________________________________
________________________________________________________________________________
(TAX IDENTIFICATION OR SOCIAL SECURITY NUMBER(S))
GUARANTEE OF SIGNATURE(S)
(IF REQUIRED, SEE INSTRUCTIONS 2 AND 5)
________________________________________________________________________________
(AUTHORIZED SIGNATURE)
Date: ___________, 1998
Name of Firm____________________________________________________________________
Capacity (full title)___________________________________________________________
(PLEASE PRINT)
Address_________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(INCLUDE ZIP CODE)
Area Code and Telephone Number__________________________________________________
________________________________________________________________________________
________________________________________________________________________________
5
<PAGE>
SPECIAL ISSUANCE INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5 AND 6)
To be completed ONLY if New Notes or Old Notes not tendered are to be
issued in the name of someone other than the registered Holder of the Old Notes
whose name(s) appear(s) above.
Issue
[ ] Old Notes not tendered to:
[ ] New Notes to:
Name(s)_________________________________________________________________________
Address_________________________________________________________________________
(INCLUDE ZIP CODE)
Area Code and
Telephone Number________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5 AND 6)
To be completed ONLY if New Notes or Old Notes not tendered are to be
sent to someone other than the registered Holder of the Old Notes whose name(s)
appear(s) above, or such registered Holder(s) at an address other than that
shown above.
Mail
[ ] Old Notes not tendered to:
[ ] New Notes to:
Name(s)_________________________________________________________________________
Address_________________________________________________________________________
(INCLUDE ZIP CODE)
Area Code and
Telephone Number________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
6
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER
1. DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATES; GUARANTEED
DELIVERY PROCEDURES. This Letter of Transmittal is to be completed either if (a)
Certificates are to be forwarded herewith or (b) tenders are to be made pursuant
to the procedures for tender by book-entry transfer set forth in "The Exchange
Offer --Procedures for Tendering Old Notes" in the Prospectus and an Agent's
Message is not delivered. Certificates, or timely confirmation of a book-entry
transfer of such Old Notes into the Exchange Agent's account at DTC, as well as
this Letter of Transmittal (or facsimile thereof), properly completed and duly
executed, with any required signature guarantees, and any other documents
required by this Letter of Transmittal, must be received by the Exchange Agent
at its address set forth herein on or prior to the Expiration Date. Tenders by
book-entry transfer may also be made by delivering an Agent's Message in lieu
thereof. Old Notes may be tendered in whole or in part in integral multiples of
$1,000.
Holders who wish to tender their Old Notes and (i) whose Old Notes are
not immediately available or (ii) who cannot deliver their Old Notes, this
Letter of Transmittal and all other required documents to the Exchange Agent on
or prior to the Expiration Date or (iii) who cannot complete the procedures for
delivery by book-entry transfer on a timely basis, may tender their Old Notes by
properly completing and duly executing a Notice of Guaranteed Delivery pursuant
to the guaranteed delivery procedures set forth in "The Exchange Offer --
Procedures for Tendering Old Notes" in the Prospectus. Pursuant to such
procedures: (i) such tender must be made by or through an Eligible Institution
(as defined below); (ii) a properly completed and duly executed Notice of
Guaranteed Delivery, substantially in the form made available by the Company,
must be received by the Exchange Agent on or prior to the Expiration Date; and
(iii) the Certificates (or a book-entry confirmation) representing all tendered
Old Notes, in proper form for transfer, together with a Letter of Transmittal
(or facsimile thereof), properly completed and duly executed, with any required
signature guarantees and any other documents required by this Letter of
Transmittal, must be received by the Exchange Agent within three New York Stock
Exchange trading days after the date of execution of such Notice of Guaranteed
Delivery, all as provided in "The Exchange Offer -- Procedures for Tendering Old
Notes" in the Prospectus.
