As filed with the Securities and Exchange Commission on May 1, 1998
Registration No. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------
Trans World Airlines, Inc.
(Exact name of Registrant as specified in its charter)
Delaware 4512 43-1145889
(State or jurisdiction of in- (Primary Standard Industrial (I.R.S. Employer
corporation or organization) Classification Code Number) Identification No.)
One City Centre, 515 N. Sixth Street
St. Louis, Missouri 63101
(314) 589-3000
(Address, including zip code, and telephone number, including area code,
of Registrant's principal executive offices)
----------
Gerald L. Gitner
Chairman and Chief Executive Officer
Trans World Airlines, Inc.
One City Centre, 515 N. Sixth Street
St. Louis, Missouri 63101
(314) 589-3000
(Name, address, including zip code, and telephone number, including
area code, of agent for service)
----------
Copies to:
Joseph P. Hadley, Esq.
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
----------
Approximate date of commencement of proposed sale to the
public: As soon as practicable after the Registration Statement becomes
effective.
----------
If the securities being registered on this Form are being
offered in connection with the formation of a holding company and there is
compliance with General Instruction G, check the following box: [ ]
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, please check the
following box and list the Securities Act registration statement for the same
offering. [ ]
If this Form is a post-effective amendment filed pursuant to
Rule 462(c) under the Securities Act, check the following box and list the
Securities Act registration number of the earliest effective registration
statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant
to Rule 434, please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
Proposed Proposed
Maximum Maximum
Amount Offering Aggregate Amount of
Title of Each Class of to be Price Offering Registration
Securities to be Registered(1) Registered(1) Per Unit Price(2) Fee
- ------------------------------ ------------- -------- ----------- ----------
11 3/8% Senior Notes due 2006... $150,000,000 100% $150,000,000 $44,250
- ----------
(1) Plus accrued interest, if any, from the date of issuance.
(2) Calculated pursuant to Rule 457(f).
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.
SUBJECT TO COMPLETION, DATED ____________, 1998
PROSPECTUS
TRANS WORLD AIRLINES, INC.
OFFER TO EXCHANGE 11 3/8% SENIOR NOTES DUE 2006 WHICH HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, FOR ANY
AND ALL OUTSTANDING 11 3/8% SENIOR NOTES 2006
----------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY
TIME, ON , 1998, UNLESS EXTENDED.
Trans World Airlines, Inc., a Delaware corporation (the
"Company" or "TWA"), hereby offers, upon the terms and subject to the
conditions set forth in this Prospectus and the accompanying letter of
transmittal (the "Letter of Transmittal" and, together with this Prospectus,
the "Exchange Offer"), to exchange its 11 3/8% Senior Notes due 2006 (the
"Exchange Notes"), which have been registered under the Securities Act of
1933, as amended (the "Securities Act"), pursuant to a Registration Statement
of which this Prospectus is a part (including all amendments, including
post-effective amendments, and exhibits thereto, the "Registration
Statement"), for an equal principal amount at maturity of its outstanding 11
3/8% Senior Notes due 2006 (the "Old Notes," and together with the Exchange
Notes, the "Notes"), of which $150 million aggregate principal amount at
maturity is outstanding as of the date hereof.
The Company will accept for exchange any and all Old Notes that
are validly tendered and not withdrawn on or prior to 5:00 P.M., New York City
time, on the date the Exchange Offer expires (the "Expiration Date"), which
will be ____________, 1998 (30 days following the commencement of the Exchange
Offer), unless the Exchange Offer is extended. Tenders of Old Notes may be
withdrawn at any time prior to 5:00 P.M., New York City time, on the
Expiration Date. The Exchange Offer is not conditioned upon any minimum
principal amount of Old Notes being tendered for exchange Old Notes may be
tendered only in integral multiples at maturity of $1,000. See "The Exchange
Offer."
The Exchange Notes will bear interest at the rate of 11 3/8%
per annum, payable semi-annually in arrears on each March 1 and September 1,
commencing on September 1, 1998. The Exchange Notes will mature on March 1,
2006. The Exchange Notes will be redeemable, in whole or in part, at the
option of TWA, at any time on or after March 1, 2002 at the redemption prices
set forth herein, plus accrued and unpaid interest and Special Interest, if
any, to the redemption date. In addition, prior to March 1, 2001, TWA may, at
its option, use the Net Cash Proceeds from one or more Public Equity Offerings
to redeem up to $52.5 million aggregate principal amount of the Notes at a
price equal to 111.375% of the principal amount thereof, plus accrued and
unpaid interest and Special Interest, if any, to the redemption date;
provided, that at least $____ million aggregate principal amount of the Notes
is outstanding immediately following each such redemption. Upon entering into
certain merger or acquisition agreements, TWA shall have the right, without
the consent of holders of the Exchange Notes, to redeem the Exchange Notes in
whole, but not in part, at a redemption price equal to 100% of the outstanding
principal amount of the Exchange Notes plus Applicable Premium and accrued and
unpaid interest and Special Interest, if any. Upon a Change in Control, each
holder of Exchange Notes shall have the right to require TWA to purchase all,
or any part of, such holder's Exchange Notes at a purchase price equal to 101%
of the principal amount thereof, plus accrued and unpaid interest and Special
Interest, if any, to the purchase date. Upon the incurrence of Acquired
Indebtedness, each holder of Exchange Notes shall have the right to require
TWA to purchase all, or any part of, such holder's Exchange Notes at a
purchase price equal to 100% of the principal amount thereof, plus Applicable
Premium and accrued and unpaid interest and Special Interest, if any, to the
purchase date. In addition, upon the occurrence of an Asset Disposition, the
Company will, under certain circumstances, make an Offer to Purchase the
Exchange Notes at 100% of their principal amount plus accrued and unpaid
interest and Special Interest, if any. See "Description of Notes."
The Exchange Notes will represent senior unsecured obligations
of the Company and will rank senior in right of payment to all existing and
future subordinated indebtedness of the Company and will rank pari passu in
right of payment with all other senior obligations of the Company. The Notes
are not secured and, therefore, will be effectively subordinated to all
existing and future secured indebtedness of the Company to the extent of the
value of the assets securing such indebtedness.
THIS PROSPECTUS AND THE LETTER OF TRANSMITTAL ARE FIRST BEING
MAILED TO HOLDERS OF OLD NOTES ON OR ABOUT , 1998.
The Exchange Notes will be obligations of the Company
evidencing the same indebtedness as the Old Notes. The Exchange Notes will be
issued under and entitled to the benefits of the same Indenture (as defined)
pursuant to which the Old Notes were issued such that the Exchange Notes and
Old Notes will be treated as a single class of debt securities under the
Indenture. The form and terms of the Exchange Notes are generally the same as
the form and terms of the Old Notes, except that (i) the exchange will be
registered under the Securities Act and, therefore, the Exchange Notes will
not bear legends restricting the transfer thereof, and (ii) holders of the
Exchange Notes will not be entitled to any of the registration rights of
holders of Old Notes under the Registration Rights Agreement (as defined),
which rights will terminate upon the consummation of the Exchange Offer. See
"Description of the Notes."
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK. SEE PAGE 19, "RISK
FACTORS," FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED
BY PROSPECTIVE PARTICIPANTS 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 UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO THE REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH
STATE.
Based on interpretations by the staff of the Securities and
Exchange Commission (the "Commission"), as set forth in no-action letters
issued to Exxon Capital Holdings Corporation (available May 13, 1988), Morgan
Stanley & Co. Incorporated (available June 5, 1991), Mary Kay Cosmetics, Inc.
(available June 5, 1991) and Warnaco, Inc. (available October 11, 1991), the
Company believes that a holder who exchanges Old Notes for Exchange Notes
pursuant to the Exchange Offer may offer for resale, resell and otherwise
transfer such Exchange Notes without compliance with the registration and
prospectus delivery requirements of the Securities Act, provided, that (i)
such Exchange Notes are acquired in the ordinary course of such holder's
business, (ii) such holder is not engaged in, and does not intend to engage
in, a distribution of such Exchange Notes and has no arrangement with any
person to participate in the distribution of such Exchange Notes, and (iii)
such holder is not an affiliate of the Company (as defined under Rule 405 of
the Securities Act). However, the staff of the Commission has not considered
the Exchange Offer in the context of a no-action letter and there can be no
assurance that the staff of the Commission would make a similar determination
with respect to the Exchange Offer as in such other circumstances. A holder
who exchanges Old Notes for Exchange Notes pursuant to the Exchange Offer with
the intention to participate in a distribution of the Exchange Notes may not
rely on the staff's position enunciated in the Exxon Capital Letter, the
Morgan Stanley Letter or similar letters 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 Exchange Notes for its own
account in exchange for Old Notes, where such Old Notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such Exchange Notes. See "Plan of Distribution." The Letter
of Transmittal states that by so acknowledging and by delivering a prospectus,
a broker-dealer will not be deemed to admit that it is an "underwriter" within
the meaning of the Securities Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of Exchange Notes received in exchange for Old Notes where such
Old Notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities. The Company has agreed that, for a
period of 180 days after the Expiration Date, it will make this Prospectus
available to any broker-dealer for use in connection with any such resale. See
"Plan of Distribution." EXCEPT AS DESCRIBED IN THIS PARAGRAPH, THIS PROSPECTUS
MAY NOT BE USED FOR ANY OFFER, SALE OR OTHER TRANSFER OF EXCHANGE NOTES.
Prior to this Exchange Offer, there has been no public market
for the Old Notes or Exchange Notes. The Old Notes have traded in the National
Association of Securities Dealers, Inc. Private Offerings, Resales and Trading
through Automated Linkages ("PORTAL") market. If a public market were to
develop, the Exchange Notes could trade at prices that may be higher or lower
than their principal amount at maturity. The Company intends to apply for
listing of the Exchange Notes on the American Stock Exchange. However, there
can be no assurance that an active public market for the Exchange Notes will
develop. See "Risk Factors--Risk Factors Relating to the Notes and the Exchange
Offer--Absence of Public Trading Market."
THE COMPANY WILL NOT RECEIVE ANY PROCEEDS FROM THIS EXCHANGE
OFFER. THE COMPANY HAS AGREED TO PAY THE EXPENSES OF THE EXCHANGE OFFER. NO
UNDERWRITER IS BEING USED IN CONNECTION WITH THIS EXCHANGE OFFER.
No person has been authorized to give any information or to
make any representations not contained in this Prospectus in connection with
the offer of securities made by this Prospectus and, if given or made, such
information or representations must not be relied upon as having been
authorized by the Company or by any underwriter, dealer or agent. This
Prospectus does not constitute an offer to sell or a solicitation of an offer
to buy any of the securities offered hereby in any jurisdiction to any person
to whom it is unlawful to make such offer or solicitation in such
jurisdiction. This Prospectus does not constitute an offer to sell or a
solicitation of an offer to buy any securities other than those to which it
relates. Neither the delivery of this Prospectus nor any sale of, or offer to
sell, the securities offered hereby shall, under any circumstances, create an
implication that there has been no change in the affairs of the Company since
the date hereof or that the information herein is correct as of any time
subsequent to its date.
AVAILABLE INFORMATION
TWA is currently subject to the informational requirements of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements and other information
with the Commission. Reports, proxy statements and other information filed by
the Company with the Commission may be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549 and at the Commission's regional offices
located at Room 1400, 75 Park Place, New York, New York 10007 and Suite 1400,
Northwestern Atrium Center, 500 West Madison Street, Chicago, Illinois
60661-2511. Copies of such materials may be obtained from the Public Reference
Section of the Commission at Room 1024, 450 Fifth Street, NW, Washington, D.C.
20549 at prescribed rates, and such reports, proxy statements and other
information regarding the Company can also be inspected at the offices of the
American Stock Exchange, 86 Trinity Place, New York, New York 1006-1881, on
which the Company's Common Stock, $.01 par value per share (the "Common
Stock") is listed. The Commission maintains a Web site that contains reports,
proxy and information statements and other materials that are filed through
the Commission's Electronic Data Gathering, Analysis and Retrieval System.
This Web site can be accessed at http://www.sec.gov.
This Prospectus contains summaries, believed to be accurate in
all material respects, of certain terms of certain agreements, however, in
each such case, reference is made to the actual agreements (copies of which
will be made available upon request to the Company) for complete information
with respect thereto, and all such summaries are qualified in their entirety
by this reference.
This Prospectus forms a part of the Registration Statement
which the Company has filed under the Securities Act with respect to the
securities offered hereby. This Prospectus does not contain all the
information otherwise set forth in the Registration Statement, certain parts
of which are omitted in accordance with the rules and regulations of the
Commission. For further information, reference is made to the Registration
Statement and the exhibits filed as part thereof. The Registration Statement
may be inspected at the public reference facilities maintained by the
Commission at the addresses set forth above. Statements contained herein
concerning any document filed as an exhibit are not necessarily complete and,
in each instance, reference is made to the copy of such document filed as an
exhibit to the Registration Statement.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company hereby incorporates by reference in this Prospectus
the following documents filed with the Commission pursuant to the requirements
of the Exchange Act (File No. 001-07815): (i) the Company's Annual Report on
Form 10-K (the "1997 10-K") for the fiscal year ended December 31, 1997; (ii)
the description of the Common Stock contained in the Company's Form 8-A dated
August 1, 1995 filed under the Exchange Act, including any amendment or
reports filed for the purpose of updating such description; and (iii) the
Company's Proxy Statement and Notice of Meeting relating to the Annual Meeting
of Stockholders to be held on May 19, 1998.
All documents filed by the Company pursuant to Sections 13(a),
13(c), 14 and 15(d) of the Exchange Act after the date of this Prospectus and
prior to the termination of the offering of the securities offered hereby
shall be deemed to be incorporated by reference in this Prospectus and to be a
part hereof from the respective dates of filing such document. Any statement
contained in a document incorporated or deemed to be incorporated by reference
herein shall be deemed to be modified or superseded for purposes of this
Prospectus to the extent that a statement contained herein or in any other
subsequently filed document that also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or
superseded, to constitute a part of this Prospectus.
This prospectus incorporates documents by reference which are
not presented herein or delivered herewith. These documents are available
without charge upon the written or oral request of each person, including any
beneficial owner, to whom this Prospectus is delivered. Requests should be
made to the Corporate Secretary of Trans World Airlines, Inc., One City
Centre, 515 N. Sixth Street, St. Louis, Missouri 63101, telephone (314)
589-3285. In order to ensure timely delivery of the documents, any request
should be made at least five business days before the Expiration Date of the
Exchange Offer.
FORWARD-LOOKING STATEMENTS
CERTAIN STATEMENTS CONTAINED IN THIS PROSPECTUS UNDER
"PROSPECTUS SUMMARY", "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS" AND "BUSINESS", IN ADDITION TO CERTAIN
STATEMENTS CONTAINED ELSEWHERE IN THIS PROSPECTUS, ARE "FORWARD-LOOKING
STATEMENTS" WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT
OF 1995 AND ARE THUS PROSPECTIVE. SUCH FORWARD-LOOKING STATEMENTS ARE SUBJECT
TO RISKS, UNCERTAINTIES AND OTHER FACTORS WHICH COULD CAUSE ACTUAL RESULTS TO
DIFFER MATERIALLY FROM FUTURE RESULTS EXPRESSED OR IMPLIED BY SUCH
FORWARD-LOOKING STATEMENTS. THE MOST SIGNIFICANT OF SUCH RISKS, UNCERTAINTIES
AND OTHER FACTORS ARE DISCUSSED UNDER THE HEADING "RISK FACTORS" IN THIS
PROSPECTUS AND HOLDERS OF THE OLD NOTES AND PROSPECTIVE INVESTORS IN THE
EXCHANGE NOTES ARE URGED TO CAREFULLY CONSIDER SUCH FACTORS.
PROSPECTUS SUMMARY
This summary does not purport to be complete and is qualified
by reference to the detailed information and financial statements appearing
elsewhere in this Prospectus or incorporated by reference herein. Terms not
defined in this summary are defined elsewhere herein.
The Company
TWA is the eighth largest U.S. air carrier (based on revenue
passenger miles ("RPMs") for the full year 1997), whose primary business is
transporting passengers, cargo and mail. During 1997, the Company carried
approximately 23.4 million passengers and flew approximately 25.1 billion
RPMs. As of December 31, 1997, TWA provided regularly scheduled jet service to
89 cities in the United States, Mexico, Europe, the Middle East, Canada and
the Caribbean. As of December 31, 1997, the Company operated a fleet of 185
jet aircraft.
TWA's North American operations have a primarily domestic hub
in St. Louis at Lambert International Airport ("St. Louis") and a
domestic-international hub at New York's John F. Kennedy International Airport
("JFK"). TWA is the predominant carrier at St. Louis, with approximately 365
scheduled daily departures as of December 31, 1997 and approximately a 74.5%
share of airline passenger enplanements in St. Louis for the full year 1997.
Given its location in the center of the country, St. Louis is well-suited to
function as an omni-directional hub for both north-south and east-west
transcontinental traffic. Therefore, TWA believes it can offer more
frequencies and connecting opportunities to many travelers in its key
Midwestern markets than competing airlines.
TWA's international operations are concentrated at JFK, from
which TWA currently serves 26 domestic and international cities with
approximately 40 daily departures. JFK is both the Company's and the
industry's largest international gateway from North America. As of December
31, 1997, the Company offers non-stop flights from JFK to 8 cities in Europe
and the Middle East as well as 17 destinations in the U.S. and the Caribbean.
As described below, during 1997, the Company implemented certain steps to
refocus and improve the operating and financial performance of its JFK
operations.
TWA is a Delaware corporation organized in 1978 and is the
successor to the business of its predecessor corporation, Transcontinental &
Western Air, Inc., originally formed in 1934. The Company's principal
executive offices are located at One City Centre, 515 N. Sixth Street, St.
Louis, Missouri 63101 and its telephone number is (314) 589-3000.
Recent Financial and Operating Results
On April 22, 1998, the Company reported financial results for
the first quarter 1998 reflecting an operating loss of $68.7 million and a net
loss before extraordinary items of $54.1 million for the three months ended
March 31, 1998, including a non-cash operating expense of $26.5 million
relating to the distribution in July 1998 of Common Stock to employee stock
plans. These results compare with an operating loss of $99.5 million and a
net loss before extraordinary items of $70.0 million in the first quarter
1997. Excluding the effect of non-cash expense associated with earned stock
compensation, the first quarter 1998 operating loss was $42.2 million compared
to the first quarter 1997 operating loss of $98.2 million. Similarly
calculated, the net loss before extraordinary items for the first quarter 1998
and 1997 were $38.0 million and $69.3 million, respectively. Operating
revenue for the first quarter 1998 was $765.4 million versus $762.3 million in
the first quarter 1997 despite a slight reduction in capacity from the first
quarter 1997 to 1998 resulting from the replacement of B747 and L-1011
aircraft with smaller B767, B757 and MD-80 aircraft.
The Company's operating statistics, for scheduled passengers
only and excluding TWE, for the three month periods ended March 31, 1998 and
1997 and for the years ended December 31, 1997 and 1996 were as follows:
<TABLE>
<CAPTION>
Three Months Ended
March 31, Year Ended December 31,
------------------------------------- -------------------------------------
1998 1997 1997 1996
---------------- ------------------ ------------------ --------------
<S> <C> <C> <C> <C>
Revenue passenger miles (millions)................ 5,764 5,673 25,100 27,111
Available seat miles (millions)................... 8,467 8,539 36,464 40,594
Passenger load factor............................. 68.1% 66.4% 68.8% 66.8%
Passenger yield (cents)........................... 11.74 Cents 11.84 Cents 11.65 Cents 11.35 Cents
Passenger revenue per available seat mile (cents). 7.99 Cents 7.87 Cents 8.02 Cents 7.58 Cents
Operating cost per available seat mile (cents).... 9.36 Cents 9.88 Cents 8.97 Cents 8.76 Cents
</TABLE>
For definitions of the above items see "Management's Discussion
and Analysis of Financial Condition and Results of Operations--Results of
Operations."
TWA has significantly enhanced its operational reliability and
schedule integrity since the first quarter of 1997. According to statistics
reported to the U.S. Department of Transportation (the "DOT"), TWA improved
from tenth among the 10 largest U.S. scheduled commercial airlines in
domestic on-time performance in 1996 to second in 1997. TWA also canceled
5,413 fewer flights in 1997 than in 1996, improving its percentage of
scheduled flights completed to 98.0% compared to 96.2% for 1996. In the first
quarter 1998, TWA completed 96.7% of its scheduled flights, compared to 96.4%
in the first quarter 1997.
Recent Strategic Initiatives
Management believes that certain strategic initiatives
undertaken by the Company beginning in late 1996 have contributed to the
improved financial and operating results described above. TWA's management
began to implement such strategic initiatives in response to a significant
deterioration in the Company's operating performance and financial condition
during the second half of 1996. This deterioration was primarily caused by (i)
an overly aggressive expansion of TWA's capacity and planned flight schedule,
particularly during the 1996 summer season, which forced the Company to rely
disproportionately on lower-yield feed traffic and bulk ticket sales to fill
the increased capacity of its system; (ii) the delayed delivery of four older
747s intended to increase capacity for incremental international operations
during the summer of 1996; and (iii) unexpected maintenance delays due to the
capacity increase, higher levels of scheduled narrow-body heavy maintenance
and increased contract maintenance performed for third parties. These factors
caused excessive levels of flight cancellations, poor on-time performance,
increased pilot training costs and higher maintenance expenditures and
adversely affected the Company's yields and unit costs. In addition, the crash
of TWA Flight 800 on July 17, 1996 distracted management's attention from core
operating issues and led to lost bookings and revenues. The Company also
experienced a 27.6% increase in fuel costs in 1996 versus 1995, primarily due
to a 22.3% increase in the average fuel price paid per gallon during the year.
The primary focus of the Company's new strategic initiatives is
to reestablish TWA's operational reliability and schedule integrity and
overall product quality in order to attract higher-yield passengers and
enhance overall productivity, which should improve the Company's financial
results. As the initial steps in implementing this strategy, the Company
temporarily reduced its flight schedule during the first quarter of 1997 to
more closely match aircraft available for active service and worked to reduce
the number of aircraft in maintenance backlog by increasing overtime and
utilizing maintenance capacity made available by the termination of an
unprofitable aircraft maintenance contract with the U.S. government.
Other new strategic initiatives being pursued by TWA are:
Accelerated Fleet Renewal. In the first quarter of 1997, as
part of its efforts to improve near-term operational performance, TWA
announced plans to accelerate the retirement of the 14 747s and 11 L-1011s
remaining in its fleet. As a result, TWA's last L-1011 was retired in
September 1997 and its last three 747s were retired in February 1998. Under
its fleet renewal plan, the Company has replaced these older, less reliable
and less efficient wide-body aircraft with new or later-model used 757, 767
and MD-80 aircraft. Management believes that these smaller aircraft are more
appropriately sized to the routes served, and, by reducing the Company's
reliance on lower-yield feed traffic to fill capacity, have resulted in
higher load factors and improved yields. Further, these newer, twin-engine,
two-pilot aircraft are expected to provide efficiencies in fuel, flight crew
and maintenance expenses, while reducing long-term pilot training costs by
enabling TWA to have fewer aircraft types in the fleet. TWA also expects to
retire eight 727s during 1998. As of March 31, 1998, TWA had retired two of
the eight 727s. As a result of this fleet restructuring, the Company's mix of
narrow-body and wide-body aircraft shifted to approximately 90%/10% as of
December 31, 1997 versus approximately 80%/20% as of year-end 1996, and the
average number of seats per aircraft declined to 141 from 161 over the same
period. As of December 31, 1997, the average age of the Company's fleet had
decreased to 16.9 years from 19.0 years at year-end 1996. In April 1998, the
Company entered into an agreement to purchase from the manufacturer 24 new
MD-83 aircraft with deliveries in 1999. The Company has obtained financing
commitments for long-term debt and lease financing for such aircraft. If TWA
takes delivery of all of these aircraft, and assuming no other changes in the
composition of the Company's fleet, the average age of its fleet as of
December 31, 1999 would decrease to 12.4 years. TWA also entered into an
agreement with a third-party aircraft lessor for the sale and leaseback of 15
Boeing 727-200A aircraft owned by the Company. The aircraft were delivered on
March 31 and April 1, 1998 and leased to TWA under leases which expire in 1999
and 2000.
The Company believes that this rationalization of fleet size,
together with the decrease in international operations described below, will
help deseasonalize TWA's business, with the difference between TWA's seasonal
average daily peak and trough capacities anticipated to be approximately 4.2%
in 1998, versus 16.9% in 1997 and 20.5% in 1996. As a result, the Company
expects the seasonal variability of its financial performance will be reduced;
however, there can be no assurance that such deseasonalization will occur.
Restructuring of JFK Operations. As part of its efforts to
position the Company for sustained profitability, TWA restructured its
operations at JFK during 1997 by eliminating certain unprofitable
international destinations (such as Frankfurt and Athens), as well as certain
low-yield domestic feed service into JFK. The Company also consolidated for
the near term most of its JFK operations from two terminals into a single
terminal in order to reduce operating costs, increase facility utilization
and improve passenger service. In addition to enhancing yields and load
factors, the substitution of 757s and 767s for 747s and L-1011s on
international routes also has increased operating efficiencies at JFK, since
these smaller aircraft are better suited to the physical limitations of TWA's
terminals. As a result of these changes, TWA's international scheduled
capacity (as measured by ASMs) decreased 32.3% in 1997 compared to 1996 and
represented 19.5% of total scheduled capacity for the full year 1997 versus
25.6% for the full year 1996.
Productivity Enhancements. The Company has sought to improve
its financial performance through productivity enhancements. During 1997, TWA
realized cost efficiencies in maintenance, reflecting the elimination of TWA's
maintenance backlog during the first quarter of 1997, as well as the reduced
maintenance requirements for the newer aircraft added to TWA's fleet. In
addition, as described above, the Company's fleet renewal plan is expected to
provide efficiencies in fuel, flight crew and training expenses, while the
JFK restructuring has eliminated certain unprofitable routes and reduced
certain operating costs. TWA's average number of employees per aircraft has
decreased from 131.0 as of December 31, 1996 to 120.7 as of December 31,
1997, which is generally consistent with industry standards.
Marketing Initiatives. The Company has also begun to introduce
a series of marketing initiatives designed, in combination with its enhanced
operational reliability and schedule integrity, to attract a greater
percentage of higher-yield business passengers. These initiatives include
branded service products such as an improved international business class,
Trans World One[SM] ("Trans World One"), expanded first class cabins in the
domestic narrow-body fleet (launched with an enhanced service package as
Trans World First in January 1998), and a branded short-haul business market
service, TWQ, launched in March 1998. The Company has also enhanced its
frequent flier program by introducing a Platinum level for its highest
mileage customers and, for certain travelers, a system for recognizing dollar
amounts paid as well as miles flown, and by joining the American Express
Membership Rewards Program, which allows members to earn additional frequent
flier miles on TWA. The Company is also in the early phases of a series of
facilities upgrades, including a newly opened Ambassadors Club in St. Louis, a
renovated club at LaGuardia, a completely refurbished club in its JFK
terminal and improved new check-in counters and backwalls. The Company's
advertising features the improved on-time and operational performance, new
aircraft, and the programs outlined above.
Employee Initiatives. Through certain programs, TWA has sought
to institutionalize throughout all levels of its organization the importance
of running an airline with operational reliability. These programs provide
certain operating and procedural guidelines for enhancing performance and
improving overall product quality. In addition, in 1996 the Company introduced
Flight Plan 97, which paid eligible employees a $65 bonus for each month that
TWA finished in the top five in all three performance categories tracked by
the DOT (on-time performance, customer complaints and baggage handling) and a
total of $100 if TWA also ranked first in at least one of such categories.
Based on the Company's performance in September 1997, eligible employees
earned their first bonus under this program, a $100 payment for ranking first
in on-time performance, fourth in customer complaints and fifth in baggage
handling. This program has been enhanced as Flight Plan 98 and now provides
that in any quarter where the Company places first in the DOT-tracked on-time
performance category for the entire quarter (and assuming that no bonus over
$100 was paid to employees during that quarter) the eligible employees would
receive a $100 bonus.
Changes to Management Team
On February 12, 1997, the Company's Board of Directors (the
"Board of Directors" or the "Board") named Gerald L. Gitner, a member of the
Board since 1993, as Chairman and Chief Executive Officer of the Company. Mr.
Gitner, who had been named acting Chief Executive Officer in December 1996,
replaced Jeffrey H. Erickson, who on October 24, 1996 announced his intention
to leave as the Company's President and Chief Executive Officer. On December 3,
1997, the Board named William F. Compton, a TWA pilot and a director of the
Company since November 1993, as President and Chief Operating Officer of the
Company. Mr. Compton had been appointed Executive Vice President, Operations
in March 1997. He had been acting in such position since December 14, 1996.
On May 29, 1997 the Board elected Donald M. Casey as Executive Vice President,
Marketing. On October 29, 1997 James F. Martin was elected as Senior Vice
President, Human Resources. On December 31, 1997, Roden A. Brandt resigned as
Senior Vice President, Planning, but will remain as a consultant to the
Company through April 30, 1998. On January 28, 1998, the Board appointed
Kathleen A. Soled, Esq. to serve as the Company's Senior Vice President and
General Counsel replacing Richard P. Magurno, Esq. who resigned on January 28,
1998. Ms. Soled had been the Company's Vice President, Legal and Corporate
Secretary. See "Risk Factors--Risk Factors Related to the Company--Changes to
Management Team."
Labor Matters
On March 6, 1997, the International Association of Machinists
and Aerospace Workers (the "IAM") was certified to replace the Independent
Federation of Flight Attendants ("IFFA") as the bargaining representative for
the Company's flight attendants. Negotiations on a new collective bargaining
agreement with the IAM with regard to the flight attendants commenced in July
1997 and are currently ongoing. At the request of the IAM, a mediator was
appointed on March 27, 1998 in connection with the negotiation on the
collective bargaining agreement covering the flight attendants. Negotiations
regarding the Company's ground employees represented by the IAM commenced in
February 1997 and are also currently ongoing. At the request of the IAM, a
mediator was appointed on August 6, 1997 in connection with the negotiation on
the collective bargaining agreement covering the ground employees. Negotiations
on a new collective bargaining agreement with the Air Line Pilots Association
("ALPA") commenced in June 1997 and are currently ongoing. See "Certain
Provisions of the Certificate of Incorporation, the By-laws and Delaware
Law--Board of Directors" and "Risk Factors--Risk Factors Related to the
Company--'94 Labor Agreements."
Recent Securities Offerings
On December 2, 1997, the Company consummated a Rule
144A/Regulation S private placement offering of 1,725,000 shares of 9 1/4%
Cumulative Convertible Exchangeable Preferred Stock (the "1997 Preferred
Stock") which raised net proceeds of approximately $82.2 million (the "1997
Preferred Stock Offering"). On December 9, 1997, the Company consummated a
Rule 144A/Regulation S offering of $140.0 million aggregate principal amount
of 11 1/2% Senior Secured Notes due 2004 (the "11 1/2% Notes") which raised
net proceeds of approximately $133.5 million (the "11 1/2% Notes Offering").
On December 30, 1997, a wholly-owned, bankruptcy remote subsidiary of the
Company consummated a Rule 144A/Regulation S private placement offering of
$100.0 million aggregate principal amount of 9.80% Airline Receivable Asset
Backed Notes due 2001 (the "Receivables Securitization Notes") which raised net
proceeds of approximately $97.0 million (the "Receivables Securitization
Offering"). A portion of the net proceeds from the 11 1/2% Notes Offering and
the Receivables Securitization Offering was used to repay existing
indebtedness. On March 3, 1998 the Company consummated a Rule 144A/Regulation
S offering of $150.0 million aggregate principal amount of Old Notes which
raised net proceeds of approximately $144.9 million (the "11 3/8% Notes
Offering"). On April 21, 1998, the Company consummated a private placement of
$43.2 million aggregate principal amount of 11 3/8% Senior Secured Notes due
2003 (the "11 3/8% Secured Notes") and $31.8 million principal amount of
Mandatory Conversion Equity Notes due 1999 (the "Equity Notes"). See
"Capitalization."
The Old Note Offering
Old Notes........................... On March 3, 1998, the Company issued
and sold $150,000,000 aggregate
principal amount of its Old Notes to
Lazard Freres & Co. LLC as initial
purchaser (the "Initial Purchaser").
The Initial Purchaser subsequently
offered and resold the Old Notes to
Qualified Institutional Buyers (as
defined in Rule 144A under the
Securities Act) pursuant to Rule 144A
under the Securities Act, to a limited
number of institutional investors that
are Accredited Investors (as defined in
Rule 501(a)(1), (2), (3) or (7) under
the Securities Act) and in offshore
transactions complying with Rule 903 or
Rule 904 of Regulation S under the
Securities Act (the "Old Note
Offering").
Exchange Offer
Exchange Notes...................... Up to $150,000,000 aggregate principal
amount of 11 3/8% Senior Notes due 2006
(the "Exchange Notes") of the Company.
The terms of the Exchange Notes and the
Old Notes are identical in all
respects, except that the offer of the
Exchange Notes will have been
registered under the Securities Act and
therefore, the Exchange Notes will not
be subject to certain transfer
restrictions and registration rights
and related provisions for an increase
in the interest rate payable on the Old
Notes under certain circumstances if
the Company defaults with respect to
its registration requirements under the
Registration Rights Agreement
applicable to the Old Notes.
Exchange Offer...................... The Company is offering, upon the terms
and subject to the conditions of the
Exchange Offer, to exchange $1,000
principal amount of Exchange Notes for
each $1,000 principal amount of Old
Notes. See "The Exchange Offer" for a
description of the procedures for
tendering Old Notes. In connection with
the Old Note Offering, the Company
entered into the Registration Rights
Agreement (the "Registration Rights
Agreement") dated as of March 3, 1998
among the Company and the Initial
Purchaser, which grants holders of the
Old Notes certain exchange and
registration rights. The Exchange Offer
is intended to satisfy obligations of
the Company under the Registration
Rights Agreement. The date of
acceptance for exchange of the Exchange
Notes will be the first business day
following the Expiration Date.
Tenders, Expiration Date;
Withdrawal.......................... The Exchange Offer will expire at 5:00
p.m., New York City time, on ,
1998, or such later date and time to
which it is extended. The tender of Old
Notes pursuant to the Exchange Offer
may be withdrawn at any time prior to
the Expiration Date. Any Old Notes not
accepted for exchange for any reasons
will be returned without expense to the
tendering Holder thereof as promptly as
practicable after the expiration or
termination of the Exchange Offer.
Accounting Treatment................ No gain or loss for accounting purposes
will be recognized by the Company upon
the consummation of the Exchange Offer.
See "The Exchange Offer--Accounting
Treatment."
Federal Income Tax Consequences..... The exchange pursuant to the Exchange
Offer will not result in any income,
gain or loss to the Holders of the
Notes or the Company for federal income
tax purposes. See "Certain Federal
Income Tax Considerations -- Tax
Consequences to U.S. Holders --
Exchange Offer."
Use of Proceeds..................... There will be no proceeds to the
Company from the issuance of the
Exchange Notes pursuant to the Exchange
Offer.
Exchange Agent...................... The First Security Bank, National
Association is serving as exchange
agent (the "Exchange Agent") in
connection with the Exchange Offer.
Consequences of Exchanging Old Notes Pursuant to the Exchange Offer
The Company has not requested, and does not intend to request,
an interpretation by the staff of the Commission with respect to whether the
Exchange Notes issued pursuant to the Exchange Offer in exchange for the Old
Notes may be offered for sale, resold or otherwise transferred by any holder
without compliance with the registration and prospectus delivery provisions of
the Securities Act. Based on interpretations by the staff of the Commission
set forth in no-action letters issued to third parties, the Company believes
that Exchange Notes issued pursuant to the Exchange Offer in exchange for Old
Notes may be offered for resale, resold and otherwise transferred by any
holder of such Exchange Notes, other than broker-dealers which must sell in
accordance with the provisions set forth below and other than any holder that
is an "affiliate" of the Company within the meaning of Rule 405 under the
Securities Act, without compliance with the registration and prospectus
delivery provisions of the Securities Act, provided that such Exchange Notes
are acquired in the ordinary course of such holder's business and such holder
has no arrangement or understanding with any person to participate in the
distribution of such Exchange Notes. Any holder who tenders in the Exchange
Offer for the purpose of participating in a distribution of the Exchange Notes
or who is an affiliate of the Company may not rely on such interpretations by
the staff of the Commission and must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with any
secondary resale transaction. Each broker-dealer (whether or not it is also an
"affiliate" of the Company) that receives Exchange Notes for its own account
in exchange for Old Notes, where such Old Notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such Exchange Notes. See "Plan of Distribution."
By executing the Letter of Transmittal, each holder of Old
Notes will represent to the Company that, among other things, (i) the Exchange
Notes acquired pursuant to the Exchange Offer are being obtained in the
ordinary course of business of the person receiving such Exchange Notes,
whether or not such person is such holder, (ii) neither the holder of Old
Notes, nor any such other person has an arrangement or understanding with any
person to participate in the distribution of such Exchange Notes, (iii) if the
holder is not a broker-dealer, or is a broker-dealer but will not receive
Exchange Notes for its own account in exchange for Old Notes, neither the
holder nor any such other person is engaged in or intends to participate in
the distribution of such Exchange Notes and (iv) neither the holder nor any
such other person is an "affiliate" of the Company within the meaning of Rule
405 under the Securities Act or, if such Holder is an "affiliate," that such
Holder will comply with the registration and prospectus delivery requirements
of the Securities Act to the extent applicable. If the tendering Holder is a
broker-dealer (whether or not it is also an "affiliate") that will receive
Exchange Notes for its own account in exchange for Old Notes that were
acquired as a result of market-making activities or other trading activities,
it will be required to acknowledge that it will deliver a prospectus in
connection with any resale of such Exchange Notes. See "Plan of
Distribution". To comply with the securities laws of certain jurisdictions,
it may be necessary to qualify for sale or register the Exchange Notes prior
to offering or selling such Exchange Notes. The Company does not currently
intend to take any action to register or qualify the Exchange Notes for resale
in any such jurisdictions.
Following the consummation of the Exchange Offer, holders of
Old Notes not tendered will not have any further registration rights and the
Old Notes will continue to be subject to certain restrictions on transfer. In
general, the Old Notes may not be offered or sold, unless registered under the
Securities Act, except pursuant to an exemption from, or in a transaction not
subject to, the Securities Act and applicable state securities laws. Failure
to comply with such requirements in such instance may result in such Holder
incurring liability under the Securities Act for which such Holder is not
indemnified by the Company. See "The Exchange Offer--Consequences of Failure
to Exchange."
Summary Description of the Notes
The terms of the Exchange Notes and the Old Notes are identical
in all respects, except that the offer of the Exchange Notes is registered
under the Securities Act and, therefore, the Exchange Notes will not be
subject to certain transfer restrictions, registration rights and related
provisions requiring an increase in the interest rate on the Old Notes under
certain circumstances if the Company defaults with respect to its registration
requirements under the Registration Rights Agreement applicable to the Old
Notes.
Exchange Notes Offered.............. Up to $150,000,000 aggregate principal
amount of Exchange Notes of the Company.
Maturity Date....................... March 1, 2006.
Interest Payment Dates.............. March 1 and September 1, beginning
September 1, 1998. The Exchange Notes
will bear interest from March 3, 1998.
Holders of Old Notes whose Old Notes
are accepted for exchange will be
deemed to have waived the right to
receive any payment in respect of
interest on such Old Notes accrued from
March 3, 1998 to the date of the
issuance of the Exchange Notes.
Consequently, holders who exchange
their Old Notes for Exchange Notes will
receive the same interest payment on
September 1, 1998 (the first interest
payment date with respect to the Old
Notes and the Exchange Notes) that they
would have received had they not
accepted the Exchange Offer.
Mandatory Repurchases............... The Company will be required to make an
Offer to Purchase the Notes in the case
of (i) the incurrence of certain
Acquired Indebtedness (as defined) or
(ii) certain Asset Dispositions (as
defined). See "Description of
Notes--Repurchase of Notes in
Connection with Incurrence of Acquired
Indebtedness" and "--Certain Covenants
--Limitation on Sales of Assets and
Subsidiary Stock."
Optional Redemption................. The Notes will be redeemable prior to
March 1, 2002 only in the event that on
or before March 1, 2001 the Company
uses the Net Cash Proceeds (as defined)
of one or more Public Equity Offerings
(as defined) to redeem up to $52.5
million aggregate principal amount of
the Notes at a price equal to 111.375%
of the principal amount thereof, plus
accrued and unpaid interest and Special
Interest, if any, to the redemption
date. On or after March 1, 2002, the
Notes will be redeemable on at least 30
days' prior notice to the Holders, in
whole or in part, at any time, at the
applicable redemption price as set
forth herein, in each case together
with accrued and unpaid interest and
Special Interest, if any, to the
redemption date. See "Description of
Notes--Redemptions." The Notes will
also be redeemable in whole, but not in
part, in the event the Company enters
into any merger or acquisition
agreement which is prohibited by the
terms of the indenture governing the
Notes (the "Indenture"). See
"Description of Notes--Certain
Covenants--Merger and Consolidation."
Change in Control................... Upon a Change in Control, each holder
of Notes shall have the right for a
limited period to require the Company to
repurchase all or any part of such
holder's Notes at a price, in cash,
equal to 101% of the principal amount
thereof, plus accrued and unpaid
interest and Special Interest, if any,
to the date fixed for repurchase.
Ranking............................. The Notes will represent senior
unsecured obligations of the Company.
The notes will rank senior in right of
payment to all existing and future
subordinated indebtedness of the
Company and will rank pari passu in
right of payment with all other senior
obligations of the Company. The Notes
are not secured and, therefore, will be
effectively subordinated to all
existing and future secured
indebtedness of the Company to the
extent of the value of the assets such
indebtedness.
Certain Covenants................... The Indenture contains certain
covenants, which, among other things,
limit (i) the incurrence of additional
indebtedness by the Company and its
Restricted Subsidiaries (as defined)
and the issuance of preferred stock by
the Company's Restricted Subsidiaries,
(ii) the payment of dividends on
capital stock of the Company and the
purchase, redemption or retirement of
capital stock or subordinated
indebtedness, (iii) certain
investments, (iv) certain transactions
with affiliates, (v) the incurrence of
liens and sale and leaseback
transactions, (vi) sale of assets,
including the capital stock of
subsidiaries, (vii) certain
consolidations and mergers and certain
guarantees by Restricted Subsidiaries
and (viii) distributions from
Restricted Subsidiaries. These
limitations are subject to a number of
important qualifications. See
"Description of Notes--Certain
Covenants."
Exchange Offer; Registration
Rights............................. In the event that applicable law or
interpretations of the staff of the
Commission do not permit the Company to
effect this Exchange Offer or if
certain holders of the Old Notes notify
the Company that they are not permitted
to participate in, or would not receive
freely transferable Exchange Notes
pursuant to, the Exchange Offer, or upon
the request of an Initial Purchaser (as
defined herein) under certain
circumstances, the Company will use its
best efforts to cause to become
effective a registration statement (the
"Shelf Registration Statement") with
respect to the resale of the Old Notes
and to keep the Shelf Registration
Statement effective for a period of two
years from the date of original
issuance of the Old Notes or such
shorter period that will terminate when
Old Notes covered by the Shelf
Registration Statement have been sold
pursuant thereto or can be sold
pursuant to Rule 144(k). The interest
rate on the Old Notes is subject to
increase under certain circumstances if
the Company defaults with respect to
its registration obligations under the
Registration Rights Agreement. See "The
Exchange Offer."
Lack of Prior Market for the Exchange
Notes............................... The Exchange Notes are being offered to
holders of the Old Notes. The Old Notes
were resold by the Initial Purchaser
to Qualified Institutional Buyers (as
defined in Rule 144A of the Securities
Act), to a limited number of
institutional accredited investors
within the meaning of Rule 501(a)(1),
(2), (3) or (7) of the Securities Act
and in offshore transactions, complying
with Rule 903 or Rule 904 of Regulation
S under the Securities Act and are
eligible for trading in the PORTAL
Market. The Exchange Notes will be new
securities for which there is currently
no established trading market, and none
may develop. Although the Initial
Purchaser is making a market in the Old
Notes and has indicated to the Company
that it currently intends to make a
market in the Exchange Notes, as
permitted by applicable laws and
regulations, it is under no obligation
to do so; and such market-making could
be discontinued at any time without
notice, at the sole discretion of the
Initial Purchaser. In addition, such
market making activities may be limited
during the Exchange Offer and the
pendency of a Shelf Registration
Statement. Accordingly, no assurance
can be given that an active trading
market for the Exchange Notes will
develop or, if such a market develops,
as to the liquidity of such market. The
Company intends to apply for listing of
the Exchange Notes on the American Stock
Exchange. If the Exchange Notes, are
traded after their initial issuance,
they may trade at a discount from their
initial offering price, depending upon
prevailing interest rates, the market
for similar securities, the performance
of the Company and certain other
factors.
Risk Factors
See "Risk Factors" for a discussion of certain factors which
should be considered in connection with the Exchange Offer or an investment in
the Exchange Notes.
Summary Consolidated Financial and Operating Data
The summary consolidated financial and operating data presented
below relates to periods in the years ended December 31, 1997 and 1996, the
four months ended December 31, 1995, the eight months ended August 31, 1995,
the year ended December 31, 1994, the two months ended December 31, 1993 and
the ten months ended October 31, 1993. This data should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the Consolidated Financial Statements. The
consolidated financial data for the above periods was derived from the audited
consolidated financial statements of the Company. Certain amounts have been
reclassified to conform with presentations adopted in 1997.
During the period from 1992 through 1995, TWA underwent two
separate Chapter 11 reorganizations, the first in 1992-93 and the second in
1995. In connection with the '95 Reorganization, TWA has applied fresh start
reporting in accordance with the American Institute of Certified Public
Accountants Statement of Position 90-7, "Financial Reporting by Entities in
Reorganization Under the Bankruptcy Code" ("SOP 90-7"), which has resulted in
the creation of a new reporting entity for accounting purposes and the
Company's assets and liabilities being adjusted to reflect fair values on the
'95 Effective Date. A description of the adjustments to the financial
statements arising from the consummation of the '95 Reorganization and the
application of fresh start reporting is contained in Note 19 to the
Consolidated Financial Statements. For accounting purposes, the '95 Effective
Date is deemed to be September 1, 1995. Because of the application of fresh
start reporting, the financial statements for periods after the '95
Reorganization are not comparable in all respects to the financial statements
for periods prior to the reorganization. Similarly, the Consolidated
Financial Statements for the periods prior to the '93 Reorganization are not
consistent with periods subsequent to the '93 Reorganization. Accordingly, a
vertical black line separates these periods. Preferred stock dividend
requirements and earnings per share of the predecessor companies have not been
presented as these amounts are not meaningful.
<TABLE>
<CAPTION>
Prior
Predecessor
Reorganized Company Predecessor Company Company
------------------------------------------ ---------------------------------------- ------------
Four Months Two Months Ten Months
Year Ended Year Ended Ended Eight Months Year Ended Ended Ended
December 31, December 31, December 31, Ended August December 31, December 31, October 31,
1997 1996 1995 31, 1995 1994 1993 1993
------------ -------------- ------------ ------------ ------------ ------------ ------------
(Dollars in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations Data:
Operating Revenues ............. $ 3,327,952 $ 3,554,407 $1,098,474 $2,218,355 $ 3,407,702 $ 520,821 $ 2,633,937
Operating income (loss)(1) ..... (29,260) (198,527) 10,446 14,642 (279,494) (58,251) (225,729)
Loss before income taxes and
extraordinary items(2) ....... (89,335) (274,577) (32,268) (338,309) (432,869) (88,140) (362,620)
Provision (credit) for income
taxes ........................ 527 450 1,370 (96) 960 (248) 1,312
Loss before extraordinary
items......................... (89,862) (275,027) (33,638) (338,213) (433,829) (87,892) (363,932)
Extraordinary items, net of
income taxes(3) .............. (20,973) (9,788) 3,500 140,898 (2,005) -- 1,075,581
Net income (loss) .............. (110,835) (284,815) (30,138) (197,315) (435,834) (87,892) 711,649
Per share amounts(4):
Loss before extraordinary
items ...................... $(1.98) $(6.60) $(1.15)
Net loss ..................... (2.37) (7.27) (1.05)
</TABLE>
<TABLE>
<CAPTION>
Reorganized Company Predecessor Company
-------------------------------------------- -----------------------------
December 31,
------------------------------------------------------------------------------
1997 1996 1995 1994 1993
------------ ------------ ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Selected Balance Sheet Data:
Cash and cash equivalents(5).............. $ 237,765 $ 181,586 $ 304,340 $ 138,531 $ 187,717
Current assets............................ 632,957 625,745 737,301 603,806 728,303
Net working capital (deficiency).......... (303,988) (336,416) (81,913) (1,238,216) (106,703)
Flight equipment, net..................... 626,382 472,495 455,434 508,625 660,797
Total property and equipment, net......... 741,765 614,207 600,066 693,045 886,116
Intangible assets, net.................... 1,118,864 1,184,786 1,275,995 921,659 1,024,846
Total assets.............................. 2,773,848 2,681,939 2,868,211 2,512,435 2,958,862
Current maturities of long-term debt and
capital leases(6)....................... 88,460 134,948 110,401 1,149,739 108,345
Long-term debt, less current
maturities(6)........................... 736,540 608,485 764,031 -- 1,053,644
Long-term obligations under capital
leases, less current maturities......... 182,922 220,790 259,630 339,895 376,646
Shareholders' equity (deficiency)(7)...... 268,284 238,105 302,855 (417,476) 18,358
</TABLE>
- ----------
(1) Includes special charges of $85.9 million in 1996, $1.7 million in the
eight months ended August 31, 1995 and $138.8 million in 1994. For a
discussion of these and other non-recurring items, see Note 16 to the
Consolidated Financial Statements.
(2) The eight months ended August 31, 1995 includes charges of $242.2 million
related to reorganization items. The ten months ended October 31, 1993
includes a charge of $342.4 million related to the settlement of pension
obligations and income of $268.1 million related to reorganization items.
(3) The extraordinary items in 1997 and 1996 are the result of the early
extinguishment of certain debt. The extraordinary item in the four months
ended December 31, 1995 was the result of the settlement of a debt of a
subsidiary, while the extraordinary item in the eight months ended August
31, 1995 represents the gain on the discharge of indebtedness pursuant to
the consummation of the '95 Reorganization. The extraordinary item in 1994
represents the charge for a prepayment premium related to the sale and
lease back of four McDonnell Douglas MD-80 aircraft. The extraordinary
item in 1993 represents the gain on discharge of indebtedness pursuant to
the consummation of the '93 Reorganization.
(4) No effect has been given to stock options, warrants, convertible preferred
stock or potential issuances of additional Employee Preferred Stock as the
impact would have been anti-dilutive.
(5) Includes cash and cash equivalents held in international operations and by
subsidiaries which, based upon foreign monetary regulations and other
factors, might not be immediately available to the Company.
(6) Long-term debt in 1994 was reclassified to current maturities as a result
of certain alleged defaults and payment defaults.
(7) No dividends were paid on the Company's outstanding common stock during
the periods presented above.
RISK FACTORS
In addition to the other information appearing in this
Prospectus, the following risk factors should be considered carefully in
evaluating the Company and its business before participating in the Exchange
Offer or investing in the Exchange Notes.
Risk Factors Related to the Company
Liquidity; Substantial Indebtedness; Capital Expenditure
Requirements
The Company believes that continued improvement in its
operating results is necessary for TWA to maintain adequate liquidity to meet
its obligations. The Company is highly leveraged and has and will continue to
have significant debt service obligations. As of December 31, 1997, the
Company's ratio of long-term debt and capital leases (including current
maturities) to shareholders' equity was 3.76 to 1. As of December 31, 1997,
after giving effect to the issuance of the Old Notes, the 11 3/8% Secured
Notes and the Equity Notes, the aggregate principal amount of the Company's
total outstanding indebtedness would be approximately $1,233.0 million, and
the ratio of such long-term debt and capital leases (including current
maturities) to shareholders' equity would have been 4.6 to 1. TWA's estimated
minimum payment obligations under noncancellable operating leases in effect
at December 31, 1997 were approximately $393.7 million for 1998 and
approximately $3,144.0 million for periods thereafter. These amounts exclude
payment obligations of the Company that will arise from financing arrangements
relating to the 24 MD-83 aircraft that are more fully described under
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources--Commitments." Over the last
several years, the Company's earnings have not been sufficient to cover fixed
charges. The Company's earnings were not sufficient to cover fixed charges by
$94.1 million for the year ended December 31, 1997, $280.0 million for the
year ended December 31, 1996, $32.3 million for the four months ended
December 31, 1995, $338.3 million for the eight months ended August 31, 1995,
$435.0 million for the year ended December 31, 1994, $88.4 million for the two
months ended December 31, 1993, $364.7 million for the ten months ended
October 31, 1993, and $317.4 million for the year ended December 31, 1992.
See "Capitalization," "Selected Consolidated Financial Data," "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--General" and the Consolidated Financial Statements.
The degree to which the Company is leveraged could have
important consequences to holders of the Exchange Notes offered hereby,
including the following: (i) the Company's ability to obtain additional
financing in the future for working capital, capital expenditures,
acquisitions, general corporate purposes or other purposes may be impaired;
(ii) a substantial portion of the Company's cash flow from operations must be
dedicated to the payment of principal and interest on the Company's existing
indebtedness; (iii) the Company is placed at a relative competitive
disadvantage to its less highly leveraged competitors and is more vulnerable
to economic downturns; and (iv) such indebtedness contains restrictive and
other covenants, which, if not complied with, may result in an event of
default which, if not cured or waived, could have a material adverse effect on
the Company (including, under certain circumstances, a cross-default of other
debt).
The Company's capital expenditures for 1998 are currently
anticipated to total approximately $90.4 million compared to capital
expenditures totaling approximately $100.1 million for 1997. The Company's
capital expenditures budget for 1998 includes $60.0 million for flight
equipment related expenditures (including pre-delivery deposits for aircraft
and the purchase of aircraft engines and spare parts). See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources--Certain Other Capital
Requirements" for a discussion of the potential additional expenditures that
may be required by the Company in order to address the year 2000-related
technology issues. While the Company is seeking financing for certain of its
planned capital expenditures, a substantial portion of such expenditures are
expected to utilize internally generated funds. The inability to finance or
otherwise fund such expenditures could have a material adverse effect on the
ability of the Company to continue to implement its strategic plan.
On December 31, 1997, the Company's total cash and cash
equivalents balance was approximately $237.8 million (including amounts held in
TWA's international operations and by subsidiaries which, based upon various
monetary regulations and other factors, might not be immediately available to
the Company). This balance represented an increase of approximately $56.2
million from the Company's corresponding cash balance at December 31, 1996.
This increase in the Company's cash balance resulted primarily from the proceeds
from various capital markets offerings during 1997 and asset dispositions
offset by capital expenditures and debt repayments. Due to improvements in
operating results experienced by the Company, cash used by operations in 1997
was reduced from the prior year. On March 31, 1998, the Company had total cash
and cash equivalents of $346.1 million. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Liquidity and Capital
Resources--Liquidity."
TWA has no unused credit lines and must satisfy all of its
working capital and capital expenditure requirements from cash provided by
operating activities, from external capital sources or from the sale of
assets. See "The Company--Business Strategy" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Liquidity and
Capital Resources--Liquidity" for a description of the actions taken by the
Company to improve its liquidity during 1997. As a result of the financings
consummated in the fourth quarter of 1997 and the repayment of certain debt
in connection therewith, assets with an approximate appraised value of $165.0
million were released from collateral liens and are currently unencumbered.
Substantially all of TWA's other strategic assets, have been pledged to
secure various issues of outstanding indebtedness of the Company. To the
extent that pledged assets are sold, the applicable financing agreements
generally require the sale proceeds to be applied to repay the corresponding
indebtedness. To the extent that the Company's access to capital is
constrained, the Company may not be able to make certain capital expenditures
or to continue to implement certain other aspects of its strategic plan, and
the Company may therefore be unable to achieve the full benefits expected
therefrom. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Liquidity and Capital Resources--Availability of
NOLs" for a discussion of the status of the Company's net operating loss
carryforwards.
The Company's long-term viability as well as its ability to
meet its existing debt and other obligations and future capital commitments
depends upon the Company's financial and operating performance, which in turn
is subject to, among other things, prevailing economic conditions and to
certain other financial, business and other factors beyond the Company's
control. As discussed elsewhere herein, in late 1996 and early 1997, the
Company began implementing certain operational changes which are intended to
improve the Company's financial results through, among other things, improved
operational reliability; higher yields and load factors; increased fuel, pilot
and other aircraft operating efficiencies; and a decrease in
maintenance-related expenditures, employee headcount and JFK-related operating
costs. Although management believes that such operational changes will be
successful and that the Company's cash flow from its operations and financing
activities should therefore be sufficient in the foreseeable future to meet
the Company's debt and other obligations and future capital commitments, the
airline industry in general and the Company in particular are subject to
significant risks and uncertainties referred to in this Prospectus including
under these Risk Factors and "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- General" and " -- Liquidity
and Capital Resources." Therefore, there can be no assurance that the
Company's operating results and financing activities will be sufficient in the
foreseeable future to meet its debt and other obligations and future capital
commitments.
Prior Operating Losses and Future Uncertainties Relating to
Results of Operations; Results for First Quarter 1998
TWA's long-term viability depends on its ability to achieve and
maintain profitable operations. Although the airline industry has generally
seen strengthened performance in recent years, particularly since 1995 when
many airlines reported record profits, the Company has reported significant
net losses. For example, the Company reported a net loss of $227.5 million
for the combined 12-month period ended December 31, 1995 (including
extraordinary gains related to the '95 Reorganization), while reporting an
operating profit of $25.1 million (including $58.0 million of non-cash expense
relating to the distribution of stock to employees as part of the '95
Reorganization), which represented the Company's first operating profit since
1989. The Company's reported net loss of $284.8 million for 1996 represented
a $57.3 million increase over the 1995 net loss, while the Company reported a
$198.5 million operating loss for 1996 (including special charges of $85.9
million), which represented a $223.6 million decline from its operating profit
in 1995. The Company's 1997 financial results reflected a net loss of $110.8
million, which represented an improvement of $174.0 million over the $284.8
million net loss for the full year 1996, and a $29.3 million operating loss,
which represented a $169.2 million improvement over the $198.5 million
operating loss reported for the full year 1996. For a discussion of such
operating results and the substantial net losses incurred during such periods,
see "Management's Discussion and Analysis of Financial Condition and Results
of Operations" and "The Company--Business Strategy." Although the Company has
taken a number of actions which management believes will improve future
results, the Company will incur additional expenses relating to these actions,
including pilot training and aircraft leases, and there can be no assurance
that such actions will make the Company's future operations profitable. See "
- -- Liquidity; Substantial Indebtedness; Capital Expenditure Requirements" and
"The Company--Business Strategy."
On April 22, 1998, the Company reported financial results for
the first quarter 1998 reflecting an operating loss of $68.7 million and a net
loss before extraordinary items of $54.1 million for the three months ended
March 31, 1998, including a non-cash operating expense of $26.5 million
relating to the distribution in July 1998 of Common Stock to employee stock
plans. These results compare with an operating loss of $99.5 million and a
net loss before extraordinary items of $70.0 million in the first quarter
1997. Excluding the effect of non-cash expense associated with earned stock
compensation, the first quarter 1998 operating loss was $42.2 million compared
to the first quarter 1997 operating loss of $98.2 million. Similarly
calculated, the net loss before extraordinary items for the first quarter 1998
and 1997 were $38.0 million and $69.3 million, respectively. Operating
revenue for the first quarter 1998 was $765.4 million versus $762.3 million in
the first quarter 1997 despite a slight reduction in capacity from the first
quarter 1997 to 1998 resulting from the replacement of B747 and L-1011
aircraft with smaller B767, B757 and MD-80 aircraft.
TWA has historically experienced significant variations in
quarterly and annual operating revenues and operating expenses and expects
such variations to continue. Due to the greater demand for air travel during
the summer months, airline industry revenues for the third quarter of the year
are generally significantly greater than revenues in the first and fourth
quarters of the year and moderately greater than revenues in the second
quarter of the year. In the past, given the Company's historical dependence
on summer leisure travel, TWA's results of operations have been particularly
sensitive to such seasonality. While the Company, through an acceleration of
its fleet renewal program and restructuring of its JFK operations, anticipates
that the deseasonalization of operations affected thereby will reduce quarter
to quarter fluctuations in the future, there can be no assurance that such
deseasonalization will occur.
The Company's results of operations have also been impacted by
numerous other factors that are not necessarily seasonal. Among the
uncertainties that might adversely impact TWA's future results of operations
are: (i) competitive pricing and scheduling initiatives; (ii) the availability
and cost of capital; (iii) increases in fuel and other operating costs; (iv)
insufficient levels of air passenger traffic resulting from, among other
things, war, threat of war, terrorism or changes in the economy; (v)
governmental limitations on the ability of TWA to service certain airports
and/or foreign markets; (vi) regulatory requirements necessitating additional
capital or operating expenditures; (vii) the outcome of certain ongoing labor
negotiations (see "--'94 Labor Agreements"); and (viii) the reduction in yield
due to the continued implementation of a discount ticket program entered into
between the Company and Karabu Corporation ("Karabu"), a Delaware corporation
controlled by Carl Icahn, in connection with the '95 Reorganization, on the
terms currently sought to be applied by Karabu, which terms are, in the
opinion of the Company, inconsistent with, and in violation of, the agreement
governing such program (see "Management's Discussion and Analysis of Financial
Condition and Results of Operations--General" and "Business--Legal
Proceedings--Icahn Litigation"). The Company is unable to predict the
potential impact of any such uncertainties upon its future results of
operations.
Crash of Flight 800
On July 17, 1996, TWA Flight 800 crashed shortly after
departure from JFK en route to Paris, France. There were no survivors among
the 230 passengers and crew members aboard the Boeing 747 aircraft. The
Company is cooperating fully with all federal, state and local regulatory and
investigatory agencies to ascertain the cause of the crash, which to date has
not been determined. The National Transportation Safety Board held hearings
relating to the crash in December 1997 and is continuing its investigation.
While TWA is currently a defendant in a number of lawsuits relating to the
crash, it is unable to predict the amount of claims which may ultimately be
made against the Company or how those claims might be resolved. TWA maintains
substantial insurance coverage and, at this time, management has no reason to
believe that such insurance coverage will not be sufficient to cover the
claims arising from the crash. Therefore, TWA believes that the resolution
of such claims will not have a material adverse effect on its financial
condition or results of operations. The Company is unable to identify or
predict the extent of any adverse effect on its revenues, yields, or results
of operations which has resulted or may result from the public perception of
the crash or from any future findings by the National Transportation Safety
Board. See "Business--Legal Proceedings."
Changes to Management Team
Commencing in June 1996, the Company experienced a substantial
number of changes in its executive management team. In June 1996, the Company
announced the separation of Messrs. Robert A. Peiser and Mark J. Coleman,
Executive Vice President and Chief Financial Officer and Senior Vice
President, Marketing, respectively, from the Company. Messrs. Peiser and
Coleman differed with the determination of the Board of Directors, as expressed
by its unanimous vote, to continue the management approach of the Company's
President and Chief Executive Officer at that time relating to the Company's
rebuilding process. On August 21, 1996, Edward Soule was elected to the
position of Executive Vice President and Chief Financial Officer. On
September 3, 1996, Roden A. Brandt was elected to the position of Senior Vice
President, Planning. On October 24, 1996, the Company announced that Jeffery
H. Erickson, President and Chief Executive Officer, had informed the Board of
his intention to leave the Company in January 1997. On December 14, 1996, the
Board appointed Gerald L. Gitner, a member of the Board, to serve as Vice
Chairman and Acting Chief Executive Officer; David M. Kennedy, a member of the
Board, to serve as Acting Executive Vice President and Chief Operating
Officer; and William F. Compton, also a member of the Board, to serve as
Acting Executive Vice President, Operations. On December 20, 1996, Michael J.
Palumbo was appointed as Senior Vice President and Chief Financial Officer,
succeeding Mr. Soule, who had resigned from the positions of Executive Vice
President and Chief Financial Officer on December 19, 1996. On February 12,
1997, the Board of Directors elected Mr. Gitner to serve as Chairman and Chief
Executive Officer. On February 14, 1997, Don Monteath, who had served as the
Company's Senior Vice President, Operations, left the Company. On March 27,
1997, the Board elected Mr. Compton to serve as Executive Vice President,
Operations. On May 29, 1997, Donald M. Casey was elected to serve as the
Company's Executive Vice President, Marketing. It was also announced on May
29, 1997 that Mr. Kennedy would leave his interim position as Acting Executive
Vice President and Chief Operating Officer. Mr. Kennedy, whose services have
been retained on a consulting basis, will also remain as a director and as
chairman of the Finance Committee of the Board of Directors. On October 29,
1997 James F. Martin was elected to the office of Senior Vice President, Human
Resources, replacing Charles J. Thibaudeau who retired effective October 1,
1997. In addition, on December 3, 1997, the Board elected Mr. Compton to
serve as the Company's President and Chief Operating Officer. On December 31,
1997, Mr. Brandt resigned as Senior Vice President, Planning, but he will
remain as a consultant to the Company through April 30, 1998. On January 28,
1998, the Board appointed Kathleen A. Soled, Esq. to serve as the Company's
Senior Vice President and General Counsel replacing Richard P. Magurno, Esq.
who resigned on January 28, 1998. Ms. Soled had been the Company's Vice
President, Legal and Corporate Secretary. The Company does not believe that
such changes have unduly affected its ongoing operations or implementation of
the Company's business strategy, although there can be no assurance that such
changes will not have a material adverse effect on future operations.
'94 Labor Agreements
As of December 31, 1997, the Company had approximately 22,321
full-time employees (based upon full-time equivalents which include part-time
employees). Of these, approximately 84.6% were represented by ALPA and the
IAM. On March 6, 1997, the IAM was certified to replace IFFA as the
bargaining representative of the Company's flight attendants. The Company's
currently effective collective bargaining agreement with each such union
(collectively the " '94 Labor Agreements") contain more favorable work rules
than in prior contracts and wage levels which the Company believes to be below
many other U.S. airlines. The '94 Labor Agreements are three year agreements
which became amendable as of August 31, 1997. Negotiations on a new
collective bargaining agreement with the IAM with regard to the flight
attendants commenced in July 1997 and are currently ongoing and negotiations
regarding the Company's ground employees represented by the IAM commenced in
February 1997 and are also currently ongoing. Negotiations on a new
collective bargaining agreement with ALPA commenced in June 1997 and are
currently ongoing. Under the Railway Labor Act (the "RLA"), workers whose
contracts have become amendable are required to continue to work under the
"status quo" (i.e., under the terms of employment antedating the amendable
date) until the RLA's procedures are exhausted. Under the RLA, the Company
and its unions are obligated to continue to bargain until agreement is reached
or until a mediator is appointed and concludes that negotiations are
deadlocked and mediation efforts have failed. The mediator must then further
attempt to induce the parties to agree to arbitrate the dispute. If either
party refuses to arbitrate, then the mediator must notify the parties that his
efforts have failed and, after a 30-day cooling-off period, a strike or other
direct action may be taken by the parties. At the request of the IAM, a
mediator was appointed on August 6, 1997 with respect to ground employees
represented by the IAM. On March 27, 1998, at the request of the IAM, a
mediator was appointed with respect to the flight attendants represented by
the IAM.
In the opinion of management, the Company's financial resources
are not as great as those of most of its competitors, and, therefore,
management believes that any substantial increase in its labor costs as a
result of any new labor agreements or any cessation or disruption of
operations due to any strike or work action could be particularly damaging to
the Company. See "Business--Employees."
Age of Fleet; Noise
At December 31, 1997, the average age of TWA's operating
aircraft fleet was 16.9 years, making TWA's fleet one of the oldest of U.S.
air carriers. As a result, TWA has incurred increased overall operating costs
due to the higher maintenance, fuel and other operating costs associated with
older aircraft. During 1997, TWA acquired 27 new or later-model used
aircraft. The Company expects to continue the process of acquiring a number
of new and later-model used aircraft. As of December 31, 1997, TWA's fleet
included 69 aircraft which did not meet the noise reduction requirements under
the Airport Noise and Capacity Act of 1990 (the "Noise Act") and must
therefore be retired or substantially modified by the end of 1999. Although
the Company has plans to meet the Noise Act's noise reduction requirement,
there can be no assurance that such plans will be achieved. In addition, in
1990, the FAA issued several Airworthiness Directives ("ADs") mandating
changes to maintenance programs for older aircraft to ensure that the oldest
portion of the nation's fleet remains airworthy. Many of the Company's
aircraft are currently affected by these aging aircraft ADs. In 1996 and
1997, TWA spent approximately $3.4 million and $4.2 million, respectively, to
comply with aging aircraft maintenance requirements. Based on information
currently available to TWA and its current fleet plan, TWA estimates that
costs associated with complying with these aging aircraft maintenance
requirements will aggregate an additional approximately $19.8 million through
the year 2001. These cost estimates assume, among other things, that newer
aircraft will replace certain of TWA's existing aircraft and that as a result
certain aircraft will be retired by the Company before TWA would be required
to make certain aging aircraft maintenance expenditures. There can be no
assurance that TWA will be able to implement fully its fleet plan or that the
cost of complying with aging aircraft maintenance requirements will not be
significantly increased. See "--Liquidity; Substantial Indebtedness; Capital
Expenditure Requirements," "Business--Regulatory Matters--Noise Abatement" and
"--Aging Aircraft Maintenance."
Corporate Governance Provisions; Special Voting Arrangements
As a result of provisions of the '94 Labor Agreements, the
Company's Third Amended and Restated Certificate of Incorporation (the
"Certificate of Incorporation") and Amended and Restated By-laws (the
"By-laws") contain provisions (the "Blocking Coalition Provisions") which
allow certain corporate actions requiring board approval, including mergers,
consolidations and sale of all or substantially all the assets of the Company,
to be blocked by a vote of six (four union elected directors and two other
directors) of the Company's fifteen directors, which together constitute a
"Blocking Coalition". Actions subject to disapproval by the Blocking Coalition
include: (a) any sale, transfer or disposition, in a single or series of
transactions, of at least 20% of the Company's assets, except for transactions
in the ordinary course of business including aircraft transactions as part of
a fleet management plan; (b) any merger of the Company into or with, or
consolidation of the Company with any other entity; (c) any business
combination within the meaning of Section 203 of the Delaware General
Corporation Law (the "DGCL"); (d) any dissolution or liquidation of the
Company; (e) any filing of a petition for bankruptcy, reorganization or
receivership under any state or federal bankruptcy, reorganization or
insolvency law; (f) any repurchase, retirement or redemption of the Company's
capital stock or other equity securities prior to their scheduled maturity or
expiration, except for redemptions out of the proceeds of any substantially
concurrent offering of comparable or junior securities and mandatory
redemptions of any redeemable preferred stock of the Company; (g) any
acquisition of assets, not related to the Company's current business as an air
carrier, in a single transaction or a series of related transactions exceeding
$50 million adjusted annually by the consumer price index; or (h) any sale of
the Company's capital stock or securities convertible into capital stock of
the Company to any person if (i) at the time of issuance or (ii) assuming
conversion of all outstanding securities of the Company convertible into
capital stock, such person or entity would beneficially own at least 20% of
the capital stock of the Company.
Anti-takeover Provisions in Certificate of Incorporation and
By-laws; Rights Plan
The Certificate of Incorporation and By-laws contain provisions
which authorize the Board of Directors to issue preferred stock without
stockholder approval, prohibit action by written consent of the stockholders,
authorize only the Chairman of the Board of Directors or a majority of the
Board of Directors to call special meetings of the stockholders and require
advance notice for director nominations. These provisions of the Certificate
of Incorporation and By-laws and the Blocking Coalition Provisions, as well as
federal laws limiting foreign ownership of U.S. flag carriers and the
prohibition on certain business combinations contained in Section 203 of the
DGCL, could have the effect of delaying, deferring or preventing a change in
control or the removal of existing management. In addition, the Board of
Directors declared a dividend distribution of one Right for each outstanding
share of Common Stock and Employee Preferred Stock payable to holders of
record as of the close of business on January 12, 1996 and, thereafter all
Common Stock issued by the Company has had an equivalent number of rights
attendant to it. The Rights are intended to protect TWA's shareholders from
certain non-negotiated takeover attempts which present the risk of a change of
control on terms which may be less favorable to TWA's stockholders than would
be available in a transaction negotiated with and approved by the Board of
Directors of the Company. See "Certain Provisions of the Certificate of
Incorporation, the By-laws and Delaware Law" and "Business--Regulatory
Matters--Foreign Ownership of Shares" and "Description of Capital
Stock--Rights Plan."
Certain Potential Future Earnings Charges
There are a number of uncertainties relating to agreements with
employees of the Company, the resolution of which could result in significant
non-cash charges to TWA's future operating results. Shares granted or
purchased at a discount under the employee stock incentive plan (the "ESIP")
will generally result in a charge equal to the fair market value of shares
granted plus the discount for shares purchased at the time when such shares
are earned. If the ESIP's target prices for the Common Stock are realized,
the minimum aggregate charge for the years 1997 to 2002 (the 1997 and 1998
target prices having been met) would be approximately $108.8 million based
upon such target prices and the number of shares of Common Stock and Employee
Preferred Stock outstanding at January 30, 1998. The charge for any year,
however, could be substantially higher if the then market price of the Common
Stock exceeds certain target prices. On February 17, 1998, the first target
price of $11.00 was realized and a grant of 2.0% of the outstanding Common
Stock and Employee Preferred Stock will be made on July 15, 1998. Based on
the current number of outstanding shares of Common Stock and Employee
Preferred Stock and taking into account a credit with respect to the Company's
required contribution, the net contribution will be 1,109,722 shares and the
non-cash charge in the first quarter of 1998 will be approximately $12.3
million. In addition, on March 4, 1998 the market price of the Company's
Common Stock exceeded the $12.10 target price for the 30-day period necessary
to earn the 1998 grant. As a result, on July 15, 1998 the Company will be
required to make an additional contribution to the relevant employee trusts of
1.5% of its Common Stock and Employee Preferred Stock. Based on the current
number of outstanding shares of Common Stock and Employee Preferred Stock,
that contribution would be 1,172,354 shares. As a result of the grants earned
in 1998, the Company expects to issue a combined total of 2,282,076 shares of
Common Stock and Employee Preferred Stock on July 15, 1998 and the aggregate
non-cash charge in connection with such issuance was recorded in the first
quarter of 1998 in the amount of $26.5 million. See "Business--Employees."
Fresh Start Reporting
In connection with the '95 Reorganization, the Company adopted
fresh start reporting in accordance with the American Institute of Certified
Public Accountants' Statement of Position 90-7 "--Financial Reporting by
Entities in Reorganization Under the Bankruptcy Code" ("SOP 90-7"). The fresh
start reporting common equity value of the Company was determined by the
Company, with the assistance of its financial advisors, to be approximately
$270.0 million based, in part, on assumptions as to future results of
operations. The carrying value of the Company's assets does not reflect
historical cost but rather reflects current values determined by the Company
as of the August 23, 1995 effective date (the "'95 Effective Date") of the '95
Reorganization (including values for intangible assets such as routes, gates
and slots of approximately $458.4 million). The difference between (i) the
equity valuation of the Company plus the estimated fair market value of the
Company's liabilities and (ii) the estimated fair market value of its
identifiable assets was allocated to "reorganization value in excess of
amounts allocable to identifiable assets" in the amount of approximately
$839.1 million. In future periods, these intangible assets will be evaluated
for recoverability based upon estimated future cash flows. If expectations
are not substantially achieved, charges to future operations for impairment
of these assets might be required and such charges could be material. Due to
the significant adjustments relating to the '95 Reorganization and the
adoption of fresh start reporting, the pre-reorganization consolidated
financial statements are not comparable to the post-reorganization
consolidated financial statements. A vertical black line is shown in the
Consolidated Financial Statements and Selected Consolidated Financial Data
presented herein to separate TWA's post-reorganization Consolidated Financial
Statements from its pre-'95 Reorganization consolidated financial statements
since they have not been prepared on a consistent basis of accounting. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and Note 19 to the Consolidated Financial Statements.
In the fourth quarter of 1996, the Company reported a special
charge of $26.7 million relating to the write-down of the carrying value of
TWA's JFK-Athens route authority, reflecting the Company's decision to
terminate service on such route after April 18, 1997.
Risk Factors Related to the Industry
Competition
The airline industry operates in an intensely competitive
environment. TWA competes with one or more major airlines on most of its
routes (including on all routes between major cities) and with various forms
of surface transportation. The airline industry is also cyclical due to,
among other things, a close relationship of yields and traffic to general U.S.
and worldwide economic conditions. Small fluctuations in RASM and cost per
available seat mile ("CASM") can have a significant impact on the Company's
financial results. Airline profit levels are highly sensitive to, and during
recent years have been adversely affected by, among other things, changes in
fuel costs, fare levels and passenger demand. Vigorous price competition
exists, and TWA and its competitors have frequently offered sharply reduced
discount fares in many markets. Airlines, including TWA, use discount fares
and other promotions to stimulate traffic during normally slack travel
periods, to generate cash flow and to increase relative market share in
selected markets. TWA has often elected to initiate or match discount or
promotional fares in certain markets in order to compete vigorously in those
discounted markets or to stimulate traffic. Passenger demand and fare levels
have also been affected adversely by, among other factors, the state of the
economy and international events.
The airline industry has consolidated as a result of mergers
and liquidations and more recently through alliances, and further
consolidation may occur in the future. This consolidation has, among other
things, enabled certain of the Company's major competitors to expand their
international operations and increase their domestic market presence. In
addition, certain of the Company's competitors have in recent years
established alliances with one or more large foreign carriers, allowing those
competitors to strengthen their overall operations by, among other things,
transporting passengers connecting with or otherwise traveling on the alliance
carriers. Although the Company has established a code share arrangement with
one foreign carrier and has filed an application with the DOT to establish an
alliance with another foreign carrier, it does not have an alliance with a
large foreign carrier.
The emergence and growth of low cost, low fare carriers in
domestic markets represents an intense competitive challenge for the Company,
which has higher operating costs than many of such low fare carriers and fewer
financial resources than many of its major competitors. In many cases, such
low cost carriers have initiated or triggered price discounting. In part as a
result of the industry consolidation referred to above, aircraft, skilled
labor and gates at most airports continue to be readily available to start-up
carriers. To the extent new carriers or other lower cost competitors enter
markets in which the Company operates, such competition could have a material
adverse effect on the Company. Certain of the traditional carriers that
compete with TWA have implemented, or are in the process of implementing,
measures to reduce their operating costs including the creation of low cost
regional jet airline affiliates. In addition, the Company is more highly
leveraged and has significantly less liquidity (and in certain cases, a higher
cost structure) than certain of its competitors, several of whom have
available lines of credit, significant unencumbered assets and/or greater
access to capital markets. Accordingly, TWA may be less able than certain of
its competitors to withstand a prolonged recession in the airline industry or
prolonged periods of competitive pressure.
Demand for air transportation has historically tended to mirror
general economic conditions. During the most recent economic recession in the
United States, the change in industry capacity failed to mirror the reduction
in demand for domestic air transportation due primarily to continued delivery
of new aircraft. While in the period following such recession, industry
capacity leveled off, such capacity has again begun to expand. TWA expects
that the airline industry will remain extremely competitive for the
foreseeable future.
Aircraft Fuel
Since fuel costs constitute a significant portion of the
Company's operating costs (approximately 15.6% in 1996 and approximately 14.3%
in 1997), significant increases in fuel costs would materially and adversely
affect the Company's operating results. Fuel prices continue to be
susceptible to, among other factors, political events and market factors
beyond the Company's control, and the Company cannot predict near or
longer-term fuel prices. In the event of a fuel supply shortage resulting
from a disruption of oil imports or otherwise, higher fuel prices or
curtailment of scheduled service could result. During 1996, the Company's
average per gallon cost of fuel increased approximately 22.3% versus 1995,
from approximately 57.0 Cents per gallon to approximately 69.8 Cents per
gallon. During 1997, the Company's average per gallon cost of fuel decreased
approximately 5.6%, from approximately 69.8 Cents per gallon to approximately
65.9 Cents per gallon. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations." A one cent change in the cost per gallon
of fuel (based on consumption during 1997) impacts operating expense by
approximately $609,000 per month. Increases in fuel prices may have a greater
proportionate and more immediate impact on TWA than many of its competitors
because of the composition of its fleet and because the Company does not
presently maintain substantial reserves of fuel required for its operations or
otherwise hedge the cost of anticipated purchases of fuel. See
"Business--Aircraft Fuel."
Regulatory Matters
The airline industry is subject to extensive federal and
international government regulations relating to airline safety, security and
scheduling, as well as to local, state, federal, and international
environmental laws. Adoption of newly proposed regulations relating to these
matters could increase the Company's cost of compliance with governmental
regulations, and could therefore increase operating expenses and in some cases
restrict the operations of airlines, including TWA, thereby adversely
affecting TWA's results of operations.
During the last several years, the FAA has issued a number of
maintenance directives and other regulations relating to, among other things,
collision avoidance systems, airborne windshear avoidance systems, noise
abatement and increased inspection requirements, including added requirements
for aging aircraft. TWA believes, based on its current fleet, that it will
incur substantial capital expenditures to comply with the aging aircraft and
noise abatement regulations. The Company expects that a number of aircraft
will be retired before major aging aircraft modifications and noise compliance
will be required; however, required capital expenditures will vary depending
upon changes in TWA's fleet composition. Management expects that the cost of
compliance will be funded through a combination of internally generated funds
and utilization of cost sharing and/or funding provisions under certain lease
agreements and loan agreements. See "--Risk Factors Related to the
Company--Liquidity; Substantial Indebtedness; Capital Expenditure
Requirements."
Additional laws and regulations have been proposed from time to
time which could significantly increase the cost of airline operations by, for
instance, imposing additional requirements or restrictions on operations. For
example, several airports have recently sought to increase substantially the
rates charged to airlines, and the ability of airlines to contest such
increases has been restricted by federal legislation, DOT resolutions and
judicial decisions. In addition, laws and regulations have also been
considered from time to time that would prohibit or restrict the ownership
and/or transfer of airline routes or takeoff and landing slots. Also, the
award of international routes to U.S. carriers (and their retention) is
regulated by treaties and related agreements between the United States and
foreign governments which are amended from time to time. The Company cannot
predict what laws and regulations will be adopted or what changes to
international air transportation treaties will be effected, if any, or how
they will affect TWA. See "Business--Regulatory Matters."
Management believes that the Company benefitted from the
expiration on December 31, 1995 of the aviation trust fund tax (the "Ticket
Tax"), which imposed certain taxes including a 10% air passenger tax on
tickets for domestic flights, a 6.25% air cargo tax and a $6 per person
international departure tax. The Ticket Tax was reinstated on August 27, 1996
and expired again on December 31, 1996. At the end of February 1997, the
Ticket Tax was reinstated effective March 7, 1997 through September 30, 1997.
Congress recently passed tax legislation reimposing and significantly
modifying the Ticket Tax, effective October 1, 1997. The legislation includes
the imposition of new excise tax and significant fee tax formulas over a
multiple year period, an increase in the international departure tax, the
imposition of a new arrivals tax, and the extension of the Ticket Tax to cover
items such as the sale of frequent flier miles. Management believes that the
reimposition and modification of the Ticket Tax will have a negative impact on
the Company, although neither the amount of such negative impact nor the
benefit previously realized by its expiration can be precisely determined.
However, management believes that the recent tax legislation and any other
increases of the Ticket Tax will result in higher costs to the Company and/or,
if passed on to consumers in the form of increased ticket prices, might have
an adverse effect on passenger traffic, revenue and/or margins. See
"Business--Regulatory Matters."
Risk Factors Relating to the Notes and the Exchange Offer
Certain Bankruptcy Considerations
If the Company were to become a debtor in a proceeding under
Title 11 of the United States Bankruptcy Code, as amended (the "Bankruptcy
Code"), it is likely that there would be delays in payment with respect to the
Notes and delays in or prevention from enforcing remedies and other rights
that may otherwise be available to holders of the Notes. It is also possible
that holders of Notes would not ultimately receive repayment, in whole or in
part, of the Notes.
Ranking of the Notes
The Notes are not secured and, therefore, will be effectively
subordinated to all existing and future secured indebtedness of the Company to
the extent of the value of the assets securing such indebtedness. As of
December 31, 1997, the Company had $1,008.0 million of secured indebtedness
outstanding. Subject to certain conditions specified therein, the Indenture
permits the Company to incur additional secured indebtedness which will
effectively rank senior to the Notes to the extent of the value of the assets
subject thereto. See "Description of Notes." The Notes will represent senior
unsecured obligations of the Company and will rank pari passu in right of
payment with other senior obligations of the Company. As of December 31,
1997, after giving effect to the issuance of the Notes and the application of
the net proceeds therefrom, the aggregate principal amount of the Company's
total outstanding indebtedness would be approximately $1,158.0 million. The
Notes are not presently guaranteed by any subsidiary of the Company and as a
result will effectively rank junior to all creditors (including trade
creditors) of, and holders of preferred stock issued by, subsidiaries of the
Company. As of December 31, 1997, the subsidiaries of the Company did not
have any outstanding indebtedness or preferred stock, except for the
wholly-owned, bankruptcy remote subsidiary that is the issuer of the
Receivables Securitization Notes. Although the Notes will contain
restrictions on the incurrence of indebtedness by subsidiaries, the amount of
indebtedness which is permitted to be incurred could be substantial. The
Notes will contain no limitations on the ability of subsidiaries to incur
trade credit and other obligations. See "Description of Notes."
Fraudulent Conveyance
Under certain circumstances, subsidiaries of the Company will
be required to guarantee the Company's obligations with respect to the Notes.
The Company believes that any such guarantee will be for proper purposes and
in good faith. See "Description of Notes--Certain Covenants--Limitation on
Guarantees by Restricted Subsidiaries."
If a court of competent jurisdiction in a suit by an unpaid
creditor or a representative of creditors (such as a trustee in bankruptcy or
a debtor-in-possession) were to find that, at the time such subsidiary
incurred its obligations under its guarantee, either such subsidiary incurred
such obligations with the intent to hinder, delay or defraud its present or
future creditors, or that it was insolvent or was rendered insolvent by reason
of such incurrence, was engaged or was about to engage in a business or
transaction for which its remaining unencumbered assets constituted
unreasonably small capital to carry on its business or intended to incur, or
believed or reasonably should have believed that it would incur, debts beyond
its ability to pay such debts as they matured, and the indebtedness was
incurred for less than reasonably equivalent value, such court could avoid
such subsidiary's obligations under its guarantee, subordinate such guarantee
to any or all other indebtedness of such subsidiary or take other action
detrimental to the holders of the Notes. In that event, there can be no
assurance that any repayment on such guarantee could ever be recovered by the
holders of the Notes.
The measure of insolvency for purposes of the foregoing will
vary depending upon the law of the jurisdiction in which it is being applied.
Generally, however, an entity would be considered insolvent for these purposes
if, at the time it incurred indebtedness such as a guaranty obligation, either
the sum of its debts was then greater than all of its property at a fair
valuation, or the then fair salable value of its assets was less than the
amount that was then required to pay its probable liabilities on its existing
debts (including contingent liabilities such as guarantee obligations) as they
become absolute and matured or if, at any time, it proved unable to satisfy
its liabilities immediately due and payable with its current cash flow and
available assets.
Change in Control; Cross Default Provisions
Upon a Change in Control, each holder of Notes will have the
right, for a limited period of time, to require the Company to repurchase all
or any part of such holder's Notes at a price in cash equal to 101% of the
principal amount thereof, plus accrued and unpaid interest and Special
Interest, if any, to the date fixed for repurchase. However, there can be no
assurance that upon the occurrence of such a Change in Control, the Company
will be able to repurchase the Notes. In the event the Company fails to
repurchase the Notes upon a Change in Control, it would be in default under
the Indenture and the maturity of substantially all of its long-term debt
could be accelerated. See "Description of Notes--Repurchase of Notes Upon a
Change in Control."
Lack of Prior Market for the Exchange Notes
The Exchange Notes are being offered to the holders of the Old
Notes. The Old Notes were offered and sold in March 1998 to "Qualified
Institutional Buyers" and to a limited number of other institutional
"Accredited Investors" (as defined in Rule 144A and Rule 501(a)(1), (2), (3)
or (7) under the Securities Act, respectively) and in offshore transactions
complying with Rule 903 or Rule 904 of Regulation S under the Securities Act
and are eligible for trading in the PORTAL Market.
The Exchange Notes will constitute a new issue of securities
for which there is currently no established trading market, and the Exchange
Notes may not be widely distributed. Although the Initial Purchaser is making
a market in the Old Notes and has indicated to the Company that it currently
intends to make a market in the Exchange Notes, as permitted by applicable
laws and regulations, it is not obligated to do so and any such market-making
may be discontinued at any time without notice at the sole discretion of the
Initial Purchaser. In addition, such market making activities may be limited
during the Exchange Offer and the tendency of a Shelf Registration Statement.
Accordingly, no assurance can be given that an active trading market for the
Exchange Notes will develop. If a market for any of the Exchange Notes does
develop, the price of such Exchange Notes may fluctuate and liquidity may be
limited. If a market for any of the Exchange Notes does not develop,
purchasers may be unable to resell such Exchange Notes for an extended period
of time, if at all. The Company has agreed to list the Exchange Notes on the
American Stock Exchange or on such other stock exchange or market as the
Common Stock is then principally traded no later than the earliest to occur of
(i) the effectiveness of the this Exchange Offer Registration Statement and
(ii) the effectiveness of the Shelf Registration Statement, provided that such
Exchange Notes meet the minimum requirements for listing on any such exchange
or market, and, if applicable, to maintain such listing for so long as any of
the Exchange Notes is outstanding.
Historically, the market for non-investment grade debt has been
subject to disruptions that have caused substantial volatility in the prices
of such securities. There can be no assurance that the market for the Old
Notes or the Exchange Notes will not be subject to similar disruptions. Any
such disruptions may have an adverse effect on holders of the Old Notes or the
Exchange Notes.
Consequences of Failure to Exchange
Holders of Old Notes who do not exchange their Old Notes for
Exchange Notes pursuant to the Exchange Offer will continue to be subject to
the restrictions on transfer of such Old Notes as set forth in the legend
thereon. In general, the Old Notes may not be offered or sold, unless
registered under the Securities Act, except pursuant to an exemption from, or
in a transaction not subject to the Securities Act and applicable state
securities laws. The Company does not intend to register the Old Notes under
the Securities Act. The Company believes that, based upon interpretations
contained in letters issued to third parties by the staff of the SEC, Exchange
Notes issued pursuant to the Exchange Offer in exchange for Old Notes may be
offered for resale, resold or otherwise transferred by each Holder thereof
(other than a broker-dealer, as set forth below, and any such Holder which is
an "affiliate" of the Company within the meaning of Rule 405 under the
Securities Act) without compliance with the registration and prospectus
delivery provisions of the Securities Act provided that such Exchange Notes
are acquired in the ordinary course of such Holder's business and such Holder
has no arrangement or understanding with any person to participate in the
distribution of such Exchange Notes. Eligible Holders wishing to accept the
Exchange Offer must represent to the Company in the Letter of Transmittal that
(i) the Exchange Notes acquired pursuant to the Exchange Offer are being
obtained in the ordinary course of business of the person receiving such
Exchange Notes, whether or not such person is such holder, (ii) neither the
holder of Old Notes nor any such other person has an arrangement or
understanding with any person to participate in the distribution of such
Exchange Notes, (iii) if the holder is not a broker-dealer or is a
broker-dealer but will not receive Exchange Notes for its own account in
exchange for Old Notes, neither the holder nor any such other person is
engaged in or intends to participate in a distribution of the Exchange Notes
and (iv) neither the holder nor any such other person is an "affiliate" of the
Company within the meaning of Rule 405 or if such holder is an "affiliate",
that such holder will comply with the registration and prospectus delivery
requirements of the Securities Act to the extent applicable. Each
broker-dealer (whether or not it is also an "affiliate") that receives
Exchange Notes for its own account pursuant to the Exchange Offer must
represent that the Old Notes tendered in exchange therefor were acquired as a
result of market-making activities or other trading activities and must
acknowledge that it will deliver a prospectus in connection with any resale of
such Exchange Notes. The Letter of Transmittal states that by so acknowledging
and by delivering a prospectus, a broker-dealer will not be deemed to admit
that it is an "underwriter" within the meaning of the Securities Act. This
Prospectus, as it may be amended or supplemented from time to time, may be
used by a broker-dealer in connection with the resales of Exchange Notes
received in exchange for Old Notes where such Old Notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities. The Company has agreed that, for a period of 180 days after the
Expiration Date (as defined herein), it will make this Prospectus available to
any broker-dealer for use in connection with any such resale. See "Plan of
Distribution." However, to comply with the securities laws of certain
jurisdictions, if applicable, the Exchange Notes may not be offered or sold
unless they have been registered or qualified for sale in such jurisdiction or
an exemption from registration or qualification is available and is complied
with. The Company does not currently intend to take any action to register or
qualify the Exchange Notes for resale in any such jurisdictions.
In the event the Exchange Offer is consummated, the Company
will not be required to register the transfer of the Old Notes under the
Securities Act or any applicable securities laws. In such event, holders of
Old Notes seeking liquidity in their investment would have to rely on
exemptions to the registration requirements under such laws. The Old Notes
currently may be sold to "Qualified Institutional Buyers" and to a limited
number of other institutional "Accredited Investors" (as defined in Rule 144A
and Rule 501(a) (1), (2), (3) or (7) under the Securities Act, respectively)
and in offshore transactions complying with Rule 903 or Rule 904 of Regulation
S under the Securities Act or pursuant to another available exemption under
the Securities Act without registration under the Securities Act. To the
extent that Old Notes are tendered and accepted in the Exchange Offer, the
reduction in the principal amount of Old Notes outstanding could have an
adverse effect upon, and increase the volatility of the market price for, the
untendered and tendered but unaccepted Old Notes.
Exchange Offer Procedures
To participate in the Exchange Offer, and avoid the
restrictions on Old Notes, each holder of Old Notes must transmit a properly
completed Letter of Transmittal, including all other documents required by
such Letter of Transmittal, to the First Security Bank, National Association
(the "Exchange Agent") at the address set forth below under "The Exchange
Offer -- Procedures for Tendering -- Exchange Agent" on or prior to the
Expiration Date. In addition, (i) certificates for such Old Notes must be
received by the Exchange Agent along with the Letter of Transmittal, (ii) a
timely confirmation of a book-entry transfer (a "Book-Entry Confirmation") of
such Old Notes, if such procedure is available, into the Exchange Agent's
account at The Depository Trust Company ("DTC" or the "Depositary") pursuant
to the procedure for book-entry transfer described below, must be received by
the Exchange Agent prior to the Expiration Date or (iii) the Holder must
comply with the guaranteed delivery procedures. See "The Exchange Offer."
USE OF PROCEEDS
The Company will not receive any proceeds from the Exchange
Offer. The Company has agreed to pay the expenses of the Exchange Offer. No
underwriter is being used in connection with the Exchange Offer.
THE EXCHANGE OFFER
Purpose of the Exchange Offer
On March 3, 1998, the Company issued $150 million aggregate
principal amount of Old Notes to the Initial Purchaser. In connection with the
issuance and sale of the Old Notes, the Company entered into the Registration
Rights Agreement with the Initial Purchaser, which obligated the Company to
(i) file the Registration Statement of which this Prospectus is a part for the
Exchange Offer within 60 days after March 3, 1998, the date the Old Notes were
issued (the "Issue Date"), (ii) use its best efforts to cause the Registration
Statement to become effective within 150 days after the Issue Date, and (iii)
consummate the Exchange Offer within 180 days of the Issue Date. A copy of the
Registration Rights Agreement has been filed as an exhibit to the Registration
Statement of which this Prospectus is a part. The Exchange Offer is being made
pursuant to the Registration Rights Agreement to satisfy the Company's
obligations thereunder.
Based on interpretations by the staff of the Commission, as set
forth in no-action letters issued to Exxon Capital Holdings Corporation
(available May 13, 1988), Morgan Stanley & Co. Incorporated (available June 5,
1991), Mary Kay Cosmetics, Inc. (available June 5, 1991) and Warnaco, Inc.
(available October 11, 1991), the Company believes that a holder who exchanges
Old Notes for Exchange Notes pursuant to the Exchange Offer may offer for
resale, resell and otherwise transfer such Exchange Notes without compliance
with the registration and prospectus delivery requirements of the Securities
Act; provided, that (i) such Exchange Notes are acquired in the ordinary
course of such holder's business, (ii) such holder is not engaged in, and does
not intend to engage in, a distribution of such Exchange Notes and has no
arrangement with any person to participate in the distribution of such
Exchange Notes, and (iii) such holder is not an affiliate of the Company (as
defined under Rule 405 of the Securities Act). However, the staff of the
Commission has not considered the Exchange Offer in the context of a no-action
letter and there can be no assurance that the staff of the Commission would
make a similar determination with respect to the Exchange Offer as in such
other circumstances. A holder who exchanges Old Notes for Exchange Notes
pursuant to the Exchange Offer with the intention to participate in a
distribution of the Exchange Notes may not rely on the staff's position
enunciated in the Exxon Capital Letter, the Morgan Stanley Letter or similar
letters 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 Exchange Notes for its own account in
exchange for Old Notes, where such Old Notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such Exchange Notes. See "Plan of Distribution." The Letter
of Transmittal states that by so acknowledging and by delivering a prospectus,
a broker-dealer will not be deemed to admit that it is an "underwriter" within
the meaning of the Securities Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of Exchange Notes (other than a resale of an unsold allotment
from the original sale of the Notes) received in exchange for Old Notes where
such Old Notes were acquired by such broker-dealer as a result of
market-making activities or other trading activities. The Company has agreed
that, for a period of 180 days after the Expiration Date, it will make this
Prospectus available to any broker-dealer for use in connection with any such
resale. See "Plan of Distribution."
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 (which together
constitute the Exchange Offer), the Company will accept any and all Old Notes
validly tendered and not withdrawn prior to 5:00 p.m., New York City time, on
the Expiration Date. The Company will issue a principal amount at maturity of
Exchange Notes in exchange for an equal principal amount at maturity of
outstanding Old Notes validly tendered pursuant to the Exchange Offer and not
withdrawn prior to the Expiration Date. Old Notes may only be tendered in
integral multiples at maturity of $1,000. Holders may tender some or all of
their Old Notes pursuant to the Exchange Offer.
The terms of the Exchange Notes and the Old Notes are
substantially identical in all material respects, except that (i) the exchange
will be registered under the Securities Act and, therefore, the Exchange Notes
will not bear legends restricting the transfer of such Exchange Notes, and
(ii) holders of the Exchange Notes will not be entitled to any of the
registration rights of holders of Old Notes under the Registration Rights
Agreement, which rights will terminate upon the consummation of the Exchange
Offer. See "Description of Notes." The Exchange Notes will evidence the same
indebtedness as the Old Notes. The Exchange Notes will be issued under and
entitled to the benefits of the Indenture pursuant to which the Old Notes were
issued such that the Exchange Notes and Old Notes will be treated as a single
class of debt securities under the Indenture.
As of the date of this Prospectus, $150 million aggregate
principal amount at maturity of the Old Notes are outstanding. This
Prospectus, together with the Letter of Transmittal, is being sent to all
registered holders of the Old Notes.
Holders of Old Notes do not have any appraisal or dissenters'
rights under the DGCL or the Indenture in connection with the Exchange Offer.
The Company intends to conduct the Exchange Offer in accordance with the
provisions of the Registration Rights Agreement and the applicable
requirements of the Exchange Act, and the rules and regulations of the
Commission thereunder. Old Notes which are not tendered and were not
prohibited from being tendered for exchange in the Exchange Offer will remain
outstanding and continue to accrue interest and to be subject to transfer
restrictions, but will not be entitled to any rights or benefits under the
Registration Rights Agreement.
Upon satisfaction or waiver of all the conditions to the
Exchange Offer, the Company will accept, promptly after the Expiration Date,
all Old Notes properly tendered and not withdrawn and will issue Exchange
Notes in exchange therefor promptly after acceptance of the Old Notes. For
purposes of the Exchange Offer, the Company shall be deemed to have accepted
properly tendered Old Notes for exchange when, as and if, the Company has
given oral or written notice thereof to the Exchange Agent. The Exchange Agent
will act as agent for the tendering holders for the purposes of receiving the
Exchange Notes from the Company.
In all cases, issuance of Exchange Notes for Old Notes that are
accepted for exchange pursuant to the Exchange Offer will be made only after
timely receipt by the Exchange Agent of such Old Notes, a properly completed
and duly executed Letter of Transmittal and all other required documents;
provided, however, that the Company reserves the absolute right to waive any
defects or irregularities in the tender or conditions of the Exchange Offer.
If any tendered Old Notes are not accepted for any reason set forth in the
terms and conditions of the Exchange Offer or if Old Notes are submitted for a
greater principal amount at maturity than the holder desires to exchange, such
unaccepted or nonexchanged Old Notes or substitute Old Notes evidencing the
unaccepted portion, as appropriate, will be returned without expense to the
tendering holder thereof as promptly as practicable after the expiration or
termination of the Exchange Offer.
Holders who tender Old Notes in the Exchange Offer will not be
required to pay brokerage commissions or fees or, subject to the instructions
in the Letter of Transmittal, transfer taxes with respect to the exchange of
Old Notes pursuant to the Exchange Offer. The Company will pay all charges and
expenses, other than certain applicable taxes described below, in connection
with the Exchange Offer. See "--Fees and Expenses."
Expiration Date; Extension; Amendments
The term "Expiration Date" shall mean 5:00 p.m., New York City
time, on ___________, 1998 (30 days following the commencement of the Exchange
Offer), unless the Company, in its sole discretion, extends the Exchange Offer,
in which case the term "Expiration Date" will mean the latest date and time to
which the Exchange Offer is extended.
In order to extend the Exchange Offer, the Company will notify
the Exchange Agent of any extension by oral or written notice and will mail to
the registered holders an announcement thereof, prior to 9:00 a.m., New York
City time, on the next business day after the then Expiration Date.
The Company reserves the right, in its sole discretion, (i) to
delay accepting any Old Notes, to extend the Exchange Offer or to terminate
the Exchange Offer if any of the conditions set forth below under
"--Conditions" shall not have been satisfied, by giving oral or written notice
of such delay, extension or termination to the Exchange Agent or (ii) to amend
the terms of the Exchange Offer. Any such delay in acceptance, extension,
termination or amendment will be followed as promptly as practicable by oral
or written notice thereof to the registered holders. If the Exchange Offer is
amended in a manner determined by the Company to constitute a material change,
the Company will promptly disclose such amendment in a manner reasonably
calculated to inform the holders of Old Notes of such amendment.
Without limiting the manner in which the Company may choose to
make a public announcement of any delay, extension, amendment or termination
of the Exchange Offer, the Company shall have no obligation to publish,
advertise, or otherwise communicate any such public announcement, other than
by making a timely release to an appropriate news agency.
Interest on the Exchange Notes
The Exchange Notes will bear interest from March 3, 1998 at the
rate of 11 3/8% per annum, payable semi-annually in arrears, in cash, on March
1 and September 1 of each year, commencing September 1, 1998. Holders of Old
Notes whose Old Notes are accepted for exchange will be deemed to have waived
the right to receive any payment in respect of interest on the Old Notes
accrued from March 3, 1998 until the date of the issuance of the Exchange
Notes. Consequently, holders who exchange their Old Notes for Exchange Notes
will receive the same interest payment on September 1, 1998 (the first
interest payment date with respect to the Old Notes and the Exchange Notes)
that they would have received had they not accepted the Exchange Offer.
Conditions
Notwithstanding any other term of the Exchange Offer, the
Company will not be required to exchange any Exchange Notes for any Old Notes,
and may terminate or amend the Exchange Offer before the acceptance of any Old
Notes for exchange, if: (a) any action or proceeding is instituted or
threatened in any court or by or before any governmental agency with respect
to the Exchange Offer which seeks to restrain or prohibit the Exchange Offer
or, in the Company's judgment, would materially impair the ability of the
Company to proceed with the Exchange Offer, or (b) any law, statute, rule or
regulation is proposed, adopted or enacted, or any existing law, statute,
rule, order or regulation is interpreted, by any government or governmental
authority which, in the Company's judgment, would materially impair the
ability of the Company to proceed with the Exchange Offer, or (c) the Exchange
Offer or the consummation thereof would otherwise violate or be prohibited by
applicable law.
If the Company determines in its sole discretion that any of
these conditions are not satisfied, the Company may (i) refuse to accept any
Old Notes and return all tendered Old Notes to the tendering holders, (ii)
extend the Exchange Offer and retain all Old Notes tendered prior to the
expiration of the Exchange Offer, subject, however, to the rights of holders
who tendered such Old Notes to withdraw their tendered Old Notes, or (iii)
waive such unsatisfied conditions with respect to the Exchange Offer and
accept all properly tendered Old Notes which have not been withdrawn. If the
Company's waiver constitutes a material change to the Exchange Offer, the
Company will promptly disclose such waiver by means of a prospectus supplement
that will be distributed to the registered holders, and the Company will
extend the Exchange Offer for a period of five to ten business days, depending
upon the significance of the waiver and the manner of disclosure to the
registered holders, if the Exchange Offer would otherwise expire during such
five to ten business day period.
The foregoing conditions are for the sole benefit of the
Company and may be asserted by the Company regardless of the circumstances
giving rise to any such condition or may be waived by the Company in whole or
in part at any time and from time to time in its sole discretion. The
Company's failure at any time to exercise any of the foregoing rights will not
be deemed a waiver of any such right, and each such right will be deemed an
ongoing right which may be asserted at any time and from time to time. Any
determination by the Company concerning the events described above will be
final and binding on all parties. NO VOTE OF THE COMPANY'S SECURITYHOLDERS IS
REQUIRED TO EFFECT THE EXCHANGE OFFER AND NO SUCH VOTE (OR PROXY THEREFOR) IS
BEING SOUGHT HEREBY.
Procedures for Tendering
Only a holder of Old Notes may tender such Old Notes in the
Exchange Offer. To tender in the Exchange Offer, a holder must (i) complete,
sign and date the Letter of Transmittal, or a facsimile thereof, have the
signatures thereon guaranteed if required by the Letter of Transmittal, and
mail or otherwise deliver such Letter of Transmittal or such facsimile,
together with the Old Notes (unless such tender is being effected pursuant to
the procedure for book-entry transfer described below) and any other required
documents, to the Exchange Agent prior to 5:00 p.m., New York City time, on
the Expiration Date, or (ii) comply with the guaranteed delivery procedures
described below. Delivery of all documents must be made to the Exchange Agent
at its address set forth herein. Each broker-dealer that receives Exchange
Notes for its own account in exchange for Old Notes, where such Notes were
acquired by such broker-dealer as a result of market-making activities or
other trading activities, must acknowledge that it will deliver a prospectus in
connection with the resale of such Exchange Notes. See "Plan of Distribution."
The tender of Old Notes by a holder as set forth below will
constitute an agreement between such holder and the Company in accordance with
the terms and subject to the conditions set forth in this Prospectus and in
the Letter of Transmittal.
THE METHOD OF DELIVERY OF OLD NOTES AND THE LETTER OF
TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE
ELECTION AND RISK OF THE HOLDER. 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 DELIVERY TO THE EXCHANGE
AGENT BEFORE THE EXPIRATION DATE. NO LETTER OF TRANSMITTAL OR OLD NOTES SHOULD
BE SENT TO THE COMPANY. HOLDERS MAY REQUEST THEIR RESPECTIVE BROKERS, DEALERS,
COMMERCIAL BANKS, TRUST COMPANIES OR NOMINEES TO EFFECT THE ABOVE TRANSACTIONS
FOR SUCH HOLDERS.
Any beneficial owner(s) whose Old Notes are registered in the
name of a broker, dealer, commercial bank, trust company or other nominee and
who wishes to tender should contract the registered holder promptly and
instruct such registered holder to tender on such beneficial owner's behalf.
If such beneficial owner wishes to tender on such owner's own behalf, such
owner must, prior to completing and executing the Letter of Transmittal and
delivering such owner's Old Notes, either make appropriate arrangement to
register ownership of the Old Notes in such owner's name or obtain a properly
completed bond power from the registered holder. The transfer of registered
ownership may take considerable time.
Signatures on a Letter of Transmittal or a notice of withdrawal
(described below), as the case may be, must be guaranteed by an "eligible
guarantor institution" (banks, stockbrokers, savings and loan associations and
credit unions with membership in an approved signature guarantee medallion
program), pursuant to Rule 17Ad-15 under the Exchange Act (an "Eligible
Institution") unless the Old Notes tendered pursuant thereto are tendered (i)
by a registered holder who has not completed the box entitled "Special
Issuance Instructions" or "Special Delivery Instructions" on the Letter of
Transmittal or (ii) for the account of an Eligible Institution.
If a person other than the registered holder of any Old Notes
listed therein signs the Letter of Transmittal, such Old Notes must be
endorsed or accompanied by a properly completed bond power, signed by such
registered holder as such registered holder's name appears on such Old Notes,
with the signature thereon guaranteed by an Eligible Institution. If the
Letter of Transmittal or any Old 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, such
persons should so indicate when signing, and unless waived by the Company,
evidence satisfactory to the Company of their authority to so act must be
submitted with the Letter of Transmittal.
The Company will determine, in its sole discretion, all
questions as to the validity, form, eligibility (including time of receipt),
acceptance of tendered Old Notes and withdrawal of tendered Old Notes and the
Company's determination will be final and binding. The Company reserves the
absolute right to reject any and all Old Notes not properly tendered or any
Old Notes the Company's acceptance of which would, in the opinion of counsel
for the Company, be unlawful. The Company also reserves the right to waive any
defects, irregularities or conditions of tender as to particular Old Notes.
The Company's 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 Old Notes must be cured within such time as the
Company shall determine. Although the Company intends to notify holders of
defects or irregularities with respect to tenders of Old Notes, neither the
Company, the Exchange Agent nor any other person shall incur any liability for
failure to give such notification. Tenders of Old Notes will not be deemed to
have been made until such defects or irregularities have been cured or waived.
Any Old 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 by the Exchange Agent to the tendering holders, unless
otherwise provided in the Letter of Transmittal, as soon as practicable
following the Expiration Date.
In addition, the Company reserves the right in its sole
discretion to purchase or make offers for any Old Notes that remain
outstanding subsequent to the Expiration Date or, as set forth above under
"Conditions," to terminate the Exchange Offer and, to the extent permitted by
applicable law, to purchase Old Notes in the open market, in privately
negotiated transactions or otherwise. The terms of any such purchases or
offers could differ from the terms of the Exchange Offer.
By tendering, each holder will represent to the Company that,
among other things, (i) the Notes to be acquired pursuant to the Exchange
Offer are being obtained in the ordinary course of business of such holder,
(ii) such holder has no arrangement or understanding with any person to
participate in the distribution (within the meaning of the Securities Act) of
the Exchange Notes and (iii) such holder is not an "affiliate," as defined in
Rule 405 under the Securities Act, of the Company, or that if it is an
"affiliate," it will comply with applicable registration and prospectus
delivery requirements of the Securities Act.
Book-Entry Transfer
Within two business days after the date of this Prospectus, the
Exchange Agent will make a request to establish an account with respect to the
Old Notes at the book-entry transfer facility for the Old Notes, DTC, for
purposes of the Exchange Offer. Any financial institution that is a
participant in DTC's systems may make book-entry delivery of Old Notes by
causing DTC to transfer such Old Notes into the Exchange Agent's account with
respect to the Old Notes in accordance with DTC's procedures for such
transfer. Although delivery of Old Notes may be effected through book-entry
transfer into the Exchange Agent's account at DTC, an appropriate Letter of
Transmittal with any required signature guarantee and all other required
documents must in each case be transmitted to and received and 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 such procedures.
Guaranteed Delivery Procedures
Holders who wish to tender their Old Notes and (i) whose Old
Notes are not immediately available, (ii) who cannot deliver their Old Notes,
the Letter of Transmittal or any other required documents to the Exchange
Agent prior to the Expiration Date, or (iii) who cannot complete the
procedures for book-entry transfer of Old Notes to the Exchange Agent's
account with DTC prior to the Expiration Date, may effect a tender if:
(a) The tender is made through an Eligible Institution;
(b) On or prior to the Expiration Date, the Exchange Agent
receives from such Eligible Institution (by facsimile transmission, mail or
hand delivery) a properly completed and duly executed notice of guaranteed
delivery substantially in the form provided by the Company (the "Notice of
Guaranteed Delivery"), setting forth the name and address of the holder, the
certificate number(s) of such Old Notes (if possible) and the principal amount
at maturity of Old Notes tendered, stating that the tender is being made
thereby and guaranteeing that, within five business trading days after the
Expiration Date, (i) the Letter of Transmittal (or facsimile thereof) together
with the certificate(s) representing the Old Notes and any other documents
required by the Letter of Transmittal will be deposited by the Eligible
Institution with the Exchange Agent, or (ii) that book-entry transfer of such
Old Notes into the Exchange Agent's account at DTC will be effected and
confirmation of such book-entry transfer will be delivered to the Exchange
Agent; and
(c) Such properly completed and executed Letter of Transmittal
(or facsimile thereof), as well as the certificate(s) representing all
tendered Old Notes in proper form for transfer and all other documents
required by the Letter of Transmittal, or confirmation of book-entry transfer
of the Old Notes into the Exchange Agent's account at DTC, are received by the
Exchange Agent within five business trading days after the Expiration Date.
Upon request to the Exchange Agent, a Notice of Guaranteed
Delivery will be sent to holders who wish to tender their Old Notes according
to the guaranteed delivery procedures set forth above.
Withdrawal of Tenders
Except as otherwise provided herein, tenders of Old Notes may
be withdrawn at any time prior to 5:00 p.m., New York City time, on the
Expiration Date.
To withdraw a tender of Old Notes in the Exchange Offer, the
Exchange Agent must receive at its address set forth herein a telegram, telex,
facsimile transmission or letter indicating notice of withdrawal prior to 5:00
p.m., New York City time, on the Expiration Date. Any such notice of
withdrawal must (i) specify the name of the person having tendered the Old
Notes to be withdrawn (the "Depositor"), (ii) identify the Old Notes to be
withdrawn (including the certificate number or numbers and principal amount at
maturity of such Old Notes), (iii) be signed by the holder in the same manner
as the original signature on the Letter of Transmittal by which such Old Notes
were tendered (including any required signature guarantees) or be accomplished
by documents of transfer sufficient to have the Trustee with respect to the
Old Notes register the transfer of such Old Notes into the name of the person
withdrawing the tender and (iv) specify the name in which any such Old Notes
are to be registered, if different from that of the Depositor. If Old Notes
have been tendered pursuant to the procedure for book-entry transfer, any
notice of withdrawal must specify the name and number of the account at DTC to
be credited with the withdrawn Old Notes or otherwise comply with DTC's
procedures. All questions as to the validity, form and eligibility (including
time of receipt) of such notices will be determined by the Company, whose
determination shall be final and binding on all parties. Any Old Notes so
withdrawn will be deemed not to have been validly tendered for purposes of the
Exchange Offer and no Exchange Notes will be issued with respect thereto
unless the Old Notes so withdrawn are validly retendered. Any Old Notes which
have been tendered but which are not accepted for payment will be returned to
the holder thereof without cost to such holder as soon as practicable after
withdrawal, rejection of tender or termination of the Exchange Offer. Properly
withdrawn Old Notes may be retendered by following one of the procedures
described above under "--Procedures for Tendering" at any time prior to the
Expiration Date.
Untendered Old Notes
Holders of Old Notes whose Old Notes are not tendered or are
tendered but not accepted in the Exchange Offer will continue to hold such Old
Notes and will be entitled to all the rights and preferences and subject to
the limitations applicable thereto under the Indenture. Following consummation
of the Exchange Offer, the holders of Old Notes will continue to be subject to
the existing restrictions upon transfer contained in the legend thereon. In
general, the Old Notes may not be offered for resale or resold, unless
registered under the Securities Act, except pursuant to an exemption from, or
in a transaction not subject to, the Securities Act and applicable state
securities laws. The Company will have no further obligations to such holders,
other than the Initial Purchaser, to provide for the registration under the
Securities Act of the Old Notes held by them after the Expiration Date. To the
Extent that Old Notes are tendered and accepted in the Exchange Offer, the
trading market for untendered and tendered but unaccepted Old Notes could be
adversely affected.
Exchange Agent
First Securities Bank, National Association, has been appointed
as Exchange Agent of the Exchange Offer. Questions and requests for
assistance, requests for additional copies of this Prospectus or of the Letter
of Transmittal and requests for Notices of Guaranteed Delivery should be
directed to the Exchange Agent addressed as follows:
By Mail, Overnight Courier or Hand:
First Security Bank, National Association
79 South Main Street
Salt Lake City, Utah 84111
Attention: Corporate Trust Department
(registered or certified mail recommended)
Telephone: 801/246-5630
Facsimile: 801/246-5053
Delivery to an address other than as set forth above or
transmission of instructions via facsimile to a number other than as set forth
above will not constitute a valid delivery.
Fees and Expenses
The Company will bear the expenses of soliciting tenders. The
principal solicitation is being made by mail; however, officers and regular
employees of the Company and its affiliates may make additional solicitation by
telegraph, facsimile transmission, telephone or in person.
The Company has not retained any dealer-manager in connection
with the Exchange Offer and will not make any payments to brokers, dealers or
other soliciting acceptances of the Exchange Offer. The Company, 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
therewith.
The Company will pay the cash expenses to be incurred in
connection with the Exchange Offer. Such expenses include registration fees
and expenses of the Exchange Agent and Trustee, accounting and legal fees and
printing costs, among others.
The Company will pay any and all transfer taxes applicable to
the exchange of Old Notes pursuant to the Exchange Offer. If, however,
certificates representing Exchange Notes or Old Notes for principal amounts
not tendered or accepted for exchange are to be delivered to, or are to be
registered or issued in the name of, any person other than the registered
holder of the Old Notes tendered, or if tendered Old Notes are registered in
the name of any person other than the person signing the Letter of
Transmittal, or if a transfer tax is imposed for any reason other than the
exchange of Old Notes pursuant to the Exchange Offer, satisfactory evidence of
the payment of the amount of any such transfer taxes must be submitted with
the Letter of Transmittal (whether imposed on the registered holder or any
other person). Certificates representing Exchange Notes will not be issued to
such persons until satisfactory evidence of the payment of such taxes, or an
exemption therefrom, is submitted.
Consequences of Failure to Exchange
Upon consummation of the Exchange Offer, holders that were not
prohibited from participating in the Exchange Offer and did not tender their
Old Notes will not have any registration rights under the Registration Rights
Agreement with respect to such nontendered Old Notes and, accordingly, such
Old Notes will continue to be subject to the restrictions on transfer
contained in the legend thereon as a consequence of the issuance of the Old
Notes pursuant to exemptions from or in transactions not subject to, the
registration requirements of the Securities Act and applicable state
securities laws. In general, the Old Notes may not be offered for resale or
resold, unless registered under the Securities Act, except pursuant to an
exemption from, or in a transaction not subject to, the Securities Act and
applicable state securities laws. The Company does not intend to register the
Old Notes under the Securities Act. The Exchange Notes may not be offered or
sold unless they have been registered or qualified for sale under applicable
state securities laws or an exemption from registration or qualification is
available and is complied with. The Registration Rights Agreement requires the
Company to register the Exchange Notes in any jurisdiction requested by the
holders, subject to certain limitations. To the extent the Old Notes are
tendered and accepted in the Exchange Offer, the trading market for untendered
and tendered but unaccepted Old Notes could be adversely affected.
Resale of the Exchange Notes
Under existing interpretations of the staff of the Commission
contained in several no-action letters to third parties, the Exchange Notes
would in general be freely transferable after the Exchange Offer without
further registration under the Securities Act. However, any purchaser of Old
Notes who intends to participate in the Exchange Offer for the purpose of
distributing the Exchange Notes (i) would not be able to rely on the
interpretation of the staff of the Commission, (ii) will not be able to tender
its Old Notes in the Exchange Offer and (iii) must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any sale or transfer of the Notes unless such sale or transfer
is made pursuant to an exemption from such requirements. By executing the
Letter of Transmittal, each holder of the Old Notes will represent that (i) it
is not an affiliate of the Company or if such Holder is an "affiliate," that
such Holder will comply with the registration and prospectus delivery
requirements of the Securities Act to the extent applicable, (ii) any Exchange
Notes to be received by it were acquired in the ordinary course of its
business and (iii) at the time of commencement of the Exchange Offer, it had
no arrangement with any person to participate in the distribution (within the
meaning of the Securities Act) of the Exchange Notes. In addition, in
connection with any resales of Exchange Notes, any broker-dealer (a
"Participating Broker-Dealer") who acquired the Notes for its own account as a
result of market-making or other trading activities must deliver a prospectus
meeting the requirements of the Securities Act. The Commission has taken the
position that Participating Broker-Dealers may fulfill their prospectus
delivery requirements with respect to the Exchange Notes (other than a resale
of an unsold allotment from the original sale of the Old Notes) with the
prospectus contained in the Exchange Offer Registration Statement. Under the
Registration Rights Agreement, the Company is required to allow Participating
Broker-Dealers and other persons, if any, subject to similar prospectus
delivery requirements to use this Prospectus as it may be amended or
supplemented from time to time, in connection with the resale of such Exchange
Notes.
Other
Participation in the Exchange Offer is voluntary and holders
should carefully consider whether to accept. Holders of the Old Notes are
urged to consult their financial and tax advisors in making their own
decisions on what action to take.
Upon consummation of the Exchange Offer, holders who were not
prohibited from participating in the Exchange Offer and who did not tender
their Old Notes will not have any registration rights under the Registration
Rights Agreement with respect to such nontendered Old Notes and such Old Notes
will continue to be subject to the restrictions on transfer contained in the
legend thereon. Accordingly, such Old Notes may not be offered, sold, pledged
or otherwise transferred except (i) to a person whom the seller reasonably
believes is a "Qualified Institutional Buyer" within the meaning of Rule 144A
under the Securities Act purchasing for its own account or for the account of
a Qualified Institutional Buyer in a transaction meeting the requirements of
Rule 144A, (ii) in an offshore transaction complying with Rule 904 of
Regulation S under the Securities Act, (ii) pursuant to an exemption from
registration under the Securities Act provided by Rule 144 thereunder (if
available), (iv) pursuant to an effective registration statement under the
Securities Act or (v) to the Company and, in each case, in accordance with all
other applicable securities laws.
Accounting Treatment
The Exchange Notes will be recorded in the Company's accounting
records at the same carrying value as the Old Notes as reflected in the
Company's accounting records on the date of the exchange. Accordingly, the
Company will recognize no gain or loss for accounting purposes upon the
consummation of the Exchange Offer. The expenses of the Exchange Offer will be
amortized over the remaining term of the Exchange Notes.
THE COMPANY
TWA is the eighth largest U.S. air carrier (based on RPMs for
the full-year 1997), whose primary business is transporting passengers, cargo
and mail. During 1997, the Company carried approximately 23.4 million
passengers and flew approximately 25.1 billion RPMs. As of December 31, 1997,
TWA provided regularly scheduled jet service to 89 cities in the United
States, Mexico, Europe, the Middle East, Canada and the Caribbean. As of
December 31, 1997, the Company operated a fleet of 185 jet aircraft.
North American Route Structure
TWA's North American operations have a hub-and-spoke structure,
with a primarily domestic hub at St. Louis and a domestic-international hub at
JFK. The North American system serves 36 states, the District of Columbia,
Puerto Rico, Mexico, Canada and the Caribbean. The JFK and St. Louis hub
systems are designed to allow TWA to support both its North American and
transatlantic connecting flights. During 1997, TWA's North American revenues
accounted for approximately 85.9% of its total revenues versus approximately
81.7% during the same period of 1996.
St. Louis
TWA is the predominant carrier at St. Louis, with approximately
365 scheduled daily departures as of December 31, 1997 serving 79 cities. In
1997, TWA had approximately a 74.5% share of airline passenger enplanements in
St. Louis, excluding all commuter flights, while the next largest competitor
enplaned approximately 12.6%. Since 1995, TWA has added service from its St.
Louis hub to Reno, Nevada, Knoxville, Tennessee, Shreveport, Louisiana,
Steamboat Springs, Colorado, Palm Springs, California, Toronto, Canada and the
Mexican resort cities of Cancun, Puerto Vallarta and Ixtapa/Zihuatenejo.
JFK
TWA serves 26 domestic and international cities from its JFK
hub, with approximately 40 daily departures. JFK is both the Company's and the
industry's largest international gateway from North America. The Company offers
non-stop flights from JFK to 8 cities in Europe and the Middle East as well as
17 destinations in the U.S. and the Caribbean.
Commuter Feed
TWA coordinates operation of its commuter feed into the
Company's hubs at St. Louis and JFK with Trans States Airlines, Inc. ("Trans
States"). Trans States, an independently owned regional commuter carrier,
currently operates approximately 169 daily flights into St. Louis and 56
flights into JFK. Trans States' operations are coordinated to feed TWA's North
American and international flights. Management believes that these commuter
operations are an important source of traffic into the Company's domestic and
international route networks.
International Route Structure
TWA's international operations consist of both nonstop and
through service from JFK and St. Louis to destinations in Europe and the
Middle East. TWA's international operations are concentrated at JFK, where TWA
has built a hub system primarily designed to provide domestic traffic feed for
its transatlantic service. International cities served include: Barcelona,
Cairo, Lisbon, Madrid, Milan, Riyadh, Rome, Tel Aviv from JFK; Paris from JFK
and St. Louis; and London-Gatwick from St. Louis. On January 13, 1997, as part
of its plans to improve the operating and financial performance of its
international operations, the Company discontinued service on certain European
routes, including JFK to Frankfurt and Boston to Paris, as well as non-stop
feed service to JFK from several domestic cities. In addition, service to
Athens was discontinued on April 18, 1997. In 1997, TWA's international
passenger revenues accounted for approximately 14.1% of total revenues versus
approximately 18.3% in 1996.
On April 28, 1997, TWA announced it had filed an application
with the DOT seeking approval of code-share service with Royal Jordanian
Airline. The DOT approved the code-share on October 1, 1997. The agreement
calls for the joint coding of TWA domestic flights between seven U.S. cities
and JFK and of Royal Jordanian Airline's direct flights between JFK, Amsterdam
and Amman, Jordan. Service began on November 1, 1997. In addition, TWA and
Royal Jordanian Airline recently announced that they have requested an
amendment to their statements of authorization to add additional cities in the
U.S. and in the Persian Gulf area. The DOT has approved the application and
TWA is seeking authority to serve Bahrain, Qatar, Pakistan and India. It is
anticipated that such authority will be received in the second quarter of
1998. On October 24, 1997, TWA announced that it had signed an agreement with
Spanish carrier Air Europa to provide code share service. Under the
agreement, which still requires governmental approval, TWA will place its TW
flight code on Air Europa flights operating between Madrid and Barcelona, on
the one hand, and Palma and Malaga, Spain, on the other hand. Air Europa will
place its UX flight code on TWA flights operating between both Madrid and
Barcelona, on the one hand, and JFK, on the other hand, and to numerous U.S.
points beyond JFK. The code share service is anticipated to commence in the
second quarter of 1998. Pursuant to their agreements, both Royal Jordanian
Airline and Air Europa have moved their operations to the Company's JFK
terminal. On February 11, 1998, TWA announced that it had applied to the DOT
seeking authority to operate 28 frequencies of code share service between St.
Louis and Japan in cooperation with Delta Air Lines ("Delta"). The
application proposed to start code share service to Tokyo and Nagoya as soon
as possible after approval, and to Osaka and Fukuoka on October 28, 1998. TWA
also applied for non-stop route authority from St. Louis to Tokyo beginning
June 1, 1999. On March 16, 1998, the DOT issued an order authorizing the
Company to serve the St. Louis-Tokyo market with seven weekly frequencies and
allocating to the Company fourteen of the weekly frequencies for United
States-Japan code share service. The DOT allowed interested parties ten days
to object and seven additional days to reply to objections. It is anticipated
that a final order will be issued by the DOT in the second quarter.
TWA is exploring the possibility of entering into marketing and
code-share alliances with additional foreign carriers. These alliances, if
consummated, would allow the Company to provide its passengers with extended
service to foreign destinations not served directly by the Company, while
feeding TWA's North American operations from these foreign destinations.
Business Strategy
In late 1996, the Company began implementing certain
initiatives designed to further its strategic objectives. These initiatives
were implemented in response to a significant deterioration in the Company's
operating performance and financial condition during the second half of 1996.
This deterioration was primarily caused by (i) an overly aggressive expansion
of TWA's capacity and planned flight schedule, particularly during the 1996
summer season, which forced the Company to rely disproportionately on
lower-yield feed traffic and bulk ticket sales to fill the increased capacity
of its system; (ii) the delayed delivery of four older 747s intended to
increase capacity for incremental international operations during the summer
of 1996; and (iii) unexpected maintenance delays due to the capacity increase,
higher levels of scheduled narrow-body heavy maintenance and increased
contract maintenance performed for third parties. These factors caused
excessive levels of flight cancellations, poor on-time performance, increased
pilot training costs and higher maintenance expenditures and adversely
affected the Company's yields and unit costs. In addition, the crash of TWA
Flight 800 on July 17, 1996 distracted management's attention from core
operating issues and led to lost bookings and revenues. The Company also
experienced a 27.6% increase in fuel costs in 1996 versus 1995, primarily due
to a 22.3% increase in the average fuel price paid per gallon during the year.
