<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 3, 2000
REGISTRATION NO. 333-88593
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 4
TO
FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
WORLDWIDE FLIGHT SERVICES, INC.
(Exact name of registrant as specified in Its Charter)
<TABLE>
<S> <C> <C>
DELAWARE 4581 75-1932711
(State or Other Jurisdiction Primary Standard Industrial (I.R.S. Employer
of Incorporation or Classification Code Number Identification Number)
Organization)
</TABLE>
PETER A. PAPPAS
CHIEF EXECUTIVE OFFICER
1001 WEST EULESS BOULEVARD, SUITE 320, EULESS, TEXAS 76040
PH: (817) 665-3200
(Address, Including Zip Code, and Telephone Number, Including Area Code,
of Registrant's Principal Executive Offices)
<TABLE>
<S> <C>
CO-REGISTRANTS CT CORPORATION
SEE NEXT PAGE CORPORATION TRUST CENTER
C/O WORLDWIDE FLIGHT SERVICES, INC. 1209 ORANGE STREET
ATTN: PETER A. PAPPAS WILMINGTON, DE 19801
1001 WEST EULESS BOULEVARD, SUITE 320 PH: (800) 677-3394
EULESS, TEXAS 76040 FAX: (302) 655-5049
PH: (817) 665-3200 (Name, Address, Including Zip Code, and
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
Telephone Number, Including Area Code, of Agent For Service)
of Co-Registrants)
</TABLE>
Copies to:
MICHAEL R. LITTENBERG, ESQ.
SCHULTE ROTH & ZABEL LLP
900 THIRD AVENUE
NEW YORK, NEW YORK 10022
PH: (212) 756-2000
FAX: (212) 593-5955
---------------------
Approximate Date of Commencement of Proposed Offer to the Public. As soon
as practicable after this registration statement becomes effective.
If the securities being registered are being offered in connection with the
formation of a holding company and there is compliance with General Instruction
G, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until 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> 2
CO-REGISTRANTS
<TABLE>
<CAPTION>
EXACT NAME OF STATE OR OTHER PRIMARY STANDARD
CO-REGISTRANT AS JURISDICTION OF INDUSTRIAL
SPECIFIED IN ITS INCORPORATION OR CLASSIFICATION CODE I.R.S. EMPLOYER
CHARTER ORGANIZATION NUMBER IDENTIFICATION NUMBER
---------------- ---------------- ------------------- ---------------------
<S> <C> <C> <C>
Worldwide Flight Delaware 4581 75-2533058
Finance Company
Worldwide Flight Delaware 4581 75-2276559
Security Service
Corporation
Miami International Florida 4581 59-2550848
Airport Cargo
Facilities &
Services, Inc.
International Florida 4581 65-0117574
Enterprises Group,
Inc.
Miami Aircraft Delaware 4581 59-2096579
Support, Inc.
Aerolink Pennsylvania 4581 25-1559013
International, Inc.
Aerolink Maintenance, Pennsylvania 4581 25-1579442
Inc.
Aerolink Management, Pennsylvania 4581 25-1824429
Inc.
Aerolink Pennsylvania 4581 25-6449621
International, L.P.
</TABLE>
<PAGE> 3
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SUBJECT TO COMPLETION, DATED FEBRUARY 3, 2000
PRELIMINARY PROSPECTUS
[WORLDWIDE FLIGHT SERVICES, INC. LOGO]
WORLDWIDE FLIGHT SERVICES, INC.
$130,000,000
OFFER TO EXCHANGE
12 1/4% SENIOR NOTES DUE 2007, SERIES B
FOR ANY AND ALL OUTSTANDING
12 1/4% SENIOR NOTES DUE 2007, SERIES A
OF
WORLDWIDE FLIGHT SERVICES, INC.
- --------------------------------------------------------------------------------
The Exchange Offer will expire at 5:00 p.m., New York City time,
on , unless extended.
- --------------------------------------------------------------------------------
WORLDWIDE FLIGHT SERVICES:
- - We are one of the world's leading independent providers of ground services to
air cargo and passenger airlines.
THE OFFERING:
- - Offered Securities: the securities offered by this prospectus are senior
notes, which are being issued in exchange for senior notes sold by us in our
August 1999 private placement. The new notes are substantially identical to
the original notes and are governed by the same indenture governing the
original notes.
- - Expiration of Offering: the exchange offer expires at 5:00 p.m., New York City
time, on , unless extended.
THE NEW NOTES:
- - Maturity: August 15, 2007.
- - Interest Payment Dates: semiannually on each February 15 and August 15,
beginning on February 15, 2000.
- - Subsidiary guarantees: with some exceptions, our domestic subsidiaries will
fully and unconditionally and jointly and severally guarantee the new notes.
Our foreign subsidiaries and any subsidiaries we later designate as
"unrestricted" under the indenture will not guarantee the new notes.
- - Redemption: we can redeem the new notes on or after August 15, 2003, except we
may redeem up to 35% of the new notes prior to August 15, 2002 with the
proceeds of one or more public equity offerings. We are required to redeem the
new notes under some circumstances involving changes of control and asset
sales.
- - Ranking: the new notes and subsidiary guarantees will be senior unsecured
obligations, and will rank equally with all of our other existing and future
obligations that are not by their terms subordinated in right of payment to
the new notes. The new notes will rank senior in right of payment to all of
our obligations that are expressly subordinated in right of payment to the new
notes.
SEE "RISK FACTORS," BEGINNING ON PAGE 14, FOR A DISCUSSION OF SOME FACTORS
THAT SHOULD BE CONSIDERED BY HOLDERS IN CONNECTION WITH A DECISION TO TENDER
ORIGINAL NOTES IN THE EXCHANGE OFFER.
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 on
the accuracy or adequacy of this prospectus. Any representation to the contrary
is a criminal offense.
The date of this prospectus is , 2000
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Notice to New Hampshire Residents........................... i
Where You Can Find More Information......................... ii
Prospectus Summary.......................................... 1
Special Note Regarding Forward-Looking Statements........... 13
Risk Factors................................................ 14
Use of Proceeds............................................. 23
Unaudited Pro Forma Combined Consolidated Financial Data.... 24
Selected Historical Consolidated Financial Data............. 29
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 32
The Exchange Offer.......................................... 43
Business.................................................... 54
Management.................................................. 64
Security Ownership of Beneficial Owners and Management...... 71
Related Party Transactions.................................. 73
Description of Senior Secured Credit Facility............... 74
Description of New Notes.................................... 77
United States Federal Income Tax Consequences............... 123
Plan of Distribution........................................ 127
Legal Matters............................................... 128
Experts..................................................... 128
Index to Consolidated Financial Statements.................. F-1
</TABLE>
NOTICE TO NEW HAMPSHIRE RESIDENTS
Neither the fact that a registration statement or an application for a
license has been filed with the State of New Hampshire nor the fact that a
security is effectively registered or a person is licensed in the State of New
Hampshire constitutes a finding by the Secretary of State that any document
filed under RSA 421-B is true, complete and not misleading. Neither those facts
nor the fact that an exemption or exception is available for a security or a
transaction means that the Secretary of State has passed in any way upon the
merits or qualifications of, or recommended or given approval to, any person,
security, or transaction. It is unlawful to make, or cause to be made, to any
prospective purchaser, customer or client any representation inconsistent with
the provisions of this paragraph.
-------------------------
i
<PAGE> 5
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC a registration statement on Form S-4 under the
Act with respect to our offering of the new notes. This prospectus does not
contain all the information included in the registration statement and the
exhibits and schedules thereto. You will find additional information about us
and the new notes in the registration statement. The registration statement and
the exhibits and schedules thereto may be inspected and copied at the public
reference facilities maintained by the SEC at Room 1024, Judiciary Plaza, 450
Fifth Street, N.W., Washington, D.C. 20549, and at the public reference
facilities of the SEC's Regional Offices: New York Regional Office, Seven World
Trade Center, Suite 1300, New York, New York 10048; and Chicago Regional Office,
Citicorp Center, 500 West Madison Street, Chicago, Illinois 60661. Copies of
this material may also be obtained from the Public Reference Section of the
Securities and Exchange Commission at 450 Fifth Street, N.W., Washington, D.C.
20549 at prescribed rates. The SEC also maintains a site on the World Wide Web
(http://www.sec.gov) that contains reports, proxy and information statements and
other information regarding registrants, including Worldwide, that file
electronically with the SEC. Statements made in this prospectus about legal
documents may not necessarily be complete and you should read the documents
which are filed as exhibits to the registration statement or otherwise filed
with the SEC.
If for any reason we are not required to comply with the reporting
requirements of the Securities Exchange Act of 1934, we are still required under
the indenture to furnish the holders of the New Notes with the information,
documents and other reports specified in Sections 13 and 15(d) of the Exchange
Act. In addition, we have agreed that, for so long as any original notes or new
notes remain outstanding, we will furnish to the holders of those notes and to
securities analysts and prospective investors, upon their request, the
information required to be delivered pursuant to Rule 144A(d)(4) under the
Securities Act.
ii
<PAGE> 6
PROSPECTUS SUMMARY
This summary may not contain all of the information that may be important
to you. You should read the entire prospectus, including the financial
statements and other financial data, before making an investment decision to
tender Original Notes.
Unless the context otherwise indicates:
- "We," "our," "us" refers to Worldwide Flight Services, Inc. and its
subsidiaries on a pro forma combined basis after giving effect to the
acquisitions of Miami Aircraft Support, Inc. and its subsidiaries, which
are collectively referred to in this prospectus as Miami Aircraft
Support, and Aerolink International, Inc. and its affiliates, which are
collectively referred to in this prospectus as Aerolink; and
- "Worldwide" refers to Worldwide Flight Services, Inc. and its
subsidiaries without giving effect to the acquisitions of Miami Aircraft
Support and Aerolink.
OUR COMPANY
We are one of the world's leading independent providers of ground services
to air cargo and passenger airlines. Our services include cargo handling and
ramp, passenger and technical services. We provide services for over 300
customers, including American Airlines, British Airways, Cathay Pacific,
Continental Airlines, Delta Air Lines, DHL, Emery Worldwide, Korean Air Lines,
Nippon Cargo Airlines and UPS. We currently service our customers at 89
airports, including 25 of the 30 busiest U.S. airports and five of the 10
busiest European airports, each based on 1998 annual arrivals and departures. We
employ approximately 9,700 employees in North America, the Caribbean, Europe and
Hong Kong.
The ground services that we provide fall into the following four main
categories:
- CARGO HANDLING. Cargo handling includes loading and unloading of cargo
aircraft, cargo warehousing at or near airport terminals, the build-up
and break-down of cargo and other related cargo services.
- RAMP SERVICES. Ramp services include loading and unloading of baggage and
freight from passenger aircraft, guiding the aircraft to and from the
gate, cabin cleaning and providing heating, air conditioning, lavatory
and water services.
- PASSENGER SERVICES. Passenger services include passenger ticketing,
curbside and ticket counter check-in, boarding services, baggage claim
and other services for passengers. We customize our passenger services to
meet the specific needs of each of our airline customers.
- TECHNICAL SERVICES. Technical services include jet bridge and ground
equipment maintenance, aircraft de-icing, freight management, aircraft
fueling and other services.
We frequently provide more than one of our services to the same customer at
a particular airport. Our services are generally provided under service
contracts. At September 30, 1999, we had over 800 service contracts and over 75
of our customer relationships date back five years or more.
After giving effect to our acquisition of Miami Aircraft Support and
Aerolink our entering into the senior secured credit facility, the $10.0 million
equity contribution by our parent to us and the refinancing of our indebtedness
for the nine months ended September 30, 1999, we would have had a pro forma net
loss of $9.4 million.
1
<PAGE> 7
BUSINESS STRATEGY
Our goal is to become the world's leading provider of ground services for
air cargo and passenger airlines. We intend to achieve this goal through the
following:
- increasing our customer base at existing locations where we provide
services;
- cross-selling our services;
- emphasizing our service quality; and
- selectively pursuing additional complementary acquisitions.
In seeking to accomplish this goal, we may face the following difficulties,
among others:
- we may not be able to find complementary acquisitions at reasonable
prices; and
- we may have difficulties expanding our consumer base in some markets
where there are high levels of competition.
COMPETITIVE STRENGTHS
We believe that we are well positioned to benefit from current trends,
including expected growth in our industry due to the following competitive
strengths:
- our long-standing customer relationships;
- the wide range of services that we offer;
- our broad geographic presence; and
- our experienced management team.
Our principal executive offices are located at 1001 West Euless Boulevard,
Suite 320, Euless, Texas 76040, and our telephone number is (817) 665-3200.
2
<PAGE> 8
THE EXCHANGE OFFER
Expiration Date.............. 5:00 p.m., New York City time, on ,
unless we extend the exchange offer.
Exchange and Registration
Rights..................... In an A/B exchange registration rights agreement
dated August 12, 1999, the holders of
Worldwide's 12 1/4 senior notes due 2007, series
A, which are referred to in this prospectus as
the original notes, were granted exchange and
registration rights. This exchange offer is
intended to satisfy these rights. You have the
right to exchange the original notes that you
hold for Worldwide's 12 1/4 senior notes due
2007, series B, which are referred to in this
prospectus as the new notes, with substantially
identical terms. Once the exchange offer is
complete, you will no longer be entitled to any
exchange or registration rights with respect to
your original notes.
Accrued Interest on the New
Notes and Original Notes... The new notes will bear interest from August 12,
1999. Holders of original notes which are
accepted for exchange will be deemed to have
waived the right to receive any payment in
respect of interest on those original notes
accrued to the date of issuance of the new
notes.
Conditions to the Exchange
Offer...................... The exchange offer is conditioned upon some
customary conditions which we may waive and upon
compliance with securities laws.
Procedures for Tendering
Original Notes............. Each holder of original notes wishing to accept
the exchange offer must:
- complete, sign and date the letter of
transmittal, or a facsimile of the letter of
transmittal; or
- arrange for DTC to transmit required
information in accordance with DTC's
procedures for transfer to the exchange agent
in connection with a book-entry transfer.
You must mail or otherwise deliver this
documentation together with the original notes
to the exchange agent.
Special Procedures for
Beneficial Holders......... If you beneficially own original notes
registered in the name of a broker, dealer,
commercial bank, trust company or other nominee
and you wish to tender your original notes in
the exchange offer, you should contact the
registered holder promptly and instruct them to
tender on your behalf. If you wish to tender on
your own behalf, you must, before completing and
executing the letter of transmittal for the
exchange offer and
3
<PAGE> 9
delivering your original notes, either arrange
to have your original notes registered in your
name or obtain a properly completed bond power
from the registered holder. The transfer of
registered ownership may take considerable time.
Guaranteed Delivery
Procedures................... You must comply with the applicable procedures
for tendering if you wish to tender your
original notes and:
- time will not permit your required documents
to reach the exchange agent by the expiration
date of the exchange offer; or
- you cannot complete the procedure for
book-entry transfer on time; or
- your original notes are not immediately
available.
Withdrawal Rights............ You may withdraw your tender of original notes
at any time up to 5:00 p.m., New York City time,
on the business day prior to the date the
exchange offer expires.
Failure to Exchange Will
Affect You Adversely......... If you are eligible to participate in the
exchange offer and you do not tender your
original notes, you will not have further
exchange or registration rights and you will
continue to be restricted from transferring your
original notes. Accordingly, the liquidity of
the original notes will be adversely affected.
Federal Tax Considerations... We believe that the exchange of original notes
for new notes pursuant to the exchange offer
will not be a taxable event for United States
federal income tax purposes. A holder's holding
period for new notes will include the holding
period for original notes, and the adjusted tax
basis of the new notes will be the same as the
adjusted tax basis of the original notes
exchanged. See "United States Federal Income Tax
Consequences."
Exchange Agent............... The Bank of New York, trustee under the
indenture under which the new notes will be
issued, is serving as exchange agent.
Use of Proceeds.............. We will not receive any proceeds from the
exchange offer.
4
<PAGE> 10
SUMMARY TERMS OF NEW NOTES
Issuer....................... Worldwide Flight Services, Inc.
Securities Offered........... The form and terms of the new notes will be the
same as the form and terms of the original notes
except that:
- the new notes will bear a different CUSIP
number from the original notes;
- the new notes will have been registered under
the Securities Act and, therefore, will not
bear legends restricting their transfer; and
- you will not be entitled to any exchange or
registrations rights with respect to the new
notes.
The new notes will evidence the same debt as the
original notes. They will be entitled to the
benefits of the indenture governing the original
notes and will be treated under the indenture as
a single class with the original notes.
Maturity..................... August 15, 2007.
Interest..................... The new notes will bear cash interest at the
rate of 12 1/4% per annum, payable semi-annually
in arrears.
Payment frequency--every six months on February
15 and August 15.
First payment--February 15, 2000.
Ranking...................... The new notes and subsidiary guarantees will be
senior unsecured obligations and will rank
equally with all of our other existing and
future obligations that are not subordinated in
right of payment to the new notes, including
borrowings under our senior secured credit
facility. There are no obligations that rank
senior to the new notes, the borrowings under
our senior secured credit facility in the amount
of $16.0 million on September 30, 1999 are the
only obligations that rank equally to the new
notes and the new notes will rank senior in
right of payment to all of our obligations that
are expressly subordinated in right of payment
to the new notes. However, as of September 30,
1999, the new notes will be effectively
subordinated to borrowings under the senior
secured credit facility because those borrowings
are secured by our assets and borrowings under
the new notes are not.
In addition, the new notes will be:
- effectively subordinated to, as of September
30, 1999, $5.2 million of capital leases
entered into by Miami Aircraft Support, one of
our guarantor subsidiaries, because these
capital leases are secured by the assets of
Miami Aircraft Support and the new notes are
not;
- effectively subordinated to, as of September
30, 1999, $8.1 million of obligations of our
non-guarantor subsidiaries; and
5
<PAGE> 11
- effectively equal to, as of September 30,
1999, an additional $3.9 million of
obligations of our guarantor subsidiaries.
We will be permitted to borrow additional
amounts that will rank equally to the new notes
based on conditions contained in the indenture.
In addition, our subsidiaries will be permitted
to borrow additional amounts that will
effectively rank senior to the new notes, but
our guarantor subsidiaries will only be
permitted to borrow additional amounts that
effectively rank senior to the new notes based
on conditions contained in the indenture.
Guarantees................... The new notes will be fully and unconditionally
and jointly and severally guaranteed by our
existing domestic subsidiaries, and with some
exceptions our future subsidiaries; these
subsidiaries are referred to in this prospectus
as the guarantors. Our existing and future
foreign subsidiaries and any subsidiaries we
later designate as "unrestricted", based on
conditions contained in the indenture, will not
be guarantors. The guarantees, which are
referred to in this prospectus as the
"subsidiary guarantees," will be senior
unsecured obligations of each guarantor. These
subsidiary guarantees will rank equal to other
existing and future senior subordinated
indebtedness of the guarantors and senior in
right of payment to all of the existing and
future obligations of the guarantors that are
expressly subordinated in right of payment to
the subsidiary guarantees.
Optional Redemption.......... On or after August 15, 2003, we may redeem some
or all of the new notes at any time at the
redemption prices listed in the section
"Description of New Notes" under the heading
"Optional Redemption."
Before August 15, 2002, we may redeem up to 35%
of the new notes with the proceeds of one or
more public equity offerings by us or WFS
Holdings, Inc., which is referred to in this
prospectus as our parent. The redemption would
be at the price listed in the section
"Description of New Notes" under the heading
"Optional Redemption."
Mandatory Offer to
Repurchase................... If we sell some of our assets or experience
specific kinds of changes of control, we must
offer to repurchase the new notes at the prices
listed in the section "Description of New Notes"
under the heading "Repurchase at Option of
Holders."
Basic Covenants of
Indenture.................... We will issue the new notes under an indenture
with The Bank of New York. The terms of the new
notes will, among other things, restrict our
ability and the ability of our restricted
subsidiaries to:
- borrow more money;
- pay dividends on stock or make other
equity distributions;
6
<PAGE> 12
- purchase or redeem our capital stock;
- make some investments;
- allow the imposition of dividend
restrictions on some subsidiaries;
- sell some assets;
- create some liens;
- engage in transactions with affiliates;
and
- sell all, or almost all, of our assets or
merge with or into other companies.
For more details, see the section "Description
of New Notes" under the heading "Covenants."
Exchange Offer; Registration
Rights....................... You have the right to exchange the original
notes for new notes with substantially identical
terms. This exchange offer is intended to
satisfy that right. The new notes will not
provide you with any further exchange or
registration rights.
Resales Without Further
Registration................. We believe that the new notes issued in the
exchange offer in exchange for original notes
may be offered for resale, resold and otherwise
transferred by you without compliance with the
registration and prospectus delivery provisions
of the Securities Act, if:
- you are acquiring the new notes issued in the
exchange offer in the ordinary course of your
business;
- you have not engaged in, do not intend to
engage in, and have no arrangement or
understanding with any person to participate
in the distribution of the new notes issued to
you in the exchange offer; and
- you are not our "affiliate," as defined under
Rule 405 of the Securities Act.
Each of the participating broker-dealers that
receives new notes for its own account in
exchange for original notes that were acquired
by it as a result of market-making or other
activities must acknowledge that it will deliver
a prospectus in connection with the resale of
the new notes. We do not intend to list the new
notes on any securities exchange.
7
<PAGE> 13
SUMMARY PRO FORMA AND HISTORICAL CONSOLIDATED FINANCIAL DATA
WORLDWIDE--UNAUDITED PRO FORMA FINANCIAL DATA
The summary unaudited pro forma financial data set forth below have been
derived from the unaudited pro forma financial data included elsewhere in this
prospectus and give effect to:
- the acquisitions of Miami Aircraft Support and Aerolink;
- Worldwide's entering into a new senior secured credit facility;
- an equity contribution of $10.0 million to Worldwide by our parent;
- the refinancing of the existing indebtedness of Worldwide, Miami Aircraft
Support and Aerolink; and
- the prior acquisition of AMR Services Corporation, which is referred to
in this prospectus as AMRS.
All of the above listed transactions, except for the acquisitions of AMRS
and Aerolink, occurred on August 12, 1999. The acquisition of AMRS took place on
March 31, 1999 and the acquisition of Aerolink took place on August 23, 1999.
The pro forma statements of operations data and other data give effect to
the above listed transactions as if they had occurred at the beginning of the
period presented.
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER 30,
1999
----
(DOLLARS IN
THOUSANDS)
<S> <C>
STATEMENT OF OPERATIONS DATA:
Revenues.................................................. $237,579
Salaries, wages, and benefits............................. 150,071
Depreciation and amortization............................. 10,978
Other operating expenses.................................. 67,656
--------
Operating income from continuing operations............... 8,874
Interest expense, net..................................... (15,024)
Other income (expense).................................... (732)
--------
Loss from continuing operations before income taxes and
extraordinary loss..................................... $ (6,882)
OTHER DATA:
Capital expenditures...................................... $ 7,934
Cash interest expense(a).................................. 13,561
ADDITIONAL DATA:
EBITDA(b)................................................. $ 19,120
SELECTED RATIOS:
Ratio of EBITDA to cash interest expense(b)............... 1.4x
Ratio of earnings to fixed charges........................ (c)
</TABLE>
- -------------------------
(a) Cash interest expense represents interest expense, less the amortization of
debt discount and issuance costs.
8
<PAGE> 14
(b) EBITDA for any period is calculated as the sum of net income plus the
following to the extent deducted in calculating net income: (1) interest
expense (income), (2) income tax expense, (3) depreciation expense and (4)
amortization expense. We consider EBITDA to be a widely accepted financial
indicator of a company's ability to service debt, fund capital expenditures
and expand its business; however, EBITDA is not calculated in the same way
by all companies and is neither a measurement required, nor represents cash
flow from operations as defined, by generally accepted accounting
principles. EBITDA should not be considered by you as an alternative to net
income, as an indicator of operating performance or as an alternative to
cash flow as a measure of liquidity. The calculation of EBITDA in this
prospectus is calculated differently than for purposes of the covenants
under the indenture and the senior secured credit facility. See "Description
of Senior Secured Credit Facility" and "Description of New Notes" for how
these instruments calculate EBITDA.
(c) Ratio of earnings to fixed charges is computed assuming that 1/3 of rental
expense is representative of the interest factor. Earnings were insufficient
to cover fixed charges by $9,370,000 for the nine months ended September 30,
1999.
9
<PAGE> 15
WORLDWIDE--HISTORICAL AND PREDECESSOR FINANCIAL DATA
The following table sets forth summary historical consolidated financial
data of Worldwide and its predecessor, AMRS. The statement of operations data,
other data and additional data for 1997 and 1998 and the three months ended
March 31, 1999 have been derived from the audited consolidated financial
statements of AMRS included elsewhere in this prospectus. The balance sheet
data, statement of operations data, other data and additional data at and for
the six months ended September 30, 1999 has been derived from the audited
consolidated financial statements of Worldwide included elsewhere in this
prospectus. The results of operations for the three months ended March 31, 1999
and the six months ended September 30, 1999 are not necessarily indicative of
the results that may be expected for all of 1999.
<TABLE>
<CAPTION>
AMRS HISTORICAL WORLDWIDE
---------------------------------------- -------------
THREE MONTHS SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED ENDED
------------------------- MARCH 31, SEPTEMBER 30,
1997 1998 1999 1999
---- ---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues.......................... $223,090 $229,742 $61,475 $131,579
Salaries, wages, and benefits..... 144,422 154,706 39,679 85,803
Depreciation and amortization..... 5,643 5,908 1,627 4,476
Other operating expenses.......... 66,167 61,074 18,438 35,243
-------- -------- ------- --------
Operating income from continuing
operations..................... 6,858 8,054 1,731 6,057
Interest income................... 1,421 2,160 440 --
Interest expense.................. -- -- -- (5,083)
Other income (expense)............ (584) 580 (552) (185)
-------- -------- ------- --------
Income from continuing operations
before income taxes and
extraordinary loss............. 7,695 10,794 1,619 789
OTHER DATA:
Depreciation and amortization..... $ 5,643 $ 5,908 $ 1,627 $ 4,476
Capital expenditures.............. 12,662 7,219 1,688 4,606
Ratio of earnings to fixed
charges........................ 3.1x 3.4x 2.3x 1.1x
ADDITIONAL DATA:
EBITDA(a)......................... $ 11,917 $ 14,542 $ 2,806 $ 10,348
</TABLE>
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30,
1999
----
(IN THOUSANDS)
<S> <C>
BALANCE SHEET DATA
Cash and cash equivalents................................. $ 11,629
Working capital........................................... 40,921
Total assets.............................................. 241,244
Long-term debt (including current portion)................ 147,801
Stockholder's equity...................................... 34,774
</TABLE>
- -------------------------
(a) EBITDA for any period is calculated as the sum of net income plus the
following to the extent deducted in calculating net income: (1) interest
expense (income),
10
<PAGE> 16
(2) income tax expense, (3) depreciation expense, (4) amortization expense
and (5) extraordinary gains or losses. We consider EBITDA to be a widely
accepted financial indicator of a company's ability to service debt, fund
capital expenditures and expand its business; however, EBITDA is not
calculated in the same way by all companies and is neither a measurement
required, nor represents cash flow from operations as defined, by generally
accepted accounting principles. EBITDA should not be considered by you as an
alternative to net income, as an indicator of operating performance or as an
alternative to cash flow as a measure of liquidity. The calculation of
EBITDA in this prospectus is calculated differently than for purposes of the
covenants under the indenture and the senior secured credit facility. See
"Description of Senior Secured Credit Facility" and "Description of New
Notes" for how the instruments calculate EBITDA.
11
<PAGE> 17
MIAMI AIRCRAFT SUPPORT--HISTORICAL FINANCIAL DATA
The following table sets forth summary historical consolidated financial
data of Miami Aircraft Support. The statement of operations data, other data and
additional data for 1997, 1998 and for the period from January 1, 1999 to August
12, 1999 have been derived from Miami Aircraft Support's audited consolidated
financial statements. The results of operations for the interim period is not
necessarily indicative of the results of operations for a full year.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, PERIOD FROM
----------------- JANUARY 1, 1999
1997 1998 TO AUGUST 12, 1999
---- ---- ------------------
(IN THOUSANDS)
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues...................................... $46,557 $56,402 $ 36,516
Operating expenses............................ 36,145 43,519 28,602
Depreciation and amortization................. 2,743 3,274 2,116
General and administrative expenses........... 4,297 4,073 3,450
------- ------- --------
Total operating expenses...................... 43,185 50,866 34,168
------- ------- --------
Operating income.............................. 3,372 5,536 2,348
Interest income............................... 71 69 73
Interest expense.............................. (516) (563) (316)
Other income (expense)........................ 74 (62) --
------- ------- --------
Income before income taxes.................... 3,001 4,980 2,105
Provision for income tax expense.............. 1,163 1,886 747
------- ------- --------
Net income.................................... $ 1,838 $ 3,094 $ 1,358
OTHER DATA:
Depreciation and amortization................. $ 2,743 $ 3,274 $ 2,116
Capital expenditures.......................... 611 537 1,052
Ratio of earnings to fixed charges............ 2.4x 3.0x 2.5x
ADDITIONAL DATA:
EBITDA(a)..................................... $ 6,189 $ 8,748 $ 4,464
</TABLE>
- -------------------------
(a) EBITDA for any period is calculated as the sum of net income plus the
following to the extent deducted in calculating net income: (1) interest
expense (income), (2) income tax expense, (3) depreciation expense and (4)
amortization expense. We consider EBITDA to be a widely accepted financial
indicator of a company's ability to service debt, fund capital expenditures
and expand its business; however, EBITDA is not calculated in the same way
by all companies and is neither a measurement required, nor represents cash
flow from operations as defined, by generally accepted accounting
principles. EBITDA should not be considered by you as an alternative to net
income, as an indicator of operating performance or as an alternative to
cash flow as a measure of liquidity. The calculation of EBITDA in this
prospectus is calculated differently than for purposes of the covenants
under the indenture and the senior secured credit facility. See "Description
of Senior Secured Credit Facility" and "Description of New Notes" for how
these instruments calculate EBITDA.
12
<PAGE> 18
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements. The words "believe,"
"estimate," "anticipate," "project," "intend," "expect" and similar expressions
are intended to identify forward-looking statements. All forward-looking
statements involve some risks and uncertainties. In light of these risks and
uncertainties, the forward-looking events discussed in this prospectus might not
occur. Factors that may cause actual results or events to differ materially from
those contemplated by the forward-looking statements include, among other
things, the following possibilities:
- future revenues are lower than expected;
- costs or difficulties relating to the integration of businesses that we
acquire are greater than expected;
- expected cost savings from our acquisitions are not fully realized or
realized within the expected time frame;
- competitive pressures in the industry increase;
- general economic conditions or conditions affecting the airline industry,
whether internationally, nationally or in the states in which we do
business, are less favorable than expected;
- changes in the interest rate environment generally; and
- conditions in the securities markets are less favorable than expected.
You are cautioned not to place undue reliance on forward-looking statements
contained in this prospectus as these speak only as of its date. We undertake no
obligation to publicly update or revise any forward-looking statements, whether
as a result of new information, future events or otherwise. For a further
discussion of these and other risks related to our business, see the section
entitled "Risk Factors."
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<PAGE> 19
RISK FACTORS
In addition to the other information set forth in this prospectus, you
should carefully consider the following factors before tendering original notes
in exchange for new notes. The following risks could materially harm our
business, financial condition or future results. If that occurs, the value of
the new notes could decline, and you could lose all or part of your investment.
OUR SUBSTANTIAL AMOUNT OF DEBT COULD PREVENT US FROM FULFILLING OUR OBLIGATIONS
UNDER THE NEW NOTES
We have a substantial amount of debt. As of September 30, 1999, we had
total debt of $147.8 million, which reflects $16.0 million of borrowings under
the senior secured credit facility that was outstanding at September 30, 1999.
At September 30, 1999, we had additional availability under the senior secured
credit facility of approximately $30.4 million, contingent upon us satisfying
leverage and coverage ratios and other customary conditions. As of September 30,
1999, our total stockholders' equity was approximately $35.4 million.
After giving effect to our acquisition of Miami Aircraft Support and
Aerolink, our entering into the senior secured credit facility, the $10.0
million equity contribution by our parent to us and the refinancing of our
indebtedness, for the nine months ended September 30, 1999:
- we would have had a pro forma net loss of $9.4 million; and
- our pro forma earnings would have been insufficient to cover our fixed
charges of $20.6 million by $9.4 million.
Our high level of debt could have important consequences for you and us.
For example, it could:
- make it more difficult for us to obtain additional financing in the
future for working capital, capital expenditures, acquisitions or other
purposes;
- require us to dedicate a large portion of our cash flow to pay principal
and interest on our indebtedness, including the new notes, which would
reduce the amount of cash flow available to fund working capital, capital
expenditures, acquisitions and other business activities;
- adversely effect the value of the securities;
- increase our vulnerability to general adverse economic and industry
conditions, including increases in interest rates;
- place us at a competitive disadvantage compared to our competitors that
have proportionately less debt; and
- limit our flexibility in planning for, or reacting to, changes in our
business and the ground services industry generally.
We anticipate that our cash flow from operations, together with borrowings
under the senior secured credit facility, will be sufficient to service our debt
obligations as they become due. Our ability to meet these requirements depends
on our future financial performance, which will be affected by financial,
business, economic, competitive and other factors. We will not be able to
control many of these factors, such as economic conditions in the markets in
which we operate and competitive initiatives undertaken by competitors. We
cannot be certain that our cash flow from operations will be sufficient to allow
us to
14
<PAGE> 20
pay principal and interest on our debt, including the new notes, and meet our
other obligations. If we cannot generate sufficient cash flow from operations,
we may be required to adopt one or more alternative financing plans, such as
refinancing or restructuring all or part of our existing debt, including the new
notes, selling assets, reducing or delaying investments in our business or
seeking to raise additional debt or equity capital. We may not be able to effect
any of these actions on commercially reasonable terms, or at all, and these
actions may not enable us to continue to satisfy our cash requirements. In
addition, the terms of existing or future debt agreements, including the senior
secured credit facility and the indenture relating to the new notes, may
restrict us from adopting any of these alternatives.
IF WE DO NOT SATISFY FINANCIAL RATIOS AND TESTS OR OTHER COVENANT RESTRICTIONS
CONTAINED WITHIN OUR INDEBTEDNESS AGREEMENTS, THEN WE MAY BE LIMITED IN OUR
ABILITY TO OPERATE OUR BUSINESS
The senior secured credit facility and the indenture contain, and our other
indebtedness agreements may contain, covenants that restrict our ability to make
distributions or other payments to our investors and creditors unless financial
tests or other criteria are satisfied. We must also comply with specified
financial ratios and tests. If we do not comply with these or other covenants
and restrictions contained in the senior secured credit facility or the
indenture, we could default under those agreements and the indebtedness,
together with accrued interest, could then be declared immediately due and
payable. Our ability to comply with these provisions of the senior secured
credit facility and the indenture may be affected by changes in economic or
business conditions or other events beyond our control.
The senior secured credit facility contains, and our other indebtedness
agreements may contain, additional affirmative and negative covenants, including
limitations on our ability to incur additional indebtedness and to make
acquisitions and capital expenditures, which could affect our ability to operate
our business. The indenture restricts, among other things, our ability to incur
additional debt, sell assets, create liens or other encumbrances, make dividend
and other payments to third parties or merge or consolidate, all of which could
affect our ability to operate our business and may limit our ability to take
advantage of potential business opportunities as they arise.
OUR FAILURE TO COMPLY WITH COVENANTS AND RESTRICTIONS MAY RESULT IN A DEFAULT
UNDER OUR SENIOR SECURED CREDIT FACILITY OR OUR INDENTURE
A failure to comply with the covenants and restrictions under our senior
credit facility or the indenture could result in an event of default under
either agreement, which could lead to an acceleration of the related debt and
the acceleration of debt under other debt instruments that may contain
cross-acceleration or cross-default provisions.
SECURED LENDERS ARE EFFECTIVELY SENIOR IN RIGHT OF PAYMENT TO THE HOLDERS OF THE
NEW NOTES BECAUSE OUR ASSETS ARE ENCUMBERED TO SECURE THE SENIOR SECURED CREDIT
FACILITY
The new notes and guarantees of the new notes will not be secured by any of
our assets. Our obligations under the senior secured credit facility, however,
are secured by a first priority pledge of, and security interest in, the stock
of all our present and future domestic subsidiaries, and 65% of the stock of all
our present and future foreign subsidiaries, and substantially all of our assets
and the assets of our domestic subsidiaries.
15
<PAGE> 21
If we were to become insolvent or liquidate, or if payment under the senior
secured credit facility were accelerated, the lenders under the senior secured
credit facility would be entitled to exercise the legal remedies available to a
secured lender. Accordingly, all secured lenders would be effectively senior in
right of payment to all unsecured lenders, including the holders of the new
notes, to the extent of the value of the assets securing the indebtedness owed
to the secured lenders.
IF OUR SUBSIDIARIES DO GENERATE SIGNIFICANT CASH FLOWS, WE MAY NOT BE ABLE TO
REPAY OUR OBLIGATIONS UNDER THE NEW NOTES AND OTHER DEBT
We conduct a substantial amount of our business through our subsidiaries.
As a result, we depend, in part, on dividends, loans, advances or other payments
from our subsidiaries to satisfy our financial obligations and make payments to
our investors.
Our subsidiaries may be unable to distribute money to us by dividends,
loans, advances or other payouts because the ability of our subsidiaries to make
payments to us may be restricted by, among other things:
- their earnings;
- covenants contained in their debt agreements, including the
indenture; and
- covenants contained in other agreements to which our subsidiaries
are or may become a party.
NOT ALL OF OUR SUBSIDIARIES ARE GUARANTORS AND THEIR ASSETS MAY NOT BE AVAILABLE
TO MAKE PAYMENTS ON THE NEW NOTES
Our present and future foreign subsidiaries and some of our other
subsidiaries which do not meet the economic measures in the indenture will not
be guarantors of the new notes. Payments on the new notes are only required to
be made by us and the guarantors. As a result, no payments are required to be
made from assets of subsidiaries which do not guarantee the new notes unless
those assets are transferred, by dividend or otherwise, to us or a guarantor.
In the event of a bankruptcy, liquidation or reorganization of any of our
non-guarantor subsidiaries, holders of their indebtedness, including their trade
creditors, will generally be entitled to payment of their claims from the assets
of those subsidiaries before any assets are made available for distribution to
us. As of September 30, 1999, the total liabilities, including trade payables,
of our non-guarantor foreign subsidiaries were approximately $8.1 million.
After giving effect to our acquisition of Miami Aircraft Support and
Aerolink, our entering into the senior secured credit facility, the $10.0
million equity contribution by our parent to us and the refinancing of our
indebtedness, our non-guarantor foreign subsidiaries generated approximately
12.3% of our pro forma consolidated revenues for the nine months ended September
30, 1999. In addition, our non-guarantor foreign subsidiaries held approximately
10.8% of our consolidated assets as of September 30, 1999.
16
<PAGE> 22
WE MAY NOT BE ABLE TO REPURCHASE THE NEW NOTES UPON A CHANGE OF CONTROL AS
REQUIRED BY THE INDENTURE
Upon the occurrence of specific change of control events under the
indenture, we will be required to offer to repurchase all outstanding new notes
from their holders at 101% of their principal amount, plus accrued interest to
the date of repurchase. However, a change of control will also constitute an
event of default under the senior secured credit facility. Any future credit
agreements or other agreements to which we become a party may contain similar
provisions. A default under the senior secured credit facility would result in
an event of default under the indenture if the lenders were to accelerate the
debt under the senior secured credit facility. This event of default under the
indenture would require us to repurchase the new notes. However, the terms of
the senior secured credit facility provide that a change of control event will
constitute a default thereunder. In the event a change of control occurs at a
time when we are prohibited from repurchasing the new notes, we could seek the
consent of our lenders to repurchase the new notes or could attempt to refinance
those borrowings. If we do not obtain their consent or refinance borrowings, we
will remain contractually prohibited from repurchasing the new notes.
The source of funds for any repurchase of the new notes would be our
available cash or cash generated from other sources, including borrowings, sales
of assets or sales of equity. None of these sources may be available. Upon the
occurrence of a change of control event, we may seek to refinance the
indebtedness outstanding under the senior secured credit facility and the new
notes. However, it is possible that we will not be able to complete the
refinancing on commercially reasonable terms or at all. In that case, we would
not have the funds necessary to finance the required change of control offer.
IF WE FAIL TO MAINTAIN OUR RELATIONSHIPS WITH AMERICAN AIRLINES AND OTHER
SIGNIFICANT CUSTOMERS, IT COULD AFFECT OUR ABILITY TO PAY INTEREST AND MAKE
PRINCIPAL PAYMENTS ON THE NEW NOTES
We derived approximately 23% of our revenues from American Airlines and its
affiliate American Eagle for the nine months ended September 30, 1999 and our
top ten customers accounted for approximately 50% of our revenues for the nine
months ended September 30, 1999, in both cases after giving effect to the
acquisitions of Miami Aircraft Support and Aerolink. If we experience a
significant reduction in business from American Airlines or its affiliates
before we grow our business, it could affect our ability to pay interest or make
principal payments on the new notes. We cannot assure you that we will be able
to service our significant customers at current or increased levels. Revenues
from our customers could decrease either because they choose to use other third
party ground services providers or because they choose to perform these services
using their own personnel. Many of our customers, including American Airlines,
currently provide a significant portion of their own ground services.
OUR CUSTOMERS MAY TERMINATE THEIR CONTRACTS WITH US ON SHORT NOTICE, WHICH COULD
AFFECT OUR ABILITY TO PAY INTEREST AND MAKE PRINCIPAL PAYMENTS ON THE NEW NOTES
Many of our service contracts allow customers to terminate their contract
on 90 days notice or sooner for performance breaches. However, many of our
contracts have passed the term specified in the contract, and therefore, under
their terms, generally have become terminable by either party on 60 days notice
or less for any reason. While we believe these terms are typical in the
industry, we can provide no assurance that customers will not
17
<PAGE> 23
terminate their contracts. The termination of a large portion of our contracts
could affect our ability to pay interest or make principal payments on the new
notes.
OUR RIGHTS TO OPERATE AT AIRPORTS COULD BE TERMINATED BY LOCAL AIRPORT
AUTHORITIES, WHICH COULD AFFECT OUR ABILITY TO PAY INTEREST AND MAKE PRINCIPAL
PAYMENTS ON THE NEW NOTES
In order to provide our services at an airport, we usually must have
permission from the local airport authority. This permission generally can be
terminated by the local airport authority at will and without cause. The loss of
one or more of our permits, licenses or consents to operate could affect our
ability to operate at these airports, which in turn could affect our ability to
pay interest and make principal payments on the new notes.
THE OCCURRENCE OF SIGNIFICANT ADVERSE EVENTS AFFECTING THE AIRLINE INDUSTRY
COULD ADVERSELY AFFECT OUR ABILITY TO PAY INTEREST AND MAKE PRINCIPAL PAYMENTS
ON THE NEW NOTES
Because we provide most of our services to air cargo and passenger
airlines, we are likely to be affected by significant events that affect those
businesses. All of these events will be outside of our control and any of them
could affect our ability to pay interest or make principal payments on the new
notes. These events could include the following:
- an economic downturn in one or more of the geographic markets where
we do business;
- route changes by airlines;
- strikes by unions; and
- a substantial reduction in air traffic or financial problems
incurred by air cargo or passenger airlines.
IF WE DO NOT COMPETE EFFECTIVELY WITH OTHER GROUND SERVICE PROVIDERS, WE COULD
LOSE CUSTOMERS, WHICH IN TURN COULD AFFECT OUR ABILITY TO PAY INTEREST AND MAKE
PRINCIPAL PAYMENTS ON THE NEW NOTES
The ground services business is highly competitive. If we do not compete
effectively with other service providers, we could lose customers and our
revenues could be reduced. Either of these could affect our ability to pay
interest or make principal payments on the new notes.
Service quality and price are particularly important competitive factors in
our industry. In addition to competition for customers, we compete against other
service providers for airport permits, which are in some cities only issued to a
small number of service providers. In addition to competing with other service
providers, we indirectly compete for portions of our business with airlines that
do not outsource some or all of their ground services and businesses that
provide other forms of transportation, including businesses that transport cargo
by trucks. Although we believe that trends and projections in our industry are
favorable for third party providers of ground services, this may not prove to be
the case as a result of factors outside of our control such as changes in
economic conditions or a change in outsourcing strategies by airlines. In
addition, some of our competitors are larger than us and have significant
financial and other resources.
18
<PAGE> 24
IF WE FAIL TO MANAGE OUR GROWTH THROUGH ACQUISITIONS, THEN WE MAY NOT REALIZE
THE ANTICIPATED BENEFITS FROM THE ACQUISITIONS
As part of our business strategy, we intend to grow through acquisitions,
as well as through internal growth. On August 12, 1999, Worldwide acquired Miami
Aircraft Support and on August 23, 1999, Worldwide acquired Aerolink. We intend
to pursue additional acquisitions. Acquisitions present various risks, including
the following:
- difficulties assimilating and integrating the operations of the combined
companies and retaining key personnel;
- difficulties integrating the acquired company's financial, computer,
payroll and other systems into our own;
- difficulties implementing additional controls and information systems
appropriate to a larger company;
- distractions to management, which could result in a disruption of our
business;
- unanticipated liabilities or contingencies relating to the acquired
company; and
- reduced earnings due to increased goodwill amortization, increased
interest costs and costs related to integration.
In addition, suitable acquisition candidates may not be available. If we
fail to manage our growth effectively, we may not realize the anticipated
benefits from the acquisitions.
FLUCTUATIONS IN FOREIGN CURRENCY MAY ADVERSELY AFFECT OUR FINANCIAL PERFORMANCE,
WHICH COULD AFFECT OUR ABILITY TO PAY INTEREST AND MAKE PRINCIPAL PAYMENTS ON
THE NEW NOTES
A substantial portion of our revenues are denominated in non-U.S.
currencies, consisting principally of French francs, Canadian dollars, Hong Kong
dollars and British pounds. However, most of our expenses, including interest
and principal on our indebtedness, are denominated in U.S. dollars. This exposes
us to fluctuations in the rate of exchange between foreign currencies and the
U.S. dollar. Significant exchange rate fluctuations could result in exchange
rate losses, which in turn could affect our ability to pay interest or make
principal payments on the new notes. We currently do not engage in foreign
currency hedging, although we may do so in the future.
IF WE DO NOT COMPLY WITH SIGNIFICANT ENVIRONMENTAL REGULATION, WE COULD FACE
FINES OR RESTRICTIONS ON OUR OPERATIONS, WHICH IN TURN COULD AFFECT OUR ABILITY
TO PAY INTEREST AND MAKE PRINCIPAL PAYMENTS ON THE NEW NOTES
We must comply with a variety of international, federal, state and local
governmental regulations relating to the use, storage, discharge, emission and
disposal of hazardous substances and wastes, remediation of contamination
associated with the releases of hazardous substances and worker health and
safety.
We maintain fueling operations at four locations. In connection with these
fueling operations, we stock jet fuel in large above-ground storage tanks and
operate sub-surface fuel lines that may give rise to unknown releases. We are
not aware of the occurrence of any releases that are expected to result in fines
or restrictions on our operations, which in turn could affect our ability to pay
interest or make principal payments on the new notes.
19
<PAGE> 25
However, future events, such as the discovery of unknown contamination, future
spills and releases, compliance with more stringent regulations, more vigorous
enforcement policies by regulatory agencies or stricter or different
interpretations of existing regulations could cause us operating constraints or
require us to make material expenditures for cleaning up contamination or
complying with evolving environmental regulations. These or other events
relating to compliance with environmental regulations could materially affect
our ability to pay interest or make principal payments on the new notes. See
"Business--Regulatory Compliance--Environmental" for a summary discussion of
these regulations.
THE INTERESTS OF OUR PARENT'S SHAREHOLDERS MAY CONFLICT WITH YOUR INTERESTS
All of our outstanding shares of common stock are owned by our parent. The
principal shareholder of our parent and parties related to the principal
shareholder own and control in excess of 98% of our parent outstanding voting
common stock. As a result, the principal shareholder and parties related to the
principal shareholder have the ability to elect all of our directors and the
directors of our parent and approve any action requiring the approval of the
holders of other voting common stock and the voting common stock of our parent,
including adopting amendments to our certificate of incorporation and the
certificate of incorporation of our parent and approving acquisitions or sales
of all or substantially all of our assets or the assets of our parent.
Circumstances may occur in which the interests of our parent shareholders
could be in conflict with your interests. In addition, our parent shareholders
may have an interest in pursuing transactions that, in their judgment, enhance
the value of their equity investment in our company, even though these
transactions may involve risks to you as a holder of New Notes.
FRAUDULENT TRANSFER CONSIDERATIONS
Under applicable provisions of the United States Bankruptcy Code or
comparable provisions of state fraudulent transfer or conveyance law, if, at the
time the new notes or the subsidiary guarantees are issued:
(1) we or our guarantors incurred that indebtedness with the intent to
hinder, delay or defraud creditors; or
(2) (a) we or our guarantors received less than reasonably equivalent value
for incurring that indebtedness; and
(b) we or our guarantors
- were insolvent or were rendered insolvent by reason of the
incurrence of that indebtedness (and the application of the
proceeds of the incurrence);
- were engaged, or about to engage, in a business or transaction
for which the assets remaining constituted unreasonably small
capital to carry on our business; or
- intended to incur, or believed that we would incur, debts beyond
our ability to pay those debts as they matured;
20
<PAGE> 26
then, in each of these cases, a court of competent jurisdiction could void,
in whole or in part, the new notes or the subsidiary guarantees or, in the
alternative, subordinate the new notes or the subsidiary guarantees to our
existing and future indebtedness.
The measure of insolvency for purposes of the above would likely vary
depending upon the law applied in the case. Generally, however, we or our
guarantors would be considered insolvent if the sum of our debts, including
contingent liabilities, were greater than all of our assets at a fair valuation.
We believe that, for purposes of the United States Bankruptcy Code and state
fraudulent transfer or conveyance laws, the new notes and the subsidiary
guarantees are being issued without the intent to hinder, delay or defraud
creditors and for proper purposes and in good faith, and that we will receive
reasonably equivalent value or fair consideration therefor. Based on our
projections of expected cash flows and estimates of the fair value of our assets
and liabilities, we believe that after the issuance of the new notes and the
subsidiary guarantees and the application of the net proceeds therefrom, we will
be solvent, will have sufficient capital for carrying on our business and will
be able to pay our debts as they mature. However, we cannot assure you that a
court passing on these issues would agree with our determination.
AN ACTIVE TRADING MARKET MAY NOT DEVELOP FOR THE NEW NOTES
There is no established trading market for the new notes. The original
notes are eligible for trading in the PORTAL market. The new notes are a new
issue of securities with no established trading market and will not be listed on
any securities exchange. Donaldson, Lufkin and Jenrette Securities Corporation
and Chase Securities, Inc., the initial purchasers, informed us that they intend
to make a market in the new notes. However, they may cease their market-making
at any time.
We cannot assure you that a liquid market will develop for the new notes.
The liquidity of any market for the new notes will depend upon many factors,
including:
- the number of holders of the new notes;
- our results of operations and financial condition;
- the market for similar securities; and
- the interest of securities dealers in making a market in the new notes.
If a trading market does not develop or is not maintained, you may
experience difficulty in reselling the new notes, or you may be unable to sell
them at all.
Historically, the market for non-investment grade debt has been affected by
disruptions that have caused volatility in prices. It is possible that the
market for the new notes will be affected by disruptions. These disruptions may
have a negative effect on you as a holder of the new notes regardless of our
prospects and financial performance.
IF YOU FAIL TO EXCHANGE YOUR ORIGINAL NOTES, YOUR ORIGINAL NOTES WILL REMAIN
SUBJECT TO RESTRICTIONS ON TRANSFER
Holders of original notes who do not exchange their original notes for new
notes in the exchange offer will continue to be subject to the restrictions on
transfer of the original notes described in the legend on those notes. The
restrictions result from the issuance of the original notes in reliance on
exemptions from registration under the Securities Act and
21
<PAGE> 27
applicable state securities laws. In general, the original notes may not be
transferred or resold except in a transaction registered in accordance with, or
exempt from, these registration requirements. If we complete this exchange
offer, we will not be required to register the original notes, and we do not
anticipate that we will register the original notes, under the Securities Act.
Additionally, to the extent that original notes are tendered and accepted in the
exchange offer, the aggregate principal amount of the original notes outstanding
will decrease, with a resulting decrease in the liquidity of the market for the
original notes.
22
<PAGE> 28
USE OF PROCEEDS
This exchange offer is intended to satisfy our obligations under the
registration rights agreement entered into in connection with the offering of
the original notes. We will not receive any proceeds from the exchange offer. In
consideration for issuing the new notes, we will receive original notes with
like original principal amount at maturity. The form and terms of the original
notes are the same as the form and terms of the new notes, except as otherwise
described in this prospectus. The original notes surrendered in exchange for new
notes will be retired and canceled and cannot be reissued. Accordingly, the
issuance of the new notes will not result in any increase in our outstanding
debt.
We received net proceeds totaling approximately $126.8 million from the
private placement of the original notes. The net proceeds, as well as the $10.0
million equity contribution by our parent and $7.4 million of proceeds under the
senior secured credit facility, were used to:
- fund the $63.0 million acquisition of Miami Aircraft Support;
- repay $68.5 million of outstanding indebtedness of Worldwide and
Miami Aircraft Support; and
- pay $12.7 million of related fees and expenses.
23
<PAGE> 29
UNAUDITED PRO FORMA COMBINED CONSOLIDATED
FINANCIAL DATA
The unaudited pro forma combined consolidated financial data is based on
the historical consolidated financial statements of Worldwide, its predecessor
AMRS and the historical consolidated financial statements of Miami Aircraft
Support and Aerolink, and on the assumptions and adjustments described in the
notes to the unaudited pro forma combined consolidated financial data, including
assumptions relating to the allocation of the consideration paid for AMRS, Miami
Aircraft Support and Aerolink to the assets and liabilities of AMRS, Miami
Aircraft Support and Aerolink based on preliminary estimates of their respective
fair values. Worldwide's management does not expect the final allocation of this
consideration to significantly differ from that reflected in the unaudited pro
forma combined consolidated financial data.
Our unaudited pro forma combined consolidated statements of operations data
has been presented as if the acquisition by our parent of AMRS, our acquisition
of Miami Aircraft Support and Aerolink, our entering into the senior secured
credit facility, the $10.0 million equity contribution by our parent to us and
the financing of our indebtedness had occurred as of January 1, 1999. Pro forma
adjustments were calculated to:
- reflect the resulting changes in amortization and interest expense from
the acquisition of Miami Aircraft Support, the acquisition of AMRS and
the acquisition of Aerolink;
- adjust the results of operations of Miami Aircraft Support, Aerolink and
AMRS to remove operating expenses, previously allocated by their owners,
that no longer existed after the acquisitions; and
- adjust interest expense resulting from the refinancings of existing Miami
Aircraft Support, Aerolink and Worldwide indebtedness.
Except for our parent's acquisition of AMRS, we completed the transactions
listed above in the third quarter of 1999. We recorded an extraordinary loss of
approximately $2.0 million in connection with the refinancing of Worldwide's
existing indebtedness.
Our unaudited pro forma combined financial data should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the respective historical consolidated financial
statements of Worldwide, AMRS and Miami Aircraft Support and the related notes
thereto included elsewhere in this prospectus. Our unaudited pro forma combined
consolidated financial data does not purport to represent what our financial
position and results of operations would have been if the transactions listed
above had actually been completed as of the dates indicated and are not intended
to project our financial position or results of operations for any future
period.
24
<PAGE> 30
UNAUDITED PRO FORMA COMBINED CONSOLIDATED
STATEMENT OF OPERATIONS DATA
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
MIAMI
AIRCRAFT
SUPPORT AEROLINK
---------- ---------- PRO FORMA
AMRS WORLDWIDE PERIOD PERIOD COMBINED
------------ ------------- FROM FROM -------------
THREE MONTHS SIX MONTHS JANUARY 1, JANUARY 1, NINE MONTHS
ENDED ENDED 1999 TO 1999 TO ENDED
MARCH 31, SEPTEMBER 30, AUGUST 12, AUGUST 23, PRO FORMA SEPTEMBER 30,
1999 1999 1999 1999 ADJUSTMENTS 1999
------------ ------------- ---------- ---------- ----------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenues............... $61,475 $131,579 $ 36,516 $ 8,009 $ -- $237,579
Salaries, wages, and
benefits............ 39,679 85,803 20,499 4,527 (437)(d) 150,071
Depreciation and
amortization........ 1,627 4,476 2,116 231 2,528(a)(b)(c) 10,978
Other operating
expenses............ 18,438 35,243 11,553 2,868 (446)(g)(h)(i) 67,656
------- -------- -------- -------- -------- --------
Operating income from
continuing
operations.......... 1,731 6,057 2,348 383 (1,645) 8,874
Interest income........ 440 -- 73 7 (440)(j) 80
Interest expense....... -- (5,083) (316) (33) (9,672)(e) (15,104)
Other income (expense),
net................. (552) (185) -- 5 -- (732)
------- -------- -------- -------- -------- --------
Income (loss) from
continuing
operations before
income taxes and
extraordinary
loss................ 1,619 789 2,105 362 (11,757) (6,882)
Provision for income
tax
expense............. 644 1,659 747 -- (562)(f) 2,488
------- -------- -------- -------- -------- --------
Income (loss) from
continuing operation
before extraordinary
loss................ 975 (870) 1,358 362 (11,195) (9,370)
======= ======== ======== ======== ======== ========
OTHER DATA:
Ratio of earnings to fixed charges(l)........................................................ --
ADDITIONAL DATA:
EBITDA(k).................................................................................... $ 19,120
</TABLE>
The accompanying notes are an integral part of these
pro forma combined consolidated financial statements.