The Notice of Guaranteed Delivery may be delivered by hand or
transmitted by facsimile or mail to the Exchange Agent, and must include a
guarantee by an Eligible Institution in the form set forth in such Notice of
Guaranteed Delivery. For Old Notes to be properly tendered pursuant to the
guaranteed delivery procedure, the Exchange Agent must receive a Notice of
Guaranteed Delivery on or prior to the Expiration Date. As used herein and in
the Prospectus, "Eligible Institution" means a firm or other entity identified
in Rule 17Ad-15 under the Exchange Act as "an eligible guarantor institution,"
including (as such terms are defined therein) (i) a bank; (ii) a broker, dealer,
municipal securities broker or dealer or government securities broker or dealer;
(iii) a credit union; (iv) a national securities exchange, registered securities
association or clearing agency; or (v) a savings association that is a
participant in a Securities Transfer Association.
THE METHOD OF DELIVERY OF CERTIFICATES, THIS LETTER OF TRANSMITTAL AND
ALL OTHER REQUIRED DOCUMENTS IS AT THE OPTION AND SOLE RISK OF THE TENDERING
HOLDER, AND THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE
EXCHANGE AGENT. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT
REQUESTED, PROPERLY INSURED, OR OVERNIGHT DELIVERY SERVICE IS RECOMMENDED. IN
ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
The Company will not accept any alternative, conditional or contingent
tenders. Each tendering Holder, by execution of a Letter of Transmittal (or
facsimile thereof), waives any right to receive any notice of the acceptance of
such tender.
2. GUARANTEE OF SIGNATURES. No signature guarantee on this Letter of
Transmittal is required if:
(i) this Letter of Transmittal is signed by the registered
Holder (which term, for purposes of this document, shall include any
participant in DTC whose name appears on a security position listing as
the owner of the Old Notes (the "Holder")) of Old Notes tendered
herewith, unless such Holder(s) has completed either the box entitled
"Special Issuance Instructions" or the box entitled "Special Delivery
7
<PAGE>
Instructions" above, or
(ii) such Old Notes are tendered for the account of a firm
that is an Eligible Institution.
In all other cases, an Eligible Institution must guarantee the
signature(s) on this Letter of Transmittal. See Instruction 5.
3. INADEQUATE SPACE. If the space provided in the box captioned
"Description of Old Notes" is inadequate, the Certificate number(s) and/or the
principal amount of Old Notes and any other required information should be
listed on a separate signed schedule which is attached to this Letter of
Transmittal.
4. PARTIAL TENDERS AND WITHDRAWAL RIGHTS. Tenders of Old Notes will be
accepted only in integral multiples of $1,000. If less than all the Old Notes
evidenced by any Certificate submitted are to be tendered, fill in the principal
amount of Old Notes which are to be tendered in the box entitled "Principal
Amount of Old Notes Tendered." In such case, new Certificate(s) for the
remainder of the Old Notes that were evidenced by your old Certificate(s) will
only be sent to the Holder of the Old Note, promptly after the Expiration Date.
All Old Notes represented by Certificates delivered to the Exchange Agent will
be deemed to have been tendered unless otherwise indicated.
Except as otherwise provided herein, tenders of Old Notes may be
withdrawn at any time on or prior to the Expiration Date. In order for a
withdrawal to be effective on or prior to that time, a written, telegraphic or
facsimile transmission of such notice of withdrawal must be timely received by
the Exchange Agent at one of its addresses set forth above or in the Prospectus
on or prior to the Expiration Date. Any such notice of withdrawal must specify
the name of the person who tendered the Old Notes to be withdrawn, the aggregate
principal amount of Old Notes to be withdrawn, and (if Certificates for Old
Notes have been tendered) the name of the registered Holder of the Old Notes as
set forth on the Certificate for the Old Notes, if different from that of the
person who tendered such Original Notes. If Certificates for the Old Notes have
been delivered or otherwise identified to the Exchange Agent, then prior to the
physical release of such Certificates for the Old Notes, the tendering Holder
must submit the serial numbers shown on the particular Certificates for the Old
Notes to be withdrawn and the signature on the notice of withdrawal must be
guaranteed by an Eligible Institution, except in the case of Old Notes tendered
for the account of an Eligible Institution. If Old Notes have been tendered
pursuant to the procedures for book-entry transfer set forth in the Prospectus
under "The Exchange Offer -- Procedures for Tendering Old Notes," the notice of
withdrawal must specify the name and number of the account at DTC to be credited
with the withdrawal of Old Notes, in which case a notice of withdrawal will be
effective if delivered to the Exchange Agent by written, telegraphic, telex or
facsimile transmission. Withdrawals of tenders of Old Notes may not be
rescinded. Old Notes properly withdrawn will not be deemed validly tendered for
purposes of the Exchange Offer, but may be retendered at any subsequent time on
or prior to the Expiration Date by following any of the procedures described in
the Prospectus under "The Exchange Offer -- Procedures for Tendering Old Notes."