The primary focus of the Company's strategic initiatives,
initially implemented in late 1996, was to reestablish TWA's operational
reliability and schedule integrity and overall product quality in order to
attract higher-yield passengers and enhance overall productivity, which was
intended to improve the Company's financial results. As the initial steps in
implementing this strategy, the Company temporarily reduced its flight
schedule during the first quarter of 1997 to more closely match aircraft
available for active service and worked to reduce the number of aircraft in
maintenance backlog by increasing overtime and maintenance capacity made
available by terminating an unprofitable aircraft maintenance contract with
the U.S. government. The other key initiatives which TWA began implementing
in late 1996 included: (i) acceleration of the Company's fleet renewal plan;
(ii) a restructuring of TWA's operations at JFK; (iii) a focus on improving
productivity; (iv) implementation of a series of revenue-enhancing marketing
initiatives; and (v) implementation of a number of employee-related
initiatives to reinforce the Company's focus on operational performance.
The key elements of the Company's overall ongoing business
strategy, as well as the late 1996 strategic initiatives, are outlined below.
Fleet Upgrade and Simplification
TWA's fleet modernization plans seek to realize operating cost
savings by replacing a number of older, less efficient aircraft with more
modern, technologically advanced, twin-engine, two-pilot aircraft. New flight
equipment acquisition plans initiated in 1996, are intended to achieve a
decrease in operating and maintenance costs as the older, heavier maintenance
aircraft are phased out and replaced by newer aircraft. These changes are
intended to simplify the Company's fleet structure, thereby reducing the
number of aircraft types to decrease overall crew training and aircraft
maintenance costs (although resulting in increased short-term transition crew
training costs). Additional efficiencies should be realized through increased
standardization of aircraft parts, supplies and cabin equipment that must be
inventoried throughout TWA's system. Despite the higher capital costs
associated with owning or leasing new and later model aircraft, the Company
believes that corresponding reductions in operating costs will offset any
increased costs. Management believes this initiative will further improve the
Company's operating performance while allowing the Company to achieve Stage 3
compliance with the Noise Act by the year 2000 and will not require further
fleet reductions.
In the first quarter of 1997, as part of its efforts to improve
near-term operational reliability, the Company announced plans to accelerate
retirement of the 14 747s (four-engine, 3-pilot wide-body jets with an average
age of approximately 25.6 years) and the 11 L-1011s (three-engine, three-pilot
wide-body jets with an average age of approximately 22.6 years) remaining in
its fleet as of December 31, 1996. All of the L-1011s and 747s have been
retired. These older, less efficient and less reliable aircraft have been
replaced with new or later-model used 757, 767 and MD-80 aircraft. Management
believes that these smaller aircraft are more appropriately sized to the
routes served and, by reducing the Company's reliance on lower-yield feed
traffic to fill capacity, have resulted in higher load factors and improved
yields. Further, these newer twin-engine, two-pilot aircraft are expected to
provide efficiencies in fuel, flight crew and maintenance expenses, while
reducing long-term pilot training costs by enabling TWA to have fewer aircraft
types in the fleet. Such aircraft should also permit TWA to more effectively
utilize its yield management system. In 1996, TWA entered into agreements to
lease 10 new 757s and to purchase an additional 10 new 757 aircraft. As of
February 1, 1998, TWA had taken delivery of 15 of such aircraft. The Company
also acquired the right, subject to certain conditions, to purchase up to 20
more new 757 aircraft from the manufacturer. In addition, the Company entered
into agreements with a major operating lessor to lease two 767-300ERs which
were delivered in early 1998. In 1996, the Company entered into an agreement
with the manufacturer to acquire 15 new MD-83s. As of February 1, 1998, the
Company had taken delivery of seven of the MD-83s, and expects to take
delivery of six additional planes during 1998 and two additional planes in
1999. The Company also entered into an agreement for the lease of nine
late-model used MD-82s, which were delivered in 1997 and early 1998. The
Company also intends to retire eight of its older 727s in 1998, which are
expected to be replaced with MD-80s. As of March 31, 1998, TWA had retired two
such 727s. As a result of this fleet restructuring, the Company's mix of
narrow-body and wide-body aircraft shifted to approximately 90%/10% as of
December 31, 1997 versus 80%/20% as of year-end 1996, while TWA's average
number of seats per aircraft declined to 141 from 161 over the same period.
As of December 31, 1997, the average age of its fleet had decreased to 16.9
years from 19.0 years at year-end 1996. In April 1998, the Company entered
into an agreement to purchase from the manufacturer 24 new MD-83 aircraft with
deliveries in 1999. The Company has obtained financing commitments for
long-term debt and lease financing for such aircraft. If TWA takes delivery of
all of these aircraft, and assuming no other changes in the composition of the
Company's fleet, the average age of its fleet as of December 31, 1999 would
decrease to 12.8 years. TWA also entered into an agreement with a third-party
aircraft lessor for the sale and leaseback of 15 Boeing 727-200A aircraft
owned by the Company. The aircraft were delivered on March 31 and April 1,
1998 and leased to TWA under leases which expire in 1999 and 2000. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources--Commitments."
During 1996 and 1997, the Company outfitted 30 of its DC9-30
aircraft with "hush-kits" in order to bring such aircraft into compliance with
Stage 3 requirements of the Noise Act. The Company is considering
"hush-kitting" additional aircraft as well as other alternatives to assure
compliance with Stage 3 noise requirements, in particular the replacement of
such DC9 aircraft with newer model aircraft. See "Business--Regulatory
Matters--Noise Abatement." While the Company is seeking financing for certain
of its planned capital expenditures, a substantial portion of such
expenditures is expected to utilize internally generated funds. The inability
to finance or otherwise fund such expenditures could materially adversely
affect the ability of the Company to continue to implement its strategic plan.
See "Risk Factors--Risk Factors Related to the Company--Liquidity; Substantial
Indebtedness; Capital Expenditure Requirements."
Route Structure Optimization
The Company has been optimizing its route structure by
redeploying assets to markets in which it believes it has a competitive
advantage and limiting its commitments in other markets.
Domestically, the Company believes the greatest opportunities
for improved operating results will continue to come from focusing additional
resources on its St. Louis hub in order to leverage its strong market
position. The Company already dominates operations at St. Louis, with
approximately 74.5% of total enplanements in 1997, excluding commuter traffic.
In addition, the Company enjoys certain advantages in the Midwest due to its
established route system, strong brand identity and concentrated presence in
that market. Because St. Louis is located in the center of the country, it is
well-suited to function as an omni-directional hub for both north-south and
east-west transcontinental traffic. Therefore, TWA believes it is better
positioned to offer more frequencies and connecting opportunities to many
travelers in its key Midwestern markets than competing airlines. To
capitalize on these advantages, the Company has increased its number of daily
departures at St. Louis from 229 in 1993 to approximately 365 as of December
31, 1997. In addition, beginning in 1995, the Company has increased service
to the north and south with service to Reno, Nevada, Knoxville, Tennessee,
Shreveport, Louisiana, Steamboat Springs, Colorado, Palm Springs, California,
Toronto, Canada and the Mexican resort cities of Cancun, Puerto Vallarta and
Ixtapa/Zihuatenejo.
Internationally, the Company's operations are concentrated at
JFK. The Company's strategy has been to reduce and streamline international
operations to focus on markets that it believes can support non-stop service
and to maximize utilization of the JFK facility. As a result, since 1994, the
Company has eliminated service to several European cities and reduced its
service to and from Paris. In addition, during 1996 and 1997 the Company
increased service from JFK to the Caribbean, Florida and to certain other
domestic cities to increase utilization of the Company's JFK facility,
particularly during off-peak time periods, and to provide feed traffic for its
international operations. On February 11, 1998, the Company applied to the
DOT seeking authority to operate code share service between St. Louis and
Japan in cooperation with Delta Air Lines. The application proposes to start
code share service to Tokyo and Nagoya as soon as possible after approval, and
to Osaka and Fukuoka on October 28, 1998. TWA also applied for non-stop route
authority from St. Louis to Tokyo beginning June 1, 1999. On March 16, 1998,
the DOT issued an order authorizing the Company to serve the St. Louis-Tokyo
market with seven weekly frequencies and allocating to the Company fourteen of
the weekly frequencies for United States-Japan code share service. The DOT
allowed interested parties ten days to object and seven additional days to
reply to objections. It is anticipated that a final order will be issued by
the DOT in the second quarter.
As part of its efforts to position the Company for sustained
profitability, TWA restructured its operations at JFK during 1997 by
eliminating certain unprofitable international destinations (such as Frankfurt
and Athens), as well as certain low-yield domestic feed service into JFK. The
Company also consolidated for the near term most of its JFK operations from
two terminals into a single terminal in order to reduce operating costs,
increase facility utilization and improve passenger service. In addition to
enhancing yields and load factors, the substitution of 757s and 767s for 747s
and L-1011s on international routes also has increased operating efficiencies
and on-time performance at JFK, since these smaller aircraft are better suited
to the physical limitations of TWA's terminals. As a result of these changes,
TWA's international scheduled capacity (as measured by ASMs) decreased 31.5%
in 1997 versus 1996 and represented 19.5% of total scheduled capacity for the
full year 1997 versus 25.6% for the full year 1996. The Company believes that
this decrease in international operations, together with the rationalization
of fleet size described above, will help deseasonalize TWA's business, with
the difference between TWA's seasonal average daily peak and trough capacities
anticipated to be approximately 4.2% in 1998, versus 20.5% in 1996 and 16.9%
in 1997. As a result, the Company believes the seasonal variability of its
financial performance will be reduced; however, there can be no assurance that
such deseasonalization will occur.
Customer Service; Travel Agent Commissions
The Company is focusing on improving the quality of its air
travel product and the service provided to passengers by TWA personnel. The
Company believes that its increased focus on quality, certain new marketing
initiatives and the steps taken to restore operational reliability and
schedule integrity in 1997 have resulted and will allow TWA to attract a
greater percentage of higher-yield passengers. Ongoing initiatives include:
Focus on Business Traveler. Based on customer research, the
Company has targeted business travelers and is therefore tailoring its
marketing and advertising efforts to emphasize the Company's positioning as a
full-service, high-value airline providing service to popular business
destinations throughout the U.S. The Company believes that its convenient
flight schedules and connections, as well as its centrally located hub at St.
Louis, are important in providing service which is attractive to these
travelers.
The Company is introducing a series of marketing initiatives
designed to attract a greater percentage of higher-yield business passengers.
In March 1995, TWA introduced Trans World One, a premium
business class service in its international and certain trans-continental
non-stop markets. This product has recently been enhanced and relaunched with
advertising and promotional support. Trans World One is available in 767
equipment and in selected 757 equipment. Overall service is being improved,
including check-in, on-board comfort, food service and priority baggage
return. TWA is also increasing first class cabin seating in its narrow-body
domestic aircraft by 60% and is planning a series of airport and in-flight
enhancements. This domestic service was launched in early 1998 as Trans World
First. In March 1998, the Company launched TWQ, a specially designed service
for short-haul business markets. The Company is also in the early phases of a
series of facilities upgrades, including a newly opened Ambassadors Club in
St. Louis, a renovated club at LaGuardia, a completely refurbished club in its
JFK terminal and improved new check-in counters and backwalls. A new
electronic passenger and baggage processing system is being installed in St.
Louis.
TWA announced in March 1998 a rebranded frequent flier program
named "Aviators" which is effective as of May 1, 1998. The Company has
already implemented several new initiatives to improve its frequent flier
program. A Platinum level was introduced in the third quarter of 1997 to
offer the Company's most attractive travel benefits for its highest mileage
customers. Platinum level travelers and travelers purchasing first class or
full fare coach tickets will also be given mileage bonuses equal to the base
dollar amount paid for their tickets, in addition to other existing bonuses.
Further, TWA joined the American Express Membership Rewards Program, allowing
members the opportunity to earn additional miles for amounts charged on the
American Express Card.
Leisure Traveler. Within the leisure travel market, TWA is
positioned as a high-quality, competitive-fare carrier. Management believes
that TWA's cost structure and attractive route system position it well to
compete for leisure traffic. Further, TWA's Getaway Program, which was the
original airline tour program, has a leading position in this sector.
Travel Agent Commissions. Until recently TWA paid the full
traditional 10% commission on tickets for domestic transportation on TWA sold
by independent travel agents without the cap of $50 and $25 per domestic
round-trip and one-way tickets, respectively, which most other major airlines
imposed in 1995, and paid an 11% commission on tickets for international
transportation. On October 2, 1997, the Company reduced its commissions on
tickets for domestic and international transportation to 8% and 10%,
respectively, without the cap imposed by most other major airlines. Although
the Company cannot quantify the current or potential future impact of this
decision, the Company believes the uncapped commission structure is a positive
factor in maintaining and improving its long-term relationships with such
travel agents and encourages the booking of higher fare tickets. See
"Business--Travel Agencies--Travel Agent Commissions."
Labor Relationship
Management believes TWA has a generally cooperative
relationship with its employees, including employees represented by unions.
At various times, the Company's employees have demonstrated significant
loyalty and commitment to TWA's future by, among other things, agreeing to
various wage and work rule concessions to improve productivity in connection
with the '93 Reorganization (as defined) and the '95 Reorganization. As a
result of these agreements (i) the Company's employees received approximately
30% of the voting equity of TWA outstanding immediately following the '95
Reorganization and (ii) certain corporate governance provisions were effected,
including provision of the right of employees currently represented by ALPA
and the IAM to elect four of the Company's 15 directors. See "Description of
Capital Stock--Description of Employee Preferred Stock" and "Certain
Provisions of the Certificate of Incorporation, the By-laws and Delaware Law."
On March 6, 1997, the IAM assumed representation of the Company's flight
attendants formerly represented by IFFA, and IFFA was decertified. Union and
non-union employees are also eligible under the ESIP to increase their level
of stock ownership through grants and purchases of additional shares over a
five year period commencing in 1997. For information concerning the ESIP, see
"Business--Employees."
Each of the Company's union contracts became amendable as of
August 31, 1997, and negotiations have begun with respect to all three major
contracts. While management believes that the negotiation process for the new
contracts will result in extended contracts mutually satisfactory to the
parties, there can be no assurances as to the ultimate timing or terms of any
such new contracts. As the Company's financial resources are not as great as
those of most of its competitors, any substantial increase in its labor costs
as a result of any new labor agreements or any cessation or disruption of
operations due to any strike or work action could be particularly damaging to
the Company. The Company believes that the status of its employees as
substantial stockholders and participants in corporate governance and the
Company's efforts to involve employees in developing and achieving the
Company's goals will result in continued dedication to the efforts to improve
the Company's financial and operational performance.
In January 1997, TWA implemented programs through which TWA has
sought to institutionalize throughout all levels of its organization the
importance of running an airline with operational reliability and schedule
integrity. These programs provide certain operating and procedural guidelines
for enhancing performance and improving overall product quality. In addition,
in 1996 the Company introduced Flight Plan 97, which paid eligible employees a
$65 bonus for each month that TWA finished in the top five in all three
performance categories tracked by the DOT (on-time performance, customer
complaints and baggage handling) and a total of $100 if TWA also ranked first
in at least one of such categories. Based on the Company's performance in
September 1997, eligible employees earned their first bonus under this
program, a $100 payment for ranking first in on-time performance, fourth in
customer complaints and fifth in baggage handling. This program has been
enhanced as Flight Plan 98 and now provides that in any quarter where the
Company places first in one of the DOT-tracked performance categories for the
entire quarter (and assuming that no bonus was paid to employees during that
quarter) the eligible employees would receive a $100 bonus.
Investment in Technology
Management believes significant opportunities exist for the
Company to increase revenues and reduce costs by investing in available
technology that provides the Company and its employees with the information
necessary to operate its business more effectively and to improve customer
service. The Company has taken a significant step forward in this area by
installing a computerized yield management system. The need to build a
historical database for such yield management system has delayed full
realization of benefits expected from such system; however, as this database
grows during 1998, it is expected to allow the Company to improve
significantly its ability to estimate demand flight-by-flight for each class
of fares and manage the allocation of seats accordingly. Given TWA's prior
lack of a computerized yield management system, the Company's management
believes that as this database grows the system will offer significant
opportunities for revenue improvement. In 1996, the Company implemented a
"QIK-Res" system at its reservation center in Norfolk, Virginia. QIK-Res is a
front-end reservations software program designed to improve customer service.
Management believes the system has demonstrated its effectiveness at Norfolk
and intends to pursue the possibility of extending the system to its
reservation center in St. Louis. TWA is also in the process of installing
state-of-the-art computer hardware for ticket counter and gate podiums at St.
Louis using "QIK-Chek" software to improve passenger service and data
collection while simplifying the ticket and check-in process.
Cost and Efficiency Initiatives
Management believes that maintaining a low cost structure is
crucial to the Company's business strategy. TWA's airline operating cost per
ASM (adjusted for subsidiaries, restructuring and earned stock contributions)
increased from 8.12 Cents in 1995 to 8.76 Cents in 1996 and to 8.97 Cents in
1997. The primary contributors to these increases were increases in
maintenance costs and costs associated with flight crew training which
occurred primarily during the first six months of 1997. Despite these
increases, management believes that TWA's operating costs remain below the
average of the six largest full service carriers. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations." The
Company intends to continue to pursue, among other things, route optimization,
increased labor efficiencies, fleet modernization and rationalization, and
investment in technological advances in order to improve operating results.
During 1997, TWA realized cost efficiencies in maintenance, reflecting the
elimination of TWA's maintenance backlog during the first quarter of 1997, as
well as the reduced maintenance requirements for the newer aircraft already
added to TWA's fleet. In addition, as described above, the Company's fleet
renewal plan is expected to provide efficiencies in fuel, flight crew and
training expenses, while the JFK restructuring has eliminated certain
unprofitable routes and reduced certain operating costs. TWA's average number
of employees per aircraft has decreased from 131.0 as of December 31, 1996 to
120.7 as of December 31, 1997, which is generally consistent with industry
standards.
The Company has increased to 12 the number of connecting
"banks" of flights operating into its St. Louis hub to increase further the
utilization of its aircraft. TWA has installed a new ticketless system and
has begun to test automatic ticket machines in selected markets. In mid-1996,
the Company initiated programs allowing customers to book reservations
directly via on-line network systems, and during the second quarter of 1997,
TWA began to provide bookings via the Internet. It is expected that
distribution costs will be reduced as travelers use these on-line booking
vehicles and ticketless systems. In addition, TWA is implementing a number of
programs to reduce computer reservation systems booking fees, both internally
and from travel agents. Such booking fees are separate transaction fees that
are paid in addition to any travel agent commission. TWA will continue to
explore other opportunities to reduce costs and improve efficiency in the
areas of aircraft maintenance, airport operations, purchasing, distribution,
ticket delivery, food service, cargo delivery operations and administrative
functions.
Corporate Reorganizations
During the early 1990s, the U.S. airline industry, including
the Company, experienced unprecedented losses, which were largely attributable
to, among other things, the Persian Gulf War (which caused a substantial
increase in fuel costs and reduction in travel demand due to concerns over
terrorism), recessions in the United States and Europe, and significant
industry-wide fare discounting resulting from another U.S. airline's attempt
to introduce a new pricing structure into the domestic airline business. In
addition, TWA had incurred significant debt as a result of the leveraged
acquisition in 1986 of a controlling interest in the Company by Carl Icahn.
The substantial losses sustained by the Company during this period, coupled
with the Company's excessive debt obligations, made it necessary for TWA to
restructure its debt obligations and equity, lower its labor costs and
severely reduce its capital outlays.
'93 Reorganization
On November 3, 1993 (the "'93 Effective Date"), TWA emerged
from the protection of Chapter 11 of the United States Bankruptcy Code
pursuant to a bankruptcy case filed on January 31, 1992. During the pendency
of the '93 Reorganization, the Company (i) negotiated, effective September 1,
1992, a series of three-year concession agreements with its unions providing
for, among other things, a 15% reduction in wages and benefits and certain
work-rule concessions designed to reduce costs substantially (the "'92 Labor
Agreements"), (ii) obtained confirmation of a reorganization plan which
eliminated more than $1.0 billion of debt and lease obligations, and (iii)
reached a settlement with the Pension Benefit Guaranty Corporation (the
"PBGC") with respect to the Company's underfunded pension plan obligations.
During the pendency of the '93 Reorganization, the Icahn Entities (as defined)
released their claims against and interests in TWA and Mr. Icahn resigned as
Chairman of the Board of Directors and as an officer of TWA. The Icahn
Entities also agreed to provide up to $200.0 million of financing pursuant to
the Icahn Loans (as defined) (see "Management's Discussion and Analysis of
Financial Condition and Results of Operations").
'95 Reorganization
Notwithstanding the reduction in levels of debt and obligations
achieved through the '93 Reorganization, the Company emerged from the '93
Reorganization in a too highly leveraged position and, despite progress in
increasing revenues and reducing costs, continued to experience significant
operating losses. With the hiring of a new management team in 1994, the
assumptions underlying the Company's operating plans, upon which its ability
to service its post '93 Reorganization obligations depended, were recognized
as unrealistic and unachievable. As a consequence, the Company was forced to
seek a second financial restructuring.
In the second quarter of 1995, the Company solicited and
received sufficient acceptances to effect the proposed "prepackaged" plan of
bankruptcy. Therefore, on June 30, 1995, the Company filed a prepackaged
Chapter 11 plan of reorganization, which with certain modifications was
confirmed by the United States Bankruptcy Court in St. Louis (the "Bankruptcy
Court") on August 4, 1995. On August 23, 1995, approximately eight weeks
after filing the prepackaged Chapter 11 plan, the '95 Reorganization became
effective and the Company emerged from the protection of this second Chapter
11 proceeding. In connection with the '95 Reorganization, the Company (i)
exchanged certain of its then outstanding debt securities for a combination of
newly issued 12% Preferred Stock, Common Stock, warrants and rights to
purchase Common Stock, and debt securities, (ii) converted its then
outstanding preferred stock to shares of Common Stock, warrants and rights to
purchase Common Stock, (iii) obtained certain short-term lease payment and
conditional sale indebtedness deferrals amounting to approximately $91.0
million and other modifications to certain aircraft leases, and (iv) obtained
an extension of the term of the approximately $190.0 million principal amount
of the Icahn Loans. The Company also (i) effected a reverse stock split of
its then outstanding common stock and exchanged such shares for Common Stock,
(ii) raised approximately $52.0 million through an equity rights offering;
(iii) distributed certain warrants to its then current equity holders, and
(iv) implemented certain amendments to the Certificate of Incorporation
relating to the recapitalization and various corporate governance matters.
See "Description of Capital Stock--Description of Employee Preferred Stock."
In connection with and as a precondition to the '95
Reorganization, in August and September of 1994, the Company entered into the
'94 Labor Agreements, amending existing collective bargaining agreements, with
the IAM, ALPA and IFFA, the three labor unions who then represented
approximately 84% of the Company's employees. The '94 Labor Agreements
provided for an extension of certain previously agreed wage concessions,
modifications to work rules and the deletion of certain provisions of the then
existing labor agreements, including elimination of so-called snapbacks, i.e.,
the automatic restoration of wage reductions granted in such agreements at the
end of their term to levels that prevailed prior to the concessionary
agreement. During 1994 and 1995, the Company also implemented a number of
similar cost savings initiatives with respect to domestic non-union and
management employees, primarily through reducing head count, altering benefit
packages, and continuing wage reductions which had been scheduled to expire.
See "Business--Employees."
CAPITALIZATION
The following table sets forth the consolidated cash and the
capitalization of the Company as of March 31, 1998. This information should
be read in conjunction with the Consolidated Financial Statements appearing
elsewhere in this Prospectus.
<TABLE>
<CAPTION>
March 31, 1998
(in millions)
<S> <C>
Cash and cash equivalents(1) $ 346.1
==========
Long-term debt and capital lease obligations (net of unamortized discounts and including current
maturities)(2):
11 3/8% Senior Notes due 2006........................................................................ $ 150.0
9.80% Airline Receivable Asset Backed Notes, Series 1997.............................................. 100.0
11 1/2% Senior Secured Notes due 2004................................................................. 138.4
12% Senior Secured Notes due 2002..................................................................... 43.5
8% IAM Backpay Notes.................................................................................. 13.7
PBGC Notes............................................................................................ 117.1
Various secured notes, 4.0% to 12.4%, due 1997-2001................................................... 36.7
Installment Purchase Agreements, 10.00% to 10.53%, due 2002-2003...................................... 115.3
Boeing Co. 757 Purchase Agreements, 11.85% to 12.38%, due 2015........................................ 147.9
IRS Deferral Note..................................................................................... 4.8
Predelivery Financing Agreement....................................................................... 6.4
Worldspan Note........................................................................................ 31.2
Capital lease obligations............................................................................. 211.1
----------
Total long-term debt and capital lease obligations.................................................... 1,116.1
----------
Shareholders' equity:
Preferred Stock, $0.01 par value; 137,500,000 shares authorized:
8% Preferred Stock, 3,869,000 shares authorized; 3,869,000 shares issued and
outstanding....................................................................................... --
9 1/4% Preferred Stock, no shares authorized; no shares issued and outstanding;
1,725,000 authorized, issued and outstanding and as adjusted...................................... --
Employee Preferred Stock; 6,959,860 shares authorized; 6,020,145 shares issued and
outstanding (3)................................................................................... 0.1
Common Stock, $0.01 par value; 150,000,000 shares authorized; 51,946,129 shares issued
and outstanding (4)............................................................................... 0.5
Additional paid-in capital.......................................................................... 687.8
Accumulated deficit (481.3)
----------
Total shareholders' equity....................................................................... 207.1
----------
Total capitalization............................................................................. $1,323.2
==========
</TABLE>
- ----------
(1) Includes cash and cash equivalents held in its international operations
and by its subsidiaries which, based upon foreign monetary regulations and
other factors, might not be immediately available to the Company.
(2) Current maturities of long-term debt and capital lease obligations at March
31, 1998 were $49.2 million and $36.6 million, respectively. In April 1998,
the Company consummated a private placement of $43.2 million aggregate
principal amount of 11 3/8% Senior Secured Notes due 2003 and $31.8 million
principal amount of Mandatory Convertible Equity Notes due 1999 in
connection with the acquisition of three used Boeing 767-231 ETOPS aircraft.
See "Management's Discussion and Analysis of Financial Condition and Results
of Operations."
(3) Comprised of 3,191,759 shares of the Company's IAM Preferred Stock, par
value $0.01 per share, 962,892 shares of the Company's IFFA Preferred
Stock, par value $0.01 per share, and 1,865,494 shares of the Company's ALPA
Preferred Stock, par value $0.01 per share, distributed and allocated to
employees through employee stock ownership plans for the benefit of
employees represented by IAM and ALPA (collectively, the "Employee
Preferred Stock"). See "Description of Capital Stock--Employee Preferred
Stock."
(4) Does not include (i) the number of shares of Common Stock that will be
reserved as of the Issue Date for issuance upon conversion of the Equity
Notes, which number shall be calculated using the closing price of the
Common Stock on the American Stock Exchange, or on such other stock
exchange or market system as the Common Stock is principally traded, on the
Issue Date, and which number of reserved shares may be adjusted pursuant to
the terms of the Equity Notes, (ii) approximately 10.9 million shares of
Common Stock initially reserved for issuance upon conversion of the 1997
Preferred Stock, (iii) approximately 6.3 million shares of Common Stock
reserved for issuance upon exercise of warrants issued in connection with
the March 1997 offering of the Company's 50,000 Units (the "Units"), each
consisting of (x) one 12% Senior Secured Note due 2002, in the principal
amount of $1,000 and (y) one Redeemable Warrant to purchase 126.26 shares
of Common Stock at an exercise price of approximately $7.92 per share, (iv)
approximately 9.5 million shares of Common Stock reserved for issuance upon
conversion of the 8% Preferred Stock, (v) approximately 3.7 million shares
of Common Stock which may be issued upon exercise of outstanding stock
options granted to officers and employees of the Company under the KESIP
(as defined) at prices ranging from $4.64 to $18.37 per share and Common
Stock issuable upon the exercise of warrants, and (vi) shares of Common
Stock which may be granted or sold at a discount to employees under the
ESIP. See Notes 11 and 12 to the Consolidated Financial Statements, "Risk
Factors--Risk Factors Related to the Company--Corporate Governance
Provisions; Special Voting Arrangements" and "Business--Employees."
SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data presented below relate
to periods in the years ended December 31, 1997 and 1996, the four months
ended December 31, 1995, the eight months ended August 31, 1995, the year ended
December 31, 1994, the two months ended December 31, 1993 and the ten months
ended October 31, 1993. This data should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Consolidated Financial Statements. The consolidated
financial data for the above periods were derived from the audited
consolidated financial statements of the Company. Certain amounts have been
reclassified to conform with presentations adopted in 1997.
During the period from 1992 through 1995, TWA underwent two
separate Chapter 11 reorganizations, the first in 1992-93 and the second in
1995. In connection with the '95 Reorganization, TWA has applied fresh start
reporting in accordance with the American Institute of Certified Public
Accountants Statement of Position 90-7, "Financial Reporting by Entities in
Reorganization Under the Bankruptcy Code" ("SOP 90-7"), which has resulted in
the creation of a new reporting entity for accounting purposes and the
Company's assets and liabilities being adjusted to reflect fair values on the
'95 Effective Date. A description of the adjustments to the financial
statements arising from the consummation of the '95 Reorganization and the
application of fresh start reporting is contained in Note 19 to the
Consolidated Financial Statements. For accounting purposes, the '95 Effective
Date is deemed to be September 1, 1995. Because of the application of fresh
start reporting, the financial statements for periods after the '95
Reorganization are not comparable in all respects to the financial statements
for periods prior to the reorganization. Similarly, the Consolidated
Financial Statements for the periods prior to the '93 Reorganization are not
consistent with periods subsequent to the '93 Reorganization. Accordingly, a
vertical black line separates these periods. Preferred stock dividend
requirements and earnings per share of the predecessor companies have not been
presented as these amounts are not meaningful.
<TABLE>
<CAPTION>
Prior
Predecessor
Reorganized Company Predecessor Company Company
------------------------------------------ ------------------------------------------ -----------
Four Months Two Months Ten Months
Year Ended Year Ended Ended Eights Months Year Ended Ended Ended
December 31, December 31, December 31, Ended August December 31, December 31, October 31,
1997 1996 1995 31, 1995 1994 1993 1993
-------------- ------------- ------------- ------------- ------------- ------------ ------------
(Dollars in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations Data:
Operating Revenues ............$ 3,327,952 $ 3,554,407 $ 1,098,474 $ 2,218,355 $ 3,407,702 $ 520,821 $ 2,633,937
Operating income (loss)(1) .... (29,260) (198,527) 10,446 14,642 (279,494) (58,251) (225,729)
Loss before income taxes and
extraordinary items(2) ...... (89,335) (274,577) (32,268) (338,309) (432,869) (88,140) (362,620)
Provision (credit) for income
taxes ....................... 527 450 1,370 (96) 960 (248) 1,312
Loss before extraordinary
items........................ (89,862) (275,027) (33,638) (338,213) (433,829) (87,892) (363,932)
Extraordinary items, net of
income taxes(3) ............. (20,973) (9,788) 3,500 140,898 (2,005) -- 1,075,581
Net income (loss) ............. (110,835) (284,815) (30,138) (197,315) (435,834) (87,892) 711,649
Per share amounts(4):
Loss before extraordinary
items .....................$ (1.98) $ (6.60) $ (1.15)
Net loss .................... (2.37) (7.27) (1.05)
</TABLE>
<TABLE>
<CAPTION>
Predecessor Company Reorganized Company
-------------------------------------------- ------------------------------
December 31,
1997 1996 1995 1994 1993
----------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Selected Balance Sheet Data:
Cash and cash equivalents(5).............. $ 237,765 $ 181,586 $ 304,340 $ 138,531 $ 187,717
Current assets............................ 632,957 625,745 737,301 603,806 728,303
Net working capital (deficiency).......... (303,988) (336,416) (81,913) (1,238,216) (106,703)
Flight equipment, net..................... 626,382 472,495 455,434 508,625 660,797
Total property and equipment, net......... 741,765 614,207 600,066 693,045 886,116
Intangible assets, net.................... 1,118,864 1,184,786 1,275,995 921,659 1,024,846
Total assets.............................. 2,773,848 2,681,939 2,868,211 2,512,435 2,958,862
Current maturities of long-term debt and
capital leases(6)....................... 88,460 134,948 110,401 1,149,739 108,345
Long-term debt, less current
maturities(6)........................... 736,540 608,485 764,031 -- 1,053,644
Long-term obligations under capital
leases, less current maturities......... 182,922 220,790 259,630 339,895 376,646
Shareholders' equity (deficiency)(7)...... 268,284 238,105 302,855 (417,476) 18,358
</TABLE>
- ----------
(1) Includes special charges of $85.9 million in 1996, $1.7 million in the
eight months ended August 31, 1995 and $138.8 million in 1994. For a
discussion of these and other non-recurring items, see Note 16 to the
Consolidated Financial Statements.
(2) The eight months ended August 31, 1995 includes charges of $242.2 million
related to reorganization items. The ten months ended October 31, 1993
includes a charge of $342.4 million related to the settlement of pension
obligations and income of $268.1 million related to reorganization items.
(3) The extraordinary items in 1997 and 1996 are the result of the early
extinguishment of certain debt. The extraordinary item in the four months
ended December 31, 1995 was the result of the settlement of a debt of a
subsidiary, while the extraordinary item in the eight months ended August
31, 1995 represents the gain on the discharge of indebtedness pursuant to
the consummation of the '95 Reorganization. The extraordinary item in 1994
represents the charge for a prepayment premium related to the sale and
lease back of four McDonnell Douglas MD-80 aircraft. The extraordinary
item in 1993 represents the gain on discharge of indebtedness pursuant to
the consummation of the '93 Reorganization.
(4) No effect has been given to stock options, warrants, convertible preferred
stock or potential issuances of additional Employee Preferred Stock as the
impact would have been anti-dilutive.
(5) Includes cash and cash equivalents held in international operations and by
subsidiaries which, based upon foreign monetary regulations and other
factors, might not be immediately available to the Company.
(6) Long-term debt in 1994 was reclassified to current maturities as a result
of certain alleged defaults and payment defaults.
(7) No dividends were paid on the Company's outstanding common stock during
the periods presented above.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
In late 1996, the Company began implementing certain strategic
initiatives in response to a significant deterioration in the Company's
operating performance and financial condition during the second half of 1996.
This deterioration was primarily caused by: (i) an overly aggressive expansion
of TWA's capacity and planned flight schedule, particularly during the 1996
summer season, which forced the Company to rely disproportionately on
lower-yield feed traffic and bulk ticket sales to fill the increased capacity
of its system; (ii) the delayed delivery of four older 747s intended to
increase capacity for incremental international operations during the summer
of 1996; and (iii) unexpected maintenance delays due to the capacity increase,
higher levels of scheduled narrow-body heavy maintenance and increased contract
maintenance performed for third parties. These factors caused excessive
levels of flight cancellations, poor on-time performance, increased pilot
training costs and higher maintenance expenditures and adversely affected the
Company's yields and unit costs. In addition, the crash of TWA Flight 800 on
July 17, 1996 distracted management's attention from core operating issues and
led to lost bookings and revenues. The Company also experienced a 27.6%
increase in fuel costs in 1996 versus 1995, primarily due to a 22.3% increase
in the average fuel price paid per gallon during the year.
The primary focus of the Company's new strategic initiatives
was to reestablish TWA's operational reliability, schedule integrity and
overall product quality in order to attract higher-yield passengers and
improve its financial results. As the initial steps in implementing this
strategy, the Company temporarily reduced its flight schedule during the first
quarter of 1997 to more closely match aircraft available for active service
and worked to reduce the number of aircraft in maintenance backlog by
increasing overtime and utilizing maintenance capacity made available by the
termination of an unprofitable aircraft maintenance contract with the U.S.
government. The other key initiatives which TWA began implementing in late
1996 included: (i) acceleration of the Company's fleet renewal plan; (ii) a
restructuring of TWA's operations at JFK; (iii) a focus on improving
productivity; (iv) implementation of a series of revenue-enhancing marketing
initiatives; and (v) implementation of a number of employee-related
initiatives to reinforce the Company's focus on operational performance.
General
The airline industry operates in an intensely competitive
environment. The industry is also cyclical due to, among other things, a
close relationship of yields and traffic to general U.S. and worldwide
economic conditions. Small fluctuations in RASM and cost per ASM can have a
significant impact on the Company's financial results. The Company has
experienced significant losses (excluding extraordinary items) on an annual
basis since the early 1990s, except in 1995 when the Company's combined
operating profit was $25.1 million. The airline industry has consolidated in
recent years as a result of mergers, alliances, liquidations, and further
consolidation may occur in the future. This consolidation has, among other
things, enabled certain of the Company's major competitors to expand their
international operations and increase their domestic market presence. The
emergence and growth of low cost, low fare carriers in domestic markets
represents an intense competitive challenge for the Company, which has higher
operating costs than many of such low fare carriers and fewer financial
resources than many of its major competitors. In many cases, such low cost
carriers have initiated or triggered price discounting.
The '94 Labor Agreements became amendable after August 31,
1997. Negotiations on a new collective bargaining agreement with the IAM with
regard to the flight attendants commenced in July 1997 and are currently
ongoing, and negotiations regarding the Company's ground employees represented
by the IAM commenced in February 1997 and are currently ongoing. At the
request of the IAM, a mediator was appointed on August 6, 1997 in connection
with the negotiations on the collective bargaining agreement covering the
ground employees. On March 27, 1998, at the request of the IAM, a mediator
was appointed in connection with the negotiations on the collective bargaining
agreement covering the flight attendants. Negotiations on a new collective
bargaining agreement with ALPA commenced in June 1997 and are also currently
ongoing. While wage rates currently in effect will likely increase,
management believes that it is essential that the Company's labor costs remain
favorable in comparison to its largest competitors. See "The
Company--Business Strategy." The Company will seek to continue to improve
employee productivity as an offset to any wage increases and will continue to
explore other ways to control and/or reduce operating expenses. There can be
no assurance that the Company will be successful in obtaining such
productivity improvements or unit cost reductions. In the opinion of
management, the Company's financial resources are not as great as those of
most of its competitors, and therefore, any substantial increase in its labor
costs as a result of any new labor agreements or any cessation or disruption
of operations due to any strike or work action could be particularly damaging
to the Company.
There are a number of uncertainties relating to agreements with
employees, the resolution of which could result in significant non-cash
charges to future operating results of the Company. Shares granted or
purchased at a discount under the ESIP will generally result in a charge equal
to the fair value of shares granted plus the discount for shares purchased at
the time when such shares are earned. If the ESIP's target prices for the
Common Stock are realized, the minimum aggregate charge for the years 1997 to
2002 (the 1997 and 1998 target prices having been met) would be approximately
$108.8 million based upon such target prices and the number of shares of
Common Stock and Employee Preferred Stock outstanding at January 30, 1998.
The charge for any year, however, could be substantially higher if the then
market price of the Common Stock exceeds certain target prices. On February
17, 1998, the first target price of $11.00 was realized and a grant of 2% of
the outstanding Common Stock and Employee Preferred Stock will be made on July
15, 1998. Based on the current number of outstanding shares of Common Stock
and Employee Preferred Stock and taking into account a credit with respect to
the Company's required contribution, the net contribution will be 1,109,722
shares and the related non-cash charge recorded in the first quarter of 1998
was approximately $12.3 million. In addition, on March 4, 1998 the market
price of the Company's Common Stock exceeded the $12.10 target price for the
30-day period necessary to earn the 1998 grant. As a result, on July 15, 1998
the Company will be required to make an additional contribution to the
relevant employee trusts of 1.5% of its Common Stock and Employee Preferred
Stock. Based on the current number of outstanding shares of Common Stock and
Employee Preferred Stock, that contribution would be 1,172,354 shares. As a
result of the grants earned in 1998, the Company expects to issue a combined
total of 2,282,076 shares of Common Stock and Employee Preferred Stock on July
15, 1998 and the aggregate non-cash charge in connection with such issuance
was recorded in the first quarter of 1998 in the amount of $26.5 million. See
"Business--Employees."
Pursuant to the '92 Labor Agreements, the Company agreed to pay
to employees represented by the IAM a cash bonus for the amount by which
overtime incurred by the IAM from September 1992 through August 1995 was
reduced below specified thresholds. This amount was to be offset by the
amount by which medical savings during the period for the same employees did
not meet certain specified levels of savings. The obligation is payable in
three equal annual installments beginning in 1998. The Company has estimated
the net overtime bonus owed to the IAM to be approximately $26.3 million and
has reflected this amount as a noncurrent liability in the Consolidated
Financial Statements. Such amount reflects a reduction of approximately $10.0
million pursuant to an agreement to reduce proportionately the obligation
based upon the size of the reduction of indebtedness achieved by the '95
Reorganization. The IAM, while not providing a calculation of its own, has
disputed the method by which management has computed the net overtime bonus
and has indicated that it believes the amount due to the IAM is much greater
than the amount which has been estimated by management. TWA also entered into
an agreement which provides for an adjustment to existing salary rates of
labor-represented employees based on the amount of the cash bonus for overtime
ultimately paid to the employees represented by the IAM as described in this
paragraph. The exact amount of such adjustment is not capable of being
determined until the amount of the IAM bonus payment is finally determined.
In addition, in connection with certain wage scale adjustments
afforded to non-contract employees, employees previously represented by the
IFFA have asserted and won an arbitration ruling with respect to the
comparability of wage concessions made in 1994 that, if sustained, would
require that the Company provide additional compensation to such employees.
The Company estimates that at December 31, 1997 such additional compensation
that would be payable pursuant to the arbitration ruling would be
approximately $12.0 million. The Company denies any such obligation and is
pursuing an appeal of the arbitration ruling and a court award affirming the
ruling. Effective September 1, 1997, the Company also reduced the overall
compensation and benefits package for non-contract employees so as to offset,
in the Company's view, any claims by such employees previously represented by
IFFA for any retroactive or prospective wage increases. As such, no liability
has been recorded by the Company.
In connection with the '95 Reorganization, the Company entered
into a letter agreement with employees represented by ALPA whereby if the
Company's flight schedule, as measured by block hours, does not exceed certain
thresholds, a defined cash payment would be made to ALPA. The defined
thresholds were exceeded during the measurement periods through December 31,
1996 and no amount was therefore owed to ALPA as of that date. A payment of
approximately $2.6 million was due under the agreement on August 14, 1997 for
the period January through June 1997. The Company made this payment in
January 1998. Management estimates that its aggregate obligation for 1997 is
approximately $9.5 million. See Notes 7 and 12 to the Consolidated Financial
Statements. For a description of certain additional employee related
uncertainties, see "Risk Factors--Risk Factors Related to the Company--Certain
Potential Future Earnings Charges."
TWA has historically experienced significant variations in
quarterly and annual operating revenues and operating expenses and expects
such variations to continue. Due to the greater demand for air travel during
the summer months, airline industry revenues for the third quarter of the year
are generally significantly greater than revenues in the first and fourth
quarters of the year and moderately greater than revenues in the second
quarter of the year. In the past, given the Company's historical dependence
on summer leisure travel, TWA's results of operations have been particularly
sensitive to such seasonality. While the Company, through an acceleration of
its fleet renewal program and restructuring of its JFK operations, anticipates
that the deseasonalization of operations affected thereby will reduce quarter
to quarter fluctuations in the future, there can be no assurance that such
deseasonalization will occur.
The Company's results of operations have also been impacted by
numerous other factors that are not necessarily seasonal. Among the
uncertainties that might adversely impact TWA's future results of operations
are: (i) competitive pricing and scheduling initiatives; (ii) the availability
and cost of capital; (iii) increases in fuel and other operating costs; (iv)
insufficient levels of air passenger traffic resulting from, among other
things, war, threat of war, terrorism or changes in the economy; (v)
governmental limitations on the ability of TWA to service certain airports
and/or foreign markets; (vi) regulatory requirements necessitating additional
capital expenditures; (vii) the outcome of certain ongoing labor negotiations;
and (viii) the reduction in yield due to the continued implementation, of a
discount ticket program entered into by the Company with Karabu in connection
with the '95 Reorganization on the terms currently sought to be applied by
Karabu, which terms are, in the opinion of the Company, inconsistent with and
in violation of, the agreement governing such program. See "-- Liquidity and
Capital Resources" and "Business--Legal Proceedings--Icahn Litigation." The
Company is unable to predict the potential impact of any of such uncertainties
upon its future results of operations.
On July 17, 1996, TWA Flight 800 crashed shortly after
departure from JFK en route to Paris, France. There were no survivors among
the 230 passengers and crew members aboard the Boeing 747 aircraft. The
Company is cooperating fully with all federal, state and local regulatory and
investigatory agencies to ascertain the cause of the crash, which to date has
not been determined. The National Transportation Safety Board held hearings
relating to the crash in December of 1997 and is continuing its investigation.
While TWA is currently a defendant in a number of lawsuits relating to the
crash, it is unable to predict the amount of claims which may ultimately be
made against the Company or how those claims might be resolved. TWA maintains
substantial insurance coverage and, at this time, management has no reason to
believe that such insurance coverage will not be sufficient to cover the
claims arising from the crash. Therefore, TWA believes that the resolution of
such claims will not have a material adverse effect on its financial condition
or results of operations. The Company is unable to identify or predict the
extent of any adverse effect on its revenues, yields or results of operations
which has resulted or may result from the public perception of the crash or
from any future findings by the National Transportation Safety Board. See
"Business--Legal Proceedings."
Following the crash of TWA Flight 800 in July 1996, the FAA
implemented new security measures primarily impacting international
operations. The Company does not believe that these measures have had any
material effect on its revenues or operating costs to date. Additionally, a
special committee appointed by the President to review aviation safety and
airport security issued its final report on February 12, 1997. The report
contains several recommendations. However, the Company is unable to predict
which recommendations will be adopted or their impact on the Company's future
operating results. Additional government mandated security measures could
have a direct adverse impact on the Company's operating costs to the extent
any such costs are directly assessed to commercial airlines or, if funded
through new taxes or user fees, could indirectly have an adverse impact on the
Company's future operating results in the event that the Company is not able
to fully pass on those charges in the form of ticket price increases.
Management believes that the Company benefitted from the
expiration on December 31, 1995 of the Ticket Tax, which imposed certain taxes
including a 10% air passenger tax on tickets for domestic flights, a 6.25% air
cargo tax and a $6 per person international departure tax. The Ticket Tax was
reinstated on August 27, 1996 and expired again on December 31, 1996. At the
end of February 1997, the Ticket Tax was reinstated effective March 7, 1997
through September 30, 1997. Congress recently passed tax legislation
reimposing and significantly modifying the Ticket Tax, effective October 1,
1997. The legislation includes the imposition of new excise tax and
significant fee tax formulas over a multiple year period, an increase in the
international departure tax, the imposition of a new arrivals tax, and the
extension of the Ticket Tax to cover items such as the sale of frequent flier
miles. Management believes that the imposition and modification of the Ticket
Tax have a negative impact on the Company, although neither the amount of such
negative impact nor the benefit previously realized by its expiration can be
precisely determined. However, management believes that the recent tax
legislation and any other increases of the Ticket Tax will result in higher
costs to the Company and/or, if passed on to consumers in the form of
increased ticket prices, might have an adverse effect on passenger traffic,
revenue and/or margins. See "Business--Regulatory Matters."
During the period from 1992 through 1995, TWA underwent two
separate Chapter 11 reorganizations, the first in 1992-93 and the second in
1995. In connection with the '95 Reorganization, TWA has applied fresh start
reporting in accordance with SOP 90-7 which has resulted in the creation of a
new reporting entity for accounting purposes and the Company's assets and
liabilities being adjusted to reflect fair values on the '95 Effective Date.
A description of the adjustments to financial statements arising from
consummation of the '95 Reorganization and the application of fresh start
reporting is contained in Note 19 to the Consolidated Financial Statements.
For accounting purposes, the '95 Effective Date is deemed to be September 1,
1995. Because of the application of fresh start reporting, the financial
statements for periods after the '95 Reorganization are not comparable in all
respects to the financial statements for periods prior to the reorganization.
Similarly, the Consolidated Financial Statements for the periods prior to the
'93 Reorganization are not consistent with periods subsequent to the '93
Reorganization.
As a result of the application of fresh start reporting as of
the '95 Effective Date, substantial values were assigned to routes, gates and
slots ($458.4 million) and reorganization value in excess of amounts allocable
to identifiable assets ($839.1 million). The Company has evaluated its future
cash flows and, notwithstanding the operating loss experienced since the '95
Effective Date, expects that the carrying value of the intangibles at December
31, 1996 will be recovered. However, the achievement of such improved future
operating results and cash flows are subject to considerable uncertainties.
In future periods these intangibles will be evaluated for recoverability based
upon estimated future cash flows. If expectations are not substantially
achieved, charges to future operations for impairment of those assets may be
required and such charges could be material.
The Company's ability to improve its financial position and
meet its financial obligations will depend upon a variety of factors,
including: significantly improved operating results, favorable domestic and
international airfare pricing environments, absence of adverse general
economic conditions, more effective operating cost controls and efficiencies,
and the Company's ability to attract new capital and maintain adequate
liquidity. No assurance can be given that the Company will be successful in
generating the operating results or attracting new capital required for future
viability.
Results of Operations
TWA's passenger traffic data, for scheduled passengers only and
excluding Trans World Express, Inc. ("TWE") a wholly-owned subsidiary of the
Company that provided a commuter feed service to the Company's New York hub
prior to November, 1995, are shown in the table below for the indicated
periods (1):
<TABLE>
<CAPTION>
1997 1996 1995
--------------- --------------- ---------------
<S> <C> <C> <C>
North America
Passenger revenues ($ millions)....................... $ 2,512 $ 2,515 $ 2,292
Revenue passenger miles (millions)(2)................. 19,737 19,513 17,902
Available seat miles (millions)(3).................... 29,341 30,201 28,194
Passenger load factor(4).............................. 67.3% 64.6% 63.5%
Passenger yield (cents)(5)............................ 12.73 Cents 12.89 Cents 12.80 Cents
Passenger revenue per available seat mile (cents)(6).. 8.56 Cents 8.33 Cents 8.13 Cents
International
Passenger revenues ($ millions)....................... $ 412 $ 563 $ 544
Revenue passenger miles (millions)(2)................. 5,363 7,598 7,000
Available seat miles (millions)(3).................... 7,123 10,393 9,719
Passenger load factor(4).............................. 75.3% 73.1% 72.1%
Passenger yield (cents)(5)............................ 7.68 Cents 7.41 Cents 7.78 Cents
Passenger revenue per available seat mile (cents)(6).. 5.78 Cents 5.42 Cents 5.60 Cents
Total System
Passenger revenues ($ millions)....................... $ 2,924 $ 3,078 $ 2,836
Revenue passenger miles (millions)(2)................. 25,100 27,111 24,902
Available seat miles (millions)(3).................... 36,464 40,594 37,905
Passenger load factor(4).............................. 68.8% 66.8% 65.7%
Passenger yield (cents)(5)............................ 11.65 Cents 11.35 Cents 11.39 Cents
Passenger revenue per available seat mile (cents)(6).. 8.02 Cents 7.58 Cents 7.48 Cents
Operating cost per available seat mile (cents)(7)..... 8.97 Cents 8.76 Cents 8.12 Cents
Average daily utilization per aircraft (hours)(8)..... 9.38 9.63 9.45
Aircraft in fleet being operated at end of period..... 185 192 188
</TABLE>
- ----------
(1) Excludes subsidiary companies.
(2) The number of scheduled miles flown by revenue passengers.
(3) The number of seats available for passengers multiplied by the number of
scheduled miles those seats are flown.
(4) Revenue passenger miles divided by available seat miles.
(5) Passenger revenue per revenue passenger mile.
(6) Passenger revenue divided by scheduled available seat miles.
(7) Operating expenses, excluding special charges, earned stock compensation,
other nonrecurring charges and subsidiaries, divided by total available
seat miles.
(8) The average block hours flown per day in revenue service per aircraft.
Results of Operations for the Fiscal Year Ended December 31, 1997 Compared to
the Fiscal Year Ended December 31, 1996
Total operating revenues of $3,328.0 million for 1997 were $226.4 million or
6.4% less than the total operating revenues of $3,554.4 million for the year
ended December 31, 1996. The decrease was primarily reflected in TWA
passenger revenues, which were $153.9 million less than in 1996, resulting
from the elimination of certain unprofitable international destinations and
the planned reduction in capacity as the Company replaced older L-1011 and
B-747 aircraft with new B-757, B-767 and MD-80 aircraft on many routes.
Additionally, revenues from contract work decreased $41.8 million primarily
due to the termination of an unprofitable aircraft maintenance contract with
the U.S. government and overall reduction in other third party maintenance as
the Company focused its resources on maintenance of its own aircraft. Revenue
from freight and mail also decreased $26.3 million as a result of the reduction
in capacity.
As a result of the Company's planned retirement of older widebody aircraft and
elimination of unprofitable services, capacity and traffic decreased in 1997
as compared to 1996. System-wide capacity, measured in ASMs, decreased by
10.2% in 1997 as compared to 1996 (reflecting a 2.8% decrease in domestic ASMs
and a 31.5% decrease in international ASMs). Passenger traffic volume, as
measured by total RPMs in scheduled service, decreased 7.4% in 1997 over 1996.
Passenger load factor for 1997 was 68.8% compared to 66.8% in 1996. TWA's
yield per passenger mile increased from 11.35 cents in 1996 to 11.65 cents in
1997.
Reflecting the Company's efforts to improve productivity and reduce operating
costs, operating expenses declined to $3,357.2 million in 1997, $395.7 million
(10.5%) lower than the total operating expenses of $3,752.9 million for the
year ended December 31, 1996, representing a net change in the following
expense groups:
Salaries, wages and benefits of $1,224.1 million for 1997 were $30.2 million
(2.4%) less than 1996, primarily due to a decrease in the average number of
employees. The average number of employees declined 3.5% to 23,413 in 1997
as compared to 24,254 in 1996. A reduction of the number of employees
occurred in several areas, particularly those impacted by the reduction in
flying or maintenance of older narrow and widebody aircraft.
Earned stock compensation charges of $4.2 million for 1997 and $9.1 million
for 1996 represent primarily the non-cash compensation charge recorded to
reflect the expense associated with the distribution of shares of stock on
behalf of employees as part of the '95 Reorganization. For a further
discussion of future charges related to non-cash compensation, see Note 12 to
the Consolidated Financial Statements.
Aircraft fuel and oil expense of $480.9 million for 1997 was $104.3 million
(17.8%) less than expenses of $585.2 million for the year ended December 31,
1996. The decrease in expenses is primarily due to decreases in the price of
fuel ($28.2 million) and in gallons consumed ($76.1 million).
Passenger sales commission expense of $242.1 million for 1997 was $26.0
million (9.7%) less than the expense of $268.1 million in 1996 primarily
related to the $153.9 million decrease in TWA passenger revenues. Other
factors contributing to the decrease were a reduction in commission rates in
October 1997 and a decrease in the percentage of commissionable sales
resulting in decreases in commission expense of $7.1 million and $3.2 million,
respectively.
Aircraft maintenance materials and repairs expense of $138.4 million in 1997
represented a decrease of $69.8 million (33.5%) from $208.2 million for 1996.
The decrease was primarily the result of higher levels of scheduled maintenance
in 1996, including heavy maintenance, a 3.0% decrease in flying hours in 1997
versus 1996, addition of new aircraft and retirement of old aircraft from
TWA's fleet, and a decrease in contract repair work performed by the Company
for other air carriers and third parties. The average age of TWA's operating
fleet decreased from 19.0 years at December 31, 1996 to 16.9 years at December
31, 1997.
Depreciation and amortization expense decreased $11.4 million from $161.8
million in 1996 to $150.4 million in 1997 primarily represented by decreases
in the provision for obsolescence ($7.0 million), depreciation of aircraft
($3.0 million) and amortization of intangible assets ($1.2 million). The
decrease in obsolescence was significantly related to the retirement of L-1011
and B-747 aircraft fleets and its replacement with newer aircraft fleets. The
decrease in aircraft depreciation was related to B-727-200, B-747 and L-1011
fleets becoming fully depreciated partially offset by increased depreciation
on B-757, B-767 and DC9-30 fleets related to new aircraft acquisitions and
aircraft modifications on the DC9-30 aircraft associated with noise compliance
and aging aircraft. The decrease in amortization of intangible assets was
related to the 1996 write-off of the carrying value of TWA's New York to
Athens route authority as a result of TWA's decision to discontinue
unprofitable service to Athens and the sale of three gates at Newark
International Airport in early 1997.
Operating lease rentals of $370.8 million for 1997 were $67.8 million (22.4%)
more than the total rentals of $303.0 million for 1996. The increase was
primarily due to an increase in the average number of aircraft under operating
leases from 123 in 1996 to 137 in 1997 and higher lease rates attributed to
the introduction of newer aircraft into the fleet.
Passenger food and beverage expense of $83.2 million in 1997 represented a
decrease of $26.9 million (24.4%) from $110.1 million for the twelve months of
1996. The decrease was primarily due to a 29.7% reduction in the number of
passengers boarded on international flights resulting from the 31.5% reduction
in international scheduled ASMs together with savings derived from changes and
improved efficiencies in food and beverage service.
During the fourth quarter of 1996, special charges of $85.9 million were
recorded in connection with the Company's decision to modify its international
route structure and related aircraft fleet plan. The charges included a
write-off of the carrying value of TWA's New York-Athens route authority
($26.7 million) and international employee severance liabilities ($5.5
million) related to the termination of service to Athens and Frankfurt. The
1996 special charges also include a reduction in carrying value of TWA's owned
L-1011 and B-747 fleets ($32.2 million) and the related inventories ($21.5
million). These charges were based upon management's estimate of the amounts
to be realized upon the disposition of these assets when they are removed from
service. Actual amounts could materially differ from such estimates. See
Note 16 to the Consolidated Financial Statements for a further discussion of
these special charges.
All other operating expenses decreased $104.1 million (13.6%) to $663.1
million in 1997 from $767.2 million during the year ended December 31, 1996.
Decreases were noted in the cost of services sold ($19.3 million), cost of
services purchased ($23.0 million), advertising and publicity ($17.8 million),
navigation charges ($9.4 million), landing fees ($6.4 million), subsidiary
expenses ($7.4 million), uncollectible accounts ($5.6 million), taxes-other
than income ($5.4 million) and numerous other miscellaneous categories. These
decreases were primarily related to TWA's planned reductions in capacity
(10.2% reduction in system scheduled ASMs) and maintenance performed for third
parties.
Other charges (credits) were a net charge of $60.1 million for 1997 as
compared to $76.1 million for 1996. Interest expense decreased $12.8 million
in 1997 over 1996 as a result of the reduction of debt arising from the '95
Restructuring and additional reductions of debt during 1997 and 1996. Interest
income decreased by $8.8 million in 1997 primarily as a result of lower levels
of invested funds. Dispositions of assets resulted in a net gain of $16.0
million in 1997, compared to a net loss of $1.1 million in 1996. The net gain
in 1997 included $7.4 million from the sale of three gates at Newark
International Airport and $8.6 million from the sale of aircraft, engines and
other property. Other charges and credits-net were unfavorable by $5.2
million in 1997 compared to 1996, primarily due to a $1.2 million decline in
foreign currency translation adjustments, a $1.7 million decrease in vendor
discounts and a $2.5 million credit in 1996 to reflect a litigation settlement.
The provision for income taxes in 1997 and 1996 related primarily to foreign
taxes. In future periods, the amortization of reorganization value in excess
of amounts allocable to identifiable assets and certain other non-deductible
items will likely result in the Company's effective tax rate for financial
reporting purposes exceeding statutory rates, notwithstanding the Company's
substantial net operating loss carryforwards. See Note 5 to the Consolidated
Financial Statements.
As a result of the above, the operating loss of $29.3 million for 1997 was
$169.2 million less than the operating loss of $198.5 million for 1996. The
net loss of $110.8 million for 1997 was $174.0 million less than the net loss
of $284.8 million for 1996. The operating and net losses for 1996 included
special charges for nonrecurring items of $85.9 million as further described
in Note 16 to the Consolidated Financial Statements. The 1996 net loss also
included $9.8 million in extraordinary charges related to the early
extinguishment of debt while the 1997 net loss included $21.0 million of such
charges.
Results of Operations for the Fiscal Year Ended December 31, 1996 Compared to
the Four Months Ended December 31, 1995 and Eight Months Ended August 31, 1995
In the following discussion, the results of operations for the fiscal year
ended December 31, 1996 is compared to the combined results of the four months
ended December 31, 1995 and eight months ended August 31, 1995 (twelve months
ended December 31, 1995) unless specified otherwise.
Total operating revenues of $3,554.4 million for 1996 were $237.6 million or
7.2% more than the total operating revenues of $3,316.8 million for the year
ended December 31, 1995. The increase was primarily reflected in TWA
passenger revenues which were $241.6 million higher than in 1995.
Additionally, revenues from contract work increased $15.7 million and revenue
from freight and mail increased $9.9 million. Operating revenues for 1995
included $35.9 million in passenger revenues from Trans World Express which
discontinued operations in November 1995.
Capacity and traffic increased in 1996 as compared to 1995. System-wide
capacity, measured in ASMs, increased by 7.1% in 1996 as compared to 1995
(representing increases in domestic and international ASMs of 7.1% and 7.0%,
respectively). Passenger traffic volume, as measured by total RPMs in
scheduled service, increased 8.9% in 1996 over 1995. Passenger load factor
for 1996 was 66.8% compared to 65.7% in 1995. TWA's yield per passenger mile
decreased slightly from 11.39 cents in 1995 to 11.35 cents in 1996. Although
the yield per passenger mile declined only slightly year over year, the yield
during the second half of 1996 was 10.97 cents compared to 11.40 cents during
the second half of 1995.
Operating expenses of $3,752.9 million in 1996 reflect an increase of $461.2
million (14.0%) over the total operating expenses of $3,291.7 million for the
year ended December 31, 1995, representing a net change in the following
expense groups:
Salaries, wages and benefits of $1,254.3 million for 1996 were $125.6 million
(11.1%) more than 1995, primarily due to an increase in the average number of
employees, overtime costs required due to poor operating performance in 1996
and lower productivity levels. The Company had an average of 24,254 employees
in 1996 as compared to 22,927 in 1995.
Earned stock compensation charges of $9.1 million for 1996 and $58.0 million
for 1995 represent primarily the non-cash compensation charge recorded to
reflect the expense associated with the distribution of shares of stock on
behalf of employees as part of the '95 Reorganization.
Aircraft fuel and oil expense of $585.2 million for 1996 was $126.6 million
(27.6%) over the total expenses of $458.6 million for 1995. This increase is
primarily due to an increase in the price of fuel (22.3%), an increase in
gallons consumed (4.3%) and the expiration in October 1995 of the airlines'
exemption from paying fuel taxes of 4.3 cents per gallon, which impacted fuel
expense by approximately $13.6 million.
Passenger sales commission expense of $268.1 million for 1996 was $2.1 million
(0.8%) higher than the combined expenses of $266.0 million in 1995, and is
primarily related to the $241.6 million increase in TWA passenger revenues
offset by an increase in non-commissionable international tickets.
Aircraft maintenance materials and repairs expense of $208.2 million in 1996
represented an increase of $60.5 million (41.0%) from $147.7 million for 1995.
The increase was primarily the result of higher levels of scheduled maintenance
in 1996, including heavy maintenance, a 3.6% increase in flying hours and
increased repair work performed by the Company for other air carriers and
third parties.
Depreciation and amortization expense of $161.8 million for 1996 increased
slightly from combined expenses of $161.6 million for 1995.
Operating lease rentals of $303.0 million for 1996 were $24.1 million (8.6%)
more than the total rentals of $278.9 million for 1995. The increase was
primarily due to an increase in the average number of leased aircraft from 119
in 1995 to 123 in 1996 and higher lease rates.
Passenger food and beverage expense of $110.1 million in 1996 represented an
increase of $7.3 million (7.1%) from $102.8 million for the twelve months of
1995. The increase is primarily due to the 8% increase in the number of
passengers boarded.
During the fourth quarter of 1996, special charges of $85.9 million were
recorded in connection with the Company's decision to modify its international
route structure and related aircraft fleet plan. The charges included a
write-off of the carrying value of TWA's New York-Athens route authority
($26.7 million), international employee severance liabilities ($5.5 million)
related to the termination of service to Athens and Frankfurt, and a reduction
in carrying value of TWA's owned L-1011 and B-747 fleets ($32.2 million) and
the related inventories ($21.5 million), reflecting planned retirement of such
aircraft. See Note 16 to the Consolidated Financial Statements for a further
discussion of these special charges. Special charges of $1.7 million were
recorded in the third quarter of 1995 related to the shutdown of TWE.
All other operating expenses of $767.2 million in 1996 represented an increase
of $79.6 million (11.6%) from $687.6 million for the year ended December 31,
1995. An increase in flight cancellations during 1996 resulted in increased
CRS fees related thereto ($19.4 million) and interrupted trip expenses ($3.7
million). In addition, expenses relating to maintenance services provided
under a contract with the military increased approximately $21.6 million in
1996 compared to 1995. The Company also experienced a significant increase in
professional/technical fees ($18.7 million) which was primarily due to the use
of contract programmers for ongoing development of new systems and external
consultants' fees for re-engineering.
Other charges (credits) were a net charge of $76.1 million for 1996 as
compared to $42.7 million and $353.0 million in the four month and the eight
month periods of 1995, respectively (included in the eight month period is a
charge of $242.3 million for reorganization items in connection with the
application of fresh start reporting pursuant to the '95 Reorganization).
Interest expense decreased $42.3 million in 1996 over 1995 as a result of the
reduction of debt arising from the '95 Restructuring and additional reductions
of debt during 1996. Interest income increased by $3.5 million in 1996
primarily as a result of higher levels of invested funds. Other charges and
credits-net improved $35.8 million in 1996 compared to 1995, primarily due to
a $19.8 million improvement in the Company's share of earnings of Worldspan
and a $2.5 million credit to reflect a litigation settlement. Additionally,
other charges and credits-net for 1995 included a $14.0 million charge for
restructuring expenses.
As a result of the above, the operating loss of $198.5 million for 1996 was
$223.6 million unfavorable to the combined operating income of $10.5 million
and $14.6 million for the four month and the eight month periods of 1995,
respectively. The net loss of $284.8 million for 1996 was $57.4 million
greater than the combined loss of $227.4 million for 1995. The 1996 net loss
included $9.8 million in extraordinary losses related to the early
extinguishment of debt, while the 1995 net loss included $144.4 million in
extraordinary gains related to the discharge of indebtedness pursuant to the
'95 Reorganization and the cancellation of debt between TWE and an aircraft
lessor.
Liquidity and Capital Resources
The following is a discussion of the impact of significant factors affecting
TWA's liquidity position and capital resources. These comments should be read
in conjunction with, and are qualified in their entirety by, the Consolidated
Financial Statements and Notes thereto.
Liquidity
The Company's consolidated cash and cash equivalents balance at December 31,
1997 was $237.8 million, a $56.2 million increase from the December 31, 1996
balance of $181.6 million. This increase in the Company's cash balances
resulted primarily from the issuance of long-term debt and sale of preferred
stock as described below. Although the Company's operational performance
substantially improved during the second, third and fourth quarters of 1997,
the residual effects of difficulties experienced in 1996 continued throughout
the first two quarters of 1997 and, to a lesser extent, during the third
quarter of 1997. However, the Company has taken various initiatives designed
to improve the Company's financial performance. As a result, the Company's
financial performance for the final six months of 1997 was better than its
performance in the final six months of 1996.
In February 1997, in order to improve its liquidity, the Company entered into
an agreement with and received approximately $26 million from certain St.
Louis business enterprises, representing the advance payment for tickets for
future travel by such enterprises. In March 1997, the Company raised
approximately $47.2 million in net proceeds from the issuance of 50,000 Units,
with each Unit consisting of (i) one 12% Senior Secured Note due 2002, in the
principal amount of $1,000, and (ii) one Redeemable Warrant to purchase 126.26
shares of Common Stock at an exercise price of approximately $7.92 per share.
In December 1997, the Company raised net proceeds of $82.2 million from the
sale of the 9(1)/(4)% Preferred Stock, net proceeds of $133.5 million from the
sale of the 11(1)/(2)% Notes, a portion of the proceeds of which was used to
repay the 12% Reset Notes, and net proceeds of $97.0 million from the sale of
the Receivables Securitization Notes, a portion of the proceeds of which was
used to repay the outstanding balance of the Icahn Loans.
The net increase in cash and cash equivalents during 1997 was due, in large
part, to cash provided by financing activities of $112.2 million in 1997
versus cash used by financing activities of $9.7 million in 1996. Sources of
cash generated by financing activities related primarily to proceeds from
long-term debt, warrants and preferred stock sold of $359.9 million in 1997
versus $188.9 million in 1996. These proceeds were partially offset by the
repayment of long-term debt and capital lease obligations of $257.8 million in
1997 versus $117.2 million in 1996, and the 1996 redemption of 12% preferred
stock in the amount of $81.7 million. Cash provided by operating activities
improved to $0.2 million in 1997 from cash used by operating activities of
$5.7 million in 1996. This favorable change reflects a reduction in the net
loss from $284.8 million in 1996 to $110.8 million in 1997. Additionally, as
an offset, net discounted sales from tickets sold under the Karabu Ticket
Agreement are excluded from cash provided by operating activities as the
related amounts are applied as a reduction of the Icahn Loans and PBGC Notes.
During 1997, $53.8 million of such proceeds had been applied as a reduction to
the principal balance of the Icahn Loans and $70.3 had been applied as a
reduction to the PBGC Notes. During 1996, the proceeds applied as reductions
to the Icahn Loans and the PBGC Notes were $62.9 million and $6.4 million,
respectively. Additionally, $42.5 million in cash was generated from an
increase in accounts payable and accrued expenses, primarily due to the timing
of payments of certain obligations, and $65.3 million in cash was generated
from a decrease in receivables, offset by a related reduction of $41.3 million
in advanced ticket sales. Cash used by investing activities decreased to
$56.3 million in 1997 from $107.4 million in 1996. Components of this
decrease include a decrease in capital expenditures (including aircraft
pre-delivery payments) to $74.0 million in 1997 from $121.5 million in 1996,
an increase in proceeds from the sale of assets to $22.8 million in 1997
versus $3.2 million in 1996 and the return of $5.6 million in pre-delivery
deposits related to a new B-757 aircraft which was purchased by a lessor and
simultaneously leased back to TWA. Gross proceeds from assets sold during
1997 included $10.0 million for three gates at Newark International Airport
and $12.8 million from the sale of aircraft, engines and other surplus
property and equipment.
The net decrease in cash and cash equivalents during 1996 as compared to 1995
was due, in large part, to the fact that cash used in operating activities in
1996 was $5.7 million as compared to 1995 when cash provided by operating
activities was $216.9 million. The adverse change was primarily attributable
to the decrease in 1996 operating income as compared with 1995. Additionally,
as discussed above, net discounted sales from tickets sold under the Karabu
Ticket Agreement are excluded from cash provided by operating activities as
the related amounts were applied as a $62.9 million reduction of the Icahn
Loans and a $6.4 million reduction of the PBGC Notes. At December 31, 1995
approximately $2.0 million of such proceeds had been applied to the principal
balance of the Icahn Loans, while no proceeds had been applied to the PBGC
Notes. The increase of $79.5 million in trade accounts payable during 1996
was primarily due to the Company utilizing a safe harbor provision with regard
to payment of U.S. transportation taxes of $60 million for the period
September through December 1996, a significant portion of which was paid in
February 1997. Cash used in investing activities increased $84.1 million from
$23.3 million in 1995 to $107.4 million in 1996. A large part of this
increase was related to capital expenditures ($121.5 million in 1996 versus
$59.5 million in 1995) which had been somewhat restricted by fiscal controls
in place during most of 1995. Financing activities used $9.7 million of cash
in 1996, compared with a net use of cash of $27.8 million in 1995. Proceeds
from long-term debt issued and sale and leaseback transactions decreased from
$22.1 million in 1995 to $16.6 million in 1996. Repayments of long-term debt
and capital leases required $15.4 million more cash in 1996 than in 1995. In
1996, net proceeds from the sale of 8% Preferred Stock were $186.2 million
while the early redemption of the Mandatorily Redeemable 12% Preferred Stock
and cash dividends required $81.7 million and $14.5 million, respectively. In
1995, the net proceeds from an equity rights offering generated $51.9 million.
In March 1998, the Company completed the sale of $150.0 million in 11 3/8%
Senior Notes due 2006 resulting in net proceeds to the Company of $144.9
million. The Company intends to use the net proceeds for certain capital
expenditures, including pre-delivery deposits on new aircraft acquisitions,
and for working capital and other general corporate purposes.
In late 1996, the Company began implementing a series of new strategic
initiatives designed to improve the Company's financial and operating results.
The achievement of these improved operating results is subject to significant
uncertainties, including the Company's ability to achieve higher revenue
yields and load factors, the cost of aircraft fuel, the Company's ability to
finance or lease suitable replacement aircraft at reasonable rates and the
containment of operating costs. No assurance can be given that any of the
initiatives already implemented or any new initiatives, if implemented, will
be successful, or if successful, that such initiatives will produce sufficient
results for the Company to be successful in generating the operating revenues
and cash required for profitable operations or future viability.
Pursuant to the '95 Reorganization, the Company issued 600,000 ticket
vouchers, each with a face value of $50.00, which may be used for up to a 50%
discount off the cost of a TWA airline ticket for transportation on TWA
("Ticket Vouchers"). Pursuant to certain agreements, the Company repurchased
approximately 236,000 of the Ticket Vouchers at an aggregate cost of $8.8
million. Payments in respect of these Ticket Vouchers were approximately $0.7
million in 1995 and approximately $8.1 million in 1996. Concurrently, the
Company undertook aircraft lease payment deferrals to increase liquidity and
improve the Company's financial condition. Gross deferrals of lease and
conditional sale indebtedness payments aggregated approximately $91.0 million
with a weighted average repayment period of approximately two years. The
aircraft lease payment deferrals contemplated by the '95 Reorganization
generally anticipated six month deferrals with various payback periods,
extending in some instances over the remaining life of the lease, and in other
cases over a specified period. Cash repayments of lease deferrals, including
interest, were approximately $9.5 million in the fourth quarter of 1995, $23.8
million in 1996, $9.1 million in 1997 and are expected to approximate $0.5
million in 1998.
On June 14, 1995, the Company signed an agreement (the "Extension and Consent
Agreement") with Karabu to extend the term of the Icahn Loans from January 8,
1995 to January 8, 2001 and to obtain the consent of Karabu and the Icahn
Entities to certain modifications to the PBGC Notes. Collateral for the Icahn
Loans included a number of aircraft, engines and related equipment, along with
substantially all of the Company's receivables. On December 30, 1997 the
Company repaid the outstanding balance of the Icahn Loans with a portion of
the proceeds from the sale of the Receivables Securitization Notes.
On June 14, 1995, in consideration of, among other things, the extension of
the Icahn Loans, TWA and Karabu entered into the Ticket Agreement, which
permitted Karabu to purchase two categories of discounted tickets: (1)
"Domestic Consolidator Tickets," which are subject to a cap of $610 million,
based on the full retail price of the tickets ($120 million in the first 15
months and $70 million per year for seven consecutive years through the term
of the Ticket Agreement), and (2) "System Tickets," which are not subject to
any cap throughout the term of the Ticket Agreement.
Tickets sold by the Company to Karabu pursuant to the Ticket Agreement are
priced at levels intended to approximate current competitive discount fares
available in the airline industry. The Ticket Agreement provides that no
ticket may be included with an origin or destination of St. Louis, nor may any
ticket include flights on other carriers. Tickets purchased by Karabu
pursuant to the Ticket Agreement are required to be at fares specified in the
Ticket Agreement, net to TWA, and exclusive of tax. No commissions will be
paid by TWA for tickets sold under the Ticket Agreement, and TWA believes that
under the applicable provisions of the Ticket Agreement, Karabu may not market
or sell System Tickets through travel agents or directly to the general
public. Karabu, however, has been marketing System Tickets through travel
agents and directly to the general public. TWA has demanded that Karabu cease
doing so and Karabu has stated that is disagrees with the Company's
interpretation concerning sales through travel agents or directly to the
general public. For a description of the litigation pending between TWA and
Karabu, Mr. Icahn and affiliated companies, see "Business--Legal
Proceedings--Icahn Litigation."
Domestic Consolidator Tickets sold under the Ticket Agreement are limited to
certain origin/destination city markets in which TWA has less than a 5% market
share limit except for New York where there is a 10% limit. These restricted
markets will be reviewed from time to time to determine any change in TWA's
market share, and other markets may be designated as necessary.
The purchase price for the tickets purchased by Karabu had been required to
either, at Karabu's option, be retained by Karabu and the amount so retained
credited as prepayments against the outstanding balance of the Icahn Loans, or
be paid over by Karabu to a settlement trust established in connection with
the '93 Reorganization for TWA's account as prepayments on the PBGC Notes. At
December 31, 1997, approximately $118.6 million of such proceeds had been
applied to the principal balance of the Icahn Loans and $76.7 million had been
applied to the PBGC Notes. On December 30, 1997, the Company repaid the
outstanding balance of the Icahn Loans out of the proceeds of the Receivables
Securitization Offering. As a result, the purchase price of tickets purchased
by Karabu will be paid, at Karabu's election, either to the settlement trust
for prepayments on the PBCG Notes or to TWA directly.
The Company elected to pay interest, due August 1, 1995 and February 1, 1996,
and half the interest due February 1, 1997, on the 12% Reset Notes, in shares
of Common Stock. The amount of such interest aggregated approximately $10.4
million, $10.2 million and $3.7 million, respectively, and resulted in the
issuance of approximately 1.9 million, 1.1 million and 0.6 million shares of
Common Stock on the respective dates. The Company elected to pay dividends
due February 1, 1996 on its 12% Preferred Stock for the period from November
1, 1995 to and including January 31, 1996, in the amount of approximately $3.3
million, in shares of Common Stock.
Capital Resources
During 1997 the Company continued a series of privately negotiated exchanges
with a significant holder of 12% Reset Notes which resulted in the return to
the Company of $51.8 million in 12% Reset Notes and approximately $1.4 million
in accrued interest thereon in exchange for the issuance of approximately 7.7
million shares of Common Stock leaving an outstanding principal balance of
approximately $72.5 million. The Company redeemed the outstanding balance of
its 12% Reset Notes on January 20, 1998.
TWA has no unused credit lines and must satisfy all of its working capital and
capital expenditure requirements from cash provided by operating activities,
from external capital sources or from the sale of assets. As a result of the
financings consummated in the fourth quarter of 1997 and the repayment of
certain debt in connection therewith, assets with an approximate appraised
value of $165.0 million were released from collateral liens and are currently
unencumbered. Further pledging of these unencumbered assets, however, may be
limited by negative pledge restrictions in outstanding indebtedness.
Substantially all of TWA's other strategic assets have been pledged to secure
various issues of outstanding indebtedness of the Company. To the extent that
the pledged assets are sold, the applicable financing agreements generally
require the sale proceeds to be applied to repay the corresponding
indebtedness. To the extent that the Company's access to capital is
constrained, the Company may not be able to make certain capital expenditures
or to continue to implement certain other aspects of its strategic plan, and
the Company may therefore be unable to achieve the full benefits expected
therefrom.
Commitments
In February 1996, TWA executed definitive agreements providing for the
operating lease of 10 new 757 aircraft, all of which have been delivered.
These aircraft have an initial lease term of 10 years. Although individual
aircraft rentals escalate over the term of the leases, aggregate rental
obligations are estimated to average approximately $59 million per annum over
the lease terms. The Company also entered into an agreement in February 1996
with Boeing for the purchase of ten 757-231 aircraft and related engines,
spare parts and equipment for an aggregate purchase price of approximately
$500 million. The agreement also provides for the purchase of up to ten
additional aircraft. As of February 1, 1998, TWA had taken delivery of five
purchased aircraft and had five on firm order. Furthermore, to the extent TWA
exercises its options for additional aircraft, the Company will have the right
to an equal number of additional option aircraft. Four of the five aircraft
already delivered were manufacturer financed and one was leased. TWA has
obtained commitments for debt financing for approximately 80% of the total
costs associated with the acquisition of four of the remaining five aircraft
which have not been delivered and obtained commitments for 100% lease
financing of the total costs of the remaining fifth and final of such
aircraft. Such commitments are subject to, among other things, so-called
material adverse change clauses which make the availability of such debt and
lease financing dependent upon the financial condition of the Company.
In 1997, TWA reached agreements for the acquisition, by lease, of two new
Boeing 767-300ER aircraft, one of which has been delivered in March 1998 and
the second is scheduled to be delivered in April 1998. The longer-range 300
series aircraft will be utilized on TWA's international routes and to Hawaii.
TWA has entered into agreements with AVSA, S.A.R.L. and Rolls-Royce plc
relating to the purchase of ten A330-300 twin-engine wide body aircraft and
related engines, spare parts and equipment for an aggregate purchase price of
approximately $1.0 billion. The agreements, as amended, require the delivery
of the aircraft in 2001 and 2002 and provide for the purchase of up to ten
additional aircraft. TWA has not yet made arrangements for the permanent
financing of the purchases subject to the agreements. In the event of
cancellation, predelivery payments of approximately $18 million would be
subject to forfeiture.
The Company has entered into an agreement to acquire from the manufacturer
fifteen new MD-83s. The long-term leasing arrangement provides for delivery
of the aircraft between the second quarter of 1997 and the first quarter of
1999. As of December 31, 1997, the Company has taken delivery of seven of the
MD-83 aircraft and expects to take delivery of six additional planes during
1998 and two additional planes in 1999.
In April 1998, the Company entered into an agreement to purchase from the
manufacturer 24 new MD-83 aircraft with deliveries in 1999. The Company has
obtained financing commitments for long-term debt and lease financing for such
aircraft. Although the Company anticipates that rental payments for such
aircraft would represent a substantial financial commitment, it is not
possible to accurately estimate the amount of such payments at this time.`
TWA elected to comply with the transition requirements of the Noise Act by
adopting the Stage 2 aircraft phase-out/retrofit option, which requires that
50% of its base level (December 1990) Stage 2 fleet be phased-out/retrofitted
by December 31, 1996. To comply with the 1996 requirement, the Company
retrofitted, by means of engine hush-kits, 30 of its DC-9 aircraft. As of
December 31, 1997, hush-kits have been installed on 71 DC-9 engines at an
aggregate cost of approximately $55 million, most of which was financed by
lessors with repayments being facilitated through increased rental rates or
lease term extensions. TWA intends to comply with the transition requirements
for December 31, 1998 by having 75% of its fleet meet Stage 3 requirements.
By December 31, 1999, 100% of the fleet must meet Stage 3 requirements.
The Company has acquired three Boeing 767-231 ETOPS airframes and six
accompanying engines (collectively, the "Aircraft") which the Company previously
leased in exchange for the issuance of (i) $43.2 million aggregate principal
amount of the 11 3/8% Senior Secured Notes due 2003, and (ii) $31.8 million
aggregate principal amount of the Mandatory Conversion Equity Notes due 1999,
which have a second priority security interest in the Aircraft and are
convertible into shares of Common Stock. The 11 3/8% Senior Secured Notes and
the Mandatory Conversion Equity Notes due 1999 have not been registered under
the Securities Act and may not be transferred or sold in the United States
absent registration or an applicable exemption from registration requirements.
Certain Other Capital Requirements
Expenditures for facilities and equipment, other than aircraft, generally are
not committed prior to purchase and, therefore, no such significant
commitments exist at the present time. TWA's ability to finance such
expenditures will depend in part on TWA's financial condition at the time of
the commitment.
The Company utilizes software and related computer technologies essential to
its operations that use two digits rather than four to specify the year, which
will result in a date recognition problem in the year 2000 and thereafter
unless modified. The Company has completed an assessment to determine the
changes needed to make its computer systems year 2000 compliant and has
developed a plan to implement such changes. The Company currently expects
that it will complete the necessary changes and testing in mid-1999. As of
December 31, 1997, the Company estimates that the total cost to complete the
remediation of its computer systems would be approximately $18.7 million.
The Company is also reviewing software which was purchased from outside
vendors and is evaluating its reliance on other third parties to determine and
minimize the extent to which its operations may be dependent on such third
parties to remediate the year 2000 issues in their systems. The costs of the
Company's year 2000 project and the date on which it will be completed are
based on management's best estimates and include assumptions regarding third
party modification plans. However, there can be no assurance that these
estimates will be achieved and actual results could differ materially from
those anticipated.
Availability of NOLs
The Company estimates that it had, for federal income tax purposes, net
operating loss carryforwards ("NOLs") amounting to approximately $855 million
at December 31, 1997. Such NOLs expire in 2008 through 2012 if not utilized
before then to offset taxable income. Section 382 of the Internal Revenue
Code of 1986, as amended (the "Code"), and regulations issued thereunder
impose limitations on the ability of corporations to use NOLs, if the
corporation experiences a more than 50% change in ownership during certain
periods. Changes in ownership in future periods could substantially restrict
the Company's ability to utilize its tax net operating loss carryforwards. The
Company believes that no ownership change has occurred subsequent to the '95
Reorganization. There can be no assurance, however, that an ownership change
will not occur in the future. In addition, the NOLs are subject to
examination by the IRS and, thus, are subject to adjustment or disallowance
resulting from any such IRS examination. For financial reporting purposes,
the tax benefits from substantially all of the tax net operating loss
carryforwards will, to the extent realized in future periods, have no impact
on the Company's operating results, but instead be applied to reduce
reorganization value in excess of amounts allocable to identifiable assets.
BUSINESS
TWA is the eighth largest U.S. air carrier (based on RPMs for the full-year
1997), whose primary business is transporting passengers, cargo and mail.
During 1997, the Company carried approximately 23.4 million passengers and
flew approximately 25.1 billion RPMs. As of December 31, 1997, TWA provided
regularly scheduled jet service to 89 cities in the United States, Mexico,
Europe, the Middle East, Canada and the Caribbean. As of December 31, 1997,
the Company operated a fleet of 185 jet aircraft.
Route Structure
TWA's passenger airline business is the Company's chief source of revenue.
TWA also carries cargo (mail and freight) on its North American and
international systems. For the year ended 1997, the Company's North American
passenger operations accounted for 85.9% of its total passenger revenues,
while its international passenger operations contributed 14.1% of total
revenues.
TWA's North American operations have a hub-and-spoke structure, with a
primarily domestic hub at St. Louis and a domestic-international hub at JFK.
The North American system serves 36 states, the District of Columbia, Puerto
Rico, Mexico, Canada, and the Caribbean. TWA also participates in the charter
market, flying both domestic and international charter flights.
TWA's international operations consist of both nonstop and through-service
from JFK and St. Louis to destinations in Europe and the Middle East. TWA's
international operations are concentrated at JFK, from which it now serves 26
cities with approximately 40 daily departures. International cities served
include Barcelona, Cairo, Lisbon, Madrid, Milan, Riyadh, Rome, and Tel Aviv
from JFK; Paris from JFK and St. Louis; and London-Gatwick from St. Louis.
Other Activities
In addition to TWA's passenger and cargo services, the Company operates
Getaway Vacations, a tour package offering leisure travel products and
services. In addition, TWA earns revenue by providing contract maintenance
services for a number of third parties. In 1996, the Company began reducing
certain third-party airframe and engine contract maintenance service and,
while the Company expects to maintain the reduced level of airframe
third-party contract work through 1998, the Company has selectively expanded
the amount of engine third-party contract maintenance work that it performs.
Flight Equipment
As of December 31, 1997, TWA operated a fleet of 185 aircraft, of which 36
were owned by TWA and 149 were leased. All aircraft in use are maintained in
airworthy condition in accordance with procedures approved by the FAA. The
active operating aircraft owned by and leased to TWA as of December 31, 1997
are listed below.
<TABLE>
<CAPTION>
Average Age Seats in
of Aircraft (in Standard TWA
Type Owned(2) Leased Total(3) years) Configuration
- ---- -------- ------ -------- ------ -------------
<S> <C> <C> <C> <C> <C>
Douglas DC-9-10.......... -- 7 7 31.0 77
Douglas DC-9-30.......... -- 36 36 28.0 100
Douglas DC-9-40.......... -- 3 3 23.2 100
Douglas DC-9-50.......... -- 12 12 20.9 115
Douglas MD-80/83(1)...... -- 65 65 9.6 142
Boeing 727-200(1)........ 25 5 30 22.2 146
Boeing 747(1)............ 1 2 3 27.3 433
Boeing 757............... 4 11 15 0.7 180
Boeing 767............... 6 8 14 13.3 192
-- --- --- ----
Total................... 36 149 185 16.9
== === === ====
</TABLE>
- ----------
(1) Excludes the following aircraft which are not in the active fleet: four
Boeing 727-100s, four Boeing 727-200s, eight Boeing 747-100s, two Boeing
747-200s, 10 L-1011s and two Douglas MD-80s.
(2) A significant portion of TWA's owned flight equipment is pledged to secure
its indebtedness.
(3) For information concerning compliance of the above-referenced aircraft
with the Noise Act, see "--Regulatory Matters--Noise Abatement."
For a discussion of the Company's fleet restructuring plans,
see "The Company--Business Strategy--Fleet Upgrade and Simplification."
Real Property
TWA utilizes or has rights to utilize airport and terminal
facilities located in or near the cities it serves under lease agreements or
other arrangements with the governmental authorities exercising control over
such facilities.
At St. Louis, TWA has preferential use rights to 57 gates and
40 ticket counter positions, and ramp, baggage and other supporting ground
facility space. TWA's domestic-international hub at JFK operates out of two
passenger terminal facilities (Terminals 5 and 6). TWA is the lessee at JFK
of a total of 29 gates, 102 ticket counter positions, and ramp, baggage and
other supporting ground facility space. TWA occupies both Terminal 5 and
Terminal 6 as a holdover tenant pursuant to expired agreements of lease with
the Port Authority of New York and New Jersey (the "Port Authority"). Such
holdover tenancies are with the consent of the Port Authority pursuant to a
Term Sheet dated August 12, 1993 (the "Term Sheet"), which extended TWA's
right to occupy Terminals 5 and 6, provided TWA paid the rent set forth in the
Term Sheet, made certain specified financed improvements to Terminals 5 and 6,
and was otherwise in compliance with the expired leases. TWA's tenancy is
currently on a month-to-month basis and no lease has been signed. The Company
has recently consolidated for the near term most of its JFK operations into
Terminal 5, using only limited facilities in Terminal 6. TWA has currently
subleased a majority of the gates in Terminal 6 to other carriers.
TWA's overhaul base is located on approximately 250 acres of
leased property at the Kansas City International Airport, Kansas City,
Missouri. The overhaul base is TWA's principal maintenance base where TWA
performs major maintenance and repair services for its aircraft fleet. The
overhaul base is owned by the City of Kansas City, Missouri and leased to TWA
along with other facilities until May 31, 2000. TWA leases office space and
other facilities in a number of locations in the U.S. and abroad. In December
1993, pursuant to a sale/leaseback with the City of St. Louis, TWA leased a
two-story ground operations building near the St. Louis Airport and an
adjacent 165,000 square foot, five-story flight training facility. The lease
of these properties is covered under a month-to-month agreement subject to
automatic renewal so long as TWA is not in default thereunder, such agreement
having a term otherwise expiring December 31, 2005. Such term is subject to
early termination in the event of certain events of default, including
non-payment of rents, cessation of service, failure to maintain corporate
headquarters within the City or County of St. Louis or failure to maintain a
reservations office within the City of St. Louis. For a description of
certain environmental corrective actions that TWA anticipates will be required
at the overhaul base, see "--Legal Proceedings."
TWA's corporate headquarters are located at One City Centre,
515 N. Sixth Street, St. Louis, Missouri where TWA has subleased approximately
56,700 square feet through February 28, 2000. TWA's St. Louis area reservation
facility and customer relations department is located in approximately 48,000
square feet in the City of St. Louis, Missouri. In June 1996, TWA opened a
new reservation facility in Norfolk, Virginia, comprised of approximately
40,000 square feet and having 455 work stations. The facility is leased for a
twenty-five year term.
Travel Agencies
Travel Agent Commissions
Consistent with most other airlines, tickets sold for travel on
TWA are sold by travel agents as well as directly by the Company. During
1997, approximately 81.9% of all ticket sales on TWA were sold by travel
agents. Until October 2, 1997, TWA paid the full traditional 10% commission
on tickets for domestic transportation on TWA sold by independent travel
agents without the cap of $50 and $25 per domestic round-trip and one-way
tickets, respectively, which most other major airlines imposed in 1995 and
paid an 11% commission on tickets for international transportation. On
October 2, 1997, the Company reduced its commission on tickets for domestic
and international transportation to 8% and 10%, respectively, without the cap
imposed by most of the major airlines. Although the Company cannot quantify
the current or potential future impact of this decision, the Company believes
the uncapped commission structure is a positive factor in the Company
maintaining and improving its long-term relationships with such travel agents
and encourages the booking of higher fare tickets. TWA pays 9% for tickets
issued outside the U.S. Carriers (including TWA) may also pay additional
commissions to travel agents as incentive for increased volume or other
business directed to the carrier.
Travel Agency Automation
Greater than 90% of all travel agencies in the U.S. obtain
their airline travel information through access to Global Distribution Systems
(also referred to as Computer Reservation Systems or "CRS"). Such systems are
used by travel agents to make travel reservations including airline, hotel,
train, car and other bookings and allow travel agents to issue airline tickets
and boarding passes.
One such system is WORLDSPAN, which is owned by a partnership
in which affiliates of TWA, Delta Air Lines, Northwest Airlines, and ABACUS
Distribution Systems Pte. Ltd, have interests of 25%, 32%, 38% and 5%,
respectively. Management believes that its participation in Worldspan has
given it direct access to an efficient distribution system. Worldspan
continues to expand its offering and coverage, further benefitting the
Company. TWA will continue to increase the methods and efficiency of
distributing its product through a variety of channels and systems, including
increasing use of "E" ticketing (electronic ticketing) and direct booking
through the Internet.
Frequent Flyer Program: "Aviators"
TWA initiated its frequent flyer program in May 1981. Frequent
flier programs like TWA's Aviators have been adopted by most major air
carriers and are considered the number one marketing tool for developing brand
loyalty among travelers and accumulating demographic data pertaining to
business fliers.
TWA's frequent flyer program rewards certain of its members
with mileage credits based on the fare paid as well as miles flown for travel
on TWA and also offers mileage credits for members' purchases of goods and
services offered by various travel and non-travel related businesses that
participate in Aviators including other airlines. Aviators members may also
receive mileage credit pursuant to exchange agreements maintained by TWA with
a variety of entities, including hotels, car rental firms, credit card issuers
and long distance telephone service companies. For example, through the
American Express Membership Rewards Program, Aviators members may use amounts
charged on the American Express card to earn additional frequent flier miles.
TWA accounts for its frequent flyer program under the
incremental cost method, whereby travel awards are valued at the incremental
cost of carrying one additional passenger. Such costs are accrued when
Aviators participants accumulate sufficient miles to be entitled to claim
award certificates. Incremental costs include unit costs for passenger food,
beverages and supplies, fuel and liability insurance expenses expected to be
incurred on a per passenger basis. No profit or overhead margin is included
in the accrual for incremental costs. No liability is recorded for airline,
hotel or car rental award certificates that are to be honored by other parties
because there is no cost to TWA for these awards.
At December 31, 1996, participants in TWA's frequent flyer
program had accumulated mileage credits for approximately 751,689 free awards,
compared with accumulated mileage credits for approximately 938,319 free awards
at December 31, 1997. Because TWA expects that some award certificates will
never be redeemed, the calculations of the accrued liability for incremental
costs at December 1996 and 1997 were based on approximately 71.5% and 63.0%,
respectively, of the accumulated credits. Mileage for Aviators participants
who have accumulated less than the minimum number of mileage credits necessary
to claim a free award is excluded from the calculation of the accrual.
The accrued liability at December 31, 1996 was approximately
$20.4 million compared to approximately $19.6 million at December 31, 1997.
TWA's customers redeemed free awards representing approximately 4.5% and 4.9%
of TWA's RPMs in 1996 and 1997, respectively.
Aircraft Fuel
TWA's worldwide aircraft fuel requirements are met by in excess
of twenty different suppliers. The Company has contracts with some of these
suppliers, the terms of which vary as to price, payment terms, quantities and
duration. The Company also makes incremental purchases of fuel based on price
and availability. To assure adequate supplies of jet fuel and to provide a
measure of control over price, the Company trades fuel, ships fuel and
maintains fuel storage facilities to support key locations. Petroleum product
prices, including jet fuel, are primarily driven by crude oil costs. The
market's alternate uses of crude oil to produce petroleum products other than
jet fuel (e.g., heating oil and gasoline) as well as the adequacy of refining
capacity and other supply constraints affect the price and availability of jet
fuel. Changes in the price or availability of fuel could materially affect
the financial results of the Company. See also "Risk Factors--Risk Factors
Related to the Industry--Aircraft Fuel."
During 1996, aircraft fuel prices increased significantly,
however, such prices declined moderately during 1997. The following table
details TWA's fuel consumption and costs for the four years ended December 31,
1994, 1995, 1996 and 1997:
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------------------------------------------
1994 1995 1996 1997
------------- ------------ ------------- ------------
<S> <C> <C> <C> <C>
Gallons consumed (in millions)....... 852.2 804.2 838.9 730.3
Total cost(1) (in millions).......... $477.6 $458.6 $585.2 $480.9
Average cost per gallon.............. 56 Cents 57 Cents 70 Cents 66 Cents
Percentage of operating expenses..... 13.0% 13.9% 15.6% 14.3%
</TABLE>
- ----------
(1) Excludes into-plane fees.
Competition
Since the passage of the Airline Deregulation Act of 1978, the
airline industry has been characterized by intense competition, consolidation
of existing carriers, the formation of international and domestic alliances
and the advent of numerous low-cost, low-fare new entrants. A number of
airlines have filed for bankruptcy and/or ceased operations. In addition,
several carriers have introduced or announced plans to introduce low-cost,
short-haul jet service, which may result in increased competition to TWA.
Airlines offer discount fares, a wide range of schedules, frequent flier
mileage programs and ground and in-flight services as competitive tools to
attract passengers and increase market share. Intense price competition has
accelerated the efforts of airline managements to reduce costs and improve
productivity in order to withstand greater levels of discounting. TWA's
services are subject to varying degrees of competition, depending in part on
whether such services are operated over domestic or international routes.
Because of the relative ease with which U.S. carriers can enter new domestic
markets, TWA's domestic services are subject to increases or decreases in
competition from other air carriers. Changes in intensity of competition in
the deregulated domestic environment cannot be predicted.
The level of competition in international markets is normally
governed by the terms of bilateral agreements between the U.S. and the foreign
countries involved. Many of the bilateral agreements permit an unlimited
number of carriers to operate between the U.S. and the foreign country.
Competition in some international markets is limited to a specified number of
carriers and flights on a given route by the terms of the air transport
agreements between the U.S. and the foreign country. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations --
General" and "--Regulatory Matters."
The airline industry is subject to substantial price
competition as U.S. airlines are free to determine domestic pricing policies
without government regulation. While the DOT retains authority over
international fares, which are also subject to the jurisdiction of the
governments of the foreign countries being served, the Company generally has
substantial discretion with respect to its international pricing policies.
While DOT authority is required before any person may operate
as an air carrier within or to and from the U.S., the Airline Deregulation Act
of 1978 and the International Air Transportation Competition Act of 1979
substantially decreased previous governmental restrictions in this area. In
the case of domestic operations, any person who is found to be fit, willing
and able may operate as an air carrier between any two points in the U.S.
Thus, TWA is able to enter new routes or suspend existing routes within the
U.S. without seeking regulatory approval. Similarly, other airlines are free
to enter or leave TWA's domestic markets.
Employees
As of December 31, 1997, the Company had approximately 22,321
full-time employees (based upon full-time equivalents which include part-time
employees). Of these, approximately 84.6% were represented by ALPA and the
IAM. On March 6, 1997, the IAM was certified to replace IFFA as the
bargaining representative of the Company's flight attendants.
During 1994, the Company entered into the '94 Labor Agreements
with ALPA, IAM and IFFA amending then existing labor agreements with each such
union to, among other things, (i) eliminate certain raises scheduled to take
effect in 1994 and 1995, thereby continuing certain wage and benefit
concessions granted to the Company in the '92 Labor Agreements, (ii) modify
existing work rules and benefit packages, and (iii) eliminate contractual
"snapback" provisions contained therein which would have automatically
restored wages to pre-concessionary levels for purposes of future contract
negotiations. The terms of the IFFA contract remain in effect, although the
flight attendants are now represented by the IAM. In addition, the Company
implemented a number of similar savings initiatives with respect to domestic
non-union and management employees, primarily through reducing headcount,
altering benefit packages, and eliminating certain planned restorations of
previous wage concessions.
In exchange for the substantial cost savings realizable by the
Company as a result of the foregoing, as described in more detail below, TWA
(i) agreed to certain wage increases and productivity payments to its
employees, (ii) issued certain equity securities of the Company to its
employees, (iii) agreed to make certain future grants of equity securities and
to permit such employees an opportunity to purchase certain additional
securities at a discount, and (iv) effected certain amendments to the
Company's Certificate of Incorporation and By-laws with respect to the
election of certain directors and director voting requirements in the event of
certain specified corporate actions.
As part of the '94 Labor Agreements, TWA agreed with its
unionized employees to a series of semi-annual 1% wage increases commencing in
May 1995 and continuing through August 31, 1997 (the last such wage increase
equaled 3% in the case of employees represented by ALPA and IFFA, and the IAM
received a 1% wage increase and a 2% contribution to its retirement plan on
August 31, 1997).
On the '95 Effective Date, TWA issued to certain trusts
established for the benefit of its unionized employees shares of Employee
Preferred Stock; such stock being issued in three separate series designated
the ALPA Preferred Stock, the IAM Preferred Stock and the IFFA Preferred
Stock. Except for certain rights with respect to the election of directors,
the Employee Preferred Stock has rights substantially identical to the Common
Stock. See "Description of Capital Stock--Description of Employee Preferred
Stock." TWA also issued an aggregate of 1,026,694 shares of Common Stock to a
trust established for the benefit of certain of TWA's other employees. The
value of shares issued to the Company's non-union employees was intended to
reflect the estimated value to the Company of the concessions granted by these
employees. The equity securities issued on the '95 Effective Date resulted in
the employees of the Company initially owning approximately 30% of the then
outstanding Common Stock and Common Stock equivalents of the Company.
In recognition of the fact that as a result of the '95
Reorganization, the percentage of the Company's stock owned by the Company's
employees was substantially reduced, the Company adopted as of the '95
Effective Date the ESIP pursuant to which the Company would grant, commencing
in 1997, to certain trusts established for the benefit of its union and
non-union employees certain additional shares of Common Stock and Employee
Preferred Stock. The ESIP provides that the first stock grant under the plan
would be made on July 15, 1997 in an amount sufficient to increase the
employee ownership of the combined total number of then outstanding shares of
Common Stock and Employee Preferred Stock by 2.0% if the average closing price
of the Common Stock on the American Stock Exchange, or such other exchange or
market which is then the principal market on which the Common Stock is listed
or admitted to trading, for 30 consecutive trading days (the "Average Closing
Price") exceeded a target price of $11.00 per share during the period from
January 1, 1997 to July 14, 1997. If the target price of $11.00 per share is
not exceeded, the grant would instead be made, if at all, on July 15 of the
next year (up to and including July 15, 2002) in which the Average Closing
Price of the Common Stock exceeds such target price prior to July 15 of that
year. In each of 1998 through 2002, additional shares of Employee Preferred
Stock and Common Stock will become subject to grant under this program in an
amount sufficient to increase the employee ownership by 1.5% in 1998, 1.5% in
1999, 1.0% in 2000, 1.0% in 2001 and 1.0% in 2002 (subject to adjustment as
described below) based on the combined total number of shares of Common Stock
and Employee Preferred Stock outstanding as of the applicable July 15 grant
date, with the target price applicable to the additional shares made available
for grant in such year equal to $12.10 in 1998, $13.31 in 1999, $14.64 in
2000, $16.11 in 2001 and $17.72 in 2002. Each such grant is cumulative and,
where the applicable target price is not met in the initial grant year, the
applicable grant is carried forward and is subject to grant in future years up
to and including July 15, 2002 in the manner described above. To protect
against the dilutive effect of certain stock issuances, the ESIP provides for
an adjustment (the "Adjustment") to the grants described above in the event the
Company issues additional Common Stock to third parties for cash or property
or in lieu of cash payments on the 12% Reset Notes or the Company's
Mandatorily Redeemable 12% Preferred Stock (both the 12% Reset Notes and the
Mandatorily Redeemable 12% Preferred Stock have been retired). To the extent
that a sale of additional capital stock for cash results in a decline in the
percentage of employee ownership of the combined total number of shares of
Common Stock and Employee Preferred Stock below a level equal to the Adjusted
Base Ownership Percentage (as defined in the ESIP), one-quarter of the
difference between the new percentage of employee ownership and the Adjusted
Base Ownership Percentage (but in no event greater than 1.0% in each year)
would be added to the percentage of Employee Preferred Stock and Common Stock
to be granted to union employees and non-union employees, respectively, under
the ESIP in each of the years 1999 through 2002, assuming the target prices
are met. Furthermore, if TWA issues additional shares of Common Stock with an
aggregate value of more than $20 million to third parties for cash or a
reduction in debt at a price equal to or greater than $11.00 per share (the
"Equity Issuance Acceleration Trigger"), the last two scheduled grants under
the ESIP are to be aggregated and these shares allocated equally to the
remaining installments in the program. In addition, pursuant to the ESIP,
employees have the right commencing July 15, 1997 through July 15, 2002, to
purchase additional shares of Employee Preferred Stock in amounts up to an
aggregate of 2.0% of the combined total number of outstanding shares of Common
Stock and Employee Preferred Stock at a discount of 20.0% from the then
current market price. Should all of the target prices be met or exceeded
within the time periods specified and should the entire discount stock
purchase option be exercised, the various employee stock trusts would receive
a total of 10.0% (as adjusted as described below) of the Company's outstanding
Common Stock, with the exact amount issued dependent upon the number of shares
outstanding as of the date of each grant and option exercise.
The ESIP separately provides that if additional shares of
Employee Preferred Stock and Common Stock are distributed following the '95
Effective Date in respect of the '95 Reorganization, employees will be
entitled to receive an additional number of shares of Employee Preferred Stock
and Common Stock such that the employees will retain the same level of
ownership. Union representatives and the Company agreed to a one-time
distribution pursuant to this provision of the ESIP in an aggregate amount of
525,856 shares of Employee Preferred Stock and Common Stock. As part of that
agreement, since additional ESIP shares were not issued to the employees in
July 1997, an additional 405,750 shares of Employee Preferred Stock and Common
Stock were issued to the employee trusts and, to the extent that additional
shares are granted under the ESIP, the Company will receive a credit towards
the new grant for these previously issued shares, in that amount.
While the $11.00 target price was not exceeded as of July 15,
1997 and no grant was made on that date, on February 17, 1998, the Average
Closing Price for the Company's Common Stock did exceed the $11.00 target price
with respect to the first scheduled grant. As a result, the initial grant in an
amount sufficient to increase the employee ownership by 2.0% based on the then
outstanding Common Stock and Employee Preferred Stock will be made on July 15,
1998. Based on the current outstanding Voting Equity (as defined in the ESIP)
of 57,890,907, the number of shares of Employee Preferred Stock and Common Stock
to be issued to the employees under the ESIP on that date is 1,515,472. TWA is
entitled to a credit against this number in the amount of 405,750 shares due to
the prior grant to employees as described above. On March 4, 1998, the Average
Closing Price for the Company's Common Stock did exceed the $12.10 target price
with respect to the 1998 grant of 1.5%. As a result, the 1998 grant in an
amount sufficient to increase the employee ownership by 1.5% based on the then
outstanding Common Stock and Employee Preferred Stock will also be made on July
15, 1998. Based on the current outstanding Voting Equity, the number of
additional shares of Employee Preferred Stock and Common Stock to be issued
under the ESIP on that date for the 1998 grant is 1,172,354 shares, which
together with the shares to be issued in connection with the 1997 grant equals a
total of 2,282,076 shares. The number of shares to be granted could be increased
if the last two grants are accelerated pursuant to the Equity Issuance
Acceleration Trigger. Furthermore, based on issuances of Common Stock to date,
the Adjustment has resulted in a revised grant schedule of 1.5% in 1998, 1.84%
in 1999, 1.34% in 2000, 1.34% in 2001 and 1.34% in 2002. Taking into account
the Common Stock to be issued upon conversion of the Mandatory Conversion Equity
Notes due 1999, the grants for the years 1999 through 2002 would further
increase pursuant to the Adjustment to: 1.91% in 1999, 1.41% in 2000, 1.41% in
2001 and 1.41% in 2002.
In addition to certain amendments required to effect the
recapitalization of the Company, on the '95 Effective Date, TWA further
amended its Certificate of Incorporation and By-laws to (i) permit certain
employees represented by ALPA and the IAM to elect four of the Company's 15
directors (the "Employee Directors"), and (ii) provide that certain
extraordinary corporate actions, including mergers, sales of all or
substantially all of the Company's assets or certain routes or any filing
seeking protection under the bankruptcy laws, may be blocked by a vote of six
directors, including each of the Employee Directors. See "Certain Provisions
of the Certificate of Incorporation, the By-laws and Delaware Law--Blocking
Coalition."
The '94 Labor Agreements were three year agreements and became
amendable as of August 31, 1997. Negotiations on a new collective bargaining
agreement with the IAM with regard to the flight attendants commenced in July
1997 and are currently ongoing and negotiations regarding the Company's ground
employees represented by the IAM commenced in February 1997 and are also
currently ongoing. Negotiations on a new collective bargaining agreement with
ALPA commenced in June 1997 and are currently ongoing. Under the RLA workers
whose contracts have become amendable are required to continue to work under
the "status quo" (i.e., under the terms of employment in effect before the
amendable date) until the RLA's procedures are exhausted. Under the RLA, the
Company and its unions are obligated to continue to bargain until agreement is
reached or until a mediator is appointed and concludes that negotiations are
deadlocked and mediation efforts have failed. The mediator must then further
attempt to induce the parties to agree to arbitrate the dispute. If either
party refuses to arbitrate, then the mediator must notify the parties that his
efforts have failed and, after a 30-day cooling-off period, a strike or other
direct action may be taken by the parties. At the request of the IAM, a
mediator was appointed on August 6, 1997 in connection with the negotiations
on the collective bargaining agreement covering ground employees. On March
27, 1998, at the request of the IAM, a mediator was appointed in connection
with the negotiations on the collective bargaining agreement covering the
flight attendants. In the opinion of management, the Company's financial
resources are not as great as those of most of its competitors, and,
therefore, any substantial increase in its labor costs as a result of any new
labor agreements or any cessation or disruption of operations due to any
strike or work action could by particularly damaging to the Company. See
"Risk Factors--Risk Factors Related to the Company--'94 Labor Agreements."
Regulatory Matters
Slot Restrictions
The Company's ability to increase its level of operations at
certain domestic cities currently served is affected by the number of slots
available for takeoffs and landings. At JFK, LaGuardia, Chicago O'Hare and
Ronald Reagan Washington National airports, which have been designated "High
Density Airports" by the FAA, there are restrictions on the number of aircraft
that may land and take off during peak hours. In the future, these take-off
and landing time slot restrictions and other restrictions on the use of
various airports and their facilities may result in further curtailment of
services by, and increased operating costs for, individual airlines, including
TWA, particularly in light of the increase in the number of airlines operating
at such airports. On April 1, 1986, the FAA implemented a final rule relating
to allocated slots at the High Density Airports. This rule, as since amended,
contains provisions requiring the relinquishment of slots for nonuse and
permits carriers, under certain circumstances, to sell, lease or trade their
slots to other carriers. TWA does not anticipate losing any slots as a result
of these new rules; however the higher use rates required by these rules do
increase the risk that TWA might lose slots in the future because of nonuse
and decrease TWA's ability to adjust its flight schedules at the High Density
Airports.
Most international points served by TWA also are
slot-controlled.
Control over International Routes
TWA's international certificates are granted by the DOT for
indefinite or fixed-term periods, depending on the route. TWA is authorized
to provide transatlantic service from major cities in the U.S. to points in
Europe, North Africa, the Middle East and Asia. Some of these authorized
routes are not currently served by TWA. Many of the European markets served
by TWA are "limited entry" markets in which, as a result of agreements between
the United States and foreign governments, TWA has traditionally competed with
a limited number of other carriers. During the past several years, however,
the U.S. government has encouraged competition in international markets and
entered into bilateral agreements with various foreign governments that
provide for expanded exchanges of routes and traffic rights, reduction of
governmental controls over fares and avoidance of limits on capacity and
charter services. Competition in international markets has increased
dramatically over the past several years as major U.S. carriers have initiated
and/or continued to expand their international operations. Foreign flag
carriers have continued to expand service and the DOT has indicated its
support for further expansion of opportunities of foreign carriers to serve
new points in the U.S. No assurance can be given that TWA will continue to
have the advantage of all the "limited entry" markets in which it currently
operates or that additional carriers will not be permitted to operate in one
or more of these markets or that TWA in general will not face substantial
unexpected competition. Competition in the international market is further
complicated by the fact that pricing levels on some transatlantic routes are
influenced by subsidies that certain foreign carriers receive from their
governments and by the presence of smaller, low-cost carriers.
Certain portions of TWA's transatlantic route authority have
been granted on a fixed-term basis. On May 4, 1993, the bilateral air
transport agreement between the U.S. and France lapsed. In the absence of a
new bilateral agreement, the U.S. and France are currently operating on a
system of comity and reciprocity. Under this regime, carriers are permitted
to maintain historical levels of service, but few or no new services are
permitted. Cessation of service to any authorized markets from France may
cause such underlying authority to terminate. Any reduction in U.S. carrier
access to France could have an adverse impact on TWA's transatlantic
operations.
The operations of TWA's international system will require
continued approval by the U.S. government as well as permission or
authorization from the governments of the respective countries served and
compliance with the laws and regulations of those countries. These
authorizations, permits and rights vary considerably in their terms,
particularly as to the imposition of restrictive conditions on U.S. airlines.
Other DOT/FAA Regulations
The DOT has the authority to regulate competitive practices,
advertising and other consumer protection matters such as on-time performance,
smoking policies, denied boarding, baggage liability and CRSs provided to
travel agents. With respect to foreign air transportation, the DOT may
approve agreements between air carriers and grant antitrust immunity to those
agreements. The DOT must also approve the transfer between U.S. carriers of
international route certificates. The Department of Justice has the authority
to approve mergers and interlocking relationships.
Noise Abatement
The Noise Act provides for a reduction in aircraft noise levels
by commercial aircraft. Under the Noise Act, air carriers were permitted to
elect to comply with the transitional requirements of the Noise Act at
December 31, 1994, either by (i) phasing out, or retrofitting with noise
abatement equipment, certain older aircraft known as Stage 2, or (ii) phasing
in quieter aircraft, known as Stage 3. Air carriers who elected to comply by
phasing out or retrofitting Stage 2 aircraft were required to phase out or
retrofit at least 25% of a specified 1990 base level of such aircraft by
December 31, 1994 and by at least 50% by December 31, 1996. TWA elected to
comply with the final Noise Act requirements by adopting the Stage 2 aircraft
phase out/retrofit option, and had reduced its specified base level of Stage 2
aircraft by 25% at December 31, 1994 and by 50% at December 31, 1996. The
Company will be required to reduce its specified base level of Stage 2
aircraft by at least 75% by December 31, 1998 and 100% by December 31, 1999 or
alternatively, 75% and 100% of its total fleet will be required to meet Stage
3 requirements by December 31, 1998 and December 31, 1999, respectively. See
"Risk Factors--Risk Factors Related to the Company--Age of Fleet; Noise."
As of December 31, 1997, approximately 69% of TWA's active
fleet, met the Stage 3 standards. TWA's ability to comply with the federal
requirements within the time specified, or with more restrictive local noise
restrictions, by acquiring newer aircraft and by phasing out or retrofitting
older aircraft that are not in compliance with the Stage 3 standards, will
depend upon its ongoing financial condition, its ability to renegotiate
existing leases for such aircraft and its ability to obtain financing to
acquire the requisite number of Stage 3 aircraft or retrofit kits. TWA is
considering "hush-kitting" additional aircraft as well as other alternatives
to assure compliance with Stage 3 noise requirements, and has already acquired
a number of Stage 3 aircraft while phasing out several Stage 2 aircraft.
However, there can be no assurance that TWA will be able to satisfy all
applicable noise level requirements. See also "Risk Factors--Risk Factors
Related to the Company--Liquidity; Substantial Indebtedness; Capital
Expenditure Requirements."
Numerous airports have imposed restrictions such as curfews,
airplane noise levels, mandatory flight paths and runway restrictions, which
limit the ability of TWA and other carriers to increase services at such
airports. Other jurisdictions are considering similar measures. While the
Company has historically had the flexibility to schedule around these
restrictions, there can be no assurance that the Company will continue to be
able to work around these restrictions. At this time, TWA cannot predict what
additional restrictions will be implemented or, if so, the timing or effect on
TWA of any such implementation. The effect on TWA would depend on the extent
to which TWA's aircraft then being used in the affected airports meet the
Stage 3 requirements as well as the timing of TWA's flights.
Labor
The RLA governs the labor relations of employers and employees
engaged in the airline industry. Comprehensive provisions are set forth in
the RLA establishing the right of airline employees to organize and bargain
collectively along craft or class lines and imposing a duty on air carriers
and their employees to exert every reasonable effort to make and maintain
collective bargaining agreements. See "--Employees." The RLA contains
detailed procedures which must be exhausted before a lawful work stoppage can
occur. Pursuant to the RLA, TWA has collective bargaining agreements with two
domestic unions which together represent approximately 84.6% of the Company's
employees. See "Risk Factors--Risk Factors Related to the Company--'94 Labor
Agreements."
Aging Aircraft Maintenance
The FAA issued several ADs in 1990 mandating changes to
maintenance programs for older aircraft to ensure that the oldest portion of
the nation's fleet remains airworthy. The FAA required that these older
aircraft undergo extensive structural modifications prior to the later of the
accumulation of a designated number of flight cycles or 1994 deadlines
established by the various ADs. Most of the Company's aircraft are currently
affected by these aging aircraft ADs. The Company monitors its fleet of
aircraft to ensure safety levels which meet or exceed those mandated by the
FAA.
In 1996 and 1997, TWA spent approximately $3.4 million and $4.2
million, respectively, to comply with aging aircraft maintenance requirements.
Based on information currently available to TWA and its current fleet plan, TWA
estimates that costs associated with complying with these aging aircraft
maintenance requirements will aggregate approximately $19.8 million for 1998
through 2001. These cost estimates assume, among other things, that newer
aircraft will replace certain of TWA's existing aircraft and as a result, the
average age of TWA's fleet will be significantly reduced. There can be no
assurance that TWA will be able to implement fully its fleet plan.
Safety
TWA is subject to FAA jurisdiction with respect to aircraft
maintenance and operations, including equipment, dispatch, communications,
training, flight personnel and other matters affecting air safety. The FAA
has the authority to issue new or additional regulations. To ensure
compliance with its regulations, the FAA requires the Company to obtain
operating, airworthiness and other certificates which are subject to
suspensions or revocation for cause. In addition, a combination of FAA and
Occupational Safety and Health Administrative regulations on both federal and
state levels apply to all of TWA's ground-based operations.
Passenger Facilities Charges
During 1990, Congress enacted legislation to permit airport
authorities, with prior approval from the FAA, to impose passenger facility
charges ("PFCs") as a means of funding local airport projects. These charges,
which are intended to be collected by the airlines from their passengers and
remitted to the airports, are limited to $3.00 per enplanement and to $12.00
per round trip, although Congress is currently considering allowing airports
to raise the PFCs. As a result of competitive pressure, the Company and other
airlines have been limited in their abilities to pass on the cost of the PFCs
to passengers through fare increases.
Environmental
The Company is subject to regulation under major environmental
laws administered by state and federal agencies, including the Clean Air Act,
the Clean Water Act, the Comprehensive Environmental Response Compensation and
Liability Act of 1980 and the Resource Conservation and Recovery Act. In some
locations there are also county and sanitary sewer district agencies which
regulate the Company. The Company believes that it is in substantial
compliance with applicable environmental regulations. See, however, "--Legal
Proceedings."
Foreign Ownership of Shares
The Federal Aviation Act of 1958 generally prohibits non-U.S.
citizens from owning more than 25% of the voting interest in U.S. air
carriers, including the Company.
Insurance
The Company maintains commercial airline insurance with a major
group of independent insurers that regularly participate in world aviation
insurance markets. The Company's policies include coverage for losses
resulting from the physical destruction of or damage to TWA's owned and leased
aircraft, as well as losses arising from bodily injury, property damage and
personal injury to third parties for which TWA becomes legally obligated to
pay. The Company maintains aircraft third party and airline general third
party liability insurance with a combined single limit of $1.0 billion per
occurrence. Management believes that TWA's commercial airline insurance
policies are generally consistent with those of other United States domiciled
scheduled passenger air carriers operating similar aircraft over similar
routes.
Legal Proceedings
Icahn Litigation
On June 14, 1995, the Company signed the Extension and Consent
Agreement with Karabu to extend the term of the Icahn Loans from January 8,
1995 to January 8, 2001 and to obtain the consent of Karabu and the Icahn
Entities to certain modifications to the PBGC Notes. Collateral for the Icahn
Loans included a number of aircraft, engines and related equipment, along with
substantially all of the Company's receivables. On December 30, 1997, the
Company repaid the outstanding balance of the Icahn Loans out of the proceeds
from the sale of the Receivables Securitization Notes.
In addition, on June 14, 1995, in consideration of, among other
things, the extension of the Icahn Loans, TWA and Karabu entered into the
Ticket Agreement which permitted Karabu to purchase two categories of
discounted tickets: (1) "Domestic Consolidator Tickets," which are subject to
a cap of $610.0 million, based on the full retail price of the tickets ($120.0
million in the first 15 months and $70.0 million per year for seven
consecutive years through the term of the Ticket Agreement), and (2) "System
Tickets," which are not subject to any cap throughout the term of the Ticket
Agreement.
Tickets sold by the Company to Karabu pursuant to the Ticket
Agreement are priced at levels intended to approximate current competitive
discount fares available in the airline industry. TWA believes that applicable
provisions of the Ticket Agreement do not allow Karabu to market or sell
System Tickets through travel agents or directly to the general public.
Karabu, however, has been marketing System Tickets through travel agents and
directly to the general public. TWA has demanded that Karabu cease doing so,
and Karabu has stated that it disagrees with the Company's interpretation
concerning sales through travel agents or directly to the general public. In
December 1995, the Company filed a lawsuit against Karabu, Mr. Icahn, and
certain affiliated companies seeking damages and to enjoin further violations
of the Ticket Agreement. Mr. Icahn countered by threatening to file his own
lawsuit and to declare a default on the Icahn Loans, which financing was then
secured by receivables and certain flight equipment pledged under the Karabu
Security Agreements. Mr. Icahn's position was based upon a variety of claims
related to his interpretations of the Karabu Security Agreements as well as
with respect to certain alleged violations of the Ticket Agreement by the
Company. The parties negotiated a series of standstill agreements pursuant to
which TWA's original lawsuit was withdrawn, while the Company and Mr. Icahn
endeavored to negotiate a settlement of their differences and respective
claims.
Those negotiations reached an impasse and the Company refiled
its suit (the "TWA Petition") on March 20, 1996 in the St. Louis County
Circuit Court against Mr. Icahn, Karabu and certain other entities affiliated
with Icahn (collectively, the "Icahn Defendants"). The TWA Petition alleges
that the Icahn Defendants are violating the Ticket Agreement by, among other
things, marketing and selling tickets purchased under the Ticket Agreement
through travel agents or directly to the general public. The TWA Petition
seeks a declaratory judgment finding that the Icahn Defendants have violated
the Ticket Agreement, and also seeks liquidated and compensatory damages. In
response to such lawsuit, Karabu and another Icahn-affiliated company asserted
counterclaims alleging that the Company had breached its obligations under the
Ticket Agreement by, among other things, seeking to restrict Karabu and
Icahn-affiliated companies from selling System Tickets through travel agents
or directly to the general public. The trial of this case was completed on
January 7, 1998. A decision regarding this matter is pending.
Also on March 20, 1996, TWA was named as a defendant in a
complaint (the "Icahn Complaint") filed by Karabu and certain other affiliates
of Mr. Icahn (the "Icahn Entities"). The Icahn Complaint alleged, among other
things, that the Company had violated certain federal antitrust laws, breached
the Ticket Agreement and interfered with certain existing and prospective
commercial relations of the Icahn Entities. The Icahn Complaint was based upon
an interpretation by Mr. Icahn and the Icahn Entities that the Ticket
Agreement permits sales of tickets through travel agents and directly to the
general public. The Icahn Complaint sought injunctive relief and actual and
punitive monetary damages, as well as the Icahn Entities' costs of litigation.
On June 13, 1996, following TWA's filing of a motion to dismiss the Icahn
Complaint, the Icahn Entities amended the Icahn Complaint to delete the
federal antitrust claim and to add new allegations and theories with respect
to claimed violations of the federal antitrust laws and the Lanham Act (the
"Amended Icahn Complaint"). On March 24, 1997, the United States District
Court for the Southern District of New York, on the Company's motion,
dismissed the suit in its entirety and that decision has not been appealed.
On August 11, 1997, Karabu and another entity controlled by Mr.
Icahn filed another suit against six senior officers of the Company in New
York state court seeking damages and other relief and alleging tortious
interference with prospective economic advantage based on alleged violations
of the Ticket Agreement. This suit is similar to the previous action with
respect to which the Icahn Complaint related. The defendants removed this case
to the United States District Court for the Southern District of New York and
have moved to dismiss the case on the grounds of lack of personal
jurisdiction, res judicata and failure to state a claim. This action is
pending.
On October 15, 1997, Karabu filed suit in New York Supreme
Court, New York County, seeking a declaratory judgment that even if TWA were
to pay in full the outstanding balance due on the Icahn Loans, Karabu would
have no obligation to release any portion of its lien on TWA's accounts
receivable and/or aircraft and engine collateral so long as the TWA Petition
in the Missouri lawsuit is pending or in the event that TWA is awarded damages
as a result of the TWA Petition. By stipulation of the parties in December
1997, this claim was dismissed with prejudice. On November 12, 1997, however,
Karabu had amended its complaint to add a claim alleging that TWA had failed
to make the appropriate payment to the PBGC in June 1997. TWA believes that it
has in fact made the proper payment as it came due and that there is no merit
in this claim. On April 16, 1998, Karabu withdrew its complaint.
Although the Company intends to press its claims vigorously, it
is possible that Karabu's interpretation of the Ticket Agreement regarding
system discount ticket sales by the Icahn Defendants through travel agents or
directly to the general public could be determined, either by a court or
otherwise, to be correct. In such event, unless the Company took appropriate
action to mitigate the effect of such sales, the Company could suffer
significant loss of revenue that could reduce overall passenger yields on a
continuing basis during the term of the Ticket Agreement.
Other Actions
On July 17, 1996, TWA Flight 800 crashed shortly after
departure from JFK en route to Paris, France. There were no survivors among
the 230 passengers and crew members aboard the Boeing 747 aircraft. The
Company is cooperating fully with all federal, state and local regulatory and
investigatory agencies to ascertain the cause of the crash, which to date has
not been determined. The National Transportation Safety Board held hearings
relating to the crash in December 1997 and is continuing its investigation.
While TWA is currently a defendant in a number of lawsuits relating to the
crash, it is unable to predict the amount of claims which may ultimately be
made against the Company or how those claims might be resolved. TWA maintains
substantial insurance coverage, and at this time management has no reason to
believe that such insurance coverage will not be sufficient to cover the
claims arising from the crash. Therefore, TWA believes that the resolution of
such claims will not have a material adverse effect on its financial condition
or results of operations.
On May 31, 1988, the U.S. Environmental Protection Agency
("EPA") filed an administrative complaint seeking civil penalties as well as
other relief requiring TWA to take remedial procedures at TWA's maintenance
base in Kansas City, Missouri, alleging violations resulting from TWA's past
hazardous waste disposal and related environmental practices. Simultaneously,
TWA became a party to a consent agreement and a consent order with the EPA
pursuant to which TWA paid a civil penalty of $100,000 and agreed to implement
a schedule of remedial and corrective actions and to perform environmental
audits at TWA's major maintenance facilities. In September 1989, TWA and the
EPA signed an administrative order of consent, which required TWA to conduct
extensive investigations at or near the overhaul base and to recommend
remedial action alternatives. TWA completed its investigations and on February
17, 1996, submitted a Corrective Measures Study ("CMS") to the Missouri
Department of Natural Resources ("MDNR") and the EPA. On August 19, 1997 the
MDNR and the EPA approved the CMS. On February 27, 1998, MDNR notified TWA of
the EPA's preliminary decision to issue a hazardous waste post-closure permit
for TWA's maintenance facility, subject to public comment. Upon final
approval of the permit, an additional order will be issued and the required
corrective actions implemented. TWA presently estimates the cost of the
corrective action activities under the existing and anticipated orders to be
approximately $7 million, a majority of which represents costs associated with
long-term groundwater monitoring and maintenance of the remedial systems.
Although the Company believes adequate reserves have been provided for all
known environmental contingencies, it is possible that additional reserves
might be required in the future which could have a material adverse effect on
the results of operations or financial condition of the Company. However, the
Company believes that the ultimate resolution of known environmental
contingencies should not have a material adverse effect on the financial
position or results of operations based on the Company's knowledge of similar
environmental sites.