25
<PAGE> 31
NOTES TO UNAUDITED PRO FORMA COMBINED CONSOLIDATED STATEMENTS OF OPERATIONS DATA
(a) Represents the increase in amortization expense for the excess of the AMRS
purchase price over estimated fair value of the net assets acquired under
the terms of the acquisition agreement. In connection with the acquisition
of AMRS, Worldwide recorded approximately $37.0 million of intangibles,
including goodwill which is being amortized over 20 years. The purchase
price allocation is preliminary, and still subject to adjustments.
However, Worldwide's management does not expect the final allocation to
significantly differ from that reflected in the unaudited pro forma
combined consolidated data. The pro forma adjustment reflects additional
amortization expense assuming the acquisition had occurred as of January
1, 1999.
(b) Represents the increase in amortization expense for the excess of the
Miami Aircraft Support purchase price over estimated fair value of the net
assets acquired under the terms of the acquisition agreement. In
connection with the acquisition of Miami Aircraft Support, Worldwide
recorded approximately $66.0 million of intangibles, including goodwill
which is being amortized over 20 years. The purchase price allocation is
preliminary, and still subject to adjustments. However, Worldwide's
management does not expect the final allocation to significantly differ
from that reflected in the unaudited pro forma combined consolidated data.
The pro forma adjustment reflects additional amortization assuming the
acquisition had occurred as of January 1, 1999.
(c) Represents the increase in amortization expense for the excess of the
Aerolink purchase price over estimated fair value of the net assets
acquired under the terms of the acquisition agreement. In connection with
the acquisition of Aerolink, Worldwide recorded approximately $4.0 million
of intangibles, including goodwill which is being amortized over 20 years.
The purchase price allocation is preliminary, and still subject to
adjustments. However, Worldwide's management does not expect the final
allocation to significantly differ from that reflected in the unaudited
pro forma combined consolidated data. The pro forma adjustment reflects
additional amortization assuming the acquisition had occurred as of
January 1, 1999.
(d) Represents the elimination of payments to employee shareholders previously
incurred by Miami Aircraft Support and Aerolink that are no longer
incurred by Worldwide. In connection with the acquisition agreements of
Miami Aircraft Support and Aerolink, previous arrangements with employee
shareholders were terminated. These employee shareholders were not
actively involved in the operations of Miami Aircraft Support or Aerolink
prior to the acquisition and, as a result, such costs have been eliminated
and not replaced.
26
<PAGE> 32
(e) Represents the interest expense resulting from completion of our
acquisition of Miami Aircraft Support and Aerolink, our entering into the
senior secured credit facility and the refinancing of our indebtedness net
of the elimination of interest expense of Miami Aircraft Support. In
addition, upon completion of those transactions, Worldwide had outstanding
some amounts under the senior secured credit facility and some other
amounts. The following table sets forth the calculation of pro forma
interest expense:
<TABLE>
<CAPTION>
INTEREST RATE PRO FORMA
USED IN ANNUAL
PRO FORMA INTEREST
DEBT ISSUE BASE INTEREST RATE BORROWINGS CALCULATION EXPENSE
---------- ------------------ ----------- ------------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Senior Secured Credit
Facility................ LIBOR plus 3% for the
outstanding balance $ 16,000 8.93% $ 1,428
Commitment Fee -- 0.5%
on unused balance 0.5% 295
Senior Notes
due 2007.... 12.25% $130,000 12.25% 15,925
-------
Pro forma cash interest expense...................................... 17,648
Amortization of debt discount and issuance costs..................... 1,775
-------
Total pro forma interest expense..................................... $19,423
=======
</TABLE>
A 1/8% change in interest rates on the senior secured credit facility would
cause interest expense to increase or decrease by approximately $20,000 per
annum as compared to the amounts set forth above.
(f) Represents an adjustment to estimated tax expense related primarily to
establishment of valuation allowances on foreign taxes.
(g) Represents the elimination of the corporate overhead expenses allocated
from AMR Corporation and included in the historical financial statements
of AMRS. Prior to the acquisition of AMRS by our parent, AMR Corporation
allocated significant overhead expenses to AMRS. In connection with the
acquisition some of these expenses will no longer be incurred by
Worldwide. These expenses primarily relate to benefit plans, including
stock based compensation plans and employee personal travel plans that
will no longer be continued nor replaced by Worldwide, and allocation of
the AMR Corporation senior executive salaries for which there will be no
equivalent at Worldwide. The following is a listing of expenses that will
no longer be incurred by Worldwide:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, 1999
--------------
(IN THOUSANDS)
<S> <C>
Allocation of AMR Corporation senior executives............. $349
Personal travel benefits............................. 79
Variable stock based compensation plans allocated by
AMR Corporation................................... 80
----
Total........................................ $508
</TABLE>
27
<PAGE> 33
(h) Represents the additional overhead expense that was allocated by AMR
Corporation during the three month period ended March 31, 1999. During the
three months ended March 31, 1999 AMRS received a monthly allocation of
approximately $640,000 of overhead expense, excluding items removed above,
from AMR Corporation as compared to an average monthly allocation of
$407,000 of overhead expense, excluding items removed above, during fiscal
1998. This increase resulted exclusively from the sale during the quarter
of AMR Corporation's other operations in this segment. Upon their sale,
corporate overhead allocated to AMRS was increased with no increase in
services. As a result, a pro forma adjustment has been included for
$699,000 to reduce the AMR Corporation overhead allocation to reflect
historical levels.
(i) As a consequence of the Original Notes offering, we and Castle Harlan, Inc.
amended the management agreement on August 12, 1999 as described in
"Related Party Transactions." The term of the amended management agreement
is from March 31, 1999 through December 31, 2005, which represents
approximately 6.375 years. The amended management agreement provides that
no management fees are payable until July 1, 2000 at which time management
fees will be payable at an annual rate of $1.25 million through December
31, 2002 with an increase to the annual rate of $2.0 million for the period
January 1, 2003 through December 31, 2005. The total management fees to be
paid in connection with the amended management fee agreement are $9.4
million. The annual average of amended management fees on a straight line
basis over the term of the amended agreement would be approximately $1.4
million. Our historical financial statements for the three months ended
June 30, 1999 included management fees of $312,000 paid and expensed during
the three months ended June 30, 1999. Thus we have included an adjustment
to increase management fees by $762,000 for the nine months ended September
30, 1999.
(j) Represents the elimination of interest income from AMR Corporation related
to accumulated undistributed cash of AMRS, held by AMR Corporation, and
included in the historical financial statements. These amounts were paid by
dividend to AMR Corporation prior to the sale of AMRS.
(k) EBITDA for any period is calculated as the sum of net income plus the
following to the extent deducted in calculating net income: (1) interest
expense (income), (2) income tax expense, (3) depreciation expense and (4)
amortization expense. We consider EBITDA to be a widely accepted financial
indicator of a company's ability to service debt, fund capital expenditures
and expand its business; however, EBITDA is not calculated in the same way
by all companies and is neither a measurement required, nor represents cash
flow from operations as defined, by generally accepted accounting
principles. EBITDA should not be considered by you as an alternative to net
income, as an indicator of operating performance or as an alternative to
cash flow as a measure of liquidity. The calculation of EBITDA in this
prospectus is calculated differently than for purposes of the covenants
under the indenture and the senior secured credit facility. See
"Description of Senior Secured Credit Facility" and "Description of New
Notes" for how these instruments calculate EBITDA.
(l) Ratio of earnings to fixed charges is computed assuming that 1/3 of rental
expense is representative of the interest factor. Earnings were
insufficient to cover fixed charges by $9,370,000.
28
<PAGE> 34
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
You should read the selected historical consolidated financial data set
forth below in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations," and the consolidated financial
statements and the notes thereto, and the pro forma and other financial
information included herein.
WORLDWIDE AND AMRS FINANCIAL INFORMATION
The selected consolidated financial data for the years ended December 31,
1995 and December 31, 1996 have been derived from Worldwide's and AMRS's
unaudited consolidated financial statements and, in the opinion of our
management, include all adjustments, consisting of only normal recurring
adjustments, necessary for a fair presentation of its results of operations for
these periods and financial condition as at the dates presented. The selected
historical consolidated financial data for the fiscal years ended December 31,
1997, December 31, 1998 and the three months ended March 31, 1999 have been
derived from AMRS's audited consolidated financial statements. The selected
historical consolidated financial data for the six months ended September 30,
1999 have been derived from Worldwide's audited consolidated financial
statements.
<TABLE>
<CAPTION>
AMRS Historical Worldwide
-------------------------------------------------------- ------------- COMBINED
THREE MONTHS SIX MONTHS NINE MONTHS
Years Ended December 31, ENDED ENDED ENDED
----------------------------------------- MARCH 31, SEPTEMBER 30, SEPTEMBER 30,
1995 1996 1997 1998 1999 1999 1999(a)
---- ---- ---- ---- ---- ---- -------
(Unaudited) (In thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues................... $156,262 $193,189 $223,090 $229,742 $61,475 $131,579 $193,054
Salaries, wages, and
benefits................. 96,662 124,543 144,422 154,706 39,679 85,803 125,482
Depreciation and
amortization............. 5,650 5,938 5,643 5,908 1,627 4,476 6,103
Other operating expenses... 50,609 56,598 66,167 61,074 18,438 35,243 53,681
-------- -------- -------- -------- ------- -------- --------
Operating income........... 3,341 6,110 6,858 8,054 1,731 6,057 7,788
Interest income............ 1,460 1,052 1,421 2,160 440 -- (a)
Interest expense........... -- -- -- -- -- (5,083) (a)
Other income (expense)..... 585 288 (584) 580 (552) (185) (737)
-------- -------- -------- -------- ------- -------- --------
Income from continuing
operations before income
taxes and extraordinary
loss..................... 5,386 7,450 7,695 10,794 1,619 789 (a)
Provision for income tax
expense.................. 2,316 3,162 3,309 4,490 644 1,659 (a)
-------- -------- -------- -------- ------- -------- --------
Income (loss) from
continuing operations
before extraordinary
loss..................... 3,070 $ 4,288 $ 4,386 $ 6,304 $ 975 $ (870) (a)
Extraordinary loss on early
extinguishment of debt... -- -- -- -- -- (1,959) (a)
Income (loss) from
continuing operations.... 3,070 4,288 4,386 6,304 975 (2,829) (a)
Loss from discontinued
operations............... -- -- -- 552 210 -- (a)
======== ======== ======== ======== ======= ======== ========
Net income (loss).......... $ 3,070 4,288 $ 4,386 $ 5,752 $ 765 $ (2,829) (a)
======== ======== ======== ======== ======= ======== ========
OTHER DATA:
Capital expenditures....... $ 6,253 $ 9,182 $ 12,662 $ 7,219 $ 1,688 $ 4,606 $ 6,294
Ratio of earnings to fixed
charges.................. 2.3x 2.6x 3.1x 3.4x 2.3x 1.1x (a)
ADDITIONAL DATA:
EBITDA(b).................. $ 9,576 $ 12,336 $ 11,917 $ 14,542 $ 2,806 $ 10,348 $ 13,154
</TABLE>
29
<PAGE> 35
<TABLE>
<CAPTION>
AS OF
AS OF DECEMBER 31, SEPTEMBER 30,
------------------------------------- -------------
1995 1996 1997 1998 1999
------- ------- ------- ------- -------------
(UNAUDITED) (IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents......... $ 3,922 $20,396 $20,544 $14,200 $ 11,629
Working capital................... 14,448 23,707 24,083 25,747 40,921
Total assets...................... 79,937 79,205 85,418 88,696 241,244
Long-term debt (including current
position)...................... -- -- -- -- 147,801
Stockholders' equity.............. 48,451 52,773 56,756 62,365 34,774
</TABLE>
- ---------------
(a) The nine months ended September 30, 1999 represents a combination of two
interim periods, one for AMRS the three month period prior to the
consummation of the acquisition ended March 31, 1999, and one for Worldwide
for the six month period following the consummation of the acquisition ended
September 30, 1999. Revenue and operating expense data for the two periods
have been combined to present a combined nine month period ended September
30, 1999. No combined information is presented below the operating income
from continued operations line item, except for other income (expense), as
Worldwide and AMRS had dramatically different capital structures and a
combination of such data is not meaningful. For a presentation of the pro
forma combined results assuming the new capital structure of Worldwide and
its subsequent acquisitions see the unaudited pro forma combined
consolidated statement of operations data included herein.
(b) EBITDA for any period is calculated as the sum of net income plus the
following to the extent deducted in calculating net income: (1) interest
expense (income), (2) income tax expense, (3) depreciation expense, (4)
amortization expense and (5) extraordinary gains or losses. We consider
EBITDA to be a widely accepted financial indicator of a company's ability to
service debt, fund capital expenditures and expand its business; however,
EBITDA is not calculated in the same way by all companies and is neither a
measurement required, nor represents cash flow from operations as defined,
by generally accepted accounting principles. EBITDA should not be considered
by you as an alternative to net income, as an indicator of operating
performance or as an alternative to cash flow as a measure of liquidity. The
calculation of EBITDA in this prospectus is calculated differently than for
purposes of the covenants under the indenture and the senior secured credit
facility. See "Description of Senior Secured Credit Facility" and
"Description of New Notes" for how these instruments calculate EBITDA.
30
<PAGE> 36
MIAMI AIRCRAFT SUPPORT
The following table sets forth selected historical data of Miami Aircraft
Support. The selected historical consolidated financial data for 1995, 1996,
1997, 1998 and the period from January 1, 1999 to August 12, 1999 have been
derived from Miami Aircraft Support's audited consolidated financial statements
included elsewhere in this prospectus. The results of operations for the interim
period are not necessarily indicative of the results of operations for a full
year.
<TABLE>
<CAPTION>
PERIOD FROM
JANUARY 1, 1999
1995 1996 1997 1998 TO AUGUST 12, 1999
---- ---- ---- ---- ------------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue........................ $34,617 $38,084 $46,557 $56,402 $ 36,516
Operating expenses............. 26,633 29,876 36,145 43,519 28,602
Depreciation and
amortization................ 3,034 2,338 2,743 3,274 2,116
General and administrative
expenses.................... 1,870 2,717 4,297 4,073 3,450
------- ------- ------- ------- ---------
Operating income............... 3,080 3,153 3,372 5,536 2,348
Interest income................ 36 32 71 69 73
Interest expense............... (559) (621) (516) (563) (316)
Other income (expense)......... 61 (53) 74 (62) --
------- ------- ------- ------- ---------
Income before income taxes..... 2,618 2,511 3,001 4,980 2,105
Provision for income tax
expense..................... 981 942 1,163 1,886 747
------- ------- ------- ------- ---------
Net income..................... $ 1,637 $ 1,569 $ 1,838 $ 3,094 $ 1,358
OTHER DATA:
Ratio of earnings to fixed
charges..................... 2.5x 2.6x 2.4x 3.0x 2.5x
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
-------------------------------------
1995 1996 1997 1998
---- ---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents........... $ 8 $ 4 $ 4 $ 1,212
Working capital (deficit)........... (972) (671) (871) 1,638
Total assets........................ 17,936 18,044 22,412 25,299
Long-term debt and capital leases
(including current portion)...... 6,991 6,136 6,716 6,886
Stockholders' equity................ 5,486 7,055 9,238 12,332
</TABLE>
31
<PAGE> 37
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the
Consolidated Financial Statements, and the notes thereto, included elsewhere in
this prospectus. This discussion should also be read in conjunction with the
Unaudited Pro Forma Combined Consolidated Financial Statements included
elsewhere in this prospectus.
OUR COMPANY
OVERVIEW
Worldwide Acquisition; AMRS. Our parent, which is owned by Castle Harlan
Partners III, L.P., its affiliates and some members of Worldwide's management,
acquired Worldwide from AMR Corporation on March 31, 1999. Prior to the
acquisition, Worldwide was known as AMR Services Corporation. Worldwide's
business was not operated by AMR Corporation as a single entity, but instead
operated through a number of companies that were part of the AMR Global Services
group. Prior to the date the acquisition was closed, some of these operations
were sold or were merged directly into AMR Corporation. The financial statements
and financial information included in this prospectus for AMR Services
Corporation represent the entity purchased, and not the distinct AMR Services
Corporation legal entity that existed prior to the acquisition. The AMR Services
Corporation entity purchased is sometimes referred to in this prospectus as
AMRS.
Acquisition of Miami Aircraft Support. We completed the acquisition of
Miami Aircraft Support on August 12, 1999, the same time as the sale of the
original notes. The purchase price for Miami Aircraft Support was approximately
$63.0 million. The acquisition was accounted for under the purchase method of
accounting. Worldwide recorded approximately $66.0 million of intangibles,
including goodwill which is being amortized over 20 years.
Acquisition of Aerolink. We completed the acquisition of Aerolink on
August 23, 1999. The purchase price was approximately $5.9 million plus an
earn-out of a maximum of $1.0 million. As part of the purchase price, we repaid
$0.6 million of debt of Aerolink. The acquisition was accounted for under the
purchase method of accounting. Worldwide recorded approximately $4.0 million of
intangibles, including goodwill which is being amortized over 20 years.
Acquisition Intangibles. Upon completion of the acquisition of Miami
Aircraft Support and Aerolink, we had total intangibles, including goodwill, of
approximately $107.0 million as of September 30, 1999. The amortization of these
amounts over their estimated useful life of 20 years will reduce earnings by
approximately $5.5 million on an annual basis.
Integration and Expansion Strategy. Historically, under AMR Corporation's
ownership, we pursued an aggressive geographic expansion strategy, spending a
significant amount of capital to open new locations. In the future, we plan to
focus on building market share at existing locations and spending capital
primarily on equipment to service new contracts at existing locations. Limited
capital spending on new locations is anticipated, as we intend to acquire other
companies to gain access to new locations rather
32
<PAGE> 38
than incurring significant start-up costs. We completed our acquisition of Miami
Aircraft Support on August 12, 1999 and we completed the acquisition of Aerolink
on August 23, 1999.
Allocated Corporate Expenses. Prior to the sale of Worldwide to our
parent, AMR Corporation provided us with various corporate services, including
executive oversight and corporate planning, cash management, tax planning, risk
management, insurance, payroll, legal, corporate administrative and other
services. Allocated expenses for these services amounted to $2.3 million, $5.8
million, $5.9 million and $5.9 million for the three month period ended March
31, 1999 and for the years ended December 31, 1998, 1997 and 1996, respectively.
These expenses have been reflected in our operating income for these periods.
Charges for these corporate services were based on a general allocation
methodology used by AMR Corporation to allocate all corporate overhead expenses
to its operating divisions. These costs were not necessarily allocated on a
basis that approximated Worldwide's estimated usage of services or the costs
Worldwide would have incurred if it had provided these services using its own
personnel. AMR Corporation's corporate allocations ceased at the time the
acquisition was closed, and have subsequently been replaced with either internal
expense to perform the services or outsourced services provided by a third party
provider. To date it has been our experience that although we may have lost some
of the leverage available to us from our former parent in obtaining third party
services, we have gained the ability to procure the services that best meet our
specific needs. As a result, we believe that on an overall basis, our service
costs going forward will be equal to or slightly lower than the costs previously
allocated by AMR for the equivalent services.
Discontinued Business. In July 1998, AMRS acquired a license to operate
and began to fund the operations of Cyclone Surface Cleaning, Inc., which was
engaged in developing a technology to clean airport runways. We decided that
Cyclone does not fit with our core businesses and to discontinue its operations.
Results of operations for 1998 and the three months ended March 31, 1999 have
been adjusted to reflect Cyclone as a discontinued operation. On August 31,
1999, we assigned our license and a stock option that we also had acquired and
paid approximately $0.6 million to the owners of Cyclone to settle our
obligations due under a promissory note.
RESULTS OF OPERATIONS
Revenues, operating income, and income from continuing operations before
extraordinary loss for the six months ended as of September 30, 1999 were
$131,579,000, 6,057,000, and 789,000, respectively, as a result of the
acquisition of Worldwide effective March 31, 1999 these amounts are not
comparable to those items in the financial statements in the comparable periods
of the prior year. Financial information for periods subsequent to March 31,
1999 are presented using different bases of accounting. However, for information
purposes results of operations for the nine months ended September 30, 1999 have
been included and represent an adjusted combination of two interim periods: one
for AMRS for the period prior to the consummation of the acquisition until March
31, 1999, and one for Worldwide for the six month period following the
consummation of the acquisition through September 30, 1999. No combined
historical financial information is presented below the operating income line
item, except for other income (expense), because Worldwide and AMR Services
Corporation had different capital structures and we believe that a combination
of this information is not meaningful. Information with respect
33
<PAGE> 39
to interest expense, income taxes, and a complete presentation of the impact of
recent acquisitions, is provided in the unaudited pro forma combined
consolidated statement of operations for the nine months ended September 30,
1999.
Revenues. Revenues are generated by providing cargo handling and ramp,
passenger and technical services for air cargo and passenger airlines. Cargo
services are generally billed based on the number of man-hours needed to provide
the services, the number of pounds of cargo handled or, in some cases, a
combination of the two. Most of our other services are billed based on the
number of man-hours used to provide the services, although some ramp services
are billed on a per aircraft basis. Technical services are generally billed
based on time and materials.
Since the acquisition of AMRS, we have identified revenue information for
the cargo handling, ramp service, passenger service or technical service
categories. Prior to the acquisition, AMRS did not identify revenues in similar
categories. The following table contains, for the period since our acquisition
from AMR Corporation, revenues by cargo handling, ramp service, passenger
service and technical service categories.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
SEPTEMBER 30, 1999
-----------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Cargo handling.......................................... $ 32,374 24.6%
Ramp service............................................ 55,280 42.0%
Passenger service....................................... 30,137 22.9%
Technical service....................................... 13,788 10.5%
-------- ------
Total......................................... $131,579 100.0%
</TABLE>
Expenses. Expenses incurred to generate revenues consist primarily of
salaries, wages and benefits. Our other significant expenditures are:
- materials, supplies and services, which includes operating supplies such
as fuel, glycol for de-icing, outsourced services, cost of sales for
freight management services and office supplies;
- equipment and facilities rentals;
- depreciation and amortization;
- interest expense; and
- other operating expenses, which include data processing and information
systems, telecommunications, accounting, human resources, office
supplies, travel and general corporate administration.
As indicated above, AMRS was responsible for paying significant overhead
allocations from AMR Corporation in addition to the overhead required to run the
daily operations of AMRS. For example, AMRS had its own executive group, finance
and accounting, legal and human resources departments. AMR Corporation's
corporate allocations ceased at the time the acquisition of Worldwide by our
parent was closed. In connection with our establishment of an administrative
structure, we have hired, and intend to continue to hire, additional personnel
at our Euless corporate office.
34
<PAGE> 40
NINE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
1999
The following table contains, for the periods indicated, revenues and
categories of expenses in dollars and as a percentage of sales.
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
------------------------------------
1998 % 1999(A) %
---- - ------- -
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Revenues.......................... $169,196 100% $193,054 100%
Salaries, wages and benefits...... 113,723 67.2 125,482 65.0
Materials, supplies and
services........................ 20,643 12.2 23,715 12.3
Equipment and facilities rental... 10,026 5.9 12,132 6.3
Depreciation and amortization..... 4,398 2.6 6,103 3.2
Other operating expenses.......... 9,902 5.9 15,565 8.1
General and administrative
allocated expenses.............. 4,591 2.7 2,269 1.2
-------- --------
Operating income from continuing
operations...................... $ 5,913 3.5 $ 7,788 4.0
======== ========
</TABLE>
- ---------------
(a) Represents two interim periods consisting of one for AMRS for the three
month period prior to the consummation of the acquisition from January 1,
1999 through March 31, 1999, and one for Worldwide for the six month period
following the consummation of the acquisition from April 1, 1999 through
September 30, 1999.
Revenues. Total revenues increased $23.9 million, or 14.1%, from $169.2
million in 1998 to $193.1 million in 1999. Revenues increased $3.4 million, or
1.8%, in 1999 as a result of the addition of a new location in Hong Kong, which
opened in July 1998. We also experienced revenue growth in our cargo handling
operations, especially at our location in Paris which had a $3.4 million
increase, and in our freight management business which increased $2.1 million
over the 1998 period. The acquisitions of Miami Aircraft Support and Aerolink in
August 1999 accounted for the majority of the remaining increase.
Salaries, wages and benefits. Salaries, wages and benefits increased $11.8
million, or 10.4%, from $113.7 million in 1998 to $125.5 million in 1999. The
primary reason for the increase was an increase in the number of employees
required to support the additional new business during 1999, $4.6 million
additional salaries expense as a result of the Miami Aircraft Support and
Aerolink acquisitions. Also, an increase of $2.1 million occurred at our new
location in Hong Kong, which was not in operation during most of the same period
in 1998.
Materials, supplies and services. Materials, supplies and services
increased $3.1 million, or 15.0%, from $20.6 million in 1998 to $23.7 million in
1999. This increase was primarily due to an increase in freight management cost
of sales, resulting from additional freight management business.
Equipment and facilities rental. Equipment and facilities rental increased
$2.1 million, or 21.0%, from $10.0 million in 1998 to $12.1 million in 1999. The
main reason for the increase was an additional facilities rental expense
attributed to the acquisitions of Miami Aircraft Support and Aerolink. Another
reason for the increase was the increase in facilities rentals of $0.4 million
in Europe and $0.2 million in New York required to service our increased cargo
operations in those locations.
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<PAGE> 41
Depreciation and amortization. Depreciation and amortization increased
$1.7 million, or 38.6%, from $4.4 million in 1998 to $6.1 million in 1999. The
primary reason for the increase in 1999 was additional amortization as a result
of the acquisitions of AMRS, Miami Aircraft Support and Aerolink.
Other operating expenses. Other operating expenses increased $5.7 million,
or 57.6%, from $9.9 million in 1998 to $15.6 million in 1999. Expenses increased
as a result of the higher level of business activity, the growth in freight
related expenses of $1.9 million in the European Cargo operations due to the
increase in business volume, the addition of the new Hong Kong location which
accounted for $0.5 million of the increase, and an increase in operating
expenses of $1.0 million due to the acquisitions of Miami Aircraft Support. The
increase was substantially offset by a decrease in general and administrative
allocated expenses as indicated below.
General and administrative allocated expenses. General and administrative
allocated expenses decreased $2.3 million, or 50.0%, from $4.6 million in 1998
to $2.3 million in 1999. The reason for the decrease was the elimination of the
corporate overhead charge of $4.2 million allocated to AMRS from AMR
Corporation. This allocation was included in the 1998 period and the quarter
ended March 31, 1999, but was eliminated at the time of the acquisition of
Worldwide. AMR Corporation increased the allocation in the quarter ended March
31, 1999, which resulted in this decrease being lower than if the allocation had
remained constant with amounts from prior years.
Operating income from continuing operations. Operating income from
continuing operations increased $1.9 million, or 32.2%, from $5.9 million in
1998 to $7.8 million in 1999. As a percentage of sales, operating income
increased by 0.5% in 1999 to 4.0%. This increase resulted from the elimination
of corporate overhead allocations from AMR Corporation in the quarter ended
March 31, 1999, and lower expenses, consisting primarily of salaries and wages,
as a percentage of sales during the nine month period ended September 30, 1999.
Also responsible for the increase during 1999 were one-time start-up costs of
$0.7 million incurred in Hong Kong during the first six months of 1998 before
operations began at that location.
36
<PAGE> 42
YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1998
The following table contains, for the periods indicated, revenues and
categories of expenses in dollars and as a percentage of sales.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------
1997 % 1998 %
---- - ---- -
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Revenues............................ $223,090 100.0% $229,742 100.0%
Expenses:
Salaries, wages and benefits........ 144,422 64.7 154,706 67.3
Materials, supplies and services.... 33,384 15.0 28,047 12.2
Equipment and facilities rental..... 11,059 5.0 13,597 5.9
Depreciation and amortization....... 5,643 2.5 5,908 2.6
Other operating expenses............ 15,847 7.1 13,632 6.0
General and administrative allocated
expenses.......................... 5,877 2.6 5,798 2.5
-------- --------
Operating income from continuing
operations........................ 6,858 3.1 8,054 3.5
Interest income..................... 1,421 0.6 2,160 0.9
Other income (expense), net......... (584) 0.3 580 0.3
-------- --------
Income before taxes................. 7,695 3.4 10,794 4.7
Taxes............................... 3,309 1.5 4,490 2.0
-------- --------
Income from continuing operations... 4,386 2.0 6,304 2.7
-------- --------
Loss from discontinued operations
net of applicable income taxes.... -- -- (552) .2
-------- --------
Net income.......................... $ 4,386 2.0 $ 5,752 2.5
======== ========
</TABLE>
Revenues. Total revenues increased $6.6 million, or 3.0%, from $223.1
million in 1997 to $229.7 million in 1998. This increase had a number of
components, including:
- revenue from providing technical and passenger services at our new Hong
Kong location, which accounted for $3.9 million of the increase;
- an expansion of cargo handling and passenger services operations at
Boston, which accounted for $2.0 million; and
- additional revenues from our New York cargo operations, which increased
by $2.2 million.
However, these were largely offset by a $7.6 million loss of revenue in the
freight management business due to a major customer in that business ceasing
operations in late 1997.
Salaries, wages and benefits. Salaries, wages and benefits increased $10.3
million, or 7.1%, from $144.4 million in 1997 to $154.7 million in 1998.
Increases in salaries and wages track closely with increases in revenues in our
Hong Kong, Boston and New York locations discussed above. The decrease in the
freight management business during 1998
37
<PAGE> 43
did not significantly decrease salaries and wages as fulfillment in our freight
management business is exclusively provided by common carriers, and not our
employees.
Materials, supplies and services. Materials, supplies and services
decreased $5.3 million, or 16.0%, from $33.4 million in 1997 to $28.0 million in
1998. The primary reason for the decrease was the reduction in volume in the
freight management business, which accounted for $6.3 million, due to the major
customer loss discussed above. This decrease was partially offset by normal
growth in our other business lines, as discussed above.
Equipment and facilities rental. Equipment and facilities rental increased
$2.5 million, or 22.9%, from $11.1 million in 1997 to $13.6 million in 1998. The
primary reason for the increase was the increase in the cargo handling
operations at our New York location, which were lower in 1997 due to rental
credit received.
Depreciation and amortization. Depreciation and amortization remained
relatively flat increasing only $0.3 million, or 4.7%, from $5.6 million in 1997
to $5.9 million in 1998. This increase was primarily related to our new location
in Hong Kong.
Other operating expenses. Other operating expenses decreased $2.2 million,
or 14.0%, from $15.8 million in 1997 to $13.6 million in 1998. The primary
reason for the decrease was the decrease in freight management business,
including a $1.0 million bad debt write-off occurring in 1997 relating to a
major customer ceasing operations.
General and administrative allocated expenses. Allocations included in the
financial statements for 1997 and 1998 were at AMR Corporation's discretion and
were comparable.
Operating income from continuing operations. Operating income from
continuing operations increased $1.2 million, or 17.4%, from $6.9 million in
1997 to $8.1 million in 1998. As a percent of sales, operating income remained
relatively flat increasing by only 0.5% in 1998.
Interest income. Interest income increased $0.7 million, or 52.0%, from
$1.4 million in 1997 to $2.2 million in 1998. This increase reflected an
increase in the accumulated undistributed cash balances at AMRS, which were held
on its behalf by AMR Corporation.
Income tax expense. Income tax expense increased from $3.3 million in 1997
to $4.5 million in 1998. AMRS's effective income tax rate remained relatively
flat at approximately 43.0% in 1997 and 41.6% in 1998.
Loss from discontinued operations net of applicable income taxes. Loss
from discontinued operations net of applicable income taxes was $0.6 million in
1998. It was due to the operations of Cyclone, which was purchased in July 1998.
As discussed above, we intend to dispose of Cyclone.
Net income. Net income increased $1.4 million, or 31.1%, from $4.4 million
in 1997 to $5.8 million in 1998. The increase in net income was due to increases
in operating income and interest income in 1998.
YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1997
AMRS's statement of operations data for 1996 is unaudited. However, in the
opinion of management, this data includes all adjustments, consisting only of
normal recurring
38
<PAGE> 44
adjustments, which we consider necessary for a fair presentation of results of
operations for 1996. Some results of operations data for AMRS has not been
presented because it was not determinable from AMR Corporation's historical
accounting records. Prior to December 31, 1996, balance sheet data was
aggregated for AMRS with other AMR Corporation non-airline subsidiaries,
although operating data was tracked to each specific entity. The absence of
separate balance sheet data makes operating costs with respect to interest and
taxes not determinable. As a result, 1996 statement of operations data is
presented only through operating income from continuing operations.
The following table contains, for the periods indicated, revenues and
categories of expenses in dollars and as a percentage of sales.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------
1996 % 1997 %
---- - ---- -
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Revenues........................... $193,189 100.0% $223,090 100.0%
Expenses:
Salaries, wages and benefits....... 124,543 64.5 144,422 64.7
Materials, supplies and services... 25,661 13.3 33,384 15.0
Equipment and facilities rental.... 12,776 6.6 11,059 5.0
Depreciation and amortization...... 5,729 3.0 5,643 2.5
Other operating expenses........... 12,466 6.5 15,847 7.1
General and administrative
allocated expenses............... 5,904 3.1 5,877 2.6
-------- --------
Operating income................... $ 6,110 3.2 $ 6,858 3.1
</TABLE>
Revenues. Total revenues increased $29.9 million, or 15.5%, from $193.2
million in 1996 to $223.1 million in 1997. Significant increases in revenues
resulted from an $8.1 million increase due to new customers in the freight
management business, subsequently lost in late 1997, significant new operations
starting up in Boston, Halifax, Providence, and Oakland in late 1996 or early
1997, most of which related to new ramp services activities, and a significant
increase in Denver's revenues due to the opening of the new Denver International
Airport in 1997.
Salaries, wages and benefits. Salaries, wages and benefits increased $19.9
million, or 16.0%, from $124.5 million in 1996 to $144.4 million in 1997. The
primary reason for the increase was the increase in employees required to
support additional business activity as described in the preceding paragraph.
Materials, supplies and services. Materials, supplies and services
increased $7.7 million, or 30.1%, from $25.7 million in 1996 to $33.4 million in
1997. The increase is almost exclusively related to the increase in freight
management business, for which fulfillment cost is included in materials,
supplies, and services.
Equipment and facilities rental. Equipment and facilities rental decreased
$1.7 million, or 13.4%, from $12.8 million in 1996 to $11.1 million in 1997. The
primary reason for the decrease was rent credits received on our New York cargo
facilities in 1997.
Depreciation and amortization. Depreciation and amortization remained flat
decreasing only $0.1 million, or 1.5%, from $5.7 million in 1996 to $5.6 million
in 1997.
39
<PAGE> 45
Other operating expenses. Other operating expenses increased $3.3 million,
or 27.1%, from $12.5 million in 1996 to $15.8 million in 1997. The primary
reason for the increase was the increase in operating expenses required to
support additional business activity, including the increase in freight
management business.
General and administrative allocated expenses. Allocations included in the
financial statements for 1996 and 1997 were at AMR Corporation's discretion and
were comparable as a percentage of sales.
Operating income. Operating income increased $0.7 million, or 12.2%, from
$6.1 million in 1996 to $6.9 million in 1997. As a percentage of sales,
operating income decreased by 0.1% in 1997 due to slightly lower operating
margins. The slight decrease in operating margins was due to a significant
increase in freight management business, which has a lower operating margin than
most of our other services.
LIQUIDITY AND CAPITAL RESOURCES
Prior to August 12, 1999, our primary sources of liquidity were cash flows
from operations and borrowings under our old credit facility. Our current
primary sources of liquidity are cash flows from operations and borrowings under
the senior secured credit facility, which is discussed below. In the six months
ended September 30, 1999, net cash used in operations was $4.1 million and
borrowings under our senior secured credit facility of $16.0 million and the
$10.7 million equity contribution by our parent were used to fund this expansion
in working capital and $4.6 million in capital expenditures. At September 30,
1999, we had $11.6 million in cash and cash equivalents, approximately one-half
of which is held by our operations in France and Hong Kong.
In addition to our debt service obligations, our principal liquidity needs
are for working capital and capital expenditures. During 1998, AMRS spent $7.2
million on capital projects, and for the nine months ended September 30, 1999,
Worldwide spent $6.3 million on capital projects. Most of the projects were
related to the purchase of additional equipment to handle new business activity,
the purchase of replacement capital items, the refurbishment of equipment and
new financial systems.
We have significant debt service obligations. Our annual interest payments
on the Original Notes are $15.9 million. Our interest payment requirements on
borrowings under the senior secured credit facility depend on the level of our
borrowings.
Total capital expenditures for the year ended December 31, 1999 are
expected to be approximately $9.5 million. Of this amount, approximately $3.0
million is expected to be incurred in connection with the establishment of our
new corporate administrative facility, principally for computer software and
hardware, as well as for furniture, fixtures and office equipment. The other
capital expenditures of $6.5 million are budgeted for the replacement and
refurbishment of equipment and for new equipment to support existing and new
business. AMR Corporation has agreed to fund up to $3.0 million for the
replacement or establishment of a new business enterprise resource planning
system for us. We are in the process of implementing this system and expect it
to be completed prior to the end of 1999.
The purchase price for Miami Aircraft Support, which was acquired on August
12, 1999, was $63.0 million. In addition, we retained approximately $5.2 million
of Miami Aircraft Support indebtedness. These amounts were funded out of the
proceeds of the
40
<PAGE> 46
offering of the Original Notes and an equity contribution of $10.0 million to
Worldwide by our parent which occurred simultaneously.
The purchase price of Aerolink was approximately $5.9 million, plus
possible additional consideration of up to a maximum of $1.0 million based on
various conditions being satisfied, including conditions relating to calendar
1999 earnings. We repaid $0.6 million of Aerolink indebtedness. These amounts
were funded in part with borrowings under the senior secured credit facility.
We are also pursuing additional acquisitions which, if completed, are
expected to be funded primarily through borrowings under the senior secured
credit facility.
The acquisition price for Worldwide has an adjustment provision that
requires a price adjustment depending on a calculation based on working capital
and capital spending. This issue is still being negotiated and its ultimate
outcome cannot currently be determined. As a result of our separation from AMR,
our levels of trade receivables and accrued liabilities have both increased.
This has resulted in a net increase in our working capital levels. We expect
both our trade receivables and accrued liabilities to decrease, but we can
provide no assurances that our net working capital will either increase or
decrease from its current levels.
We entered into the senior secured credit facility with a new group of
lenders that provides us with up to $75.0 million for purposes of funding
working capital requirements and funding financing needs for future
acquisitions. Through September 30, 1999, we borrowed approximately $16.0
million under the senior secured credit facility. As of that date, we had
additional availability under the senior secured credit facility of at least
$30.4 million. As of September 30, 1999, borrowings accrued interest at an
average rate of 8.93%. However, our future additional availability may be less
than the total remaining commitment amount and will depend on the borrowing base
and us being able to meet the applicable leverage and coverage ratios and other
customary conditions. If we are in default under the senior secured credit
facility, which may occur if we fail to maintain financial ratios and meet other
covenants, we may not be able to make these additional borrowings under that
facility. See "Description of Senior Secured Credit Facility" for a summary of
some of its terms.
We intend to satisfy our working capital requirements, capital expenditures
and scheduled debt service requirements for at least the next twelve months
through a combination of cash flows generated from operations, funds available
under the senior secured credit facility.
EFFECTS OF INFLATION
Inflation has not had a significant effect on our operations. However, in
the event of increases in inflation, particularly in employment costs, we could
experience sudden and significant increases in operating costs. Over the
short-term, we may be unable to completely pass wage increases on to our
customers. Management believes that, over longer periods of time, we generally
will be able to pass on inflationary increases to our customers.
41
<PAGE> 47
SEASONALITY
Historically, our revenues and operating income have not been significantly
seasonal due to our geographic dispersion and business line diversity. We
experience a moderate seasonal peak during the fourth quarter due to December
holiday season cargo activity.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 requires all derivatives to be
measured at fair value and recognized as either assets or liabilities on the
balance sheet. Changes in such fair value are required to be recognized
immediately in net income (loss) to the extent the derivatives are not effective
as hedges. SFAS No. 133 is effective for fiscal years beginning after June 15,
2000 and is effective for interim periods in the initial year of adoption. At
the present time, we do not feel the adoption of SFAS No. 133 will have a
material effect on our results of operations, financial position or cash flows.
MARKET RISK SENSITIVE INSTRUMENTS AND POSITIONS
The risk inherent in our market risk sensitive instruments and positions is
the potential loss arising from adverse changes in foreign currency exchange
rates and interest rates. The sensitivity analyses presented do not consider the
effects that those adverse changes may have on overall economic activity, nor do
they consider additional actions we may take to mitigate our exposure to those
changes. Actual results may differ.
Foreign currency. We are exposed to the effect of foreign exchange rate
fluctuations between the U.S. dollar and the currencies related to our foreign
operations. Our largest exposure comes from the French franc. However the
operations in France are substantially self-contained in that the majority of
the revenues and related expenses are incurred in French francs. However, we are
exposed to currency fluctuations with respect to finance costs which are
currently all incurred in the United States in U.S. dollars, and to the extent
there are investments and profits denominated in French francs that need to be
repatriated. During 1997, foreign currency losses amounted to $584,000, during
1998, foreign currency gains amounted to $440,000, for the three months ended
March 31, 1999, losses amounted to 552,000 and for the six months ended
September 30, 1999, losses amounted to $52,000, mainly as a result of French
franc fluctuations.
Interest. Our earnings are also affected by changes in interest rates due
to the impact those changes have on our interest expense from variable-rate debt
instruments. A 1/8% change in interest rates under the senior secured credit
facility would cause interest expense to increase or decrease by approximately
$20,000. We purchased an interest rate cap to limit our exposure to increases in
levels of variable interest rates. The interest rate cap agreements are for a
notional amount of $50.0 million. We have $16.0 million of borrowing currently
outstanding under variable-rate debt instruments, but have elected to maintain
the interest rate caps in their full $50.0 million notional amount, in the
anticipation of incurring additional borrowings from variable-rate debt
instruments in the future to fund various activities, including possible
acquisitions.
42
<PAGE> 48
THE EXCHANGE OFFER
GENERAL
We sold the original notes on August 12, 1999 in a transaction exempt from
the registration requirements of the Securities Act. The initial purchaser of
the original notes subsequently resold them to qualified institutional buyers in
reliance on Rule 144A under the Securities Act.
In connection with the sale of original notes to the initial purchasers,
the holders of the original notes became entitled to the benefits of an A/B
exchange registration rights agreement dated August 12, 1999 among us, some of
our subsidiaries and the initial purchasers.
Under the registration rights agreement, we became obligated to file a
registration statement in connection with an exchange offer within 60 days after
the issue date and cause the exchange offer registration statement to become
effective within 180 days after the issue date. The exchange offer being made by
this prospectus, if consummated within the required time periods, will satisfy
our obligations under the registration rights agreement. This prospectus,
together with the letter of transmittal, is being sent to all beneficial holders
known to us.
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this prospectus
and in the accompanying letter of transmittal, we will accept all original notes
properly tendered and not withdrawn on or prior to the expiration date. We will
issue $1,000 principal amount of new notes in exchange for each $1,000 principal
amount of outstanding original notes accepted in the exchange offer. Holders may
tender some or all of their original notes pursuant to the exchange offer.
Based on no-action letters issued by the staff of the SEC to third parties,
we believe that holders of the new notes issued in exchange for original notes
may offer for resale, resell and otherwise transfer the new notes, other than
any holder that is an affiliate of ours within the meaning of Rule 405 under the
Securities Act, without compliance with the registration and prospectus delivery
provisions of the Securities Act. This is true as long as the new notes are
acquired in the ordinary course of the holder's business, the holder has no
arrangement or understanding with any person to participate in the distribution
of the new notes and neither the holder nor any other person is engaging in or
intends to engage in a distribution of the new notes. A broker-dealer that
acquired original notes directly from us cannot exchange the original notes in
the exchange offer. Any holder who tenders in the exchange offer for the purpose
of participating in a distribution of the New Notes cannot rely on the no-action
letters of the staff of the SEC and must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with any
resale transaction.
Each broker-dealer that receives new notes for its own account in exchange
for original notes, where original notes were acquired by such broker-dealer as
a result of market-making or other trading activities, must acknowledge that it
will deliver a prospectus in connection with any resale of such new notes. See
"Plan of Distribution" for additional information.
43
<PAGE> 49
We will be deemed to have accepted validly tendered original notes when, as
and if we have given oral or written notice of the acceptance of those notes to
the exchange agent. The exchange agent will act as agent for the tendering
holders of original notes for the purposes of receiving the new notes from the
issuer and delivering new notes to those holders.
If any tendered original notes are not accepted for exchange because of an
invalid tender or the occurrence of the conditions set forth under
"--Conditions" without waiver by us, certificates for any of those unaccepted
original notes will be returned, without expense, to the tendering holder of any
of those original notes as promptly as practicable after the expiration date.
Holders of original notes who tender in the exchange offer will not be
required to pay brokerage commissions or fees or, in accordance with the
instructions in the letter of transmittal, transfer taxes with respect to the
exchange of original notes, pursuant to the exchange offer. We will pay all
charges and expenses, other than taxes applicable to holders in connection with
the exchange offer. See "--Fees and Expenses."
SHELF REGISTRATION STATEMENT
If (1) applicable law or interpretations of the staff of the SEC are
changed so that the new notes received by holders who make all of the necessary
representations in the letter of transmittal are not or would not be, upon
receipt, transferable by each such holder without restriction under the
Securities Act, or (2) any holder of original notes which are Transfer
Restricted Securities, as defined below, notifies the Company prior to the 20th
business day following the consummation of the exchange offer that (a) based on
the advise of counsel, which may be internal counsel, it is prohibited by law or
SEC policy from participating in the exchange offer, (b) it 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 it, or (c) it is a
broker-dealer and holds original notes acquired directly from Worldwide or any
of Worldwide's affiliates, we will, at our cost:
- file a shelf registration statement covering resales of the original
notes;
- use our best efforts to cause the shelf registration statement to be
filed under the Securities Act at the earliest possible time, but no
later than 30 days after the time the obligation to file arises;
- use our best efforts to cause the shelf registration statement to be
declared effective at the earliest possible time, but no later than 60
days after the date in which we are required to file the shelf
registration statement as set forth above; and
use our reasonable best efforts to keep effective the shelf registration
statement until the earlier of two years after the date as of which the SEC
declares that shelf registration statement effective or the shelf registration
otherwise becomes effective, or a shorter period as will terminate when all
Transfer Restricted Securities covered thereby have been sold pursuant thereto,
except that Worldwide and our subsidiaries that are guarantors will have the
ability to suspend the shelf registration statement for up to 60 calendar days
in the aggregate, if Worldwide, upon written advice of counsel, determines that
the continued effectiveness and use of a shelf registration statement would
require the disclosure of confidential information or interfere with any
financing, acquisition, reorganization or other material transaction involving
Worldwide.
44
<PAGE> 50
"Transfer Restricted Securities" means each original note or new note until
the earliest on the date of which that note:
- is exchanged in the exchange offer and entitled to be resold to the
public by the Holder thereof without complying with the prospectus
delivery requirements of the Securities Act;
- has been disposed of in accordance with the shelf registration statement;
- is disposed of by a broker-dealer pursuant to the "Plan of Distribution"
within this prospectus including delivery of a prospectus; or
- is distributed to the public pursuant to Rule 144 under the Securities
Act.
We will, if and when we file the shelf registration statement, provide to
each holder of the original notes copies of the prospectus which is a part of
the shelf registration statement, notify each holder when the shelf registration
statement has become effective and take other actions as are required to permit
unrestricted resales of the original notes. A holder that sells original notes
pursuant to the shelf registration statement generally must be named as a
selling security-holder in the related prospectus and must deliver a prospectus
to purchasers. A seller will be subject to civil liability provisions under the
Securities Act in connection with these sales. A seller of the original notes
also will be bound by applicable provisions of the registration rights
agreement, including indemnification obligations. In addition, each holder of
original notes must deliver information to be used in connection with the shelf
registration statement and provide comments on the shelf registration statement
in order to have its original notes included in the shelf registration statement
and benefit from the provisions regarding any liquidated damages in the
registration rights agreement.
LIQUIDATED DAMAGES
If we are required to file the shelf registration statement and either:
(1) if the exchange offer is not consummated on or before the 30th business day
after this registration statement is declared effective;
(2) if obligated to file the shelf registration statement and the we and the
guarantors fail to file the shelf registration statement with the SEC on or
prior to the 30th day after such filing obligation arises;
(3) if obligated to file a shelf registration statement and the shelf
registration statement is not declared effective on or prior to the 60th day
after the obligation to file a shelf registration statement arises; or
(4) if the exchange offer registration statement or the shelf registration
statement, as the case may be, is declared effective but thereafter ceases
to be effective or useable in connection with resales of the Transfer
Restricted Securities, for such time of non-effectiveness or non-useability
(each, a "Registration Default"),
then the we and the guarantors agree to pay to each holder of Transfer
Restricted Securities affected thereby liquidated damages ("Liquidated Damages")
in an amount equal to $0.05 per week per $1,000 in principal amount of Transfer
Restricted Securities held by such holder for each week or portion thereof that
the Registration Default
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continues for the first 90-day period immediately following the occurrence of
such Registration Default. The amount of the liquidated damages will increase by
an additional $0.05 per week per $1,000 in principal amount of 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 $0.35 per week per $1,000 in principal amount of Transfer Restricted
Securities. We and the guarantors will not be required to pay Liquidated Damages
for more than one Registration Default at any given time. Following the cure of
all Registration Defaults, the accrual of Liquidated Damages will cease.
All accrued Liquidated Damages will be paid by us or the guarantors to
holders entitled thereto in the same manner in which interest is payable to
holders under the Indenture.
The sole remedy available to the holders of the original notes will be that
described above. Any amounts of additional interest due will be payable in cash
on the same interest payments dates as the original notes.
EXPIRATION DATE; EXTENSIONS; AMENDMENT
The term "expiration date" means 5:00 p.m., New York City time, on,
, unless we extend the exchange offer, in which case the term
"expiration date" means the latest date to which the exchange offer is extended.
In order to extend the expiration date, we will notify the exchange agent
of any extension by oral or written notice and will issue a public announcement
of the extension, each prior to 9:00 a.m., New York City time, on the next
business day after the previously scheduled expiration date.
We reserve the right:
(a) to delay accepting of any original notes, to extend the exchange offer or to
terminate the exchange offer and not accept original notes not previously
accepted if any of the conditions set forth under "--Conditions" shall have
occurred and shall not have been waived by us, if permitted to be waived by
us, by giving oral or written notice of the delay, extension or termination
to the exchange agent, or
(b) to amend the terms of the exchange offer in any manner deemed by us to be
advantageous to the holders of the original notes.
We will notify you as promptly as practicable of any delay in acceptance,
extension, termination or amendment. If the exchange offer is amended in a
manner determined by us to constitute a material change, we will promptly
disclose the amendment in a manner intended to inform the holders of the
original notes of the amendment. Depending upon the significance of the
amendment, we may extend the exchange offer if it otherwise would expire during
the extension period.
Without limiting the manner in which we may choose to publicly announce any
extension, amendment or termination of the exchange offer, we will not be
obligated to publish, advertise, or otherwise communicate that announcement,
other than by making a timely release to an appropriate news agency.
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PROCEDURES FOR TENDERING
To tender in the exchange offer, a holder must:
- complete, sign and date the letter of transmittal, or a facsimile of the
letter of transmittal;
- have the signatures on the letter of transmittal guaranteed if required
by instruction 3 of the letter of transmittal; and
- mail or otherwise deliver the letter of transmittal or the facsimile in
connection with a book-entry transfer, together with the original notes
and any other required documents.
To be validly tendered, the documents must reach the exchange agent by or before
5:00 p.m. New York City time, on the expiration date. Delivery of the original
notes may be made by book-entry transfer in accordance with the procedures
described below. Confirmation of the book-entry transfer must be received by the
exchange agent on or prior to the expiration date.
The tender by a holder of original notes will constitute an agreement
between that holder and us in accordance with the terms and subject to the
conditions set forth in this prospectus and in the letter of transmittal.
Delivery of all documents must be made to the exchange agent at its address
set forth below. Holders may also request their brokers, dealers, commercial
banks, trust companies or nominees to effect the tender for those holders.
The method of delivery of original notes and the letter of transmittal and
all other required documents to the exchange agent is at the election and risk
of the holders. Instead of delivery by mail, it is recommended that holders use
an overnight or hand delivery service. In all cases, sufficient time should be
allowed to assure timely delivery to the exchange agent by or before 5:00 p.m.
New York City time, on the expiration date. No letter of transmittal or original
notes should be sent to us.
Only a holder of original notes may tender original notes in the exchange
offer. The term "holder" with respect to the exchange offer means any person in
whose name original notes are registered on our books or any other person who
has obtained a properly completed bond power from the registered holder.
Any beneficial holder whose original notes are registered in the name of
its broker, dealer, commercial bank, trust company or other nominee and who
wishes to tender should contact the registered holder promptly and instruct the
registered holder to tender on its behalf. If the beneficial holder wishes to
tender on its own behalf, it must, prior to completing and executing the letter
of transmittal and delivering its original notes, either make appropriate
arrangements to register ownership of the original notes in the holder's name or
obtain a properly completed bond power from the registered holder. The transfer
of record ownership may take considerable time.
Signatures on a letter of transmittal or a notice of withdrawal must be
guaranteed by a member firm of a registered national securities exchange or of
the National Association of Securities Dealers, Inc. or a commercial bank or
trust company having an office or correspondent in the United States referred to
as an "eligible institution," unless the Original Notes are tendered: (a) by a
registered holder who has not completed the box
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entitled "Special Issuance Instructions" or "Special Delivery Instructions" on
the letter of transmittal; or (b) for the account of an eligible institution. In
the event that signatures on a letter of transmittal or a notice of withdrawal,
are required to be guaranteed, the guarantee must be by an eligible institution.
If the letter of transmittal is signed by a person other than the
registered holder of any original notes listed therein, those original notes
must be endorsed or accompanied by appropriate bond powers and a proxy which
authorizes that person to tender the original notes on behalf of the registered
holder, in each case signed as the name of the registered holder or holders
appears on the original notes.
If the letter of transmittal or any original notes 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, they should indicate that when signing, and unless waived by us,
submit evidence satisfactory to us of their authority to act with the letter of
transmittal.
All questions as to the validity, form, eligibility, including time of
receipt, and withdrawal of the tendered original notes will be determined by us
in our sole discretion. This determination will be final and binding. We reserve
the absolute right to reject any original notes not properly tendered or any
original notes our acceptance of which, in the opinion of counsel for us, would
be unlawful. We also reserve the right to waive any irregularities or conditions
of tender as to particular original notes. Our interpretation of the terms and
conditions of the exchange offer, including the instructions in the letter of
transmittal, will be final and binding on all parties. Unless waived, any
defects or irregularities in connection with tenders of original notes must be
cured within such time as we shall determine. None of us, the exchange agent or
any other person shall be under any duty to give notification of defects or
irregularities with respect to tenders of original notes, nor shall any of them
incur any liability for failure to give notification. Tenders of original notes
will not be deemed to have been made until irregularities have been cured or
waived. Any original notes received by the exchange agent that are not properly
tendered and as to which the defects or irregularities have not been cured or
waived will be returned without cost by the exchange agent to the tendering
holders of original notes, unless otherwise provided in the letter of
transmittal, as soon as practicable following the expiration date.
In addition, we reserve the right in our sole discretion to:
(a) purchase or make offers for any original notes that remain outstanding
subsequent to the expiration date or, as set forth under "--Conditions," to
terminate the exchange offer in accordance with the terms of the
registration rights agreements; and
(b) to the extent permitted by applicable law, purchase original notes in the
open market, in privately negotiated transactions or otherwise. The terms of
any such purchases or offers may differ from the terms of the exchange
offer.
By tendering original notes pursuant to the exchange offer, each holder
will represent to us that, among other things,
(a) the new notes acquired pursuant to the exchange offer are being obtained in
the ordinary course of business of such holder;
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(b) the holder is not engaged in and does not intend to engage in a distribution
of the new notes;
(c) the holder has no arrangement or understanding with any person to
participate in the distribution of such new notes; and
(d) the holder is not our "affiliate," as defined under Rule 405 of the
Securities Act, or, if the holder is an affiliate, will comply with the
registration and prospectus delivery requirements of the Securities Act to
the extent applicable.
BOOK-ENTRY TRANSFER
We understand that the exchange agent will make a request promptly after
the date of this prospectus to establish accounts with respect to the original
notes at DTC for the purpose of facilitating the exchange offer, and upon the
establishment of those accounts, any financial institution that is a participant
in DTC's system may make book-entry delivery of original notes by causing DTC to
transfer the original notes into the exchange agent's account with respect to
the original notes in accordance with DTC's procedures for transfers. Although
delivery of the original notes may be effected through book-entry transfer into
the exchange agent's account at the depository trust company, an appropriate
letter of transmittal properly completed and duly executed with any required
signature guarantee, and all other required documents must in each case be
transmitted to and received or confirmed by the exchange agent at its address
set forth below on or prior to the expiration date, or, if the guaranteed
delivery procedures described below are complied with, within the time period
provided under the procedures. Delivery of documents to the depository trust
company does not constitute delivery to the exchange agent.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their original notes and
(a) whose original notes are not immediately available or
(b) who cannot deliver their original notes, the letter of transmittal or any
other required documents to the exchange agent on or prior to the expiration
date, may effect a tender if:
(1) the tender is made through an eligible institution;
(2) on or prior to the expiration date, the exchange agent receives from
the eligible institution a properly completed and duly executed Notice
of Guaranteed Delivery, by facsimile transmission, mail or hand
delivery, setting forth the name and address of the holder of the
original notes, the certificate number or numbers of the original notes
and the principal amount of original notes tendered stating that the
tender is being made thereby, and guaranteeing that, within three
business days after the expiration date, the letter of transmittal, or
facsimile thereof, together with the certificate(s) representing the
original notes to be tendered in proper form for transfer and any other
documents required by the letter of transmittal will be deposited by
the eligible institution with the exchange agent; and
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(3) the properly completed and executed letter of transmittal, or facsimile
thereof, together with the certificate(s) representing all tendered
original notes in proper form for transfer and all other documents
required by the letter of transmittal are received by the exchange
agent within three business days after the expiration date.