All questions as to the validity, form and eligibility (including time
of receipt) of such withdrawal notices will be determined by the Company, in its
sole discretion, whose determination shall be final and binding on all parties.
The Company, any affiliates or assigns of the Company, the Exchange Agent or any
other person shall not be under any duty to give any notification of any
irregularities in any notice of withdrawal or incur any liability for failure to
give any such notification. Any Old Notes which have been tendered but which are
withdrawn will be returned to the Holder thereof without cost to such Holder
promptly after withdrawal.
5. SIGNATURES ON LETTER OF TRANSMITTAL, ASSIGNMENTS AND ENDORSEMENTS.
If this Letter of Transmittal is signed by the registered Holder(s) of the Old
Notes tendered hereby, the signature(s) must correspond exactly with the name(s)
as written on the face of the Certificate(s) without alteration, enlargement or
any change whatsoever.
If any of the Old Notes tendered hereby are owned of record by two or
more joint owners, all such owners must sign this Letter of Transmittal.
If any tendered Old Notes are registered in different name(s) on
several Certificates, it will be necessary to complete, sign and submit as many
separate Letters of Transmittal (or facsimiles thereof) as there are different
registrations of Certificates.
8
<PAGE>
If this Letter of Transmittal or any Certificates or bond powers 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 the
Company, must submit proper evidence satisfactory to the Company, in its sole
discretion, of each such person's authority so to act.
When this Letter of Transmittal is signed by the registered owner(s) of
the Original Notes listed and transmitted hereby, no endorsement(s) of
Certificate(s) or separate bond power(s) are required unless New Notes are to be
issued in the name of a person other than the registered Holder(s). Signature(s)
on such Certificate(s) or bond power(s) must be guaranteed by an Eligible
Institution.
If this Letter of Transmittal is signed by a person other than the
registered owner(s) of the Old Notes listed, the Certificates must be endorsed
or accompanied by appropriate bond powers, signed exactly as the name or names
of the registered owner(s) appear(s) on the Certificates, and also must be
accompanied by such opinions of counsel, certifications and other information as
the Company or the Trustee for the Old Notes may require in accordance with the
restrictions on transfer applicable to the Old Notes. Signatures on such
Certificates or bond powers must be guaranteed by an Eligible Institution.
6. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS. If New Notes are to be
issued in the name of a person other than the signer of this Letter of
Transmittal, or if New Notes are to be sent to someone other than the signer of
this Letter of Transmittal or to an address other than that shown above, the
appropriate boxes on this Letter of Transmittal should be completed.
Certificates for Old Notes not exchanged will be returned by mail or, if
tendered by book-entry transfer, by crediting the account indicated above
maintained at DTC. See Instruction 4.
7. IRREGULARITIES. The Company will determine, in its sole discretion,
all questions as to the form of documents, validity, eligibility (including time
of receipt) and acceptance for exchange of any tender of Old Notes, which
determination shall be final and binding on all parties. The Company reserves
the absolute right to reject any and all tenders determined by it not to be in
proper form or the acceptance of which, or exchange for which, may, in the view
of counsel to the Company be unlawful. The Company also reserves the absolute
right, subject to applicable law, to waive any of the conditions of the Exchange
Offer set forth in the Prospectus under "The Exchange Offer -- Conditions to the
Exchange Offer" or any conditions or irregularity in any tender of Old Notes of
any particular Holder whether or not similar conditions or irregularities are
waived in the case of other Holders. The Company's interpretation of the terms
and conditions of the Exchange Offer (including this Letter of Transmittal and
the instructions hereto) will be final and binding. No tender of Old Notes will
be deemed to have been validly made until all irregularities with respect to
such tender have been cured or waived. The Company, any affiliates or assigns of
the Company, the Exchange Agent, or any other person shall not be under any duty
to give notification of any irregularities in tenders or incur any liability for
failure to give such notification.