On October 22, 1991, judgment in the amount of $12,336,127 was
entered against TWA in an action in the United States District Court for the
Southern District of New York by Travellers International A.G. and its parent
company, Windsor, Inc. (collectively, "Travellers"). The action commenced in
1987, as subsequently amended, sought damages from TWA in excess of $60
million as a result of TWA's alleged breach of its contract with Travellers
for the planning and operation of Getaway Vacations. In order to obtain a stay
of judgment pending appeal, TWA posted a cash undertaking of $13,693,101. In
connection with the '93 Reorganization, TWA sought to have the matter
ultimately determined by the Bankruptcy Court and claimed that the cash
undertaking constituted a preference payment. Following prolonged litigation
with respect to jurisdiction, the United States Supreme Court determined that
the entire matter should be addressed by the bankruptcy court, and in February
1994, the bankruptcy court determined the matter in a manner favorable to TWA.
Upon appeal, the District Court affirmed in part and reversed in part the
bankruptcy court's decision. On January 20, 1998, the Court of Appeals for the
Third Circuit reversed the District Court and affirmed the findings of the
Bankruptcy Court. Travellers sought reconsideration by the Third Circuit which
reconsideration was denied. Travellers has advised they will appeal this
decision.
In February 1995, a number of actions were commenced in various
federal district courts against TWA and six other major airlines, alleging
that such companies conspired and agreed to fix, lower and maintain travel
agent commissions on the sale of tickets for domestic air travel in violation
of the United States and, in certain instances, state, antitrust laws. On May
9, 1995, TWA announced settlement, subject to court approval, of the
referenced actions and reinstated the traditional 10% commission on domestic
air fares. A final order has not yet been entered; however, an interim order
approving the settlement has been entered. The Company believes the settlement
of this case will have a favorable effect on revenues.
On November 9, 1995, ValuJet Air Lines, Inc., now known as
AirTran Airlines, Inc. ("ValuJet") instituted a lawsuit against TWA and Delta
in the United States District Court for the Northern District of Georgia,
alleging breach of contract and violations of certain antitrust laws with
respect to the Company's lease of certain takeoff and landing slots at
LaGuardia International Airport in New York. On November 17, 1995, the court
denied ValuJet's motion to temporarily enjoin the lease transaction and the
Company and Delta consummated the lease of the slots. On July 12, 1996, the
Federal Court in Atlanta granted summary judgment in TWA's favor in the
ValuJet litigation on all claims and counts raised in the ValuJet amended
complaint. The order granting summary judgment to TWA was not a final order
and was not directly appealable due to an outstanding claim against Delta.
ValuJet has settled its claim with Delta and appealed the grant of summary
judgment to the 11th Circuit Court of Appeals. Settlement discussions are
ongoing.
In addition, based on certain written grievances or complaints
filed by ValuJet, the Company was informed that the United States Department
of Justice ("DOJ"), Antitrust Division, was investigating the circumstances of
the slot lease of certain takeoff and landing slots to Delta at LaGuardia to
determine whether an antitrust violation has occurred. During the course of
its investigation, the DOJ was informed of the summary judgment described
above. Since the date of the judgment, TWA is unaware of whether the DOJ has
undertaken further investigative efforts, the status of the investigation or
any future plans of the DOJ or other regulatory bodies with respect to the
ValuJet allegations. While TWA believes the summary judgment should be
persuasive to the various regulatory bodies petitioned by ValuJet, it will
cooperate with any further investigations.
The Company is also defending a number of other actions which
have either arisen in the ordinary course of business or are insured or the
cumulative effect of which management of the Company does not believe may
reasonably be expected to be materially adverse.
DESCRIPTION OF NOTES
The Company issued the Old Notes and will issue the Exchange
Notes under the Indenture dated as of March 3, 1998 by and between the Company
and First Security Bank, National Association, as trustee (the "Trustee"), a
copy of which has been filed as an exhibit to the Registration Statement of
which this Prospectus is a part. The Notes are entitled to the benefits of and
are subject to those terms set forth in the Indenture and those made part of
the Indenture by reference to the Trust Indenture Act of 1939, as amended (the
"TIA"), as in effect on the date of the Indenture. Copies of the Indenture can
be obtained from the Company upon request. The following description of
material provisions of the Notes, the Indenture and the Registration Rights
Agreement is intended as a summary only and is qualified by reference to those
documents, including the definitions in those documents of certain terms.
Whenever particular articles, sections or defined terms of the Notes, the
Indenture or the Registration Rights Agreement are referred to, it is intended
that those articles, sections or defined terms are to be incorporated herein
by reference. See "--Certain Definitions" for definitions of certain
capitalized terms used herein.
General
The Notes will represent senior unsecured obligations of the
Company. The Notes will rank senior in right of payment to all existing and
future subordinated indebtedness of the Company and will rank pari passu in
right of payment with other senior obligations of the Company. The Notes are
not secured and, therefore, will be effectively subordinated to all existing
and future secured indebtedness of the Company to the extent of the value of
the assets securing such indebtedness. Subject to certain conditions specified
therein, the Indenture permits the Company to incur additional indebtedness,
including certain senior secured indebtedness. The Notes are not presently
guaranteed by any subsidiary of the Company and as a result will effectively
rank junior to all creditors (including trade creditors) of, and holders of
preferred stock issued by, subsidiaries of the Company. Although the Notes
will contain restrictions on the incurrence of indebtedness by subsidiaries,
the amount of indebtedness which is permitted to be incurred could be
substantial. The Notes will contain no limitations on the ability of
subsidiaries to incur trade credit and other obligations. As of December 31,
1997, after giving effect to the issuance of the Notes and the application of
the net proceeds therefrom, the aggregate principal amount of the Company's
total outstanding unsecured indebtedness would be approximately $150.0
million, all of which constitutes senior obligations.
The Notes are issued only in fully registered form, without
coupons, in minimum denominations of $1,000 and integral multiples of $1,000.
Holders will not be charged for any registration of transfer or exchange of
the Notes, but the Company may require payment of a sum sufficient to cover
any tax or other governmental charge payable in connection with any such
transaction.
Principal, Maturity and Interest
The Notes will be limited to $150.0 million of principal in the
aggregate and will mature on March 1, 2006. The Notes will bear interest at
the annual rate of 11 3/8% from the date of original issuance, or from the
most recent interest payment date to which interest has been paid or provided
for, payable semiannually in arrears on March 1 and September 1 of each year,
commencing on September 1, 1998, to the person in whose name the Note is
registered at the close of business on the preceding February 15 and August
15, as the case may be. Interest and Special Interest, if any, will be payable
to the holders of record as they appear on the register of the Company kept by
the registrar on such record dates. Interest will be computed on the basis of
a 360-day year of twelve 30-day months. The Notes will not be subject to any
sinking fund. Principal of, premium, if any, interest on, and Special
Interest, if any, with respect to the Notes will be payable, and the transfer
of the Notes will be registerable, at the office or agency of the Company
maintained for such purposes. In addition, payment of interest and Special
Interest, if any, may, at the option of the Company, be made by check mailed
to the address of the person entitled thereto as it appears in the register of
the holders of Notes. The Trustee will initially act as paying agent and
registrar for the Notes. The Company may change the paying agent and registrar
in accordance with the Indenture.
Redemptions
Mandatory Redemption. Except as set forth under "--Repurchase
of Notes Upon a Change in Control", "--Repurchase of Notes in Connection with
Incurrence of Acquired Indebtedness" and "--Certain Covenants--Limitation on
Sales of Assets and Subsidiary Stock," the Company will not be required to
repurchase or make mandatory redemption or sinking fund payments with respect
to the Notes.
Optional Redemption. Except as described below under
"--Redemption upon Public Equity Offering" and "--Certain Covenants-Merger and
Consolidation," the Notes may not be redeemed prior to March 1, 2002. On or
after March 1, 2002, the Notes may be redeemed at any time in whole or in part
(in any integral multiple of $1,000) by the Company at its sole option at the
applicable redemption price (expressed as a percentage of principal amount) as
set forth below during the twelve month periods beginning March 1 of the years
shown below, plus in each case an amount equal to accrued and unpaid interest
and Special Interest, if any, with respect to the Notes to and including the
redemption date.
Year Redemption Price
---- ----------------
2002................................ 105.69%
2003................................ 102.84%
2004 and thereafter................. 100.00%
Notice of redemption shall be sent to each holder of Notes
being redeemed at the address shown on the books of the Company at least 30
but not more than 60 days prior to the redemption date. If less than all of
the Notes are to be redeemed, the Notes to be redeemed shall be selected by
lot or pro rata. On or after the redemption date, interest will cease to
accrue on the Notes or portions thereof called for redemption.
Redemption upon Public Equity Offering. The Notes will be
redeemable prior to March 1, 2002 only in the event that on or before March 1,
2001 the Company receives Net Cash Proceeds of one or more Public Equity
Offerings in which case the Company may, at its option, use all or a portion
of any such Net Cash Proceeds to redeem up to $52.5 million aggregate
principal amount of the Notes, within 90 days of such Public Equity Offering,
on not less than 30 days, but not more than 60 days, notice to each Holder of
the Notes to be redeemed, at a redemption price (expressed as a percentage of
principal amount) of 111.375% plus accrued and unpaid interest and Special
Interest, if any, to the redemption date (subject to the right of holders of
record on the relevant record date to receive interest and Special Interest,
if any, due on the relevant interest payment date); provided, however, that at
least $97.5 million aggregate principal amount of the Notes must remain
outstanding after each such redemption.
Repurchase of Notes Upon a Change in Control
The Company must commence, within 30 days of the occurrence of
a Change in Control, and consummate an Offer to Purchase for all Notes then
outstanding, at a purchase price equal to 101% of the principal amount thereof
on the relevant Payment Date, plus accrued and unpaid interest and Special
Interest, if any, to the Payment Date.
There can be no assurance that the Company will have sufficient
funds available at the time of any Change in Control to make any debt payment
(including repurchases of Notes) required by the foregoing covenant (as well
as may be contained in other securities or agreements of the Company which
might be outstanding at the time).
Future indebtedness of the Company may contain prohibitions on
the occurrence of certain events that would constitute a Change in Control or
require such indebtedness to be purchased upon a Change in Control. Moreover,
the exercise by the holders of their right to require the Company to
repurchase the Notes could cause a default under such indebtedness, even if
the Change in Control itself does not, due to the financial effect of such
purchase on the Company. Finally, the Company's ability to pay cash to the
holders of Notes following the occurrence of a Change in Control may be
limited by the Company's then existing financial resources. The provisions
under the Indenture relative to the Company's obligation to make an offer to
repurchase the Notes as a result of a Change in Control may be waived or
modified with the written consent of the holders of a majority in principal
amount of the Notes.
One of the events which constitutes a Change in Control under
the Indenture is the disposition of "all or substantially all" of the
Company's assets. This term has not been interpreted under New York law (the
law governing the Indenture) to represent a specific quantitative test. As a
consequence, in the event the holders of the Notes elect to require the
Company to repurchase the Notes and the Company elects to contest such
election, there can be no assurance as to how a court interpreting New York
law would interpret the phrase.
The Company could, in the future, enter into certain
significant transactions that would not constitute a Change in Control with
respect to the Change in Control purchase feature of the Notes. The Change in
Control purchase feature of the Notes may in certain circumstances make more
difficult or discourage a takeover of the Company and, thus, the removal of
incumbent management. The Change in Control purchase feature, however, is not
the result of, to management's knowledge, any specific effort to obtain
control of the Company by means of a merger, tender offer, solicitation or
otherwise, nor is it part of a plan by management to adopt a series of
anti-takeover provisions.
The right to require the repurchase of Notes shall terminate
after a discharge of the Company from its obligations under the Notes and the
Indenture in accordance therewith. See "--Defeasance." Repurchase of the Notes
may, under certain circumstances, constitute a default or event of default
under senior indebtedness then outstanding and, in such instances, repurchase
of the Notes would be prohibited unless and until such default has been cured
or waived. The failure to repurchase the Notes in such instance would
constitute an Event of Default. See "--Events of Default."
Repurchase of Notes in Connection with Incurrence of Acquired Indebtedness
The Company shall not, and shall not permit any Restricted
Subsidiary to incur any Acquisition Indebtedness in reliance, in whole or in
part, on clause (8) of paragraph (b) of the "Limitation on Indebtedness"
covenant described below under "--Certain Covenants" unless the Company shall
have (i) made an Offer to Purchase all of the Notes at a purchase price equal
to 100% of the principal amount thereof, plus the Applicable Premium (as
defined) as of, and accrued and unpaid interest and Special Interest, if any,
to, the Payment Date and (ii) such Payment Date shall have occurred and money
sufficient to pay the purchase price of all Notes or portions thereof tendered
for purchase pursuant to such Offer to Purchase shall have been deposited with
the Trustee. Any such Offer to Purchase shall contain information concerning
the business of the Company which the Company in good faith believes will
enable the Holders of the Notes to make an informed decision with respect to
such Offer to Purchase and will include (A) the most recent annual and
quarterly financial statements and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" contained in the documents
required to be filed with the Trustee pursuant to the Indenture (which
requirements may be satisfied by delivery of such documents together with the
Offer to Purchase), (B) a description of material developments, if any, in the
Company's business subsequent to the date of the latest of such financial
statements referred to in clause (A) (including a description of the events
requiring the Company to make such Offer to Purchase), (C) if applicable,
appropriate pro forma financial information concerning such Offer to Purchase
and the events requiring the Company to make the Offer to Purchase and (D) any
other information required by applicable law to be included therein.
Registered Exchange Offer; Registration Rights
Pursuant to a Registration Rights Agreement between the Company
and the Initial Purchaser (the "Registration Rights Agreement"), the Company
has agreed to use its best efforts to (i) file with the Commission, within 60
days after the date of original issuance of the Notes, a registration
statement on an appropriate form under the Securities Act (the "Exchange Offer
Registration Statement") with respect to a registered offer (the "Registered
Exchange Offer") to exchange the Notes for a like aggregate principal amount
of debt securities (the "Exchange Notes") of the Company issued under the
Indenture and identical in all material respects to the Notes (except that the
Exchange Notes will not contain terms with respect to transfer restrictions)
and (ii) cause the Exchange Offer Registration Statement to be declared
effective under the Securities Act within 150 days after the date of original
issuance of the Notes. Upon the effectiveness of the Exchange Offer
Registration Statement, the Company will offer the Exchange Notes in exchange
for surrender of the Notes. The Company will keep the Registered Exchange
Offer open for not less than 30 days (or longer if required by applicable law)
after the date notice of the Registered Exchange Offer is first mailed to the
holders of the Notes. For each Note surrendered to the Company pursuant to the
Registered Exchange Offer, the holder of such Note will receive an Exchange
Note having a principal amount equal to that of the surrendered Note. Under
existing Commission interpretations, the Exchange Notes would be freely
transferable by holders other than affiliates of the Company after the
Registered Exchange Offer without further registration under the Securities
Act if the holder of the Exchange Notes represents that it is acquiring the
Exchange Notes in the ordinary course of its business, that it has no
arrangement or understanding with any person to participate in the
distribution of the Exchange Notes and that it is not an affiliate of the
Company, as such terms are interpreted by the Commission; provided, however,
that broker-dealers ("Participating Broker-Dealers") receiving Exchange Notes
in the Registered Exchange Offer will have a prospectus delivery requirement
with respect to resales of such Exchange Notes. The Commission has taken the
position that Participating Broker-Dealers may fulfill their prospectus
delivery requirements with respect to Exchange Notes (other than a resale of
an unsold allotment from the original sale of the Notes) with the prospectus
contained in the Exchange Offer Registration Statement. Under the Registration
Rights Agreement, the Company is required to allow Participating
Broker-Dealers and other persons, if any, with similar prospectus delivery
requirements to use the prospectus contained in the Exchange Offer
Registration Statement in connection with the resale of such Exchange Notes.
A Holder of Notes (other than certain specified holders) who
wishes to exchange such Notes for Exchange Notes in the Registered Exchange
Offer will be required to represent that any Exchange Notes to be received by
it will be acquired in the ordinary course of its business and that at the
time of the commencement of the Registered Exchange Offer it has no
arrangement or understanding with any person to participate in the
distribution (within the meaning of the Securities Act) of the Exchange Notes
and that it is not an "affiliate" of the Company, as defined in Rule 405 of
the Securities Act, or if it is an affiliate, that it will comply with the
registration and prospectus delivery requirements of the Securities Act to the
extent applicable.
In the event that applicable interpretations of the staff of
the Commission do not permit the Company to effect the Registered Exchange
Offer, or if for any other reason the Registered Exchange Offer is not
consummated within 180 days of the date of the Registration Rights Agreement,
or if the Initial Purchaser so requests with respect to Notes not eligible to
be exchanged for Exchange Notes in the Registered Exchange Offer, or if any
holder of Notes is not eligible to participate in the Registered Exchange
Offer or does not receive freely tradable Exchange Notes in the Registered
Exchange Offer, the Company will, at its cost, (a) as promptly as practicable,
file a shelf registration statement (the "Shelf Registration Statement")
covering resales of the Notes or the Exchange Notes, as the case may be, (b)
use its best efforts to cause the Shelf Registration Statement to be declared
effective under the Securities Act and (c) keep the Shelf Registration
Statement effective for a period of two years from the date of original
issuance of the Notes or such shorter period that will terminate when Notes
covered by the Shelf Registration Statement have been sold pursuant thereto or
can be sold pursuant to Rule 144(k). The Company will, in the event a Shelf
Registration Statement is filed, among other things, provide to each holder
for whom such Shelf Registration Statement was filed copies of the prospectus
which is a part of the Shelf Registration Statement, notify each such holder
when the Shelf Registration Statement has become effective and take certain
other actions as are required to permit unrestricted resales of the Notes or
the Exchange Notes, as the case may be. A holder selling such Notes or
Exchange Notes pursuant to the Shelf Registration Statement generally would be
required to be named as a selling security holder in the related prospectus
and to deliver a prospectus to purchasers, will be subject to certain of the
civil liability provisions under the Securities Act in connection with such
sales and will be bound by the provisions of the Registration Rights Agreement
which are applicable to such holder (including certain indemnification
obligations).
If (i) on or prior to 60 days after the date of original
issuance of the Notes, neither the Registered Exchange Offer Registration
Statement nor the Shelf Registration Statement has been filed with the
Commission; (ii) on or prior to 150 days after the original issuance of the
Notes, neither the Exchange Offer Registration Statement nor the Shelf
Registration Statement is declared effective; (iii) on or prior to 180 days
after the original issuance of the Notes, neither the Registered Exchange
Offer is consummated nor the Shelf Registration Statement is declared
effective; (iv) notwithstanding the filing of the Exchange Offer Registration
Statement or the effectiveness thereof or the consummation of the Registered
Exchange Offer, by the later of (x) 60 days after the date of original
issuance of the Notes and (y) 30 days after a request by the Initial Purchaser
or certain other holders of Notes, pursuant to the Registration Rights
Agreement, that the Company file a Shelf Registration Statement, a Shelf
Registration Statement has not been filed with the Commission or such Shelf
Registration Statement has not been declared effective by the Commission
within 150 days after any such request; or (v) after either the Exchange Offer
Registration Statement or the Shelf Registration Statement is declared
effective, such registration statement thereafter ceases to be effective or
usable (subject to certain exceptions) in connection with resales of Notes or
Exchange Notes in accordance with and during the periods specified in the
Registration Rights Agreement (each such event referred to in clauses (i)
through (v), a "Registration Default," and each period during which a
Registration Default has occurred and is continuing, a "Registration Default
Period"), then special interest ("Special Interest") on the Notes and the
Exchange Notes will accrue at a per annum rate of 0.50% for the first 90 days
of the Registration Default Period, at a per annum rate of 1.0% for the second
90 days of the Registration Default Period, at a per annum rate of 1.50% for
the third 90 days of the Registration Default Period and at a per annum rate
of 2.00% thereafter for the remaining portion of the Registration Default
Period. From and including the date on which all Registration Defaults have
been cured, the accrual of Special Interest will cease. Special Interest is
payable in addition to any other interest payable from time to time pursuant to
the terms of the Notes and the Exchange Notes.
If the Company effects the Exchange Offer, it will be entitled
(subject to applicable law) to consummate the Exchange Offer 30 days after the
commencement thereof provided that it has accepted all Notes theretofore
validly tendered in accordance with the terms of the Exchange Offer. The
summary herein of certain provisions of the Registration Rights Agreement does
not purport to be complete and is subject, and is qualified in its entirety by
reference, to all of the provisions of the Registration Rights Agreement, a
copy of which is available upon request to the Company.
Certain Covenants
Limitation on Indebtedness. (a) Neither the Company nor the
Restricted Subsidiaries shall Incur, directly or indirectly, any Indebtedness;
provided, however, that the Company may Incur Indebtedness so long as, on the
date of such Incurrence and after giving effect thereto, the Consolidated
Coverage Ratio exceeds (i) 2.00 to 1 for Indebtedness Incurred on or prior to
December 31, 1999, (ii) 2.25 to 1 for Indebtedness Incurred after December 31,
1999 and on or prior to December 31, 2001 and (iii) 2.50 to 1 for Indebtedness
Incurred after December 31, 2001.
(b) Notwithstanding the foregoing paragraph (a), the Company
and the Restricted Subsidiaries may Incur any or all of the following
Indebtedness:
(i) Indebtedness of the Company Incurred subsequent to
the Issue Date; provided, however, that (A) after giving effect to
any such Incurrence, the aggregate principal amount of such
Indebtedness then outstanding does not exceed $400.0 million, (B) the
Stated Maturity of any such Indebtedness is at least one year after
the Stated Maturity of the Notes, (C) the Average Life of any such
Indebtedness at the time that it is Incurred is not less than the
Average Life of the Notes at such time and (D) except for Liens
permitted by clause (p) of the definition of Permitted Liens, such
Indebtedness is not secured by a Lien on any asset of the Company or
its Restricted Subsidiaries;
(ii) Aircraft Acquisition Debt;
(iii) Indebtedness of the Company owed to and held by a
Restricted Subsidiary or Indebtedness of a Restricted Subsidiary owed
to and held by the Company or a Restricted Subsidiary; provided,
however, that any subsequent issuance or transfer of any Capital
Stock which results in any such Restricted Subsidiary ceasing to be a
Restricted Subsidiary or any subsequent transfer of such Indebtedness
(other than to the Company or another Restricted Subsidiary) shall be
deemed in each case, to constitute the Incurrence of such
Indebtedness by the Company;
(iv) the Notes and the Exchange Notes;
(v) Indebtedness Incurred to finance the cost (including the
cost of design, development, acquisition, construction, installation,
improvement, transportation or integration) of plant, property and
equipment used or to be used in the airline business or any other business
that is substantially related, ancillary or complementary thereto
(including any Capital Lease Obligation and the cost of the Capital Stock
of a Person that becomes a Restricted Subsidiary to the extent of the fair
market value of the plant, property and equipment of such Person at the
time it becomes a Restricted Subsidiary) to be acquired by the Company or
a Restricted Subsidiary after the Issue Date; provided that such
Indebtedness is incurred within 270 days after such plant, property and
equipment has been placed into service; provided further that (A) the
principal amount of such Indebtedness does not exceed 80% of the cost of
such plant, property or equipment financed thereby and (B) the aggregate
principal amount of all Indebtedness Incurred pursuant to the provisions
described under this clause (5) shall not exceed $70.0 million at any time
outstanding; provided further that the limitations described in clauses
(A) and (B) of the immediately preceding proviso shall not apply to
Indebtedness Incurred to finance the cost of (i) airport facilities,
reservations centers or maintenance facilities or (ii) information
technology systems, including all related hardware and software;
(vi) Indebtedness outstanding on the Issue Date (other than
Indebtedness described in clause (i), (ii), (iii), (iv) or (v) of this
covenant);
(vii) Indebtedness of the Company not to exceed, at any time
outstanding, 2.0 times the Net Cash Proceeds received by the Company after
the Issue Date from the issuance and sale of its Capital Stock (other than
Disqualified Stock) to a Person that is not a Subsidiary of the Company,
to the extent such Net Cash Proceeds are not included in the calculation
of amounts under clause (iii)(B) of paragraph (a) of the "Limitation on
Restricted Payments" covenant described below or used to make a Restricted
Payment pursuant to clause (i) of paragraph (b) of such "Limitation on
Restricted Payments" covenant; provided that such Indebtedness (A) is
Incurred within 180 days following receipt of such Net Cash Proceeds and
(B) does not have a Stated Maturity that is prior to the first anniversary
of the Stated Maturity of the Notes and has an Average Life longer than
the Notes at the time of Incurrence of such Indebtedness;
(viii) Acquired Indebtedness; provided that prior to the
Incurrence thereof the Company shall have made an Offer to Purchase all of
the Notes and deposited with the Trustee money sufficient to pay the
purchase price of all Notes or portions thereof tendered for purchase
pursuant to such Offer to Purchase, all as described above under
"--Repurchase of Notes in Connection with Incurrence of Acquired
Indebtedness";
(ix) Refinancing Indebtedness in respect of Indebtedness
Incurred pursuant to paragraph (a) or pursuant to clause (i), (ii), (iii),
(iv), (v), (vi), (vii), (viii) of this covenant or this clause (ix);
(x) Indebtedness (A) in respect of performance, surety,
appeal or similar bonds provided in the ordinary course of business, and
(B) arising from agreements providing for indemnification, adjustment of
purchase price or similar obligations, or from Guarantees or letters of
credit, surety bonds or performance bonds securing any obligations of the
Company or any of the Restricted Subsidiaries pursuant to such agreements,
in any case Incurred in connection with the disposition of any business,
assets of the Company or any of the Restricted Subsidiaries, including all
or any interest in any Restricted Subsidiary, and not exceeding the gross
proceeds therefrom, other than Guarantees of Indebtedness Incurred by any
Person acquiring all or any portion of such business, assets or Restricted
Subsidiary or any of the Restricted Subsidiaries for the purpose of
financing such acquisition;
(xi) Hedging Obligations consisting of Interest Rate
Agreements, Fuel Protection Agreements or Currency Agreements;
(xii) Indebtedness Incurred in satisfaction of payment
obligations arising out of collective bargaining agreements with labor
unions representing employees of the Company or its Restricted
Subsidiaries;
(xiii) Indebtedness arising from aircraft lessor financing of
improvements to or maintenance of aircraft, engines or related parts and
equipment leased by the Company or its Restricted Subsidiaries;
(xiv) Indebtedness Incurred in satisfaction of "return
condition" obligations of the Company or its Restricted Subsidiaries under
aircraft leases in an aggregate principal amount not to exceed $25.0
million at any time outstanding;
(xv) Indebtedness under working capital and/or Receivables
financing facilities in an aggregate principal amount not to exceed $150.0
million at any time outstanding and Guarantees thereof by Restricted
Subsidiaries not prohibited by the "Limitation of Guarantees by Restricted
Subsidiary" covenant; provided that such Indebtedness is not secured by a
Lien on any assets of the Company or its Restricted Subsidiaries other
than Receivables and Capital Stock of special purpose Subsidiaries of the
Company formed to effect a Receivables-based financing;
(xvi) Indebtedness issued in satisfaction of trade payables
arising in the ordinary course of business; provided that (A) the
principal amount of such Indebtedness does not exceed the amount of such
trade payables (including accrued interest or finance charges), (B) the
Stated Maturity of such Indebtedness is no more than 180 days after the
date of Incurrence thereof and (C) the aggregate principal amount of such
Indebtedness does not exceed $50.0 million at any time outstanding; and
(xvii) Indebtedness of the Company or any Restricted Subsidiary
in an aggregate principal amount which, together with all other
Indebtedness of the Company and the Restricted Subsidiaries outstanding on
the date of such Incurrence (other than Indebtedness permitted by clauses
(1) through (16) of this covenant or paragraph (a) of this covenant) does
not exceed $100.0 million.
(c) Notwithstanding the foregoing, neither the Company nor any
Restricted Subsidiary shall Incur any Indebtedness pursuant to the foregoing
paragraph (b) if the proceeds thereof are used, directly or indirectly, to
Refinance any Subordinated Obligations unless such Indebtedness shall be
subordinated to the Notes, to at least the same extent as such Subordinated
Obligations.
(d) For purposes of determining compliance with the foregoing covenant, (i)
in the event that an item of Indebtedness meets the criteria of more than one of
the types of Indebtedness described above, the Company, in its sole discretion,
will classify such item of Indebtedness and only be required to include the
amount and type of such Indebtedness in one of the above clauses and (ii) an
item of Indebtedness may be divided and classified in more than one of the types
of Indebtedness described above.
Limitation on Restricted Payments. (a) The Company shall not, and shall not
permit any Restricted Subsidiary, directly or indirectly, to make a Restricted
Payment if at the time the Company or such Restricted Subsidiary makes such
Restricted Payment: (i) a Default shall have occurred and be continuing (or
would result therefrom); (ii) the Company is not able to Incur an additional
$1.00 of Indebtedness pursuant to paragraph (a) of the covenant described under
"--Limitation on Indebtedness"; or (ii) the aggregate amount of such Restricted
Payment and all other Restricted Payments since the Issue Date (the amount of
any such Restricted Payment, if other than cash, as determined in good faith by
the Company, whose determination shall be conclusive and evidenced by a
resolution of the Board of Directors or a certificate of the chief financial or
accounting officer of the Company delivered to the Trustee prior to the making
of such Restricted Payment) would exceed the sum of:
(A) 50% of the Consolidated Net Income accrued during the period (treated
as one accounting period) from the beginning of the fiscal quarter
immediately following the fiscal quarter during which the Notes are
originally issued to the end of the most recent fiscal quarter for which
financial statements are publicly available prior to the date of such
Restricted Payment (or, in case such Consolidated Net Income shall be a
deficit, minus 100% of such deficit);
(B) the aggregate net proceeds (including 50% of the fair market value of
property other than cash (as determined in good faith by the Company,
whose determination shall be conclusive and evidenced by a resolution of
the Board of Directors or a certificate of the chief financial or
accounting officer of the Company delivered to the Trustee prior to the
making of such Restricted Payment)) received by the Company or any
Restricted Subsidiary from the issuance or sale, subsequent to the Issue
Date, of its Capital Stock (other than Disqualified Stock) and
Indebtedness of the Company or any Restricted Subsidiary that has been
converted into or exchanged for Capital Stock (other than Disqualified
Stock) subsequent to the Issue Date (other than an issuance or sale to a
Restricted Subsidiary and other than an issuance or sale to an employee
stock ownership plan or to a trust established by the Company or any of
its Subsidiaries for the benefit of their employees); and
(C) an amount equal to the sum of (i) the net reduction in Investments in
Unrestricted Subsidiaries resulting from dividends, repayments of loans or
advances or other transfers of assets, in each case to the Company or any
Restricted Subsidiary from Unrestricted Subsidiaries, and (ii) the portion
(proportionate to the Company's equity interest in such Subsidiary) of the
fair market value of the net assets of an Unrestricted Subsidiary at the
time such Unrestricted Subsidiary is designated a Restricted Subsidiary;
provided, however, that the foregoing sum shall not exceed, in the case of
any Unrestricted Subsidiary, the amount of Investments previously made
(and treated as a Restricted Payment) by the Company or any Restricted
Subsidiary in such Unrestricted Subsidiary.
(b) The provisions of the foregoing paragraph (a) shall not prohibit:
(i) any Restricted Payment made by exchange for, or out of the net
proceeds (including 50% of the fair market value of property other than
cash (as determined in good faith by the Company, whose determination
shall be conclusive and evidenced by a resolution of the Board of
Directors or a certificate of the chief financial or accounting officer of
the Company delivered to the Trustee prior to the making of such
Restricted Payment)) of the substantially concurrent sale of, Capital
Stock of the Company (other than Disqualified Stock and other than Capital
Stock issued or sold to a Subsidiary of the Company or an employee stock
ownership plan or to a trust established by the Company or any of its
Subsidiaries for the benefit of their employees); provided, however, that
(A) such Restricted Payment shall be excluded in the calculation of the
amount of Restricted Payments and (B) to the extent used to make such
Restricted Payment, the net proceeds from such sale shall be excluded from
the calculation of amounts under clause (3)(B) of paragraph (a) above;
(ii) any purchase, repurchase, redemption, defeasance or other acquisition
or retirement for value of Subordinated Obligations made by exchange for,
or out of the proceeds of the substantially concurrent sale of,
Indebtedness of the Company which is permitted to be Incurred pursuant to
the covenant described under "--Limitation on Indebtedness"; provided,
however, that such purchase, repurchase, redemption, defeasance or other
acquisition or retirement for value shall be excluded in the calculation
of the amount of Restricted Payments;
(iii) dividends paid within 60 days after the date of declaration thereof
if at such date of declaration such dividend would have complied with this
covenant; provided, however, that such dividend shall be included in the
calculation of the amount of Restricted Payments;
(iv) the declaration or payment of dividends on or payment of liquidated
damages with respect to (A) any Preferred Stock outstanding on the Issue
Date or (B) any Preferred Stock (other than Disqualified Stock) issued
after the Issue Date that ranks on parity with or junior to Preferred
Stock outstanding on the Issue Date; provided, however, that any dividend
referred to in the foregoing clause (A) or, subject to the following
proviso, clause (B), shall be included in the calculation of the amount of
Restricted Payments and provided further, that the Company may elect to
exclude from the calculation of amounts under clause 3(B) of paragraph (a)
above any Net Cash Proceeds received by the Company from the issue or sale
of Preferred Stock pursuant to the foregoing clause (B) (which election
must be made by written notice to the Trustee within ten (10) Business
Days of the receipt of such Net Cash Proceeds) and, if such election is
made, any dividend, distribution, purchase, redemption, acquisition or
retirement on or of the Preferred Stock for which such election is made
shall not be a Restricted Payment;
(v) (A) the payment of cash in lieu of issuing fractional shares of
Capital Stock of the Company in connection with the exercise of options or
warrants, the conversion of convertible securities or the redemption of
interests in employee stock ownership or benefits plans, (B) the purchase
or redemption of Capital Stock by the Company from employee stock
ownership or benefit plans subject to ERISA to the extent required by
ERISA, (C) repurchases of Capital Stock which occur upon the exercise of
stock options if such Capital Stock represents a portion of the exercise
price of such options, (D) the purchase, redemption, acquisition,
cancellation or other retirement for value of shares of Capital Stock of
the Company or any Restricted Subsidiary, options on any such shares or
related stock appreciation rights or similar securities held by officers
or employees or former officers or employees (or their estates or
beneficiaries under their estates), upon death, disability, retirement,
termination of employment or pursuant to any agreement under which such
shares of stock or related rights were issued; provided that the aggregate
cash consideration paid pursuant to this clause (D) for such purchase,
redemption, acquisition, cancellation or other retirement of such shares
of Capital Stock or related rights after the Issue Date does not exceed an
aggregate amount of $10.0 million; provided further that the amount of any
payment, purchase, redemption, repurchase, acquisition, cancellation or
other retirement paid pursuant to this clause (D) shall be included in the
amount of Restricted Payments;
(vi) any purchase or redemption of Capital Stock of the Company resulting
from the consolidation or merger with or into any Person or conveyance,
transfer or lease of all or substantially all of the Company's or any
Restricted Subsidiary's property to one or more Persons substantially as
an entirety not prohibited by the terms of the "Merger and Consolidation"
covenant (other than any consolidation, merger or other transactions
involving only the Company and a Subsidiary of the Company or involving
only Subsidiaries of the Company); provided that the amount of such
purchase or redemption shall be excluded in the calculation of the amount
of Restricted Payments; or
(vii) the exchange of Preferred Stock (other than Disqualified Capital
Stock) for Indebtedness of the Company permitted to be incurred under the
Limitation on Indebtedness Covenant; provided that the liquidation value
of the Preferred Stock exchanged shall be included in the calculation of
the amount of Restricted Payments but only to the extent of the Net Cash
Proceeds of such Preferred Stock received after the Issue Date.
Limitation on Restrictions on Distributions from Restricted
Subsidiaries. The Company shall not, and shall not permit any Restricted
Subsidiary to create or otherwise cause or permit to exist or become effective
any consensual encumbrance or restriction on the ability of any Restricted
Subsidiary to (a) pay dividends or make any other distributions on its Capital
Stock to the Company or a Restricted Subsidiary or pay any Indebtedness owed
to the Company, (b) make any loans or advances to the Company or (c) transfer
any of its property or assets to the Company except:
(i) any encumbrance or restriction pursuant to an agreement in
effect at or entered into on the Issue Date;
(ii) any encumbrance or restriction with respect to a Restricted
Subsidiary or its property or assets pursuant to an agreement relating to
any Indebtedness or Preferred Stock Incurred by such Restricted Subsidiary
on or prior to the date on which such Restricted Subsidiary became a
Restricted Subsidiary or was acquired by the Company (other than
Indebtedness or Preferred Stock Incurred as consideration in, or to
provide all or any portion of the funds or credit support utilized to
consummate, the transaction or series of related transactions pursuant to
which such Restricted Subsidiary became a Restricted Subsidiary or was
acquired by the Company) and outstanding on such date;
(iii) any encumbrance or restriction pursuant to an agreement
effecting a Refinancing of Indebtedness or Preferred Stock Incurred
pursuant to an agreement referred to in clause (i) or (ii) of this
covenant or this clause (iii) or contained in any amendment to an
agreement referred to in clause (i) or (ii) of this covenant or this
clause (iii); provided, however, that the encumbrances and restrictions
with respect to such Restricted Subsidiary contained in any such
refinancing agreement or amendment are in the aggregate no less favorable
to the Noteholders than encumbrances and restrictions with respect to such
Restricted Subsidiary contained in such predecessor agreements;
(iv) any restriction with respect to a Restricted Subsidiary imposed
pursuant to an agreement entered into for the sale or disposition of all
or substantially all the Capital Stock or assets of such Restricted
Subsidiary pending the closing of such sale or disposition;
(v) any encumbrances and restrictions existing under or by reason of
applicable law or regulation;
(vi) any encumbrances and restrictions (A) that restrict in a
customary manner the subletting, assignment or transfer of any property or
asset that is a lease, license, conveyance or contract or similar property
or asset, (B) existing by virtue of any transfer of, agreement to
transfer, option or right with respect to, or Lien on, any property or
assets of the Company or any Restricted Subsidiary not otherwise
prohibited by the Indenture or (C) arising or agreed to in the ordinary
course of business not relating to any Indebtedness, and that do not (as
determined by the Company and certified in a resolution of the Board of
Directors or a certificate of the chief financial or chief accounting
officer of the Company delivered to the Trustee prior to or promptly
following such encumbrance or restriction becoming effective),
individually or in the aggregate, (1) detract from the value of property
or assets of the Company or any Restricted Subsidiary in any manner
material to the Company or any Restricted Subsidiary or (2) materially
adversely affect the Company's ability to make principal or interest
(including Special Interest, if any) payments on the Notes;
(vii) any encumbrance or restriction contained in the terms of any
Indebtedness or any agreement pursuant to which such Indebtedness was
issued if (A) the encumbrance or restriction applies only in the event of
a payment default or default with respect to a financial covenant
contained in such Indebtedness or agreement, (B) the encumbrance or
restriction is not materially more disadvantageous to the Holders of the
Notes than is customary in comparable financings (as determined by the
Company and certified in a resolution of the Board of Directors or a
certificate of the chief financial or chief accounting officer of the
Company delivered to the Trustee prior to or promptly following such
encumbrance or restriction becoming effective) and (C) such encumbrance or
restriction will not materially adversely affect the Company's ability to
make principal or interest (including Special Interest, if any) payments
on the Notes (as determined by the Company and certified in a resolution
of the Board of Directors or a certificate of the chief financial or chief
accounting officer of the Company delivered to the Trustee prior to or
promptly following such encumbrance or restriction becoming effective);
and
(viii) any encumbrance or restriction resulting from any financing
transaction involving the sale of Receivables or aircraft and/or related
engines, spare parts and equipment to a special purpose Subsidiary of the
Company formed to effect such financing and which applies only to such
special purpose Subsidiary and its assets.
Nothing contained in this "Limitation on Restrictions on
Distributions from Restricted Subsidiaries" covenant shall prevent the Company
or any Restricted Subsidiary from (1) creating, incurring, assuming or
suffering to exist any Liens otherwise permitted in the "Limitation on Liens"
covenant or (2) restricting the sale or other disposition of property or
assets of the Company or any of its Restricted Subsidiaries that secure
Indebtedness of the Company or any of its Restricted Subsidiaries.
Limitation on Sales of Assets and Subsidiary Stock. The Company
shall not, and shall not permit any Restricted Subsidiary to, directly or
indirectly, consummate any Asset Disposition unless the Company or such
Restricted Subsidiary receives consideration at the time of such Asset
Disposition at least equal to the fair market value (including as to the value
of all non-cash consideration), as determined in good faith by the Board of
Directors or by the chief financial or accounting officer of the Company, of the
shares and assets subject to such Asset Disposition and at least 80% of the
consideration thereof received by the Company or such Restricted Subsidiary is
in the form of cash or cash equivalents. If the Company or any Restricted
Subsidiary engages in an Asset Disposition, the Company may use the Net
Available Cash from such Asset Disposition, within one year after the later of
such Asset Disposition and the receipt of such Net Available Cash (such later
date, the "Trigger Date"), to (i) permanently repay or prepay any then
outstanding Senior Indebtedness of the Company or any Restricted Subsidiary or
(ii) invest in or acquire (or enter into a legally binding commitment to invest
in or acquire) Additional Assets; provided that the transaction subject to any
such commitment be consummated within 180 days after the date of such
commitment. If any such legally binding commitment to invest in or acquire such
Additional Assets is terminated, then the Company may, within 90 days of such
termination or the Trigger Date, whichever is later, use such Net Available Cash
as provided in clause (i) or (ii) (without giving effect to the parenthetical
contained in such clause (ii)) above. The amount of such Net Cash Proceeds not
so used as set forth above in this paragraph constitutes "Excess Proceeds."
When the aggregate amount of Excess Proceeds exceeds $10.0
million, the Company will, within 30 days thereof, apply such aggregate Excess
Proceeds (1) first, to make an Offer to Purchase outstanding Notes at 100% of
their principal amount plus accrued and unpaid interest and Special Interest,
if any, to the date of purchase and, to the extent required by the terms
thereof, any other Indebtedness of the Company that is pari passu with the
Notes at a price no greater than 100% of the principal amount thereof plus
accrued interest to the date of purchase and (2) second, to the extent of any
remaining Excess Proceeds following the completion of the Offer to Purchase,
to any other use as determined by the Company which is not otherwise
prohibited by the Indenture. Upon the completion of an Offer to Purchase
pursuant to this paragraph, the amount of Excess Proceeds shall be reset to
zero.
For the purposes of this covenant, the following are deemed to be
cash or cash equivalents: (x) the assumption of Indebtedness of the Company or
any Restricted Subsidiary and the release of the Company or such Restricted
Subsidiary from all liability on such Indebtedness in connection with such Asset
Disposition and (y) securities received by the Company or any Restricted
Subsidiary from the transferee that are promptly converted by the Company or
such Restricted Subsidiary into cash.
Limitation on Affiliate Transactions. (a) The Company shall not,
and shall not permit any Restricted Subsidiary to, enter into or permit to exist
any transaction (including the purchase, sale, lease or exchange of any property
or employee compensation arrangements) with any Affiliate of the Company (an
"Affiliate Transaction") unless the terms thereof (1) are no less favorable to
the Company or such Restricted Subsidiary than those that could be obtained at
the time of such transaction in arm's-length dealings with a Person who is not
such an Affiliate and (2) if such Affiliate Transaction involves an amount in
excess of $2.0 million (i) are set forth in writing and (ii) have been approved
by a majority of the members of the Board of Directors having no personal stake
in such Affiliate Transaction. If such Affiliate Transaction involves an amount
in excess of $10.0 million, a fairness opinion must be obtained from an
internationally recognized investment banking firm, appraisal firm or auditing
firm with respect to the financial terms of such Affiliate Transaction.
(b) The provisions of the foregoing paragraph (a) shall not
prohibit or apply to (i) any Restricted Payment permitted to be paid pursuant to
the covenant described under "--Limitation on Restricted Payments," (ii) loans
or advances to employees in the ordinary course of business and in an amount
that does not exceed $1.0 million in the aggregate outstanding at any one time,
(iii) the payment of reasonable fees to directors of the Company and its
Restricted Subsidiaries who are not employees of the Company or its Restricted
Subsidiaries, (iv) any Affiliate Transaction between the Company and a
Restricted Subsidiary or between Restricted Subsidiaries, (v) any issuance of
securities, or other payments, awards or grants in cash, securities or otherwise
pursuant to, or the funding of, employment arrangements, stock options and stock
ownership plans approved by the Board of Directors, (vi) the grant of stock
options or similar rights to employees and directors of the Company pursuant to
plans approved by the Board of Directors and (vii) any Affiliate Transaction
entered into pursuant to agreements with labor unions.
Limitation on the Sale or Issuance of Capital Stock of Restricted
Subsidiaries. The Company shall not sell or otherwise dispose of any Capital
Stock of a Restricted Subsidiary, and shall not permit any such Restricted
Subsidiary, directly or indirectly, to issue or sell or otherwise dispose of any
of its Capital Stock except (i) to the Company or a Wholly Owned Subsidiary,
(ii) the issuance and sale of directors' qualifying shares, (iii) if,
immediately after giving effect to any such issuance, sale or other disposition,
such Restricted Subsidiary would no longer constitute a Restricted Subsidiary
and any Investment in such Person remaining after giving effect thereto would
have been permitted to be made under the covenant described under "--Limitation
on Restricted Payments" if made on the date of such issuance, sale or other
disposition, (iv) if such sale or other disposition is of all or any portion of
the Capital Stock of a Restricted Subsidiary and the Net Available Cash received
from such sale or other disposition are applied in accordance with the covenant
"--Limitation on Sales of Assets and Subsidiary Stock" or (v) to the extent the
ownership by a Person other than the Company or a Wholly Owned Subsidiary is
required by applicable law and except that any Restricted Subsidiary may issue
or permit to exist (x) Preferred Stock issued to and held by the Company or a
Wholly Owned Subsidiary; provided, however, that upon either (A) the transfer or
other disposition by the Company or such Wholly Owned Subsidiary of any
Preferred Stock so permitted to a Person other than the Company or another
Wholly Owned Subsidiary or (B) such Wholly Owned Subsidiary ceasing to be a
Wholly Owned Subsidiary, the provisions of this clause (x) will no longer be
applicable to such Preferred Stock and such Preferred Stock will be deemed to
have been issued at the time of such transfer or other disposition or such
cessation; and (y) Preferred Stock issued by a Person prior to the time such
Person becomes a Restricted Subsidiary (including by way of a merger or
consolidation with another Restricted Subsidiary), which Preferred Stock was not
issued in anticipation of and was outstanding prior to such transaction;
provided, however, that on the date of such acquisition and after giving effect
thereto, the Company would have been able to Incur at least $1.00 of additional
Indebtedness pursuant to clause (a) of the covenant described under
"--Limitation on Indebtedness."
Limitation on Guarantees by Restricted Subsidiaries. The Company
shall not permit any Restricted Subsidiary, directly or indirectly, to Guarantee
any Indebtedness of the Company which is pari passu with or subordinate in right
of payment to the Notes ("Guaranteed Indebtedness"), unless (i) such Restricted
Subsidiary simultaneously executes and delivers a Subsidiary Guaranty of payment
of the Notes by such Restricted Subsidiary and (ii) such Restricted Subsidiary
waives and will not in any manner whatsoever claim or take the benefit or
advantage of, any rights of reimbursement, indemnity or subrogation or any other
rights against the Company or any other Restricted Subsidiary as a result of any
payment by such Restricted Subsidiary under its Subsidiary Guaranty; provided
that this paragraph shall not be applicable to (1) any Guarantee by any
Restricted Subsidiary that existed at the time such Person became a Restricted
Subsidiary and was not Incurred in connection with, or in contemplation of, such
Person becoming a Restricted Subsidiary or (2) Guarantees of Indebtedness under
working capital facilities of the Company in an aggregate principal amount not
exceeding $50.0 million at any time outstanding or, if less, the amount by which
$150.0 million exceeds the aggregate outstanding principal amount of
Indebtedness of the Company under clause (15) of paragraph (b) of the
"Limitation on Indebtedness" which is secured by a Lien. If the Guaranteed
Indebtedness is (A) pari passu with the Notes, then the Guarantee of such
Guaranteed Indebtedness shall be pari passu with, or subordinated to, the
Subsidiary Guarantee or (B) subordinated to the Notes, then the Guarantee of
such Guaranteed Indebtedness shall be subordinated to the Subsidiary Guaranty at
least to the extent that the Guaranteed Indebtedness is subordinated to the
Notes.
Notwithstanding the foregoing, any Subsidiary Guaranty by a
Restricted Subsidiary may provide by its terms that it shall be automatically
and unconditionally released and discharged upon (i) any sale, exchange or
transfer, to any Person not an Affiliate of the Company, of all of the Company's
and each Restricted Subsidiary's Capital Stock in, or all or substantially all
the assets of, such Restricted Subsidiary (which sale, exchange or transfer is
not prohibited by the Indenture) or (ii) the release or discharge of the
Guarantee which resulted in the creation of such Subsidiary Guaranty, except a
release or discharge by, or as a result of, payment under such Guarantee.
Limitation on Liens. The Company shall not, and shall not permit
any Restricted Subsidiary to, directly or indirectly, Incur or permit to exist
any Lien of any nature whatsoever on any of its properties other than Permitted
Liens, without effectively providing that the Notes shall be secured equally and
ratably with (or prior to) the obligations so secured for so long as such
obligations are so secured.
Limitation on Sale/Leaseback Transactions. The Company shall not,
and shall not permit any Restricted Subsidiary to, enter into any Sale/Leaseback
Transaction with respect to any property unless (i) the Company or such
Restricted Subsidiary would be entitled to (A) Incur Indebtedness in an amount
equal to the Attributable Debt with respect to such Sale/Leaseback Transaction
pursuant to the covenant described under "--Limitation on Indebtedness" and (B)
create a Lien on such property securing such Attributable Debt without equally
and ratably securing the Notes pursuant to the covenant described under
"--Limitation on Liens," or (ii) the Sale/Leaseback Transaction is treated as an
Asset Disposition and the Company applies the proceeds of such transaction in
compliance with the covenant described under "--Limitation on Sales of Assets
and Subsidiary Stock."
Merger and Consolidation. The Company shall not consolidate with
or merge with or into, or convey, transfer or lease, in one transaction or a
series of transactions, all or substantially all of its assets to, any Person,
unless: (i) the resulting, surviving or transferee Person (the "Successor
Company") shall be a Person organized and existing under the laws of the United
States, any state thereof or the District of Columbia and the Successor Company
(if not the Company) shall expressly assume, by an indenture supplemental
thereto, executed and delivered to the Trustee, in form satisfactory to the
Trustee, all the obligations of the Company under the Notes and the Indenture;
(ii) immediately after giving effect to such transaction (and treating any
Indebtedness which becomes an obligation of the Successor Company or any
Subsidiary of the Company as a result of such transaction as having been
Incurred by such Successor Company or such Subsidiary at the time of such
transaction), no Default shall have occurred and be continuing; (iii)
immediately after giving effect to such transaction, the Successor Company would
be able to Incur an additional $1.00 of Indebtedness pursuant to paragraph (a)
of the covenant described under "--Limitation on Indebtedness;" (iv) immediately
after giving effect to such transaction, the Successor Company shall have
Consolidated Net Worth in an amount that is not less than the Consolidated Net
Worth of the Company immediately prior to such transaction; and (v) the Company
shall have delivered to the Trustee an Officers' Certificate and an Opinion of
Counsel, each stating that (A) such consolidation, merger or transfer and such
supplemental indenture (if any) comply with the Indenture, (B) the Indenture and
the Notes will constitute valid and legally binding obligations of the Successor
Company and (C) the Indenture is enforceable against the Successor Company in
accordance with its terms.
The Successor Company shall be the successor to the Company and
shall succeed to, and be substituted for, and be bound by and obligated to pay
the obligations of, and may exercise every right and power of, the Company under
the Indenture, but the predecessor Company in the case of a conveyance, transfer
or lease shall not be released from the obligation to pay the principal of,
interest on, and Special Interest, if any, with respect to, the Notes.
The Company shall have the right, without the consent of the
Holders, to redeem the Notes in whole, but not in part, at a redemption price
equal to 100% of the unpaid principal amount of the outstanding Notes plus the
Applicable Premium as of, and accrued and unpaid interest and Special Interest
if any, to, the date of redemption in the event that the Company enters into a
binding agreement to consummate any transaction which would be prohibited by
this covenant. The redemption date must occur prior to or simultaneously with
the consummation of such prohibited transaction. Notice of redemption will be
mailed to each Noteholder at such Noteholder's address of record not less than
30 days nor more than 60 days prior to the redemption date. On and after the
redemption date, interest will cease to accrue on the Notes.
Maintenance of Properties and Insurance. The Company will, and
will cause its Subsidiaries to, maintain or cause to be maintained in good
repair, working order and condition all properties used or useful in their
businesses; provided, however, that neither the Company nor any such Subsidiary
shall be prevented from discontinuing those operations or suspending the
maintenance of those properties which, in the reasonable judgment of the
Company, are no longer necessary or useful in the conduct of the Company's
business or that of its Subsidiaries. For so long as any property is deemed to
be useful to the conduct of the business of the Company or its Subsidiaries, the
Company shall, or shall cause such Subsidiaries to, maintain appropriate
insurance, in accordance with industry practice, on such properties.
Application for Rating. The Company will, within 180 days after
the Issue Date, apply to Moody's Investors Service, Inc. and Standard & Poor's
Ratings Group, to obtain a rating for the Notes.
SEC Reports. The Company shall file with the Trustee and provide,
or cause the Trustee to provide, holders of Notes, within 30 days after it files
with, or furnishes to, the SEC, copies of its annual report and of the
information, documents and other reports (or copies of such portions of any of
the foregoing as the SEC may by rules and regulations prescribe) which the
Company is required to file with the SEC pursuant to Section 13 or 15(d) of the
Exchange Act or is required to furnish to the SEC pursuant to the Indenture.
Notwithstanding that the Company may not be required to remain
subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act
or otherwise report on an annual and quarterly basis on forms provided for such
annual and quarterly reporting pursuant to rules and regulations promulgated by
the SEC, the Indenture requires the Company to continue to file with, or furnish
to, the SEC (i) within 90 days after the end of each fiscal year (or such
shorter period as the SEC may in the future prescribe), annual reports on Form
10-K (or any successor form) containing the information required to be contained
therein (or required in such successor form), including annual financial
statements audited by an internationally recognized independent public
accountant with respect to such year and prepared in accordance with GAAP and
all applicable exhibits, (ii) within 45 days after the end of each of the first
three fiscal quarters of each fiscal year (or such shorter period as the SEC may
in the future prescribe), reports on Form 10-Q (or any successor form)
containing substantially the same information required to be contained therein
prepared in accordance with GAAP and (iii) promptly from time to time after the
occurrence of an event required to be therein reported, such other reports on
Form 8-K (or any successor form) containing substantially the same information
required to be contained therein.
Concurrently with the reports delivered pursuant to the preceding
paragraph, the Company is required to furnish the Trustee an officer's
certificate to the effect that such officer has conducted or supervised a review
of the activities of the Company and of performance under the Indenture and
that, to the knowledge of such officer, based on such review, the Company has
fulfilled all of its obligations under the Indenture or, if there has been a
default, specifying each default known to him, its nature and status.
Listing of Notes on the AMEX. The Company has agreed to list the
Notes on the American Stock Exchange or on such other stock exchange or market
as the Common Stock is then principally traded no later than the earliest to
occur of (i) the effectiveness of the initial Exchange Offer Registration
Statement and (ii) the effectiveness of the initial Shelf Registration
Statement, provided that such Notes meet the minimum requirements for listing on
any such exchange or market, and, if applicable, to maintain such listing for so
long as any of the Notes is outstanding.
Events of Default
The following shall constitute "Events of Default" with respect
to the Notes: (i) failure to pay the principal of, premium, if any, on, or Offer
to Purchase repurchase amount, if any, with respect to, any Note when such
amounts become due and payable at maturity, upon acceleration, redemption,
tender for repurchase or otherwise; (ii) failure to pay interest or Special
Interest on the Notes when due, where such failure continues for a 30-day
period; (iii) the failure by the Company to comply with its obligations under
"--Certain Covenants-Merger and Consolidation" above; (iv) the failure by the
Company to comply for 30 days after notice with any of its obligations in the
covenants described above under "Repurchase of Notes Upon a Change in Control"
or "Repurchase of Notes in Connection with Incurrence of Acquired Indebtedness"
(other than, in each case, a failure to purchase Notes) and "--Certain
Covenants" under "--Limitation on Indebtedness," "--Limitation on Restricted
Payments," "--Limitation on Restrictions on Distributions from Restricted
Subsidiaries," "--Limitation on Sales of Assets and Subsidiary Stock (other than
a failure to purchase Notes)," "--Limitation on Affiliate Transactions,"
"--Limitation on the Sale or Issuance of Capital Stock of Restricted
Subsidiaries," "--Limitation on Guarantees by Restricted Subsidiaries,"
"--Limitation on Liens," "--Limitation on Sale/Leaseback Transactions,"
"--Maintenance of Properties and Insurance," "--Application for Rating," "--SEC
Reports" or "--Listing of Notes on the AMEX;" (v) any representation or warranty
of the Company in the Indenture shall prove to have been untrue in any material
respect when made and such default continues for the period and after the notice
specified below, or a default in any material respect in the observance or
performance of any other covenant or agreement of the Company in the Notes or
the Indenture, in each case that continues for the period and after the notice
specified below; (vi) an event of default shall have occurred and be continuing
under any other evidence of Indebtedness of the Company or any Significant
Subsidiary (as defined in SEC Regulation S-X) of the Company, whether such
Indebtedness now exists or is created hereafter, which event of default results
in the acceleration of such Indebtedness which, together with any such other
Indebtedness so accelerated, aggregates more than $15.0 million (the "cross
acceleration provision"); (vii) any final judgment or judgments for payment of
money in excess of $15.0 million in the aggregate shall be rendered against the
Company or any Restricted Subsidiary and shall remain unstayed, unsatisfied and
undischarged for the period and after the notice specified below; and (viii)
certain events of bankruptcy, insolvency or reorganization involving the Company
or any Restricted Subsidiary. The Company is required to deliver to the Trustee
within 120 days after the end of each fiscal year of the Company, an officer's
certificate stating whether or not the signatories know of any default by the
Company under the Indenture and the Notes and, if any default exists, describing
such default.
A default under clause (iv), (v) or (vii) above or, with respect
to a Restricted Subsidiary that is not a Significant Subsidiary, clause (viii)
above, is not an Event of Default until the Trustee or the holders of at least
25% in principal amount of the then outstanding Notes notify the Company of the
default and the Company does not cure the default within 60 days with respect to
clauses (v) or (vii), or within 30 days with respect to clause (iv) or, with
respect to a Restricted Subsidiary that is not a Significant Subsidiary, clause
(viii), after receipt of the notice. The notice must specify the default, demand
that it be remedied and state that the notice is a "Notice of Default." If the
holders of 25% or more in principal amount of the then outstanding Notes request
the Trustee to give such notice on their behalf, the Trustee shall do so.
In case an Event of Default (other than an Event of Default
resulting from bankruptcy, insolvency or reorganization of the Company or a
Restricted Subsidiary that is a Significant Subsidiary) shall have occurred and
be continuing, the Trustee, by notice to the Company, or the holders of 25% or
more of the principal amount of the Notes then outstanding, by notice to the
Company and the Trustee, may declare the principal amount of the Notes, plus
accrued and unpaid interest and Special Interest, if any, to be immediately due
and payable. In case an Event of Default resulting from certain events of
bankruptcy, insolvency or reorganization of the Company or a Restricted
Subsidiary that is a Significant Subsidiary shall occur, such amounts shall be
due and payable without any declaration or any act on the part of the Trustee or
the holders of the Notes. Such declaration of acceleration may be rescinded and
past defaults may be waived by the holders of a majority of the principal amount
of the Notes then outstanding upon conditions provided in the Indenture, except
a default in the payment of principal, or interest on, or Special Interest, if
any, with respect to, any Note cannot be waived or amended without payment of
the amount then due otherwise than for the acceleration. Except to enforce the
right to receive payment when due of principal, premium, if any, interest, and
Special Interest, if any, no holder of a Note may institute any proceeding with
respect to the Indenture or the Notes or for any remedy thereunder unless such
holder has previously given to the Trustee written notice of a continuing Event
of Default and unless the holders of 25% or more of the principal amount of the
Notes then outstanding have requested the Trustee to institute proceedings in
respect of such Event of Default and have offered the Trustee reasonable
indemnity against loss, liability and expense to be thereby incurred, the
Trustee has failed so to act for 60 days after receipt of the same and during
such 60-day period the holders of a majority of the principal amount of the
Notes then outstanding have not given the Trustee a direction inconsistent with
the request. Subject to certain restrictions, the holders of a majority in
principal amount of the Notes then outstanding will have the right to direct the
time, method and place of conducting any proceeding for any remedy available to
the Trustee or exercising any trust or power conferred on the Trustee. The
Trustee, however, may refuse to follow any direction that conflicts with law or
the Indenture, that is unduly prejudicial to the rights of any holder of a Note
or that would involve the Trustee in personal liability and the Trustee may take
any other action deemed proper by the Trustee which is not inconsistent with
such direction.
Modifications and Waivers of the Indenture
Supplemental indentures modifying or amending the Indenture may
be made by the Company and the Trustee with the consent of the holders of not
less than a majority in aggregate principal amount of the then outstanding
Notes; provided, however, that no such modification or amendment may, without
the consent of the holders of each Note affected thereby, (a) change the fixed
maturity of any Note, reduce the rate or extend the time of payment of interest
on, or Special Interest, if any, with respect to, any Note, reduce the principal
amount, or premium, if any, on, or Special Interest, if any, (in each case,
whether on redemption, repurchase or otherwise) with respect to, any Note,
change the time at which any Note may be redeemed as described under
"--Redemptions" above, impair the right of a holder to institute suit for
payment thereof, or change the place of payment of the Notes, or the currency in
which the Notes are payable or make any change in any Subsidiary Guaranty that
would adversely affect any holders of the Notes or (b) reduce the percentage of
Notes, the consent of the holders of which is required for any modification or
waiver. Without the consent of any holders of the Notes, the Company and the
Trustee may amend or supplement the Notes or the Indenture to (i) provide for
uncertificated Notes in addition to or in place of certificated Notes, (ii)
provide for the assumption of the Company's obligations to holders of the Notes
in the case of a merger or consolidation or transfer of all or substantially all
of the Company's assets, (iii) comply with the TIA, or (iv) cure any ambiguity,
defect or inconsistency, or make any other change, in each case provided that
such action does not materially adversely affect the interests of the holders of
the Notes.
The holders of a majority in aggregate principal amount of
outstanding Notes may waive any past default under the Indenture, except a
default in the payment of principal, premium, if any, interest or Special
Interest, if any, or default with respect to certain covenants under the
Indenture.
The consent of the holders of the Notes is not necessary under
the Indenture to approve the particular form of any proposed amendment. It is
sufficient if such consent approves the substance of the proposed amendment.
After the amendment under the Indenture becomes effective, the Company is
required to mail to holders of the Notes a notice briefly describing such
amendment. However, the failure to give such notice to all holders of the
Notes, or any defect therein, will not impair or affect the validity of the
amendment.
Defeasance
The Company at any time may terminate all its obligations under
the Notes and the Indenture ("legal defeasance"), except for certain
obligations, including those respecting the defeasance trust and obligations to
register the transfer or exchange of the Notes, to replace mutilated, destroyed,
lost or stolen Notes and to maintain a registrar and paying agent in respect of
the Notes. The Company at any time may terminate its obligations under
"Redemptions," "Repurchase of Notes Upon a Change in Control" and under the
covenants described under "--Certain Covenants" (other than the covenant
described under "--Merger and Consolidation"), the operation of the cross
acceleration provision, the bankruptcy provisions with respect to Restricted
Subsidiaries, the judgment default provision, described under "--Events of
Default" above and the limitations contained in clauses (iii) and (iv) of the
first paragraph under "--Certain Covenants-Merger and Consolidation" above
("covenant defeasance").
The Company may exercise its legal defeasance option
notwithstanding its prior exercise of its covenant defeasance option. If the
Company exercises its legal defeasance option, payment of the Notes may not be
accelerated because of an Event of Default with respect thereto. If the Company
exercises its covenant defeasance option, payment of the Notes may not be
accelerated because of an Event of Default specified in clause (iv), (v), (vi),
(vii) or (viii) (with respect only to Restricted Subsidiaries), under "--Events
of Default" above or because of the failure of the Company to comply with clause
(iii) or (iv) of the first paragraph under "--Certain Covenants-Merger and
Consolidation" above. In order to exercise either defeasance option, the
Company must irrevocably deposit in trust with the Trustee money or U.S.
Government Obligations for the payment of principal and interest and Special
Interest, if any, on the Notes to redemption or maturity, as the case may be,
and must comply with certain other conditions, including delivery to the Trustee
of (i) an Opinion of Counsel to the effect that (x) holders of the Notes will
not recognize income, gain or loss for federal income tax purposes as a result
of such deposit and defeasance and will be subject to federal income tax on the
same amounts and in the same manner and at the same times as would have been the
case if such deposit and defeasance had not occurred (and, in the case of legal
defeasance only, such Opinion of Counsel must be based on a ruling of the
Internal Revenue Service or other change in applicable federal income tax law)
and (y) the trust funds will not be subject to the effect of any applicable
bankruptcy, insolvency, reorganization or similar law affecting creditors rights
generally under any United States federal or state law and that the Trustee has
a perfected security interest in such trust funds for the ratable benefit of the
Holders and (ii) an opinion of counsel in the Company's jurisdiction of
incorporation to the effect that holders of the Notes will not recognize income,
gain or loss for tax purposes in such jurisdiction as a result of such deposit
and defeasance and will be subject to taxes in such jurisdiction on the same
amounts and in the same manner and at the same time as would have been the case
if such deposit and defeasance had not occurred.
No Personal Liability of Directors, Officers, Employees and Stockholders
No past, present or future director, officer, employee, agent,
manager, stockholder or other affiliate, as such, of the Company shall have any
liability for any obligations of the Company under the Notes or the Indenture or
for any claim based on, in respect of, or by reason of, such obligations or
their creation. Each holder of the Notes by accepting a Note waives and releases
all such liability.
Transfer and Exchange
A holder may transfer or exchange the Notes in accordance with
the Indenture. The Company may require a holder to, among other things, furnish
appropriate endorsements and transfer documents and pay any taxes and fees
required by law or permitted by the Indenture.
The registered holder of a Note may be treated as the owner of it
for all purposes.
Delivery and Form
The Notes are issued in registered form.
Concerning the Trustee
The Indenture contains certain limitations on the rights of the
Trustee, should it become a creditor of the Company, to obtain payment of claims
in certain cases or to realize on certain property received in respect of any
such claim as security or otherwise. Subject to the TIA, the Trustee will be
permitted to engage in other transactions; however, if it acquires any
conflicting interest, as described in the TIA, it must eliminate such conflict
or resign. The Trustee shall have a lien prior to the Notes on all money or
property held or collected by the Trustee or otherwise distributable to holders
of Notes (except money, securities or property held in trust to pay principal
and/or interest on particular Notes) to secure the Company's payment and
indemnity obligations to the Trustee.
Governing Law
The Indenture provides that it and the Notes will be governed by
the laws of the State of New York without regard to principles of conflict of
laws.
Certain Definitions
"Acquired Indebtedness" means Indebtedness of a Person existing
at the time such Person became a Restricted Subsidiary and not Incurred in
connection with, or in contemplation of, such Person becoming a Restricted
Subsidiary.
"Additional Assets" means (i) any property or assets utilized in
the airline business or any business that is substantially related, ancillary or
complementary thereto (including an Investment in any Person engaged in any such
business); (ii) the Capital Stock of a Person that becomes a Restricted
Subsidiary as a result of the acquisition of such Capital Stock by the Company
or another Restricted Subsidiary or (iii) Capital Stock constituting a minority
interest in any Person that at such time is a Restricted Subsidiary.
"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 the purposes of this definition,
"control" when used with respect to any Person means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing. For
purposes of the provisions described under "--Certain Covenants-Limitation on
Restricted Payments", "--Certain Covenants--Limitation on Affiliate
Transactions", and "--Certain Covenants--Limitation on Sales of Assets and
Subsidiary Stock" only, "Affiliate" shall also mean any beneficial owner of
Capital Stock representing 10% or more of the total voting power of the Voting
Stock (on a fully diluted basis) of the Company or of rights or warrants to
purchase such Capital Stock (whether or not currently exercisable) and any
Person who would be an Affiliate of any such beneficial owner pursuant to the
first sentence hereof.
"Aircraft Acquisition Debt" means Indebtedness Incurred by the
Company or any of its Restricted Subsidiaries in connection with an acquisition
of aircraft, related engines or spare engines, spare parts or other related
equipment (including ground equipment) which Indebtedness either constitutes all
or part of the purchase price thereof, or is Incurred prior to, at the time of
or within one year after the acquisition thereof for the purpose of financing or
refinancing part of the purchase price thereof, and which equipment was not
owned by the Company or a Restricted Subsidiary of the Company prior to such
purchase provided, however, that in either case the proportion (expressed as a
percentage) of such Indebtedness to the purchase price or Appraised Value of
such equipment at the time of such financing does not exceed 90% (except that
the foregoing limitation shall not apply to aircraft under order or option on
the Issue Date for which vendor financing (including by way of vendor guarantee)
is initially obtained).
"Applicable Premium" means, with respect to a Note at any
redemption or repurchase date, the greater of (i) 1.0% of the principal amount
of such Note and (ii) the excess of (A) the present value on such redemption or
repurchase date of the principal amount of such Note plus all required interest
and Special Interest payments due on such Note through its Stated Maturity, such
present value computed using a discount rate equal to the Treasury Rate plus 50
basis points over (B) the principal amount of such Note.
"Appraised Value" means the fair market sale value as of a
specified date of the appraised assets that would be obtained in an arm's length
transaction between an informed and willing seller under no compulsion to sell
and an informed and willing buyer under no compulsion to buy, as determined by
an Independent Appraiser.
"Asset Disposition" means any sale, lease, transfer or other
disposition (or series of related sales, leases, transfers or dispositions) by
the Company or any Restricted Subsidiary, including any disposition by means of
a merger, consolidation or similar transaction (each referred to for the
purposes of this definition as a "disposition") in one transaction or a series
of related transactions, of (i) any shares of Capital Stock of a Restricted
Subsidiary (other than directors' qualifying shares or shares required by
applicable law to be held by a Person other than the Company or a Restricted
Subsidiary), (ii) all or substantially all the assets of any division or line of
business of the Company or any Restricted Subsidiary or (iii) sales of aircraft,
engines and related equipment (and leasehold interests therein) and any other
assets of the Company or any Restricted Subsidiary outside of the ordinary
course of business of the Company or such Restricted Subsidiary; provided that
"Asset Disposition" shall not include (A) any sale, lease, transfer or other
disposition by a Restricted Subsidiary to the Company or by the Company or a
Restricted Subsidiary to a Restricted Subsidiary, (B) any sale, lease, transfer
or other disposition that constitutes a Restricted Payment permitted by the
covenant described under "--Certain Covenants-Limitation on Restricted
Payments", (C) any sale, lease, transfer or other dispositions of (i) inventory,
(ii) Receivables or (iii) other current assets in the ordinary course of
business, (D) any sale, lease, transfer or other dispositions of assets for
consideration at least equal to the fair market value of the assets sold or
disposed of, to the extent that the consideration received would constitute
Additional Assets, (E) any sale, lease, transfer or other disposition of the
Company's direct or indirect interest in Worldspan, (F) any sale, lease,
transfer or other disposition of aircraft and related engines, spare parts and
equipment (including ground equipment) or leasehold interests therein which are
obsolete or which have been grounded and held for resale or are of a type no
longer used by the Company in the ordinary course of business, (G) any
Sale/Leaseback Transaction permitted by clause (i) of the "Sale and Leaseback"
covenant or (H) any sale, lease, transfer or other disposition of maintenance
bases, hangars and engine shops.
"Attributable Debt" in respect of a Sale/Leaseback Transaction
means, as at the time of determination, the present value (discounted at the
interest rate borne by the Notes) of the total obligations of the lessee for
rental payments during the remaining term of the lease included in such
Sale/Leaseback Transaction (including any period for which such lease has been
extended).
"Average Life" means, as of the date of determination, with
respect to any Indebtedness or Preferred Stock, the quotient obtained by
dividing (i) the sum of the products of numbers of years from the date of
determination to the dates of each successive scheduled principal payment of
such Indebtedness or redemption or similar payment with respect to such
Preferred Stock multiplied by the amount of such payment by (ii) the sum of
all such payments.
"Board of Directors" means the Board of Directors of the
Company or any committee of such board duly authorized to act in respect of
any particular matter.
"Business Day" means each day which is not a Legal Holiday.
"Capital Lease Obligations" means an obligation that is
required to be classified and accounted for as a capital lease for financial
reporting purposes in accordance with GAAP, and the amount of Indebtedness
represented by such obligation shall be the capitalized amount of such
obligation determined in accordance with GAAP; and the Stated Maturity thereof
shall be the date of the last payment of rent or any other amount due under
such lease prior to the first date upon which such lease may be terminated by
the lessee without payment of a penalty.
"Capital Stock" of any Person means any and all shares
interests, rights to purchase, warrants, options, participations or other
equivalents of or interests in (however designated) equity of such Person,
including any Preferred Stock, but excluding any debt securities convertible
into such equity.
"Change in Control" means the occurrence of any of the
following events: (i) any person (including any entity or group deemed to be a
"person" under Section 13(d)(3) or Section 14(d)(2) of the Exchange Act) is or
becomes the direct or indirect beneficial owner (as determined in accordance
with Rule 13d-3 under the Exchange Act) of shares of the Company's Capital
Stock representing greater than 50% of the total voting power of all shares of
Capital Stock of the Company entitled to vote in the election of directors
under ordinary circumstances or to elect a majority of the Board of Directors,
(ii) the Company sells, transfers or otherwise disposes of all or
substantially all of its assets, (iii) when, during any period of 12
consecutive months after the Issue Date, individuals who at the beginning of
any such 12-month period constituted the Board of Directors (together with any
new directors whose election by such Board or whose nomination for election by
the stockholders of the Company was approved by a vote of a majority of the
directors still in office entitled to vote with respect to such nomination who
were either directors at the beginning of such period or whose election or
nomination for election was previously so approved, but excluding any of the
individuals who at the beginning of such 12-month period constituted such
Board but who ceased to be a member of the Board pursuant to the Company's
mandatory retirement policy as in effect as of the Issue Date), cease for any
reason to constitute a majority of the Board of Directors then in office or
(iv) the date of the consummation of the merger or consolidation of the
Company with another corporation where the stockholders of the Company,
immediately prior to the merger or consolidation, would not beneficially own,
immediately after the merger or consolidation, shares entitling such
stockholders to 50% or more of all votes (without consideration of the rights
of any class of stock to elect directors by a separate class vote) to which
all stockholders of the corporation issuing cash or securities in the merger
or consolidation would be entitled in the election of directors or where
members of the Board of Directors, immediately prior to the merger or
consolidation, would not, immediately after the merger or consolidation,
constitute a majority of the board of directors of the corporation issuing
cash or securities in the merger or consolidation.
"Code" means the Internal Revenue Code of 1986, as amended.
"Consolidated Coverage Ratio" as of any date of determination
means the ratio of (i) the aggregate amount of EBITDA for the period of the
most recent four consecutive fiscal quarters ending prior to the date of such
determination for which financial statements have been made publicly available
to (ii) Consolidated Fixed Charges for such four fiscal quarters; provided,
however, that
(a) if the Company or any Restricted Subsidiary has Incurred any
Indebtedness since the beginning of such period that remains outstanding
or if the transaction giving rise to the need to calculate the
Consolidated Coverage Ratio is an Incurrence of Indebtedness, or both,
EBITDA and Consolidated Fixed Charges for such period shall be calculated
after giving effect on a pro forma basis to such Indebtedness as if such
Indebtedness had been Incurred on the first day of such period and the
discharge of any other Indebtedness repaid, repurchased, defeased or
otherwise discharged with the proceeds of such new Indebtedness as if such
discharge had occurred on the first day of such period,
(b) if the Company or any Restricted Subsidiary has repaid,
repurchased, defeased or otherwise discharged any Indebtedness since the
beginning of such period or if any Indebtedness is to be repaid,
repurchased, defeased or otherwise discharged (in each case other than
Indebtedness Incurred under any revolving credit facility unless such
Indebtedness has been permanently repaid and has not been replaced) on the
date of the transaction giving rise to the need to calculate the
Consolidated Coverage Ratio, EBITDA and Consolidated Fixed Charges for
such period shall be calculated on a pro forma basis as if such discharge
had occurred on the first day of such period,
(c) if since the beginning of such period the Company or any
Restricted Subsidiary shall have made any Asset Disposition, the EBITDA
for such period shall be reduced by an amount equal to the EBITDA (if
positive) directly attributable to the assets which are the subject of
such Asset Disposition for such period, or increased by an amount equal to
the EBITDA (if negative), directly attributable thereto for such period
and Consolidated Fixed Charges for such period shall be reduced by an
amount equal to the Consolidated Fixed Charges directly attributable to
any Indebtedness of the Company or any Restricted Subsidiary repaid,
repurchased, defeased or otherwise discharged with respect to the Company
and its continuing Restricted Subsidiaries in connection with such Asset
Disposition for such period (or, if the Capital Stock of any Restricted
Subsidiary is sold, the Consolidated Fixed Charges for such period
directly attributable to the Indebtedness of such Restricted Subsidiary to
the extent the Company and its continuing Restricted Subsidiaries are no
longer liable for such Indebtedness after such disposition),
(d) if since the beginning of such period the Company or any
Restricted Subsidiary (by merger or otherwise) shall have made an
Investment in any Restricted Subsidiary (or any Person which becomes a
Restricted Subsidiary) or an acquisition of assets, including any
acquisition of assets occurring in connection with a transaction requiring
a calculation to be made hereunder, which constitutes all or substantially
all of an operating unit of a business, EBITDA and Consolidated Fixed
Charges for such period shall be calculated after giving pro forma effect
thereto (including the Incurrence of any Indebtedness) as if such
Investment or acquisition occurred on the first day of such period, and
(e) if since the beginning of such period any Person (that
subsequently became a Restricted Subsidiary or was merged with or into the
Company or any Restricted Subsidiary since the beginning of such period)
shall have made any Asset Disposition, any Investment or acquisition of
assets that would have required an adjustment pursuant to clause (c) or
(d) above if made by the Company or a Restricted Subsidiary during such
period, EBITDA and Consolidated Fixed Charges for such period shall be
calculated after giving pro forma effect thereto as if such Asset
Disposition, Investment or acquisition occurred on the first day of such
period.
For purposes 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 Fixed Charges associated with
any Indebtedness Incurred in connection therewith, the pro forma calculations
shall be determined in good faith by a responsible financial or accounting
officer of the Company. If any Indebtedness bears a floating rate of interest
and is being given pro forma effect, the interest of such Indebtedness shall
be calculated as if the rate in effect on the date of determination had been
the applicable rate for the entire period (taking into account any Interest
Rate Agreement applicable to such Indebtedness if such Interest Rate Agreement
has a remaining term in excess of one year).
"Consolidated Fixed Charges" means, for any period, the sum of
(i) the Consolidated Interest Expense for such period plus (ii) dividends
declared during such period with respect to Preferred Stock that is
Disqualified Stock.
"Consolidated Interest Expense" means, for any period, the
total interest expense of the Company and its consolidated Restricted
Subsidiaries, determined on a consolidated basis in accordance with GAAP,
plus, to the extent not included in such total interest expense, and to the
extent incurred by the Company or its Restricted Subsidiaries, without
duplication, (i) interest expense attributable to capital leases, (ii)
amortization of debt discount and debt issuance cost, (other than in respect
of the Notes) (iii) capitalized interest, (iv) non-cash interest expense, (v)
commissions, discounts and other fees and charges owed with respect to letters
of credit and bankers' acceptance financing, (vi) net costs associated with
Hedging Obligations (including amortization of fees), (vii) interest incurred
in connection with Investments in discontinued operations, (viii) interest
accruing on any Indebtedness of any other Person to the extent such
Indebtedness is Guaranteed by (or secured by the assets of) the Company or any
Restricted Subsidiary and (ix) the cash contributions to any employee stock
ownership plan or similar trust to the extent such contributions are used by
such plan or trust to pay interest or fees to any Person (other than the
Company) in connection with Indebtedness Incurred by such plan or trust.
"Consolidated Net Income" means, for any period, the net income
of the Company and its consolidated Subsidiaries; provided, however, that
there shall not be included in such Consolidated Net Income:
(a) any net income of any Person (other than the Company) if such
Person is not a Restricted Subsidiary, except that (i) subject to the
exclusion contained in clause (d) below, the Company's equity in the net
income of any such Person for such period shall be included in such
Consolidated Net Income up to the aggregate amount of cash actually
distributed by such Person during such period to the Company or a
Restricted Subsidiary as a dividend or other distribution (subject, in the
case of a dividend or other distribution paid to a Restricted Subsidiary,
to the limitations contained in clause (c) below) and (ii) the Company's
equity in a net loss of any such Person for such period shall be included
in determining such Consolidated Net Income;
(b) any net income (or loss) of any Person acquired by the Company
or a Subsidiary in a pooling of interests transaction for any period prior
to the date of such acquisition;
(c) any net income of any Restricted Subsidiary if such Restricted
Subsidiary is subject to restrictions, directly or indirectly, on the
payment of dividends or the making of distributions by such Restricted
Subsidiary, directly or indirectly, to the Company, except that (i)
subject to the exclusion contained in clause (d) below, the Company's
equity in the net income of any such Restricted Subsidiary for such period
shall be included in such Consolidated Net Income up to the aggregate
amount of cash actually distributed by such Restricted Subsidiary during
such period to the Company or another Restricted Subsidiary as a dividend
or other distribution (subject, in the case of a dividend or other
distribution paid to another Restricted Subsidiary, to the limitation
contained in this clause) and (ii) the Company's equity in a net loss of
any such Restricted Subsidiary for such period shall be included in
determining such Consolidated Net Income;
(d) any gain or loss realized upon the sale or other disposition of
any assets of the Company or its consolidated Subsidiaries (including
pursuant to any sale-and-leaseback arrangement) which is not sold or
otherwise disposed of in the ordinary course of business and any gain or
loss realized upon the sale or other disposition of any Capital Stock of
any Person;
(e) extraordinary, unusual and non-recurring gains or losses; and
(f) the cumulative effect of a change in accounting principles since
the Issue Date. Notwithstanding the foregoing, for the purposes of the
covenant described under "Certain Covenants--Limitation on Restricted
Payments" only, there shall be excluded from Consolidated Net Income any
dividends, repayments of loans or advances or other transfers of assets
from Unrestricted Subsidiaries to the Company or a Restricted Subsidiary
to the extent such dividends, repayments or transfers increase the amount
of Restricted Payments permitted under such covenants pursuant to clause
(a)(3)(C) thereof.
"Consolidated Net Worth" means the total of the amounts shown on
the balance sheet of the Company and its consolidated Subsidiaries, determined
on a consolidated basis in accordance with GAAP, as of the end of the most
recent fiscal quarter of the Company for which financial statements have been
made publicly available prior to the taking of any action for the purpose of
which the determination is being made, as (i) the par or stated value of all
outstanding Capital Stock of the Company plus (ii) paid-in capital or capital
surplus relating to such Capital Stock plus (iii) any retained earnings or
earned surplus less (A) any accumulated deficit and (B) only to the extent
otherwise included in the amount specified in clauses (i), (ii) or (iii) of
this definition, any amounts attributable to Disqualified Stock. "Currency
Agreement" means in respect of a Person any foreign exchange contract, currency
swap agreement or other similar agreement to which such Person is a party or a
beneficiary designed to protect such Person against fluctuations in currency
values and not for the purpose of speculation.
"Default" means any event which is, or after notice or passage of
time or both would be, an Event of Default.
"Disqualified Stock" means, with respect to any Person, any
Capital Stock which 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 (i) matures or is mandatorily redeemable pursuant to a sinking fund
obligation or otherwise prior to the first anniversary of the Stated Maturity of
the Notes, (ii) is convertible or exchangeable for Indebtedness with a Stated
Maturity prior to the first anniversary of the Stated Maturity of the Notes or
Disqualified Stock or (iii) is redeemable at the option of the holder thereof,
in whole or in part, in each case on or prior to the first anniversary of the
Stated Maturity of the Notes; provided, however, that any Capital Stock that
would not constitute Disqualified Stock but for provisions thereof giving
holders thereof the right to require such Person to repurchase or redeem such
Capital Stock upon the occurrence of an "asset disposition" or "change of
control" occurring prior to the first anniversary of the Stated Maturity of the
Notes shall not constitute Disqualified Stock if the "asset disposition" or
"change of control" provisions applicable to such Capital Stock are not more
favorable to the holders of such Capital Stock than the provisions described
under "--Certain Covenants--Limitation on Sales of Assets and Subsidiary Stock"
and "--Repurchase of Notes Upon Change in Control".
"EBITDA" for any period means the sum of Consolidated Net Income,
plus Consolidated Interest Expense plus the following to the extent deducted in
calculating such Consolidated Net Income: (a) all income tax expense of the
Company and its consolidated Restricted Subsidiaries, (b) depreciation expense
of the Company and its consolidated Restricted Subsidiaries, (c) amortization
expense of the Company and its consolidated Restricted Subsidiaries (excluding
amortization expense attributable to a prepaid cash item that was paid in a
prior period) and (d) all other noncash charges of the Company and its
consolidated Restricted Subsidiaries (excluding any such noncash charge to the
extent that it represents an accrual of or reserve for cash expenditures in any
future period), in each case for such period. Notwithstanding the foregoing, the
provision for taxes based on the income or profits of, and the depreciation and
amortization and noncash charges of, a Restricted Subsidiary shall be added to
Consolidated Net Income to compute EBITDA only to the extent (and in the same
proportion) that the net income of such Restricted Subsidiary was included in
calculating Consolidated Net Income and only if a corresponding amount would be
permitted at the date of determination to be dividended to the Company by such
Restricted Subsidiary without prior approval (that has not been obtained),
pursuant to the terms of its charter and all agreements, instruments, judgments,
decrees, orders, statutes, rules and governmental regulations applicable to such
Restricted Subsidiary or its stockholders.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Fuel Protection Agreements" means in respect to a Person any
fuel protection agreement or other financial agreement or arrangement designed
to protect such Person against fluctuations in market prices of aircraft fuels
and not for the purpose of speculation.
"GAAP" means generally accepted accounting principles in the
United States of America as in effect as of the Issue Date, including those
set forth in (i) the opinions and pronouncements of the Accounting Principles
Board of the American Institute of Certified Public Accountants, (ii)
statements and pronouncements of the Financial Accounting Standards Board,
(iii) such other statements by such other entity as approved by a significant
segment of the accounting profession and (iv) the rules and regulations of the
SEC governing the inclusion of financial statements (including pro forma
financial statements) in periodic reports required to be filed pursuant to
Section 13 of the Exchange Act, including opinions and pronouncements in staff
accounting bulletins and similar written statements from the accounting staff
of the SEC.
"Guarantee" means any obligation, contingent or otherwise, of
any Person directly or indirectly guaranteeing any Indebtedness of any Person
and any obligation, direct or indirect, contingent or otherwise, of such
Person (i) to purchase or pay (or advance or supply funds for the purchase or
payment of) such Indebtedness or other obligation of such Person (whether
arising by virtue of partnership arrangements, or by agreements to keep-well,
to purchase assets, goods, securities or services, to take-or-pay or to
maintain financial statement condition or otherwise) or (ii) entered into for
the purpose of assuring in any other manner the obligee of such Indebtedness
of the payment thereof or to protect such obligee against loss in respect
thereof (in whole or in part); provided, however, that the term "Guarantee"
shall not include endorsements for collection or deposit in the ordinary
course of business. The term "Guarantee" used as a verb has a corresponding
meaning. The term "Guarantor" shall mean any Person Guaranteeing any
obligation.
"Hedging Obligations" of any Person means the obligations of
such Person pursuant to any Interest Rate Agreement, Fuel Protection Agreement
or Currency Agreement.
"Holder" or "Noteholder" means the Person in whose name a Note
is registered on the Registrar's books.
"Incur" means issue, assume, Guarantee, incur or otherwise
become liable for; provided, however, that any Indebtedness or Capital Stock
of a Person existing at the time such Person becomes a Subsidiary (whether by
merger, consolidation, acquisition or otherwise) shall be deemed to be
Incurred by such Subsidiary at the time it becomes a Subsidiary. The term
"Incurrence" when used as a noun shall have a correlative meaning. The
accretion of principal of a non-interest bearing or other discount security
shall be deemed the Incurrence of Indebtedness. Neither the accrual of
interest, the accretion of original issue discount or fluctuations in exchange
rates of currencies shall be considered an Incurrence of Indebtedness. Any
change in GAAP that results in an obligation of such Person that exists at
such time becoming Indebtedness shall not be considered an Incurrence of
Indebtedness.
"Indebtedness" means, with respect to any Person on any date of
determination (without duplication): (a) the principal of and premium (if
any) in respect of (i) indebtedness of such Person for money borrowed and (ii)
indebtedness evidenced by notes, debentures, bonds or other similar
instruments for the payment of which such Person is responsible or liable,
including, in each case, any premium on such indebtedness to the extent such
premium has become due and payable;
(b) all Capital Lease Obligations of such Person;
(c) all obligations of such Person issued or assumed as the
deferred purchase price of property, all conditional sale obligations of such
Person and all obligations of such Person under any title retention agreement
(but excluding trade accounts payable arising in the ordinary course of
business);
(d) all obligations of such Person for the reimbursement of any
obligor on any letter of credit, banker's acceptance or similar credit
transaction (other than obligations with respect to letters of credit securing
obligations (other than obligations described in clauses (i) through (iii)
above) entered into in the ordinary course of business of such Person to the
extent such letters of credit are not drawn upon or, if and to the extent
drawn upon, such drawing is reimbursed no later than the tenth Business Day
following receipt by such Person of a demand for reimbursement following
payment on the letter of credit);
(e) the amount of all obligations of such Person with respect to
the redemption, repayment or other repurchase of any Disqualified Stock or,
with respect to any Subsidiary of such Person, the liquidation preference with
respect to, any Preferred Stock (but excluding, in each case, any accrued
dividends);
(f) all obligations of the type referred to in clauses (a)
through (e) above of other Persons and all dividends of other Persons for the
payment of which, in either case, such Person is responsible or liable,
directly or indirectly, as obligor, guarantor or otherwise, including by means
of any Guarantee;
(g) all obligations of the type referred to in clauses (i)
through (vi) above of other Persons secured by any Lien on any property or
asset of such Person (whether or not such obligation is assumed by such
Person), the amount of such obligation being deemed to be the lesser of the
value of such property or assets or the amount of the obligation so secured;
and (viii) to the extent not otherwise included in this definition, Hedging
Obligations of such Person.
The "amount" or "principal amount" of Indebtedness at any time
of determination as used herein represented by (a) any contingent
Indebtedness, shall be the maximum principal amount thereof, (b) any
Indebtedness issued at a price that is less than the principal amount at
maturity thereof, shall be the amount of the liability in respect thereof
determined in accordance with GAAP and (c) any Disqualified Stock, shall be
the maximum fixed redemption or repurchase price in respect thereof.
"Interest Rate Agreement" means in respect of a Person any
interest rate swap agreement, interest rate cap agreement or other financial
agreement or arrangement designed to protect such Person against fluctuations
in interest rates and not for the purpose of speculation.
"Investment" in any Person means any direct or indirect
advance, loan (other than advances to customers in the ordinary course of
business that are recorded as accounts receivable on the balance sheet of the
lender) or other extensions of credit (including by way of Guarantee or
similar arrangement) or capital contribution to (by means of transfer of cash
or other property to others or any payment for property or other services for
the account or use of others), or any purchase or acquisition of Capital
Stock, Indebtedness or other similar instruments issued by such Person. For
purposes of the definition of "Unrestricted Subsidiary", the definition of
"Restricted Payment" and the covenant described under "--Certain
Covenants-Limitation on Restricted Payments", (i) "Investment" shall include
the portion (proportionate to the Company's equity interest in such
Subsidiary) of the fair market value of the net assets of any Subsidiary of
the Company at the time that such Subsidiary is designated an Unrestricted
Subsidiary; provided, however, that upon a redesignation of such Subsidiary as
a Restricted Subsidiary, the Company shall be deemed to continue to have a
permanent "Investment" in an Unrestricted Subsidiary equal to an amount (if
positive) equal to (x) the Company's "Investment" in such Subsidiary at the
time of such redesignation less (y) the portion (proportionate to the
Company's equity interest in such Subsidiary) of the fair market value of the
net assets of such Subsidiary at the time of such redesignation; and (ii) any
property transferred to or from an Unrestricted Subsidiary shall be valued at
its fair market value at the time of such transfer, in each case as determined
in good faith by the Board of Directors.
"Issue Date" means the date on which the Notes are originally
issued.
"Legal Holiday" means a Saturday, Sunday or any other day on
which banks located in New York City or the city and state of the Trustee's
corporate trust office as of the Issue Date are authorized or obligated by law
to remain closed.
"Lien" means any mortgage, pledge, security interest,
encumbrance, lien or charge of any kind (including any conditional sale or
other title retention agreement or lease in the nature thereof).
"Net Available Cash" from an Asset Disposition means cash
payments received therefrom (including any cash payments received by way of
deferred payment of principal pursuant to a note or installment receivable or
otherwise and proceeds from the sale or other disposition of any securities
received as consideration, but only as and when received, but excluding any
other consideration received in the form of assumption by the acquiring Person
of indebtedness or other obligations relating to such properties or assets or
received in any other noncash form), in each case net of (i) all legal, title
and recording tax expenses, commissions and other fees and expenses incurred,
and all Federal, state, provincial, foreign and local taxes required to be
accrued as a liability under GAAP, as a consequence of such Asset Disposition,
(ii) all payments made on any Indebtedness which is secured by any assets
subject to such Asset Disposition, in accordance with the terms of any Lien
upon or other security agreement of any kind with respect to such assets, or
which must by its terms, or in order to obtain a necessary consent to such
Asset Disposition, or by applicable law, be repaid out of the proceeds from
such Asset Disposition, (iii) all distributions and other payments required to
be made to minority interest holders in Subsidiaries or joint ventures as a
result of such Asset Disposition and (iv) the deduction of appropriate amounts
provided by the seller as a reserve, in accordance with GAAP, against any
liabilities associated with the property or other assets disposed in such
Asset Disposition and retained by the Company or any Restricted Subsidiary
after such Asset Disposition. "Net Cash Proceeds" means, with respect to any
issuance or sale of Capital Stock, the cash proceeds of such issuance or sale
net of attorneys' fees, accountants' fees, underwriters' or placement agents'
fees, discounts or commissions and brokerage, consultant and other fees
actually incurred in connection with such issuance or sale and net of taxes
paid or payable as a result thereof.
"Offer to Purchase" means an offer to purchase all or a pro
rata portion, as the case may be, of the Notes by the Company from the Holders
commenced by the mailing (by first class mail, postage prepaid) by the Company
(or, if requested by the Company on at least five Business Days prior notice
to the Trustee and at the Company's expense, by the Trustee) of a notice to
each Holder (and, if mailed by the Company, to the Trustee) at such Holder's
address appearing in the Note register, stating: (i) the covenant pursuant to
which the offer is being made and that all Notes validly tendered will be
accepted for payment on a pro rata basis; (ii) the purchase price and the date
of purchase (which shall be a Business Day no earlier than 30 days nor later
than 60 days from the date such notice is mailed) (the "Payment Date"); (iii)
that any Note not tendered will continue to accrue interest pursuant to its
terms; (iv) that, unless the Company defaults in the payment of the purchase
price, any Note accepted for payment pursuant to the Offer to Purchase shall
cease to accrue interest on and after the Payment Date; (v) that Holders
electing to have a Note purchased pursuant to the Offer to Purchase will be
required to surrender the Note, together with the form entitled "Option of the
Holder to Elect Purchase" attached to or on the reverse side of the Note
completed, to the Paying Agent at the address specified in the notice prior to
the close of business on the Business Day immediately preceding the Payment
Date (or, if such day is a Legal Holiday, on the next subsequent day which is
not a Legal Holiday), and such Holder shall be entitled to receive from the
Paying Agent a non-transferable receipt of deposit evidencing such deposit;
(vi) that, unless the Company defaults in making the payment of the purchase
price or shall otherwise, in its sole discretion, consent thereto, Holders
will be entitled to withdraw their election only if the Trustee receives, not
later than the close of business on the fifth Business Day immediately
preceding the Payment Date, a telegram, facsimile transmission or letter
setting forth the name of such Holder, the principal amount of Notes delivered
for purchase and a statement that such Holder is withdrawing his election to
have such Notes purchased; and (vii) that Holders whose Notes are being
purchased only in part will be issued new Notes equal in principal amount to
the unpurchased portion of the Notes surrendered; provided that each Note
purchased and each new Note issued shall be in a principal amount of $1,000 or
integral multiples thereof. The Company shall place such notice in a financial
newspaper of general circulation in New York City. No failure of the Company
to give the foregoing notice shall limit any Holder's right to exercise a
repurchase right. On the Payment Date, the Company shall (i) accept for
payment on a pro rata basis Notes or portions thereof tendered pursuant to an
Offer to Purchase; (ii) deposit with the Trustee money sufficient to pay the
purchase price of all Notes or portions thereof so accepted; and (iii)
deliver, or cause to be delivered, to the Trustee all Notes or portions
thereof so accepted together with an officers' certificate specifying the
Notes or portions thereof accepted for payment by the Company. The Trustee
shall promptly mail to the Holders of Notes so accepted payment in an amount
equal to the purchase price, and the Trustee shall promptly authenticate, and
the Company shall promptly execute and mail (or cause to be mailed) to such
Holders a new Note equal in principal amount to any unpurchased portion of the
Note surrendered; provided that each Note purchased and each new Note issued
shall be in a principal amount of $1,000 or integral multiples thereof;
provided further that if the Payment Date is between a regular record date and
the next succeeding interest payment date, Notes to be repurchased must be
accompanied by payment of an amount equal to the interest and Special
Interest, if any, payable on such succeeding interest payment date on the
principal amount to be repurchased, and the interest on the principal amount
of the Note being repurchased, and Special Interest, if any, with respect
thereto, will be paid on such next succeeding interest payment date to the
registered holder of such Note on the immediately preceding record date. A
Note repurchased on an interest payment date need not be accompanied by any
such payment, and the interest on the principal amount of the Note being
repurchased and Special Interest, if any, with respect thereto, will be paid
on such interest payment date to the registered holder of such Note on the
corresponding record date. The Company will publicly announce the results of
an Offer to Purchase as soon as practicable after the Payment Date. The
Trustee shall act as the Paying Agent for an Offer to Purchase. The Company
will comply with Rule 14e-1 under the Exchange Act and any other securities
laws and regulations thereunder to the extent such laws and regulations are
applicable, in the event that the Company is required to repurchase Notes
pursuant to an Offer to Purchase. Both the notice of the Company and the
notice of the Holder having been given as specified above, the Notes so to be
repurchased shall, on the Payment Date become due and payable at the purchase
price applicable thereto and from and after such date (unless the Company
shall default in the payment of such purchase price) such Notes shall cease to
bear interest. If any Note shall not be paid upon surrender thereof for
repurchase, the principal shall, until paid, bear interest from the Payment
Date at the rate borne by such Note. Any Note which is to be submitted for
repurchase only in part shall be delivered pursuant to the above provisions
with (if the Company or Trustee so requires) due endorsement by, or a written
instrument of transfer in form satisfactory to the Company and the Trustee
duly executed by, the Holder thereof or such Holder's attorney duly authorized
in writing.
"Payment Date" with respect to any Offer to Purchase, has the
meaning specified in the definition herein of Offer to Purchase.
"Permitted Investment" means an Investment by the Company or
any Restricted Subsidiary in (i) the Company, a Restricted Subsidiary or a
Person that will, upon the making of such Investment, become a Restricted
Subsidiary; (ii) another Person if as a result of such Investment such other
Person is merged or consolidated with or into, or transfers or conveys all or
substantially all its assets to, the Company or a Restricted Subsidiary; (iii)
Temporary Cash Investments; (iv) receivables owing to the Company or any
Restricted Subsidiary if created or acquired in the ordinary course of
business and payable or dischargeable in accordance with customary trade
terms; provided, however, that such trade terms may include such concessionary
trade terms as the Company or any such Restricted Subsidiary deems reasonable
under the circumstances; (v) payroll, travel and similar advances to cover
matters that are expected at the time of such advances ultimately to be
treated as expenses for accounting purposes and that are made in the ordinary
course of business; (vi) loans or advances to employees made in the ordinary
course of business consistent with past practices of the Company or such
Restricted Subsidiary in an aggregate amount outstanding at any time of not
more than $1.0 million; (vii) any Investment arising as a result of any
Hedging Obligations; (viii) stock, obligations or securities received in
settlement of debts created in the ordinary course of business and owing to
the Company or any Restricted Subsidiary or in satisfaction of judgments; (ix)
any Investment to the extent such Investment represents the non-cash portion
of the consideration received for an Asset Disposition as permitted pursuant
to the covenant described under "--Certain Covenants-Limitation on Sales of
Assets and Subsidiary Stock" and (x) Investments in the normal course of
business in any Persons the primary business of which is substantially
related, ancillary or complementary to the airline business.
"Permitted Liens" means, with respect to any Person,
(a) Liens existing or securing Indebtedness existing (or for
which a written commitment has been made on or prior to the Issue Date) on the
Issue Date;
(b) Liens granted on or after the Issue Date in favor of the
holders of the Notes or the Exchange Notes;
(c) Liens with respect to the assets of a Restricted Subsidiary
granted by such Restricted Subsidiary to the Company to secure Indebtedness
owing to the Company by such Restricted Subsidiary;
(d) Liens for employee wages and pledges or deposits by such
Person under worker's compensation laws, unemployment insurance laws or
similar legislation, or good faith deposits in connection with bids, tenders,
contracts (other than for the payment of Indebtedness) or leases to which such
Person is a party, or deposits to secure public or statutory obligations of
such Person or deposits of cash or United States government bonds to secure
surety or appeal bonds to which such Person is a party, or deposits as
security for contested taxes or import duties or for the payment of rent, in
each case Incurred in the ordinary course of business;
(e) Liens imposed by law, such as carriers', warehousemen's and
mechanics' Liens, in each case for sums not yet due or being contested in good
faith by appropriate proceedings or other Liens arising out of judgments or
awards against such Person with respect to which such Person shall then be
proceeding with an appeal or other proceedings for review;
(f) Liens for property taxes not yet subject to penalties for
non-payment or which are being contested in good faith and by appropriate
proceedings;
(g) Liens in favor of issuers of surety bonds or letters of
credit issued pursuant to the request of and for the account of such Person in
the ordinary course of business; provided, however, that such letters of
credit do not constitute Indebtedness;
(h) minor survey exceptions, minor encumbrances, easements or
reservations of, or rights of others for, licenses, rights-of-way, sewers,
electric lines, telegraph and telephone lines and other similar purposes, or
zoning or other restrictions as to the use of real property or Liens
incidental to the conduct of the business of such Person or to the ownership
of its properties which were not Incurred in connection with Indebtedness and
which do not in the aggregate materially adversely affect the value of said
properties or materially impair their use in the operation of the business of
such Person;
(i) any Lien securing Aircraft Acquisition Debt, which Lien is
Incurred when such Indebtedness is Incurred and which Lien does not extend to
property other than aircraft, related engines or spare engines, spare parts or
related equipment (including ground equipment) financed thereby;
(j) Liens on property or shares of Capital Stock of another
Person at the time such other Person becomes a Subsidiary of such Person;
provided, however, that such Liens are not created, incurred or assumed in
connection with, or in contemplation of, such other Person becoming such a
Subsidiary; provided further, however, that such Lien may not extend to any
other property owned by such Person or any of its Subsidiaries;
(k) Liens on property at the time such Person or any of its
Subsidiaries acquires the property, including any acquisition by means of a
merger or consolidation with or into such Person or a Subsidiary of such
Person; provided, however, that such Liens are not created, incurred or
assumed in connection with, or in contemplation of, such acquisition; provided
further, however, that the Liens may not extend to any other property owned by
such Person or any of its Subsidiaries;
(l) Liens securing Hedging Obligations permitted under the
Indenture;
(m) any Lien or pledge created or subsisting in the ordinary
course of business over documents of title, insurance policies or sale
contracts in relation to commercial goods to secure the purchase price thereof;
(n) Liens to secure any Refinancing (or successive Refinancings)
as a whole, or in part, of any Indebtedness secured by any Lien referred to in
clauses (a), (i), (j), (k) and (r);provided, however, that (x) such new Lien
shall be limited to all or part of the same property that secured the original
Lien (plus improvements to or on such property) and (y) the Indebtedness secured
by such Lien at such time is not increased to any amount greater than the sum of
(A) the outstanding principal amount, or, if greater, committed amount of the
Indebtedness described under clause (a), (i), (j), (k) and (r) at the time the
original Lien became a Permitted Lien and (B) an amount necessary to pay any
fees and expenses, including premiums, related to such Refinancing;
(o) Liens with respect to Indebtedness permitted pursuant to
clauses (b)(5), (b)(12) or (b)(16) of "--Certain Covenants-Limitation on
Indebtedness" above;
(p) Liens securing any future interest payable with respect to
any Indebtedness on cash and cash equivalents which constituted a portion of
the net proceeds to the Company or a Restricted Subsidiary from the issuance
of such Indebtedness;
(q) Liens securing Indebtedness or other obligations of a
Subsidiary of such Person owing to such Person or a wholly owned Subsidiary of
such Person;
(r) Liens on Receivables (or on the Capital Stock and assets of
any special purpose Subsidiary formed solely for the purpose of effecting a
Receivables based financing transaction) securing Indebtedness permitted under
clause (b)(15) of the covenant described under "--Certain Covenants-Limitation
on Indebtedness" above; and
(s) any judgment Lien, unless the judgment it secures shall not,
within sixty (60) days after the entry thereof, have been discharged, vacated
or reversed or the execution thereof stayed pending appeal, or shall not have
been discharged, vacated or reversed within sixty (60) days after the
expiration of any such stay.
"Person" means any individual, corporation, partnership,
limited liability issuer, joint venture, association, joint-stock issuer,
trust, unincorporated organization, government or any agency or political
subdivision thereof or any other entity.
"Preferred Stock" as applied to the Capital Stock of any
Person means Capital Stock of any class or classes (however designated) which
is preferred as to the payment of dividends or distributions, or as to the
distribution of assets upon any voluntary or involuntary liquidation or
dissolution of such Person, over shares of Capital Stock of any other class of
such Person.
"Principal" of a Note means the principal of the Note plus the
premium, if any, payable on the Note which is due or overdue or is to become
due at the relevant time.
"Public Equity Offering" means an underwritten primary public
offering of common stock of the Company pursuant to an effective registration
statement under the Securities Act.
"Receivables" means accounts receivables, chattel paper,
instruments, documents or general intangibles evidencing or relating to the
right to payment of money and other similar assets, in each case, relating to
such receivables, including any interest in merchandise or goods, the sale or
lease of which gave rise to such receivables, related contractual rights,
guarantees, insurance proceeds, collections, other related assets and proceeds
of all of the foregoing.
"Refinance" means, in respect of any Indebtedness, to
refinance, extend, renew, refund, repay, prepay, redeem, defease or retire, or
to issue other Indebtedness in exchange for, such Indebtedness. "Refinanced"
or "Refinancing" shall have correlative meanings.
"Refinancing Indebtedness" means Indebtedness that Refinances
any Indebtedness of the Company or any Restricted Subsidiary existing on the
Issue Date or Incurred in compliance with the Indenture, including Indebtedness
that Refinances Refinancing Indebtedness; provided, however, that (i) such
Refinancing Indebtedness has a Stated Maturity no earlier than the Stated
Maturity of the Indebtedness being Refinanced, (ii) such Refinancing
Indebtedness has an Average Life at the time such Refinancing Indebtedness is
Incurred that is equal to or greater than the Average Life of the Indebtedness
being Refinanced and (iii) such Refinancing Indebtedness has an aggregate
principal amount (or if Incurred with original issue discount, an aggregate
issue price) that is equal to or less than the aggregate principal amount (or
if Incurred with original issue discount, the aggregate accreted value) then
outstanding or committed (plus fees and expenses, including any premium and
defeasance costs) under the Indebtedness being Refinanced; provided further,
however, that Refinancing Indebtedness shall not include (x) Indebtedness of a
Subsidiary that Refinances Indebtedness of the Company or (y) Indebtedness of
the Company or a Restricted Subsidiary that Refinances Indebtedness of an
Unrestricted Subsidiary.
"Restricted Payment" with respect to any Person means (i) the
declaration or payment of any dividends or any other distributions of any sort
in respect of its Capital Stock (including any payment in connection with any
merger or consolidation involving such Person) or similar payment to the
direct or indirect holders of its Capital Stock (other than dividends or
distributions payable solely in its Capital Stock (other than Disqualified
Stock) and dividends or distributions payable solely to the Company or a
Restricted Subsidiary, and other than pro rata dividends or other
distributions made by a Subsidiary that is not a Wholly Owned Subsidiary to
minority stockholders (or owners of an equivalent interest in the case of a
Subsidiary that is an entity other than a corporation)), (ii) the purchase,
redemption or other acquisition or retirement for value of any Capital Stock
of the Company held by any Person or of any Capital Stock of a Restricted
Subsidiary held by any Affiliate of the Company (other than a Restricted
Subsidiary and other than pro rata purchases, redemptions, acquisitions or
retirements made by a Subsidiary that is not a Wholly-Owned Subsidiary),
including the exercise of any option to exchange any Capital Stock (other than
into Capital Stock of the Company that is not Disqualified Stock), (iii) the
purchase, repurchase, redemption, defeasance or other acquisition or
retirement for value, prior to scheduled maturity, scheduled repayment or
scheduled sinking fund payment of any Subordinated Obligations (other than the
purchase, repurchase or other acquisition of Subordinated Obligations
purchased in anticipation of satisfying a sinking fund obligation, principal
installment or final maturity, in each case due within one year of the date of
acquisition) or (iv) the making of any Investment in any Person (other than a
Permitted Investment). Any purchase or redemption of Capital Stock by an
employee stock ownership or benefit plan shall not constitute a Restricted
Payment except to the extent, if any, that such purchase or redemption is
financed by the Company or its Restricted Subsidiaries.
"Restricted Subsidiary" means any Subsidiary of the Company
that is not an Unrestricted Subsidiary.
"Sale/Leaseback Transaction" means an arrangement relating to
property now owned or hereafter acquired whereby the Company or a Restricted
Subsidiary transfers such property to a Person and the Company or a Restricted
Subsidiary leases it from such Person.
"SEC" means the Securities and Exchange Commission.
"Senior Indebtedness" of any Person means (i) Indebtedness of
such Person, whether outstanding on the Issue Date or thereafter Incurred and
(ii) accrued interest (including interest accruing on or after the filing of
any petition in bankruptcy or for reorganization relating to the Company to
the extent post-filing interest is allowed in such proceeding) in respect of
(A) indebtedness for money borrowed and (B) indebtedness evidenced by notes,
debentures, bonds or other similar instruments for the payment of which such
Person is responsible or liable unless, in the case of (i) and (ii), in the
instrument creating or evidencing the same or pursuant to which the same is
outstanding, it is provided that such obligations are subordinate in right of
payment to the Notes; provided, however, that Senior Indebtedness shall not
include (1) any obligation of such Person to any Subsidiary of such Person,
(2) any liability for Federal, state local or other taxes owed or owing by
such Person, (3) any accounts payable or other liability to trade creditors
arising in the ordinary course of business (including guarantees thereof or
instruments evidencing such liabilities), (4) any Indebtedness of such Person
(and any accrued interest in respect thereof) which is subordinate or junior
in any respect to any other Indebtedness or other obligation of such Person or
(5) that portion of any Indebtedness which at the time of Incurrence is
Incurred in violation of the Indenture.
"Stated Maturity" means, with respect to any security, the date
specified in such security as the fixed date on which the final payment of
principal of such security is due and payable, including pursuant to any
mandatory redemption provision (but excluding any provision providing for the
repurchase of such security at the option of the holder thereof upon the
happening of any contingency unless such contingency has occurred).
"Subordinated Obligation" means any Indebtedness of the Company
(whether outstanding on the Issue Date or thereafter Incurred) which is
subordinate or junior in right of payment to the Notes pursuant to a written
agreement to that effect.
"Subsidiary" means, in respect of any Person, any corporation,
association, partnership or other business entity of which more than 50% of
the total voting power of shares of Capital Stock or other interests
(including membership or partnership interests) 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 (i) such Person, (ii) such Person and one or more Subsidiaries
of such Person or (iii) one or more Subsidiaries of such Person.
"Subsidiary Guaranty" means the Guarantee by a Restricted
Subsidiary of the Company's obligations with respect to the Notes. The form of
such Guarantee is provided for in the Indenture. Each Subsidiary Guaranty will
be limited in amount to an amount not to exceed the maximum amount that can be
guaranteed by the applicable Restricted Subsidiary without rendering the
Subsidiary Guaranty, as it relates to such Restricted Subsidiary, voidable
under applicable law relating to fraudulent conveyance or fraudulent transfer
or similar laws affecting the rights of creditors generally.
"Temporary Cash Investments" means any of the following: (i)
any investment in U.S. Government Obligations; (ii) investments in time
deposit accounts, certificates of deposit and money market deposits maturing
within 180 days of the date of acquisition thereof issued by a bank or trust
issuer which is organized under the laws of the United States of America, any
state thereof or any foreign country recognized by the United States, and
which bank or trust issuer has capital, surplus and undivided profits
aggregating in excess of $50.0 million (or the foreign currency equivalent
thereof) and has outstanding debt which is rated "A" (or such similar
equivalent rating) or higher by at least one nationally recognized statistical
rating organization (as defined in Rule 436 under the Securities Act) or any
money market fund sponsored by a registered broker dealer or mutual fund
distributor; (iii) repurchase obligations with a term of not more than 30 days
for underlying securities of the types described in clause (i) above entered
into with a bank meeting the qualifications described in clause (ii) above;
(iv) investments in commercial paper, maturing not more than 90 days after the
date of acquisition, issued by corporation (other than an Affiliate of the
Company) organized and in existence under the laws of the United States of
America or any foreign country recognized by the United States of America with
a rating at the time as of which any investment therein is made of "P-1" (or
higher) according to Moody's Investors Service, Inc., or "A-1" (or higher)
according to Standard & Poor's Ratings Group; and (v) investments in
securities with maturities of six months or less from the date of acquisition
issued or fully guaranteed by any state, commonwealth or territory of the
United States of America, or by any political subdivision or taxing authority
thereof, and rated at least "A" by Standard & Poor's Ratings Group or "A" by
Moody's Investors Service, Inc.
"Treasury Rate" means the yield to maturity at the time of
computation of United States Treasury securities with a constant maturity (as
compiled and published in the most recent Federal Reserve Statistical Release
H.15 (519) which has become publicly available at least two business days
prior to such redemption or repurchase date (or, if such Statistical Release
is no longer published, any publicly available source or similar market data))
most nearly equal to the period from such redemption or repurchase date to the
Stated Maturity of the Notes; provided, however, that if the period from such
redemption or repurchase date to the Stated Maturity of the Notes is less than
one year, the weekly average yield on actually traded United States Treasury
securities adjusted to a constant maturity of one year shall be used.
"Unrestricted Subsidiary" means (i) any Subsidiary of the
Company that at the time of determination shall be designated an Unrestricted
Subsidiary by the Board of Directors in the manner provided below and (ii) any
Subsidiary of an Unrestricted Subsidiary. The Board of Directors may designate
any Subsidiary of the Company (including any newly acquired or newly formed
Subsidiary) to be an Unrestricted Subsidiary unless such Subsidiary or any of
its Subsidiaries owns any Capital Stock or Indebtedness of, or holds any Lien
on any property of, the Company or any other Subsidiary of the Company that is
not a Subsidiary of the Subsidiary to be so designated; provided, however, that
either (A) the Subsidiary to be so designated has total assets of $1,000 or
less or (B) if such Subsidiary has assets greater than $1,000, such
designation would be permitted under the covenant described under "--Certain
Covenants-Limitation on Restricted Payments". The Board of Directors may
designate any Unrestricted Subsidiary to a Restricted Subsidiary; provided,
however, that immediately after giving effect to such designation (x) the
Company could Incur $1.00 of additional Indebtedness under paragraph (a) of
the covenant described under "--Certain Covenants-Limitation on Indebtedness"
and (y) no Default shall have occurred and be continuing. Any such designation
by the Board of Directors shall be made by the Company to the Trustee by
promptly filing with the Trustee a copy of the resolution of the Board of
Directors giving effect to such designation and an Officers' Certificate
certifying that such designation complied with the foregoing provisions.
"U.S. Government Obligations" means direct obligations (or
certificates representing an ownership interest in such obligations) of the
United States of America (including any agency or instrumentality thereof) for
the payment of which the full faith and credit of the United States of America
is pledged and which are not callable at the Company's option.
"Voting Stock" of a Person means all classes of Capital Stock
or other interests (including partnership interests) of such Person then
outstanding and normally entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees
thereof.
"Wholly Owned Subsidiary" means a Restricted Subsidiary all the
Capital Stock of which (other than directors' qualifying shares) is owned by
the Company or one or more Wholly Owned Subsidiaries.
BOOK-ENTRY, DELIVERY AND FORM
General
Each of the Old Notes was issued in the form of one or more
fully registered Old Notes in global form ("Old Global Notes"). All Exchange
Notes issued in the Exchange Offer for Old Notes represented by Old Global
Notes will be represented by one or more Exchange Notes in global form (the
"Global Exchange Note," and together with the Old Global Notes, the "Global
Notes"), which will be deposited with, or on behalf of, the DTC and registered
in the name of the DTC or its nominee.
Holders of Exchange Notes who elect to take physical delivery
of their certificates instead of holding their interest through the Global
Exchange Note (collectively referred to herein as the "Non-Global Holders")
will be issued in registered form a certificated Exchange Note ("Certificated
Exchange Note"). Upon the transfer of any Certificated Exchange Note initially
issued to a Non-Global Holder, such Certificated Exchange Note will, unless
the transferee requests otherwise or the Global Exchange Note has previously
been exchanged in whole for Certificated Exchange Notes, be exchanged for an
interest in the Global Exchange Note.
Global Notes
Upon deposit of the Global Exchange Note, DTC will credit, on
its book-entry registration and transfer system interests in the Global
Exchange Note to the accounts of institutions that have accounts with DTC
(including Euroclear and Cedel) ("participants"). Ownership of beneficial
interests in the Global Exchange Note will be limited to participants or
persons that may hold interests through participants. Ownership of beneficial
interests in the Global Exchange Note will be shown on, and the transfer of
that ownership will be effected only through, records maintained by DTC (with
respect to participants' interests) for the Global Exchange Note, or by
participants or persons that hold interests through participants (with respect
to beneficial interests of persons other than participants). The laws of some
jurisdictions may require that certain purchasers of securities take physical
delivery of such securities in definitive form. Such limits and laws may
impair the ability to transfer or pledge beneficial interests in the Global
Exchange Note.
So long as DTC, or its nominee, is the registered holder of any
Global Notes, DTC or such nominee, as the case may be, will be considered the
sole legal owner and holder of such Notes represented by such Global Notes for
all purposes under the Indenture and the Notes. Except as set forth below,
owners of beneficial interests in Global Notes will not be entitled to have
such Global Notes represented thereby registered in their names, will not
receive or be entitled to receive physical delivery of certificates
representing Notes in definitive, fully registered form bearing a legend
containing the applicable restrictions on transfers ("Definitive Notes") in
exchange therefor and will not be considered to be the owners or holders of
such Global Notes represented thereby for any purpose under the Notes or the
Indenture. The Company understands that under existing industry practice, in
the event an owner of a beneficial interest in a Global Note desires to take
any action that DTC, as the holder of such Global Note, is entitled to take,
DTC would authorize the participants to take such action, and that the
participants would authorize beneficial owners owning through such
participants to take such action or would otherwise act upon the instructions
of beneficial owners owning through them.
Any payment of principal, interest or Special Interest due on
the Notes on any interest payment date or at maturity will be made available
by the Company to the Trustee by such date. As soon as possible thereafter,
the Trustee will make such payments to DTC or its nominee, as the case may be,
as the registered owner of the Global Notes representing such Notes in
accordance with existing arrangements between the Trustee and DTC.
The Company expects that DTC or its nominee, upon receipt of
any payment of principal, interest or Special Interest in respect of the
Global Notes, will credit immediately the accounts of the related participants
with payments in amounts proportionate to their respective beneficial
interests in the principal amount of such Global Note as shown on the records
of DTC. The Company also expects that payments by participants to owners of
beneficial interests in the Global Notes held through such participants will
be governed by standing instructions and customary practices, as is now the
case with securities held for the accounts of customers in bearer form or
registered in "street name," and will be the responsibility of such
participants.
None of the Company, the Trustee, or any payment agent for the
Global Notes will have any responsibility or liability for any aspect of the
records relating to or payments made on account of beneficial ownership
interests in any of the Global Notes or for maintaining, supervising or
reviewing any records relating to such beneficial ownership interests or for
other aspects of the relationship between DTC and its participants or the
relationship between such participants and the owners of beneficial interests
in the Global Securities owning through such participants.
As long as the Notes are represented by a Global Note, DTC's
nominee will be the holder of the Notes and therefore will be the only entity
that can exercise a right to repayment or repurchase of the Notes. See
"Description of Notes--Repurchase of Notes Upon a Change in Control." Notice
by participants, or by owners of beneficial interests in a Global Note held
through such participants, of the exercise of the option to elect repayment of
beneficial interests in Notes represented by a Global Note must be transmitted
to DTC in accordance with its procedures on a form required by DTC and
provided to participants. In order to ensure that DTC's nominee will timely
exercise a right to repayment with respect to a particular Note, the
beneficial owner of such Note must instruct the broker or other participant to
exercise a right to repayment. Different firms have cut-off times for
accepting instructions from their customers and, accordingly, each beneficial
owner should consult the broker or other participant through which it holds an
interest in a Note in order to ascertain the cut-off time by which such an
instruction must be given in order for timely notice to be delivered to DTC.
The Company will not be liable for any delay in delivery of notices of the
exercise of the option to elect repayment.
Unless and until exchanged in whole or in part for Notes in
definitive form in accordance with the terms of the Notes, the Global Notes
may not be transferred except as a whole by DTC to a nominee of DTC, or by a
nominee of DTC to DTC or another nominee of DTC, or by DTC or any such nominee
to a successor of DTC or a nominee of each successor.
Although DTC has agreed to the foregoing procedures in order
to facilitate transfers of interests in the Global Notes among its
participants, it is under no obligation to perform or continue to perform such
procedures, and such procedures may be discontinued at any time. Neither the
Trustee nor the Company will have any responsibility for the performance by
DTC or its participants or indirect participants of their respective
obligations under the rules and procedures governing their operations. The
Company and the Trustee may conclusively rely on, and shall be protected in
relying on, instructions from DTC for all purposes.
Definitive Notes
Upon transfer of Old Notes in definitive, fully registered form
bearing a legend containing restrictions on transfers ("Definitive Old Notes")
to a Qualified Institutional Buyer, such Definitive Notes will be transferred
to the corresponding Old Global Note. Old Global Notes and the Global Exchange
Note shall be exchangeable for corresponding Definitive Old Notes and
Certificated Exchange Notes, respectively, registered in the name of persons
other than DTC or its nominee if (A) DTC (i) notifies the Company that it is
unwilling or unable to continue as DTC for any of the Global Notes or (ii) at
any time ceases to be a clearing agency registered under the Exchange Act, (B)
there shall have occurred and be continuing an Event of Default (as defined in
the Indenture) with respect to the Notes or (C) the Company executes and
delivers to the Trustee an order that the Global Notes shall be so
exchangeable. Any Definitive Notes will be issued only in fully registered
form and shall be issued without coupons in denominations of $1,000 and
integral multiples thereof. Any Definitive Notes issued in exchange for a
Global Note will be registered in such names and in such denominations as DTC
shall request.
The Clearing System
DTC has advised the Company as follows: DTC is a
limited-purpose trust company organized under the laws of the State of New
York, a member of the Federal Reserve System, a "clearing corporation" within
the meaning of the New York Uniform Commercial Code and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. DTC
was created to hold securities of participants and to facilitate the clearance
and settlement of securities transactions among its participants in such
securities through electronic book-entry changes in accounts of participants,
thereby eliminating the need for physical movement of securities certificates.
DTC's participants include securities brokers and dealers (which may include
the Initial Purchaser), banks, trust companies, clearing corporations and
certain other organizations. Access to DTC's book-entry system is also
available to others such as banks, brokers, dealers and trust companies that
clear through or maintain a custodial relationship with a participant, whether
directly or indirectly.
Settlement
Initial settlement in the Notes will be in same-day funds.
Investors holding their Notes through DTC will follow settlement practices
applicable to United States corporate debt obligations. The Indenture will
require that payments in respect of Notes (including principal, premium,
interest and Special Interest) be made by wire transfer of same-day funds to
the accounts specified by the holders thereof or, if no such account is
specified, by mailing a check to each such holder's registered address.
DESCRIPTION OF CAPITAL STOCK
Pursuant to TWA's Certificate of Incorporation, the Company
has the authority to issue 287.5 million shares of capital stock, consisting
of 150 million shares of Common Stock, and 137.5 million additional shares of
preferred stock. The Certificate of Incorporation authorizes the Board of
Directors to establish one or more series of preferred stock and to establish
such relative voting, dividend, redemption, liquidation, conversion and other
powers, preferences, rights, qualifications, limitations and restrictions as
the Board of Directors may determine without further approval of the
stockholders of the Company. The issuance of preferred stock by the Board of
Directors could, among other things, adversely affect the voting power of the
holders of Common Stock and, under certain circumstances, make it more
difficult for a person or group to gain control of the Company. See "Certain
Provisions of the Certificate of Incorporation, the By-laws and Delaware Law."
The issuance of any series of preferred stock, and the
relative powers, preferences, rights, qualifications, limitations and
restrictions of such series, if and when established, will depend upon, among
other things, the future capital needs of the Company, the then existing
market conditions and other factors that, in the judgment of the Board of
Directors, might warrant the issuance of preferred stock. At the date of this
Offering Memorandum, there are no plans, agreements or understandings relative
to the issuance of any additional series of preferred stock other than the
Series A Preferred Stock issuable pursuant to the Rights.
Description of Common Stock
The holders of the Common Stock are entitled to one vote per
share on all matters voted on by stockholders, including elections of
directors, and, except for the voting rights of the holders of Employee
Preferred Stock (who are entitled to elect a total of four directors to the
Board) and, under certain circumstances, the 1997 Preferred Stock and 8%
Preferred Stock, and as otherwise required by law or provided in any
resolution adopted by the Board of Directors with respect to any series of the
preferred stock, the holders of such shares exclusively possess all voting
power. The Certificate of Incorporation does not provide for cumulative
voting in the election of directors but the Board is classified, which means
that the holders of a majority of the shares entitled to vote at a meeting at
which a quorum is present can elect all of the directors of the class then to
be elected (except that the holders of a majority of the shares of Employee
Preferred Stock are exclusively entitled to elect four labor directors) and
the holders of the remaining shares would not be able to elect any directors
at that meeting. Subject to any preferential rights of the 8% Preferred
Stock, the 1997 Preferred Stock or any other outstanding series of Preferred
Stock entitled to vote in the election of directors, the holders of Common
Stock are entitled to such dividends as may be declared from time to time by
the Board of Directors from funds available therefor, and upon liquidation are
entitled to receive pro rata all assets of the Company available for
distribution to such holders. The holders of Common Stock have no preemptive
rights and no rights to convert their shares of Common Stock into any other
security. It is not presently anticipated that dividends will be paid on the
Common Stock in the foreseeable future. All outstanding shares of Common
Stock are fully paid and nonassessable, and the shares of Common Stock
issuable upon conversion of the 1997 Preferred Stock and the 8% Preferred
Stock and, if issued, upon conversion of the 9 1/4% Convertible Subordinated
Debentures due 2007 (the "2007 Debentures") and the 8% Convertible
Subordinated Debentures due 2006 (the "2006 Debentures") will be, upon
issuance, fully paid and nonassessable. As of March 26, 1998, 51,896,129
shares of Common Stock were issued and outstanding and were held by
approximately 21,606 holders of record.
Rights Plan
The Board of Directors of the Company declared a dividend
distribution of one right (a "Right") for each outstanding share of Common
Stock and Employee Preferred Stock (collectively, the "Voting Stock") payable
to holders of record as of the close of business on January 12, 1996 (the
"Record Date") and, thereafter, all Common Stock issued by the Company has had
an equivalent number of Rights attendant to it. Each Right entitles the
holder to purchase, after the Distribution Date (as defined below), from the
Company one one-hundredth of a share of Series A Preferred Stock of the
Company at a price of $47.50 (the "Purchase Price"). The description and
terms of the Rights are set forth in a Rights Agreement, dated as of December
19, 1995 between the Company and American Stock Transfer & Trust Company, as
Rights Agent (the "Rights Agent") as supplemented. The Rights Plan is set
forth in full in the Rights Agreement and the description thereof herein is
qualified in its entirety by reference to such Rights Agreement.
Until the earlier to occur of (a) the tenth day after public
announcement that any person or group has become the beneficial owner of at
least 15% of the Company's Voting Stock (other than pursuant to a "Permitted
Offer," as defined below) and (b) the tenth business day after the date of the
commencement of a tender or exchange offer (other than a Permitted Offer) by
any person which would, if consummated, result in such person becoming the
beneficial owner of at least 20% of the Voting Stock (the earlier of such
dates being hereinafter called the "Distribution Date"), the Rights will be
evidenced, with respect to any of the Voting Stock certificates outstanding as
of the Record Date, by such Voting Stock certificates.