WITHDRAWAL OF TENDERS
Except as otherwise provided in this prospectus, tenders of original notes
may be withdrawn at any time by or prior to 5:00 p.m., New York City time, on
the expiration date, unless previously accepted for exchange.
To withdraw a tender of original notes in the exchange offer, a written or
facsimile transmission notice of withdrawal must be received by the exchange
agent at its address set forth in this prospectus by 5:00 p.m., New York City
time, on the expiration date. Any such notice of withdrawal must:
(a) specify the name of the depositor, who is the person having deposited the
original notes to be withdrawn;
(b) identify the original notes to be withdrawn, including the certificate
number or numbers and principal amount of the original notes or, in the case
of original notes transferred by book-entry transfer, the name and number of
the account at DTC to be credited;
(c) be signed by the holder in the same manner as the original signature on the
letter of transmittal by which such original notes were tendered, including
any required signature guarantees, or be accompanied by documents of
transfer sufficient to have the trustee with respect to the original notes
register the transfer of such original notes into the name of the depositor
withdrawing the tender; and
(d) specify the name in which any such original notes are being registered if
different from that of the depositor.
All questions as to the validity, form and eligibility, including time of
receipt, of withdrawal notices will be determined by us, and our determination
will be final and binding on all parties. Any original notes so withdrawn will
be deemed not to have been validly tendered for purposes of the exchange offer
and no new notes will be issued with respect to the original notes withdrawn
unless the original notes so withdrawn are validly retendered. Any original
notes which have been tendered but which are not accepted for exchange will be
returned to their holder without cost to the holder as soon as practicable after
withdrawal, rejection of tender or termination of the exchange offer. Properly
withdrawn original notes may be retendered by following one of the procedures
described above under "Procedures for Tendering" at any time on or prior to the
expiration date.
CONDITIONS
Notwithstanding any other term of the exchange offer, we will not be
required to accept for exchange, or exchange, any new notes for any original
notes, and may terminate or amend the exchange offer on or before the expiration
date, if the exchange offer violates any applicable law or interpretation by the
staff of the SEC.
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If we determine in our reasonable discretion that the foregoing condition
exists, we may:
- refuse to accept any original notes and return all tendered original
notes to the tendering holders;
- extend the exchange offer and retain all original notes tendered prior to
the expiration of the exchange offer, subject, however, to the rights of
holders who tendered the original notes to withdraw their tendered
original notes; or
- waive such condition, if permissible, with respect to the exchange offer
and accept all properly tendered original notes which have not been
withdrawn.
If a waiver constitutes a material change to the exchange offer, we will
promptly disclose the waiver by means of a prospectus supplement that will be
distributed to the holders, and we will extend the exchange offer as required by
applicable law.
Pursuant to the registration rights agreement, we are required to cause to
be filed with the SEC a shelf registration statement with respect to the
original notes on or prior to 30 days after the filing deadline, and thereafter
use our best efforts to have the shelf registration statement declared
effective, if:
(a) the exchange offer is not permitted by law or applicable interpretations of
the staff of the SEC or
(b) any holder of original notes or new notes notifies us that either
(1) the holder is not eligible to participate in the exchange offer
(2) the holder participates in the exchange offer and does not receive
freely transferable new notes in exchange for tendered original notes,
or
(3) the holder is a broker-dealer and holds the original notes acquired
directly from us or our affiliates.
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EXCHANGE AGENT
The Bank of New York has been appointed as exchange agent for the exchange
offer, and is also the trustee under the indenture under which the new notes
will be issued. Questions and requests for assistance and requests for
additional copies of this prospectus or of the letter of transmittal should be
directed to Kin Lau, addressed as follows:
For information by Telephone:
(212) 815-3750
<TABLE>
<S> <C>
By Mail: By Hand or Overnight Delivery Service:
The Bank of New York The Bank of New York
101 Barclay Street, Floor 7E 101 Barclay Street
New York, New York 10286 Corporate Trust Service Window, Ground
Attn: Kin Lau, Reorganization Dept.--7E Level
New York, New York 10286
Attn: Kin Lau, Reorganization Dept.--7E
</TABLE>
By Facsimile Transmission:
(212) 815-6339
(Telephone Confirmation)
(212) 815-3750
FEES AND EXPENSES
We have agreed to bear the expenses of the exchange offer pursuant to the
registration rights agreement. We have not retained any dealer-manager in
connection with the exchange offer and will not make any payments to brokers,
dealers or others soliciting acceptances of the exchange offer. We, however,
will pay the exchange agent reasonable and customary fees for its services and
will reimburse it for its reasonable out-of-pocket expenses in connection with
providing the services.
The cash expenses to be incurred in connection with the exchange offer will
be paid by us. These expenses include fees and expenses of The Bank of New York
as exchange agent, accounting and legal fees and printing costs, among others.
ACCOUNTING TREATMENT
The new notes will be recorded at the same carrying value as the original
notes as reflected in our accounting records on the date of exchange.
Accordingly, no gain or loss for accounting purposes will be recognized by us.
The expenses of the exchange offer and the unamortized expenses related to the
issuance of the original notes will be amortized over the term of the new notes.
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of original notes who are eligible to participate in the exchange
offer but who do not tender their original notes will not have any further
registration rights, and their
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original notes will continue to be restricted for transfer. Accordingly, such
original notes may be resold only:
(a) to us, upon redemption of the original notes or otherwise;
(b) so long as the original notes are eligible for resale pursuant to Rule 144A
under the Securities Act to a person inside the United States whom the
seller reasonably believes is a qualified institutional buyer within the
meaning of Rule 144A, in a transaction meeting the requirements of Rule
144A;
(c) in accordance with Rule 144 under the Securities Act, or under another
exemption from the registration requirements of the Securities Act, and
based upon an opinion of counsel reasonably acceptable to us;
(d) outside the United States to a foreign person in a transaction meeting the
requirements of Rule 904 under the Securities Act; or
(e) under an effective registration statement under the Securities Act;
in each case in accordance with any applicable securities laws of any state of
the United States.
REGULATORY APPROVALS
We do not believe that the receipt of any material federal or state
regulatory approval will be necessary in connection with the exchange offer,
other than the effectiveness of the exchange offer registration statement under
the Securities Act.
OTHER
Participation in the exchange offer is voluntary and holders of original
notes should carefully consider whether to accept the terms and condition of
this exchange offer. Holders of the original notes are urged to consult their
financial and tax advisors in making their own decisions on what action to take
with respect to the exchange offer.
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BUSINESS
We are one of the world's leading independent providers of ground services
to air cargo and passenger airlines. Our services include cargo handling and
ramp, passenger and technical services. We provide services for over 300
customers, including American Airlines, British Airways, Cathay Pacific,
Continental Airlines, Delta Air Lines, DHL, Emery Worldwide, Korean Air Lines,
Nippon Cargo Airlines and UPS. We currently service our customers at 89
airports, including 25 of the 30 busiest U.S. airports and five of the 10
busiest European airports, each based on 1998 annual arrivals and departures. We
employ approximately 9,700 employees in North America, the Caribbean, Europe and
Hong Kong.
We have experienced steady revenue growth by providing dependable and cost
effective service in the commercial aviation market that has experienced nearly
uninterrupted growth in annual departures, revenue passenger miles and air cargo
ton miles. Worldwide's revenues grew from $72.0 million in 1989 to $229.7
million in 1998, representing a compounded annual growth rate of 13.8%. On
August 12, 1999, Worldwide purchased all of the stock of Miami Aircraft Support,
one of the largest independent providers of express air cargo handling services
in the United States. Miami Aircraft Support's revenues grew from $24.8 million
in 1994 to $56.4 million in 1998, representing a compounded annual growth rate
of 22.7%.
On a pro forma basis for the nine months ended September 30, we generated
revenues and EBITDA of $237.6 million and $20.2 million, respectively. EBITDA
for any period is calculated as the sum of net income plus the following to the
extent deducted in calculating net income: (1) interest expense (income), (2)
income tax expense, (3) depreciation expense and (4) amortization expense. We
consider EBITDA to be a widely accepted financial indicator of a company's
ability to service debt, fund capital expenditures and expand its business;
however, EBITDA is not calculated in the same way by all companies and is
neither a measurement required, nor represents cash flow from operations as
defined, by generally accepted accounting principles. EBITDA should not be
considered by you as an alternative to net income, as an indicator of operating
performance or as an alternative to cash flow as a measure of liquidity. The
calculation of EBITDA in this prospectus is calculated differently than for
purposes of the covenants under the indenture and the senior secured credit
facility. See "Description of Senior Secured Credit Facility" and "Description
of New Notes" for how these instruments calculate EBITDA.
INDUSTRY TRENDS
We believe that the demand for independent ground services will continue to
increase due to (1) the growing demand for air cargo and passenger
transportation and the increased outsourcing of ground services and (2)
continuing European regulatory liberalization. In addition, we believe that the
highly fragmented nature of our industry will provide us with significant
opportunities to obtain new business and make acquisitions. Each of these
factors is discussed below.
Growing Demand for Air Transportation. Historically, the ground services
industry has grown along with cargo and passenger air traffic. We expect
continued growth in both cargo and passenger air traffic, as well as in the
ground services industry, due to continued global economic growth, increased
globalization of trade, increased use of express air shipments and foreign
airport liberalization. According to MergeGlobal, Inc., global freight measured
in millions of metric tons were estimated to have grown at a compounded annual
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rate of 10.4% from 1993 to 1997 and were projected to grow at a compounded
annual rate of 6.6% from 1997 to 2002. According to The Airline Monitor, global
passenger air traffic, as measured by revenue passenger miles, were estimated to
have grown at a compounded annual rate of 6.1% from 1990 to 1997 and were
projected to grow at a compounded annual rate of 4.6% from 1997 to 2008.
Increased Outsourcing. Outsourcing ground services is a cost-effective
alternative to performing services internally for many airlines. For example,
outsourcing is cost-effective when a carrier has a limited number of daily
flights into a particular airport, making the purchase and maintenance of the
necessary equipment and labor uneconomical. As a result, foreign carriers,
regional carriers, carriers initiating service to a new city and U.S. carriers
at non-hub airports outsource a relatively high percentage of their ground
services. We believe that outsourcing of ground services will increase as (1)
major carriers further heighten their focus on their core airline businesses and
seek to further reduce costs, (2) airlines expand to new airports, (3) ground
services liberalization continues at European Union airports and (4) new
airlines emerge.
European Regulatory Liberalization. We expect regulatory liberalization in
Europe to increase demand for third party ground services at European airports.
We believe that this regulatory liberalization will create significant
opportunities for expansion of our presence in Europe.
At most European airports, there have historically been significant
limitations on the ability of third party ground services providers to provide
these services. The European Union has called for a two-part liberalization of
European airports which took effect January 1999. The first part of the
liberalization requires that all European airports allow any ground services
provider to provide cargo handling, passenger services and cabin cleaning
services at these airports. The second part requires that European airports
grant permission for at least one independent ground services provider that is
not affiliated with the airport or the national flag carrier in that country to
provide ramp services and baggage handling services. Compliance with this second
part of regulatory liberalization may be postponed until 2003 if petitions are
filed by European airports.
Fragmented Industry. The ground services industry is highly fragmented in
both the United States and Europe and consists of a large number of domestic and
international service providers, many of which provide services at a small
number of airports or a single airport. Many of the smaller providers also
specialize in particular geographic areas or niche markets such as cargo
warehousing or fueling. We believe that smaller providers are likely to face
significant competitive pressures as large airlines increasingly outsource to
fewer and larger suppliers that can provide a broader range of services at
multiple locations.
COMPETITIVE STRENGTHS
We believe that we are well positioned to benefit from current trends,
including expected growth in our industry due to the following competitive
strengths:
Long-standing Customer Relationships. We have long-standing relationships
with many of the major passenger airlines and express air cargo carriers. We
believe that these relationships provide us with significant credibility when
marketing our services to new customers and in cross-selling additional services
to our existing customers. Our long-standing customer relationships include
Emery (16 years), UPS (16 years), American
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Airlines (15 years), Nippon Cargo Airlines (15 years), Continental Airlines (10
years), Korean Air Lines (10 years), DHL (10 years) and BAX Global (7 years). We
believe that our long-standing customer relationships are due in part to our
emphasis on providing quality service.
Wide Range of Services. We provide a wide range of services, from aircraft
arrival through departure, to both air cargo and passenger airlines. By doing
so, we are able to build on existing customer relationships by cross-selling our
services. For example, when we sign a new contract for baggage loading and cargo
handling, we may offer that customer additional services such as aircraft
cleaning, de-icing or passenger ticketing at the same or another airport. We
believe that cargo and passenger airlines will increasingly look to fewer and
larger suppliers, such as our company, that provide a more comprehensive range
of ground services at multiple locations.
Broad Geographic Presence. We have a presence at 19 international airports
and 70 domestic airports. We intend to use our broad geographic presence to
further build on our customer relationships by cross-selling our services at
more locations. We believe that few other providers can offer as many types of
ground services in as many locations. We also believe that the diversity of our
customer base, both by geography and type of carrier, creates a stronger revenue
base and reduces our exposure to regional economic cycles.
Experienced Management Team. Our executive officers have an average of over
17 years of experience in the aviation industry. Many of our executive officers
and our managers have worked at major international airlines, which we believe
provides them with firsthand knowledge of the needs and perspectives of our
airline customers. Our chairman and chief executive officer, Peter A. Pappas,
has held various management positions in the aviation industry for approximately
30 years, including as a corporate officer for both AMR Corporation and Pan
American World Airways. In addition, our president and chief operating officer,
Mark Dunkerley, has worked in the aviation industry for approximately 14 years,
including as a senior vice president for British Airways.
Competitive Weaknesses. Although we believe that we are well positioned to
benefit from current trends in the ground services industry, we have the
following competitive weaknesses:
- we have a near-term dependence on American Airlines and other significant
customers; and
- although we have long-standing customer relationships, the contractual
agreements with our customers are often short-term in duration and may be
cancelled by our customers on short notice.
BUSINESS STRATEGY
Our goal is to become the world's leading provider of ground services for
air cargo and passenger airlines by:
Increasing Our Customer Base at Existing Locations. We intend to market our
wide range of services and broad geographic presence to increase our customer
base across our existing network of 89 airports. We believe that our services
and geographic presence will provide us with a competitive advantage when
offering our services to potential new customers. We also believe that, as an
independent company, we will have new customer opportunities that were not
available to us when we were affiliated with American Airlines.
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Cross-Selling Our Services. By providing a broad range of services at a
large number of airports in North America and Europe, we believe that we are
well positioned to cross-sell additional services to our customers, including at
additional locations. For example, if we provide cargo handling services to a
customer at one location, we can cross-sell cargo handling or other services to
that customer at one or more additional locations. Moreover, we believe that the
increase in the number of airline alliances will present cross-selling
opportunities by enabling us to use our relationships with alliance member
customers to more effectively market our services to other alliance members.
Emphasizing Service Quality. Due to the nature of the services we provide,
we believe that service quality is critical to our customers and therefore
compete on this basis. Our employees go through training programs tailored to
our customers' policies and procedures. Local managers at our airport locations
are also given substantial discretion in tailoring services to the needs of
customers at their airports. Additionally, we believe that we are one of the few
ground service providers that has brought its services to a new standard of
quality by obtaining ISO 9002 certification for our cargo terminals at the John
F. Kennedy International Airport in New York and the Charles de Gaulle and Orly
airports in Paris. ISO 9002 is a certification by the International Standards
Organization that we have formalized our quality control and operations
procedures and that these procedures meet quality standards. The certification
requires that we continue to monitor our procedures and subject them to periodic
auditing. We intend to pursue this certification at additional locations.
Selectively Pursuing Complementary Acquisitions. We believe that
significant acquisition opportunities exist as a result of the highly fragmented
nature of the U.S. and European ground services industry. We view the purchase
of Miami Aircraft Support and Aerolink as excellent examples of these
opportunities because both Miami Aircraft Support and Aerolink complement
Worldwide in terms of current services, customer base and geographic presence
and are expected to improve our profitability and cash flow stability. We intend
to continue to selectively pursue additional domestic and international
acquisitions that complement our existing business, profitability and cash flow
stability.
Difficulties implementing our business strategy. In accomplishing our
goals, we may face the following difficulties, among others:
- we may not be able to find complementary acquisitions at reasonable
prices; and
- we may have difficulties expanding our customer base in some markets
where there are high levels of competition.
SERVICES
Our ground services consist of:
- cargo handling;
- ramp services;
- passenger services; and
- technical services.
Cargo Handling. Cargo handling is our largest line of business. We
generate much of our cargo handling revenue by charging fees to load and unload
cargo on to and from cargo aircraft. Through the acquisition of Miami Aircraft
Support, we are one of the
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largest providers of services for express air cargo carriers that deliver time
sensitive parcels, mail and other cargo. We also handle various types of cargo
items, including perishables, electronic equipment, valuable or fragile
merchandise and bulk items for other air carrier customers.
For selected customers, we also manage warehouse facilities. For inbound
flights, we transport freight to a warehouse, remove it from the pallet or
container and process the shipment and delivery orders. For outbound flights, we
handle cargo shipment receiving, processing and aircraft loading.
We provide cargo handling services at approximately 50 U.S. airports. We
principally provide these services in the United States at John F. Kennedy
International Airport in New York, Dallas-Fort Worth International Airport and
Miami International Airport. In France, we are a leading provider of cargo
handling services, with operations at six airports. We also provide cargo
handling services at four other European markets.
We believe that we are one of the few ground service providers that has
brought its services to a new standard of quality by obtaining ISO 9002
certification at John F. Kennedy airport in New York and Charles de Gaulle and
Orly airports in Paris, which are key domestic and international airports. ISO
9002 certification is important to our customers because it demonstrates formal
recognition of our quality control procedures. Currently we intend to pursue
this certification in additional locations.
Ramp Services. Ramp services include the following services for passenger
airlines:
- guiding the aircraft to and from the gate;
- loading and unloading baggage and freight;
- cabin cleaning; and
- providing heating, air conditioning, lavatory and water services.
Ramp services are critical to every airline. This is because airlines only
have a short period of time between arrival and departure to prepare an aircraft
for new passengers. Without experienced ramp crews and well-maintained
equipment, a flight may be delayed and customers may become dissatisfied. An
experienced ramp crew helps ensure that an aircraft departs on schedule.
Passenger Services. Passenger services, which are provided to passenger
airlines, include the following:
- checking passengers' baggage at curbside;
- providing ticket counter service, which includes helping passengers to
check baggage, receive boarding passes, purchase tickets, check
documentation and receive flight-related information;
- staffing airline lounges;
- providing departure gate services and managing the ticket-taking process;
- assisting with passengers' baggage-related problems such as damage, theft
or mishandled bags; and
- providing wheelchair assistance.
We customize passenger services to meet the particular needs of an airline.
For example, at the airports where we provide passenger services to American
Airlines, our employees that provide these services wear the same uniforms as
American Airlines
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employees and are trained to their standards. For our foreign airline customers,
we frequently provide employees who are fluent in the language of the airline's
home country. Passenger services customers provide individualized specifications
regarding the number of employees that must be available for the handling of a
given flight.
Our approximately 75 customers for these services include American
Airlines, for which we provide passenger services at approximately 50 airports,
foreign airlines such as Korean Air Lines and Japan Airlines, and smaller and
start-up airlines, such as Citybird and Spirit Airlines.
Technical Services. Technical services include the following:
- preventive maintenance and mechanical support for aircraft, ground
equipment and jet bridges;
- freight management, including brokering freight for both airline and
non-airline customers;
- shuttling of airline crews to and from the airport;
- aircraft fueling and managing airport fuel storage facilities; and
- aircraft de-icing.
Because we already have a presence at 89 airports and our equipment and
personnel are already in place, we believe that we are able to provide these
additional services for customers at these airports upon short notice and in an
efficient manner.
Pricing of our Services. We do not have a single price structure for our
services. We price our services based on the following:
- the specific services requested by the customer;
- the projected volume of services requested;
- the location where these services are to be performed; and
- the costs associated with providing these services, including the cost of
labor.
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AIRPORT LOCATIONS
We provide services at the airports indicated below.
UNITED STATES
Atlanta, GA
Baltimore, MD
Boston, MA
Bradley, CT
Buffalo, NY
Burbank, CA
Charlotte, NC
Chicago, IL
Cincinnati, OH
Cleveland, OH
Colorado Springs, CO
Columbus, OH
Dallas/Ft. Worth, TX
Dayton, OH
Denver, CO
Detroit, MI
Ft. Lauderdale, FL
Ft. Myers, FL
Greensboro, NC
Greenville/Spartanburg, SC
Gunnison, CO
Harrisburg, PA
Hayden, CO
Honolulu, HI
Houston, TX
Islip, NY
Jackson Hole, WY
Jackson, MS
Jacksonville, FL
Kona, HI
Las Vegas, NV
Lihue, HI
Los Angeles, CA
Louisville, KY
Mather AFB, CA
Maui, HI
Memphis, TN
Miami, FL
Newburgh, NY
New York(JFK), NY
New York(LaGuardia), NY
Newark, NJ
Norfolk, VA
Oakland, CA
Oklahoma City, OK
Omaha, NB
Ontario, CA
Orange County, CA
Philadelphia, PA
Pittsburgh, PA
Portsmouth, NH
Providence, RI
Raleigh/Durham, NC
Reno, NV
Richmond, VA
Sacramento, CA
Salt Lake City, UT
San Antonio, TX
San Francisco, CA
San Jose, CA
San Juan, Puerto Rico
Seattle, WA
Spokane, WA
St. Petersburg, FL
Tucson, AZ
Vail, CO
Washington(Dulles), DC
Washington(National), DC
West Palm Beach, FL
White Plains, NY
CANADA
Halifax, Nova Scotia
Montreal,(Dorval), Quebec
Montreal,(Mirabel), Quebec
Toronto, Ontario
CARIBBEAN
Kingston, Jamaica
Montego Bay, Jamaica
St. Croix, Virgin Islands
St. Thomas, Virgin Islands
EUROPE
Brussels, Belgium
Frankfurt, Germany
Lille, France
London(Heathrow), England
Lyon, France
Madrid, Spain
Marseilles, France
Paris(Charles de Gaulle), France
Paris(Orly), France
Toulouse, France
ASIA
Hong Kong, China
CUSTOMERS
We have over 300 customers, including approximately 200 airline customers,
approximately 30 air cargo carrier customers and approximately 10 airport
customers. Our remaining customers include among others, freight forwarders and
non-airline customers for which we provide a variety of services. Our airline
customers include American Airlines and its affiliate American Eagle, British
Airways, Continental Airlines, Korean Air Lines, Nippon Cargo Airlines and Saudi
Arabian Airlines. Air cargo carrier customers include UPS, DHL, Emery and BAX
Global. Significant airport customers include the Port Authority of New York and
New Jersey, the Houston Intercontinental Airport, the State of Hawaii and the
Madrid airport. Our top ten customers, including American Airlines and its
affiliate American Eagle, accounted for approximately 50% of year to date
September 30, 1999 pro forma revenues. No single customer accounted for more
than 5% of our pro forma revenues for the nine months ended September 30, 1999,
other than American Airlines and American Eagle, which together accounted for
approximately 23% of total pro forma revenues for the nine months ended
September 30, 1999.
We generally have service contracts with our customers and, at September
30, 1999, we had over 800 service contracts. These contracts are typically based
on standard industry
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forms that are customized to fit the desired contractual arrangement. Many of
our service contracts are effective for a specified term and allow our customers
to terminate their contract on ninety days notice or sooner for continuing
performance breaches. After their initial term, our contracts typically
automatically continue but become terminable by either party on 60 days notice
or less for any reason. Our contracts usually contain price escalation clauses
that are linked to the consumer price index. Under these clauses, if the
consumer price index increases, we are permitted to increase our prices by the
consumer price index or a percentage of it.
SALES AND MARKETING
We employ eight sales and four marketing professionals on a full-time
basis. They have been with our company for an average of approximately nine
years.
Our sales force performs a combination of functions, including the
servicing of existing accounts and generating new business. Each salesperson is
assigned accounts that they manage on a national and local basis. Our sales
force formally markets our services through customer visits, membership in trade
organizations and annual customer events. Our sales force also conducts market
and competitive research to identify new business opportunities. Emphasis is
placed on determining where a current or potential customer is currently
outsourcing ground services and on who is providing the services. The research
conducted by our sales force on market conditions and competition enables us to
concentrate on our strengths at an individual location. Local managers also
informally market our services on a daily basis through their interaction with
customers. Instead of paying commissions to our sales professionals, we allow
them to participate in our incentive compensation plan, which we believe alters
their focus from short-term growth to establishing and maintaining profitable
long-term customer relationships.
The primary function of our five person marketing group is to create and
enhance our brand and image through advertising and sales promotion activities.
The marketing group also prepares customer and industry presentations and
prepares and reviews contracts.
COMPETITION
The ground services industry consists of a large number of domestic and
international service providers. Many of these provide service at more than one
airport, although only a small number of them provide services nationally or
internationally. In the United States, our principal competitors are national
ground service providers such as DynAir Services, Hudson General Corporation and
Ogden Aviation Corporation, as well as smaller companies that operate regionally
or at individual locations. Internationally, we compete principally with
international ground service providers such as Cargo Service Centers, Globe
Ground, Servisair and Swissport. We also indirectly compete against airlines,
since airlines continue to perform a large portion of their ground services
in-house.
The principal competitive factors in our industry are:
- price;
- reputation for quality;
- breadth of services offered; and
- experience in a particular market or geographic region.
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We believe that we compare favorably to our competition with respect to all
of these factors.
EMPLOYEES
As of September 30, 1999, we had approximately 9,700 employees, of whom
approximately 1,050 were management and approximately 8,650 were non-management
personnel. Approximately 4,050, or 42%, of our employees work part-time.
Approximately 2,300 of our U.S. employees are represented by collective
bargaining agreements. These employees consist primarily of cargo handling and
ramp services workers. The Transport Workers Union, or TWU, represents
approximately 2,250 of our U.S.-based employees. Our current agreement with the
TWU is effective until June 2001. The Teamsters Union also represents
approximately 75 Philadelphia employees, and the contract is effective until
February 2000. In Canada, approximately 300 of our employees are represented by
the Canadian Auto Workers Union. This agreement expired in November 1998. We
continue to operate under the agreement and we intend to renegotiate the
agreement in the near future. In some of the other countries where we operate,
we are subject to industry-wide collective bargaining agreements, as well as
local labor laws.
We have not experienced any material business interruption as a result of
labor disputes and believe that we have a good relationship with our employees.
PROPERTIES
Our headquarters are located in Euless, Texas, where we lease approximately
18,700 square feet of office space. This lease expires on August 15, 2004. We
also lease more than 2,350,000 square feet of other space at approximately 50
different airports domestically and internationally. Many of these leases are on
a month-to-month basis. We do not own any facilities.
Often, the cargo facilities that we use are owned or leased by airline
customers, rather than leased by us.
LEGAL PROCEEDINGS
We are not a party to any legal proceedings, other than ordinary routine
litigation incidental to our business, that we believe are material to our
business or financial condition.
REGULATORY COMPLIANCE
FAA and Other Related Operational Regulations. Our business must comply
with FAA airport security regulations regarding the screening of passengers and
cargo on behalf of air carriers. While companies that screen passengers and
cargo are not currently required to be certificated by the FAA, the FAA
published an advance notice of proposed rulemaking in March 1997 that would have
required the certification of companies that screen passengers or cargo, such as
ours. While the FAA withdrew this advance notice in May 1998, the FAA may
require this certification in the future. At that time, we would be required to
become certificated to continue screening passengers and cargo. In addition, we
would be directly regulated by the FAA and could be subject to enforcement
actions, such as suspension or revocation of our certification or civil
penalties, if we did not adequately comply with FAA security regulations.
Because we accept hazardous material on behalf of our customers and perform
services regarding the transportation of hazardous materials by both air and
ground transport, we must comply with DOT regulations governing the handling,
packaging,
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marking, labeling and transportation of hazardous materials. Our employees who
directly affect hazardous materials transportation safety must comply with DOT
regulations, including among other things, receiving specialized training. If we
fail to properly handle, package, mark, label or transport hazardous materials
or to properly train employees who directly affect hazardous materials
transportation safety, it could result in substantial civil penalties.
Additionally, because of the types of materials that we carry for ground
transport on behalf of our customers, such as explosives and toxic materials, we
are required to register with the DOT annually as a hazardous materials carrier.
While we do not hold an FAA-issued repair station certificate, and do not
hold ourselves out as an FAA-certificated repair station, we employ certificated
and rated mechanics who perform maintenance and preventive maintenance on
aircraft. These mechanics must perform their duties in accordance with the
Federal Aviation Regulations in order to approve and return to service aircraft
upon which any maintenance has been performed. Their failure to comply with
these regulations could result in civil penalties, as well as the suspension or
revocation of their individual mechanic's certificates, which could adversely
affect that portion of our business.
While we are not directly impacted by FAA regulations regarding drug and
alcohol use, our certificated mechanics, our employees who perform passenger and
cargo screening and our other employees who perform safety sensitive functions
must be covered by FAA approved drug and alcohol misuse plans to perform
services on behalf of many of our customers. If we or our employees fail to
comply with the FAA drug and alcohol use regulations, we could be fined or
restricted by our airline customers from performing these services in the
future, which could adversely affect that portion of our business.
Environmental. We must comply with a variety of international, federal and
state laws and regulations relating to environmental protection, including laws
and regulations relating to the handling, storage, disposal and remediation of
petroleum-based products used in the airline industry. These operations are
regulated by the Resource Conservation and Recovery Act, or RCRA, and its state
and local counterparts. RCRA regulates our hazardous waste generator status, the
disposal of solid wastes from our operations and our storage of petroleum
products. We are also required to file Spill Prevention Control and
Countermeasure Plans with the regulatory authorities where we have bulk storage
of petroleum. Also, at some of our locations, we are required to register with
regulatory authorities as either permittee or co-permittee for discharges of
wastewater and stormwater.
These laws and regulations may affect the cost of operating our business
because we operate fueling depots in a small number of locations, maintain
equipment for our cargo and ramp operations and store and dispose of petroleum
products used in these operations. We believe that our operations are in
material compliance with these environmental laws and regulations. We do not
expect future costs associated with compliance with these laws and regulations
to materially harm our business, financial condition or future results. In
addition, in connection with the sale of Worldwide to our parent, we obtained
environmental indemnities from AMR Corporation which provide that AMR
Corporation will indemnify us, subject to deductibles, for all environmental
liabilities that relate to periods prior to the closing of the sale. We also
received environmental indemnities from the sellers of Miami Aircraft Support
and Aerolink. We also maintain environmental impairment insurance.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table contains the name, age and position of each person who
is an executive officer or director of our company. Each director also serves as
a director of our parent.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Peter A. Pappas..................... 62 Chairman and Chief Executive Officer
Mark Dunkerley...................... 36 Chief Operating Officer, President and
Director
John P. Vittas...................... 55 Senior Vice President, Sales and
Marketing
Olivier Bijaoui..................... 42 Senior Vice President, Europe
Jonathan S. Weaver.................. 35 Senior Vice President, Planning
Albert V. Casey..................... 79 Director
Marcel Fournier..................... 44 Director
Leonard M. Harlan................... 63 Director
Lieut. General Thomas G. McInerney
(Retired)......................... 62 Director
Bradley G. Stanius.................. 53 Director
Gilbert A. Yanuck................... 59 Director
</TABLE>
We currently have eight authorized directors, each of whom will serve until
a successor is elected or until any of them resigns or is removed. On January
27, 2000, A. Scott Letier, our former Chief Financial Officer, ceased to be
employed by Worldwide. We are currently searching for his replacement.
Peter A. Pappas joined Worldwide in October 1998 and serves as Chairman and
Chief Executive Officer. From October 1998 to July 1999, Mr. Pappas served as
Worldwide's President and Chief Executive Officer. Mr. Pappas has approximately
30 years of aviation industry experience. Prior to joining Worldwide, Mr. Pappas
served as Senior Vice President of Marketing, Planning and Sales at American
Eagle, a position he held since November 1995. From January 1992 to October
1995, Mr. Pappas served as President of the AMR Consulting Group and its
successor, AMR Training and Consulting Group. From March 1989 to November 1991,
Mr. Pappas served as Vice President of Strategic Planning at Pan American World
Airways. Prior to March 1989, Mr. Pappas held various executive positions with
American Airlines, Pan American World Airways and Eastern Airlines.
Mark Dunkerley joined Worldwide in July 1999 and serves as Chief Operating
Officer and President and as a director. Prior to joining Worldwide, Mr.
Dunkerley served as the Senior Vice President in charge of the Latin America and
Caribbean Division for British Airways from April 1997 to July 1999 and also
served as Manager in British Airways' Eastern Europe division from October 1995
until April 1997. Mr. Dunkerley also served as a Vice President and Manager of
British Airways from August 1989 to October 1995 in various capacities and was
responsible for Commercial and Government Affairs for North America and Investor
Relations for North America. Prior to joining British Airways, Mr. Dunkerley
served as the Assistant to the Chief Executive Officer of the Miami
International Airport from August 1985 to August 1989.
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John P. Vittas joined Worldwide in September 1993 and has been Senior Vice
President of Sales and Marketing since August 1998. Mr. Vittas also served as
Senior Vice President of the New York Region of Worldwide from September 1993 to
July 1998. Prior to joining Worldwide, Mr. Vittas held various management
positions at American Airlines, dating back to 1968.
Olivier Bijaoui joined Worldwide in January 1996 and has served as Senior
Vice President for Europe since May 1996. From January 1993 to May 1996, Mr.
Bijaoui served as President of SFS, a cargo handling company operated at Orly
and Charles de Gaulle airports in Paris which had been built by Mr. Bijaoui and
his father and was acquired by Worldwide in 1993. From 1980 until his promotion
to President, Mr. Bijaoui served as managing director of SFS.
Jonathan S. Weaver joined Worldwide in September 1988 and has served as
Senior Vice President of Planning since February 1999. From August 1998 to
February 1999, Mr. Weaver served as Vice President of Field Resources of
Worldwide. From May 1997 to August 1998, he acted as Assistant Vice President of
Field Resources. From March 1995 to May 1997, Mr. Weaver served as Director of
Field Resources. Prior to March 1995, Mr. Weaver held various other management
positions at Worldwide.
Albert V. Casey has served as a director of Worldwide since March 1999. Mr.
Casey rejoined the Edwin L. Cox School of Business at Southern Methodist
University during July 1993 after having served as the school's Ann Cox
Distinguished Professor of Business Policy from August 1986 to May 1988. Prior
to rejoining the Business School, Mr. Casey was the President and Chief
Executive Officer of the Resolution Trust Corporation from October 1991 to March
1993. Mr. Casey was the Chief Executive Officer of AMR Corp. and American
Airlines from February 1974 until the retirement in February 1985. In 1986, Mr.
Casey served as Postmaster General of the United States.
Marcel Fournier has served as a director of Worldwide since March 1999. Mr.
Fournier has served as a Managing Director of Castle Harlan, Inc. since December
1995. Prior to joining Castle Harlan, Inc., Mr. Fournier held various positions,
including Managing Director, at the investment banking group of Lepercq, de
Neuflize & Co., Inc. from November 1981 to November 1995. From June 1979 to
November 1981, Mr. Fournier was Assistant Director of the United States office
of the agency of the French Prime Minister.
Leonard M. Harlan has served as a director of Worldwide since March 1999.
Mr. Harlan is the President of Castle Harlan, Inc., which he co-founded in 1987,
Castle Harlan Partners II GP, Inc. and Castle Harlan Partners III GP, Inc. Prior
to founding Castle Harlan, from 1969 to 1995, Mr. Harlan was Chairman and Chief
Executive Officer of the Harlan Company, a real estate investment banking and
advisory firm. Mr. Harlan was also a member of the Executive Committee of the
Harvard Business School Alumni Association, is currently a Trustee of the New
York City Citizens Budget Commission and is on the Advisory Board of the Journal
of Private Equity.
Lieut. General Thomas G. McInerney (Retired) has served as a director of
Worldwide since March 1999. General McInerney has served as the Chief Executive
Officer and President of Business Executives for National Security (BENS) since
March 1996. Prior to joining BENS, General McInerney was Vice President of
Command and Control for Loral Defense Systems--Eagan, which was formerly Unisys,
Electronic Systems Division, from November 1994 to March 1996. Prior to 1994,
General McInerney served in
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numerous key U.S. Air Force assignments and had extensive military command,
including Assistant Vice Chief of Staff of the Air Force, Director of the
Defense Performance Review, Vice Commander in Chief-United States Air Forces in
Europe and Commander-Alaskan Air Command. General McInerney is also a member of
the board of directors of Signal Technology Corporation.
Bradley G. Stanius has served as a director of Worldwide since March 1999.
Mr. Stanius has served as the Chief Executive Officer of Smarte Carte since
December 1997, which he joined in 1992. Prior to joining Smarte Carte in 1992,
Mr. Stanius served as the Chairman and Chief Executive Officer of Pharmaceutical
Services, Inc. Mr. Stanius is also a former member of the Minnesota House of
Representatives, served as the Republican caucus whip and is a former Mayor of
White Bear Lake, Minnesota.
Gilbert A. Yanuck has served as a director of Worldwide since March 1999.
From 1971 through March 1999, Mr. Yanuck has held various positions with MAG
Aerospace Industries, Inc., including President and Chief Executive Officer
prior to retiring in March, 1999. Mr. Yanuck has also served and continues to
serve as a consultant and a director of MAG Aerospace Industries, Inc.
COMMITTEES OF THE BOARD OF DIRECTORS
Our board of directors presently has two committees, a compensation
committee and an audit committee. The compensation committee is comprised of
Messrs. Fournier, Harlan, Stanius and Yanuck and the audit committee is
comprised of Mr. Casey, General McInerney and Mr. Fournier. The compensation
committee establishes remuneration levels for some of our officers and performs
other functions as may be delegated to it under our various benefit and
executive compensation programs. The audit committee selects and engages the
independent public accountants to audit our annual financial statements. The
audit committee also reviews and approves the planned scope of the annual audit.
The board of directors may from time to time establish other committees to
facilitate our management.
COMPENSATION OF DIRECTORS
Messrs. Casey, McInerney, Stanius and Yanuck, as directors who are not
otherwise associated with Worldwide or its affiliates, are paid $25,000 per
year, payable quarterly. Mr. Harlan and Mr. Fournier, employees of Castle
Harlan, Inc., and Mr. Pappas and Mr. Dunkerley, who are executive officers of
Worldwide, do not receive compensation for serving as directors.
EXECUTIVE COMPENSATION
The following table indicates the 1999 contractual compensation of our
Chief Executive Officer and our four other most highly compensated officers
under their employment agreements. The table does not include discretionary
bonuses, as none were accrued or paid in 1999. The compensation committee of the
board of directors may, in the future, in its discretion increase the salary or
bonus of any of these employees. Selected terms of their employment agreements
are summarized below. Salary information for executive officers during 1998 is
not included below because we believe that information would not be meaningful,
as two of our executive officers were not hired until
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1999, our Chairman and Chief Executive Officer was not hired until October 1998
and some of our executive officers during 1998 are no longer executive officers.
<TABLE>
<CAPTION>
1999 COMPENSATION
----------------------------------------------------
OTHER ANNUAL ALL OTHER
NAME TITLE SALARY BONUS(4) COMPENSATION COMPENSATION
- ---- ----- -------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Peter A. Pappas....... Chairman and Chief $270,000 $50,000 $60,000(5) --
Executive Officer
Mark Dunkerley(1)..... President and 235,000 62,500 -- --
Chief Operating
Officer
A. Scott Letier(2).... Chief Financial 165,000 -- -- --
Officer
Olivier Bijaoui....... Senior Vice 152,960(3) 98,184(3) -- $78,444(6)(3)
President, Europe
John P. Vittas........ Senior Vice 109,000 69,033 -- --
President, Sales
and Marketing
</TABLE>
- -------------------------
(1) Hired on July 12, 1999.
(2) Hired on March 31, 1999. On January 27, 2000, Mr. Letier ceased to be
employed by Worldwide.
(3) Converted from French francs at a conversion rate of FF 6.36 to $1.00.
(4) Some of our executive officers received signing bonuses when they entered
into their employment agreements or upon the closing of the acquisition of
Worldwide by our parent. These signing bonuses are described in the
summaries of their employment agreements below.
(5) Consists of (a) $25,000 country club membership entrance fee, (b) $30,000
country club membership fees and (c) other perquisites not exceeding 25% of
the total perquisites reported.
(6) Consists of severance payments.
1999 STOCK OPTION PLAN
Our parent has established a stock option plan which provides for the
granting of incentive stock options and non-qualified stock options to key
employees, consultants and directors of our parent, our company and our
subsidiaries to acquire shares of non-voting common stock of our parent. The
granting of these options is made in the discretion of the compensation
committee of the board of directors of our parent and each grantee will receive
options over a period of five years. The exercise price of each option will be
the fair market value of the stock on the date that the option is granted.
Options vest and become exercisable based on the achievement of performance
targets. The compensation committee of our parent will review performance
targets annually or upon the sale of a majority of the stock of either our
parent or the sale of all or substantially all of the assets of our parent, to
determine what portion, if any, of the options will vest and become exercisable.
If the grantee's employment is terminated for any reason, all options not yet
exercisable as of the date of termination will expire.
We have reserved 100,000 shares of non-voting common stock for issuance
under the option plan. As of September 30, 1999, no options had been granted.
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EMPLOYMENT AGREEMENTS AND ARRANGEMENTS
PETER A. PAPPAS. We have an employment agreement with Peter A. Pappas for
him to serve as our Chief Executive Officer. Mr. Pappas is to be paid an annual
base salary of $270,000 per year and compensation committee of the board of
directors, with a guaranteed minimum bonus of $50,000. The term of his agreement
extends to September 30, 2001. Mr. Pappas's employment agreement provides that
if he dies, becomes disabled, terminates his employment with good reason or if
Worldwide terminates his employment without cause, he will be entitled to
receive a severance payment, equal to his base salary for the remainder of his
employment term and a termination bonus. If Mr. Pappas' employment is terminated
other than for the reasons listed above, he will not receive any severance
payment. If Mr. Pappas continues his employment until September 30, 2001 and the
fair market value of the stock in our parent granted to him is less than the
aggregate amount of bonuses paid to him throughout his employment term, Mr.
Pappas will be entitled to receive an additional payment equal to the difference
between his total bonuses and the fair market value of his stock in our parent.
MARK DUNKERLEY. We have an employment agreement with Mark Dunkerley under
which he serves as our Chief Operating Officer and President. This agreement
extends to July 12, 2002. Mr. Dunkerley is to be paid an annual base salary of
$235,000 per year and a discretionary annual cash bonus up to a maximum of 50%
of his base salary, as determined by the compensation committee of Worldwide.
Mr. Dunkerley was paid a signing bonus of $30,000 on July 12, 1999 and is
entitled to an additional signing bonus of $32,500 on October 12, 1999. Mr.
Dunkerley's employment agreement also provides that if he terminates his
employment with good reason or if Worldwide terminates his employment for any
reason other than cause, he will be entitled to receive a severance payment
equal to his base salary for the greater of 18 months and the remainder of his
employment term. If there is a sale of a majority of the stock of our parent or
the sale of all or substantially all of the assets of our parent, Mr. Dunkerley
will have the right to terminate his employment and receive a lump sum severance
payment equal to nine months of his base salary. If Mr. Dunkerley's employment
is terminated for reasons other than those listed above, he will not receive any
severance payment.
A. SCOTT LETIER. On January 27, 2000, A. Scott Letier ceased to be
employed by Worldwide. We had entered into an employment agreement with A. Scott
Letier for him to serve as our Chief Financial Officer. The agreement extends
until March 31, 2002. He was to be paid an annual base salary of $165,000 and a
discretionary annual cash bonus up to a maximum of 50% of his base salary, as
determined by the compensation committee of Worldwide. In lieu of severance
payments under his employment agreement, Worldwide and Mr. Letier reached a
mutually agreeable severance package, the amount of which is not material to
Worldwide.
JOHN P. VITTAS. We have an employment agreement with John Vittas for him
to serve as our Senior Vice President, Sales and Marketing. Under this
agreement, Mr. Vittas is to be paid an annual base salary of $109,000. Also, Mr.
Vittas is guaranteed an annual bonus of 30% of his base salary. The term of this
agreement extends until March 31, 2001. Mr. Vittas also was paid a signing bonus
equal to two months of his base salary upon the closing of the acquisition of
Worldwide by our parent. This agreement also provides that, if Mr. Vittas
becomes disabled, terminates his employment with good reason or if Worldwide
terminates his employment without cause, he will be entitled to receive a
severance
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<PAGE> 74
payment equal to his base salary and bonus until the end of his employment term.
If Mr. Vittas' employment is terminated for reasons other than those listed
above, he will not receive any severance payment.
OLIVIER BIJAOUI. We have an employment agreement with Olivier Bijaoui for
him to serve as our Senior Vice President, Europe. The agreement took effect as
of December 7, 1998 and extends until March 31, 2001. He is to be paid an annual
base salary of 972,825 French francs. Mr. Bijaoui is also guaranteed an annual
bonus of 30% of his base salary. Mr. Bijaoui also was paid a signing bonus equal
to eight months of his base salary upon the closing of the acquisition of
Worldwide by our parent. This agreement provides that if Mr. Bijaoui becomes
disabled, terminates his employment with good reason or if Worldwide terminates
his employment without cause, he will be entitled to receive a severance payment
equal to his base salary and bonus until the end of the term of his employment.
agreement. If Mr. Bijaoui's employment is terminated for reasons other than
those listed above, he will not receive any severance payment.
All of the employment agreements described above provide that each of the
executives will receive life, disability and health insurance benefits for the
period of time that they receive payments from Worldwide after their termination
of employment, except for Mr. Pappas who will only receive these benefits until
the end of his agreement's term if his employment terminates as a result of a
disability.
In addition, our parent and Worldwide have entered into non-competition and
confidentiality agreements with each of Mr. Dunkerley and Mr. Letier that
prohibit these executives from competing with or soliciting employees or
customers of our parent, Worldwide or any of our subsidiaries. These limitations
last for three years from the termination of employment if the executive leaves
Worldwide without good reason or if he is terminated for cause. If the executive
leaves our employment with good reason or is terminated without cause, the
limitations on competition and solicitation will last for the remaining term of
the employment agreement or eighteen months from the time of termination,
whichever is longer. In addition, Mr. Dunkerley is currently prohibited from
disclosing confidential information obtained while working for us.
LIMITATIONS ON OFFICERS' AND DIRECTORS' LIABILITY
Our Certificate of Incorporation indemnifies our officers and directors to
the fullest extent permitted by the Delaware General Corporation Law, which is
referred to in this prospectus as the DGCL. Under Section 145 of the DGCL, a
corporation may indemnify its directors, officers, employees and agents and its
former directors, officers, employees and agents and those who serve, at the
corporation's request, in such capacities with another enterprise, against
expenses, including attorneys' fees, as well as judgments, fines and settlements
in nonderivative lawsuits, actually and reasonably incurred in connection with
the defense of any action, suit or proceeding in which they or any of them were
or are made parties or are threatened to be made parties by reason of their
serving or having served in that capacity. The DGCL provides, however, that the
person must have acted in good faith and in a manner that he or she reasonably
believed to be in, or not opposed to, the best interests of the corporation and,
in the case of a criminal action, he or she must have had no reasonable cause to
believe his or her conduct was unlawful. In addition, the DGCL does not permit
indemnification in an action or suit by or in the right of the corporation where
he or she has been adjudged liable to the corporation, unless, and only to the
extent that, a court determines that he or she fairly and reasonably is entitled
to indemnity for costs the court deems proper in light of liability
adjudication. Indemnification is mandatory to the extent a claim, issue or
matter has been successfully defended.
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<PAGE> 75
The Certificate of Incorporation and the DGCL also prohibit limitations on
officer or director liability for acts or omissions which resulted in a
violation of a statute prohibiting dividend declarations, payments to
stockholders after dissolution and particular types of loans. The effect of
these provisions is to eliminate the rights of our company and our stockholders,
through stockholders' derivative suits on behalf of our company, to recover
monetary damages against an officer or director for breach of a fiduciary duty
as an officer or director, except in the situations described above.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors or officers of our company pursuant to the
foregoing provisions, we have been informed that, in the opinion of the SEC,
this indemnification is against public policy as expressed in the Securities Act
and is therefore unenforceable.
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<PAGE> 76
SECURITY OWNERSHIP OF BENEFICIAL OWNERS
AND MANAGEMENT
As a wholly-owned subsidiary of our parent, all of our issued and
outstanding capital stock is held by our parent. As of November 15, 1999, our
parent had outstanding 1,369,912 shares of voting common stock, $.01 par value
per share, and 3,424,781 shares of Series A preferred stock, $.01 par value per
share. Each share of voting common stock carries one vote while the shares of
the Series A preferred stock are non-voting shares.
The following table contains information with respect to the beneficial
ownership of the voting common stock and Series A preferred stock of our parent
as of November 15, 1999 by (1) any person or group who beneficially owns more
than five percent of our parent's voting common stock or Series A preferred
stock, (2) each of our directors and executive officers and (3) all of our
directors and officers as a group. The following table, however, does not give
effect to the issuance of warrants to purchase 74,750 shares of the voting
common stock of our parent issued in connection with the original notes. All
information with respect to beneficial ownership has been furnished to us by the
respective stockholders of our parent.
<TABLE>
<CAPTION>
NUMBER OF PERCENTAGE NUMBER OF PERCENTAGE
SHARES OF OF TOTAL SHARES OF OF TOTAL
COMMON COMMON PREFERRED PREFERRED
NAME AND ADDRESS OF BENEFICIAL OWNER(1) STOCK STOCK STOCK STOCK
- --------------------------------------- --------- ---------- --------- ----------
<S> <C> <C> <C> <C>
Castle Harlan Partners III,
L.P.(2)(3)(5)...................... 1,353,982 98.8% 3,384,956 98.8%
Leonard M. Harlan(3)(4)(5)........... 38,103 2.8 10,565 *
Peter A. Pappas...................... 7,080 * 17,700 *
Mark Dunkerley....................... -- -- -- --
John P. Vittas....................... -- -- -- --
Olivier Bijaoui(6)................... -- -- -- --
Jonathan S. Weaver................... -- -- -- --
Albert V. Casey(5)................... 3,540 * 8,850 *
Marcel Fournier(5)(7)................ 1,770 * 4,425 *
Thomas G. McInerney(5)............... 1,770 * 4,425 *
Bradley G. Stanius(5)................ 1,770 * 4,425 *
Gilbert A. Yanuck(5)................. 1,770 * 4,425 *
All directors and officers as a group
(11 persons)....................... 38,103 2.8 54,815 1.6
</TABLE>
- -------------------------
* Less than 1%.
(1) Beneficial ownership includes shares of voting common stock and Series A
preferred stock to be outstanding upon our parent's equity contribution and
shares of voting common stock and Series A preferred stock that any person
has the right to acquire within 60 days after November 15, 1999. Shares of
voting common stock and Series A preferred stock not outstanding but deemed
beneficially owned because a person or group has the right to acquire them
within 60 days are treated as outstanding only for purposes of determining
the percentage owned by that person or group. For purposes of this table,
all fractional shares have been rounded to the
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<PAGE> 77
nearest whole share. Except as indicated in the footnotes to this table and
pursuant to applicable community property laws, the persons named in the
table have sole investment power with respect to the voting common stock and
the Series A preferred stock, but (1) all of the shares of the voting common
stock are restricted by a voting trust agreement under which Mr. Harlan acts
as voting trustee and (2) all of the shares of Series A preferred stock are
non-voting shares. Except as otherwise indicated in the footnotes to this
table, the address for each person in the table is c/o Worldwide Flight
Services, Inc., 1001 West Euless Boulevard, Suite 320, Euless, Texas 76040.
(2) Includes 77,726 shares of voting common stock and 181,048.46 shares of
Series A preferred stock held by related entities and persons, all of which
may be deemed to be beneficially owned by Castle Harlan Partners III, L.P.
Castle Harlan Partners III, L.P. disclaims beneficial ownership of these
shares.
(3) John K. Castle and Leonard M. Harlan are the controlling stockholders of
Castle Harlan Partners III G.P., Inc., the general partner of the general
partner of Castle Harlan Partners III, L.P., and as such, each of them may
be deemed to be a beneficial owner of the shares owned by Castle Harlan
Partners III, L.P. Both Mr. Castle and Mr. Harlan disclaim beneficial
ownership of the shares in excess of their respective pro rata partnership
interests in Castle Harlan Partners III, L.P. and its affiliates.
(4) Includes 38,103 shares of voting common stock of entities and persons
related to Castle Harlan Partners III, L.P. and some of our officers or
directors, the voting of which Leonard M. Harlan may direct pursuant to a
voting trust agreement under which Mr. Harlan acts as voting trustee. Mr.
Harlan disclaims beneficial ownership of the shares subject to the voting
trust agreement, other than 4,226 shares of voting common stock owned by him
subject to the voting trust. The term of the voting trust is the maximum
period allowed under Delaware law.
(5) The address for this person is c/o Castle Harlan, Inc., 150 East 58th
Street, New York, New York 10155.
(6) The address for this person is c/o Societe de Fret et de Services, Zone
Roissy-Tech, 5, Rue du cercle -- Batiment 3312, Roissy CDG 96703, France.
(7) All shares are held in Marcel Fournier's individual retirement account of
which Mr. Fournier is the sole beneficiary. These shares may be deemed to be
beneficially owned by Mr. Fournier. Mr. Fournier disclaims beneficial
ownership of these shares.
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<PAGE> 78
RELATED PARTY TRANSACTIONS
We entered into a management agreement with Castle Harlan, Inc., as
manager, under which the manager will provide us with business and
organizational strategy, financial, investment management, advisory and merchant
and investment banking services. Castle Harlan, Inc. is an affiliate of our
parent, which owns all of our outstanding stock. In connection with our
acquisition of Miami Aircraft Support, our entering into the senior secured
credit facility, the $10.0 million equity contribution by our parent to us and
the refinancing of our indebtedness, the management agreement was amended to
provide that we pay the manager an annual fee of $1.25 million starting July 1,
2000 until December 31, 2002, increasing to $2.0 million starting January 1,
2003 until December 31, 2005. After December 31, 2005 the agreement will
automatically renew each year unless cancelled by either party. On March 31,
1999, we paid $312,000 to Castle Harlan, Inc. under this fee agreement. We also
indemnify the manager, its officers, directors and affiliates from any losses or
claims suffered by them as a result of services they provide us.
In connection with the acquisition of Worldwide from AMR Corporation, we
paid $2.0 million to Castle Harlan, Inc. for reimbursement of expenses related
thereto. Concurrent with the closing of the offering of the Original Notes and
the senior secured credit facility, fees of $2.5 million were paid to Castle
Harlan. See "Description of New Notes--Covenants--Restricted Payments."
For a discussion of AMRS's transactions with its affiliates, see note 5 to
the Worldwide's financial statements.
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<PAGE> 79
DESCRIPTION OF SENIOR SECURED CREDIT FACILITY
The Chase Manhattan Bank, Chase Securities Inc. and DLJ Capital Funding,
Inc., which are referred to as the Agents, provided to us a 5 1/2-year revolving
credit facility of up to $75.0 million which provides for loans and under which
letters of credit may be issued. The maximum amount we may borrow at any time
will be limited by a borrowing base formula which will consist of a percentage
of some of our accounts receivable and a percentage of the value of some of our
equipment.
We may use the proceeds of loans under the senior secured credit facility
as follows:
- up to $50.0 million for acquisitions, including the acquisitions of Miami
Aircraft Support and Aerolink; and
- up to $25.0 million for working capital purposes.
As of September 30, 1999, we had 30.4 of available borrowings under the
senior secured credit facility.
REDUCTION IN COMMITMENTS
Commitments under the senior secured credit facility will be reduced as
follows:
<TABLE>
<CAPTION>
MONTHS AFTER
AUGUST 12,
1999 REDUCTION
------------ ---------
<S> <C>
12.......................................................... $ 0
24.......................................................... 0
36.......................................................... 5,000,000
42.......................................................... 5,000,000
48.......................................................... 5,000,000
54.......................................................... 5,000,000
60.......................................................... 5,000,000
</TABLE>
Except for limited exceptions, the commitment under the senior secured
credit facility will be reduced by 100% of the net cash proceeds of all asset
sales and other dispositions of our property or that of our subsidiaries.
We are permitted to voluntarily reduce the unutilized amount committed
under the senior secured credit facility without any penalty or premium at any
time.
INTEREST
At our option, the interest rate on the senior secured credit facility will
be either (1) LIBOR plus 3.00% or (2) 2.00% plus the greater of The Chase
Manhattan Bank's prime rate, the federal funds effective rate plus 1/2% and the
base CD rate published by The Chase Manhattan Bank plus 1%. The interest rate
will be subject to step-downs based on our financial performance. At September
30, 1999, we were paying interest averaging 8.93% based on LIBOR plus 3.00%.
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<PAGE> 80
FEES
We have agreed to pay customary fees with respect to the senior secured
credit facilities, including annual administration and agency fees, commitment
fees on the unused portion of the senior secured credit facility and letter of
credit fees.
PREPAYMENTS
Except for limited exceptions, we are required to repay the senior secured
credit facility with:
- 100% of the net cash proceeds of all asset sales and other dispositions
of our property and property of our subsidiaries; and
- 100% of the net cash proceeds of any debt issuances by us and our
subsidiaries.
Mandatory repayments will be applied first to borrowings made for acquisitions
and then to borrowings made for working capital purposes.
GUARANTEES
Our parent and our existing domestic subsidiaries have fully and
unconditionally and jointly and severally guaranteed repayment of the senior
secured credit facility. Our future domestic subsidiaries, and to the extent no
adverse tax consequences to us would result, our future foreign subsidiaries,
will also unconditionally guarantee repayment of the senior secured credit
facility.