8. QUESTIONS, REQUESTS FOR THE ASSISTANCE AND ADDITIONAL COPIES.
Questions and requests for assistance may be directed to the Exchange Agent at
its address and telephone number set forth on the front of this Letter of
Transmittal. Additional copies of the Prospectus, the Notice of Guaranteed
Delivery and the Letter of Transmittal may be obtained from the Exchange Agent
or from your broker, dealer, commercial bank, trust company or other nominee.
9. 31% BACKUP WITHHOLDING; SUBSTITUTE FORM W-9. Under the U.S. Federal
income tax law, a Holder whose tendered Old Notes are accepted for exchange is
required to provide the Exchange Agent with such Holder's correct taxpayer
identification number ("TIN") on Substitute Form W-9 below. If the Exchange
Agent is not provided with the correct TIN, the Internal Revenue Service (the
"IRS") may subject the Holder or other payee to a $50 penalty. In addition,
payments to such Holders or other payees with respect to Old Notes exchanged
pursuant to the Exchange Offer may be subject to 31% backup withholding.
The box in Part 3 of the Substitute Form W-9 may be checked if the
tendering Holder has not been issued a TIN and has applied for a TIN or intends
to apply for a TIN in the near future. If the box in Part 3 is checked, the
Holder or other payee must also complete the Certificate of Awaiting Taxpayer
Identification Number below in order to avoid backup withholding.
Notwithstanding that the box in Part 3 is checked and the Certificate of
Awaiting Taxpayer Identification Number is completed, the Exchange Agent will
withhold 31% of all payments made prior to the time a properly certified TIN is
provided to the Exchange Agent. The Exchange Agent will retain such amounts
withheld during the 60-day period following the date of the Substitute Form W-9.
If the Holder furnishes the Exchange Agent with its TIN within 60 days after the
date of the Substitute Form W-9, the amounts
9
<PAGE>
retained during the 60-day period will be remitted to the Holder and no further
amounts shall be retained or withheld from payments made to the Holder
thereafter. If, however, the Holder has not provided the Exchange Agent with its
TIN within such 60-day period, amounts withheld will be remitted to the IRS as
backup withholding. In addition, 31% of all payments made thereafter will be
withheld and remitted to the IRS until a correct TIN is provided.
The Holder is required to give the Exchange Agent the TIN (e.g., social
security number or employer identification number) of the registered owner of
the Old Notes or of the last transferee appearing on the transfers attached to,
or endorsed on, the Old Notes. If the Old Notes are registered in more than one
name or are not in the name of the actual owner, consult the enclosed
"Guidelines for Certification of Taxpayer Identification Number on Substitute
Form W-9" for additional guidance on which number to report.
Certain Holders (including, among others, corporations, financial
institutions and certain foreign persons) may not be subject to these backup
withholding and reporting requirements. Such Holders should nevertheless
complete the attached Substitute Form W-9 below, and write "exempt" on the face
thereof, to avoid possible erroneous backup withholding. A foreign person may
qualify as an exempt recipient by submitting a properly completed IRS Form W-8,
signed under penalties of perjury, attesting to that Holder's exempt status.
Please consult the enclosed "Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9" for additional guidance on which
Holders are exempt from backup withholding.
Backup withholding is not an additional U.S. Federal income tax.
Rather, the U.S. Federal income tax liability of a person subject to backup
withholding will be reduced by the amount of tax withheld. If withholding
results in an overpayment of taxes, a refund may be obtained.
10. WAIVER OF CONDITIONS. The Company reserves the absolute right to
waive satisfaction of any or all conditions enumerated in the Prospectus.