Each share of Voting Stock issued or delivered by the Company
after the Record Date but prior to the earlier of the Distribution Date or the
expiration of the Rights shall be accompanied by one Right.
The Rights Agreement provides that, until the Distribution
Date, the Rights will be transferred with and only with the Voting Stock.
Until the Distribution Date (or earlier redemption or expiration of the
Rights), the surrender or transfer of any certificates for Voting Stock in
respect of which Rights have been issued will also constitute the transfer of
the Rights associated with the Voting Stock represented by such certificates.
As soon as practicable after the Distribution Date, separate certificates
evidencing the Rights (the "Right Certificates") will be mailed to holders of
record of the Voting Stock as of the close of business on the Distribution
Date and such separate Right Certificates alone will evidence the Rights.
No Right is exercisable at any time prior to the Distribution
Date. The Rights will expire on January 12, 2006 (the "Final Expiration
Date") unless earlier exchanged or redeemed by the Company as described below.
Until a Right is exercised, the holder thereof, as such, will have no rights
as a stockholder of the Company, including without limitation the right to
vote or to receive dividends.
Upon exercise, each Right shall be converted into one
one-hundredth of a share of the Series A Preferred Stock. Holders of shares
of Series A Preferred Stock are entitled to receive, when, as and if declared
by the Board of Directors out of funds legally available therefor, quarterly
dividends in an amount per share equal to the greater of (a) $1.00 and (b) 100
times the aggregate per share amount of all cash dividends or other
distributions (other than dividends payable solely in shares of Common Stock),
declared on the Common Stock since the first dividend payment date with respect
to the Series A Preferred Stock. Dividends payable on the Series A Preferred
Stock are cumulative. In addition, in the event the Company enters into any
consolidation, merger, combination or other transaction in which shares of
Common Stock are exchanged for or changed into other stock or securities,
shares of Series A Preferred Stock shall be similarly exchanged for or changed
into 100 times the aggregate amount of stock, securities, cash or other
consideration.
Subject to the rights of holders of the 1997 Preferred Stock
and the 8% Preferred Stock, holders of shares of Series A Preferred Stock are
entitled to 100 votes on all matters submitted to a vote of the stockholders
of TWA, voting together as a single class, except as otherwise required by
applicable law. In the event dividends payable on the Series A Preferred
Stock shall be in arrears in an amount equal to six quarterly payments, all
holders of the Series A Preferred Stock together with other holders of
preferred stock entitled to vote, shall, voting together as a single class be
entitled to elect one director to the Company's Board of Directors.
In the event that any person or group (an "Acquiring Person")
becomes the beneficial owner of at least 15% of the Company's Voting Stock,
then each Right (other than Rights beneficially owned by the Acquiring Person
and certain affiliated persons) will entitle the holder to elect to receive,
without payment of the Purchase Price, a number of shares of the Company's
Common Stock having a market value equal to the Purchase Price. The term
"Acquiring Person" does not include (i) the Company, any of its subsidiaries
or any employee benefit plan of the Company, except for any such employee
benefit plan acting in concert with a third party (other than another employee
benefit plan of the Company) or (ii) any person or group which becomes the
beneficial owner of at least 15% of the Voting Stock pursuant to a "Permitted
Offer" (as defined below).
"Permitted Offer" means a tender or exchange offer by a Person
for all outstanding shares of Voting Stock, which is made at a price and on
such other terms determined by at least a majority of the Continuing Directors
(as defined below) to be in the best interests of the Company and its
stockholders.
In the event that, after any person has become an Acquiring
Person, (i) the Company is involved in a merger or other business combination
in which the Company is not the surviving corporation or its Voting Stock is
exchanged for other securities or assets or (ii) the Company and/or one or
more of its subsidiaries sell or otherwise transfer assets or earning power
aggregating more than 50% of the assets or earning power of the Company and
its subsidiaries, taken as a whole, then each Right will entitle the holder to
purchase, for the Purchase Price, a number of shares of common stock of the
other party to such business combination or sale (or in certain circumstances,
an affiliate) having a market value of two times the Purchase Price.
At any time after any person has become an Acquiring Person
(but before any person becomes the beneficial owner of at least 50% of the
Voting Stock), a majority of the Company's Continuing Directors may exchange
all or part of the Rights (other than the Rights beneficially owned by the
Acquiring Person and certain affiliated persons) for shares of Common Stock at
an exchange ratio of one share of Common Stock per Right.
"Continuing Director" means (i) any member of the Board of
Directors who was a member of the Board prior to the time an Acquiring Person
becomes such or (ii) any person subsequently elected to the Board if he is
recommended or approved by a majority of the Continuing Directors or, in the
case of a successor to a director elected by holders of a series of Employee
Preferred Stock, if such person is elected pursuant to the applicable terms of
such Employee Preferred Stock. Continuing Directors do not include an
Acquiring Person, an affiliate or associate of an Acquiring Person or any
representative or nominee of the foregoing.
The Company may redeem the Rights, in whole but not in part, at
a price of $.01 per Right at any time prior to the close of business on the
tenth day after public announcement that any person has become an Acquiring
Person (subject to extension by a majority of the Continuing Directors).
After the Distribution Date, the Rights Agreement may be
amended in any respect that does not adversely affect the Rights holders
(other than any Acquiring Person and certain affiliated persons). In addition,
after any person has become an Acquiring Person, the Rights Agreement may be
amended only with the approval of a majority of the Continuing Directors.
Description of Employee Preferred Stock
Pursuant to the '95 Reorganization, the Company issued an
aggregate of 6,425,118 shares of Employee Preferred Stock to employee stock
trusts for the benefit of certain domestic employees of the Company then
represented by ALPA, IFFA and IAM pursuant to the terms of the '94 Labor
Agreements (collectively, the "Employee Stock Trusts"). The Employee Preferred
Stock was issued in three series designated ALPA Preferred Stock, IAM
Preferred Stock and IFFA Preferred Stock. Except for an exclusive right to
elect a certain number of directors to the Board of Directors and the
liquidation preference described below under "--Liquidation Preference and
Other Rights," the Employee Preferred Stock is the functional equivalent of
Common Stock. The Employee Preferred Stock is junior to the 1997 Preferred
Stock and the 8% Preferred Stock, as to the payment of dividends and the
distribution of assets upon Liquidation.
Dividends
Subject to the issuance by the Company of preferred stock with
senior rights (including the 1997 Preferred Stock and the 8% Preferred Stock),
the holders of the Employee Preferred Stock are entitled to receive, when, as
and if declared by the Board of Directors out of funds legally available
therefor, dividends payable in cash, stock or otherwise. No dividends may be
paid on the Common Stock unless an equivalent dividend is paid on the Employee
Preferred Stock, and no dividends may be paid on the Employee Preferred Stock
unless an equivalent dividend is paid on the Common Stock. It is not presently
anticipated that dividends will be paid on the Employee Preferred Stock in the
foreseeable future.
Liquidation Preference and Other Rights
Subject to the issuance by the Company of preferred stock with
senior rights (including the 1997 Preferred Stock and the 8% Preferred Stock),
upon any liquidation of the Company, holders of the Employee Preferred. Stock
will be entitled to a liquidation preference equal to $.01 per share from
TWA's net assets before any amounts are paid to, or on account of, the holders
of Common Stock, and thereafter the remaining net assets of the Company will
be distributed pro rata to the holders of the Employee Preferred Stock, the
Common Stock and other equity securities of the Company which rank on a parity
with such stock and with respect to such rights, all in accordance with their
respective rights and interests. The Employee Preferred Stock does not have
redemption rights.
Automatic Conversion
Each share of Employee Preferred Stock will automatically
convert into one share of Common Stock upon the withdrawal of such share of
Employee Preferred Stock from the Employee Stock Trust in which such share is
held.
Voting
So long as any shares of ALPA Preferred Stock are outstanding,
the holders of the ALPA Preferred Stock are entitled to one vote per share (i)
on each matter submitted to a vote at a meeting of stockholders other than the
election of directors and (ii) for the ALPA Director (defined below) to be
elected at an annual meeting of stockholders. Such holders have the exclusive
right to elect to the Board one director (the "ALPA Director"), which director
shall be a Class II director.
So long as any shares of IFFA Preferred Stock are outstanding,
the holders of the IFFA Preferred Stock are entitled to one vote per share (i)
on each matter submitted to a vote at a meeting of stockholders other than the
election of directors and (ii) for the IFFA Director (defined below) to be
elected at an annual meeting of stockholders. Such holders have the exclusive
right to elect to the Board one director (the "IFFA Director"), which director
shall be a Class II director.
So long as any shares of IAM Preferred Stock are outstanding,
the holders of the IAM Preferred Stock are entitled to one vote per share (i)
on each matter submitted to a vote at a meeting of stockholders other than the
election of directors and (ii) for the IAM Directors (defined below) to be
elected at an annual meeting of stockholders. Such holders have the exclusive
right to elect to the Board two directors (the "IAM Directors"), one of which
directors shall be a Class II director and one of which shall be a Class III
director.
Amendment
The Certificate of Designations, Preferences and Rights
relating to each series of Employee Preferred Stock may be amended only upon
the unanimous approval of the holders of the outstanding shares of such series
of Employee Preferred Stock.
Description of the 8% Preferred Stock
The 8% Preferred Stock ranks on a parity with the 1997
Preferred Stock and on a parity with all other Preferred Stock, the terms of
which expressly provide that it ranks on a parity with the 8% Preferred Stock
with respect to dividends and amounts payable upon Liquidation. The 8%
Preferred Stock ranks senior to the Common Stock, the Series A Preferred
Stock, if issued, and the Employee Preferred Stock with respect to payment of
dividends and amounts payable upon Liquidation.
Dividends
The holders of the 8% Preferred Stock are entitled to receive
cumulative cash dividends at the rate of 8% per annum (equivalent to $4.00 per
share per annum), when, as and if declared by the Board of Directors out of
funds legally available therefor. Dividends and liquidated damages, if any,
are payable quarterly in arrears on March 15, June 15, September 15 and
December 15 of each year (and, in the case of any accrued but unpaid
dividends, at such additional times and for such interim periods, if any, as
determined by the Board of Directors) to the holders of record on the record
dates, which shall be not more than 30 days nor less than 10 days preceding
the payment dates. Dividends on the 8% Preferred Stock commenced to accrue on
March 18, 1996
If dividends are not paid in full upon the 8% Preferred Stock
and any other preferred stock ranking on a parity as to dividends with the 8%
Preferred Stock, all dividends declared upon shares of 8% Preferred Stock and
such other preferred stock ranking on a parity as to dividends with the 8%
Preferred Stock will be declared pro rata so that in all cases the amount of
dividends declared per share on the 8% Preferred Stock and such other
preferred stock bear to each other the same ratio that accrued and unpaid
dividends per share on the shares of the 8% Preferred Stock and such other
preferred stock bear to each other. Except as set forth above, unless full
cumulative dividends or the 8% Preferred Stock have been paid and funds set
aside, and all liquidated damages, if any, paid, dividends (other than
dividends paid solely in Common Stock or other stock ranking junior as to
dividends and liquidation preference) may not be paid or declared and set
aside for payment and other distributions may not be made upon the Common
Stock or on any other stock of the Company ranking junior to or on a parity
with the 8% Preferred Stock as to dividends and liquidation preference. Under
such circumstances, such stock may not be redeemed, purchased, or otherwise
acquired for any consideration by the Company.
Conversion Rights
Each share of 8% Preferred Stock may be converted at any time
at the option of the holder, unless previously redeemed or exchanged, into
fully paid, nonassessable shares of Common Stock at an initial conversion
price of $20.269 per share of Common Stock (equivalent to a conversion rate of
approximately 2.467 shares of Common Stock for each share of 8% Preferred
Stock), subject to adjustments in certain circumstances. The right to convert
8% Preferred Stock called for redemption will expire at the close of business
on the fifth business day prior to the redemption date. Whenever the Company
issues shares of Common Stock upon conversion of 8% Preferred Stock, the
Company will, subject to certain conditions, issue, together with each share
of Common Stock, one Right, entitling the holder to purchase one one-hundredth
of a share of Series A Preferred Stock under certain circumstances.
No fractional shares of Common Stock will be issued upon
conversion but, in lieu thereof, an appropriate amount will be paid in cash
based on the closing price on the last trading day before the conversion date.
The conversion price is subject to adjustment upon the occurrence of certain
events.
Optional Redemption by the Company
The 8% Preferred Stock may not be redeemed prior to March 15,
1999. On or after March 15, 1999, the 8% Preferred Stock may be redeemed, in
whole or in part, at the option of the Company, at a redemption price of $52.80
in 1999 and at a redemption price decreasing by $0.40 increments each March 15
thereafter until 2006, from which time the redemption price shall be and
remain $50.00, in each case, plus accrued and unpaid dividends thereon to the
date fixed for redemption.
Liquidation Rights
Upon any Liquidation of the Company, and after provision is
made for any preferential amounts to which the holders of any senior preferred
stock may be entitled, holders of 8% Preferred Stock will be entitled to
receive from the Company's assets available for distribution to all
stockholders $50.00 per share plus all accrued and unpaid dividends through
the date of distribution or determination whether or not declared, and
liquidated damages, if any, before any distribution is made on the Employee
Preferred Stock or Common Stock, Series A Preferred Stock (if issued) or any
other capital stock ranking junior to the 8% Preferred Stock and will be
entitled to such amount on a parity with the 1997 Preferred Stock and every
other series of the Company's preferred stock that ranks on a parity with the
8% Preferred Stock in respect of distributions of assets upon Liquidation.
Neither a consolidation or merger of the Company with another corporation nor
a sale or transfer of all or substantially all of the Company's assets for
cash, securities or other property will be considered a liquidation,
dissolution or winding up of the Company for these purposes.
Voting Rights
Except as indicated below or otherwise required by law, holders
of 8% Preferred Stock have no voting rights. If at any time the equivalent of
six quarterly dividends payable on the 8% Preferred Stock are accrued and
unpaid, the holders of all outstanding shares of 8% Preferred Stock and any
stock ranking on a parity as to dividends with the shares of 8% Preferred
Stock and having similar voting rights then exercisable, voting separately as
a class without regard to series, will be entitled to elect at the next annual
or special meeting of the stockholders of the Company, two directors to serve
until all dividends accumulated and unpaid have been paid or declared and
funds set aside to provide for payment in full. In exercising any such vote,
each outstanding share of 8% Preferred Stock will be entitled to one vote,
excluding shares held by the Company or any entity controlled by the Company,
which shares shall have no vote.
Exchange Provisions
Provided that all accrued and unpaid dividends and liquidated
damages, if any, then owing on the 8% Preferred Stock have been paid, the 8%
Preferred Stock is exchangeable in whole, but not in part, at the Company's
option for the Company's 2006 Debentures on any dividend payment date,
beginning on March 15, 1998, at the rate of $50.00 principal amount thereof
for each share of 8% Preferred stock outstanding at the time of exchange. The
2006 Debentures are issuable in denominations of $1,000 and integral multiples
thereof. The 2006 Debentures, if issued, will be unsecured, subordinated
obligations of the Company and will mature on March 15, 2006. The 2006
Debentures are convertible into fully paid non assessable shares of Common
Stock and may be redeemed on and after March 15, 1999 at the option of the
Company.
Description of the 1997 Preferred Stock
The 1997 Preferred Stock ranks on a parity with the 8%
Preferred Stock and on a parity with all other Preferred Stock, the terms of
which expressly provide that it ranks on a parity with the 1997 Preferred
Stock with respect to dividends and amounts payable upon Liquidation. The 1997
Preferred Stock ranks senior to the Common Stock, the Series A Preferred
Stock, if issued, and the Employee Preferred Stock with respect to payment of
dividends and amounts payable upon Liquidation.
Dividends
The holders of the 1997 Preferred Stock are entitled to receive
cumulative cash dividends at the rate of 9 1/4% per annum (equivalent to
$4.625 per share per annum), when, as and if declared by the Board of
Directors out of funds legally available therefor. Dividends and liquidated
damages, if any, are payable quarterly in arrears on March 15, June 15,
September 15 and December 15 of each year (and, in the case of any accrued but
unpaid dividends, at such additional times and for such interim periods, if
any, as determined by the Board of Directors) to the holders of record on the
record dates, which shall be not more than 30 days nor less than 10 days
preceding the payment dates. Dividends on the 1997 Preferred Stock commenced
accruing on December 2, 1997.
If dividends are not paid in full upon the 1997 Preferred Stock
and any other preferred stock ranking on a parity as to dividends with the
1997 Preferred Stock, all dividends declared upon shares of 1997 Preferred
Stock and such other preferred stock ranking on a parity as to dividends with
the 1997 Preferred Stock will be declared pro rata so that in all cases the
amount of dividends declared per share on the 1997 Preferred Stock and such
other preferred stock bear to each other the same ratio that accrued and
unpaid dividends per share on the shares of the 1997 Preferred Stock and such
other preferred stock bear to each other. Except as set forth above, unless
full cumulative dividends or the 1997 Preferred Stock have been paid and funds
set aside, and all liquidated damages, if any, paid, dividends (other than
dividends paid solely in Common Stock or other stock ranking junior as to
dividends and liquidation preference) may not be paid or declared and set
aside for payment and other distributions may not be made upon the Common Stock
or on any other stock of the Company ranking junior to or on a parity with the
1997 Preferred Stock as to dividends and liquidation preference. Under such
circumstances, such stock may not be redeemed, purchased, or otherwise
acquired for any consideration by the Company.
Conversion Rights
Each share of 1997 Preferred Stock may be converted at any time
at the option of the holder, unless previously redeemed or exchanged, into
fully paid, nonassessable shares of Common Stock at an initial conversion
price of $7.90 per share of Common Stock (equivalent to a conversion rate of
approximately 6.329 shares of Common Stock for each share of 1997 Preferred
Stock), subject to adjustments in certain circumstances. The right to convert
1997 Preferred Stock called for redemption will expire at the close of
business on the second business day prior to the redemption date. Whenever the
Company issues shares of Common Stock upon conversion of 1997 Preferred Stock,
the Company will, subject to certain conditions, issue, together with each
share of Common Stock, one Right, entitling the holder to purchase one
one-hundredth of a share of Series A Preferred Stock under certain
circumstances.
No fractional shares of Common Stock will be issued upon
conversion but, in lieu thereof, an appropriate amount will be paid in cash
based on the closing price on the last trading day before the conversion date.
The conversion price is subject to adjustment upon the occurrence of certain
events.
Optional Redemption by the Company
The 1997 Preferred Stock may not be redeemed prior to December
15, 2000. On or after December 15, 2000, the 1997 Preferred Stock may be
redeemed, in whole or in part, at the option of the Company, at a redemption
price of $53.24 in 2000 and at a redemption price decreasing by approximately
$0.46 each December 15 thereafter until 2007, from which time the redemption
price shall be and remain $50.00, in each case, plus accrued and unpaid
dividends thereon to the date fixed for redemption.
Liquidation Rights
Upon any Liquidation of the Company, and after provision is
made for any preferential amounts to which the holders of any senior preferred
stock may be entitled, holders of 1997 Preferred Stock will be entitled to
receive from the Company's assets available for distribution to all
stockholders $50.00 per share plus all accrued and unpaid dividends through
the date of distribution or determination whether or not declared, and
liquidated damages, if any, before any distribution is made on the Employee
Preferred Stock or Common Stock, Series A Preferred Stock (if issued) or any
other capital stock ranking junior to the 1997 Preferred Stock and will be
entitled to such amount on a parity with the 8% Preferred Stock and every
other series of the Company's preferred stock that ranks on a parity with the
1997 Preferred Stock in respect of distributions of assets upon Liquidation.
Neither a consolidation or merger of the Company with another corporation nor
a sale or transfer of all or substantially all of the Company's assets for
cash, securities or other property will be considered a liquidation,
dissolution or winding up of the Company for these purposes.
Voting Rights
Except as indicated below or otherwise required by law, holders
of 1997 Preferred Stock have no voting rights. If at any time the equivalent
of six quarterly dividends payable on the 1997 Preferred Stock are accrued and
unpaid, the holders of all outstanding shares of 1997 Preferred Stock and any
stock ranking on a parity as to dividends with the shares of 1997 Preferred
Stock and having similar voting rights then exercisable, voting separately as
a class without regard to series, will be entitled to elect at the next annual
or special meeting of the stockholders of the Company, two directors to serve
until all dividends accumulated and unpaid have been paid or declared and
funds set aside to provide for payment in full. In exercising any such vote,
each outstanding share of 1997 Preferred Stock will be entitled to one vote,
excluding shares held by the Company or any entity controlled by the Company,
which shares shall have no vote.
Exchange Provisions
Provided that all accrued and unpaid dividends and liquidated
damages, if any, then owing on the 1997 Preferred Stock have been paid, the
1997 Preferred Stock is exchangeable in whole, but not in part, at the
Company's option for the 2007 Debentures on any dividend payment date,
beginning on December 15, 1999, at the rate of $50.00 principal amount thereof
for each share of 1997 Preferred Stock outstanding at the time of exchange.
The 2007 Debentures are issuable in denominations of $1,000 and integral
multiples thereof. The 2007 Debentures, if issued, will be unsecured,
subordinated obligations of the Company and will mature on December 15, 2007.
The 2007 Debentures are convertible into fully paid non assessable shares of
Common Stock and may be redeemed on and after December 15, 2000 at the option
of the Company.
CERTAIN PROVISIONS OF THE CERTIFICATE OF INCORPORATION,
THE BY-LAWS AND DELAWARE LAW
The Certificate of Incorporation and the By-laws contain
certain provisions that could make more difficult the acquisition of the
Company by means of a tender offer, a proxy contest or otherwise. These
provisions are expected to discourage certain types of coercive takeover
practices and inadequate takeover bids and to encourage persons seeking to
acquire control of the Company first to negotiate with the Company. The
Company believes that the benefits of increased protection of the Company's
potential ability to negotiate with the proponent of an unfriendly or
unsolicited proposal to acquire or restructure the Company outweigh the
disadvantages of discouraging such proposals because, among other things,
negotiation of such proposals could result in an improvement of their terms.
In addition, pursuant to the '95 Reorganization and in connection with the
adoption of the '94 Labor Agreements, the Company adopted certain amendments,
both to the Certificate of Incorporation and the By-laws, relating to
corporate governance matters. These amendments are designed to enhance the
input of the Company's union employees or the directors nominated by them in
the governance of the Company and to limit the ability to change the
provisions of the Certificate of Incorporation in general and the By-laws in
particular without broad support from the Company's voting stockholders. Such
provisions will also make it more difficult to enact any change in the By-laws
or to take any of the specified actions, if such changes or actions are
opposed by a substantial constituency, including the Company's employees who
are represented by organized labor. The description set forth below is
intended as a summary only and is qualified in its entirety by reference to
the Certificate of Incorporation and the By-laws.
Board of Directors
The Certificate of Incorporation and the By-laws provide that
the number of directors constituting the entire Board of Directors will be
fifteen. The By-laws also provide for the Board of Directors to be divided
into three classes consisting of five directors each, with the term of each
class expiring in a different year. Subject to any rights of holders of any
class or series of the Company's preferred stock, a majority of the remaining
directors then in office has the sole authority to fill any vacancies on the
Board of Directors, provided, however, that any vacancies arising during the
first or second term of a director will be filled by a nominee of the
remaining directors who were nominated by the same Original Nominating Entity
(as defined below) as the vacating director in accordance with the Certificate
of Incorporation. See "Business--Employees" and "Description of Capital
Stock--Description of Employee Preferred Stock." Any director elected to fill
a vacancy will hold office for the remainder of the full term of the class of
directors in which the vacancy occurred and until the director's successor is
elected and qualified. The Certificate of Incorporation provides that
directors may be removed only by the affirmative vote of at least a majority
of the voting power of all the then outstanding shares of stock entitled to
vote generally in the election of directors, voting together as a single
class. The affirmative vote of at least 80% of the Voting Stock, voting
together as a single class, is required to amend or repeal, or adopt any
provision inconsistent with, the provision of the Certificate of Incorporation
relating to the number, election and terms of directors.
"Original Nominating Entity" means, as applicable, each of the
management of the Company, ALPA, IAM and IFFA. Upon being certified to replace
IFFA as the bargaining representative for the Company's flight attendants, the
IAM became the nominating entity with respect to the director to be elected by
holders of the IFFA Preferred Stock.
Stockholder Actions and Special Meetings
The Certificate of Incorporation provides that stockholder
action can be taken only at an annual or special meeting of stockholders, and
prohibits, subject to the rights of holders of any class or series of the
Company's preferred stock to the contrary, stockholder action by written
consent in lieu of a meeting. The Certificate of Incorporation and By-laws
provide that, subject to the rights of holders of any series of preferred
stock, special meetings of stockholders can be called only by (i) the Chairman
of the Board of Directors of the Company, (ii) the Corporate Secretary of the
Company within ten calendar days after receipt of the written request of a
majority of the total number of directors that the Company would have if there
were no vacancies, and (iii) the Board of Directors after receipt by the
Company of a written request executed by the holders of at least 35% of the
outstanding Voting Stock of the Company, provided, however, that no separate
special meeting will be required to be convened if the Board of Directors
calls an annual or special meeting to be held no later than ninety (90)
calendar days after receiving the request for a meeting and the purposes of
such annual or special meeting of stockholders called by the Board of
Directors include the purposes specified in the request. Business permitted to
be conducted at a special meeting of stockholders is limited to the business
(x) specified in the notice of meeting given by or at the direction of the
chairman of the meeting or a majority of the entire Board of Directors or (y)
otherwise properly brought before the meeting by the chairman of the meeting
or at the direction of a majority of the entire Board of Directors. Moreover,
the chairman of the annual or special meeting of the stockholders will
determine whether any business sought to be brought before the meeting is
properly brought.
Pursuant to the Certificate of Incorporation, the By-laws
establish an advance notice procedure with regard to the nomination, other
than by or at the direction of the Board of Directors, of candidates for
election as directors and with regard to business to be brought before an
annual meeting of stockholders of the Company.
Amendment of the Certificate of Incorporation and By-laws
The Certificate of Incorporation contains provisions requiring
the affirmative vote of the holders of at least 80% of the Voting Stock,
voting together as a single class, to amend certain provisions of the
Certificate of Incorporation, primarily those related to anti-takeover
provisions. In addition, the Certificate of Incorporation requires the
affirmative vote of at least three-fourths of its issued and outstanding
Voting Stock, voting as a single class and not as separate classes, to amend
the By-laws by stockholder action. "Voting Stock" means the outstanding
shares of all classes and series of capital stock of the Company entitled to
vote generally in the election of directors of the Company and does not
include any class or series of preferred stock of the Company unless the
certificate of designations, preferences and rights for such class or series
specifically states that such class or series shall be deemed "Voting Stock"
for purposes of the Certificate of Incorporation. Employee Preferred Stock has
been deemed Voting Stock and the 1997 Preferred Stock and the 8% Preferred
Stock are not Voting Stock. See "Description of Capital Stock."
Blocking Coalition
Pursuant to the '94 Labor Agreements and in connection with the
'95 Reorganization, the Company amended the By-laws to provide that certain
actions (as set forth in the next paragraph) may not be approved by the Board
of Directors if votes are cast against such actions by directors sufficient to
constitute a "Blocking Coalition." A Blocking Coalition is defined as the
negative votes of (i) a total of the four directors elected by the holders of
the Employee Preferred Stock plus (ii) the negative votes of any two of the
Company's other directors.
Actions subject to disapproval by the Blocking Coalition
include: (a) any sale, transfer or disposition, in a single or series of
transactions, of at least 20% of the Company's assets, except for transactions
in the ordinary course of business including aircraft transactions as part of
a fleet management plan; (b) any merger of the Company into or with, or
consolidation of the Company with any other entity; (c) any business
combination within the meaning of Section 203 of the DGCL; (d) any dissolution
or liquidation of the Company; (e) any filing of a petition for bankruptcy,
reorganization or receivership under any state or federal bankruptcy,
reorganization or insolvency law; (f) any repurchase, retirement or redemption
of the Company's capital stock or other equity securities prior to their
scheduled maturity or expiration, except for redemptions out of the proceeds
of any substantially concurrent offering of comparable or junior securities
and mandatory redemptions of any redeemable preferred stock of the Company;
(g) any acquisition of assets, not related to the Company's current business
as an air carrier, in a single transaction or a series of related transactions
exceeding $50.0 million adjusted annually by the consumer price index; or (h)
any sale of the Company's capital stock or securities convertible into capital
stock of the Company to any person if (i) at the time of issuance or (ii)
assuming conversion of all outstanding securities of the Company convertible
into capital stock, such person or entity would beneficially own at least 20%
of the capital stock of the Company.
Super Majority Voting Provisions
At all times before September 1, 2000, the Company must obtain
the approval of at least two-thirds of the issued and outstanding Voting Stock
of the Company, voting as a single class and not as separate classes, for the
holders of such Voting Stock to approve certain actions, unless such matters
have been approved by a vote of at least 80% of the Board of Directors then in
office. Actions requiring such approval are the following: (i) any merger of
the Company into or with, or consolidation of the Company with, any other
entity; (ii) any business combination within the meaning of Section 203 of the
DGCL; (iii) any dissolution or liquidation of the Company; or (iv) any
repurchase, retirement or redemption of the Company's capital stock or other
equity securities prior to their scheduled maturity or expiration, except for
redemptions out of the proceeds of any substantially concurrent offering of
comparable or junior securities, and mandatory redemptions of any redeemable
preferred stock of the Company.
Preferred Stock
The Company believes that the ability of the Board of Directors
to issue one or more series of preferred stock of the Company provides TWA
with increased flexibility in structuring possible future financings and in
meeting other corporate needs that might arise. The authorized shares of
preferred stock, as well as shares of Common Stock, will be available for
issuance without further action by TWA's stockholders, unless such action is
required by applicable law or the rules of any stock exchange on which TWA
securities may be listed. If the approval of TWA's stockholders is not
required for the issuance of shares of preferred stock or Common Stock, the
Board of Directors does not intend to seek stockholder approval. Although the
Board of Directors has no intention of doing so, it could issue a series of
preferred stock that could, depending on the terms of such series, impede the
completion of a merger, tender offer or other takeover attempt. The Board of
Directors will make any determination to issue such shares based on its
judgment as to the best interests of TWA and its stockholders. The Board of
Directors, in so acting, could issue preferred stock having terms that could
discourage an acquisition attempt or other transaction that some, or a
majority, of the stockholders might believe to be in their best interests or
in which stockholders might receive a premium for their stock over the then
current market price of such stock.
Rights to Purchase Stock
The Rights are intended to protect TWA's stockholders from
certain non-negotiated takeover attempts which present the risk of a change of
control on terms which may be less favorable to TWA's stockholders than would
be available in a transaction negotiated with and approved by the Board of
Directors of the Company. Although there can be no certainty as to the results
of any particular negotiation, the Board of Directors believes that the
interests of the stockholders are best served if any acquisition of TWA or a
substantial percentage of the Common Stock results from arms-length
negotiations and reflects the Board's or stockholders' careful consideration
of the proposed terms of a transaction. In particular, the Rights are intended
to help (a) reduce the risk of coercive, two-tiered, front-end loaded or
partial offers which may not offer fair value to all stockholders, (b)
mitigate against market accumulators who through open market or private
purchases may achieve a position of substantial influence or control without
paying to selling or remaining stockholders a fair control premium, and (c)
deter market accumulators who are simply interested in putting a company "in
play". See "Description of Capital Stock--Rights Plan."
Anti-Takeover Statute
Section 203 of the DGCL is applicable to corporate takeovers in
Delaware. Subject to certain exceptions set forth therein, Section 203 of the
DGCL provides that a corporation shall not engage in any business combination
with any "interested stockholder" for a three-year period following the date
that such stockholder becomes an interested stockholder unless (a) prior to
such date, the board of directors of the corporation approved either the
business combination or the transaction which resulted in the stockholder
becoming an interested stockholder, (b) upon consummation of the transaction
which resulted in the stockholder becoming an interested stockholder, the
interested stockholder owned at least 85% of the voting stock of the
corporation outstanding at the time the transaction commenced (excluding
certain shares) or (c) on or subsequent to such date, the business combination
is approved by the board of directors of the corporation and by the
affirmative vote of at least 662/3% of the outstanding voting stock which is
not owned by the interested stockholder. Except as specified therein, an
interested stockholder is defined to include any person that is the owner of
15% or more of the outstanding voting stock of the corporation, or is an
affiliate or associate of the corporation and was the owner of 15% or more of
the outstanding voting stock of the corporation, at any time within three
years immediately prior to the relevant date, and the affiliates and
associates of such person. Under certain circumstances, Section 203 of the
DGCL makes it more difficult for an "interested stockholder" to effect various
business combinations with a corporation for a three-year period, although the
stockholders may, by adopting an amendment to the corporation's certificate of
incorporation or by-laws, elect not to be governed by this section, effective
twelve months after adoption. The Certificate of Incorporation and the By-laws
do not exclude TWA from the restrictions imposed under Section 203 of the
DGCL, but do provide that a business combination within the meaning of Section
203 of the DGCL (i) may be approved without the approval of at least 662/3% of
the Voting Stock if the business combination is approved by at least 80% of
the directors then in office and (ii) may not be approved if votes are cast
against the action by the Blocking Coalition. It is anticipated that the
provisions of Section 203 of the DGCL and the provisions of the Certificate of
Incorporation may encourage companies interested in acquiring TWA to negotiate
in advance with the Board of Directors of TWA since the stockholder approval
requirement would be avoided if 80% of the directors then in office approve
either the business combination or the transaction which resulted in the
stockholder becoming an interested stockholder.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following is a general discussion of material United States
federal income tax considerations applicable to the initial holders of the Old
Notes who purchased the Old Notes at their "issue price," that is, the first
price at which a substantial amount of the Old Notes is sold for money to the
public (not including bond houses, brokers or similar persons or organizations
acting in the capacity of underwriters, placement agents or wholesalers). This
summary is based upon provisions of the Internal Revenue Code of 1986, as
amended (the "Code"), regulations, rulings and decisions currently in effect,
all of which are subject to change (possibly with retroactive effect). The
discussion does not purport to deal with all aspects of the United States
federal taxation that may be relevant to particular investors in light of
their particular circumstances (for example, to persons holding Notes as part
of a conversion transaction or as part of a hedge or hedging transaction, or
as a position in a straddle for tax purposes), nor does it discuss the United
States federal income tax considerations applicable to certain types of
investors subject to special treatment under the federal income tax laws (for
example, insurance companies, tax-exempt organizations, financial institutions
and persons who are not United States Holders or United States Alien Holders
(each as defined below)). In addition, the discussion does not consider the
effect of any foreign, state, local or other tax laws that may be applicable
to a particular investor. The discussion assumes that investors hold the Notes
as "capital assets" within the meaning of Section 1221 of the Code. The
Company intends to treat the Notes as indebtedness and not as equity for
United States federal income tax purposes, and the United States federal
income tax considerations described below are based on that characterization.
Such treatment, however, is not binding on the Internal Revenue Service (or
the courts), and there can be no assurance that the Internal Revenue Service
would not argue (or that a court would not hold) that the Notes should be
treated as equity for federal income tax purposes.
Prospective investors considering the Exchange Offer should
consult their tax advisors with regard to the application of the United States
federal income tax laws to their particular situations as well as any tax
consequences arising under the laws of any state, local or foreign taxing
jurisdiction.
As used herein, the term "United States Holder" means an owner
of a Note that is, for United States federal income tax purposes, (i) a
citizen or resident of the United States, (ii) a corporation created or
organized in or under the laws of the United States or of any political
subdivision thereof, or (iii) an estate or trust the income of which is
subject to United States federal income taxation regardless of its source. The
term also includes certain former citizens and certain former long-term
residents of the United States.
As used herein, the term "United States Alien Holder" means an
owner of a Note that is, for United States federal income tax purposes, (i) a
nonresident alien individual, (ii) a foreign corporation, (iii) a nonresident
alien fiduciary of a foreign estate or trust or (iv) a foreign partnership one
or more of the members of which is, for United States federal income tax
purposes, a nonresident alien individual, a foreign corporation or a
nonresident alien fiduciary of a foreign estate or trust.
Tax Consequences to United States Holders
Exchange Offer
The exchange of the Old Notes for Exchange Notes pursuant to
the Exchange Offer will not result in any United States federal income tax
consequences to the United States Holders. When a United States Holder
exchanges an Old Note for an Exchange Note pursuant to the Exchange Offer, the
Holder will have the same adjusted tax basis and holding period in the
Exchange Note as in the Old Note immediately before the exchange.
Interest on a Note
The Old Notes were not issued with original issue discount for
United States federal income tax purposes. Accordingly, interest and Special
Interest, if any, on a Note will generally be taxable to a United States
Holder as ordinary interest income at the time it accrues or is received in
accordance with the United States Holder's method of accounting for United
States federal income tax purposes.
Sale or Retirement of a Note
Upon the sale or retirement of a Note, a United States Holder
will recognize taxable gain or loss equal to the difference between the amount
realized on the sale or retirement and such Holder's adjusted tax basis in the
Note.
Backup Withholding and Information Reporting
Certain noncorporate United States Holders may be subject to
backup withholding at a rate of 31% on payments of principal, premium and
interest (including Special Interest and/or original issue discount, if any)
on, and the proceeds of disposition of, a Note. Backup withholding will apply
only if the United States Holder (i) fails to furnish its Taxpayer
Identification Number ("TIN") which, for an individual, would be his Social
Security number, (ii) furnishes an incorrect TIN, (iii) is notified by the
Internal Revenue Service that it has failed to properly report payments of
interest or dividends or (iv) under certain circumstances, fails to certify,
under penalties 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 for failure to report interest and dividend payments. United
States Holders should consult their tax advisors regarding their qualification
for exemption from backup withholding and the procedure for obtaining such an
exemption if applicable.
The amount of any backup withholding from a payment to a United
States Holder will be allowed as a credit against such Holder's United States
federal income tax liability and may entitle such Holder to a refund, provided
that the required information is furnished to the Internal Revenue Service.
Tax Consequences to United States Alien Holders
Under present United States federal law, and subject to the
discussion below concerning backup withholding, payments of principal,
interest (including Special Interest, if any) and premium on the Notes by the
Company or any paying agent to any United States Alien Holder, and gain
realized on the sale, exchange or other disposition of such Note, will not be
subject to United States federal income or withholding tax, provided that: (i)
such Holder does not own, actually or constructively, 10 percent or more of
the total combined voting power of all classes of stock of the Company
entitled to vote, is not a controlled foreign corporation related, directly or
indirectly, to the Company through stock ownership, and is not a bank
receiving interest described in Section 881(c)(3)(A) of the Code; (ii) the
statement requirement set forth in Section 871(h) or Section 881(c) of the
Code has been fulfilled with respect to the beneficial owner, as discussed
below; (iii) such Holder is not an individual who is present in the United
States for 183 days or more in the taxable year of disposition, or such
individual does not have a "tax home" (as defined in Section 911(d)(3) of the
Code) or an office or other fixed place of business in the United States; and
(iv) such payments and gain are not effectively connected with the conduct by
such Holder of a trade or business in the United States.
As noted above, the Company intends to treat the Notes as
indebtedness for United States federal income tax purposes. No assurance can
be given, however, that Company's treatment will not be challenged by the
Internal Revenue Service. If the Notes were ultimately treated as equity
rather than debt for United States federal income tax purposes, the portfolio
interest exception would not apply and withholding tax at a flat rate of 30%
(or a lower rate under an applicable income tax treaty) would be imposed on
the payments of interest and Special Interest, if any, on Notes to the extent
of the Company's current or accumulated earnings and profits or on the entire
amounts of the payments if the withholding agent does not know or cannot
reasonably estimate the amount of such earnings and profits. Further, any such
withholding could commence when the Internal Revenue Service first asserted
that the Notes constituted equity; in such event, if the Internal Revenue
Service did not ultimately prevail, the United States Alien Holders would be
able to recover the tax withheld by filing a claim for refund with the
Internal Revenue Service.
Certain Certification Requirements
Sections 871(h) and 881(c) of the Code require that, in order
to obtain the portfolio interest exemption from the withholding tax described
in the paragraphs above, either the beneficial owner of the Note, or a
securities clearing organization, bank or other financial institution that
holds customers' securities in the ordinary course of its trade or business (a
"Financial Institution") and that is holding the Note on behalf of such
beneficial owner, file a statement with the withholding agent to the effect
that the beneficial owner of the Note is not a United States Holder. Under
current United States Treasury Regulations, such requirement will be fulfilled
if the beneficial owner of a Note certifies on Internal Revenue Service Form
W-8, under penalties of perjury, that it is not a United States Holder and
provides its name and address, and any Financial Institution holding the Note
on behalf of the beneficial owner files a statement with the withholding agent
to the effect that it has received such a statement from the Holder (and
furnishes the withholding agent with a copy thereof). Under recently finalized
United States Treasury Regulations, which are generally applicable to payments
made after December 31, 1998, certain United States Alien Holders would also
need to provide their United States taxpayer identification numbers on such
forms in order to fulfill such requirement.
If a United States Alien Holder of a Note is engaged in a
trade or business in the United States, and if interest on the Note is
effectively connected with the conduct of such trade or business, the United
States Alien Holder, although exempt from the withholding tax discussed in the
preceding paragraphs, will generally be subject to regular United States
income tax on interest and on any gain realized on the sale, exchange or other
disposition of a Note in the same manner as if it were a United States Holder.
In lieu of the certificate described in the preceding paragraph, such a Holder
will be required to provide to the withholding agent a properly executed
Internal Revenue Service Form 4224 (or the successor W-8 Form), in order to
claim an exemption from withholding tax. Under recently finalized United States
Treasury Regulations, a United States Alien Holder may also need to provide a
United States taxpayer identification number on such form in order to fulfill
such requirement. In addition, if such United States Alien Holder is a foreign
corporation, it may be subject to a branch profits tax equal to 30% (or such
lower rate provided by an applicable treaty) of its effectively connected
earnings and profits for the taxable year, subject to certain adjustments. For
purposes of the branch profits tax, interest on and any gain recognized on the
sale, exchange or other disposition of a Note will be included in the
effectively connected earnings and profits of such United States Alien Holder
if such interest or gain, as the case may be, is effectively connected with
the conduct by the United States Alien Holder of a trade or business in the
United States.
Estate Taxes
Under Section 2105(b) of the Code, a Note held by an
individual who is not a citizen or resident of the United States at the time
of his death will not be subject to United States federal estate tax as a
result of such individual's death, provided that the individual does not own,
actually or constructively, 10 percent or more of the total combined voting
power of all classes of stock of the Company entitled to vote and, at the time
of such individual's death, payments with respect to such Note would not have
been effectively connected to the conduct by such individual of a trade or
business in the United States.
As noted above, the Company intends to treat the Notes as
indebtedness for United States federal income tax purposes. No assurance can
be given, however, that the Company's treatment will not be challenged by the
Internal Revenue Service. If the Notes were ultimately treated as equity
rather than debt for United States federal income tax purposes, a United
States Alien Holder who is treated as the owner of, or has made certain
lifetime transfers of, an interest in the Notes will be required to include
the value thereof in his or her gross estate for United States federal estate
tax purposes, and may be subject to United States federal estate tax unless an
applicable estate tax treaty provides otherwise.
Backup Withholding and Information Reporting
Under current Treasury Regulations, backup withholding (31%)
will not apply to payments by the Company made on a Note if the certifications
required by Sections 871(h) and 881(c) of the Code are received, provided in
each case that the Company or such paying agent, as the case may be, does not
have actual knowledge that the payee is a United States person.
Under current Treasury Regulations, payments on the sale,
exchange or other disposition of a Note made to or through a foreign office of
a broker generally will not be subject to backup withholding. However, if such
broker is a United States person, a controlled foreign corporation for United
States tax purposes, a foreign person 50 percent or more of whose gross income
is effectively connected with a United States trade or business for a
specified three-year period or another United States related person described
in Section 1.6049-5(c)(5) of the Treasury Regulations, information reporting
will be required unless the broker has in its records documentary evidence
that the beneficial owner is not a United States person and certain other
conditions are met or the beneficial owner otherwise establishes an exemption.
Under recently finalized Treasury Regulations, backup withholding may apply to
any payment made after December 31, 1998 which such broker is required to
report if such broker has actual knowledge that the payee is a United States
person. Payments to or through the United States office of a broker will be
subject to backup withholding and information reporting unless the Holder
certifies, under penalties of perjury, that it is not a United States person
or otherwise establishes an exemption.
United States Alien Holders of Notes should consult their tax
advisors regarding the application of information reporting and backup
withholding in their particular situations, the availability of an exemption
therefrom, and the procedure for obtaining such an exemption, if available.
Any amounts withheld from a payment to a United States Alien Holder under the
backup withholding rules will be allowed as a credit against such Holder's
United States federal income tax liability and may entitle such Holder to a
refund, provided that the required information is furnished to the Internal
Revenue Service.
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Notes for its own
account ("Participating Broker-Dealer") pursuant to the Exchange Offer must
acknowledge that it will deliver a prospectus in connection with any resale of
such Exchange Notes. This Prospectus, as it may be amended or supplemented
from time to time, may be used by a Participating Broker-Dealer in connection
with resales of Exchange Notes received in exchange for Old Notes where such
Old Notes were acquired as a result of market-making activities or other
trading activities. The Company has agreed that, for a period of 180 days
after the Expiration Date, it will make this Prospectus, as amended or
supplemented, available to any Participating Broker-Dealer for use in
connection with any such resale. In addition, until , 1998
(90 days after the date of this Prospectus), all dealers effecting
transactions in the Exchange Notes may be required to deliver a prospectus.
The Company will not receive any proceeds from any sale of
Exchange Notes by Participating Broker-Dealers. Exchange Notes received by
Participating Broker-Dealers for their own account pursuant to the Exchange
Offer may be sold from time to time in one or more transactions in the
over-the-counter market, in negotiated transactions, through the writing of
options on the Exchange Notes or a combination of such methods of resale, at
market prices prevailing at the time of resale, at prices related to such
prevailing market prices or negotiated prices. Any such resale may be made
directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
Participating Broker-Dealer or the purchasers of any such Exchange Notes. Any
Participating Broker-Dealer that resells Exchange Notes that were received by
it for its own account pursuant to the Exchange Offer and any broker or dealer
that participates in a distribution of such Exchange Notes may be deemed to be
an "underwriter" within the meaning of the Securities Act and any profit on
any such resale of Exchange Notes and any commission or concessions received
by any such persons may be deemed to be underwriting compensation under the
Securities Act. The Letter of Transmittal states that, by acknowledging that
it will deliver and by delivering a prospectus, a Participating Broker-Dealer
will not be deemed to admit that it is an "underwriter" within the meaning of
the Securities Act.
For a period of 180 days after the Expiration Date the Company
will promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any Participating Broker-Dealer that requests
such documents in the Letter of Transmittal. The Company has agreed to pay all
expenses incident to the Exchange Offer (including the reasonable expenses of
one counsel for the holders of the Notes) other than commissions or concessions
of any brokers or dealers and will indemnify the holders of the Notes
(including any broker-dealers) against certain liabilities, including
liabilities under the Securities Act.
LEGAL MATTERS
The validity of the Exchange Notes offered hereby will be
passed upon for the Company by Davis Polk & Wardwell, New York, New York.
EXPERTS
The consolidated financial statements of the Company as of
December 31, 1996 and 1997 and for each of the periods in the three year
periods ended December 31, 1997 included in this Prospectus, have been audited
by KPMG Peat Marwick LLP, independent auditors, as set forth in their report
appearing herein and are included in reliance upon the report of such firm
given and upon their authority as experts in accounting and auditing. The
report of KPMG Peat Marwick LLP refers to the application of fresh start
reporting in connection with the '95 Reorganization. See the Consolidated
Financial Statements.
TRANS WORLD AIRLINES, INC. AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS
Page No.
--------
Financial Statements:
Independent Auditors' Report.........................................F-2
Statements of Consolidated Operations for the Years Ended
December 31, 1997 and 1996, the Four Months Ended
December 31, 1995, and the Eight Months Ended August
31, 1995........................................................F-3
Consolidated Balance Sheets, December 31, 1997 and 1996..............F-4
Statements of Consolidated Cash Flows for the Years Ended
December 31, 1997 and 1996, the Four Months Ended
December 31, 1995, and the Eight Months Ended August
31, 1995........................................................F-6
Consolidated Statements of Shareholders' Equity
(Deficiency) for the Years Ended December 31, 1997
and 1996, the Four Months Ended December 31, 1995,
and the Eight Months Ended August 31,
1995............................................................F-8
Notes to Consolidated Financial Statements...........................F-9
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Trans World Airlines, Inc.
We have audited the accompanying consolidated balance sheets of
Trans World Airlines, Inc. and subsidiaries as of December 31, 1997 and 1996,
and the related statements of consolidated operations, cash flows and
shareholders' equity (deficiency) for the years ended December 31, 1997 and
1996, the four months ended December 31, 1995 and the eight months ended
August 31, 1995. 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
Trans World Airlines, Inc. and subsidiaries as of December 31, 1997 and 1996,
and the results of their operations and their cash flows for the years ended
December 31, 1997 and 1996, the four months ended December 31, 1995 and the
eight months ended August 31, 1995, in conformity with generally accepted
accounting principles.
As discussed in Note 3 to the consolidated financial
statements, the consolidated financial statements reflect the application of
fresh start reporting as of September 1, 1995 and, therefore, are not
comparable in all respects to the consolidated financial statements for
periods prior to such date.
KPMG PEAT MARWICK LLP
Kansas City, Missouri
March 4, 1998
TRANS WORLD AIRLINES, INC. AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED OPERATIONS
For the Years Ended December 31, 1997 and 1996, the Four Months
Ended December 31, 1995
and the Eight Months Ended August 31, 1995
(Amounts in Thousands Except Per Share Amounts)
<TABLE>
<CAPTION>
Predecessor
Reorganized Company Company
----------------------------------------------- ----------------
Year Year Four Months Eight Months
Ended Ended Ended Ended
December 31, December 31, December 31, August 31,
1997 1996 1995 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Operating revenues:
Passenger.................................................. $ 2,924,042 $ 3,077,905 $ 943,077 $ 1,929,166
Freight and mail........................................... 126,730 153,076 48,384 94,784
All other.................................................. 277,180 323,426 107,013 194,405
------------ ------------ ------------ ------------
Total.................................................... 3,327,952 3,554,407 1,098,474 2,218,355
------------ ------------ ------------ ------------
Operating expenses:
Salaries, wages and benefits............................... 1,224,116 1,254,341 373,041 755,708
Earned stock compensation (Note 12)........................ 4,199 9,056 2,192 55,767
Aircraft fuel and oil...................................... 480,853 585,163 161,799 296,833
Passenger sales commissions................................ 242,135 268,131 80,045 185,981
Aircraft maintenance materials and repairs................. 138,353 208,183 51,998 95,657
Depreciation and amortization.............................. 150,381 161,822 55,168 106,474
Operating lease rentals.................................... 370,827 302,990 96,393 182,548
Passenger food and beverages............................... 83,241 110,092 34,676 68,137
Special charges (Note 16).................................. -- 85,915 -- 1,730
All other.................................................. 663,107 767,241 232,716 454,878
------------ ------------ ------------ ------------
Total.................................................... 3,357,212 3,752,934 1,088,028 2,203,713
------------ ------------ ------------ ------------
Operating income (loss)..................................... (29,260) (198,527) 10,446 14,642
------------ ------------ ------------ ------------
Other charges (credits):
Interest expense (contractual interest of $141,967 for the
eight months ended August 31, 1995)..................... 114,066 126,822 45,917 123,247
Interest and investment income............................. (12,555) (21,309) (7,484) (10,366)
Disposition of assets, gains and losses - net (Note 15).... (16,004) 1,135 (3,330) 206
Reorganization items (Note 19)............................. -- -- -- 242,243
Other charges and credits - net (Note 17).................. (25,432) (30,598) 7,611 (2,379)
------------ ------------ ------------ ------------
Total.................................................... 60,075 76,050 42,714 352,951
------------ ------------ ------------ ------------
Income (loss) before income taxes and extraordinary items.. (89,335) (274,577) (32,268) (338,309)
Provision (credit) for income taxes (Note 5)............... 527 450 1,370 (96)
------------ ------------ ------------ ------------
Loss before extraordinary items............................ (89,862) (275,027) (33,638) (338,213)
Extraordinary items, net of income taxes (Note 14)......... (20,973) (9,788) 3,500 140,898
------------ ------------ ------------ ------------
Net loss................................................... (110,835) (284,815) (30,138) (197,315)
Preferred stock dividend requirements...................... 16,119 36,649 4,751 11,554
------------ ------------ ------------ ------------
Loss applicable to common shares........................... $ (126,954) $ (321,464) $ (34,889) $ (208,869)
============ ============ ============ ============
Per share amounts:
Loss before extraordinary item and special dividend
requirement.............................................. $ (1.98) $ (6.60) $ (1.15)
Extraordinary item and special dividend requirement........ (0.39) (0.67) 0.10
------------ ------------ ------------
Net loss................................................... $ (2.37) $ (7.27) $ (1.05)
============ ============ ============
</TABLE>
See notes to consolidated financial statements
TRANS WORLD AIRLINES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 1997 and 1996
(Amounts in Thousands)
ASSETS
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents.................................................... $ 237,765 $ 181,586
Receivables, less allowance for doubtful accounts, $9,334 in 1997 and
$12,939 in 1996 (Note 8).................................................... 176,333 239,496
Spare parts, materials and supplies, less allowance for obsolescence,
$19,176 in 1997 and $29,463 in 1996 (Note 8)................................ 96,108 111,239
Prepaid expenses and other................................................... 122,751 93,424
------------ ------------
Total............................................................... 632,957 625,745
------------ ------------
Property (Notes 8, 9 & 18):
Property owned:
Flight equipment.......................................................... 569,063 339,150
Prepayments on flight equipment........................................... 15,431 39,072
Land, buildings and improvements.......................................... 62,854 59,879
Other property and equipment.............................................. 64,131 60,750
------------ ------------
Total owned property................................................ 711,479 498,851
Less accumulated depreciation............................................. 114,921 71,810
------------ ------------
Property owned - net................................................ 596,558 427,041
------------ ------------
Property held under capital leases:
Flight equipment.......................................................... 166,358 172,812
Land, buildings and improvements.......................................... 49,443 54,761
Other property and equipment.............................................. 7,704 6,570
------------ ------------
Total property held under capital leases............................ 223,505 234,143
Less accumulated amortization............................................. 78,298 46,977
------------ ------------
Property held under capital leases - net ........................... 145,207 187,166
------------ ------------
Total property - net................................................ 741,765 614,207
------------ ------------
Investments and other assets:
Investments in affiliated companies (Note 4)................................. 117,293 108,173
Investments, receivables and other (Note 9).................................. 162,969 149,028
Routes, gates and slots - net................................................ 377,691 401,659
Reorganization value in excess of amounts allocable to
identifiable assets - net................................................... 741,173 783,127
------------ ------------
Total............................................................... 1,399,126 1,441,987
------------ ------------
$ 2,773,848 $ 2,681,939
============ ============
</TABLE>
See notes to consolidated financial statements
TRANS WORLD AIRLINES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 1997 and 1996
(Amounts in Thousands Except Per Share Amounts)
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
1997 1996
------------- ------------
<S> <C> <C>
Current liabilities:
Current maturities of long-term debt (Note 8)................................... $ 51,392 $ 92,447
Current obligations under capital leases (Note 9)............................... 37,068 42,501
Advance ticket sales............................................................ 223,197 241,516
Accounts payable, principally trade............................................. 250,551 216,675
Accounts payable to affiliated companies (Note 4)...................... 6,261 4,894
Accrued expenses:
Employee compensation and vacations earned.................................... 119,572 116,846
Contributions to retirement and pension trusts (Note 6) ...................... 13,469 14,091
Interest on debt and capital leases........................................... 32,018 39,420
Taxes......................................................................... 14,146 19,018
Other accrued expenses........................................................ 189,271 174,753
------------- ------------
Total accrued expenses...................................................... 368,476 364,128
------------- ------------
Total....................................................................... 936,945 962,161
------------- ------------
Long-term liabilities and deferred credits:
Long-term debt, less current maturities (Note 8)................................ 736,540 608,485
Obligations under capital leases, less current obligations (Note 9)............. 182,922 220,790
Postretirement benefits other than pensions (Note 6)............................ 485,787 471,171
Noncurrent pension liabilities (Note 6)......................................... 30,011 30,716
Other noncurrent liabilities and deferred credits............................... 133,359 150,511
------------- ------------
Total....................................................................... 1,568,619 1,481,673
------------- ------------
Commitments and Contingent Liabilities
(Notes 1, 2, 3, 6, 7, 8, 9, 11, 12, 16, & 18)
Shareholders' equity:
8% cumulative convertible exchangeable preferred stock, $50 liquidation
preference; 3,869 shares issued and outstanding ............................... 39 39
9 1/4% cumulative convertible exchangeable preferred stock, $50 liquidation
preference; 1,725 shares issued and outstanding ................................ 17 --
Employee preferred stock, $0.01 liquidation preference; special voting rights;
shares issued and outstanding: 1997-6,472; 1996-5,681........................... 65 57
Common stock, $0.01 par value; shares issued and outstanding: 1997-51,393;
1996-41,763..................................................................... 514 418
Additional paid-in capital......................................................... 693,437 552,544
Accumulated deficit ............................................................... (425,788) (314,953)
------------- ------------
Total....................................................................... 268,284 238,105
------------- ------------
$ 2,773,848 $ 2,681,939
============= ============
</TABLE>
TRANS WORLD AIRLINES, INC. AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
For the Years Ended December 31, 1997 and 1996, the Four Months
Ended December 31, 1995
and the Eight Months Ended August 31, 1995
(Amounts in Thousands)
<TABLE>
<CAPTION>
Reorganized Company
---------------------------------------------
Year Year Four Months
Ended Ended Ended
December 31, December 31, December 31,
1997 1996 1995
------------- ------------ ------------
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net loss........................................................... $(110,835) $(284,815) $(30,138)
Adjustments to reconcile net loss to net cash provided (used) by
operating activities:
Employee earned stock compensation............................... 4,199 9,056 2,192
Depreciation and amortization ................................... 150,381 161,822 55,168
Amortization of discount and expenses on debt ................... 14,461 14,744 3,063
Extraordinary loss (gain) on extinguishment of debt.............. 20,973 9,788 (3,500)
Interest paid in common stock.................................... 4,125 11,332 11,587
Equity in undistributed earnings of affiliates not consolidated.. (9,404) (10,017) 12,169
Revenue from Icahn ticket program................................ (115,991) (71,534) (4,356)
Net gains-losses on disposition of assets ....................... (16,004) 1,135 (3,330)
Non-cash special charges......................................... -- 85,915 --
Reorganization items ............................................ -- -- --
Change in operating assets and liabilities:
Decrease (increase) in:
Receivables.................................................... 65,336 3,927 69,121
Inventories.................................................... 13,496 (4,897) 510
Prepaid expenses and other current assets...................... (9,227) (28,288) 23,241
Other assets .................................................. (10,910) 111 (3,088)
Increase (decrease) in:
Accounts payable and accrued expenses ......................... 42,480 83,840 (41,989)
Advance ticket sales........................................... (41,301) 19,698 (39,350)
Benefits, other noncurrent liabilities and deferred credits.... (1,541) (7,505) (6,387)
--------- --------- --------
Net cash provided (used) ................................... 238 (5,688) 44,913
--------- --------- --------
Cash Flows from Investing Activities:
Proceeds from sales of property ............................... 22,749 3,234 7,069
Capital expenditures........................................... (74,025) (121,547) (42,973)
Return of pre-delivery deposits related to leased aircraft..... 5,565 -- --
Net decrease (increase) in investments, receivables and other.. (10,553) 10,941 842
--------- --------- ---------
Net cash provided (used).................................... (56,264) (107,372) (35,062)
--------- --------- ---------
Cash Flows from Financing Activities:
Proceeds from long-term debt issued............................ 270,608 2,750 22,100
Proceeds from warrants issued ................................. 7,076 -- --
Proceeds from sale and leaseback of certain aircraft........... 17,600 13,800 --
Repayments on long-term debt and capital lease obligations..... (257,838) (117,203) (39,654)
Refund from retirement of 1967 bonds........................... 5,318 -- --
Net proceeds from sale of preferred stock...................... 82,231 186,163 --
Net proceeds from exercise of equity rights
warrants and options........................................ 2,686 1,034 51,930
Redemption of 12% Preferred Stock ............................. -- (81,749) --
Cash dividends paid on preferred stock......................... (15,476) (14,489) --
--------- --------- --------
Net cash provided (used).................................... 112,205 (9,694) 34,376
--------- --------- ---------
Net increase (decrease) in cash and cash equivalents................ 56,179 (122,754) 44,227
Cash and cash equivalents at beginning of period.................... 181,586 304,340 260,113
--------- --------- --------
Cash and cash equivalents at end of period.......................... $ 237,765 $ 181,586 $ 304,340
========= ========= =========
<CAPTION>
Predecessor
Company
--------------
Eight Months
Ended
August 31,
1995
-------------
<S> <C>
Cash Flows from Operating Activities:
Net loss........................................................... $(197,315)
Adjustments to reconcile net loss to net cash provided (used) by
operating activities:
Employee earned stock compensation............................... 55,767
Depreciation and amortization ................................... 106,474
Amortization of discount and expenses on debt ................... 12,472
Extraordinary loss (gain) on extinguishment of debt.............. (140,898)
Interest paid in common stock.................................... --
Equity in undistributed earnings of affiliates not consolidated.. (2,339)
Revenue from Icahn ticket program................................ --
Net gains-losses on disposition of assets ....................... 206
Non-cash special charges......................................... --
Reorganization items ............................................ 242,243
Change in operating assets and liabilities:
Decrease (increase) in:
Receivables.................................................... (62,094)
Inventories.................................................... 5,866
Prepaid expenses and other current assets...................... (8,894)
Other assets .................................................. (1,586)
Increase (decrease) in:
Accounts payable and accrued expenses ......................... 108,669
Advance ticket sales........................................... 81,598
Benefits, other noncurrent liabilities and deferred credits.... (28,160)
---------
Net cash provided (used) ................................... 172,009
---------
Cash Flows from Investing Activities:
Proceeds from sales of property ............................... 2,221
Capital expenditures........................................... (16,554)
Return of pre-delivery deposits related to leased aircraft..... --
Net decrease (increase) in investments, receivables and other.. 26,064
---------
Net cash provided (used).................................... 11,731
---------
Cash Flows from Financing Activities:
Proceeds from long-term debt issued............................ --
Proceeds from warrants issued ................................. --
Proceeds from sale and leaseback of certain aircraft........... --
Repayments on long-term debt and capital lease obligations..... (62,158)
Refund from retirement of 1967 bonds........................... --
Net proceeds from sale of preferred stock...................... --
Net proceeds from exercise of equity rights
warrants and options........................................ --
Redemption of 12% Preferred Stock ............................. --
Cash dividends paid on preferred stock......................... --
---------
Net cash provided (used).................................... (62,158)
---------
Net increase (decrease) in cash and cash equivalents................ 121,582
Cash and cash equivalents at beginning of period.................... 138,531
---------
Cash and cash equivalents at end of period.......................... $ 260,113
=========
</TABLE>
See notes to consolidated financial statements
TRANS WORLD AIRLINES, INC. AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
For the Years Ended December 31, 1997 and 1996,
the Four Months Ended December 31, 1995
and the Eight Months Ended August 31, 1995
(Amounts in Thousands)
SUPPLEMENTAL CASH FLOW INFORMATION
<TABLE>
<CAPTION>
Predecessor
Reorganized Company Company
------------------------------------------------------- ----------------
Eight Months
Year Year Four Months Ended
Ended December Ended December Ended December August 31,
31, 1997 31, 1996 31, 1995 1995
-------------- -------------- -------------- ----------
<S> <C> <C> <C> <C>
Cash Paid During the Period for:
Interest ........................................ $ 96,865 $102,311 $27,318 $ 55,878
======== ======== ======= ========
Income taxes .................................... $ 14 $ 159 $ 7 $ 39
======== ======== ======= ========
Information About Noncash Operating, Investing
and Financing Activities:
Promissory notes issued to finance aircraft
acquisition................................... $177,469 $ 10,565 $ -- $ --
======== ======== ======= ========
Promissory notes issued to finance aircraft
predelivery payments.......................... $ 6,237 $ 19,862 $ -- $ 12,690
======== ======== ======= ========
Property acquired and obligations recorded
under new capital lease transactions.......... $ 1,138 $ 4,266 $ -- $ 12,690
======== ======== ======= ========
Partial interest on debt paid in kind, issued
and valued at principal amount................ $ -- $ -- $ 574 $ 18,496
======== ======== ======= ========
Common Stock issued in lieu of cash
dividends on mandatorily redeemable
12% preferred stock........................... $ -- $ 3,255 $ -- $ --
======== ======== ======= ========
Exchange of long-term debt for common stock:
Debt cancelled including accrued interest,
net of unamortized discount ............... $ 48,835 $ 41,021 $ -- $ --
Common stock issued, at fair value ........... 56,028 49,182 -- --
======== ======== ======= ========
Extraordinary loss ........................... $ 7,193 $ 8,161 $ -- $ --
======== ======== ======= ========
</TABLE>
Accounting Policy
For purposes of the Statements of Consolidated Cash Flows, TWA
considers all highly liquid debt instruments purchased with a maturity of
three months or less to be cash equivalents.
See notes to consolidated financial statements
TRANS WORLD AIRLINES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIENCY)
For the Years Ended December 31, 1997 and 1996, the Four Months
Ended December 31, 1995
and the Eight Months Ended August 31, 1995
(Amounts in Thousands)
<TABLE>
<CAPTION>
12% 8% 9 1/4% Employee
Preferred Preferred Preferred Preferred
Stock Stock Stock Stock
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
PREDECESSOR COMPANY:
Balance, December 31, 1994 ....................................... $ 125 $ -- $ -- $ --
Net loss for the eight months ended August 31, 1995 .............. -- -- -- --
Eliminate Predecessor equity accounts in connection with
fresh start reporting ........................................... (125) -- -- --
Record additional excess of reorganization value over
identifiable assets ............................................. -- -- -- --
Issuance of Common and Employee Preferred Stock pursuant to
Plan of Reorganization.......................................... -- -- -- 53
--------- ------- -------- --------
Balance, August 31, 1995 ......................................... -- -- -- 53
REORGANIZED COMPANY:
Equity rights exercised .......................................... -- -- -- --
Interest on 12% Notes paid in Common Stock ....................... -- -- -- --
Options and warrants exercised ................................... -- -- -- --
Earned Stock Compensation ........................................ -- -- -- --
Amortization of the excess of redemption value over carrying value
of Mandatorily Redeemable 12% Preferred Stock ................... -- -- -- --
Net loss for the four months ended December 31, 1995 ............. -- -- -- --
--------- ------- ------- -------
Balance, December 31, 1995 ....................................... -- -- -- 53
Warrants exercised ............................................... -- -- -- --
Options exercised ................................................ -- -- -- --
Earned Stock Compensation ........................................ -- -- -- --
Allocation of employee preferred stock to ALPA ESOP .............. -- -- -- 6
Conversion of employee preferred stock to Common Stock ........... -- -- -- (2)
Net proceeds from issuance of 8% preferred stock ................. -- 39 -- --
Dividends on 8% preferred stock paid in cash ..................... -- -- -- --
Dividends on mandatorily redeemable 12% preferred stock
paid in Common Stock ............................................ -- -- -- --
Dividends on mandatorily redeemable 12% preferred stock
paid in cash .................................................... -- -- -- --
Amortization of the excess of redemption value over carrying value
of mandatorily redeemable 12% preferred stock ................... -- -- -- --
Excess of cash paid for early redemption of mandatorily redeemable
12% preferred stock over carrying value ......................... -- -- -- --
Common Stock issued in exchange for 12% notes .................... -- -- -- --
Interest on 12% Notes paid in Common Stock ....................... -- -- -- --
Net loss for 1996 ................................................ -- -- -- --
--------- ------- ------- -------
Balance, December 31, 1996 ....................................... -- 39 -- 57
Options exercised ................................................ -- -- -- --
Earned stock compensation ........................................ -- -- -- --
Allocation of employee preferred stock to ALPA ESOP .............. -- -- -- 6
Conversion of employee preferred stock to Common Stock ........... -- -- -- (6)
Common Stock issued in exchange for 12% Reset Notes .............. -- -- -- --
Net proceeds from issuance of 9 1/4% preferred stock .......... -- -- 17 --
Dividends on 8% preferred stock paid in cash ..................... -- -- -- --
Interest on 12% Reset Notes paid in Common Stock ................. -- -- -- --
Issuance of warrants with 12% Senior Secured Notes Due 2002 ...... -- -- -- --
Issuance of employee fill-up shares .............................. -- -- -- 8
Net loss for 1997 ................................................ -- -- -- --
--------- ------- --------- ---------
Balance, December 31, 1997 ....................................... $ -- $ 39 $ 17 $ 65
========= ======= ========= =========
Additional
Common Paid-in Accumulated
Stock Capital Deficit Total
--------- --------- --------- ---------
<C> <C> <C> <C>
<S>
PREDECESSOR COMPANY:
Balance, December 31, 1994 ....................................... $ 200 $ 105,925 $(523,726) $(417,476)
Net loss for the eight months ended August 31, 1995 .............. -- -- (197,315) (197,315)
Eliminate Predecessor equity accounts in connection with
fresh start reporting ........................................... (200) (105,925) 35,817 (70,433)
Record additional excess of reorganization value over
identifiable assets ............................................. -- -- 685,224 685,224
Issuance of Common and Employee Preferred Stock pursuant to
Plan of Reorganization........................................... 172 269,775 -- 270,000
--------- --------- --------- ---------
Balance, August 31, 1995 ......................................... 172 269,775 -- 270,000
REORGANIZED COMPANY:
Equity rights exercised .......................................... 132 51,727 -- 51,859
Interest on 12% Notes paid in Common Stock ....................... 19 11,568 -- 11,587
Options and warrants exercised ................................... 28 43 -- 71
Earned Stock Compensation ........................................ -- 2,046 -- 2,046
Amortization of the excess of redemption value over carrying value
of Mandatorily Redeemable 12% Preferred Stock ................... -- (2,570) -- (2,570)
Net loss for the four months ended December 31, 1995 ............. -- -- (30,138) (30,138)
--------- --------- --------- ---------
Balance, December 31, 1995 ....................................... 351 332,589 (30,138) 302,855
Warrants exercised ............................................... 4 68 -- 72
Options exercised ................................................ 2 1,248 -- 1,250
Earned Stock Compensation ........................................ -- 6,875 -- 6,875
Allocation of employee preferred stock to ALPA ESOP .............. -- (6) -- --
Conversion of employee preferred stock to Common Stock ........... 2 -- -- --
Net proceeds from issuance of 8% preferred stock ................. -- 186,124 -- 186,163
Dividends on 8% preferred stock paid in cash ..................... -- (11,349) -- (11,349)
Dividends on mandatorily redeemable 12% preferred stock
paid in Common Stock ............................................ 3 (3) -- --
Dividends on mandatorily redeemable 12% preferred stock
paid in cash .................................................... -- (3,140) -- (3,140)
Amortization of the excess of redemption value over carrying value
of mandatorily redeemable 12% preferred stock ................... -- (328) -- (328)
Excess of cash paid for early redemption of mandatorily redeemable
12% preferred stock over carrying value ......................... -- (19,992) -- (19,992)
Common Stock issued in exchange for 12% notes .................... 45 49,137 -- 49,182
Interest on 12% Notes paid in Common Stock ....................... 11 11,321 -- 11,332
Net loss for 1996 ................................................ -- -- (284,815) (284,815)
--------- --------- --------- ---------
Balance, December 31, 1996 ....................................... 418 552,544 (314,953) 238,105
Options exercised ................................................ 6 3,098 -- 3,104
Earned stock compensation ........................................ -- 2,941 -- 2,941
Allocation of employee preferred stock to ALPA ESOP .............. -- (6) -- --
Conversion of employee preferred stock to Common Stock ........... 6 -- -- --
Common Stock issued in exchange for 12% Reset Notes .............. 77 55,951 -- 56,028
Net proceeds from issuance of 9 1/4% preferred stock .......... -- 82,214 -- 82,231
Dividends on 8% preferred stock paid in cash ..................... -- (15,476) -- (15,476)
Interest on 12% Reset Notes paid in Common Stock ................. 6 4,119 -- 4,125
Issuance of warrants with 12% Senior Secured Notes Due 2002 ...... -- 7,076 -- 7,076
Issuance of employee fill-up shares .............................. 1 976 -- 985
Net loss for 1997 ................................................ -- -- (110,835) (110,835)
--------- --------- --------- ---------
Balance, December 31, 1997 ....................................... $ 514 $ 693,437 $(425,788) $ 268,284
========= ========= ========= =========
</TABLE>
See notes to consolidated financial statements
TRANS WORLD AIRLINES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Financial Condition and Liquidity:
Trans World Airlines, Inc. ("TWA" or the "Company") has
undergone two reorganizations under Chapter 11 of the Bankruptcy Code since
1992, as further described in Note 3 -- Chapter 11 Reorganizations. In August
1995 the Company emerged from the most recent bankruptcy proceeding and
thereafter, through the second quarter of 1996, the Company had experienced
improvements in its operating performance. However, beginning in the third
quarter of 1996, the Company's operating performance substantially
deteriorated. Management believes that certain strategic initiatives
undertaken by the Company beginning in late 1996 have contributed to the
improved financial and operating results. TWA's management began to implement
such strategic initiatives in response to a significant deterioration in the
Company's operating performance and financial condition during the second half
of 1996. This deterioration was primarily caused by (i) an overly aggressive
expansion of TWA's capacity and planned flight schedule, particularly during
the 1996 summer season, which forced the Company to rely disproportionately on
lower-yield feed traffic and bulk ticket sales to fill the increased capacity
of its system; (ii) the delayed delivery of four older 747s intended to
increase capacity for incremental international operations during the summer
of 1996; and (iii) unexpected maintenance delays due to the capacity increase,
higher levels of scheduled narrow-body heavy maintenance and increased
contract maintenance performed for third parties. These factors caused
excessive levels of flight cancellations, poor on-time performance, increased
pilot training costs and higher maintenance expenditures and adversely
affected the Company's yields and unit costs. In addition, the crash of TWA
Flight 800 on July 17, 1996 distracted management's attention from core
operating issues and led to lost bookings and revenues.
Management believes that certain strategic initiatives
undertaken by the Company beginning in late 1996 and continuing throughout
1997 have contributed to the Company's improved financial and operating
results. The primary focus of the Company's strategic initiatives was to
reestablish TWA's operational reliability and schedule integrity and overall
product quality in order to attract higher-yield passengers and enhance
overall productivity, which was intended to improve the Company's financial
results. As the initial steps in implementing this strategy, the Company
temporarily reduced its flight schedule during the first quarter of 1997 to
more closely match aircraft available for active service and worked to reduce
the number of aircraft in maintenance backlog by increasing overtime and
maintenance capacity made available by terminating an unprofitable aircraft
maintenance contract with the U.S. government. The other key initiatives
which TWA began implementing in late 1996 included: (i) acceleration of the
Company's fleet renewal plan; (ii) a restructuring of TWA's operations at JFK;
(iii) a focus on improving productivity; (iv) implementation of a series of
revenue-enhancing marketing initiatives; and (v) implementation of a number of
employee-related initiatives to reinforce the Company's focus on operational
performance.
TWA has significantly enhanced its operational reliability and
schedule integrity since the first quarter of 1997. According to statistics
reported to the DOT, TWA improved from tenth among the 10 largest U.S.
scheduled commercial airlines in domestic on-time performance in 1996 to
second in 1997. TWA also canceled 5,413 fewer flights in 1997 than in 1996,
improving its percentage of scheduled flights completed to 98.0% compared to
96.2% for 1996. Primarily as a result of the Company's improved operational
performance during 1997, passenger load factors and passenger revenue per
available seat mile reflected improvement compared to 1996.
For the full year ended December 31, 1997, the Company's
financial results reflected operating revenues of $3,328.0 million (a decrease
of $226.4 million from operating revenues of $3,554.4 million for the full
year 1996), an operating loss of $29.3 million (an improvement of $169.2
million over the full year 1996 operating loss of $198.5 million, which
included special charges of $85.9 million), and a net loss of $110.8 million
(including a non-cash extraordinary loss of $21.0 million related to the early
extinguishment of debt), an improvement of $174.0 million over a net loss of
$284.8 million (which included a non-cash extraordinary loss of $9.8 million
and special charges of $85.9 million) for 1996. The reduction in full-year
operating revenues for 1997 resulted from the planned reduction in capacity as
the Company replaced older L-1011 and B-747 aircraft with new B-757, B-767 and
MD-80 aircraft on many routes. The Company's first quarter operating results
have historically been considerably less favorable than other quarters and
typically reflect substantial operating and net losses. Notwithstanding
actions taken to date and planned by management to improve the Company's
future operating results and performance, the Company anticipates reporting
operating and net losses in the first quarter of 1998, which losses may be
substantial.
On December 31, 1997, the Company's total cash and cash
equivalents balance was approximately $237.8 million. This balance
represented an increase of approximately $56.2 million from the Company's
corresponding cash balance at December 31, 1996. This increase in the
Company's cash balance resulted primarily from the proceeds of various capital
market offerings during 1997 and asset dispositions offset by capital
expenditures and debt repayments. In March 1997, the Company raised
approximately $47.2 million in net proceeds from the issuance of 50,000 Units,
with each Unit consisting of (i) one 12% Senior Secured Note due 2002, in the
principal amount of $1,000, and (ii) one Redeemable Warrant to purchase 126.26
shares of Common Stock at an exercise price of approximately $7.92 per share.
In December 1997, the Company raised net proceeds of $82.2 million from the
sale of the 9 1/4% Preferred Stock, net proceeds of $133.5 million from the
sale of the 11 1/2% Notes, a portion of the proceeds of which was used to
repay the 12% Reset Notes, and net proceeds of $97.0 million from the sale of
the Receivables Securitization Notes, a portion of the proceeds of which was
used to repay the outstanding balance of the Icahn Loans. In March 1998, the
Company completed the sale of $150.0 million in 11 3/8% Senior Notes due 2006
resulting in net proceeds to the Company of $144.9 million. The Company
intends to use the net proceeds for certain capital expenditures including
pre-delivery deposits on new aircraft acquisitions, and for working capital
and other general corporate purposes.
Each of the Company's union contracts became amendable as of
August 31, 1997, and negotiations have begun with respect to all three of the
contracts. While management believes that the negotiation process for the new
contracts will result in extended contracts mutually satisfactory to the
parties, there can be no assurances as to the ultimate timing or terms of any
such new contracts. As the Company's financial resources are not as great as
those of most of its competitors, any substantial increase in its labor costs
as a result of any new labor agreements or any cessation or disruption of
operations due to any strike or work action could be particularly damaging to
the Company. The Company believes that the status of its employees as
substantial stockholders and participants in corporate governance and the
Company's efforts to involve employees in developing and achieving the
Company's goals will result in continued dedication to the efforts to improve
the Company's financial and operational performance.
As a result of application of fresh start reporting in August
of 1995, substantial values were assigned to routes, gates and slots ($458.4
million) and reorganization value in excess of amounts allocable to
identifiable assets ($839.1 million). The Company has evaluated its future
cash flows and, notwithstanding its substantial operating losses in recent
periods, expects that the carrying value of the intangibles at December 31,
1997 will be recovered. However, the achievement of such improved future
operating results and cash flows are subject to considerable uncertainties.
In future periods these intangibles will be evaluated for recoverability based
upon estimated future cash flows. If expectations are not substantially
achieved, charges to future operations for impairment of those assets may be
required and such charges could be material.
The Company has no unused credit lines and must satisfy all of
its working capital and capital expenditure requirements from cash provided by
operating activities, from external capital sources or from the sale of
assets. As a result of the financings consummated in the fourth quarter of
1997 and the repayment of certain debt in connection therewith, certain assets
were released from collateral liens and are currently unencumbered. Further
pledging of these unencumbered assets, however, may be limited by negative
pledge restrictions in outstanding indebtedness. Substantially all of TWA's
other strategic assets have been pledged to secure various issues of
outstanding indebtedness of the Company. To the extent that the pledged
assets are sold, the applicable financing agreements generally require the
sale proceeds to be applied to repay the corresponding indebtedness. The
Company's ability to improve its financial position and meet its financial
obligations will depend upon a variety of factors including: significantly
improved operating results, favorable domestic and international airfare
pricing environments, absence of adverse general economic conditions, more
effective operating cost controls and efficiencies, and the Company's ability
to attract new capital and maintain adequate liquidity. No assurance can be
given that the Company will be successful in generating the operating results
or attracting new capital required for future viability.
2. Summary of Significant Accounting Policies:
Accounting policies and methods of their application that
significantly affect the determination of financial position, cash flows, and
results of operations are as follows:
(a) Description of Business: TWA is one of the major airlines in the United
States serving many of the principal domestic and transatlantic
destinations. TWA's principal domestic routes include service to and from
its St. Louis and New York-JFK hubs and between other cities in the U.S.,
both nonstop and through St. Louis. TWA's domestic routes also provide
connections with its international service to and from U.S. cities and
certain major cities in Europe and the Middle East (see Note 21).
The airline industry is highly competitive and the factors affecting
competition are subject to rapid change. Many of the Company's competitors
are larger and have significantly greater financial resources. In addition,
several carriers have introduced or have announced plans to introduce
low-cost, short-haul service, which may result in increased competition to
the Company. Internationally, TWA competes in several "limited entry"
markets in which, as a result of governmental regulations and agreements
with foreign governments, TWA has traditionally competed with a limited
number of carriers. Additionally, certain of the Company's major competitors
have established or announced plans to establish alliances with one or more
foreign or domestic carriers to expand their international operations and
increase the domestic market presence. No assurance can be given that TWA
will continue to have the advantage of all of the "limited entry" markets in
which it currently operates or that it will not face substantial additional
competition.
Historically, the airline industry has experienced substantial volatility in
profitability as a result of, among other factors, general economic
conditions, competitive pricing initiatives, the overall level of capacity
operated in the industry and fuel prices. TWA continues to be highly
leveraged and has and will continue to have significant debt service
obligations. TWA presently has no unused credit lines and most of TWA's
strategic assets have been pledged to secure indebtedness of the Company.
(b) Fresh Start Reporting: Financial accounting during a Chapter 11 proceeding
is prescribed in "Statement of Position 90-7 of the American Institute of
Certified Public Accountants", titled "Financial Reporting by Entities in
Reorganization Under the Bankruptcy Code" ("SOP 90-7"), which TWA adopted
effective June 30, 1995. The emergence from the 1995 Chapter 11 proceeding
(the "'95 Reorganization") on August 23, 1995 (the "'95 Effective Date"),
resulted in the creation of new reporting entities without any accumulated
deficit and with the Company's assets and liabilities restated to their
estimated fair values (also see Note 19-Fresh Start Reporting). Because of
the application of fresh start reporting, the financial statements for
periods after reorganization are not comparable in all respects to the
financial statements for periods prior to the '95 Reorganization.
For periods during the Chapter 11 proceedings, prepetition liabilities which
were unsecured or estimated to be undersecured were classified as
"Liabilities Subject to Compromise in the Chapter 11 Reorganization
Proceedings." The accrual of interest on such liabilities was discontinued
for the period from June 30, 1995 to the '95 Effective Date.
(c) Consolidation: The consolidated financial statements include the accounts of
TWA and its subsidiaries. All significant inter-company transactions have
been eliminated. The results of Worldspan, L.P. ("Worldspan"), a 25% owned
affiliate are recorded under the equity method and are included in the
Statements of Consolidated Operations in Other Charges (Credits). Certain
amounts previously reported have been reclassified to conform with revised
classifications.
(d) Property and Depreciation: Property and equipment owned are depreciated to
residual values over their estimated useful service lives on the
straight-line method. Property held under capital leases is amortized on the
straight-line method over its estimated useful life, limited generally by
the lease period. Estimated remaining useful service lives and residual
values are reviewed periodically for reasonableness and any necessary change
is effected at the beginning of the accounting period in which the revision
is adopted. In connection with the application of fresh start reporting, no
significant changes in the estimated useful lives of assets have been made.
Estimated useful service lives in effect for the purpose of computing the
provision for depreciation, were:
Flight equipment (aircraft and engines, including related spares)-- 16
to 30 years, varying by aircraft fleet type
Buildings--20 to 50 years
Other equipment--3 to 20 years
Leasehold improvements--Estimated useful life limited by the lease period
Maintenance and repairs, including periodic aircraft overhauls, are expensed
in the year incurred; major renewals and betterments of equipment and
facilities are capitalized and depreciated over the remaining life of the
asset.
(e) Intangible Assets: Route authorities are amortized on a straight line basis
over 30 years, gates over the term of the related leases and slots over 20
years. Routes, gates and slots consist of the following amounts at December
31 (in thousands):
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Routes......................... $248,100 $248,100
Gates.......................... 83,649 86,649
Slots.......................... 95,800 95,800
-------- --------
427,549 430,549
Accumulated Amortization....... 49,858 28,890
-------- --------
$377,691 $401,659
======== ========
</TABLE>
The reorganization value in excess of amounts allocable to identifiable
assets is being amortized over a twenty year period on the straight-line
method. Accumulated amortization at December 31, 1997 and 1996 was
$97,891,000 and $55,937,000, respectively.
When facts and circumstances suggest that intangible and other long- term
assets may be impaired, the Company evaluates their recoverability based
upon estimated undiscounted future cash flows over the remaining estimated
useful lives. The amount of impairment, if any, is measured based on
projected discounted future operating cash flows.
(f) Foreign Exchange: Foreign currency and amounts receivable and payable in
foreign currencies are translated into U.S. dollars at current exchange
rates on the date of the financial statements. Revenue and expense
transactions are translated at average rates of exchange in a manner that
produces approximately the same dollar amounts that would have resulted had
the underlying transactions been translated into dollars on the dates they
occurred. Exchange gains and losses are included in net income for the
period in which the exchange rate changes.
(g) Inventories: Inventories, valued at standard cost, which approximates actual
average unit cost, consist primarily of expendable spare parts used for the
maintenance and repair of flight equipment, plus aircraft fuel and other
operating supplies. A provision for obsolescence of spare parts is accrued
at annual rates which will provide an allowance such that the unused
inventory, at the retirement date of the related aircraft fleet, is
reflected at the lower of cost or estimated net realizable value.
(h) Passenger Revenue Recognition: Passenger ticket sales are recognized as
revenue when the transportation service is rendered. At the time of sale a
current liability for advance ticket sales is established and subsequently
is eliminated either through carriage of the passenger by TWA, through
billing from another carrier that renders the service, or by refund to the
passenger.
Under TWA's "Frequent Flight Bonus Program" ("FFB"), frequent travelers may
accumulate certain defined unit mileage credits which entitle them to a
choice of various awards, including certain free air transportation on TWA
at a future date. When the free travel award level is achieved by a frequent
traveler, a liability is accrued and TWA's operating expense is charged for
the estimated incremental cost which will be incurred by TWA upon the future
redemption of the free travel awarded.
Pursuant to the 1995 Restructuring, TWA issued 600,000 ticket vouchers, each
having a face value of $50, which may be used for a discount of up to 50%
off the cost of a ticket for transportation on TWA. Concurrently, TWA
entered into an agreement, as amended, to purchase for cash from a third
party any ticket vouchers acquired by the stand-by purchaser. The ticket
vouchers were initially recorded as a liability at their estimated fair
value, approximately $26.2 million. The liability will be relieved in future
periods as vouchers are redeemed for cash or will be reflected as revenue
when the transportation is provided for tickets purchased with vouchers.
Approximately 131,000 and 180,000 vouchers were outstanding at December 31,
1997 and 1996, respectively.
(i) Interest Capitalized: Interest cost associated with funds expended for the
acquisition of qualifying assets is capitalized. Interest capitalized was
$4,784,000 in 1997 and $5,463,000 in 1996. There was no interest capitalized
during 1995.
(j) Income Taxes: TWA accounts for income taxes based on Statement of Financial
Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes". This
statement requires the use of the liability method to record the deferred
income tax consequences of differences between the financial reporting and
income tax bases of assets and liabilities.
(k) Postretirement Benefits Other Than Pensions: TWA accounts for postretirement
benefits other than pensions based on SFAS No. 106 which requires that the
expected cost of providing such benefits be accrued over the years that the
employee renders service, in a manner similar to the accounting for pension
benefits.
(l) Deferred Credit-Aircraft Operating Leases: The present value of the excess
of contractual rents due under aircraft operating leases over the fair
rentals for such aircraft were recorded as deferred credits as part of the
application of fresh start reporting. The deferred credit will be increased
through the accrual of interest expense and reduced through a reduction in
operating lease rentals over the terms of the respective aircraft leases. At
December 31, 1997 and 1996, the unamortized balances of the deferred credits
were $23,154,000 and $31,408,000, respectively.
(m) Environmental Contingencies: TWA is subject to numerous environmental laws
and regulations and is subject to liabilities and compliance costs arising
from its past and current handling, processing, recycling, storing and
disposing of hazardous substances and hazardous wastes. It is TWA's policy
to accrue environmental remediation costs when it is probable that a
liability has been incurred and an amount can be reasonably estimated. As
potential environmental liabilities are identified and assessments and
remediation proceed, these accruals are reviewed periodically and adjusted,
if necessary, as additional information becomes available. The accruals for
these liabilities can significantly change due to factors such as the
availability of additional information on the nature or extent of the
contamination, methods and costs of required remediation and other actions
by governmental agencies. Costs of future expenditures for environmental
remediation obligations are not discounted to their present value.
(n) Mandatorily Redeemable 12% Preferred Stock: The Mandatorily Redeemable 12%
Preferred Stock issued in connection with the 1995 Reorganization was
initially recorded at its estimated fair value. Until its redemption in
April 1996, the carrying amount was being increased by amortization of the
difference between the redemption value and the carrying amount, using the
interest method. Such amounts were recorded as additional preferred stock
dividend requirements. A special dividend requirement of approximately $20.0
million was recorded in 1996 to reflect the excess of the early redemption
price over the carrying value of the Mandatorily Redeemable 12% Preferred
Stock.
(o) Earnings (Loss) Per Share: In 1997, the Financial Accounting Standards Board
("FASB") issued Statement of Financial Accounting Standards No. 128,
Earnings Per Share ("SFAS No. 128"), which specifies the computation,
presentation, and disclosure requirements for earnings per share ("EPS").
SFAS No. 128 replaces the presentation of primary EPS with a presentation of
basic EPS and fully diluted EPS with diluted EPS. Basic EPS, unlike primary
EPS, excludes dilution and is computed by dividing income available to
common stockholders by the weighted-average number of common shares
outstanding for the period. Diluted EPS reflects the potential dilution that
could occur if securities or other contracts to issue common stock were
exercised or converted into common stock or resulted in the issuance of
common stock that then shared in the earnings of the entity. As a result of
the losses reported in the periods presented, the adoption of SFAS No. 128
did not impact previously reported earnings per share data.
In computing the loss applicable to common shares for 1997 and 1996 and the
four months ended December 31, 1995, the net loss has been increased by
dividend requirements on the 9 1/4% Cumulative Convertible Exchangeable
Preferred Stock from the date of issuance in December 1997, the Mandatorily
Redeemable 12% Preferred Stock (including amortization of the difference
between the carrying amount and the redemption value and the special
dividend requirement related to the early redemption in 1996) and on the 8%
Cumulative Convertible Exchangeable Preferred Stock from the date of
issuance in March 1996. In computing the related net loss per share, the
loss applicable to common shares has been divided by the aggregate average
number of outstanding shares of Common Stock (47.1 million in 1997, 38.5
million in 1996 and 28.0 million in 1995) and Employee Preferred Stock (6.4
million in 1997, 5.7 million in 1996 and 5.3 million in 1995) which, with
the exception of certain special voting rights, is the functional equivalent
of Common Stock. Diluted EPS has not been presented as the impact of stock
options, warrants, conversion of preferred stock or potential issuances of
additional Employee Preferred Stock would have been anti-dilutive. For a
description of securities which represent potential common shares and which
could materially dilute basic EPS in the future, see Notes 11, 12, & 13.
Earnings per share of the predecessor company are not presented as the
amounts are not meaningful.
(p) Concentration of Credit Risk: TWA does not believe it is subject to any
significant concentration of credit risk. At December 31, 1997 most of the
Company's receivables were related to tickets sold to individual passengers
through the use of major credit cards (40%) or to tickets sold by other
airlines (14%) and used by passengers on TWA. These receivables are
short-term, generally being settled shortly after sale or in the month
following usage. Bad debt losses, which have been minimal in the past, have
been considered in establishing allowances for doubtful accounts.
(q) 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.
(r) Stock-Based Compensation: TWA applies APB Opinion No. 25 and related
interpretations in accounting for its plans. This opinion allows for
stock-based employee compensation to be recognized based on the intrinsic
value.
(s) Presentation: Certain prior period amounts have been reclassified to
conform with current year presentation.
(t) New Accounting Standards: The FASB recently issued SFAS No. 130, Reporting
Comprehensive Income, SFAS No. 131, Disclosures about Segments of an
Enterprise and Related Information, and SFAS No. 132, Employers' Disclosure
about Pensions and Other Postretirement Benefits. SFAS No. 130 provides for
the reporting and presentation of comprehensive income and its components.
SFAS No. 131 establishes standards for defining operating segments and
reporting certain information about such segments. SFAS No. 132 revised
disclosure requirements relative to pension and other postretirement
benefits. Since these statements only impact how financial information is
disclosed in interim and annual periods, the adoption of these standards in
1998 will not impact the Company's financial condition or results of
operations.
3. Chapter 11 Reorganizations:
On January 31, 1992, TWA commenced a reorganization case (the
"'93 Reorganization") by filing a voluntary petition for relief under Chapter
11, Title 11 of the United States Bankruptcy Code (the "Bankruptcy Code") in
the U.S. Bankruptcy Court for the District of Delaware (the "Bankruptcy
Court"). TWA's subsidiary companies did not file for Chapter 11 protection.
On August 12, 1993 the Bankruptcy Court entered an order confirming the '93
Reorganization, which was jointly proposed by TWA and the Official Unsecured
Creditors' Committee. The '93 Reorganization became effective on November 3,
1993 (the "'93 Effective Date").
Pursuant to the '93 Reorganization Plan, on the '93 Effective
Date: (i) all prepetition interests in TWA (including TWA's previously
existing preferred stock, preference stock and common stock) were cancelled
without any consideration being distributed on account of those interests;
(ii) nine million shares of newly authorized TWA common stock, representing
45% of TWA's then authorized common stock, were issued to trusts established
for the benefit of TWA's domestic unionized and domestic non-unionized and
management employees (the "Employee Stock Trusts") in exchange for certain
wage, benefit and claim concessions granted pursuant to certain agreements
entered into by TWA with its domestic unionized and domestic non-unionized and
management employees (the "'92 Labor Agreements"); (iii) 11 million shares of
newly authorized common stock, representing 55% of TWA's authorized common
stock, were issued to a voting trust established on the '93 Effective Date for
the benefit of certain creditors of TWA in partial satisfaction and discharge
of their claims, which trust issued 11 million Voting Trust Certificates
("VTCs") evidencing the rights of the VTC holders in the Voting Trust; (iv)
12.5 million shares of newly authorized preferred stock were issued for the
benefit of certain creditors of TWA in partial satisfaction and discharge of
their claims; (v) new five year notes (the "10% Senior Secured Notes"), new
seven year notes (the "8% Senior Secured Notes"), new eight year, 8% secured
notes (the "IAM Back Pay Notes"), new equipment trust certificate notes (the
"11% ETC Notes") and Aircraft Financing Secured Notes with varying interest
rates and maturity dates (the "Aircraft Financing Notes"), the aggregate
principal amount of which was approximately $730.6 million, were issued to
certain creditors of TWA in full satisfaction and discharge of their claims;
(vi) all claims except for certain claims to be reinstated under the '93
Reorganization Plan were discharged; (vii) certain contingent and/or
unliquidated claims were settled and (viii) executory contracts and unexpired
leases to which TWA was a party were assumed or rejected, in each case on the
terms and subject to the conditions set forth in the '93 Reorganization.
Notwithstanding the reductions in levels of debt and
obligations achieved through the '93 Reorganization, TWA's operating results
and cash flows did not meet the projected levels upon which the '93
Reorganization Plan was formulated, and in 1994 it was determined that a
recapitalization of the Company was needed.
In the second quarter of 1995, the Company solicited and
received sufficient acceptances to effect the proposed "prepackaged" plan of
bankruptcy. Therefore, on June 30, 1995, the Company filed a prepackaged
Chapter 11 plan of reorganization, which with certain modifications was
confirmed by the United States Bankruptcy Court for the Eastern District of
Missouri (the "Bankruptcy Court") on August 4, 1995. On August 23, 1995,
approximately eight weeks after filing the prepackaged Chapter 11 plan, the
'95 Reorganization became effective and the Company emerged from the
protection of this second Chapter 11 proceeding. In connection with the '95
Reorganization, the Company (i) exchanged certain of its then outstanding debt
securities for a combination of newly issued Mandatorily Redeemable 12%
Preferred Stock, Common Stock, warrants to purchase Common Stock and debt
securities, (ii) converted the then outstanding preferred stock of the Company
to shares of Common Stock, warrants and equity rights, (iii) obtained certain
short-term lease payment and conditional sale indebtedness deferrals amounting
to approximately $91 million and other modifications to certain aircraft
leases and (iv) obtained an extension of the Company's approximately $190
million principal amount of indebtedness to certain entities controlled by Mr.
Carl C. Icahn (the "Icahn Loans"). The Company also (i) effected a reverse
stock split of its then outstanding common stock for Common Stock, (ii)
completed an equity rights offering, (iii) distributed certain warrants to its
then current equity holders and (iv) implemented certain amendments to the
Company's Certificate of Incorporation.
In connection with and as a precondition to the '95
Reorganization, in August and September of 1994, the Company entered into new
three-year labor agreements (the "'94 Labor Agreements"), amending existing
collective bargaining agreements with the three labor unions representing
approximately 84% of the Company's employees, the IAM, ALPA and IFFA. The '94
Labor Agreements provided for waiver of certain contractually agreed wage
concessions, modifications to work rules and the deletion of certain
provisions of the then existing labor agreements, including eliminating so
called snapbacks, i.e., the automatic restoration of the wage reductions
granted in such agreements upon their expiration. During 1994 and 1995, the
Company also implemented a number of similar saving initiatives with respect
to domestic non-union and management employees, primarily through reducing
head count, altering benefit packages, and eliminating certain planned
restorations of wage reductions.
On June 14, 1995, as one of the transactions contemplated by
the extension of the Icahn Loans, TWA and an entity affiliated with Mr. Icahn,
Karabu Corporation ("Karabu"), entered into an agreement for the sale of
tickets (the "Ticket Agreement"). There are two categories of tickets under
the Karabu Ticket Program: (1) "Domestic Consolidator Tickets," which are
subject to a cap of $610 million, based on the full retail price of the
tickets ($120 million in the first fifteen months and $70 million per year for
seven consecutive years through the term of the Ticket Agreement) and (2)
"System Tickets," which are not subject to any cap throughout the term of the
Ticket Agreement. The Ticket Agreement provides for the sale of tickets to
Karabu at prices significantly lower than the full retail price.
Ticket sales under the Ticket Program, which commenced in
September 1995, were $236.1 million in 1997, $139.7 million in 1996 and $16.0
million in 1995 at full published fares. The aggregate net sales, after
applicable discounts under the Ticket Agreement, were $129.9 million in 1997,
$76.9 million in 1996 and $8.8 million in 1995. Of these amounts, $116.0
million, $71.5 million and $4.4 million is included as passenger revenues for
1997, 1996 and the four months ended December 31, 1995, respectively, as the
related transportation had been provided. Substantially all ticket sales
under the Ticket Program to date have been "System Tickets".
The purchase price for the tickets purchased by Karabu are
required to either, at Karabu's option and with certain restrictions, be
retained by Karabu and the amount so retained shall be credited as prepayments
against the outstanding balance of the Icahn Loans, or be paid over to the
settlement trust established in connection with the '93 Reorganization for
TWA's account as prepayments on the PBGC Notes. Through December 31, 1997,
approximately $118.6 million of such proceeds had been applied to the
principal balance of the Icahn Loans, and $76.7 million had been applied to
the PBGC Notes, which resulted in an $11.5 million extraordinary charge
related to the early extinguishment of PBGC Notes ($9.9 million in 1997 and
$1.6 million in 1996) (See Note 14). On December 30, 1997, TWA completed a
$100 million private placement of 9.8% Airline Receivable Asset Backed Notes
due 2001. Proceeds from this financing were used, in part, to retire the
remaining balance of Icahn Loans, including approximately $71.4 million of
principal and $2.7 million in accrued interest.
Tickets sold by the Company to Karabu pursuant to the Ticket
Agreement are priced at levels intended to approximate current competitive
discount fares available in the airline industry. The Ticket Agreement
provides that no ticket may be included with an origin or destination of St.
Louis, nor may any ticket include flights on other carriers. Tickets
purchased by Karabu pursuant to the Ticket Agreement are required to be at
fares specified in the Ticket Agreement, net to TWA, and exclusive of tax. No
commissions will be paid by TWA for tickets sold under the Ticket Agreement,
and TWA believes that under the applicable provisions of the Ticket Agreement,
Karabu may not market or sell System Tickets through travel agents or directly
to the general public. Karabu, however, has been marketing System Tickets
through travel agents and directly to the general public. TWA has demanded
that Karabu cease doing so and Karabu has stated that it disagrees with the
Company's interpretation concerning sales through travel agents or directly to
the general public. In December 1995, the Company filed a lawsuit against
Karabu, Mr. Icahn and affiliated companies seeking damages and to enjoin
further violations of the Ticket Agreement. Mr. Icahn countered by
threatening to file his own lawsuit and declare a default on the Icahn Loans,
which financing was secured by receivables and certain flight equipment
pledged under one or more security agreements (the "Karabu Security
Agreements"). Mr. Icahn's position was based on a variety of claims related
to his various interpretations of the Karabu Security Agreements as well as
with respect to certain alleged violations of the Ticket Agreement by the
Company. The parties negotiated a series of standstill agreements pursuant to
which TWA's original lawsuit was withdrawn, while the Company and Mr. Icahn
endeavored to negotiate a settlement of their differences and respective
claims. Those negotiations reached an impasse and the Company re-filed its
suit on March 20, 1996 in the St. Louis County Circuit Court. In response to
such lawsuit, Karabu and another Icahn-affiliated company asserted
counterclaims alleging that the Company had breached its obligations under the
Ticket Agreement by, among other things, seeking to restrict Karabu and
Icahn-affiliated companies from selling System Tickets through travel agents
or directly to the general public. If Karabu's interpretation as to sales of
System Tickets through travel agents or directly to the general public was
determined by a court or otherwise to be correct and the Company did not
otherwise take appropriate action to mitigate the effect of such sales, the
Company could suffer significant loss of revenue collected that could reduce
overall passenger yields on a continuing basis during the term of the Ticket
Agreement. The trial of this case was completed on January 7, 1998. A
decision regarding this matter is pending.
4. Investments:
TWA, through a wholly-owned subsidiary, has a 25% partnership
interest in Worldspan, a joint venture among TWA, Delta Airlines, Inc.,
Northwest Airlines, Inc. and ABACUS Distribution Systems PTE Ltd. Worldspan
owns, markets and operates a global computer airline passenger reservation
system on behalf of subscriber travel agents and contracting airlines who pay
booking fees to Worldspan for such reservation service. TWA accounts for its
investment in the partnership on the equity basis. TWA's share of the
combined net earnings (loss) of the partnership was approximately $11,305,000
for the year ended December 31, 1997, $11,919,000 for the year ended December
31, 1996, $(11,535,000) for the four months ended December 31, 1995 and
$3,607,000 for the eight months ended August 31, 1995, which is included in
Other Charges (Credits) in TWA's Statements of Consolidated Operations. The
excess of TWA's carrying value for its investment in Worldspan over its share
of the underlying net assets of Worldspan is being amortized over a period of
20 years. At December 31, 1997 and 1996, the unamortized balance of this
excess amounted to approximately $30.1 million and $32.0 million, respectively.
The partnership provides passenger reservations services,
communication facilities and other computer services which are purchased by
TWA on a recurring basis. The aggregate cost of the services purchased from
the partnership, which is included in all other operating expenses in TWA's
Statements of Consolidated Operations, is approximately as follows (amounts in
thousands):
<TABLE>
<S> <C>
Year Ended December 31, 1997........................ $48,902
Year Ended December 31, 1996........................ $54,611
Four Months Ended December 31, 1995................. $16,566
Eight Months Ended August 31, 1995.................. $29,604
</TABLE>
Summary financial data for Worldspan is as follows (amounts in
thousands):
<TABLE>
<CAPTION>
December 31,
------------------------
1997 1996
---------- ---------
<S> <C> <C>
Current assets........................ $220,602 $172,368
Non-current assets.................... 360,728 384,653
-------- --------
Total assets......................... $581,330 $557,021
======== ========
Current liabilities................... $128,159 $126,774
Non-current liabilities............... 102,957 125,255
Partners' equity...................... 350,214 304,992
-------- --------
Total liabilities and equity......... $581,330 $557,021
======== ========
</TABLE>
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------
1997 1996 1995
---------- --------- ---------
<S> <C> <C> <C>
Revenues................ $578,340 $548,419 $498,138
Costs and expenses...... 533,119 500,743 529,852
-------- -------- --------
Net income (loss)...... $45,221 $47,676 $(31,714)
======== ======== ========
</TABLE>
5. Income Taxes:
Income tax liabilities at December 31, 1997 and 1996, included
in other noncurrent liabilities, consist of the following (in millions):
<TABLE>
<CAPTION>
1997 1996
----------- ---------
<S> <C> <C>
Current taxes........................... $ -- $ --
Deferred taxes:
Federal................................ 10.7 10.7
Other income and franchise taxes....... 0.3 0.3
----------- --------
Total income tax liability.............. $ 11.0 $ 11.0
=========== ========
</TABLE>
Significant components of the Company's deferred tax
liabilities and assets as of December 31, 1997 and 1996 are as follows (in
millions):
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Deferred tax assets:
Postretirement benefits, other than pensions..... $ 199.8 $ 198.5
Pension obligations.............................. 51.0 82.3
Employee compensation and other benefits......... 40.0 36.5
Capital leases, net.............................. 58.8 54.3
Net operating loss carryforwards................. 337.7 247.1
Other, net....................................... 77.9 84.0
--------- ---------
Total deferred tax assets...................... 765.2 702.7
--------- ---------
Deferred tax liabilities:
Property and spare parts, net.................... (45.0) (34.6)
Routes, gates, and slots, net.................... (149.2) (158.7)
Investment in affiliate.......................... (46.1) (42.7)
--------- ---------
Total deferred tax liabilities................. (240.3) (236.0)
--------- ---------
Net deferred tax asset before valuation allowance. 524.9 466.7
Deferred tax asset valuation allowance........... (535.9) (477.7)
--------- ---------
Net deferred tax liability.................. $ (11.0) $ (11.0)
========= =========
</TABLE>
The valuation allowance arises primarily from the amortization
of intangibles, representing taxable temporary differences, the reversal of
which extends beyond the period in which deductible temporary differences are
expected to reverse.
A summary of the provision (credit) for income taxes is as
follows (amounts in thousands):
<TABLE>
<CAPTION>
Predecessor
Reorganized Company Company
--------------------------------------------------- ---------------
Year Ended Four Months Eight Months
------------------------------- Ended Ended
December 31, December 31, December 31, August 31,
1997 1996 1995 1995
------------ ------------ ------------ --------------
<S> <C> <C> <C> <C>
Current, primarily foreign.......................... $527 $450 $1,370 $(96)
Deferred............................................ -- -- -- --
--------- -------- ---------- --------
Total provision (benefit) for income taxes, net.... $527 $450 $1,370 $(96)
========= ======== ========== ========
</TABLE>
Income tax expense for the periods presented below differs from
the amounts which would result from applying the federal statutory tax rate to
pretax income, as follows (amounts in thousands):
<TABLE>
<CAPTION>
Predecessor
Reorganized Company Company
--------------------------------------------------- ---------------
Year Ended Four Months Eight Months
------------------------------- Ended Ended
December 31, December 31, December 31, August 31,
1997 1996 1995 1995
------------ ------------ ------------ --------------
<S> <C> <C> <C> <C>
Income tax benefit at United States statutory rates.. $ (31,268) $ (93,652) $ (11,294) $ (118,408)
Amortization of reorganization value in excess of
amounts allocable to identifiable assets............ 14,684 14,683 4,894 1,976
Meals and entertainment disallowance................. 4,124 4,257 1,419 2,838
Foreign and state taxes.............................. 527 450 1,370 (96)
Net operating loss not benefited and other items..... 12,460 74,712 4,981 113,594
----------- ----------- ------------- -----------
Income tax expense (benefit)........................ $ 527 $ 450 $ 1,370 $ (96)
=========== =========== ============= ===========
</TABLE>
A provision for income tax on the extraordinary gain from the
extinguishment of debt in the eight months ended August 31, 1995 was not
required as such income is excluded from taxation under the Internal Revenue
Code of 1986, as amended.
In May 1993, TWA and the Internal Revenue Service reached an
agreement (the "IRS Settlement") to settle both: (i) the IRS' proof of claim
in the '93 Reorganization in the amount of approximately $1.4 billion covering
prepetition employment and income taxes of TWA, and (ii) the audit of TWA's
federal income tax returns through 1992. Pursuant to the IRS Settlement, TWA
paid $6 million to the IRS through the application of funds owed to TWA by
certain governmental agencies and issued a note in the amount of $19 million
payable in quarterly installments over a six year period (also see Note 8 --
Debt). As a result of the IRS Settlement, TWA increased its tax basis in
certain of its assets and will be allowed no benefit of any federal net
operating loss or credit carryforward from 1992 or any prior year. Federal
income tax losses incurred by TWA subsequent to 1992 may not be carried back
to pre-1993 years.
The Company estimates that it has tax net operating loss
carryforwards ("NOLs") amounting to approximately $855 million at December 31,
1997 expiring in 2008 through 2012 if not utilized before then to offset
taxable income. Section 382 of the Internal Revenue Code of 1986, as amended
(the "Code"), and regulations issued thereunder, imposed limitations on the
ability of corporations to use NOLs if the corporation experiences a more than
50% change in ownership during certain periods. Changes in ownership in
future periods could substantially restrict the Company's ability to utilize
its tax net operating loss carryforwards. In addition, the tax net operating
loss carryforwards are subject to examination by the IRS and thus are subject
to adjustment or disallowance resulting from any such IRS examination. For
financial reporting purposes, the tax benefits from substantially all of the
tax net operating loss carryforwards will, to the extent realized in future
periods, have no impact on the Company's operating results, but instead be
applied to reduce reorganization value in excessive amounts allocable to
identifiable assets.
6. Employee Benefit Plans:
Substantially all of TWA's employees are covered by
noncontributory defined benefit retirement plans that were frozen on January
1, 1993. While many of TWA's employees continue participation in these plans,
they have not accrued any additional benefits since the date the plans were
frozen. Employees hired after the freeze are not entitled to participate in
these defined benefit retirement plans. TWA's policy has been to fund the
defined benefit plans in amounts necessary for compliance with the funding
standards established by the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"),
The retirement plans for Pilots, Flight Attendants and
Dispatchers provide benefits determined from career average earnings, with
Pilots having minimum benefits after ten years of service. Employees (other
than Passenger Service Employees) represented by the IAM earn retirement plan
benefits of stated amounts for each year of service. The Retirement Plan for
U.S. Noncontract Employees (including Passenger Service Employees) provides
pension benefits that are based on the employee's compensation during the last
five years prior to retirement, with compensation subsequent to 1988 frozen at
the 1988 pay level. Foreign plans provide benefits that meet or exceed local
requirements.
Normal retirement is age 60 for Pilots and Flight Attendants,
and age 65 for nonflight personnel. The age at which employees can receive
supplemental benefits for early retirement varies by labor group, but ranges
from age 45 to age 64.
As noted above, in January 1993, TWA's defined benefit plans
covering domestic employees (the "Pension Plans") were frozen and Pichin
Corporation, a Delaware corporation formed by the Icahn Entities, assumed
sponsorship of the Pension Plans and is now responsible for management and
control of the Pension Plans. Pursuant to an agreement (the "Comprehensive
Settlement Agreement") among the Company, the Icahn Entities, the Pension
Benefit Guarantee Corporation (the "PBGC") and unions representing TWA
employees, TWA retains only specified obligations and liabilities in respect
of the Pension Plans, which include (i) payment obligations under the PBGC
Notes, and (ii) the obligation to continue to act as the benefits
administrator responsible for, among other things, determining and
administering the payment of Pension Plan benefits (also see Note 8 -- Debt).
Pichin Corporation is obligated to make the required minimum
funding payments to each of the Pension Plans, subject to reduction for any
payments made under the PBGC Notes. The PBGC may not terminate the Pension
Plans, except under section 4042(a)(2) of ERISA or at the request of Pichin
Corporation, so long as the Icahn Entities and Pichin Corporation have
complied with all terms of the Comprehensive Settlement Agreement relating to
the PBGC. Upon the occurrence of certain significant events (as defined)
including, but not limited to, a sale of substantially all of TWA's assets, a
merger involving TWA or a liquidation under Chapter 7 under the Bankruptcy
Code, and at the request of Pichin Corporation, the Pension Plans will be
terminated. After such a termination, the liability of Pichin Corporation and
all members of its controlled group will be limited to an obligation to make
annual payments of $30 million to the PBGC for a period of eight years. Mr.
Icahn has advised TWA that Pichin Corporation is entitled to terminate the
Pension Plans in a non-standard termination at any time after January 1, 1995.
In connection with the Comprehensive Settlement Agreement, Mr.
Icahn and each of the Icahn Entities surrendered all of the equity and debt
securities of TWA and its affiliates owned beneficially or of record by them.
Pursuant to the Comprehensive Settlement Agreement, each of the parties to the
agreement mutually released the various claims of the other parties to the
agreement.
The net periodic pension expense recorded for TWA's foreign
defined benefit retirement plans is presented below (amounts in thousands).
<TABLE>
<CAPTION>
Predecessor
Reorganized Company Company
--------------------------------------------------- ---------------
Year Ended Four Months Eight Months
------------------------------- Ended Ended
December 31, December 31, December 31, August 31,
1997 1996 1995 1995
------------ ------------ ------------ --------------
<S> <C> <C> <C> <C>
Service cost....................... $ 875 $ 577 $ 274 $ 493
Interest cost...................... 4,652 992 583 1,040
Actual return on assets............ (4,592) (505) (100) (200)
Net amortization and deferral...... (289) (355) -- --
-------- ------- ------- -------
Net pension expense............... $ 646 $ 709 $ 757 $ 1,333
======== ======= ======= =======
</TABLE>
Actuarial assumptions used for determining pension costs were:
<TABLE>
<CAPTION>
Predecessor
Reorganized Company Company
--------------------------------------------------- ---------------
Year Ended Four Months Eight Months
------------------------------- Ended Ended
December 31, December 31, December 31, August 31,
1997 1996 1995 1995
------------ ------------ ------------ --------------
<S> <C> <C> <C> <C>
Discount rate for interest cost.................. 7.50% 7.50% 7.00% 8.50%
Rate of increase in future compensation levels... 5.50% 5.50% 5.50% 5.50%
Expected long-term rate of return on plan assets. 9.00% 9.00% 11.00% 11.00%
</TABLE>
The funded status (with benefit obligations determined using
the current estimated discount rate of 7.25% and 7.50% at December 31, 1997
and 1996, respectively) and amounts recognized in the Consolidated Balance
Sheets at December 31, 1997 and 1996, for defined benefit plans covering
foreign employees, are as follows (amounts in thousands):
<TABLE>
<CAPTION>
December 31,
----------------------------------------------------------------------
1997 1996
--------------------------------- ---------------------------------
Plans in Which Plans in Which
--------------------------------- ---------------------------------
Assets Exceed Accumulated Assets Exceed Accumulated
Accumulated Benefits Exceed Accumulated Benefits Exceed
Benefits Assets Benefits Assets
------------- --------------- ------------- ---------------
<S> <C> <C> <C> <C>
Actuarial present value of benefit obligations:
Vested benefit obligation........................... $47,979 $12,108 $44,200 $7,153
Nonvested benefit obligation........................ -- 431 -- 1,198
------- ------- ------- ------
Accumulated benefit obligation...................... 47,979 12,539 44,200 8,351
Projected benefit obligation more than
accumulated benefit obligation.................... 4,273 8,832 3,983 5,882
------- ------- ------- ------
Projected benefit obligation........................ 52,252 21,371 48,183 14,233
Plan assets at fair value(a)......................... 54,366 -- 50,703 --
------- ------- ------- ------
Projected benefit obligation more (less) than plan
assets at fair value................................ (2,114) 21,371 (2,520) 14,233
Unrecognized net gain (loss)......................... 6,578 4,176 7,307 11,696
------- ------- ------- ------
Pension liability (asset) recognized in Consolidated
Balance Sheets................................... $4,464 $25,547 $4,787 $25,929
======= ======= ======= ======
</TABLE>
(a) Plan assets are invested in cash equivalents, international stocks, fixed
income securities and real estate.
(b) United Kingdom law requires the reduction of retirement plan assets when
such assets exceed 105% of plan liabilities. In 1996, assets in TWA's United
Kingdom Pension Plan exceeded liabilities by approximately $20 million. This
surplus was eliminated by terminating the existing UK Pension Plan and
establishing a new pension plan for UK employees. The surplus assets were
split between TWA and the participants of the UK Plan, with plan
participants receiving their share in enhanced pension benefits, and TWA
receiving, in December 1996, a reversion from the original plan of $9.7
million.
TWA has several defined contribution plans covering most of its
employees. Total pension expense for these plans was $53.4 million, $58.0
million, $14.1 million and $26.8 million for the years ended December 31, 1997,
December 31, 1996, the four months ended December 31, 1995 and the eight
months ended August 31, 1995, respectively. Such defined contribution plans
include: (a) trust plans established pursuant to collective bargaining
agreements with certain employee groups providing for defined Company
contributions generally determined as a percentage, ranging from 2% to 11%, of
pay; and (b) retirement savings plan for Noncontract Employees to which the
Company contributes amounts equal to 25% of voluntary employee after-tax
contributions up to a maximum of 10% of the employee's pay. Pursuant to the
'92 Labor Agreements, Company contributions were suspended for certain defined
contribution plans for the period September 1, 1992 through August 31, 1995.
Such suspension has been extended through August 31, 1997. In connection with
the Comprehensive Settlement Agreement, TWA agreed to make contributions to
defined contribution plans aggregating 2% of eligible wages for 1993 through
1995, and 3.3% thereafter. The Company made the 1994 contribution payment on
June 20, 1995. Commencing on July 1, 1995, TWA is required to make such
contributions on a monthly basis.
In addition to providing retirement benefits, TWA provides
certain health care and life insurance benefits for retired employees, their
spouses and qualified dependents. Substantially all employees may become
eligible for these benefits if they reach specific retirement age criteria
while still actively employed by TWA. SFAS No. 106 requires that the expected
cost of providing postretirement benefits other than pensions be accrued over
the years that the employee renders service, in a manner similar to the
accounting for pension benefits.
The following table sets forth a reconciliation of the accrued
postretirement benefit cost as of December 31, 1997 and 1996 (in millions):
<TABLE>
<CAPTION>
December 31, December 31,
1997 1996
------------ ------------
<S> <C> <C>
Accumulated postretirement benefit obligation:
Actives fully eligible..................... $ 184 $ 163
Other actives.............................. 130 144
Retirees................................... 215 225
------------ ------------
Total APBO................................ 529 532
Unrecognized cumulative loss.................. (12) (29)
------------ ------------
Accrued postretirement benefit cost........... $ 517 $ 503
============ ============
</TABLE>
The components of net periodic postretirement benefit cost are
as follows (in millions):
<TABLE>
<CAPTION>
Predecessor
Reorganized Company Company
--------------------------------------------------- ---------------
Year Ended Four Months Eight Months
------------------------------- Ended Ended
December 31, December 31, December 31, August 31,
1997 1996 1995 1995
------------ ------------ ------------ --------------
<S> <C> <C> <C> <C>
Service Cost........... $ 9.9 $ 10.0 $ 3.0 $ 5.4
Interest Cost.......... 39.0 35.4 11.0 25.5
------ ------ ------ ------
Total............... $ 48.9 $ 45.4 $ 14.0 $ 30.9
====== ====== ====== ======
</TABLE>
The discount rate used to determine the APBO was 7.25% at
December 31, 1997 and 7.50% at December 31, 1996. The discount rate used to
determine net periodic postretirement benefit costs was 7.50% for the year
ended December 31, 1997, 7.0% for the year ended December 31, 1996, 7.0% for
the four months ended December 31, 1995 and 8.5% for the eight months ended
August 31, 1995. The assumed health care cost trend rate used in measuring the
APBO was 8.0% in 1997 declining by 1% per year to an ultimate rate of 5%. If
the assumed health care cost trend rate was increased by 1 percentage point,
the APBO at December 31, 1997 would be increased by approximately 6.5% and
1997 periodic postretirement benefit cost would increase approximately 4.0%.
7. Contingencies:
On July 17, 1996, TWA Flight 800 crashed shortly after
departure from JFK en route to Paris, France. There were no survivors among
the 230 passengers and crew members aboard the Boeing 747 aircraft. The
Company is cooperating fully with all federal, state and local regulatory and
investigatory agencies to ascertain the cause of the crash, which to date has
not been determined. The National Transportation Safety Board held hearings
relating to the crash in December 1997 and is continuing its investigation.
While TWA is currently a defendant in a number of lawsuits relating to the
crash, it is unable to predict the amount of claims which may ultimately be
made against the Company or how those claims might be resolved. TWA maintains
substantial insurance coverage, and at this time management has no reason to
believe that such insurance coverage will not be sufficient to cover the
claims arising from the crash. Therefore, TWA believes that the resolution of
such claims will not have a material adverse effect on its financial condition
or results of operations. The Company is unable to identify or predict the
extent of any adverse effect on its revenues, yields, or results of operations
which has resulted, or may result, from the public perception of the crash.
On October 22, 1991, a judgment in the amount of $12,336,127
was entered against TWA in an action in the United States District Court for
the Southern District of New York by Travellers International A.G. and its
parent company, Windsor, Inc. (collectively, "Travellers"). The action
commenced in 1987, as subsequently amended, sought damages from TWA in excess
of $60 million as a result of TWA's alleged breach of its contract with
Travellers for the planning and operation of Getaway Vacations. In order to
obtain a stay of judgment pending appeal, TWA posted a cash undertaking of
$13,693,101. In connection with the '93 Reorganization, TWA sought to have
the matter ultimately determined by the Bankruptcy Court and claimed that the
cash undertaking constituted a preference payment. Following prolonged
litigation with respect to jurisdiction, the United States Supreme Court
determined that the entire matter should be addressed by the Bankruptcy Court,
and in February 1994, the Bankruptcy Court determined the matter in a manner
favorable to TWA. Upon appeal, the District Court affirmed in part and
reversed in part the Bankruptcy Court's decision. On January 20, 1998, the
Court of Appeals for the Third Circuit reversed the District Court and
affirmed the findings of the Bankruptcy Court. Travellers sought
reconsideration by the Third Circuit which reconsideration was denied.
Travellers has advised they will appeal this decision. TWA has agreed that
amounts received pursuant to this proceeding will be applied to reduce the
PBGC Notes or contributed to the settlement trust established for defined
benefit pension plans covering certain TWA employees.
TWA is subject to numerous environmental laws and regulations
administered by various state and federal agencies. Although the Company
believes adequate reserves have been provided for all known environmental
contingencies, it is possible that additional reserves might be required in
the future which could have a material effect on the results of operations or
financial condition of the Company. However, the Company believes that the
ultimate resolution of known environmental contingencies should not have a
material adverse effect on its financial position or results of operations
based on the Company's knowledge of similar environmental sites.
Since May 1991, TWA's employees in Israel have claimed that the
Company should be required to collateralize its contingent payment of
termination indemnities. This matter deals only with collateralization of a
contingent payment obligation. The employees have asserted that the amount
necessary to collateralize the contingent payment of termination indemnities
could be as much as $25 million. The Company denies any obligation to
collateralize and asserts that any obligation to collateralize any termination
indemnity is not a current obligation.
In February 1995, a number of actions were commenced in various
federal district courts against TWA and six other major airlines, alleging
that such companies conspired and agreed to fix, lower and maintain travel
agent commissions on the sale of tickets for domestic air travel in violation
of the United States and, in certain instances, state, antitrust laws. On May
9, 1995, TWA announced settlement, subject to court approval, of the
referenced actions. A final order has not yet been entered; however, an
interim order approving the settlement has been entered.
On November 9, 1995, ValuJet Air Lines, Inc., now known as
AirTran Airlines, Inc. ("ValuJet") instituted a lawsuit against TWA and Delta
in the United States District Court for the Northern District of Georgia,
alleging breach of contract and violations of certain antitrust laws with
respect to the Company's lease of certain takeoff and landing slots at
LaGuardia International Airport in New York. On November 17, 1995, the court
denied ValuJet's motion to temporarily enjoin the lease transaction and the
Company and Delta consummated the lease of the slots. On July 12, 1996, the
Federal Court in Atlanta granted summary judgment in TWA's favor in the
ValuJet litigation on the claims and counts raised in the ValuJet amended
complaint. The order granting summary judgment to TWA was not a final order
and was not directly appealable due to an outstanding claim against Delta.
ValuJet has settled its claim with Delta and appealed the grant of summary
judgment to the 11th Circuit Court of Appeals. Settlement discussions are
ongoing. The Company does not expect that the resolution of this matter will
have a material adverse effect on its results of operations or financial
position.
In addition, based on certain written grievances or complaints
filed by ValuJet, the Company was informed that the United States Department
of Justice ("DOJ"), Antitrust Division, was investigating the circumstances of
the slot lease of certain takeoff and landing slots to Delta at LaGuardia to
determine whether an antitrust violation has occurred. During the course of
its investigation, the DOJ was informed of the summary judgment described
above. Since the date of the judgment, TWA is unaware of whether the DOJ has
undertaken further investigative efforts, the status of the investigation or
any future plans of the DOJ or other regulatory bodies with respect to the
ValuJet allegations. While TWA believes the summary judgment should be
persuasive to the various regulatory bodies petitioned by ValuJet, it will
cooperate with any further investigations.
On September 6, 1995 TWA announced that the operations of its
wholly owned subsidiary, Trans World Express, Inc. ("TWE"), would be
discontinued on November 6, 1995. TWA entered into an agreement with an
unaffiliated entity, Trans States Airlines, Inc., to provide feeder service
into TWA's JFK hub, which commenced on November 7, 1995. TWA does not believe
that the liquidation of TWE has had or will have a material adverse impact on
the financial position or results of operations of TWA.
Pursuant to the '92 Labor Agreements, the Company agreed to pay
to employees represented by the IAM a cash bonus for the amount by which
overtime incurred by the IAM from September 1992 through August 1995 was
reduced below specified thresholds. This amount was to be offset by the amount
by which medical savings during the period for the same employees did not meet
certain specified levels of savings. The obligation is payable in three equal
annual installments beginning in 1998. The Company has estimated the net
overtime bonus owed to the IAM to be approximately $26.3 million and has
reflected this amount as a liability in the accompanying balance sheets. Such
amount reflects a reduction of approximately $10.0 million pursuant to an
agreement to reduce proportionately the obligation based upon the size of the
reduction of indebtedness achieved by the '95 Reorganization. The IAM, while
not providing a calculation of its own, has disputed the method by which
management has computed the net overtime bonus and has indicated that it
believes the amount due to the IAM is much greater than the amount which has
been estimated by management.
In addition, in connection with certain wage scale adjustments
afforded to non-contract employees, employees previously represented by the
IFFA have asserted and won an arbitration ruling with respect to the
comparability of wage concessions made in 1994 that, if sustained, would
require that the Company provide additional compensation to such employees.
The Company estimates that at December 31, 1997 such additional compensation
that would be payable pursuant to the arbitration ruling would be
approximately $12.0 million. The Company denies any such obligation and is
pursuing an appeal of the arbitration ruling and a court award affirming the
ruling. Effective September 1, 1997, the Company also reduced the overall
compensation and benefits package for non-contract employees so as to offset,
in the Company's view, any claims by such employees previously represented by
IFFA for any retroactive or prospective wage increases. As such, no liability
has been recorded by the Company.
In connection with the '95 Reorganization, the Company entered
into a letter agreement with employees represented by ALPA whereby if the
Company's flight schedule, as measured by block hours, does not exceed certain
thresholds, a defined cash payment would be made to ALPA. The defined
thresholds were exceeded during the measurements periods through December 31,
1996 and no amount was therefore owed to ALPA as of that date. A payment of
approximately $2.6 million was due under the agreement on August 14, 1997 for
the period January through June 1997. The Company made this payment in
January 1998. Management estimates that its aggregate obligation for 1997
will be approximately $9.1 million.
The Company is also defending a number of other actions which
have arisen in the ordinary course of business, and are insured or the likely
outcome of which the management of the Company does not believe may be
reasonably be expected to be materially adverse to the Company's financial
condition or results of operations.
8. Debt:
Substantially all of TWA's assets are subject to liens and
security interests relating to long-term debt and other agreements.