SECURITY
We, our parent and our existing domestic subsidiaries have, our future
domestic subsidiaries will and, to the extent no adverse tax consequences to us
would result, our future foreign subsidiaries will unconditionally secure
repayment of the senior secured credit facility through the following:
- a first-priority pledge in all of our capital stock owned by our parent
and all of the capital stock of our existing and future subsidiaries,
except that, in the case of a foreign subsidiary, the pledge will be
limited to 65% of the voting capital stock of the foreign subsidiary to
the extent that any greater percentage will result in adverse tax
consequences to us; and
- first-priority security interests in, and mortgages on, substantially all
of our tangible and intangible assets, including all accounts receivable,
inventory, equipment, intellectual property, licensing agreements, real
property and proceeds of the foregoing, and those of our existing and
future domestic, and, to the extent indicated above, foreign
subsidiaries.
RESTRICTIVE COVENANTS
The senior secured credit facility contains covenants restricting our
ability and the ability of our domestic subsidiaries to:
- incur debt;
- issue equity securities;
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<PAGE> 81
- subject our assets to liens and enter into sale-leaseback transactions;
- engage in mergers and acquisitions and change the nature of our business;
- conduct asset sales;
- enter into hedging agreements;
- pay dividends and make investments, loans, guarantees and other
restricted payments;
- make capital expenditures;
- prepay other debt; and
- enter into affiliate transactions.
In addition, the senior secured credit facility requires us to meet various
financial performance tests, including a minimum interest coverage ratio and a
maximum leverage ratio, and also contain some covenants restricting the ability
of our parent to enter into some transactions.
EVENTS OF DEFAULT
An event of default could occur under the senior secured credit facility if
any of the following occurs:
- principal, interest or fees under the senior secured credit facility are
not paid when due;
- we default under other debt or other debt obligations are accelerated;
- we breach covenants or representations and warranties contained in the
senior secured credit facility;
- the security interests created in connection with the senior secured
credit facility are invalid or are claimed to be invalid;
- voluntary bankruptcy or involuntary bankruptcy of us, our parent or any
of our subsidiaries;
- there is a material judgment against us; or
- we have a change in control.
If an event of default occurs, all principal and interest owed under the
senior secured credit facility could become immediately payable within a short
period of time after the event of default occurs.
Borrowings under the senior secured credit facility are subject to
significant conditions, including compliance with financial ratios and the
absence of any material adverse change.
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<PAGE> 82
DESCRIPTION OF NEW NOTES
As used in this "Description of New Notes," the term "Worldwide" refers
only to Worldwide Flight Services, Inc., a Delaware corporation, and not to any
of our Subsidiaries or Affiliates. You can find the definitions of terms used in
this Description of New Notes under the subheading "Definitions."
The Original Notes were issued, and the New Notes will be issued under an
Indenture (the "INDENTURE") among Worldwide, the Guarantors and The Bank of New
York, as trustee (the "TRUSTEE"). The terms of the New Notes include those
stated in the Indenture and those made part of the Indenture by reference to the
Trust Indenture Act of 1939. The holders of New Notes (the "HOLDERS") are
referred to the Indenture and the Trust Indenture Act of 1939 for a statement of
the terms thereof.
The terms of the New Notes are identical in all material respects to the
terms of the Original Notes, except for transfer restrictions and registration
rights relating to the Original Notes.
The following description is a summary of the material provisions of the
Indenture. It does not restate that agreement in its entirety. We urge you to
read the Indenture because it, and not this description, defines your rights as
Holders. A copy of the Indenture is available as indicated below under "Where
You Can Find More Information."
BRIEF DESCRIPTION OF THE NEW NOTES AND THE GUARANTEES
THE NEW NOTES
The New Notes:
(a) will be senior unsecured obligations of Worldwide;
(b) will be equal in right of payment to all existing and future
Indebtedness of Worldwide that is not by its terms subordinated in
right of payment to the New Notes and senior in right of payment to
any future subordinated Indebtedness of Worldwide;
(c) will be effectively subordinated in right of payment to all existing
and future secured Indebtedness of Worldwide, including all
Indebtedness under the Senior Secured Credit Facility, to the extent
of the assets securing such Indebtedness;
(d) will be fully and unconditionally, jointly and severally guaranteed
by the Guarantors; and
(e) will be effectively subordinated to all liabilities of Worldwide's
Subsidiaries that are not Guarantors, including trade payables.
THE GUARANTEES
With some exceptions provided for below, the New Notes will be fully and
unconditionally and jointly and severally guaranteed by all of the Domestic
Subsidiaries of Worldwide.
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<PAGE> 83
The Guarantees of the New Notes:
(a) will be senior unsecured obligations of each Guarantor;
(b) will be equal in right of payment to all existing and future
Indebtedness of each Guarantor that is not by its terms subordinated
in right of payment to the Guarantees and senior in right of payment
to any future subordinated Indebtedness of each Guarantor; and
(c) will be effectively subordinated in right of payment to all existing
and future secured Indebtedness of each Guarantor, including all
Indebtedness under the Senior Secured Credit Facility, to the extent
of the assets securing such Indebtedness.
As of the Issue Date, all of our subsidiaries will be "Restricted
Subsidiaries." However, under the circumstances described below in the
definition of "Unrestricted Subsidiaries," we will be permitted to designate
some of our Subsidiaries as "Unrestricted Subsidiaries." Unrestricted
Subsidiaries will not be subject to any of the restrictive covenants in the
Indenture and will not guarantee the New Notes. Our Foreign Subsidiaries,
whether existing currently or acquired or created subsequently, will not
guarantee the New Notes.
Not all of our "Restricted Subsidiaries" will guarantee the New Notes. In
the event of a bankruptcy, liquidation or reorganization of any non-guarantor
Subsidiaries, these non-guarantor Subsidiaries will pay the holders of their
debt and their trade creditors before they will be able to distribute any of
their assets to us.
PRINCIPAL, MATURITY AND INTEREST
Worldwide will issue New Notes with a maximum aggregate principal amount of
$130.0 million in exchange for the Original Notes. Worldwide will issue New
Notes in denominations of $1,000 and integral multiples of $1,000. The New Notes
will mature on August 15, 2007.
Interest on the New Notes will accrue at the rate of 12 1/4% per annum and
will be payable semi-annually in arrears on February 15 and August 15,
commencing on February 15, 2000. Worldwide will make each interest payment to
the Holders of record of the New Notes on the immediately preceding February 1
and August 1, respectively.
Interest on the New Notes will accrue from August 12, 1999, the date of
original issuance of the Original Notes or, if interest has already been paid,
from the date it was most recently paid. Interest will be computed on the basis
of a 360-day year comprised of twelve 30-day months.
METHODS OF RECEIVING PAYMENTS ON THE NEW NOTES
If a Holder has given wire transfer instructions to Worldwide, Worldwide
will make all principal, premium and interest payments on those New Notes in
accordance with those instructions. All other payments on the New Notes will be
made at the office or agency of the Paying Agent and Registrar within the City
and State of New York unless Worldwide elects to make interest payments by check
mailed to the Holders at their respective addresses set forth in the register of
Holders.
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<PAGE> 84
PAYING AGENT AND REGISTRAR FOR THE NEW NOTES
The Trustee will initially act as Paying Agent and Registrar. Worldwide may
change the Paying Agent or Registrar without prior notice to the Holders of the
New Notes, and Worldwide or any of its Subsidiaries may act as Paying Agent or
Registrar.
TRANSFER AND EXCHANGE
A Holder may transfer or exchange New Notes in accordance with the
Indenture. The Registrar and the Trustee may require a Holder, among other
things, to furnish appropriate endorsements and transfer documents and Worldwide
may require a Holder to pay any taxes and fees required by law or permitted by
the Indenture. Worldwide is not required to transfer or exchange any New Note
selected for redemption. Also, Worldwide is not required to transfer or exchange
any New Note for a period of 15 days before a selection of New Notes to be
redeemed.
The registered Holder will be treated as the owner of it for all purposes.
SUBSIDIARY GUARANTEES
The Guarantors will fully and unconditionally and jointly and severally
guarantee Worldwide's Obligations under the New Notes. Each Subsidiary Guarantee
will be effectively subordinated in right of payment to all existing and future
secured Indebtedness of that Guarantor to the extent of the assets securing such
Indebtedness. The obligations of each Guarantor under its Subsidiary Guarantee
will be limited as necessary to prevent that Subsidiary Guarantee from
constituting a fraudulent conveyance under applicable law. See "--Risk
Factors--Fraudulent transfer considerations."
The Subsidiary Guarantee of a Guarantor will be automatically and
unconditionally released without any action on the part of the Trustee or the
Holder of the new notes:
- in connection with any sale or other disposition of all or substantially
all of the assets, including, without limitation, by way of merger or
consolidation, of that Guarantor if Worldwide applies the Net Proceeds of
that sale or other disposition, in accordance with the applicable
provisions of the Indenture;
- in connection with any sale of all of the Capital Stock of that
Guarantor, if Worldwide applies the Net Proceeds of the sale in
accordance with the applicable provisions of the Indenture; or
- if Worldwide designates that Guarantors as an Unrestricted Subsidiary in
accordance with the applicable provisions of the Indenture.
See "--Repurchase at Option of Holders--Asset Sales."
In addition, concurrently with any Legal Defeasance or Covenant Defeasance,
the Guarantors shall be released from all of their Obligations under their
Subsidiaries Guarantees.
OPTIONAL REDEMPTION
At any time prior to August 15, 2002, Worldwide may, at its option, use the
net cash proceeds of any one or more Public Equity Offerings to the extent the
net cash proceeds
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<PAGE> 85
thereof are contributed to the equity capital of Worldwide to redeem up to 35%
of the aggregate principal amount of New Notes issued under the Indenture at a
redemption price of 112.250% of the principal amount thereof, plus accrued and
unpaid interest to the redemption date; provided that
(1) at least 65% of the aggregate principal amount of New Notes issued on the
Issue Date remains outstanding immediately after the occurrence of each
such redemption (excluding New Notes held by Worldwide and its
Subsidiaries); and
(2) each such redemption must occur within 90 days of the date of the closing
of the related Public Equity Offering.
Except pursuant to the preceding paragraph, the New Notes will not be
redeemable at Worldwide's option prior to August 15, 2003. After August 15,
2003, Worldwide may redeem the New Notes, in whole or from time to time in part,
upon not less than 30 nor more than 60 days' notice, at the redemption prices
(expressed as percentages of principal amount) set forth below plus accrued and
unpaid interest thereon, if any, to the applicable redemption date, if redeemed
during the twelve-month period beginning on August 15 of the years indicated
below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- ---- ----------
<S> <C>
2003........................................ 106.125%
2004........................................ 104.594%
2005........................................ 103.063%
2006........................................ 101.531%
2007 and thereafter......................... 100.000%
</TABLE>
REPURCHASE AT THE OPTION OF HOLDERS
CHANGE OF CONTROL
If a Change of Control occurs, each Holder of New Notes will have the right
to require Worldwide to repurchase all or any part (equal to $1,000 or an
integral multiple thereof) of that Holder's New Notes pursuant to an Offer to
repurchase the New Notes in accordance with the terms of this section. In the
offer to repurchase the New Notes upon a Change of Control, Worldwide will offer
a payment in cash equal to 101% of the aggregate principal amount of New Notes
repurchased plus accrued and unpaid interest thereon, if any, to the date of
purchase. Within 30 days following any Change of Control, Worldwide will mail a
notice to each Holder describing the transaction or transactions that constitute
the Change of Control and offering to repurchase New Notes on a date specified
in such notice, pursuant to the procedures required by the Indenture and
described in such notice. Worldwide will comply with the requirements of Rule
14e-1 under the Exchange Act and any other securities laws and regulations to
the extent such laws and regulations are applicable in connection with the
repurchase of the New Notes as a result of a Change of Control. To the extent
that the provisions of any securities laws or regulations applicable to
Worldwide and the offer to repurchase the New Notes upon a Change of Control
conflict with the "Change of Control" provisions of the Indenture, Worldwide
shall comply with the applicable securities laws and regulations and shall not
be deemed to have breached its obligations under the Indenture by virtue
thereof.
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On the date of the repurchase of the New Notes, Worldwide will, to the
extent lawful:
(1) accept for payment all New Notes or portions thereof properly tendered
pursuant to the offer to repurchase the New Notes upon a Change of Control;
(2) deposit with the Paying Agent an amount equal to 101% of the aggregate
principal amount of the New Notes repurchased plus accrued and unpaid
interest thereon, if any, in respect of all New Notes or portions thereof so
tendered; and
(3) deliver or cause to be delivered to the Trustee the New Notes so accepted
together with an Officers' Certificate stating the aggregate principal
amount of New Notes or portions thereof being tendered to Worldwide.
The Paying Agent will promptly mail to each Holder of New Notes so tendered
the payment for such New Notes, and the Trustee will promptly authenticate and
mail (or cause to be transferred by book entry) to each Holder a replacement New
Note equal in principal amount to any unpurchased portion of the New Notes
surrendered, if any; provided that each such replacement New Note will be in a
principal amount of $1,000 or an integral multiple thereof.
The provisions described above that require Worldwide to make an offer to
repurchase the New Notes upon a Change of Control will be applicable whether or
not the covenant described below under "--Covenants--Merger, Consolidation or
Sale of Assets" is applicable. Except as described above with respect to an
offer to repurchase the New Notes upon a Change of Control, the Indenture does
not contain provisions that permit the Holders of the New Notes to require that
Worldwide repurchase or redeem the New Notes in the event of a takeover,
recapitalization or similar transaction.
There can be no assurance that Worldwide will have sufficient funds
available to make the payments, including purchasing the New Notes, required in
connection with any offer to repurchase the New Notes upon a Change of Control.
The Senior Secured Credit Facility will prohibit Worldwide from purchasing any
New Notes prior to the repayment in full of the Indebtedness thereunder, and
also will provide that some change of control events with respect to Worldwide
will constitute a default thereunder. Any future credit agreements or other
agreements relating to other Indebtedness of Worldwide may contain similar
restrictions and provisions. In the event a Change of Control occurs at a time
when Worldwide is contractually prohibited from purchasing New Notes, Worldwide
could seek the consent of its lenders thereunder to the purchase of New Notes or
could attempt to refinance the borrowings made pursuant to agreements that
contain such prohibition. If Worldwide does not obtain such a consent or repay
such borrowings, Worldwide will remain contractually prohibited from purchasing
New Notes. In such case, Worldwide's failure to purchase tendered New Notes
would constitute an Event of Default pursuant to clause (3) described in "Events
of Default and Remedies" which would, in turn, constitute a default under the
agreements relating to such other Indebtedness.
Worldwide will not be required to make an offer to repurchase the New Notes
upon a Change of Control if a third party makes the offer to repurchase the New
Notes in the manner, at the times and otherwise in compliance with the
requirements set forth in the Indenture applicable to an offer to repurchase the
New Notes upon a Change of Control made by Worldwide and purchases all New Notes
validly tendered and not withdrawn under such offer.
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The definition of Change of Control includes a phrase relating to the sale,
lease, transfer, conveyance or other disposition of "all or substantially all"
of the assets of Worldwide and its Subsidiaries taken as a whole. There is a
limited body of case law interpreting the phrase "substantially all;" however,
there is no precise established definition of the phrase under applicable law.
Accordingly, the ability of a Holder of New Notes to require Worldwide to
repurchase such New Notes as a result of a sale, lease, transfer, conveyance or
other disposition of less than all of the assets of Worldwide and its
Subsidiaries, taken as a whole, to another Person or group may be uncertain.
ASSET SALES
Worldwide will not, and will not permit any of its Restricted Subsidiaries
to, consummate an Asset Sale unless:
(1) Worldwide (or such Restricted Subsidiary) receives consideration at the
time of such Asset Sale (without giving effect to subsequent changes in
value) at least equal to the fair market value of the assets or Equity
Interests issued or sold or otherwise disposed of;
(2) with respect to any such Asset Sale involving aggregate consideration in
excess of $2.5 million, such fair market value is determined by Worldwide's
Board of Directors and evidenced by a resolution of the Board of Directors
set forth in an Officer's Certificate delivered to the Trustee; and
(3) at least 75% of the consideration therefor received by Worldwide or such
Restricted Subsidiary is in the form of cash or Cash Equivalents. For
purposes of this provision, each of the following shall be deemed to be
cash:
(a)any Indebtedness or other liabilities, of Worldwide or any Restricted
Subsidiary (other than liabilities that are by their terms subordinated
to the New Notes or any Subsidiary Guarantee) that are assumed by the
transferee of any such assets pursuant to an agreement that releases
Worldwide or such Restricted Subsidiary from further liability; and
(b)any currencies, securities, notes or other obligations received by
Worldwide or any such Restricted Subsidiary from such transferee (or any
Person on behalf of such transferee in respect of such Asset Sale) and
that are converted by Worldwide or such Restricted Subsidiary into cash
or Cash Equivalents within 60 days after the closing of such Asset Sale
(to the extent of the cash or Cash Equivalents received in that
conversion).
Within 360 days after the receipt of any Net Proceeds from an Asset Sale,
Worldwide or any Restricted Subsidiary may, at its option, apply such Net
Proceeds, or enter into a legally binding agreement:
(1) to prepay or repay permanently Indebtedness of Worldwide or Restricted
Subsidiaries under the Senior Secured Credit Facility or any other
Indebtedness secured by a Lien and, if the Indebtedness repaid is revolving
credit Indebtedness, to correspondingly reduce commitments with respect
thereto to the extent the aggregate of all such revolving commitments
exceeds $40.0 million;
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(2) to acquire all or substantially all of the assets of, or a majority of the
Voting Stock of, another Permitted Business or to make a Permitted
Investment pursuant to clause (7) of the definition of "Permitted
Investments;"
(3) to make a capital expenditure;
(4) to acquire other properties or other assets (other than Indebtedness, cash
or Cash Equivalents or Capital Stock) that are used or useful in a
Permitted Business; or
(5) to make any combination of (1) through (4) above.
Pending the final application of any such Net Proceeds, Worldwide or such
Restricted Subsidiary may temporarily reduce outstanding Indebtedness or
otherwise invest such Net Proceeds in any manner that is not prohibited by the
Indenture.
Any Net Proceeds from Asset Sales that are not applied or invested as
provided in the preceding paragraph will constitute Excess Proceeds. When the
aggregate amount of Excess Proceeds exceeds $10.0 million, the Indenture will
require Worldwide to make an offer to all Holders of New Notes to the extent
required by the terms thereof, Worldwide may also make a similar offer to all
holders of other Indebtedness that is pari passu with the New Notes containing
provisions similar to those set forth in the Indenture with respect to offers to
purchase or redeem with the proceeds of sales of assets to purchase the maximum
principal amount of New Notes and such other pari passu Indebtedness that may be
purchased out of the Excess Proceeds. The offer price in any offer to repurchase
the New Notes and other pari passu Indebtedness from Excess Proceeds will be
equal to 100% of principal amount plus accrued and unpaid interest, if any, to
the date of purchase, and will be payable in cash. If any Excess Proceeds remain
after consummation of an offer to repurchase the New Notes and other pari passu
Indebtedness from Excess Proceeds, Worldwide may use such Excess Proceeds for
any purpose not otherwise prohibited by the Indenture. If the aggregate
principal amount of New Notes and such other pari passu Indebtedness tendered
into such offer to repurchase exceeds the amount of Excess Proceeds, the Trustee
shall select the New Notes and such other pari passu Indebtedness to be
purchased on a pro rata basis. Upon completion of each offer to repurchase the
New Notes and other pari passu Indebtedness from Excess Proceeds, the amount of
Excess Proceeds shall be reset at zero.
Worldwide will not, and will not permit any Restricted Subsidiary to,
engage in any Asset Swaps, unless:
(1) at the time of entering into such Asset Swap and immediately after giving
effect to such Asset Swap, no Default or Event of Default shall have
occurred and be continuing;
(2) in the event such Asset Swap involves the transfer by Worldwide or any
Restricted Subsidiary of Worldwide of assets having an aggregate fair
market value, as determined by the Board of Directors in good faith, in
excess of $2.5 million, the terms of such Asset Swap have been approved by
a majority of the members of the Board of Directors whose resolution with
respect thereto shall be delivered to the Trustee; and
(3) in the event such Asset Swap involves the transfer by Worldwide or any
Restricted Subsidiary of Worldwide of assets having an aggregate fair
market value, as determined by a majority of the members of the Board of
Directors in good faith, in excess of $10.0 million, Worldwide has received
an opinion issued by an accounting,
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appraisal or investment banking firm of nationally recognized standing that
such Asset Swap is fair to Worldwide or such Restricted Subsidiary, as the
case may be, from a financial point of view.
SELECTION AND NOTICE
If less than all of the New Notes are to be redeemed at any time, the
Trustee will select New Notes for redemption as follows:
(1) if the New Notes are listed, in compliance with the requirements of the
principal national securities exchange on which the New Notes are listed;
or
(2) if the New Notes are not so listed, on a pro rata basis, by lot or by such
method as the Trustee shall deem fair and appropriate.
No New Notes of $1,000 or less shall be redeemed in part. Notices of
redemption shall be mailed by first class mail at least 30 but not more than 60
days before the redemption date to each Holder of New Notes to be redeemed at
such Holder's registered address. Notices of redemption may not be conditional.
If any New Note is to be redeemed in part only, the notice of redemption
that relates to that New Note shall state the portion of the principal amount
thereof to be redeemed. A replacement New Note in principal amount equal to the
unredeemed portion of the replaced New Note will be issued in the name of the
Holder thereof upon cancellation of the replaced New Note. New Notes called for
redemption become due on the date fixed for redemption. On and after the
redemption date, interest shall cease to accrue on New Notes or portions of them
called for redemption.
COVENANTS
RESTRICTED PAYMENTS
Worldwide will not, and will not permit any of its Restricted Subsidiaries
to, directly or indirectly:
(1) declare or pay any dividend or make any other payment or distribution on
account of Worldwide or any of its Restricted Subsidiaries' Equity
Interests other than declarations or payments of dividends, distributions
or such other payments payable (a) in Equity Interests (other than
Disqualified Stock) of Worldwide or (b) to Worldwide or a Restricted
Subsidiary of Worldwide;
(2) purchase, redeem or otherwise acquire or retire for value any Equity
Interests of Worldwide or any direct or indirect parent of Worldwide or any
Restricted Subsidiary of Worldwide (other than any such Equity Interests
owned by Worldwide or any Restricted Subsidiary of Worldwide or in exchange
for other Equity Interests (other than Disqualified Stock) of Worldwide);
(3) make any voluntary or optional principal payment, or purchase, redeem,
defease or otherwise acquire or retire for value, any Indebtedness that (a)
is subordinate in right of payment to the Subsidiary Guarantees, with
respect to the Guarantors or (b) otherwise constitutes Subordinated
Indebtedness, except a payment of principal at the Stated Maturity thereof
or pursuant to any required sinking fund payments; or
(4) make any Restricted Investment;
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(all such payments and other actions set forth in clauses (1) through (4) above
being collectively referred to as "RESTRICTED PAYMENTS"), unless, at the time of
and immediately after giving effect to such Restricted Payment:
(1) no Default or Event of Default shall have occurred and be continuing; and
(2) Worldwide would, at the time of such Restricted Payment and after giving
pro forma effect thereto as if such Restricted Payment had been made at the
beginning of the applicable four-quarter period, have been permitted to
incur at least $1.00 of additional Indebtedness pursuant to the Fixed
Charge Coverage Ratio test set forth in the first paragraph of the covenant
described below under the caption "--Incurrence of Indebtedness and
Issuance of Preferred Stock;" and
(3) such Restricted Payment, together with the aggregate amount of all other
Restricted Payments made by Worldwide and its Restricted Subsidiaries after
the Issue Date (excluding Restricted Payments permitted by clauses (2),
(3), (4) and (9) of the next succeeding paragraph), is less than the sum,
without duplication, of
(a)50% of the Consolidated Net Income of Worldwide for the period (taken as
one accounting period) from the beginning of the first fiscal quarter
commencing after the Issue Date to the end of Worldwide's most recently
ended fiscal quarter for which internal financial statements are
available at the time of such Restricted Payment (or, if such
Consolidated Net Income for such period is a deficit, less 100% of such
deficit); plus
(b)100% of the aggregate net cash proceeds received by Worldwide from any
Person (other than a Subsidiary of Worldwide) since the Issue Date (i)
as a contribution to its common equity capital, (ii) from the issuance
or sale of Equity Interests of Worldwide (other than Disqualified Stock)
and/or (iii) from the issuance or sale of convertible or exchangeable
Disqualified Stock or convertible or exchangeable debt securities of
Worldwide that have been converted into or exchanged for such Equity
Interests (other than Equity Interests (or Disqualified Stock or debt
securities) sold to a Subsidiary of Worldwide), together with the
aggregate cash received by Worldwide or any of its Subsidiaries at the
time of such conversion or exchange (in any case, other than net cash
proceeds received from an issuance or sale of such Capital Stock to an
employee of Worldwide or any of its Restricted Subsidiaries to the
extent such sale is financed by loans from or guaranteed by Worldwide or
any Restricted Subsidiary unless such loans have been repaid (or such
guarantee has been released or discharged) on or prior to the date of
determination); plus
(c)to the extent that any Restricted Investment that was made after the
Issue Date is sold or otherwise liquidated or repaid, the lesser of (i)
the cash (including Cash Equivalents) return of capital with respect to
such Restricted Investment, including any cash or Cash Equivalents
received as a result of the sale of any property received upon the sale
or other liquidation or repayment of such Restricted Investment within
60 days after the receipt of such property (less the cost of
disposition, if any) and (ii) the initial amount of such Restricted
Investment; plus
(d)upon the redesignation of an Unrestricted Subsidiary as a Restricted
Subsidiary, the fair market value (as determined by the Board of
Directors in good faith) of such Unrestricted Subsidiary as of the date
it is redesignated; provided, however,
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that for purposes of this clause (d), the fair market value of any
redesignated Unrestricted Subsidiary shall be reduced by the amount that
any such redesignation replenishes or increases the amount of Restricted
Investments permitted to be made pursuant to clause (7) of the
definition of Permitted Investments.
The preceding provisions will not prohibit:
(1) the payment of any dividend or distribution 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, defeasance or other acquisition of
any Indebtedness or of any Equity Interests of Worldwide or of any
Restricted Subsidiary in exchange for, or out of the net cash proceeds of
the substantially concurrent sale (other than to a Subsidiary of Worldwide)
of, Equity Interests of Worldwide (other than Disqualified Stock); provided
that the amount of any such net cash proceeds that are utilized for any
such redemption, repurchase, retirement, defeasance or other acquisition
shall be excluded from clause (3)(b) of the preceding paragraph;
(3) payment of principal or the defeasance, redemption, retirement, repurchase
or other acquisition of Indebtedness with the net cash proceeds from an
incurrence of Permitted Refinancing Indebtedness;
(4) the payment of any dividend, distribution or other payment by a Restricted
Subsidiary of Worldwide to the holders of its common Equity Interests or
the repurchase by a Restricted Subsidiary of Worldwide of its common Equity
Interests, in each case, on a pro rata basis, provided that no Default or
Event of Default shall have occurred and be continuing (i) in the case of
any dividend, distribution or other payment, at the time of, and
immediately after giving effect to, the declaration of such dividend,
distribution or other payment or (ii) in the case of any repurchase, at the
time of, and immediately after giving effect to, such repurchase;
(5) the repurchase, redemption or other acquisition or retirement for value of
(a) any Equity Interests of Worldwide or any Restricted Subsidiary of
Worldwide held by any member (present or former) of Worldwide or any of its
Subsidiaries' management (or their estates or beneficiaries thereunder)
pursuant to any management equity subscription agreement or stock option
agreement or other compensation or severance arrangement in effect as of
the Issue Date or entered into or created thereafter without violating the
Indenture or (b) any Equity Interests of Worldwide or any of its Restricted
Subsidiaries to the extent necessary, in the good faith judgment of the
Board of Directors of Worldwide, to prevent the loss or secure the renewal
or reinstatement of any license, permit or authorization held by Worldwide
or any of its Restricted Subsidiaries under any applicable law or
governmental regulation or the policies of any applicable governmental
authority or other regulatory body; provided, that the amount of any such
repurchase, redemption, acquisition or retirement for value pursuant to
this clause (b) shall not exceed the fair market value of the Equity
Interests being repurchased, redeemed, acquired or otherwise retired;
provided, further, that the aggregate price paid for all such repurchased,
redeemed, acquired or retired Equity Interests pursuant to clauses (a) and
(b) shall not exceed $2.0 million in any calendar year (with up to $1.0
million of any unused amount in any calendar year being carried over to the
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succeeding calendar year subject to a maximum of $3.0 million in any
calendar year, after giving effect to any unused amounts carried over to a
succeeding calendar year);
(6) the payment or distribution to dissenting equityholders (other than
Affiliates of Worldwide or any of its Subsidiaries) pursuant to applicable
law, pursuant to or in connection with a consolidation, merger or transfer
of all, or substantially all, of the assets or property of Worldwide that
is not prohibited by the Indenture;
(7) the declaration or payment of dividends on the common stock of Worldwide
following any Public Equity Offering of such common stock, or of the common
stock of our parent, of up to 6% per annum of the net cash proceeds
received by Worldwide, or contributed by our parent to the equity capital
of Worldwide, in all such Public Equity Offerings; provided that, at the
time of the declaration of any such dividends and immediately after giving
effect to such declaration, no Default or Event of Default shall have
occurred and be continuing;
(8) the repurchase of any Subordinated Indebtedness pursuant to an offer to
purchase in the event of a change of control in accordance with provisions
similar to the "Change of Control" covenant in the Indenture; provided,
that, (i) at the time any such Subordinated Indebtedness is accepted for
payment pursuant to the offer to purchase and immediately after giving
effect to such repurchase, no Default or Event of Default shall have
occurred and be continuing and (ii) prior to or simultaneously with the
making of the offer to purchase such Subordinated Indebtedness, Worldwide
has made the offer to repurchase the New Notes upon a Change of Control as
provided in such covenant with respect to the New Notes and has repurchased
all New Notes validly tendered for payment in connection with such offer to
repurchase the New Notes upon a Change of Control;
(9) loans and advances to employees, officers and directors of Worldwide and
its Restricted Subsidiaries the proceeds of which are used to purchase
Equity Interests of Worldwide or its Restricted Subsidiaries and other
loans and advances to employees and officers in the ordinary course of
business for bona fide business purposes, provided that the aggregate
principal amount of all such loans and advances made pursuant to this
clause (9) does not exceed $2.0 million at any one time outstanding; and
(10) the declaration or payment of any dividends or distributions or the making
of loans or other payments to our parent to enable our parent to pay
reasonable and customary fees to directors of our parent.
The amount of all Restricted Payments (other than cash) shall be the fair
market value on the date of the Restricted Payment of the asset(s) or securities
proposed to be transferred or issued by Worldwide or its Restricted
Subsidiaries, as the case may be, pursuant to the Restricted Payment. The fair
market value of any non-cash assets or securities that are required to be valued
by this covenant in excess of $2.5 million shall be determined by a majority of
the members of the Board of Directors whose resolution with respect thereto
shall be delivered to the Trustee. The Board of Directors' determination must be
based upon an opinion or appraisal issued by an accounting, appraisal or
investment banking firm of national standing if the fair market value exceeds
$10.0 million. Not later than 10 days after the date of making any Restricted
Payment (but not including any Restricted Payment described in the preceding
paragraph), of more than $2.5 million,
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Worldwide shall deliver to the Trustee an Officer's Certificate stating that
such Restricted Payment is permitted and setting forth the basis upon which the
calculations required by this "Restricted Payments" covenant were computed,
together with a copy, if any, of any fairness opinion or appraisal required by
the Indenture.
INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK
Worldwide will not, and will not permit any of its Restricted Subsidiaries
to, directly or indirectly, create, incur, issue, assume, guarantee or otherwise
become directly or indirectly liable, contingently or otherwise, with respect to
(collectively, "INCUR") any Indebtedness (including Acquired Debt), and
Worldwide will not issue any Disqualified Stock and will not permit any of its
Restricted Subsidiaries to issue any shares of preferred stock; provided,
however, that Worldwide and any Guarantor may incur Indebtedness (including
Acquired Debt) or issue Disqualified Stock or preferred stock (or other Capital
Stock having preferential rights similar to preferred stock) if the Fixed Charge
Coverage Ratio for Worldwide's most recently ended four full fiscal quarters for
which internal financial statements are available immediately preceding the date
on which such additional Indebtedness is incurred or such Disqualified Stock or
preferred stock (or other Capital Stock having preferential rights similar to
preferred stock) is issued would have been at least 2.0 to 1, determined on a
pro forma basis (including a pro forma application of the net proceeds
therefrom), as if such additional Indebtedness had been incurred, or such
Disqualified Stock or preferred stock (or other Capital Stock having
preferential rights similar to preferred stock) has been issued, as the case may
be, at the beginning of such four-quarter period.
So long as no Default shall have occurred and be continuing or would occur
or be continuing immediately after giving effect to the incurrence of any of the
following, the first paragraph of this covenant will not prohibit the incurrence
of any of the following (collectively, "PERMITTED DEBT"):
(1) the incurrence by Worldwide and any Restricted Subsidiary of Indebtedness
under one or more Credit Facilities; provided that the aggregate principal
amount of all Indebtedness of Worldwide outstanding under all Credit
Facilities after giving effect to such incurrence does not exceed an amount
equal to the sum of (A) (1) $75 million less (2) (without duplication) the
aggregate amount applied by Worldwide or any of its Subsidiaries since the
Issue Date to repay Indebtedness under a Credit Facility as a result of
asset dispositions which are required by the Indenture to be accompanied by
a corresponding permanent commitment reduction plus (B) additional
Indebtedness incurred under one or more Credit Facilities in an aggregate
amount not exceeding in the aggregate the amount of Indebtedness that is
permitted to be incurred, but has not been incurred, under clauses (4) and
(10) of this paragraph;
(2) the incurrence by Worldwide and its Subsidiaries of Existing Indebtedness;
(3) the incurrence by Worldwide and the Guarantors of Indebtedness represented
by the New Notes in an aggregate principal amount of $130.0 million at any
time outstanding and the Subsidiary Guarantees;
(4) (a) Acquired Debt of Worldwide and its Restricted Subsidiaries and (b) the
incurrence by Worldwide or any of its Restricted Subsidiaries of
Indebtedness
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represented by Capital Lease Obligations, mortgage financings or purchase
money obligations, in each case, incurred for the purpose of financing all
or any part of the purchase price or cost of construction or improvement of
property, plant or equipment used in the business of Worldwide or such
Restricted Subsidiary; provided that the aggregate principal amount at any
time outstanding of all Indebtedness outstanding under clauses (a) and (b)
after giving effect to such incurrence does not exceed $10.0 million
(reduced by the aggregate amount of additional Indebtedness incurred under
one or more Credit Facilities then in effect that represents such
additional Indebtedness under the immediately preceding clause (1)(B)) (it
being understood that any Indebtedness incurred under this clause (4)
shall, at the option of Worldwide, cease to be deemed incurred or
outstanding for purposes of this clause (4) but shall be deemed to be
incurred for purposes of the first paragraph of this covenant from and
after the first date on which Worldwide or such Restricted Subsidiary could
have incurred such Indebtedness under such paragraph without reliance on
this clause (4));
(5) the incurrence by Worldwide or any of its Restricted Subsidiaries of
Permitted Refinancing Indebtedness in exchange for, or the net proceeds of
which are used to refund, refinance or replace, Indebtedness (other than
intercompany Indebtedness) that was permitted by the Indenture to be
incurred under the first paragraph of this covenant or clauses (2), (3) or
(10) of this paragraph;
(6) the incurrence by Worldwide or any of its Restricted Subsidiaries of
intercompany Indebtedness between or among Worldwide and any of its
Restricted Subsidiaries; provided, however, that:
(a)if Worldwide or any Guarantor is the obligor on such Indebtedness, such
Indebtedness must be expressly subordinated upon the occurrence and continuation
of an Event of Default, to the prior payment in full in cash or Cash
Equivalents of all Obligations with respect to the New Notes, in the
case of Worldwide, or the Subsidiary Guarantee of such Guarantor, in
the case of a Guarantor; and
(b)(i) any subsequent issuance or transfer of Equity Interests that
results in any such Indebtedness being held by a Person other than
Worldwide or a Restricted Subsidiary thereof and (ii) any sale or other
transfer of any such Indebtedness to a Person that is other than
Worldwide or a Restricted Subsidiary thereof; shall be deemed, in each
case, to constitute an incurrence of such Indebtedness by Worldwide or
any such Restricted Subsidiary, as the case may be, that was not
permitted by this clause (6) (provided that for purposes of this clause
(6), a pledge of Equity Interests under the Credit Facilities shall not
be considered a sale, transfer or issuance of such Equity Interests);
(7) shares of preferred stock (or other Capital Stock having preferential
rights similar to preferred stock) of a Restricted Subsidiary of Worldwide
issued to Worldwide or another Restricted Subsidiary of Worldwide; provided
that any subsequent event which results in any such Restricted Subsidiary
ceasing to be a Restricted Subsidiary of Worldwide shall be deemed, in each
case, to be an Investment by Worldwide or any such Restricted Subsidiary in
the issuer of such preferred stock (or other Capital
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Stock having preferential rights similar to preferred stock)(provided that
for purposes of this clause (7), a pledge of Equity Interests under the
Credit Facilities shall not be considered a sale, transfer or issuance of
such Equity Interests);
(8) the incurrence by Worldwide or any of its Restricted Subsidiaries of
Hedging Obligations that are incurred in the ordinary course of business
for the purpose of fixing or hedging interest rate risk or foreign currency
valuation risk, but excluding Hedging Obligations entered into for
speculative purposes;
(9) (a) the guarantee by Worldwide or any of the Guarantors of Indebtedness of
Worldwide or any Restricted Subsidiary that was permitted to be incurred by
another provision of this covenant and (b) the guarantee by a Restricted
Subsidiary of Worldwide that is not a Guarantor of Indebtedness of any
other Restricted Subsidiary of Worldwide that is not a Guarantor;
(10) the incurrence by Worldwide or any of its Restricted Subsidiaries of
additional Indebtedness in an aggregate principal amount (or accreted
value, as applicable) at any time outstanding, including, without
duplication, all Permitted Refinancing Indebtedness incurred to refund,
refinance or replace any Indebtedness incurred pursuant to this clause
(10), not to exceed $5.0 million (reduced by the aggregate amount of
additional Indebtedness incurred under one or more Credit Facilities then
in effect that represents such additional Indebtedness under the
immediately preceding clause (1)(B) (it being understood that any
Indebtedness incurred under this clause (10) shall, at the option of
Worldwide, cease to be deemed incurred or outstanding for purposes of this
clause (10) but shall be deemed to be incurred for purposes of the first
paragraph of this covenant from and after the first date on which Worldwide
or such Restricted Subsidiary could have incurred such Indebtedness under
such paragraph without reliance on this clause (10));
(11) Indebtedness of Worldwide's Foreign Subsidiaries in an aggregate principal
amount at any time outstanding not to exceed the Foreign Borrowing Base at
the time of such incurrence;
(12) the accrual of interest, accretion or amortization of original issue
discount, the payment of interest on any Indebtedness in the form of
additional Indebtedness with the same terms, and the payment of dividends
on Disqualified Stock or preferred stock (or other Capital Stock having
preferential rights similar to preferred stock) in the form of additional
shares of the same class of Disqualified Stock or preferred stock; (or
other Capital Stock having preferential rights similar to preferred stock)
provided, in each such case, that the amount thereof is included in Fixed
Charges of Worldwide as accrued;
(13) Indebtedness in respect of standby letters of credit and performance,
surety and appeal bonds and completion guarantees provided by Worldwide or
any Restricted Subsidiary in the ordinary course of business or pursuant to
self-insurance obligations and not in connection with the borrowing of
money or the obtaining of advances of credit;
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(14) Indebtedness arising from agreements of Worldwide or a Restricted
Subsidiary providing for indemnification, adjustment of purchase price or
similar obligations, in each case, incurred or assumed in connection with
the disposition of any business, assets or a Subsidiary, other than
guarantees of Indebtedness incurred by any Person acquiring all or any
portion of such business, assets or a Subsidiary for the purpose of
financing such acquisition; provided, however, that the maximum assumable
liability in respect of the principal amount of all such Indebtedness shall
at no time exceed the gross proceeds including noncash proceeds (the fair
market value of such noncash proceeds being measured at the time received
and without giving effect to any subsequent changes in value) actually
received by Worldwide and its Restricted Subsidiaries in connection with
such disposition; and
(15) Indebtedness arising from the honoring by a bank or other financial
institution of a check, draft or similar instrument inadvertently drawn
against insufficient funds in the ordinary course of business; provided,
that such Indebtedness is extinguished within five Business Days of
incurrence.
For purposes of determining compliance with this "Incurrence of
Indebtedness and Issuance of Preferred Stock" covenant, in the event that an
item of proposed Indebtedness meets the criteria of more than one of the
categories of Permitted Debt described in clauses (1) through (15) above, or is
entitled to be incurred pursuant to the first paragraph of this covenant,
Worldwide shall, in its sole discretion, classify such item of Indebtedness on
the date of its incurrence in any manner that complies with this covenant and
such items of Indebtedness will be treated as having been incurred pursuant to
one or more of such clauses or pursuant to the first paragraph of this covenant,
as so classified. Indebtedness under Credit Facilities outstanding on the Issue
Date shall be deemed to have been incurred on such date in reliance on the
exception provided by clause (1) of the preceding paragraph.
For purposes of this covenant, "Acquired Debt" shall be deemed to have been
incurred by Worldwide or one of its Restricted Subsidiaries, as the case may be,
at the time an acquired Person becomes a Restricted Subsidiary (or is merged
into Worldwide or any of its Restricted Subsidiaries) or at the time of the
acquisition of assets, as the case may be; and, to avoid duplication,
guarantees, Liens, letters of credit or other obligations supporting
Indebtedness otherwise included in the determination of any particular amount of
Indebtedness under this covenant shall not be included.
For purposes of determining compliance with any U.S. dollar-denominated
restriction on the incurrence of Indebtedness, the U.S. dollar-equivalent
principal amount of Indebtedness denominated in a foreign currency shall be
calculated based on the relevant currency exchange rate in effect on the date
such Indebtedness was incurred, in the case of term Indebtedness, or first
committed, in the case of revolving credit Indebtedness; provided that if such
Indebtedness is incurred to refinance other Indebtedness denominated in a
foreign currency, and such refinancing would cause the applicable U.S. dollar-
denominated restriction to be exceeded if calculated at the relevant currency
exchange rate in effect on the date of such refinancing, such U.S.
dollar-denominated restriction shall be deemed not to have been exceeded so long
as the principal amount of such refinancing Indebtedness does not exceed the
principal amount of such Indebtedness being refinanced. The principal amount of
any Indebtedness incurred to refinance other Indebtedness, if incurred in a
different currency from the Indebtedness being refinanced, shall be calculated
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based on the currency exchange rate between the currency in which such
Refinancing Indebtedness is denominated and the currency applicable to the
Indebtedness being refunded that is in effect on the date of such refinancing.
Worldwide will not incur, create, issue, assume or guarantee any
Indebtedness that is contractually subordinate or junior in right of payment to
any other Indebtedness other than Indebtedness permitted by clause (1) of the
second paragraph of the covenant entitled "Incurrence of Indebtedness and
Issuance of Preferred Stock" of Worldwide unless such Indebtedness is also
contractually subordinated in right of payment to the New Notes on substantially
similar terms. No Guarantor will incur, create, issue, assume or guarantee any
Indebtedness that is contractually subordinate in right of payment to any other
Indebtedness other than Indebtedness permitted by clause (1) of the second
paragraph of the covenant entitled "Incurrence of Indebtedness and Issuance of
Preferred Stock" of such Guarantor unless such Indebtedness is also
contractually subordinated in right of payment to such Guarantor's Subsidiary
Guarantee on substantially similar terms.
LIENS
Worldwide will not, and will not permit any of its Restricted Subsidiaries
to, directly or indirectly, create, incur, assume or suffer to exist any Lien of
any kind securing any Indebtedness on any asset now owned or hereafter acquired,
unless the New Notes or such Guarantee, as the case may be, are directly secured
equally and ratably with (or prior to, in the case of Subordinated Indebtedness)
the Indebtedness secured by such Lien; provided, however, that the foregoing
restriction shall not apply to any Permitted Lien.
In the event that the Lien the existence of which gives rise to a Lien
securing the New Note or a Subsidiary Guarantee pursuant to the provisions of
this covenant ceases to exist, the Lien securing the New Notes or such
Subsidiary Guarantee required by this covenant shall automatically be released
and the Trustee shall execute appropriate documentation.
DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES
Worldwide will not, and will not permit any of its Restricted Subsidiaries
to, directly or indirectly, create or permit to exist or become effective any
consensual encumbrance or restriction on the ability of such Restricted
Subsidiary to:
(1) pay dividends or make any other distributions on its Equity Interests to
Worldwide or any of Worldwide's Restricted Subsidiaries, or pay any
Indebtedness owed to Worldwide or any of Worldwide's Restricted
Subsidiaries;
(2) make loans or advances to Worldwide or any of Worldwide's Restricted
Subsidiaries; or
(3) transfer any of its properties or assets to Worldwide or any of Worldwide's
Restricted Subsidiaries.
However, the preceding restrictions will not apply to encumbrances or
restrictions existing under or by reason of:
(1) agreements, including, without limitation, those with respect to Existing
Indebtedness and the Credit Facilities in each case, as in effect on the
Issue Date and any
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amendments, modifications, restatements, renewals, increases, supplements,
refundings, replacements or refinancings thereof, provided that such
amendments, modifications, restatements, renewals, increases, supplements,
refundings, replacement or refinancings are no more restrictive, in any
material respect, taken as a whole, with respect to such dividend and other
payment restrictions than those contained in such agreements as in effect
on the Issue Date;
(2) the Indenture, the Subsidiary Guarantees and the New Notes;
(3) applicable law;
(4) any instrument governing Acquired Debt or Capital Stock of a Person
acquired by Worldwide or any of its Restricted Subsidiaries as in effect at
the time of such acquisition (except to the extent such Acquired Debt was
incurred in connection with or in contemplation of such acquisition), which
encumbrance or restriction is not applicable to any Person, or the
properties or assets of any Person, other than the Person, or the property
or assets of the Person, so acquired;
(5) customary non-assignment provisions restricting subletting, assignment or
transfer in licenses, leases or other agreements entered into in the
ordinary course of business;
(6) purchase money or capital lease obligations for property or assets acquired
in the ordinary course of business that impose restrictions on the property
or assets so acquired of the nature described in clause (3) of the
preceding paragraph;
(7) any agreement for the sale or other disposition of all or substantially all
of the Equity Interests of, or property and assets of, any Restricted
Subsidiary that restricts dividends, distributions, loans, advances or
transfers by such Restricted Subsidiary pending its sale or other
disposition;
(8) Permitted Refinancing Indebtedness, provided that the restrictions
contained in the agreements governing such Permitted Refinancing
Indebtedness are no more restrictive, in any material respect, taken as a
whole, than those contained in the agreements governing the Indebtedness
being refinanced;
(9) Liens not prohibited by the Indenture that limit the right of Worldwide or
any of its Restricted Subsidiaries to transfer property or assets subject
to such Lien;
(10) provisions with respect to the disposition or distribution of assets or
property in joint venture agreements and other similar agreements entered
into in the ordinary course of business;
(11) restrictions on cash or other deposits imposed by customers under contracts
entered into in the ordinary course of business;
(12) provisions in agreements or instruments which prohibit the payment of
dividends or the making of other distributions with respect to any Capital
Stock of a Person other than on a pro rata basis;
(13) restrictions on the ability of any Restricted Subsidiary to make dividends
or other distributions resulting from the operation of reasonable and
customary covenants including, without limitation, negative pledge
covenants, contained in documentation governing Indebtedness incurred by
such Restricted Subsidiary in compliance with the Indenture; and
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(14) provisions contained in any licenses, permits or leases with airports or
airport regulatory authorities entered into in the ordinary course of
business that restrict the ability of any Restricted Subsidiary of
Worldwide to make loans or advances or to transfer any of its properties or
assets to Persons other than Worldwide or any other Person which owns,
directly or indirectly, any Equity Interests in such Restricted Subsidiary.
MERGER, CONSOLIDATION OR SALE OF ASSETS
Worldwide may not, directly or indirectly: (1) consolidate or merge with or
into another Person (whether or not Worldwide is the surviving Person); or (2)
sell, assign, transfer, convey or otherwise dispose of all or substantially all
of its properties or assets (determined on a consolidated basis for Worldwide
and its Restricted Subsidiaries), in one or more related transactions, to
another Person; unless:
(1) either: (a) Worldwide is the surviving Person; or (b) the Person formed by
or surviving any such consolidation or merger (if other than Worldwide) or
to which such sale, assignment, transfer, conveyance or other disposition
shall have been made is a corporation organized or existing under the laws
of the United States, any state thereof or the District of Columbia;
(2) the Person formed by or surviving any such consolidation or merger (if
other than Worldwide) or the Person to which such sale, assignment,
transfer, conveyance or other disposition shall have been made assumes all
the obligations of Worldwide under the New Notes, the Indenture and the
Registration Rights Agreement pursuant to a supplemental indenture
reasonably satisfactory to the Trustee;
(3) immediately after giving effect to such transaction no Default or Event of
Default exists; and
(4) except in the case of a merger of Worldwide with a Wholly Owned Restricted
Subsidiary, Worldwide or the Person formed by or surviving any such
consolidation or merger (if other than Worldwide) or to which such sale,
assignment, transfer, conveyance or other disposition shall have been made:
(a)will have, on a pro forma basis after giving effect to the transaction,
Consolidated Net Worth equal to or greater than the Consolidated Net
Worth of Worldwide immediately preceding the transaction; and
(b)will, on the date of such transaction after giving pro forma effect
thereto and any related financing transactions as if the same had
occurred at the beginning of the applicable four-quarter period, be
permitted to incur at least $1.00 of additional Indebtedness pursuant to
the Fixed Charge Coverage Ratio test set forth in the first paragraph of
the covenant described above under the caption "--Incurrence of
Indebtedness and Issuance of Preferred Stock."
In addition, Worldwide may not, directly or indirectly, lease all or
substantially all of its properties or assets, in one or more related
transactions, to any other Person. This covenant will not apply to a sale,
assignment, transfer, conveyance or other disposition of assets between or among
Worldwide and any of its Wholly Owned Subsidiaries.
A Guarantor may not sell or otherwise dispose of all or substantially all
of its assets, or consolidate with or merge with or into (whether or not such
Guarantor is the surviving
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Person, whether or not such Person is affiliated with such Guarantor), another
Person unless: (1) immediately after giving effect to that transaction, no
Default or Event of Default exists; and (2) either: (a) the Person acquiring the
property in any such sale or disposition or the Person formed by or surviving
any such consolidation or merger assumes all the Obligations of that Guarantor
under its Guarantee pursuant to a supplemental indenture reasonably satisfactory
to the Trustee; or (b) the Net Proceeds of such sale or other disposition are
applied in accordance with the applicable provisions of the Indenture. If the
sale, disposition, consolidation or merger is with or into Worldwide or another
Guarantor, then the immediately preceding sentence shall not apply.
TRANSACTIONS WITH AFFILIATES
Worldwide will not, and will not permit any of its Restricted Subsidiaries
to sell, lease, transfer or otherwise dispose of any of its properties or assets
to, or purchase any property or assets from, or enter into or make or amend any
transaction, contract, agreement, understanding, loan, advance or guarantee
with, or for the benefit of, any Affiliate (each, an "AFFILIATE TRANSACTION"),
unless:
(1) such Affiliate Transaction is on terms that are no less favorable to
Worldwide or such Restricted Subsidiary than those that would have been
obtained in a comparable transaction by Worldwide or such Restricted
Subsidiary with an unrelated Person; and
(2) Worldwide delivers to the Trustee:
(a)with respect to any Affiliate Transaction or series of related Affiliate
Transactions involving aggregate consideration in excess of $2.5
million, a resolution of the Board of Directors set forth in an
Officer's Certificate certifying that such Affiliate Transaction or
series of related Affiliate Transactions complies with this covenant and
that such Affiliate Transaction or series of related Affiliate
Transactions has been approved by a majority of the disinterested
members of the Board of Directors; and
(b)with respect to any Affiliate Transaction or series of related Affiliate
Transactions involving aggregate consideration in excess of $10.0
million, an opinion as to the fairness to Worldwide or such Restricted
Subsidiary, as the case may be, of such Affiliate Transaction or series
of related Affiliate Transactions from a financial point of view issued
by an accounting, appraisal or investment banking firm of national
standing.
The following items shall not be deemed to be Affiliate Transactions and,
therefore, will not be subject to the provisions of the prior paragraph:
(1) any employment, consulting, stock option, stock repurchase, employee
benefit, indemnification, compensation (including the payment of reasonable
and customary fees to Directors of Worldwide or any of its Restricted
Subsidiaries who are not employees of any such Person), business expense
reimbursement or other employee-related agreements, arrangements or plans
entered into by Worldwide or any of its Restricted Subsidiaries in the
ordinary course of business;
(2) transactions between or among Worldwide and its Restricted Subsidiaries;
(3) any agreement, including, without limitation, the Management Agreement
(provided that all obligations of Worldwide under the Management Agreement
are subordinated
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to the prior payment in full in cash or Cash Equivalents of all Obligations
with respect to the New Notes upon the occurrence and continuation of an
Event of Default), as in effect as of the Issue Date or any amendment
thereto or any transaction contemplated thereby (including pursuant to any
amendment thereto) or any replacement agreement thereto so long as any such
amendment or replacement agreement is not materially more disadvantageous
to the Holders taken as a whole than the original agreements as in effect
on the Issue Date;
(4) the entering into, and any payment pursuant to, any tax-sharing agreement
existing at the time of such payment between Worldwide and any other Person
with which it files a consolidated tax return or with which Worldwide is
part of a consolidated group for tax purposes, provided, that any such
payment relates solely to taxes and, in each case, is not in excess of the
tax liability that would have been payable by the Person making such
payment on a stand-alone basis;
(5) payment by Worldwide or any of its Restricted Subsidiaries to CHI of fees
for advisory services in connection with financings, acquisitions or
divestitures or other investment banking activities upon terms no less
favorable than Worldwide or any of its Restricted Subsidiaries could obtain
from a nationally recognized investment banking firm for a comparable
transaction, in each case, which fees pursuant to this clause (5) are
approved by a majority of the Board of Directors in good faith; and
(6) Restricted Payments that are permitted by the provisions of the Indenture
described above under the caption "--Restricted Payments."
ADDITIONAL SUBSIDIARY GUARANTEES
If Worldwide or any of its Restricted Subsidiaries acquires or creates
another Domestic Subsidiary after the Issue Date or if any Foreign Subsidiary
becomes a Domestic Subsidiary, then that newly acquired or created Restricted
Subsidiary must become a Guarantor and execute a supplemental indenture
reasonably satisfactory to the Trustee and deliver an opinion of counsel to the
Trustee within 10 Business Days of the date on which it was acquired or created,
provided, that this covenant shall not apply to any Subsidiary that has been
properly designated as an Unrestricted Subsidiary; provided, further, Worldwide
may, at its option, elect to have any such newly acquired or created Restricted
Subsidiary not become a Guarantor (a "NON-GUARANTOR SUBSIDIARY") provided that,
and for so long as, (1) none of the total assets, stockholders' equity or
Consolidated Cash Flow of such Restricted Subsidiary exceeds $500,000 and (2)
none of the total assets, stockholders' equity or Consolidated Cash Flow of such
Restricted Subsidiary together with all other Non-Guarantor Subsidiaries,
considered as a single Person, exceeds $1.0 million in the aggregate.
SALE AND LEASEBACK TRANSACTIONS
Worldwide will not, and will not permit any of its Restricted Subsidiaries
to, enter into any sale and leaseback transaction; provided that Worldwide or
any Restricted Subsidiary of Worldwide may enter into a sale and leaseback
transaction if:
(1) Worldwide or that Restricted Subsidiary, as applicable, could have incurred
Indebtedness in an amount equal to the Attributable Debt relating to such
sale and leaseback transaction under the Fixed Charge Coverage Ratio test
in the first
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paragraph of the covenant described above under the caption "--Incurrence
of Additional Indebtedness and Issuance of Preferred Stock;"
(2) the gross proceeds consisting of cash and Cash Equivalents of that sale and
leaseback transaction are at least equal to the fair market value (in the
case of gross cash proceeds in excess of $1.0 million as determined in good
faith by the Board of Directors and set forth in an Officer's Certificate
delivered to the Trustee), of the property that is the subject of such sale
and leaseback transaction; and
(3) the transfer of assets in that sale and leaseback transaction complies with
the covenant described above under the caption "--Asset Sales," to the
extent applicable.
The foregoing restrictions shall not apply to one or more sale and leaseback
transactions that (i) singly or in the aggregate relate to assets having in the
aggregate (in the case of related transactions) a fair market value not
exceeding $1.0 million; (ii) are solely between or among any of Worldwide and
any Guarantors; or (iii) are solely between or among any Restricted Subsidiary
of Worldwide that are not Guarantors and other Restricted Subsidiaries that are
not Guarantors.
BUSINESS ACTIVITIES
Worldwide will not, and will not permit any Restricted Subsidiary to,
engage in any business other than Permitted Businesses.
PAYMENTS FOR CONSENT
Worldwide will not, and will not permit any of its Subsidiaries to,
directly or indirectly, pay or cause to be paid any consideration to or for the
benefit of any Holder of New Notes for or as an inducement to any consent,
waiver or amendment of any of the terms or provisions of the Indenture or the
New Notes unless such consideration is offered to be paid and is paid to all
Holders of the New Notes that consent, waive or agree to amend in the time frame
set forth in the solicitation documents relating to such consent, waiver or
agreement.
REPORTS
Whether or not required by the SEC, so long as any New Notes are
outstanding, Worldwide will deliver or otherwise make available to the Holders
of New Notes or the Trustee, within the time periods specified in the SEC's
rules and regulations:
(1) all quarterly and annual financial information that would be required to be
contained in a filing with the SEC on Forms 10-Q and 10-K if Worldwide 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 on the annual financial
statements by Worldwide's certified independent accountants; and
(2) all current reports that would be required to be filed with the SEC on Form
8-K if Worldwide were required to file such reports.