11. NO CONDITIONAL TENDERS. No alternative, conditional or contingent
tenders will be accepted. All tendering Holders of Old Notes, by execution of
this Letter of Transmittal, shall waive any right to receive notice of the
acceptance of Old Notes for exchange.
Neither the Company, the Exchange Agent nor any other person is
obligated to give notice of any defect or irregularity with respect to any
tender of Old Notes nor shall any of them incur any liability for failure to
give any such notice.
12. LOST, DESTROYED OR STOLEN CERTIFICATES. If any Certificate(s)
representing Old Notes have been lost, destroyed or stolen, the Holder should
promptly notify the Exchange Agent. The Holder will then be instructed as to the
steps that must be taken in order to replace the Certificate(s). This Letter of
Transmittal and related documents cannot be processed until the procedures for
replacing lost, destroyed or stolen Certificate(s) have been followed.
13. SECURITY TRANSFER TAXES. Holders who tender their Old Notes for
exchange will not be obligated to pay any transfer taxes in connection
therewith. If, however, New Notes are to be delivered to, or are to be issued in
the name of, any person other than the registered Holder of the Old Notes
tendered, or if a transfer tax is imposed for any reason other than the exchange
of Old Notes in connection with the Exchange Offer, then the amount of any such
transfer tax (whether imposed on the registered Holder or any other persons)
will be payable by the tendering Holder. If satisfactory evidence of payment of
such taxes or exemption therefrom is not submitted with the Letter of
Transmittal, the amount of such transfer taxes will be billed directly to such
tendering Holder.
10
<PAGE>
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR FACSIMILE
THEREOF) AND ALL OTHER REQUIRED DOCUMENTS MUST BE
RECEIVED BY THE EXCHANGE AGENT ON OR PRIOR TO
THE EXPIRATION DATE. TO BE COMPLETED BY
ALL TENDERING SECURITYHOLDERS
(SEE INSTRUCTION 9)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
PAYOR'S NAME: THE BANK OF NEW YORK
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
SUBSTITUTE FORM W-9 PART 1 - PLEASE PROVIDE YOUR TIN ON THE LINE AT RIGHT Social Security Number
AND CERTIFY BY SIGNING AND DATING BELOW
OR
Employer Identification
Number
- ---------------------------------------------------------------------------------------------------------------------
DEPARTMENT OF THE PART 2 - Part 3
TREASURY, CERTIFICATION -- Under the Penalties of Perjury, I Check if TIN Applied For
INTERNAL REVENUE SERVICE certify that: (1) The number shown on this form
is my correct taxpayer identification number (or
I am waiting for a number to be issued to me),
(2) I am not subject to backup withholding either
because (i) I am exempt from backup withholding,
(ii) I have not been notified by the Internal
Revenue Service ("IRS") that I am subject to
backup withholding as a result of a failure to
report all interest or dividends, or (iii) the
IRS has notified me that I am no longer subject
to backup withholding, and (3) any other
information provided on this form is true and
correct.
- ---------------------------------------------------------------------------------------------------------------------
PAYOR'S REQUEST
FOR TAXPAYER You must cross out item (iii) in Part (2) above if you have been notified by the IRS
IDENTIFICATION that you are subject to backup withholding because of underreporting interest or
NUMBER ("TIN") AND dividends on your tax return and you have not been notified by the IRS that you are
CERTIFICATION no longer subject to backup withholding.
SIGNATURE _________________________________ DATE __________, 1998
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY IN CERTAIN CIRCUMSTANCES
RESULT IN BACKUP WITHHOLDING OF 31% OF ANY AMOUNTS PAID TO YOU PURSUANT
TO THE EXCHANGE OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR
CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9
FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN PART 3 OF THE SUBSTITUTE
FORM W-9 CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
</TABLE>
I certify under penalties of perjury that a taxpayer identification
number has not been issued to me, and either (1) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office or (2)
I intend to mail or deliver an application in the near future. I understand that
if I do not provide a taxpayer identification number by the time of payment, 31%
of all payments made to me on account of the New Notes shall be retained until I
provide a taxpayer identification number to the Exchange Agent and that, if I do
not provide my taxpayer identification number within 60 days, such retained
amounts shall be remitted to the Internal Revenue Service as backup withholding
and 31% of all reportable payments made to me thereafter will be withheld and
remitted to the Internal Revenue Service until I provide a taxpayer
identification number.