Long-term debt (net of unamortized discounts) outstanding at
each balance sheet date was:
<TABLE>
<CAPTION>
December 31,
--------------------------
1997 1996
--------- -------------
(Amounts in Thousands)
<S> <C> <C>
9.80% Airline Receivable Asset Backed Notes, Series 1997-1(a)................. $ 100,000 $ --
12% Senior Secured Notes due 2002(b).......................................... 43,254 --
11 1/2% Senior Secured Notes due 2004(c)................................... 138,360 --
12% Senior Secured Reset Notes due 1998(d).................................... -- 111,799
8% IAM Backpay Notes(e)....................................................... 13,354 12,090
PBGC Notes(f)................................................................. 141,243 198,672
Icahn Financing Facilities(g)................................................. -- 125,102
Equipment Trust Certificates(h)............................................... -- 8,963
Various Secured Notes, 4.0% to 12.4%, due 1998-2001(i)........................ 43,799 75,478
Installment Purchase Agreements, 10.0% to 10.53%, due 1998-2003(j)............ 267,199 109,034
Predelivery Financing Agreements(k)........................................... 3,166 19,862
IRS Deferral Note(l).......................................................... 6,333 8,708
WORLDSPAN Note(m)............................................................. 31,224 31,224
----------- -------------
Total long-term debt..................................................... 787,932 700,932
Less current maturities.................................................. 51,392 92,447
----------- -------------
Long-term debt, less current maturities....................................... $ 736,540 $ 608,485
=========== =============
</TABLE>
(a) In December 1997, TWA agreed to sell certain receivables on an ongoing basis
to Constellation Finance LLC ("Constellation"), a special purpose limited
liability company wholly owned by TWA, and TWA agreed to service the related
receivables. Concurrently, the 9.80% Airline Receivable Asset Backed Notes,
Series 1997-1 were issued in December 1997 by Constellation in the principal
amount of $100.0 million. Interest on the 1997-1 Notes is payable monthly on
the 15th day of each month at the rate of 9.80% per annum. No principal
payments are due under the 1997-1 Notes until January 2001, except under
certain circumstances. The terms of the 1997-1 Notes provide for the
maintenance of certain minimum levels of receivables as defined, or in the
event of a deficiency, the deposit of funds with the trustee in the amount
of such deficiency. At December 31, 1997, $9.7 million was held by the
Company Trustee and is included in the accompanying balance sheet as prepaid
expenses and other current assets. This amount was returned by the Company
Trustee to the Company by January 9, 1998 at which time the deficiency was
eliminated.
(b) The 12% Senior Secured Notes due 2002 were issued in March 1997 in the
principal amount of $50.0 million. The notes are reflected net of the
unamortized discount of $6.7 million at December 31, 1997, to reflect an
effective interest rate of approximately 16.4%. Interest is payable
semi-annually on April 1 and October 1. The notes are not redeemable prior
to their maturity on April 1, 2002. The notes are secured by (i) TWA's
beneficial interest in certain take-off and landing slots at three
high-density, capacity-controlled airports, (ii) certain ground equipment at
certain domestic airports and (iii) all stock of (a) a subsidiary holding
the leasehold interest in a hangar at Los Angeles International Airport and
(b) three subsidiaries holding leasehold interests in gates and related
support space at certain domestic airports.
(c) The 11 1/2% Senior Secured Notes due 2004 were issued in December 1997 in
the principal amount of $140.0 million. The notes are reflected net of the
unamortized discount of $1.6 million at December 31, 1997, to reflect an
effective interest rate of approximately 11.7%. Interest is payable
semi-annually in arrears on each June 15 and December 15, commencing June
15, 1998. The Company purchased $23.1 million of U.S. Government Obligations
with a portion of the net proceeds from the sale of the notes which was
deposited in an escrow account to fund interest payments through June 15,
1999. The notes are secured by a lien on (i) a pool of aircraft spare parts,
(ii) TWA's beneficial interest in 30 take-off and landing slots at Ronald
Reagan Washington National Airport and (iii) securities pledged to provide
for the first three scheduled interest payments.
(d) The 12% Senior Secured Reset Notes due 1998 were scheduled to pay interest
semi-annually, payable either in cash or, as to the first four interest
payments, at the Company's option, in whole or in part, in Common Stock,
beginning August 1, 1995, subject to certain conditions. The Company elected
to pay interest due and payable for the first two periods and one-half of
the interest due and payable February 1, 1997 (fourth period) in common
stock.
During 1996 and continuing through August 1997, the Company consummated a
series of privately negotiated exchanges with a significant holder of the
12% Senior Secured Reset Notes which resulted in the return to the Company
of approximately $97.1 million principal amount of 12% Senior Secured Reset
Notes and $2.9 million in accrued interest thereon in exchange for the
issuance of approximately 12.2 million shares of Company Common Stock.
The remaining outstanding notes were retired in December 1997 with a portion
of the proceeds related to the issuance of 11 1/2% Senior Secured Notes.
The principal balance remaining at retirement was $72.5 million. As a result
of the privately negotiated exchanges and the retirement of the balance of
the 12% Senior Secured Reset Notes, certain slots, equipment, subsidiary
stock and spare parts were released and used to secure the 12% Senior
Secured Notes and the 11 1/2% Senior Secured Notes. A number of aircraft
and engines were also released and remain free and clear.
(e) The 8% IAM Backpay Notes have a stated principal amount of $22.0 million at
December 31, 1997 and 1996. The notes are reflected net of the unamortized
discount of $8.7 million and $9.9 million at December 31, 1997 and 1996,
respectively, which reflects an effective interest rate of approximately
24.4% at December 31, 1997. The notes mature in 2001 and pay interest
semi-annually. The notes are secured by a subordinate lien on TWA's interest
in Worldspan and liens on one JT8D engine and one JT9D engine. During
December 1996, ownership of the notes was transferred from the Indenture
Trustee to current and former IAM union members who participated in the 1992
labor agreement.
(f) The PBGC Notes have a stated unpaid principal balance of $158.7 million and
$232.9 million at December 31, 1997 and 1996, respectively. The notes are
reflected net of unamortized discounts of $17.4 million and $34.3 million at
December 31, 1997 and 1996, respectively, to reflect an effective interest
rate of approximately 13.0%. Interest on the PBGC Notes is payable
semi-annually at an average stated rate of 8.19% per annum. Principal
payments are due in semi-annual installments beginning in 1999 through 2003,
however, due to certain note provisions mandatory prepayments are required.
Additional prepayments could arise from the election of Karabu to apply the
purchase price for tickets purchased under the Ticket Agreement to a
reduction of the PBGC Notes (see Note 3). Such prepayments would result in
extraordinary charges related to the early extinguishment of debt. The Notes
are non-recourse notes secured by first liens on TWA's international routes
and TWA's leasehold interest in the Kansas City maintenance facility and
certain fixtures and equipment.
(g) The Icahn Financing Facilities include a $75 million Asset Based Facility
and a $125 million Receivables Facility, the remaining outstanding balance
of which was retired in December 1997 in conjunction with the issuance of
the 9.8% Airline Receivable Asset Backed Notes due 2001. The principal
balance of the Icahn Financing Facilities had been reduced to $71.4 million
by the election of Karabu to apply the purchase price for tickets purchased
under the Ticket Agreement to a reduction of the Icahn Loans. Collateral for
the Icahn Loans included a number of aircraft, engines, and related
equipment, along with substantially all of the Company's receivables, which
were released on retirement of the Facilities on December 30, 1997.
(h) The Equipment Trust Certificates paid interest semi-annually at a rate of
11% per annum and were subject to mandatory redemptions beginning in April
1994 and continuing until September 1997. The certificates were retired on
March 31, 1997. The certificates were secured by certain aircraft, engines
and other equipment which also secured the 12% Senior Secured Reset Notes.
(i) Various Secured Notes represent borrowings to finance the purchase or
lease of certain flight equipment and other property.
(j) Installment Purchase Agreements represent borrowings to finance the purchase
of four Boeing 767-231 and one Boeing 747-238 aircraft. The borrowings
mature in monthly installments through 2003, and require interest at rates
ranging from 10.0% to 10.53% per annum.
(k) The Predelivery Financing Agreements represent borrowings from the engine
manufacturer to finance prepayments on the purchase of five Boeing 757
aircraft. The borrowings mature upon delivery of the aircraft beginning in
July 1998 and continuing through September 1999. Interest is payable
quarterly at a rate of LIBOR plus 3.5%.
(l) The IRS Deferral Note represents unpaid amounts due under the terms of a
settlement reached in 1993 for taxes and interest owed to the IRS. The note
requires payment of interest quarterly at a rate of 7% per annum and matures
in 1999.
(m) The Worldspan Note represents amounts owed to Worldspan, a 25% owned
affiliate of TWA, for prior services and advances. The note pays interest at
maturity at a rate of prime plus 1% per annum and matures in 1999. The note
is secured by a pledge of TWA's partnership interest in Worldspan.
(n) At December 31, 1997, aggregate principal payments due for long-term debt
for the succeeding five years were as follows:
(Amounts in
Year Thousands)
---- ----------
1998.............................. $51,392
1999.............................. 126,851
2000.............................. 80,973
2001.............................. 184,848
2002.............................. 88,829
TWA discontinued, effective June 30, 1995, the accrual of
interest on prepetition debt that was unsecured or estimated to be
undersecured through the '95 Effective Date. Contractual interest expense for
the eight months ended August 31, 1995 was approximately $18.7 million in
excess of reported interest expense.
Certain of the Company's long-term debt agreements contain
various covenants which limit, among other things, the incurrence of
additional indebtedness, the payment of dividends on capital stock, certain
investments, transactions with affiliates, incurrence of liens and sale and
leaseback transactions, and sale of assets. The Company was in compliance
with these covenants as of December 31, 1997.
9. Leases and Related Guarantees:
Sixteen of the aircraft in the Company's fleet at December 31,
1997 were leased under capital leases. The remaining lease periods for these
aircraft range from zero to nine years. The Company has options and/or rights
of first refusal to purchase or re-lease most of such aircraft at market terms
upon termination of the lease. The Company has guaranteed repayment of
certain of the debt issued by the owner/lessor to finance some of the aircraft
under capital lease to the Company; however, the scheduled rental payments
will exceed the principal and interest payments required of the owner/lessor.
Aggregate annual rentals in 1998 will be approximately $36.3 million for the
15 aircraft held under capital leases (one lease expired on December 31, 1997).
One hundred forty-four of the aircraft in TWA's fleet at
December 31, 1997 were leased under operating leases. Other than four leases
on a month-to-month basis, the remaining lease periods range from two months
to eighteen years. Upon expiration of the current leases, TWA has the option
to re-lease most of such aircraft for specific terms and/or rentals with some
of the renewal options being subject to fair market rental rates.
Buildings and facilities leased under capital and operating
leases are primarily for airport terminals and air transportation support
facilities. Leases of equipment, other than flight equipment, include some of
the equipment at airports and maintenance facilities, flight simulators,
computers and other properties.
Pursuant to an agreement between the City of St. Louis and TWA
in November 1993 (the "Asset Purchase Agreement"), the City of St. Louis
waived a $5.3 million pre-petition claim and provided TWA with two installments
of $24.7 million and $40 million pursuant to sale/leaseback transactions
involving certain of TWA's assets located at Lambert-St. Louis Airport and
other property and assets located in St. Louis including gates, terminal
support facilities at the airport, hangar/St. Louis Ground Operations Center
complex, Flight Training Center and equipment and tenant improvements at these
various St. Louis facilities.
Under the Asset Purchase Agreement, TWA leased back the
properties involved under a month-to-month agreement subject to automatic
renewal so long as TWA is not in default thereunder, such agreement having a
term otherwise expiring December 31, 2005. Such term is subject to early
termination in the event of certain events of default, including non-payment
of rents, cessation of service, or failure to relocate and maintain its
corporate headquarters within the City or County of St. Louis, or relocate and
maintain a reservations office within the City of St. Louis. Under the Asset
Purchase Agreement, TWA has the right to use 57 gates and terminal support
facilities at Lambert-St. Louis Airport. The City has certain rights of
redesignation of TWA's gates in the event TWA's flight activity at St. Louis
is reduced below a threshold level of 190 daily flight departures during any
given monthly period. The related leases are classified as capital leases for
financial reporting purposes.
The Company's acquisition of 11 new aircraft during 1982 and
1983, one Lockheed L-1011 and ten Boeing 767s, created certain tax benefits
that were not of immediate value in the Company's federal income tax returns
and, therefore, such tax benefits were sold to outside parties under so-called
"Safe Harbor Leases" as permitted by IRS regulations. Pursuant to the sales
agreements, the Company is required to indemnify the several purchasers if the
tax benefits cannot be used because of circumstances within the control of the
Company. As of December 31, 1997, the Company's contingent indemnification
obligations in connection with the tax benefit transfers were collateralized by
bank letters of credit aggregating $9,803,000 for which the Company has posted
$9,803,000 in cash collateral to secure its reimbursement obligations and the
bank letters of credit. In addition, the Company has pledged $4,398,000 in
cash collateral to secure its obligation with respect to four of the tax
benefit transfers and has pledged flight equipment having a net book value of
$23,147,000 to secure its obligation with respect to two of the tax benefit
transfers.
At December 31, 1997 future minimum lease payments for capital
leases and future minimum lease payments, net of sublease rentals of
immaterial amounts, for long-term leases, were as follows:
Minimum Lease Payments
---------------------------
Capital Operating
Leases Leases
---------- ------------
(Amounts in Thousands)
Year
- ----
1998.................................... $ 54,660 $ 393,686
1999.................................... 52,360 378,166
2000.................................... 49,314 356,681
2001.................................... 45,008 334,295
2002.................................... 27,109 292,216
Subsequent.............................. 60,064 1,782,677
--------- ------------
Total.................................. 288,515 $ 3,537,721
============
Less imputed interest................... 68,525
---------
Present value of capital leases......... 219,990
Less current portion.................... 37,068
---------
Obligations under capital leases,
less current portion.................. $ 182,922
=========
Included in the Minimum Lease Payments for Operating Leases are
increased rental rates related to lessor financing of engine hush-kits for 25
aircraft. Also included in the Minimum Lease Payments for Operating Leases
are rentals related to an agreement entered into in 1996 providing for the
lease of ten Boeing 757 aircraft, with delivery of the first aircraft in July
1996 and the final aircraft in July 1997, as well as estimated rentals related
to an agreement entered into in 1996 for the lease of fifteen new and three
used McDonnell Douglas MD-83 aircraft, with delivery of the aircraft between
February 1997 and April 1999.
10. Mandatorily Redeemable 12% Preferred Stock:
Pursuant to the '95 Reorganization the Company issued 1,089,991
shares of the 1,510,000 authorized shares of Mandatorily Redeemable 12%
Preferred Stock to the holders of the 8% Senior Secured Notes. The Mandatorily
Redeemable 12% Preferred Stock had an aggregate redemption value of
approximately $109.0 million, was cumulative, and had an initial liquidation
preference of $100 per share. Commencing November 1995, dividends accrued at
the rate of 12% of the liquidation preference per share per annum, payable
quarterly in arrears on the first day of each February, May, August and
November. Subject to certain limitations, the dividends could be paid in
Common Stock at the option of the Company, and, accordingly, the Company
elected to pay the February 1, 1996 dividend in Common Stock and subsequently
issued 317,145 shares. For purposes of determining the number of shares of
Common Stock to distribute, such Common Stock was valued at 90% of the fair
market value, based upon trading prices for the twenty days prior to the
record date for the dividend payment.
On March 22, 1996, the Company announced a call for redemption
on April 26, 1996 (the "Redemption Date") of all of its issued and outstanding
12% Preferred Stock at a redemption price per share equal to $75.00, plus
accrued dividends to and including the Redemption Date of $2.8667 per share.
On April 26, 1996, the Company paid an aggregate of $84.9 million in
redemption of the 12% Preferred Stock and payment of accrued dividends.
11. Capital Stock:
The Company has the authority to issue 287.5 million shares of
capital stock, consisting of 150 million shares of Common Stock and 137.5
million additional shares of preferred stock. On the '95 Effective Date of
the '95 Reorganization, TWA issued approximately 17.2 million shares of Common
Stock, 6.4 million shares of Employee Preferred Stock (including approximately
1.7 million shares which are attributable to ALPA represented employees, see
Note 12), Equity Rights for the purchase of approximately 13.2 million shares
of Common Stock, warrants for the purchase of approximately 1.7 million shares
of Common Stock exercisable over a seven year period at $14.40 per share (the
"Seven Year Warrants"), warrants for the purchase of up to 1.15 million shares
of Common Stock (for nominal consideration), and $109.0 million aggregate
liquidation value of Mandatorily Redeemable 12% Preferred Stock (the "12%
Preferred Stock"). In addition, each of the 12.5 million shares of the then
existing preferred stock were converted into, and holders received, 0.1024
shares of Common Stock, 0.0512 Equity Rights and 0.1180 Seven Year Warrants.
Holders of then existing common stock, other than shares held by trusts for
employees, received 0.0213 shares of Common Stock, 0.0107 Equity Rights and
0.0246 Seven Year Warrants.
In October 1995, TWA received approximately $55.3 million in
gross proceeds from the exercise of 13,206,247 Equity Rights and issued
13,206,247 shares of Common Stock. The Company paid a fee of approximately
$3.4 million in September to certain standby purchasers of shares covered by
the Equity Rights.
TWA subsequently issued 2.07 million additional shares of
Common Stock to previous holders of TWA's 10% Senior Secured Notes based upon
the trading prices of securities distributed pursuant to the '95
Reorganization.
The Employee Preferred Stock is the functional equivalent of
Common Stock except for an exclusive right to elect a certain number of
directors to the Board of Directors and its liquidation preference of $0.01
per share. Employee Preferred Stock does not have redemption rights. Each
share will automatically convert into one share of Common Stock upon the
withdrawal of such share from the employee stock trust in which such share is
held.
There were 1,742,920 and 1,742,922 Seven Year Warrants
outstanding at December 31, 1997 and 1996, respectively. All warrants to
purchase shares of Common Stock for nominal consideration had been exercised at
December 31, 1997.
In March 1997, the Company issued 50,000 Redeemable Warrants in
conjunction with the sale of $50.0 million 12% Senior Secured Notes Due 2002.
The Warrants are exercisable commencing on the first anniversary of the date
of original issuance through their expiration on April 1, 2002 and entitles
the holders thereof to purchase 126.26 shares of Common Stock per Warrant at
an exercise price of approximately $7.92 per share.
In December 1997, the Company completed an offering, pursuant
to Rule 144A of the Securities Act of 1933, of 1,725,000 shares of its
9 1/4% Cumulative Convertible Exchangeable Preferred Stock, with a
liquidation preference of $50 per share. Each share of the 9 1/4%
Preferred Stock may be converted at any time at the option of the holder,
unless previously redeemed or exchanged, into shares of the Company's Common
Stock at a conversion price of $7.90 per share (equivalent to a conversion
rate of approximately 6.329 shares of Common Stock for each share of 9 1/4%
Preferred Stock), subject to adjustment.
The 9 1/4% Preferred Stock may not be redeemed prior to
December 15, 2000. On or after December 15, 2000, the 9 1/4% Preferred
Stock may be redeemed in whole or in part, at the option of the Company, at
specified redemption prices. The 9 1/4% Preferred Stock may be exchanged,
in whole but not in part, at the option of the Company, for the Company's
9 1/4% Convertible Subordinated Debentures due 2007 on any dividend payment
date beginning on December 15, 1999 at the rate of $50 principal amount of
Debentures for each share of 9 1/4% Preferred Stock outstanding at the time
of exchange; provided that all accrued and unpaid dividends on the 9 1/4%
Preferred Stock to the date of exchange have been paid or set aside for
payment and certain other conditions are met.
The Company was required to file a registration statement (the
"Shelf Registration Statement") with the Securities and Exchange Commission to
register resales of 9 1/4% Preferred Stock, the Debentures and the
underlying shares of Common Stock issuable upon conversion thereof. In
addition the Company must use its reasonable best efforts to cause the Shelf
Registration Statement to be effective until the earlier of (i) the sale of
all securities covered by the registration or (ii) two years after the date of
original issuance.
In March 1996, the Company completed an offering, pursuant to
Rule 144A of the Securities Act, of 3,869,000 shares of its 8% Preferred
Stock, with a liquidation preference of $50 per share. Each share of the 8%
Preferred Stock may be converted at any time, at the option of the holder,
unless previously redeemed or exchanged, into shares of Common Stock at a
conversion price of $20.269 per share (equivalent to a conversion rate of
approximately 2.467 shares of Common Stock for each share of 8% Preferred
Stock), subject to adjustment. Pursuant to the registration rights agreement
between the Company and the initial purchasers of the 8% Preferred Stock, the
Company filed a shelf registration statement effective August 16, 1996 to
register resales of the 8% Preferred Stock, the Debentures (as defined below)
and the underlying shares of Common Stock issuable upon conversion thereof.
The 8% Preferred Stock may not be redeemed prior to March 15,
1999. On or after March 15, 1999, the 8% Preferred Stock may be redeemed, in
whole or in part, at the option of the Company, at specified redemption prices.
The 8% Preferred Stock may be exchanged at the option of the Company, in whole
but not in part, for the Company's 8% Convertible Subordinated Debentures Due
2006 (the "Debentures") on any dividend payment date beginning March 15, 1998
at the rate of $50 principal amount of Debentures for each share of 8%
Preferred Stock outstanding at the time of exchange; provided that all accrued
and unpaid dividends on the 8% Preferred Stock to the date of exchange,
whether or not earned or declared, have been paid or set aside for payment and
certain other conditions are met.
In December 1995, the Company adopted a Shareholders Rights
Plan. Each holder of Common Stock or Employee Preferred Stock received a
dividend of one right for each share, entitling the holder to buy one
one-hundredth of a share of a new series of preferred stock at a purchase
price of $47.50. The rights may become exercisable only under certain
conditions whereby certain persons (as defined) become the owner of or commence
a tender offer for certain specified percentages of TWA's voting stock and may
be redeemed by TWA at $0.01 per right prior to such time. In the event the
rights become exercisable, holders would be entitled to receive, without
payment of a purchase price, additional shares of Common Stock or be entitled
to purchase Common Stock having a market value of twice the purchase price.
12. Earned Stock Compensation:
Pursuant to the '94 Labor Agreements and '95 Reorganization, on
the '95 Effective Date, approximately 4.7 million shares of Employee Preferred
Stock and 1.0 million shares of Common Stock were distributed and allocated
to employees through employee stock ownership plans for the benefit of union
(other than the ALPA represented employees) and noncontract employees,
respectively. The distribution of these shares resulted in a charge to
operations in the eight months ended August 31, 1995 of $43.2 million, based
upon the market price of TWA's Common Stock at that time.
Additionally, a "Rabbi Trust" was established to receive the
distribution of approximately 1.7 million shares of Employee Preferred Stock
attributable to ALPA represented employees. The Rabbi Trust distributed to an
employee benefit plan (the "ESOP") one-third of the shares annually beginning
August 1995. Accordingly, operating results for 1997, 1996, the four months
ended December 31, 1995 and the eight months ended August 31, 1995 include
charges of approximately $3.9 million, $6.9 million, $2.0 million and $5.1
million, respectively, representing the value of shares allocated and shares
earned, but unallocated, for such periods, based upon the market price of
TWA's Common Stock.
Operating results for the eight months ended August 31, 1995
include a non-cash charge of approximately $8.0 million, representing the
excess of the fair market value of the shares distributed to employees over
the purchase price paid for shares which were sold to employees pursuant to
the Equity Rights offering.
Also pursuant to the '94 Labor Agreements and the '95
Reorganization, the Company has adopted a seven year employee stock incentive
program (the "ESIP") pursuant to which TWA will grant its union and non-union
employees additional shares of Employee Preferred Stock and Common Stock (the
"Incentive Shares"), respectively, and such employees will be entitled to
purchase additional shares of such stock under certain circumstances through an
employee stock purchase arrangement. The ESIP has been designed to enable
TWA's employees to increase their level of ownership from 30% to 40% of the
combined total number of outstanding Common Stock and Employee Preferred Stock
over the seven year period.
In recognition of the fact that as a result of the '95
Reorganization, the percentage of the Company's stock owned by the Company's
employees was substantially reduced, the Company adopted as of the '95
Effective Date an ESIP pursuant to which the Company would grant, commencing
in 1997, to certain trusts established for the benefit of its union and
non-union employees certain additional shares of Common Stock and Employee
Preferred Stock. The ESIP provides that the first stock grant under the plan
would be made on July 15, 1997 in an amount sufficient to increase the
employee ownership of the combined total number of then outstanding shares of
Common Stock and Employee Preferred Stock by 2.0% if the average closing price
of the Common Stock exceeded a target price of $11.00 per share during the
period from January 1, 1997 to July 14, 1997. If the target price of $11.00
per share is not exceeded, the grant would instead be made, if at all, on July
15 of the next year (up to and including July 15, 2002) in which the market
price of the Common Stock exceeds such target price prior to July 14 of that
year. In each of 1998 through 2002, additional shares of Employee Preferred
Stock and Common Stock will become subject to grant under this program in an
amount sufficient to increase the employee ownership by 1.5% in 1998, 1.5% in
1999, 1.0% in 2000, 1.0% in 2001 and 1.0% in 2002 (subject to adjustment as
described below) based on the combined total number of shares of Common Stock
and Employee Preferred Stock outstanding as of the applicable July 15 grant
date, with the target price applicable to the additional shares to be issued
in such year equal to $12.10 in 1998, $13.31 in 1999, $14.64 in 2000, $16.11
in 2001 and $17.72 in 2002. Each such grant is cumulative and, where the
applicable target price is not met in the initial grant year, the applicable
grant is carried forward and is subject to grant in future years up to and
including July 15, 2002 in the manner described above. To prevent against the
dilutive effect of certain stock issuances, the ESIP provides for an
adjustment (the "Adjustment") to the grants described above in the event the
Company issues additional Common Stock to third parties for cash or property
or in lieu of cash payments on the 12% Reset Notes or the Mandatorily
Redeemable 12% Preferred Stock. To the extent that a sale of additional
capital stock for cash results in a decline in the percentage of employee
ownership of the combined total number of shares of Common Stock and Employee
Preferred Stock below a level equal to the Adjusted Base Ownership Percentage
(as defined in the ESIP), one-quarter of the difference between the new
percentage of employee ownership and the level just determined (but in no
event greater than 1.0% in each year) would be added to the amount of Employee
Preferred Stock to be granted to union employees and Common Stock to be
granted to non-union employees to be issued under the ESIP in each of the
years 1999 through 2002, assuming the target prices are met in each of such
years. Furthermore, if TWA issues additional shares of Common Stock with an
aggregate value of more than $20 million to third parties for cash or a
reduction in debt at a price equal to or greater than $11.00 per share (the
"Equity Issuance Acceleration Trigger"), the last two scheduled grants under
the ESIP are to be aggregated and these shares allocated equally to the
remaining installments in the program. In addition, pursuant to the ESIP,
employees have the right commencing as of July 15, 1997, to purchase over the
seven year term of the ESIP additional shares of Employee Preferred Stock in
amounts up to an aggregate of 2% of the combined total number of outstanding
Common Stock and Employee Preferred Stock at a discount of 20% from the then
current market price. Should all of the target prices be met or exceeded
within the time periods specified and should the entire discount stock
purchase option be exercised, the various employee stock trusts would receive
a total of 10.0% (as adjusted as described below) of the outstanding stock,
with the exact amount issued dependent upon the outstanding shares as of the
date of each grant and option exercise.
The ESIP separately provides that if additional shares are
distributed following the '95 Effective Date in respect of the '95
Reorganization, employees will be entitled to receive an additional number of
shares of Employee Preferred Stock and Common Stock such that the employees
will retain the same level of ownership. Union representatives and the
Company agreed to a one-time distribution pursuant to this provision of the
ESIP in an aggregate amount of 525,856 shares of Employee Preferred Stock and
Common Stock. As part of that agreement, since additional ESIP shares were
not issued to the employees in July 1997, an additional 405,750 shares of
Employee Preferred Stock and Common Stock were issued to the employee trusts
and, to the extent that additional shares are granted under the ESIP, the
Company will receive a credit towards the new grant for these previously
issued shares, in that amount.
While the $11.00 target price was not exceeded as of July 15,
1997 and no target price grant was made on that date, on February 17, 1998,
the Average Closing Price for the Company's Common Stock did exceed the $11.00
target price with respect to the first scheduled grant. As a result, the
initial grant in an amount sufficient to increase the employee ownership by
2.0% based on the then outstanding Common Stock and Employee Preferred Stock
will be made on July 15, 1998. Based on the current outstanding Voting Equity
(as defined in the ESIP) of 57,890,907 shares, the number of shares of
Employee Preferred Stock and Common Stock to be issued to the employees under
the ESIP on that date is 1,515,472. TWA is entitled to a credit against this
number in the amount of 405,750 shares due to the prior grant to employees as
described above. On March 4, 1998, the Average Closing Price for the Company's
Common Stock did exceed the $12.10 target price with respect to the 1998 grant
of 1.5%. As a result, the 1998 grant in an amount sufficient to increase the
employee ownership by 1.5% based on the then outstanding Common Stock and
Employee Preferred Stock will also be made on July 15, 1998. Based on the
current outstanding Voting Equity, the number of additional shares of Employee
Preferred Stock and Common Stock to be issued to the employees under the ESIP
on that date for the 1998 grant is 1,172,354 shares. The number of shares to
be granted could be increased if the last two grants are accelerated pursuant
to the Equity Issuance Acceleration Trigger. Furthermore, based on issuances
of Common Stock to date, the Adjustment has resulted in a revised grant
schedule of 1.5% in 1998, 1.84% in 1999, 1.34% in 2000, 1.34% in 2001 and
1.34% in 2002. Assuming the consummation of a planned transaction involving
the issuance of Common Stock, the grants for the years 1999-2002 would further
increase pursuant to the Adjustment to: 1.91% in 1999, 1.41% in 2000, 1.41% in
2001 and 1.41% in 2002. Finally, in the event that the planned transaction is
consummated and that the price per share is in excess of $11.00, the Equity
Issuance Acceleration Trigger will be met and the final two scheduled
installments will be aggregated and these shares will be allocated equally to
the remaining installments in the program. As a result, the remaining grants
would be as follows: 2.705% in 1997 (already vested and payable on July 15,
1998); 2.205% on July 15, 1998 (already vested and payable on July 15, 1998);
2.615% on July 15, 1999 if the target price exceeds $13.31 and 2.115% on July
15, 2000 if the target price exceeds $14.64. Shares granted or purchased at a
discount under the ESIP will generally result in a charge to earnings in an
amount equal to the fair value of shares granted and the discount for shares
purchased at the time when such shares are earned.
13. Stock Option Plans:
The Company's 1994 Key Employee Stock Incentive Plan (the
"KESIP"), as amended, provides for the award of incentive and nonqualified
stock options for up to 14% of the Common Stock and Employee Preferred Stock
outstanding as of the start of each fiscal year (approximately 7.0 million
shares at January 1, 1998). Generally, options granted under the KESIP have a
five year life after the final vesting period and vest at the rate of 34% upon
the first anniversary of the award date, 33% upon the second and 33% upon the
third anniversary of the award date. Unvested shares are subject to
forfeiture under certain circumstances.
A summary of the Company's outstanding stock options as of
December 31, 1997 and 1996, and changes during the years ended on those dates
is presented below:
<TABLE>
<CAPTION>
1997 1996 1995
------------------------- ------------------------ -------------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
--------- --------- --------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year............... 2,026,384 $5.61 2,228,000 $4.68 1,398,576 $4.64
Granted........................................ 2,027,155 6.80 453,000 11.65 829,424 4.74
Exercised...................................... (565,545) 4.66 (191,316) 4.64 -- --
Forfeited...................................... (145,814) 7.88 (463,300) 7.43 -- --
--------- --------- ---------
Outstanding at end of year..................... 3,342,180 6.39 2,026,384 5.61 2,228,000 4.68
========= ========= =========
Options exercisable at year-end................ 1,812,020 1,302,700 475,516
Weighted average fair value of options granted
during the year............................... $3.32 $6.79 $3.03
</TABLE>
The per share weighted average fair value of options granted
during 1997, 1996, and 1995 were estimated using the Black Scholes option
pricing model assuming risk-free interest rates of 5.97%, 6.6%, and 6.0% in
1997, 1996 and 1995, respectively, an expected volatility factor of 67.14% in
1997 and 85.00% in 1996 and 1995 and an expected life of three years.
The following table summarizes information about fixed stock
options at December 31, 1997:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
-------------------------------------------------- -----------------------------------
Number Weighted-Average Number
Outstanding Remaining Weighted-Average Exercisable Weighted-Average
Range of Exercise Prices at 12/31/97 Contractual Life Exercise Price at 12/31/97 Exercise Price
- ------------------------ ----------- ---------------- ---------------- --------------- -----------------
<S> <C> <C> <C> <C> <C>
$ 4.64 to 6.78 2,158,350 3.12 years $5.31 1,625,485 $5.11
7.06 to 8.12 833,350 5.19 years 7.47 12,575 8.01
8.47 to 15.81 339,380 5.42 years 10.24 166,820 11.88
16.25 to 18.37 11,100 3.05 years 17.85 7,140 18.10
--------- ---------
$ 4.64 to 18.37 3,342,180 1,812,020
========= =========
</TABLE>
As permitted under Statement of Financial Accounting Standards
No. 123 "Accounting for Stock-Based Compensation" ("SFAS No. 123"), the
Company applies APB Opinion No. 25 and related interpretations in accounting
for its plans. However, pro forma disclosures as if the Company adopted the
fair value based method of measurement for stock-based compensation plans
under SFAS No. 123 in 1997 and 1996 are presented below.
Had compensation cost for the Company's grants for stock-based
compensation plans been determined using the fair value method under SFAS No.
123, the Company's pro forma net loss, and net loss per common share for 1997,
1996 and the four months ended December 31, 1995 would approximate the amounts
below (in thousands except per share data):
<TABLE>
<CAPTION>
Year Ended Year Ended Four Months Ended
December 31, 1997 December 31, 1996 December 31, 1995
------------------------- ------------------------- -------------------------
As Reported Pro forma As Reported Pro forma As Reported Pro forma
------------ --------- ------------ --------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C>
Net loss.................. $ (110,835) $(114,942) $ (284,815) $(285,716) $ (30,138) $ (30,350)
Net loss per common share. $ (2.37) $ (2.45) $ (7.27) $ (7.30) $ (1.05) $ (1.06)
</TABLE>
The pro forma amounts do not give any effect to options granted
prior to January 1, 1995.
Operating results include charges of $2.2 million and $0.02
million for the year ended December 31, 1996 and the four months ended
December 31, 1995, respectively, to reflect the excess of the market price of
TWA's common stock on the date of grant over the exercise price, over the
vesting period. There were no such charges in 1997. The 1996 charge includes
$1.8 million in respect to the accelerated vesting of certain awards in
connection with the severance of certain officers.
14. Extraordinary Items:
In 1997 and 1996, the Company consummated a series of privately
negotiated exchanges with a significant holder of the 12% Senior Secured Reset
Notes which resulted in the return to the Company of approximately $51.8
million, in 1997, and $45.3 million, in 1996, in 12% Senior Secured Reset
Notes and approximately $1.4 million, in 1997, and $1.5 million, in 1996, in
accrued interest thereon in exchange for the issuance of approximately 7.7
million, in 1997, and 4.5 million, in 1996, in shares of Company Common Stock.
As a result of the exchange of the 12% Senior Secured Reset Notes, the Company
recorded an extraordinary non-cash charge of $7.2 million in 1997 and $8.2
million in 1996 representing the difference between the fair value of the
common stock issued (based upon the trading price of the Company's common
stock on the dates of exchanges) and the carrying value of the Senior Secured
Reset Notes retired.
During December 1997, the Company prepaid the remaining 12%
Senior Secured Reset Notes, incurring an extraordinary non-cash charge of $3.9
million relative to the write off of the unamortized discount on the Notes.
The Company recorded extraordinary charges of approximately
$9.9 million in 1997 and $1.6 million in 1996 due to the early extinguishment
of a portion of the PBGC Notes as a result of Karabu applying approximately
$90.4 million in 1997 and $6.4 million in 1996 in ticket proceeds as
prepayments on the PBGC Notes.
The extraordinary gain recorded in the four months ended
December 31, 1995 was due to the cancellation of debt as a result of a
settlement between TWE, a subsidiary, and an aircraft lessor. The
extraordinary gain recorded in the eight months ended August 31, 1995 was for
the discharge of indebtedness pursuant to the Company's '95 Reorganization.
15. Disposition of Assets:
Disposition of assets resulted in net losses of approximately
$1.1 million and $0.2 million during 1996 and for the eight months ended
August 31, 1995, respectively, and net gains of $16.0 million and $3.3 million
during 1997 and for the four months ended December 31, 1995, respectively.
In 1997, TWA recorded gains of $7.4 million in connection with
the sale of three gates at Newark International Airport and $8.6 million in
connection with the sale of spare flight equipment, aircraft, engines and other
miscellaneous property.
In 1996, TWA recorded a gain of approximately $8.0 million in
connection with the hull insurance settlement for the aircraft destroyed in
the Flight 800 incident. The gain was offset by a loss of $8.3 million on the
sale of expendable aircraft parts and losses of $0.8 million on other
miscellaneous dispositions.
In November 1995, TWA entered into an agreement to sublease
certain of TWA's leased commissary facilities in Los Angeles. As part of this
agreement, TWA sold its commissary furnishings and equipment, resulting in a
gain of $2.0 million.
16. Special Charges and Other Nonrecurring Items:
The 1996 operating loss includes an aggregate of approximately
$85.9 million in special charges and nonrecurring items, primarily as follows:
(i) approximately $26.7 million to reflect the write-off of the carrying value
of TWA's New York-Athens route authority over which TWA has elected to
discontinue service, (ii) approximately $53.7 million to reflect the reduction
in carrying value of TWA's owned L-1011 and B-747 aircraft and related spare
parts which are expected to be retired from service over the next year and
(iii) approximately $5.5 million for employee severance liabilities related to
the termination of service to Athens and Frankfurt. The write-down of owned
aircraft and related spare parts was based upon management's estimates of the
net proceeds to be received upon the disposition of these assets.
Additionally, the Company has obligations under operating leases for B-747
aircraft aggregating approximately $36 million over the next six years.
Management currently estimates that it will be able to recover substantially
all of these costs pursuant to subleases of these aircraft and, accordingly,
no provision has been made for any such costs at this time. Management's
estimates relative to the costs of the retirement of the L-1011 and B-747
fleets and related spare parts are based upon current market conditions,
preliminary discussions with interested parties and other factors. The actual
costs could differ materially from the current estimates.
The operating income for the eight months ended August 31,
1995, includes a special charge of $1.7 million for shut-down related expenses
of TWE.
17. Other Charges and Credits-net:
<TABLE>
<CAPTION>
(Amounts in Thousands) Predecessor
Reorganized Company Company
-------------------------------------------- --------------
Year Year Four Months Eight Months
Ended Ended Ended Ended
December 31, December 31, December 31, August 31,
1997 1996 1995 1995
------------- ------------ ------------ --------------
<S> <C> <C> <C> <C>
Expenses associated with the restructuring of debt and flight
equipment leases............................................. $ -- $ -- $ 3,000 $ 11,000
Provisions for losses resulting from claims and litigation
judgments against TWA........................................ 143 235 26 351
Foreign currency transaction (gains) losses-net............... 578 (642) 1,156 384
Finance charge income earned on receivables carried by
TWA.......................................................... (8,112) (8,030) (2,662) (6,198)
Credits related to settlement of various contract disputes,
litigation and other matters................................. (289) (2,500) -- --
Credits related to vendor discounts applied................... (5,412) (7,074) (2,282) (4,109)
Equity in (earnings)/losses of TWA's investment in
Worldspan (Note 4)........................................... (11,305) (11,919) 11,535 (3,607)
Miscellaneous other nonoperating charges (credits)-net........ (1,035) (668) (3,162) (200)
------------ ------------ ---------- ------------
Total Other Charges and Credits-net.......................... $ (25,432) $ (30,598) $ 7,611 $ (2,379)
============ ============ ========== ============
</TABLE>
18. Aircraft Commitments:
TWA has entered into agreements with AVSA, S.A.R.L. and
Rolls-Royce plc relating to the purchase of ten A330-300 twin-engine wide body
aircraft and related engines, spare parts and equipment for an aggregate
purchase price of approximately $1.0 billion. The agreements, as amended,
require the delivery of the aircraft in 2001 and 2002 and provide for the
purchase of up to ten additional aircraft. TWA has not yet made arrangements
for the permanent financing of the purchases subject to the agreements. In the
event of cancellation, predelivery payments of approximately $18 million would
be subject to forfeiture.
In February 1996, TWA executed definitive agreements providing
for the operating lease of 10 new B-757 aircraft, all of which have been
delivered. These aircraft have an initial lease term of 10 years. Although
individual aircraft rentals escalate over the term of the leases, aggregate
rental obligations are estimated to average approximately $59 million per
annum over the lease terms. The Company also entered into an agreement in
February 1996 with Boeing for the purchase of ten B-757 aircraft and related
engines, spare parts and equipment for an aggregate purchase price of
approximately $500 million. The agreement also provides for the purchase of
up to ten additional aircraft. As of February 1, 1998, TWA had taken delivery
of five of such aircraft and had five on firm order. Furthermore, to the
extent TWA exercises its options for additional aircraft, the Company will
have the right to an equal number of additional option aircraft. Four of the
five aircraft already delivered were manufacturer financed and one was leased.
TWA has obtained commitments for debt financing for approximately 80% of the
total costs associated with the acquisition of four of the remaining five
aircraft which have not been delivered and obtained commitments for 100% lease
financing of the total costs of the remaining fifth aircraft. Such
commitments are subject to, among other things, so-called material adverse
change clauses which make the availability of such debt and lease financing
dependent upon the financial condition of the Company.
Required future expenditures under the purchase agreements
described above, including an estimate of price escalation as defined in the
subject agreements and exclusive of secured financing, are as follows (amounts
in millions):
AVSA Boeing
---- ------
1998.................. $52.1 $48.5
1999.................. 52.4 194.0
2000.................. -- --
2001.................. 610.7 --
2002.................. 272.0 --
During 1997, TWA reached agreements for the lease of two new
B-767-300ER aircraft, one of which has been delivered in March 1998 and the
second is scheduled to be delivered in April 1998. The longer-range 300ER
series aircraft will be utilized on TWA's international routes.
The Company has entered into an agreement to acquire from the
manufacturer fifteen new MD-83s. The long-term leasing arrangement provides
for delivery of the aircraft between the second quarter of 1997 and the first
quarter of 1999. The Company has taken delivery of seven of the MD-83
aircraft and expects to take delivery of six additional planes during the
remainder of 1998 and two additional planes in 1999.
On February 25, 1998, the Company's Board of Directors approved
letters of intent to acquire 24 new MD-83 aircraft from the manufacturer. The
proposed long-term leasing arrangement provides for delivery of the aircraft in
1999. Although the Company anticipates that rental payments for such aircraft
would represent a substantial financial commitment, it is not possible to
accurately estimate the amount of such payments at this time. There can be no
assurance that such aircraft acquisition program will be concluded or as to
the final terms of any such program.
19. Fresh Start Reporting:
Pursuant to SOP 90-7, TWA adopted fresh start reporting which
has resulted in the creation of a new reporting entity and the Company's
assets and liabilities being adjusted to reflect fair values on the '95
Effective Date. For accounting purposes, the '95 Effective Date was deemed to
be September 1, 1995. In the fresh start reporting, an aggregate value of
$270 million was assigned to TWA's Common Stock and Employee Preferred Stock.
These values were established by management with the assistance of its
financial advisors. These valuations considered TWA's expected future
performance, relevant industry and economic conditions, and analyses and
comparisons with comparable companies.
The reorganization value of TWA has been allocated to the
Reorganized Company's assets and liabilities in a manner similar to the
purchase method of accounting for a business combination. Management obtained
valuations from independent third parties which, along with other market and
related information and analyses, were utilized in assigning fair values to
assets and liabilities. A summary of the impact of the '95 Reorganization and
the related fresh start adjustments is presented below. The fresh start
adjustments resulted in, among other things, the allocation of substantial
amounts to reorganization value in excess of amounts allocable to identifiable
assets, the amortization of which, while not requiring the use of cash, will
significantly affect future operating results.
A summary of the impact of the '95 Reorganization Plan and the
related fresh start adjustments is presented below (amounts in thousands).
<TABLE>
<CAPTION>
September 1, 1995
------------------------------------------------------------------------------
Predecessor Debt Fresh Start Other Reorganized
Company Discharge(a) Adjustments(b) Adjustments(c) Company
<S> <C> <C> <C> <C> <C>
Current Assets:
Cash and cash equivalents...................... $ 239,796 $ -- $ -- $ -- $ 239,796
Receivables ................................... 297,022 (1,449) -- -- 295,573
Spare parts, materials and supplies............ 146,191 -- -- -- 146,191
Prepaid expenses and other..................... 60,947 -- -- -- 60,947
----------- --------- ------------- -------------- ----------
Total Current Assets....................... 743,956 (1,449) -- -- 742,507
----------- --------- ------------- -------------- ----------
Property and Equipment.......................... 631,087 -- (24,239) -- 606,848
----------- --------- ------------- -------------- ----------
Other Assets:
Investment in affiliated companies............. 110,325 -- -- -- 110,325
Other investments and receivables.............. 163,715 -- -- -- 163,715
Routes, gates and slots........................ 737,171 -- (278,722) -- 458,449
Reorganization value in excess of amounts
allocable to identifiable assets............. 153,840 -- -- 685,224 839,064
Other assets................................... 28,531 -- (9,392) -- 19,139
----------- --------- ------------- -------------- ----------
Total Other................................ 1,193,582 -- (288,114) 685,224 1,590,692
----------- --------- ------------- -------------- ----------
Total........................................... $ 2,568,625 $ (1,449) $ (312,353) $ 685,224 $2,940,047
=========== ========= ============= ============== ==========
Current Liabilities:
Current maturities of long-term debt........... $472,510 $(404,665) $ -- $ -- $ 67,845
Current obligations under capital leases....... 42,643 -- (647) -- 41,996
Advance ticket sales........................... 253,642 -- -- -- 253,642
Accounts payable and other accrued
expenses..................................... 518,030 24,466 3,739 -- 546,235
----------- --------- ------------- -------------- ----------
Total...................................... 1,286,825 (380,199) 3,092 -- 909,718
----------- --------- ------------- -------------- ----------
Liabilities Subject to Chapter 11
Reorganization Proceedings..................... 748,855 (748,855) -- -- --
----------- --------- ------------- -------------- ----------
Noncurrent Liabilities and Deferred Credits:
Long-term debt, less current maturities........ -- 765,435 -- -- 765,435
Obligations under capital leases, less current
obligations.................................. 317,196 -- (42,440) -- 274,756
Other noncurrent liabilities and deferred
credits...................................... 673,428 18,612 (30,762) -- 661,278
----------- --------- ------------- -------------- ----------
Total...................................... 990,624 784,047 (73,202) -- 1,701,469
----------- --------- ------------- -------------- ----------
Redeemable Preferred Stock...................... -- 58,860 -- -- 58,860
----------- --------- ------------- -------------- ----------
Shareholders' Equity (Deficiency):
Old Preferred Stock............................ 125 -- -- (125) --
Old Common Stock............................... 200 -- -- (200) --
Employee Preferred Stock....................... -- -- -- 53 53
New Common Stock............................... -- -- -- 172 172
Additional paid-in capital..................... 161,692 143,800 -- (35,717) 269,775
Accumulated Deficit............................ (619,696) 140,898 (242,243) 721,041 --
----------- --------- ------------- -------------- ----------
Total...................................... (457,679) 284,698 (242,243) 685,224 270,000
----------- --------- ------------- -------------- ----------
Total........................................... $ 2,568,625 $ (1,449) $ (312,353) $ 685,224 $2,940,047
=========== ========= ============= ============== ==========
</TABLE>
(a) To record the discharge of indebtedness pursuant to the '95 Reorganization
and reclassification of debt between current and non-current based upon its
revised terms. Debt securities, Mandatorily Redeemable 12% Preferred Stock,
Ticket Vouchers and Contingent Payment Rights issued pursuant to the '95
Reorganization have been recorded at their estimated fair values. The excess
of indebtedness eliminated over the fair value of securities issued in
settlement of those claims, approximately $140.9 million, is reflected as an
extraordinary item in the eight months ended August 31, 1995.
(b) To record adjustments to reflect assets and liabilities at fair values. The
adjustments to record the fair values of assets and liabilities resulted in
a nonrecurring charge to reorganization items of approximately $228.8
million in the eight months ended August 31, 1995. Charges to reorganization
items were recorded for various fees and expenses related to the
consummation of the '95 Plan aggregating approximately $13.4 million.
Significant elements of the adjustments to record the fair value of assets
and liabilities are summarized below:
-- Adjustments to reflect the fair value of owned property and equipment
under capital leases.
-- Adjustments to reflect the fair value of TWA's international route
authorities, take-off and landing time slots and airport gate leaseholds.
-- Adjustments to record the present value of the liabilities for
postretirement medical and life insurance benefits and certain foreign
pension plans to reflect the current postretirement benefit obligation
and projected benefit obligation, respectively, utilizing current
discount rates.
-- An adjustment to reduce deferred income taxes to reflect the impact of
the preceding adjustments.
(c) To record adjustments to reflect the elimination of the remaining deficit in
shareholders' equity after the adjustments arising from (a) and (b) above
and to reflect the associated reorganization value in excess of amounts
allocable to identifiable assets.
20. Supplemental Financial Information (Unaudited):
Selected consolidated financial data (unaudited) for each
quarter within 1997 and 1996 are as follows:
<TABLE>
<CAPTION>
First Quarter Second Quarter Third Quarter Fourth Quarter
---------------- --------------- ---------------- ---------------
(Amounts in Thousands)
<S> <C> <C> <C> <C>
Year Ended December 31, 1997
Operating revenues.............................. $ 762,306 $ 844,442 $ 908,381 $ 812,823
========= ========= ========== =========
Operating income (loss)......................... $ (99,486) $ 5,932 $ 63,757 $ 537
========= ========= ========== =========
Disposition of assets, gains (losses) - net..... $ 9,350 $ 3,030 $ 2,828 $ 796
========= ========= ========== =========
Income (loss) before extraordinary items........ $ (70,032) $ (11,995) $ 13,276 $ (21,111)
========= ========= ========== =========
Extraordinary items............................. $ (1,532) $ (2,405) $ (6,985) $ (10,051)
========= ========= ========== =========
Net income (loss)............................... $ (71,564) $ (14,400) $ 6,291 $ (31,162)
========= ========= ========== =========
Per share amounts:
Basic:
Earnings (loss) before extraordinary items... $ (1.51) $ (0.31) $ 0.17 $ (0.44)
========= ========= ========== =========
Extraordinary items.......................... $ (0.03) $ (0.05) $ (0.13) $ (0.18)
========= ========= ========== =========
Net income (loss)............................ $ (1.54) $ (0.36) $ 0.04 $ (0.62)
========= ========= ========== =========
Diluted(a):
Net income (loss)............................ $ (1.54) $ (0.36) $ 0.04 $ (0.62)
========= ========= ========== =========
Year Ended December 31, 1996
Operating revenues.............................. $ 782,433 $ 965,808 $1,002,867 $ 803,299
========= ========= ========== =========
Special charges (Note 16)....................... $ -- $ -- $ -- $ 85,915
========= ========= ========== =========
Operating income (loss)......................... $ (54,191) $ 62,028 $ 26,019 $(232,383)
========= ========= ========== =========
Disposition of assets, gains (losses) - net..... $ (214) $ 239 $ (87) $ (1,073)
========= ========= ========== =========
Income (loss) before extraordinary items........ $ (37,107) $ 25,262 $ (6,905) $(256,277)
========= ========= ========== =========
Extraordinary items............................. $ -- $ -- $ (7,420) $ (2,368)
========= ========= ========== =========
Net income (loss)............................... $ (37,107) $ 25,262 $ (14,325) $(258,645)
========= ========= ========== =========
Per share amounts:
Basic:
Earnings (loss) before extraordinary items
and special dividend requirements........... $ (0.98) $ 0.48 $ (0.24) $ (5.51)
Extraordinary items and special dividend ========= ========= ========== =========
requirements................................ $ (0.48) $ -- $ (0.16) $ (0.05)
========= ========= ========== =========
Net income (loss)............................ $ (1.46) $ 0.48 $ (0.40) $ (5.56)
========= ========= ========== =========
Diluted(a)
Net income (loss)............................ $ (1.46) $ 0.44 $ (0.40) $ (5.56)
========= ========= ========== =========
</TABLE>
- ----------
(a) Amounts have been restated pursuant to SFAS No. 128.
The results for each period include all adjustments which are,
in the opinion of management, necessary for a fair statement of the results
for the interim periods.
The consolidated financial results on an interim basis are not
necessarily indicative of future financial results on either an interim or
annual basis. TWA's air transportation business is highly seasonal with the
second and third quarters of the calendar year historically producing
substantially better operating results than the first and fourth quarters.
The results for the fourth quarter of 1996 include an
adjustment to reduce aircraft fuel and oil costs by approximately $8.8
million, as a result of federal fuel excise taxes paid which were refunded to
the Company.
21. Foreign Operations:
TWA conducts operations in various foreign countries,
principally in Europe and the Middle East. Operating revenues from foreign
operations were approximately $518.1 million in 1997, $719.2 million in 1996,
$228.7 million in the four months ended December 31, 1995 and $474.4 million
in the eight months ended August 31, 1995.
22. Disclosures about Fair Values of Financial Instruments:
SFAS No. 107, "Disclosures About Fair Value of Financial
Instruments" requires disclosures with regards to fair values of all financial
instruments, whether recognized or not recognized in the balance sheet,
subject to certain exceptions. Solely for purposes of complying with this
accounting standard, the Company has estimated the fair value of certain of
its financial instruments, as further described below. Because no market
exists for a significant portion of TWA's financial instruments, fair value
estimates provided below are based on judgments regarding current economic
conditions, risk characteristics of various financial instruments, and other
factors. These estimates are subjective in nature and involve uncertainties
and matters of significant judgment and therefore cannot be determined with
precision. Changes in assumptions could significantly affect the estimates.
The discussion of financial instruments below conforms with the presentation
in the Consolidated Balance Sheet and relates to the amounts at December 31,
1997 and 1996.
(a) Cash, cash equivalents and receivables: The carrying amounts
of these assets are estimated to approximate fair value due to the
generally short maturities of these instruments.
(b) Other investments and receivables: The carrying amounts of
these assets are estimated to approximate fair value due to the
generally short maturities of the underlying instruments which are,
however, classified as long-term assets because TWA's ability to access
these amounts is generally restricted by contractual provisions.
(c) Accounts payable and other accrued liabilities: The carrying
amounts of these liabilities are estimated to approximate fair value
due to the generally short maturities of these instruments.
(d) Debt: On December 31, 1997, none of TWA's debt was publicly
traded, while at December 31, 1996, the Company's publicly-traded debt
had a carrying value of $111.8 million and a market value of $126.0
million. The Company believes the fair value of the remaining debt
which had an aggregate carrying value of approximately $787.9 million
and $589.1 million at December 31, 1997 and 1996, respectively, was
approximately $800.4 million and $466.4 million on those dates.
In connection with credit card sales, the Company has agreed to
maintain specified levels of deposits or a letter of credit. At December 31,
1997, a letter of credit of $15.0 million had been issued for the Company's
benefit to provide the required level of deposits. Additionally, in 1997, a
letter of credit in the amount of $2.6 million was issued to secure the
Company's obligations under certain workers compensation agreements.
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. Indemnification of Directors and Officers
Under the Delaware General Corporation Law (the "DGCL"), directors,
officers, employees and other individuals may be indemnified against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement in
connection with specified actions, suits or proceedings, whether civil,
criminal, administrative or investigative (other than a derivative action) if
they acted in good faith and in a manner they reasonably believed to be in or
not opposed to the best interests of TWA and, with respect to any criminal
action or proceeding, had no reasonable cause to believe their conduct was
unlawful. A similar standard of care is applicable in the case of a derivative
action, except that indemnification only extends to expenses (including
attorneys' fees) incurred in connection with the defense or settlement of such
an action, and the DGCL requires court approval before there can be any
indemnification of expenses where the person seeking indemnification has been
found liable to TWA.
The eleventh article of TWA's Third Amended and Restated Certificate of
Incorporation ("Article Eleventh") provides that the Company shall indemnify any
person who was or is a party or is threatened to be made a party to, or
testifies in, any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative in nature, by reason of
the fact that such person is or was a director, officer, employee or agent of
the Company, or is or was serving at the request of the Company as a director,
officer, employee or agent of another corporation, partnership, joint venture,
employee benefit plan, trust or other enterprise, against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by such person in connection with such action, suit or
proceeding to the full extent permitted by law, and the Company may adopt
By-Laws or enter into agreements with any such person for the purpose of
providing for such indemnification.
To the extent that a director or officer of the Company has been successful
on the merits or otherwise (including without limitation settlement by nolo
contendere) in defense of any action, suit or proceeding referred to in the
immediately preceding paragraph, or in defense of any claim, issue or matter
therein, such person shall be indemnified against expenses (including attorneys'
fees) actually and reasonably incurred by such person in connection therewith.
Expenses incurred by an officer, director, employee or agent in defending
or testifying in a civil, criminal, administrative or investigative action, suit
or proceeding may be paid by the Company in advance of the final disposition of
such action, suit or proceeding upon receipt of an undertaking by or on behalf
of such director or officer to repay such amount if it shall ultimately be
determined that such director or officer is not entitled to be indemnified by
the Company against such expenses as authorized by Article Eleventh and the
Company may adopt By-Laws or enter into agreements with such persons for the
purpose of providing for such advances.
The indemnification permitted by Article Eleventh shall not be deemed
exclusive of any other rights to which any person may be entitled under any
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 shall 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.
The Company shall have power to purchase and maintain insurance on behalf
of any person who is or was a director, officer, employee or agent of the
Company, or is or was serving at the request of the Company as a director,
officer, employee or agent of another corporation, partnership, joint venture,
employee benefit plan trust or other enterprise, against any liability asserted
against such person and incurred by such person in any such capacity, or arising
out of such person's status as such, whether or not the Company would have the
power to indemnify such person against such liability under the provisions of
Article Eleventh or otherwise.
If the DGCL is amended to further expand the indemnification permitted to
directors, officers, employees or agents of the Company, then the Company shall
indemnify such persons to the fullest extent permitted by the DGCL, as so
amended.
The obligations of the Company to indemnify any person serving as one of
its directors, officers or employees as of or following the Company's '93
Reorganization, by reason of such person's past or future service in such a
capacity, or as a director, officer or employee of another corporation,
partnership or other legal entity, to the extent provided in Article Eleventh or
in similar constituent documents or by statutory law or written agreement of or
with the Company, shall be deemed and treated as executory contracts assumed by
the Company pursuant to the Company's '93 Reorganization. Accordingly, such
indemnification obligations survive and were unaffected by the entry of the
order confirming the Company's '93 Reorganization. The obligations of the
Company to indemnify any person who, as of the '93 Reorganization, was no longer
serving as one of its directors, officers or employees, which indemnity
obligation arose by reason of such person's prior service in any such capacity,
or as a director, officer or employee of another corporation, partnership or
other legal entity, to the extent provided in the certificate of incorporation,
by-laws or other constituent documents or by statutory law or written agreement
of or with TWA were terminated and discharged pursuant to Section 502(e) of the
United States Bankruptcy Code or otherwise, as of the date the '93
Reorganization was confirmed. Nothing contained in the Second Amended and
Restated Certificate of Incorporation of the Company shall be deemed to
reinstate any obligation of the Corporation to indemnify any person or entity,
which was otherwise released under or in connection with the Comprehensive
Settlement Agreement entered into pursuant to the '93 Reorganization.
ITEM 21. Exhibits
(a) Exhibits
*2.1 -- Joint Plan of Reorganization, dated May 12, 1995 (Appendix B to the
Registrant's Registration Statement on Form S-4, Registration Number
33-84944, as amended)
*2.2 -- Modifications to Joint Plan of Reorganization, dated July 14, 1995
and Supplemental Modifications to Joint Plan of Reorganization dated
August 2, 1995 (Exhibit 2.5 to 6/95 10-Q)
*2.3 -- Findings of Fact, Conclusions of Law and Order Confirming Modified
Joint Plan of Reorganization, dated August 4, 1995, with Exhibits A-B
attached (Exhibit 2.6 to 6/95 10-Q)
*2.4 -- Final Decree, dated December 28, 1995, related to the '95
Reorganization (Exhibit 2.7 to 12/31/95 Form 10-K)
*3(i)-- Third Amended and Restated Certificate of Incorporation of the
Registrant (Exhibit 3(i) to the Registrant's Registration Statement
on Form S-4, Registration Number 333-26645)
*3(ii)-- Amended and Restated By-Laws of Trans World Airlines, Inc., effective
May 24, 1996 (Exhibit 3(ii) to 6/96 10-Q)
*4.1 -- Voting Trust Agreement, dated November 3, 1993, between TWA and
LaSalle National Trust, N.A. as trustee (Exhibit 4.3 to 9/93 10-Q)
*4.2 -- IAM Trans World Employees' Stock Ownership Plan and related Trust
Agreement, dated August 31, 1993, between TWA, the IAM Plan Trustee
Committee and the IAM Trustee (Exhibit to 9/93 10-Q)
*4.3 -- IFFA Trans World Employees' Stock Ownership Plan and related Trust
Agreement, dated August 31, 1993, between TWA, the IFFA Plan Trustee
Committee and the IFFA Trustee (Exhibit 4.5 to 9/93 10-Q)
*4.4 -- Trans World Airlines, Inc. Employee Stock Ownership Plan, dated
August 31, 1993, First Amendment thereto, dated October 31, 1993, and
related Trust Agreement, dated August 31, 1993, between TWA and the
ESOP Trustee (Exhibit 4.6 to 9/93 10-Q)
*4.5 -- ALPA Stock Trust, dated August 31, 1993, between TWA and the ALPA
Trustee (Exhibit 4.7 to 9/93 10-Q)
*4.6 -- Stockholders Agreement, dated November 3, 1993, among TWA, LaSalle
National Trust, N.A., as Voting Trustee and the ALPA Trustee, IAM
Trustee, IFFA Trustee and Other Employee Trustee (each as defined
therein), as amended by the Addendum to Stockholders dated November
3, 1993 (Exhibit 4.8 to 9/93 10-Q)
*4.7 -- Registration Rights Agreement, dated November 3, 1993, between TWA
and the Initial Significant Holders (Exhibit 4.9 to 9/93 10-Q)
*4.8 -- Indenture between TWA and Harris Trust and Savings Bank, dated
November 3, 1993 relating to TWA's 8% Senior Secured Notes Due 2000
(Exhibit 4.11 to 9/93 10-Q)
*4.9 -- Indenture between TWA and American National Bank and Trust Company of
Chicago, N.A., dated November 3, 1993 relating to TWA's 8% Secured
Notes Due 2001 (Exhibit 4.12 to 9/93 10-Q)
*4.10-- The TWA Air Line Pilots 1995 Employee Stock Ownership Plan, effective
as of January 1, 1995 (Exhibit 4.12 to 9/95 10-Q)
*4.11-- TWA Air Line Pilots Supplemental Stock Plan, effective September 1,
1994 (Exhibit 4.13 to 9/95 10-Q)
*4.12-- TWA Air Line Pilots Supplemental Stock Plan Trust, effective August
23, 1995 (Exhibit 4.14 to 9/95 10-Q)
*4.13-- TWA Air Line Pilots Supplemental Stock Plan Custodial Agreement,
effective August 23, 1995 (Exhibit 4.15 to 9/95 10-Q)
*4.14-- Form of Indenture relating to TWA's 8% Convertible Subordinated
Debentures Due 2006 (Exhibit 4.16 to Registrant's Registration
Statement on Form S-3, No. 333-04977)
*4.15-- Indenture dated as of March 31, 1997 between TWA and First Security
Bank, National Association relating to TWA's 12% Senior Secured Notes
due 2002 (Exhibit 4.15 to Registrant's Registration Statement on Form
S-4, No. 333-26645)
*4.16-- Form of 12% Senior Secured Note due 2002 (contained in Indenture
filed as Exhibit 4.15 to 12/31/97 Form 10-K)
*4.17-- Registration Rights Agreement dated as of March 31, 1997 between the
Company and the Initial Purchaser relating to the 12% Senior Secured
Notes due 2002 and the warrants to purchase 126.26 shares of TWA
Common Stock (Exhibit 4.17 to Registrant's Registration Statement on
Form S-4, No. 333-26645)
*4.18-- Warrant Agreement dated as of March 31, 1997 between the Company and
American Stock Transfer & Trust Company, as Warrant Agent, relating
to warrants to purchase 126.26 shares of TWA Common Stock (Exhibit
4.18 to Registrant's Registration Statement on Form S-4, No.
333-26645)
*4.19-- Form of Indenture relating to TWA's 9 1/4% Convertible Subordinated
Debentures due 2007 (Exhibit 4.19 to Registrant's Registration
Statement on Form S-3, No. 33-44689)
*4.20-- Registration Rights Agreement dated as of December 2, 1997 between
the Company and the Initial Purchasers (Exhibit 4.20 to Registrant's
Registration Statement on Form S-3, No. 33-44689)
*4.21-- Indenture dated as of December 9, 1997 by and between TWA and First
Security Bank, National Association, as Trustee, relating to TWA's 11
1/2% Senior Secured Notes due 2004 (Exhibit 4.21 to Registrant's
Registration Statement on Form S-3, No. 33-44661)
*4.22-- Form of 11 1/2% Senior Secured Note due 2004 (contained in Indenture
filed as Exhibit 4.21 to 12/31/97 Form 10-K)
*4.23-- Registration Rights Agreement dated as of December 9, 1997 among the
Company and Lazard Freres & Co. LLC and PaineWebber Incorporated, as
initial purchasers, relating to TWA's 11 1/2% Senior Secured Notes
due 2004 (Exhibit 4.23 to Registrant's Registration Statement on
Form S-3, No. 33-44661)
*4.24-- Sale and Service Agreement dated as of December 30, 1997 between TWA
and Constellation Finance LLC, as purchaser, relating to TWA's
receivables (Exhibit 4.24 to Registrant's Registration Statement on
Form S-3, No. 33-44661)
4.25-- Registration Rights Agreement dated as of March 3, 1998 between the
Company and the Initial Purchaser
4.26-- Indenture dated as of March 3, 1998 by and between TWA and First
Security Bank, National Association, as Trustee, relating to TWA's
11 3/8% Senior Notes due 2006
4.27-- Aircraft Sale and Note Purchase Agreement dated as of April 9, 1998
among TWA, First Security Bank, National Association, as Owner
Trustee and Seven Sixty Seven Leasing, Inc.
4.28-- Indenture dated as of April 21, 1998 by and between TWA and First
Security Bank, National Association, as Trustee, relating to TWA's
11 3/8% Senior Secured Notes due 2003
4.29-- Form of 11 3/8% Senior Secured Notes due 2003 (contained as Exhibit
1 to Rule 144A/Regulation Appendix to Indenture in Exhibit 4.28)
4.30-- Form of Mandatory Conversion Equity Note due 1999 (contained as
Exhibit A to Indenture in Exhibit 4.28)
5 -- Opinion of Davis Polk & Wardwell, Counsel of the Registrant,
regarding the validity of the securities being registered
*10.1.1-- Asset Purchase Agreement, dated as of November 4, 1993, between TWA
and St. Louis (Exhibit 10.2 to 9/93 10-Q)
*10.1.2-- Equipment Operating Lease Agreement, dated November 4, 1993, between
TWA and St. Louis (Exhibit 10.2 to 9/93 10-Q)
*10.1.3-- Cargo Use Amendment, dated November 4, 1993 between TWA and St.
Louis (Exhibit F to the Asset Purchase Agreement) (Exhibit 10.2 to
9/93 10-Q)
*10.1.4-- Use Amendment 1993, dated November 4, 1993, between TWA and St.
Louis (Exhibit E to the Asset Purchase Agreement) (Exhibit 10.2 to
9/93 10-Q)
*10.2.1-- Amendment Number One to the Note Purchase and Security Agreement,
dated October 26, 1993, between TWA and Rolls-Royce (Exhibit 10.3 to
9/93 10-Q)
*10.2.2-- Amendment Number One to the Equipment Purchase Contract, dated
October 26, 1993, between TWA and Rolls-Royce (Exhibit 10.3 to 9/93
10-Q)
*10.3-- Amendment Number Two to the AVSA Agreement dated June 1, 1989 between
TWA and AVSA, dated August 25, 1993 (Exhibit 10.4 to 9/93 10-Q)
*10.4.1-- First Amendment to Aircraft Installment Sale Agreement, dated
November 1, 1993, among TWA, the Vendors, and ITOCHU with respect to
aircraft N605TW (Exhibit 10.5 to 9/93 10-Q)
*10.4.2-- First Amendment to Aircraft Installment Sale Agreement, dated
November 1, 1993, among TWA, the Vendors, and ITOCHU with respect to
aircraft N603TW (Exhibit 10.5 to 9/93 10-Q)
*10.4.3-- First Amendment to Security Agreement and Chattel Mortgage, dated
November 1, 1993, among TWA, the Vendors, and ITOCHU, as to ITOCHU
Amendment No. 1 (Exhibit 10.5 to 9/93 10-Q)
*10.4.4-- First Amendment to Security Agreement and Chattel Mortgage, dated
November 1, 1993, among TWA, the Vendors, and ITOCHU, as to ITOCHU
Amendment No. 2 (Exhibit 10.5 to 9/93 10-Q)
*10.5.1-- Deferral Agreement and First Amendment to Aircraft Installment Sale
Agreement No. 1, dated November 1, 1993, among TWA, the Vendors, and
ORIX with respect to aircraft N601TW (Exhibit 10.6 to 9/93 10-Q)
*10.5.2-- Deferral Agreement and First Amendment to Aircraft Installment Sale
Agreement, dated November 1, 1993, among TWA, the Vendors, and ORIX
with respect to aircraft N603TW (Exhibit 10.6 to 9/93 10-Q)
*10.5.3-- First Amendment to Security Agreement and Chattel Mortgage, dated
November 1, 1993, among TWA, the Vendors, and ORIX, as to ORIX
Amendment No. 1 (Exhibit 10.6 to 9/93 10-Q)
*10.5.4-- First Amendment to Security Agreement and Chattel Mortgage, dated
November 1, 1993, among TWA, the Vendors, and ORIX, as to ORIX
Amendment No. 2 (Exhibit 10.6 to 9/93 10-Q)
*10.6.1-- Purchase Agreement, dated October 5, 1993, between TWA and Pacific
AirCorp 747, Inc. with respect to aircraft N93107 and N93108 (Exhibit
10.7 to 9/93 10-Q)
*10.6.2-- Lease Agreement 107, dated October 5, 1993, between Pacific AirCorp
747, Inc. and TWA with respect to aircraft N93107 (Exhibit 10.7 to
9/93 10-Q)
*10.6.3-- Lease Agreement 108, dated October 5, 1993, between Pacific AirCorp
747, Inc. and TWA with respect to aircraft N93108 (Exhibit 10.7 to
9/93 10-Q)
*10.7-- '92 Labor Agreements (Exhibits 2.1, 2.2 and 2.3 to 9/92 8-K)
*10.8-- Comprehensive Settlement Agreement, dated January 5, 1993 (Exhibit
10(iv)(1) to '92 10-K)
*10.8.1-- Omnibus Amendment and Supplement to Agreements between TWA and
Karabu Corp. dated as of March 28, 1994 (Exhibit 10.9.1 to
Registrant's Registration Statement on Form S-4, No. 33-84944)
*10.9-- Letter Agreement, dated April 15, 1994, between TWA and Richard P.
Magurno relating to employment by TWA (Exhibit 10.14 to 3/94 10-Q)
*10.10-- Form of Indemnification Agreement between TWA and individual members
of the TWA Board of Directors relating to indemnification of director
(Exhibit 10.16 to 6/94 10-Q)
*10.11.1-- Purchase Agreement, dated as of December 15, 1993 between TWA and
Pacific AirCorp DC9, Inc. with respect to aircraft N927L and N928L
(Exhibit 10.20.1 to Registrant's Registration Statement on Form S-4,
No. 33-84944)
*10.11.2-- Lease Agreement 927, dated as of December 15, 1993, between Pacific
AirCorp DC9, Inc. and TWA with respect to aircraft N927L (Exhibit
10.20.2 to Registrant's Registration Statement on Form S-4, No.
33-84944)
*10.11.3-- Lease Agreement 928, dated as of December 15, 1993, between Pacific
AirCorp DC9, Inc. and TWA with respect to aircraft N928L (Exhibit
10.20.3 to Registrant's Registration Statement on Form S-4, No.
33-84944)
*10.12.1-- Aircraft Purchase Agreement between TWA and Mitsui & Co. (U.S.A.),
Inc. dated March 31, 1994, with respect to aircraft N950U (Exhibit
10.21.1 to Registrant's Registration Statement on Form S-4, No. 33-
84944)
*10.12.2-- Aircraft Purchase Agreement between TWA and Mitsui & Co. (U.S.A.),
Inc., dated March 31, 1994, with respect to aircraft N953U (Exhibit
10.21.2 to Registrant's Registration Statement on Form S-4, No.
33-84944)
*10.12.3-- Lease Agreement, dated as of March 31, 1994 between Mitsui & Co.
(U.S.A.), Inc. and TWA with respect to aircraft N950U and N953U
(Exhibit 10.21.3 to Registrant's Registration Statement on Form S-4
No. 33-84944)
*10.12.4-- Aircraft Purchase Agreement between TWA and McDonnell Douglas Finance
Corporation, dated March 31, 1994, with respect to aircraft N951U
(Exhibit 10.21.4 to Registrant's Registration Statement on Form S-4,
No. 33-84944)
*10.12.5-- Aircraft Purchase Agreement between TWA and McDonnell Douglas Finance
Corporation, dated March 31, 1994, with respect to aircraft N952U
(Exhibit 10.21.5 to Registrant's Registration Statement on Form S-4,
No. 33-84944)
*10.12.6-- Lease Agreement, dated as of March 31, 1994 between McDonnell
Douglas Finance Corporation and TWA with respect to aircraft N951U
and N952U (Exhibit 10.21.6 to Registrant's Registration Statement on
Form S-4, No. 33-84944)
*10.13.1-- Aircraft Purchase Agreement, dated March 31, 1994, between
McDonnell Douglas Finance Corporation and TWA with respect to
aircraft N306TW (formerly N534AW) (Exhibit 10.22.1 to Registrant's
Registration Statement on Form S-4, No. 33-84944)
*10.13.2-- Purchase Money Chattel Mortgage, dated as of March 31, 1994, by TWA,
as Mortgagor, and McDonnell Douglas Finance Corporation, as
Mortgagee, with respect to N306TW (formerly N534AW) (Exhibit 10.22.2
to Registrant's Registration Statement on Form S-4, No. 33-84944)
*10.13.3-- Chattel Mortgage, dated as of March 31, 1994 by TWA as Mortgagor, in
favor of McDonnell Douglas Finance Corporation, as Mortgagee, with
respect to aircraft N306TW (formerly N534AW) (Exhibit 10.22.3 to
Registrant's Registration Statement on Form S-4, No. 33-84944)
*10.14-- Commuter Air Service Agreement dated July 22, 1992, between TWA and
Trans World Express, Inc. (Exhibit 10.23 to Registrant's Registration
Statement on Form S-4, No. 33-84944)
*10.15-- Commuter Air Service Agreement dated October 27, 1993, between TWA
and Alpha Air (Exhibit 10.24 to Registrant's Registration Statement
on Form S-4, No. 33-84944)
*10.16-- Air Service Agreement dated October 1, 1994, between TWA and Trans
States Airlines, Inc. (Exhibit 10.25 to Registrant's Registration
Statement on Form S-4, No. 33-84944)
*10.17-- Consulting Agreement between TWA and Fieldstone, Private Capital
Group, L.P. dated July 11, 1994 (Exhibit 10.26 to Registrant's
Registration Statement on Form S-4, No. 33-84944)
*10.18-- Consulting Agreement dated July 15, 1994, between TWA and Simat,
Helliesen & Eichner, Inc. (Exhibit 10.27 to Registrant's Registration
Statement on Form S-4, No. 33-84944)
*10.19.1-- Agreement for Purchase and Sale dated as of August 29, 1994, between
TWA and Browsh & Associates, Inc. (Exhibit 10.28.1 to Registrant's
Registration Statement on Form S-4, No. 33-84944)
*10.19.2-- Agreement for Purchase and Sale dated as of August 29, 1994, between
TWA and Travel Marketing Holding Corporation (Exhibit 10.28.2 to
Registrant's Registration Statement on Form S-4, No. 33- 84944)
*10.20.1-- Addendum to Stock Purchase Agreement (identified in 10.29.2) dated
October 31, 1994 (Exhibit 10.29.3 to 9/94 10-Q)
*10.20.2-- Addendum to Stock Purchase Agreement (identified in 10.29.2) dated
November 2, 1994 (Exhibit 10.29.4 to 9/94 10-Q)
*10.21.1-- Form of Agreement dated as of August 31, 1994, between TWA and the
Air Line Pilots Association, International (Exhibit 10.31.1 to
Registrant's Registration Statement on Form S-4, No. 33-84944)
*10.21.2-- Form of Agreement dated as of September 1, 1994, between TWA and
the International Association of Machinists and Aerospace Workers
(Exhibit 10.31.2 to Registrant's Registration Statement on Form S-4,
No. 33-84944)
*10.21.3-- Form of Agreement dated as of September 1, 1994, between TWA and
the Independent Federation of Flight Attendants (Exhibit 10.31.3 to
Registrant's Registration Statement on Form S-4, No. 33-84944)
*10.21.4-- Form of Agreement dated as of September 1, 1994, between TWA and
the Transport Workers Union of America (Exhibit 10.31.4 to 9/94 10-Q)
*10.22.1-- Trust Agreement dated as of August 24, 1994 between and among TWA,
the International Association of Machinists and Aerospace Workers,
the Independent Federation of Flight Attendants, the Air Line Pilots
Association, International, United States Trust Company of New York
(Exhibit 10.32.1 to Registrant's Registration Statement on Form S-4,
No. 33-84944)
*10.22.2-- Stock Pledge and Intercreditor Agreement dated as of August 24,
1994 among TWA, TWA Stock Holding Company, Inc. and United States
Trust Company of New York (Exhibit 10.32.2 to Registrant's
Registration Statement on Form S-4, No. 33-84944)
*10.23.1-- Key Employee Stock Incentive Plan (Exhibit 10.33.1 to Registrant's
Registration Statement on Form S-4, No. 33-84944)
*10.23.2-- Form of Option Agreements for options issued pursuant to the 1994
Key Employee Stock Incentive Plan (Exhibit 10.33.2 to Registrant's
Registration Statement on Form S-4, No. 33-84944)
*10.24-- Extension, Refinancing and Consent Agreement between TWA, Karabu
Corp, Pichin Corp, and Carl C. Icahn and the "Icahn Entities" dated
as of June 14, 1995 (Exhibit 10.37 to 9/95 10-Q)
*10.24.1-- Karabu Ticket Program Agreement between TWA and Karabu Corp. dated
as of June 14, 1995 (Exhibit 10.37.1 to 12/95 10-K)
*10.25-- Trans World Airlines, Inc. Stock Purchase Warrant to Purchase Shares
of Common Stock, dated August 23, 1995 (Exhibit 10.38 to 9/95 10-Q)
*10.26-- Stand-By Purchase Agreement dated as of August 8, 1995 between Trans
World Airlines, Inc., M.D. Sass Re/Enterprise Partners L.P., a
Delaware limited partnership and M.D. Sass Re/Enterprise
International Ltd. a British Virgin Islands Company (Exhibit 10.39 to
9/95 10-Q)
*10.27-- Voucher Purchase Agreement dated as of October 18, 1995 between TWA
and M.D. Sass Re/Enterprise Partners L.P., a Delaware limited
partnership and M.D. Sass Re/Enterprise International Ltd. a British
Virgin Islands Company (Exhibit 10.40 to 9/95 10-Q)
*10.28-- Equity Rights Put Agreement dated as of September 15, 1995 between
TWA and Elliott Associates L.P., a Delaware limited partnership
(Exhibit 10.41 to 9/95 10-Q)
*10.29-- Equity Rights Put Agreement dated as of September 15, 1995 between
TWA and Westgate International L.P., a Cayman Islands limited
partnership (Exhibit 10.42 to 9/95 10-Q)
*10.30-- Equity Rights Put Agreement dated as of September 15, 1995 between
TWA and United Equities (Commodities) Company, a New York general
partnership (Exhibit 10.43 to 9/95 10-Q)
*10.31-- Equity Rights Put Agreement dated as of September 15, 1995 between
TWA and Grace Brothers, Ltd., an Illinois limited partnership
(Exhibit 10.44 to 9/95 10-Q)
*10.32-- Equity Rights Put Agreement dated as of September 15, 1995 between
TWA and First Capital Alliance, L.P., an Illinois limited partnership
(Exhibit 10.45 to 9/95 10-Q)
*10.33-- Equity Rights Put Agreement dated as of September 15, 1995 between
TWA and Romulus Holdings Corp. a Delaware Corporation (Exhibit 10.46
to 9/95 10-Q)
*10.34-- Purchase Agreement, dated February 9, 1996 between The Boeing Company
and TWA relating to Boeing Model 757-231 Aircraft (Purchase Agreement
Number 1910) (Exhibit 10.48 to 12/31/95 Form 10-K/A)
*10.35-- Employee Stock Incentive Program dated as of August 23, 1995 by TWA
(Exhibit 10.49 to 12/31/95 Form 10-K)
*10.36-- Trans World Airlines, Inc. 1995 Outside Directors' Stock Ownership
and Stock Option Plan (Exhibit 10.51 to Registrant's Registration
Statement on Form S-3, No. 333-04977)
*10.37-- Letter Agreement dated July 30, 1996 between Trans World Airlines,
Inc. and Robert A. Peiser (Exhibit 10.52 to Registrant's Registration
Statement on Form S-3, No. 333-04977)
*10.38-- Letter Agreement dated July 26, 1996 between Trans World Airlines,
Inc. and Mark J. Coleman (Exhibit 10.53 to Registrant's Registration
Statement on Form S-3, No. 333-04977)
*10.39-- Agreement dated as of September 3, 1996 between the Company and Roden
A. Brandt (Exhibit 10.6 to 9/96 Form 10-Q)
*10.40-- Letter Agreement dated January 6, 1997 between the Company and Edward
Soule (Exhibit 10.33 to 12/31/96 Form 10-K)
*10.41-- Agreement dated as of October 1, 1996 between the Company and Michael
J. Palumbo (Exhibit 10.34 to 12/31/96 Form 10-K)
*10.42-- Agreement dated as of November 11, 1996 between the Company and
Jeffrey H. Erickson (Exhibit 10.35 to 12/31/96 Form 10-K)
*10.43-- Consulting Agreement between the Company and David M. Kennedy dated
as of June 6, 1997 (Exhibit 10.1 to 6/97 Form 10-Q)
*10.44-- Separation Agreement dated July 25, 1997 between the Company and
Charles J. Thibaudeau (Exhibit 10.2 to 6/97 form 10-Q)
*10.45-- Agreement between the Company and Gerald L. Gitner dated as of
February 12, 1997 (Exhibit 10.1 to 9/97 Form 10-Q)
*10.46.1-- Pledge and Security Agreement dated as of December 9, 1997 from the
Company to First Security Bank, National Association, as Collateral
Agent, in connection with the 11(1)/(2)% Senior Secured Notes due
2004 (Exhibit 10.46.1 to Registrant's Registration Statement on Form
S-4, No. 333-44661)
*10.46.2-- Acquired Slot Trust Agreement Declaration of Trust dated as of
December 9, 1997 between the Company and First Security Bank,
National Association, as Slot Trustee, in connection with the
11(1)/(2)% Senior Secured Notes due 2004 (Exhibit 10.46.2 to
Registrant's Registration Statement on Form S-4, No. 333-44661)
*10.46.3-- Master Sub-License Agreement dated as of December 9, 1997 between the
Company and First Security Bank, National Association, in connection
with the 11(1)/(2)% Senior Secured Notes due 2004 (Exhibit 10.46.3 to
Registrant's Registration Statement on Form S-4, No. 333-44661)
*10.46.4-- Collateral Pledge and Security Agreement dated as of December 9, 1997
between the Company and First Security Bank, National Association, as
Trustee, in connection with the 11(1)/(2)% Senior Secured Notes due
2004 (Exhibit 10.46.4 to Registrant's Registration Statement on Form
S-4, No. 333-44661)
*10.47.1-- Exchange Agreement dated as of June 10, 1996 between TWA and Elliott
Associates, L.P. as amended (Exhibit 10.1 to 9/20/96 Form 8-K)
*10.47.2-- Exchange Agreement dated as of June 10, 1996 between TWA and Westgate
International, L.P., as amended (Exhibit 10.2 to 9/20/96 Form 8-K)
*10.48.1-- Form of Letter Agreement between TWA and executive officers
(continuing employment) (Exhibit 10.1 to 3/97 Form 10-Q)
*10.48.2-- Form of Letter Agreement between TWA and executive officers (new
hire) (Exhibit 10.2 to 3/97 Form 10-Q)
*10.49 -- Change in Control Agreement for executive officers (Exhibit 10.49 to
12/31/97 Form 10-K)
*10.50 -- Termination Agreement with Richard P. Magurno dated March 2, 1998
(Exhibit 10.50 to 12/31/97 Form 10-K)
*11 -- Statement of Computation of Per Share Earnings (included in 12/31/97
Form 10-K)
*12 -- Statement of Computation of Ratio of Earnings to Fixed Charges
(included in 12/31/97 Form 10-K)
*13.1-- 1997 Annual Report to Stockholders
23.1-- Consent of KPMG Peat Marwick LLP
23.2-- Consent of Davis Polk & Wardwell, counsel of the Registrant (included
in Exhibit 5)
24 -- Powers of Attorney
25 -- Statement of Eligibility of First Security Bank, National Association
*27 -- Financial Data Schedule (included in 12/31/97 Form 10-K)
+99.1-- Form of Letter of Transmittal
+99.2-- Form of Notice of Guaranteed Delivery
+99.3-- Form of Instruction to Registered Holder and/or Book-Entry Transfer
Facility Participant from Owner of Old Notes
+99.4-- Form of Letter to Clients of Depository Trust Company Participants
+99.5-- Form of Letter to Registered Holders and Depository Trust Company
Participants
- ----------
* Incorporated by reference
+ To be filed
(b) Schedules
All supplementary schedules relating to the Registration Statement are
omitted because they are not required or because the required information, where
material, is contained in the Financial Statements.
Item 22. Undertakings
(a) The undersigned registrant hereby undertakes:
(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 Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than a 20% 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:
provided, however, that paragraphs (a)(1)(i) and (a)(2)(ii) above do not apply
if the registration statement is on Form S-3, Form S-8 or Form F-3, and the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Commission by the Company pursuant to section 13 or section 15(d) of the
Exchange Act that are incorporated by reference 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.
(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.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof. (c)
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission,
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue. (d) The undersigned registrant hereby undertakes to
file an application for the purpose of determining the eligibility of the
Trustee to act under subsection (a) of Section 310 of the Trust Indenture Act
("Act") in accordance with the rules and regulations prescribed by the
Commission under Section 305(b)(2) of the Act.
(e) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11, or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
(f) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this Registration Statement on Form S-4 to be
signed on its behalf by the undersigned, thereunto duly authorized in the City
of St. Louis, State of Missouri, May 1, 1998.
TRANS WORLD AIRLINES, INC.
May 1, 1998
By /s/ Michael J. Palumbo
-- ----------------------------
Michael J. Palumbo,
Senior Vice President
and Chief Financial
Officer
Pursuant to the requirements of the Securities Act of 1933,
this Registration Statement on Form S-4 has been signed by the following
persons in the capacities and on the dates indicated.
<TABLE>
<S> <C> <C>
Signatures Title Date
/s/ Gerald L. Gitner Director, Chairman of the Board and May 1, 1998
- ------------------------------------- Chief Executive Officer (Principal
Gerard L. Gitner Executive Officer)
/s/ Michael J. Palumbo Senior Vice President and Chief May 1, 1998
- ------------------------------------- Financial Officer (Principal Financial
Michael J. Palumbo Officer and Principal Accounting
Officer)
* Director May 1, 1998
- -------------------------------------
John W. Bachmann
* Director May 1, 1998
- -------------------------------------
William F. Compton
* Director May 1, 1998
- -------------------------------------
Eugene P. Conese
* Director May 1, 1998
- -------------------------------------
William M. Hoffman
* Director May 1, 1998
- -------------------------------------
Edgar M. House
* Director May 1, 1998
- -------------------------------------
Thomas H. Jacobsen
* Director May 1, 1998
- -------------------------------------
Myron Kaplan
* Director May 1, 1998
- -------------------------------------
David M. Kennedy
* Director May 1, 1998
- -------------------------------------
Merrill A. McPeak
* Director May 1, 1998
- -------------------------------------
Thomas F. Meagher
Director
- -------------------------------------
William O'Driscoll
* Director May 1, 1998
- -------------------------------------
G. Joseph Reddington
* Director May 1, 1998
- -------------------------------------
Blanche M. Touhill
* Director May 1, 1998
- -------------------------------------
Stephen M. Tumblin
*By: /s/ Kathleen A. Soled May 1, 1998
- -------------------------------------
Kathleen A. Soled,
as Attorney-in-fact
</TABLE>
EXHIBIT INDEX
*2.1 -- Joint Plan of Reorganization, dated May 12, 1995 (Appendix B to the
Registrant's Registration Statement on Form S-4, Registration Number
33-84944, as amended)
*2.2 -- Modifications to Joint Plan of Reorganization, dated July 14, 1995
and Supplemental Modifications to Joint Plan of Reorganization dated
August 2, 1995 (Exhibit 2.5 to 6/95 10-Q)
*2.3 -- Findings of Fact, Conclusions of Law and Order Confirming Modified
Joint Plan of Reorganization, dated August 4, 1995, with Exhibits A-B
attached (Exhibit 2.6 to 6/95 10-Q)
*2.4 -- Final Decree, dated December 28, 1995, related to the '95
Reorganization (Exhibit 2.7 to 12/31/95 Form 10-K)
*3(i)-- Third Amended and Restated Certificate of Incorporation of the
Registrant (Exhibit 3(i) to the Registrant's Registration Statement
on Form S-4, Registration Number 333-26645)
*3(ii)-- Amended and Restated By-Laws of Trans World Airlines, Inc., effective
May 24, 1996 (Exhibit 3(ii) to 6/96 10-Q)
*4.1 -- Voting Trust Agreement, dated November 3, 1993, between TWA and
LaSalle National Trust, N.A. as trustee (Exhibit 4.3 to 9/93 10-Q)
*4.2 -- IAM Trans World Employees' Stock Ownership Plan and related Trust
Agreement, dated August 31, 1993, between TWA, the IAM Plan Trustee
Committee and the IAM Trustee (Exhibit to 9/93 10-Q)
*4.3 -- IFFA Trans World Employees' Stock Ownership Plan and related Trust
Agreement, dated August 31, 1993, between TWA, the IFFA Plan Trustee
Committee and the IFFA Trustee (Exhibit 4.5 to 9/93 10-Q)
*4.4 -- Trans World Airlines, Inc. Employee Stock Ownership Plan, dated
August 31, 1993, First Amendment thereto, dated October 31, 1993, and
related Trust Agreement, dated August 31, 1993, between TWA and the
ESOP Trustee (Exhibit 4.6 to 9/93 10-Q)
*4.5 -- ALPA Stock Trust, dated August 31, 1993, between TWA and the ALPA
Trustee (Exhibit 4.7 to 9/93 10-Q)
*4.6 -- Stockholders Agreement, dated November 3, 1993, among TWA, LaSalle
National Trust, N.A., as Voting Trustee and the ALPA Trustee, IAM
Trustee, IFFA Trustee and Other Employee Trustee (each as defined
therein), as amended by the Addendum to Stockholders dated November
3, 1993 (Exhibit 4.8 to 9/93 10-Q)
*4.7 -- Registration Rights Agreement, dated November 3, 1993, between TWA
and the Initial Significant Holders (Exhibit 4.9 to 9/93 10-Q)
*4.8 -- Indenture between TWA and Harris Trust and Savings Bank, dated
November 3, 1993 relating to TWA's 8% Senior Secured Notes Due 2000
(Exhibit 4.11 to 9/93 10-Q)
*4.9 -- Indenture between TWA and American National Bank and Trust Company of
Chicago, N.A., dated November 3, 1993 relating to TWA's 8% Secured
Notes Due 2001 (Exhibit 4.12 to 9/93 10-Q)
*4.10-- The TWA Air Line Pilots 1995 Employee Stock Ownership Plan, effective
as of January 1, 1995 (Exhibit 4.12 to 9/95 10-Q)
*4.11-- TWA Air Line Pilots Supplemental Stock Plan, effective September 1,
1994 (Exhibit 4.13 to 9/95 10-Q)
*4.12-- TWA Air Line Pilots Supplemental Stock Plan Trust, effective August
23, 1995 (Exhibit 4.14 to 9/95 10-Q)
*4.13-- TWA Air Line Pilots Supplemental Stock Plan Custodial Agreement,
effective August 23, 1995 (Exhibit 4.15 to 9/95 10-Q)
*4.14-- Form of Indenture relating to TWA's 8% Convertible Subordinated
Debentures Due 2006 (Exhibit 4.16 to Registrant's Registration
Statement on Form S-3, No. 333-04977)
*4.15-- Indenture dated as of March 31, 1997 between TWA and First Security
Bank, National Association relating to TWA's 12% Senior Secured Notes
due 2002 (Exhibit 4.15 to Registrant's Registration Statement on Form
S-4, No. 333-26645)
*4.16-- Form of 12% Senior Secured Note due 2002 (contained in Indenture
filed as Exhibit 4.15 to 12/31/97 Form 10-K)
*4.17-- Registration Rights Agreement dated as of March 31, 1997 between the
Company and the Initial Purchaser relating to the 12% Senior Secured
Notes due 2002 and the warrants to purchase 126.26 shares of TWA
Common Stock (Exhibit 4.17 to Registrant's Registration Statement on
Form S-4, No. 333-26645)
*4.18-- Warrant Agreement dated as of March 31, 1997 between the Company and
American Stock Transfer & Trust Company, as Warrant Agent, relating
to warrants to purchase 126.26 shares of TWA Common Stock (Exhibit
4.18 to Registrant's Registration Statement on Form S-4, No.
333-26645)
*4.19-- Form of Indenture relating to TWA's 9 1/4% Convertible Subordinated
Debentures due 2007 (Exhibit 4.19 to Registrant's Registration
Statement on Form S-3, No. 33-44689)
*4.20-- Registration Rights Agreement dated as of December 2, 1997 between
the Company and the Initial Purchasers (Exhibit 4.20 to Registrant's
Registration Statement on Form S-3, No. 33-44689)
*4.21-- Indenture dated as of December 9, 1997 by and between TWA and First
Security Bank, National Association, as Trustee, relating to TWA's 11
1/2% Senior Secured Notes due 2004 (Exhibit 4.21 to Registrant's
Registration Statement on Form S-3, No. 33-44661)
*4.22-- Form of 11 1/2% Senior Secured Note due 2004 (contained in Indenture
filed as Exhibit 4.21 to 12/31/97 Form 10-K)
*4.23-- Registration Rights Agreement dated as of December 9, 1997 among the
Company and Lazard Freres & Co. LLC and PaineWebber Incorporated, as
initial purchasers, relating to TWA's 11 1/2% Senior Secured Notes
due 2004 (Exhibit 4.23 to Registrant's Registration Statement on
Form S-3, No. 33-44661)
*4.24-- Sale and Service Agreement dated as of December 30, 1997 between TWA
and Constellation Finance LLC, as purchaser, relating to TWA's
receivables (Exhibit 4.24 to Registrant's Registration Statement on
Form S-3, No. 33-44661)
4.25-- Registration Rights Agreement dated as of March 3, 1998 between the
Company and the Initial Purchaser
4.26-- Indenture dated as of March 3, 1998 by and between TWA and First
Security Bank, National Association, as Trustee, relating to TWA's
11 3/8% Senior Notes due 2006
4.27-- Aircraft Sale and Note Purchase Agreement dated as of April 9, 1998
among TWA, First Security Bank, National Association, as Owner
Trustee and Seven Sixty Seven Leasing, Inc.
4.28-- Indenture dated as of April 21, 1998 by and between TWA and First
Security Bank, National Association, as Trustee, relating to TWA's
11 3/8% Senior Secured Notes due 2003
4.29-- Form of 11 3/8% Senior Secured Notes due 2003 (contained as Exhibit
1 to Rule 144A/Regulation Appendix to Indenture in Exhibit 4.28)
4.30-- Form of Mandatory Conversion Equity Note due 1999 (contained as
Exhibit A to Indenture in Exhibit 4.28)
5 -- Opinion of Davis Polk & Wardwell, Counsel of the Registrant,
regarding the validity of the securities being registered
*10.1.1-- Asset Purchase Agreement, dated as of November 4, 1993, between TWA
and St. Louis (Exhibit 10.2 to 9/93 10-Q)
*10.1.2-- Equipment Operating Lease Agreement, dated November 4, 1993, between
TWA and St. Louis (Exhibit 10.2 to 9/93 10-Q)
*10.1.3-- Cargo Use Amendment, dated November 4, 1993 between TWA and St.
Louis (Exhibit F to the Asset Purchase Agreement) (Exhibit 10.2 to
9/93 10-Q)
*10.1.4-- Use Amendment 1993, dated November 4, 1993, between TWA and St.
Louis (Exhibit E to the Asset Purchase Agreement) (Exhibit 10.2 to
9/93 10-Q)
*10.2.1-- Amendment Number One to the Note Purchase and Security Agreement,
dated October 26, 1993, between TWA and Rolls-Royce (Exhibit 10.3 to
9/93 10-Q)
*10.2.2-- Amendment Number One to the Equipment Purchase Contract, dated
October 26, 1993, between TWA and Rolls-Royce (Exhibit 10.3 to 9/93
10-Q)
*10.3-- Amendment Number Two to the AVSA Agreement dated June 1, 1989 between
TWA and AVSA, dated August 25, 1993 (Exhibit 10.4 to 9/93 10-Q)
*10.4.1-- First Amendment to Aircraft Installment Sale Agreement, dated
November 1, 1993, among TWA, the Vendors, and ITOCHU with respect to
aircraft N605TW (Exhibit 10.5 to 9/93 10-Q)
*10.4.2-- First Amendment to Aircraft Installment Sale Agreement, dated
November 1, 1993, among TWA, the Vendors, and ITOCHU with respect to
aircraft N603TW (Exhibit 10.5 to 9/93 10-Q)
*10.4.3-- First Amendment to Security Agreement and Chattel Mortgage, dated
November 1, 1993, among TWA, the Vendors, and ITOCHU, as to ITOCHU
Amendment No. 1 (Exhibit 10.5 to 9/93 10-Q)
*10.4.4-- First Amendment to Security Agreement and Chattel Mortgage, dated
November 1, 1993, among TWA, the Vendors, and ITOCHU, as to ITOCHU
Amendment No. 2 (Exhibit 10.5 to 9/93 10-Q)
*10.5.1-- Deferral Agreement and First Amendment to Aircraft Installment Sale
Agreement No. 1, dated November 1, 1993, among TWA, the Vendors, and
ORIX with respect to aircraft N601TW (Exhibit 10.6 to 9/93 10-Q)
*10.5.2-- Deferral Agreement and First Amendment to Aircraft Installment Sale
Agreement, dated November 1, 1993, among TWA, the Vendors, and ORIX
with respect to aircraft N603TW (Exhibit 10.6 to 9/93 10-Q)
*10.5.3-- First Amendment to Security Agreement and Chattel Mortgage, dated
November 1, 1993, among TWA, the Vendors, and ORIX, as to ORIX
Amendment No. 1 (Exhibit 10.6 to 9/93 10-Q)
*10.5.4-- First Amendment to Security Agreement and Chattel Mortgage, dated
November 1, 1993, among TWA, the Vendors, and ORIX, as to ORIX
Amendment No. 2 (Exhibit 10.6 to 9/93 10-Q)
*10.6.1-- Purchase Agreement, dated October 5, 1993, between TWA and Pacific
AirCorp 747, Inc. with respect to aircraft N93107 and N93108 (Exhibit
10.7 to 9/93 10-Q)
*10.6.2-- Lease Agreement 107, dated October 5, 1993, between Pacific AirCorp
747, Inc. and TWA with respect to aircraft N93107 (Exhibit 10.7 to
9/93 10-Q)
*10.6.3-- Lease Agreement 108, dated October 5, 1993, between Pacific AirCorp
747, Inc. and TWA with respect to aircraft N93108 (Exhibit 10.7 to
9/93 10-Q)
*10.7-- '92 Labor Agreements (Exhibits 2.1, 2.2 and 2.3 to 9/92 8-K)
*10.8-- Comprehensive Settlement Agreement, dated January 5, 1993 (Exhibit
10(iv)(1) to '92 10-K)
*10.8.1-- Omnibus Amendment and Supplement to Agreements between TWA and
Karabu Corp. dated as of March 28, 1994 (Exhibit 10.9.1 to
Registrant's Registration Statement on Form S-4, No. 33-84944)
*10.9-- Letter Agreement, dated April 15, 1994, between TWA and Richard P.
Magurno relating to employment by TWA (Exhibit 10.14 to 3/94 10-Q)
*10.10-- Form of Indemnification Agreement between TWA and individual members
of the TWA Board of Directors relating to indemnification of director
(Exhibit 10.16 to 6/94 10-Q)
*10.11.1-- Purchase Agreement, dated as of December 15, 1993 between TWA and
Pacific AirCorp DC9, Inc. with respect to aircraft N927L and N928L
(Exhibit 10.20.1 to Registrant's Registration Statement on Form S-4,
No. 33-84944)
*10.11.2-- Lease Agreement 927, dated as of December 15, 1993, between Pacific
AirCorp DC9, Inc. and TWA with respect to aircraft N927L (Exhibit
10.20.2 to Registrant's Registration Statement on Form S-4, No.
33-84944)
*10.11.3-- Lease Agreement 928, dated as of December 15, 1993, between Pacific
AirCorp DC9, Inc. and TWA with respect to aircraft N928L (Exhibit
10.20.3 to Registrant's Registration Statement on Form S-4, No.
33-84944)
*10.12.1-- Aircraft Purchase Agreement between TWA and Mitsui & Co. (U.S.A.),
Inc. dated March 31, 1994, with respect to aircraft N950U (Exhibit
10.21.1 to Registrant's Registration Statement on Form S-4, No. 33-
84944)
*10.12.2-- Aircraft Purchase Agreement between TWA and Mitsui & Co. (U.S.A.),
Inc., dated March 31, 1994, with respect to aircraft N953U (Exhibit
10.21.2 to Registrant's Registration Statement on Form S-4, No.
33-84944)
*10.12.3-- Lease Agreement, dated as of March 31, 1994 between Mitsui & Co.
(U.S.A.), Inc. and TWA with respect to aircraft N950U and N953U
(Exhibit 10.21.3 to Registrant's Registration Statement on Form S-4
No. 33-84944)
*10.12.4-- Aircraft Purchase Agreement between TWA and McDonnell Douglas Finance
Corporation, dated March 31, 1994, with respect to aircraft N951U
(Exhibit 10.21.4 to Registrant's Registration Statement on Form S-4,
No. 33-84944)
*10.12.5-- Aircraft Purchase Agreement between TWA and McDonnell Douglas Finance
Corporation, dated March 31, 1994, with respect to aircraft N952U
(Exhibit 10.21.5 to Registrant's Registration Statement on Form S-4,
No. 33-84944)
*10.12.6-- Lease Agreement, dated as of March 31, 1994 between McDonnell
Douglas Finance Corporation and TWA with respect to aircraft N951U
and N952U (Exhibit 10.21.6 to Registrant's Registration Statement on
Form S-4, No. 33-84944)
*10.13.1-- Aircraft Purchase Agreement, dated March 31, 1994, between
McDonnell Douglas Finance Corporation and TWA with respect to
aircraft N306TW (formerly N534AW) (Exhibit 10.22.1 to Registrant's
Registration Statement on Form S-4, No. 33-84944)
*10.13.2-- Purchase Money Chattel Mortgage, dated as of March 31, 1994, by TWA,
as Mortgagor, and McDonnell Douglas Finance Corporation, as
Mortgagee, with respect to N306TW (formerly N534AW) (Exhibit 10.22.2
to Registrant's Registration Statement on Form S-4, No. 33-84944)
*10.13.3-- Chattel Mortgage, dated as of March 31, 1994 by TWA as Mortgagor, in
favor of McDonnell Douglas Finance Corporation, as Mortgagee, with
respect to aircraft N306TW (formerly N534AW) (Exhibit 10.22.3 to
Registrant's Registration Statement on Form S-4, No. 33-84944)
*10.14-- Commuter Air Service Agreement dated July 22, 1992, between TWA and
Trans World Express, Inc. (Exhibit 10.23 to Registrant's Registration
Statement on Form S-4, No. 33-84944)
*10.15-- Commuter Air Service Agreement dated October 27, 1993, between TWA
and Alpha Air (Exhibit 10.24 to Registrant's Registration Statement
on Form S-4, No. 33-84944)
*10.16-- Air Service Agreement dated October 1, 1994, between TWA and Trans
States Airlines, Inc. (Exhibit 10.25 to Registrant's Registration
Statement on Form S-4, No. 33-84944)
*10.17-- Consulting Agreement between TWA and Fieldstone, Private Capital
Group, L.P. dated July 11, 1994 (Exhibit 10.26 to Registrant's
Registration Statement on Form S-4, No. 33-84944)
*10.18-- Consulting Agreement dated July 15, 1994, between TWA and Simat,
Helliesen & Eichner, Inc. (Exhibit 10.27 to Registrant's Registration
Statement on Form S-4, No. 33-84944)
*10.19.1-- Agreement for Purchase and Sale dated as of August 29, 1994, between
TWA and Browsh & Associates, Inc. (Exhibit 10.28.1 to Registrant's
Registration Statement on Form S-4, No. 33-84944)
*10.19.2-- Agreement for Purchase and Sale dated as of August 29, 1994, between
TWA and Travel Marketing Holding Corporation (Exhibit 10.28.2 to
Registrant's Registration Statement on Form S-4, No. 33- 84944)
*10.20.1-- Addendum to Stock Purchase Agreement (identified in 10.29.2) dated
October 31, 1994 (Exhibit 10.29.3 to 9/94 10-Q)
*10.20.2-- Addendum to Stock Purchase Agreement (identified in 10.29.2) dated
November 2, 1994 (Exhibit 10.29.4 to 9/94 10-Q)
*10.21.1-- Form of Agreement dated as of August 31, 1994, between TWA and the
Air Line Pilots Association, International (Exhibit 10.31.1 to
Registrant's Registration Statement on Form S-4, No. 33-84944)
*10.21.2-- Form of Agreement dated as of September 1, 1994, between TWA and
the International Association of Machinists and Aerospace Workers
(Exhibit 10.31.2 to Registrant's Registration Statement on Form S-4,
No. 33-84944)
*10.21.3-- Form of Agreement dated as of September 1, 1994, between TWA and
the Independent Federation of Flight Attendants (Exhibit 10.31.3 to
Registrant's Registration Statement on Form S-4, No. 33-84944)
*10.21.4-- Form of Agreement dated as of September 1, 1994, between TWA and
the Transport Workers Union of America (Exhibit 10.31.4 to 9/94 10-Q)
*10.22.1-- Trust Agreement dated as of August 24, 1994 between and among TWA,
the International Association of Machinists and Aerospace Workers,
the Independent Federation of Flight Attendants, the Air Line Pilots
Association, International, United States Trust Company of New York
(Exhibit 10.32.1 to Registrant's Registration Statement on Form S-4,
No. 33-84944)
*10.22.2-- Stock Pledge and Intercreditor Agreement dated as of August 24,
1994 among TWA, TWA Stock Holding Company, Inc. and United States
Trust Company of New York (Exhibit 10.32.2 to Registrant's
Registration Statement on Form S-4, No. 33-84944)
*10.23.1-- Key Employee Stock Incentive Plan (Exhibit 10.33.1 to Registrant's
Registration Statement on Form S-4, No. 33-84944)
*10.23.2-- Form of Option Agreements for options issued pursuant to the 1994
Key Employee Stock Incentive Plan (Exhibit 10.33.2 to Registrant's
Registration Statement on Form S-4, No. 33-84944)
*10.24-- Extension, Refinancing and Consent Agreement between TWA, Karabu
Corp, Pichin Corp, and Carl C. Icahn and the "Icahn Entities" dated
as of June 14, 1995 (Exhibit 10.37 to 9/95 10-Q)
*10.24.1-- Karabu Ticket Program Agreement between TWA and Karabu Corp. dated
as of June 14, 1995 (Exhibit 10.37.1 to 12/95 10-K)
*10.25-- Trans World Airlines, Inc. Stock Purchase Warrant to Purchase Shares
of Common Stock, dated August 23, 1995 (Exhibit 10.38 to 9/95 10-Q)
*10.26-- Stand-By Purchase Agreement dated as of August 8, 1995 between Trans
World Airlines, Inc., M.D. Sass Re/Enterprise Partners L.P., a
Delaware limited partnership and M.D. Sass Re/Enterprise
International Ltd. a British Virgin Islands Company (Exhibit 10.39 to
9/95 10-Q)
*10.27-- Voucher Purchase Agreement dated as of October 18, 1995 between TWA
and M.D. Sass Re/Enterprise Partners L.P., a Delaware limited
partnership and M.D. Sass Re/Enterprise International Ltd. a British
Virgin Islands Company (Exhibit 10.40 to 9/95 10-Q)
*10.28-- Equity Rights Put Agreement dated as of September 15, 1995 between
TWA and Elliott Associates L.P., a Delaware limited partnership
(Exhibit 10.41 to 9/95 10-Q)
*10.29-- Equity Rights Put Agreement dated as of September 15, 1995 between
TWA and Westgate International L.P., a Cayman Islands limited
partnership (Exhibit 10.42 to 9/95 10-Q)
*10.30-- Equity Rights Put Agreement dated as of September 15, 1995 between
TWA and United Equities (Commodities) Company, a New York general
partnership (Exhibit 10.43 to 9/95 10-Q)
*10.31-- Equity Rights Put Agreement dated as of September 15, 1995 between
TWA and Grace Brothers, Ltd., an Illinois limited partnership
(Exhibit 10.44 to 9/95 10-Q)
*10.32-- Equity Rights Put Agreement dated as of September 15, 1995 between
TWA and First Capital Alliance, L.P., an Illinois limited partnership
(Exhibit 10.45 to 9/95 10-Q)
*10.33-- Equity Rights Put Agreement dated as of September 15, 1995 between
TWA and Romulus Holdings Corp. a Delaware Corporation (Exhibit 10.46
to 9/95 10-Q)
*10.34-- Purchase Agreement, dated February 9, 1996 between The Boeing Company
and TWA relating to Boeing Model 757-231 Aircraft (Purchase Agreement
Number 1910) (Exhibit 10.48 to 12/31/95 Form 10-K/A)
*10.35-- Employee Stock Incentive Program dated as of August 23, 1995 by TWA
(Exhibit 10.49 to 12/31/95 Form 10-K)
*10.36-- Trans World Airlines, Inc. 1995 Outside Directors' Stock Ownership
and Stock Option Plan (Exhibit 10.51 to Registrant's Registration
Statement on Form S-3, No. 333-04977)
*10.37-- Letter Agreement dated July 30, 1996 between Trans World Airlines,
Inc. and Robert A. Peiser (Exhibit 10.52 to Registrant's Registration
Statement on Form S-3, No. 333-04977)
*10.38-- Letter Agreement dated July 26, 1996 between Trans World Airlines,
Inc. and Mark J. Coleman (Exhibit 10.53 to Registrant's Registration
Statement on Form S-3, No. 333-04977)
*10.39-- Agreement dated as of September 3, 1996 between the Company and Roden
A. Brandt (Exhibit 10.6 to 9/96 Form 10-Q)
*10.40-- Letter Agreement dated January 6, 1997 between the Company and Edward
Soule (Exhibit 10.33 to 12/31/96 Form 10-K)
*10.41-- Agreement dated as of October 1, 1996 between the Company and Michael
J. Palumbo (Exhibit 10.34 to 12/31/96 Form 10-K)
*10.42-- Agreement dated as of November 11, 1996 between the Company and
Jeffrey H. Erickson (Exhibit 10.35 to 12/31/96 Form 10-K)
*10.43-- Consulting Agreement between the Company and David M. Kennedy dated
as of June 6, 1997 (Exhibit 10.1 to 6/97 Form 10-Q)
*10.44-- Separation Agreement dated July 25, 1997 between the Company and
Charles J. Thibaudeau (Exhibit 10.2 to 6/97 form 10-Q)
*10.45-- Agreement between the Company and Gerald L. Gitner dated as of
February 12, 1997 (Exhibit 10.1 to 9/97 Form 10-Q)
*10.46.1-- Pledge and Security Agreement dated as of December 9, 1997 from the
Company to First Security Bank, National Association, as Collateral
Agent, in connection with the 11(1)/(2)% Senior Secured Notes due
2004 (Exhibit 10.46.1 to Registrant's Registration Statement on Form
S-4, No. 333-44661)
*10.46.2-- Acquired Slot Trust Agreement Declaration of Trust dated as of
December 9, 1997 between the Company and First Security Bank,
National Association, as Slot Trustee, in connection with the
11(1)/(2)% Senior Secured Notes due 2004 (Exhibit 10.46.2 to
Registrant's Registration Statement on Form S-4, No. 333-44661)
*10.46.3-- Master Sub-License Agreement dated as of December 9, 1997 between the
Company and First Security Bank, National Association, in connection
with the 11(1)/(2)% Senior Secured Notes due 2004 (Exhibit 10.46.3 to
Registrant's Registration Statement on Form S-4, No. 333-44661)
*10.46.4-- Collateral Pledge and Security Agreement dated as of December 9, 1997
between the Company and First Security Bank, National Association, as
Trustee, in connection with the 11(1)/(2)% Senior Secured Notes due
2004 (Exhibit 10.46.4 to Registrant's Registration Statement on Form
S-4, No. 333-44661)
*10.47.1-- Exchange Agreement dated as of June 10, 1996 between TWA and Elliott
Associates, L.P. as amended (Exhibit 10.1 to 9/20/96 Form 8-K)
*10.47.2-- Exchange Agreement dated as of June 10, 1996 between TWA and Westgate
International, L.P., as amended (Exhibit 10.2 to 9/20/96 Form 8-K)
*10.48.1-- Form of Letter Agreement between TWA and executive officers
(continuing employment) (Exhibit 10.1 to 3/97 Form 10-Q)
*10.48.2-- Form of Letter Agreement between TWA and executive officers (new
hire) (Exhibit 10.2 to 3/97 Form 10-Q)
*10.49 -- Change in Control Agreement for executive officers (Exhibit 10.49 to
12/31/97 Form 10-K)
*10.50 -- Termination Agreement with Richard P. Magurno dated March 2, 1998
(Exhibit 10.50 to 12/31/97 Form 10-K)
*11 -- Statement of Computation of Per Share Earnings (included in 12/31/97
Form 10-K)
*12 -- Statement of Computation of Ratio of Earnings to Fixed Charges
(included in 12/31/97 Form 10-K)
*13.1-- 1997 Annual Report to Stockholders
23.1-- Consent of KPMG Peat Marwick LLP
23.2-- Consent of Davis Polk & Wardwell, counsel of the Registrant (included
in Exhibit 5)
24 -- Powers of Attorney
25 -- Statement of Eligibility of First Security Bank, National Association
*27 -- Financial Data Schedule (included in 12/31/97 Form 10-K)
+99.1-- Form of Letter of Transmittal
+99.2-- Form of Notice of Guaranteed Delivery
+99.3-- Form of Instruction to Registered Holder and/or Book-Entry Transfer
Facility Participant from Owner of Old Notes
+99.4-- Form of Letter to Clients of Depository Trust Company Participants
+99.5-- Form of Letter to Registered Holders and Depository Trust Company
Participants
- --------------
* Incorporated by reference
+ To be filed
Exhibit 4.25
TRANS WORLD AIRLINES, INC.
11 3/8% Senior Notes Due 2006
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement")
is made and entered into as of March 3, 1998, by Trans World
Airlines, Inc., a Delaware corporation (the "Company"), and
Lazard Freres & Co. LLC (the "Initial Purchaser"). Subject to
the terms and conditions stated in the Purchase Agreement dated
as of February 25, 1998 between the Company and the Initial
Purchaser (the "Purchase Agreement"), the Company shall issue and
sell to the Initial Purchaser $150,000,000 aggregate principal
amount of 11 3/8% Senior Notes Due 2006 (the "Notes"). The Notes
will be issued pursuant to an indenture dated as of March 3, 1998
(the "Indenture"), between the Company and First Security Bank,
National Association, as trustee (the "Trustee"). As an
inducement to the Initial Purchaser, the Company hereby agrees
with the Initial Purchaser, for the benefit of the holders of the
Notes (including, without limitation, the Initial Purchaser), the
Exchange Notes (as defined below) and the Private Exchange Notes
(as defined below) (collectively, the "Holders"), as follows:
SECTION 1. EXCHANGE OFFER REGISTRATION
The Company shall, at its cost, use its best efforts to
prepare and, not later than 60 days after (or if the 60th day is
not a business day, the first business day thereafter) the Issue
Date (as defined in the Indenture) of the Notes, file with the
Securities and Exchange Commission (the "Commission"), a
registration statement (the "Exchange Offer Registration
Statement") on an appropriate form under the Securities Act of
1933, as amended (the "Securities Act"), with respect to a
proposed offer (the "Registered Exchange Offer") to the Holders
of Transfer Restricted Notes (as defined below), who are not
prohibited by any law or policy of the Commission from
participating in the Registered Exchange Offer, to issue and
deliver to such Holders, in exchange for the Notes, a like
aggregate principal amount of debt securities (the "Exchange
Notes") of the Company issued under the Indenture and identical
in all material respects to the Notes (except for the transfer
restrictions relating to the Notes) that would be registered
under the Securities Act. The Company shall use its best efforts
to cause such Exchange Offer Registration Statement to become
effective under the Securities Act within 150 days (or if the
150th day is not a business day, the first business day
thereafter) after the Issue Date of the Notes and shall keep the
Exchange Offer Registration Statement effective for not less than
30 days (or longer if required by applicable law) after the date
on which notice of the Registered Exchange Offer is mailed to the
Holders (such period being called the "Exchange Offer
Registration Period").
If the Company effects the Registered Exchange Offer,
the Company will be entitled to close the Registered Exchange
Offer 30 days after the commencement thereof; provided, however,
that the Company has accepted all the Notes theretofore validly
tendered in accordance with the terms of the Registered Exchange
Offer.
Following the declaration of the effectiveness of the
Exchange Offer Registration Statement, the Company shall promptly
commence the Registered Exchange Offer, it being the objective of
such Registered Exchange Offer to enable each Holder of Transfer
Restricted Notes electing to exchange the Notes for Exchange
Notes (assuming that such Holder is not an affiliate of the
Company within the meaning of the Securities Act, acquires the
Exchange Notes in the ordinary course of such Holder's business,
has no arrangements with any person to participate in the
distribution (within the meaning of the Securities Act) of the
Exchange Notes and is not prohibited by any law or policy of the
Commission from participating in the Registered Exchange Offer)
to trade such Exchange Notes from and after their receipt without
any limitations or restrictions under the Securities Act and
without material restrictions under the securities laws of the
several states of the United States. In connection with such
Registered Exchange Offer, the Company shall take such further
action, including, without limitation, appropriate filings under
state securities laws, as may be necessary to realize the
foregoing objective subject to the proviso of Section 3(h).
The Company acknowledges that, pursuant to current
interpretations by the Commission's staff of Section 5 of the
Securities Act, in the absence of an applicable exemption
therefrom, (i) each Holder that is a broker-dealer electing to
exchange Notes, acquired for its own account as a result of
market making activities or other trading activities, for
Exchange Notes (an "Exchanging Dealer"), is required to deliver a
prospectus containing the information set forth in Annex A hereto
on the cover, in Annex B hereto in the "Exchange Offer
Procedures" section and the "Purpose of the Exchange Offer"
section, and in Annex C hereto in the "Plan of Distribution"
section of such prospectus in connection with a sale of any such
Exchange Notes received by such Exchanging Dealer pursuant to the
Registered Exchange Offer and (ii) the Initial Purchaser selling
Exchange Notes acquired in exchange for Notes constituting any
portion of an unsold allotment is required to deliver a
prospectus containing the information required by Items 507 or
508 of Regulation S-K under the Securities Act, as applicable, in
connection with such sale.
The Company shall use its best efforts to keep the
Exchange Offer Registration Statement effective and to amend and
supplement the prospectus contained therein in order to permit
such prospectus to be lawfully delivered by all persons subject
to the prospectus delivery requirements of the Securities Act for
such period of time as such persons must comply with such
requirements in order to resell the Exchange Notes; provided,
however, that (i) in the case where such prospectus and any
amendment or supplement thereto must be delivered by an
Exchanging Dealer or the Initial Purchaser, such period shall be
the lesser of 180 days after the expiration date of the
Registered Exchange Offer and the date on which all Exchanging
Dealers and the Initial Purchaser have sold all Exchange Notes
held by them (unless such period is extended pursuant to Section
3(j) below), and (ii) the Company shall make such prospectus and
any amendment or supplement thereto available to any broker-
dealer for use in connection with any resale of any Exchange
Notes for a period not less than 90 days after the consummation
of the Registered Exchange Offer.
If, upon consummation of the Registered Exchange Offer,
the Initial Purchaser holds Notes acquired by it as part of its
initial distribution, the Company, simultaneously with the
delivery of the Exchange Notes pursuant to the Registered
Exchange Offer, shall issue and deliver to the Initial Purchaser
upon the written request of the Initial Purchaser, in exchange
(the "Private Exchange") for the Notes held by the Initial
Purchaser, a like principal amount of debt securities of the
Company issued under the Indenture and identical in all material
respects (including the existence of restrictions on transfer
under the Securities Act and the securities laws of the several
states of the United States) to the Notes (the "Private Exchange
Notes"). The Notes, the Exchange Notes and the Private Exchange
Notes are herein collectively called the "Securities".
In connection with the Registered Exchange Offer, the
Company shall:
(a) mail to each Holder a copy of the prospectus
forming part of the Exchange Offer Registration Statement,
together with an appropriate letter of transmittal and related
documents;
(b) keep the Registered Exchange Offer open for not
less than 30 days (or longer, if required by applicable law)
after the date notice thereof is mailed to the Holders;
(c) utilize the services of a depositary for the
Registered Exchange Offer with an address in the Borough of
Manhattan, The City of New York, which may be the Trustee or an
affiliate of the Trustee;
(d) permit Holders to withdraw tendered Notes at any
time prior to the close of business, New York time, on the last
business day on which the Registered Exchange Offer shall remain
open; and
(e) otherwise comply in all material respects with all
applicable law.
As soon as practicable after the close of the
Registered Exchange Offer or the Private Exchange, as the case
may be, the Company shall:
(i) accept for exchange all the Notes validly
tendered and not withdrawn pursuant to the Registered
Exchange Offer or the Private Exchange, as the case may be;
(ii) deliver to the Trustee for cancellation all the
Notes so accepted for exchange; and
(iii) cause the Trustee to authenticate and promptly
deliver to each Holder of the Notes, Exchange Notes or
Private Exchange Notes, as the case may be, equal in
principal amount to the Notes of each Holder so accepted for
exchange.
The Indenture will provide that the Exchange Notes will
not be subject to the transfer restrictions set forth in the
Indenture and that all the Securities will vote and consent
together on all matters as one class and that none of the
Securities will have the right to vote or consent as a class
separate from one another on any matter.
Each Holder participating in the Registered Exchange
Offer shall be required to represent to the Company that at the
time of the consummation of the Registered Exchange Offer (i) any
Exchange Notes received by such Holder will be acquired in the
ordinary course of business, (ii) such Holder will have no
arrangements or understanding with any person to participate in
the distribution of the Notes or the Exchange Notes within the
meaning of the Securities Act, (iii) such Holder is not an
"affiliate", as defined in Rule 405 of the Securities Act, of the
Company or, if it is an affiliate, such Holder will comply with
the registration and prospectus delivery requirements of the
Securities Act to the extent applicable, (iv) if such Holder is
not a broker-dealer, that it is not engaged in, and does not
intend to engage in, the distribution of the Exchange Notes, and
(v) if such Holder is a broker-dealer, that it will receive
Exchange Notes for its own account in exchange for Notes that
were acquired as a result of market-making activities or other
trading activities and that it will deliver a prospectus in
connection with any resale of such Exchange Notes.
Notwithstanding any other provisions hereof, the
Company will ensure that (i) any Exchange Offer Registration
Statement and any amendment thereto and any prospectus forming
part thereof and any supplement thereto will comply in all
material respects with the Securities Act and the rules and
regulations thereunder, (ii) any Exchange Offer Registration
Statement and any amendment thereto does not, when it becomes
effective, contain an untrue statement of a material fact or omit
to state a material fact required to be stated therein or
necessary to make the statements therein not misleading and (iii)
any prospectus forming part of any Exchange Offer Registration
Statement, and any supplement to such prospectus, will not
include an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order
to make the statements therein, in the light of the circumstances
under which they were made, not misleading; provided, however,
that in no such case shall the Company be responsible for
information concerning the Initial Purchaser included in the
Exchange Offer Registration Statement, the prospectus contained
therein, or any amendment or supplement thereto, as the case may
be.
SECTION 2. SHELF REGISTRATION STATEMENT
(a) If (i) because of any change in law or in
applicable interpretations thereof by the staff of the
Commission, the Company is not permitted to effect a Registered
Exchange Offer, as contemplated by Section 1 hereof, (ii) the
Registered Exchange Offer is not consummated within 180 days of
the date of this Agreement, (iii) the Initial Purchaser so
requests with respect to the Notes (or the Private Exchange
Notes) not eligible to be exchanged for Exchange Notes in the
Registered Exchange Offer and held by it following consummation
of the Registered Exchange Offer or (iv) any Holder (other than
an Exchanging Dealer) is not eligible to participate in the
Registered Exchange Offer or, in the case of any Holder (other
than an Exchanging Dealer) that participates in the Registered
Exchange Offer, such Holder does not receive freely tradeable
Exchange Notes on the date of the exchange, the Company shall
take the following actions:
(i) The Company shall use its best efforts, at its
cost, as promptly as practicable (but in no event more than
the later of (i) 60 days after the Issue Date and (ii) 30
days after so required or requested pursuant to this Section
2) to file with the Commission and thereafter shall use its
best efforts to cause to be declared effective a
registration statement (the "Shelf Registration Statement"
and, together with the Exchange Offer Registration
Statement, a "Registration Statement") on an appropriate
form under the Securities Act relating to the offer and sale
of the Transfer Restricted Notes by the Holders thereof from
time to time in accordance with the methods of distribution
set forth in the Shelf Registration Statement and Rule 415
under the Securities Act (hereinafter, the "Shelf
Registration"); provided, however, that no Holder (other
than the Initial Purchaser) shall be entitled to have the
Securities held by it covered by such Shelf Registration
Statement unless such Holder agrees in writing to be bound
by all the provisions of this Agreement applicable to such
Holder (including certain indemnification obligations).
(ii) The Company shall use its best efforts to keep
the Shelf Registration Statement continuously effective in
order to permit the prospectus included therein to be
lawfully delivered by the Holders of the relevant
Securities, for a period of two years (or for such longer
period if extended pursuant to Section 3(j) below) from the
Issue Date or such shorter period that will terminate when
all the Securities covered by the Shelf Registration
Statement have been sold pursuant thereto or can be sold
pursuant to Rule 144(k) thereof. Subject to Section 6(b),
the Company shall be deemed not to have used its best
efforts to keep the Shelf Registration Statement effective
during the requisite period if it voluntarily takes any
action that would result in Holders of Securities covered
thereby not being able to offer and sell such Securities
during that period, unless such action is required by
applicable law; provided, however, that the Company shall
not be deemed to have voluntarily taken any such action if
it enters, in good faith, into negotiations concerning, or
executes and delivers any agreement or other document
relating to, any business combination, acquisition or
disposition.
(iii) Notwithstanding any other provision of this
Agreement to the contrary, the Company shall cause the Shelf
Registration Statement and the related prospectus and any
amendment or supplement thereto, as of the effective date of
the Shelf Registration Statement, amendment or supplement,
(i) to comply in all material respects with the applicable
requirements of the Securities Act and the rules and
regulations of the Commission and (ii) not to contain any
untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in
order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(b) No Holder of Securities may include any of its
Securities in the Shelf Registration Statement unless such Holder
furnishes to the Company in writing, within 10 business days
after receipt of a request therefor (which initial request shall
be made within 40 days after the Closing to the Holders of record
on a date not more than 5 days prior to such request), such
information and representations and warranties as the Company may
reasonably request for use in connection with the Shelf
Registration Statement or prospectus or preliminary prospectus
included therein. No Holder of Securities shall be entitled to
Special Interest, pursuant to Section 6 hereof, if such Holder's
Securities are excluded from the Shelf Registration Statement
because such Holder failed to furnish the Company in writing such
information and representations and warranties reasonably
requested by the Company for use in connection with the Shelf
Registration Statement or prospectus or preliminary prospectus
included therein. Each Holder as to which the Shelf Registration
Statement is being effected agrees to furnish promptly to the
Company all information required to be disclosed in order to make
the information previously provided to the Company by such Holder
not misleading.