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EVENTS OF DEFAULT AND REMEDIES
Each of the following is an Event of Default:
(1) default for 30 days in the payment when due of interest or liquidated
damages on the New Notes;
(2) default in payment when due of the principal of or premium, if any, on the
New Notes;
(3) failure by Worldwide or any Guarantor to comply with its Obligations
described under the caption "--Merger, Consolidation or Sale of Assets," or
the failure of Worldwide to make or consummate an offer to repurchase the
New Notes upon a Change of Control under the provisions described under the
caption "--Change of Control," or the failure of Worldwide to make or
consummate an offer to repurchase the New Notes and other pari passu
Indebtedness from Excess Proceeds under the provisions described under the
caption "--Asset Sales;"
(4) failure by Worldwide or any of its Restricted Subsidiaries for 60 days
after receipt of written notice by the Trustee to Worldwide specifying the
default to comply with any of the other agreements in the Indenture;
(5) default under the terms of any Indebtedness for money borrowed by Worldwide
or any of its Restricted Subsidiaries (or the payment of which is
guaranteed by Worldwide or any of its Restricted Subsidiaries) whether such
Indebtedness or guarantee now exists, or is created after the Issue Date,
if that default:
(a)is caused by a failure to pay principal of such Indebtedness when due at
final stated maturity after the expiration of the grace period provided
in such Indebtedness on the date of such default; or
(b)results in the acceleration of such Indebtedness prior to its final
maturity, and, in each case, the principal amount of any such
Indebtedness, together with the principal amount of any other such
Indebtedness under which there has been a payment default or the
maturity of which has been so accelerated, aggregates $5.0 million or
more;
(6) failure by Worldwide or any Significant Subsidiary or group of Restricted
Subsidiaries that, taken together (as of the latest audited consolidated
financial statements for Worldwide and its Restricted Subsidiaries) would
constitute a Significant Subsidiary to pay one or more final judgments
which exceed in the aggregate $5.0 million (net of any amounts for which a
reputable and creditworthy insurance company has assumed the defense of or
acknowledged liability for in writing), which judgments are not paid,
discharged or stayed for a period of 60 consecutive days;
(7) except as permitted by the terms of the Indenture, any Subsidiary Guarantee
shall be held in any judicial proceeding by a court of competent
jurisdiction to be unenforceable or invalid or shall cease for any reason
to be in full force and effect or any Guarantor shall deny or disaffirm in
writing that it has any further liability under its Subsidiary Guarantee;
and
(8) certain events of bankruptcy, insolvency or reorganization of Worldwide or
a Significant Subsidiary or group of Restricted Subsidiaries that, taken
together (as of
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the latest audited consolidated financial statements for Worldwide and its
Restricted Subsidiaries), would constitute a Significant Subsidiary.
In the case of an Event of Default arising from some events of bankruptcy
or insolvency with respect to Worldwide, any Restricted Subsidiary that is a
Significant Subsidiary or any group of Restricted Subsidiaries that, taken
together, would constitute a Significant Subsidiary, all outstanding New Notes
will become due and payable immediately without further action or notice. If any
other Event of Default occurs and is continuing, the Trustee or the Holders of
at least 25% in principal amount of the then outstanding New Notes may declare
all the New Notes to be due and payable by notice in writing to Worldwide and
the Trustee specifying the respective Event of Default and that it is a notice
of acceleration and the same shall become immediately due and payable.
In the event of a notice of acceleration because an Event of Default has
occurred and is continuing as a result of the acceleration of any Indebtedness
described in clause (5) of the preceding paragraph, the notice of acceleration
shall be automatically annulled and rescinded if the holders of any Indebtedness
described in clause (5) have rescinded the declaration of acceleration in
respect of such Indebtedness within 30 days of the date of such declaration and
if (i) the annulment of the acceleration of the New Notes would not conflict
with any judgment or decree binding on Worldwide or its property and issued by a
court of competent jurisdiction, and (ii) all existing Events of Default, except
nonpayment of principal or interest on the New Notes that became due solely
because of the acceleration of the New Notes, have been cured or waived. The
Trustee may withhold from Holders of the New Notes notice of any continuing
Default or Event of Default (except a Default or Event of Default relating to
the payment of principal or interest) if it determines that withholding notice
is in their interest.
Holders of the New Notes may not enforce the Indenture or the New Notes
except as provided in the Indenture and under the Trust Indenture Act of 1939.
With some limitations, Holders of a majority in principal amount of the then
outstanding New Notes may direct the Trustee in its exercise of any trust or
power. The Holders of a majority in aggregate principal amount of the New Notes
then outstanding by notice to the Trustee may on behalf of the Holders of all of
the New Notes waive any Default or Event of Default and its consequences under
the Indenture except a continuing Default or Event of Default in the payment of
interest on, or the principal of, the New Notes. At any time after the date of
the notice of acceleration the Holders of a majority in aggregate principal
amount of the New Notes then outstanding may rescind and cancel such declaration
and its consequences if (i) the annulment of the acceleration of the New Notes
would not conflict with any judgment or decree binding on Worldwide or its
property and issued by a court of competent jurisdiction, and (ii) all existing
Events of Default, except nonpayment of principal or interest on the New Notes
that became due solely because of the acceleration of the New Notes, have been
cured or waived.
Worldwide is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture. Upon becoming aware of any Default or
Event of Default, Worldwide is required to deliver promptly to the Trustee a
statement specifying such Default or Event of Default.
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NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
No director, officer, employee, incorporator or stockholder of Worldwide or
any Guarantor, as such, shall have any liability for any obligations of
Worldwide or the Guarantors under the New Notes, the Indenture or the Subsidiary
Guarantees or for any claim based on, in respect of, or by reason of, such
obligations or their creation. Each Holder of New Notes by accepting a New Note
waives and releases all such liability. The waiver and release are part of the
consideration for issuance of the New Notes. The waiver may not be effective to
waive liabilities under the federal securities laws, and it is the view of the
SEC that such waiver is against public policy.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Worldwide may, at its option and at any time, elect to have all of its
obligations discharged with respect to the outstanding New Notes and all
obligations of the Guarantors discharged with respect to their Subsidiary
Guarantees ("LEGAL DEFEASANCE") except for:
(1) the rights of Holders of outstanding New Notes to receive payments in
respect of the principal of, premium, if any, and interest on such New
Notes when such payments are due from the trust referred to below;
(2) Worldwide's obligations with respect to the New Notes concerning issuing
temporary notes, registration of New Notes, mutilated, destroyed, lost or
stolen New Notes and the maintenance of an office or agency for payment and
money for security payments held in trust;
(3) the rights, powers, trusts, duties and immunities of the Trustee, and
Worldwide's obligations in connection therewith; and
(4) the Legal Defeasance provisions of the Indenture.
In addition, Worldwide may, at its option and at any time, elect to have
the obligations of Worldwide and the Guarantors released with respect to some
covenants that are described in the Indenture ("COVENANT DEFEASANCE") and
thereafter any omission to comply with those covenants shall not constitute a
Default or Event of Default with respect to the New Notes. In the event Covenant
Defeasance occurs, events (other than non-payment, bankruptcy, receivership,
rehabilitation and insolvency events) described under "Events of Default" will
no longer constitute Events of Default with respect to the New Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance:
(1) Worldwide must irrevocably deposit with the Trustee, in trust, for the
benefit of the Holders of the New Notes, cash in U.S. dollars, non-callable
Government Securities, or a combination thereof, in such amounts as will be
sufficient, in the opinion of a nationally recognized firm of independent
public accountants selected by Worldwide to pay the principal of, premium,
if any, and interest on the outstanding New Notes on the stated maturity or
on the applicable redemption date, as the case may be, and Worldwide must
specify whether the New Notes are being defeased to maturity or to a
particular redemption date;
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(2) in the case of Legal Defeasance, Worldwide shall have delivered to the
Trustee an opinion of counsel reasonably acceptable to the Trustee
confirming that (a) Worldwide has received from, or there has been
published by, the Internal Revenue Service a ruling or (b) since the Issue
Date, 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
shall confirm that, the Holders of the outstanding New 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;
(3) in the case of Covenant Defeasance, Worldwide shall have delivered to the
Trustee an opinion of counsel reasonably acceptable to the Trustee
confirming that the Holders of the outstanding New 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 and at the same times as would have been the
case if such Covenant Defeasance had not occurred;
(4) no Default or Event of Default shall have occurred and be continuing
either: (a) on the date of such deposit (other than a Default or Event of
Default arising in connection with the borrowing of funds to be applied to
such deposit); or (b) 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;
(5) such Legal Defeasance or Covenant Defeasance will not result in a breach or
violation of, or constitute a default under the Senior Secured Credit
Facility or any other material agreement or instrument (other than the
Indenture) to which Worldwide or any of its Restricted Subsidiaries is a
party or by which Worldwide or any of its Restricted Subsidiaries is bound;
(6) Worldwide must have delivered to the Trustee an opinion of counsel to the
effect that after the 91st day following the deposit, the trust funds will
not be subject to the effect of any applicable bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights generally;
(7) Worldwide must deliver to the Trustee an Officer's Certificate stating that
the deposit was not made by Worldwide with the intent of preferring the
Holders of New Notes over the other creditors of Worldwide with the intent
of defeating, hindering, delaying or defrauding creditors of Worldwide or
others; and
(8) Worldwide must deliver to the Trustee an Officer's Certificate and an
opinion of counsel, each stating that all conditions precedent relating to
the Legal Defeasance or the Covenant Defeasance have been complied with.
AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next three succeeding paragraphs, the Indenture
or the New Notes may be amended, supplemented or otherwise modified with the
consent of Worldwide and the Holders of at least a majority in principal amount
of the New Notes then outstanding (including consents obtained in connection
with a purchase of, or tender offer or exchange offer for, the New Notes), and
any existing Default or Event of Default or compliance with any provision of the
Indenture or the New Notes may be waived with the consent of the Holders of a
majority in principal amount of the then outstanding
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New Notes (including consents obtained in connection with a purchase of, or
tender offer or exchange offer for, the New Notes).
Without the consent of each Holder affected, an amendment or waiver may not
(with respect to any New Notes held by a non-consenting Holder):
(1) reduce the principal amount of New Notes whose Holders must consent to an
amendment, supplement or waiver;
(2) reduce the principal of or change the fixed maturity of any New Note or
alter the provisions with respect to the redemption of the New Notes (other
than provisions relating to the covenants described above under the caption
"--Repurchase at the Option of Holders");
(3) reduce the rate of or change the time for payment of interest on any New
Note;
(4) waive a Default or Event of Default in the payment of principal of or
premium, if any, or interest on the New Notes (except a rescission of
acceleration of the New Notes by the Holders of at least a majority in
aggregate principal amount of the New Notes and a waiver of the payment
default that resulted from such acceleration);
(5) make any New Note payable in money other than that stated in the New Notes;
(6) make any change in the provisions of the Indenture relating to waivers of
past Defaults or the rights of Holders of New Notes to receive payments of
principal of or premium, if any, or interest on the New Notes;
(7) waive a redemption payment with respect to any New Note (other than a
payment required by one of the covenants described above under the caption
"--Repurchase at the Option of Holders"); or
(8) make any change in the preceding amendment and waiver provisions.
Notwithstanding the preceding, without the consent of any Holder of New
Notes, Worldwide and the Trustee may amend, supplement, waive or otherwise
modify provisions of the Indenture, the New Notes or the Guarantees:
(1) to cure any ambiguity, defect or inconsistency;
(2) to provide for uncertificated New Notes in addition to or in place of
certificated New Notes;
(3) to provide for the assumption of Worldwide's obligations to Holders of New
Notes in the case of a merger or consolidation or sale of all or
substantially all of Worldwide's assets;
(4) to make any change that would provide any additional rights or benefits to
the Holders of New Notes or that does not adversely affect the legal rights
under the Indenture of any such Holder; or
(5) to comply with requirements of the SEC in order to effect or maintain the
qualification of the Indenture under the Trust Indenture Act of 1939.
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CONCERNING THE TRUSTEE
If the Trustee becomes a creditor of Worldwide or any Guarantor, the
Indenture limits its right to obtain payment of claims in some cases, or to
realize on property received in respect of any such claim as security or
otherwise. The Trustee will be permitted to engage in other transactions;
however, if it acquires any conflicting interest it must eliminate such conflict
within 90 days, apply to the SEC for permission to continue or resign.
The Holders of a majority in principal amount of the then outstanding New
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
shall occur and be continuing (which shall not be cured or waived in conformity
with the Indenture), the Trustee will be required, in the exercise of its power,
to use the degree of care of a prudent person in the conduct of such person's
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 of New Notes, unless such Holder shall have offered to the Trustee
security and indemnity satisfactory to it against any loss, liability or
expense.
BOOK-ENTRY, DELIVERY AND FORM
Except as set forth below, New Notes will be issued in registered, global
form in minimum denominations of $1,000 and integral multiples of $1,000 in
excess thereof. New Notes will be issued at the closing of this exchange offer
only against delivery of the tendered Original Notes.
The New Notes initially will be represented by one or more New Notes in
registered, global form without interest coupons (collectively, the "Global
Notes"). The Global Notes will be deposited upon issuance with the Trustee as
custodian for the Depository Trust Company, in New York, New York, and
registered in the name of the Depository Trust Company or its nominee, in each
case for credit to an account of a direct or indirect participant in the
Depository Trust Company as described below.
Except as set forth below, the Global Notes may be transferred, in whole
and not in part, only to another nominee of the Depository Trust Company or to a
successor of the Depository Trust Company or its nominee. Beneficial interests
in the Global Notes may not be exchanged for New Notes in certificated form
except in limited circumstances.
In addition, transfers of beneficial interests in the Global Notes will be
subject to the applicable rules and procedures of the Depository Trust Company
and its direct or indirect participants (including, if applicable, those of
Euroclear and Cedel), which may change from time to time.
DEPOSITORY PROCEDURES
The following description of the operations and procedures of the
Depository Trust Company, Euroclear and Cedel are provided solely as a matter of
convenience. These operations and procedures are solely within the control of
the respective settlement systems and are subject to changes by them. Worldwide
takes no responsibility for these operations and procedures and urges investors
to contact the system or their participants directly to discuss these matters.
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The Depository Trust Company has advised Worldwide that it is a
limited-purpose trust company created to hold securities for its participating
organizations (collectively, the "Participants") and to facilitate the clearance
and settlement of transactions in those securities between Participants through
electronic book-entry changes in accounts of its Participants. The Participants
include securities brokers and dealers, banks, trust companies, clearing
corporations and other organizations. Access to the Depository Trust Company's
system is also available to other entities such as banks, brokers, dealers and
trust companies that clear through or maintain a custodial relationship with a
Participant, either directly or indirectly (collectively, the "Indirect
Participants"). Persons who are not Participants may beneficially own securities
held by or on behalf of the Depository Trust Company only through the
Participants or the Indirect Participants. The ownership interests in, and
transfers of ownership interests in, each security held by or on behalf of the
Depository Trust Company are recorded on the records of the Participants and
Indirect Participants.
The Depository Trust Company has also advised Worldwide that, pursuant to
procedures established by it:
(1) upon deposit of the Global Notes, the Depository Trust Company will credit
the accounts of Participants designated by the tendering Holders with
portions of the principal amount of the Global Notes; and
(2) ownership of these interests in the Global Notes will be shown on, and the
transfer of ownership thereof will be effected only through, records
maintained by the Depository Trust Company (with respect to the
Participants) or by the Participants and the Indirect Participants (with
respect to other owners of beneficial interest in the Global Notes).
Investors in the Global Notes who are Participants in the Depository Trust
Company's system may hold their interests therein directly through the
Depository Trust Company. Investors in the Global Notes who are not Participants
may hold their interests therein indirectly through organizations (including
Euroclear and Cedel) which are Participants in such system. All interests in a
Global Note, including those held through Euroclear or Cedel, may be subject to
the procedures and requirements of the Depository Trust Company. Those interests
held through Euroclear or Cedel may also be subject to the procedures and
requirements of such systems. The laws of some states require that Persons take
physical delivery in definitive form of securities that they own. Consequently,
the ability to transfer beneficial interests in a Global Note to such Persons
will be limited to that extent. Because the Depository Trust Company can act
only on behalf of Participants, which in turn act on behalf of Indirect
Participants, the ability of a Person having beneficial interests in a Global
Note to pledge such interests to Persons that do not participate in the
Depository Trust Company system, or otherwise take actions in respect of such
interests, may be affected by the lack of a physical certificate evidencing such
interests.
Except as described below, owners of interests in the Global Notes will not
have New Notes registered in their names, will not receive physical delivery of
New Notes in certificated form and will not be considered the registered owners
or "Holders" thereof under the Indenture for any purpose.
Payments in respect of the principal of, and interest and premium and
Liquidated Damages, if any, on a Global Note registered in the name of the
Depository Trust
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Company or its nominee will be payable to Depository Trust Company in its
capacity as the registered Holder under the Indenture. Under the terms of the
Indenture, Worldwide and the Trustee will treat the Persons in whose names the
New Notes, including the Global Notes, are registered as the owners thereof for
the purpose of receiving payments and for all other purposes. Consequently,
neither Worldwide, the Guarantors, the Trustee nor any agent of Worldwide, the
Guarantors, or the Trustee has or will have any responsibility or liability for:
(1) any aspect of the Depository Trust Company's records or any Participant's or
Indirect Participant's (including Euroclear and Cedel, without limitation)
records relating to or payments made on account of beneficial ownership
interest in the Global Notes or for maintaining, supervising or reviewing
any of the Depository Trust Company's records or any Participant's or
Indirect Participant's (including Euroclear and Cedel, without limitation)
records relating to the beneficial ownership interests in the Global Notes;
or
(2) any other matter relating to the actions and practices of the Depository
Trust Company or any of its Participants or Indirect Participants (including
Euroclear and Cedel, without limitation).
The Depository Trust Company has advised Worldwide that its current
practice, upon receipt of any payment in respect of securities such as the New
Notes (including principal and interest), is to credit the accounts of the
relevant Participants with the payment on the payment date unless the Depository
Trust Company has reason to believe it will not receive payment on such payment
date. Each relevant Participant is credited with an amount proportionate to its
beneficial ownership of an interest in the principal amount of the relevant
security as shown on the records of the Depository Trust Company. Payments by
the Participants and the Indirect Participants to the beneficial owners of New
Notes will be governed by standing instructions and customary practices and will
be the responsibility of the Participants or the Indirect Participants and will
not be the responsibility of the Depository Trust Company, the Trustee,
Worldwide or the Guarantors. Worldwide, the Guarantors and the Trustee will not
be liable for any delay by the Depository Trust Company or any of its
Participants in identifying the beneficial owners of the New Notes, and
Worldwide and the Trustee may conclusively rely on and will be protected in
relying on instructions from the Depository Trust Company or its nominee for all
purposes.
Transfers between Participants in the Depository Trust Company will be
effected in accordance with the Depository Trust Company's procedures, and will
be settled in same-day funds, and transfers between participants in Euroclear
and Cedel will be effected in accordance with their respective rules and
operating procedures.
Subject to compliance with the transfer restrictions applicable to the New
Notes described herein, cross-market transfers between the Participants in the
Depository Trust Company, on the one hand, and Euroclear or Cedel participants,
on the other hand, will be effected through the Depository Trust Company in
accordance with the Depository Trust Company's rules on behalf of Euroclear or
Cedel, as the case may be, by its respective depositary; however, such
cross-market transactions will require delivery of instructions to Euroclear or
Cedel, as the case may be, by the counterparty in such system in accordance with
the rules and procedures and within the established deadlines (Brussels time) of
such system. Euroclear or Cedel, as the case may be, will, if the transaction
meets its settlement
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requirements, deliver instructions to its respective depositary to take action
to effect final settlement on its behalf by delivering or receiving interests in
the relevant Global Note in the Depository Trust Company, and making or
receiving payment in accordance with normal procedures for same-day funds
settlement applicable to the Depository Trust Company. Euroclear participants
and Cedel participants may not deliver instructions directly to the depositories
for Euroclear or Cedel.
The Depository Trust Company has advised Worldwide that it will take any
action permitted to be taken by a Holder of New Notes only at the direction of
one or more Participants to whose account the Depository Trust Company has
credited the interests in the Global Notes and only in respect of such portion
of the aggregate principal amount of the New Notes as to which such Participant
or Participants has or have given such direction. However, if there is an Event
of Default under the New Notes, the Depository Trust Company reserves the right
to exchange the Global Notes for legended New Notes in certificated form, and to
distribute such New Notes to its Participants.
Although the Depository Trust Company, Euroclear and Cedel have agreed to
the foregoing procedures to facilitate transfers of interests in the Global
Notes among participants in the Depository Trust Company, Euroclear and Cedel,
they are under no obligation to perform or to continue to perform such
procedures, and may discontinue such procedures at any time. Worldwide, the
Guarantors, the Trustee and their respective agents will not have any
responsibility for the performance by the Depository Trust Company, Euroclear or
Cedel or their respective participants or indirect participants of their
respective obligations under the rules and procedures governing their
operations.
DEFINITIONS
Set forth below are some defined terms used in the Indenture. Reference is
made to the Indenture for a full disclosure of all such terms, as well as any
other capitalized terms used herein for which no definition is provided.
"Acquired Debt" means Indebtedness of a Person or any of its Subsidiaries
existing at the time such Person becomes a Restricted Subsidiary of Worldwide or
at the time it merges or consolidates with Worldwide or any of its Restricted
Subsidiaries or is assumed by Worldwide or any of its Restricted Subsidiaries in
connection with the acquisition of assets from such Person, including without
limitation, Indebtedness incurred by such Person in connection with, or in
anticipation or contemplation of, such Person becoming a Restricted Subsidiary
of Worldwide or such acquisition, merger or consolidation.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control,"
as used with respect to any Person, shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of the management or
policies of such Person, whether through the ownership of voting securities, by
agreement or otherwise; provided that beneficial ownership of 10% or more of the
Voting Stock of a Person shall be deemed to be control. For purposes of this
definition, the terms "controlling," "controlled by" and "under common control
with" shall have correlative meanings.
"Asset Sale" means:
(1) the sale, lease (other than operating leases entered into in the ordinary
course of business), conveyance or other disposition of any assets, other
than sales of Cash
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Equivalents or inventory in the ordinary course of business; provided that
the sale, conveyance or other disposition of all or substantially all of
the assets of Worldwide and its Restricted Subsidiaries taken as a whole
will be governed by the provisions of the Indenture described above under
the caption "--Repurchase at the Option of Holders--Change of Control"
and/or the provisions described above under the caption
"--Covenants--Merger, Consolidation or Sale of Assets" and not by the
provisions of the Asset Sale covenant; and
(2) the issuance by any of Worldwide's Restricted Subsidiaries of the Equity
Interests of such Restricted Subsidiary or the sale by Worldwide or any
Restricted Subsidiary of Equity Interests in any Restricted Subsidiaries
(other than directors' qualifying shares).
Notwithstanding the preceding, the following items shall not be deemed to be
Asset Sales:
(a) any single transaction or series of related transactions that: (i)
involves assets having a fair market value of less than $1.0 million;
or (ii) results in net proceeds to Worldwide and its Restricted
Subsidiaries of less than $1.0 million;
(b) a transfer, sale, lease, conveyance or other disposition of assets
between or among Worldwide and its Restricted Subsidiaries;
(c) an issuance or sale of Equity Interests by a Restricted Subsidiary to
Worldwide or to another Restricted Subsidiary;
(d) a Restricted Payment that is permitted by the covenant described above
under the caption "--Covenants--Restricted Payments;"
(e) a Permitted Lien;
(f) a sale or other disposition or abandonment of damaged, worn-out or
obsolete property in the ordinary course of business;
(g) any sale, transfer or conveyance of Equity Interests of a Restricted
Subsidiary; provided that immediately after giving effect to such sale,
transfer or conveyance, if such Restricted Subsidiary would (i) no
longer be a Restricted Subsidiary, the Investment of Worldwide (or any
Restricted Subsidiary) in such Person (after giving effect to such
sale, transfer or conveyance) would have been permitted to be made
pursuant to the covenant described above under the caption
"--Covenants--Restricted Payments" as if made on the date of such sale,
transfer or conveyance or (ii) continue to be a Restricted Subsidiary,
the aggregate noncash consideration received by Worldwide or any of its
Restricted Subsidiaries in such sale, transfer or conveyance does not
have a fair market value, taken together with all other noncash
consideration (other than such consideration converted into cash or
Cash Equivalents) received pursuant to this clause (ii), in excess of
$10.0 million; provided, further that as part of any such sale,
transfer or conveyance pursuant to clause (i) or (ii) above (1)
Worldwide or any of its Restricted Subsidiaries, as the case may be,
receives consideration at the time of such sale, transfer or conveyance
(without giving effect to subsequent changes in value) at least equal
to the fair market value of the Equity Interests sold, transferred or
conveyed and (2) with regard to any such sale, transfer or conveyance
involving aggregate consideration in excess of $2.5 million, the fair
market value of such consideration is determined by
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Worldwide's Board of Directors and evidenced by a resolution of the
Board of Directors set forth in an Officer's Certificate delivered to
the Trustee;
(h) sales of accounts receivable in the ordinary course of business for
cash for financing purposes;
(i) an Asset Swap effected in compliance with the terms contained in the
covenant under the caption "--Repurchase at the Option of
Holders--Asset Sales;" and
(j) the issuance of options, warrants or other similar rights to purchase
Equity Interests of a Restricted Subsidiary to any then-serving
director or member of management of such Restricted Subsidiary in the
ordinary course of business.
"Asset Swap" means a substantially concurrent purchase and sale or exchange
of Related Business Assets between Worldwide or any of its Restricted
Subsidiaries and another Person; provided that any cash received must be applied
in accordance with the terms contained in the covenant under the caption
"--Repurchase at the Option of Holder--Asset Sales."
"Attributable Debt" in respect of a sale and leaseback transaction means,
at the time of determination, the present value of the obligation of the lessee
for net rental payments during the remaining term of the lease included in such
sale and leaseback transaction including any period for which such lease has
been extended or may, at the option of the lessor, be extended. Such present
value shall be calculated using a discount rate equal to the rate of interest
implicit in such transaction, determined in accordance with GAAP.
"Beneficial Owner" has the meaning assigned to such term in Rule 13d-3 and
Rule 13d-5 under the Exchange Act, except that in calculating the beneficial
ownership of any particular "person" (as such term is used in Section 13(d)(3)
of the Exchange Act), such "person" shall be deemed to have beneficial ownership
of all securities that such "person" has the right to acquire, whether such
right is currently exercisable or is exercisable only upon the occurrence of a
subsequent condition.
"Business Day" means a day other than a Saturday, a Sunday or a day on
which banking institutions in New York, New York are not required to be open.
"Capital Lease Obligation" means, at the time of determination, the amount
of the liability in respect of a capital lease that would at that time be
required to be capitalized on a balance sheet in accordance with GAAP.
"Capital Stock" means:
(1) in the case of a corporation, corporate stock;
(2) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated)
in the equity of such association or entity;
(3) in the case of a partnership or limited liability company, partnership or
membership interests (whether general or limited); and
(4) any other interest or participation that confers on a Person the right to
receive a share of the profits and losses of, or distributions of assets
of, the issuing Person.
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"Cash Equivalents" means (i) securities issued by, or unconditionally
guaranteed or insured by, the United States Government or issued by any agency
thereof and backed by the full faith and credit of the United States Government,
in each case maturing within one year from the date of acquisition thereof
("GOVERNMENT OBLIGATIONS"); (ii) marketable direct obligations issued by any
state of the United States of America or any political subdivision thereof
maturing within one year from the date of acquisition thereof and, at the time
of acquisition, having one of the two highest ratings obtainable from either
Standard & Poor's Corporation ("S&P") or Moody's Investors Service, Inc.
("MOODY'S"); (iii) commercial paper and variable or fixed rate notes maturing no
more than six months from the acquisition thereof and, at the time of
acquisition, having a rating of at least A-1 from S&P or at least P-1 from
Moody's; (iv) certificates of deposit or bankers' acceptances maturing within
one year from the date of acquisition thereof issued by any bank organized under
the laws of the United States of America or any state thereof or the District of
Columbia or any U.S. branch of a foreign bank having at the date of acquisition
thereof combined capital and surplus of not less than $250.0 million; (v)
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 bank
meeting the qualifications specified in clause (iv) above; (vi) federally tax
exempt securities rated "A" or better by S&P or "A2" or better by Moody's and
(vii) investments in money market funds with assets of $100.0 million or greater
which invest substantially all their assets in securities of the types described
in clauses (i) through (vi) above; and (viii) in the case of Foreign
Subsidiaries, substantially similar Cash Equivalents as those described in
clauses (i), (iii) and (iv) above that are available in the local currency.
"Change of Control" means the occurrence of any one or more of the
following:
(1) the sale, transfer, conveyance or other disposition (other than a Lien or
by way of merger or consolidation), in one or a series of related
transactions, of all or substantially all of the assets of Worldwide and
its Subsidiaries taken as a whole to any "person" (as such term is used in
Section 13(d)(3) of the Exchange Act) other than a Permitted Holder or a
Related Party of a Permitted Holder;
(2) the adoption by holders of the Capital Stock of Worldwide of a plan for the
liquidation or dissolution of Worldwide;
(3) prior to the first Public Equity Offering, the consummation of any
transaction (including, without limitation, any merger or consolidation)
the result of which is that the Permitted Holders and their Related Parties
are the Beneficial Owners, directly or indirectly, of less than 51% of the
total voting power of the Voting Stock of Worldwide;
(4) after the first Public Equity Offering, the consummation of any transaction
(including, without limitation, any merger or consolidation) the result of
which is that any "person" (as defined above), other than the Permitted
Holders and their Related Parties, becomes the Beneficial Owner, directly
or indirectly, of more than 30% of the total voting power of the Voting
Stock of Worldwide; or
(5) the first day on which a majority of the members of the Board of Directors
of Worldwide are not Continuing Directors.
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"Consolidated Cash Flow" means, with respect to any Person for any period,
the Consolidated Net Income of such Person for such period plus:
(1) provision for taxes based on income or profits of such Person and its
Restricted Subsidiaries for such period, to the extent that such provision
for taxes was deducted in computing such Consolidated Net Income; plus
(2) consolidated interest expense of such Person and its Restricted
Subsidiaries for such period, whether paid or accrued and whether or not
capitalized (including, without limitation, amortization of debt issuance
costs and original issue discount, non-cash interest payments, the interest
component of any deferred payment obligations, the interest component of
all payments associated with Capital Lease Obligations, imputed interest
with respect to Attributable Debt, commissions, discounts and commitment
and other fees and charges incurred in respect of letter of credit or
bankers' acceptance financings, and net payments, if any, pursuant to
Hedging Obligations), to the extent that any such expense was deducted in
computing such Consolidated Net Income; plus
(3) depreciation, amortization (including amortization of goodwill and other
intangibles but excluding amortization of prepaid cash expenses that were
paid in a prior period) and other non-cash expenses (excluding any such
non-cash expense to the extent that it represents an accrual of or reserve
for cash expenses in any future period or amortization of a prepaid cash
expense that was paid in a prior period) of such Person and its Restricted
Subsidiaries for such period to the extent that such depreciation,
amortization and other non-cash expenses were deducted in computing such
Consolidated Net Income; minus
(4) non-cash items increasing such Consolidated Net Income for such period,
other than items that were accrued in the ordinary course of business, in
each case, on a consolidated basis and determined in accordance with GAAP.
Notwithstanding the preceding sentence, clauses (1) and (3) relating to
amounts of a Restricted Subsidiary of a Person will be added to Consolidated Net
Income to compute Consolidated Cash Flow of such Person only to the extent (and
in the same proportion) that the Net Income (loss) of such Restricted Subsidiary
was included in calculating the Consolidated Net Income of such Person.
"Consolidated Net Income" means, with respect to any specified Person for
any period, the aggregate of the Net Income of such Person and its Restricted
Subsidiaries for such period, on a consolidated basis, determined in accordance
with GAAP; provided that:
(1) the Net Income (but not loss) of any Person that is not a Restricted
Subsidiary shall be included only to the extent of the amount of dividends
or distributions paid in cash to the specified Person or a Wholly Owned
Subsidiary thereof;
(2) the Net Income of any Restricted Subsidiary shall be excluded to the extent
that the declaration or payment of dividends or similar distributions by
such Restricted Subsidiary of such Net Income is not at the date of
determination permitted without any prior governmental approval (that has
not been obtained) or, directly or indirectly, by operation of the terms of
its charter or any agreement, instrument, judgment, decree, order, statute,
rule or governmental regulation applicable to such Restricted Subsidiary,
except to the extent of dividends or distributions paid in accordance
therewith;
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(3) the Net Income of any Person acquired in a pooling of interests transaction
for any period prior to the date of such acquisition shall be excluded (it
being understood, however, that the acquisition of such Person may still be
considered for purposes of calculating the Fixed Charge Coverage Ratio in
accordance with the terms of the definition thereof); and
(4) the cumulative effect of a change in accounting principles shall be
excluded.
"Consolidated Net Worth" means, with respect to any Person as of any date
the consolidated stockholders' equity of such Person and its consolidated
Subsidiaries as of such date, less (without duplication) amounts attributable to
Disqualified Stock of such Person.
"Consolidated Revenue" means with respect to any specified Person for any
period, the aggregate revenue of such Person and its Restricted Subsidiaries for
such period, on a consolidated basis, determined in accordance with GAAP.
"Continuing Directors" means, as of any date of determination, any member
of the Board of Directors of Worldwide who:
(1) was a member of such Board of Directors on the Issue Date (together with
individuals whose nomination for election to the Board of Directors is or
was recommended by CHI); or
(2) was nominated for election or elected to such Board of Directors with the
approval of a majority of the Continuing Directors who were members of such
Board at the time of such nomination or election.
"Credit Facilities" means, with respect to Worldwide or any Restricted
Subsidiary, one or more debt facilities or commercial paper facilities,
including, without limitation, the Senior Secured Credit Facility, in each case
with banks or other lenders providing for revolving credit loans, term loans,
receivables financing (including through the sale of receivables to such lenders
or to special purpose entities formed to borrow from such lenders against such
receivables) or letters of credit, in each case, as amended, restated, modified,
renewed, refunded, replaced or refinanced in whole or in part from time to time
under existing or new Credit Facilities.
"Default" means any event that is, or with the passage of time or the
giving of notice or both would be, an Event of Default.
"Disqualified Stock" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible, or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or is redeemable
at the option of the holder thereof, in whole or in part, on or prior to the
date that is 91 days after the date on which the New Notes mature.
Notwithstanding the preceding sentence, any Capital Stock that would constitute
Disqualified Stock solely because the holders thereof have the right to require
Worldwide to repurchase such Capital Stock upon the occurrence of a change of
control or an asset sale shall not constitute Disqualified Stock if the terms of
such Capital Stock provide that Worldwide may not repurchase or redeem any such
Capital Stock pursuant to such provisions prior to the repurchase of all New
Notes as may be required pursuant to the
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provisions of the Indenture described under the captions "Change of Control" and
"Limitations on Asset Sales."
"Domestic Subsidiary" means a Subsidiary that is organized under the laws
of the United States, any state thereof or the District of Columbia.
"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Existing Indebtedness" means Indebtedness of Worldwide and its Restricted
Subsidiaries in existence on the Issue Date.
"Fixed Charges" means, with respect to any Person for any period, the sum,
without duplication, of:
(1) the consolidated interest expense of such Person and its Restricted
Subsidiaries for such period, whether paid or accrued and whether or not
capitalized, including, without limitation, amortization of debt issuance
costs and original issue discount, non-cash interest payments, the interest
component of any deferred payment obligations, the interest component of
all payments associated with Capital Lease Obligations, imputed interest
with respect to Attributable Debt, commissions, discounts and other fees
and charges incurred in respect of letter of credit or bankers' acceptance
financings, and net payments, if any, pursuant to Hedging Obligations; plus
(2) any interest expense on Indebtedness of another Person that is Guaranteed
by such Person or one of its Restricted Subsidiaries or secured by a Lien
on assets of such Person or one of its Restricted Subsidiaries, to the
extent such interest is actually paid by such Person or one of its
Restricted Subsidiaries or such Lien is foreclosed upon; plus
(3) the product of (a) all cash dividend payments on any series of preferred
stock of such Person or any of its Restricted Subsidiaries, other than
dividend payments to Worldwide or a Restricted Subsidiary of Worldwide,
times (b) a fraction, the numerator of which is one and the denominator of
which is one minus the then current combined federal, state and local
statutory tax rate of such Person, expressed as a decimal, in each case, on
a consolidated basis and in accordance with GAAP.
"Fixed Charge Coverage Ratio" means with respect to any specified Person
for any period, the ratio of the Consolidated Cash Flow of such Person and its
Restricted Subsidiaries for such period to the Fixed Charges of such Person for
such period. In the event that the specified Person or any of its Restricted
Subsidiaries incurs, assumes, repays or redeems any Indebtedness (other than
revolving credit borrowings) or issues or redeems preferred stock or
Disqualified Stock subsequent to the commencement of the period for which the
Fixed Charge Coverage Ratio is being calculated but prior to the date on which
the event for which the calculation of the Fixed Charge Coverage Ratio is made
(the "CALCULATION DATE"), then the Fixed Charge Coverage Ratio shall be
calculated giving pro forma effect to such incurrence, assumption, repayment or
redemption of Indebtedness (and the application of the proceeds thereof), or
such issuance or redemption of preferred stock or Disqualified Stock, as if the
same had occurred at the beginning of the applicable four-quarter reference
period.
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In addition, for purposes of calculating the Fixed Charge Coverage Ratio:
(1) acquisitions that have been made by the specified Person or any of its
Restricted Subsidiaries, including through mergers or consolidations and
including any related financing transactions, during the four-quarter
reference period or subsequent to such reference period and on or prior to
the Calculation Date shall be deemed to have occurred on the first day of
the four-quarter reference period and Consolidated Cash Flow for such
reference period shall be calculated without giving effect to clause (3) of
the proviso set forth in the definition of Consolidated Net Income;
(2) the Consolidated Cash Flow attributable to discontinued operations, as
determined in accordance with GAAP, and operations or businesses disposed
of prior to the Calculation Date, shall be excluded; and
(3) the Fixed Charges attributable to discontinued operations, as determined in
accordance with GAAP, and operations or businesses disposed of prior to the
Calculation Date, shall be excluded, but only to the extent that the
obligations giving rise to such Fixed Charges will not be obligations of
the specified Person or any of its Restricted Subsidiaries following the
Calculation Date.
For the purpose of this definition, whenever pro forma effect is to be given to
an acquisition of assets, the amount of income or earnings relating thereto and
the amount of Consolidated Interest Expense associated with any Indebtedness
incurred in connection therewith, or any other calculation under this
definition, the pro forma calculations will be determined in good faith by a
responsible financial or accounting officer of Worldwide (including pro forma
expense and cost reductions calculated on a basis consistent with Regulation S-X
under the Securities Act). If any Indebtedness bears a floating rate of interest
and is being given pro forma effect, the interest expense on such Indebtedness
will be calculated as if the average rate for the period had been the applicable
rate for the entire period (taking into account any interest rate agreement
applicable to such Indebtedness).
"Foreign Borrowing Base" means, as of any date, an amount equal to:
(1) 85% of the face amount of all accounts receivable (net of bad debt
reserves) owned by Worldwide's Foreign Subsidiaries as of the end of the
most recent fiscal quarter preceding such date, calculated on a
consolidated basis and in accordance with GAAP; plus
(2) 50% of the orderly liquidation value of all property, plant and equipment
owned by Worldwide's Foreign Subsidiaries as of the end of the most recent
fiscal quarter preceding such date; provided, that, such liquidation value
shall be determined by an appraisal of such property, plant and equipment
conducted by an independent appraisal firm of national standing.
"Foreign Subsidiary" means any Subsidiary that is not a Domestic
Subsidiary.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect from time to time.
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"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, through letters of credit
or reimbursement agreements in respect thereof, of all or any part of any
Indebtedness.
"Guarantors" means each of:
(1) Worldwide's Domestic Subsidiaries other than Non-Guarantor Subsidiaries;
and
(2) any other subsidiary that executes a Subsidiary Guarantee;
and their respective successors and assigns.
"Hedging Obligations" means, with respect to any Person, the obligations of
such Person under:
(1) foreign currency exchange agreements, interest rate swap agreements,
interest rate cap agreements and interest rate collar agreements; and
(2) other agreements or arrangements designed to protect such Person against
fluctuations in interest rates or currency exchange rates.
"Indebtedness" means, with respect to any specified Person, any
indebtedness of such Person, without duplication:
(1) in respect of borrowed money;
(2) evidenced by bonds, notes, debentures or similar instruments or letters of
credit (or reimbursement agreements in respect thereof);
(3) in respect of banker's acceptances;
(4) representing Capital Lease Obligations;
(5) representing the deferred and unpaid purchase price of any property, except
any such balance that constitutes an accrued expense or trade payable; or
(6) representing any Hedging Obligations,
if and to the extent any of the preceding items (other than reimbursement
obligations with regard to letters of credit and Hedging Obligations) would
appear as a liability upon a balance sheet of the specified Person prepared in
accordance with GAAP. In addition, the term "Indebtedness" includes all
Indebtedness referred to in clauses (1) through (6) above of other Persons
secured by a Lien on any asset of such Person (whether or not such Indebtedness
is assumed by such Person), the amount of such Indebtedness being deemed to be
the lesser of the fair market value of such property or asset and the amount of
the obligation so secured, and, to the extent not otherwise included, the
Guarantee by such Person of any Indebtedness of any other Person to the extent
of such Guarantor of such Indebtedness provided by such Person.
"Investments" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Indebtedness or other obligations),
advances or capital contributions (excluding commission, travel and similar
advances to officers and employees made in the
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ordinary course of business), purchases or other acquisitions for consideration
of Indebtedness, Equity Interests or other securities of such other Persons,
together with all items that are or would be classified as investments on a
balance sheet prepared in accordance with GAAP but excluding extensions of trade
credit in the ordinary course of business. If Worldwide or any Restricted
Subsidiary of Worldwide sells or otherwise disposes of any Equity Interests of
any direct or indirect Restricted Subsidiary of Worldwide such that, after
giving effect to any such sale or disposition, such Person is no longer a
Restricted Subsidiary of Worldwide, Worldwide shall be deemed to have made an
Investment on the date of any such sale or disposition equal to the fair market
value of the Equity Interests of such Restricted Subsidiary not sold or disposed
of in an amount determined as provided in the final paragraph of the covenant
described above under the caption "--Covenants--Restricted Payments."
"Issue Date" means the date of original issuance of the Original Notes.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind on such asset, whether or
not filed, recorded or otherwise perfected under applicable law, including any
conditional sale or other title retention agreement, any lease in the nature
thereof, any agreement to give a security interest in and any filing of any
financing statement under the Uniform Commercial Code (or equivalent statutes)
of any jurisdiction.
"Management Agreement" means the management agreement dated March 31, 1999,
by and between Castle Harlan, Inc. and Worldwide, as amended as of the Issue
Date.
"Net Income" means, with respect to any Person, the net income (loss) of
such Person and its Restricted Subsidiaries, determined in accordance with GAAP
and before any reduction in respect of preferred stock dividends, excluding,
however (without duplication):
(1) any gain (or loss), together with any related provision for taxes on such
gain (or loss), realized in connection with: (a) any Asset Sale; or (b) the
disposition of any securities by such Person or any of its Restricted
Subsidiaries or the extinguishment of any Indebtedness of such Person or
any of its Restricted Subsidiaries; and
(2) any extraordinary gain (or loss), together with any related provision for
taxes on such extraordinary gain (or loss).
"Net Proceeds" means the aggregate cash or Cash Equivalents proceeds
received by Worldwide or any of its Restricted Subsidiaries in respect of any
Asset Sale (including, without limitation, any cash or Cash Equivalents (other
than interest) received upon the sale or other disposition of any non-cash
consideration received in any Asset Sale), net of fees, commissions, expenses
and other direct costs relating to such Asset Sale, including, without
limitation, legal, accounting and investment banking fees, and sales or
brokerage commissions, and any relocation expenses and severance costs incurred
as a result thereof, taxes paid or payable as a result thereof, in each case
after taking into account any available tax credits or deductions and any tax
sharing arrangements and amounts required to be applied to the repayment of
Indebtedness, other than Indebtedness in respect of a Credit Facility or any
other Indebtedness secured by a Lien, as a result of such Asset Sale, all
distributions and other payments required to be made to minority interest
holders in Subsidiaries as a result of such Asset Sale, any reserve for
adjustment in respect of the sale price of such assets established in accordance
with GAAP and any reserves in
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accordance with GAAP against any liabilities associated with such Asset Sale,
including, without limitation, pension and other post-employment benefit
liabilities, liabilities related to environmental matters and liabilities under
any indemnification obligations associated with such Asset Sale.
"Non-Recourse Debt" means Indebtedness: (1) as to which neither Worldwide
nor any of its Restricted Subsidiaries (a) provides credit support of any kind
(including any undertaking, agreement or instrument that would constitute
Indebtedness), (b) is directly or indirectly liable as a guarantor or otherwise,
or (c) constitutes the lender or (2) pursuant to which the lender has no
recourse to any of the assets of Worldwide or any of its Restricted
Subsidiaries.
"Obligations" means any principal, interest, penalties, fees, costs,
expenses, indemnifications, reimbursements, damages and other liabilities or
amounts payable under the documentation governing any Indebtedness.
"Our parent" means WFS Holdings, Inc., a Delaware corporation.
"Permitted Business" means the coordination, provision and supervision of
ground services to the aviation industry including, without limitation, cargo
services, ramp services, passenger services and technical and industry services,
and any business which is the same as or related, ancillary or complementary
thereto.
"Permitted Holder" means (a) Castle Harlan Partners III, L.P., a Delaware
limited partnership ("CHP III"), any Person controlling, controlled by, or under
common control with, CHP III and any managed account controlled by, or under
common control with CHP III, (b) Castle Harlan, Inc., a Delaware corporation,
and (c) employees, management and directors of any of the foregoing, and any
trust or individual retirement account for the benefit of any such employees,
management or directors, or members of their immediate families and any Person
controlled by any such employee, manager or director.
"Permitted Investments" means:
(1) (a) any Investment in Worldwide or in a Guarantor or (b) any Investment by
a Restricted Subsidiary of Worldwide that is not a Guarantor in another
Restricted Subsidiary of Worldwide that is not a Guarantor;
(2) any Investment in cash or Cash Equivalents;
(3) any Investment by Worldwide or any Restricted Subsidiary of Worldwide in a
Person, if as a result of such Investment:
(a)such Person becomes a Guarantor or, to the extent such Investment is
made by a Restricted Subsidiary of Worldwide that is not a Guarantor,
such Person becomes a Restricted Subsidiary of Worldwide that is not a
Guarantor;
(b)such Person is merged, consolidated or amalgamated with or into, or
transfers or conveys substantially all of its assets to, or is
liquidated into, Worldwide or a Guarantor or to the extent such
Investment is made by a Restricted Subsidiary of Worldwide that is not
a Guarantor, such Person is merged, consolidated or amalgamated with or
into, or transfers or conveys substantially all of its assets to, or is
liquidated into, a Restricted Subsidiary of Worldwide that is not a
Guarantor;
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(4) any Investment made as a result of the receipt of non-cash consideration
from an Asset Sale that was made pursuant to and in compliance with the
covenant described above under the caption "--Repurchase at the Option of
Holders--Asset Sales;"
(5) any acquisition of assets solely in exchange for the issuance of Equity
Interests (other than Disqualified Stock) of Worldwide;
(6) Hedging Obligations;
(7) other Investments in any Unrestricted Subsidiary or in any other Person
engaged in a Permitted Business having an aggregate fair market value
(measured on the date each such Investment was made and without giving
effect to subsequent changes in value), when taken together with all other
Investments made pursuant to this clause (7) since the Issue Date, not to
exceed $3.0 million at any time outstanding (reduced, without duplication,
by the amount of Investments made pursuant to clause (10)(b) of this
definition);
(8) Investments in securities of trade creditors or customers received pursuant
to any plan of reorganization or similar agreement upon the bankruptcy or
insolvency of such trade creditors or customers;
(9) Investments by Worldwide or any Guarantor in any Foreign Subsidiary of
Worldwide; provided that each Investment is by means of an intercompany
loan made by Worldwide or a Guarantor to such Foreign Subsidiary; provided,
further, that the Indebtedness of such Foreign Subsidiary evidenced by such
intercompany loan shall not be contractually subordinated to the prior
payment of any other obligations for the payment of money of such Foreign
Subsidiary; and
(10) other Investments by Worldwide or any Guarantor in a Foreign Subsidiary
having an aggregate fair market value (measured on the date each such
Investment was made and without giving effect to subsequent changes in
value), when taken together with all other Investments made pursuant to
this clause (10) that are at the time outstanding, not to exceed (a) 15% of
Total Tangible Assets at the time of such Investment plus (b) the amount of
Investments that are permitted to be made but have not been made under
clause (7) of this definition.
"Permitted Liens" means:
(1) Liens on any assets and property of Worldwide and its Subsidiaries securing
Indebtedness, guarantees of Indebtedness and other Obligations under one or
more Credit Facilities permitted by clause (1) of the second paragraph of
the covenant entitled "Incurrence of Indebtedness and Issuance of
Preferred Stock";
(2) Liens in favor of (a) Worldwide or the Guarantors or (b) any Restricted
Subsidiary that is not a Guarantor granted by, and with respect to property
or assets of, another Restricted Subsidiary that is not a Guarantor;
(3) Liens on property of a Person existing at the time such Person is merged
with or into or consolidated with Worldwide or any Restricted Subsidiary of
Worldwide; provided that such Liens were not incurred in connection with or
in contemplation of, such merger or consolidation and do not extend to any
assets other than those of the Person merged into or consolidated with
Worldwide or the Restricted Subsidiary;
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(4) Liens on property existing at the time of acquisition thereof by Worldwide
or any Restricted Subsidiary of Worldwide, provided that such Liens were
not incurred in connection with or in contemplation of such acquisition;
(5) Liens to secure the performance of statutory obligations (including,
without limitation, Liens of landlords, carriers, warehousemen, mechanics,
suppliers, materialmen and other similar Liens imposed by law), surety or
appeal bonds, performance bonds or other obligations of a like nature
incurred in the ordinary course of business (or to secure reimbursement
obligations in respect of letters of credit issued in connection with any
of the foregoing obligations);
(6) Liens to secure Indebtedness (including Acquired Debt and Capital Lease
Obligations) permitted by clause (4) of the second paragraph of the
covenant entitled "Incurrence of Indebtedness and Issuance of Preferred
Stock" covering only the assets acquired with such Indebtedness or such
assets related to the Acquired Debt;
(7) Liens existing on the Issue Date;
(8) Liens for taxes, assessments or governmental charges or claims that are not
yet delinquent or that are being contested in good faith by appropriate
proceedings promptly instituted and diligently pursued, provided that any
reserve or other appropriate provision as shall be required in conformity
with GAAP shall have been made therefor;
(9) Liens on assets of Foreign Subsidiaries to secure Indebtedness permitted by
clause (11) of the second paragraph of the covenant entitled "Incurrence of
Indebtedness and Issuance of Preferred Stock";
(10) Liens incurred in the ordinary course of business of Worldwide or any
Restricted Subsidiary of Worldwide with respect to obligations that do not
exceed the principal amount of $10.0 million at any one time outstanding;
(11) Liens securing the New Notes or the Subsidiary Guarantees, if any;
(12) Liens securing Permitted Refinancing Indebtedness, provided, however, that
such Liens (a) are no less favorable to the Holders and are not more
favorable to the lienholders with respect to such Liens than the Liens in
respect of the Indebtedness being refinanced, and (b) do not extend to or
cover any property or assets of Worldwide or any of its Restricted
Subsidiaries not securing the Indebtedness so refinanced;
(13) Liens incurred or deposits made in the ordinary course of business in
connection with workers' compensation, employment insurance or other types
of social security, including Liens securing letters of credit issued in
the ordinary course of business or to secure the performance of tenders,
statutory obligations, surety and appeal bonds, bids, leases, government
contracts, performance and return-of-money bonds and other similar
obligations including those arising from regulatory, contractual or
warranty requirements of Worldwide and its Subsidiaries, including rights
of offset and set-off (in each case exclusive of obligations for the
payment of borrowed money);
(14) Liens arising by reason of any judgment, decree or order of any court not
giving rise to an Event of Default, so long as such Lien is adequately
bonded and any appropriate legal proceedings which may have been duly
initiated for the review of
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such judgment, order or decree shall not have been finally terminated or
the period with which such proceedings may be initiated shall not have
expired;
(15) Survey exceptions, easements, rights of way, zoning restrictions and other
restrictions on the use of property;
(16) Liens to secure Indebtedness permitted by clauses (8), (9) and (10) of the
second paragraph of the covenant entitled "Incurrence of Indebtedness and
Issuance of Preferred Stock"; and
(17) Any extension, renewal or replacement, in whole or in part, of any Lien
described in the foregoing clauses (1) through (16); provided that any such
extension, renewal or replacement is no more restrictive in any material
respect than the Lien so extended, renewed or replaced and does not extend
to any additional property or assets.
"Permitted Refinancing Indebtedness" means any Indebtedness or Disqualified
Stock of Worldwide or any of its Restricted Subsidiaries issued in exchange for,
or the net proceeds of which are used to extend, refinance, renew, replace,
defease or refund other Indebtedness or Disqualified Stock of Worldwide or any
of its Restricted Subsidiaries; provided that:
(1) the principal amount (or accreted value, if applicable) or mandatory
redemption amount of such Permitted Refinancing Indebtedness does not
exceed the principal amount of (or accreted value, if applicable) or
mandatory redemption amount, plus accrued interest or dividends on, the
Indebtedness or Disqualified Stock so extended, refinanced, renewed,
replaced, defeased or refunded (plus the amount of contractual prepayment
charges and fees and expenses and other amounts incurred in connection
therewith);
(2) such Permitted Refinancing Indebtedness has a final maturity or final
redemption date no earlier than the final maturity or final redemption date
of, and has a Weighted Average Life to Maturity equal to or greater than
the Weighted Average Life to Maturity of, the Indebtedness or Disqualified
Stock being extended, refinanced, renewed, replaced, defeased or refunded;
(3) if the Indebtedness or Disqualified Stock being extended, refinanced,
renewed, replaced, defeased or refunded is subordinated in right of payment
to the New Notes, such Permitted Refinancing Indebtedness is subordinated
in right of payment to, the New Notes on terms at least as favorable to the
Holders of New Notes as those contained in the documentation governing the
Indebtedness or Disqualified Stock being extended, refinanced, renewed,
replaced, defeased or refunded; and
(4) such Indebtedness is incurred or Disqualified Stock is issued either by
Worldwide or by the Restricted Subsidiary who is the obligor on the
Indebtedness or Disqualified Stock being extended, refinanced, renewed,
replaced, defeased or refunded.
"Person" means any individual, corporation, partnership, joint venture,
association, joint stock company, limited liability company, trust,
unincorporated association, government or any agency political subdivision
thereof or any other entity.
"Public Equity Offering" means any underwritten public offering of common
stock (other than Disqualified Stock) pursuant to an effective registration
statement under the
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Securities Act, of any Equity Interest of Worldwide or our parent in which the
gross proceeds to Worldwide are at least $20.0 million.
"Related Business Assets" means any assets used or useful in a Permitted
Business.
"Related Party" with respect to any Permitted Holder means:
(1) a spouse or immediate family member (in the case of an individual) of such
Permitted Holder; or
(2) any trust, corporation, partnership or other entity, the beneficiaries,
stockholders, partners, owners or Persons beneficially holding an 80% or
more controlling interest of which consist of such Permitted Holder and/or
such other Persons referred to in the immediately preceding clause (1).
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Subsidiary" of a Person means any Subsidiary of the referent
Person that is not an Unrestricted Subsidiary.
"Senior Secured Credit Facility" means the Credit Agreement, dated as of
August 12, 1999, by and among our parent, Worldwide, the lenders named therein,
The Chase Manhattan Bank, as administrative agent, and DLJ Capital Funding,
Inc., as syndication agent, providing for revolving credit loans, including any
related notes, guarantees, collateral documents, instruments and agreements
executed in connection therewith, and in each case as amended, modified,
supplemented, extended, renewed, restated, refunded, replaced or refinanced from
time to time, including any amendment, modification, supplement, extension,
renewal, restatement, refunding, replacement or refinancing that increases the
amount borrowable thereunder, provided such Indebtedness could be incurred under
the Indenture, or alters the maturity thereof.
"Significant Subsidiary" means any Subsidiary that would be a "significant
subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated
pursuant to the Act, as such Regulation is in effect on the date hereof.
"Stated Maturity" means, with respect to any installment of principal on
any series of Indebtedness, the date on which such payment of principal was
scheduled to be paid in the original documentation governing such Indebtedness,
and shall not include any contingent obligations to repay, redeem or repurchase
any such principal prior to the date originally scheduled for the payment
thereof.
"Subordinated Indebtedness" means any Indebtedness of Worldwide (whether
outstanding on the Issue Date or thereafter incurred) which is subordinate or
junior in right of payment to the New Notes pursuant to a written agreement.
"Subsidiary" means, with respect to any Person:
(1) any corporation, association or other business entity of which more than
50% of the total voting power of shares of Capital Stock entitled (without
regard to the occurrence of any contingency) to vote in the election of
directors, managers or trustees thereof is at the time owned or controlled,
directly or indirectly, by such Person or one or more of the other
Subsidiaries of that Person (or a combination thereof); and
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(2) any other Person of which at least a majority of the voting interest
(without regard to the occurrence of any contingency) is at the time
directly or indirectly owned by such Person.
"Subsidiary Guarantee" means the Subsidiary Guarantee executed by the
Guarantors in accordance with the terms of the Indenture.
"Total Tangible Assets" means the total consolidated tangible assets of
Worldwide and its Restricted Subsidiaries determined in accordance with GAAP and
as shown on the most recent balance sheet of Worldwide.