SIGNATURE __________________________________________ DATE ________________, 1998
11
EXHIBIT 99.2
NOTICE OF GUARANTEED DELIVERY
FINE AIR SERVICES CORP.
OFFER TO EXCHANGE ITS
9 7/8% SENIOR NOTES DUE 2008
FOR ANY AND ALL OF ITS OUTSTANDING
9 7/8% SENIOR NOTES DUE 2008
PURSUANT TO THE PROSPECTUS DATED __________________, 1998
This Notice of Guaranteed Delivery, or one substantially equivalent to
this form, must be used to accept the Exchange Offer (as defined below) if (i)
certificates for the Company's 9 7/8% Senior Notes due 2008 (the "Old Notes")
are not immediately available, (ii) Old Notes, the Letter of Transmittal and all
other required documents cannot be delivered to The Bank of New York (the
"Exchange Agent") on or prior to the Expiration Date or (iii) the procedures for
delivery by book-entry transfer cannot be completed on a timely basis. This
Notice of Guaranteed Delivery may be delivered by hand, overnight courier or
mail, or transmitted by facsimile transmission, to the Exchange Agent. See "The
Exchange Offer -- Procedures for Tendering Old Notes" in the Prospectus. In
addition, in order to utilize the guaranteed delivery procedure to tender Old
Notes pursuant to the Exchange Offer, a completed, signed and dated Letter of
Transmittal relating to the Old Notes (or facsimile thereof) must also be
received by the Exchange Agent on or prior to the Expiration Date. Capitalized
terms not defined herein have the meanings assigned to them in the Prospectus.
THE EXCHANGE AGENT FOR THE EXCHANGE OFFER IS:
THE BANK OF NEW YORK
<TABLE>
<S> <C> <C>
BY HAND DELIVERY: BY MAIL DELIVERY: BY COURIER DELIVERY:
THE BANK OF NEW YORK THE BANK OF NEW YORK THE BANK OF NEW YORK
101 BARCLAY STREET 101 BARCLAY STREET, 7E 101 BARCLAY STREET
CORPORATE TRUST SERVICES WINDOW NEW YORK, NEW YORK 10286 CORPORATE TRUST SERVICES WINDOW
GROUND LEVEL ATTENTION: REORGANIZATION GROUND LEVEL
NEW YORK, NEW YORK 10286 SECTION NEW YORK, NEW YORK 10286
ATTENTION: REORGANIZATION SECTION (REGISTERED OR CERTIFIED MAIL ATTENTION: REORGANIZATION SECTION
RECOMMENDED)
</TABLE>
FACSIMILE TRANSMISSIONS
(ELIGIBLE INSTITUTIONS ONLY):
(212) 815-6339
TO CONFIRM BY TELEPHONE
OR FOR INFORMATION CALL:
(212) 815-6337
----------------
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN
AS SET FORTH ABOVE OR TRANSMISSION OF THIS NOTICE OF GUARANTEED DELIVERY VIA
FACSIMILE TO A NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID
DELIVERY.
THIS NOTICE OF GUARANTEED DELIVERY IS NOT TO BE USED TO GUARANTEE
SIGNATURES. IF A SIGNATURE ON A LETTER OF TRANSMITTAL IS REQUIRED TO BE
GUARANTEED BY AN "ELIGIBLE INSTITUTION" UNDER THE INSTRUCTIONS THERETO, SUCH
SIGNATURE GUARANTEE MUST APPEAR IN THE APPLICABLE SPACE PROVIDED IN THE
SIGNATURE BOX ON THE LETTER OF TRANSMITTAL.
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to Fine Air Services Corp., a Delaware
corporation (the "Company"), upon the terms and subject to the conditions set
forth in the Prospectus dated ________________, 1998 (as the same may be amended
or supplemented from time to time, the "Prospectus"), and the related Letter of
Transmittal (which together constitute the "Exchange Offer"), receipt of which
is hereby acknowledged, the aggregate principal amount of Old Notes set forth
below pursuant to the guaranteed delivery procedures set forth in the Prospectus
under the caption "The Exchange Offer -- Procedures for Tendering Old Notes."