SECTION 3. REGISTRATION PROCEDURES
In connection with the Shelf Registration contemplated
by Section 2 hereof and, to the extent applicable, any Registered
Exchange Offer contemplated by Section 1 hereof, the following
provisions shall apply:
(a) The Company shall (i) furnish to the Initial
Purchaser, prior to the filing thereof with the Commission, a
copy of the Registration Statement and each amendment thereof and
each supplement, if any, to the prospectus included therein and,
in the event that the Initial Purchaser (with respect to any
portion of an unsold allotment from the original offering) is
participating in the Registered Exchange Offer or the Shelf
Registration Statement, shall use its best efforts to reflect in
each such document, when so filed with the Commission, such
comments as the Initial Purchaser reasonably may propose; (ii)
include the information set forth in Annex A hereto on the cover,
in Annex B hereto in the "Exchange Offer Procedures" section and
the "Purpose of the Exchange Offer" section and in Annex C hereto
in the "Plan of Distribution" section of the prospectus forming a
part of the Exchange Offer Registration Statement and include the
information set forth in Annex D hereto in the Letter of
Transmittal delivered pursuant to the Registered Exchange Offer;
(iii) if requested by the Initial Purchaser, include the
information required by Items 507 or 508 of Regulation S-K under
the Securities Act, as applicable, in the prospectus forming a
part of the Exchange Offer Registration Statement; (iv) include
within the prospectus contained in the Exchange Offer
Registration Statement a section entitled "Plan of Distribution",
reasonably acceptable to the Initial Purchaser, which shall
contain a summary statement of the positions taken or policies
made by the staff of the Commission with respect to the potential
"underwriter" status of any broker-dealer that is the beneficial
owner (as defined in Rule 13d-3 under the Securities Exchange Act
of 1934, as amended (the "Exchange Act")) of Exchange Notes
received by such broker-dealer in the Registered Exchange Offer
(a "Participating Broker-Dealer"), whether such positions or
policies have been publicly disseminated by the staff of the
Commission or such positions or policies, in the reasonable
judgment of the Initial Purchaser based upon advice of counsel
(which may be in-house counsel), represent the prevailing views
of the staff of the Commission; and (v) in the case of a Shelf
Registration Statement, include the names of the Holders who
propose to sell Securities pursuant to the Shelf Registration
Statement as selling securityholders.
(b) The Company shall give written notice to the
Initial Purchaser, the Holders of the Securities and any
Participating Broker-Dealer from whom the Company has received
prior written notice that it will be a Participating Broker-
Dealer in the Registered Exchange Offer (which notice pursuant to
clauses (ii)-(v) hereof shall be accompanied by an instruction to
suspend the use of the prospectus until the requisite changes
have been made):
(i) when the Registration Statement or any
amendment thereto has been filed with the Commission and
when the Registration Statement or any post-effective
amendment thereto has become effective;
(ii) of any request by the Commission for
amendments or supplements to the Registration Statement or
the prospectus included therein or for additional
information (provided, however, that with respect to any
requests prior to the effectiveness of the Registration
Statement, the Company shall be required to give written
notice only to the Initial Purchaser and its counsel, Hughes
Hubbard & Reed LLP);
(iii) of the issuance by the Commission of any
stop order suspending the effectiveness of the Registration
Statement or the initiation of any proceedings for that
purpose;
(iv) of the receipt by the Company or its legal
counsel of any notification with respect to the suspension
of the qualification of the Securities for sale in any
jurisdiction or the initiation or threatening of any
proceeding for such purpose; and
(v) of the happening of any event that requires
the Company to make changes in the Registration Statement or
the prospectus in order that the Registration Statement or
the prospectus does not contain an untrue statement of a
material fact nor omit to state a material fact required to
be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were
made, not misleading.
(c) The Company shall use its best efforts to obtain
the withdrawal at the earliest possible time of any order
suspending the effectiveness of the Registration Statement.
(d) The Company shall furnish to each Holder of
Securities included within the coverage of the Shelf
Registration, without charge, at least one copy of the Shelf
Registration Statement and any post-effective amendment thereto,
including financial statements and schedules, and, if the Holder
so requests in writing, all exhibits thereto (including those, if
any, incorporated by reference).
(e) The Company shall deliver to each Exchanging
Dealer or Participating Broker-Dealer, to the Initial Purchaser,
and to any other Holder who so requests, without charge, at least
one copy of the Exchange Offer Registration Statement and any
post-effective amendment thereto, including financial statements
and schedules, and, if the Initial Purchaser or any such Holder
requests, all exhibits thereto (including those incorporated by
reference).
(f) The Company shall deliver to each Holder of
Securities included within the coverage of the Shelf
Registration, without charge, as many copies of the prospectus
(including each preliminary prospectus) included in the Shelf
Registration Statement and any amendment or supplement thereto as
such person may reasonably request. The Company consents,
subject to the provisions of this Agreement, to the use of the
prospectus or any amendment or supplement thereto included in the
Shelf Registration Statement by each of the selling Holders of
the Securities in connection with the offering and sale of the
Securities covered by such prospectus, or any such amendment
supplement.
(g) The Company shall deliver to the Initial
Purchaser, any Exchanging Dealer, any Participating Broker-Dealer
and such other persons required to deliver a prospectus following
the Registered Exchange Offer, without charge, as many copies of
the final prospectus included in the Exchange Offer Registration
Statement and any amendment or supplement thereto as such persons
may reasonably request. The Company consents, subject to the
provisions of this Agreement, to the use of the prospectus or any
amendment or supplement thereto by the Initial Purchaser, if
necessary, any Exchanging Dealer, any Participating Broker-Dealer
and such other persons required to deliver a prospectus following
the Registered Exchange Offer in connection with the offering and
sale of the Exchange Notes covered by the prospectus, or any
amendment or supplement thereto, included in such Exchange Offer
Registration Statement.
(h) Prior to any public offering of the Securities,
pursuant to any Registration Statement, the Company shall use its
best efforts to register or qualify or cooperate with the Holders
of the Securities included therein and their respective counsel
in connection with the registration or qualification of the
Securities for offer and sale under the securities or "blue sky"
laws of such states of the United States as any Holder of the
Securities reasonably requests in writing and do any and all
other acts or things necessary or advisable to enable the offer
and sale in such jurisdictions of the Securities covered by such
Registration Statement; provided, however, that the Company shall
not be required to (i) qualify generally to do business in any
jurisdiction where it is not then so qualified, (ii) take any
action which would subject it to general service of process or to
taxation in any jurisdiction where it is not then so subject or
(iii) register or qualify Securities or take any other action
under the securities or "blue sky" laws of any jurisdiction if,
in the judgment of the Board of Directors of the Company, the
consequences of such registration, qualification or other action
would be unduly burdensome to the Company.
(i) The Company shall cooperate with the Holders of
the Securities to facilitate the timely preparation and delivery
of certificates representing the Securities to be sold pursuant
to any Registration Statement free of any restrictive legends and
in such denominations and registered in such names as the Holders
may request a reasonable period of time prior to sales of the
Securities pursuant to such Registration Statement.
(j) Upon the occurrence of any event contemplated by
paragraphs (ii) through (v) of Section 3(b) above during the
period for which the Company is required to maintain an effective
Registration Statement, the Company shall promptly prepare and
file a post-effective amendment to the Registration Statement or
a supplement to the related prospectus and any other required
document so that, as thereafter delivered to Holders of the Notes
or the Exchange Notes or purchasers of Securities, the prospectus
will not contain an untrue statement of a material fact or omit
to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. If the
Company notifies the Initial Purchaser, the Holders of the
Securities and any known Exchanging Dealer or Participating
Broker-Dealer in accordance with paragraphs (ii) through (v) of
Section 3(b) above to suspend the use of the prospectus until the
requisite changes to the prospectus have been made, then the
Initial Purchaser, the Holders of the Securities and any such
Exchanging Dealer or Participating Broker-Dealer shall suspend
use of such prospectus, and the period of effectiveness of the
Shelf Registration Statement provided for in Section 2 above and
the Exchange Offer Registration Statement provided for in Section
1 above shall each be extended (i) by the number of days from and
including the date of the giving of such notice to and including
the date when the Initial Purchaser, the Holders of the
Securities and any known Exchanging Dealer or Participating
Broker-Dealer shall have received such amended or supplemented
prospectus pursuant to this Section 3(j) or (ii) if earlier,
until the date when none of the Securities represent Transfer
Restricted Notes (as defined in Section 6(d)).
(k) Not later than the effective date of the
applicable Registration Statement, the Company will provide a
CUSIP number for the Notes, the Exchange Notes or the Private
Exchange Notes, as the case may be, and provide the applicable
trustee with printed certificates for the Notes, the Exchange
Notes or the Private Exchange Notes, as the case may be, in a
form eligible for deposit with The Depository Trust Company.
(l) The Company will comply with all rules and
regulations of the Commission to the extent and so long as they
are applicable to the Registered Exchange Offer or the Shelf
Registration and will make generally available to its security
holders (or otherwise provide in accordance with Section 11(a) of
the Securities Act) an earnings statement satisfying the
provisions of Section 11(a) of the Securities Act, no later than
45 days after the end of a 12-month period (or 90 days, if such
period is a fiscal year) beginning with the first month of the
Company's first fiscal quarter commencing after the effective
date of the Registration Statement, which statement shall cover
such 12-month period.
(m) The Company shall cause the Indenture to be
qualified under the Trust Indenture Act of 1939, as amended, in a
timely manner and containing such changes, if any, as shall be
necessary for such qualification. In the event that such
qualification would require the appointment of a new trustee
under the Indenture, the Company shall appoint a new trustee
thereunder pursuant to the applicable provisions of the
Indenture.
(n) The Company may require each Holder of Securities
to be sold pursuant to the Shelf Registration Statement to
furnish to the Company such information regarding the Holder and
the distribution of the Securities as the Company may from time
to time reasonably require for inclusion in the Shelf
Registration Statement, and the Company may exclude from such
registration the Securities of any Holder that unreasonably fails
to furnish such information within a reasonable time after
receiving such request.
(o) The Company shall enter into such customary
agreements (including if requested an underwriting agreement in
customary form) and take all such other action, if any, as may be
required in order to facilitate the disposition of the Securities
pursuant to any Shelf Registration.
(p) In the case of any Shelf Registration, subject to
appropriate confidentiality arrangements being entered into, the
Company shall (i) make available at reasonable times for
inspection by the Holders of the Securities, any underwriter
participating in any disposition pursuant to the Shelf
Registration Statement and any attorney, accountant or other
agent retained by the Holders of the Securities or any such
underwriter all relevant financial and other records, pertinent
corporate documents and properties of the Company and (ii) cause
the Company's officers, directors, employees, accountants and
auditors to supply all relevant information reasonably requested
by the Holders of the Securities or any such underwriter,
attorney, accountant or agent in connection with the Shelf
Registration Statement, in each case, as shall be reasonably
necessary, in the judgment of the Holder or any such underwriter,
attorney, accountant or agent referred to in this paragraph, to
conduct a reasonable investigation within the meaning of Section
11 of the Securities Act.
(q) In the case of any Shelf Registration, the
Company, if requested by any Holder of Securities covered
thereby, shall cause (i) its counsel to deliver an opinion and
updates thereof relating to the Securities in customary form
addressed to such Holders and the managing underwriters, if any,
thereof and dated, in the case of the initial opinion, the
effective date of such Shelf Registration Statement covering the
matters customarily covered in opinions of counsel requested in
underwritten offerings and such other matters as may be
reasonably requested by the managing underwriter or underwriters;
(ii) its officers to execute and deliver all customary documents
and certificates and updates thereof reasonably requested by any
underwriters of the applicable Securities; and (iii) its
independent public accountants to provide to the selling Holders
of the applicable Securities and any underwriter therefor a
comfort letter in customary form and covering matters of the type
customarily covered in comfort letters in connection with primary
underwritten offerings, subject to receipt of appropriate
documentation as contemplated, and only if permitted, by
Statement of Auditing Standards No. 72.
(r) In the case of the Registered Exchange Offer, if
requested by the Initial Purchaser or any known Exchanging Dealer
or Participating Broker-Dealer, the Company shall cause (i) its
counsel to deliver to the Initial Purchaser or such Exchanging
Dealer or Participating Broker-Dealer, signed opinions in the
forms set forth in Section 5(e) of the Purchase Agreement with
such changes as are customary in connection with the preparation
of a Registration Statement and (ii) its independent public
accountants to deliver to the Initial Purchaser or such
Exchanging Dealer or Participating Broker-Dealer a comfort
letter, in customary form, meeting the requirements as to the
substance thereof as set forth in Section 5(g) of the Purchase
Agreement, with appropriate date changes.
(s) If a Registered Exchange Offer or a Private
Exchange is to be consummated, upon delivery of the Notes by
Holders to the Company (or to such other Person as directed by
the Company) in exchange for the Exchange Notes or the Private
Exchange Notes, as the case may be, the Company shall mark, or
cause to be marked, on the Notes so exchanged that such Notes are
being cancelled in exchange for the Exchange Notes or the Private
Exchange Notes, as the case may be; in no event shall the Notes
be marked as paid or otherwise satisfied.
(t) In the event that any broker-dealer registered
under the Exchange Act shall underwrite any Securities or
participate as a member of an underwriting syndicate or selling
group or "assist in the distribution" (within the meaning of the
Rules of Fair Practice and the By-Laws of the National
Association of Securities Dealers, Inc. ("NASD")) thereof,
whether as a Holder of such Securities or as an underwriter, a
placement or sales agent or a broker or dealer in respect
thereof, or otherwise, the Company shall assist such broker-
dealer in complying with the requirements of such Rules and By-
Laws (including without limitation the indemnification of any
"qualified independent underwriter" required thereby).
(u) The Company will use its best efforts to cause the
Transfer Restricted Notes to be eligible for inclusion in the
National Association of Securities Dealers, Inc. Private
Offerings, Resales and Trading through Automated Linkages trading
system.
(v) The Company shall use its best efforts to take all
other steps necessary to effect the registration of the
Securities covered by a Registration Statement contemplated
hereby.
(w) The Company agrees that it will not include in the
registration contemplated by the Shelf Registration Statement any
securities other than the Securities.
(x) The Company hereby agrees to list the Notes on the
American Stock Exchange or on such other stock exchange or market
as the Common Stock is then principally traded no later than the
earliest to occur of (i) the effectiveness of the initial
Exchange Offer Registration Statement and (ii) the effectiveness
of the initial Shelf Registration Statement, provided that such
Notes meet the minimum requirements for listing on any such
exchange or market, and, if applicable, to maintain such listing
for so long as any of the Notes is outstanding.
SECTION 4. REGISTRATION EXPENSES
The Company shall bear all fees and expenses incurred
in connection with the performance of its obligations under
Sections 1 through 3 hereof (including the reasonable fees and
expenses of Hughes Hubbard & Reed LLP, counsel for the Initial
Purchaser, incurred in connection with the Registered Exchange
Offer), whether or not the Registered Exchange Offer or a Shelf
Registration is filed or becomes effective, and, in the event of
a Shelf Registration, shall bear, or reimburse the Holders of the
Securities covered thereby for, the reasonable fees and
disbursements of one firm of counsel designated by the Holders of
a majority in principal amount of the Securities covered thereby
to act as counsel for the Holders of the Securities in connection
therewith, it being understood that the Company shall not be
responsible for the fees and expenses of more than one counsel
employed at any one time.
The Company will, in any event, bear its internal
expenses (including, without limitation, all salaries and
expenses of its officers and employees performing legal or
accounting duties), the expense of any annual audit, and the fees
and expenses of any Person, including special experts, retained
by the Company. The Holders shall bear the expense of any
broker's commission or underwriters' discount or commission.
SECTION 5. INDEMNIFICATION
(a) The Company agrees to indemnify and hold harmless
each Holder of the Securities, any Exchanging Dealer, any
Participating Broker-Dealer and each person, if any, who controls
such Holder, Exchanging Dealer or Participating Broker-Dealer
within the meaning of the Securities Act or the Exchange Act
(each Holder, Exchanging Dealer, Participating Broker-Dealer and
such controlling persons being referred to in this Section 5(a)
and the Company and its controlling persons referred to in
Section 5(b), being collectively referred to herein, as the case
may be, as the "indemnified parties", from and against any
losses, claims, damages or liabilities, joint or several, or any
actions in respect thereof (including, but not limited to, any
losses, claims, damages, liabilities or actions relating to
purchases and sales of the Securities) to which each indemnified
party may become subject under the Securities Act, the Exchange
Act or otherwise, insofar as such losses, claims, damages,
liabilities or actions arise out of or are based upon any untrue
statement or alleged untrue statement of a material fact
contained in a Registration Statement or prospectus or in any
amendment or supplement thereto or in any preliminary prospectus
relating to a Registration Statement, or arise out of, or are
based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which
they were made, not misleading, and shall reimburse the
indemnified parties for any legal or other expenses reasonably
incurred by them in connection with investigating or defending
any such loss, claim, damage, liability or action in respect
thereof; provided, however, that (i) the Company shall not be
liable in any such case to the extent that such loss, claim,
damage or liability arises out of or is based upon any untrue
statement or alleged untrue statement or omission or alleged
omission made in a Registration Statement or prospectus or in any
amendment or supplement thereto or in any preliminary prospectus
relating to a Registration Statement in reliance upon and in
conformity with written information pertaining to such Holder and
furnished to the Company by or on behalf of such Holder
specifically for inclusion therein, (ii) with respect to any
untrue statement or omission or alleged untrue statement or
omission made in any prospectus relating to such Registration
Statement, the indemnity agreement contained in this subsection
(a) shall not inure to the benefit of any person as to which
there is a prospectus delivery requirement (a "Delivering
Seller") that sold the Securities to the person asserting any
such losses, claims, damages or liabilities to the extent that
any such loss, claim, damage or liability of such Delivering
Seller results from the fact that there was not sent or given to
such person, on or prior to the written confirmation of such
sale, a copy of the relevant prospectus, as amended and
supplemented, provided that (I) the Company shall have previously
furnished copies thereof to such Delivering Seller in accordance
with this Agreement and (II) such furnished prospectus, as
amended and supplemented, would have corrected any such untrue
statement or omission or alleged untrue statement or omission,
and (iii) this indemnity agreement will be in addition to any
liability which the Company may otherwise have to such
indemnified party. The Company shall also indemnify
underwriters, selling brokers, dealer-managers and similar
securities industry professionals participating in the
distribution (in each case as described in the Registration
Statement), their officers and directors and each person who
controls such persons within the meaning of the Securities Act or
the Exchange Act to the same extent as provided above with
respect to the indemnification of the Holders of the Securities
if requested by such Holders; provided, however, that the Company
shall not indemnify any such party to the extent its liability
arises from its failure to comply with the requirements described
in Annexes A, B and C hereto.
(b) Each Holder of the Securities, severally and not
jointly, will indemnify and hold harmless the Company and each
person, if any, who controls the Company within the meaning of
the Securities Act or the Exchange Act from and against any
losses, claims, damages or liabilities or any actions in respect
thereof to which the Company or any such controlling person may
become subject under the Securities Act, the Exchange Act or
otherwise, insofar as such losses, claims, damages, liabilities
or actions arise out of or are based upon any untrue statement or
alleged untrue statement of a material fact contained in a
Registration Statement or prospectus or in any amendment or
supplement thereto or in any preliminary prospectus relating to a
Shelf Registration, or arise out of or are based upon the
omission or alleged omission to state therein a material fact
necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, but in
each case only to the extent that the untrue statement or alleged
untrue statement or omission or alleged omission was made in
reliance upon and in conformity with written information
pertaining to such Holder and furnished to the Company by or on
behalf of such Holder specifically for inclusion therein; and,
subject to the limitation set forth immediately preceding this
clause, shall reimburse, as incurred, the Company for any legal
or other expenses reasonably incurred by the Company or any such
controlling person in connection with investigating or defending
any loss, claim, damage, liability or action in respect thereof.
This indemnity agreement will be in addition to any liability
which such Holder may otherwise have to the Company or any of its
controlling persons.
(c) Promptly after receipt by an indemnified party
under this Section 5 of notice of the commencement of any action
or proceeding (including a governmental investigation), such
indemnified party will, if a claim in respect thereof is to be
made against the indemnifying party under this Section 5, notify
the indemnifying party of the commencement thereof; but the
omission so to notify the indemnifying party will not, in any
event, relieve the indemnifying party from any obligations to any
indemnified party, except to the extent that it is prejudiced or
harmed in any material respect by failure to give such prompt
notice. In case any such action is brought against any
indemnified party, and it notifies the indemnifying party of the
commencement thereof, the indemnifying party will be entitled to
participate therein and, to the extent that it may wish, jointly
with any other indemnifying party similarly notified, to assume
the defense thereof, with one counsel (and local counsel as
necessary) reasonably satisfactory to such indemnified party (who
shall not, except with the consent of the indemnified party, be
counsel to the indemnifying party), and after notice from the
indemnifying party to such indemnified party of its election so
to assume the defense thereof the indemnifying party will not be
liable to such indemnified party under this Section 5 for any
legal or other expenses, other than reasonable costs of
investigation, subsequently incurred by such indemnified party in
connection with the defense thereof. No indemnifying party
shall, without the prior written consent of the indemnified
party, not to be unreasonably withheld, effect any settlement of
any pending or threatened action in respect of which any
indemnified party is or could have been a party and indemnity
could have been sought hereunder by such indemnified party unless
such settlement includes an unconditional release of such
indemnified party from all liability on any claims that are the
subject matter of such action and does not include any injunctive
relief against such indemnified party. No indemnifying party
shall be liable for any amounts paid in settlement of any action
or claim without its written consent, which consent shall not be
unreasonably withheld.
(d) If the indemnification provided for in this
Section 5 is unavailable or insufficient to hold harmless an
indemnified party under subsections (a) or (b) above for any
reason, then each indemnifying party shall contribute to the
amount paid or payable by such indemnified party as a result of
the losses, claims, damages or liabilities (or actions in respect
thereof) referred to in subsection (a) or (b) above (i) in such
proportion as is appropriate to reflect the relative benefits
received by the indemnifying party or parties on the one hand and
the indemnified party on the other from (x) in the case of a
Holder of Notes, such Holder's exchange of its proportionate
share of Notes pursuant to the Registered Exchange Offer, and
(y) in the case of the Company, the Company's initial issuance of
the Notes, or (ii) if the allocation provided by the foregoing
clause (i) is not permitted by applicable law, in such proportion
as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of
the indemnifying party or parties on the one hand and the
indemnified party on the other in connection with the statements
or omissions that resulted in such losses, claims, damages or
liabilities (or actions in respect thereof) as well as any other
relevant equitable considerations. The relative fault of the
parties shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact
relates to information supplied by the Company on the one hand or
such Holder or such other indemnified person, as the case may be,
on the other, and the parties' relative intent, knowledge, access
to information and opportunity to correct or prevent such
statement or omission. The amount paid by an indemnified party
as a result of the losses, claims, damages or liabilities
referred to in the first sentence of this subsection (d) shall be
deemed to include any legal or other expenses reasonably incurred
by such indemnified party in connection with investigating or
defending any action or claim which is the subject of this
subsection (d). Notwithstanding any other provision of this
Section 5(d), the Holders of the Securities shall not be required
to contribute any amount in excess of the amount by which the net
proceeds received by such Holders from the sale of the Securities
pursuant to a Registration Statement exceeds the amount of
damages which such Holders have otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or
alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. For
purposes of this paragraph (d), each officer, director, employee,
representative and agent of an indemnified party and each person,
if any, who controls such indemnified party within the meaning of
the Securities Act or the Exchange Act shall have the same rights
to contribution as such indemnified party.
(e) The Company and each Holder agree that it would
not be just and equitable if contributions pursuant to Section
5(d) were determined by pro rata allocation or by any other
method of allocation that does not take account of the equitable
consideration referred to in Section 5(d).
(f) The agreements contained in this Section 5 shall
survive the sale of the Securities pursuant to a Registration
Statement and shall remain in full force and effect, regardless
of any termination or cancellation of this Agreement or any
investigation made by or on behalf of any indemnified party.
SECTION 6. SPECIAL INTEREST
(a) If any of the following events occurs (each such
event in clauses (i) through (iii) below a "Registration
Default"):
(i) if by May 4, 1998, neither the Exchange Offer
Registration Statement nor a Shelf Registration Statement
has been filed with the Commission;
(ii) if by July 31, 1998, neither the Exchange
Offer Registration Statement nor the Shelf Registration
Statement is declared effective;
(iii) if by August 31, 1998 neither the
Registered Exchange Offer is consummated nor, if required in
lieu thereof, the Shelf Registration Statement is declared
effective by the Commission;
(iv) if, notwithstanding the filing of the
Exchange Offer Registration Statement or the effectiveness
thereof or the consummation of the Registered Exchange
Offer, pursuant to the terms of subparagraph (i) of Section
2(a) hereof, by the later of (x) May 4, 1998 and (y) 30 days
after a request made pursuant to Section 2, a Shelf
Registration Statement has not been filed with the
Commission or such Shelf Registration Statement has not been
declared effective by the Commission within 150 days after
any such request; or
(v) if after either the Exchange Offer
Registration Statement or the Shelf Registration Statement
is declared effective (A) such Registration Statement
thereafter ceases to be effective; or (B) such Registration
Statement or the related prospectus ceases to be usable
(except as permitted in paragraph (b)) in connection with
resales of Transfer Restricted Notes during the periods
specified herein,
the Company will pay special interest ("Special Interest") to
each Holder of Transfer Restricted Notes, during the first 90-day
period immediately following such Registration Default at a per
annum rate of 0.50% per Transfer Restricted Note held by such
Holder. The amount of Special Interest will increase by an
additional 0.50% per annum per Transfer Restricted Note, for each
subsequent 90-day period until the date on which the Exchange
Offer Registration Statement or Shelf Registration Statement is
filed or declared effective, as the case may be, or such
Registration Statement again becomes effective, or such
Registration Statement prospectus becomes usable as the case may
be, up to a maximum Special Interest with respect to any
Registration Default of 2.00% per annum per Transfer Restricted
Note. Such Special Interest is payable in addition to any other
interest payable from time to time with respect to the
Securities.
(b) A Registration Default referred to in Section
6(a)(v) shall be deemed not to have occurred and be continuing in
relation to a Shelf Registration Statement or the related
prospectus if (i) such Registration Default has occurred solely
as a result of (x) the filing of a post-effective amendment to
such Shelf Registration Statement to incorporate annual audited
or, if required by the rules and regulations under the Securities
Act, quarterly unaudited financial information with respect to
the Company where such post-effective amendment is not yet
effective and needs to be declared effective to permit Holders to
use the related prospectus or (y) other material events or
developments with respect to the Company that would need to be
described in such Shelf Registration Statement or the related
prospectus and (ii) in the case of clause (y), the Company is
proceeding promptly and in good faith to amend or supplement such
Shelf Registration Statement and related prospectus to describe
such events; provided, however, that in no event shall the
Company be required to disclose the business purpose for such
suspension if the Company determines in good faith that such
business purpose must remain confidential; provided further,
however, that in any case if such Registration Default occurs for
a continuous period in excess of 45 days, Special Interest shall
be payable in accordance with the above paragraph from the day
following such 45 day period until the date on which such
Registration Default is cured.
(c) All accrued Special Interest shall be payable by
the Company in cash on the regular interest payment dates with
respect to the Notes, the Private Exchange Notes or the Exchange
Notes to the Holders of record on the applicable record dates.
The parties hereto agree that Special Interest provided in this
Section constitutes a reasonable estimate of the damages that
will be incurred by the Holders by reason of the failure of the
Exchange Offer Registration Statement or the Shelf Registration
Statement to be filed, declared effective or to remain effective
or such Registration Statement or related prospectus to be
usable, as the case may be.
(d) "Transfer Restricted Notes" means each Note until
(i) the date on which such Transfer Restricted Note has been
exchanged by a person other than a broker-dealer for a freely
transferable Exchange Note in the Registered Exchange Offer, (ii)
following the exchange by a broker-dealer in the Registered
Exchange Offer of a Transfer Restricted Note for an Exchange
Note, the date on which such Exchange Note is sold to a purchaser
who receives from such broker-dealer on or prior to the date of
such sale a copy of the prospectus contained in the Exchange
Offer Registration Statement, (iii) the date on which such
Transfer Restricted Note has been effectively registered under
the Securities Act and disposed of in accordance with the Shelf
Registration Statement or (iv) the date on which such Transfer
Restricted Note is distributed to the public pursuant to Rule 144
under the Securities Act or is saleable pursuant to Rule 144(k)
under the Securities Act.
SECTION 7. RULE 144 AND RULE 144A
The Company shall use its reasonable best efforts to
file on a timely basis all such reports required to be filed
under the Exchange Act as, and endeavor in good faith to take
such other actions as, are reasonably necessary to enable Holders
to sell Transfer Restricted Notes without registration under the
Securities Act within the limitation of the exemptions provided
under (a) Rule 144 under the Securities Act, as such Rule may be
amended from time to time, (b) Rule 144A under the Securities
Act, as such Rule may be amended from time to time, and (c) any
similar rules or regulations hereafter adopted by the Commission.
Upon request of any Holder of Transfer Restricted Notes, the
Company will provide a written statement as to whether it has
complied with such requirements and will, at its expense,
forthwith upon the request of the Initial Purchaser, deliver to
the Initial Purchaser a certificate, signed by the Company's
principal financial officer, stating (a) the Company's name,
address and telephone number (including area code), (b) the
Company's Internal Revenue Service identification number, (c) the
Company's Commission file number, (d) the number of shares of
each class of capital stock outstanding as shown by the most
recent report or statement published by the Company, and (e)
whether the Company has filed the reports required to be filed
under the Exchange Act for a period of at least ninety (90) days
prior to the date of such certificate and in addition has filed
the most recent annual report required to be filed thereunder.
SECTION 8. UNDERWRITING
If any of the Transfer Restricted Notes covered by any
Shelf Registration Statement are to be sold in an underwritten
offering, the investment banker(s) and manager(s) that will
manage the offering will be selected by the Holders of a majority
of the then outstanding Transfer Restricted Notes (determined in
accordance with Section 9(d)) included in such offering (after
consultation with the Company as to such selection and upon the
written consent of the Company, which consent will not be
unreasonably withheld or delayed). If requested by the
underwriters, the Company will promptly enter into an
underwriting agreement reasonably acceptable to the Company with
such underwriters for such offering, such agreement to contain
such representations and warranties by the Company and such other
terms and conditions as are customary for underwriting agreements
with respect to secondary offerings, including without
limitation, indemnities to the effect and to the extent provided
in Section 5 hereof. The Holders of Transfer Restricted Notes on
whose behalf such securities are being distributed shall be party
to any such underwriting agreement. Such Holders shall not be
required by the Company to make any representations or warranties
to the underwriters with respect to the Company or the Transfer
Restricted Notes (other than that the Holders are conveying such
securities free and clear of all pledges, securities interests,
liens, charges, encumbrances, agreements, equities, claims and
options of whatever nature), and the Holders shall not be
required to indemnify the Company or the underwriters (other than
with respect to the matters, and to the extent, provided in
Section 5). Furthermore, the Company shall make available for
inspection by the Holders, any underwriter participating in any
disposition pursuant to such Shelf Registration Statement, and
any attorney, accountant or other agent retained by the Holders
or underwriter, all financial and other records and other
information, pertinent corporate documents and properties of the
Company as shall be reasonably necessary to enable them to
exercise their due diligence responsibilities.
No Holder of Transfer Restricted Notes may participate
in any underwritten distribution hereunder unless such holder (a)
agrees to sell such Holder's Transfer Restricted Notes on the
basis provided in any underwriting arrangements approved in
accordance with the terms hereof, and (b) completes and executes
all questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents required under the terms of such
underwriting arrangements.
SECTION 9. MISCELLANEOUS
(a) Remedies. Each Holder of Securities, in addition
to being entitled to exercise all rights provided herein, and as
provided in the Purchase Agreement and granted by law, including
the recovery of damages, shall be entitled to specific
performance of such Holder's rights under this Agreement. Except
with respect to the payment of Special Interest in the event of
the occurrence of a Registration Default, the Company agrees that
monetary damages would not be adequate compensation for any loss
incurred by reason of a breach by it of the provisions of this
Agreement and hereby agrees in any action for specific
performance to waive the defense that a remedy at law would be
adequate.
(b) No Inconsistent Agreements. The Company has not
and shall not on or after the date of this Agreement enter into
any agreement with respect to its securities that is inconsistent
with the rights granted to the Holders of Securities in this
Agreement or otherwise conflicts with the provisions hereof. The
rights granted to the Holders of Securities hereunder do not and
will not in any way conflict with and are not and will not be
inconsistent with the rights granted to the holders of the
Company's other securities under any other agreements. No Holder
of any securities of the Company has rights to the registration
of any securities of the Company because of the execution,
delivery or performance by the Company of this Agreement or as a
result of the filing of the Exchange Offer Registration Statement
or the Shelf Registration Statement.
(c) No Adverse Action Affecting the Securities. The
Company has not taken and will not take, any action, or permit
any change to occur with respect to the Securities which would
adversely affect the ability of any of the Holders of Securities
to include such Securities in a registration undertaken pursuant
to this Agreement.
(d) Amendments and Waivers. The provisions of this
Agreement, including the provisions of this sentence, may not be
amended, modified or supplemented, and waivers or consents to
departures from the provisions hereof may not be given unless the
Company has obtained the written consent of Holders of a majority
of the outstanding principal amount of Transfer Restricted Notes.
Notwithstanding the foregoing, a waiver or consent to departure
from the provisions hereof that relates exclusively to the rights
of Holders of Transfer Restricted Notes whose Transfer Restricted
Notes are being sold pursuant to the Shelf Registration Statement
and that does not directly or indirectly affect the rights of
other Holders of Transfer Restricted Notes may be given by the
Holders of a majority of the Transfer Restricted Notes being
sold.
(e) Notices. All notices and other communications
provided for or permitted hereunder shall be made in writing by
hand-delivery, first-class mail (registered or certified, return
receipt requested), telex, telecopier, or air courier
guaranteeing overnight delivery:
(i) if to a Holder of Securities, at the address set
forth on the records of the Company or the Trustee under the
Indenture, with a copy to the Trustee, and if to the Initial
Purchaser, at the address set forth in the Purchase
Agreement; and
(ii) if to the Company, initially at its address set
forth in the Purchase Agreement and thereafter at such other
address, notice of which is given in accordance with the
provisions of this Section.
All such notices and communications shall be deemed to
have been duly given: at the time delivered by hand, if
personally delivered; five business days after being deposited in
the mail, postage prepaid, if mailed; when answered back, if
telexed; when receipt acknowledged, if telecopied; and on the
next business day, if timely delivered to an air courier
guaranteeing overnight delivery.
Copies of all such notices, demands or other
communications shall be concurrently delivered by the Person
giving the same to the Trustee under the Indenture at the address
specified in the Indenture.
(f) Successors and Assigns. This Agreement shall
inure to the benefit of and be binding upon the successors and
assigns of each of the parties, including without limitation and
without the need for an express assignment, subsequent Holders of
Securities.
(g) Counterparts. This Agreement may be executed in
any number of counterparts and by the parties hereto in separate
counterparts, each of which when so executed shall be deemed to
be an original and all of which taken together shall constitute
one and the same agreement.
(h) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise
affect the meaning hereof.
(i) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
YORK, WITHOUT REGARD TO THE CONFLICT OF LAWS PRINCIPLES OF SUCH
STATE.
(j) Severability. In the event that any one or more
of the provisions contained herein, or the application thereof in
any circumstance, is held invalid, illegal or unenforceable, the
validity, legality and enforceability of any such provision in
every other respect and of the remaining provisions contained
herein shall not be affected or impaired thereby.
(k) Entire Agreement. This Agreement is intended by
the parties as a final expression of their agreement and intended
to be a complete and exclusive statement of the agreement and
understanding of the parties hereto in respect of the subject
matter contained herein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or
referred to herein with respect to the registration rights
granted by the Company with respect to the Securities except as
provided in the Indenture and in the Purchase Agreement. Except
as set forth in the prior sentence this Agreement supersedes all
prior agreements and understandings between the parties with
respect to the subject matter hereof.
[Remainder of this page is blank.]
IN WITNESS WHEREOF, the parties have executed this
Agreement as of the date first written above.
TRANS WORLD AIRLINES, INC.
By:
-------------------------------
Name:
Title:
LAZARD FRERES & CO. LLC
By:
-------------------------------
Name:
Title:
ANNEX A
Each broker-dealer that receives Exchange Notes for its
own account pursuant to the Exchange Offer must acknowledge that
it will deliver a prospectus in connection with any resale of
such Exchange Notes. The Letter of Transmittal states that by so
acknowledging and by delivering a prospectus, a broker-dealer
will not be deemed to admit that it is an "underwriter" within
the meaning of the Securities Act. This Prospectus, as it may be
amended or supplemented from time to time, may be used by a
broker-dealer in connection with resales of Exchange Notes
received in exchange for Notes where such Notes were acquired by
such broker-dealer as a result of market-making activities or
other trading activities. The Company has agreed that, for a
period of 180 days after the Expiration Date (as defined herein),
it will make this Prospectus available to any broker-dealer for
use in connection with any such resale. See "Plan of
Distribution."
ANNEX B
Each broker-dealer that receives Exchange Notes for its
own account in exchange for Notes, where such Notes were acquired
by such broker-dealer as a result of market-making activities or
other trading activities, must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes.
See "Plan of Distribution."
ANNEX C
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Notes for its
own account pursuant to the Registered Offer must acknowledge
that it will deliver a prospectus in connection with any resale
of such Exchange Notes. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in
connection with resales of Exchange Notes received in exchange
for Existing Notes where such Existing Notes were acquired as a
result of market-making activities or other trading activities.
The Company has agreed that, for a period of 180 days after the
Expiration Date, it will make this prospectus, as amended or
supplemented, available to any broker-dealer for use in
connection with any such resale. In addition, until _____, 199_,
all dealers effecting transactions in the Exchange Notes may be
required to deliver a prospectus.*
The Company will not receive any proceeds from any sale
of Exchange Notes by broker-dealers. Exchange Notes received by
broker-dealers for their own account pursuant to the Exchange
Offer may be sold from time to time in one or more transactions
in the over-the-counter market, in negotiated transactions,
through the writing of options on the Exchange Notes or a
combination of such methods of resale, at market prices
prevailing at the time of resale, at prices related to such
prevailing market prices or negotiated prices. Any such resale
may be made directly to purchasers or to or through brokers or
dealers who may receive compensation in the form of commissions
or concessions from any such broker-dealer or the purchasers of
any such Exchange Notes. Any broker-dealer that resells Exchange
Notes that were received by it for its own account pursuant to
the Exchange Offer and any broker or dealer that participates in
a distribution of such Exchange Notes may be deemed to be an
"underwriter" within the meaning of the Securities Act and any
profit on any such resale of Exchange Notes and any commission or
concessions received by any such persons may be deemed to be
underwriting compensation under the Securities Act. The Letter
of Transmittal states that, by acknowledging that it will deliver
and by delivering a prospectus, a broker-dealer will not be
deemed to admit that it is an "underwriter" within the meaning of
the Securities Act.
For a period of 180 days after the Expiration Date the
Company will promptly send additional copies of this Prospectus
and any amendment or supplement to this Prospectus to any broker-
dealer that requests such documents in the Letter of Transmittal.
The Company has agreed to pay all expenses incident to the
Exchange Offer (including the reasonable expenses of one counsel
for the Holders of the Notes) other than commissions or
concessions of any brokers or dealers and will indemnify the
Holders of Securities (including any broker-dealers) against
certain liabilities, including liabilities under the Securities
Act.
______________________________
* In addition, the legend required by Item 502(e) of
Regulation S-K will appear on the back cover page of the
Exchange Offer prospectus.
ANNEX D
_ CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10
ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY
AMENDMENTS OR SUPPLEMENTS THERETO.
Name:
-----------------------------------------------------
Address:
--------------------------------------------------
--------------------------------------------------
If the undersigned is not a broker-dealer, the undersigned
represents that it is not engaged in, and does not intend to
engage in, a distribution of Exchange Notes. If the undersigned
is a broker-dealer that will receive Exchange Notes for its own
account in exchange for Notes that were acquired as a result of
market-making activities or other trading activities, it
acknowledges that it will deliver a prospectus in connection with
any resale of such Exchange Notes; however, by so acknowledging
and by delivering a prospectus, the undersigned will not be
deemed to admit that it is an "underwriter" within the meaning of
the Securities Act.
Exhibit 4.26
===============================================================================
TRANS WORLD AIRLINES, INC.
and
FIRST SECURITY BANK, NATIONAL ASSOCIATION,
as Trustee
INDENTURE
Dated as of March 3, 1998
$150,000,000
11 3/8% Senior Notes due 2006
================================================================================
TABLE OF CONTENTS
Page
----
ARTICLE 1.
DEFINITIONS AND RULES OF CONSTRUCTION
Section 1.1 Definitions........................................................1
Section 1.2 Rules of Construction..............................................1
ARTICLE 2.
THE SECURITIES
Section 2.1 Designation, Form and Dating......................................1
Section 2.2 Execution, Amount, Authentication and Delivery....................2
Section 2.3 Registrar and Paying Agent........................................4
Section 2.4 Paying Agent to Hold Payments In Trust............................4
Section 2.5 Securityholder Lists..............................................6
Section 2.6 Transfer and Exchange.............................................6
Section 2.7 Mutilated, Defaced, Destroyed, Lost and Stolen
Securities........................................................7
Section 2.8 Treasury Securities...............................................8
Section 2.9 Temporary Securities..............................................9
Section 2.10 Cancellation......................................................9
Section 2.11 Defaulted Interest; Interest on Defaulted
Principal ........................................................9
Section 2.12 CUSIP Numbers....................................................10
ARTICLE 3.
REDEMPTIONS AND CERTAIN REPURCHASES
Section 3.1 Optional Redemption-General.......................................10
Section 3.2 Redemption Notice to Trustee......................................10
Section 3.3 Selection of Securities to be Redeemed............................11
Section 3.4 Notice of Redemption..............................................11
Section 3.5 Effect of Notice of Redemption....................................12
Section 3.6 Deposit of Redemption Price.......................................12
Section 3.7 Securities Redeemed in Part.......................................12
Section 3.8 Optional Redemption Upon Public Equity Offering...................12
ARTICLE 4.
COVENANTS, REPRESENTATIONS AND WARRANTIES
Section 4.1 Payment of Securities...........................................12
Section 4.2 Maintenance of Office or Agency.................................13
Section 4.3 Limitation on Restricted Payments...............................13
Section 4.4 Corporate Existence.............................................16
Section 4.5 Payment of Taxes and Other Claims...............................17
Section 4.6 Notices.........................................................17
Section 4.7 Maintenance of Properties and Insurance.........................17
Section 4.8 Default Notices and Compliance Certificates.....................18
Section 4.9 SEC Reports.....................................................18
Section 4.10 Waiver of Stay, Extension or Usury Laws.........................19
Section 4.11 Amendment to Indenture..........................................19
Section 4.12 Limitation on Liens.............................................19
Section 4.13 Books, Records, Access; Confidentiality.........................20
Section 4.14 Repurchase of Securities Upon a Change in Control...............20
Section 4.15 Restrictions on Becoming an Investment Company..................21
Section 4.16 Limitation on Indebtedness......................................21
Section 4.17 Limitation on Restrictions on Distributions from
Restricted Subsidiaries.........................................24
Section 4.18 Limitation on Sales of Assets and Subsidiary Stock..............26
Section 4.19 Limitation on Affiliate Transactions............................27
Section 4.20 Limitation on the Sale or Issuance of Capital Stock
of Restricted Subsidiaries......................................27
Section 4.21 Limitation on Guarantees by Restricted
Subsidiaries ...................................................28
Section 4.22 Limitation on Sale/Leaseback Transactions.......................29
Section 4.23 Application for Rating..........................................29
Section 4.24 Listing.........................................................29
ARTICLE 5.
SUCCESSOR CORPORATION
Section 5.1 Covenant Not to Consolidate, Merge, Convey or
Transfer Except Under Certain Conditions........................29
Section 5.2 Successor Person Substituted....................................30
Section 5.3 Optional Right of Redemption....................................31
ARTICLE 6.
DEFAULT AND REMEDIES
Section 6.1 Events of Default...............................................31
Section 6.2 Acceleration....................................................33
Section 6.3 Other Remedies..................................................33
Section 6.4 Waiver of Past Defaults.........................................33
Section 6.5 Control by Majority.............................................34
Section 6.6 Limitation on Suits.............................................34
Section 6.7 Rights of Holders to Receive Payment............................35
Section 6.8 Collection Suit by Trustee......................................35
Section 6.9 Trustee May File Proofs of Claim................................35
Section 6.10 Application of Proceeds.........................................36
Section 6.11 Undertaking for Costs...........................................37
Section 6.12 Restoration of Rights on Abandonment of
Proceedings.....................................................37
Section 6.13 Powers and Remedies Cumulative; Delay or Omission
Not Waiver of Default...........................................37
ARTICLE 7.
TRUSTEE
Section 7.1 Duties of Trustee................................................38
Section 7.2 Rights of Trustee................................................39
Section 7.3 Individual Rights of Trustee.....................................39
Section 7.4 Trustee's Disclaimer.............................................39
Section 7.5 Notice of Defaults...............................................39
Section 7.6 Reports by Trustee to Holders....................................40
Section 7.7 Compensation and Indemnity.......................................40
Section 7.8 Replacement of Trustee...........................................41
Section 7.9 Successor Trustee by Merger, etc.................................42
Section 7.10 Eligibility; Disqualification...................................42
Section 7.11 Preferential Collection of Claims Against Company...............42
ARTICLE 8.
DISCHARGE OF INDENTURE; DEFEASANCE
Section 8.1 Discharge of Liability on Securities; Defeasance.................42
Section 8.2 Conditions to Defeasance.........................................43
Section 8.3 Application of Trust Money.......................................44
Section 8.4 Repayment to Company.............................................44
Section 8.5 Indemnity for Government Obligations.............................45
Section 8.6 Reinstatement....................................................45
ARTICLE 9.
AMENDMENTS, SUPPLEMENTS AND WAIVERS
Section 9.1 Without Consent of Holders.......................................45
Section 9.2 With Consent of Holders..........................................46
Section 9.3 Compliance with Trust Indenture Act..............................47
Section 9.4 Revocation and Effect of Consents................................47
Section 9.5 Notation on or Exchange of Securities............................47
Section 9.6 Trustee to Sign Amendments, etc..................................47
Section 9.7 Effect of Supplement and/or Amendment............................48
ARTICLE 10.
MISCELLANEOUS
Section 10.1 Conflict with Trust Indenture Act of 1939......................48
Section 10.2 Notices; Waivers...............................................48
Section 10.3 Communications by Holders with Other Holders...................49
Section 10.4 Certificate and Opinion as to Conditions Precedent.............49
Section 10.5 Statements Required in Certificate or Opinion..................50
Section 10.6 Rules by Trustee, Paying Agent, Registrar......................51
Section 10.7 Holidays.......................................................51
Section 10.8 Governing Law; Waiver of Jury Trial............................51
Section 10.9 No Adverse Interpretation of Other Agreements..................51
Section 10.10 No Recourse Against Others.....................................51
Section 10.11 Benefits of Indenture and the Securities
Restricted ....................................................52
Section 10.12 Successors and Assigns.........................................52
Section 10.13 Counterpart Originals..........................................52
Section 10.14 Severability...................................................52
Section 10.15 Rating Agencies................................................52
Section 10.16 Effect of Headings.............................................53
APPENDIX I Definitions Appendix
APPENDIX II Rule 144A/Regulation S Appendix (including forms of
11 3/8% Senior Note as Exhibits 1 and 2 thereto)
EXHIBIT A Form of Subsidiary Guaranty
INDENTURE dated as of March 3, 1998 between TRANS WORLD AIRLINES,
INC., a Delaware corporation (the "Company"), and FIRST SECURITY BANK,
NATIONAL ASSOCIATION, a national banking association, as Trustee (the
"Trustee").
Each party agrees as follows for the benefit of the other party and for
the equal and ratable benefit of the Holders of the Company's 11 3/8% Senior
Notes due 2006 (the "Initial Securities") and, if and when issued pursuant to
a registered exchange for Initial Securities, the Company's 11 3/8% Senior
Notes due 2006 (the "Exchange Securities", and, if and when issued pursuant to
a private exchange for Initial Securities, the Company's 11 3/8% Senior
Notes due 2006 (the "Private Exchange Securities", together with the
Exchange Securities and the Initial Securities, the "Securities").
ARTICLE 1.
DEFINITIONS AND RULES OF CONSTRUCTION
Section 1.1 Definitions.
Capitalized terms used herein and not otherwise defined herein shall
have the meanings ascribed to such terms in Section 1 of the Definitions
Appendix attached hereto as Appendix I, which shall be a part of this
Indenture as if fully set forth in this place.
Section 1.2 Rules of Construction.
The rules of construction for this Indenture are set forth in Section 2
of the Definitions Appendix.
ARTICLE 2.
THE SECURITIES
Section 2.1 Designation, Form and Dating.
Provisions relating to the Initial Securities, the Private Exchange
Securities and the Exchange Securities are set forth in the Rule
144A/Regulation S Appendix attached hereto as Appendix II (the "Rule 144A
Appendix") which is hereby incorporated in and expressly made part of this
Indenture. The Initial Securities and the Trustee's certificate of
authentication shall be substantially in the form of Exhibit 1 to the Rule
144A Appendix (with such appropriate insertions, omissions, substitutions and
other variations as are required by this Indenture) and are hereby
incorporated in and expressly made a part of this Indenture. The
Exchange Securities, the Private Exchange Securities, and the Trustee's
certificates of authentication shall be substantially in the form of Exhibit 2
to the Rule 144A Appendix (with such appropriate insertions,
omissions, substitutions and other variations as are required by this
Indenture) and are hereby incorporated in and expressly made a part of this
Indenture. The Securities may have imprinted or otherwise reproduced
thereon such notations, legends or endorsements, not inconsistent with
the provisions of this Indenture, as may be required to comply with any law
or with any rules or regulations pursuant thereto, or with the rules of any
securities market in which the Securities are admitted to trading, or
to conform to general usage. The Company shall approve the form of the
Securities and any notation, legend or endorsement on them. Each Security
shall be dated the date of its authentication and shall bear interest from
the applicable date set forth in the form of Security and shall be
payable, unless previously Tendered, on the dates as specified on the face of
the form of the Security.
The Person in whose name any Security is registered at the close of
business on any Record Date with respect to any Interest Payment Date shall
be entitled to receive the interest and Special Interest, if any, payable
on such Interest Payment Date to the extent provided by such Security, except
if and to the extent the Company shall default in the payment of the
interest or Special Interest due on such Interest Payment Date, in which case
defaulted interest or Special Interest, as the case may be, shall be paid to
the Person in whose name the Outstanding Security is registered at the close
of business on the subsequent record date (which shall be not less than five (5)
Business Days prior to the date of payment of such defaulted interest)
established by notice given by mail by or on behalf of the Company to
the Holders of Securities not less than fifteen (15) days preceding such
subsequent record date (a "Special Record Date").
Section 2.2 Execution, Amount, Authentication and Delivery.
The Securities shall be signed for the Company by the manual or facsimile
signatures of an Officer and a Certifying Officer. The Company's seal shall
be affixed to or reproduced on the Securities. Typographical or other errors
or defects in any such reproduction of the seal or any such signature shall not
affect the validity or enforceability of any Security which has been duly
authenticated and delivered by the Trustee.
If an officer whose signature is on a Security no longer holds that
office at the time the Trustee authenticates the Security, the Security
shall be valid nevertheless.
A Security shall not be valid until the Trustee manually signs the
certificate of authentication on the Security. The signature shall be
conclusive evidence that the Security has been authenticated under this
Indenture.
The aggregate principal amount of Securities which may be authenticated
and delivered under this Indenture is limited to $150,000,000 except for
Securities authenticated and delivered upon registration of transfer of, or
in exchange for, or in lieu of, other Securities pursuant to Sections 2.6, 2.7,
2.9, 4.14, or 9.5 or in conjunction with a Registered Exchange Offer or any
Private Exchange (as such terms are defined in the Rule 144A Appendix).
The Securities shall be known and designated as the "11 3/8% Senior Notes
due 2006" of the Company. Their Stated Maturity shall be March 1, 2006, and
they shall bear interest at the rate of 11 3/8% per annum, from March 3, 1998
or from the most recent Interest Payment Date to which interest and Special
Interest, if any, have been paid or duly provided for, as the case may be,
payable semi-annually in arrears on March 1 and September 1, commencing
September 1, 1998, until the principal thereof is paid or made available for
payment.
Subject to the limits set forth in the second preceding paragraph of
this Indenture, the Trustee shall authenticate Securities for original
issue upon written order of the Company signed by an Officer and by a
Certifying Officer of the Company. The order shall specify the amount of
Securities to be authenticated and the date on which the original
issue of Securities is to be authenticated, shall provide instructions with
respect to the delivery thereof and shall be accompanied by the documents
specified in Section 10.4 and by the following (provided, however, that the
Trustee is authorized conclusively to rely upon the documents specified in
Section 10.4):
(a) an Officers' Certificate confirming all representations and
warranties of the Company contained in this Indenture as of the date of
authentication;
(b) an Officers' Certificate containing representations and warranties of
the type usual and customary to the issuance of the Securities such as, but not
limited to, representations regarding due authorization of this Indenture; due
authorization of the issuance, sale and delivery of the Securities;
that the Securities, when so issued, sold and delivered against payment
therefor will be duly and validly issued, and constitute valid and binding
obligations of the Company, enforceable in accordance with their terms; that no
consent, approval or authorization of, or designation, declaration, or filing
with, any governmental authority or any other person or entity is
required of the Company in connection with the execution and delivery of
this Indenture or the issuance, sale and delivery of the Securities; and that
the Securities have been registered under the Securities Act or that
registration is not required in connection with the offer, sale and delivery of
the Securities;
(c) an Opinion of Counsel to the effect that the Company has the
requisite corporate power and authority to execute, deliver and perform
its obligations under this Indenture; that the Securities have been duly
authorized and validly issued; and that the offer and sale of the Securities
have been registered or will be exempt from the registration requirements
under the Securities Act; and
(d) execution and delivery by the Company of the Securities and by all
parties thereto of this Indenture;
provided, however, that any Securities in fact authenticated by the Trustee
upon written order of the Company as set forth in the first sentence of this
paragraph shall be deemed to have been duly authenticated hereunder and to
constitute an enforceable contractual obligation of the Company and shall be
entitled to all the benefits of this Indenture equally and proportionately
with any and all other Securities duly authenticated and delivered
hereunder, in each case, notwithstanding any failure of the Company to deliver
any of the documents specified in Section 10.4 or above in this sentence;
The Securities shall be issuable only in registered form, without
coupons, in denominations of $1,000 and any integral multiple thereof,
except that the Global Securities may be issued in a different denomination.
The Trustee may appoint an authenticating agent acceptable to the
Company to authenticate Securities. An authenticating agent may authenticate
Securities whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such agent. An
authenticating agent has the same rights as an Agent to deal with the
Company, any guarantor or any Affiliate of the Company.
Section 2.3 Registrar and Paying Agent.
The Company shall maintain an office or agency where Securities
eligible for transfer or exchange may be presented for registration of
transfer or for exchange ("Registrar") and an office or agency where
Securities may be presented for payment or repurchase ("Paying Agent"). The
Registrar shall keep a register of the Securities and of their transfer
and exchange ("Register"). Such Register shall be in written form in the
English language or any other form capable of being converted into such form
within a reasonable time. At all reasonable times such Register shall be open
for inspection by the Trustee. The Company may have one or more
co-Registrars and one or more additional paying agents. The term "Paying
Agent" includes any additional paying agent.
The Company may enter into an appropriate agency agreement with any
Agent not a party to this Indenture. The agreement shall implement the
provisions of this Indenture that relate to such Agent. The Company shall
notify the Trustee of the name and address of any such Agent. If the Company
fails to maintain a Registrar or Paying Agent, the Trustee shall act as such.
The Company initially appoints the Trustee as Registrar and Paying Agent.
Section 2.4 Paying Agent to Hold Payments In Trust.
Each Paying Agent shall hold in trust for the benefit of
Securityholders or the Trustee all Payments held by the Paying Agent for
the payment of principal of, repurchase or redemption price, if any, of,
interest on, and Special Interest, if any, with respect to, the Securities
(whether such Payment has been paid to it by the Company or any other
obligor on the Securities), and shall notify the Trustee of any default by
the Company (or any other obligor on the Securities) in making any such
Payment. The Company at any time may require a Paying Agent to Pay all Payments
held by it to the Trustee and account for any funds disbursed and the Trustee
may at any time during the continuance of any payment default, upon written
request to a Paying Agent, require such Paying Agent to Pay all Payments held
by it to the Trustee and to account for any Payments distributed. Upon doing
so the Paying Agent shall have no further liability for the Payments.
If the Company shall at any time act as its own Paying Agent, it
will, on or before each due date of the principal of, repurchase or
redemption price, if any, of, interest on, or Special Interest, if any, with
respect to, any of the Securities, segregate and hold in trust for the
benefit of the Persons entitled thereto Payments sufficient to pay the
principal, repurchase or redemption price, if any, of, interest or Special
Interest, if any, so becoming due until such Payments shall be Paid to such
Persons or otherwise disposed of as herein provided, and will promptly notify
the Trustee of such action or any failure so to act.
The Company will, on or before each due date for the payment of the
principal of, repurchase or redemption price, if any, of, interest on, or
Special Interest, if any, with respect to any of the Securities, deposit with a
Paying Agent Payments (in same day funds) sufficient to pay the principal,
repurchase or redemption price, if any, of, interest or Special Interest, if
any, so becoming due, such Payments to be held in trust for the benefit of
the Persons entitled to such principal, repurchase or redemption price,
if any, of, interest, or Special Interest, if any, and (unless such Paying
Agent is the Trustee) the Company will promptly notify the Trustee of such
action or any failure so to act.
The Company will cause each Paying Agent other than the Trustee to
execute and deliver to the Trustee an instrument in which such Paying Agent
shall agree with the Trustee, subject to the provisions of this Section, that
such Paying Agent will:
(a) hold all Payments received by it as such agent for the payment of
the principal of, repurchase or redemption price, if any, of, interest on, or
Special Interest, if any, with respect to the Securities (whether such
Payments have been paid to it by the Company or by any other obligor on the
Securities) in trust for the benefit of the Persons entitled thereto
until such Payments shall be paid to such Persons or otherwise disposed of as
herein provided;
(b) promptly give the Trustee notice of any failure by the Company (or
any other obligor upon the Securities) to make any payment of the principal
of, repurchase or redemption price, if any, of, interest on, or Special
Interest, if any, with respect to, the Securities when the same shall be due
and payable; and
(c) at any time during the continuance of any such failure, upon the
written request of the Trustee, forthwith pay to the Trustee all Payments so
held in trust by such Paying Agent.
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, Pay, or
direct any Paying Agent to Pay, to the Trustee all Payments held in trust by
the Company or such Paying Agent, such Payments to be held by the Trustee upon
the same trusts as those upon which such Payments were held by the Company or
such Paying Agent; and, upon such Payment by any Paying Agent to the Trustee,
such Paying Agent shall be released from all further liability with respect
to such Payments held by it as Paying Agent.
Any Payments deposited with the Trustee or any Paying Agent, or then held
by the Company, in trust for the payment of the principal of, redemption or
repurchase price, if any, of, interest on or Special Interest, if any,
with respect to, any Security and unclaimed for two (2) years after such
principal, redemption, repurchase price, interest or Special Interest has
become due and payable shall be paid to the Company on its request, or
(if then held by the Company) shall be discharged from such trust, unless
otherwise required by mandatory provisions of applicable escheat or
abandoned or unclaimed property law, and the Holder of such Security shall
thereafter, as an unsecured general creditor, look only to the Company for
payment thereof and all liability of the Trustee or such Paying Agent with
regard to such Payments, and all liability of the Company as trustee thereof,
shall thereupon cease.
Section 2.5 Securityholder Lists.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and
addresses of Securityholders identified as to series. If the Trustee is not
the Registrar, the Company shall furnish to the Trustee on or before each
Interest Payment Date and at such other times as the Trustee may request in
writing a list in such form and as of such date as the Trustee may
reasonably require of the names and addresses of Securityholders.
Section 2.6 Transfer and Exchange.
When Securities are presented to the Registrar or a co- Registrar with
a request to register the transfer or to exchange them for an equal
principal amount of Securities of other authorized denominations, the
Registrar shall register the transfer or make the exchange as requested if
its requirements, for such transactions are met. To permit registrations
of transfers and exchanges, the Company shall execute and the Trustee
shall authenticate Securities at the Registrar's request. All Securities
presented for registration of transfer, exchange, redemption or payment shall
(if so required by the Company or the Trustee) be duly endorsed by, or be
accompanied by a written instrument or instruments of transfer in form
satisfactory to the Company and the Trustee, duly executed by the Holder or
his attorney duly authorized in writing. The Company may require payment
of a sum sufficient to pay all taxes, assessments or other governmental
charges in connection with any registration of transfer or exchange, but not
for any exchange pursuant to Sections 2.9, 3.7, 4.14 or 9.5 or any other
Tender not involving any transfer of Securities (other than to the
Company). No service charge shall be made for any such transaction.
In the case of any Security which is Tendered in part only, upon such
Tender the Company shall execute and the Trustee shall authenticate and make
available for delivery to the Holder thereof, without service charge, a new
Security or Securities of any authorized denomination as requested by such
Holder in aggregate principal amount equal to the non-Tendered portion of the
principal of such Security. No Securities will be issued in denominations of
less than $1,000 upon tender of the Securities.
All Securities issued upon any transfer or exchange of Securities
shall be valid obligations of the Company, evidencing the same debt of the
same series and entitled to the same benefits under this Indenture, as the
Securities surrendered upon such transfer or exchange.
Section 2.7 Mutilated, Defaced, Destroyed, Lost and Stolen
Securities.
In case any temporary or definitive Security shall become mutilated,
defaced or be apparently destroyed, lost or stolen, subject to compliance
with the following sentence and in the absence of notice to the Company
or the Trustee that such Security has been acquired by a bona fide
purchaser, the Company shall execute, and the Trustee shall authenticate and
deliver, a new Security, bearing a number not contemporaneously outstanding, in
exchange and substitution for the mutilated or defaced Security, or in
lieu of and substitution for the Security so apparently destroyed, lost or
stolen. In every case the applicant for a substitute Security shall
furnish to the Company and to the Trustee and any agent of the Company or the
Trustee such security or indemnity as may be required by them to
indemnify and defend and to save each of them harmless and, in every case
of destruction, loss or theft, evidence to their satisfaction of the
apparent destruction, loss or theft of such Security and of the ownership
thereof.
Upon the issuance of any substitute Security pursuant to the preceding
paragraph, the Company may require the payment of a sum sufficient to cover any
tax or other governmental charge that may be imposed in relation thereto and
any other expenses (including the fees and expenses of the Trustee) connected
therewith. In case any Security which has matured or is about to mature, or
has been tendered for repurchase pursuant to any of the provisions hereof
(as evidenced by an irrevocable written notice from the Holder to the Company
and the Trustee), shall become mutilated or defaced or be apparently destroyed,
lost or stolen, the Company may, instead of issuing a substitute Security, pay
or authorize the payment of such Security (without surrender of such Security
except in the case of a mutilated or defaced Security), as applicable,
if the applicant for such payment shall furnish to the Company and to the
Trustee and any agent of the Company or the Trustee such security or indemnity
as any of them may require to save each of them harmless from all risks,
however remote, and, in every case of apparent destruction, loss or theft,
the applicant shall also furnish to the Company and the Trustee and any agent
of the Company or the Trustee evidence to their satisfaction of the
apparent destruction, loss or theft of such Security and of the ownership
thereof.
Every substitute Security issued pursuant to the provisions of this
Section by virtue of the fact that any Security is apparently destroyed,
lost or stolen shall constitute an additional contractual obligation of
the Company, whether or not the apparently destroyed, lost or stolen Security
shall be at any time enforceable by anyone and shall be entitled to all
the benefits of (but shall also be subject to all the limitations of rights
set forth in) this Indenture equally and proportionately with any and all
other Securities duly authenticated and delivered hereunder. Every
substitute Security issued pursuant to the provisions of this Section by
virtue of the fact that any Security is mutilated or defaced shall constitute
an additional contractual obligation of the Company and shall be entitled to
all the benefits of (but shall also be subject to all the limitations
of rights set forth in) this Indenture equally and proportionately with any
and all other Securities of the same series duly authenticated and
delivered hereunder. All Securities shall be held and owned upon the
express condition that, to the extent permitted by law, the foregoing
provisions are exclusive with respect to the replacement or payment of
mutilated or defaced or apparently destroyed, lost or stolen Securities
and shall preclude any and all other rights or remedies notwithstanding
any law or statute existing or hereafter enacted to the contrary with respect
to the replacement or payment of negotiable instruments or other
securities without their surrender.
Section 2.8 Treasury Securities.
In determining whether the Holders of the required principal amount of
Securities have given or concurred in any amendment, request, demand,
authorization, direction, notice, consent or waiver under this Indenture,
Securities owned by the Company (including Securities Tendered), an Affiliate
of the Company, any other obligor upon the Securities, any Affiliate of such
obligor upon the Securities or any Person who has given or concurred in any
such amendment, request, demand, authorization, direction, notice, consent or
waiver under the direction of, by agreement with, or as a condition or in
consideration of any exchange offer by or transfer of such Person's Securities
to the Company, an Affiliate of the Company, any other obligor, any
Affiliate of such obligor or any such Person, shall be disregarded and deemed
not to be Outstanding for the purpose of any such determination, except that,
for the purposes of determining whether the Trustee shall be protected in
relying on any such amendment, request, demand, authorization, direction,
notice, consent or waiver, only Securities which the Trustee knows are so
owned shall be so disregarded. Securities so owned which have been pledged
in good faith may be regarded as Outstanding if the pledgee establishes to
the satisfaction of the Trustee that neither the Company nor any such other
obligor, Affiliate or Person is affiliated with the pledgee or any Affiliate
of the pledgee and that the pledgee has the present right (subject to no
contrary obligation or understanding) so to act with respect to the
Securities on the basis of its best interests as a Holder independently of
any direction by or interest of the Company. In case of a dispute as to such
right, the Trustee in good faith shall be entitled to rely upon the advice
of counsel, including counsel for the Company. Upon request of the Trustee,
the Company shall promptly furnish to the Trustee a certificate of a
Certifying Officer listing and identifying all Securities, if any, known by
the Company to be owned or held by or for the account of any of the
above-described Persons; and subject to Sections 7.1 and 7.2 herein, the
Trustee shall be entitled to accept such certificate as conclusive evidence of
the facts therein set forth and of the fact that all Securities not listed
therein are Outstanding for the purpose of any such determination. The
Company shall not, directly or indirectly, pay or cause to be paid any
remuneration, whether by way of supplemental or additional interest, fee or
otherwise, or grant any additional security, to any Holder of Securities as
consideration for or as an inducement to giving or concurring in any
amendment, request, demand, authorization, direction, notice, consent or
waiver under this Indenture unless such remuneration is concurrently paid,
or such security is concurrently granted, as the case may be, on the
same terms ratably to the Holders of all Securities then Outstanding
(regardless of whether any such Holder has given or concurred in such
amendment, request, demand, authorization, direction, notice, consent or
waiver under this Indenture).
For purposes of this Section and without limiting the generality of
the foregoing, Securities which are subject to a binding contract or
irrevocable tender offer (including an offer which is in any way conditioned
upon or simultaneous with, or requires as a condition precedent (whether
by contract or otherwise) or which cannot be effected without, the agreement
or consent of the transferor to any amendment, request, demand,
authorization, direction, notice, consent or waiver hereunder) pursuant to
which ownership (direct or indirect) is to be transferred (including for
example, Securities tendered to the Company or any other Person in an exchange
transaction) shall be deemed owned by such transferee, and therefore,
any such simultaneous agreement or consent by the transferor shall be
invalid.
Section 2.9 Temporary Securities.
Until definitive Securities are ready for delivery, the Company may
prepare, and, upon written order of the Company, the Trustee shall
authenticate, temporary Securities in any authorized denominations.
Temporary Securities shall be substantially in the form of definitive
Securities of the same series but may have variations that the Company
considers appropriate for temporary Securities. Without unreasonable
delay, the Company shall prepare and the Trustee shall authenticate
and deliver definitive Securities in exchange for temporary Securities.
Until so exchanged, the temporary Securities shall be entitled to the
same benefits under this Indenture as definitive Securities of the same
series.
Section 2.10 Cancellation.
The Company may at any time deliver Securities to the Trustee for
cancellation. The Registrar and the Paying Agent shall forward to the
Trustee any Securities surrendered to them for transfer, exchange (including
without limitation, Initial Securities exchanged for Exchange Securities,
Private Exchange Securities or both), repurchase or payment. All
Securities purchased pursuant to any Offer to Purchase shall be canceled. The
Trustee and no one else shall cancel all Securities surrendered for
transfer, exchange, repurchase or cancellation. The Company may not issue new
Securities to replace Securities it has paid (upon Tender or otherwise) or
which have been delivered to the Trustee for cancellation. The Trustee shall
destroy all canceled Securities and, if requested, deliver a certificate of
such destruction to the Company. If the Company shall acquire any of the
Securities, such acquisition shall not operate as a satisfaction of the
indebtedness represented by such Securities unless and until the same are
delivered to the Trustee for cancellation.
Section 2.11 Defaulted Interest; Interest on Defaulted Principal.
If the Company defaults in a payment of interest on, or Special
Interest, if any, with respect to, the Securities, it shall pay the
defaulted interest, plus interest on the defaulted interest or Special
Interest, as the case may be, at the rate then borne on the Securities to the
extent permitted by law and the terms thereof, to the persons who are
Securityholders on a subsequent Special Record Date. The Company shall
fix the Special Record Date and payment date. At least fifteen (15) days
before the Special Record Date, the Company shall mail to each Securityholder
a notice that states the Special Record Date, the payment date and the
amount of defaulted interest or Special Interest, as the case may be, to
be paid. If the Company defaults in the payment of principal on the
Securities (whether on acceleration, at maturity, upon tender for
repurchase, or otherwise), it shall pay interest on such defaulted principal
at the rate then borne by the Securities to the Trustee upon demand. The
Trustee shall apply any such payment in accordance with the provisions of
Section 6.10.
Section 2.12 CUSIP Numbers.
The Company in issuing the Securities may use "CUSIP" numbers (if
then generally in use) and, if so, the Trustee shall use "CUSIP" numbers in
notices of redemption as a convenience to Holders; provided, however, that any
such notice may state that no representation is made as to the correctness of
such numbers either as printed on the Securities or as contained in any notice
of a redemption and that reliance may be placed only on the other identification
numbers printed on the Securities, and any such redemption shall not be
affected by any defect in or omission of such numbers.
ARTICLE 3
REDEMPTIONS AND CERTAIN REPURCHASES
Section 3.1 Optional Redemption-General
Except as set forth in Sections 3.8 and 5.3, the Securities Outstanding
shall not be subject to redemption in whole or in part at the option of the
Company prior to March 1, 2002. On or after March 1, 2002, the Securities may
be redeemed at any time in whole or in part (in any integral multiple of
$1,000) by the Company at its sole option at redemption prices (expressed as
a percentage of principal amount) as set forth below during the twelve
month periods beginning March 1 of the years shown below, plus in each case an
amount equal to accrued and unpaid interest and Special Interest, if any, with
respect to, the Securities to and including the redemption date:
Redemption Year
Price ---- 2002 105.688% 2003
102.844% 2004 and thereafter 100.000%
Section 3.2 Redemption Notice to Trustee.
If the Company elects to redeem Securities as provided in Section 3.1,
3.8 or 5.3, it shall notify the Trustee of the redemption date, the
principal amount of Securities and all other information needed for the notice
to be given by the Trustee pursuant to Section 3.4.
The Company shall give the notice provided for in this Section at
least ten (10) days (unless a shorter notice shall be satisfactory to the
Trustee) prior to the date the Trustee must give notice pursuant to Section
3.4.
Section 3.3 Selection of Securities to be Redeemed.
If less than all the Securities are to be redeemed, the Trustee shall
select the Securities to be redeemed on either a pro rata basis or by lot.
The Trustee shall make the selection from Securities outstanding not previously
called for redemption. The Trustee may select for redemption portions of the
principal of Securities that have denominations larger than $1,000.
Securities and portions of them it selects shall be in amounts of $1,000 or
whole multiples of $1,000. Provisions of this Indenture that apply to
Securities called for redemption also apply to portions of Securities called
for redemption.
Section 3.4 Notice of Redemption.
At least 30 days but not more than 60 days before a redemption
date, the Company shall mail by first-class mail a notice of redemption to
each Holder whose Securities are to be redeemed.
The notice shall identify the Securities and the principal amount thereof
to be redeemed and shall state:
(a) the principal amount of each Security held by each such Holder to be
redeemed;
(b) the redemption date;
(c) the redemption price (including the amount of accrued and unpaid
interest, Special Interest and Applicable Premium, if any, to be paid on the
Securities called for redemption);
(d) if any Security is being redeemed in part, the portion of the
principal amount of such Security to be redeemed and that, after the redemption
date, upon surrender of such Security, a new Security or Securities in
principal amount equal to the unredeemed portion will be issued;
(e) the name and address of the Paying Agent;
(f) that Securities called for redemption must be surrendered to
the Paying Agent to collect the redemption price; and
(g) that, unless the Company defaults in making the redemption
payment, interest on the Securities to be redeemed ceases to accrue on and
after the redemption date and the only remaining right of the Holders of such
Securities is to receive payment of the redemption price upon surrender to
the Paying Agent of the Securities.
At the Company's request, the Trustee shall give the notice of redemption
in the Company's name and at the Company's expense.
Section 3.5 Effect of Notice of Redemption.
Once a notice of redemption is mailed, Securities called for redemption
become due and payable on the redemption date at the redemption price and, on
and after such date (unless the Company shall default in the payment of the
redemption price), such Securities shall cease to bear interest. Upon
surrender to the Paying Agent, such Securities shall be paid at the
redemption price plus accrued interest, Special Interest and Applicable
Premium, if any, to the redemption date.
Section 3.6 Deposit of Redemption Price.
On or before 10:00 a.m., Eastern Time, on the redemption date, the
Company shall deposit with the Paying Agent money in funds immediately
available on the redemption date sufficient to pay the redemption price of
and accrued interest on and Special Interest and Applicable Premium, if any,
with respect to, all Securities to be redeemed on that date.
Section 3.7 Securities Redeemed in Part.
Upon surrender of a Security that is redeemed in part, the Trustee shall
authenticate for the Holder a new Security equal in principal amount to the
unredeemed portion of the Security surrendered.
Section 3.8 Optional Redemption Upon Public Equity Offering.
The Securities may be redeemed in part by the Company at its sole option
if, on or before March 1, 2001, the Company receives Net Cash Proceeds of one
or more Public Equity Offerings. The Company may use all or a portion of any
such Net Cash Proceeds to redeem up to $52,500,000 aggregate principal
amount of the Securities, within 90 days of such Public Equity Offering, at
a redemption price (expressed as a percentage of the aggregate principal
amount of Securities Outstanding) of 111.375% plus accrued and unpaid
interest and Special Interest, if any, to the redemption date (subject to the
right of holders of record on the relevant record date to receive interest and
Special Interest, if any, due on the relevant Interest Payment Date);
provided, however, that at least $97,500,000 aggregate principal amount of the
Securities shall remain Outstanding after each such redemption. Any
such redemption shall be subject to the provisions of Sections 3.2
through 3.7, inclusive.
ARTICLE 4.
COVENANTS, REPRESENTATIONS AND WARRANTIES
Section 4.1 Payment of Securities.
The Company shall pay the principal of, interest on and Special
Interest, if any, with respect to, the Securities on the dates and in the
manner provided in this Indenture and in the Securities.
The Company shall pay interest semi-annually in arrears on each
Interest Payment Date, commencing September 1, 1998. Interest shall be
paid on each Interest Payment Date in an amount equal to the interest accrued
for the period beginning from the Issue Date, or from the most recent date to
which interest and Special Interest, if any, have been paid. All interest
and Special Interest, if any, due and payable on the Securities shall be paid
in cash, except that the Company may at its option, make such Payments by
check mailed to the address of the Person entitled thereto as it appears in
the Register.
An installment of principal, interest or Special Interest, if any,
shall be considered paid on the date due if the Trustee or Paying Agent (other
than the Company or any Affiliate thereof) holds on that date Payments
designated for and sufficient to pay such installment and the Trustee or Paying
Agent has not received instructions from the Company not to make such payment or
is not prohibited from Paying such Payments to the Holders of the
Securities pursuant to this Indenture.
The Company shall pay interest at the rate set forth in the Securities and
the Company shall pay interest on unpaid interest or Special Interest, if
any, at the same rate to the extent legally permitted.
Section 4.2 Maintenance of Office or Agency.
The Company shall maintain in the Borough of Manhattan, The City of New
York, an office or agency where Securities may be surrendered for
registration of transfer or exchange or for presentation for payment or
repurchase and where notices and demands to or upon the Company in respect
of the Securities and this Indenture may be served. At the request of the
Company, said office or agency may be the office of an agent appointed by the
Trustee for such purpose. The Company shall give prompt written notice to
the Trustee of the location, and any change in the location, of such office
or agency not designated or appointed by the Trustee. If at any time the
Company shall fail to maintain any such required office or agency or shall
fail to furnish the Trustee with the address thereof, such presentations,
surrenders, notices and demands may be made or served at the Corporate
Trust Office.
The Company may also from time to time designate one or more other offices
or agencies where the Securities may be presented or surrendered for any or
all such purposes and may from time to time rescind such designations;
provided, however, that no such designation or rescission shall in any manner
relieve the Company of its obligation to maintain an office or agency in the
Borough of Manhattan, The City of New York, for such purposes. The
Company will give prompt written notice to the Trustee of any such
designation or rescission and of any change in the location of any such other
office or agency.
Section 4.3 Limitation on Restricted Payments.
(a) The Company shall not, and shall not permit any Restricted
Subsidiary, directly or indirectly, to make a Restricted Payment if at
the time the Company or such Restricted Subsidiary makes such Restricted
Payment: (1) a Default shall have occurred and be continuing (or would result
therefrom); (2) the Company is not able to Incur an additional $1.00
of Indebtedness pursuant to paragraph (a) of Section 4.16; or (3) the
aggregate amount of such Restricted Payment and all other Restricted Payments
since the Issue Date (the amount of any such Restricted Payment, if other than
cash, as determined in good faith by the Company, whose determination shall
be conclusive and evidenced by a resolution of the Board of Directors or
a certificate of the chief financial or accounting officer of the Company
delivered to the Trustee prior to the making of such Restricted Payment)
would exceed the sum of:
(A) 50% of the Consolidated Net Income accrued during the period
(treated as one accounting period) from the beginning of the fiscal quarter
immediately following the fiscal quarter during which the Securities are
originally issued to the end of the most recent fiscal quarter for which
financial statements are publicly available prior to the date of such
Restricted Payment (or, in case such Consolidated Net Income shall be a
deficit, minus 100% of such deficit);
(B) the aggregate net proceeds (including 50% of the fair market
value of property other than cash (as determined in good faith by the
Company, whose determination shall be conclusive and evidenced by a
resolution of the Board of Directors or a certificate of the chief
financial or accounting officer of the Company delivered to the Trustee
prior to the making of such Restricted Payment)) received by the Company or
any Restricted Subsidiary from the issuance or sale, subsequent to the Issue
Date, of its Capital Stock (other than Disqualified Stock) and Indebtedness
of the Company or any Restricted Subsidiary that has been converted into
or exchanged for its Capital Stock (other than Disqualified Stock) subsequent
to the Issue Date (other than an issuance or sale to a Restricted
Subsidiary and other than an issuance or sale to an employee stock
ownership plan or to a trust established by the Company or any of its
Subsidiaries for the benefit of their employees); and
(C) an amount equal to the sum of (i) the net reduction in
Investments in Unrestricted Subsidiaries resulting from dividends,
repayments of loans or advances or other transfers of assets, in each
case to the Company or any Restricted Subsidiary from Unrestricted
Subsidiaries, and (ii) the portion (proportionate to the Company's equity
interest in such Subsidiary) of the fair market value of the net assets of an
Unrestricted Subsidiary at the time such Unrestricted Subsidiary is designated
a Restricted Subsidiary; provided, however, that the foregoing sum shall
not exceed, in the case of any Unrestricted Subsidiary, the amount of
Investments previously made (and treated as a Restricted Payment) by the
Company or any Restricted Subsidiary in such Unrestricted Subsidiary.
(b) The provisions of the foregoing paragraph (a) shall not prohibit:
(i) any Restricted Payment made by exchange for, or out of the
net proceeds (including 50% of the fair market value of property other
than cash (as determined in good faith by the Company, whose
determination shall be conclusive and evidenced by a resolution of the
Board of Directors or a certificate of the chief financial or
accounting officer of the Company delivered to the Trustee prior to the
making of such Restricted Payment)) of the substantially concurrent
sale of, Capital Stock of the Company (other than Disqualified
Stock and other than Capital Stock issued or sold to a Subsidiary of
the Company or an employee stock ownership plan or to a trust
established by the Company or any of its Subsidiaries for the benefit of
their employees); provided, however, that (A) such Restricted Payment shall
be excluded in the calculation of the amount of Restricted Payments and
(B) to the extent used to make such Restricted Payment, the net proceeds
from such sale shall be excluded from the calculation of amounts under
clause (3)(B) of paragraph (a) above;
(ii) any purchase, repurchase, redemption, defeasance or other
acquisition or retirement for value of Subordinated Obligations made by
exchange for, or out of the proceeds of the substantially concurrent sale
of, Indebtedness of the Company which is permitted to be Incurred
pursuant to Section 4.16; provided, however, that such purchase,
repurchase, redemption, defeasance or other acquisition or retirement for
value shall be excluded in the calculation of the amount of Restricted
Payments;
(iii) dividends paid within 60 days after the date of
declaration thereof if at such date of declaration such dividend would
have complied with this Section 4.3; provided, however, that such
dividend shall be included in the calculation of the amount of Restricted
Payments;
(iv) the declaration or payment of dividends on or payment of
liquidated damages with respect to (A) any Preferred Stock
outstanding on the Issue Date or (B) any Preferred Stock (other than
Disqualified Stock) issued after the Issue Date that ranks on parity
with or junior to Preferred Stock outstanding on the Issue Date;
provided, however, that any dividend referred to in the foregoing
clause (A) or, subject to the following proviso, clause (B), shall be
included in the calculation of the amount of Restricted Payments and
provided further, that the Company may elect to exclude from the
calculation of amounts under clause 3(B) of paragraph (a) above any Net
Cash Proceeds received by the Company from the issue or sale of Preferred
Stock pursuant to the foregoing clause (B) (which election must be made
by written notice to the Trustee within ten (10) Business Days of the
receipt of such Net Cash Proceeds) and, if such election is made, any
dividend, distribution, purchase, redemption, acquisition or retirement on
or of the Preferred Stock for which such election is made shall not be a
Restricted Payment;
(v) (A) the payment of cash in lieu of issuing fractional
shares of Capital Stock of the Company in connection with the
exercise of options or warrants, the conversion of convertible
securities or the redemption of interests in employee stock ownership or
benefits plans, (B) the purchase or redemption of its Capital Stock by
the Company from employee stock ownership or benefit plans subject
to ERISA to the extent required by ERISA, (C) repurchases of its
Capital Stock which occur upon the exercise of stock options if such
Capital Stock represents a portion of the exercise price of such
options, (D) the purchase, redemption, acquisition, cancellation or
other retirement for value of shares of Capital Stock of the Company
or any Restricted Subsidiary, options on any such shares or related
stock appreciation rights or similar securities held by officers or
employees or former officers or employees (or their estates or
beneficiaries under their estates), upon their death, disability,
retirement, termination of employment or pursuant to any agreement under
which such shares of stock or related rights were issued; provided that
the aggregate cash consideration paid pursuant to this clause (D)
for such purchase, redemption, acquisition, cancellation or other
retirement of such shares of Capital Stock or related rights after the
Issue Date does not exceed an aggregate amount of $10,000,000;
provided further that the amount of any payment, purchase,
redemption, repurchase, acquisition, cancellation or other retirement
paid pursuant to this clause (D) shall be included in the amount of
Restricted Payments;
(vi) any purchase or redemption of Capital Stock of the Company
resulting from the consolidation or merger with or into any Person or
conveyance, transfer or lease of all or substantially all of the
Company's or any Restricted Subsidiary's property to one or more
Persons substantially as an entirety not prohibited by Section 5.1 (other
than any consolidation, merger or other transactions involving only the
Company and a Restricted Subsidiary of the Company or involving only
Restricted Subsidiaries of the Company); provided that the amount of
such purchase or redemption shall be excluded in the calculation of
the amount of Restricted Payments; or
(vii) the exchange of Preferred Stock (other than Disqualified
Capital Stock) for Indebtedness of the Company permitted to be incurred
under Section 4.16; provided that the liquidation value of the Preferred
Stock exchanged shall be included in the calculation of the amount of
Restricted Payments but only to the extent of the Net Cash Proceeds of
such Preferred Stock received after the Issue Date.
Section 4.4 Corporate Existence.
(a) Except as otherwise provided in Article 5, the Company shall do or
cause to be done all things necessary to preserve and keep in full force and
effect its corporate existence and the corporate existence of each
Restricted Subsidiary and the corporate existence of each other
Subsidiary of the Company engaged in substantial business activity each in
accordance with the respective organizational documents of the Company and
each such Subsidiary and the rights (charter and statutory), licenses, permits,
approvals and governmental franchises of the Company and each such Subsidiary
necessary to the conduct of its respective business; provided, however, that
the Company shall not be required to preserve any such right, license or
franchise, or (other than with respect to the Restricted Subsidiaries) to
preserve the corporate existence of any such Subsidiary, if the Board of
Directors shall determine that the preservation thereof is no longer in the
interest of the Company and that termination of the corporate existence is not
disadvantageous to the Holders in any material respect.
(b) The Company shall continue to be an air carrier certificated
under Section 604(b) of the Federal Aviation Act.
(c) The Company is and, to the extent required to operate its business
as presently conducted and to perform its obligations under this
Indenture, shall remain a "citizen of the United States" as defined in
Section 101(16) of the Federal Aviation Act.
Section 4.5 Payment of Taxes and Other Claims.
The Company shall, and shall cause each of its Subsidiaries to, pay or
discharge or cause to be paid or discharged, before the same shall become
delinquent, (a) all taxes, assessments and governmental charges levied or
imposed upon the Company and each Subsidiary or upon the income, profits or
Property of the Company and each Subsidiary and (b) all lawful claims
for labor, materials and supplies which, if unpaid, might by law become a
Lien upon the Property of the Company or a Subsidiary; provided, however, that
the Company or a Subsidiary, as the case may be, shall not be required to pay
or discharge or cause to be paid or discharged any such tax, assessment,
charge or claim (i) the amount, applicability or validity of which is being
contested in good faith by appropriate proceedings as permitted by and in
accordance with the provisions of this Indenture, to the extent applicable,
and for which adequate reserves have been established in accordance with GAAP,
as in effect from time to time, or (ii) if the Company delivers to the
Trustee a Certificate of an Officer stating that such non-payment and
non-discharge is in the interest of the Company and not prejudicial in any
material respect to the Holders.
Nothing contained herein or in the Securities shall be deemed to
impose on the Trustee or on the Company any obligation to pay on behalf of
the Holder of any Securities any tax, assessment or governmental charge
required by any present or future law of the U.S. or of any state, county,
municipality or other taxing authority thereof to be paid on behalf of,
or withheld from the amount payable to, the Holder of any Securities;
rather any tax, assessment or governmental charge shall, to the extent
required by law, be withheld from the amounts provided for herein.
Section 4.6 Notices.
The Company shall notify the Trustee in writing of any of the following
promptly (and in any event within five (5) Business Days after an Officer
learns of the occurrence thereof) describing the same and, if applicable,
the steps being taken by the Person(s) affected with respect thereto:
(a) In the event that any Indebtedness of the Company or any
Significant Subsidiary of the Company in a principal amount in excess of
$15,000,000 (i) is declared due and payable before its stated maturity because
of the occurrence of any default (or any event which, with notice or the lapse
of time, or both, shall constitute such default) under such Indebtedness or (ii)
is not paid at its stated maturity; or
(b) Any litigation, arbitration proceeding or governmental proceeding
involving damages or potential liability in excess of $15,000,000 is
instituted against the Company or any of its Subsidiaries which, if
adversely determined, would have a material adverse effect on the
business, operations or financial condition of the Company and its Subsidiaries
taken as a whole.
Section 4.7 Maintenance of Properties and Insurance.
Except as otherwise provided in this Indenture, the Company shall, and
shall cause each of its Subsidiaries to, cause all Properties owned by or
leased to it and used or useful in the conduct of the business of the Company
or any such Subsidiary, as the case may be, to be maintained and kept in
good repair, working order and condition, except for reasonable wear and use,
and supplied with all necessary equipment and shall cause to be made all
necessary repairs, renewals, replacements, betterments and improvements
thereof, all as in the judgment of the Company may be necessary, so that the
business carried on in connection therewith may be properly and advantageously
conducted at all times, except, in every case, as and to the extent that
the Company or any such Subsidiary may be prevented by fire, strikes, lockouts,
acts of God, inability to obtain labor or materials, governmental
restrictions, enemy action, civil commotion or unavoidable casualty or
similar causes beyond the control of the Company or such Subsidiary;
provided, however, that nothing in this Section 4.7 shall prevent the Company
or any such Subsidiary from discontinuing the use, operation or maintenance of
any such Properties, or disposing of any of them, if such Property or
Properties are, in the good faith judgment of an Officer of the Company (or
other agent employed by the Company) having managerial responsibility for
any such Property (or, in the case of any materially important item, with
respect to operations or value, in the good faith judgment of the Company as
expressed in a resolution of the Board of Directors), no longer necessary or
useful in the conduct of the Company's business or that of its Subsidiaries.
For so long as any Property is deemed to be useful to the conduct of
the business of the Company or its Subsidiaries, the Company shall, or shall
cause such Subsidiaries to, maintain appropriate insurance, in accordance
with industry practice, on such Properties.
Section 4.8 Default Notices and Compliance Certificates.
Contemporaneously with furnishing reports to the Trustee pursuant to
Section 4.9, the Company shall furnish to the Trustee a Certifying Officer's
Certificate to the effect that such officer has conducted or supervised a
review of the activities of the Company and of performance under this Indenture
and that, to the knowledge of such officer, based on such review, the Company
has fulfilled all of its obligations under this Indenture or, if there has
been a Default, specifying each Default known to him, its nature and status.
The Company shall deliver to the Trustee within one hundred twenty (120)
days after the end of each fiscal year in which any of the Securities remain
Outstanding a certificate of the principal executive officer, principal
financial officer or principal accounting officer of the Company (which
need not comply with the provisions of Section 10.5) stating whether or not,
to the knowledge of the signer, the Company is in compliance with all
conditions and covenants under this Indenture (determined without regard
to any period of grace or requirement of notice), and if the Company is not in
compliance with all such conditions and covenants, describing each Default or
Event of Default and its status. The first certificate to be delivered by the
Company pursuant to this Section 4.8 shall be for the fiscal year ending
December 31, 1998.
Section 4.9 SEC Reports.
(a) The Company shall file with the Trustee and provide, or cause the
Trustee to provide, Holders of Securities, within 30 days after it files with,
or furnishes to, the SEC, copies of its annual report and of the information,
documents and other reports (or copies of such portions of any of the foregoing
as the SEC may by rules and regulations prescribe) which the Company is
required to file with the SEC pursuant to Section 13 or 15(d) of the Exchange
Act or is required to furnish to the SEC pursuant to Section 4.9(b). The
Company shall also comply with the other provisions of TIA Section 314(a).
(b) Notwithstanding that the Company may not be required to remain
subject to the reporting requirements of Section 13 or l5(d) of the
Exchange Act or otherwise report on an annual and quarterly basis on forms
provided for such annual and quarterly reporting pursuant to rules and
regulations promulgated by the SEC, the Company shall continue to file with,
or furnish to, the SEC (i) within 90 days after the end of each fiscal year (or
such shorter period as the SEC may in the future prescribe), annual reports
on Form 10-K (or any successor form) containing the information required to
be contained therein (or required in such successor form), including annual
financial statements audited by an internationally recognized independent
public accountant with respect to such year and prepared in accordance with GAAP
and all applicable exhibits, (ii) within 45 days after the end of each of the
first three fiscal quarters of each fiscal year (or such shorter period as
the SEC may in the future prescribe), reports on Form 10-Q (or any successor
form) containing substantially the same information required to be contained
therein prepared in accordance with GAAP and (iii) promptly from time to time
after the occurrence of an event required to be therein reported, such other
reports on Form 8-K (or any successor form) containing substantially the
same information required to be contained therein.
Section 4.10 Waiver of Stay, Extension or Usury Laws.
The Company covenants (to the extent that it may lawfully do so) that it
will not at any time insist upon, or plead, or in any manner whatsoever claim,
and will resist any and all efforts to be compelled to take the benefit or
advantage of, any stay or extension law or any usury law or other law that
would prohibit or forgive the Company from paying all or any portion of
the principal of, interest on, or Special Interest, if any, with respect
to, the Securities as contemplated herein, wherever enacted, now or at
any time hereafter in force, or which may affect the covenants or the
performance of this Indenture; and (to the extent that it may lawfully do
so) the Company hereby expressly waives all benefit or advantage of any such
law, and covenants that it will not hinder, delay or impede the execution of
any power granted to the Trustee herein, but will suffer and permit the
execution of every such power as though no such law had been enacted.
Section 4.11 Amendment to Indenture.
The Company shall not enter into or consent to any amendment,
supplement or other modification of this Indenture except as permitted under
Article 9 hereof.
Section 4.12 Limitation on Liens.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, Incur or suffer to exist any Lien
of any nature whatsoever upon or with respect to any of its Properties
(including Capital Stock of a Restricted Subsidiary), whether owned at the
Issue Date or thereafter acquired, other than Permitted Liens,
without effectively providing that the Securities shall be secured
equally and ratably with (or prior to) the obligations so secured for so long as
such obligations are so secured.
Section 4.13 Books, Records, Access; Confidentiality.
(a) The Company shall, and shall cause each of its Subsidiaries
to, (i) maintain complete and accurate books and records in which full and
correct entries in conformity with GAAP shall be made of all dealings and
transactions in relation to its respective business and activities and (ii)
permit authorized representatives of the Trustee to visit and inspect
the Properties of the Company or its Subsidiaries, and any or all such
books and records in the possession of the Company, and to make copies and
take extracts therefrom all upon reasonable notice and at such reasonable
times during normal business hours and as often as may be reasonably requested.
(b) The Trustee and its authorized representatives referred to in clause
(a) above agree not to use any information obtained pursuant to this Section
4.13 for any purpose other than as required in order to discharge their
respective duties hereunder and except as otherwise required for such
purpose to keep confidential and not to disclose any such information to
any person except that (i) the recipient of the information may disclose
any information which becomes publicly available other than as a result of
disclosure by such recipient, (ii) the recipient of the information may
disclose any information which its counsel reasonably concludes is necessary to
be disclosed by law, pursuant to any court or administrative order or ruling
or in any pending legal or administrative proceeding or
investigation after notice to the Company adequate, subject to applicable
laws, to allow the Company to obtain a protective order or other appropriate
remedy, provided that the recipient of the information will (if not otherwise
required in order to discharge its duties as aforesaid) cooperate with the
Company's efforts to obtain a protective order or other reliable assurance that
confidential treatment will be accorded any such information required to be
so disclosed, and (iii) the recipient of the information may disclose any
information necessary to be disclosed pursuant to any provision of the TIA.
Section 4.14 Repurchase of Securities Upon a Change in Control.
(a) In the event that there shall occur a Change in Control, the
Company shall make an Offer to Purchase all of the Outstanding Securities, at
a purchase price equal to 101% of the aggregate principal amount of the
Securities Outstanding, plus accrued and unpaid interest and Special Interest,
if any, to and including the repurchase date. The right to require
such repurchase of Securities shall not continue after a discharge of the
Company from its obligations with respect to the Securities in accordance with
Article 8.
(b) The Company shall commence such Offer to Purchase within thirty
(30) days after the occurrence of a Change in Control.
Section 4.15 Restrictions on Becoming an Investment Company.
The Company shall not become an investment company within the meaning of
the Investment Company Act of 1940 as such statute and the regulations
thereunder and any successor statute or regulations thereto may from time to
time be in effect.
Section 4.16 Limitation on Indebtedness.
(a) Neither the Company nor the Restricted Subsidiaries shall Incur,
directly or indirectly, any Indebtedness; provided, however, that the Company
may Incur Indebtedness so long as, on the date of such Incurrence and after
giving effect thereto, the Consolidated Coverage Ratio exceeds (i) 2.00
to 1 for Indebtedness Incurred on or prior to December 31, 1999, (ii) 2.25
to 1 for Indebtedness Incurred after December 31, 1999 and on or prior to
December 31, 2001 and (iii) 2.50 to 1 for Indebtedness Incurred after December
31, 2001.
(b) Notwithstanding the foregoing paragraph (a), the Company and
the Restricted Subsidiaries may Incur any or all of the following
Indebtedness:
(1) Indebtedness of the Company Incurred subsequent to the Issue
Date; provided, however, that (A) after giving effect to any such
Incurrence, the aggregate principal amount of such Indebtedness then
outstanding does not exceed $400,000,000, (B) the Stated Maturity of
any such Indebtedness is at least one year after the Stated Maturity of
the Securities, (C) the Average Life of any such Indebtedness at
the time that it is Incurred is not less than the Average Life of the
Securities at such time and (D) except for Liens permitted by clause (p)
of the definition of Permitted Liens, such Indebtedness is not secured by
a Lien on any asset of the Company or its Restricted
Subsidiaries;
(2) Aircraft Acquisition Debt;
(3) Indebtedness of the Company owed to and held by a Restricted
Subsidiary or Indebtedness of a Restricted Subsidiary owed to and
held by the Company or a Restricted Subsidiary; provided, however, that
any subsequent issuance or transfer of any Capital Stock which results in
any such Restricted Subsidiary ceasing to be a Restricted Subsidiary or
any subsequent transfer of such Indebtedness (other than to the Company
or another Restricted Subsidiary) shall be deemed in each case, to
constitute the Incurrence of such Indebtedness by the Company;
(4) the Securities and the Exchange Securities;
(5) Indebtedness Incurred to finance the cost (including
the cost of design, development, acquisition, construction,
installation, improvement, transportation or integration) of plant,
property and equipment used or to be used in the airline business or any
other business that is substantially related, ancillary or complementary
thereto (including any Capital Lease Obligation and the cost of the
Capital Stock of a Person that becomes a Restricted Subsidiary to
the extent of the fair market value of the plant, property and equipment
of such Person at the time it becomes a Restricted Subsidiary) to be
acquired by the Company or a Restricted Subsidiary after the Issue
Date; provided that such Indebtedness is incurred within 270 days after
such plant, property and equipment has been placed into service; and
provided further that (A) the principal amount of such Indebtedness does
not exceed 80% of the cost of such plant, property or equipment financed
thereby and (B) the aggregate principal amount of all Indebtedness
Incurred pursuant to the provisions described under this clause (5)
shall not exceed $70,000,000 at any time outstanding; and provided
further that the limitations described in clauses (A) and (B) of
the immediately preceding proviso shall not apply to Indebtedness
Incurred to finance the cost of (i) airport facilities, reservations
centers or maintenance facilities or (ii) information technology
systems, including all related hardware and software;
(6) Indebtedness outstanding on the Issue Date (other than
Indebtedness described in clause (1), (2), (3), (4) or (5) of this Section
4.16);
(7) Indebtedness of the Company not to exceed, at any time
outstanding, 2.0 times the Net Cash Proceeds received by the Company
after the Issue Date from the issuance and sale of its Capital Stock
(other than Disqualified Stock) to a Person that is not a Subsidiary of
the Company, to the extent such Net Cash Proceeds are not included
in the calculation of amounts under clause (3)(B) of Section 4.3(a) or
used to make a Restricted Payment pursuant to clause (i) of Section
4.3(b); provided that such Indebtedness (A) is Incurred within 180 days
following receipt of such Net Cash Proceeds and (B) does not have a
Stated Maturity that is prior to the first anniversary of the Stated
Maturity of the Securities and has an Average Life longer than
the Securities at the time of Incurrence of such Indebtedness;
(8) Acquired Indebtedness; provided that prior to the Incurrence
thereof the Company shall have (i) made an Offer to Purchase all of the
Outstanding Securities at a purchase price equal to 100% of the principal
amount thereof, plus the Applicable Premium as of, and accrued and
unpaid interest and Special Interest, if any, to, the Payment Date, and
(ii) such Payment Date shall have occurred and money sufficient to pay
the purchase price of all Securities or portions thereof tendered for
purchase pursuant to such Offer to Purchase shall have been
deposited with the Trustee. Any such Offer to Purchase shall
contain information concerning the business of the Company which the
Company in good faith believes will enable the Holders of the Securities
to make an informed decision with respect to such Offer to Purchase and
will include (A) the most recent annual and quarterly financial statements
and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" contained in the documents required to be filed
with the Trustee pursuant to Section 4.9 (which requirements may be
satisfied by delivery of such documents together with the Offer to
Purchase), (B) a description of material developments, if any, in the
Company's business subsequent to the date of the latest of such
financial statements referred to in clause (A) (including a
description of the events requiring the Company to make such Offer to
Purchase), (C) if applicable, appropriate pro forma financial information
concerning such Offer to Purchase and the events requiring the Company
to make the Offer to Purchase and (D) any other information
required by applicable law to be included therein.
(9) Refinancing Indebtedness in respect of Indebtedness
Incurred pursuant to paragraph (a) or pursuant to clause (1), (2), (3),
(4), (5), (6), (7), (8) above or this clause (9);
(10) Indebtedness (A) in respect of performance, surety,
appeal or similar bonds provided in the ordinary course of business,
and (B) arising from agreements providing for indemnification,
adjustment of purchase price or similar obligations, or from Guarantees
or letters of credit, surety bonds or performance bonds securing
any obligations of the Company or any of the Restricted
Subsidiaries pursuant to such agreements, in any case Incurred in
connection with the disposition of any business, assets of the Company or
any of the Restricted Subsidiaries, including all or any interest in any
Restricted Subsidiary, and not exceeding the gross proceeds therefrom,
other than Guarantees of Indebtedness Incurred by any Person acquiring
all or any portion of such business, assets or Restricted Subsidiary or
any of the Restricted Subsidiaries for the purpose of financing such
acquisition;
(11) Hedging Obligations consisting of Interest Rate Agreements,
Fuel Protection Agreements or Currency Agreements;
(12) Indebtedness Incurred in satisfaction of payment obligations
arising out of collective bargaining agreements with labor unions
representing employees of the Company or its Restricted Subsidiaries;
(13) Indebtedness arising from aircraft lessor financing of
improvements to or maintenance of aircraft, engines or related parts and
equipment leased by the Company or its Restricted Subsidiaries;
(14) Indebtedness Incurred in satisfaction of "return condition"
obligations of the Company or its Restricted Subsidiaries under
aircraft leases in an aggregate principal amount not to exceed $25,000,000
at any time outstanding;
(15) Indebtedness under working capital and/or Receivables
financing facilities in an aggregate principal amount not to exceed
$150,000,000 at any time outstanding and Guarantees thereof by
Restricted Subsidiaries not prohibited under Section 4.21;
provided that such Indebtedness is not secured by a Lien on any assets
of the Company or its Restricted Subsidiaries other than
Receivables and Capital Stock of special purpose Subsidiaries
of the Company formed to effect a Receivables- based financing;
(16) Indebtedness issued in satisfaction of trade payables
arising in the ordinary course of business; provided that (A) the
principal amount of such Indebtedness does not exceed the amount of such
trade payables (including accrued interest or finance charges), (B)
the Stated Maturity of such Indebtedness is no more than 180 days after
the date of Incurrence thereof and (C) the aggregate principal
amount of such Indebtedness does not exceed $50,000,000 at any time
outstanding; and
(17) Indebtedness of the Company or any Restricted Subsidiary in
an aggregate principal amount which, together with all other
Indebtedness of the Company and the Restricted Subsidiaries
outstanding on the date of such Incurrence (other than Indebtedness
permitted by clauses (1) through (16) above or paragraph (a) of this
Section 4.16) does not exceed $100,000,000.
(c) Notwithstanding the foregoing, neither the Company nor any
Restricted Subsidiary shall Incur any Indebtedness pursuant to the foregoing
paragraph (b) if the proceeds thereof are used, directly or indirectly, to
Refinance any Subordinated Obligations unless such Indebtedness shall be
subordinated to the Securities, to at least the same extent as such Subordinated
Obligations.
(d) For purposes of determining compliance with this Section 4.16,
(i) in the event that an item of Indebtedness meets the criteria of more
than one of the types of Indebtedness described above, the Company, in
its sole discretion, will classify such item of Indebtedness and only be
required to include the amount and type of such Indebtedness in one of the
above clauses and (ii) an item of Indebtedness may be divided and classified in
more than one of the types of Indebtedness described above.
Section 4.17 Limitation on Restrictions on Distributions from
Restricted Subsidiaries.
The Company shall not, and shall not permit any Restricted Subsidiary to
create or otherwise cause or permit to exist or become effective any
consensual encumbrance or restriction on the ability of any Restricted
Subsidiary to (a) pay dividends or make any other distributions on its Capital
Stock to the Company or a Restricted Subsidiary or pay any Indebtedness
owed to the Company, (b) make any loans or advances to the Company or (c)
transfer any of its property or assets to the Company except:
(i) any encumbrance or restriction pursuant to an agreement in
effect at or entered into on the Issue Date;
(ii) any encumbrance or restriction with respect to a Restricted
Subsidiary or its property or assets pursuant to an agreement relating to
any Indebtedness or Preferred Stock Incurred by such Restricted Subsidiary
on or prior to the date on which such Restricted Subsidiary became a
Restricted Subsidiary or was acquired by the Company (other than
Indebtedness or Preferred Stock Incurred as consideration in, or to
provide all or any portion of the funds or credit support utilized to
consummate, the transaction or series of related transactions pursuant
to which such Restricted Subsidiary became a Restricted Subsidiary or
was acquired by the Company) and outstanding on such date;
(iii) any encumbrance or restriction pursuant to an agreement
effecting a Refinancing of Indebtedness or Preferred Stock Incurred
pursuant to an agreement referred to in clause (i) or (ii) of this Section
4.17 or this clause (iii) or contained in any amendment to an agreement
referred to in clause (i) or (ii) of this Section 4.17 or this clause
(iii); provided, however, that the encumbrances and restrictions
with respect to such Restricted Subsidiary contained in any such
refinancing agreement or amendment are in the aggregate no less favorable
to the Securityholders than encumbrances and restrictions with respect
to such Restricted Subsidiary contained in such predecessor
agreements;
(iv) any restriction with respect to a Restricted Subsidiary
imposed pursuant to an agreement entered into for the sale or
disposition of all or substantially all the Capital Stock or assets
of such Restricted Subsidiary pending the closing of such sale or
disposition;
(v) any encumbrances and restrictions existing under or by reason
of applicable law or regulation;
(vi) any encumbrances and restrictions (A) that restrict in a
customary manner the subletting, assignment or transfer of any property or
asset that is a lease, license, conveyance or contract or similar
property or asset, (B) existing by virtue of any transfer of,
agreement to transfer, option or right with respect to, or Lien on, any
property or assets of the Company or any Restricted Subsidiary not
otherwise prohibited by this Indenture or (C) arising or agreed to in the
ordinary course of business not relating to any Indebtedness, and that do
not (as determined by the Company and certified in a resolution of the
Board of Directors or a certificate of the chief financial or chief
accounting officer of the Company delivered to the Trustee prior to
or promptly following such encumbrance or restriction becoming
effective), individually or in the aggregate, (1) detract from the value
of property or assets of the Company or any Restricted Subsidiary in any
manner material to the Company or any Restricted Subsidiary or (2)
materially adversely affect the Company's ability to make principal or
interest (including Special Interest, if any) payments on the Securities;
(vii) any encumbrance or restriction contained in the terms of
any Indebtedness or any agreement pursuant to which such Indebtedness was
issued if (A) the encumbrance or restriction applies only in the event of
a payment default or default with respect to a financial covenant
contained in such Indebtedness or agreement, (B) the encumbrance or
restriction is not materially more disadvantageous to the Holders of
the Securities than is customary in comparable financings (as determined
by the Company and certified in a resolution of the Board of Directors or
a certificate of the chief financial or chief accounting officer of the
Company delivered to the Trustee prior to or promptly following such
encumbrance or restriction becoming effective), and (C) such encumbrance
or restriction will not materially adversely affect the Company's
ability to make principal or interest (including Special Interest, if
any) payments on the Securities (as determined by the Company and
certified in a resolution of the Board of Directors or a certificate of
the chief financial or chief accounting officer of the Company delivered
to the Trustee prior to or promptly following such encumbrance or
restriction becoming effective); and
(viii) any encumbrance or restriction resulting from any financing
transaction involving the sale of Receivables or aircraft and/or
related engines, spare parts and equipment to a special purpose
Subsidiary of the Company formed to effect such financing and which
applies only to such special purpose Subsidiary and its assets.
Nothing contained in this Section 4.17 shall prevent the Company or
any Restricted Subsidiary from (1) creating, incurring, assuming or
suffering to exist any Liens otherwise permitted in Section 4.12 or (2)
restricting the sale or other disposition of property or assets of the Company
or any of its Restricted Subsidiaries that secure Indebtedness of the
Company or any of its Restricted Subsidiaries.
Section 4.18 Limitation on Sales of Assets and Subsidiary Stock.
(a) The Company shall not, and shall not permit any Restricted
Subsidiary to, directly or indirectly, consummate any Asset Disposition
unless the Company or such Restricted Subsidiary receives consideration
at the time of such Asset Disposition at least equal to the fair market
value (including as to the value of all non-cash consideration), as
determined in good faith by the Board of Directors or by the chief financial or
accounting officer of the Company, of the shares and assets subject to
such Asset Disposition and at least 80% of the consideration thereof
received by the Company or such Restricted Subsidiary is in the form of cash
or cash equivalents. If the Company or any Restricted Subsidiary engages
in an Asset Disposition, the Company may use the Net Available Cash from such
Asset Disposition, within one year after the later of such Asset Disposition
and the receipt of such Net Available Cash (such later date, the "Trigger
Date"), to (i) permanently repay or prepay any then outstanding Senior
Indebtedness of the Company or any Restricted Subsidiary or (ii) invest in or
acquire (or enter into a legally binding commitment to invest in or
acquire) Additional Assets; provided that the transaction subject to any such
commitment be consummated within 180 days after the date of such commitment. If
any such legally binding commitment to invest in or acquire such Additional
Assets is terminated, then the Company may, within 90 days of such
termination or the Trigger Date, whichever is later, use such Net Available
Cash as provided in clause (i) or (ii) (without giving effect to the
parenthetical contained in such clause (ii)) above. The amount of such Net Cash
Proceeds not so used as set forth above in this paragraph constitutes
"Excess Proceeds."
(b) When the aggregate amount of Excess Proceeds exceeds $10,000,000,
the Company shall, within 30 days thereof, apply such aggregate Excess
Proceeds (1) first, to make an Offer to Purchase Outstanding Securities at
100% of their principal amount plus accrued and unpaid interest and Special
Interest, if any, to the Purchase Date and, to the extent required by the
terms thereof, any other Indebtedness of the Company that is pari passu with
the Securities at a price no greater than 100% of the principal amount
thereof plus accrued interest to the date of purchase and (2) second, to
the extent of any remaining Excess Proceeds following the completion of the
Offer to Purchase, to any other use as determined by the Company which is not
otherwise prohibited by this Indenture. Upon the completion of an Offer to
Purchase pursuant to this paragraph (b), the amount of Excess Proceeds shall
be reset to zero.
(c) For purposes of this Section 4.18, the following are deemed to be
cash or cash equivalents: (x) the assumption of Indebtedness of the Company or
any Restricted Subsidiary and the release of the Company or such Restricted
Subsidiary from all liability on such Indebtedness in connection with such
Asset Disposition and (y) securities received by the Company or any
Restricted Subsidiary from the transferee that are promptly converted by
the Company or such Restricted Subsidiary into cash.
Section 4.19 Limitation on Affiliate Transactions.
(a) The Company shall not, and shall not permit any Restricted
Subsidiary to, enter into or permit to exist any transaction (including
the purchase, sale, lease or exchange of any property or employee
compensation arrangements) with any Affiliate of the Company (an "Affiliate
Transaction") unless the terms thereof (1) are no less favorable to the
Company or such Restricted Subsidiary than those that could be obtained at
the time of such transaction in arm's-length dealings with a Person who is
not such an Affiliate and (2) if such Affiliate Transaction involves an
amount in excess of $2,000,000 (i) are set forth in writing and (ii) have been
approved by a majority of the members of the Board of Directors having no
personal stake in such Affiliate Transaction. If such Affiliate
Transaction involves an amount in excess of $10,000,000, a fairness opinion
must be obtained from an internationally recognized investment banking firm,
appraisal firm or auditing firm with respect to the financial terms of such
Affiliate Transaction.
(b) The provisions of the foregoing paragraph (a) shall not prohibit or
apply to (i) any Restricted Payment permitted to be paid pursuant to Section
4.3, (ii) loans or advances to employees in the ordinary course of business and
in an amount that does not exceed $1,000,000 in the aggregate outstanding at
any one time, (iii) the payment of reasonable fees to directors of the Company
and its Restricted Subsidiaries who are not employees of the Company or
its Restricted Subsidiaries, (iv) any Affiliate Transaction between the
Company and a Restricted Subsidiary or between Restricted Subsidiaries, (v)
any issuance of securities, or other payments, awards or grants in cash,
securities or otherwise pursuant to, or the funding of, employment
arrangements, stock options and stock ownership plans approved by the Board of
Directors, (vi) the grant of stock options or similar rights to employees
and directors of the Company pursuant to plans approved by the Board of
Directors and (vii) any Affiliate Transaction entered into pursuant to
agreements with labor unions.
Section 4.20 Limitation on the Sale or Issuance of Capital Stock of
Restricted Subsidiaries.
The Company shall not sell or otherwise dispose of any Capital Stock
of a Restricted Subsidiary, and shall not permit any such Restricted
Subsidiary, direct or indirectly, to issue or sell or otherwise dispose of any
of its Capital Stock except (i) to the Company or a Wholly Owned Subsidiary,
(ii) the issuance and sale of directors' qualifying shares, (iii) if,
immediately after giving effect to any such issuance, sale or other
disposition, such Restricted Subsidiary would no longer constitute a
Restricted Subsidiary and any Investment in such Person remaining after
giving effect thereto would have been permitted to be made under Section 4.3
if made on the date of such issuance, sale or other disposition, (iv) if
such sale or other disposition is of all or any portion of the Capital Stock
of a Restricted Subsidiary and the Net Available Cash received from such
sale or other disposition are applied in accordance with Section 4.18, or (v)
to the extent the ownership by a Person other than the Company or a Wholly
Owned Subsidiary is required by applicable law and except that any Restricted
Subsidiary may issue or permit to exist (x) Preferred Stock issued to and
held by the Company or a Wholly Owned Subsidiary; provided, however, that
upon either (A) the transfer or other disposition by the Company or such
Wholly Owned Subsidiary of any Preferred Stock so permitted to a Person other
than the Company or another Wholly Owned Subsidiary or (B) such Wholly Owned
Subsidiary ceasing to be a Wholly Owned Subsidiary, the provisions of this
clause (x) will no longer be applicable to such Preferred Stock and such
Preferred Stock will be deemed to have been issued at the time of such transfer
or other disposition or such cessation; and (y) Preferred Stock issued by a
Person prior to the time such Person becomes a Restricted Subsidiary (including
by way of a merger or consolidation with another Restricted Subsidiary),
which Preferred Stock was not issued in anticipation of and was
outstanding prior to such transaction; provided, however, that on the date of
such acquisition and after giving effect thereto, the Company would have been
able to Incur at least $1.00 of additional Indebtedness pursuant to
Section 4.16(a).
Section 4.21 Limitation on Guarantees by Restricted Subsidiaries.
The Company shall not permit any Restricted Subsidiary, directly or
indirectly, to Guarantee any Indebtedness of the Company which is pari
passu with or subordinate in right of payment to the Securities ("Guaranteed
Indebtedness"), unless (i) such Restricted Subsidiary simultaneously executes
and delivers a Subsidiary Guaranty of payment of the Securities by such
Restricted Subsidiary and (ii) such Restricted Subsidiary waives and will not
in any manner whatsoever claim or take the benefit or advantage of, any
rights of reimbursement, indemnity or subrogation or any other rights against
the Company or any other Restricted Subsidiary as a result of any
payment by such Restricted Subsidiary under its Subsidiary Guaranty;
provided that this paragraph shall not be applicable to (1) any Guarantee by
any Restricted Subsidiary that existed at the time such Person became a
Restricted Subsidiary and was not Incurred in connection with, or in
contemplation of, such Person becoming a Restricted Subsidiary or (2)
Guarantees of Indebtedness under working capital facilities of the
Company in an aggregate principal amount not exceeding $50,000,000 at any
time outstanding or, if less, the amount by which $150,000,000 exceeds the
aggregate outstanding principal amount of Indebtedness of the Company under
clause (15) of paragraph (b) of Section 4.16 which is secured by a Lien. If the
Guaranteed Indebtedness is (A) pari passu with the Securities, then the
Guarantee of such Guaranteed Indebtedness shall be pari passu with, or
subordinated to, the Subsidiary Guaranty or (B) subordinated to the
Securities, then the Guarantee of such Guaranteed Indebtedness shall be
subordinated to the Subsidiary Guaranty at least to the extent that the
Guaranteed Indebtedness is subordinated to the Securities.
Notwithstanding the foregoing, any Subsidiary Guaranty by a Restricted
Subsidiary may provide by its terms that it shall be automatically and
unconditionally released and discharged upon (i) any sale, exchange or
transfer, to any Person not an Affiliate of the Company, of all of the
Company's and each Restricted Subsidiary's Capital Stock in, or all or
substantially all the assets of, such Restricted Subsidiary (which sale,
exchange or transfer is not prohibited by this Indenture) or (ii) the release
or discharge of the Guarantee which resulted in the creation of such
Subsidiary Guaranty, except a release or discharge by, or as a result of,
payment under such Guarantee.
Section 4.22 Limitation on Sale/Leaseback Transactions.
The Company shall not, and shall not permit any Restricted Subsidiary
to, enter into any Sale/Leaseback Transaction with respect to any Property
unless (i) the Company or such Restricted Subsidiary would be entitled to (A)
Incur Indebtedness in an amount equal to the Attributable Debt with
respect to such Sale/Leaseback Transaction pursuant to Section 4.16 and
(B) create a Lien on such Property securing such Attributable Debt without
equally and ratably securing the Securities pursuant to Section 4.12, or (ii)
the Sale/Leaseback Transaction is treated as an Asset Disposition and the
Company applies the proceeds of such transaction in compliance with Section
4.18.
Section 4.23 Application for Rating.
The Company shall, within 180 days after the Issue Date, apply to
Moody's Investors Service, Inc. and Standard & Poor's Ratings Group, to obtain
a rating for the Securities.
Section 4.24 Listing.
No later than the earliest to occur of (i) the effectiveness of the initial
Exchange Offer Registration Statement and (ii) the effectiveness of the
initial Shelf Registration Statement, in either case, filed under (and as
defined in) the Registration Rights Agreement, the Company shall cause the
Exchange Securities to be listed on the American Stock Exchange, or such other
stock exchange or market as the Common Stock of the Company is then
principally traded provided, that such Securities meet the minimum
requirements for listing on any such exchange or market, and, if applicable, to
maintain such listing for so long as any of the Exchange Securities is
Outstanding.
ARTICLE 5.
SUCCESSOR CORPORATION
Section 5.1 Covenant Not to Consolidate, Merge, Convey or Transfer
Except Under Certain Conditions.
The Company shall not consolidate with, or merge with or into, or
convey, transfer or lease, in one transaction or a series of transactions,
all or substantially all of its assets to, any Person unless:
(i) The resulting, surviving or transferee Person (the "Successor
Company") shall be a Person organized and existing under the laws of the
U.S., any state thereof or the District of Columbia and the Successor Company
(if not the Company) shall expressly assume, by an indenture supplemental
hereto, executed and delivered to the Trustee, in form satisfactory to
the Trustee, all the obligations of the Company under the Securities and this
Indenture;
(ii) Immediately after giving effect to such transaction (and treating
any Indebtedness which becomes an obligation of the Successor Company or any
Subsidiary of the Company as a result of such transaction as having been
Incurred by such Successor Company or such Subsidiary at the time of such
transaction), no Default shall have occurred and be continuing;
(iii) Immediately after giving effect to such transaction,
the Successor Company would be able to Incur an additional $1.00 of
Indebtedness pursuant to paragraph (a) of Section 4.16;
(iv) Immediately after giving effect to such transaction, the Successor
Company shall have Consolidated Net Worth in an amount that is not less than
the Consolidated Net Worth of the Company immediately prior to such
transaction; and
(v) The Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that (i) such
consolidation, merger or transfer and such supplemental indenture (if any)
comply with the terms of this Indenture, (ii) this Indenture and the
Securities constitute the valid and legally binding obligations of the
Successor Company, and (iii) this Indenture is enforceable against the
Successor Company in accordance with its terms.
Section 5.2 Successor Person Substituted.
The Successor Company shall be the successor to the Company and shall
succeed to, and be substituted for, and be bound by and obligated to pay the
obligations of, and may exercise every right and power of, the Company
under this Indenture, but the predecessor Company in the case of a
conveyance, transfer or lease shall not be released from the obligation
to pay the principal of, interest on, and Special Interest, if any, with
respect to, the Securities.
The Successor Company may cause to be signed, and may issue either in
its own name or in the name of the Company prior to such succession any or
all of the Securities issuable hereunder which theretofore shall not have been
signed by the Company and delivered to the Trustee; and upon the order of
the Successor Company, instead of the Company, and subject to all the terms,
conditions and limitations in this Indenture prescribed, the Trustee shall
authenticate and shall deliver any Securities which previously shall have been
signed and delivered by the officers of the Company to the Trustee for
authentication, and any Securities which such Successor Company thereafter
shall cause to be signed and delivered to the Trustee for that purpose. All of
the Securities so issued shall in all respects have the same legal rank and
benefit under this Indenture as though all of such Securities had been issued at
the date of the execution hereof.
In case of any such consolidation, merger, sale, transfer or conveyance
such changes in phraseology and form (but not in substance) may be made in
the Securities thereafter to be issued as may be appropriate.
Section 5.3 Optional Right of Redemption.
The Company shall have the right, without the consent of the Holders, to
redeem the Securities in whole, but not in part, at a redemption price equal to
100% of the unpaid principal amount of the Outstanding Securities plus the
Applicable Premium as of, and accrued and unpaid interest and Special Interest
if any, to, the date of redemption in the event that the Company enters into
a binding agreement to consummate any transaction which would be prohibited
by Section 5.1. Such redemption date must occur prior to or simultaneously
with the consummation of such prohibited transaction. Any such redemption
shall be subject to the provisions of Sections 3.2 through 3.7, inclusive.
ARTICLE 6.
DEFAULT AND REMEDIES
Section 6.1 Events of Default.
An "Event of Default" occurs if:
(a) the Company defaults in the payment of interest on, or Special
Interest, if any, with respect to, any Security when the same becomes due and
payable and the default continues for thirty (30) days;
(b) the Company defaults in the payment of the principal of, or
purchase price, if any, with respect to, any Security when the same becomes due
and payable at maturity, upon acceleration, redemption, tender for repurchase or
otherwise;
(c) the Company takes any action prohibited by Section 5.1;
(d) the Company fails to comply with any of the covenants contained in
Sections 4.3, 4.7, 4.9, 4.12, 4.17, 4.19 through 4.24, inclusive, or (except,
in each case, for a failure to Pay the purchase price of Securities in
connection with an Offer to Purchase) 4.14, 4.16 or 4.18, and in any such case
such default continues for the period and after the notice specified below;
(e) any representation or warranty of the Company in this Indenture, or
in any certificate of the Company delivered hereunder or under any such
document shall prove to have been untrue in any material respect when made,
or the Company fails in any material respect to comply with any covenant or
agreement (other than as specified in clauses (a) through (d), inclusive,
above) contained in the Securities or this Indenture, and in any such case
such default continues for the period and after the notice specified below;
(f) an event of default shall have occurred and be continuing
under any other evidence of Indebtedness of the Company or any
Significant Subsidiary of the Company, whether such Indebtedness now exists or
is created hereafter, which event of default results in the acceleration of
such Indebtedness which, together with any such other Indebtedness so
accelerated, aggregates more than $15,000,000;
(g) the Company or any Restricted Subsidiary pursuant to or within the
meaning of any Bankruptcy Law (as hereinafter defined):
(i) commences a voluntary case or proceeding,
(ii) consents to the entry of an order for relief against it in
an involuntary case or proceeding,
(iii) consents to the appointment of a Custodian (as
hereinafter defined) of it or for all or substantially all of its
property,
(iv) makes a general assignment for the benefit of its creditors, or
(v) generally is unable to pay its debts as the same become due;
(h) a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that:
(i) is for relief against the Company or any Restricted
Subsidiary in an involuntary case or proceeding,
(ii) appoints a Custodian of the Company or any Restricted
Subsidiary for all or substantially all of its properties, or
(iii) orders the liquidation of the Company or any Restricted
Subsidiary,
and in each case the order and decree remains unstayed and in effect
for sixty (60) consecutive days; or
(i) final, non-appealable judgments for the payment of money which
judgments in the aggregate exceed $15,000,000 shall be rendered against the
Company or any Restricted Subsidiary by a court of competent jurisdiction and
remain undischarged, unstayed and unsatisfied for the period and after the
notice specified below.
The term "Bankruptcy Law" means Title 11, U.S. Code or any similar
Federal or state law for the relief of debtors. The term "Custodian" means
any receiver, trustee, assignee, liquidator, sequestrator or similar official
under any Bankruptcy Law.
A Default under clause (d), (e), (i) or, with respect to a Restricted
Subsidiary that is not a Significant Subsidiary, (g) or (h) of this Section
6.1 is not an Event of Default until the Trustee notifies the Company, or the
Holders of at least twenty- five percent (25%) in aggregate principal
amount of the Securities Outstanding notify the Company and the Trustee, of
the Default and the Company does not cure the Default within sixty (60) days
with respect to clauses (e) and (i), or within thirty (30) days with respect
to clauses (d) and, with respect to a Restricted Subsidiary that is not a
Significant Subsidiary, (g) and (h), after receipt of the notice. The notice
must specify the Default, demand that it be remedied and state that the notice
is a "Notice of Default." When a Default is cured, it ceases.
Section 6.2 Acceleration.
If an Event of Default (other than an Event of Default specified in
Section 6.1(g) or (h) with respect to the Company or a Restricted Subsidiary
that is a Significant Subsidiary) occurs, and is continuing, the Trustee may, by
notice to the Company, or the Holders of at least twenty-five percent (25%)
in aggregate principal amount of the Securities Outstanding may, by notice to
the Company and the Trustee, and the Trustee shall, upon the request of
such Holders, declare all unpaid principal of, premium, if any, accrued
interest and Special Interest, if any, to the date of acceleration on the
Securities Outstanding (if not then due and payable) to be due and payable and
upon any such declaration, the same shall become and be immediately due
and payable. If an Event of Default specified in Section 6.1(g) or (h) occurs
with respect to the Company or a Restricted Subsidiary that is a Significant
Subsidiary, all unpaid principal of, premium, if any, accrued interest on
and Special Interest, if any, with respect to, the Securities Outstanding
shall ipso facto become and be immediately due and payable without any
declaration or other act on the part of the Trustee or any Securityholder.
Upon payment of such principal amount, interest, and Special Interest, if
any, all of the Company's obligations under the Securities and this
Indenture, other than obligations under Sections 7.7, 8.5 and 8.6, shall
terminate. The Holders of a majority in principal amount of the Securities
then Outstanding by notice to the Trustee may rescind an acceleration and
its consequences if (a) all existing Events of Default, other than the
non-payment as to the Securities of the principal, interest or Special
Interest, if any, which has become due solely by such declaration of
acceleration, have been cured or waived, (b) to the extent the payment of
such interest is permitted by law, interest on overdue installments of
interest and on overdue principal which has become due otherwise than by such
declaration of acceleration, has been paid, (c) the rescission would not
conflict with any judgment or decree of a court of competent jurisdiction,
and (d) all payments due to the Trustee and any predecessor Trustee under
Section 7.7 have been made.
Section 6.3 Other Remedies.
If an Event of Default occurs and is continuing, the Trustee may pursue any
available remedy by proceeding at law or in equity to collect the payment of
principal of, interest on or Special Interest, if any, with respect to the
Securities or to enforce the performance of any provision of the
Securities or this Indenture including, without limitation, instituting
proceedings and exercising and enforcing, or directing exercise and
enforcement of, all rights and remedies of the Trustee under this Indenture.
The Trustee may maintain a proceeding even if it does not possess any of
the Securities or does not produce any of them in the proceeding. A delay
or omission by the Trustee or any Securityholder in exercising any right or
remedy accruing upon an Event of Default shall not impair the right or
remedy or constitute a waiver of or acquiescence in the Event of Default. No
remedy is exclusive of any other remedy. All available remedies are
cumulative.
Section 6.4 Waiver of Past Defaults.
Subject to Sections 6.7, 9.2 and 9.6, the Holders of a majority in
aggregate principal amount of the Securities Outstanding by notice to the
Trustee may authorize the Trustee to waive an existing Default or Event
of Default and its consequences, except a Default (a) in the payment of
principal of, or interest on, or Special Interest with respect to, any
Security as specified in clauses (a) and (b) of Section 6.1 or (b) in respect
of a covenant or provision hereof which cannot be modified or amended without
the consent of the Holder of each Security affected. When a Default or Event
of Default is waived, it is cured and ceases, and the Company, the Holders
and the Trustee shall be restored to their former positions and rights
hereunder respectively; but no such waiver shall extend to any subsequent or
other Default or Event of Default or impair any right consequent thereon.