"Unrestricted Subsidiary" means any Subsidiary of Worldwide that is
designated by the Board of Directors as an Unrestricted Subsidiary pursuant to a
Board Resolution, but only to the extent that such Subsidiary:
(1) has no Indebtedness other than Non-Recourse Debt;
(2) is not party to any agreement, contract, arrangement or understanding with
Worldwide or any Restricted Subsidiary of Worldwide unless the terms of any
such agreement, contract, arrangement or understanding are no less
favorable to Worldwide or such Restricted Subsidiary than those that might
be obtained at the time from Persons who are not Affiliates of Worldwide;
(3) is a Person with respect to which neither Worldwide nor any of its
Restricted Subsidiaries has any direct or indirect obligation (a) to
subscribe for additional Equity Interests or (b) to maintain or preserve
such Person's financial condition or to cause such Person to achieve any
specified levels of operating results; and
(4) has not guaranteed or otherwise directly or indirectly provided credit
support for any Indebtedness of Worldwide or any of its Restricted
Subsidiaries.
Any designation of a Subsidiary of Worldwide as an Unrestricted Subsidiary
shall be evidenced to the Trustee by filing with the Trustee a certified copy of
the Board Resolution giving effect to such designation and an Officer's
Certificate certifying that such designation complied with the preceding
conditions and was permitted by the covenant described above under the caption
"--Covenants--Restricted Payments." If, at any time, any Unrestricted Subsidiary
would fail to meet the preceding requirements as an Unrestricted Subsidiary, it
shall thereafter cease to be an Unrestricted Subsidiary for purposes of the
Indenture and any Indebtedness of such Subsidiary shall be deemed to be incurred
by a Restricted Subsidiary of Worldwide as of such date and, if such
Indebtedness is not permitted to be incurred as of such date under the covenant
described under the caption "Incurrence of Indebtedness and Issuance of
Preferred Stock," Worldwide shall be in default of such covenant. The Board of
Directors of Worldwide may at any time designate any Unrestricted Subsidiary to
be a Restricted Subsidiary; provided that such designation shall be deemed to be
an incurrence of Indebtedness by a Restricted Subsidiary of Worldwide of any
outstanding Indebtedness of such Unrestricted Subsidiary and such designation
shall only be permitted if (1) such Indebtedness is permitted under the covenant
described under the caption "--Covenants--Incurrence of Indebtedness and
Issuance of Preferred Stock," calculated on a pro forma basis as if such
designation had occurred at the beginning of the four-quarter reference period;
and (2) no Default or Event of Default would be in existence immediately
following such designation.
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The Board of Directors of Worldwide may designate any Subsidiary to be an
Unrestricted Subsidiary if that designation would not cause a Default to be
continuing immediately after such designation. If a Subsidiary is designated as
an Unrestricted Subsidiary, all outstanding Investments owned by Worldwide and
its Restricted Subsidiaries in the Subsidiary so designated will be deemed to be
an Investment made as of the time of such designation and will either reduce the
amount available for Restricted Payments under the first paragraph of the
covenant described above under the caption "--Covenants--Restricted Payments" or
reduce the amount available for future Investments under one or more clauses of
the definition of "Permitted Investments." All such outstanding Investments will
be valued at their fair market value at the time of such designation. That
designation will only be permitted if such Restricted Payment would be permitted
at that time and if such Restricted Subsidiary otherwise meets the definition of
an Unrestricted Subsidiary. The Board of Directors may redesignate any
Unrestricted Subsidiary to be a Restricted Subsidiary if the redesignation would
not cause a Default to be continuing immediately after such designation.
"Voting Stock" of any Person as of any date means the Capital Stock of such
Person that is at the time entitled to vote in the election of the Board of
Directors of such Person.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing:
(1) the sum of the products obtained by multiplying (a) the amount of each then
remaining installment, sinking fund, serial maturity or other required
payments 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
(2) the then outstanding principal amount of such Indebtedness.
"Wholly Owned Restricted Subsidiary" of any Person means a Restricted
Subsidiary of such Person all of the outstanding Capital Stock or other
ownership interests of which (other than directors' qualifying shares) shall at
the time be owned by such Person and/or by one or more Wholly Owned Restricted
Subsidiaries of such Person.
"Wholly Owned Subsidiary" of any person means a subsidiary of such person
all of the outstanding capital stock or other ownership interests of which
(other than directors' qualifying shares) shall at the time be owned by one or
more wholly owned subsidiaries.
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<PAGE> 128
UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following is a discussion of the material United States federal income
tax consequences of the exchange of the original notes for the new notes and the
ownership and disposition of the new notes. Except where noted, the following
deals only with New Notes held as capital assets within the meaning of section
1221 of the Internal Revenue Code of 1986, as amended (the "Code") by a holder
of new notes that acquired the new notes pursuant to their original issue. The
following does not deal with special situations, such as those of dealers in
securities or currencies, tax-exempt organizations, financial institutions,
insurance companies, or persons holding new notes as part of a hedging or
conversion transaction or a straddle. Furthermore, the following is based upon
the provisions of the Code, U.S. Treasury Department regulations promulgated
thereunder, administrative pronouncements, judicial decisions and
interpretations of the foregoing as of the date hereof. Such authorities may be
repealed, revoked, or modified, possibly with retroactive effect, so as to
result in United States federal income tax consequences different from those
discussed below. In addition, except as otherwise indicated, the following does
not consider the effect of any applicable foreign, state, local or other tax
laws or estate or gift tax considerations.
As used herein, a "United States person" is:
(1) a citizen or resident of the U.S.;
(2) a corporation or partnership created or organized in or under the laws of
the U.S. or any political subdivision thereof;
(3) an estate the income of which is subject to U.S. federal income taxation
regardless of its source; or
(4) a trust if
(A) a court within the United States is able to exercise primary
supervision over the administration of the trust and
(B) one or more United States persons have the authority to control all
substantial decisions of the trust.
A U.S. holder is a beneficial owner of a new note who is a United States
person. A Non-U.S. holder is a beneficial owner of a new note who is not a U.S.
holder.
THE EXCHANGE OFFER
The exchange of new notes pursuant to the exchange offer will be treated as
a continuation of the corresponding original notes because the terms of the new
notes are not materially different from the terms of the original notes.
Accordingly:
(1) such exchange will not constitute a taxable event to a holder;
(2) no gain or loss will be realized by a holder upon receipt of a new note;
(3) the holding period of a new note will include the holding period of the
original note exchanged therefor; and
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<PAGE> 129
(4) the adjusted tax basis of the New Notes will be the same as the adjusted tax
basis of the original notes exchanged.
TAX CONSEQUENCES TO U.S. HOLDERS
ORIGINAL ISSUE DISCOUNT. The new notes will be issued with original issue
discount ("OID") in an amount equal to the difference between the principal
amount of the new notes and the issue price of the new notes. U.S. holders
should be aware that they generally must include OID in gross income in advance
of the receipt of cash attributable to that income.
The amount of OID includable in income by a U.S. holder of a new note is
the sum of the "daily portions" of OID with respect to the new note for each day
during the U.S. holder's taxable year on which it held such new note. The daily
portion is determined by allocating to each day in any "accrual period" a pro
rata portion of the OID allocable to that accrual period. The accrual period for
a new note may be of any length and may vary in length over the term of the new
note, provided that each accrual period is no longer than one year and each
scheduled payment of principal or interest occurs on the first day or the final
day of an accrual period.
In general, the amount of OID allocable to an accrual period is an amount
equal to the excess, if any, of (a) the product of the new note's "adjusted
issue price" at the beginning of such accrual period and its yield to maturity,
determined on the basis of compounding at the close of each accrual period and
properly adjusted for the length of the accrual period, over (b) the sum of any
stated interest allocable to the accrual period. OID allocable to a final
accrual period is the difference between the amount payable at maturity, other
than a payment of stated interest, and the adjusted issue price at the beginning
of the final accrual period. The adjusted issue price of a new note at the
beginning of any accrual period is equal to its issue price increased by the
accrued OID for each prior accrual period. Under these rules, a U.S. holder will
have to include in income increasingly greater amounts of OID in successive
accrual periods.
SALE, EXCHANGE OR DISPOSITION OF THE NEW NOTES. Upon the sale, exchange or
other disposition of a new note, a U.S. Holder generally will recognize capital
gain or loss equal to the difference between the amount of cash and the fair
market value of property received by such U.S. holder, except to the extent
attributable to accrued interest, which will be treated as interest, and such
U.S. holder's adjusted tax basis in the new note. Such capital gain or loss
generally will be long-term capital gain or loss if at the time of such sale,
exchange or other disposition the new note has been held by the U.S. holder for
more than 12 months, and will be short-term capital gain or loss if the new note
has been held by the U.S. holder for 12 months or less. In the case of some
non-corporate taxpayers, long-term capital gain will be subject to tax at a
maximum rate of 20% and short-term capital gain will be taxable as ordinary
income at a maximum rate of 39.6%. The deductibility of capital losses is
subject to limitations.
BACKUP WITHHOLDING AND INFORMATION REPORTING. Some noncorporate U.S.
holders may be subject to backup withholding at a rate of 31% on payments of
principal, and interest on, and the proceeds of disposition of, a new note.
Backup withholding will apply only if:
(1) the U.S. holder fails to furnish its Taxpayer Identification Number ("TIN")
in the manner required;
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<PAGE> 130
(2) the U.S. holder furnishes an incorrect TIN;
(3) the Internal Revenue Service notifies Worldwide or other payor that the U.S.
holder has underreported payments of interest or dividends; or
(4) under some circumstances, the U.S. holder fails to certify, under penalty of
perjury, that it has furnished a correct TIN and has not been notified by
the Internal Revenue Service that it is subject to backup withholding.
In general, information reporting requirements will apply to certain
payments made in respect of the new note of a U.S. holder, unless the U.S.
holder is an exempt recipient or otherwise establishes an exemption. Generally,
individuals are not exempt recipients, whereas corporations and certain other
entities are exempt recipients.
If you are a U.S. holder, any amounts withheld under the backup withholding
rules from a payment to you would be allowed as a refund or a credit against
your U.S. federal income tax liability, provided that the required information
is furnished in a timely manner to the Internal Revenue Service.
TAX CONSEQUENCES TO NON-U.S. HOLDERS
PAYMENTS OF INTEREST. Payments of interest on the new notes to a Non-U.S.
holder will generally not be subject to U.S. federal income or withholding tax,
provided that:
(1) (a) the holder is not (A) a direct or indirect owner of 10% or more of the
total combined voting power of all classes of stock of Worldwide within the
meaning of Section 871(h)(3) of the Code or (B) a controlled foreign
corporation related to us within the meaning of Section 864(d)(4) of the
Code;
(b) such interest is not effectively connected with the conduct by that holder
of a trade or business within the United States; and
(c) we or our paying agent receives (A) from the beneficial owner of the New
Note, a properly completed Internal Revenue Service Form W-8, Form W-8BEN or
other appropriate successor form, signed under penalties of perjury, which
provides its name and address and certifies that it is a Non-U.S. holder or
(B) from a securities clearing organization, bank or other financial
institution that holds the new notes in the ordinary course of its trade or
business (a "Financial Institution") on behalf of the beneficial owner, a
statement certifying under penalties of perjury that it has received such a
Form W-8, Form W-8BEN or other appropriate successor form from the Non-U.S.
holder, or that it has received from another Financial Institution a
statement that it has received a Form W-8, Form W-8BEN or other appropriate
successor form from the Non-U.S. holder, and a copy of such form is
furnished to the payor; or
(2) the payments of interest are not effectively connected with the conduct of a
U.S. trade or business and the Non-U.S. holder is entitled to the benefits
of an income tax treaty under which interest on the new notes is exempt from
United States federal withholding tax and the Non-U.S. Holder provides a
properly executed Internal Revenue Service Form 1001, Form W-8BEN or other
appropriate successor form claiming the exemption.
125
<PAGE> 131
If payment of interest on a New Note is effectively connected with the
conduct of a trade or business in the United States by a Non-U.S. Holder, such
payment will generally be subject to United States federal income tax on a net
basis at the rates applicable to U.S. Holders (and, if you are a corporate
Non-U.S. Holder, such payments may also be subject to a 30% branch profits tax).
Payments that are subject to United States federal income tax in such a manner
will not be subject to United States federal withholding tax so long as the
Non-U.S. Holder provides us or our paying agent with a properly executed
Internal Revenue Service Form 4224, Form W-8ECI or other appropriate successor
form.
SALE, EXCHANGE OR RETIREMENT OF THE NEW NOTES. Subject to the discussion
below concerning backup withholding, if you are a Non-U.S. holder, you will not
be subject to United States federal income or withholding tax with respect to
gain recognized on a sale, exchange or other disposition of the new notes
unless:
- the gain is effectively connected with your conduct of a trade or
business in the United States;
- if you are an individual, you are present in the United States for 183 or
more days in the taxable year of the disposition and other requirements
are met; or
- you are subject to the special rules applicable to some former citizens
and residents of the United States.
BACKUP WITHHOLDING AND INFORMATION REPORTING. Under current U.S. federal
income tax law, backup withholding at a rate of 31% will not apply to payments
of interest to a Non-U.S. Holder by us or our paying agent on a New Note if the
certifications described above under "Non-U.S. Holders--Payment of Interest" are
received, provided that we (or our paying agent) do not have actual knowledge
that the payee is a United States person. Interest paid with respect to a New
Note, and payment of the proceeds from the sale, exchange or other disposition
of a New Note to or through a United States office of a broker will be subject
to information reporting and backup withholding unless the payor receives the
appropriate certification statement. Appropriate certification procedures
require that the beneficial owner certifies as to its status as a Non-U.S.
Holder or otherwise establishes an exemption. In addition, payments of the
proceeds from the sale, exchange or other disposition of a New Note to or
through a foreign office of a broker or the foreign office of a custodian,
nominee or other agent acting on behalf of the beneficial owner of a New Note
will not be subject to information reporting or backup withholding; however, if
the broker, custodian, nominee or other agent is, for United States federal
income tax purposes, a United States person, a controlled foreign corporation or
a foreign person 50% or more of whose gross income over a specified three-year
period is from a United States trade or business, information reporting may be
required with respect to such payments. Backup withholding may apply to any
payment that the broker is required to report if the broker has actual knowledge
that the payee is a United States person.
If you are a Non-U.S. Holder, any amounts withheld under the backup
withholding rules from a payment to you would be allowed as a refund or a credit
against your U.S. federal income tax liability, provided that the required
information is furnished in a timely manner to the Internal Revenue Service.
New Treasury regulations governing the certification procedures regarding
withholding, backup withholding and information reporting on certain amounts
paid to Non-U.S. Holders are generally effective for payments made after
December 31, 2000. In general, the new Treasury regulations do not alter the
treatment of Non-U.S. Holders who
126
<PAGE> 132
satisfy current reporting requirements. The new Treasury regulations change some
procedural requirements relating to establishing a holder's non-U.S. status,
alter the procedures for claiming the benefits of an income tax treaty and may
change certain procedures relating to intermediaries receiving payments on
behalf of a beneficial owner of a new note. If you are a Non-U.S. Holder you
should consult your tax advisor concerning the effect, if any, of such new
Treasury regulations on the ownership and disposition of the new notes.
PLAN OF DISTRIBUTION
A broker-dealer that is the holder of original notes that were acquired for
the account of that broker-dealer as a result of market-making or other trading
activities, other than original notes acquired directly from us or any of our
affiliates, may exchange those original notes for new notes pursuant to the
exchange offer. This is true so long as each broker-dealer that receives new
notes for its own account in exchange for original notes, where the original
notes were acquired by the broker-dealer as a result of market-marking or other
trading activities, acknowledges that it will deliver a prospectus in connection
with any resale of such new notes. This prospectus, as it may be amended or
supplemented form time to time, may be used by a broker-dealer in connection
with resales of new notes received in exchange for original notes where the
original notes were acquired as result of market-making activities or other
trading activities. We have agreed that for a period of 180 days after
consummation of the exchange offer or such shorter period as will terminate when
all registrable securities covered hereby have been sold pursuant hereto, we
will make this prospectus, as it may be amended or supplemented from time to
time, available to any broker-dealer for use in connection with any resale,
except that the period may be suspended for a period if we and our guarantors
determine, upon the advise of counsel, that the amended or supplemented
prospectus would require disclosure of confidential information or interfere
with any of our financing, acquisition, reorganization or other material
transactions. All broker-dealers effecting transactions in the New Notes may be
required to deliver a prospectus.
We will not receive any proceeds from any sale of new notes by
broker-dealers or any other holder of new notes. New notes received by
broker-dealers for their own account in 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 negotiated
prices. Any 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 pursuant to 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
resale of new notes and any commissions or concessions received by those 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.
127
<PAGE> 133
For a period of 180 days after consummation of the exchange offer or such
time as any broker-dealer no longer owns any registrable securities, we will
promptly send additional copies of this prospectus and any amendment or
supplement to this prospectus to any broker-dealer that requests those documents
in the letter of transmittal, except that the period may be suspended for a
period if we and our guarantors determine, upon the advise of counsel, that the
amended or supplemented prospectus would require disclosure of confidential
information or interfere with any of our financing, acquisition, reorganization
or other material transactions. We have agreed to pay all expenses incident to
the exchange offer and to our performance of, or compliance with, the
registration rights agreements (other than commissions or concessions of any
brokers or dealers) and will indemnify the holders of the new notes (including
any broker-dealers) against some liabilities, including liabilities under the
Securities Act.
LEGAL MATTERS
The validity of the new notes offered hereby and the subsidiary guarantees
to be issued by our guarantor subsidiaries that are incorporated in Delaware
will be passed upon for us by Schulte Roth & Zabel LLP, New York, New York. In
giving its opinion, Schulte Roth & Zabel will rely as to some matters of
Pennsylvania law on the opinion of Pepper Hamilton LLP and as to some matters of
Florida law on the opinion of Berger, Davis and Singerman.
EXPERTS
The consolidated financial statements of AMR Services Corporation, as of
December 31, 1998 and Worldwide Flight Services, Inc. as of September 30, 1999,
and the related consolidated statements of operations, stockholder's equity, and
cash flows for the years ended December 31, 1997 and December 31, 1998 and for
the three months ended March 31, 1999, of AMR Services Corporation and the
consolidated statements of operations, stockholders equity, and cash flows for
the six months ended September 30, 1999 of Worldwide Flight Services, Inc.
appearing in this prospectus, have been audited by Ernst & Young LLP,
independent auditors, as stated in their report appearing herein, and are
included in reliance upon such report given on the authority of such firm as
experts in accounting and auditing.
The consolidated statements of income and cash flows of Miami Aircraft
Support and its subsidiary for the period January 1, 1999 through August 12,
1999, appearing in this prospectus, have been audited by Ernst & Young LLP,
independent auditors, as stated in their report appearing herein, and are
included in reliance upon such report given on the authority of such firm as
experts in accounting and auditing.
The consolidated financial statements of Miami Aircraft Support and its
subsidiary as of December 31, 1997 and 1998 and for each of the years in the two
year period ended December 31, 1998, have been included herein and in the
registration statement in reliance upon the report of KPMG LLP, independent
certified public accountants, appearing elsewhere herein, and upon the authority
of said firm as experts in accounting and auditing.
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<PAGE> 134
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<S> <C>
CONSOLIDATED FINANCIAL STATEMENTS OF WORLDWIDE FLIGHT
SERVICES, INC. (AND PREDECESSOR AMR SERVICES CORPORATION)
Report of Ernst & Young LLP, Independent Auditors......... F-2
Consolidated Balance Sheets--As of December 31, 1998 and
September 30,
1999................................................... F-3
Consolidated Statements of Operations--Years ended
December 31, 1997 and 1998, the three months ended
March 31, 1999 and six months ended September 30,
1999................................................... F-4
Consolidated Statements of Stockholders' Equity--Years
ended December 31, 1997 and 1998, the three months
ended March 31, 1999 and six months ended September 30,
1999................................................... F-5
Consolidated Statements of Cash Flows--Years ended
December 31, 1997 and 1998, the three months ended
March 31, 1999 and six months ended September 30,
1999................................................... F-6
Notes to Consolidated Financial Statements................ F-7
CONSOLIDATED FINANCIAL STATEMENTS OF MIAMI AIRCRAFT SUPPORT,
INC.
Report of Ernst & Young LLP, Independent Auditors......... F-27
Consolidated Statement of Income--Period from January 1,
1999 through August 12, 1999........................... F-28
Consolidated Statement of Cash Flows--Period from January
1, 1999 through August 12, 1999........................ F-29
Notes to Consolidated Statement of Income................. F-30
Report of KPMG LLP, Independent Auditors.................. F-33
Consolidated Balance Sheets--December 31, 1997 and 1998... F-34
Consolidated Statements of Income--Years ended December
31, 1997
and 1998............................................... F-35
Consolidated Statements of Stockholders' Equity--Years
ended December 31, 1996, 1997 and 1998................. F-36
Consolidated Statements of Cash Flows--Years ended
December 31, 1997 and 1998............................. F-37
Notes to Consolidated Financial Statements................ F-38
</TABLE>
F-1
<PAGE> 135
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors and Stockholder of
Worldwide Flight Services, Inc.
We have audited the accompanying consolidated balance sheets of AMR
Services Corporation (the "Predecessor"), as of December 31, 1998 and Worldwide
Flight Services as of September 30, 1999, and the related consolidated
statements of operations, stockholder's equity, and cash flows for the years
ended December 31, 1997 and December 31, 1998 and for the three months ended
March 31, 1999, of AMR Services Corporation and the consolidated statements of
operations, stockholders equity, and cash flows for the six months ended
September 30, 1999 of Worldwide Flight Services. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards in the United States. Those standards require that we plan and perform
the audit 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 audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of AMR Services
Corporation at December 31, 1998 and the consolidated financial position of
Worldwide Flight Services as of September 30, 1999 and the consolidated results
of operations and cash flows for the years ended December 31, 1997 and 1998 and
for the three months ended March 31, 1999 of AMR Services Corporation and the
consolidated results of operations and cash flows for the six months ended
September 30, 1999 of Worldwide Flight Services in conformity with generally
accepted accounting principles in the United States.
ERNST & YOUNG LLP
Dallas, Texas
November 19, 1999
F-2
<PAGE> 136
WORLDWIDE FLIGHT SERVICES, INC.
(FORMERLY AMR SERVICES CORPORATION)
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
PREDECESSOR
AMRS WORLDWIDE
------------ -------------
DECEMBER 31, SEPTEMBER 30,
1998 1999
------------ -------------
<S> <C> <C>
Current Assets:
Cash and cash equivalents.......................... $14,200 $ 11,629
Accounts receivable, less allowance for doubtful
accounts of $449, and $1,430, respectively...... 31,255 66,098
Inventories........................................ 554 422
Deferred income taxes.............................. 2,445 4,124
Prepaid and other current assets................... 2,786 4,633
------- --------
Total current assets....................... 51,240 86,906
Equipment and property:
Equipment and property, at cost.................... 68,050 45,850
Less accumulated depreciation...................... 39,276 2,502
------- --------
28,774 43,348
Intangible assets including Goodwill, net............ 6,512 101,232
Other assets......................................... 2,170 9,758
------- --------
Total assets............................... $88,696 $241,244
======= ========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current Liabilities:
Accounts payable................................... $10,543 $ 19,727
Accrued salaries, wages, and benefits.............. 10,317 11,212
Accrued liabilities................................ 3,681 12,419
Current portion of long-term debt.................. 952 2,627
------- --------
Total current liabilities.................. 25,493 45,985
Deferred income taxes................................ 838 15,311
Long-term debt....................................... -- 145,174
Stockholder's equity:
Common stock....................................... 1 --
Additional paid-in-capital......................... 15,000 38,918
Retained earnings.................................. 48,394 (2,829)
Accumulated other comprehensive income............. (1,030) (1,315)
------- --------
Total stockholder's equity................. 62,365 34,774
------- --------
Total liabilities and stockholder's
equity.................................. $88,696 $241,244
======= ========
</TABLE>
See accompanying notes.
F-3
<PAGE> 137
WORLDWIDE FLIGHT SERVICES, INC.
(FORMERLY AMR SERVICES CORPORATION)
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
PREDECESSOR
AMRS WORLDWIDE
---------------------------------- -------------
YEAR ENDED THREE MONTHS SIX MONTHS
DECEMBER 31, ENDED ENDED
------------------- MARCH 31, SEPTEMBER 30,
1997 1998 1999 1999
-------- -------- ------------ -------------
<S> <C> <C> <C> <C>
Revenues:
External customers.............. $147,841 $155,443 $38,640 $131,579
Affiliates...................... 75,249 74,299 22,835 --
-------- -------- ------- --------
Total operating
revenues............. 223,090 229,742 61,475 131,579
Expenses:
Salaries, wages, and benefits... 144,422 154,706 39,679 85,803
Materials, supplies, and
services..................... 33,384 28,047 7,744 15,971
Equipment and facilities
rental....................... 11,059 13,597 3,641 8,491
Depreciation and amortization... 5,643 5,908 1,627 4,476
Other miscellaneous expenses.... 15,847 13,632 4,784 10,781
General and administrative
allocated expenses........... 5,877 5,798 2,269 --
-------- -------- ------- --------
Total operating
expenses............. $216,232 $221,688 $59,744 $125,522
-------- -------- ------- --------
Operating income from continuing
operations...................... 6,858 8,054 1,731 6,057
Interest expense.................. -- -- -- (5,083)
Interest income................... 1,421 2,160 440 --
Other income (expense), net....... (584) 580 (552) (185)
-------- -------- ------- --------
Income from continuing operations
before income taxes and
extraordinary loss.............. 7,695 10,794 1,619 789
Provision for income taxes........ 3,309 4,490 644 1,659
-------- -------- ------- --------
Income (loss) from continuing
operations before extraordinary
loss............................ 4,386 6,304 975 (870)
Extraordinary loss on early
extinguishment of debt.......... -- -- -- (1,959)
Loss from discontinued operations,
net of tax benefit of $395 and
$139, respectively.............. -- (552) (210) --
-------- -------- ------- --------
Net income (loss)................. $ 4,386 $ 5,752 $ 765 $ (2,829)
======== ======== ======= ========
</TABLE>
See accompanying notes.
F-4
<PAGE> 138
WORLDWIDE FLIGHT SERVICES, INC.
(FORMERLY AMR SERVICES CORPORATION)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
PREDECESSOR
------------------------------------------------------------
ACCUMULATED
OTHER TOTAL
COMMON PAID-IN RETAINED COMPREHENSIVE STOCKHOLDERS'
STOCK CAPITAL EARNINGS INCOME EQUITY
------ -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1997......... $ 1 $ 15,000 $42,642 $ (887) $ 56,756
Net income......................... -- -- 5,752 -- 5,752
Foreign currency translation....... -- -- -- (143) (143)
--------
Total comprehensive
income.................... 5,609
--- -------- -------- ------- --------
Balance at December 31, 1998......... 1 15,000 48,394 (1,030) 62,365
Net income......................... -- -- 765 -- 765
Foreign currency translation....... -- -- -- 223 223
--------
Total comprehensive
income.................... 988
--- -------- -------- ------- --------
Balance at March 31, 1999............ 1 15,000 49,159 (807) 63,353
Sale of AMRS....................... (1) (15,000) (49,159) 807 (63,353)
WORLDWIDE
------------------------------------------------------------
Sale of stock to parent............ -- $ 28,250 -- -- $ 28,250
Equity contribution by parent........ 10,668 10,668
Net loss............................. -- -- (2,829) -- (2,829)
Foreign currency translation......... -- -- -- (1,315) (1,315)
--- -------- -------- ------- --------
Total comprehensive loss.... (4,144)
--- -------- -------- ------- --------
Balance at September 30, 1999........ -- $ 38,918 $(2,829) $(1,315) $ 34,774
=== ======== ======== ======= ========
</TABLE>
See accompanying notes.
F-5
<PAGE> 139
WORLDWIDE FLIGHT SERVICES, INC.
(FORMERLY AMR SERVICES CORPORATION)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
PREDECESSOR
AMRS WORLDWIDE
--------------------------------- -------------
YEAR ENDED THREE MONTHS SIX MONTHS
DECEMBER 31, ENDED ENDED
------------------ MARCH 31, SEPTEMBER 30,
1997 1998 1999 1999
-------- ------- ------------ -------------
<S> <C> <C> <C> <C>
Operating Activities:
Net income (loss)............................ $ 4,386 $ 5,752 $ 765 $ (2,829)
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization.............. 5,643 6,333 1,627 4,476
Deferred income taxes...................... (292) 933 1,584 (39)
Extraordinary loss......................... -- -- -- 1,959
Other...................................... -- -- -- 494
Change in assets and liabilities:
Accounts receivable........................ 3,969 (5,630) (4,190) (22,937)
Other assets............................... (357) (506) 183 (1,023)
Accounts payable and accrued liabilities... (658) (4,008) (7,117) 15,821
-------- ------- -------- ---------
Net cash provided by (used in) operating
activities................................... 12,691 2,874 (7,148) (4,078)
Investing Activities:
Capital expenditures......................... (12,662) (7,219) (1,688) (4,606)
Acquisitions, net of cash.................... -- (1,500) -- (149,833)
Other........................................ 119 (499) 26 --
-------- ------- -------- ---------
Net cash used in investing activities.......... (12,543) (9,218) (1,662) (154,439)
Financing Activities:
Proceeds from sale of senior notes........... -- -- -- 126,793
Issue costs on long term debt................ -- -- -- (10,204)
Proceeds from long-term debt................. -- -- -- 85,748
Payments on long-term debt................... -- -- -- (70,866)
Proceeds from sale of stock.................. -- -- -- 28,250
Equity contribution by parent................ 10,425
Dividend to parent........................... -- -- (5,390) --
-------- ------- -------- ---------
Net cash provided by financing activities...... -- -- (5,390) 170,146
Net increase (decrease) in cash and cash
equivalents.................................. 148 (6,344) (14,200) 11,629
Cash and cash equivalents at beginning of
period....................................... 20,396 20,544 14,200 --
Cash and cash equivalents at end of period..... $ 20,544 $14,200 $ -- $ 11,629
======== ======= ======== =========
Supplemental Disclosures of Cash Flow
Information:
Cash paid (refunded) for income taxes.......... $ 3,017 $ 3,162 (1,079) 456
Cash paid for interest....................... -- -- -- 2,806
Non-cash transactions:
Note payable for acquisition............... -- $ 914 -- --
</TABLE>
See accompanying notes.
F-6
<PAGE> 140
WORLDWIDE FLIGHT SERVICES, INC.
(FORMERLY AMR SERVICES CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BUSINESS AND BASIS OF PRESENTATION
On March 31, 1999, MR Services Acquisition Corporation completed the
acquisition of all of the outstanding stock of AMR Services Corporation
("Predecessor"), a wholly owned subsidiary of AMR Services Holding Corporation,
which was a wholly owned subsidiary of AMR Corporation, the parent company of
American Airlines, Inc. ("American"). MR Services Acquisition Corporation was
immediately merged with and into AMRS, and AMRS, the surviving corporation was
renamed Worldwide Flight Services, Inc. ("Worldwide"). Worldwide is owned by WFS
Holdings, Inc. ("Holdings" or "Parent"). The acquisition was funded by an
initial capital contribution by the parent of $28.3 million and borrowings under
a term debt facility and revolving credit facility (see Note 3). The initial
purchase price was $75.0 million plus subsequent adjustments for working capital
and capital spending, all of which is described in more detail in Note 3. The
acquisition as of March 31, 1999 has resulted in a new entity as well as a
change in the basis of accounting and as a result, financial information at any
point or for any period subsequent to March 31, 1999 is not comparable to
financial information at any point or for any period prior to the acquisition.
Prior to the acquisition, some subsidiaries, divisions and branches of AMRS
were sold or transferred to AMR Corporation. As a result, the accompanying
consolidated historical financial statements of the Predecessor have been
adjusted to exclude certain subsidiaries, divisions, or branches, in order to
achieve a consistent presentation of the entities included in the acquisition as
discussed above. The excluded subsidiaries, divisions, or branches include AMR
Combs, Inc.; the logistics division (consisting of the CP19 warehouse, McKesson,
Southland, and Airbourne branches); Dalfort Aviation Services, LP; the Warsaw
operations branch; and the ground services branch in Spain servicing American
contracts. As a result, the financial statements presented herein do not
represent the legal entity AMR Services Corporation as it existed during 1997 or
1998 or at December 31, 1998 or March 31, 1999, but rather represent the entity
to be sold. The accompanying financial statements were prepared from the
historical accounting records of AMR Corporation. These financial statements
included all revenues of the Predecessor and all items of expense directly
incurred by it and expenses charged or allocated to it by AMR Corporation in the
normal course of business.
On August 12, 1999, Worldwide purchased all of the stock of Miami Aircraft
Services, Inc. ("MAS"), an independent provider of express air cargo handling
services in the United States, for $63.0 million plus transactions. Also, on
August 23, 1999, Worldwide completed the acquisition of Aerolink International,
Inc. ("Aerolink"), a leading provider of ground services, located in Pittsburg,
Pennsylvania for a purchase price of $5.9 million plus possible additional
consideration. The operations of MAS and Aerolink are included in the operations
of Worldwide since the date of acquisition. (see Note 3)
Worldwide is an independent provider of ground services which operates in
four separate areas: cargo handling and ramp, passenger and technical services.
Cargo handling activities includes the loading and unloading of cargo aircraft,
the build-up and break-down of cargo and other services. Ramp services include
loading and unloading, aircraft marshaling, aircraft push-back, cabin cleaning,
and providing heating, air-conditioning,
F-7
<PAGE> 141
WORLDWIDE FLIGHT SERVICES, INC.
(FORMERLY AMR SERVICES CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
1. BUSINESS AND BASIS OF PRESENTATION (CONTINUED)
lavatory and water services. Passenger services include passenger ticketing,
curbside and ticket counter check-in boarding services, baggage claim and other
services for passengers. Technical services include jet bridge and ground
equipment maintenance, aircraft de-icing, freight management, aircraft fueling
and other services.
Worldwide operates in airports around the world, after completion of the
acquisitions described in Note 3, with primary operations in New York City, New
York; Dallas, Texas; Miami, Florida; Pittsburg, Pennsylvania, Paris, France; and
Hong Kong, China. International operations are generally organized as either
foreign branches or separately incorporated subsidiaries. Worldwide provides
services to a significant number of airlines around the world with typical
payment terms of 30-60 days. Worldwide routinely analyzes the credit worthiness
of its customers and generally does not require collateral.
All material intercompany balances and transactions for the entity have
been eliminated in consolidation.
The financial statements of Worldwide's foreign subsidiaries and branches
are translated as if the local currency were the functional currency.
Accordingly, assets and liabilities of the foreign subsidiaries and branches are
translated at end-of-period rates. Operations are translated at average exchange
rates in effect during the period. Included in other income/(expense) net are
foreign exchange gains(losses) resulting from foreign currency transactions of
$(584,000), $440,000, $(552,000), and $(52,000) for the years ended December 31,
1997 and 1998, the three months ended March 31, 1999 and the six months ended
September 30, 1999, respectively.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
REVENUE RECOGNITION
Worldwide recognizes fees from its services contracts as service is
provided. The terms of the service contracts are cancellable by either party on
60 days notice or less for any reason.
BUSINESS AND CONCENTRATIONS OF CREDIT RISK
At September 30, 1999, Worldwide derived approximately 23% of its revenues
from one customer and its affiliates. If Worldwide experiences a significant
reduction in business from its significant customer, it could result in material
harm to its business, financial condition and future results. Revenues from this
significant customer could decrease either because they choose to use other
third party ground service providers or because they choose to perform these
services using their own personnel.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect
F-8
<PAGE> 142
WORLDWIDE FLIGHT SERVICES, INC.
(FORMERLY AMR SERVICES CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
the amounts reported in the consolidated financial statements and accompanying
notes. Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of cash and short-term, highly liquid
investments with maturities of 90 days or less when purchased.
LONG-LIVED ASSETS
The Company reviews long-lived assets and certain identifiable intangibles
for impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Recoverability of assets to
be held and used is measured by a comparison of the carrying amount of the asset
to undiscounted future net cash flows expected to be generated by the asset. If
such assets are considered to be impaired, the impairment to be recognized is
measured by the amount by which the carrying amount of the assets exceeds the
fair value of the assets. Assets held for sale are reported at the lower of the
carrying amount or fair value less costs to sell.
INTANGIBLES (PREDECESSOR)
Intangibles result primarily from the acquisition discussed in Note 10 (the
Cyclone Acquisition) and certain prior acquisitions of freight handling
companies in Miami, Florida, and Paris, France. Intangibles are amortized on a
straight-line basis over 30 years. Worldwide continually evaluates intangible
assets to determine whether current events and circumstances warrant adjustment
of the carrying value or amortization periods. See Note 3 for a description of
the Worldwide acquisition and the related intangible.
Intangible assets consist of goodwill of $6,760,000 at December 31, 1998
(net of accumulated amortization of $1,678,000) and other intangibles of
$1,922,000 at December 31, 1998, (net of accumulated amortization of $492,000).
INTANGIBLES (WORLDWIDE FLIGHT SERVICES)
Intangible assets consist primarily of values assigned to customer
relationships and goodwill of $103,322,000 at September 30, 1999 (net of
accumulated amortization of $2,000,000) from the acquisitions of AMR Services,
MAS and Aerolink. Such amounts include goodwill of approximately $32,000,000
(net of accumulated amortization of $200,000). Intangibles and goodwill are both
being amortized over 20 years. (See Note 3)
FINANCIAL INSTRUMENTS
Worldwide purchases interest rate cap agreements to hedge interest on
variable-rate debt instruments. To the extent Worldwide has borrowings
outstanding on variable-rate debt instruments, interest rate cap agreements are
deferred and recognized as an
F-9
<PAGE> 143
WORLDWIDE FLIGHT SERVICES, INC.
(FORMERLY AMR SERVICES CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
adjustment to interest expense on the variable rate debt. Notional amounts in
excess of variable-rate debt outstanding are marked to market with the resulting
gain or loss being included in interest expense.
INCOME TAXES
The Predecessor was included in AMR Corporation's consolidated United
States federal income tax return and state income tax returns in unitary states.
Under the terms of AMR Corporation's tax sharing policy, income taxes are
allocated to AMR Corporation subsidiaries as if the subsidiaries were separate
taxable entities. The Predecessor computes its provision for deferred federal
income taxes using the liability method as if it were a separate taxpayer. Under
this method, deferred tax assets and liabilities are determined based on
differences between financial reporting and tax bases of assets and liabilities
and are measured using the enacted tax rates. As part of the provisions of the
acquisition agreement with AMR Corporation, income, franchise, ad valorem, and
other tax liabilities for periods prior to March 31, 1999 remain the liability
of by AMR Corporation.
Worldwide will be included in Holdings' consolidated United States federal
income tax return and state income tax returns in unitary states. Under the
terms of Holdings' tax sharing policy, income taxes will be allocated to
Holdings' subsidiaries as if the subsidiaries were separate taxable entities.
Worldwide computes its provision for deferred federal income taxes using the
liability method as if it were a separate taxpayer. Under this method, deferred
tax assets and liabilities are determined based on differences between financial
reporting and tax bases of assets and liabilities and are measured using the
enacted tax rates.
COMMON STOCK AND STOCK OPTIONS
The Predecessor had 1000 shares of issued, authorized, and outstanding
$1.00 par value common stock at December 31, 1998. Worldwide has 1,000 shares of
issued, authorized, and outstanding $.01 par value common stock at September 30,
1999. Certain Worldwide employees are covered by a stock option plan which will
grant shares of its Parent's nonvoting common stock. Such grants will vest over
various periods of time (generally five years), subject to certain conditions.
As of November 19, 1999, there have been no shares granted under the stock
option plan.
In connection with the placement of $130,000,000 in Senior Notes (see Note
4) in a private placement, Holdings issued 130,000 warrants which will entitle
the holders to purchase an aggregate of 74,750 shares of its non-voting common
stock. The warrants represent approximately 5% of the common stock of Holdings
at an exercise price of $.01 per share. The warrants cannot be exercised until a
public offering of Holdings is consummated, a class of common stock is listed on
a national securities exchange, or certain other exercise events occur.
F-10
<PAGE> 144
WORLDWIDE FLIGHT SERVICES, INC.
(FORMERLY AMR SERVICES CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
ACCOUNTS RECEIVABLE
Worldwide periodically evaluates the credit worthiness of its customers as
accounts receivable balances are not collateralized. The Company has not
experienced significant credit losses.
The following summarizes the activity in the allowance for doubtful
accounts for the following periods (in thousands):
<TABLE>
<CAPTION>
BALANCE
AT BAD
BEGINNING DEBT BALANCE AT
PERIOD OF PERIOD EXPENSE ACQUIRED WRITE-OFFS END OF PERIOD
- ------ --------- ------- -------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Period ended September 30,
1999.......................... 915 301 250 (36) 1,430
- -------------------------------------------------------------------------------------------
Period ended March 31, 1999... 449 466 -- -- 915
Year ended December 31,
1998........................ 1,611 189 -- (1,351) 449
Year ended December 31,
1997........................ 1,350 1,076 -- (815) 1,611
</TABLE>
INVENTORIES
Inventories consist primarily of fuel and glycol inventories which are
carried at cost determined on a first-in, first-out basis.
NEW ACCOUNTING PRONOUNCEMENTS
As of January 1, 1998, the Predecessor adopted Financial Accounting
Standards Board Statement No. 130, Reporting Comprehensive Income. ("FAS 130")
which establishes rules for the reporting and display of comprehensive income
and its components. The Statement of Shareholders' Equity presents comprehensive
income for the year ended December 31, 1998 and the period ended September 30,
1999. Comprehensive income has been presented for all periods.
As of January 1, 1998, the Financial Accounting Standards Board established
Statement No. 131, Disclosures about Segments of an Enterprise and Related
Information ("FAS 131"), which establishes standards for the way in which public
enterprises report information about operating segments in annual financial
statements and requires that those enterprises report selected information about
operating segments in interim financial reports issued to stockholders. It also
establishes standards for related disclosure about products and services,
geographic areas, and major customers. Worldwide adopted FAS 131 effective April
1, 1999. Worldwide reports financial information and evaluates its operations by
location and not by its four different services areas. The Company does not have
discrete financial information to evaluate the operating results for each of the
four ground service categories. Although revenue can be identified for these
service categories, management can not and does not identify expenses,
profitability or other financial information for these service categories. As a
result, management, including the chief
F-11
<PAGE> 145
WORLDWIDE FLIGHT SERVICES, INC.
(FORMERLY AMR SERVICES CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
operating decision makers, review operating results solely by location and thus
the Company has determined that it operates under one reportable segment. The
adoption of FAS 131 did not have an effect on the results of operations,
financial position, cash flows or disclosure information. Worldwide determined
it operates under one reportable segment.
In June 1998, the Financial Accounting Standards Board issued Statement No.
133, Accounting for Derivative Instruments and Hedging Activities ("FAS 133"),
as amended, which is required to be adopted in years beginning after June 15,
2000. FAS 133 requires all derivatives to be measured at fair value and
recognized as either assets or liabilities on the balance sheet . Changes in
such fair value are required to be recognized immediately in net income (loss)
to the extent the derivatives are not effective as hedges. At present time,
Worldwide does not feel the adoption of FAS 133 will have a material effect on
its financial position, results of operations or cash flows.
3. ACQUISITIONS
On March 31, 1999, the Predecessor was acquired from AMR Corporation for
$75.0 million plus transaction costs estimated at approximately $3.2 million.
The acquisition was financed by a $28.3 million sale of stock to the Parent and
proceeds from the issuance of $50.0 million in term debt (see Note 4). The
acquisition of the Predecessor was accounted for as a purchase. The stock
purchase agreement also contains provisions by which AMR Corporation may receive
up to an additional $10.0 million in purchase price based on the growth rate of
revenues received from AMR Corporation and its affiliates as measured against
certain benchmarks and certain other consideration. Finally, the stock purchase
agreement has provisions for purchase adjustments based on working capital and
capital spending at closing. These provisions are not yet resolved, but are not
expected to result in significant adjustments to the purchase price.
The purchase price allocation resulted in approximately $37.0 million of
intangible assets, including goodwill which is being amortized over 20 years.
On August 12, 1999, Worldwide acquired the business of Miami Aircraft
Support, Inc. (MAS), a provider of ground services to airlines, for $63 million
plus transaction costs. Worldwide paid for the capital stock of MAS which was
financed primarily from proceeds from a debt offering described in Note 4. The
acquisition of MAS was accounted for as a purchase and resulted in goodwill and
intangibles of approximately $66 million which is being amortized on a
straight-line basis over 20 years. The operations of MAS are included in
Worldwide's operations from the date of acquisition.
On August 23, Worldwide completed the acquisition of Aerolink, a provider
of ground services to airlines. The purchase price was $5.9 million plus
possible additional consideration of $1.0 million based on the actual results
for 1999. As part of the purchase price, Worldwide repaid $0.6 million of debt
of Aerolink. The acquisition was accounted under the purchase method of
accounting. Worldwide recorded approximately 4 million of goodwill and
intangibles which is being amortized on a straight-line basis over 20 years. The
operations of Aerolink are included in Worldwide's operations from the date of
F-12
<PAGE> 146
WORLDWIDE FLIGHT SERVICES, INC.
(FORMERLY AMR SERVICES CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
3. ACQUISITIONS (CONTINUED)
acquisition. The acquisition was financed with borrowings under the senior
secured credit facility.
COMBINED PURCHASE PRICE ALLOCATION (IN THOUSANDS)
<TABLE>
<S> <C>
Current assets.............................................. $ 45,978
Property, plant and equipment............................... 42,240
Goodwill and other intangible assets........................ 101,232
Other assets................................................ 2,142
Total liabilities, including deferred taxes................. (41,759)
--------
$149,833
========
</TABLE>
These purchase price allocations are preliminary, and still subject to
adjustment.
If the acquisitions of AMRS, MAS, and Aerolink had occurred at the
beginning of the year ended December 31, 1998 and the nine months ended
September 30, 1999 total revenues and net loss would have been as follows (in
thousands):
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, SEPTEMBER 30,
1998 1999
------------ -----------------
<S> <C> <C>
Total Revenues........................... $297,938 $237,425
Total Net Loss........................... (8,561) (5,808)
</TABLE>
4. SENIOR SECURED CREDIT FACILITY AND SENIOR NOTES:
<TABLE>
<CAPTION>
SEPTEMBER 30,
1999
--------------
(IN THOUSANDS)
<S> <C>
Long-term debt consists of the following (in thousands):
Borrowings under a $75,000 senior secured credit facility
with a bank; revolving commitment due March 2005 with
minimum interest payable monthly....................... $ 16,000
12 1/4% Senior Notes due August 2007; interest payable
semiannually beginning on February 2000................ 126,599
Other notes payable....................................... 5,202
--------
147,801
Less current maturities..................................... 2,627
--------
Long term debt.............................................. $145,174
========
</TABLE>
In July, 1999, Worldwide entered into a series of transactions to provide
financing for the MAS acquisition (see Note 3) and refinance its existing
borrowings. Such transaction
F-13
<PAGE> 147
WORLDWIDE FLIGHT SERVICES, INC.
(FORMERLY AMR SERVICES CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
4. SENIOR SECURED CREDIT FACILITY AND SENIOR NOTES (CONTINUED)
included the placement of $130 million in Senior Notes ("the offering") due 2007
in a private transaction along with the issuance of certain warrants (as
described in Note 2). In addition, Worldwide entered into a new long-term
secured revolving credit agreement with a syndicate of banks, totaling $75
million. The facility provides for the availability of both term borrowings and
revolving credit. These transactions closed on August 12 1999.
In connection with the acquisition of the Predecessor on March 31, 1999,
Worldwide entered into a series of revolving credit and term loan agreements
with a syndicate of banks. As a result of the transactions described above,
Worldwide retired its existing indebtedness under these agreements and recorded
an extraordinary loss of $2.0 million from the early extinguishment of this
debt.
Worldwide's obligation under the senior secured facility are secured by a
first priority pledge of, and security interest in, the stock of all present and
future domestic subsidiaries, and 65% of the stock of all our present and future
foreign subsidiaries, and substantially all of our assets and the assets of our
domestic subsidiaries. Worldwide's obligation under the 12 1/4% Senior Notes is
unconditionally guaranteed by its domestic subsidiaries.
At Worldwide's option the interest rate on the senior secured credit
facility will be either (1) the London Interbank Offering Rate (LIBOR) plus
3.00% or (2) 2.00% plus the greater of The Chase Manhattan Bank's prime rate,
the federal funds effective rate plus 1/2% and the base CD rate published by
The Chase Manhattan Bank plus 1%. The interest rate is subject to step-downs
based on Worldwide's financial performance. At September 30, 1999, Worldwide's
weighted average borrowing rate was 8.93%. Worldwide also pays a quarterly fee
equal to 0.5% of the unused commitments under the senior secured credit
facility.
Worldwide is subject to various covenants associated with the $75 million
senior secured facility such as certain leverage and coverage ratios and other
customary conditions. In addition, Worldwide has certain restrictions on its
ability to incur debt, make capital expenditures, pay dividends, conduct asset
sales, issue equity securities, engage in acquisitions and other restrictions.
The maximum amount Worldwide may borrow at any time is limited by a borrowing
base formula which consists of a percentage of some of its accounts receivable
and a percentage of the value of some of its equipment which may have the effect
of limiting the credit available to Worldwide under the facility to an amount
less than the $75 million. At September 30, 1999, based on the borrowing base
calculation, Worldwide has $30.7 million available under its $75 million
facility. At September 30, 1999, Worldwide was in compliance with all debt
covenants. However, if the Company completes additional acquisitions, the
borrowing base would rise based on the acquired company's available collateral.
The scheduled maturities on long-term debt
F-14
<PAGE> 148
WORLDWIDE FLIGHT SERVICES, INC.
(FORMERLY AMR SERVICES CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
4. SENIOR SECURED CREDIT FACILITY AND SENIOR NOTES (CONTINUED)
for the three months ended December 31, 1999 and the next five fiscal years are
as follows (in thousands):
<TABLE>
<S> <C>
Remainder of 1999........................................... $ 1,079
2000...................................................... 2,145
2001...................................................... 787
2002...................................................... 512
2003...................................................... 338
2004 and thereafter....................................... 142,940
</TABLE>
The senior secured credit facility requires Worldwide to enter into one or
more interest rate protection agreements such that the interest cost with
respect to at least 50% of Worldwide's indebtedness will be fixed, hedged or
capped. (See Note 8)
Based on current rates available to Worldwide for debt with similar terms,
there is not a significant difference between the carrying amounts of long term
debt and their fair values.
5. RELATED PARTY TRANSACTIONS
PREDECESSOR
Cash and cash equivalents consisted of cash held at the operations and cash
held for the Predecessor by American. American invests this cash or
alternatively provides financing for the operations of its other affiliates. As
of December 31, 1998, the cash held for Worldwide by American was $11.2 million,
respectively; these amounts were immediately available for use by the
Predecessor. The balances were immediately charged or credited upon recording
certain transactions with AMR Corporation or its affiliates. The Predecessor
received interest at the average rate earned by American's portfolio of short-
term marketable securities. The aforementioned arrangement resulted in interest
income that may not be representative of what AMRS would have received if it
were not affiliated with AMR Corporation. Interest income related to this
arrangement was approximately $1.1 million and $1.9 million for the years ended
December 31, 1997 and 1998, respectively. The interest rate, which is reset
monthly, was 5.9% and 5.4% as of December 31, 1997 and 1998, respectively. The
average interest rate during 1997 and 1998 was 5.9% and 5.8%, respectively.
The Predecessor's transactions with AMR Services Holding Corporation,
American, and American Eagle Inc., a wholly owned subsidiary of AMR Corporation,
have been recorded on a basis determined by the parties which may not be
representative of the terms the Predecessor might have negotiated with third
parties.
The Company recognized revenue from affiliates primarily related to freight
handling and ramp services. General and administrative expenses allocated and
transfer priced from AMR Services Holding Corporation and AMR Corporation and
its affiliates to Worldwide,
F-15
<PAGE> 149
WORLDWIDE FLIGHT SERVICES, INC.
(FORMERLY AMR SERVICES CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
5. RELATED PARTY TRANSACTIONS (CONTINUED)
including legal, accounting, personnel, employee benefits (including
post-employment benefits), marketing, and other administrative costs, aggregated
$6.3 million, and $6.0 million for the years ended December 31, 1997 and 1998
and $2.3 million for the three month period ended March 31, 1999, respectively.
In addition, AMR Corporation and affiliates allocated approximately $3.8
million, and $3.4 million of other operating expenses, primarily travel
expenses, computer related charges, and facilities rent for the years ended
December 31, 1997 and 1998, respectively and $0.6 million for the three months
ended March 31, 1999, respectively.
Expenses allocated to the Predecessor by AMR Corporation were primarily
based on an allocation cost method. The method for allocated costs was generally
based on a specific measurement such as the number of transactions processed,
employee head count, square footage, etc. Management believes that allocated
costs were reasonable under the circumstances and such costs would not
materially differ from amounts that would have been incurred if the Predecessor
operated on a stand alone basis.
Certain eligible members of management participated in a defined benefit
plan sponsored by American. Worldwide was jointly and severally liable with AMR
Corporation and other members of AMR Corporation's consolidated group for
applicable funding and termination liabilities, if any, of the plan. The
accompanying financial statements do not reflect the portion of the net
obligation of the defined benefit plan sponsored by American attributable to the
employees of the Company.
WORLDWIDE
Worldwide entered into a management agreement with Castle Harlan, Inc., as
manager, under which the manager will provide us with business and
organizational strategy, financial, investment management, advisory and merchant
and investment banking services. Castle Harlan, Inc. is an affiliate of
Holdings, which owns all of our outstanding stock. During the six months ended
September 30, 1999, we paid $312,000 to Castle Harlan, Inc. for such services.
On August 12, 1999, the management agreement with Castle Harlan, Inc. was
amended to provide an annual charge for services to be rendered of $1.25 million
starting July 1, 2000 until December 31, 2002 and increasing to $2.0 million
starting January 1, 2003 until December 31, 2005. The expenses for such services
will be recorded ratably on a straight-line basis over the term of the
agreement. After December 31, 2005 the agreement will automatically renew each
year unless canceled by either party.
In connection with the acquisition of the Predecessor, Worldwide paid $2.0
million to Castle Harlan, Inc., primarily as reimbursement of expenses that
Castle Harlan, Inc. incurred in connection with the acquisition. Also,
concurrent with the closing of the offering (see Note 4) and the senior secured
credit facility, Worldwide paid fees of $2.5 million to Castle Harlan, Inc.
F-16
<PAGE> 150
WORLDWIDE FLIGHT SERVICES, INC.
(FORMERLY AMR SERVICES CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
6. EQUIPMENT AND PROPERTY
Equipment and property are carried at cost and are depreciated using the
straight-line method over the estimated lives indicated in the table below. A
summary of equipment and property at December 31, 1998 of the Predecessor and at
September 30, 1999 of Worldwide follows (in thousands):
<TABLE>
<CAPTION>
DEPRECIABLE
LIFE 1998 1999
----------- ------- -------
<S> <C> <C> <C>
Buildings and improvements.............. 25-30 years $17,191 $12,564
Ground equipment........................ 5-8 years 46,888 26,918
Other equipment......................... 3-10 years 3,971 6,368
------- -------
Equipment and property, at cost......... $68,050 $45,850
======= =======
</TABLE>
Depreciation expense totaled $5,332,000 and $5,420,000 for the years ended
December 31, 1997 and 1998 and the three months ended March 31, 1999 of
$1,579,000 of the Predecessor and $2,926,000 for the six months ended September
30, 1999 of Worldwide.
7. INCOME TAXES
Income before income taxes for years ended December 31, 1997, 1998 and the
three month period ended March 31, 1999 of the Predecessor was $3,160,000,
$5,879,000 and $479,000, respectively, for U.S. operations and was $4,535,000,
$3,968,000, and $1,140,000 for foreign operations, respectively. Income (loss)
before income taxes for the six month period ended September 30, 1999 of
Worldwide was $(5,180,000) for US operations and was $4,010,000 for foreign
operations. These amounts include the amounts allocated to discontinued
operations, all of which occurred in U.S. operations.
The components of the income tax provision for the years ended December 31,
1997, 1998 and the three month period ended March 31, 1999 of the Predecessor
and for the six month period ended September 30, 1999 of Worldwide are as
follows (in thousands):
<TABLE>
<CAPTION>
MARCH 31, SEPTEMBER 30,
1997 1998 1999 1999
------ ------ --------- -------------
<S> <C> <C> <C> <C>
Current
Federal..................... $1,083 $1,265 $(1,194) $ --
Foreign..................... 1,905 1,136 180 1,588
State....................... 613 761 (65) 110
------ ------ ------- ------
3,601 3,162 (1,079) 1,698
Deferred...................... (292) 933 1,584 (39)
------ ------ ------- ------
Total income tax
provision........ $3,309 $4,095 $ 505 $1,659
====== ====== ======= ======
</TABLE>
F-17
<PAGE> 151
WORLDWIDE FLIGHT SERVICES, INC.
(FORMERLY AMR SERVICES CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
7. INCOME TAXES (CONTINUED)
<TABLE>
<CAPTION>
MARCH 31, SEPTEMBER 30,
1997 1998 1999 1999
------ ------ --------- -------------
<S> <C> <C> <C> <C>
Statutory income provision.... $2,693 $3,445 $ 445 $ (409)
State income tax provision,
net......................... 399 492 39 71
Foreign Taxes................. -- -- 180 1,588
Other......................... 217 158 (159) 409
------ ------ ----- ------
Income tax
provision........ $3,309 $4,095 $ 505 $1,659
====== ====== ===== ======
</TABLE>
The components of deferred income taxes for the year ended December 31,
1998 of the Predecessor and September 30, 1999 of Worldwide are as follows (in
thousands):
<TABLE>
<CAPTION>
SEPTEMBER 30,
1998 1999
------ -------------
<S> <C> <C>
Deferred tax assets:
Expenses deductible for tax in a different
period than books........................... $2,445 $ 3,934
Foreign tax credit............................. 998 1,588
Net Operating Loss Carryforward................ -- 1,422
Other.......................................... 253 190
------ --------
Total deferred tax assets.............. 3,696 7,134
------ --------
Valuation Allowance.................... -- (3,010)
------ --------
Net Deferred Tax Asset................. $3,696 $ 4,124
====== ========
Deferred tax liabilities:
Undistributed earnings of foreign
subsidiaries................................ $1,368 $ 670
Identified Intangibles......................... -- 12,264
Accelerated depreciation....................... 126 536
Other.......................................... 595 1,841
------ --------
Total deferred tax liabilities......... 2,089 15,311
------ --------
Net deferred tax asset (liability)............... $1,607 $(11,187)
====== ========
</TABLE>
At September 30, 1999, Worldwide has recorded a valuation allowance to
reflect the estimated amount of deferred tax assets that may not be realized due
to the expiration of the foreign tax credit carryforward and net operating loss
carryforward. Worldwide has approximately $1,422,000 of net operating loss
carryforwards at September 30, 1999, the majority of which will expire in 2019.