Aggregate Principal Amount Name(s) of Registered Holder(s):_______
Amount Tendered: $_________________* _______________________________________
Certificate No(s) (if
available): ____________________________________________________________________
________________________________________________________________________________
$ ______________________________________________________________________________
(Total Principal Amount Represented by Old Notes Certificate(s))
If Old Notes will be tendered by book-entry transfer, provide the following
information:
DTC Account Number: ____________________________________________________________
Date: __________________________________________________________________________
* Must be in integral multiples of $1,000.
________________________________________________________________________________
All authority herein conferred or agreed to be conferred shall survive
the death or incapacity of the undersigned and every obligation of the
undersigned hereunder shall be binding upon the heirs, personal representatives,
successors and assigns of the undersigned.
________________________________________________________________________________
PLEASE SIGN HERE
X _______________________________ _________________________________
X _______________________________ _________________________________
Signature(s) of Owner(s) or Date
Authorized Signatory
Area Code and Telephone Number:____________________________________
Must be signed by the holder(s) of the Old Notes as their name(s)
appear(s) on certificates for Old Notes or on a security position listing, or by
person(s) authorized to become registered holder(s) by endorsement and documents
transmitted with this Notice of Guaranteed Delivery. If signature is by a
trustee, executor, administrator, guardian, attorney-in-fact, officer or other
person acting in a fiduciary or representative capacity, such person must set
forth his or her full title below and, unless waived by the Company, provide
proper evidence satisfactory to the Company of such person's authority to so
act.
2
<PAGE>
Please print name(s) and address(es)
Name(s): ___________________________________________________________
___________________________________________________________
___________________________________________________________
___________________________________________________________
Capacity: ___________________________________________________________
Address(es): ___________________________________________________________
___________________________________________________________
GUARANTEE OF DELIVERY
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a firm or other entity identified in Rule 17Ad-15
under the Securities Exchange Act of 1934, as amended, as an "eligible guarantor
institution," including (as such terms are defined therein): (i) a bank; (ii) a
broker, dealer, municipal securities broker, government securities broker or
government securities dealer; (iii) a credit union; (iv) a national securities
exchange, registered securities association or clearing agency; or (v) a savings
association that is a participant in a Securities Transfer Association (each of
the foregoing being referred to as an "Eligible Institution"), hereby guarantees
to deliver to the Exchange Agent, at one of its addresses set forth above,
either the Old Notes tendered hereby in proper form for transfer, or
confirmation of the book-entry transfer of such Old Notes to the Exchange
Agent's account at The Depository Trust Company ("DTC"), pursuant to the
procedures for book-entry transfer set forth in the Prospectus, in either case
together with one or more properly completed and duly executed Letter(s) of
Transmittal (or facsimile thereof) and any other required documents within three
New York Stock Exchange trading days after the date of execution of this Notice
of Guaranteed Delivery.
The undersigned acknowledges that it must deliver the Letter(s) of
Transmittal (or facsimile thereof) and the Old Notes tendered hereby to the
Exchange Agent within the time period set forth above and that failure to do so
could result in a financial loss to the undersigned.
____________________________________ ___________________________________
Name of Firm Authorized Signature
____________________________________ ___________________________________
Address Title
____________________________________ ___________________________________
Zip Code (Please Type or Print)
Area Code and Telephone No. ________________ Dated: _________________
NOTE: DO NOT SEND CERTIFICATES FOR OLD NOTES WITH THIS FORM. CERTIFICATES FOR
ORIGINAL NOTES SHOULD ONLY BE SENT WITH YOUR LETTER OF TRANSMITTAL.
3
EXHIBIT 99.3
FINE AIR SERVICES CORP.