Section 6.5 Control by Majority.
The Holders of a majority in aggregate principal amount of the
Securities Outstanding may direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or exercising any
trust or power conferred on it; provided that the Trustee may take any other
action deemed proper by the Trustee which is not inconsistent with such
direction. The Trustee may refuse to follow any direction hereunder or
authorization under Section 6.4 that conflicts with law or this Indenture,
that the Trustee determines may be unduly prejudicial to the rights of
another Securityholder, or that the Trustee determines may subject the
Trustee to personal liability. However, the Trustee shall have no liability
for any actions or omissions to act which are in accordance with any such
direction or authorization.
Section 6.6 Limitation on Suits.
A Securityholder may not pursue any remedy with respect to this Indenture
or the Securities unless:
(a) the Holder gives to the Trustee written notice of a continuing
Event of Default;
(b) the Holders of at least twenty-five percent (25%) in principal
amount of the Securities Outstanding make a written request to the Trustee to
pursue the remedy;
(c) such Holder or Holders offer to the Trustee indemnity satisfactory
to the Trustee against any loss, liability or expense;
(d) the Trustee does not comply with the request within sixty (60)
days after receipt of the request and the offer of indemnity; and
(e) during such 60-day period the Holders of a majority in aggregate
principal amount of the Securities Outstanding do not give the Trustee a
direction which, in the opinion of the Trustee, is inconsistent with such
request.
A Securityholder may not use this Indenture to prejudice the rights of
another Securityholder or to obtain a preference or priority over such other
Securityholder.
Section 6.7 Rights of Holders to Receive Payment.
Notwithstanding any other provision of this Indenture, the right of any
Holder of a Security to receive payment of principal of, interest on, and
Special Interest, if any, with respect to, the Security in cash, on or
after the respective due dates expressed in the Security, or to bring suit
for the enforcement of any such payment on or after such respective dates,
shall not be impaired or affected without the consent of the Holder.
It is hereby expressly understood, intended and agreed that any and all
actions which a Holder of the Securities may take to enforce the provisions of
this Indenture and/or collect Payments due hereunder or under the Securities,
except to the extent that such action is determined to be on behalf of all
Holders of the Securities, shall be in addition to and shall not in any
way change, adversely affect or impair the rights and remedies of the Trustee or
any other Holder of the Securities thereunder or under this Indenture.
Section 6.8 Collection Suit by Trustee.
If an Event of Default in payment of interest or principal specified in
clause (a) or (b) of Section 6.1 occurs and is continuing, the Trustee may
recover judgment in its own name and as trustee of an express trust against
the Company or any other obligor on the Securities for the whole amount of
principal, accrued interest and Special Interest, if any, remaining unpaid,
together with interest on overdue principal and on overdue installments
of interest to the extent that payment of such interest is permitted by
law, in each case at the rate per annum provided for by the Securities, and
such further amount as shall be sufficient to cover the costs and expenses
of collection, including the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel.
Section 6.9 Trustee May File Proofs of Claim.
The Trustee may file such proofs of claim and other papers or documents
as may be necessary or advisable in order to have the claims of the Trustee
(including any claim for the reasonable compensation, expenses, disbursements
and advances of the Trustee, its agents and counsel) and the
Securityholders allowed in any judicial proceedings relative to the Company (or
any other obligor upon the Securities), its creditors or its Property and
shall be entitled and empowered to collect and receive any moneys or other
Property payable or deliverable on any such claims and to distribute the
same, and any Custodian in any such judicial proceedings is hereby authorized
by each Securityholder to make such payments to the Trustee and, in the event
that the Trustee shall consent to the making of such payments directly to
the Securityholders, to pay to the Trustee any amount due to it for the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agent and counsel, and any other amounts due the Trustee under Section 7.7,
and unless prohibited by law or applicable regulations to vote on behalf
of the Holders of Securities for the election of a trustee in bankruptcy or
other person performing similar functions. Nothing herein contained shall
be deemed to authorize the Trustee to authorize or consent to or accept or adopt
on behalf of any Securityholder any plan of reorganization, arrangement,
adjustment or composition affecting the Securities or the rights of any
Holder thereof, or to authorize the Trustee to vote in respect of the
claim of any Securityholder in any such proceeding except, as aforesaid, for
the election of a trustee in bankruptcy or person performing similar
functions.
Section 6.10 Application of Proceeds.
Any moneys collected by the Trustee pursuant to this Article shall be
applied in the following order at the date or dates fixed by the Trustee
and, in case of the distribution of such moneys on account of principal,
interest, or Special Interest, if any, upon presentation of the several
Securities and stamping (or otherwise noting) thereon the payment, or issuing
Securities in reduced principal amounts in exchange for the presented
Securities if only partially paid, or upon surrender thereof if fully paid:
FIRST: To the payment of costs and expenses, including
reasonable compensation to the Trustee, its predecessors, if any,
and their respective agents and attorneys (including amounts due and
unpaid under Section 7.7), and of all costs, fees, expenses and
liabilities incurred, and all advances made, by any and all of the
foregoing (including amounts due and unpaid under Section 7.7), except
as a result of negligence or bad faith;
SECOND: In case the entire principal of the Securities
shall not have become and be then due and payable, as to any
Securities (a) first to the payment of interest and Special Interest, if
any, in default in the order of the maturity of the installments of
such interest and Special Interest, if any, with interest (to the extent
that such interest has been collected by the Trustee) upon the overdue
installments of interest or Special Interest, if any, at the rate of
interest specified in the Securities and (b) second to the payment of
principal of the Securities as the same shall become due and payable,
such payments to be made ratably to the Persons entitled thereto,
without discrimination or preference;
THIRD: In case the entire principal of the Securities
shall have become and shall be then due and payable, as to any
Securities, to the payment of the whole amount then owing and unpaid
upon all the Securities for principal, interest and Special Interest,
with interest upon the overdue principal, and (to the extent that such
interest has been collected by the Trustee) upon overdue installments of
interest or Special Interest, if any, at the same rate as the rate of
interest specified in the Securities; and in case such moneys shall be
insufficient to pay in full the whole amount so due and unpaid upon the
Securities, then to the payment of such principal, interest and
Special Interest, if any, without preference or priority of any of
principal, interest or Special Interest, if any, over the other, or
any installment of interest or Special Interest, if any, over any other
installment of interest or Special Interest, if any, or of any
Security over any other Security, ratably to the aggregate of such
principal, and accrued and unpaid interest and Special Interest; and
FOURTH: To the payment of the remainder, if any, after payment
in full of the entire principal balance, if any, of the Securities and
all interest, Special Interest and other amounts due upon or in respect of
such Securities, to the Company or any other Person lawfully
entitled thereto.
The Trustee, upon prior written notice to the Company, may fix a
record date and payment date for any payment to Securityholders
pursuant to this Section 6.10.
Section 6.11 Undertaking for Costs.
All parties to this Indenture agree, and each Holder of any Security by
his acceptance thereof shall be deemed to have agreed, that any court in
its discretion may require in any suit for the enforcement of any right or
remedy under this Indenture or in any suit against the Trustee for any
action taken or omitted by it as Trustee, the filing by any party litigant in
the suit of an undertaking to pay the costs of the suit, and the court in
its discretion may assess reasonable costs, including reasonable attorneys'
fees, against any party litigant in the suit, having due regard to the
merits and good faith of the claims or defenses made by the party litigant.
This Section 6.11 does not apply to a suit by the Trustee, a suit by a
Holder pursuant to Section 6.7, or a suit by Holders of more than ten percent
(10%) in principal amount of the Securities Outstanding.
Section 6.12 Restoration of Rights on Abandonment of Proceedings.
In case the Trustee shall have proceeded to enforce any right under
this Indenture and such proceedings shall have been discontinued or abandoned
for any reason, or shall have been determined adversely to the Trustee, then
and in every such case the Company, the Trustee and the Securityholders
shall be restored respectively to their former positions and rights
hereunder, and all rights, remedies and powers of the Company, the Trustee
and the Securityholders shall continue as though no such proceedings had been
taken.
Section 6.13 Powers and Remedies Cumulative; Delay or Omission Not
Waiver of Default.
No right or remedy herein conferred upon or reserved to the Trustee or to
the Securityholders is intended to be exclusive of any other right or remedy,
and every right and remedy shall, to the extent permitted by law, be
cumulative and in addition to every other right and remedy given hereunder or
now or hereafter existing at law or in equity or otherwise. The assertion
or employment of any right or remedy hereunder, or otherwise, shall not
prevent the concurrent assertion or employment of any other appropriate right
or remedy.
No delay or omission of the Trustee or of any Holder of any of the
Securities to exercise any right or power accruing upon any Event of Default
occurring and continuing as aforesaid shall impair any such right or power or
shall be construed to be a waiver of any such Event of Default or an
acquiescence therein; and, subject to the other applicable provisions
of this Indenture, every power and remedy given by this Indenture or by law
to the Trustee or to the Securityholders may be exercised from time to time,
and as often as shall be deemed expedient, by the Trustee or by the
Securityholders.
Any right or remedy herein conferred upon or reserved to the Trustee may be
exercised by it in its capacity as Trustee, as it may deem most efficacious, if
it is then acting in such capacity.
ARTICLE 7.
TRUSTEE
Section 7.1 Duties of Trustee.
(a) If an Event of Default has occurred and is continuing, the Trustee
shall exercise such of the rights and powers vested in it by this Indenture and
use the same degree of care and skill in their exercise as a prudent person
would exercise or use under the circumstances in the conduct of his own affairs.
(b) Except during the continuance of an Event of Default:
(i) The Trustee need perform only those duties as are specifically
set forth in this Indenture and no others.
(ii) In the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Trustee and conforming to the
requirements of this Indenture. However, the Trustee shall
examine the certificates and opinions to determine whether or not they
conform to the requirements of this Indenture.
(c) The Trustee may not be relieved from liability for its own negligent
action, its own negligent failure to act, or its own willful misconduct,
except that:
(i) This paragraph (c) does not limit the effect of paragraph (b)
of this Section 7.1 or of Section 7.2.
(ii) The Trustee shall not be liable for any error of judgment made
in good faith by a Trust Officer, unless it is proved that the Trustee
was negligent in ascertaining the pertinent facts.
(iii) The Trustee shall not be liable with respect to any
action it takes or omits to take in good faith in accordance with a
direction received by it pursuant to Section 6.5.
(d) The Trustee shall be under no obligation to exercise any of the
rights, trusts or powers vested in it by this Indenture at the request,
order or direction of any of the Holders pursuant to this Indenture,
unless such Holders shall have offered to the Trustee security or
indemnity reasonably satisfactory to the Trustee against the costs,
expenses and liabilities which might be incurred by it in compliance with such
request, order or direction.
(e) Every provision of this Indenture that in any way relates to the
Trustee is subject to paragraphs (a), (b), (c) and (d) of this Section 7.1.
(f) Funds held in trust for the benefit of the Holders of the Securities
by the Trustee or any Paying Agent on deposit with itself or elsewhere, shall
be held in distinct, identifiable accounts, and other funds or investments of
any nature or from any source whatsoever may be held in such accounts,
except, in each case, to the extent required by law. The Trustee shall not be
liable for interest on any money received by it except as the Trustee may agree
with the Company.
Section 7.2 Rights of Trustee.
(a) The Trustee may rely on any document believed by it to be genuine
and to have been signed or presented by the proper person. The Trustee need
not investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may require an
Officers' Certificate or an Opinion of Counsel, which shall conform to Section
10.5. The Trustee shall not be liable for any action it takes or omits to
take in good faith in reliance on such certificate or opinion.
(c) The Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through its attorneys
and agents and the Trustee shall not be responsible for the misconduct or
negligence of any agent or attorney appointed with due care.
(d) The Trustee shall not be liable for any action it takes or omits to
take in good faith which it reasonably believes to be authorized or within its
rights or powers.
Section 7.3 Individual Rights of Trustee.
The Trustee in its individual or any other capacity may become the
owner or pledgee of Securities and may otherwise deal with and collect
obligations owed to it by the Company or Affiliates of the Company with the
same rights it would have if it were not Trustee. Any Agent may do the same
with like rights. However, the Trustee is subject to Sections 7.10 and 7.11.
Section 7.4 Trustee's Disclaimer.
The Trustee makes no representation as to the validity or adequacy of
this Indenture or the Securities, it shall not be accountable for the
Company's use of the proceeds from the Securities, and it shall not be
responsible for any statement in the Securities or in this Indenture other than
its certificate of authentication.
Section 7.5 Notice of Defaults.
If a Default occurs and is continuing and if it is known to the Trustee,
the Trustee shall mail to each Securityholder notice of the Default within
ninety (90) days after the occurrence thereof except as otherwise permitted
by the TIA. Except in the case of a Default in payment of principal of, or
interest on, or Special Interest, if any, with respect to, any Security,
the Trustee may withhold the notice if and so long as it, in good faith,
determines that withholding the notice is in the interests of the
Securityholders.
Section 7.6 Reports by Trustee to Holders.
If circumstances require any report to Holders under TIA Section 313(a),
it shall be mailed to Securityholders within sixty (60) days after each May 15
(beginning with the May 15 following the date of this Indenture) as of which
such circumstances exist. The Trustee also shall comply with the remainder of
TIA Section 313.
The Company shall notify the Trustee if the Securities become listed
on or delisted from any stock exchange or other recognized trading market.
The Trustee shall, upon the written request of any Holder of Securities
but subject to applicable laws and contractual limitations, provide to
such Holder copies of any reports, certificates, opinions or other materials
of any kind or nature required to be delivered to the Trustee under this
Indenture or otherwise delivered by or on behalf of the Company to the
Trustee.
Section 7.7 Compensation and Indemnity.
The Company shall pay to the Trustee from time to time reasonable
compensation, as agreed upon from time to time, for its services hereunder.
The Trustee's compensation shall not be limited by any law on compensation of
a trustee of an express trust. The Company shall reimburse the Trustee upon
request for all reasonable disbursements, expenses and advances incurred or
made by it in any capacity hereunder. Such expenses shall include the
reasonable compensation, disbursements and expenses of the Trustee's agents
and counsel and all agents and other persons not regularly in its employ.
The Company shall indemnify the Trustee and each predecessor Trustee for,
and hold each of them harmless against, any loss or liability incurred by
each of them in connection with the administration of this Indenture and
its duties hereunder. In connection with any defense of such a claim, the
Trustee may have separate counsel and the Company shall pay the reasonable
fees and expenses of such counsel. The Company need not reimburse any expense
or indemnify against any loss or liability incurred by the Trustee or any
predecessor Trustee through the negligence or bad faith of such Trustee or each
such predecessor Trustee.
To secure the Company's payment obligations in this Section 7.7, the
Trustee shall have a Lien (legal and equitable) prior to the Securities on all
money or Property held or collected by the Trustee, in its capacity as
Trustee, or otherwise distributable to Securityholders, except money,
securities or Property held in trust to pay principal of or interest on
particular Securities (including, without limitation, pursuant to Section
8.1(b) hereof).
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.1(g) or (h) occurs, the expenses and the
compensation for the services are intended to constitute expenses of
administration under any Bankruptcy Law.
Section 7.8 Replacement of Trustee.
The Trustee may resign by so notifying the Company in writing. The
Holders of a majority in aggregate principal amount of the Securities
Outstanding may remove the Trustee by so notifying the Trustee in writing
and may appoint a successor Trustee with the Company's consent, which
consent shall not be unreasonably refused or delayed. The Company may
remove the Trustee if:
(a) the Trustee fails to comply with Section 7.10;
(b) the Trustee is adjudged a bankrupt or an insolvent;
(c) a receiver or other public officer takes charge of the Trustee or its
Property;
(d) the Trustee becomes incapable of acting; or
(e) no Default or Event of Default has occurred and is continuing and
the Company determines in good faith to remove the Trustee.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Company shall promptly appoint a
successor Trustee. Within one year after the successor Trustee takes office,
the Holders of a majority in aggregate principal amount of the Securities
Outstanding may appoint a successor Trustee to replace the successor
Trustee appointed by the Company.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Immediately after
that, the retiring Trustee shall transfer all Property held by it as Trustee to
the successor Trustee, subject to the Lien provided in Section 7.7, the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the
Trustee under this Indenture. A successor Trustee shall mail notice of its
succession to each Securityholder.
No resignation or removal of the Trustee and no appointment of a
successor Trustee, pursuant to this Article, shall become effective until the
acceptance of appointment by the successor Trustee under this Section 7.8. If
a successor Trustee does not take office within sixty (60) days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or
the Holders of at least ten percent (10%) in principal amount of the Securities
Outstanding may petition any court of competent jurisdiction for the
appointment of a successor Trustee.
If the Trustee fails to comply with Section 7.10, any Holder of Securities
may petition any court of competent jurisdiction for the removal of the Trustee
and the appointment of a successor Trustee.
Notwithstanding replacement of the Trustee pursuant to this Section 7.8,
the Company's obligations under Section 7.7 shall continue for the benefit
of the retiring Trustee which shall retain its claim pursuant to Section 7.7.
Section 7.9 Successor Trustee by Merger, etc.
If the Trustee consolidates with, merges or converts into, or transfers
all or substantially all of its corporate trust business to, another
corporation, the resulting, surviving or transferee corporation without any
further act shall be the successor Trustee.
Section 7.10 Eligibility; Disqualification.
This Indenture shall always have a Trustee who satisfies the requirements
of TIA Section 310(a)(1). The Trustee shall have a combined capital and surplus
of at least $50,000,000 as set forth in its most recent, published annual report
of condition. The Trustee shall comply with TIA Section 310(b); provided,
however, that there shall be excluded from the operation of TIA Section
310(b)(1) any indenture or indentures under which other securities, or
certificates of interest or participation in other securities, of the Company
are outstanding, if the requirements for such exclusion set forth in TIA Section
310(b)(1) are met.
Section 7.11 Preferential Collection of Claims Against Company.
The Trustee shall comply with TIA Section 311(a), excluding any creditor
relationship listed in TIA Section 311(b). A Trustee who has resigned or been
removed shall be subject to TIA 311(a) to the extent indicated.
ARTICLE 8.
DISCHARGE OF INDENTURE; DEFEASANCE
Section 8.1 Discharge of Liability on Securities; Defeasance.
(a) When (i) the Company delivers to the Trustee all outstanding
Securities (other than Securities replaced pursuant to Section 2.7) for
cancellation or (ii) all outstanding Securities have become due and payable,
whether at maturity or as a result of the mailing of a notice of redemption
pursuant to Article 3 hereof and the Company irrevocably deposits with the
Trustee funds sufficient to pay at maturity or upon redemption all
outstanding Securities, including interest thereon to maturity or such
redemption date (other than Securities replaced pursuant to Section 2.7), and if
in either case the Company pays all other sums payable hereunder by the
Company, then this Indenture shall, subject to Section 8.1(c), cease to
be of further effect. The Trustee shall acknowledge satisfaction and
discharge of this Indenture by executing and delivering to the Company on
demand of the Company accompanied by an Officers' Certificate and an Opinion
of Counsel, a written instrument to such effect prepared by the Company at its
sole cost and expense.
(b) Subject to Sections 8.1(c) and 8.2, the Company at any time may
terminate (i) all its obligations under the Securities and this Indenture
("legal defeasance option") or (ii) its obligations under Article 3,
Sections 4.3, 4.7, 4.9, 4.12, 4.14 and 4.16 through 4.24, inclusive, and the
operation of Sections 6.1(d), 6.1(e), 6.1(f), 6.1(g), 6.1(h), 6.1(i) (but, in
the case of Sections 6.1(g) and (h), with respect only to Restricted
Subsidiaries) and the limitations contained in Sections 5.1(iii) and (iv)
("covenant defeasance option"). The Company may exercise its legal
defeasance option notwithstanding its prior exercise of its covenant
defeasance option.
If the Company exercises its legal defeasance option, payment of
the Securities may not be accelerated because of an Event of Default with
respect thereto. If the Company exercises its covenant defeasance option,
payment of the Securities may not be accelerated because of an Event of
Default specified in Sections 6.1(d), 6.1(e), 6.1(f), 6.1(g), 6.1(h) and
6.1(i) (but, in the case of Sections 6.1(g) and (h), with respect only to
Restricted Subsidiaries) or because of the failure of the Company to comply with
Section 5.1(iii) or (iv).
Upon satisfaction of the conditions set forth herein and upon request
of the Company, the Trustee shall acknowledge in a writing prepared by the
Company at its sole cost and expense the discharge of those obligations that
the Company terminates.
(c) Notwithstanding clauses (a) and (b) above, the Company's
obligations in Sections 2.3 through 2.8, inclusive, 7.7 and 7.8 and in this
Article 8 shall survive until the Securities have been paid in full.
Thereafter, the Company's obligations in Sections 7.7, 8.4 and 8.5 shall
survive.
Section 8.2 Conditions to Defeasance. The Company may exercise its
legal defeasance option or its covenant defeasance option only if:
(a) the Company irrevocably deposits in trust with the Trustee money
or U.S. Government Obligations for the payment of principal and interest and
Special Interest, if any, on the Securities to redemption or maturity, as
the case may be;
(b) the Company delivers to the Trustee a certificate from a nationally
recognized firm of independent accountants expressing their opinion
that the payments of principal and interest when due and without reinvestment
on the deposited U.S. Government Obligations plus any deposited money
without investment will provide cash at such times and in such amounts as will
be sufficient to pay when due all of the principal of, interest on and
Special Interest, if any, on all the Securities to redemption or maturity, as
the case may be;
(c) 123 days pass after the deposit is made and during the 123-day
period no Default specified in Sections 6.1(g) or (h) with respect to the
Company or any Restricted Subsidiary that is a Significant Subsidiary occurs
which is continuing at the end of the period;
(d) the deposit does not constitute a default under any other
agreement binding on the Company;
(e) the Company delivers to the Trustee an Opinion of Counsel to
the effect that the trust resulting from the deposit does not constitute, or
is qualified as, a regulated investment company under the Investment Company Act
of 1940;
(f) in the case of the legal defeasance option, the Company shall have
delivered to the Trustee an Opinion of Counsel stating that (i) the Company
has received from, or there has been published by, the Internal Revenue
Service a ruling, or (ii) since the date of this Indenture there has been a
change in the applicable Federal income tax law, in either case to the effect
that, and based thereon such Opinion of Counsel shall confirm that, the
Securityholders will not recognize income, gain or loss for Federal income tax
purposes as a result of such 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 defeasance had not occurred;
(g) in the case of the covenant defeasance option, the Company shall
have delivered to the Trustee an Opinion of Counsel to the effect that the
Securityholders 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;
(h) the Company shall have delivered an Opinion of Counsel to the
effect that the trust funds will not be subject to the effect of any
applicable bankruptcy, insolvency, reorganization or similar law affecting
creditors rights generally under any United States federal or state law and
that the Trustee has a perfected security interest in such trust funds for
the ratable benefit of the Holders;
(i) the Company shall have delivered an Opinion of Counsel in the
Company's jurisdiction of incorporation to the effect that the Securityholders
will not recognize income, gain or loss for such jurisdiction's tax purposes
as a result of such defeasance and will be subject to taxes in such
jurisdiction on the same amounts, in the same manner and at the same times as
would have been the case if such defeasance had not occurred; and
(j) the Company delivers to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that all conditions precedent to
the defeasance and discharge of the Securities as contemplated by this
Article 8 have been complied with.
Before or after a deposit, the Company may make arrangements satisfactory
to the Trustee for the redemption of Securities at a future date in accordance
with Article 3.
Section 8.3 Application of Trust Money. The Trustee shall hold
in trust money or U.S. Government Obligations deposited with it pursuant
to this Article 8. It shall apply the deposited money and the money from U.S.
Government Obligations through the Paying Agent and in accordance with this
Indenture to the payment of principal of, interest on, and Special Interest,
if any, on the Securities.
Section 8.4 Repayment to Company. The Trustee and the Paying Agent
shall promptly turn over to the Company, upon request accompanied by a
certificate from a nationally recognized firm of independent accountants
expressing their opinion that any money or U.S. Government Obligations are in
excess of the amounts sufficient to pay when due all of the principal of,
interest on, and Special Interest, if any, on the Securities to redemption or
maturity, as the case may be, any such excess money or securities held by them.
Subject to any applicable abandoned property law, the Trustee and
the Paying Agent shall pay to the Company upon request any money held by
them for the payment of principal, interest or Special Interest that
remains unclaimed for two years, and, thereafter, Securityholders entitled
to the money must look to the Company for payment as general creditors.
Section 8.5 Indemnity for Government Obligations. The Company shall
pay and shall indemnify the Trustee against any tax, fee or other charge
imposed on or assessed against deposited U.S. Government Obligations or the
principal and interest received on such U.S. Government Obligations.
Section 8.6 Reinstatement. If the Trustee or Paying Agent is
unable to apply any money or U.S. Government Obligations in accordance with
this Article 8 by reason of any legal proceeding or by reason of any order
or judgment of any court or governmental authority enjoining, restraining
or otherwise prohibiting such application, the Company's obligations under
this Indenture and the Securities shall be revived and reinstated as though no
deposit had occurred pursuant to this Article 8 until such time as the
Trustee or Paying Agent is permitted to apply all such money or U.S. Government
Obligations in accordance with this Article 8; provided, however, that, if the
Company has made any payment of principal of, premium, if any, interest or
Special Interest, if any, on, any Securities because of the reinstatement
of its obligations, the Company shall be subrogated to the rights of the
Holders of such Securities to receive such payment form the money or U.S.
Government Obligations held by the Trustee or Paying Agent.
ARTICLE 9.
AMENDMENTS, SUPPLEMENTS AND WAIVERS
Section 9.1 Without Consent of Holders.
The Company and the Trustee may amend or supplement this Indenture or
the Securities without notice to or consent of any Securityholder:
(a) to provide for uncertificated Securities in addition to or in place of
certificated Securities;
(b) to provide for the assumption of the Company's obligations
to the Holders of the Securities in the case of a merger or consolidation or
transfer of all or substantially all of the assets of the Company or otherwise
to comply with Article 5;
(c) to comply with any requirements of the SEC in connection
with the qualification of this Indenture under the TIA; or
(d) to cure any ambiguity, defect or inconsistency or to make any
other change, in each case, provided that such action does not materially
adversely affect the interests of any Securityholder.
Section 9.2 With Consent of Holders.
Subject to Section 6.7, the Company (by resolution of its Board of
Directors if required) and the Trustee may amend or supplement this Indenture
or the Securities without notice to any Securityholder but with the written
consent of the Required Holders. Subject to Sections 6.4, 6.5 and 6.7,
the Required Holders may authorize the Trustee to, and the Trustee, subject to
Section 9.6, upon such authorization shall, waive compliance by the Company
with any provision of this Indenture or the Securities. However, an
amendment, supplement or waiver, including a waiver pursuant to any
provision of Section 6.4, may not without the consent of each Securityholder
affected:
(a) reduce the amount of Securities whose Holders must consent to an
amendment, supplement or waiver;
(b) reduce the rate or extend the time for payment of interest on,
or Special Interest, if any, with respect to, any Security;
(c) reduce the principal of, or the amount of Special Interest, if
any, with respect to (in each case, whether on redemption, repurchase or
otherwise), or change the fixed maturity of any Security;
(d) change the place of payment where, or the coin or currency in
which, any Security (or the repurchase or redemption price thereof), interest
thereon, or Special Interest, if any, with respect thereto is payable;
(e) waive a default in the payment of the principal of, or interest on,
or Special Interest with respect to any Security;
(f) make any changes in Sections 2.8, 6.4, 6.7 or 6.10 or the third
sentence of this Section 9.2 or change the time at which any Security may be
redeemed hereunder;
(g) reduce any amount payable upon exercise of any repurchase
rights thereof or otherwise change any repurchase right provision or impair
the right of any Holder to institute suit for the enforcement of any such
payment on any Security when due or adversely effect any repurchase rights
hereunder; or
(h) make any change in any Subsidiary Guaranty that would adversely
affect any Holder.
It shall not be necessary for the consent of the Holders under this
Section to approve the particular form of any proposed amendment, supplement or
waiver, but it shall be sufficient if such consent approves the substance
thereof.
After an amendment, supplement or waiver under this Section 9.2 becomes
effective, the Company shall mail to the Holders affected thereby a brief
notice describing such amendment, supplement or waiver. Any failure of the
Company to mail such notice, or any defect therein, shall not, however in
any way impair or affect the validity of any such amendment, supplement or
waiver.
Section 9.3 Compliance with Trust Indenture Act.
Every amendment to or supplement of this Indenture or the Securities
shall comply with the TIA as then in effect.
Section 9.4 Revocation and Effect of Consents.
Until an amendment or waiver becomes effective, a consent to it by a
Holder is a continuing consent by the Holder and every subsequent Holder of a
Security or portion of a Security that evidences the same debt as the
consenting Holder's Security, even if notation of the consent is not made on any
Security. However, any such Holder or subsequent Holder may revoke the consent
as to his Security or portion of a Security. Such revocation shall be
effective only if the Trustee receives the notice of revocation before the
date the amendment, supplement or waiver becomes effective.
After an amendment, supplement or waiver becomes effective, it shall
bind every Securityholder, unless it makes a change described in any of
clauses (a) through (h) of Section 9.2. In that case the amendment,
supplement or waiver shall bind each Holder of a Security who has consented to
it and every subsequent Holder of a Security or portion of a Security that
evidences the same debt as the consenting Holder's Security; provided, however,
that no amendment, supplement or waiver relating to any impairment of
the right to receive principal, interest and Special Interest, if any, when
due and payable consented to by a Holder shall be binding upon any subsequent
Holder of a Security or a portion of a Security that evidences the same debt
as the consenting Holder's Security unless notation with regard thereto is
made upon such Security or the Security representing such portion.
Section 9.5 Notation on or Exchange of Securities.
If an amendment, supplement or waiver changes the terms of a Security, the
Trustee may require the Holder of the Security to deliver it to the Trustee.
The Trustee may place an appropriate notation on the Security about the changed
terms and return it to the Holder. Alternatively, if the Company or the
Trustee so determines, the Company in exchange for the Security shall issue
and the Trustee shall authenticate a new Security that reflects the changed
terms.
Section 9.6 Trustee to Sign Amendments, etc.
The Trustee shall be entitled to receive and rely upon an Officers'
Certificate and an Opinion of Counsel stating that the execution of any
amendment, supplement or waiver authorized pursuant to this Article 9 has
been duly authorized by the Company and is authorized or permitted by this
Indenture. The Trustee may, but shall not be obligated to, execute any
such amendment, supplement or waiver which affects the Trustee's own rights,
duties or immunities under this Indenture or otherwise.
Section 9.7 Effect of Supplement and/or Amendment.
Upon the execution of any supplemental indenture pursuant to the provisions
of this Article 9, this Indenture shall be and be deemed to be modified and
amended in accordance therewith and the respective rights, limitations of
rights, obligations, duties and immunities under this Indenture of the Trustee,
the Company and the Holders of Securities shall thereafter be
determined, exercised and enforced hereunder subject in all respects to such
modifications and amendments, and all terms and conditions of any such
supplemental indenture shall be and be deemed to be part of the terms and
conditions of this Indenture for any and all purposes.
ARTICLE 10.
MISCELLANEOUS
Section 10.1 Conflict with Trust Indenture Act of 1939.
If and to the extent that any provision of this Indenture limits,
qualifies, or conflicts with the duties imposed by Sections 310 to 317,
inclusive, of the TIA, such imposed duties shall control.
Section 10.2 Notices; Waivers.
Any request, demand, authorization, direction, notice, consent,
waiver or other document provided or permitted by this Indenture to be made
upon, given or furnished to, or filed with
(a) the Company shall be sufficient for every purpose hereunder if
in writing (including telecopied communications) and made, given, furnished or
filed by personal delivery or mailed by registered or certified mail or by
nationally recognized overnight courier, postage or courier charges, as the
case may be, prepaid, to or with the Company at:
Trans World Airlines, Inc. One City Centre 515 N. 6th Street St.
Louis, Missouri 63101 Attention: Senior Vice President &
General Counsel
Telecopier No.: (314) 589-3267
(b) the Trustee shall be sufficient for every purpose hereunder if
in writing (including telecopied communications) and made, given, furnished or
filed by personal delivery or mailed by registered or certified mail or by
nationally recognized overnight courier, postage or courier charges, as the
case may be, prepaid, to or with the Trustee at:
First Security Bank, National Association 79 South Main Street
Salt Lake City, UT 84111 Attention: Corporate Trust Services
Telecopier No.: (801) 246-5053
or to any of the above parties at any other address or telecopier number
subsequently furnished in writing by it to each of the other parties
listed above. An affidavit by any person representing or acting on
behalf of the Company or the Trustee as to such mailing, having any registry
receipt required by this Section attached, shall be conclusive evidence of
the giving of such demand, notice or communication.
Any notice or communication mailed to a Holder shall be mailed to
such holder by first-class mail or by nationally recognized overnight
courier, postage or courier charges, as the case may be, prepaid, at such
holder's address as it appears on the Register and shall be sufficiently given
to such holder if so mailed within the time prescribed.
Failure to mail a notice or send a communication to a Holder or any defect
in it shall not affect its sufficiency with respect to other Holders. Notices
to the Trustee or to the Company are deemed given only when received. Where
this Indenture provides for notice in any manner, such notice may be waived in
writing by the Person entitled to receive such notice, either before or
after the event, and such waiver shall be the equivalent of such notice.
Waivers of notice by the Holders shall be filed with the Trustee, but such
filing shall not be a condition precedent to the validity of any action taken
in reliance upon such waiver.
Section 10.3 Communications by Holders with Other Holders.
Securityholders may communicate pursuant to TIA Section 312(b) with other
Securityholders with respect to their rights under this Indenture or the
Securities. The Company, the Trustee, the Registrar and any other person shall
have the protection of TIA Section 312(c).
Section 10.4 Certificate and Opinion as to Conditions Precedent.
Upon any Request or application by the Company to the Trustee to
take any action under this Indenture, the Company shall furnish to the
Trustee: (a) an Officers' Certificate, and (b) an Opinion of Counsel, each
stating that, in the opinion of the signers, all conditions precedent, if any,
provided for in this Indenture relating to the proposed action have been
complied with, provided, that in the case of any such application or
Request as to which the furnishing of an Officers' Certificate or Opinion of
Counsel is specifically required by any provision of this Indenture relating
to such particular application or Request, no additional certificate or
opinion, as the case may be, need be furnished.
Section 10.5 Statements Required in Certificate or Opinion.
Each certificate or opinion provided for and delivered to the Trustee
with respect to compliance with a condition or covenant provided for in
this Indenture shall include: (a) a statement that the Person signing such
certificate or opinion has read such condition or covenant and the definitions
herein or therein relating thereto; (b) a brief statement as to the nature and
scope of the examination or investigation upon which the statements or
opinions contained in such certificate or opinion are based; (c) a statement
that, in the opinion of such Person, he has made such examination or
investigation as is necessary to enable him to express an informed opinion as
to whether or not such condition or covenant has been complied with; and
(d) a statement as to whether or not in the opinion of such Person, such
condition or covenant has been complied with.
Any certificate or opinion of an Officer or an engineer, insurance
broker, accountant or other expert may be based, insofar as it relates
to legal matters, upon a certificate or opinion of or upon representations
by counsel, unless such officer, engineer, insurance broker, accountant or
other expert knows that the certificate or opinion or representations with
respect to the matters upon which his opinion may be based as aforesaid are
erroneous, or in the exercise of reasonable care should have known that the
same were erroneous.
Any certificate or Opinion of Counsel may be based, insofar as it relates
to factual matters, upon the certificate or opinion of or representations by
an officer or officers of the Company stating that the information with respect
to such factual matters is in possession of the Company, unless such counsel
knows that the certificate or opinion or representations with respect to the
matters upon which his opinion may be based as aforesaid are erroneous and
insofar as it relates to legal matters in a jurisdiction or area of law
beyond the expertise of such counsel, such counsel may rely upon the opinion
of counsel qualified in such other jurisdiction or area of law.
Wherever in this Indenture in connection with any application,
certificate or report to the Trustee it is provided that the Company shall
deliver any document as a condition of the granting of such application or as
evidence of the Company's compliance with any term hereof, it is intended
that the truth and accuracy at the time of the granting of such application
or at the effective date of such certificate or report, as the case may be, of
the facts and opinions stated in such document shall in each such case be a
condition precedent to the right of the Company to have such application
granted or to the sufficiency of such certificate or report. Nevertheless, in
the case of any such application, certificate or report, any document
required by any provision of this Indenture to be delivered to the Trustee as a
condition of the granting of such application or as evidence of such compliance
may be received by the Trustee as conclusive evidence of any statement
therein contained and shall be full warrant, authority and protection to the
Trustee acting on the faith thereof.
In any case where several matters are required to be certified by,
or covered by an opinion of, any specified Person, it is not necessary that
all such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and
one or more other such Persons as to other matters, and any such Person may
certify or give an opinion as to such matters in one or several documents.
Whenever any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements or opinions or
other instruments under this Indenture such Person may, but need not,
consolidate such instruments into one.
Section 10.6 Rules by Trustee, Paying Agent, Registrar.
The Trustee may make reasonable rules for action by or at a meeting of
Securityholders. The Registrar, Paying Agent or Tender Agent may make
reasonable rules for their respective functions.
Section 10.7 Holidays.
In the event that any date for the payment of any amount due hereunder
shall not be a Business Day, then (notwithstanding any other provision of this
Indenture) such payment need not be made on such date, but may be made on the
next succeeding Business Day with the same force and effect as if made on the
due date, and no interest or Special Interest, if any, shall accrue from such
due date to and including the next succeeding Business Day.
Section 10.8 Governing Law; Waiver of Jury Trial.
(a) The laws of the State of New York shall govern this Indenture and
the Securities without regard to principles of conflict of laws.
(b) The Company and the Trustee each waive any right to have a jury
participate in resolving any dispute, whether sounding in contract,
tort, or otherwise arising out of, connected with, related to or
incidental to the relationship established between them in connection
with this Indenture. Instead, any disputes resolved in court will be
resolved in a bench trial without a jury.
Section 10.9 No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret any agreement of the Company or
any of its Subsidiaries which is unrelated to this Indenture or the Securities.
Any such agreement may not be used to interpret this Indenture.
Section 10.10 No Recourse Against Others.
A director, officer, employee or stockholder, as such, of the Company
shall not have any liability for any obligations of the Company under the
Securities or this Indenture or for any claim based on, in respect of or by
reason of such obligations or their creation. Each Securityholder by
accepting a Security waives and releases all such liability. The waiver and
release are part of the consideration for the issue of the Securities.
Section 10.11 Benefits of Indenture and the Securities Restricted.
Subject to the provisions of Section 10.12 hereof, nothing in this
Indenture or the Securities, express or implied, shall give or be construed to
give to any Person, firm or corporation, other than the parties hereto and
the Holders, any legal or equitable right, remedy or claim under or in
respect of this Indenture or under any covenant, condition, or provision
herein contained, all such covenants, conditions and provisions, subject to
Section 10.12 hereof, being for the sole benefit of the parties hereto and
of the Holders.
Section 10.12 Successors and Assigns.
This Indenture and all obligations of the Company hereunder shall be
binding upon the successors and permitted assigns of the Company, and shall,
together with the rights and remedies of the Trustee hereunder, inure to the
benefit of the Trustee, the Holders, and their respective successors
and assigns. Any assignment in violation hereof shall be null and void ab
initio.
Section 10.13 Counterpart Originals.
This Indenture may be signed in two or more counterparts, each of which
shall be deemed an original, but all of which shall together constitute one and
the same agreement.
Section 10.14 Severability.
The provisions of this Indenture are severable, and if any clause or
provision shall be held invalid, illegal or unenforceable in whole or in
part in any jurisdiction, then such invalidity or unenforceability shall
affect in that jurisdiction only such clause or provision, or part thereof, and
shall not in any manner affect such clause or provision in any other
jurisdiction or any other clause or provision of this Indenture in any
jurisdiction, and a Holder shall have no claim therefor against any party
hereto.
Section 10.15 Rating Agencies.
Any reference in this Indenture to Moody's Investors Service, Inc.
or Standard & Poor's Ratings Group (each a "rating agency" or an "agency")
shall include its successors or successor publishers of its financial
ratings, and references to the ratings of any such rating agency shall
include comparable ratings in the event of one or more reclassifications of
such ratings by such rating agency after the date hereof. In the event
that any of such rating agencies shall cease to publish applicable ratings,
any provision herein requiring ratings of all of such agencies shall be deemed
to require ratings of only the agency or agencies continuing to publish
applicable ratings. If all of such agencies cease to publish applicable
ratings, any provision herein requiring ratings of any of such agencies shall
be deemed to require ratings that are both (a) certified by the Company in
an Officers' Certificate to be equivalent to the ratings of such agency
or agencies and (b) reasonably satisfactory to the Trustee.
Section 10.16 Effect of Headings.
The Article and Section headings and the Table of Contents contained in
this Indenture have been inserted for convenience of reference only, and are and
shall be without substantive meaning or content of any kind whatsoever and
are not a part of this Indenture.
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed, all as of the date first written above.
TRANS WORLD AIRLINES, INC.
By:
Name:
Title:
FIRST SECURITY BANK,
NATIONAL ASSOCIATION,
as Trustee
By:
Name:
Title:
Exhibit 4.27
[EXECUTED COPY]
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
AIRCRAFT SALE AND NOTE PURCHASE AGREEMENT
Dated as of April 9, 1998
AMONG
TRANS WORLD AIRLINES, INC.,
and
FIRST SECURITY BANK,
NATIONAL ASSOCIATION, as Owner Trustee
and
SEVEN SIXTY SEVEN LEASING, INC.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Airframe Make and Model: Used Boeing 767-231 ETOPS
Airframe Manufacturer's Serial Numbers: 22571, 22572 and 22573
Airframe Registration Marks: N608TW, N609TW and N610TW
Make and Model of Engines: Pratt & Whitney JT9D-7R4D
Serial Numbers of Engines: P709654 and P709655, P709643 and
P709644,
and P709656 and P709659
TABLE OF CONTENTS
-----------------
Page
----
ARTICLE 1
Summary of Transaction
Section 1.01. Description of Aircraft..................................... 2
Section 1.02. Country of Registration..................................... 2
Section 1.03. Closing Date and Location................................... 2
Section 1.04. Sale Price.................................................. 2
ARTICLE 2
Definitions
Section 2.01. General Definitions......................................... 3
ARTICLE 3
Place and Date of Sale
Section 3.01. Place of Delivery of Aircraft............................... 6
Section 3.02 Scheduled Closing Date...................................... 6
Section 3.03. Total Loss of Aircraft Prior to Sale........................ 6
ARTICLE 4
Sale Price
Section 4.01. Sale Price.................................................. 6
Section 4.02. Payment of Sale Price....................................... 7
Section 4.03. Description of the Notes and the Equity Notes............... 7
Section 4.04. Delivery and Payment........................................ 9
ARTICLE 5
Representations and Warranties of TWA
Section 5.01. Representations and Warranties of TWA....................... 13
ARTICLE 6
Condition of Aircraft at Sale
Section 6.01. Condition at Sale........................................... 23
Section 6.02. Ground Inspection........................................... 24
Section 6.03. Disclaimer.................................................. 24
Section 6.04. Deficiencies and Delays..................................... 25
Section 6.05. No Waiver................................................... 25
ARTICLE 7
Bill of Sale and Other Documentary Requirements
Section 7.01. Conditions to TWA's Obligations to Purchase
the Aircraft................................................ 25
Section 7.02. Conditions to the Owner Trustee's Obligations to
Sell the Aircraft........................................... 27
Section 7.03. After Closing............................................... 28
Section 7.04. Conditions with Regard to the Issuance of the
Securities.................................................. 29
Section 7.05. Conditions to Closing....................................... 34
ARTICLE 8
Termination
Section 8.01. Termination by the Owner Trustee............................ 34
Section 8.02. Effect of Termination....................................... 35
ARTICLE 9
Owner Trustee Assignment of Rights and Warranties
Section 9.01. Assignable Warranties....................................... 35
Section 9.02. Non-Assignable Warranties................................... 36
ARTICLE 10
Expenses and Taxes
Section 10.01. Costs and Expenses of Sales................................ 36
Section 10.02. Taxes...................................................... 36
Section 10.03. After-tax Basis............................................ 36
Section 10.04. Timing of Payment.......................................... 37
Section 10.05. Contests................................................... 37
Section 10.06. Refunds.................................................... 37
Section 10.07. Cooperation in Filing Tax Returns.......................... 37
ARTICLE 11
Indemnities and Insurance
Section 11.01. Indemnification with Regard
to the Aircraft............................................ 38
Section 11.02. Indemnification of TWA by Owner
Trustee.................................................... 39
Section 11.03. Insurance.................................................. 41
ARTICLE 12
Representations, Warranties and Covenants
of Owner Trustee
Section 12.01. Owner Trustee's Representations,
Warranties and Covenants In Its
Individual Capacity........................................ 42
Section 12.02. Owner Trustee's Representations,
Warranties and Covenants................................... 43
Section 12.03. Representations, Warranties and
Covenants of the Owner Trustee Regarding the
Securities................................................. 44
Section 12.04. TBT Leases Excluded........................................ 46
ARTICLE 13
Agreements of TWA
Section 13.01. Agreements of TWA.......................................... 46
ARTICLE 14
Notices
Section 14.01. Manner of Sending Notices.................................. 48
Section 14.02. Notice Information......................................... 49
ARTICLE 15
Miscellaneous
Section 15.01. GOVERNING LAW.............................................. 50
Section 15.02. No Brokers................................................. 50
Section 15.03. Confidentiality............................................ 50
Section 15.04. Successors and Assigns..................................... 51
Section 15.05. Rights of Parties.......................................... 51
Section 15.06. Further Assurances......................................... 51
Section 15.07. Use of Word "Including".................................... 51
Section 15.08. Headings................................................... 51
Section 15.09. Invalidity of Any Provision................................ 51
Section 15.10. Waiver of Trial by Jury.................................... 52
Section 15.11. Amendments in Writing...................................... 52
Section 15.12. Entire Agreement........................................... 52
Section 15.13. Counterparts............................................... 52
Section 15.14. Third Party Beneficiary.................................... 52
ARTICLE 16
Authorization of Beneficiary
Section 16.01. Authorization of Beneficiary............................... 52
AIRCRAFT SALE AND NOTE PURCHASE AGREEMENT
THIS AIRCRAFT SALE AND NOTE PURCHASE AGREEMENT is made and
entered into as of this 9th day of April 1998.
AMONG:
TRANS WORLD AIRLINES, INC., a Delaware corporation whose
address and principal place of business is at One City Centre, 515 N. Sixth
Street, St. Louis, Missouri 63101, United States of America ("TWA"), and
FIRST SECURITY BANK, NATIONAL ASSOCIATION, whose address and
principal place of business is at 79 South Main Street, Salt Lake City, Utah
84111, United States of America, not in its individual capacity, except as
expressly stated herein, but solely as Owner Trustee (the "Owner Trustee")
under the Trust Agreement (the "Trust Agreement") dated January 24, 1995
between Owner Trustee and Seven Sixty Seven Leasing, Inc., the beneficiary
named therein, and
SEVEN SIXTY SEVEN LEASING, INC., a Delaware corporation and the
sole beneficiary under the Trust Agreement with an address at 1013 Centre
Road, Wilmington, Delaware 19805, United States of America (the
"Beneficiary"), and who is only executing this Sale Agreement as evidence of
its instruction to the Owner Trustee to enter into this Sale Agreement.
The subject matter of this Sale Agreement is three (3) used
Boeing 767-231 ETOPS airframes and six (6) Pratt & Whitney JT9D-7R4D engines,
which the Owner Trustee and Beneficiary desire that the Owner Trustee sell to
TWA and TWA is willing to purchase from the Owner Trustee. All property
covered by this Sale Agreement is currently leased by Owner Trustee to TWA
under the Leases (as hereinafter defined).
In consideration of and subject to the mutual covenants, terms
and conditions contained in this Sale Agreement, TWA and the Owner Trustee
agree as follows:
ARTICLE 1
Summary of Transaction
The following is a summary of the sale transaction between TWA and the Owner
Trustee. It is set forth for the convenience of the parties only and will not
be deemed in any way to amend, detract from or simplify the other provisions
of this Sale Agreement.
Section 1.01. Description of Aircraft.
Three (3) used Boeing 767-231 ETOPS airframes bearing
manufacturer's serial numbers 22571, 22572 and 22573 and six (6) Pratt &
Whitney JT9D-7R4D engines bearing manufacturer's serial numbers P709654 and
P709655, P709643 and P709644, and P709656 and P709659.
Section 1.02. Country of Registration.
United States of America
Section 1.03. Closing Date and Location.
On the Closing Date at New York, New York, with the Aircraft
located in such locations as are mutually agreeable to the parties.
Section 1.04. Sale Price.
US$ 75,000,000.00 (US$ 25,000,000.00 per Aircraft), payable by
delivery at the Closing of Securities as set forth in Article 4 hereof.
ARTICLE 2
Definitions
Except where the context otherwise requires, the following
words have the following meanings for all purposes of this Sale Agreement. The
definitions are equally applicable to the singular and plural forms of the
words. Any agreement defined below includes each amendment, modification,
supplement and waiver thereto in effect from time to time.
Section 2.01. General Definitions.
"Aircraft" means the three (3) Airframes, the six (6) Engines,
the Parts, the Ancillary Equipment and the Aircraft Documentation collectively.
"Aircraft Documentation" means all log books, Aircraft records,
manuals and other documents provided by the Owner Trustee at Sale of the
Aircraft and the documents listed in Exhibit B.
"Airframes" means each of the airframes described in Exhibit A
together with all Parts relating thereto (except Engines or engines).
"Ancillary Equipment" means all accessories, appurtenances and
other equipment owned by Owner Trustee and appertaining to an Airframe or an
Engine, whether or not attached or affixed thereto.
"Aviation Authority" means the FAA or any Government Entities
which under the Laws of the United States of America from time to time have
control over civil aviation or the registration, airworthiness or operation of
aircraft by TWA in the United States of America.
"Beneficiary" has the meaning set forth in the introductory
paragraphs hereof.
"Business Day" means each day that is not a Saturday, Sunday or
any other day on which banks located in New York, NY, St. Louis, MO or Salt
Lake City, UT are authorized or obligated by law to remain closed.
"CL/PK Airfinance" means CL/PK Airfinance, a financial sector
corporation organized under the laws of the Grand Duchy of Luxembourg, and its
successors.
"Dollars" and "$" means the lawful currency of the United
States of America.
"Engine" means (i) each of the engines listed on Exhibit A
hereto or any other engines which the parties hereto agree in writing will be
substituted therefor and (ii) all Parts installed in or on any of such engines
at Sale.
"Engine Manufacturer" means United Technologies Corporation,
Pratt & Whitney Division.
"FAA" means the Federal Aviation Administration of the
Department of Transportation or any successor thereto under the Laws of the
United States of America.
"FARs" means the U.S. Federal Aviation Regulations embodied in
Title 14 of the U.S. Code of Federal Regulations, as amended from time to
time, or any successor regulations thereto.
"Government Entity" means any (i) national, state or local
government, (ii) board, commission, department, division, instrumentality,
court, agency or political subdivision thereof and (iii) association,
organization or institution of which any thereof is a member or to whose
jurisdiction any thereof is subject or in whose activities any thereof is a
participant.
"Law" means any (i) statute, decree, constitution, regulation,
order or any directive of any Government Entity, (ii) treaty, pact, compact or
other agreement to which any Government Entity is a signatory or party and
(iii) judicial or administrative interpretation or application of any of the
foregoing.
"Lease" means each of Lease Agreement N608TW, dated January 27,
1995, between Owner Trustee and TWA, as amended, Lease Agreement N609TW, dated
January 27, 1995, between Owner Trustee and TWA, as amended and Lease
Agreement N610TW, dated January 27, 1995, between Owner Trustee and TWA, as
amended, covering the Aircraft.
"Lessor Liens" means liens arising as a result of (i) claims or
judgments against Owner Trustee in its individual capacity not related to the
transactions contemplated by the Trust Agreements or by any Lease; or (ii)
acts or omissions of Owner Trustee not related to the transactions
contemplated by the Trust Agreement or by any Lease or not permitted under the
Trust Agreement or under any Lease; or (iii) taxes imposed against Owner
Trustee in its individual capacity (x) based on or measured by compensation
paid to the Owner Trustee for serving as Owner Trustee under the Trust
Agreement or (y) not related to the transactions contemplated by the Trust
Agreement or by any Lease.
"Manufacturer" means The Boeing Company.
"Part" means any part, component, appliance, accessory,
instrument, communications equipment, furnishing, module, equipment furnished
by the Owner Trustee or other item of equipment (other than complete Engines or
engines) installed in or attached to the Airframe or any Engine.
"Participants" means Norddeutsche Landesbank GZ, Credit Foncier
de France, A/S Bergens Skillingbank, Fernwood Associates, L.P., Fernwood
Restructurings Ltd., Fernwood Foundation Fund, L.P., Fernwood Total Return
Holdings Ltd., Hour, LLC, Lazard Freres & Co. LLC, and Mackay-Shields
Financial Corporation, as investment advisor to Vulcan Materials Company
Master Trust High Yield Account, The Brown & Williamson Master Retirement
Trust, Highbridge Capital Corporation, Mainstay VP Series Fund, Inc., On
Behalf of its High Yield Corporate Bond Fund Portfolio, The Mainstay Funds, On
Behalf of its High Yield Corporate Bond Fund Series and Police Officers
Pension System of the City of Houston, and any of their respective successors
or assigns under the Participation Agreement.
"Participation Agreement" means the Agreement Among Participants
dated as of January 24, 1995 among CL/PK Airfinance and certain of the
Participants.
"Person" means any individual, firm, partnership, joint
venture, trust, corporation, Government Entity, committee, department,
authority or any body, incorporated or unincorporated, whether having distinct
legal personality or not.
"Sale" means the tender for sale of the Aircraft by the Owner
Trustee to TWA and TWA's purchase of the Aircraft from the Owner Trustee in
accordance with this Sale Agreement.
"Sale Agreement" means this Aircraft Sale and Note Purchase
Agreement, together with all Exhibits and Annexes hereto.
"Securities" has the meaning set forth in Section 4.03.
"Security Interest" means any encumbrance or security interest
whatsoever, however and wherever created or arising including (without
prejudice to the generality of the foregoing) any right of ownership, security,
mortgage, pledge, charge, encumbrance, lease, lien, statutory or other right in
rem, hypothecation, title retention, attachment, levy, claim or right of
possession or detention.
"State of Registration" means the United States of America.
"TBT Lease" means each of (1) the Qualified Leased Property
Lease dated December 22, 1983 between USAir Group, Inc. and Trans World
Airlines, Inc. with respect to aircraft model 767-231 bearing manufacturer's
number 22571 and the other equipment described therein, (2) the Qualified
Leased Property Lease dated December 22, 1983 between USAir Group, Inc. and
Trans World Airlines, Inc. with respect to aircraft model 767-231 bearing
manufacturer's number 22573 and the other equipment described therein, and (3)
the Qualified Leased Property Lease dated October 28, 1983 between Gordon Food
Service, Inc. and Trans World Airlines, Inc. with respect to aircraft model
767-231 bearing manufacturer's number 22572 and the other equipment described
therein, as such leases may have been amended through any relevant date.
"TBT Lessor" means the Person designated as Lessor in each TBT
Lease.
"Total Loss of an Aircraft" means the destruction, damage beyond
repair, or permanent rendering unfit for normal use for any reason whatsoever
of any of the Aircraft, or the constructive total loss of any of the Aircraft.
ARTICLE 3
Place and Date of Sale
Section 3.01. Place of Delivery of Aircraft. Subject to the terms and
conditions hereof, the Owner Trustee will deliver the Aircraft for sale to TWA
on the Closing Date at such locations as are mutually agreeable to the
parties. Notwithstanding the foregoing, any required ferrying of the Aircraft
to the place of delivery shall be the obligation of and at the expense of TWA,
as provided in the Leases.
Section 3.02 Scheduled Closing Date. TWA shall give the Owner
Trustee two Business Days' notice by telephone (confirmed in writing) or by
facsimile of the date on which the Sale is scheduled to occur (the date such
Sale actually occurs being the "Closing Date"). In no event shall the Closing
Date be later than April 20, 1998 without the consent in writing of the Owner
Trustee.
Section 3.03. Total Loss of Aircraft Prior to Sale. If a Total
Loss of an Aircraft occurs prior to the Sale, then neither party will have any
further liability to the other arising from this Sale Agreement with respect
to such Aircraft.
ARTICLE 4
Sale Price
Section 4.01. Sale Price. On the Closing Date, provided TWA has met all of
its obligations under this Sale Agreement, the Beneficiary will instruct the
Owner Trustee to, and the Owner Trustee will, sell the Aircraft to TWA, and
TWA will purchase the Aircraft from the Owner Trustee for the sum of
Seventy-Five Million U.S. Dollars (US$75,000,000 ) (Twenty-Five Million U.S.
Dollars (US$25,000,000) per Aircraft) (the "Sale Price"), payable by delivery
of Securities, as hereinafter provided; provided that the Sale Price shall be
reduced by U.S. $25,000,000 for each Aircraft as to which there occurs a Total
Loss between the date hereof and the Closing Date.
Section 4.02. Payment of Sale Price. Subject to the
adjustments described in Section 4.01, at the time of TWA's purchase of the
Aircraft from Owner Trustee on the Closing Date, TWA will issue to Owner
Trustee the following securities as payment of the Sale Price:
<TABLE>
<S> <C>
Initial Aggregate
Securities Principal Amount
11 3/8% Senior Secured Notes due 2003 US$ 43,200,000
Mandatory Conversion Equity Notes due US$ 31,800,000
1999
</TABLE>
Section 4.03. Description of the Notes and the Equity Notes.
The Securities which TWA shall issue in payment of the Sale Price shall
consist of $43,200,000 aggregate principal amount of its 11 3/8% Senior
Secured Notes due 2003 (the "Notes") and $31,800,000 aggregate principal
amount of its Mandatory Conversion Equity Notes due 1999 (the "Equity Notes"
and, together with the Notes, the "Securities"). In the event of a Total Loss
of an Aircraft between the date hereof and the Closing Date, the aggregate
principal amount of Notes and Equity Notes to be issued on the Closing Date
shall be reduced by $14,400,000 and $10,600,000, respectively, for each
Aircraft subject to such Total Loss, in accordance with Sections 3.03 and 4.01.
(a) The Notes will be issued pursuant to an indenture in form and
substance satisfactory to TWA and the Owner Trustee (the "Notes Indenture"),
dated as of the Closing Date between TWA and First Security Bank, National
Association (in such capacity, the "Notes Trustee").
The Notes will be secured by a first priority security interest
in (among other things) all of TWA's right, title and interest in (i) the
Airframes and (ii) the Engines, each pursuant to the Aircraft Mortgage and
Security Agreement dated as of the Closing Date between TWA and the Notes
Trustee (the "Notes Security Agreement") and the Mortgage Supplements referred
to therein (the "Notes Mortgage Supplements"), each in form and substance
satisfactory to TWA and the Owner Trustee. The Aircraft, the Engines and the
other Collateral covered by (and as defined in) the Notes Security Agreement
are referred to herein as the "Collateral."
(b) The Equity Notes will be issued pursuant to an indenture in
form and substance satisfactory to TWA and the Owner Trustee (the "Equity
Notes Indenture" and, together with the Notes Indenture, the "Indentures"),
dated as of the Closing Date between TWA and First Security Bank, National
Association (in such capacity, the "Equity Notes Trustee" and, together
with the Notes Trustee, the "Trustee").
The Equity Notes will be secured by a second priority security
interest in all of TWA's right, title and interest in the Collateral, up to an
aggregate principal amount of US$24,300,000, pursuant to the Aircraft Second
Mortgage and Security Agreement dated as of the Closing Date between TWA and
the Equity Notes Trustee (the "Equity Notes Security Agreement" and, together
with the Notes Security Agreement, the "Security Agreements") and the Mortgage
Supplements referred to therein (the "Equity Notes Mortgage Supplements" and,
together with the Notes Mortgage Supplements, the "Mortgage Supplements"),
each in form and substance satisfactory to TWA and the Owner Trustee,
provided, however, that if, on the Business Day immediately succeeding the
Closing Date the holders of the Equity Notes (other than the Placement Agent
(as defined below)) do not include at least one of the Owner Trustee, the
Beneficiary, a Participant or an affiliate of any Participant, then the Equity
Notes shall automatically, without any further act or deed, become unsecured
obligations of TWA and shall rank junior in priority to all secured
indebtedness of TWA and pari passu with all unsecured indebtedness of TWA, in
each case whether such indebtedness is existing on the Closing Date or
thereafter incurred, and the Equity Notes Trustee shall be authorized to enter
into or execute and deliver such agreements, instruments or other documents as
may be reasonably requested by (and at the cost and expense of) TWA to
evidence or confirm the release of liens on the Collateral or such
subordination of the Equity Notes.
The Securities have not been registered under the Securities
Act of 1933, as amended (the "Securities Act") and, prior to the date which
is two years after the later of the Closing Date and the last date on which
TWA or any affiliate of TWA was the owner of the Securities, may be resold
only if registered pursuant to the provisions of the Securities Act or (i)
to TWA, (ii) in the case of the Notes only, to qualified institutional
buyers (within the meaning of Rule 144A, ("Rule 144A") under the Securities
Act) ("Qualified Institutional Buyers") in reliance upon Rule 144A, (iii)
to institutional "accredited investors" (within the meaning of Rule 501
under the Securities Act) ("Institutional Accredited Investors"), (iv) to
certain persons outside the United States in reliance on Regulation S under
the Securities Act ("Regulation S") or (v) pursuant to any other available
exemption from the registration requirements of the Securities Act. Upon
issuance of the Securities on the Closing Date and until such time as the
Company deems that it is no longer required under the Securities Act, the
certificates representing the Securities shall bear the legend set forth in
Annex A.
Holders (including subsequent transferees) of the Notes and
the Equity Notes will have the registration rights set forth in the
respective Registration Rights Agreements (defined below) to be dated as of
the Closing Date, among TWA, the Owner Trustee and the Placement Agent,
each in form and substance satisfactory to TWA and the Owner Trustee.
Pursuant to the Registration Rights Agreement relating to the Notes (the
"Notes Registration Rights Agreement"), TWA will agree to file with the
Securities and Exchange Commission (the "Commission") (i) a registration
statement under the Securities Act registering an issue of a series of
senior secured notes (the "Exchange Notes") identical in all material
respects to the Notes (except that the Exchange Notes will not contain
terms with respect to transfer restrictions) to be offered in exchange for
the Notes (the "Exchange Offer") and (ii) a shelf registration statement
pursuant to Rule 415 under the Securities Act (the "Notes Shelf
Registration Statement") with respect to resales of certain of the Notes,
including the Private Exchange Notes (as defined). Following the
consummation of the Exchange Offer, in the event the Placement Agent
continues to hold Notes acquired in payment of the Placement Fee (as
defined), and upon receipt of written request from the Placement Agent, the
Company shall issue and deliver to the Placement Agent (the "Private
Exchange Offer") senior secured notes identical in all material respects to
the Notes (the "Private Exchange Notes"). Pursuant to the Registration
Rights Agreement relating to the Equity Notes (the "Equity Notes
Registration Rights Agreement" and, together with the Notes Registration
Rights Agreement, the "Registration Rights Agreements") TWA will agree to
file with the Commission a shelf registration statement pursuant to Rule
415 under the Securities Act (the "Equity Shelf Registration Statement")
registering resales of the shares of TWA's common stock, par value $.01 per
share (the "Common Stock"), issuable upon conversion of the Equity Notes.
This Sale Agreement, the Indentures, the Security Agreements,
the Mortgage Supplements and the Registration Rights Agreements, are referred
to herein collectively as the "Operative Documents".
Section 4.04. Delivery and Payment. Subject to the terms and
conditions hereof, delivery of the Securities shall be made to the Owner
Trustee, against transfer of title to the Aircraft in a manner satisfactory to
the parties (the "Closing"), at the office of Hughes Hubbard & Reed LLP, One
Battery Park Plaza, New York, New York 10004 (the "Closing Location"), at
10:00 a.m., New York City time, on the Closing Date.
The Owner Trustee authorizes and directs that US$1,728,000
aggregate principal amount of Notes and US$1,272,000 aggregate principal
amount of Equity Notes (collectively, the "Placement Fee Securities") be
deducted from the principal amount of Notes and Equity Notes issued to the
Owner Trustee on the Closing Date in payment of the Sale Price and that
such Placement Fee Securities be reissued and delivered in the name of
Lazard Freres & Co. LLC (the "Placement Agent") in payment of the
placement agency fee (the "Placement Fee") payable to the Placement Agent
pursuant to a Placement Agreement dated as of the date hereof between the
Placement Agent and TWA. In this regard, the Owner Trustee acknowledges
that the Placement Agent, in addition to acting as placement agent for TWA,
has acted in the following capacities and/or engaged in the following
activities: (i) acted as financial advisor to TWA, (ii) acted as the
initial purchaser in connection with several offerings under Rule 144A
and/or Regulation S of the Securities Act of debt securities and
convertible exchangeable preferred stock of TWA, (iii) acted as a market
maker in TWA securities, (iv) purchased as a principal approximately 68% of
the debt and equity participation interests from certain original
participants under the Participation Agreement, sold a portion of such
interests outright and/or through participations to certain of the
Participants and entered into agreements with three other original
participants to purchase the remaining debt and equity participation
interests under the Participation Agreement and any distributions related
thereto, the closing of which is expected to occur in May, 1998, (v)
engaged in trading activities for certain of the Participants, (vi)
participated in discussions with CL/PK Airfinance and certain other
Participants in connection with the attempted but since suspended
negotiation of the amount of the advisory fee due to CL/PK Airfinance under
the Participation Agreement and (vii) agreed to reimburse Credit Lyonnais
for certain liabilities related to drawings, if any, under letters of
credit issued or confirmed by Credit Lyonnais in connection with the TBT
Leases. As a result of acting in such capacities and engaging in such
activities, the Placement Agent may have interests adverse to, or that
conflict with, the interests of the Owner Trustee, in the Sale in exchange
for Securities. The Owner Trustee hereby waives any claim of conflict or
adverse interest against the Placement Agent arising as a result of the
roles and activities of the Placement Agent described in the second
preceding sentence; provided that the Owner Trustee does not waive any
claims arising as a result of (i) the sale by the Placement Agent to any of
the Participants of a participation or other interest in the Beneficiary,
(ii) the joint and several liability of the Participants to indemnify or
reimburse CL/PK Airfinance under the Participation Agreement or (iii)
actions occurring prior to the earliest date upon which one of the
Participants first purchased from the Placement Agent a participation or
other interest in the Beneficiary.
The Owner Trustee further authorizes and directs that the
advisory fee payable to CL/PK Airfinance pursuant to the Participation
Agreement (the "Advisory Fee") be paid in Securities with an aggregate
principal amount equal to the Advisory Fee (such Securities to be comprised of
57.6% Notes and 42.4% Equity Notes and hereinafter referred to collectively as
the "Advisory Fee Securities") and that such Advisory Fee Securities be
deducted from the principal amount of the Notes and Equity Notes issued to the
Owner Trustee on the Closing Date in payment of the Sale Price and that such
Advisory Fee Securities be reissued and delivered in the name of CL/PK
Airfinance in payment of the Advisory Fee.
On the Closing Date, after giving effect to payment of the
Placement Fee to the Placement Agent and the Advisory Fee to CL/PK Airfinance
as provided in the first and second immediately preceding paragraphs, and
subject to the other provisions of this Section 4.04 set forth below, the
Beneficiary shall (a) cause the Owner Trustee to transfer Securities to the
Beneficiary in a principal amount equal to the proportional interest in the
aggregate principal amount of Securities outstanding of the Participants from
whom the Owner Trustee has received an Investor Letter (as defined), in the
form of Annex B or Annex C, on or prior to the Closing Date, (b) the
Beneficiary shall transfer such Securities to CL/PK Airfinance and (c) CL/PK
Airfinance shall distribute such Securities to the relevant Participants as
required by Section 4(b) of the Participation Agreement; provided that the
transfers of the Securities by the Owner Trustee to the Beneficiary, by the
Beneficiary to CL/PK Airfinance and by CL/PK Airfinance to each Participant
shall, in each case, be made in compliance with the applicable provisions of
Section 12.03 hereof, including the due execution and delivery of the
appropriate Investor Letter as provided below.
At the Closing, TWA shall deliver one security evidencing
the Notes in definitive fully registered form in the principal amount of
$43,200,000 registered in the name of the Owner Trustee (the "Initial
Definitive Note") and one Global Note (as defined) in the principal amount
of $0. The Initial Definitive Note and the Global Note together shall
comprise the aggregate principal amount of Notes outstanding. Notes
subsequently transferred to the Placement Agent, the Beneficiary, CL/PK
Airfinance and the Participants shall also be in definitive fully
registered form and in such denominations and registered in such names as
the Owner Trustee, the Placement Agent, the Beneficiary, CL/PK Airfinance
and the Participants may request in a written notice delivered to TWA on or
prior to the day immediately preceding the Closing Date. Notes shall be
delivered on the Closing Date pursuant to the instructions of each of the
Persons listed in the preceding sentence following receipt by the Owner
Trustee on or prior to the Closing Date of an Investor Letter executed by
each such Person (except for the Owner Trustee), substantially in the form
of Annex B hereto.
Any Notes subsequently transferred to Institutional
Accredited Investors that are not Qualified Institutional Buyers or sold
pursuant to Regulation S under the Securities Act shall be issued in
definitive fully registered form (the "Definitive Notes"), and in such
denominations and registered in such names as such transferee may request
in accordance with the provisions of the Indenture. On or prior to the
Closing Date, TWA shall have delivered to The Depository Trust Company
("DTC") a global certificate (the "Global Note") registered in the name of
Cede & Co., the nominee of DTC, in an aggregate principal amount of $0.
Upon transfer of Definitive Notes from the Participants or any subsequent
holder in accordance with Rule 144A to a Qualified Institutional Buyer,
such Definitive Notes may be exchanged for a beneficial interest in the
Global Note. The interest of such beneficial owners will be represented by
book entries on the records of DTC and participating members thereof.
At the Closing, TWA shall deliver a single security
representing the $31,800,000 aggregate principal amount of Equity Notes. All
Equity Notes shall be issued in definitive fully registered form ("Definitive
Equity Notes") and in such denominations and registered in such names as the
Owner Trustee, the Placement Agent, the Beneficiary, CL/PK Airfinance and the
Participants and any subsequent holders thereof may request in a written
notice delivered to TWA on or prior to the day immediately preceding the
Closing Date. Equity Notes shall be delivered on the Closing Date pursuant to
the instructions of each of the Persons listed in the preceding sentence
following receipt by the Owner Trustee on or prior to the Closing Date of an
Investor Letter executed by each such person (except for the Owner Trustee),
substantially in the form of Annex C hereto. The Initial Definitive Note,
Definitive Notes, the Global Note and any Definitive Equity Notes shall bear
the legend relating thereto set forth in Annex A. For the purpose of
expediting the checking and packaging of certificates for the Notes and Equity
Notes, TWA agrees to make such certificates available for inspection on the
day prior to the Closing Date at the offices of Lazard Freres & Co. LLC, 120
Broadway, Room 851, New York, New York 10271.
The documents to be delivered at the Closing by or on behalf of
the parties hereto pursuant to Article 7 hereof, including the cross-receipt
for the Notes and the Equity Notes, will be delivered at the Closing Location.
A meeting will be held at the Closing Location at 2:00 p.m. New York City time
on the Business Day next preceding the Closing Date, at which meeting the
final drafts of the documents to be delivered pursuant to the preceding
sentence will be available for review by the parties hereto.
The cost of original issue tax stamps, if any, in connection
with the issuance and delivery of the Securities by TWA to the Owner Trustee
shall be borne by TWA. TWA will pay and save the Owner Trustee and any
subsequent holder of Notes or Equity Notes harmless from any and all
liabilities with respect to or resulting from any failure or delay in paying
federal and state stamp and other transfer taxes, if any, which may be payable
or determined to be payable in connection with the original issuance or sale to
the Owner Trustee of the Securities or transfers of the Securities to other
Persons contemplated hereby on the Closing Date.
ARTICLE 5
Representations and Warranties of TWA
Section 5.01. Representations and Warranties of TWA. TWA represents and
warrants to the Owner Trustee, the Beneficiary, the Placement Agent, CL/PK
Airfinance and each Participant that acquires Securities on the Closing Date
the following:
(a) A private placement memorandum dated April 9, 1998 has been
prepared by TWA in connection with the offering of the Notes (together with
all information incorporated by reference therein, the "Notes Private
Placement Memorandum"). TWA has also prepared a private placement memorandum
dated April 9, 1998 in connection with the offering of the Equity Notes
(together with all information incorporated by reference therein, the "Equity
Notes Private Placement Memorandum" and, together with the Notes Private
Placement Memorandum, the "Private Placement Memoranda"). The Private
Placement Memoranda and any amendments or supplements thereto did not, as of
their respective dates, and the Private Placement Memoranda and any amendments
or supplements thereto, including the financial statements included or
incorporated by reference therein (prepared in conformity with the generally
accepted accounting principles in the United States applied on a consistent
basis except as otherwise specified therein), will not, as of the Closing
Date, contain any untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements therein, in the light
of the circumstances under which they were made, not misleading. TWA has not
distributed or caused the distribution of any offering material in connection
with the offering or sale of the Securities other than the Notes Private
Placement Memorandum and the Equity Notes Private Placement Memorandum.
(b) When the Notes are issued and delivered pursuant to this Sale
Agreement, they will not be of the same class (within the meaning of Rule
144A) as any securities of TWA which are listed on a national securities
exchange registered under Section 6 of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), or quoted in a United States automated
inter-dealer quotation system.
(c) None of TWA or any of its affiliates, or any person acting
on its or their behalf, has engaged or will engage in any directed selling
efforts within the meaning of Regulation S with respect to the Securities,
and TWA and its affiliates and all persons acting on its or their behalf
have complied with and will comply with the offering restrictions
requirements of Regulation S in connection with the offering of the
Securities outside the United States.
(d) Neither TWA nor any of its affiliates or any person acting on
its behalf has engaged, in connection with the offering of the Securities, in
any form of general solicitation or general advertising within the meaning of
Rule 502(c) under the Securities Act; and neither TWA nor any affiliate (as
defined in Rule 501(b) under the Securities Act) of TWA has, directly or
through any agent, sold, offered for sale, solicited offers to buy or
otherwise negotiated in respect of, any security (as defined in the Securities
Act) which is or will be integrated with the sale of the Notes or the Equity
Notes in a manner that would require the registration of the Notes or the
Equity Notes under the Securities Act.
(e) Assuming that the representations and warranties of the Owner
Trustee in Article 12, and of the Beneficiary, CL/PK Airfinance, the Placement
Agent and each Participant that acquires Securities on the Closing Date in the
Investment Letters delivered in satisfaction of the condition specified in
Section 7.01(g) hereof are true, and assuming compliance with the covenants and
agreements set forth in Section 12.03 and in such Investment Letters, it is not
necessary in connection with the offer, issuance and delivery of the
Securities to the Owner Trustee, or the transfer on the Closing Date of the
Securities to the Placement Agent, the Beneficiary, CL/PK Airfinance or the
Participants, in each case in the manner contemplated by, and in accordance
with the terms and provisions of, this Sale Agreement and in such Investment
Letters, to register such offer, sale or transfer of the Notes or the Equity
Notes under the Securities Act or to qualify either of the Indentures under
the Trust Indenture Act of 1939, as amended (the "Indenture Act").
(f) TWA is a corporation duly organized, validly existing and in
good standing under the laws of its jurisdiction of incorporation. TWA has full
power and authority to conduct all the activities conducted by it, to own or
lease and operate all the assets owned or leased by it (including, without
limitation, the Collateral) and to conduct its business as described in the
Private Placement Memoranda. TWA is duly licensed or qualified to do business
and in good standing as a foreign corporation in all jurisdictions in which
the nature of the activities conducted by it or the character of the assets
owned or leased by it (including, without limitation, the Collateral) makes
such licensing or qualification necessary, except where the failure to be so
licensed or qualified or in good standing would not individually or in the
aggregate have a material adverse effect on the business, properties or
financial condition of TWA and its subsidiaries taken as a whole or on the
enforceability by the holders of the Notes or the Equity Notes of the aforesaid
security interest in the Collateral (a "Material Adverse Effect"); and to the
best knowledge of TWA, no proceeding has been instituted in any such
jurisdiction revoking, limiting or curtailing, or seeking to revoke, limit or
curtail, such power and authority, license or qualification. TWA has no
subsidiaries which are "significant subsidiaries" within the meaning of
Regulation S-X under the Securities Act.
(g) TWA has an authorized capitalization as set forth in the
Private Placement Memoranda and the authorized capital stock of TWA conforms to
the statements relating thereto contained in the Private Placement Memoranda.
All of the issued shares of capital stock of TWA have been duly and validly
authorized and issued, are fully paid and non-assessable, have been issued in
compliance with all federal and state securities laws and were not issued in
violation of or subject to any preemptive rights or other rights to subscribe
for or purchase securities. Except as disclosed in the Private Placement
Memoranda, TWA does not own, directly or indirectly, any shares of stock or
any other equity or long-term debt securities of any corporation or have any
equity interest in any firm, partnership, joint venture, association or other
entity which would constitute a "significant subsidiary" within the meaning of
Regulation S-X or would otherwise be material to the purchase of the Notes or
the Equity Notes by the Owner Trustee. Complete and correct copies of the
certificate of incorporation and of the by-laws of TWA and all amendments
thereto have been delivered to the Owner Trustee, and no changes therein will
be made subsequent to the date hereof and prior to the Closing Date.
(h) TWA and its subsidiaries have filed all necessary federal,
state and foreign income and franchise tax returns that are required to be
filed, except where the failure to so file such returns would not,
individually or in the aggregate, have a Material Adverse Effect. Except as
set forth in the Private Placement Memoranda, TWA and its subsidiaries have
paid all taxes, assessments, fees and other charges (including, without
limitation, withholding taxes, penalties and interest) due or claimed to be
due thereon that are due and payable, other than tax deficiencies which (i)
TWA is contesting in good faith and for which TWA has provided adequate
reserves in accordance with U.S. generally accepted accounting principles
applied on a consistent basis or (ii) the failure to duly and timely pay would
not have a Material Adverse Effect. There is no tax deficiency or actual or
proposed tax assessment that has been asserted against TWA that would have,
individually or in the aggregate, a Material Adverse Effect. TWA is not aware
of any reasonable basis for the imposition of any material additional tax
assessment against TWA for any taxable period ending on or before the date
hereof.
(i) Except as disclosed in the Private Placement Memoranda, TWA
does not have outstanding any options to purchase, warrants, or any preemptive
rights or other rights to subscribe for or to purchase any securities or
obligations convertible into, or any contracts, arrangements or commitments
to issue or sell, shares of its capital stock or any such options, warrants,
rights, convertible securities or obligations. Neither the execution and
delivery of the Sale Agreement nor the issuance of the Securities on the
Closing Date pursuant hereto to the Owner Trustee, the Beneficiary, the
Placement Agent, CL/PK Airfinance or the Participants will render Owner
Trustee, the Beneficiary, the Placement Agent, CL/PK Airfinance or any of the
Participants an "Acquiring Person" or otherwise entitle the holders of rights
(the "Rights") of TWA entitling the holder to purchase one one-hundredth of a
share of TWA's Series A Participating Preferred Stock, par value $.01 per
share (the "Series A Preferred Stock") to exercise such Rights. The
description of TWA's stock option and other stock plans or arrangements,
including TWA's Employee Stock Incentive Program (the "ESIP") and the Key
Employee Stock Incentive Program (the "KESIP"), and the options or other
rights granted and exercised thereunder, and of the Rights, set forth in the
Private Placement Memoranda accurately and fairly describe in all material
respects the terms of such plans, arrangements, options and rights. The shares
of Common Stock reserved for issuance pursuant to the ESIP and the KESIP and
upon conversion of all outstanding convertible securities, and upon exercise
of outstanding warrants or options to purchase Common Stock are sufficient in
number to meet all issuance, conversion and exercise requirements and have
been duly and validly authorized and reserved for issuance pursuant to stock
plans or upon conversion or exercise of such securities and, upon issuance in
accordance with the terms of such securities or plans, will be duly and validly
issued and fully paid and non-assessable and free of preemptive rights.
(j) The financial statements and schedules included in or
incorporated by reference into the Private Placement Memoranda present fairly
the consolidated financial condition of TWA as of the respective dates thereof
and the consolidated results of operations and cash flows of TWA for the
respective periods covered thereby, all in conformity with U.S. generally
accepted accounting principles applied on a consistent basis throughout the
entire period involved, except as otherwise set forth in the financial
statements (or notes thereto) contained in or incorporated by reference into
the Private Placement Memoranda. The selected and summary financial and
statistical and operating data included in the Private Placement Memoranda
present fairly the information shown therein and, to the extent applicable,
have been compiled on a basis consistent with the audited financial statements
presented, or incorporated by reference, therein. KPMG Peat Marwick LLP (the
"Accountants"), who have reported on the financial statements and schedules
included in or incorporated by reference into the Private Placement Memoranda,
are independent accountants with respect to TWA as required by the Exchange
Act and the rules and regulations promulgated thereunder (the "Exchange Act
Rules and Regulations").
(k) Subsequent to the respective dates as of which information is
given in the Private Placement Memoranda and prior to the Closing Date, except
as set forth in or contemplated by the Private Placement Memoranda, there has
not been (i) any change in the capital stock (other than changes attributable
to (w) shares of Common Stock issuable upon conversion of the 8% Cumulative
Convertible Exchangeable Preferred Stock (the "8% Preferred Stock") or the 9
1/4% Cumulative Convertible Exchangeable Preferred Stock (the "9 1/4%
Preferred Stock"), (x) shares of Common Stock issuable upon the exercise of
presently outstanding stock options and other options to be granted under the
KESIP, ESIP and 1995 Outside Directors' Stock Ownership and Stock Option Plan
in accordance with the terms thereof, (y) shares of Common Stock issuable
pursuant to the exercise of warrants outstanding as of the date hereof, the
conversion of shares of IFFA Preferred Stock, par value $.01 per share (the
"IFFA Preferred Stock"), ALPA Preferred Stock, par value $.01 per share (the
"ALPA Preferred Stock") and IAM Preferred Stock, par value $.01 per share (the
"IAM Preferred Stock", and, together with the IFFA Preferred Stock and the
ALPA Preferred Stock, the "Employee Preferred Stock"), and (z) securities
issuable pursuant to registrations by TWA on Form S-8 or any successor
thereto), or long term debt of TWA, or any change or development in the
business, properties, business prospects, condition (financial or otherwise)
or results of operations of TWA and its subsidiaries which has caused, or is
reasonably expected to cause, a Material Adverse Effect (it being agreed that
the execution and delivery of agreements for TWA's purchase or lease of 24
MD-83 aircraft, which are the subject of letters of intent referred to in the
Private Placement Memoranda, and for the financing of such purchases and
leases shall not be considered to have a Material Adverse Effect), arising for
any reason whatsoever, (ii) neither TWA nor any of its subsidiaries has
incurred any material liabilities or obligations, direct or contingent, nor
has it entered into any material transactions other than pursuant to this Sale
Agreement and the transactions referred to herein, and (iii) TWA has not paid
or declared any dividends or other distributions of any kind on any class of
its capital stock or made any redemption or repurchases of any shares thereof,
except for the payment of dividends on the 8% Preferred Stock or the 9 1/4%
Preferred Stock.
(l) No consent, approval, authorization or order of, or any filing
or declaration with or notice to, any court or governmental agency or body,
including, without limitation, the United States Department of Transportation
or the FAA, is required in connection with (i) the Sale, (ii) the valid
authorization, issuance, transfer, sale or delivery of the Notes and the Equity
Notes by TWA to the Owner Trustee and the transfers on the Closing Date of the
Notes and the Equity Notes by the Owner Trustee to the Beneficiary and the
Placement Agent, by the Beneficiary to CL/PK Airfinance and by CL/PK
Airfinance to the Participants in the manner contemplated by, and in
accordance with the terms of, this Sale Agreement, (iii) the execution,
delivery and performance by TWA of the Operative Documents, (iv) the taking by
TWA of any action contemplated by the Operative Documents or under the Notes
or the Equity Notes (including without limitation the Exchange Offer and the
filing of the Equity Shelf Registration Statement, respectively) or (v) the
creation of the aforesaid security interest in the Collateral, except (w) for
any filing or recording that may be required under the FARs and except for
filing the Bill of Sale (as defined below) with the FAA in connection with the
Sale, (x) as may be required with respect to the Registration Rights
Agreements under the Securities Act, the rules and regulations promulgated
under the Securities Act (the "Securities Act Rules and Regulations"), the
Indenture Act, the rules and regulations under the Indenture Act (the
"Indenture Act Rules and Regulations"), the securities or blue sky laws of the
various states and (y) as described in subsection (s) of this Section 5.1 with
respect to the Collateral.
(m) Except as disclosed in the Private Placement Memoranda, each of
TWA and its subsidiaries (i) has complied with all laws, regulations and
orders, federal, state or foreign, applicable to it or its business and
performed all of its obligations required to be performed by it, and (ii) is
not in default, and no event has or will have occurred that with the giving of
notice or the passage of time or both, would constitute a default, under any
indenture, mortgage, deed of trust, voting trust agreement, loan agreement,
bond, debenture, note agreement or other evidence of indebtedness, lease,
contract, joint venture agreement, or other agreement or instrument
(collectively, a "contract or other agreement") to which it is a party or by
which it or its property (including without limitation the Collateral) is
bound or affected, other than in the case of either clause (i) or (ii), such
failures to comply or perform or defaults that, singly and in the aggregate,
do not have a Material Adverse Effect. There is no material contract or other
agreement of a character required to be described in the Private Placement
Memoranda which is not described therein. All material contracts or other
agreements to which TWA or any of its subsidiaries is a party have been duly
authorized, executed and delivered by TWA or such subsidiary, constitute valid
and binding agreements of TWA or such subsidiary and are enforceable against
TWA or such subsidiary in accordance with the terms thereof, subject to the
effect of bankruptcy, insolvency and reorganization and other laws of general
applicability, relating to and affecting creditors' rights and to general
principles of equity (whether considered in a proceeding in equity or in law).
Except as disclosed in the Private Placement Memoranda, to the best knowledge
of TWA and each of its subsidiaries, no other party under any contract or
other agreement to which TWA or any such subsidiary is a party is in default
in any respect thereunder other than defaults that, singly and in the
aggregate, do not have a Material Adverse Effect. TWA is not in violation of
any provision of its certificate of incorporation or by-laws.
(n) Except as does not or could not reasonably be expected to have
a Material Adverse Effect, each of TWA and its subsidiaries now holds all
certificates, licenses, consents, orders, permits and other authorizations
issued by the appropriate local, state, federal or foreign regulatory agencies
or bodies that are necessary to the conduct of its business as now conducted
and as contemplated in the Private Placement Memoranda to be conducted and to
operate its properties (including without limitation the Collateral) and
(except as are described in Section 5.1(l) are necessary to the execution,
delivery and performance of this Sale Agreement and the other Operative
Documents, all of which are valid and in full force and effect, and there is
no proceeding pending (or, to the best knowledge of TWA, threatened or
contemplated) which could reasonably be expected to cause any such
certificate, license, consent, order, permit or other authorization to be
withdrawn, canceled, modified, suspended or not renewed.
(o) The Securities and the Collateral conform in all material
respects to the description thereof in the respective Private Placement
Memoranda.
(p) The Operative Documents have been duly authorized by TWA; this
Sale Agreement has been, and on the Closing Date each of the other Operative
Documents will have been, duly executed and delivered by TWA. This Sale
Agreement constitutes, and each of the other Operative Documents will, on the
Closing Date, constitute, a valid and binding obligation of TWA, enforceable
against TWA in accordance with its terms, subject in each case to the effect
of bankruptcy, insolvency and reorganization and other laws of general
applicability relating to and affecting creditors' rights and to general
principles of equity (whether considered in a proceeding in equity or at law),
and each conforms to the description thereof contained in the respective
Private Placement Memoranda.
(q) The Notes, the Exchange Notes, the Private Exchange Notes and
the Equity Notes have been duly and validly authorized by TWA and, when
authenticated by the Notes Trustee or the Equity Notes Trustee, as applicable,
and issued and delivered in accordance with this Sale Agreement or the Notes
Registration Rights Agreement, as applicable, and the applicable Indenture,
will have been duly and validly executed, authenticated, issued and delivered,
will constitute valid and binding obligations of TWA enforceable against TWA
in accordance with their respective terms, subject to the effect of bankruptcy,
insolvency and reorganization and other laws of general applicability relating
to and affecting creditors' rights and to general principles of equity (whether
considered in a proceeding in equity or at law), and will be entitled to the
benefits provided by the applicable Indenture and the Security Agreements.
Upon consummation of the Exchange Offer, the Notes Indenture will comply with
all applicable provisions of the Indenture Act, and the Indenture Act Rules
and Regulations.
(r) The shares of Common Stock into which the Equity Notes are
convertible have been duly and validly authorized by TWA and, when issued and
delivered upon conversion of the Equity Notes will be duly and validly issued,
fully paid and non-assessable and will conform to the description thereof
included under "Description of Capital Stock" in the Private Placement
Memoranda.
(s) On the Closing Date, the Notes Security Agreement will create a
valid lien on and first priority perfected security interest in all of TWA's
right, title and interest in the Collateral securing the payment of the Notes
in accordance with the terms thereof and the Company's other Obligations under,
and as defined in, the Notes Security Agreement, and the Equity Notes Security
Agreement will create a valid lien on and a second priority perfected security
interest in all of TWA's right, title and interest in the Collateral securing
the payment of the Equity Notes in accordance with the terms thereof and the
Company's other Obligations under, and as defined in, the Equity Notes
Security Agreement, and, except as permitted by the Security Agreements, the
Collateral will be free and clear of all liens, encumbrances, charges, claims
and security interests. No filings, recordings or other actions are required
in order to perfect the liens created by the Security Agreements except for
the filings or recordings which on or before the Closing Date have been duly
made (or, to the extent acceptable to the Owner Trustee, in its sole
discretion, which will be made promptly after the Closing Date) with respect
to the Collateral with appropriate state and local Uniform Commercial Code
filing offices and except for the filing of the Security Agreements and the
Mortgage Supplements with the FAA pursuant to Title 49 of the United States
Code, as amended, and the regulations promulgated pursuant thereto (the
"Transportation Code"), which filing will be made concurrently with the
Closing.
(t) TWA has full right, power and authority to enter into each of
the Operative Documents and to consummate the transactions contemplated
thereby, including, without limitation, the Sale and the creation of the
respective valid, perfected security interests in the Collateral. The execution
and delivery by TWA of the Operative Documents, the Notes and the Equity
Notes, the consummation of the transactions contemplated thereby and the
compliance by TWA with the terms, conditions or provisions thereof do not and
will not result in the creation or imposition of any lien, claim, charge,
security interest or encumbrance upon any of the assets of TWA or any of its
subsidiaries (except pursuant to the Operative Documents as disclosed in the
Private Placement Memoranda) pursuant to the terms or provisions of, or result
(with the giving of notice, the passage of time, or both) in a breach or
violation of any of the terms or provisions of, or constitute a default under,
or give any other party a right to terminate any of their respective
obligations under, or result in the acceleration of any obligation under, the
certificate of incorporation or by-laws of TWA or any of its subsidiaries, any
contract or other agreement to which TWA or any of its subsidiaries is a party
or by which TWA or any of its subsidiaries or any of their respective
properties (including, without limitation, the Collateral) is bound or
affected, or violate or conflict with any judgment, ruling, decree, order,
statute, rule or regulation of any court or other governmental agency or body
applicable to the business or properties (including, without limitation, the
Collateral) of TWA or any of its subsidiaries. No holder of securities of TWA,
other than holders of the Notes and the Equity Notes, has rights to the
registration of any securities of TWA because of the execution, delivery or
performance by TWA of this Sale Agreement or the Registration Rights
Agreements.
(u) TWA is not an "investment company" or an "affiliated person"
of, or "promoter" or "principal underwriter" for, an "investment company," as
such terms are defined in the Investment Company Act of 1940, as amended (the
"Investment Company Act"), nor is TWA an "open-end investment trust," "unit
investment trust" or "face-amount certificate company" that is or is required
to be registered under Section 8 of the Investment Company Act.
(v) Except as set forth in the Private Placement Memoranda or as
disclosed by the Participants, there are no actions, suits or proceedings
pending or, to the best knowledge of TWA, threatened or contemplated against
or affecting TWA or any of its subsidiaries or any of their respective officers
or directors in their capacity as such or any of their respective property or
assets (including the Collateral), before or by any local, state, federal or
foreign court, commission, regulatory body, administrative agency or other
governmental body, (i) wherein an unfavorable ruling, decision or finding,
either singly or in the aggregate, is reasonably likely to have a Material
Adverse Effect, or (ii) which, if adversely determined, would prevent
consummation of the transactions contemplated hereby or by the other Operative
Documents or which is required to be disclosed in the Private Placement
Memoranda. All pending legal or governmental proceedings in the aggregate to
which TWA or any of its subsidiaries is a party or of which any of their
respective property or assets is the subject which are not described in the
Private Placement Memoranda, including ordinary routine litigation incidental
to the business, are (considered in the aggregate) not material to TWA and its
subsidiaries taken as a whole.
(w) TWA has good and marketable title to the properties and assets
described in the Private Placement Memoranda as owned by it (including without
limitation the Collateral). TWA and its subsidiaries each has valid,
subsisting and enforceable leases for the properties described in the Private
Placement Memoranda as leased or subleased by it, with such exceptions as are
not material and do not materially interfere with the uses made and proposed
to be made of such properties by TWA and its subsidiaries, and neither TWA nor
any of its subsidiaries has received any notice of any material claim of any
sort that has been asserted by anyone adverse to the rights of TWA or any of
its subsidiaries under any of the leases or subleases mentioned above, or
affecting or questioning the rights of such corporation to the continued
possession of the leased or subleased premises. Except as set forth in the
Private Placement Memoranda, TWA owns or leases all such properties as are
necessary to its business as currently conducted or as proposed to be
conducted.
(x) No statement, representation, warranty or covenant made by TWA
in this Sale Agreement or any Operative Document or made in any certificate or
document required by this Sale Agreement or any Operative Document to be
delivered by TWA or any officer thereof is inaccurate, untrue or incorrect in
any material respect.
(y) Neither TWA nor any of its directors, officers or controlling
persons has taken, or will take, directly or indirectly, any action prohibited
by Regulation M under the Exchange Act in connection with the offering of the
Notes or the Equity Notes.
(z) TWA has, to the extent applicable, complied, and until the
completion of the distribution of the Securities will, to the extent
applicable, comply, with all of the provisions of (including, without
limitation, filing all forms required by) Section 517.075 of the Florida
Securities and Investor Protection Act and Regulation 3E-900.001 issued
thereunder with respect to the offering and sale of the Securities.
(aa) Except as set forth in the Private Placement Memoranda, (i) TWA
and each of its subsidiaries are in compliance in all material respects with
all Environmental Laws (as defined below) which are applicable to their
business and have received no notice from any governmental authority or third
party of an asserted claim under Environmental Laws, and (ii) to the best
knowledge of TWA and its subsidiaries, there are no past or present actions,
conditions, events, circumstances or practices, including, without limitation,
the release of any Hazardous Substance (as defined below), that could
reasonably be expected to form the basis of any claim under any Environmental
Law against TWA or any of its subsidiaries which, singly or in the aggregate,
could reasonably be expected to result in a Material Adverse Effect. The term
"Environmental Law" means the common law and any federal, state, local or
foreign law, rule or regulation, code, order, decree, judgment or injunction,
issued, promulgated, approved or entered thereunder relating to pollution or
protection of public or employee health or the environment and any other laws
relating to (i) releases of any Hazardous Substance into the environment
(including, without limitation, ambient air, surface water, ground water, land
surface or subsurface strata), (ii) the manufacture, processing, distribution,
use, treatment, storage, disposal, transport, presence or handling of any
Hazardous Substance, or (iii) underground storage tanks and related piping,
and releases therefrom. The term "Hazardous Substance" means any pollutant,
contaminant, chemical, hazardous material, or industrial, toxic or hazardous
substance or waste (including, without limitation, petroleum or any petroleum
product) regulated by or the subject of any Environmental Law.
(ab) TWA and all corporations, trades or businesses within the same
controlled group of corporations as, or under common control with, TWA (within
the meaning of Sections 414(b), (c), (m) and (o) of the Internal Revenue Code
of 1986, as amended (the "Code")) are in compliance in all material respects
with all presently applicable provisions of the Employee Retirement Income
Security Act of 1974, as amended, including the regulations and published
interpretations thereunder ("ERISA") and all Plans (as defined below) are in
compliance in all material respects with all applicable provisions of ERISA
and the Code; and TWA does not maintain and is not required to make
contributions to any Plan that is subject to the minimum funding standard of
Section 302 of ERISA or Section 412 of the Code or that is subject to Title IV
of ERISA, except for the Plans that are the subject of the Settlement
Agreement dated as of January 5, 1993 among TWA, the Icahn Entities (as
defined in the Private Placement Memoranda), the Pension Benefit Guaranty
Corporation and others. As used herein, "Plan" means any qualified plan
maintained by TWA or by a member of TWA's "controlled group" as defined in
Section 414(b), (c), (m) or (o) of the Code.
(ac) TWA is a "reporting issuer" as defined in Rule 902(l) of
Regulation S promulgated under the Securities Act.
(ad) TWA and its subsidiaries maintain insurance with respect to
their properties and businesses of the types and in amounts generally deemed
adequate by TWA for their businesses and generally comparable to insurance
coverage maintained by U.S. airlines similarly situated, all of which insurance
is in full force and effect.
(ae) None of the execution, delivery and performance of any
Operative Document, the issuance and delivery of the Notes and the Equity
Notes and the consummation of the transactions contemplated by the Operative
Documents, will violate Section 7 of the Exchange Act, or any regulation
promulgated thereunder, including, without limitation, Regulation G, T, U, or
X promulgated by the Board of Governors of the Federal Reserve System.
(af) Except as set forth in the Private Placement Memoranda, no
labor dispute with the employees of TWA or any subsidiary exists or, to the
knowledge of TWA, is imminent or threatened other than disputes that, singly
and in the aggregate, would not have a Material Adverse Effect.
ARTICLE 6
Condition of Aircraft at Sale
Section 6.01. Condition at Sale. On the Closing Date each of
the Aircraft will be in its then "AS IS, WHERE IS" condition.
Section 6.02. Ground Inspection. Prior to actual tender of
each of the Aircraft from the Owner Trustee to TWA for sale, TWA will have an
opportunity to reinspect each of the Aircraft and Aircraft Documentation.
Section 6.03. Disclaimer. EACH OF THE AIRCRAFT AND EACH PART
THEREOF WILL BE SOLD IN ITS "AS IS, WHERE IS" CONDITION ON THE CLOSING DATE,
WITHOUT ANY REPRESENTATION, WARRANTY OR GUARANTEE OF ANY KIND BEING MADE OR
GIVEN BY ANY OF THE OWNER TRUSTEE, THE BENEFICIARY, CL/PK AIRFINANCE, THE
PLACEMENT AGENT OR ANY PARTICIPANTS, THEIR SERVANTS OR AGENTS, EXPRESS OR
IMPLIED, ARISING BY LAW OR OTHERWISE, EXCEPT FOR THE REPRESENTATIONS AND
WARRANTIES GIVEN BY THE OWNER TRUSTEE CONTAINED IN ARTICLE 12 HEREOF.
(a) FROM AND AFTER THE RECEIPT BY OWNER TRUSTEE OF THE ACCEPTANCE
CERTIFICATE, THE FOLLOWING SHALL APPLY: WITHOUT LIMITING THE GENERALITY OF THE
FOREGOING, OWNER TRUSTEE SPECIFICALLY DISCLAIMS, AND EXCLUDES HEREFROM (A) ANY
WARRANTY AS TO THE AIRWORTHINESS, VALUE, DESIGN, QUALITY, MANUFACTURE,
OPERATION, OR CONDITION OF THE AIRCRAFT; (B) ANY EXPRESS OR IMPLIED
REPRESENTATION OR WARRANTY OF MERCHANTABILITY OR FITNESS FOR USE OR FOR A
PARTICULAR PURPOSE; (C) ANY EXPRESS OR IMPLIED REPRESENTATION OR WARRANTY OF
FREEDOM FROM ANY RIGHTFUL CLAIM BY WAY OF INFRINGEMENT OR THE LIKE; (D) ANY
IMPLIED REPRESENTATION OR WARRANTY ARISING FROM COURSE OF PERFORMANCE, COURSE
OF DEALING OR USAGE OF TRADE; (E) ANY EXPRESS OR IMPLIED WARRANTY REGARDING THE
CONDITION OF THE AIRCRAFT; AND (F) ANY OBLIGATION OR LIABILITY OF OWNER
TRUSTEE ARISING IN CONTRACT OR IN TORT (INCLUDING STRICT LIABILITY OR SUCH AS
MAY ARISE BY REASON OF OWNER TRUSTEE'S NEGLIGENCE) ACTUAL OR IMPUTED, OR IN
STRICT LIABILITY, INCLUDING ANY OBLIGATION OR LIABILITY FOR LOSS OF USE,
REVENUE OR PROFIT WITH RESPECT TO THE AIRCRAFT OR FOR ANY LIABILITY OF TWA TO
ANY THIRD PARTY OR ANY OTHER DIRECT, INCIDENTAL, SPECIAL OR CONSEQUENTIAL
DAMAGE WHATSOEVER. NO AGREEMENT ALTERING OR EXTENDING OWNER TRUSTEE'S
LIABILITY FOR WARRANTIES SHALL BE BINDING UPON OWNER TRUSTEE UNLESS IN WRITING
AND EXECUTED BY A DULY AUTHORIZED OFFICER OF OWNER TRUSTEE.
(b) DELIVERY BY TWA TO OWNER TRUSTEE OF THE ACCEPTANCE CERTIFICATE
SHALL BE CONCLUSIVE PROOF AS BETWEEN OWNER TRUSTEE AND TWA THAT TWA'S TECHNICAL
EXPERTS HAVE EXAMINED AND INVESTIGATED EACH OF THE AIRCRAFT AND EACH PART
THEREOF AND THAT EACH OF THE AIRCRAFT AND EACH PART THEREOF IS AIRWORTHY AND IN
GOOD WORKING ORDER AND REPAIR, WITHOUT DEFECT (WHETHER OR NOT DISCOVERABLE ON
THE CLOSING DATE) AND IN EVERY WAY SATISFACTORY TO TWA.
Section 6.04. Deficiencies and Delays. The Owner Trustee shall
not be liable for any liability, claim, loss, damage or expense of any kind or
nature caused directly or indirectly by the Aircraft or any part thereof, by
any inadequacy of the Aircraft for any purpose or any deficiency or defect
therein, by the use or performance of the Aircraft, by any maintenance or
repairs to the Aircraft, by the failure of the Aircraft to conform to any
description thereof set forth in the Operative Documents, by any interruption
or loss of service or use of the Aircraft or by any loss of business or other
consequential damage or any damage whatsoever, howsoever caused including the
negligence of the Owner Trustee. The Owner Trustee shall bear no liability
whatsoever for the cost of modifications of the Aircraft whether in the event
of grounding or suspensions of certification, or for any other cause.
Section 6.05. No Waiver. Nothing in this Article 6 or
elsewhere in this Sale Agreement shall be deemed a waiver by TWA of any rights
it may have against the Manufacturer, the Engine Manufacturer, or any other
Person other than the Owner Trustee, the Beneficiary, CL/PK Airfinance, the
Placement Agent and the Participants.
ARTICLE 7
Bill of Sale and Other Documentary Requirements
Section 7.01. Conditions to TWA's Obligations to Purchase the
Aircraft. The following will be conditions precedent to TWA's obligation to
purchase the Aircraft from the Owner Trustee on the Closing Date (it being
understood that delivery of such documents and the Aircraft by the Owner
Trustee is subject to satisfaction of or waiver of the conditions set forth in
Section 7.2):
(a) The Owner Trustee will have transferred to TWA title to the
Aircraft by delivery to TWA of, and will have warranted that such title is free
and clear of such Security Interests described in, a full warranty bill of sale
dated the Closing Date in the form of Exhibit D evidencing this transfer of
title. The Owner Trustee will also have delivered to TWA (by delivery to
Crowe & Dunlevy, special FAA counsel to TWA, in advance of Closing, to be
released and filed on Closing) a bill of sale dated the Closing Date on the
form provided by the FAA (the "Bill of Sale").
(b) The Owner Trustee will have delivered to TWA an assignment of
Manufacturer and Engine Manufacturer rights in the form and substance of
Exhibit E.
(c) The Owner Trustee will have delivered to TWA evidence
satisfactory to it that the Owner Trustee has all necessary power and authority
to enter into and perform this Sale Agreement.
(d) TWA and the Owner Trustee will have executed and delivered a
Lease Termination Agreement satisfactory to TWA and the Owner Trustee and such
Lease Termination Agreement shall have been delivered in escrow to Crowe &
Dunlevy and shall have become effective in accordance with its terms thereby
terminating the existing Leases.
(e) The Aircraft shall have been registered in the name of TWA with
the FAA.
(f) The Aircraft shall have been released from the lien of any
existing security agreement as evidenced by a lien release, in form and
substance reasonably acceptable to TWA and the Owner Trustee, executed and
delivered by the appropriate parties in escrow to Crowe & Dunlevy.
(g) The Placement Agent, the Beneficiary, CL/PK Airfinance and
each Participant that acquires Securities on the Closing Date shall have
delivered to TWA and the Placement Agent an Investment Letter in the form of
Annexes B and/or C hereto.
(h) TWA shall have received an opinion and the Placement Agent a
reliance letter, dated the Closing Date, of Coudert Brothers in form and
substance satisfactory to TWA, to the effect that (x) this Sale Agreement has
been duly authorized, executed and delivered by, and constitutes a valid and
binding agreement of, each of the Owner Trustee and the Beneficiary, (y) the
execution, performance and delivery of this Sale Agreement by the Owner
Trustee and the Beneficiary, including the transfer of the Securities by the
Owner Trustee to the Placement Agent and the Beneficiary, by the Beneficiary
to CL/PK Airfinance and by CL/PK Airfinance to the Participants on the Closing
Date as contemplated by this Sale Agreement, does not (with the giving of
notice or the passage of time or both) conflict or violate or result in a
default under any term of the Trust Agreement or Participation Agreement, and
(z) other matters as TWA may reasonably request relating to the existence of
the Owner Trustee and its power and authority to enter into the transactions
contemplated hereby.
(i) TWA shall have received an opinion and the Placement Agent a
reliance letter, dated the Closing Date, of Ray Quinney & Nebeker in form and
substance satisfactory to TWA, to the effect that (x) this Sale Agreement has
been duly authorized, executed and delivered by, and constitutes a valid and
binding agreement of the Owner Trustee, (y) the execution, performance and
delivery of this Sale Agreement by the Owner Trustee, including the transfer
of the Securities by the Owner Trustee to the Placement Agent and the
Beneficiary on the Closing Date as contemplated by this Sale Agreement, does
not conflict (with the giving of notice or the passage of time or both) or
violate or result in a default under any term of the Trust Agreement, and (z)
other matters as TWA may reasonably request relating to the existence of the
Owner Trustee and its power and authority to enter into the transactions
contemplated hereby.
(j) The lessors under the TBT Leases for the Aircraft shall have
waived any required notice period for the Sale or such period shall have been
satisfied and shall have confirmed that the Mortgages are permitted under such
TBT Leases, such waivers and confirmations to be satisfactory to TWA.
(k) The Operative Documents shall have been duly executed and
delivered by the other parties thereto, shall be in full force and effect and
each shall be in form and substance satisfactory to TWA.
(l) No Government Entity shall have issued an order, decree or
ruling or taken any other action to restrain, enjoin, prohibit or otherwise
invalidate any transaction contemplated by this Sale Agreement, and no third
party shall have commenced any proceeding requesting such relief.
Section 7.02. Conditions to the Owner Trustee's Obligations to
Sell the Aircraft. The following will be conditions precedent to the Owner
Trustee's obligation to sell the Aircraft to TWA (it being understood that
delivery of such documents and the Securities by TWA are subject to
satisfaction of or waiver of the conditions set forth in Section 7.1):
(a) TWA will have executed and delivered to the Owner Trustee
Acceptance Certificates in the form of Exhibit C covering the Aircraft and
effective as of the Closing Date.
(b) TWA will have delivered to the Owner Trustee a certified copy
of the board resolutions approving the Sale, the issuance of the Securities
and the other actions contemplated by the Operative Documents.
(c) TWA and the Owner Trustee will have executed and delivered a
Lease Termination Agreement satisfactory to TWA and the Owner Trustee with
respect to each Lease and each such Agreement shall have been filed with the
FAA and shall have become effective in accordance with its terms thereby
terminating the existing Leases.
(d) The Aircraft shall have been registered in the name of TWA with
the FAA.
(e) The Aircraft shall have been released from the lien of any
existing security agreement as evidenced by a lien release, in form and
substance acceptable to TWA and the Owner Trustee, with respect to each
Aircraft executed and delivered by the appropriate parties and filed with the
FAA.
(f) TWA shall have agreed in writing, in form and substance
satisfactory to the Owner Trustee and the Placement Agent, to indemnify the
Owner Trustee, the Beneficiary, each Participant and the Placement Agent
against any liability arising under the TBT Leases or any related letters of
credit to the TBT Lessors or other Persons, arising directly or indirectly from
TWA's acquisition of the Aircraft and the Owner Trustee's sale of the Aircraft
or arising subsequent to such acquisition and sale pursuant to this Sale
Agreement.
(g) The Operative Documents shall have been duly executed and
delivered by the other parties thereto, shall be in full force and effect and
each shall be in form and substance satisfactory to the Owner Trustee.
(h) TWA shall have
(i) complied with all preconditions to the Sale imposed upon
it by the TBT Leases, including confirming that the Security
Agreements and the Mortgage Supplements are permitted under
such TBT Leases, and assumed the obligations of the Owner
Trustee arising under each TBT Lease on and after the Closing
Date, in each case in a manner satisfactory to the Owner
Trustee or
(ii) terminated the TBT Leases or, in a manner satisfactory
to the Owner Trustee, assumed, as between TWA and the Owner
Trustee, all obligations of the Owner Trustee under the TBT
Leases and in each case deposited an amount of cash in an
escrow account pursuant to an escrow agreement in form and
substance satisfactory to Lazard Freres & Co. LLC sufficient
in the judgment of Lazard Freres & Co. LLC to reimburse
Lazard Freres & Co. LLC and CL/PK Airfinance for payments by
them to reimburse the account party or Credit Lyonnais as
issuer of certain letters of credit issued for the benefit
of the TBT Lessors in the event that any TBT Lessor shall
draw on any such letter of credit in connection with the
relevant TBT Lease.
(i) Satisfaction of the conditions precedent set forth in Section
7.04.
Section 7.03. After Closing. Immediately upon TWA's purchase
of the Aircraft, all risk of loss or damage to the Aircraft will pass from the
Owner Trustee to TWA.
Section 7.04. Conditions with Regard to the Issuance of the
Securities. The obligations of the Owner Trustee hereunder to sell the
Aircraft to TWA on the Closing Date are subject to the following additional
conditions precedent:
(a) (i) No order suspending the offer and sale of the Notes or the
Equity Notes under the securities or blue sky laws of any jurisdiction shall be
in effect and no proceeding for such purpose shall be pending before or
threatened or contemplated by the authorities of any such jurisdiction, (ii)
any request for additional information on the part of any such authorities
shall have been complied with to the satisfaction of the staff of such
authorities and (iii) after the date hereof, no amendment or supplement to
the Private Placement Memoranda shall have been distributed unless a copy
thereof was first delivered to the Placement Agent, the Owner Trustee, the
Beneficiary, CL/PK Airfinance and each Participant.
(b) Since the date as of which information is given in the Private
Placement Memoranda (i) there shall not have been any change in the capital
stock (other than changes attributable to (x) shares of Common Stock issuable
upon the exercise of presently outstanding stock options and other options to
be granted under the KESIP, ESIP and 1995 Outside Directors' Stock Option and
Stock Compensation Plan in accordance with the terms thereof, (y) shares of
Common Stock issuable pursuant to the exercise of warrants outstanding as of
the date hereof, or the conversion of shares of Employee Preferred Stock and
(z) shares of Common Stock issuable upon conversion of the 8% Preferred Stock
or the 9 1/4% Preferred Stock) or any increase in the long-term debt of TWA or
any of its subsidiaries or any change in the business or financial condition
of TWA and its subsidiaries, taken as a whole, whether or not arising from
transactions in the ordinary course of business, in each case other than as
set forth in or contemplated by the Private Placement Memoranda and (ii)
neither TWA nor any of its subsidiaries shall have sustained any loss or
interference with its business or properties from fire, explosion, flood or
other casualty, whether or not covered by insurance, or from any labor dispute
or any court or legislative or other governmental action, order or decree,
which is not set forth in the Private Placement Memoranda, which with respect
to clauses (i) or (ii) of this Section 7.04(b), reasonably would be expected to
result in a Material Adverse Effect.
(c) Since the date as of which information is given in the Private
Placement Memoranda, there shall have been no litigation or other proceeding
instituted against TWA or any of its subsidiaries or any of their respective
officers or directors in their capacities as such or any of their property or
assets (including the Collateral), before or by any local, state, federal, or
foreign court, commission, regulatory body, administrative agency or other
governmental body, which litigation or proceeding, either singly or in the
aggregate, may reasonably be expected to result in an unfavorable ruling,
decision or finding that is reasonably likely to have a Material Adverse
Effect.
(d) As confirmed in an officers' certificate to be delivered by
TWA to the Owner Trustee pursuant to paragraph (g) of this Section 7.04, each
of the representations and warranties of TWA contained herein or in any
Operative Document shall be true and correct in all material respects at the
Closing Date, as if made on the Closing Date; provided, however, that if any
such representation or warranty is already qualified by materiality, for
purposes of determining whether this condition has been satisfied, such
representation or warranty as so qualified must be true and correct in all
respects; and all covenants and agreements contained herein or in any
Operative Document to be performed on the part of TWA and all conditions
herein or therein contained to be fulfilled or complied with by TWA at or
prior to the Closing Date shall have been duly performed, fulfilled or
complied with in all material respects.
(e) The Owner Trustee shall have received an opinion, dated the
Closing Date, from each of (i) Davis Polk & Wardwell, counsel to TWA, (ii)
local Missouri counsel to TWA, which counsel shall be reasonably acceptable to
the Owner Trustee, (iii) Crowe & Dunlevy, special FAA counsel to TWA, and (iv)
Kathleen A. Soled, Esq., Senior Vice President and General Counsel to TWA, in
each case in form and substance satisfactory to the Owner Trustee.
(f) On the date hereof the Accountants shall have furnished to the
Placement Agent a letter, dated the date of its delivery, addressed to the
Placement Agent and in form and substance satisfactory to the Placement Agent,
confirming that they are independent accountants with respect to TWA as
required by the Securities Act and the Exchange Act and the rules and
regulations promulgated thereunder and, with respect to the financial and other
statistical and numerical information contained in or incorporated by reference
into the Private Placement Memoranda, indicating the results of their limited
procedures relative to such information. At the Closing Date, the Accountants
shall have furnished to the Placement Agent a letter, dated the date of its
delivery, which shall confirm, on the basis of a review in accordance with the
procedures set forth in the letter from the Accountants, that nothing has come
to their attention during the period from the date of the letter referred to
in the prior sentence to a date (specified in the letter) not more than three
days prior to the Closing Date which would require any change in their letter
dated the date hereof if it were required to be dated and delivered at the
Closing Date.
(g) There shall be furnished to the Owner Trustee a certificate in
form and substance satisfactory to the Owner Trustee, dated the Closing Date,
signed by each of the Chief Executive Officer and the Chief Financial Officer
of TWA, addressed to the Owner Trustee, to the effect that:
(i) Each signer of such certificate has carefully examined
the Private Placement Memoranda and (A) as of the date of such certificate,
such document is true and correct in all material respects and does not omit
to state a material fact necessary in order to make the statement therein not
untrue or misleading, (B) no event has occurred as a result of which it is
necessary to amend or to supplement the Private Placement Memoranda as in
effect on the Closing Date in order to make the statements therein not untrue
or misleading in any material respect, and (C) no event or circumstance of the
nature described in clauses (i) and (ii) of Section 7.4(b) has occurred or
exists.
(ii) Each of the representations and warranties of TWA
contained in this Sale Agreement or in any Operative Document were, when
originally made, and are as of the Closing Date, true and correct in all
material respects, provided, however, that if any such representation or
warranty is already qualified by materiality, such representation or warranty
as so qualified was, when originally made, and is, at the time such
certificate is dated, true and correct in all respects.
(iii) Each of the covenants required herein or in any Operative
Document to be performed by TWA on or prior to the delivery of such
certificate has been duly, timely and fully performed, and each condition
herein or in any Operative Document required to be complied with by TWA on or
prior to the Closing Date has been duly, timely and fully complied with.
(h) Prior to the Closing Date, the Notes shall be eligible for
trading through the National Association of Securities Dealers, Inc. Private
Offerings, Resales and Trading through Automated Linkages market ("PORTAL").
(i) TWA shall have furnished to the Owner Trustee such
certificates, in addition to those specifically mentioned herein, as the Owner
Trustee may have reasonably requested as to the accuracy and completeness as
of the Closing Date of any statement in the Private Placement Memoranda, as to
the accuracy as of the Closing Date of the representations and warranties of
TWA in the Operative Documents, as to the performance by TWA of its obligations
under the Operative Documents, or as to the fulfillment of the conditions
concurrent and precedent to the obligations of the Owner Trustee under the
Operative Documents; and all proceedings taken by TWA at or prior to the
Closing in connection with the authorization, issuance and sale of the
Securities and the creation and perfection of the liens in the Collateral
contemplated by the Security Agreements shall be in form and substance
satisfactory to the Owner Trustee and to their counsel.
(j) Between the date of the Private Placement Memoranda and the
Closing Date (i) no downgrading shall have occurred in the rating accorded the
debt securities of TWA or any of its subsidiaries by any "nationally recognized
statistical rating organization," as that term is defined by the Commission for
purposes of Rule 436(g)(2) under the Securities Act and (ii) no such
organization shall have publicly announced that it has under surveillance or
review, with possible negative implications, its rating of any of the debt
securities of TWA or any of its subsidiaries.
(k) The Operative Documents shall have been duly executed and
delivered by the parties, shall be in full force and effect and each shall be
in form and substance satisfactory to the Owner Trustee.
(l) The Securities shall have been duly authorized, executed and
delivered by TWA and duly authenticated by the Trustee in the manner provided
for in the Indentures and shall be in form and substance satisfactory to the
Owner Trustee and the Placement Agent.
(m) At or before the Closing Date (i) evidence (including without
limitation, the results of lien searches and security interest termination
documents) satisfactory to the Owner Trustee of the absence of any liens other
than Permitted Liens (as defined in the Definitions Appendices to the
Indentures) on any of the Collateral shall have been furnished to the Owner
Trustee, and (ii) such evidence of the completion of all recordings and filings
of the Security Agreements and the Mortgage Supplements, and of the execution,
delivery, recording and/or filing of such other documents, as may be necessary
or, in the reasonable opinion of the Owner Trustee, desirable to create or
perfect the liens created, or purported or intended to be created, by the
Security Agreements shall have been furnished to the Owner Trustee.
(n) On the Closing Date, TWA shall have delivered or cause to have
been delivered to the Owner Trustee original executed copies of all
certificates, opinions and other documents required to be delivered or caused
to be delivered by it under the Operative Documents in connection with the
initial issuance of the Securities.
(o) The Owner Trustee shall have received the following in each
case in form and substance satisfactory to it:
(i) a certificate dated the Closing Date of the Secretary or
an Assistant Secretary of TWA, certifying (A) a copy of the resolutions of the
board of directors of TWA, duly authorizing the transactions contemplated
hereby and the execution, delivery and performance by TWA of the Securities
and the Operative Documents and each other document required to be executed
and delivered on the Closing Date by TWA in accordance with the provisions
hereof and (B) on the Closing Date, a copy of the certificate of incorporation
and by-laws of TWA; and
(ii) in the case of each Aircraft, an insurance report of
TWA's independent broker as to TWA's due compliance with terms of Section 6.3
of the Security Agreements and certificates of insurance issued by or on
behalf of the insurers evidencing the insurance coverage required by such
Section, which certificates shall specify, among other things, the amount of
public liability insurance carried by TWA pursuant to such Section.
(p) The following statements shall be true and correct and the
Owner Trustee shall have received evidence in form and substance satisfactory
to the Owner Trustee to the effect that:
(i) each Aircraft shall have been duly certified by the FAA
as to type and airworthiness and shall have a currently valid United States
Standard Certificate of Airworthiness issued by the FAA;
(ii) the FAA Bill of Sale for each Aircraft shall have been
duly filed for recordation with the FAA pursuant to the Transportation Code
with respect to such Aircraft;
(iii) application for registration of each Aircraft in the
name of TWA and a Declaration of International Operations with respect to each
Aircraft shall have been duly made with the FAA and TWA shall have temporary
or permanent authority to operate such Aircraft;
(iv) TWA has such title to each Aircraft, free and clear of
such Liens, in each case as described in a warranty bill of sale dated the
Closing Date in the form of Exhibit D hereto, other than Permitted Liens (as
defined in the Indentures);
(v) the appropriate consent forms have been executed by TWA
to be furnished by TWA to each TBT Lessor pursuant to Temporary Treasury
Regulation Section 5c.168(f)(8)-2(a)(5), pursuant to which TWA agrees to take
each of the Aircraft subject to its respective TBT Lease; and
(vi) the Trustee and any holders of the Securities, are
entitled to the protection of Section 1110 of the United States Bankruptcy Code
in connection with its right to take possession of the Aircraft and Engines
constituting part of such Aircraft in the event of a case under Chapter 11 of
the United States Bankruptcy code in which TWA is a debtor.
All of the certificates, opinions and documents delivered or
caused to be delivered by TWA to the Owner Trustee pursuant to Section 7.02 and
this Section 7.04 shall be addressed to and may be relied upon by the Owner
Trustee, the Beneficiary, CL/PK Airfinance, the Placement Agent and each
Participant to which a Security is transferred on the Closing Date. The
Trustee shall receive on the Closing Date a letter from each person delivering
an opinion pursuant to Article 7, authorizing the Trustee to rely on such
opinion as if it had been addressed to the Trustee.
Section 7.05. Conditions to Closing. If any of the conditions
specified in this Article 7 shall not have been fulfilled or waived on or
before April 20, 1998, this Sale Agreement and all of the Owner Trustee's and
TWA's obligations hereunder may be canceled as of such date by either the Owner
Trustee or TWA, each at its sole discretion; provided that neither the Owner
Trustee nor TWA will waive as a condition to Closing receipt by the Placement
Agent, in form and substance satisfactory to it, of any reliance letter, the
letters from the Accountants described in Section 7.04(f), the Securities it
is entitled to receive and any opinions required by this Article 7. Any
cancellation pursuant to this Section 7.05 shall be without any liability on
the part of any party hereto or its affiliates, directors, officers or
shareholders, other than the Owner Trustee's obligations and the obligations
of TWA pursuant to Article 11 and Section 13.01(e) hereof shall nevertheless
survive and continue thereafter. Notice of such cancellation shall be given
to TWA or the Owner Trustee, as the case may be, in writing or by telephone or
facsimile transmission confirmed in writing. Nothing contained in this
Section 7.05 shall relieve any party from liability for any breach of this Sale
Agreement.
ARTICLE 8
Termination
Section 8.01. Termination by the Owner Trustee. The
obligations of the Owner Trustee under this Sale Agreement may be terminated
at any time on or prior to the Closing Date by notice to TWA from the Owner
Trustee without liability on the part of the Owner Trustee to TWA, if, prior
to the exchange of the Securities for the Aircraft, in the judgment of the
Participants holding at least 66 2/3% of the participation interests under the
Participation Agreement, (i) there has been, since the respective dates as of
which information is given in the Private Placement Memoranda, any change or
development in TWA's business, properties, business prospects, condition
(financial or otherwise) or results of operations which has caused, or is
reasonably expected to cause, a Material Adverse Effect (it being agreed that
the execution and delivery of agreements for TWA's purchase or lease of 24
MD-83 aircraft, which are the subject of letters of intent referred to in the
Private Placement Memoranda, and for the financing of such purchases and
leases shall not be considered to have a Material Adverse Effect), (ii) trading
in any of the equity securities of TWA shall have been suspended by the
Commission, the NASD or an exchange that lists such securities, (iii) trading
in securities generally on the New York Stock Exchange, the American Stock
Exchange or the Nasdaq Stock Market shall have been suspended or limited or
minimum or maximum prices shall have been generally established on such
exchange, or additional material governmental restrictions, not in force on the
date of this Sale Agreement, shall have been imposed upon trading in
securities generally by such exchange or by order of the Commission or any
court or other governmental authority, (iv) a general banking moratorium shall
have been declared by either Federal or New York State authorities, (v) the
Closing Price (as defined in the Equity Note Indenture) of the Common Stock
on the day preceding the Closing Date shall be 25% or more less than the
Closing Price of the Common Stock on the day immediately preceding the date
hereof, (vi) any Government Entity shall have issued an order, decree or
ruling or taken any other action to restrain, enjoin, prohibit or otherwise
invalidate any transaction contemplated by this Sale Agreement, or any third
party shall have commenced any proceeding requesting such relief, (vii) at any
time prior to the Closing Date, TWA shall announce any material consolidation,
merger, acquisition (other than of aircraft) or similar transaction or (viii)
any material adverse change in the financial or securities markets in the
United States or in political, financial or economic conditions in the United
States or any outbreak or material escalation of hostilities or other calamity
or crisis shall have occurred the effect of which is such as to make it, in the
judgment of the Participants holding at least 66 2/3% of the participation
interests under the Participation Agreement, impracticable or inadvisable to
proceed with the completion of the Sale on the terms and in the manner
contemplated by this Sale Agreement.
Section 8.02. Effect of Termination. In the event of the
termination and abandonment of this Sale Agreement pursuant to this Article 8,
this Sale Agreement shall forthwith become void and have no effect, without any
liability on the part of any party hereto or its affiliates, directors,
officers or shareholders, other than Owner Trustee's obligations and the
obligations of TWA pursuant to this Section 8.2 and Article 11 and Section
13.1(e) hereof. Nothing contained in this Section 8.2 shall relieve any party
from liability for any breach of this Sale Agreement.
ARTICLE 9
Owner Trustee Assignment of Rights and Warranties
Section 9.01. Assignable Warranties. As set forth in
Section 7.01(c), at the time of Sale, the Owner Trustee will assign to TWA
any assignable warranties and indemnities given the Owner Trustee by the
Manufacturer and the Engine Manufacturer and other vendors with respect to
the Aircraft, including any rights which may have accrued prior to Sale but
which have not been fully exercised by the Owner Trustee.
Section 9.02. Non-Assignable Warranties. To the extent
that any warranty or indemnity given to the Owner Trustee by Manufacturer
and others with respect to the Aircraft cannot be assigned, TWA will be
entitled to take such action to enforce such warranty or indemnity in the
name of the Owner Trustee against Manufacturer and such other parties as
TWA sees fit, but subject to the Owner Trustee's first ensuring that the
Owner Trustee is indemnified and secured to the Owner Trustee's
satisfaction against all losses, damages, costs, expenses and liabilities
thereby incurred or to be incurred.
ARTICLE 10
Expenses and Taxes
Section 10.01. Costs and Expenses of Sales. TWA agrees to pay
all costs and expenses with respect to the purchase and sale of the Aircraft,
including but not limited to the costs and expenses to register the Aircraft in
the name of TWA (but excluding the fees and expenses of the Owner Trustee's
counsel other than FAA counsel).
Section 10.02. Taxes. TWA will pay promptly when due, and will
indemnify and hold harmless the Owner Trustee and the Beneficiary and any
officers, directors, employees, agents and shareholders of the foregoing (each,
a "Tax Indemnitee") on a full indemnity basis from, all taxes, duties and fees
(including without limitation any value added, franchise, transfer, sales,
gross receipts, use, business, occupation, excise, personal property, real
property, stamp or other tax), and any assessments, penalties, fines,
additions to tax or interest thereon, which may be levied in the United States
of America or by any other Government Entity or taxing authority regardless of
where located in connection with the sale, purchase, delivery, taking of
possession, registration and deregistration of the Aircraft (excluding any
income tax or U.S. federal withholding tax imposed upon the gross or net
income of a Tax Indemnitee, and, with respect to a Tax Indemnitee, any taxes
attributable to such Tax Indemnitee's gross negligence, willful misconduct or
Owner Trustee's breach of this Sale Agreement) (collectively, "Taxes"). TWA's
indemnity obligations will exist regardless of the manner in which such
charges are imposed (whether imposed upon a Tax Indemnitee, TWA, all or part
of the Aircraft or otherwise).
Section 10.03. After-tax Basis. The amount which TWA is
required to pay with respect to any Taxes indemnified against under this
Article 10 is an amount sufficient to restore such Tax Indemnitee on an
after-tax basis to the same position such Tax Indemnitee would have been in
had such Taxes not been incurred.