F-18
<PAGE> 152
WORLDWIDE FLIGHT SERVICES, INC.
(FORMERLY AMR SERVICES CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
8. FINANCIAL INSTRUMENTS
In connection with the initial term loan agreements, Worldwide acquired
interest rate caps in order to manage risks related to changes in variable
interest rates and to comply with the provisions under the initial term loan
agreements. With the extinguishment of the initial term loan agreement on August
12, 1999, the fair value of the interest rate cap was recognized as a component
of the extraordinary loss. Worldwide elected not to terminate these cap
agreements as similar hedging instruments will be required as borrowings are
made under the $75,000,000 senior secured credit facility. Worldwide's interest
rate caps limit its exposure to floating interest rates to a maximum LIBOR of
6.5% (at September 30, 1999, LIBOR is 5.44%). The interest rate caps have a
notional amount of $50 million and expire in varying amounts through March,
2003. However, as the notional amount of the interest rate caps currently exceed
the borrowings outstanding of the senior secured credit facility, a portion of
the interest rate caps has been marked to market as a component of interest
expense of approximately $212,000 for the six months ended September 30, 1999.
9. COMMITMENTS AND CONTINGENCIES
Future minimum lease payments under operating leases with initial and
remaining noncancelable lease terms in excess of one year for the remainders of
1999 and the five following years, are as follows (in thousands):
<TABLE>
<S> <C>
1999........................................................ $ 899
2000........................................................ 7,788
2001........................................................ 6,715
2002........................................................ 4,291
2003........................................................ 2,154
2004 and thereafter......................................... 1,961
-------
$23,808
=======
</TABLE>
All major airport facilities and office spaces are leased under operating
leases which include options to renew the leases and, escalation clauses.
COLLECTIVE BARGAINING AGREEMENTS
Approximately 23% of Worldwide's United States employees are represented by
collective bargaining agreements. The employees consists primarily of cargo
handling and ramp services workers. The Transport Workers Union, or TWU
represents approximately 2,200 of U.S. based employees. Worldwide's current
agreement with TWU is effective until June 2001. The Teamsters Union is also
represents approximately 100 Philadelphia employees and the contract is
effective until February 2000. In Canada, approximately 300 of employees are
represented by the Canadian Auto Workers Union. This agreement expired in
November 1998. Worldwide continues to operate under the agreement and intends to
renegotiate the agreement in the near future.
F-19
<PAGE> 153
WORLDWIDE FLIGHT SERVICES, INC.
(FORMERLY AMR SERVICES CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
9. COMMITMENTS AND CONTINGENCIES (CONTINUED)
Worldwide has not experienced any material business interruption as a
result of labor disputes and believes that it has a good relationship with its
employees.
10. DISCONTINUED OPERATIONS -- CYCLONE
In July 1998, the Predecessor acquired all of the stock of Cyclone Surface
Cleaning, Inc. (Cyclone) and began to fund its operations which was engaged in
developing a technology to clean airport runaways. Assets acquired consisted
primarily of intangibles, including $565,000 of goodwill and was accounted for
as a purchase.
Worldwide elected to discontinue the Cyclone business since it did not fit
with Worldwide's core businesses. Accordingly the results of operations for 1998
and the three month period ended March 31, 1999 have been restated to reflect
the Cyclone business as discontinued operations. On August 31, 1999, Worldwide
terminated its relationship with the former owners of Cyclone and settled all
obligations due under a promissory note. No other costs are expected to be
incurred under this transaction.
11. FOREIGN OPERATIONS
Worldwide operates as an independent ground services provider to air cargo
and passenger airlines in North America, Europe, and Asia. The Company, however,
operated in a single business segment, as a provider of ground services to the
aviation industry. Inter-area sales are not material. Net assets by geographic
area are those assets and liabilities which are used in Worldwide's operations
in each area. Corporate level assets and liabilities are included as a component
of North and South America.
Information about Worldwide's operations in these geographic areas is as
follows (in thousands):
<TABLE>
<CAPTION>
NORTH AND SOUTH
PERIOD AMERICA EUROPE ASIA
------------------- --------------- ------- ------
<S> <C> <C> <C> <C>
Total Revenue........ December 31, 1997 $194,703 $28,387 --
December 31 1998 193,242 32,596 $3,904
Three months ended 50,849 8,662 1,964
March 31, 1999
--------------------------------------------------------
Six months ended 108,633 19,588 3,358
September 30, 1999
Long-lived assets.... December 31, 1998 $ 22,169 $ 9,809 $4,458
--------------------------------------------------------
September 30, 1999 34,629 4,626 4,093
</TABLE>
F-20
<PAGE> 154
WORLDWIDE FLIGHT SERVICES, INC.
(FORMERLY AMR SERVICES CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
12. SUMMARIZED FINANCIAL INFORMATION
Worldwide and its subsidiaries have operations in various countries around
the world. Domestic and international operations are either organized as
branches or separate corporate subsidiaries. The Senior Notes discussed in Note
4 result in debt securities that are unconditionally guaranteed by current
domestic subsidiaries, while all foreign subsidiaries do not guarantee the
securities. The following tables present the financial positions, results of
operations, and cash flows for the years ended December 31, 1997 and 1998 and
for the three months ended March 31, 1999 and the six months ended September 30,
1999 combined into three categories: 1) the operations of Worldwide, the legal
entity, and its international branches, 2) domestic subsidiaries, and 3) foreign
subsidiaries (in thousands):
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
GUARANTOR NON-GUARANTOR
COMBINED COMBINED
GUARANTOR DOMESTIC FOREIGN
WORLDWIDE SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
--------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenues....................... $187,947 $11,539 $23,604 $ -- $223,090
Operating expenses............. 185,181 10,084 20,967 -- 216,232
-------- ------- ------- ------- --------
Operating income............... 2,766 1,455 2,637 -- 6,858
Other income (expense)......... (497) 250 (337) -- (584)
Interest income (expense)...... 1,559 635 (773) -- 1,421
Equity in earnings of
subsidiaries................. 3,867 -- -- (3,867) --
-------- ------- ------- ------- --------
Income before income taxes..... 7,695 2,340 1,527 (3,867) 7,695
Provision for income taxes..... 3,309 767 722 (1,489) 3,309
-------- ------- ------- ------- --------
Net Income..................... $ 4,386 $ 1,573 $ 805 $(2,378) $ 4,386
======== ======= ======= ======= ========
</TABLE>
F-21
<PAGE> 155
WORLDWIDE FLIGHT SERVICES, INC.
(FORMERLY AMR SERVICES CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
12. SUMMARIZED FINANCIAL INFORMATION (CONTINUED)
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
GUARANTOR NON-GUARANTOR
COMBINED COMBINED
GUARANTOR DOMESTIC FOREIGN
WORLDWIDE SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
--------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Cash provided by (used in)
operating activities........... $ 10,931 $ 2,654 $ (894) $ $ 12,691
Cash used in investing
activities................... (10,110) (2,326) (107) -- (12,543)
Cash provided by (used in)
financing activities......... (2,891) 1,563 1,328 -- --
-------- ------- ------ -- --------
Change in Cash................. $ (2,070) $ 1,891 $ 327 $-- $ 148
======== ======= ====== == ========
</TABLE>
CONDENSED CONSOLIDATING BALANCE SHEETS
DECEMBER 31, 1998
<TABLE>
<CAPTION>
GUARANTOR NON-GUARANTOR
COMBINED COMBINED
GUARANTOR DOMESTIC FOREIGN
WORLDWIDE SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
--------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Current assets................. $36,947 $ 3,678 $10,615 $ -- $51,240
Intercompany receivables....... 11,058 8,737 -- (19,795) --
Non-current assets............. 21,557 2,821 13,078 37,456
Investments in affiliates...... 12,062 -- -- (12,062) --
------- ------- ------- -------- -------
Total assets................... $81,624 $15,236 $23,693 $(32,239) $88,696
======= ======= ======= ======== =======
Liabilities.................... $19,259 $ 1,595 $ 5,477 $ -- $26,331
Intercompany payables.......... -- -- 19,795 (19,795) --
Stockholder's equity........... 62,365 13,641 (1,579) (12,062) 62,365
------- ------- ------- -------- -------
Total liabilities and
stockholder's equity......... $81,624 $15,236 $23,693 $(32,239) $88,696
======= ======= ======= ======== =======
</TABLE>
F-22
<PAGE> 156
WORLDWIDE FLIGHT SERVICES, INC.
(FORMERLY AMR SERVICES CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
12. SUMMARIZED FINANCIAL INFORMATION (CONTINUED)
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
GUARANTOR NON-GUARANTOR
COMBINED COMBINED
GUARANTOR DOMESTIC FOREIGN
WORLDWIDE SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
--------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenues....................... $186,262 $13,292 $30,188 $ -- $229,742
Operating expenses............. 182,959 11,275 27,454 -- 221,688
-------- ------- ------- ------- --------
Operating income............... 3,303 2,017 2,734 -- 8,054
Interest income (expense)...... 3,239 (440) (639) -- 2,160
Other income (expense)......... 557 609 (586) -- 580
Equity in earnings of
subsidiaries................. 3,695 -- -- (3,695) --
-------- ------- ------- ------- --------
Income before income taxes..... 10,794 2,186 1,509 (3,695) 10,794
Provision for income taxes..... 4,490 1,275 640 (1,915) 4,490
-------- ------- ------- ------- --------
Income from continuing
operations................... 6,304 911 869 (1,780) 6,304
Loss from discontinued
operations................... 552 -- -- -- 552
-------- ------- ------- ------- --------
Net income..................... $ 5,752 $ 911 $ 869 $(1,780) $ 5,752
======== ======= ======= ======= ========
</TABLE>
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
GUARANTOR NON-GUARANTOR
COMBINED COMBINED
GUARANTOR DOMESTIC FOREIGN
WORLDWIDE SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
--------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Cash provided by (used in)
operating activities........... $ 2,369 $ 37 $ 468 $ -- $ 2,874
Cash used in investing
activities................... (2,367) (364) (6,487) -- (9,218)
Cash provided by (used in)
intercompany financing
activities................... (5,828) (472) 6,300 -- --
------- ----- ------- ------- -------
Change in cash................. $(5,826) $(799) $ 281 $ -- $(6,344)
======= ===== ======= ======= =======
</TABLE>
F-23
<PAGE> 157
WORLDWIDE FLIGHT SERVICES, INC.
(FORMERLY AMR SERVICES CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
12. SUMMARIZED FINANCIAL INFORMATION (CONTINUED)
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1999
<TABLE>
<CAPTION>
GUARANTOR NON-GUARANTOR
COMBINED COMBINED
GUARANTOR DOMESTIC FOREIGN
WORLDWIDE SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
--------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenues....................... $49,645 $2,524 $9,306 $ -- $61,475
Operating expenses............. 49,460 1,955 8,329 -- 59,744
------- ------ ------ ------- -------
Operating income............... 185 569 977 -- 1,731
Interest income (expense)...... 385 170 (115) -- 440
Other income (expense)......... -- (552) -- -- (552)
Equity in earnings of
subsidiaries................. 1,049 -- -- (1,049) --
------- ------ ------ ------- -------
Income before income taxes..... 1,619 187 862 (1,049) 1,619
Provision for income taxes..... 644 77 275 (352) 644
------- ------ ------ ------- -------
Income from continuing
operations................... 975 110 587 (697) 975
Loss from discontinued
operations................... 210 -- -- -- 210
------- ------ ------ ------- -------
Net Income..................... $ 765 $ 110 $ 587 $ (697) $ 765
======= ====== ====== ======= =======
</TABLE>
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1999
<TABLE>
<CAPTION>
GUARANTOR NON-GUARANTOR
COMBINED COMBINED
GUARANTOR DOMESTIC FOREIGN
WORLDWIDE SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
--------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Cash provided by (used in)
operating activities........... $ (8,392) $ 877 $ 367 $-- $ (7,148)
Cash used in investing
activities................... (1,467) (127) (68) -- (1,662)
Cash provided by (used in)
intercompany financing
activities................... (3,908) 141 (1,623) -- (5,390)
-------- ----- ------- -- --------
Change in Cash................. $(13,767) $ 891 $(1,324) $-- $(14,200)
======== ===== ======= == ========
</TABLE>
F-24
<PAGE> 158
WORLDWIDE FLIGHT SERVICES, INC.
(FORMERLY AMR SERVICES CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
12. SUMMARIZED FINANCIAL INFORMATION (CONTINUED)
CONDENSED CONSOLIDATING BALANCE SHEETS
SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
GUARANTOR NON-GUARANTOR
COMBINED COMBINED
GUARANTOR DOMESTIC FOREIGN
WORLDWIDE SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
--------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Current assets................. $ 58,923 $14,344 $13,639 $ -- $ 86,906
Intercompany receivable........ 8,568 9,126 -- (17,694) --
Non-current assets............. 71,642 70,126 12,570 154,338
Investments in affiliates...... 84,890 -- -- (84,890) --
-------- ------- ------- --------- --------
Total assets.......... $224,023 $93,596 $26,209 $(102,584) $241,244
======== ======= ======= ========= ========
Liabilities.................... $ 41,448 $ 9,094 $ 8,127 -- $ 58,669
Intercompany payable........... -- -- 17,694 (17,694) --
Long-term debt................. 147,801 -- -- -- 147,801
Stockholder's equity........... 34,774 84,502 388 (84,890) 34,774
-------- ------- ------- --------- --------
Total liabilities and
stockholder's equity......... $224,023 $93,596 $26,209 $(102,584) $241,244
======== ======= ======= ========= ========
</TABLE>
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
SIX MONTHS ENDED SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
GUARANTOR NON-GUARANTOR
COMBINED COMBINED
GUARANTOR DOMESTIC FOREIGN
WORLDWIDE SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
--------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenues....................... $96,579 $15,028 $19,972 $ -- $131,579
Operating expenses............. 94,839 13,474 17,209 -- 125,522
------- ------- ------- ------- --------
Operating income............... 1,740 1,554 2,763 -- 6,057
Other income (expense)......... (397) -- -- -- (397)
Interest income (expense)...... (4,801) 201 (271) -- (4,871)
Equity in earnings of
subsidiaries................. 4,247 -- -- (4,247) --
------- ------- ------- ------- --------
Income (loss) before income
taxes........................ 789 1,755 2,492 (4,247) 789
Provision for income taxes
(benefit).................... 1,659 593 923 (1,516) 1,659
------- ------- ------- ------- --------
Income before extraordinary
loss......................... (870) 1,162 1,569 (2,731) (870)
Loss from early extinguishment
of debt...................... (1,959) -- -- -- (1,959)
------- ------- ------- ------- --------
Net Income..................... $(2,829) $ 1,162 $ 1,569 $(2,731) $ (2,829)
======= ======= ======= ======= ========
</TABLE>
F-25
<PAGE> 159
WORLDWIDE FLIGHT SERVICES, INC.
(FORMERLY AMR SERVICES CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
12. SUMMARIZED FINANCIAL INFORMATION (CONTINUED)
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
GUARANTOR NON-GUARANTOR
COMBINED COMBINED
GUARANTOR DOMESTIC FOREIGN
WORLDWIDE SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
--------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Cash provided by (used in)
operating activities........... $ (9,764) $ 2,443 $3,243 $ -- $ (4,078)
Cash used in investing
activities................... (89,832) (64,001) (606) -- (154,439)
Cash provided by (used in)
financing activities......... 170,605 (530) 71 -- 170,146
-------- -------- ------ ---- ---------
Change in Cash................. $ 71,009 $(62,088) $2,708 $ -- $ 11,629
======== ======== ====== ==== =========
</TABLE>
13. QUARTERLY RESULTS (UNAUDITED)
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
PREDECESSOR QUARTER QUARTER QUARTER QUARTER
- ----------- ------- ------- ------- ---------
<S> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1998
Total operating revenues............................ $56,748 $54,156 $58,292 $ 60,546
Operating income.................................... 2,160 1,152 2,601 2,141
Income from continuing operations................... 1,590 982 1,984 1,748
Net income.......................................... 1,590 982 1,719 1,461
NINE MONTHS ENDED SEPTEMBER 30, 1999
Total operating revenues............................ 61,475 59,877 71,702
Operating income.................................... 1,731 2,952 3,105
Income from continuing operations before
extraordinary loss................................ 975 539 (1,409)
Net income (loss)................................... 765 539 (3,368)
</TABLE>
The net income for the third and fourth quarter of 1998 includes a loss on
discontinued operations of $265,000 and $287,000, respectively, related to
Cyclone (see Note 10).
F-26
<PAGE> 160
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Miami Aircraft Support, Inc.:
We have audited Miami Aircraft Support, Inc. and subsidiary's consolidated
statements of income and cash flows for the period from January 1, 1999 through
August 12, 1999. These consolidated statements of income and cash flows are the
responsibility of the Company's management. Our responsibility is to express an
opinion on the consolidated statements of income and cash flows based on our
audit.
We conducted our audit in accordance with generally accepted auditing
standards in the United States. Those standards require that we plan and perform
the audit 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 audit provides a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the results of Miami Aircraft Support,
Inc. and subsidiary's operations and its cash flows for the period from January
1, 1999 through August 12, 1999 in conformity with generally accepted accounting
principles in the United States.
ERNST & YOUNG LLP
Dallas, Texas
November 19, 1999
F-27
<PAGE> 161
MIAMI AIRCRAFT SUPPORT, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENT OF INCOME
(IN THOUSANDS)
<TABLE>
<CAPTION>
PERIOD FROM JANUARY 1, 1999
THROUGH AUGUST 12, 1999
---------------------------
<S> <C>
Revenues:
Ground services...................................... $36,362
Other................................................ 154
-------
Total revenues............................... 36,516
-------
Expenses:
Operating............................................ 28,602
General and administrative........................... 3,450
Depreciation and amortization........................ 2,116
-------
Total operating expenses..................... 34,168
-------
Operating profit............................. 2,348
Other (income)/expenses, net:
Interest income...................................... (73)
Interest expense..................................... 316
-------
Total other expense, net..................... 243
-------
Income before income taxes........................ 2,105
Income taxes........................................... 747
-------
Net income................................... $ 1,358
=======
</TABLE>
See accompanying notes to consolidated financial statements.
F-28
<PAGE> 162
MIAMI AIRCRAFT SUPPORT, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
PERIOD FROM
JANUARY 1, 1999
THROUGH
AUGUST 12,
1999
---------------
<S> <C>
Cash flows from operating activities:
Net income................................................ $ 1,358
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization.......................... 2,116
Other.................................................. 251
Deferred income taxes.................................. (478)
Changes in operating assets and liabilities:
Accounts receivable.................................. 3,222
Prepaid expenses and other current assets............ (568)
Accounts payable and accrued expenses................ (1,364)
Other, net........................................... 663
-------
Net cash provided by operating activities......... 5,200
-------
Cash flows from investing activities:
Purchase of property and equipment........................ (1,052)
Proceeds from sale of equipment........................... 25
-------
Net cash used in investing activities............. (1,027)
-------
Cash flows from financing activities:
Principal payments on long-term debt...................... (1,337)
Principal payments on capital lease obligations........... (493)
Borrowing from long-term debt............................. 961
-------
Net cash used in financing activities............. (869)
-------
Net increase in cash.............................. 3,304
Cash and cash equivalents at beginning of year.............. 1,212
-------
Cash and cash equivalents at end of year.................... $ 4,516
=======
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest............................................. $ 339
=======
Income taxes......................................... $ 1,471
=======
</TABLE>
See accompanying notes to consolidated financial statements.
F-29
<PAGE> 163
MIAMI AIRCRAFT SUPPORT, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED STATEMENT OF INCOME
PERIOD FROM JANUARY 1, 1999 TO AUGUST 12, 1999
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Organization and Basis of Presentation
Miami Aircraft Support, Inc. ("MAS" or the "Company") provides ground
service support and rents equipment to domestic and international air-cargo
shippers operating in the United States. The accompanying consolidated
statements of income and cash flows cover the period from January 1, 1999
through August 12, 1999. MAS was acquired by Worldwide Flight Services
("Worldwide") on August 12, 1999 for a total purchase price of $63 million plus
transaction costs. These financial statements present the results of MAS for the
period ending upon its acquisition by Worldwide.
All significant intercompany balances and transactions have been eliminated
in consolidation.
(b) Ground Service Revenue
Ground service revenue is recognized when service is provided.
(c) 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 amounts reported in the consolidated financial
statements and accompanying notes. Actual results could differ from those
estimates
(d) Property and Equipment
Depreciation and amortization are provided on the straightline basis over
the following estimated useful lives: ground equipment--lesser of seven years or
lease life, other property and equipment--five to seven years.
At the times the assets are retired or otherwise disposed of, the cost and
accumulated depreciation and amortization are removed from the related accounts
and the differences, net of proceeds, are recorded as gains and losses.
(e) Income Taxes
Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the estimated future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and operating loss and tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date.
F-30
<PAGE> 164
MIAMI AIRCRAFT SUPPORT, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED STATEMENT OF INCOME--(CONTINUED)
(2) LEASES
Lease agreements require contingent rental payments based on a percentage
of the Company's revenue in the respective location. The Company has other
operating leases with terms either less than one year (which generally are
renewed on an annual basis), or exclusively based on a percentage of revenue.
Rent expense for the period from January 1, 1999 through August 12, 1999:
consists of the following (in thousands):
<TABLE>
<S> <C>
Minimum rent........................................... 2,555
Contingent rent........................................ 611
Rent expense total..................................... 3,166
</TABLE>
(3) INCOME TAXES
Income tax expense from January 1, 1999 through August 12, 1999 consists of
(in thousands):
<TABLE>
<CAPTION>
CURRENT DEFERRED TOTAL
------- -------- -----
<S> <C> <C> <C>
Period from January 1, to August 12, 1999:
Federal........................................ 1,134 (452) 682
State.......................................... 91 (26) 65
------ ----- ----
Total $1,225 $(478) $747
====== ===== ====
</TABLE>
Income tax expense differed from the amounts computed by applying the U.S.
federal income tax rate of 34 percent as follows (in thousands):
<TABLE>
<CAPTION>
PERIOD FROM
JANUARY 1, 1999
TO AUGUST 12,
1999
---------------
<S> <C>
Computed "expected" tax expense............................. 737
State taxes, net of federal income tax benefit.............. 42
Travel and entertainment expenses........................... 11
Other....................................................... (43)
Total tax expense................................. 747
</TABLE>
(4) BUSINESS AND CONCENTRATIONS OF CREDIT RISK
Financial instruments which potentially expose the Company to
concentrations of credit risk consist primarily of trade accounts receivable.
The Company provides services to various customers in the aviation industry.
Although the Company is directly affected by the well being of the aviation
industry, management does not believe significant credit risk exists at August
12, 1999. For the period from January 1, 1999 through August 12, 1999,
F-31
<PAGE> 165
MIAMI AIRCRAFT SUPPORT, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED STATEMENT OF INCOME--(CONTINUED)
(4) BUSINESS AND CONCENTRATIONS OF CREDIT RISK (CONTINUED)
one customer accounted for approximately 24 percent of the Company's
consolidated revenue. The Company estimates an allowance for doubtful accounts
based on the creditworthiness of its customers, as well as general economic
conditions. Consequently, an adverse change in those factors could affect the
Company's estimate of its bad debts.
(5) RELATED-PARTY TRANSACTIONS
During the period from January 1, 1999 through August 12, 1999 the Company
provided approximately $31,000 of services to a related party by way of common
management.
(6) COMMITMENTS AND CONTINGENCIES
The Company is a party to various claims and legal actions arising in the
ordinary course of business. While any proceeding or litigation has an element
of uncertainty, management believes that the ultimate disposition of these
matters will no have material adverse effect on the Company's consolidated
results of operations.
F-32
<PAGE> 166
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Miami Aircraft Support, Inc.:
We have audited the accompanying consolidated balance sheets of Miami
Aircraft Support, Inc. and subsidiary as of December 31, 1997 and 1998, and the
related consolidated statements of income, stockholders' equity, and cash flows
for the years then ended. 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 audit 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 financial position of Miami
Aircraft Support, Inc. and subsidiary as of December 31, 1997 and 1998, and the
results of their operations and their cash flows for the years then ended in
conformity with generally accepted accounting principles.
KPMG LLP
February 26, 1999, except as to note 11
which is as of May 28, 1999
Fort Lauderdale, Florida
F-33
<PAGE> 167
MIAMI AIRCRAFT SUPPORT, INC.
AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS EXCEPT SHARE AMOUNTS)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1997 1998
------------ ------------
<S> <C> <C>
Current Assets:
Cash and cash equivalents............................. $ 4 $ 1,212
Accounts receivable, net of allowance for doubtful
accounts of $274 and $268 in 1997 and 1998,
respectively....................................... 8,933 9,808
Other current assets.................................. 164 --
Deferred income taxes................................. 391 401
------- -------
Total current assets.......................... 9,492 11,421
------- -------
Property and equipment:
Ground equipment...................................... 27,664 31,573
Other property and equipment.......................... 789 755
------- -------
28,453 32,328
Less accumulated depreciation and amortization.......... 15,536 18,454
------- -------
Property and equipment, net............................. 12,917 13,874
Other assets............................................ 3 4
------- -------
Total assets.................................. $22,412 $25,299
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt..................... $ 4,145 $ 3,447
Current portion of capital lease obligations.......... 253 808
Accounts payable...................................... 2,878 1,507
Accrued expenses...................................... 2,346 2,915
Income tax payable.................................... 731 1,106
Due to affiliates..................................... 10 --
------- -------
Total current liabilities..................... 10,363 9,783
------- -------
Long-term debt, excluding current portion............... 2,061 1,711
Capital lease obligations, excluding current portion.... 257 920
Deferred income taxes................................... 493 553
------- -------
Total liabilities............................. 13,174 12,967
------- -------
Stockholders' equity:
Capital stock, no par value. Authorized and issued
2,000 shares, outstanding 1,600 shares............. 1 1
Additional paid-in capital............................ 459 459
Retained earnings..................................... 8,840 11,934
------- -------
9,300 12,394
Treasury stock, 400 shares, at cost................... (62) (62)
------- -------
Total stockholders' equity.................... 9,238 12,332
$22,412 $25,299
======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
F-34
<PAGE> 168
MIAMI AIRCRAFT SUPPORT, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-----------------
1997 1998
------- -------
<S> <C> <C>
Revenues:
Ground services........................................... $46,341 $56,238
Other..................................................... 216 164
------- -------
Total revenues.................................... 46,557 56,402
------- -------
Expenses:
Operating................................................. 36,145 43,519
General and administrative................................ 4,297 4,073
Depreciation and amortization............................. 2,743 3,274
------- -------
Total operating expenses.......................... 43,185 50,866
------- -------
Operating profit.................................. 3,372 5,536
Other (income)/expenses, net:
(Gain)/loss on disposal of assets......................... (74) 62
Interest expense, net..................................... 445 494
------- -------
Total other expense, net.......................... 371 556
------- -------
Income before income taxes........................ 3,001 4,980
Income taxes................................................ 1,163 1,886
------- -------
Net income........................................ $ 1,838 $ 3,094
======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
F-35
<PAGE> 169
MIAMI AIRCRAFT SUPPORT, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
COMMON STOCK
------------------ ADDITIONAL TOTAL
NUMBER OF PAID-IN RETAINED TREASURY STOCKHOLDERS'
SHARES AMOUNT CAPITAL EARNINGS STOCK EQUITY
--------- ------ ---------- -------- -------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balances at December 31, 1996....... 1,600 $ 1 $ 8 $ 7,108 (62) 7,055
Acquisition of International
Enterprises Group, Inc. from
affiliate under common control
(note 2)....................... -- -- 451 (107) -- 344
Net income........................ -- -- -- 1,839 -- 1,839
----- --- ---- ------- ---- -------
Balances at December 31, 1997....... 1,600 1 459 8,840 (62) 9,238
Net income........................ -- -- -- 3,094 -- 3,094
----- --- ---- ------- ---- -------
Balances at December 31, 1998....... 1,600 1 459 11,934 (62) 12,332
===== === ==== ======= ==== =======
</TABLE>
See accompanying notes to consolidated financial statements
F-36
<PAGE> 170
MIAMI AIRCRAFT SUPPORT, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
----------------
1997 1998
------ ------
<S> <C> <C>
Cash flows from operating activities:
Net income................................................ $1,838 $3,094
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization.......................... 2,743 3,274
Loss (gain) on sale/disposal of equipment.............. (74) 62
Bad Debt expense....................................... 33 --
Deferred income taxes.................................. 98 50
Changes in operating assets and liabilities:
Accounts receivable.................................. (3,500) (875)
Notes receivable..................................... -- --
Prepaid expenses and other current assets............ (41) --
Due from/to affiliate................................ -- --
Other assets......................................... 18 --
Accounts payable..................................... 1,543 (1,371)
Accrued expenses..................................... 150 734
Income tax payable................................... 348 375
Other, net........................................... 402 --
------ ------
Net cash provided by operating activities......... 3,558 5,343
------ ------
Cash flows from investing activities:
Purchase of property and equipment........................ (611) (537)
Proceeds from sale of equipment........................... 522 --
------ ------
Net cash used in investing activities............. (89) (537)
------ ------
Cash flows from financing activities:
Principal payments on long-term debt...................... (3,485) (3,049)
Principal payments on capital lease obligations........... (306) (539)
Borrowing from affiliates................................. -- --
Payments to affiliate..................................... (49) (10)
------ ------
Net cash used in financing activities............. (3,840) (3,599)
------ ------
Net increase (decrease) in cash................... (371) 1,208
Cash and cash equivalents at beginning of year.............. 375 4
------ ------
Cash and cash equivalents at end of year.................... $ 4 $1,212
====== ======
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest............................................. $ 516 $ 563
====== ======
Income taxes......................................... $ 859 $1,491
====== ======
</TABLE>
Supplemental schedule of noncash investing and financing activities:
During, 1997 and 1998, the Company financed the purchase of ground
equipment in the amounts of $2,331 in 1997 and $3,756 in 1998, by entering
into promissory note agreements totaling $2,332 in 1997 and $2,001 in 1998,
and capital lease obligations of $0 and $1,757, in 1997 and 1998,
respectively.
See accompanying notes to consolidated financial statements.
F-37
<PAGE> 171
MIAMI AIRCRAFT SUPPORT, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1998
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) ORGANIZATION AND PRINCIPLES OF CONSOLIDATION
Miami Aircraft Support, Inc. ("MAS" or the "Company") provides ground
service support and rents equipment to domestic and international air-cargo
shippers operating in the United States. The 1997 and 1998 consolidated
financial statements include the accounts of the Company and its inactive wholly
owned subsidiary, International Enterprises Group, Inc. (note 2).
All significant intercompany balances and transactions have been eliminated
in consolidation.
(b) CASH AND CASH EQUIVALENTS
The Company considers all highly-liquid debt instruments with original
maturities of three months or less to be cash equivalents.
(c) PROPERTY AND EQUIPMENT
Property and equipment are carried at cost. Depreciation and amortization
are provided on the straight-line basis over the following estimated useful
lives: ground equipment--lesser of seven years or lease life, other property and
equipment--five to seven years.
At the time the assets are retired or otherwise disposed of, the cost and
accumulated depreciation or amortization are removed from the related accounts
and the differences, net of proceeds, are recorded as gains or losses.
(d) FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value of financial instruments, consisting of cash and cash
equivalents, trade accounts receivables, other current assets, trade accounts
payables, accrued expenses, is based on the short maturity of these instruments
which approximates fair value at December 31, 1997 and 1998. The fair value of
long-term debt and capital lease obligations is based on current rates offered
for similar debt which approximates carrying value at December 31, and 1997 and
1998.
(e) GROUND SERVICE REVENUE
Ground service revenue is recognized when service is provided.
(f) Income Taxes
Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the estimated future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and
F-38
<PAGE> 172
MIAMI AIRCRAFT SUPPORT, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
liabilities and their respective tax bases and operating loss and tax credit
carryforwards. Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. The effect on
deferred tax assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date.
(g) USE OF ESTIMATES
Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure of
contingent assets and liabilities to prepare these financial statements in
conformity with generally accepted accounting principles. Actual results could
differ from those estimates.
(h) IMPAIRMENT OF LONG-LIVED ASSETS AND LONG-LIVED ASSETS TO BE DISPOSED OF
Long-lived assets used in the Company's operations are reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Recoverability of assets to
be held and used is measured by a comparison of the carrying amount of an asset
to future net undiscounted cash flows expected to be generated by the asset. If
such assets are considered to be impaired, the impairment to be recognized is
measured by the amount by which the carrying amount of the assets exceed the
fair value of the assets. Assets to be disposed of are reported at the lower of
the carrying amount or fair value less costs to sell.
(i) RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS
Effective January 1, 1998, the Company adopted Statement of Financial
Accounting Standards (FAS) No. 130, "Reporting Comprehensive Income."
Comprehensive income presents a measure of all changes in stockholders' equity
except for changes resulting from transactions with stockholders in their
capacity as stockholders. The statement also requires the separate presentation
of the accumulated balance of comprehensive income other than net earnings in
the Consolidated Balance Sheets. Comprehensive income equaled net income for the
years ended December 31, 1997 and 1998.
Effective December 31, 1998, the Company adopted FAS 131, "Disclosures
About Segments of an Enterprise and Related Information." This statement
establishes standards for reporting information about a company's operating
segments and related disclosures about its products, services, geographic areas
of operations and major customers. Adoption of this statement did not impact the
Company's results of operations or financial position. The Company has
determined it operates under one reportable segment.
(j) RECENT ACCOUNTING PRONOUNCEMENTS
In March 1998, the AICPA issued SOP 98-1, "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use," which is effective
for fiscal
F-39
<PAGE> 173
MIAMI AIRCRAFT SUPPORT, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
years beginning after December 15, 1998. SOP 98-1 outlines the accounting
treatment for certain costs related to the development or purchase of software
to be used internally and requires that costs incurred during the preliminary
project and post-implementation/ operation stages be expensed, and costs
incurred during the application development stage be capitalized and amortized
over the estimated useful life of the software. Adoption of this statement did
not have a material impact on the Company's results of operations or financial
position.
In April 1998, the AICPA also issued SOP 98-5, "Reporting on the Costs of
Start-up Activities." SOP 98-5, which is effective for fiscal years beginning
after December 15, 1998, requires that all costs of start-up activities,
including organization costs, be expensed as incurred. Adoption of this
statement did not have material impact on the Company's results of operations or
financial position.
(k) RECLASSIFICATIONS
Certain amounts in the 1997 financial statements have been reclassified to
conform with the 1998 presentation.
(2) ACQUISITION
On November 1, 1997, the Company acquired from an affiliate under common
control all of the outstanding shares of this affiliate's wholly owned
subsidiary, International Enterprises Group, Inc. ("IEG"). The purchase price
amounted to $1.9 million. The Company's affiliate maintained a noncontrolling
interest in IEG since 1996. On March 27, 1997, the affiliate obtained control of
IEG when it acquired the majority interest from an unrelated party. The
acquisition of the controlling interest by the affiliate was accounted for under
the purchase method of accounting for business combinations. The Company's
subsequent acquisition of IEG was accounted for in a manner similar to a pooling
of interest, since it was acquired from an entity under common control.
On November 1, 1997, the aforementioned affiliate forgave all amounts due
from IEG, amounting to $230,946 as of that date. This transaction was accounted
for as a capital contribution to the Company.
(3) LEASES
(a) CAPITAL LEASES
The Company leases equipment under capital leases that expire at various
dates through the year 2000. The lease agreements either provide for the
transfer of ownership at the end of the lease term or contain a bargain purchase
option. At December 31, 1997 and
F-40
<PAGE> 174
MIAMI AIRCRAFT SUPPORT, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(3) LEASES (CONTINUED)
1998 cost and accumulated depreciation of equipment under capital leases was (in
thousands):
<TABLE>
<CAPTION>
1997 1998
---- ------
<S> <C> <C>
Cost.................................................... $948 $2,290
Accumulated depreciation................................ 244 263
---- ------
$704 $2,027
==== ======
</TABLE>
The following is a schedule of future minimum lease payments under capital
leases, together with the present value of the net minimum lease payments, as of
December 31, 1998 (in thousands):
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
- ------------------------
<S> <C>
1999.................................................. $ 912
2000.................................................. 679
2001.................................................. 198
2002.................................................. 74
2003.................................................. 55
------
Total minimum lease payments.......................... 1,918
Less amount representing interest (at rates ranging
from 8.47% to 8.78%)............................. 190
------
Present value of minimum lease payments............... 1,728
Less current portion................................ 808
------
Long-term portion..................................... $ 920
======
</TABLE>
(b) OPERATING LEASES
The Company leases office and warehouse facilities under operating lease
agreements. The following is a schedule of future minimum rental payments as of
December 31, 1998,
F-41
<PAGE> 175
MIAMI AIRCRAFT SUPPORT, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(3) LEASES (CONTINUED)
for operating leases having initial noncancelable lease terms in excess of one
year (in thousands):
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
- ------------------------
<S> <C>
1999.................................................. $2,210
2000.................................................. 1,682
2001.................................................. 1,332
2002.................................................. 745
2003.................................................. 494
Thereafter............................................ 29
------
$6,492
======
</TABLE>
In addition to the above minimum rental payments, some lease agreements
require contingent rental payments based on a percentage of the Company's
revenue in the respective location. The Company has other operating leases with
terms either less than one year (which generally are renewed on an annual
basis), or exclusively based on a percentage of revenue. Rent expense for the
years ended December 31, 1997 and 1998, consists of the following (in
thousands):
<TABLE>
<CAPTION>
1997 1998
------ ------
<S> <C> <C>
Minimum rent.......................................... $3,776 $4,550
Contingent rent....................................... 995 1,088
------ ------
Rent expense total.................................... $4,771 $5,638
====== ======
</TABLE>
(4) ACCRUED EXPENSES
Accrued expenses at December 31, 1997 and 1998 consist of the following (in
thousands):
<TABLE>
<CAPTION>
1997 1998
------ ------
<S> <C> <C>
Accrued payroll expense............................... $1,044 $1,295
Accrued workers' compensation......................... 761 762
Other................................................. 541 858
------ ------
$2,346 $2,915
====== ======
</TABLE>
F-42
<PAGE> 176
MIAMI AIRCRAFT SUPPORT, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(5) LINE OF CREDIT
As of December 31, 1997, the Company maintains standby letters of credit
totaling $1,029,184 under a $2 million line of credit with a bank. These letters
of credit collateralize mainly certain Company's operating lease rental
obligations to third parties and the Company's obligations to its workers'
compensation insurance carrier. The line of credit is generally renewed annually
and is secured by the Company's accounts receivable. As of December 31, 1997,
the Company had a $-0- balance under this line of credit.
(6) LONG-TERM DEBT
Long-term debt consists of the following at December 31 (in thousands):
<TABLE>
<CAPTION>
1997 1998
------ ------
<S> <C> <C>
Various notes payable for purchase of equipment with
interest rates ranging from 6.75% to 8.05% in 1998
and 7% to 10% in 1997, maturing at various dates
through October 2003, payable in monthly
installments including principal and interest;
secured by certain equipment with a net book value
of $4,896 and $6,525 at December 31, 1998 and 1997,
respectively........................................ $4,340 $3,706
Note payable to United National Bank, payable on
demand, but if no demand is made, then in 47 monthly
installments of $47, including interest at 8.5% per
annum. The note is secured by the Company's accounts
receivable, property and equipment.................. 1,866 1,452
------ ------
6,206 5,158
Less current portion.................................. 4,145 3,447
------ ------
Long-term debt, excluding current portion............. $2,061 $1,711
====== ======
</TABLE>
The aggregate amounts of principal maturities of debt outstanding at
December 31, 1998 are as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
- ------------------------
<S> <C>
1999................................................... $3,447
2000................................................... 1,121
2001................................................... 256
2002................................................... 170
2003................................................... 164
------
Total........................................ $5,158
======
</TABLE>
F-43
<PAGE> 177
MIAMI AIRCRAFT SUPPORT, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(7) INCOME TAXES
Income tax expense for the years ended December 31, 1997 and 1998, consists
of (in thousands):
<TABLE>
<CAPTION>
CURRENT DEFERRED TOTAL
------- -------- ------
<S> <C> <C> <C>
Year ended December 31, 1997:
Federal.................................... $ 831 $78 $ 909
State...................................... 234 20 254
------ --- ------
$1,065 $98 $1,163
====== === ======
Year ended December 31, 1998:
Federal.................................... $1,437 $41 $1,478
State...................................... 398 10 408
------ --- ------
$1,835 $51 $1,886
====== === ======
</TABLE>
Income tax expense differed from the amounts computed by applying the U.S.
federal income tax rate of 34 percent as follows (in thousands):
<TABLE>
<CAPTION>
1997 1998
------ ------
<S> <C> <C>
Computed "expected" tax expense....................... $1,020 $1,693
State taxes, net of federal income tax benefit........ 167 269
Travel and entertainment expenses..................... 17 16
Other................................................. (41) (92)
------ ------
Total tax expense........................... $1,163 $1,886
====== ======
Effective tax rate.................................... 38.7% 37.9%
====== ======
</TABLE>
F-44
<PAGE> 178
MIAMI AIRCRAFT SUPPORT, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(7) INCOME TAXES -- (CONTINUED)
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at December 31,
1997 and 1998, are presented below (in thousands).
<TABLE>
<CAPTION>
1997 1998
----- -------
<S> <C> <C>
Deferred tax assets:
Accounts receivable, principally due to allowance
for doubtful accounts............................ $ 75 $ 75
Accrued expenses, mainly workers' compensation...... 316 327
Preacquisition net operating losses of subsidiary... 501 460
----- -------
Total gross deferred tax assets............. 892 862
Deferred tax liabilities:
Property and equipment, principally due to
differences in depreciation...................... (977) (985)
Other............................................... (17) (29)
----- -------
Total gross deferred tax liabilities........ (994) (1,014)
----- -------
Net deferred tax liability.................. $(102) $ (152)
===== =======
</TABLE>
As a result of the IEG acquisition (note 2), the Company had, at December
31, 1998, approximately $1,353,000 of preacquisition net operating loss
carryforwards. These amounts can be used to reduce future taxable income of the
Company, as provided for under Internal Revenue Code Section 382 described
below. Such tax loss carryforwards expire as follows: $679,000 in 2010, $443,000
in 2011 and $231,000 in 2012, subject to the limitation noted below.
Once an ownership change is deemed to have occurred under Section 382, a
limitation on the annual utilization of net operating loss carryovers is
imposed. Under the provisions of Section 382, the utilization of the
aforementioned net operating losses is limited to a maximum of $103,550 annually
through their expiration date.
Based upon the level of historical taxable income and projections for
future taxable income over the periods in which the deferred tax assets are
deductible, and after considering the reversal of deferred tax liabilities,
management believes it is more likely than not the Company will realize the
benefits of these deductible differences.
(8) BUSINESS AND CONCENTRATIONS OF CREDIT RISK
Financial instruments which potentially expose the Company to
concentrations of credit risk consist primarily of trade accounts receivable.
The Company provides services to various customers in the aviation industry.
Although the Company is directly affected by the well being of the aviation
industry, management does not believe significant credit risk exists at December
31, 1998. During 1998, three customers accounted for approximately 46 percent of
the Company's consolidated revenue. As of December 31, 1998, approximately 60
percent of trade accounts receivable originated from five customers
F-45
<PAGE> 179
MIAMI AIRCRAFT SUPPORT, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(8) BUSINESS AND CONCENTRATIONS OF CREDIT RISK -- (CONTINUED)
located in the United States. The Company estimates an allowance for doubtful
accounts based on the creditworthiness of its customers, as well as general
economic conditions. Consequently, an adverse change in those factors could
affect the Company's estimate of its bad debts.
(9) RELATED-PARTY TRANSACTIONS
During 1998, the Company provided approximately $135,000 of services to a
related party by way of common management. The revenue and related receivable as
of December 31, 1998, amounting to approximately $135,000, is included in ground
service revenue and accounts receivable, respectively.
In 1998, the Company purchased used ground equipment for $726,405 from the
aforementioned affiliate.
(10) COMMITMENTS AND CONTINGENCIES
The Company obtains insurance for workers' compensation claims. However,
the Company has elected to retain a significant portion of expected losses
through the use of deductibles. Provisions for losses expected under these
programs are recorded based upon the Company's estimate of the aggregate
liability for claims incurred. These estimates utilize the Company's prior
experience and actuarial assumptions that are provided by the Company's
insurance carrier. The total estimated liability for these losses at December
31, 1998, is $761,933 and is included in accrued expenses.
The Company is a party to various claims and legal actions arising in the
ordinary course of business. While any proceeding or litigation has an element
of uncertainty, management believes that the ultimate disposition of these
matters will not have a material adverse effect on the Company's consolidated
financial position and results of operations.
(11) SUBSEQUENT EVENTS (UNAUDITED)
On May 28, 1999, Worldwide Flight Services, Inc. ("Worldwide") contracted
to purchase 100 percent of the outstanding stock of MAS. The total purchase
price is $61 million, a portion of which is to be held in escrow for a period up
to six months to secure MAS's indemnification obligations under the agreement.
Upon consummation, an additional $2 million will be paid to MAS for distribution
to employees over an established period of time. In conjunction with the
purchase contract, the stockholder's of MAS have agreed not to compete with
Worldwide in ground service business or solicit Worldwide employees for a period
of five years. MAS anticipates the completion of the sale to Worldwide in July
1999.
F-46
<PAGE> 180
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PROSPECTUS DATED , 2000
[WORLDWIDE FLIGHT SERVICES, INC. LOGO]
$130,000,000
WORLDWIDE FLIGHT SERVICES, INC.
OFFER TO EXCHANGE
12 1/4 SENIOR NOTES DUE 2007, SERIES B
FOR ANY AND ALL OUTSTANDING
12 1/4 SENIOR NOTES DUE 2007, SERIES A
--------------------
PROSPECTUS
--------------------
- --------------------------------------------------------------------------------
We have not authorized any dealer, salesperson or other person to give you
written information other than this prospectus or to make representations as to
matters not stated in this prospectus. You must not rely on unauthorized
information. This prospectus is not an offer to sell these securities or our
solicitation of your offer to buy the securities in any jurisdiction where that
would not be permitted or legal. Neither the delivery of this prospectus nor any
sales made hereunder after the date of this prospectus shall create an
implication that the information contained herein or the affairs of Worldwide
have not changed since the date hereof.
- --------------------------------------------------------------------------------
Until (90 days from the date of this prospectus), all dealers
effecting transactions in the securities, whether or not participating in this
exchange offer, may be required to deliver a prospectus.
- --------------------------------------------------------------------------------
<PAGE> 181
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
INDEMNIFICATION UNDER THE BY-LAWS OF WORLDWIDE FLIGHT SERVICES, INC. AND MIAMI
AIRCRAFT SUPPORT, INC.
The by-law provisions of Worldwide Flight Services, Inc. and Miami Aircraft
Support, Inc. relating to indemnification of Officers and Directors are
identical. Accordingly, the description below of "Worldwide Flight Services,
Inc." or "Worldwide" applies to each of Worldwide Flight Services, Inc. and
Miami Aircraft Support, Inc.
The by-laws of Worldwide Flight Services, Inc. provide that Worldwide will
indemnify to the full extent permitted by law any person made or threatened to
be made a party to any action, suit or proceeding, whether civil, criminal,
administrative or investigative, by reason of the fact that such person or such
person's testator or intestate is or was a director, officer or employee of
Worldwide or serves or served at the request of Worldwide or any other
enterprise as a director, officer or employee. Expenses, including attorneys'
fees, incurred by any such person in defending any such action, suit or
proceeding will be paid or reimbursed by Worldwide promptly upon receipt by it
of an undertaking of such person to repay such expenses if it shall ultimately
be determined that such person is not entitled to be indemnified by Worldwide.
The rights provided to any person by the by-laws will be enforceable against
Worldwide by such person who will be presumed to have relied upon it in serving
or continuing to serve as a director, officer or employee as provided above. The
indemnification and advancement of expenses provided by, or granted pursuant to,
the by-laws of Worldwide will not be deemed exclusive and are declared expressly
to be non-exclusive of any other rights to which those seeking indemnification
or advancements of expenses may be entitled under any by-law, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in such
person's official capacity and as to action in another capacity while holding an
office, and, unless otherwise provided when authorized or ratified, will
continue as to a person who has ceased to be a director, officer, employee or
agent and shall inure to the benefit of the heirs, executors and administrators
of such person.
INDEMNIFICATION UNDER THE BY-LAWS OF WORLDWIDE FLIGHT FINANCE COMPANY AND
WORLDWIDE FLIGHT SECURITY SERVICE CORPORATION.
The by-law provisions of Worldwide Flight Finance Company and Worldwide
Flight Security Service Corporation relating to indemnification of Officers and
Directors are identical. Accordingly, the description below of "Worldwide
Flight" applies to each of Worldwide Flight Finance Company and Worldwide Flight
Security Service Corporation.
Worldwide Flight's by-laws provide that Worldwide Flight will indemnify its
directors and officers as permitted by law against all expense, liability and
loss paid or incurred by such person in connection with any threatened, pending
or completed action, suit or proceeding (a "Action") involving such person by
reason of the fact the he or she was a director or officer of Worldwide Flight
or is or was serving at the request or for the benefit of Worldwide Flight in
any capacity for another corporation or entity. Any indemnification will be made
unless it is determined that indemnification is not proper because the officer
or director (i) has not acted in good faith and in a manner he or she reasonably
believes to be in the best interest of Worldwide Flight and, with respect to any
criminal action or
II-1
<PAGE> 182
proceeding, (ii) had no reasonable cause to believe his or her conduct was
unlawful. The indemnification provided by the by-laws of Worldwide Flight (i)
will not be deemed exclusive of any other rights to which those indemnified may
be entitled under any by-law, agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in his or her official capacity and as
to action in another capacity while holding such office, (ii) will be deemed to
create contractual rights in favor of each person seeking indemnification or
advancement of expenses and (iii) will continue as to each person who has ceased
to have the status pursuant to which he or she was entitled or was denominated
as entitled to indemnification pursuant to the by-laws and applicable law and
shall inure to the benefit of the heirs and legal representatives of each person
seeking indemnification or advancement of expenses.
INDEMNIFICATION UNDER THE DELAWARE GENERAL CORPORATION LAW
Section 145 of the Delaware General Corporation Law, authorizes a
corporation to indemnify any person who was or is a party, or is threatened to
be made a party, to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative, by reason
of the fact that the person is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses, including attorneys' fees,
judgments, fines and amounts paid in settlement actually and reasonably incurred
by the person in connection with such action, suit or proceeding, if the person
acted in good faith and in a manner the person 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 the person's
conduct was unlawful. In addition, the Delaware General Corporation Law does not
permit indemnification in any threatened, pending or completed action or suit by
or in the right of the corporation in respect of any claim, issue or matter as
to which such person shall have been adjudged to be liable to the corporation,
unless and only to the extent that the court in which such action or suit was
brought shall determine upon application that, despite the adjudication of
liability, but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses, which such court
shall deem proper. To the extent that a present or former director or officer of
a corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to above, or in defense of any claim, issue
or matter, such person shall be indemnified against expenses, including
attorneys' fees, actually and reasonably incurred by such person. Indemnity is
mandatory to the extent a claim, issue or matter has been successfully defended.
The Delaware General Corporation Law also allows a corporation to provide for
the elimination or limit of the personal liability of a director to the
corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, provided that such provision shall not eliminate or limit
the liability of a director
(1) for any breach of the director's duty of loyalty to the
corporation or its stockholders,
(2) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law,
(3) for unlawful payments of dividends or unlawful stock purchases
or redemptions, or
II-2
<PAGE> 183
(4) for any transaction from which the director derived an improper
personal benefit. These provisions will not limit the liability
of directors or officers under the federal securities laws of
the United States.
INDEMNIFICATION UNDER THE BY-LAWS OF AEROLINK INTERNATIONAL, INC., AEROLINK
MAINTENANCE, INC. AND AEROLINK MANAGEMENT, INC.
The by-law provisions of Aerolink International, Inc., Aerolink
Maintenance, Inc. and Aerolink Management, Inc. relating to indemnification of
Officers and Directors are identical. Accordingly, the description below of
"Aerolink" applies to each of Aerolink International, Inc., Aerolink
Maintenance, Inc. and Aerolink Management, Inc.
The by-laws of Aerolink provide that Aerolink will indemnify its directors
and officers as permitted by law against all expense, liability and loss paid or
incurred by such person in connection with any threatened, pending or completed
action, suit or proceeding (a "Action") involving such person by reason of the
fact the he or she was a director or officer of Aerolink or is or was serving at
the request or for the benefit of Aerolink in any capacity for another
corporation or entity. No right of indemnification shall exist with respect to
an Action brought by an officer or director and any other person entitled to
indemnification under the by-laws against Aerolink except for expenses incurred
in connection with any Action brought by such person entitled to indemnification
under the by-laws against Aerolink only if the Action is a claim for indemnity
or expenses not paid in full by Aerolink or otherwise and either (i) such person
entitled to indemnification under the by-laws is successful in whole or in part
in the Action for which expenses are claimed or (ii) the indemnification for
expenses is included in a settlement of the Action or is awarded by a court. The
rights of indemnification and advancement of expenses provided by the by-laws of
Aerolink (i) will not be deemed exclusive of any other rights, whether now
existing or hereafter created, to which those seeking indemnification or
advancement of expenses may be entitled under the Articles or by-laws of
Aerolink, any agreement, any vote of shareholders or directors or otherwise,
(ii) will be deemed to create contractual rights in favor of each person seeking
indemnification or advancement of expenses, (iii) will continue as to each
person who has ceased to have the status pursuant to which he or she was
entitled or was denominated as entitled to indemnification pursuant to the
by-laws and applicable law and shall inure to the benefit of the heirs and legal
representatives of each person seeking indemnification or advancement of
expenses and (iv) will be applicable to Actions commenced after the adoption of
such by-laws, whether arising from acts or omissions occurring before or after
the adoption of such by-laws.
INDEMNIFICATION UNDER THE PENNSYLVANIA BUSINESS CORPORATION LAW
Sections 1741 and 1742 of the Pennsylvania Business Corporation Law of
1988, as amended (the "BCL") provide that a business corporation may indemnify
directors and officers against liability they may incur as such provided that
the particular person acted in good faith and in a manner he or she reasonably
believed to be in, or not opposed to, the best interests of the corporation and,
with respect to any criminal proceeding, had no reasonable cause to believe his
or her conduct was unlawful. In the case of actions against a director or
officer by or in the right of the Corporation, the power to indemnify extends
only to expenses (not judgments and amounts paid in the settlement) and such
power generally does not exist if the person otherwise entitled to
indemnification shall have been adjudged to be liable to the Corporation unless
it is judicially determined that, despite the adjudication of liability but in
view of all the circumstances of the case, the person is fairly
II-3
<PAGE> 184
and reasonably entitled to indemnification for specified expenses. In addition,
under Sections 1743 and 1744 of the BCL, the Corporation is required to
indemnify directors and officers against expenses they may incur in defending
actions against them in such capacities if they are successful on the merits or
otherwise in the defense of such actions and a corporation may pay the expenses
of a director or officer incurred in defending an action or proceeding in
advance of the final amounts advanced unless it is ultimately determined that
such person is entitled to indemnification from the corporation.
Also, Section 1746 of the BCL grants a corporation broad authority to
indemnify its directors, officers and other agents for liabilities and expenses
incurred in such capacity, except in circumstances where the act or failure to
act giving rise to the claim for indemnification is determined by a court to
have constituted willful misconduct or recklessness. Section 1747 grants a
corporation the power to purchase and maintain insurance on behalf of any
directors, officers and other agents against any liability incurred in such
capacity, whether or not the corporation would have the power to indemnify such
directors, officers and other agents against that liability under the BCL.
INDEMNIFICATION UNDER THE BY-LAWS OF MIAMI INTERNATIONAL AIRPORT CARGO
FACILITIES & SERVICES, INC. AND INTERNATIONAL ENTERPRISES GROUP, INC.
The by-law provisions of Miami International Airport Cargo Facilities &
Services, Inc. and International Enterprises Group, Inc. relating to
indemnification of Officers and Directors are identical. Accordingly, the
description below of "Miami International" applies to each of Miami
International Airport Cargo Facilities & Services, Inc. and International
Enterprises Group, Inc.
The by-laws of Miami International provide that, except for some
circumstances, Miami International will indemnify any person made or threatened
to be made a party to any action, suit or proceeding, either by or in the right
of the Miami International or such other company, a derivative action, or by a
third-party action by reason of the fact that the person is or was a director,
officer, employee or agent of Miami International or serves or served at the
request of Miami International if either:
(a) the person is wholly successful in defending the derivative or
third-party action, or
(b) it is determined by a court of competent jurisdiction, a
majority of a quorum of the Board of Directors of Miami
International (which quorum shall not include any director who
is a party to or is otherwise involved in such action) or an
opinion of independent legal counsel that the person acted
without negligence or misconduct in the performance of his duty
to Miami International in the case of a derivative action or
acted in good faith in what he reasonably believed to be the
best interests of Miami International in the case of a
third-party action.
Additionally, in any criminal action, an opinion of independent legal
counsel will be delivered stating that the person had no reasonable cause to
believe that his action was unlawful.