INSTRUCTION TO REGISTERED HOLDER AND/OR DEPOSITORY
TRUST COMPANY PARTICIPANT FROM BENEFICIAL OWNER
FOR
OFFER TO EXCHANGE ITS
9 7/8% SENIOR NOTES DUE 2008
FOR ANY AND ALL OF ITS OUTSTANDING
9 7/8% SENIOR NOTES DUE 2008
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK
CITY TIME, ON __________________, 1998, UNLESS THE OFFER IS EXTENDED.
TENDERS MAY BE WITHDRAWN PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE
EXPIRATION DATE.
To Registered Holder and/or Depository Trust Company Participant:
The undersigned hereby acknowledges receipt of the Prospectus dated
__________________, 1998 (the "Prospectus") of Fine Air Services Corp., a
Delaware corporation (the "Company"), and the accompanying Letter of Transmittal
(the "Letter of Transmittal"), that together constitute the Company's offer (the
"Exchange Offer") to exchange its 9 7/8% Senior Notes Due 2008 (the "New Notes")
registered under the Securities Act of 1933, as amended (the "Act"), for all of
its outstanding 9 7/8% Senior Notes Due 2008 (the "Old Notes") that were
privately sold and not registered under the Act. Capitalized terms used but not
defined herein have the meanings ascribed to them in the Prospectus.
This will instruct you, the registered holder and/or Depository Trust
Company Participant, as to the action to be taken by you relating to the
Exchange Offer with respect to the Old Notes held by you for the account of the
undersigned.
The aggregate face amount of the Old Notes held by you for the account
of the undersigned is (FILL IN AMOUNT):
$ ____________ of the 9 7/8% Senior Notes Due 2008.
With respect to the Exchange Offer, the undersigned hereby instructs
you (CHECK APPROPRIATE BOX):
[ ] To TENDER the following Old Notes held by you for the
account of the undersigned (INSERT PRINCIPAL AMOUNT OF
ORIGINAL NOTES TO BE TENDERED (IF LESS THAN ALL): $
[ ] NOT to TENDER any Old Notes held by you for the account of
the undersigned.
If the undersigned instructs you to tender the Old Notes held by you
for the account of the undersigned, it is understood that you are authorized to
make, on behalf of the undersigned (and the undersigned, by its signature below,
hereby makes to you), the representation and warranties contained in the Letter
of Transmittal that are to be made with respect to the undersigned as a
beneficial owner, including but not limited to the representations, that (i) the
undersigned is not an "affiliate" of the Company, (ii) any New Notes to be
received by the undersigned are being acquired in the ordinary course of its
business, (iii) the undersigned has no arrangement or understanding with any
person to participate in a distribution (within the meaning of the Securities
Act) of New Notes to be received in the Exchange Offer, and (iv) if the
undersigned is not a broker-dealer, the undersigned is not engaged in, and does
not intend to engage in, a distribution (within the meaning of the Securities
Act) of such New Notes. The Company may require the undersigned, as a condition
to the undersigned's eligibility to participate in the Exchange Offer, to
furnish to the Company (or an agent thereof) in writing information as to the
number of "beneficial owners" within the meaning of Rule 13d-3 under the
Exchange Act on behalf of whom the undersigned holds the Old Notes to be
exchanged in the Exchange Offer. By tendering Old Notes pursuant to the Exchange
Offer, a holder of Old Notes
<PAGE>
which is a broker-dealer represents and agrees, consistent
with certain interpretive letters issued by the staff of the
Division of Corporation Finance of the Securities and Exchange
Commission to third parties, that such Old Notes were acquired
by such broker-dealer for its own account as a result of
market-making activities or other trading activities, and it
will deliver a Prospectus (as amended or supplemented from
time to time) meeting the requirements of the Securities Act
in connection with any resale of such New Notes (provided
that, by so acknowledging and by delivering a Prospectus, such
broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act).
________________________________________________________
SIGN HERE
________________________________________________________
Name of beneficial owner(s)
________________________________________________________
Signature(s)
________________________________________________________
Name(s) (please print)
________________________________________________________
________________________________________________________
(Address)
________________________________________________________
(Telephone Number)
________________________________________________________
(Taypayer Identification or Social Security Number)
________________________________________________________
Date
2