II-4
<PAGE> 185
INDEMNIFICATION UNDER THE FLORIDA BUSINESS CORPORATION ACT
In general, Florida law permits a Florida corporation to indemnify its
directors, officers, employees and agents, and persons serving at the
corporation's request in such capacities for another enterprise against
liabilities arising from conduct that such persons 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. The provisions of the Florida Business Corporation Act
that authorize indemnification do not eliminate the duty of care of a director
and, inappropriate circumstances, equitable remedies such as injunctive or other
forms of nonmonetary relief will remain available under Florida law. In
addition, each director will continue to be subject to liability for (a)
violations of the criminal law, unless the director had reasonable cause to
believe his conduct was lawful or had no reasonable cause to believe his conduct
was unlawful, (b) deriving an improper personal benefit from a transaction, (c)
voting for or assenting to an unlawful distribution, and (d) willful misconduct
or a conscious disregard for the best interests of the corporation in a
proceeding by or in the right of the corporation to procure a judgment in its
favor or in a proceeding by or in the right of a shareholder. The statute does
not affect a director's responsibilities under any other law, such as the
Federal securities laws or state or Federal environmental laws.
INDEMNIFICATION UNDER THE AEROLINK INTERNATIONAL, L.P. PARTNERSHIP AGREEMENT
Aerolink Management, Inc., as general partner of Aerolink International,
L.P. Partnership, will be indemnified by the partnership but not by any limited
partner against any losses, judgments, claims and/or liabilities in connection
with any action, suit or proceeding, other than an action, suit or proceeding by
or in the right of a limited partner or the partnership, threatened, pending or
completed to which Aerolink Management, Inc., as general partner, or threatened
to be made a party. Indemnification may be sought whereby Aerolink Management,
Inc., as general partner, acted or refrained from acting in a manner that it or
its agents believed in good faith was in the best interest of the partnership,
and in a case involving a criminal proceeding, Aerolink Management, Inc., as
general partner, had no reasonable cause to believe that its actions or actions
of its agents constituted unlawful conduct.
INDEMNIFICATION UNDER THE PENNSYLVANIA REVISED UNIFORM LIMITED PARTNERSHIP ACT
Section 8510 of the Pennsylvania Revised Uniform Limited Partnership Act
provides that subject to standards and restrictions, if any, as set forth in the
partnership agreement, a limited partnership may indemnify any partner or other
person against any and all claims and demands, whether or not the limited
partnership would have power to indemnify the person under any other provision
of the law, and whether or not the liability arises out of an action by or in
the right of a limited partnership. Indemnification is not permitted, however,
in any case in which the person's conduct is judicially determined to have
constituted willful misconduct or recklessness.
II-5
<PAGE> 186
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
<C> <S>
3.1 Certificate of Incorporation of Worldwide Flight Services,
Inc. with all amendments (formerly known as AMR Services
Corporation and AMR Airline Services Corporation)*
3.2 Amended and Restated By-Laws of Worldwide Flight Services,
Inc. (formerly known as AMR Services Corporation and AMR
Airline Services Corporation)*
3.3 Certificate of Incorporation of Worldwide Flight Finance
Company with all amendments (formerly known as AMRS Holding
Corporation and AMRS Finance Company)*
3.4 By-Laws of Worldwide Flight Finance Company (formerly known
as AMRS Holding Corporation and AMRS Finance Company)*
3.5 Certificate of Incorporation of Worldwide Flight Security
Service Corporation with all amendments (formerly known as
AMR Services Security Service Corporation)*
3.6 By-Laws of Worldwide Flight Security Service Corporation
(formerly known as AMR Services Security Service
Corporation)*
3.7 Certificate of Incorporation of Aerolink International, Inc.
with all amendments*
3.8 By-Laws of Aerolink International, Inc.*
3.9 Certificate of Incorporation of Aerolink Maintenance, Inc.
with all amendments*
3.10 By-Laws of Aerolink Maintenance, Inc.*
3.11 Certificate of Incorporation of Aerolink Management, Inc.
with all amendments*
3.12 By-Laws of Aerolink Management, Inc.*
3.13 Certificate of Limited Partnership of Aerolink
International, L.P.*
3.14 Agreement of Limited Partnership of Aerolink International,
L.P.*
3.15 Amended and Restated Articles of Incorporation of Miami
International Airport Cargo Facilities & Services, Inc.
(formerly known as Miami International Container Freight
Station Inc.)*
3.16 Amended and Restated By-Laws of Miami International Airport
Cargo Facilities & Services, Inc.*
3.17 Certificate of Incorporation of International Enterprises
Group, Inc. with all amendments*
3.18 Amended and Restated By-Laws of International Enterprises
Group, Inc.*
3.19 Certificate of Incorporation of Miami Aircraft Support, Inc.
with all amendments*
3.20 Amended and Restated By-Laws of Miami Aircraft Support,
Inc.*
</TABLE>
II-6
<PAGE> 187
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
<C> <S>
4.1 Indenture, dated as of August 12, 1999, among Worldwide
Flight Services, Inc., The Bank of New York as Trustee and
Guarantors*
4.2 Form of 12 1/4 Senior Note due 2007, Series B (included in
exhibit 4.1)*
4.3 A/B Exchange Registration Rights Agreement, dated August 12,
1999, by and among Worldwide Flight Services, Inc.,
Guarantors and Initial Purchasers*
4.4 Form of Senior Guarantee (included in exhibit 4.1)*
4.5 Supplemental Indenture, dated as of September 7, 1999, by
and among Worldwide Flight Services, Inc., The Bank of New
York, as Trustee and Guarantors***
5.1 Opinion of Schulte Roth & Zabel LLP****
9.1 Form of Voting Trust Agreement, among WFS Holdings, Inc.,
Stockholders and Leonard M. Harlan*
10.1 Purchase Agreement, dated August 5, 1999 by and among the
Registrant, WFS Holdings, Inc., the initial Guarantors and
the Initial Purchasers*
10.2 Stock Purchase Agreement, dated May 28, 1999, among Miami
Aircraft Support, Worldwide Holding Corporation, Anthony
Romeo and Charles Micale*
10.3 WFS Holdings, Inc. 1999 Stock Option Plan*
10.4 Employment Agreement, effective October 1, 1998, between
Peter A. Pappas and Worldwide Flight Services, Inc.
(formerly known as AMR Services Corporation)*
10.5 Executive Employment Agreement dated May 30, 1999, between
Worldwide Flight Services, Inc. and Mark Dunkerley*
10.6 Executive Employment Agreement, dated March 29, 1999,
between Worldwide Flight Services, Inc. (formerly known as
AMR Services Corporation) and Scott Letier*
10.7 Employment Agreement, dated December 7, 1998, between
Worldwide Flight Services, Inc. (formerly known as AMR
Services Corporation) and Olivier Bijaoui*
10.8 Employment Agreement, dated November 13, 1998, between
Worldwide Flight Services, Inc. (formerly known as AMR
Services Corporation) and John Vittas*
10.9 Credit Agreement dated as of August 12, 1999, among WFS
Holdings, Inc., Worldwide Flight Services, Inc., the Lenders
party thereto, The Chase Manhattan Bank, as Administrative
Agent, and DLJ Capital Funding, Inc., as Syndication Agent*
10.10 Security Agreement dated as of August 12, 1999, among
Worldwide Flight Services, Inc., each subsidiary of WFS
Holdings, Inc. listed on Schedule I thereto and The Chase
Manhattan Bank, a New York banking corporation, as
administrative agent for the Secured Parties*
</TABLE>
II-7
<PAGE> 188
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
<C> <S>
10.11 Indemnity, Subrogation and Contribution Agreement dated as
of August 12, 1999, among Worldwide Flight Services, Inc.,
each subsidiary of WFS Holdings, Inc. listed on Schedule I
thereto and The Chase Manhattan Bank, a New York banking
corporation, as administrative agent for the Secured
Parties*
10.12 Guarantee Agreement dated as of August 12, 1999, among WFS
Holdings, Inc., each subsidiary of our parent listed on
Schedule I thereto and The Chase Manhattan Bank, a New York
banking corporation, as administrative agent for the Secured
Parties*
10.13 Pledge Agreement dated as of August 12, 1999, among
Worldwide Flight Services, Inc., WFS Holdings, Inc., each
subsidiary of WFS Holdings, Inc. listed on Schedule I
thereto and The Chase Manhattan Bank, a New York banking
corporation, as administrative agent for the Secured
Parties*
10.14 Amended and Restated Stock Purchase Agreement dated as of
December 23, 1998 among MR Services Acquisition Corporation,
AMR Services Holding Corporation and AMR Corporation**
12.1 Statement regarding Computation of Ratio of Earnings to
Fixed Charges of Worldwide Flight Services, Inc.**
12.2 Statement regarding Computation of Ratio of Earnings to
Fixed Charges of Miami Aircraft Support, Inc.**
21 Subsidiaries of Worldwide Flight Services, Inc.*
23.1 Consent of Ernst & Young LLP****
23.2 Consent of KPMG LLP****
23.3 Consent of Schulte Roth & Zabel LLP (incorporated by
reference in exhibit 5.1****)
24 Power of Attorney (included on Signature Page of initial
filing)*
25 Statement of Eligibility and Qualification on Form T-1 of
The Bank of New York, as Trustee*
99.1 Form of Letter of Transmittal*
99.2 Form of Notice of Guaranteed Delivery for Outstanding
12 1/4% Senior Notes due 2007, Series A, in exchange for
12 1/4% Senior Notes due 2007, Series B*
</TABLE>
- ---------------
* Previously filed in Registration Statement No. 333-88593 on October 7, 1999
** Previously filed in Amendment No. 1 to Registration Statement No. 333-88593
on November 24, 1999
*** Previously filed in Amendment No. 3 to Registration Statement No. 333-88593
on January 26, 2000
**** Previously filed and updated as filed herewith
II-8
<PAGE> 189
ITEM 22. UNDERTAKINGS.
The undersigned Registrants hereby undertake:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the Registration Statement, or the most recent
post-effective amendment thereof, which, individually or in the
aggregate, represent a fundamental change in the information set
forth in the Registration Statement. Notwithstanding the foregoing,
any increase or decrease in volume of securities offered, if the
total dollar value of securities offered would not exceed that which
was registered, and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the SEC pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent no more than 20
percent change in the maximum aggregate offering price set forth in
the "Calculation of Registration Fee" table in the effective
registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement
or any material change to such information in the Registration
Statement;
(2) That, for the purpose 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; and
(3) To remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of
the offering.
The undersigned Registrants hereby undertake that:
(1) 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 the reofferings by persons who may be deemed underwriters, in
addition to the information called for by the other items of the applicable
form.
(2) 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 Securities 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, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering
II-9
<PAGE> 190
of such securities at that time shall be deemed to be the initial bona fide
offering thereof.
The undersigned Registrants hereby undertake 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 Registrants hereby undertake 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.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrants pursuant to the foregoing provisions, or otherwise, the Registrants
have been advised that in the opinion of the Commission, such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrants will, unless in the opinion of their counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by then is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
II-10
<PAGE> 191
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Worldwide
Flight Services, Inc. has duly caused this Amendment to the Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Euless, State of Texas on the 3rd day of February,
2000.
WORLDWIDE FLIGHT SERVICES, INC.
By: *
--------------------------------------
Name: Peter A. Pappas
Title: Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLES DATE
<S> <C> <C>
* Chairman of the Board of February 3, 2000
- --------------------------------------------- Directors, Chief
Peter A. Pappas Executive Officer and
Director (principal
executive officer)
* President, Chief Operating February 3, 2000
- --------------------------------------------- Officer and Director
Mark Dunkerley
/s/ ABEL PALACIOS Controller (principal February 3, 2000
- --------------------------------------------- financial and accounting
Abel Palacios officer)
Director February 3, 2000
- ---------------------------------------------
Leonard M. Harlan
* Director February 3, 2000
- ---------------------------------------------
Marcel Fournier
* Director February 3, 2000
- ---------------------------------------------
Albert V. Casey
Director February 3, 2000
- ---------------------------------------------
Lieut. General Thomas G. McInerney
</TABLE>
II-11
<PAGE> 192
<TABLE>
<CAPTION>
SIGNATURES TITLES DATE
<S> <C> <C>
* Director February 3, 2000
- ---------------------------------------------
Bradley G. Stanius
* Director February 3, 2000
- ---------------------------------------------
Gilbert A. Yanuck
*By: /s/ PETER A. PAPPAS
---------------------------------------
Peter A. Pappas
Attorney-in-fact
</TABLE>
II-12
<PAGE> 193
Pursuant to the requirements of the Securities Act of 1933, Worldwide
Flight Finance Company has duly caused this Amendment to the Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Euless, State of Texas on the 3rd day of February,
2000.
WORLDWIDE FLIGHT FINANCE COMPANY
By: *
--------------------------------------
Name: Peter A. Pappas
Title: Chairman of the Board and
President
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLES DATE
<S> <C> <C>
* Chairman of the Board of February 3, 2000
- --------------------------------------------- Directors and President
Peter A. Pappas and Director (principal
executive officer)
/s/ ABEL PALACIOS Controller (principal February 3, 2000
- --------------------------------------------- financial and accounting
Abel Palacios officer)
* Vice President and February 3, 2000
- --------------------------------------------- Director
Gary Burtzlaff
* Vice President and February 3, 2000
- --------------------------------------------- Secretary and Director
James Enright
*By: /s/ PETER A. PAPPAS
---------------------------------------
Peter A. Pappas
Attorney-in-fact
</TABLE>
II-13
<PAGE> 194
Pursuant to the requirements of the Securities Act of 1933, Worldwide
Flight Security Service Corporation has duly caused this Amendment to the
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Euless, State of Texas on the 3rd day of
February, 2000.
WORLDWIDE FLIGHT SECURITY SERVICE
CORPORATION
By: *
-----------------------------------------
Name: Peter A. Pappas
Title: President
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLES DATE
<S> <C> <C>
* President and Director February 3, 2000
- --------------------------------------------- (principal executive
Peter A. Pappas officer)
/s/ ABEL PALACIOS Controller (principal February 3, 2000
- --------------------------------------------- financial and accounting
Abel Palacios officer)
* Vice President and February 3, 2000
- --------------------------------------------- Director
Gary Burtzlaff
* Assistant Vice President February 3, 2000
- --------------------------------------------- and Director
Patricia Kearney
*By: /s/ PETER A. PAPPAS
---------------------------------------
Peter A. Pappas
Attorney-in-fact
</TABLE>
II-14
<PAGE> 195
Pursuant to the requirements of the Securities Act of 1933, Miami
International Airport Cargo Facilities & Services, Inc. has duly caused this
Amendment to the Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Euless, State of Texas on
the 3rd day of February, 2000.
MIAMI INTERNATIONAL AIRPORT
CARGO FACILITIES & SERVICES, INC.
By: *
--------------------------------------
Name: Peter A. Pappas
Title: Chairman of the Board and
President
Pursuant to the requirements of the Securities Act of 1933, this Amendment
of the Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLES DATE
<S> <C> <C>
* Chairman of the Board of February 3, 2000
- --------------------------------------------- Directors, President and
Peter A. Pappas Director (principal
executive officer)
/s/ ABEL PALACIOS Controller (principal February 3, 2000
- --------------------------------------------- financial and accounting
Abel Palacios officer)
* Vice President and February 3, 2000
- --------------------------------------------- Secretary and Director
James Enright
* Vice President and February 3, 2000
- --------------------------------------------- Director
Gary Burtzlaff
*By: /s/ PETER A. PAPPAS
---------------------------------------
Peter A. Pappas
Attorney-in-fact
</TABLE>
II-15
<PAGE> 196
Pursuant to the requirements of the Securities Act of 1933, International
Enterprises Group, Inc. has duly caused this Amendment to the Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Euless, State of Texas on the 3rd day of February,
2000.
INTERNATIONAL ENTERPRISES GROUP, INC.
By: *
-----------------------------------------
Name: Peter A. Pappas
Title: Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, Amendment to
the Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLES DATE
<S> <C> <C>
* Chairman of the Board of February 3, 2000
- --------------------------------------------- Directors, Chief
Peter A. Pappas Executive Officer and
Director (principal
executive officer)
* President, Chief February 3, 2000
- --------------------------------------------- Operating Officer and
Mark Dunkerley Director
/s/ ABEL PALACIOS Controller (principal February 3, 2000
- --------------------------------------------- financial and accounting
Abel Palacios officer)
*By: /s/ PETER A. PAPPAS
---------------------------------------
Peter A. Pappas
Attorney-in-fact
</TABLE>
II-16
<PAGE> 197
Pursuant to the requirements of the Securities Act of 1933, Miami Aircraft
Support, Inc. has duly caused this Amendment to the Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Euless, State of Texas on the 3rd day of February, 2000.
MIAMI AIRCRAFT SUPPORT, INC.
By: *
--------------------------------------
Name: Peter A. Pappas
Title: Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLES DATE
<S> <C> <C>
* Chairman of the Board of February 3, 2000
- --------------------------------------------- Directors, Chief Executive
Peter A. Pappas Officer and Director
(principal executive
officer)
* Vice Chairman of the Board February 3, 2000
- --------------------------------------------- of Directors, Chief
Mark Dunkerley Operating Officer and
Director
/s/ ABEL PALACIOS Controller (principal February 3, 2000
- --------------------------------------------- financial and accounting
Abel Palacios officer)
*By: /s/ PETER A. PAPPAS
---------------------------------------
Peter A. Pappas
Attorney-in-fact
</TABLE>
II-17
<PAGE> 198
Pursuant to the requirements of the Securities Act of 1933, Aerolink
International, Inc. has duly caused this Amendment to the Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Euless, State of Texas on the 3rd day of February, 2000.
AEROLINK INTERNATIONAL, INC.
By: *
--------------------------------------
Name: Peter A. Pappas
Title: Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLES DATE
- ---------- ------ ----
<S> <C> <C>
* Chairman of the Board of February 3, 2000
- --------------------------------------------- Directors, Chief Executive
Peter A. Pappas Officer and Director
(principal executive
officer)
* President, Chief Operating February 3, 2000
- --------------------------------------------- Officer and Director
Mark Dunkerley
/s/ ABEL PALACIOS Controller (principal February 3, 2000
- --------------------------------------------- financial and accounting
Abel Palacios officer)
*By: /s/ PETER A. PAPPAS
---------------------------------------
Peter A. Pappas
Attorney-in-fact
</TABLE>
II-18
<PAGE> 199
Pursuant to the requirements of the Securities Act of 1933, Aerolink
Maintenance, Inc. has duly caused this Amendment to the Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Euless, State of Texas on the 3rd day of February, 2000.
AEROLINK MAINTENANCE, INC.
By: *
--------------------------------------
Name: Peter A. Pappas
Title: Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLES DATE
- ---------- ------ ----
<S> <C> <C>
* Chairman of the Board of February 3, 2000
- --------------------------------------------- Directors, Chief Executive
Peter A. Pappas Officer and Director
(principal executive
officer)
* President, Chief Operating February 3, 2000
- --------------------------------------------- Officer and Director
Mark Dunkerley
/s/ ABEL PALACIOS Controller (principal February 3, 2000
- --------------------------------------------- financial and accounting
Abel Palacios officer)
*By: /s/ PETER A. PAPPAS
---------------------------------------
Peter A. Pappas
Attorney-in-fact
</TABLE>
II-19
<PAGE> 200
Pursuant to the requirements of the Securities Act of 1933, Aerolink
Management, Inc. has duly caused this Amendment to the Registration Statement to
be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Euless, State of Texas on the 3rd day of February, 2000.
AEROLINK MANAGEMENT, INC.
By: *
-----------------------------------------
Name: Peter A. Pappas
Title: Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURES
- ----------
<S> <C> <C>
* Chairman of the Board of February 3, 2000
- --------------------------------------------- Directors, Chief Executive
Peter A. Pappas Officer and Director
(principal executive
officer)
* President, Chief Operating February 3, 2000
- --------------------------------------------- Officer and Director
Mark Dunkerley
/s/ ABEL PALACIOS Controller (principal February 3, 2000
- --------------------------------------------- financial and accounting
Abel Palacios officer)
*By: /s/ PETER A. PAPPAS
---------------------------------------
Peter A. Pappas
Attorney-in-fact
</TABLE>
II-20
<PAGE> 201
Pursuant to the requirements of the Securities Act of 1933, Aerolink
International, L.P. has duly caused this Amendment to the Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Euless, State of Texas on the 3rd day of February, 2000.
AEROLINK INTERNATIONAL, L.P.
By: AEROLINK MANAGEMENT, INC.
Its general partner
*
-----------------------------------------
Name: Peter A. Pappas
Title: Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
DATE
----
<S> <C> <C>
* Chairman of the Board of February 3, 2000
- --------------------------------------------- Directors, Chief Executive
Peter A. Pappas Officer and Director
(principal executive
officer)
* President, Chief Operating February 3, 2000
- --------------------------------------------- Officer and Director
Mark Dunkerley
/s/ ABEL PALACIOS Controller (principal February 3, 2000
- --------------------------------------------- financial and accounting
Abel Palacios officer)
*By: /s/ PETER A. PAPPAS
---------------------------------------
Peter A. Pappas
Attorney-in-fact
</TABLE>
II-21
<PAGE> 202
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
<C> <S>
3.1 Certificate of Incorporation of Worldwide Flight Services,
Inc. with all amendments (formerly known as AMR Services
Corporation and AMR Airline Services Corporation)*
3.2 Amended and Restated By-Laws of Worldwide Flight Services,
Inc. (formerly known as AMR Services Corporation and AMR
Airline Services Corporation)*
3.3 Certificate of Incorporation of Worldwide Flight Finance
Company with all amendments (formerly known as AMRS Holding
Corporation and AMRS Finance Company)*
3.4 By-Laws of Worldwide Flight Finance Company (formerly known
as AMRS Holding Corporation and AMRS Finance Company)*
3.5 Certificate of Incorporation of Worldwide Flight Security
Service Corporation with all amendments (formerly known as
AMR Services Security Service Corporation)*
3.6 By-Laws of Worldwide Flight Security Service Corporation
(formerly known as AMR Services Security Service
Corporation)*
3.7 Certificate of Incorporation of Aerolink International, Inc.
with all amendments*
3.8 By-Laws of Aerolink International, Inc.*
3.9 Certificate of Incorporation of Aerolink Maintenance, Inc.
with all amendments*
3.10 By-Laws of Aerolink Maintenance, Inc.*
3.11 Certificate of Incorporation of Aerolink Management, Inc.
with all amendments*
3.12 By-Laws of Aerolink Management, Inc.*
3.13 Certificate of Limited Partnership of Aerolink
International, L.P.*
3.14 Agreement of Limited Partnership of Aerolink International,
L.P.*
3.15 Amended and Restated Articles of Incorporation of Miami
International Airport Cargo Facilities & Services, Inc.
(formerly known as Miami International Container Freight
Station Inc.)*
3.16 Amended and Restated By-Laws of Miami International Airport
Cargo Facilities & Services, Inc.*
3.17 Certificate of Incorporation of International Enterprises
Group, Inc. with all amendments*
3.18 Amended and Restated By-Laws of International Enterprises
Group, Inc.*
3.19 Certificate of Incorporation of Miami Aircraft Support, Inc.
with all amendments*
3.20 Amended and Restated By-Laws of Miami Aircraft Support,
Inc.*
4.1 Indenture, dated as of August 12, 1999, by and among
Worldwide Flight Services, Inc., The Bank of New York, as
Trustee and Guarantors*
</TABLE>
<PAGE> 203
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
<C> <S>
4.2 Form of 12 1/4 Senior Note due 2007, Series B (included in
exhibit 4.1)*
4.3 A/B Exchange Registration Rights Agreement, dated August 12,
1999, by and among Worldwide Flight Services, Inc.,
Guarantors and Initial Purchasers*
4.4 Form of Senior Guarantee (included in exhibit 4.1)*
4.5 Supplemental Indenture, dated as of September 7, 1999, by
and among Worldwide Flight Services, Inc., The Bank of New
York, as Trustee and Guarantors***
5.1 Opinion of Schulte Roth & Zabel LLP****
9.1 Form of Voting Trust Agreement, among WFS Holdings, Inc.,
Stockholders and Leonard M. Harlan*
10.1 Purchase Agreement, dated August 5, 1999 by and among the
Registrant, WFS Holdings, Inc., the initial Guarantors and
the Initial Purchasers*
10.2 Stock Purchase Agreement, dated May 28, 1999, among Miami
Aircraft Support, Worldwide Holding Corporation, Anthony
Romeo and Charles Micale*
10.3 WFS Holdings, Inc. 1999 Stock Option Plan*
10.4 Employment Agreement, effective October 1, 1998, between
Peter A. Pappas and Worldwide Flight Services, Inc.
(formerly known as AMR Services Corporation)*
10.5 Executive Employment Agreement dated May 30, 1999, between
Worldwide Flight Services, Inc. and Mark Dunkerley*
10.6 Executive Employment Agreement, dated March 29, 1999,
between Worldwide Flight Services, Inc. (formerly known as
AMR Services Corporation) and Scott Letier*
10.7 Employment Agreement, dated December 7, 1998, between
Worldwide Flight Services, Inc. (formerly known as AMR
Services Corporation) and Olivier Bijaoui*
10.8 Employment Agreement, dated November 13, 1998, between
Worldwide Flight Services, Inc. (formerly known as AMR
Services Corporation) and John Vittas*
10.9 Credit Agreement dated as of August 12, 1999, among WFS
Holdings, Inc., Worldwide Flight Services, Inc., the Lenders
party thereto, The Chase Manhattan Bank, as Administrative
Agent, and DLJ Capital Funding, Inc., as Syndication Agent*
10.10 Security Agreement dated as of August 12, 1999, among
Worldwide Flight Services, Inc., each subsidiary of WFS
Holdings, Inc. listed on Schedule I thereto and The Chase
Manhattan Bank, a New York banking corporation, as
administrative agent for the Secured Parties*
10.11 Indemnity, Subrogation and Contribution Agreement dated as
of August 12, 1999, among Worldwide Flight Services, Inc.,
each subsidiary of WFS Holdings, Inc. listed on Schedule I
thereto and The Chase Manhattan Bank, a New York banking
corporation, as administrative agent for the Secured
Parties*
</TABLE>
<PAGE> 204
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
<C> <S>
10.12 Guarantee Agreement dated as of August 12, 1999, among WFS
Holdings, Inc., each subsidiary of WFS Holdings, Inc. listed
on Schedule I thereto and The Chase Manhattan Bank, a New
York banking corporation, as administrative agent for the
Secured Parties*
10.13 Pledge Agreement dated as of August 12, 1999, among
Worldwide Flight Services, Inc., WFS Holdings, Inc., each
subsidiary of WFS Holdings, Inc. listed on Schedule I
thereto and The Chase Manhattan Bank, a New York banking
corporation, as administrative agent for the Secured
Parties*
10.14 Amended and Restated Stock Purchase Agreement dated as of
December 23, 1998 among MR Services Acquisition Corporation,
AMR Services Holding Corporation and AMR Corporation**
12.1 Statement regarding Computation of Ratios of Earnings to
Fixed Charges of Worldwide Flight Services, Inc.**
12.2 Statement regarding Computation of Ratios of Earnings to
Fixed Charges of Miami Aircraft Support, Inc.**
21 Subsidiaries of Worldwide Flight Services, Inc.*
23.1 Consent of Ernst & Young LLP****
23.2 Consent of KPMG LLP****
23.3 Consent of Schulte Roth & Zabel LLP (incorporated by
reference in exhibit 5.1)****
24 Power of Attorney (included on Signature Page of initial
filing)*
25 Statement of Eligibility and Qualification on Form T-1 of
The Bank of New York, as Trustee*
99.1 Form of Letter of Transmittal*
99.2 Form of Notice of Guaranteed Delivery for Outstanding
12 1/4% Senior Notes due 2007, Series A, in exchange for
12 1/4% Senior Notes due 2007, Series B*
</TABLE>
- ---------------
* Previously filed in Registration Statement No. 333-88593 on October 7, 1999
** Previously filed in Amendment No. 1 to Registration Statement No. 333-88593
on November 24, 1999
*** Previously filed in Amendment No. 3 to Registration Statement No. 333-88593
on January 26, 2000.
**** Previously filed and updated as filed herewith
<PAGE> 1
EXHIBIT 5.1
[LETTERHEAD OF SCHULTE ROTH & ZABEL LLP]
February 3, 2000
Worldwide Flight Services, Inc.
1001 West Euless Boulevard, Suite 320
Euless, Texas 76040
Ladies and Gentlemen:
We have acted as counsel for each of Worldwide Flight Services, Inc., a
Delaware corporation (the "Company"), Worldwide Flight Finance Company, a
Delaware corporation ("Worldwide Finance"), Worldwide Flight Security Service
Corporation, a Delaware corporation ("Worldwide Security") and Miami Aircraft
Support, Inc., a Delaware corporation ("Miami Aircraft" and together with
Worldwide Finance and Worldwide Security, collectively, the "Delaware Subsidiary
Guarantors"), in connection with the preparation and filing by the Company, the
Delaware Subsidiary Guarantors, Miami International Airport Cargo Facilities &
Services, Inc., a Florida corporation ("Miami International"), International
Enterprises Group, Inc., a Florida corporation ("International Enterprises"),
Aerolink International, Inc., a Pennsylvania corporation ("Aerolink
International"), Aerolink Maintenance, Inc., a Pennsylvania corporation
("Aerolink Maintenance"), Aerolink Management, Inc., a Pennsylvania corporation
("Aerolink Management") and Aerolink International, L.P., a Pennsylvania limited
partnership ("Aerolink L.P." and together with the Delaware Subsidiary
Guarantors, Miami International, International Enterprises, Aerolink
International, Aerolink Maintenance, and Aerolink Management, collectively the
"Subsidiary Guarantors") with the Securities and Exchange Commission (the
"Commission") of a Registration Statement on Form S-4 (the "Registration
Statement"), relating to the 12 1/4% Senior Notes due 2007, Series B of the
Company in the aggregate principal amount of $130,000,000 (the "New Notes") and
the guarantees of the New Notes by the Subsidiary Guarantors (the "New
Guarantees"). The New Notes and the New Guarantees are to be offered by the
Company and the Subsidiary Guarantors in exchange for $130,000,000 in aggregate
principal amount of its outstanding 12 1/4% Senior Notes due 2007, Series A (the
"Original Notes") and the guarantees of the Original Notes by the Subsidiary
Guarantors (the "Original Guarantees").
In this capacity, we have examined originals, telecopies or copies
certified or otherwise identified to our satisfaction of such records of the
Company and the Delaware Subsidiary Guarantors and all such agreements,
certificates of public officials, certificates of officers or representatives of
the Company, the Delaware Subsidiary Guarantors and others, and such other
<PAGE> 2
documents, certificates and corporate or other records as we have deemed
necessary or appropriate as a basis for this opinion.
In such examination, we have assumed the genuineness of all signatures,
the legal capacity of natural persons signing or delivering any instrument, the
authenticity of all documents submitted to us as originals, the conformity to
original documents of all documents submitted to us as certified or photostatic
copies and the authenticity of the originals of such latter documents. As to any
facts material to this opinion that were not independently established or
verified, we have relied upon statements and representations of officers and
other representatives of the Company and/or the Delaware Subsidiary Guarantors.
In rendering our opinion, we have assumed the accuracy of, and have not
independently verified, all matters set forth in the opinion, dated the date
hereof, of Berger, Davis and Singerman, Florida counsel to International
Enterprises and Miami International attached hereto as Exhibit I, with respect
to matters of the laws of the State of Florida, and in the opinion, dated the
date hereof, of Pepper Hamilton, LLP, Pennsylvania counsel to Aerolink
International, Aerolink Management, Aerolink Maintenance and Aerolink, L.P.
attached hereto as Exhibit II, with respect to the laws of the State of
Pennsylvania. Our opinions expressed below are subject to the limitations and
assumptions set forth in the opinions referred to in the foregoing sentence.
Based on the foregoing, and having such regard for such legal
considerations as we deem relevant, we are of the opinion that:
(i) upon the issuance of the New Notes in the manner referred to in the
Registration Statement, and when the New Notes are executed by the Company and
authenticated by The Bank of New York, in its capacity as trustee under the
Indenture, dated as of August 12, 1999 (the "Indenture"), between the Company,
the Subsidiary Guarantors (except for Aerolink International, Aerolink
Maintenance, Aerolink Management and Aerolink L.P.), and The Bank of New York,
as supplemented by a Supplemental Indenture, dated as of September 7, 1999 (the
"Supplemental Indenture"), between the Company, the Subsidiary Guarantors and
The Bank of New York, the New Notes will be legally valid and binding
obligations of the Company, enforceable against the Company in accordance with
their terms, subject to applicable bankruptcy, reorganization, fraudulent
conveyance, insolvency, moratorium or other laws affecting creditors' rights
generally from time to time in effect and to general principles of equity;
(ii) upon the issuance of the New Guarantees in the manner referred to
in the Registration Statement, and when the New Guarantees are executed by the
Subsidiary Guarantors, each of the New Guarantees will be a legally valid and
binding obligation of each of the applicable Subsidiary Guarantors, enforceable
against such Subsidiary Guarantor in accordance with its terms, subject to
applicable bankruptcy, reorganization, fraudulent conveyance, insolvency,
moratorium or other laws affecting creditors' rights generally from time to time
in effect and to general principles of equity;
We hereby consent to the filing of this opinion as an Exhibit to the
Registration Statement and to the reference to this firm under the heading
"Legal Matters" in the Prospectus. In giving this consent, we do not thereby
admit that we are in the category of persons whose consent is required under
Section 7 of the Securities Act of 1933, as amended, or the rules and
regulations of the Commission promulgated thereunder.
Very truly yours,
/s/ SCHULTE ROTH & ZABEL LLP
<PAGE> 3
EXHIBIT I
February 3, 2000
Worldwide Flight Services, Inc.
1001 West Euless Boulevard
Suite 320
Euless, Texas 76040
Schulte Roth & Zabel LLP
900 Third Avenue
New York, New York 10022
Re: Miami International Airport Cargo Facilities & Services, Inc. and
International Enterprises Group, Inc.
Ladies and Gentlemen:
We have acted as special Florida counsel to Miami International Airport
Cargo Facilities & Services, Inc., a Florida corporation ("CFS") and
International Enterprises Group, Inc., a Florida corporation ("IEG"), solely to
render the opinion in this letter in connection with the guarantee contemplated
by that certain guarantee agreement ("Florida Guarantee"), to be dated on or
about the date hereof, pursuant to which CFS and IEG (collectively, the "Florida
Guarantors") will guarantee the obligations under those certain 12 1/4% Senior
Notes due 2007, Series B ("Notes"), to be issued by Worldwide Flight Services,
Inc., a Delaware corporation ("WWFS"); which guarantee is to be issued pursuant
that certain indenture ("Indenture"), dated August 12, 1999, among WWFS, as
issuer, Worldwide Flight Finance Company, Worldwide Flight Security Service
Corporation, CFS, Miami Aircraft Support, Inc., IEG, as guarantors, and the Bank
of New York, as Trustee (collectively, the Indenture and the Florida Guarantee
are referred to below as the "Agreements").
This opinion letter is furnished to you solely in connection with the
Florida Guarantee contemplated to be made by the Florida Guarantors and not as
to the Indenture or other guarantees or guarantors.
We have not participated in the origination, negotiation, documentation
or execution of the Florida Guarantee or of any other agreements pertaining to
the transactions contemplated by the Agreements, or to be entered into by the
Florida Guarantors or any other party to the Indenture or related documents, nor
have we represented the Florida Guarantors, or any such
<PAGE> 4
other party, in connection with the Agreements, the transactions contemplated
therein, or otherwise, except to the sole extent of rendering the opinion in
this letter, and except that we rendered certain opinions previously as special
counsel to CFS in connection with the execution and delivery of certain portions
of the Indenture and various related documents.
In rendering the opinion in this letter, we have relied as to factual
matters solely on a certificate of an officer of CFS, dated as of the date
hereof, attached as EXHIBIT A ("CFS Certificate"), and on a certificate of an
officer of IEG, dated as of the date hereof, attached as EXHIBIT B ("IEG
Certificate") (collectively, "Certificates"), and upon our examination of:
o the Agreements;
o copies of minutes and written consents of the Florida Guarantors'
Boards of Directors and shareholders, including resolutions adopted by the
Florida Guarantors' Boards of Directors and shareholders approving the
Agreements and the transactions contemplated thereby, and a copy of each of
the Florida Guarantors' stock transfer ledgers, all of which were provided
to us by the Florida Guarantors and certified to us in the Certificates as
being true, correct and complete copies of the foregoing;
o Articles of Incorporation of CFS, as amended, certified by the
Secretary of State of Florida on January 18, 2000 , Articles of
Incorporation of IEG, as amended, certified by the Secretary of State of
Florida on January 18, 2000, a Certificate of Good Standing of CFS issued
by the Secretary of State of Florida on January 18, 2000, and a Certificate
of Good Standing of IEG issued by the Secretary of State of Florida on
January 18, 2000; and
o Amended and Restated Bylaws of CFS adopted August 12, 1999, and
Amended and Restated Bylaws of IEG adopted August 12, 1999.
We have made no independent investigation of the facts asserted to be
true and correct in the above materials or the Certificates. We assume that the
addressees of this opinion do not have any actual knowledge that any factual
assumptions specified, or opinion stated, in this letter are not accurate. In
our examinations, we have assumed, with your permission and without
investigation, the genuineness of all signatures and the authenticity of all
documents submitted to us as originals, and the regularity and continuity in the
maintenance of the Florida Guarantors' corporate minute books and corporate
records since the dates of their respective incorporation. Due to the incomplete
nature of certain corporate and shareholder records of CFS and IEG in rendering
our opinion, with your permission we have relied solely on the CFS Certificate
as to the identity of the current shareholder of CFS and solely on the IEG
Certificate as to the identity of the current shareholder of IEG.
<PAGE> 5
As special Florida counsel, we do not have knowledge of any facts
concerning the Notes' issuance and related transactions, or the parties
involved, except for the information contained in the Agreements and the
Florida Guarantors' articles, bylaws, corporate minutes and officers'
certificates provided to us by the Florida Guarantors for our review.
Attorneys involved in preparation of this opinion are admitted to the
bar of the State of Florida, and we do not purport to be experts on, or to
express any opinion herein concerning, any law other than the laws of the State
of Florida.
Based on the foregoing, and subject to the qualifications and
limitations stated in this letter and in the Report, we are of the opinion that
CFS has authorized the execution, delivery and performance of the Florida
Guarantee by all necessary corporate action of CFS, and IEG has authorized the
execution, delivery and performance of the Florida Guarantee by all necessary
corporate action of IEG.
Our opinion covers only due authorization under the Florida Business
Corporation Act, Chapter 607, Florida Statutes.
We express no opinion with respect to any document, instrument,
agreement or other matter merely referenced in, or exhibited or attached to, any
of the Agreements, nor do we express any opinion with respect to the effect of
any agreements, instruments or documents that we have not reviewed on the
Agreements or the opinion set forth in this letter.
<PAGE> 6
We hereby consent to the filing of this opinion letter as an Exhibit to
the Registration Statement on Form S-4 filed with the Securities and Exchange
Commission in connection with the Notes, and to a reference to this firm under
the heading "Legal Matters" in the prospectus so long as such reference
identifies the limited scope of our opinion. In giving this consent, we do not
admit that we are in the category of persons whose consent is required under
Section 7 of the Securities Act of 1933, as amended, or the rules and
regulations thereunder.
The opinion in this letter is rendered as of the date hereof;
accordingly, this opinion is based solely on existing laws, facts and
circumstances; and we express no opinion as to, and assume no obligation to
update or supplement such opinion to reflect, any change in the laws or any fact
or circumstance which may exist or occur, subsequent to the date hereof. The
opinion in this letter is limited to the matters expressly stated herein, and no
opinion is implied or may be inferred beyond what is expressly stated.
Very truly yours,
/s/ BERGER DAVIS & SINGERMAN
<PAGE> 7
EXHIBIT A
OFFICER'S CERTIFICATE IN SUPPORT OF OPINION
OF BERGER DAVIS & SINGERMAN
Capitalized terms used but not defined in this Certificate have the
respective meanings given such terms in the Transaction Agreements (as defined
below).
I, PETER A. PAPPAS, in my capacity as President of Miami International
Airport Cargo Facilities & Services, Inc., a Florida corporation ("CFS"), have
personal knowledge of the matters stated below; and in connection with the
opinions of Berger Davis & Singerman ("Opinion"), which are being delivered in
connection with the transactions ("Transactions") contemplated by the following
agreements (Collectively, "Transaction Agreements"):
Purchase Agreement, dated August 5, 1999, among Worldwide Flight
Services, Inc., a Delaware corporation ("WWFS"), as issuer, Worldwide Flight
Finance Company, Worldwide Flight Security Service Corporation, and CFS, as
initial guarantors, and Donaldson, Lufkin & Jenrette Securities Corporation
("DLJ") and Chase Securities, Inc. ("Chase"), as initial purchasers.
o Indenture, dated August 12, 1999, among WWFS, as Issuer,
Worldwide Flight Finance Company, Worldwide Flight Security
Service Corporation, CFS, Miami Aircraft Support, Inc.,
International Enterprises Group, Inc., as Guarantors, and the
Bank of New York, as Trustee (under Article 11 of which CFS is
one of the guarantors of WWFS' obligations);
o Supplemental Indenture, dated September 7, 1999, among Aerolink
International, Inc., Aerolink Maintenance, Inc., Aerolink
Management, Inc., Aerolink International, L.P., WWFS, Worldwide
Flight Security Service Corporation, CFS, and the Bank of New
York;
o Guarantee Agreement ("Florida Guarantee"), to be dated on or
about the date hereof, a form of which is attached to this
Certificate as Exhibit A, and pursuant to which CFS will
guarantee the obligations under those certain 12 1/4% Senior
Notes due 2007, Series B, of WWFS, in the aggregate principal
amount of $130,000,000;
o A/B Exchange Registration Rights Agreement, dated on or about
August 12, 1999, among WWFS, as Issuer, Worldwide Flight Finance
Company, Worldwide Flight Security Service Corporation, CFS,
Miami Aircraft Support, Inc., International Enterprises Group,
Inc., as Guarantors and DLJ and Chase, as Initial Purchasers;
o Credit Agreement, dated on or about August 12, 1999, among WFS
Holdings, Inc., a Delaware corporation, WWFS and the Lender party
thereto and Agent (as defined therein);
<PAGE> 8
o Pledge Agreement, dated on or about the date hereof, among WWFS,
Holdings, each subsidiary of Holdings listed on Schedule I
thereto, and the Agent;
o Security Agreement, dated on or about August 12, 1999, among
WWFS, Holdings, each subsidiary of Holdings listed on Schedule I
thereto, and the Agent; and
o Indemnity, Subrogation and Contribution Agreement, dated on or
about the date hereof, among WWFS, each subsidiary of Holdings
listed on Schedule I thereto, and the Agent.
I hereby certify to Berger Davis & Singerman that:
1. I am the elected and acting President of CFS and have been
authorized by the Board of Directors of CFS to execute and deliver this
Certificate as President of CFS.
2. Attached hereto as Exhibit B is a true, correct and complete copy of
the Articles of Incorporation of CFS ("Articles"), including all amendments
thereto, which are in full force and effect, and which have not been amended
except as indicated in Exhibit B.
3. No proceedings for the liquidation, dissolution, winding up or
reorganization of CFS have been undertaken.
4. Attached hereto as Exhibit C is a true, correct and complete copy of
the Bylaws of CFS ("Bylaws"), as amended and restated on August 12, 1999, which
are in full force and effect and have not been amended since such date.
5. The copies of CFS' corporate minutes and records, stock certificates
and stock powers that were provided by CFS to Berger Davis & Singerman for
review are true, correct and complete copies thereof.
6. CFS is a wholly-owned subsidiary of WWFS. There is no shareholders',
voting or trust agreement in effect relating to any capital stock of CFS, nor
any proxy in effect to vote any capital stock of CFS.
7. Attached hereto as Exhibit D are true, correct and complete copies
of the resolutions adopted by CFS' Board of Directors by unanimous written
consent, dated August 12, 1999, approving the Florida Guarantee, as well as the
Transaction and Transaction Agreements to which CFS is a party or by which it is
bound, and all actions contemplated in connection therewith. Such resolutions
are in full force and effect without amendment. The persons who signed the
unanimous written consent adopting such resolutions were elected directors of
CFS by CFS' sole shareholder and constitute all of the directors of CFS at the
time of such signing and as of the date of this Certificate.
8. Except for immaterial changes, the form of Florida Guarantee
attached as Exhibit A, and the copies of the Transaction Agreements that were
provided by CFS to Berger,
<PAGE> 9
Davis & Singerman for review, are the same as those which were reviewed and
approved by CFS' Board of Directors by written consent on August 12, 1999, and
the same as the final versions of those agreements entered into or to be entered
into by CFS.
9. The person(s) who, as an officer of CFS, will sign the Guarantee,
will at the time of such signing and delivery, be duly and properly appointed to
one or more of the "Authorized Officer" positions set forth in the August 12,
1999 written consent of CFS' Board of Directors.
10. Each of the representations and warranties contained in each of the
Transaction Agreements is true and correct, in all material respects, as to each
affiliate of WWFS who is a party thereto.
[SIGNATURE FOLLOWS ON NEXT PAGE]
<PAGE> 10
IN WITNESS WHEREOF, the undersigned has executed this Certificate on
February 3, 2000.
Signature: /s/ PETER A. PAPPAS
------------------------------------------------
Peter A. Pappas
President of Miami International Airport Cargo
Facilities & Services, Inc.
<PAGE> 11
EXHIBIT B
OFFICER'S CERTIFICATE IN SUPPORT OF OPINION
OF BERGER DAVIS & SINGERMAN
Capitalized terms used but not defined in this Certificate have the respective
meanings given such terms in the Transaction Agreements (as defined below).
I, Peter A. Pappas, in my capacity as President of International
Enterprises Group, Inc., a Florida corporation ("IEG"), have personal knowledge
of the matters stated below; and in connection with the opinions of Berger Davis
& Singerman ("Opinion"), which are being delivered in connection with the
transactions ("Transactions") contemplated by the following agreements
(collectively, "Transaction Agreements") :
o Purchase Agreement, dated August 5, 1999, among Worldwide Flight
Services, Inc., a Delaware corporation ("WWFS"), as issuer,
Worldwide Flight Finance Company, Worldwide Flight Security
Service Corporation, and Miami International Airport Cargo
Facilities & Services, Inc., a Florida corporation ("CFS"), as
initial guarantors, and Donaldson, Lufkin & Jenrette Securities
Corporation ("DLJ") and Chase Securities, Inc. ("Chase"), as
initial purchasers.
o Indenture, dated August 12, 1999, among WWFS, as Issuer,
Worldwide Flight Finance Company, Worldwide Flight Security
Service Corporation, CFS, Miami Aircraft Support, Inc., IEG, as
Guarantors, and the Bank of New York, as Trustee (under Article
11 of which IEG is one of the guarantors of WWFS' obligations);
o Supplemental Indenture, dated September 7, 1999, among Aerolink
International, Inc., Aerolink Maintenance, Inc., Aerolink
Management, Inc., Aerolink International, L.P., WWFS, Worldwide
Flight Security Service Corporation, CFS, and the Bank of New
York;
o Guarantee Agreement ("Florida Guarantee"), to be dated on or
about the date hereof, a form of which is attached to this
Certificate as Exhibit A, and pursuant to which IEG will
guarantee the obligations under those certain 12 1/4% Senior
Notes due 2007, Series B, of WWFS, in the aggregate principal
amount of $130,000,000;
o A/B Exchange Registration Rights Agreement, dated on or about
August 12, 1999, among WWFS, as Issuer, Worldwide Flight Finance
Company, Worldwide Flight Security Service Corporation, CFS,
Miami Aircraft Support, Inc., IEG, as Guarantors and DLJ and
Chase, as Initial Purchasers;
o Credit Agreement, dated on or about August 12, 1999, among WFS
Holdings, Inc., a Delaware corporation, WWFS and the Lender party
thereto and Agent (as defined therein);
o Pledge Agreement, dated on or about the date hereof, among WWFS,
Holdings, each subsidiary of Holdings listed on Schedule I
thereto, and the Agent;
<PAGE> 12
o Security Agreement, dated on or about August 12, 1999, among
WWFS, Holdings, each subsidiary of Holdings listed on Schedule I
thereto, and the Agent; and
o Indemnity, Subrogation and Contribution Agreement, dated on or
about the date hereof, among WWFS, each subsidiary of Holdings
listed on Schedule I thereto, and the Agent.
I hereby certify to Berger Davis & Singerman that:
1. I am the elected and acting President of IEG and have been
authorized by the Board of Directors of IEG to execute and deliver this
Certificate as President of IEG.
2. Attached hereto as Exhibit B is a true, correct and complete copy of
the Articles of Incorporation of IEG ("Articles"), including all amendments
thereto, which are in full force and effect, and which have not been amended
except as indicated in Exhibit B.
3. No proceedings for the liquidation, dissolution, winding up or
reorganization of IEG have been undertaken.
4. Attached hereto as Exhibit C is a true, correct and complete copy of
the Bylaws of IEG ("Bylaws"), as amended and restated on August 12, 1999, which
are in full force and effect and have not been amended since such date.
5. The copies of IEG' corporate minutes and records, stock certificates
and stock powers that were provided by IEG to Berger Davis & Singerman for
review are true, correct and complete copies thereof.
6. IEG is a wholly-owned subsidiary of Miami Aircraft Support, Inc.,
which is a wholly-owned subsidiary of WWFS. There is no shareholders', voting or
trust agreement in effect relating to any capital stock of IEG, nor any proxy in
effect to vote any capital stock of IEG.
7. Attached hereto as Exhibit D are true, correct and complete copies
of the resolutions adopted by IEG' Board of Directors by unanimous written
consent, dated August 12, 1999, approving the Florida Guarantee, as well as the
Transaction and Transaction Agreements to which IEG is a party or by which it is
bound, and all actions contemplated in connection therewith. Such resolutions
are in full force and effect without amendment. The persons who signed the
unanimous written consent adopting such resolutions were elected directors of
IEG by IEG's sole shareholder and constitute all of the directors of IEG at the
time of such signing and as of the date of this Certificate.
8. Except for immaterial changes, the form of Florida Guarantee
attached as Exhibit A, and the copies of the Transaction Agreements that were
provided by IEG to Berger, Davis & Singerman for review, are the same as those
which were reviewed and approved by IEG's Board of Directors by written consent
on August 12, 1999, and the same as the final versions of those agreements
entered into or to be entered into by IEG.
2
<PAGE> 13
9. The person(s) who, as an officer of IEG, will sign the Guarantee,
will at the time of such signing and delivery, be duly and properly appointed to
one or more of the "Authorized Officer" positions set forth in the August 12,
1999 written consent of IEG's Board of Directors.
10. Each of the representations and warranties contained in each of the
Transaction Agreements is true and correct, in all material respects, as to each
affiliate of WWFS who is a party thereto.
[SIGNATURE FOLLOWS ON NEXT PAGE]
3
<PAGE> 14
IN WITNESS WHEREOF, the undersigned has executed this Certificate on
February 3, 2000.
Signature: /s/ PETER A. PAPPAS
---------------------------------------
Peter A. Pappas
President of International Enterprises
Group, Inc.
4
<PAGE> 15
EXHIBIT II
[LETTERHEAD OF PEPPER HAMILTON LLP]
February 3, 2000
Worldwide Flight Services, Inc.
1001 West Euless Boulevard, Suite 320
Euless, Texas 76040
Ladies and Gentlemen:
This opinion is being issued in connection with the Registration
Statement on Form S-4 (the "Registration Statement") relating to the 12 1/4%
Senior Notes due 2007, Series B of Worldwide Flight Services, Inc., a Delaware
corporation (the "Company") in the aggregate principal amount of $130,000,000
(the "New Notes") and the guarantees of the New Notes by Worldwide Flight
Finance Company, a Delaware corporation ("Worldwide Finance"), Worldwide Flight
Security Service Corporation, a Delaware corporation ("Worldwide Security"),
Miami Aircraft Support, Inc., a Delaware corporation ("Miami Aircraft"), Miami
International Airport Cargo Facilities & Services, Inc., a Florida corporation
("Miami International"), International Enterprises Group, Inc., a Florida
corporation ("International Enterprises" and together with Miami Aircraft,
Worldwide Finance, Worldwide Security, Miami International, collectively the
"Original Guarantors"), Aerolink International, Inc., a Pennsylvania corporation
("Aerolink International"), Aerolink Maintenance, Inc., a Pennsylvania
corporation ("Aerolink Maintenance"), Aerolink Management, Inc., a Pennsylvania
corporation ("Aerolink Management") and Aerolink International, L.P., a
Pennsylvania limited partnership ("Aerolink L.P." and together with Aerolink
International, Aerolink Maintenance and Aerolink Management, collectively the
"Pennsylvania Guarantors"). The Original Guarantors and the Pennsylvania
Guarantors shall herein collectively be referred to herein as the "Guarantors".
The guarantees of the New Notes by the Guarantors are collectively referred to
herein as the "New Guarantees" and the guarantees of the New Notes by the
Pennsylvania Guarantors are each individually referred to herein as the
Pennsylvania Guarantees". The New Notes and the New Guarantees, respectively,
are to be offered by the Company and the Guarantors, as the case may be, in
exchange for $130,000,000 in aggregate principal amount of the Company's
outstanding 12 1/4% Senior Notes due 2007, Series A (the "Original Notes") and
the guarantees of the Original Notes by the Original Guarantors (the "Original
Guarantees").
In this capacity, we have examined originals, telecopies or copies
certified or otherwise identified to our satisfaction of such records of the
Pennsylvania Guarantors and all such agreements, certificates of public
officials, certificates of officers or representatives of the Pennsylvania
Guarantors and others, and such other documents, certificates and corporate or
other records as we have deemed necessary or appropriate as a basis for this
opinion.
1
<PAGE> 16
In such examination, we have assumed the genuineness of all signatures,
the legal capacity of natural persons signing or delivering any instrument, the
authenticity of all documents submitted to us as originals, the conformity to
original documents of all documents submitted to us as certified or photostatic
copies and the authenticity of the originals of such latter documents. As to any
facts material to this opinion that were not independently established or
verified, we have relied upon statements and representations of officers and
other representatives of the Pennsylvania Guarantors.
In addition, we have assumed that (i) The Bank of New York (the
"Trustee") has the requisite power and authority to enter into and perform its
obligations as trustee under the Indenture, dated as of August 12, 1999 (the
"Indenture"), between the Company, the Original Guarantors, and the Trustee, as
supplemented by a Supplemental Indenture, dated as of September 7, 1999 (the
"Supplemental Indenture"), between the Company, the Guarantors and the Trustee,
(ii) the Indenture has been duly authorized, executed and delivered by all
parties thereto, (iii) the Supplemental Indenture has been duly authorized,
executed and delivered by all parties thereto other than the Pennsylvania
Guarantors, and (iv) each of the Indenture and the Supplemental Indenture
constitutes a legal, valid and binding obligation of and is enforceable against
all parties thereto, other than the Pennsylvania Guarantors, in accordance with
its terms.
We have further assumed that (i) the Registration Statement, and any
applicable amendment thereto (including post-effective amendments), will have
become effective under the Securities Act of 1933, as amended, and the rules and
regulations of the Securities and Exchange Commission promulgated thereunder
(the "Securities Act") and (ii) the Pennsylvania Guarantees will be executed and
delivered in substantially the form filed as an Exhibit to the Registration
Statement.
Based on the foregoing, and having such regard for such legal
considerations as we deem relevant, we are of the opinion that:
When (a) the New Notes have been issued in the manner referred to in
the Registration Statement and have been duly authorized and executed by the
Company and authenticated by the Trustee under the Indenture and the
Supplemental Indenture and (b) each Pennsylvania Guarantee has been duly issued
in the manner referred to in the Registration Statement and has been duly
executed by the applicable Pennsylvania Guarantor, each such Pennsylvania
Guarantee will be duly authorized and validly issued.
We express no opinion as to the effect of equitable principals on the
enforceability of the Pennsylvania Guarantees or the application of general
equitable principles (whether considered in a proceeding at law or in equity) or
of bankruptcy, insolvency, reorganization, moratorium and other laws now or
hereafter in effect affecting the enforcement of creditors' rights and remedies
(including those relating to fraudulent conveyances and transfers).
We are admitted to practice law in the Commonwealth of Pennsylvania and
do not purport to be an expert on or to the express any opinion on any laws
other than the laws of the Commonwealth of Pennsylvania and the federal
securities laws of the United States of America. This opinion speaks as of
today's date and is limited to present statutes, regulations and judicial
interpretations. In rendering this opinion, we assume no obligation to revise or
supplement this opinion should the present laws be changed by legislative or
regulatory action, judicial decisions or otherwise or should the agreements or
other documents (or forms thereof) that we have examined in connection with the
opinion hereafter be changed. This opinion is rendered to you in connection with
2
<PAGE> 17
the filing of the Registration Statement.
We hereby consent to the filing of this opinion as an Exhibit to the
Registration Statement and to the reference to this firm under the heading
"Legal Matters" in the Prospectus. In giving this consent, we do not thereby
admit that we are in the category of persons whose consent is required under
Section 7 of the Securities Act.
Very truly yours,
/s/ PEPPER HAMILTON LLP
----------------------------------------
Pepper Hamilton LLP
3
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the references to our firm under the caption "Experts" and to
the use of our reports dated November 19, 1999, in Amendment No. 4 to the
Registration Statement Form S-4 (333-88593) of Worldwide Flight Services, Inc.
for the registration of $130,000,000 of 12 1/4% Senior Notes due 2007.
/s/ Ernst & Young LLP
Dallas, Texas
January 31, 2000
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors
Miami Aircraft Support, Inc.:
We consent to the inclusion of our report dated February 26, 1999, except as to
note 11 which is as of May 28, 1999, relating to the consolidated balance sheets
of Miami Aircraft Support, Inc. as of December 31, 1997 and 1998 and the related
consolidated statements of income, stockholders' equity and cash flows for each
of the years in the two-year period ended December 31, 1998, which report
appears in the registration statement of Worldwide Flight Services, Inc. and to
the reference of our firm under the heading "Experts".
/s/ KPMG LLP
January 31, 2000