Section 10.04. Timing of Payment. Any amount payable to a Tax
Indemnitee pursuant to this Article 10 will be paid within ten (10) days after
receipt of a written demand therefor from such Tax Indemnitee accompanied by a
written statement describing in reasonable detail the basis for such indemnity
and the computation of the amount so payable; provided, however, that such
amount need not be paid by TWA prior to the earlier of (i) the date any Tax is
payable to the appropriate Government Entity or taxing authority or (ii) in
the case of amounts which are being contested by TWA in good faith or by a Tax
Indemnitee pursuant to Section 10.5, the date such contest is finally resolved.
Section 10.05. Contests. If a claim is made against a Tax
Indemnitee for Taxes with respect to which TWA is liable for a payment or
indemnity hereunder, such Tax Indemnitee will promptly give TWA notice in
writing of such claim; provided, however, that a Tax Indemnitee's failure to
give notice will not relieve TWA of its obligations hereunder. So long as (i)
TWA has provided such Tax Indemnitee, at such Tax Indemnitee's request, with an
opinion of independent tax counsel satisfactory to such Tax Indemnitee that a
reasonable basis exists for contesting such claim and (ii) adequate reserves
have been made for such Taxes or, if required, an adequate bond has been
posted, then such Tax Indemnitee, at TWA's written request, will in good
faith, with due diligence and at TWA's sole expense, contest (or permit TWA
to contest in the name of such Tax Indemnitee or TWA) the validity,
applicability or amount of such Taxes.
Section 10.06. Refunds. Upon receipt by a Tax Indemnitee of a
refund of all or any part of any Taxes which TWA has paid, such Tax Indemnitee
will pay to TWA the portion of any such refund attributable to Taxes which TWA
has paid.
Section 10.07. Cooperation in Filing Tax Returns. The Owner
Trustee, the Beneficiary and TWA will cooperate with one another in providing
information which may be reasonably required to fulfill each party's tax
filing requirements and any audit information request arising from such filing.
ARTICLE 11
Indemnities and Insurance
Section 11.01. Indemnification with Regard to the Aircraft.
(a) General Indemnity. Subject to Article 11.01(b), TWA agrees to
defend, indemnify and hold harmless the Owner Trustee, the Beneficiary and
their respective affiliates, and each of their respective officers, directors,
employees, agents and shareholders (individually an "Aircraft Indemnitee" and
collectively "Aircraft Indemnitees") from any and all liabilities,
obligations, losses, damages, penalties, claims, actions, suits, costs,
disbursements and expenses (including legal fees, costs and related expenses)
of every kind and nature ("Expenses") which may be incurred by an Aircraft
Indemnitee after the Closing Date arising directly or indirectly out of or in
any way connected with:
(i) The ownership, possession, control, use or operation of
any of the Aircraft (either in the air or on the ground) by TWA or any Person
after the Sale of the Aircraft to TWA; provided the same shall not include any
warranties of title running from the Owner Trustee or any taxes or other sums
due or claimed to be due from the Owner Trustee for periods of time prior to
the Closing Date.
(ii) Any claim arising after the Sale that any design,
article or material in any of the Aircraft or in the operation or use of any
of the Aircraft constitutes an infringement of a patent, trademark, copyright,
design or other proprietary right (but only to the extent not covered by the
patent, trademark or copyright infringements provided to the Owner Trustee
from the Manufacturer and the Engine Manufacturer).
(b) Exceptions to General Indemnities. TWA will be released
from the indemnity provided for in Section 11.01(a) only if and to the
extent that it has been judicially determined that none of the acts or
omissions which gave rise to or were related to the claim or Expense were
attributable to the ownership, possession, control, use or operation of any
of the Aircraft (either in the air or on the ground) by TWA or any Person
following the Sale or to the extent resulting from the gross negligence,
willful misconduct or bad faith of any Aircraft Indemnitee.
(c) After-Tax Basis. The amount which TWA will be required to pay
with respect to any Expense indemnified against under Section 11.01(a) will be
an amount sufficient to restore each Aircraft Indemnitee, on an after-tax
basis, to the same position such Aircraft Indemnitee would have been in had
such Expense not been incurred.
(d) Timing of Payment. It is the intent of the parties that each
Aircraft Indemnitee will have the right to indemnification for Expenses
hereunder as soon as a claim is made. TWA will pay an Aircraft Indemnitee for
Expenses pursuant to this Section 11.01 within ten (10) days after receipt of
a written demand therefor from such Aircraft Indemnitee accompanied by a
written statement describing in reasonable detail the basis for such
indemnity; subject to TWA's rights under Section 11.01(h).
(e) Subrogation. Upon the payment in full of any indemnity
pursuant to this Section 11.01 by TWA, TWA will be subrogated to any right of
the Aircraft Indemnitee in respect of the matter against which such indemnity
has been made.
(f) Notice. Each Aircraft Indemnitee and TWA will give prompt
written notice one to the other of any liability of which such party has
knowledge for which TWA is, or may be, liable under Section 11.01(a); provided,
however, that failure to give such notice will not terminate any of the rights
of Aircraft Indemnitees under this Section 11.01 except to the extent that TWA
has been materially prejudiced by the failure to provide such notice.
(g) Refunds. If any Aircraft Indemnitee obtains a recovery of all
or any part of any amount which TWA has paid to such Aircraft Indemnitee, such
Aircraft Indemnitee will pay to TWA the net amount recovered by such Aircraft
Indemnitee.
(h) Defense of Claims. Unless a default hereunder has occurred and
is continuing, TWA and its insurers will have the right (in each such case at
TWA's sole expense) to investigate and, provided that TWA or its insurers has
not reserved the right to dispute liability with respect to any insurance
policies pursuant to which coverage is sought, defend or compromise any claim
covered by insurance for which indemnification is sought pursuant to Section
11.01(a) and each Aircraft Indemnitee will cooperate with TWA or its insurers
with respect thereto. If TWA or its insurers are retaining attorneys to handle
such claim, such counsel must be reasonably satisfactory to the Aircraft
Indemnitees. If not, the Aircraft Indemnitees will have the right to retain
counsel of their choice at TWA's expense; provided that prior to entering into
any settlement agreement relating to any such claim, such Aircraft Indemnitees
shall either (i) obtain a written consent from TWA or its insurers or (ii)
grant TWA and its insurers a release from and waiver of all further obligation
to such Aircraft Indemnitees under this Section 11.01 with respect to such
claim.
(i) Other Indemnification. TWA will be obligated to indemnify and
hold harmless the Aircraft Indemnitees in accordance with the terms of this
Section 11.01 and the Aircraft Indemnitees may invoke TWA's obligations
hereunder even though Owner Trustee or Beneficiary may also have received an
agreement to indemnify and hold them harmless with respect to the same matters
by any other Person.
Section 11.02. Indemnification of TWA by Owner Trustee.
(a) The Owner Trustee hereby agrees to indemnify and hold harmless
TWA and its Affiliates and each of its officers, directors, employees, agents,
advisors and representatives (but explicitly excluding Lazard Freres & Co. LLC
in any of its capacities) (each an "Indemnified Party") from and against any
and all damages, losses, liabilities, reasonable expenses and claims
(including without limitation, reasonable fees and disbursements of counsel)
that may be incurred by or asserted or awarded against any Indemnified Party,
in each case to the extent arising out of or in connection with or relating to
any investigation, litigation or proceeding or the preparation of any defense
with respect thereto, arising out of any conflict, dispute or disagreement (x)
between or among any of the Owner Trustee, the Beneficiary, CL/PK Airfinance
or any Participant in connection with the Sale or (y) arising from the failure
of TWA to have acquired the title to the Aircraft warranted in Article 12
because of the invalidity or ineffectiveness of the authorization of the Owner
Trustee to enter into and conclude the Sale as provided herein, except to the
extent such claim, damage, loss, liability or expense resulted from such
Indemnified Party's gross negligence, willful misconduct or bad faith. Each
Participant signing and delivering a transferee letter of representation
substantially in the form of Annex B or Annex C hereto (an "Investor Letter"),
as applicable, with a comparable indemnity shall be severally and not jointly
liable to an Indemnified Party under this subsection (a) for such
Participant's pro rata share of such liability (such share to bear the same
relation to such liability as such Participant's interest in the Securities on
the Closing Date bears to the aggregate principal amount of Securities of all
Participants (disregarding for all purposes of this sentence all Securities
owned from time to time by Lazard Freres & Co. LLC as a Participant except
$394, 368.58 in aggregate principal amount) who have signed and delivered such
Investor Letters from time to time). To the extent any Participant that signs
and delivers an Investor Letter is found liable for any claim, damage, loss
liability or expense, the Owner Trustee's liability for any such claim will be
reduced by such amount. For the avoidance of doubt, the indemnity to be
provided to TWA pursuant to this Section 11.02(a) and any Investor Letters is
not intended to protect it against any liability arising in connection with the
TBT Leases.
(b) Each Indemnified Party and the Owner Trustee will give
prompt written notice to each other of any liability of which any such
party has knowledge for which the Owner Trustee is, or may be, liable under
Section 11.02(a); provided, however, that failure to give such notice will
not terminate any of the rights of any Indemnified Party under this Section
11.02, except to the extent that the Owner Trustee has been materially
prejudiced by the failure to provide such notice. Upon the payment in full
of any indemnity pursuant to this Section 11.02 by the Owner Trustee, the
Owner Trustee will be subrogated, to any right of any Indemnified Party in
respect of the matter against which such indemnity has been made. If any
Indemnified Party obtains a recovery of all or any part of any amount which
the Owner Trustee has paid to such Indemnified Party, such Indemnified
Party will pay to the Owner Trustee the net amount recovered by such
Indemnified Party. The Owner Trustee and its insurers will have the right
(in each such case at the Owner Trustee's expense) to investigate and,
provided that the Owner Trustee or its insurers have not reserved the right
to dispute liability with respect to any insurance policies pursuant to
which coverage is sought, defend or compromise any claim covered by
insurance for which indemnification is sought pursuant to Section 11.02 and
each Indemnified Party will cooperate with the Owner Trustee or its
insurers with respect thereto. If the Owner Trustee or its insurers are
retaining attorneys to handle such claim, such counsel must be reasonably
satisfactory to the relevant Indemnified Party. If not, any such
Indemnified Party will have the right to retain counsel of its choice at
the Owner Trustee's expense; provided that prior to entering into any
settlement agreement relating to any such claim, such Indemnified Party
shall either (i) obtain a written consent from the Owner Trustee or its
insurers or (ii) grant Owner Trustee and its insurers a release from and
waiver of all further obligation to such Indemnified Party under this
Section 11.02 with respect to such claim.
Section 11.03. Insurance.
(a) TWA shall maintain or cause to be maintained, at all times for
a period of three (3) years after the Closing Date, at no expense to and for
the benefit of the Owner Trustee or any other Aircraft Indemnitee,
comprehensive public liability insurance (including, without limitation,
contractual liability, passenger liability, premises hangar keepers liability
and products liability) and property damage insurance with respect to the
Aircraft of the type usual and customary by commercial scheduled airline
standards for airline carriers of a similar size to TWA operating similar
aircraft and providing for no less coverage than is carried by TWA on similar
aircraft in its fleet. Such policy shall include war and allied risks in
accordance with standard market practice. Such insurance shall be in an amount
not less than the amount applicable to similar passenger aircraft and engines
which comprise TWA's fleet, and in any event not less than Seven Hundred Fifty
Million Dollars ($750,000,000). In addition the insurance shall provide that
the insurer waive any right it may have to be subrogated to any right of any
insured against an Aircraft Indemnitee with respect to the Aircraft.
(b) On the Closing Date, and on each renewal of the insurance
required hereby, but not less often than annually, TWA shall furnish the Owner
Trustee and the Trustee with a certificate of insurance executed by an
independent insurance broker appointed by TWA certifying that the insurance
then maintained on the Aircraft complies with the terms of this Section 11.03.
Such certificate will certify that the insurance policy or policies: (i)
contains a standard clause which provides for a thirty (30) days' advance
notice of cancellation (seven (7) days' notice or as available in the case of
war risk), non-renewal or material change and (ii) sets forth the
corresponding waiver of subrogation and other endorsements required by Section
11.03 hereof.
ARTICLE 12
Representations, Warranties and Covenants of Owner Trustee
Section 12.01. Owner Trustee's Representations, Warranties and
Covenants In Its Individual Capacity. Owner Trustee, in its individual
capacity, represents, warrants and covenants that:
(a) Organization, etc. Owner Trustee is a national banking
association duly organized, validly existing and in good standing under the
laws of the United States and has all requisite power, authority and legal
right to enter into and perform its obligations under this Sale Agreement and
any other Operative Document to which Owner Trustee is a party.
(b) Authorization, etc. Owner Trustee, in its trust capacity and,
to the extent expressly provided therein, in its individual capacity, has duly
authorized, executed and delivered this Sale Agreement and, as of the Closing
Date will have duly authorized, executed and delivered, any other Operative
Document to which Owner Trustee is a party in its individual capacity or as
Owner Trustee, as the case may be. This Sale Agreement constitutes, and any
other Operative Document to which the Owner Trustee is a party will as of the
Closing Date constitute, a legal, valid and binding obligation of Owner Trustee
in its individual capacity enforceable against Owner Trustee in its individual
capacity or as Owner Trustee, as the case may be, in accordance with the
respective terms hereof and thereof, subject in each case to the effect of
bankruptcy, insolvency and reorganization and other laws of general
applicability relating to and affecting creditors' rights and to general
principles of equity (whether considered in a proceeding in equity or at law).
(c) No Violation. Neither the execution and delivery or performance
by Owner Trustee, in its individual capacity or as Owner Trustee, as the case
may be, of this Sale Agreement and any other Operative Document to which Owner
Trustee is a party, nor consummation of any of the transactions as
contemplated thereby, will result in any violation of, or be in conflict with,
or constitute a default under, or result in the creation of any Lien upon any
property of Owner Trustee under, any of the provisions of Owner Trustee's
charter or by-laws, or of any indenture, mortgage, chattel mortgage, deed of
trust, conditional sales contract, lease, note or bond purchase agreement,
license, bank loan, credit agreement or other agreement to which Owner Trustee
is a party or by which Owner Trustee is bound, or any law, judgment,
governmental rule, regulation or order of any State of Utah or United States of
America government or governmental authority or agency governing the banking
or trust powers of Owner Trustee.
(d) No Consents or Approvals. Neither the execution and delivery by
Owner Trustee, in its individual capacity or as Owner Trustee, as the case may
be, of this Sale Agreement or any other Operative Document to which Owner
Trustee is a party nor the consummation of any of the transactions
contemplated hereby or thereby requires the consent or approval of, the giving
of notice to, or the registration with, any Utah state governmental authority
or agency or any United States federal governmental authority or agency
governing the banking or trust powers of Owner Trustee.
(e) Discharge of Liens. There are no Lessor Liens on the Trust
Estate (as defined in the Trust Agreement) and Owner Trustee agrees that it
will, in its individual capacity and at its own cost and expense (but without
any right of indemnity in respect of any such cost or expense under Section
11.01 hereof), promptly take such action as may be necessary to duly discharge
and satisfy in full all Lessor Liens.
(f) Litigation. There are no pending or, to the actual knowledge
of an official in Owner Trustee's Corporate Trust Services division, threatened
actions or proceedings before any court or administrative agency to which
Owner Trustee is a party, or any other actions or proceedings before any court
or administrative agency which relate to Owner Trustee's banking or trust
powers which, if determined adversely to Owner Trustee, would materially and
adversely affect its right, power and authority to perform its obligations
under the Trust Agreement, this Sale Agreement or any other Operative Document
to which it is or will be a party.
Section 12.02. Owner Trustee's Representations, Warranties and
Covenants. Owner Trustee represents, warrants and covenants that:
(a) Discharge of Liens. There are no liens on the Aircraft or the
Engines attributable to Owner Trustee or to any Person claiming by or through
Owner Trustee except as contemplated by the Operative Documents.
(b) Title to the Aircraft. On the Closing Date, Owner Trustee will
have such title to the Aircraft, free and clear of such Security Interests, in
each case, as described in a warranty bill of sale dated the Closing Date in
the form of Exhibit D hereto, and Owner Trustee will indemnify and defend TWA
in respect of any claims, losses, costs, expenses, charges or liabilities
arising out of any defect in Owner Trustee's title to the full extent provided
in the said warranty bill of sale.
(c) Performance of Lease. Owner Trustee shall be responsible for
the payment, performance and discharge of, and shall fully and completely pay,
perform and discharge, all of its obligations under each Lease in accordance
with the terms thereof.
(d) Valid and Binding Agreements. Assuming the due authorization,
execution and delivery of the other Operative Documents by the other parties
thereto, this Sale Agreement is, and the other Operative Documents to which
Owner Trustee is a party will be legal, valid and binding obligations of Owner
Trustee, enforceable against Owner Trustee in accordance with the respective
terms thereof.
Section 12.03. Representations, Warranties and Covenants of the
Owner Trustee Regarding the Securities. (a) The Owner Trustee represents,
warrants and agrees that the Securities have not been, and the shares of the
Company's Common Stock issuable upon conversion of the Equity Notes (the
"Restricted Common Stock") at the time of issuance will not be, registered
under the Securities Act, and, unless so registered, may not be sold except as
permitted in the following sentence. The Owner Trustee agrees on its own
behalf and on behalf of any investor account for which it is purchasing
Securities or, following conversion of the Equity Notes, shares of Restricted
Common Stock, to offer, sell or otherwise transfer such Securities or shares of
Restricted Common Stock prior to the date which is two years after the later
of the date of original issue and the last date on which TWA or any affiliate
of TWA was the owner of such Securities (or any predecessor thereto) or,
following conversion of the Equity Notes, such Restricted Common Stock (the
"Resale Restriction Termination Date") only (a) to TWA, (b) pursuant to a
registration statement which has been declared effective under the Securities
Act, (c) with respect to the Notes, for so long as the Notes are eligible for
resale pursuant to Rule 144A under the Securities Act ("Rule 144A") to a
person it reasonably believes is a qualified institutional buyer under Rule
144A (a "QIB") that purchases for its own account or for the account of a QIB
and to whom notice is given that the transfer is being made in reliance on Rule
144A, (d) pursuant to offers and sales to non-U.S. persons that occur outside
the United States within the meaning of Regulation S under the Securities Act
("Regulation S"), (e) to an institutional "accredited investor" within the
meaning of subparagraph (a)(1), (2), (3) or (7) (or, in the case of the
Beneficiary only, (8)) of Rule 501 under the Securities Act that is purchasing
for his own account or for the account of such an institutional "accredited
investor" for investment purposes and not with a view to, or for offer or sale
in connection with, any distribution thereof in violation of the Securities
Act, or (f) pursuant to any other available exemption from the registration
requirements of the Securities Act, subject in each of the foregoing cases to
any requirement of law that the disposition of its property or the property of
such investor account or accounts be at all times within its control and in
compliance with any applicable state securities laws. The foregoing
restrictions on resale will not apply subsequent to the Resale Restriction
Termination Date. If any resale or other transfer of the Securities or
Restricted Common Stock is proposed to be made pursuant to clause (d), (e) or
(f) above prior to the Resale Restriction Termination Date, Owner Trustee
shall deliver a letter from the transferee substantially in the form attached
as Annex B or Annex C hereto (except that any letter executed and delivered by
any transferee that is not a Participant need not contain paragraph 7 and 8
thereof), as applicable, to the Trustee, which shall provide, among other
things, that, as applicable, the transferee is (x) an institution that, at the
time the buy order was originated, was outside the United States and was not a
U.S. person (and was not purchasing for the account or benefit of a U.S.
person) within the meaning of Regulation S under the Securities Act or (y) an
institutional "accredited investor" within the meaning of subparagraph (a)(1),
(2), (3) or (7) (or, in the case of the Beneficiary only, (8)) of Rule 501
under the Securities Act and that it is acquiring such Securities or
Restricted Common Stock for investment purposes (other than in the case where
the Beneficiary or CL/PK Airfinance is the transferee and such Securities are
to be further distributed to the Participants) and not for distribution in
violation of the Securities Act. The Owner Trustee acknowledges that TWA and
the Trustee reserve the right prior to any offer, sale or other transfer by
Owner Trustee pursuant to clause (d), (e) or (f) prior to the Resale
Restriction Termination Date with respect to the Securities or Restricted
Common Stock to require the delivery of an opinion of counsel, certifications
and/or other information satisfactory to TWA and the Trustee.
(b) The Owner Trustee represents and warrants that it is either
(i) an institutional "accredited investor" (as defined in Rule 501(a)(1), (2),
(3) or (7) of Regulation D under the Securities Act) purchasing for its own
account or for the account of such an institutional "accredited investor" and
it is not acquiring the Securities with a view to, or for offer or sale in
connection with, any distribution in violation of the Securities Act and it
has such knowledge and experience in financial and business matters as to be
capable of evaluating the merits and risks of its investment in the
Securities, and it is able to bear the economic risk of its investment or (ii)
an institution that, at the time the buy order for the Securities was
originated, was outside the United States and was not a U.S. person (and was
not purchasing for the account or benefit of a U.S. person) within the meaning
of Regulation S under the Securities Act.
(c) The Owner Trustee represents, warrants and agrees that it has
received copies of the Private Placement Memoranda and acknowledges that it
has had access to such financial and other information, and have been afforded
the opportunity to ask such questions of representatives of TWA and receive
answers thereto, as it deems necessary in connection with its decision to
purchase the Securities.
(d) The Owner Trustee represents and warrants that the purchase of
the Securities hereunder does not constitute a "prohibited transaction" under
Section 406 of ERISA or Section 4975 of the Code. The Owner Trustee agrees on
its own behalf and on behalf of any investor account for which it is
purchasing Securities to offer, sell or otherwise transfer such Securities in
transactions which will not constitute prohibited transactions under Section
406 of ERISA or Section 4975 of the Code.
(e) The Owner Trustee will not take, and will not cause anyone to
take, any manipulative action with respect to the price of the Common Stock
in violation of applicable law.
Section 12.04. TBT Leases Excluded. The TBT Leases are excluded
from the foregoing representations and warranties in this Article 12.
ARTICLE 13
Agreements of TWA
Section 13.01. Agreements of TWA. TWA agrees with the Owner
Trustee as follows:
(a) TWA will use its reasonable best efforts to file on a timely
basis all such reports required to be filed under the Exchange Act, and
endeavor in good faith to take such other actions, as are reasonably necessary
to enable any beneficial owner of any of the Notes or the Equity Notes to sell
Transfer Restricted Securities (as defined below) without registration under
the Securities Act within the limitation of the exemptions provided by (i) in
the case of the Securities, Rule 144, as such rule may be amended from time to
time, (ii) in the case of the Notes, Rule 144A, as such rule may be amended
from time to time, or (iii) any similar rules or regulations hereafter adopted
by the Commission. For purposes of the foregoing, "Transfer Restricted
Securities" means each Note and Equity Note, until the date on which such Note
has been effectively registered under the Securities Act and disposed of in
accordance with the registration statement or such Equity Note has been
converted into Common Stock and the resale of such Common Stock has been
registered under the Securities Act pursuant to the Shelf Registration
Statement, the date on which such Note or Equity Note is distributed to the
public pursuant to Rule 144 or the date on which such Note or Equity Note may
be sold or transferred without any restrictions pursuant to Rule 144(k) (or
any similar provisions then in force).
(b) Neither TWA nor any person acting on its behalf will solicit
any offer to buy or offer to sell the Securities by means of any form of
general solicitation or general advertising in a manner that would require the
registration under the Securities Act of the sale of the Notes or Equity Notes
to the Owner Trustee.
(c) Neither TWA nor any affiliate (as defined in Rule 501 (b) of
the Securities Act) of TWA will offer, offer for sale or solicit offers to buy
or otherwise negotiate in respect of any security (as defined in the
Securities Act) that would be integrated with the sale of the Notes or Equity
Notes in a manner that would require the registration under the Securities Act
of the sale of the Notes or Equity Notes to the Owner Trustee.
(d) TWA will not be or become, at any time prior to the expiration
of two years after the Closing Date, an "open-end investment trust," "unit
investment trust" or "face-amount certificate Company" that is or is required
to be registered under Section 8 of the Investment Company Act.
(e) Whether or not the transactions contemplated by this Sale
Agreement are consummated or this Sale Agreement is terminated, TWA will pay
all costs and expenses incident to the performance of the obligations of TWA
under this Sale Agreement and the other Operative Documents, including but not
limited to, all costs and expenses of or relating to (1) the preparation, word
processing, printing, reproduction and distribution of the Private Placement
Memoranda, the Operative Documents, the Exchange Offer Registration Statement
and any amendments, exhibits and supplements thereto, (2) the preparation and
delivery of certificates representing the Securities, (3) making the Notes
eligible for trading through PORTAL, (4) any registration or qualification of
the Securities for offer and sale under the securities or Blue Sky laws of
such jurisdictions designated pursuant hereto, including the reasonable fees,
disbursements and other charges of counsel to the Owner Trustee and the
Placement Agent in connection therewith, and the preparation and printing of
preliminary, supplemental and final Blue Sky memoranda, (5) counsel for TWA,
(6) the transfer agent and registrar for the Securities, (7) the listing of
the Notes and the Common Stock issuable upon conversion of the Equity Notes on
the American Stock Exchange, (8) approval of the Notes by DTC for "book entry"
transfer, (9) all the costs and expenses of creating and perfecting security
interests in the Collateral in favor of the Trustee pursuant to the Security
Agreements including, without limitation, filing and recording fees and
expenses, fees and expenses of counsel for TWA for providing such opinions as
the Owner Trustee may reasonably request, (10) the fees and expenses of the
Trustee, including the fees and disbursements of counsel for the Trustee, in
connection with the Operative Documents and the Securities, and (11) all other
costs and expenses incident to the performance of TWA's obligations hereunder
and under the Operative Documents which are not otherwise specifically
provided for in this Article 13.
(f) TWA will use its reasonable best efforts to cause the Notes to
be designated as eligible for trading in the PORTAL market and/or for
clearance and settlement through DTC.
(g) During the period of two years after the Closing Date, TWA will
not resell any of the Notes or the Equity Notes which constitute "restricted
securities" under Rule 144 that have been acquired by it.
(h) On or before the Closing Date, TWA and its subsidiaries, as
applicable, shall enter into and comply with the Operative Documents other
than this Sale Agreement.
(i) TWA shall comply with all agreements set forth in the
representation letter of TWA to DTC relating to the approval of the Notes by
DTC for "book-entry" transfer.
(j) TWA shall furnish the Trustee, promptly after the Closing Date,
the results of UCC searches in each of the jurisdictions where a filing is
required to be made pursuant to any Operative Document as contemplated by
Section 7.04(m) hereof. Such UCC searches shall indicate that there exists no
lien, charge or encumbrance on the Collateral other than Permitted Liens (as
defined in the Security Agreements).
(k) TWA agrees to use its reasonable best efforts to list the
Notes on the American Stock Exchange, or on such other stock exchange or
market as the Common Stock is then principally traded, no later than the
earliest to occur of (i) the effectiveness of the initial Exchange Offer
Registration Statement and (ii) the effectiveness of the initial Shelf
Registration Statement provided that such Notes meet the minimum requirements
for listing on any such exchange or market, and, if applicable, to use its
reasonable best efforts to maintain such listing for so long as any of the
Notes are outstanding.
(l) Promptly upon completion by the FAA of the processing of the
documents referred to in Sections 7.04(m)(ii), 7.04(p)(ii) and 7.04(p)(iii), TWA
will instruct Crowe & Dunlevy, P.C., special FAA counsel, to deliver to the
Trustee and TWA an opinion addressed to each of them as to the due recordation
of the documents that were filed for recording, the absence of any intervening
Liens filed with the FAA with respect to each Aircraft and the due perfection
under the Transportation Code of the Trustee's security interest in such
Aircraft pursuant to the Security Agreements.
(m) TWA will not take, and will not cause anyone to take, any
manipulative action with respect to the price of the Common Stock in violation
of applicable law.
ARTICLE 14
Notices
Section 14.01. Manner of Sending Notices. Any notice required
or permissible under this Sale Agreement will be in writing and in English.
Notices will be delivered in person or sent by telex, fax, letter (mailed
airmail, certified and return receipt requested), or by expedited delivery
addressed to the parties as set forth in Section 14.02. In the case of a telex
or fax, notice will be deemed received upon actual receipt (in the case of a
fax notice, the date of actual receipt will be deemed to be the date set forth
on the confirmation of receipt produced by the sender's fax machine immediately
after the fax is sent). In the case of a mailed letter, notice will be deemed
received on the tenth (10th) day after mailing. In the case of a notice sent
by expedited delivery, notice will be deemed received on the date of delivery
set forth in the records of the Person which accomplished the delivery. If any
notice is sent by more than one of the above listed methods, notice will be
deemed received on the earliest possible date in accordance with the above
provisions.
Section 14.02. Notice Information. Notices will be sent:
If to TWA: TRANS WORLD AIRLINES, INC.
One City Centre
515 N. Sixth Street
St. Louis, Missouri 63101
United States of America
Attention: Senior Vice President -
Finance and Chief Financial Officer
Fax: (314) 589-3125
Telephone: (314) 589-3112
with a copy to: TRANS WORLD AIRLINES, INC.
One City Centre
515 N. Sixth Street
St. Louis, Missouri 63101
Attention: Senior Vice President and General
Counsel
Telephone Number: (314) 589-3261
Telefax Number: (314) 589-3267
If to OWNER FIRST SECURITY BANK, NATIONAL
TRUSTEE: ASSOCIATION
79 South Main Street
Salt Lake City, UT 84111
Attention: Corporate Trust Services
Fax: (801) 246-5053
Telephone: (801) 246-5630
with a copy to: SEVEN SIXTY SEVEN LEASING, INC.
c/o CL/PK AIRFINANCE, New York Branch
152 West 57th Street
New York, NY 10022
Attention: Anders Hebrand
Fax: (212) 397-9393
Telephone: (212) 245-2575
or to such other places and numbers as either party directs in writing to the
other party.
ARTICLE 15
Miscellaneous
Section 15.01. GOVERNING LAW. THIS SALE AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
Section 15.02. No Brokers. The Aircraft are being sold and
purchased without a broker, except that the Placement Agent is acting as
placement agent for TWA in connection with the Sale in accordance with the
Placement Agreement. If any person other than the Placement Agent asserts any
claim against the Owner Trustee or TWA for fees or commissions by reason of any
alleged agreement to act as a broker for the Owner Trustee or TWA in this
transaction, the party for which said person claims to have acted will on
demand defend, indemnify and hold harmless the other parties from and against
all claims, demands, liabilities, damages, losses, judgments and expenses of
every kind (including reasonable legal fees, costs and related expenses)
arising out of such claim.
Section 15.03. Confidentiality. This Sale Agreement is a
confidential document among TWA, the Owner Trustee and the Beneficiary and
will not be disclosed by a party to third parties (other than to such party's
auditors, legal and technical advisors, to the Placement Agent, to CL/PK
Airfinance, to the Participants, to subsequent holders of Securities, and to
the legal advisors of any such Persons or as required by applicable laws and
regulations) without the prior written consent of the other parties; provided
that copies of this Sale Agreement may be disclosed by any of the parties
hereto following receipt from such prospective purchaser of a written
acknowledgment that it will observe the confidentiality obligations set forth
in this Section 15.03. If disclosure is required by applicable law or
regulation, the parties hereto will cooperate to obtain confidential treatment
as to the commercial terms and other material terms of this Sale Agreement.
Section 15.04. Successors and Assigns. Except to the extent
expressly provided in the Sale Agreement or in any other Operative Document,
this Sale Agreement has been and is made solely for the benefit of the parties
hereto and of the affiliates, controlling persons, Shareholders, directors,
officers, employees and agents referred to in Article 11, and their respective
successors and assigns (including, without limitation and without the need for
an express assignment, subsequent holders of Securities), and no other person
shall acquire or have any right under or by virtue of this Sale Agreement.
Section 15.05. Rights of Parties. The rights of the parties
hereunder are cumulative, not exclusive, may be exercised as often as each
party considers appropriate and are in addition to its rights under general
law. The rights of any one party against any other party are not capable of
being waived or amended except by an express waiver or amendment in writing.
Any failure to exercise or any delay in exercising any of such rights will not
operate as a waiver or amendment of that or any other such right; any
defective or partial exercise of any such rights will not preclude any other or
further exercise of that or any other such right; and no act or course of
conduct or negotiation on a party's part or on its behalf will in any way
preclude such party from exercising any such right or constitute a suspension
or any amendment of any such right.
Section 15.06. Further Assurances. Each party agrees from time
to time to do and perform such other and further acts and execute and deliver
any and all such other instruments as may be required by law or reasonably
requested by the other party to establish, maintain or protect the rights and
remedies of the requesting party or to carry out and effect the intent and
purpose of this Sale Agreement.
Section 15.07. Use of Word "Including". The term "including" is
used herein without limitation and by way of example only.
Section 15.08. Headings. All article and paragraph headings and
captions are purely for convenience and will not affect the interpretation of
this Sale Agreement. Any reference to a specific article, paragraph or
section will be interpreted as a reference to such article, paragraph or
section of this Sale Agreement.
Section 15.09. Invalidity of Any Provision. If any of the
provisions of this Sale Agreement become invalid, illegal or unenforceable in
any respect under any law, the validity, legality and enforceability of the
remaining provisions will not in any way be affected or impaired.
Section 15.10. Waiver of Trial by Jury. THE PARTIES HERETO
EACH HEREBY IRREVOCABLY WAIVE ANY RIGHT THEY MAY HAVE TO A TRIAL BY JURY IN
RESPECT OF ANY CLAIM BASED UPON OR ARISING OUT OF THIS SALE AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY.
Section 15.11. Amendments in Writing. The provisions of this
Sale Agreement may only be amended, modified or waived by a writing executed
by the parties hereto.
Section 15.12. Entire Agreement. This Sale Agreement and each
of the other Operative Documents constitutes the entire agreement among the
parties in relation to the sale of the Aircraft by Owner Trustee to TWA the
purchase by TWA of the Aircraft from Owner Trustee and the issuance by TWA of
the Notes and the Equity Notes in payment of the purchase price of the
Aircraft and supersedes all previous proposals, agreements and other written
and oral communications in relation hereto. The parties acknowledge that as
among themselves there have been no representations, warranties, promises,
guarantees or agreements, express or implied, except as set forth herein or
therein.
Section 15.13. Counterparts. This Sale Agreement may be
signed in two or more counterparts with the same effect as if the signatures
thereto and hereto were upon the same instrument.
Section 15.14. Third Party Beneficiary. Except to the extent
expressly provided herein and below this Sale Agreement is for the sole
benefit of the parties hereto, their respective successors and permitted
assigns and nothing herein, express or implied, is intended to or shall confer
upon any other person any legal or equitable right, benefit or remedy of any
nature whatsoever under or by reason of this Sale Agreement. Notwithstanding
the foregoing, the parties hereto expressly acknowledge and agree that Lazard
Freres & Co. LLC be and hereby is irrevocably designated a third party
beneficiary of this Sale Agreement.
ARTICLE 16
Authorization of Beneficiary
Section 16.01. Authorization of Beneficiary. Pursuant to
Section 5(a) of the Agreement Among Participants, dated as of January 24,
1995, among CL/PK Airfinance, Credit Lyonnais, A/S Bergens Skillingsbank,
Hamburgische Landesbank GZ, Nordeutsche Landesbank GZ, Credit Foncier de
France, Credit Industriel et Commercial de Paris and Credit D'Equipement des
PME, and Section 5.2 of the Trust Agreement, the Beneficiary hereby authorizes
and directs the Owner Trustee to execute this Sale Agreement on the date
hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Sale
Agreement to be duly executed by their respective officers as of this ____ day
of April 1998.
TRANS WORLD AIRLINES, INC.
By:
------------------------------------
Name:
Title:
FIRST SECURITY BANK,
NATIONAL ASSOCIATION, not in its
individual capacity, except as expressly
stated herein, but solely as Owner Trustee
By:
------------------------------------
Name:
Title:
SEVEN SIXTY SEVEN LEASING, INC.
By:
------------------------------------
Name:
Title:
Annex A
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT, OR ANY STATE SECURITIES LAWS. NEITHER THESE SECURITIES NOR ANY INTEREST
OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED,
PLEDGED, ENCUMBERED, OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH
REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. [EACH PURCHASER OF THE
SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON
THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED
BY RULE 144A THEREUNDER.](*)
THE HOLDER OF THESE SECURITIES BY ITS ACCEPTANCE HEREOF AGREES
TO OFFER, SELL, OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE RESALE
RESTRICTION TERMINATION DATE WHICH IS THE DATE WHICH IS TWO YEARS AFTER THE
LATER OF THE DATE OF ORIGINAL ISSUANCE OF THESE SECURITIES AND THE LAST DATE
ON WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THESE
SECURITIES (OR ANY PREDECESSOR OF THESE SECURITIES) ONLY (A) TO THE COMPANY,
(B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE
UNDER THE SECURITIES ACT, [(C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR
RESALE PURSUANT TO RULE 144A, TO A PERSON IT REASONABLY BELIEVES IS A
"QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A THAT PURCHASES FOR ITS
OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM
NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A UNDER
THE SECURITIES ACT,](*) (D) PURSUANT TO OFFERS AND SALES TO NON-U.S. PERSONS
THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER
THE SECURITIES ACT, (E) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE
MEANING OF SUBPARAGRAPH (a)(1), (2), (3) OR (7) OF RULE 501 UNDER THE
SECURITIES ACT THAT IS ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT OR FOR THE
ACCOUNT OF SUCH AN INSTITUTIONAL "ACCREDITED INVESTOR," FOR INVESTMENT
PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY
DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (F) PURSUANT TO ANOTHER
AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT,
SUBJECT TO THE COMPANY'S AND THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER,
SALE, OR TRANSFER (i) PURSUANT TO CLAUSES (D), (E) OR (F) TO REQUIRE THE
DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND OTHER INFORMATION
SATISFACTORY TO EACH OF THEM, AND (ii) IN EACH OF THE FOREGOING CASES, TO
REQUIRE A CERTIFICATE OF TRANSFER IN THE FORM ATTACHED TO OR ON THE REVERSE
SIDE OF THIS SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE
TRUSTEE. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE
RESALE RESTRICTION TERMINATION DATE."
IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE
TRUSTEE SUCH CERTIFICATES AND OTHER INFORMATION AS THE TRUSTEE MAY REASONABLY
REQUIRE TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE FOREGOING RESTRICTIONS.
- ---------------
(*) Exclude in the case of Equity Notes.
Annex B
TRANSFEREE LETTER OF REPRESENTATION
Trans World Airlines, Inc.
c/o First Security Bank, National Association
79 South Main Street
Salt Lake City, UT 84111
Dear Sirs:
In connection with our proposed acquisition of $ of 11 3/8% Senior
Secured Notes due 2003 (the "Notes") of Trans World Airlines, Inc., a Delaware
corporation (the "Company"), we confirm that:
1. We understand that the Notes have not been registered under the
Securities Act of 1933, as amended (the "Securities Act"), and, unless so
registered, may not be sold except as permitted in the following sentence. We
agree on our own behalf and on behalf of any investor account for which we are
purchasing Notes to offer, sell or otherwise transfer such Notes prior to the
date which is two years after the later of the date of original issue and the
last date on which the Company or any affiliate of the Company was the owner
of such Notes (or any predecessor thereto) (the "Resale Restriction
Termination Date") only (a) to the Company, (b) pursuant to a registration
statement which has been declared effective under the Securities Act, (c) for
so long as the Notes are eligible for resale pursuant to Rule 144A under the
Securities Act ("Rule 144A") to a person we reasonably believe is a qualified
institutional buyer under Rule 144A (a "QIB") that purchases for its own
account or for the account of a QIB and to whom notice is given that the
transfer is being made in reliance on Rule 144A, (d) pursuant to offers and
sales to non-U.S. persons that occur outside the United States within the
meaning of Regulation S under the Securities Act ("Regulation S"), (e) to an
institutional "accredited investor" within the meaning of subparagraph
(a)(1), (2), (3) or (7) of Rule 501 under the Securities Act that is
purchasing for his own account or for the account of such an institutional
"accredited investor" for investment purposes and not with a view to, or for
offer or sale in connection with, any distribution thereof in violation of the
Securities Act, or (f) pursuant to any other available exemption from the
registration requirements of the Securities Act, subject in each of the
foregoing cases to any requirement of law that the disposition of our property
or the property of such investor account or accounts be at all times within
our or their control and in compliance with any applicable state securities
laws. The foregoing restrictions on resale will not apply subsequent to the
Resale Restriction Termination Date. If any resale or other transfer of the
Notes is proposed to be made pursuant to clause (d), (e) or (f) above prior to
the Resale Restriction Termination Date, the transferor shall deliver a letter
from the transferee substantially in the form of this letter to First Security
Bank, National Association, which shall provide, among other things, that, as
applicable, the transferee is (x) an institution that, at the time the buy
order was originated, was outside the United States, was not a U.S. person
(and was not purchasing for the account or benefit of a U.S. person) within
the meaning of Regulation S under the Securities Act or (y) an institutional
"accredited investor" within the meaning of subparagraph (a)(1), (2), (3) or
(7) of Rule 501 under the Securities Act and that it is acquiring such Notes
for investment purposes and not for distribution in violation of the
Securities Act. We acknowledge on our own behalf and on behalf of any investor
account for which we are purchasing Notes that the Company and First Security
Bank, National Association reserve the right prior to any offer, sale or other
transfer pursuant to clause (d), (e) or (f) prior to the Resale Restriction
Termination Date of the Restricted Securities to require the delivery of an
opinion of counsel, certifications and/or other information satisfactory to
the Company and First Security Bank, National Association.
2. We are either (i) an institutional "accredited investor" (as defined
in Rule 501(a)(1), (2), (3) or (7) (or in the case of the Beneficiary only,
(8)) of Regulation D under the Securities Act) purchasing for our own account
or for the account of such an institutional "accredited investor," and we are
acquiring the Notes for investment purposes and not with a view to, or for
offer or sale in connection with, any distribution in violation of the
Securities Act and we have such knowledge and experience in financial and
business matters as to be capable of evaluating the merits and risks of our
investment in the Notes, and we and any accounts for which we are acting are
each able to bear the economic risk of our or its investment or (ii) an
institution that, at the time the buy order for the Notes was originated, was
outside the United States and was not a U.S. person (and was not purchasing
for the account or benefit of a U.S. person) within the meaning of Regulation
S under the Securities Act.
[3. We are acquiring the Notes purchased by us for our own account or
for one or more accounts as to each of which we exercise sole investment
discretion.](*)
4. We [have received a copy of the Private Placement Memorandum
relating to the Notes and](**) acknowledge that we have had access to such
financial and other information, and have been afforded the opportunity to ask
such questions of representatives of the Company and receive answers thereto,
as we deem necessary in connection with our decision to purchase the Notes.
5. You are entitled to rely upon this letter and you are irrevocably
authorized to produce this letter or a copy hereof to any interested party in
any administrative or legal proceeding or pursuant to any official inquiry
with respect to the matters covered hereby.
6. We hereby represent and covenant that we are not acquiring the Notes
for or on behalf of, and will not transfer the Notes to, any pension or
welfare plan as defined in Section 3 of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), except that such a purchase for or
on behalf of a pension or welfare plan shall be permitted:
(i) to the extent such purchase is made by or on behalf of a bank
collective investment fund maintained by the purchaser in which no plan
(together with any other plans maintained by the same employer or employee
organization) has an interest in excess of 10% of the total assets in such
collective investment fund, and the other applicable conditions of Prohibited
Transaction Class Exemption 91-38 issued by the Department of Labor are
satisfied;
(ii) to the extent such purchase is made by or on behalf of an
insurance company pooled separate account maintained by the purchaser in
which, at any time while the Notes are outstanding, no plan (together with any
other plans maintained by the same employer or employee organization) has an
interest in excess of 10% of the total of all assets in such pooled separate
account, and the other applicable conditions of Prohibited Transaction Class
Exemption 90-1 issued by the Department of Labor are satisfied;
(iii) to the extent such purchase is made on behalf of a plan by (A)
an investment adviser registered under the Investment Advisers Act of 1940, as
amended (the "1940 Act"), that had as of the last day of its most recent
fiscal year total assets under its management and control in excess of $50.0
million and had stockholders' or partners' equity in excess of $750,000, as
shown in its most recent balance sheet prepared in accordance with generally
accepted accounting principles, or (B) a bank as defined in Section 202(a)(2)
of the Investment Advisers Act of 1940, as amended, with equity capital in
excess of $1.0 million as of the last day of its most recent fiscal year, or
(C) an insurance company which is qualified under the laws of more than one
state to manage, acquire or dispose of any assets of a pension or welfare
plan, which insurance company has as of the last day of its most recent fiscal
year, net worth in excess of $1.0 million and which is subject to supervision
and examination by State authority having supervision over insurance companies
and, in any case, such investment adviser, bank or insurance company is
otherwise a qualified professional asset manager, as such term is used in
- ---------------
(*) Include in letters delivered by any transferee other than the
Beneficiary and CL/PK Airfinance, except that paragraph 3 shall be included in
any letter delivered by CL/PK Airfinance with respect to Securities it has
received in payment of the Advisory Fee. Letters delivered by the Beneficiary
and CL/PK Airfinance may include additional modifications to the extent
consistent with Section 12.03 of the Aircraft Sale and Note Purchase Agreement
dated as of April 9, 1998 among TWA, the Owner Trustee and the Beneficiary.
(**) Include only in letters delivered by the Beneficiary, CL/PK Airfinance
and any Participant.
Prohibited Transaction Class Exemption 84-14 issued by the Department of
Labor, and the assets of such plan when combined with the assets of other
plans established or maintained by the same employer (or affiliate thereof) or
employee organization and managed by such investment adviser, bank or
insurance company, do not represent more than 20% of the total client assets
managed by such investment adviser, bank or insurance company at the time of
the transaction, and the other applicable conditions of such exemption are
otherwise satisfied;
(iv) to the extent such plan is a governmental plan (as defined in
Section 3 of ERISA), which is not subject to the provisions of Title I of
ERISA or Section 401 of the Code;
(v) to the extent such purchase is made by or on behalf of an
insurance company using the assets of its general account, the reserves and
liabilities for the general account contracts held by or on behalf of any
plan, together with any other plans maintained by the same employer (or its
affiliates) or employee organization, do not exceed 10% of the total reserves
and liabilities of the insurance company general account (exclusive of
separate account liabilities), plus surplus as set forth in the National
Association of Insurance Commissioners Annual Statement filed with the state
of domicile of the insurer, in accordance with Prohibited Transaction Class
Exemption 95-60, and the other applicable conditions of such exemption are
otherwise satisfied; or
(vi) to the extent such purchase is made by an in-house asset
manager within the meaning of Part IV(a) of Prohibited Transaction Class
Exemption 96-23, such manager has made or properly authorized the decision for
such plan to purchase Notes, under circumstances such that Prohibited
Transaction Class Exemption 96-23 is applicable to the purchase and holding of
such Notes.
[7. (a) We hereby agree, severally and not jointly, to indemnify and
hold harmless the Company, and its affiliates and each of its officers,
directors, employees, agents, advisors and representatives (but explicitly
excluding Lazard Freres & Co. LLC) (each an "Indemnified Party") from and
against any and all damages, losses, liabilities, expenses and claims
(including without limitation, reasonable fees and disbursements of counsel)
that may be incurred by or asserted or awarded against any Indemnified Party,
in each case to the extent arising out of or in connection with or relating to
any investigation, litigation or proceeding or the preparation of any defense
with respect thereto, any conflict, dispute or disagreement (x) between or
among any of the Owner Trustee, the Beneficiary, CL/PK Airfinance or any
Participant in connection with the Sale or (y) arising from the failure of TWA
to have acquired the title to the Aircraft warranted in Article 12 of the
Aircraft Sale and Note Purchase Agreement dated as of April 9, 1998 among TWA,
the Owner Trustee and the Beneficiary because of the invalidity or
ineffectiveness of the authorization of the Owner Trustee to enter into and
conclude the Sale as provided herein, except to the extent such claim, damage,
loss, liability or expense resulted from such Indemnified Party's gross
negligence, willful misconduct or bad faith. We hereby acknowledge that by
executing this letter we shall be severally and not jointly liable to an
Indemnified Party for our pro rata share of such liability (such share to bear
the same relation to such liability as such Participant's interest in the
Notes on the Closing Date bears to the aggregate principal amount of Notes of
all Participants (disregarding for all purposes of this sentence all Notes
owned from time to time by Lazard Freres & Co. LLC as a Participant except
$227,156.30 in aggregate principal amount) who have signed and delivered such
Investor Letters from time to time).
(b) Each Indemnified Party will give prompt written notice to each
other of any liability of which any such person has knowledge for which the
undersigned is, or may be, liable under paragraph 7(a); provided, however,
that failure to give such notice will not terminate any of the rights of any
Indemnified Party under this paragraph 7, except to the extent that the
undersigned has been materially prejudiced by the failure to provide such
notice. Upon the payment in full of any indemnity pursuant to this paragraph
7 by the undersigned, the undersigned will be subrogated to any right of any
Indemnified Party in respect of the matter against which such indemnity has
been made. If any Indemnified Party obtains a recovery of all or any part of
any amount which the undersigned has paid to such Indemnified Party, such
Indemnified Party will pay to the undersigned the net amount recovered by such
Indemnified Party. The undersigned and its insurers will have the right (in
each such case at the undersigned's expense) to investigate and, provided that
the undersigned or its insurers have not reserved the right to dispute
liability with respect to any insurance policies pursuant to which coverage is
sought, defend or compromise any claim covered by insurance for which
indemnification is sought pursuant to paragraph 7 and each Indemnified Party
will cooperate with the undersigned or its insurers with respect thereto. If
the undersigned or its insurers are retaining attorneys to handle such claim,
such counsel must be reasonably satisfactory to the relevant Indemnified
Party. If not, any such Indemnified Party will have the right to retain
counsel of its choice at the undersigned's expense; provided that prior to
entering into any settlement agreement relating to any such claim, such
Indemnified Party shall either (i) obtain a written consent from the
undersigned or its insurers or (ii) grant the undersigned and its insurers a
release from all further obligation to such Indemnified Party under this
paragraph 7 with respect to such claim.](***)
[8. We acknowledge that the Placement Agent, in addition to acting as
placement agent for TWA, has acted in the following capacities and/or engaged in
the following activities: (i) acted as financial advisor to TWA, (ii) acted as
the initial purchaser in connection with several offerings under Rule 144A
and/or Regulation S of the Securities Act of debt securities and convertible
exchangeable preferred stock of TWA, (iii) acted as a market maker in TWA
securities, (iv) purchased as a principal approximately 68% of the debt and
equity participation interests from certain original participants under the
Participation Agreement, sold a portion of such interests outright and/or
through participations to certain of the Participants and entered into
agreements with three other original participants to purchase the remaining debt
and equity participation interests under the Participation Agreement and any
distributions related thereto, the closing of which is expected to occur in May,
1998, (v) engaged in trading activities for certain of the Participants, (vi)
participated in discussions with CL/PK Airfinance and certain other Participants
in connection with the attempted but since suspended negotiation of the amount
of the advisory fee due to CL/PK Airfinance under the Participation Agreement
and (vii) agreed to reimburse Credit Lyonnais for certain liabilities related to
drawings, if any, under letters of credit issued or confirmed by Credit Lyonnais
in connection with the TBT Leases. We further acknowledge that, as a result of
acting in such capacities and engaging in such activities, the Placement Agent
may have interests adverse to, or that conflict with, our interests in the Sale
in exchange for Securities. We hereby waive any claim of conflict or adverse
interest against the Placement Agent arising as a result of the roles and
activities of the Placement Agent described in the second preceding sentence;
provided that we do not waive any claims arising as a result of (i) the sale by
the Placement Agent to any of the Participants of a participation or other
interest in the Beneficiary, (ii) the joint and several liability of the
Participants to indemnify or reimburse CL/PK Airfinance under the Participation
Agreement or (iii) actions occurring prior to the earliest date upon which one
of the Participants first purchased from the Placement Agent a participation or
other interest in the Beneficiary.](****)
9. We hereby agree that we will not take and will not cause anyone to
take, any manipulative action with respect to the price of the Common Stock in
violation of applicable law.
- ---------------
(*)Include in letters delivered by any Participant, except for any letters
delivered by Lazard Freres & Co. LLC after the Closing Date.
(**) Include in letters delivered by the Beneficiary, CL/PK or any
Participant, except for Lazard Freres & Co. LLC.
(***) Include in letters delivered by any Participant, except for any letters
delivered by Lazard Freres & Co. LLC after the Closing Date.
(****) Include in letters delivered by the Beneficiary, CL/PK or any
Participant, except for Lazard Freres & Co. LLC.
Capitalized terms used but not otherwise defined herein shall have
the meanings specified in the Aircraft Sale and Note Purchase Agreement dated
April 9, 1998 among First Security Bank, National Association, as Owner
Trustee, Trans World Airlines, Inc. and Seven Sixty Seven Leasing, Inc.
Very truly yours,
--------------------------------------
(Name of Purchaser)
By:
-----------------------------------
Date:
---------------------------------
Upon transfer the Notes would be registered in the name of the new beneficiary
as follows:
Name:
----------------------------------
Address:
-------------------------------
Taxpayer ID Number:
--------------------
Annex C
TRANSFEREE LETTER OF REPRESENTATION
Trans World Airlines, Inc.
c/o First Security Bank, National Association
79 South Main Street
Salt Lake City, UT 84111
Dear Sirs:
In connection with our proposed acquisition of $ of Mandatory
Conversion Equity Notes due 1999 (the "Equity Notes") of Trans World Airlines,
Inc., a Delaware corporation (the "Company"), we confirm that:
1. We understand that the Equity Notes have not been, and the shares of
the Company's Common Stock, $.01 par value per share issuable upon conversion
of the Equity Notes (the "Restricted Common Stock") will not be, registered
under the Securities Act of 1933, as amended (the "Securities Act"), and,
unless so registered, may not be sold except as permitted in the following
sentence. We agree on our own behalf and on behalf of any investor account for
which we are purchasing Equity Notes or, following conversion of the Equity
Notes, shares of Restricted Common Stock, to offer, sell or otherwise transfer
such Equity Notes or shares of Restricted Common Stock prior to the date which
is two years after the later of the date of original issue of the Equity Notes
and the last date on which the Company or any affiliate of the Company was the
owner of such Equity Notes (or any predecessor thereto) or, following
conversion of the Equity Notes, such Restricted Common Stock (the "Resale
Restriction Termination Date") only (a) to the Company, (b) pursuant to a
registration statement which has been declared effective under the Securities
Act, (c) pursuant to offers and sales to non-U.S. persons that occur outside
the United States within the meaning of Regulation S under the Securities Act
("Regulation S"), (d) to an institutional "accredited investor" within the
meaning of subparagraph (a)(1), (2), (3) or (7) of Rule 501 under the
Securities Act that is purchasing for his own account or for the account of
such an institutional "accredited investor" for investment purposes and not
with a view to, or for offer or sale in connection with, any distribution
thereof in violation of the Securities Act, or (e) pursuant to any other
available exemption from the registration requirements of the Securities Act,
subject in each of the foregoing cases to any requirement of law that the
disposition of our property or the property of such investor account or
accounts be at all times within our or their control and in compliance with
any applicable state securities laws. The foregoing restrictions on resale
will not apply subsequent to the Resale Restriction Termination Date. If any
resale or other transfer of the Equity Notes or Restricted Common Stock is
proposed to be made pursuant to clause (c), (d) or (e) above prior to the
Resale Restriction Termination Date, the transferor shall deliver a letter
from the transferee substantially in the form of this letter to First Security
Bank, National Association, which shall provide, among other things, that, as
applicable, the transferee is (x) an institution that, at the time the buy
order was originated, was outside the United States, was not a U.S. person
(and was not purchasing for the account or benefit of a U.S. person) within
the meaning of Regulation S under the Securities Act or (y) an institutional
"accredited investor" within the meaning of subparagraph (a)(1), (2), (3) or
(7) of Rule 501 under the Securities Act and that it is acquiring such Equity
Notes or Restricted Common Stock for investment purposes and not for
distribution in violation of the Securities Act. We acknowledge on our own
behalf and on behalf of any investor account for which we are purchasing
Equity Notes or Restricted Common Stock that the Company and First Security
Bank, National Association reserve the right prior to any offer, sale or other
transfer pursuant to clause (c), (d) or (e) prior to the Resale Restriction
Termination Date of the Equity Notes or the Restricted Common Stock to require
the delivery of an opinion of counsel, certifications and/or other information
satisfactory to the Company and First Security Bank, National Association.
2. We are either (i) an institutional "accredited investor" (as defined
in Rule 501(a)(1), (2), (3) or (7) (or in the case of the Beneficiary only,
(8)) of Regulation D under the Securities Act) purchasing for our own account
or for the account of such an institutional "accredited investor," and we are
acquiring the Equity Notes or Restricted Common Stock for investment purposes
and not with a view to, or for offer or sale in connection with, any
distribution in violation of the Securities Act and we have such knowledge and
experience in financial and business matters as to be capable of evaluating
the merits and risks of our investment in the Equity Notes or Restricted
Common Stock, and we and any accounts for which we are acting are each able to
bear the economic risk of our or its investment or (ii) an institution that,
at the time the buy order for the Equity Notes or Restricted Common Stock was
originated, was outside the United States and was not a U.S. person (and was
not purchasing for the account or benefit of a U.S. person) within the meaning
of Regulation S under the Securities Act.
[3. We are acquiring the Equity Notes or Restricted Common Stock
purchased by us for our own account or for one or more accounts as to each of
which we exercise sole investment discretion.](*)
4. We [have received a copy of the Private Placement Memorandum
relating to the Equity Notes and](**) acknowledge that we have had access to
such financial and other information, and have been afforded the opportunity
to ask such questions of representatives of the Company and receive answers
thereto, as we deem necessary in connection with our decision to purchase the
Equity Notes or Restricted Common Stock.
5. You are entitled to rely upon this letter and you are irrevocably
authorized to produce this letter or a copy hereof to any interested party in
any administrative or legal proceeding or pursuant to any official inquiry
with respect to the matters covered hereby.
6. We hereby represent and covenant that we are not acquiring the
Equity Notes or Restricted Common Stock for or on behalf of, and will not
transfer the Equity Notes or Restricted Common Stock to, any pension or
welfare plan as defined in Section 3 of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), except that such a purchase for or
on behalf of a pension or welfare plan shall be permitted:
(i) to the extent such purchase is made by or on behalf of a bank
collective investment fund maintained by the purchaser in which no plan
(together with any other plans maintained by the same employer or employee
organization) has an interest in excess of 10% of the total assets in such
collective investment fund, and the other applicable conditions of Prohibited
Transaction Class Exemption 91-38 issued by the Department of Labor are
satisfied;
(ii) to the extent such purchase is made by or on behalf of an
insurance company pooled separate account maintained by the purchaser in
which, at any time while the Equity Notes are outstanding or there remain
shares of Restricted Common Stock, no plan (together with any other plans
maintained by the same employer or employee organization) has an interest in
excess of 10% of the total of all assets in such pooled separate account, and
the other applicable conditions of Prohibited Transaction Class Exemption 90-1
issued by the Department of Labor are satisfied;
- ---------------
(*) Include in letters delivered by any transferee other than the Beneficiary
and CL/PK Airfinance, except that paragraph 3 shall be included in any letter
delivered by CL/PK Airfinance with respect to Securities it has received in
payment of the Advisory Fee. Letters delivered by the Beneficiary and CL/PK
Airfinance may include additional modifications to the extent consistent with
Section 12.03 of the Aircraft Sale and Note Purchase Agreement dated as of
April 9, 1998 among TWA, the Owner Trustee and the Beneficiary.
(**) Include only in letters delivered by the Beneficiary, CL/PK Airfinance
and any Participant.
(iii) to the extent such purchase is made on behalf of a plan by (A)
an investment adviser registered under the Investment Advisers Act of 1940, as
amended (the "1940 Act"), that had as of the last day of its most recent
fiscal year total assets under its management and control in excess of $50.0
million and had stockholders' or partners' equity in excess of $750,000, as
shown in its most recent balance sheet prepared in accordance with generally
accepted accounting principles, or (B) a bank as defined in Section 202(a)(2)
of the 1940 Act with equity capital in excess of $1.0 million as of the last
day of its most recent fiscal year, or (C) an insurance company which is
qualified under the laws of more than one state to manage, acquire or dispose
of any assets of a pension or welfare plan, which insurance company has as of
the last day of its most recent fiscal year, net worth in excess of $1.0
million and which is subject to supervision and examination by State authority
having supervision over insurance companies and, in any case, such investment
adviser, bank or insurance company is otherwise a qualified professional asset
manager, as such term is used in Prohibited Transaction Class Exemption 84-14
issued by the Department of Labor, and the assets of such plan when combined
with the assets of other plans established or maintained by the same employer
(or affiliate thereof) or employee organization and managed by such investment
adviser, bank or insurance company, do not represent more than 20% of the
total client assets managed by such investment adviser, bank or insurance
company at the time of the transaction, and the other applicable conditions of
such exemption are otherwise satisfied;
(iv) to the extent such plan is a governmental plan (as defined in
Section 3 of ERISA), which is not subject to the provisions of Title I of
ERISA of Section 401 of the Code;
(v) to the extent such purchase is made by or on behalf of an
insurance company using the assets of its general account, the reserves and
liabilities for the general account contracts held by or on behalf of any
plan, together with any other plans maintained by the same employer (or its
affiliates) or employee organization, do not exceed 10% of the total reserves
and liabilities of the insurance company general account (exclusive of
separate account liabilities), plus surplus as set forth in the National
Association of Insurance Commissioners Annual Statement filed with the state
of domicile of the insurer, in accordance with Prohibited Transaction Class
Exemption 95-60, and the other applicable conditions of such exemption are
otherwise satisfied; or
(vi) to the extent such purchase is made by an in-house asset
manager within the meaning of Part IV(a) of Prohibited Transaction Class
Exemption 96-23, such manager has made or properly authorized the decision for
such plan to purchase Equity Notes or Restricted Common Stock under
circumstances such that Prohibited Transaction Class Exemption 96-23 is
applicable to the purchase and holding of such Equity Notes or Restricted
Common Stock.
[7. (a) We hereby agree, severally and not jointly to indemnify and hold
harmless the Company and its affiliates and each of its officers, directors,
employees, agents, advisors and representatives (but explicitly excluding
Lazard Freres & Co. LLC) (each an "Indemnified Party") from and against any
and all damages, losses, liabilities, expenses and claims (including without
limitation, reasonable fees and disbursements of counsel) that may be incurred
by or asserted or awarded against any Indemnified Party, in each case arising
out of or in connection with or relating to any investigation, litigation or
proceeding or the preparation of any defense with respect thereto, arising out
any conflict, dispute or disagreement (x) between or among any of the Owner
Trustee, the Beneficiary, CL/PK Airfinance or any Participant in connection
with the Sale or (y) arising from the failure of TWA to have acquired the
title to the Aircraft warranted in Article 12 of the Aircraft Sale and Note
Purchase Agreement dated as of April 9, 1998 among TWA, the Owner Trustee and
the Beneficiary because of the invalidity or ineffectiveness of the
authorization of the Owner Trustee to enter into and conclude the Sale as
provided herein, except to the extent such claim, damage, loss, liability or
expense resulted from such Indemnified Party's gross negligence, willful
misconduct or bad faith. We hereby acknowledge that by executing this letter
we shall be severally and not jointly liable to an Indemnified Party for our
pro rata share of such liability (such share to bear the same relation to such
liability as such Participant's interest in the Equity Notes bears to the
aggregate principal amount of Equity Notes of all Participants (disregarding
for all purposes of this sentence all Equity Notes owned from time to time by
Lazard Freres & Co. LLC as a Participant except $167,212.28 in aggregate
principal amount) who have signed and delivered such Investor Letters from
time to time).
(b) Each Indemnified Party will give prompt written notice to
each other of any liability of which any such person has knowledge for which
the undersigned is, or may be, liable under paragraph 7(a); provided, however,
that failure to give such notice will not terminate any of the rights of any
Indemnified Party under this paragraph 7, except to the extent that the
undersigned has been materially prejudiced by the failure to provide such
notice. Upon the payment in full of any indemnity pursuant to this paragraph
7 by the undersigned, the undersigned will be subrogated to any right of any
Indemnified Party in respect of the matter against which such indemnity has
been made. If any Indemnified Party obtains a recovery of all or any part of
any amount which the undersigned has paid to such Indemnified Party, such
Indemnified Party will pay to the undersigned the net amount recovered by such
Indemnified Party. The undersigned and its insurers will have the right (in
each such case at the undersigned's expense) to investigate and, provided that
the undersigned or its insurers have not reserved the right to dispute
liability with respect to any insurance policies pursuant to which coverage is
sought, defend or compromise any claim covered by insurance for which
indemnification is sought pursuant to paragraph 7 and each Indemnified Party
will cooperate with the undersigned or its insurers with respect thereto. If
the undersigned or its insurers are retaining attorneys to handle such claim,
such counsel must be reasonably satisfactory to the relevant Indemnified
Party. If not, any such Indemnified Party will have the right to retain
counsel of its choice at the undersigned's expense; provided that prior to
entering into any settlement agreement relating to any such claim, such
Indemnified Party shall either (i) obtain a written consent from the
undersigned or its insurers or (ii) grant the undersigned and its insurers a
release from all further obligation to such Indemnified Party under this
paragraph 7 with respect to such claim.](***)
[8. We acknowledge that the Placement Agent, in addition to acting as
placement agent for TWA, has acted in the following capacities and/or engaged
in the following activities: (i) acted as financial advisor to TWA, (ii) acted
as the initial purchaser in connection with several offerings under Rule 144A
and/or Regulation S of the Securities Act of debt securities and convertible
exchangeable preferred stock of TWA, (iii) acted as a market maker in TWA
securities, (iv) purchased as a principal approximately 68% of the debt and
equity participation interests from certain original participants under the
Participation Agreement, sold a portion of such interests outright and/or
through participations to certain of the Participants and entered into
agreements with three other original participants to purchase the remaining
debt and equity participation interests under the Participation Agreement and
any distributions related thereto, the closing of which is expected to occur
in May, 1998, (v) engaged in trading activities for certain of the
Participants, (vi) participated in discussions with CL/PK Airfinance and
certain other Participants in connection with the attempted but since
suspended negotiation of the amount of the advisory fee due to CL/PK
Airfinance under the Participation Agreement and (vii) agreed to reimburse
Credit Lyonnais for certain liabilities related to drawings, if any, under
letters of credit issued or confirmed by Credit Lyonnais in connection with
the TBT Leases. As a result of acting in such capacities and engaging in such
activities, the Placement Agent may have interests adverse to, or that
conflict with, our interests in the Sale in exchange for Securities. We
hereby waive any claim of conflict or adverse interest against the Placement
Agent arising as a result of the roles and activities of the Placement Agent
described in the second preceding sentence; provided that we do not waive any
claims arising as a result of (i) the sale by the Placement Agent to any of
the Participants of a participation or other interest in the Beneficiary, (ii)
the joint and several liability of the Participants to indemnify or reimburse
CL/PK Airfinance under the Participation Agreement or (iii) actions occurring
prior to the earliest date upon which one of the Participants first purchased
from the Placement Agent a participation or other interest in the
Beneficiary.](****)
9. We hereby agree that we will not take and will not cause anyone to
take, any manipulative action with respect to the price of the Common Stock in
violation of applicable law.
Capitalized terms used but not otherwise defined herein shall have
the meanings specified in the Aircraft Sale and Note Purchase Agreement dated
April 9, 1998 among First Security Bank, National Association, as Owner
Trustee, Trans World Airlines, Inc. and Seven Sixty Seven Leasing, Inc.
Very truly yours,
--------------------------------------
(Name of Purchaser)
By:
-----------------------------------
Date:
---------------------------------
TelephoneNumber: (*****)
----------------------
FacsimileNumber: (*****)
----------------------
Upon transfer the Equity Notes would be registered in the name of the new
beneficiary as follows:
Name:
--------------------------------
Address:
-----------------------------
Taxpayer ID Number:
------------------
- ---------------
(***) Include in letters delivered by any Participant, except for letters
delivered by Lazard Freres & Co. LLC after the Closing Date.
(****) Include in letters delivered by the Beneficiary, CL/PK or any
Participant, except for Lazard Freres & Co. LLC.
(*****) Purchasers who if they are holding Equity Notes on the Shelf Effective
Date wish to be notified by the Company of effectiveness under the Securities
Act of the Equity Shelf Registration Statement should provide their telephone
and facsimile numbers in the appropriate spaces provided.
EXHIBIT A
AIRCRAFT DESCRIPTION
--------------------
Aircraft No. 1
Airframe Manufacturer and Model: Boeing 767-231 ETOPS
Year of Airframe Manufacture: 1984
Manufacturer's Serial Number: 22571
Registration Mark: N608TW
Engine Manufacturer and Model: Pratt & Whitney JT9D-7R4D
Engine Serial Numbers and
Year of Manufacture: P709654 and P709655,
manufactured in 1984
Aircraft No. 2
Airframe Manufacturer and Model: Boeing 767-231 ETOPS
Year of Airframe Manufacture: 1984
Manufacturer's Serial Number: 22572
Registration Mark: N609TW
Engine Manufacturer and Model: Pratt & Whitney JT9D-7R4D
Engine Serial Numbers and
Year of Manufacture: P709643 and P709644,
manufactured in 1984
Aircraft No. 3
Airframe Manufacturer and Model: Boeing 767-231 ETOPS
Year of Airframe Manufacture: 1984
Manufacturer's Serial Number: 22573
Registration Mark: N610TW
Engine Manufacturer and Model: Pratt & Whitney JT9D-7R4D
Engine Serial Numbers and
Year of Manufacture: P709659 and P709656,
manufactured in 1984
EXHIBIT B
AIRCRAFT DOCUMENTS
------------------
One copy of each of the following:
Aircraft Documentation
The Aircraft documents which Owner Trustee provided to TWA
pursuant to the terms of the Leases and pursuant to the leases of the Aircraft
dated as of January 27, 1992 and March 22, 1991.
EXHIBIT C-1
ACCEPTANCE CERTIFICATE
----------------------
TRANS WORLD AIRLINES, INC. ("TWA"), a corporation organized under
the laws of Delaware, hereby certifies to FIRST SECURITY BANK, NATIONAL
ASSOCIATION a national banking association acting not in its individual
capacity, but solely as Owner Trustee (the "Owner Trustee") under the Trust
Agreement (the "Trust Agreement") dated January 24, 1995 between Owner Trustee
and Seven Sixty Seven Leasing, Inc., as beneficiary thereunder as follows:
1. TWA and Owner Trustee and certain others have entered into an
Aircraft Sale and Note Purchase Agreement made as of the 9th day of April,
1998 (the "Sale Agreement") pursuant to which TWA has purchased the three
Aircraft (as defined therein). Words used herein with capital letters and not
otherwise defined will have the meanings set forth in the Sale Agreement.
2. TWA has this __ day of _________, 19__ (Time: ____
_____________) at _________________________ accepted for purchase from Owner
Trustee:
(a) One (1) Boeing 767-231 ETOPS airframe, bearing
Manufacturer's serial number 22571, together with two (2) accompanying Pratt
& Whitney JT9D-7R4D engines bearing manufacturer's serial numbers P709654 and
P709655, and all Parts attached thereto; and
(b) All Aircraft Documentation, including the usual and
customary manuals, logbooks, flight records and historical information
regarding the Airframe, Engines and Parts, as listed in the Document Receipt
attached hereto.
3. TWA agrees that it is purchasing the Aircraft "AS IS, WHERE
IS AND WITH ALL FAULTS" and pursuant to the terms and conditions of the Sale
Agreement.
Dated on the date set forth above
TRANS WORLD AIRLINES, INC.
By:
----------------------------
Its:
---------------------------
Attachments: Document Receipt
EXHIBIT C-2
ACCEPTANCE CERTIFICATE
----------------------
TRANS WORLD AIRLINES, INC. ("TWA"), a corporation organized under
the laws of Delaware, hereby certifies to FIRST SECURITY BANK, NATIONAL
ASSOCIATION a national banking association acting not in its individual
capacity, but solely as Owner Trustee (the "Owner Trustee") under the Trust
Agreement (the "Trust Agreement") dated January 24, 1995 between Owner Trustee
and Seven Sixty Seven Leasing, Inc., as beneficiary thereunder as follows:
1. TWA and Owner Trustee and certain others have entered into an
Aircraft Sale and Note Purchase Agreement made as of the 9th day of April,
1998 (the "Sale Agreement") pursuant to which TWA has purchased the three
Aircraft (as defined therein). Words used herein with capital letters and not
otherwise defined will have the meanings set forth in the Sale Agreement.
2. TWA has this __ day of _________, 19__ (Time: ____
_____________) at _________________________ accepted for purchase from Owner
Trustee:
(a) One (1) Boeing 767-231 ETOPS airframe, bearing
Manufacturer's serial number 22572, together with two (2) accompanying Pratt
& Whitney JT9D-7R4D engines bearing manufacturer's serial numbers P709643 and
P709644, and all Parts attached thereto; and
(b) All Aircraft Documentation, including the usual and
customary manuals, logbooks, flight records and historical information
regarding the Airframe, Engines and Parts, as listed in the Document Receipt
attached hereto.
3. TWA agrees that it is purchasing the Aircraft "AS IS, WHERE
IS AND WITH ALL FAULTS" and pursuant to the terms and conditions of the Sale
Agreement.
Dated on the date set forth above
TRANS WORLD AIRLINES, INC.
By:
----------------------------
Its:
---------------------------
Attachments: Document Receipt
EXHIBIT C-3
ACCEPTANCE CERTIFICATE
----------------------
TRANS WORLD AIRLINES, INC. ("TWA"), a corporation organized under
the laws of Delaware, hereby certifies to FIRST SECURITY BANK, NATIONAL
ASSOCIATION a national banking association acting not in its individual
capacity, but solely as Owner Trustee (the "Owner Trustee") under the Trust
Agreement (the "Trust Agreement") dated January 24, 1995 between Owner Trustee
and Seven Sixty Seven Leasing, Inc., as beneficiary thereunder as follows:
1. TWA and Owner Trustee and certain others have entered into an
Aircraft Sale and Note Purchase Agreement made as of the 9th day of April,
1998 (the "Sale Agreement") pursuant to which TWA has purchased the three
Aircraft (as defined therein). Words used herein with capital letters and not
otherwise defined will have the meanings set forth in the Sale Agreement.
2. TWA has this __ day of _________, 19__ (Time: ____
_____________) at _________________________ accepted for purchase from Owner
Trustee:
(a) One (1) Boeing 767-231 ETOPS airframe, bearing
Manufacturer's serial number 22573, together with two (2) accompanying Pratt
& Whitney JT9D-7R4D engines bearing manufacturer's serial numbers P709656 and
P709659, and all Parts attached thereto; and
(b) All Aircraft Documentation, including the usual and
customary manuals, logbooks, flight records and historical information
regarding the Airframe, Engines and Parts, as listed in the Document Receipt
attached hereto.
3. TWA agrees that it is purchasing the Aircraft "AS IS, WHERE
IS AND WITH ALL FAULTS" and pursuant to the terms and conditions of the Sale
Agreement.
Dated on the date set forth above
TRANS WORLD AIRLINES, INC.
By:
----------------------------
Its:
---------------------------
Attachments: Document Receipt
DOCUMENT RECEIPT
TWA acknowledges that it has received all of the Aircraft Documentation,
including (i) all of the documents which Owner Trustee provided to it pursuant
to the Leases and (ii) all of the documents provided pursuant to the leases of
the Aircraft between Owner Trustee and TWA dated as of January 27, 1992 and
March 22, 1991, respectively.
EXHIBIT D
WARRANTY BILL OF SALE
---------------------
FIRST SECURITY BANK, NATIONAL ASSOCIATION a national banking
association, acting not in its individual capacity, but solely as Owner
Trustee (the "Owner Trustee") under the Trust Agreement (the "Trust
Agreement") dated January 24, 1995 between Owner Trustee and Seven Sixty Seven
Leasing, Inc., as beneficiary (the "Beneficiary") thereunder, is the owner of
the full legal and beneficial title (except as provided below) to the
following equipment (collectively, the "Aircraft"), all as described in the
Aircraft Sale and Note Purchase Agreement among TRANS WORLD AIRLINES, INC.
("TWA"), Owner Trustee and the Beneficiary, made as of the 9th day of April,
1998:
1. Three (3) Boeing 767-231 ETOPS airframes bearing
manufacturer's serial numbers 22571, 22572 and 22573, respectively.
2. Six (6) Pratt & Whitney JT9D-7R4D aircraft engines bearing
manufacturer's serial numbers P709654 and P709655, P709643 and P709644, and
P709656 and P709659, respectively.
3. All appliances, parts, components, instruments,
appurtenances, accessories, furnishings or other equipment or property
installed in or attached to such aircraft and engines (but excluding passenger
telephone and passenger video equipment).
4. All logbooks, records and manuals applicable to such
airframes and engines.
For and in consideration of US$43,200,000 aggregate principal
amount of TWA's 11 3/8% Senior Secured Notes due 2003 and US $31,800,000
aggregate principal amount of TWA's Mandatory Conversion Equity Notes due 1999
and other valuable consideration, receipt and the sufficiency of which is
hereby acknowledged, Owner Trustee does hereby grant, convey, transfer,
bargain, sell, deliver and set over to TWA and its successors and assignees
forever all of Owner Trustee's right, title and interest in and to the
Aircraft, to have and to hold the Aircraft for its and their use forever.
Owner Trustee hereby warrants that title to the Aircraft is free
and clear of all liens, claims, charges, security interests, leases,
encumbrances and rights of others whatsoever, however and wherever created or
arising ("Liens") other than (i) Liens relating to the Aircraft (except for
the engine bearing manufacturer's serial number P709659) arising prior to
TWA's conveyance of ownership to such property to First Security Bank of Utah,
N.A., a national banking association, not in its individual capacity (except
as set forth in Purchase Agreements UAC-4, UAC-5 and UAC-6, each dated as of
March 1, 1990 between FSB (as hereafter defined), TWA and United Aviation
Company) but as Trustee f/b/o 767 Leasing 4, Inc., 767 Leasing 5, Inc., and
767 Leasing 6, Inc., respectively, pursuant to those certain Trust Agreements
UAC-4, UAC-5 and UAC-6, each dated as of March 1, 1990 ("FSB") between FSB and
such respective beneficiaries, (ii) Liens relating to the engine bearing
manufacturer's serial number P709659 arising prior to TWA's conveyance of
ownership of such engine to FSB and (iii) Liens arising out of TWA's, its
sublessees', bailees', or leasehold assignees' use or operation of the
Aircraft ("Excepted Liens"). Owner Trustee will warrant and defend such title
forever against any and all claims and demands whatsoever other than claims or
demands arising out of Excepted Liens.
IN TESTIMONY WHEREOF we have set our hand this _____ day of
___________, 19____.
FIRST SECURITY BANK,
NATIONAL ASSOCIATION,
as Owner Trustee
By:
----------------------------
Its:
---------------------------
EXHIBIT E
ASSIGNMENT OF RIGHTS
--------------------
(Form of letter from Owner Trustee to TWA, with copies to be sent to
Manufacturer and Engine Manufacturer)
[DATE]
TRANS WORLD AIRLINES, INC.
One City Centre
515 N. Sixth Street
St. Louis, Missouri 63101
United States of America
Gentlemen:
Reference is made to the Aircraft Sale and Note Purchase Agreement
made as of the 9th day of April, 1998 among FIRST SECURITY BANK, NATIONAL
ASSOCIATION, a national banking association, acting not in its individual
capacity, but solely as Owner Trustee (the "Owner Trustee") under the Trust
Agreement (the "Trust Agreement") dated January 24, 1995 between Owner Trustee
and Seven Sixty Seven Leasing, Inc., as beneficiary (the "Beneficiary")
thereunder, TRANS WORLD AIRLINES, INC. ("TWA") and the Beneficiary pertaining
to the sale of three (3) Boeing 767-231 ETOPS Aircraft bearing Manufacturer's
serial numbers 22571, 22572 and 22573 and U.S. registration marks N608TW,
N609TW and N610TW (the "Aircraft").
Owner Trustee hereby assigns to TWA any and all existing
assignable warranties, obligations, liabilities, service life policies and
patent indemnities of manufacturers and maintenance and overhaul agencies of
and for the Aircraft and their respective engines and components, including
any rights which may have accrued prior to TWA's purchase of the Aircraft but
which have not been fully exercised by Owner Trustee.
By copy of this letter, Owner Trustee is notifying The Boeing
Company and United Technologies, Pratt & Whitney Division of this assignment
by Owner Trustee to TWA.
The engines associated with the Aircraft are as follows:
<TABLE>
<S> <C> <C>
Aircraft No. 1 Aircraft No. 2 Aircraft No. 3
- -------------- -------------- --------------
Engine #1: P709654 Engine #1: P709643 Engine #1: P709656
Engine #2: P709655 Engine #2: P709644 Engine #2: P709659
</TABLE>
FIRST SECURITY BANK,
NATIONAL ASSOCIATION
as Owner Trustee
By:
----------------------------
Its:
---------------------------
cc: The Boeing Company
United Technologies Corporation,
Pratt & Whitney Division
DEFINITIONS APPENDIX
Appendix I
To the Indenture between
Trans World Airlines, Inc.
and
First Security Bank, National Association, as Trustee
dated as of April 21, 1998
for the Company's 11 3/8% Senior Secured Notes due 2003
and the Aircraft Mortgage and Security Agreement
dated as of an even date therewith
TABLE OF CONTENTS
Page
----
Section 1. Definitions..................................... 1
Act............................................. 1
Affiliate....................................... 1
Agent........................................... 1
Aircraft........................................ 1
Aircraft Sale Agreement ........................ 1
Airframe........................................ 1
Applicable Percentage........................... 1
Bankruptcy Law.................................. 1
Bills of Sale................................... 2
Board of Directors.............................. 2
Business Day.................................... 2
Capital Stock................................... 2
Capitalized Lease Obligation.................... 2
Certificated Air Carrier........................ 2
Certifying Officer.............................. 2
Change in Control............................... 2
CL/PK........................................... 3
Code............................................ 3
Collateral...................................... 3
Common Stock.................................... 3
Company......................................... 3
Corporate Trust Office.......................... 3
Custodian....................................... 3
Default......................................... 3
Definitions Appendix............................ 3
8% Preferred Stock.............................. 4
Employee Preferred Stock........................ 4
Engine.......................................... 4
Equity Notes.................................... 4
Equity Notes Indenture.......................... 4
Equity Notes Trustee............................ 4
ERISA........................................... 4
Event of Default................................ 4
Exchange Act.................................... 4
FAA............................................. 4
FAA Bill of Sale................................ 4
Federal Aviation Act............................ 4
GAAP............................................ 5
Global Security................................. 5
Holder or Holder of Securities.................. 5
Indebtedness.................................... 5
Indenture....................................... 5
Indenture Discharge Date........................ 6
Indenture Trustee............................... 6
Interest Payment Date........................... 6
Issue Date...................................... 6
Legal Holiday................................... 6
Lien............................................ 6
Mandatory Redemption Amount..................... 6
Mandatory Redemption Date....................... 6
Mortgage........................................ 6
Mortgage Supplement............................. 6
9 1/4% Preferred Stock.......................... 6
Obligations..................................... 6
Offer to Purchase............................... 6
Officer......................................... 8
Officers' Certificate........................... 8
Operative Documents............................. 8
Opinion of Counsel.............................. 8
Outstanding or outstanding...................... 9
Owner Trustee................................... 9
Parts........................................... 9
Paying Agent.................................... 10
Payment Date.................................... 10
Payments........................................ 10
Permitted Liens................................. 10
Person.......................................... 11
Placement Agreement............................. 11
Preferred Stock................................. 11
principal....................................... 11
Property........................................ 11
Record Date..................................... 11
Redemption Value................................ 11
Register........................................ 11
Registrar....................................... 11
Registration Rights Agreement................... 11
Replacement Engine.............................. 11
Request......................................... 12
Required Holders................................ 12
Sale OTP Amount................................. 12
SEC............................................. 12
Second Mortgage................................. 12
Securities...................................... 12
Securities Act.................................. 12
Securityholder.................................. 12
Seven Leasing................................... 12
Significant Subsidiary.......................... 12
Special Interest................................ 12
Special Record Date............................. 12
Stated Maturity................................. 12
Subsidiary...................................... 13
Taxes........................................... 13
Tender.......................................... 13
TIA............................................. 13
Total Loss and Total Loss Date.................. 13
Total Loss OTP Amount........................... 13
Trust Agreement................................. 13
Trust Officer................................... 13
Trustee......................................... 13
TWA............................................. 13
U.S. or United States........................... 13
U.S. Government Obligations..................... 13
Warranty Bill of Sale........................... 14
Section 2. Rules of Construction.......................... 14
DEFINITIONS APPENDIX
Section 1. Definitions. Unless the context otherwise requires, each of
the terms included in this Section 1 shall have the respective meanings
given in this Section 1 for all purposes of the Indenture and the other
Operative Documents (including this appendix and any other appendices,
exhibits or schedules to any thereof) and of such other agreements as may
incorporate this appendix by reference except as otherwise specifically
provided herein or therein.
"Act" means the Federal Aviation Act.
"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 the purposes of this
definition, "control" when used with respect to any Person means the power
to direct the management and policies of such Person, directly or
indirectly, whether through the ownership of voting securities, by contract
or otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
"Agent" means any Registrar, Paying Agent or co-Registrar or co-Paying
Agent.
"Aircraft" means each Airframe together with the two associated
Engines identified by manufacturer's serial number in the Mortgage
Supplement for such Airframe executed and delivered on the Issue Date,
whether or not any of such Engines may at any time be installed on such
Airframe or installed on any other airframe.
"Aircraft Sale Agreement" means the Aircraft Sale and Note Purchase
Agreement, dated as of the 9th day of April, 1998, among the Company, the
Owner Trustee and Seven Leasing.
"Airframe" means each Boeing Model 767-231 ETOPS airframe (excluding
any Engines and any other engines, but including any and all Parts which
may from time to time be incorporated or installed in, or attached to such
airframe, and including any and all Parts removed therefrom so long as the
removed Parts remain subject to the Lien of the Mortgage under the terms
thereof) purchased by the Company under the Aircraft Sale Agreement and
identified by the FAA registration number and manufacturer's serial number
in the Mortgage Supplements executed and delivered on the Issue Date.
"Applicable Percentage" means (i) with respect to any amendment,
supplement or waiver of the Indenture or any other Operative Document that
would (A) terminate the Lien of the Mortgage with respect to any Collateral
or permit the release of any Collateral (other than releases permitted by
the applicable Operative Document, which releases shall not require any
consent of the Holders) or permit the creation of any Lien on any
Collateral (other than Permitted Liens), (B) increase the aggregate
principal amount of Securities that may be issued under the Indenture or
(C) modify this definition, 66 2/3%, and (ii) otherwise, a majority.
"Bankruptcy Law" has the meaning provided in Section 6.1 of the
Indenture.
"Bills of Sale" means, for each Aircraft, the FAA Bill of Sale and the
Warranty Bill of Sale.
"Board of Directors" means the Board of Directors of the Company or
any committee of such board duly authorized to act in respect of any
particular matter.
"Business Day" means each day which is not a Legal Holiday.
"Capital Stock" of any Person means any and all shares, interests,
rights to purchase, warrants, options, participations or other equivalents
of or interests in (however designated) equity of such Person, including
any Preferred Stock, but excluding any debt securities convertible into
such equity.
"Capitalized Lease Obligation" means, as applied to any Person for any
period, an obligation of such Person to pay rent or other amounts under a
lease that is required to be capitalized for financial reporting purposes
in accordance with GAAP, and the amount of such obligation shall be the
capitalized amount of such obligation determined in accordance with GAAP.
"Certificated Air Carrier" means a United States "air carrier" within the
meaning of the Act, holding an air carrier operating certificate issued pursuant
to chapter 447 of the Act and of the type referred to in 11 U.S.C. Section 1110,
or if such certification shall cease to be available, a carrier of comparable
status under the laws of the United States then in force.
"Certifying Officer" means an Officer or an assistant secretary of the
Company.
"Change in Control" means the occurrence of any of the following
events: (i) any person (including any entity or group deemed to be a
"person" under Section 13(d)(3) or Section 14(d)(2) of the Exchange Act) is
or becomes the direct or indirect beneficial owner (as determined in
accordance with Rule 13d-3 under the Exchange Act) of shares of the
Company's Capital Stock representing greater than 50% of the total voting
power of all shares of Capital Stock of the Company entitled to vote in the
election of directors of the Company under ordinary circumstances or to
elect a majority of the Board of Directors of the Company, (ii) the Person
then constituting the "Company" under the Indenture sells, transfers or
otherwise disposes of all or substantially all of its assets, (regardless
of whether such Person thereupon ceases to constitute the "Company" under
the Indenture pursuant to Section 5.2 thereof), (iii) when, during any
period of 12 consecutive months after the date of original issuance of the
Securities, individuals who at the beginning of any such 12-month period
constituted the Board of Directors (together with any new directors whose
election by such Board or whose nomination for election by the stockholders
of the Company was approved by a vote of majority of the directors still in
office entitled to vote with respect to such nomination who were either
directors at the beginning of such period or whose election or nomination
for election was previously so approved, but excluding any of the
individuals who at the beginning of such 12-month period constituted such
Board but who ceased to be a member of the Board pursuant to the Company's
mandatory retirement policy as in effect as of the Issue Date), cease for
any reason to constitute a majority of the Board of Directors then in
office or (iv) the date of the consummation of the merger or consolidation
of the Person then constituting the "Company" under the Indenture with
another corporation where the stockholders of such Person, immediately
prior to the merger or consolidation, would not beneficially own,
immediately after the merger or consolidation, shares entitling such
stockholders to 50% or more of all votes (without consideration of the
rights of any class of stock to elect directors by a separate class vote)
to which all stockholders of the corporation issuing cash or securities in
the merger or consolidation would be entitled in the election of directors
or where members of the Board of Directors of the Person then constituting
the "Company" under the Indenture, immediately prior to the merger or
consolidation, would not, immediately after the merger or consolidation,
constitute a majority of the board of directors of the corporation issuing
cash or securities in the merger or consolidation.
"CL/PK" means Credit Lyonnais/PK Airfinance, a financial sector
corporation organized and existing under and by virtue of the laws of the
Grand Duchy of Luxembourg.
"Code" means the United States Internal Revenue Code of 1986, as
amended from time to time, or any similar legislation of the United States
enacted to supersede, amend or supplement such Code, and any reference to a
provision or provisions of the Code shall also mean and refer to any
successor provision or provisions, however designated or distributed.
"Collateral" has the meaning specified in Section 2.1 of the Mortgage.
"Common Stock" includes any stock of any class of the Company which
has no preference in respect to dividends or of amounts payable in the
event of any voluntary or involuntary liquidation, dissolution or winding
up of the Company and which is not subject to redemption by the Company;
initially it refers to the common stock, $0.01 par value, of the Company.
"Company" means the party named as such in the Indenture or any
obligor on the Securities until a successor replaces it pursuant to the
Indenture and thereafter means the successor.
"Corporate Trust Office" when used with respect to the Trustee means
the office of the Trustee at which at any particular time its corporate
trust business is administered and which, at the Issue Date, is located at
First Security Bank, National Association, as Trustee, 79 South Main
Street, Salt Lake City, Utah 84111, Attention: Corporate Trust Services.
"Custodian" has the meaning provided in Section 6.1 of the Indenture.
"Default" means any event which is, or after notice or passage of
time, or both, would be, an Event of Default.
"Definitions Appendix" means this Definitions Appendix attached as
Appendix I to the Indenture and the Mortgage and constituting a part of the
Indenture and each other Operative Document.
"8% Preferred Stock" means the 8% Cumulative Convertible Exchangeable
Preferred Stock of the Company and dividends on such stock, and payments on
account of which are to be deemed equivalent to distributions on such
stock.
"Employee Preferred Stock" means the IFFA Preferred Stock, the ALPA
Preferred Stock and the IAM Preferred Stock of the Company and dividends on
such stock, and payments on account of which are to be deemed equivalent to
distributions on such stock.
"Engine" means (i) each of the Pratt & Whitney Model JT9D-7R4D
aircraft engines identified by manufacturer's serial number in the Mortgage
Supplements executed and delivered on the Issue Date, so long as a
Replacement Engine shall not have been substituted therefor pursuant to the
Mortgage, and (ii) each Replacement Engine, so long as another Replacement
Engine shall not have been substituted therefor pursuant to the Mortgage,
whether or not such engine or Replacement Engine, as the case may be, is
from time to time installed on an Airframe or installed on another
airframe, and including, in each case all Parts incorporated or installed
in or attached thereto and any and all Parts removed therefrom so long as
such Parts remain subject to the Lien of the Mortgage under the terms
thereof.
"Equity Notes" means the Mandatory Conversion Equity Notes due 1999 of
the Company issued concurrently with the Securities.
"Equity Notes Indenture" means the Indenture dated as of April 21,
1998 between the Company and First Security Bank, National Association, as
trustee, pursuant to which the Company is issuing the Equity Notes.
"Equity Notes Trustee" means First Security Bank, National
Association, as trustee under the Equity Notes Indenture, and its
successors and assigns in such capacity.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"Event of Default" has the meaning provided in Section 6.1 of the
Indenture.
"Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time.
"FAA" means the Federal Aviation Administration or similar regulatory
authority established to replace it.
"FAA Bill of Sale" means, for each Aircraft, the bill of sale for such
Aircraft on AC Form 8050-2 or such other form as may be acceptable to the
FAA for recordation with it, executed by the Owner Trustee in favor of the
Company.
"Federal Aviation Act" means Title 49 of the United States Code,
"Transportation," as amended from time to time, or any similar legislation
of the United States enacted in substitution or replacement thereof. In
the event there is enacted any legislation replacing, modifying or
repealing, in whole or in part, the Federal Aviation Act, then the term
"certificated," when used with reference to the Federal Aviation Act or any
particular provision thereof, shall mean authorized to provide, or not
prohibited from providing, air transportation services.
"GAAP" means generally accepted accounting principles in the United
States of America as in effect as of the Issue Date, including those set
forth in (i) the opinions and pronouncements of the Accounting Principles
Board of the American Institute of Certified Public Accountants, (ii)
statements and pronouncements of the Financial Accounting Standards Board,
(iii) such other statements by such other entity as approved by a
significant segment of the accounting profession and (iv) the rules and
regulations of the SEC governing the inclusion of financial statements
(including pro forma financial statements) in periodic reports required to
be filed pursuant to Section 13 of the Exchange Act, including opinions and
pronouncements in staff accounting bulletins and similar written statements
from the accounting staff of the SEC.
"Global Security" means a Security that evidences all or part of the
Securities of any series and bears the legend set forth in Exhibit 1 to the
Rule 144A/Regulation S Appendix to the Indenture.
"Holder" or "Holder of Securities" means the Person in whose name a
Security is registered on the Registrar's books.
"Indebtedness" means, with respect to any Person at any date, without
duplication, (a) all indebtedness, obligations and other liabilities
(contingent or otherwise) of such Person for borrowed money (whether or not
the recourse of the lender is to the whole of the assets of such Person or
only to a portion thereof), (b) all obligations and other liabilities
(contingent or otherwise) of such Person evidenced by bonds, notes or other
similar instruments, (c) all obligations and other liabilities (contingent
or otherwise) of such Person in respect of letters of credit or other
similar instruments (and reimbursement obligations with respect thereto),
(d) all obligations and other liabilities (contingent or otherwise) of such
Person to pay the deferred and unpaid purchase price of property or
services (other than any such obligations that represent trade payables or
accrued expenses incurred in the ordinary course of business), (e) all
Capitalized Lease Obligations of such Person, (f) all Indebtedness of
others secured by a Lien on any asset or assets of such Person, whether or
not such Indebtedness is assumed by such Person (and, if not assumed, such
Indebtedness shall be limited to the fair market value of such asset or
assets as determined on the date such Indebtedness was incurred), and (g)
all Indebtedness of others guaranteed by such Person to the extent of such
guarantee. The amount of Indebtedness of any Person at any date shall be
the outstanding balance at such date of all unconditional obligations as
described above and the maximum liability of such Person for any such
contingent obligations at such date. A change in GAAP that results in an
obligation of the Company existing at the time of such change becoming
Indebtedness shall not be deemed an incurrence of such Indebtedness.
"Indenture" means the Indenture dated as of April 21, 1998 between the
Company and the Trustee, under which the Securities are issued, as amended
or supplemented from time to time.
"Indenture Discharge Date" means the date of the effectiveness of the
termination of the Company's obligations under the Indenture pursuant to
Section 8.1(a) or (b) thereof.
"Indenture Trustee" means the Trustee.
"Interest Payment Date" means April 15 and October 15 of each year
during which any Security is Outstanding (commencing October 15, 1998) and
the date on which the Securities mature, if different.
"Issue Date" means the date on which the Securities are originally
issued.
"Legal Holiday" means a Saturday, Sunday or any other day on which
banks located in New York City or the city and state of the Trustee's
Corporate Trust Office as of the Issue Date are authorized or obligated by
law to remain closed.
"Lien" means any conveyance in trust, assignment, mortgage, pledge,
security interest, encumbrance, lien or charge of any kind (including any
conditional sale or other title retention agreement or lease in the nature
thereof).
"Mandatory Redemption Amount" has the meaning provided in Section 3.8
of the Indenture.
"Mandatory Redemption Date" has the meaning provided in Section 3.8 of
the Indenture.
"Mortgage" means the Aircraft Mortgage and Security Agreement, dated
as of April 21, 1998, between the Company and the Trustee in substantially
the form attached to the Indenture as Exhibit A.
"Mortgage Supplement" means (i) each Mortgage and Security Agreement
Supplement executed and delivered on the Issue Date for an Aircraft, in
substantially the form attached to the Mortgage as Exhibit A, which
describes with particularity the Airframe and Engines associated with such
Aircraft, (ii) each other Mortgage and Security Agreement Supplement from
time to time executed and delivered, in substantially the form attached to
the Mortgage as Exhibit A, which shall describe with particularity any
Replacement Engine and (iii) any other supplement to the Mortgage from time
to time executed and delivered in accordance with the provisions of the
Mortgage or any other Operative Document.
"9 1/4% Preferred Stock" means the 9 1/4% Cumulative Convertible
Exchangeable Preferred Stock of the Company and dividends on such stock,
and payments on account of which are to be deemed equivalent to
distributions on such stock.
"Obligations" has the meaning provided in Section 2.1 of the Mortgage.
"Offer to Purchase" means an offer to purchase all or a portion, as
the case may be, of the Securities by the Company from the Holders
commenced by the mailing (by first class mail, postage prepaid) by the
Company (or, if requested by the Company on at least five Business Days'
prior notice to the Trustee and at the Company's expense, by the Trustee)
of a notice to each Holder (and, if mailed by the Company, to the Trustee)
at such Holder's address appearing in the Register, stating: (i) the
covenant pursuant to which the offer is being made and that all Securities
validly tendered will be accepted for payment, provided, that if Securities
in excess of the aggregate principal amount that the Company has offered to
purchase are tendered by the Holders, then Securities will be purchased
from the tendering Holders pro rata, based on the aggregate principal
amount of Securities tendered by each such Holder; (ii) the purchase price
and the date of purchase (which shall be a Business Day no earlier than 30
days nor later than 60 days from the date such notice is mailed) (the
"Payment Date"); (iii) that any Security not tendered will continue to
accrue interest pursuant to its terms (including, if such Offer to Purchase
is being made pursuant to Section 4.12(c)(i)(A) of the Indenture, a
statement that the rate of interest on such Security may be subject to
increase in accordance with the provisions of such Section); (iv) that,
unless the Company defaults in the payment of the purchase price on the
Payment Date, any Security accepted for payment pursuant to the Offer to
Purchase shall cease to accrue interest on and after the Payment Date; (v)
that Holders electing to have a Security purchased pursuant to the Offer to
Purchase will be required to surrender the Security, together with the form
entitled "Option of the Holder to Elect Purchase" attached to or on the
reverse side of the Security completed, to the Paying Agent at the address
specified in the notice at any time beginning with the date of such notice
but prior to the close of business on the Business Day immediately
preceding the Payment Date (or, if such day is a Legal Holiday, on the next
subsequent day which is not a Legal Holiday), and such Holder shall be
entitled to receive from the Paying Agent a non-transferable receipt of
deposit evidencing such deposit; (vi) that, unless the Company defaults in
making the payment of the purchase price or shall otherwise, in its sole
discretion, consent thereto, Holders will be entitled to withdraw their
election only if the Trustee receives, not later than the close of business
on the fifth Business Day immediately preceding the Payment Date, a
telegram, facsimile transmission or letter setting forth the name of such
Holder, the principal amount of Securities delivered for purchase and a
statement that such Holder is withdrawing his election to have such
Securities purchased; and (vii) that Holders whose Securities are being
purchased only in part will be promptly issued new Securities equal in
principal amount to the unpurchased portion of the Securities surrendered
(which new Securities, if such Offer to Purchase is being made pursuant to
Section 4.12(c)(i)(A) of the Indenture, will cease to be secured by the
Aircraft released pursuant to such Section); provided that each Security
purchased and each new Security issued shall be in a principal amount of
$1,000 or integral multiples thereof. The Company shall place such notice
in the national edition of The New York Times or The Wall Street Journal
or, if such newspapers are not then in circulation, in a financial
newspaper of general circulation in New York City. No failure of the
Company to give the foregoing notice shall limit any Holder's right to
exercise a repurchase right. On the Payment Date, the Company shall (i)
accept for payment Securities or portions thereof tendered pursuant to an
Offer to Purchase, provided, that if Securities in excess of the aggregate
principal amount that the Company has offered to purchase are tendered by
the Holders, then Securities will be purchased from the tendering Holders
pro rata, based on the aggregate principal amount of Securities tendered by
each such Holder; (ii) deposit with the Trustee money sufficient to pay
the purchase price of all Securities or portions thereof so accepted; and
(iii) deliver, or cause to be delivered, to the Trustee all Securities or
portions thereof so accepted together with an Officers' Certificate
specifying the Securities or portions thereof accepted for payment by the
Company. The Trustee shall promptly mail to the Holders of Securities so
accepted payment in an amount equal to the purchase price, and the Trustee
shall promptly authenticate, and the Company shall promptly execute and
mail (or cause to be mailed) to such Holders a new Security equal in
principal amount to any unpurchased portion of the Securities surrendered;
provided that each Security purchased and each new Security issued shall be
in a principal amount of $1,000 or integral multiples thereof; provided
further that if the Payment Date is between a regular Record Date and the
next succeeding Interest Payment Date, Securities to be repurchased must be
accompanied by payment of an amount equal to the interest and Special
Interest, if any, payable on such succeeding Interest Payment Date on the
principal amount to be repurchased, and the interest on the principal
amount of the Security being repurchased, and Special Interest, if any,
with respect thereto, will be paid on such next succeeding Interest Payment
Date to the registered holder of such Security on the immediately preceding
Record Date. A Security repurchased on an Interest Payment Date need not
be accompanied by any such payment, and the interest on the principal
amount of the Security being repurchased and Special Interest, if any, with
respect thereto, will be paid on such Interest Payment Date to the
registered holder of such Security on the corresponding Record Date. The
Company will publicly announce the results of an Offer to Purchase as soon
as practicable after the Payment Date. The Trustee shall act as the Paying
Agent for an Offer to Purchase. The Company will comply with Rule 14e-l
under the Exchange Act and any other securities laws and regulations
thereunder to the extent such laws and regulations are applicable, in the
event that the Company is required to repurchase Securities pursuant to an
Offer to Purchase. Both the notice of the Company and the notice of the
Holder having been given as specified above, the Securities so to be
repurchased shall, on the Payment Date become due and payable at the
purchase price applicable thereto and from and after such date (unless the
Company shall default in the payment of such purchase price) such
Securities shall cease to bear interest. If any Security shall not be paid
upon surrender thereof for repurchase, the principal shall, until paid,
bear interest from the Payment Date at the rate borne by such Security.
Any Security which is to be submitted for repurchase only in part shall be
delivered pursuant to the above provisions with (if the Company or Trustee
so requires) due endorsement by, or a written instrument of transfer in
form satisfactory to the Company and the Trustee duly executed by, the
Holder thereof or such Holder's attorney duly authorized in writing.
"Officer" means the Chairman of the Board, the President, any Vice
President of any grade, the Chief Financial Officer, the Treasurer, any
Assistant Treasurer, the Secretary or the Controller of the Company.
"Officers' Certificate" means a certificate signed by an Officer and
by a Certifying Officer satisfying the requirements of Sections 11.4 and
11.5 of the Indenture.
"Operative Documents" means the Indenture, the Mortgage and the
Mortgage Supplements.
"Opinion of Counsel" means a written opinion from the General Counsel
of the Company, legal counsel to the Company or another legal counsel who
is reasonably acceptable to the Trustee, which Opinion of Counsel shall
comply with Sections 11.4 and 11.5 of the Indenture. The counsel may be an
employee of the Company. The acceptance by the Trustee (without written
objection to the Company during the fifteen (15) Business Days following
receipt) of, or its action on, an opinion of counsel not specifically
referred to above shall be sufficient evidence that such counsel is
acceptable to the Trustee.
"Outstanding" or "outstanding" when used with respect to Securities or
a Security, means all Securities theretofore authenticated and delivered
under the Indenture, except:
(a) Securities theretofore canceled by the Trustee or delivered to
the Trustee for cancellation;
(b) Securities for which payment has been deposited with the Trustee
or any Paying Agent in trust other than deposits pursuant to Section 8.1 of
the Indenture; and
(c) Securities which have been paid, or for which other Securities
shall have been authenticated and delivered in lieu thereof or in
substitution therefor pursuant to the terms of Section 2.7 of the
Indenture, unless proof satisfactory to the Trustee is presented that any
such Securities are held by holders in due course.
A Security does not cease to be Outstanding because the Company or one
of its Affiliates holds the Security; provided, however, that in
determining whether the Holders of the requisite aggregate principal amount
of Securities Outstanding have given any request, demand, authorization,
direction, notice, consent or waiver under the Indenture, Section 2.8 of
the Indenture shall be applicable.
"Owner Trustee" means First Security Bank, National Association (f/k/a
First Security Bank of Utah, National Association), not in its individual
capacity (except as otherwise expressly set forth) but as trustee f/b/o
Seven Leasing pursuant to the Trust Agreement.
"Parts" means any and all appliances, parts, spare parts, instruments,
appurtenances, accessories, furnishings, seats and other equipment of
whatever nature (other than Engines or engines) which may from time to time
be incorporated or installed in or attached to any Airframe or any Engine,
or which have been removed therefrom but which remain subject to the Lien
of the Mortgage in accordance with the terms thereof, exclusive of any
items (i) permitted by the Mortgage to be leased by the Company in the
ordinary course of business from third parties (and installed without
discrimination with respect to other Boeing Model 767-231 ETOPS aircraft
(or improved models) owned or operated by the Company) and (ii) not
required in the navigation of the Aircraft in which they are installed.
The terms "spare parts" and "appliances" (as used in this definition) shall
include, but not be limited to, the definitions assigned to those terms by
Section 40102 of Title 49 of the United States Code as amended from time to
time or any recodification thereof or any regulation of the FAA.
"Paying Agent" has the meaning provided in Section 2.3 of the
Indenture, except that for the purposes of Article 8 of the Indenture and
any Offer to Purchase, the Paying Agent shall not be the Company.
"Payment Date" with respect to any Offer to Purchase, has the meaning
specified in the definition herein of Offer to Purchase.
"Payments" means such monies as the Company shall cause to be
delivered to the Trustee or any Paying Agent for the purpose of paying
principal, purchase price or redemption price of, or interest on, or
Special Interest with respect to, the Securities on any Interest Payment
Date, Payment Date, redemption date or acceleration; and "Pay" means paying
such monies.
"Permitted Liens" shall mean any of the following Liens:
(a) Liens in favor of the Trustee arising by reason of the Mortgage
or any other Operative Document and Liens in favor of the Equity Notes
Trustee arising by reason of the Second Mortgage or any other Operative
Document (as defined in the Equity Notes Indenture);
(b) Liens for taxes, assessments or other governmental charges or
levies not at the time delinquent or thereafter payable without penalty or
being contested by the Company in good faith by appropriate proceedings and
for which adequate reserves have been established if required in accordance
with GAAP, and which Lien presents no material risk of sale, forfeiture or
loss of any Collateral;
(c) Liens of carriers, warehousemen, mechanics, materialmen and
landlords incurred in the Company's ordinary course of business for sums
not overdue or being contested by the Company in good faith by appropriate
proceedings and for which adequate reserves have been established if
required in accordance with GAAP, and which Lien presents no material risk
of sale, forfeiture or loss of any Collateral;
(d) Liens incurred in the ordinary course of business in connection
with workmen's compensation, unemployment insurance or other forms of
governmental insurance or benefits, or to secure performance of tenders and
statutory obligations entered into in the ordinary course of business or to
secure obligations on surety or appeal bonds;
(e) judgment Liens (so long as the related judgments do not,
individually or in the aggregate, constitute an Event of Default) in
existence less than thirty (30) days after the entry thereof or with
respect to which execution has been stayed or the payment of which is
covered in full by insurance;
(f) Liens on an Aircraft in favor of a permitted lessee of such
Aircraft which result solely from the lease (so long as it is a permitted
lease under the Mortgage) on such Aircraft; and
(g) Liens on the Aircraft which are "Permitted Liens" arising under,
and defined by definitions substantially similar to above subparagraphs (b)
and (c) in, the leases (if any) for the Aircraft; provided, however, that
such leases are permitted under the Mortgage.
"Person" means any individual, corporation, partnership, limited
liability issuer, joint venture, association, joint-stock issuer, trust,
unincorporated organization, government or any agency or political
subdivision thereof or any other entity.
"Placement Agreement" means the Placement Agreement, dated April 9,
1998, between Lazard Freres & Co. LLC and the Company.
"Preferred Stock" as applied to the Capital Stock of any Person means
Capital Stock of any class or classes (however designated) which is
preferred as to the payment of dividends or distributions, or as to the
distribution of assets upon any voluntary or involuntary liquidation or
dissolution of such Person, over shares of Capital Stock of any other class
of such Person.
"principal" of a Security means the principal of the Security plus the
premium, if any, payable on the Security which is due or overdue or is to
become due at the relevant time.
"Property" means any interest in any kind of property or asset,
whether real, personal or mixed, present or future, or tangible or
intangible.
"Record Date" means the fifteenth (15th) day preceding any Interest
Payment Date, whether or not a Business Day.
"Redemption Value" means, on any date of determination with respect to
any Offer to Purchase and for each Aircraft with respect to which such
Offer to Purchase is being made, an amount equal to (a) if such date of
determination is before October 15, 2000, $14,400,000, (b) if such date of
determination is on or after October 15, 2000 and before October 15, 2001,
$13,787,000, (c) if such date of determination is on or after October 15,
2001 and before October 15, 2002, $13,174,000 and (d) if such date of
determination is on or after October 15, 2002, $12,561,000.
"Register" has the meaning provided in Section 2.3 of the Indenture.
"Registrar" has the meaning provided in Section 2.3 of the Indenture.
"Registration Rights Agreement" means the Registration Rights Agreement,
made and entered into as of April 21, 1998, by and among the Company, Lazard
Freres & Co. LLC and the Owner Trustee, relating to the Securities.
"Replacement Engine" means a Pratt & Whitney Model JT9D-7R4D aircraft
engine (or engine of the same or another manufacturer of a comparable or an
improved model and suitable for installation and use on an Airframe) (i)
which has a value, utility and remaining useful life at least equal to the
Engine which it is replacing, assuming such Engine was of the value and
utility required by the terms of the Mortgage; provided that any such
engine shall be of the same make and model as the other engine then
installed on such Airframe, shall be an engine model then being utilized by
the Company on other Boeing Model 767-231 ETOPS aircraft operated by the
Company and, for so long as such engine has been operated by Company, shall
have been maintained, serviced, repaired and overhauled in substantially
the same manner as the Company maintains, services, repairs and overhauls
similar engines utilized by the Company, and (ii) which shall have been
made subject to the Lien of the Mortgage pursuant to Section 2 and Section
3.3 of the Mortgage.
"Request" means a written request for the action therein specified
signed on behalf of the Company by any Officer and delivered to the
Trustee. Each Request shall be accompanied by an Officers' Certificate if
and to the extent required by Section 11.4 of the Indenture.
"Required Holders" means from time to time the Holders of the
Applicable Percentage in principal amount of the Securities then
Outstanding.
"Sale OTP Amount" has the meaning provided in Section 4.12 of the
Indenture.
"SEC" means the Securities and Exchange Commission and any government
agency succeeding to its functions.
"Second Mortgage" means the Aircraft Second Mortgage and Security
Agreement, dated as of April 21, 1998, between the Company and the Equity
Notes Trustee, securing, among other things, the obligations of the Company
under the Equity Notes Indenture.
"Securities" means the "Securities" (as defined in the preamble to the
Indenture and includes the Company's 11 3/8% Senior Secured Notes due 2003),
as amended or supplemented from time to time, that are issued under the
Indenture.
"Securities Act" means the Securities Act of 1933, as amended.
"Securityholder" means the Person in whose name a Security is
registered on the Registrar's books.
"Seven Leasing" means Seven Sixty Seven Leasing, Inc., a Delaware
corporation.
"Significant Subsidiary" means any Subsidiary which is a Significant
Subsidiary within the meaning of Article I of Regulation S-X under the
Exchange Act.
"Special Interest" has the meaning assigned to such term in the
Registration Rights Agreement.
"Special Record Date" has the meaning provided in Section 2.1 of the
Indenture.
"Stated Maturity" means, with respect to any security, the date
specified in such security as the fixed date on which the final payment of
principal of such security is due and payable, including pursuant to any
mandatory redemption provision (but excluding any provision providing for
the repurchase of such security at the option of the holder thereof upon
the happening of any contingency unless such contingency has occurred).
"Subsidiary" means, in respect of any Person, any corporation,
association, partnership or other business entity of which more than 50% of
the total voting power of shares of Capital Stock or other interests
(including membership or partnership interests) 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 (i) such Person, (ii) such Person and one or more
Subsidiaries of such Person or (iii) one or more Subsidiaries of such
Person.
"Taxes" means any and all fees (including, without limitation,
license, documentation and registration fees), taxes (including, without
limitation, income, gross receipts, sales, rental, use, turnover, value-
added, property (tangible and intangible), excise and stamp taxes), levies,
imposts, duties, recording charges or fees, charges, assessments or
withholdings of any nature whatsoever, together with any and all
assessments, penalties, additions to tax, fines or interest thereon.
"Tender" means, with respect to any Security, the effective tender of
such Security (in whole or in part) for repurchase in accordance with the
provisions of the Indenture.
"TIA" means the Trust Indenture Act of 1939 (15 U.S. Code Sections 77aaa-
77bbbb) as in effect on the date of the Indenture; provided, however, that in
the event the Trust Indenture Act of 1939 is amended after such date, "Trust
Indenture Act" means, to the extent required by any such amendment, the Trust
Indenture Act of 1939 as so amended.
"Total Loss" and "Total Loss Date" have the meanings provided in
Section 1.1 of the Mortgage.
"Total Loss OTP Amount" has the meaning provided in Section 4.12 of
the Indenture.
"Trust Agreement" means the Trust Agreement, dated as of January 24,
1995, between Seven Leasing and First Security Bank, National Association
(f/k/a First Security Bank of Utah, National Association).
"Trust Officer" means any officer in the corporate trust department of
the Trustee, or any other officer or assistant officer of the Trustee
assigned by the Trustee to administer its corporate trust matters.
"Trustee" means the party named as such in the Indenture until a
successor replaces it in accordance with the provisions of the Indenture
and thereafter means the successor.
"TWA" means the Company.
"U.S." or "United States" means the United States of America.
"U.S. Government Obligations" means securities which are (i) direct
obligations of the United State government or (ii) obligations of a Person
controlled or supervised by and acting as an agency or instrumentality of
the United States government, are full faith and credit obligations of the
United States government and are not callable or redeemable at the option
of the issuer thereof, and shall also include a depository receipt issued
by a bank or trust Company as custodian with respect to any such U.S.
Government Obligation or a specific payment of interest on or principal of
any such U.S. Government Obligation held by such custodian for the account
of the holder of a depository receipt, provided that (except as required by
law) such custodian is not authorized to make any deduction from the amount
payable to the holder of such depository receipt from any amount received
by the custodian in respect of the U.S. Government Obligation or the
specific payment of interest on or principal of the U.S. Government
Obligation evidenced by such depository receipt.
"Warranty Bill of Sale" means, for each Aircraft, the full warranty
(as to title) bill of sale covering such Aircraft executed by the Owner
Trustee in favor of the Company.
Section 2. Rules of Construction. Unless the context otherwise requires,
the following rules of construction shall apply to all purposes of the
Indenture and the other Operative Documents (including this appendix) and
of such agreements as may incorporate this appendix by reference.
(a) a term has the meaning assigned to it;
(b) whenever the context may require, any pronoun shall include
the corresponding masculine, feminine and neuter forms;
(c) the words "include", "includes" and "including" shall be
deemed to be followed by the phrase "without limitation";
(d) all terms used in Article 9 of the Uniform Commercial Code as
in effect in the State of New York that are used but not defined
herein shall have the meaning assigned to such terms therein;
(e) references to a specific Person shall include the Person and
(except as limited by any agreement by which such Person is bound) the
successors and assigns of such Person;
(f) references to "applicable laws" shall include statutes,
ordinances, rules, regulations, court and administrative decisions and
conditions, restrictions and limitations in licenses, permits,
approvals and authorizations issued or granted by federal, state or
local United States or foreign governmental bodies and agencies;
(g) unless otherwise specified in the computation of a period of
time from a specified date to a later specified date, the word "from"
means "from and including", and the words "to" and "until" each mean
"to but excluding";
(h) words in the singular include the plural, and words in the
plural include the singular;
(i) provisions apply to successive events and transactions;
(j) "herein", "hereto" and other words of similar import in any
agreement refer to that agreement as a whole and not to any particular
Article, Section or other subsection of that agreement;
(k) unless otherwise specified, all references in any Operative
Document to Sections, Articles, Exhibits, Appendices and Schedules are
to Sections of, Articles of, Exhibits to, Appendices to and Schedules
to such Operative Document;
(l) all accounting terms used herein and not expressly defined
shall have the meanings given to them in accordance with GAAP; and
(m) unless otherwise specified, references in this Definitions
Appendix to any instrument, contract, agreement or other document
shall be deemed to be references to such instrument, agreement or
other document as it may be amended, restated, supplemented or
otherwise modified from time to time pursuant to and as permitted by
the terms thereof, whether or not so stated in any particular
definition.
Exhibit 4.28
===============================================================================
TRANS WORLD AIRLINES, INC.
and
FIRST SECURITY BANK, NATIONAL ASSOCIATION,
as Trustee
INDENTURE
Dated as of April 21, 1998
$43,200,000
11 3/8% Senior Secured Notes due 2003
===============================================================================
TABLE OF CONTENTS
Page
----
ARTICLE 1.
DEFINITIONS AND RULES OF CONSTRUCTION
Section 1.1 Definitions.................................................. 1
Section 1.2 Rules of Construction........................................ 1
ARTICLE 2.
THE SECURITIES
Section 2.1 Designation, Form and Dating................................. 1
Section 2.2 Execution, Amount, Authentication and Delivery............... 2
Section 2.3 Registrar and Paying Agent................................... 4
Section 2.4 Paying Agent to Hold Payments In Trust....................... 5
Section 2.5 Securityholder Lists......................................... 6
Section 2.6 Transfer and Exchange........................................ 6
Section 2.7 Mutilated, Defaced, Destroyed, Lost and
Stolen Securities............................................ 7
Section 2.8 Treasury Securities.......................................... 8
Section 2.9 Temporary Securities......................................... 9
Section 2.10 Cancellation................................................. 9
Section 2.11 Defaulted Interest; Interest on Defaulted Principal.......... 10
Section 2.12 CUSIP Numbers................................................ 10
ARTICLE 3.
REDEMPTIONS
Section 3.1 Optional Redemption.......................................... 10
Section 3.2 Redemption Notice to Trustee................................. 11
Section 3.3 Selection of Securities to be Redeemed....................... 11
Section 3.4 Notice of Redemption......................................... 11
Section 3.5 Effect of Notice of Redemption............................... 12
Section 3.6 Deposit of Redemption Price.................................. 12
Section 3.7 Securities Redeemed in Part.................................. 12
Section 3.8 Mandatory Redemption......................................... 12
ARTICLE 4.
COVENANTS, REPRESENTATIONS AND WARRANTIES
Section 4.1 Payment of Securities........................................ 14
Section 4.2 Maintenance of Office or Agency.............................. 15
Section 4.3 Limitation on Dividends and Acquisition
of Common Stock.............................................. 15
Section 4.4 Corporate Existence.......................................... 16
Section 4.5 Payment of Taxes and Other Claims............................ 17
Section 4.6 Notices...................................................... 17
Section 4.7 Maintenance of Properties and Insurance...................... 18
Section 4.8 Default Notices and Compliance Certificates.................. 18
Section 4.9 SEC Reports.................................................. 19
Section 4.10 Waiver of Stay, Extension or Usury Laws...................... 20
Section 4.11 Amendment to Certain Agreements.............................. 20
Section 4.12 Title to Collateral and Limitation
on Liens; Sale of Aircraft; Total Loss
With Respect to Aircraft..................................... 20
Section 4.13 Books, Records, Access; Confidentiality...................... 23
Section 4.14 Security Interests........................................... 24
Section 4.15 Repurchase of Securities Upon a Change in Control............ 24
Section 4.16 Restrictions on Becoming an Investment Company............... 25
Section 4.17 Listing...................................................... 25
ARTICLE 5.
SUCCESSOR CORPORATION
Section 5.1 Covenant Not to Consolidate, Merge,
Convey or Transfer Except Under Certain Conditions........... 25
Section 5.2 Successor Person Substituted................................. 26
Section 5.3 Limitation on Lease of Properties............................ 27
ARTICLE 6.
DEFAULT AND REMEDIES
Section 6.1 Events of Default............................................ 27
Section 6.2 Acceleration................................................. 29
Section 6.3 Other Remedies............................................... 29
Section 6.4 Waiver of Past Defaults...................................... 30
Section 6.5 Control by Majority.......................................... 30
Section 6.6 Limitation on Suits.......................................... 30
Section 6.7 Rights of Holders to Receive Payment......................... 31
Section 6.8 Collection Suit by Trustee................................... 31
Section 6.9 Trustee May File Proofs of Claim............................. 31
Section 6.10 Application of Proceeds...................................... 32
Section 6.11 Undertaking for Costs........................................ 33
Section 6.12 Restoration of Rights on Abandonment of Proceedings.......... 33
Section 6.13 Powers and Remedies Cumulative; Delay or Omission
Not Waiver of Default........................................ 34
ARTICLE 7.
TRUSTEE
Section 7.1 Duties of Trustee............................................ 34
Section 7.2 Rights of Trustee............................................ 35
Section 7.3 Individual Rights of Trustee................................. 36
Section 7.4 Trustee's Disclaimer......................................... 36
Section 7.5 Notice of Defaults........................................... 36
Section 7.6 Reports by Trustee to Holders................................ 36
Section 7.7 Compensation and Indemnity................................... 36
Section 7.8 Replacement of Trustee....................................... 37
Section 7.9 Successor Trustee by Merger, etc............................. 38
Section 7.10 Eligibility; Disqualification................................ 38
Section 7.11 Preferential Collection of Claims Against Company............ 39
ARTICLE 8.
DISCHARGE OF INDENTURE
Section 8.1 Termination of Company's Obligations......................... 39
Section 8.2 Application of Trust Money................................... 40
Section 8.3 Repayment to Company......................................... 41
Section 8.4 Reinstatement................................................ 41
ARTICLE 9.
AMENDMENTS, SUPPLEMENTS AND WAIVERS
Section 9.1 Without Consent of Holders................................... 42
Section 9.2 With Consent of Holders...................................... 42
Section 9.3 Compliance with Trust Indenture Act.......................... 43
Section 9.4 Revocation and Effect of Consents............................ 43
Section 9.5 Notation on or Exchange of Securities........................ 44
Section 9.6 Trustee to Sign Amendments, etc.............................. 44
Section 9.7 Effect of Supplement and/or Amendment........................ 44
ARTICLE 10.
SECURITY
Section 10.1 Other Operative Documents.................................... 45
Section 10.2 Opinions, Certificates and Appraisals........................ 45
Section 10.3 Authorization of Actions to be Taken by the
Trustee Under the Operative Documents........................ 46
Section 10.4 Payment of Expenses.......................................... 46
Section 10.5 Authorization of Receipt of Funds by the Trustee
Under the Operative Documents................................ 47
ARTICLE 11.
MISCELLANEOUS
Section 11.1 Conflict with Trust Indenture Act of 1939.................... 47
Section 11.2 Notices; Waivers............................................. 47
Section 11.3 Communications by Holders with Other Holders................. 48
Section 11.4 Certificate and Opinion as to Conditions Precedent........... 48
Section 11.5 Statements Required in Certificate or Opinion................ 49
Section 11.6 Rules by Trustee, Paying Agent, Registrar.................... 50
Section 11.7 Holidays..................................................... 50
Section 11.8 Governing Law; Waiver of Jury Trial.......................... 50
Section 11.9 No Adverse Interpretation of Other Agreements................ 50
Section 11.10 No Recourse Against Others................................... 51
Section 11.11 Benefits of Indenture and the Securities Restricted.......... 51
Section 11.12 Successors and Assigns....................................... 51
Section 11.13 Counterpart Originals........................................ 51
Section 11.14 Severability................................................. 51
Section 11.15 Effect of Headings........................................... 52
ARTICLE 12.
RELEASE OF COLLATERAL
Section 12.1 Release of Collateral........................................ 52
APPENDIX I Definitions Appendix
APPENDIX II Rule 144A/Regulation S Appendix (including forms of
11 3/8% Senior Secured Note as Exhibits 1 and 2
thereto)
EXHIBIT A Form of Aircraft Mortgage and Security Agreement
INDENTURE dated as of April 21, 1998 between TRANS WORLD AIRLINES,
INC., a Delaware corporation (the "Company"), and FIRST SECURITY BANK,
NATIONAL ASSOCIATION, a national banking association, as Trustee (the
"Trustee").
Each party agrees as follows for the benefit of the other party and
for the equal and ratable benefit of the Holders of the Company's 11 3/8%
Senior Secured Notes due 2003 (the "Initial Securities") and, if and when
issued pursuant to a resale of Initial Securities, the Company's 11 3/8%
Senior Secured Notes due 2003 (the "Resale Securities") and, if and when
issued pursuant to a registered exchange for Initial Securities or Resale
Securities, the Company's 11 3/8% Senior Secured Notes due 2003 (the
"Exchange Securities") and, if and when issued pursuant to a private
exchange for Initial Securities, the Company's 11 3/8% Senior Secured Notes
due 2003 (the "Private Exchange Securities" and, together with the Resale
Securities, the Exchange Securities and the Initial Securities, the
"Securities").
ARTICLE 1.
DEFINITIONS AND RULES OF CONSTRUCTION
Section 1.1 Definitions.
Capitalized terms used herein and not otherwise defined herein shall
have the meanings ascribed to such terms in Section 1 of the Definitions
Appendix attached hereto as Appendix I, which shall be a part of this
Indenture as if fully set forth in this place.
Section 1.2 Rules of Construction.
The rules of construction for this Indenture are set forth in Section
2 of the Definitions Appendix.
ARTICLE 2.
THE SECURITIES
Section 2.1 Designation, Form and Dating.
Provisions relating to the Initial Securities, the Resale Securities,
the Private Exchange Securities and the Exchange Securities are set forth
in the Rule 144A/Regulation S Appendix attached hereto as Appendix II (the
"Rule 144A Appendix") which is hereby incorporated in and expressly made
part of this Indenture. The Initial Securities and the Resale Securities
and the Trustee's certificate of authentication with respect to each
thereof shall be substantially in the form of Exhibit 1 to the Rule 144A
Appendix (with such appropriate insertions, omissions, substitutions and
other variations as are required by this Indenture) and are hereby
incorporated in and expressly made a part of this Indenture. The Exchange
Securities, the Private Exchange Securities, and the Trustee's certificates
of authentication shall be substantially in the form of Exhibit 2 to the
Rule 144A Appendix (with such appropriate insertions, omissions,
substitutions and other variations as are required by this Indenture) and
are hereby incorporated in and expressly made a part of this Indenture.
The Securities may have imprinted or otherwise reproduced thereon such
notations, legends or endorsements, not inconsistent with the provisions of
this Indenture, as may be required to comply with any law or with any rules
or regulations pursuant thereto, or with the rules of any securities market
in which the Securities are admitted to trading, or to conform to general
usage. The Company shall approve the form of the Securities and any
notation, legend or endorsement on them. Each Security shall be dated the
date of its authentication and shall bear interest from the applicable date
set forth in the form of Security and shall be payable, unless previously
Tendered, on the dates as specified on the face of the form of the
Security.
The Person in whose name any Security is registered at the close of
business on any Record Date with respect to any Interest Payment Date shall
be entitled to receive the interest and Special Interest, if any, payable
on such Interest Payment Date to the extent provided by such Security,
except if and to the extent the Company shall default in the payment of the
interest or Special Interest due on such Interest Payment Date, in which
case defaulted interest or Special Interest, as the case may be, shall be
paid to the Person in whose name the Outstanding Security is registered at
the close of business on the subsequent record date (which shall be not
less than five (5) Business Days prior to the date of payment of such
defaulted interest) established by notice given by mail by or on behalf of
the Company to the Holders of Securities not less than fifteen (15) days
preceding such subsequent record date (a "Special Record Date").
Section 2.2 Execution, Amount, Authentication and Delivery.
The Securities shall be signed for the Company by the manual or
facsimile signatures of an Officer and a Certifying Officer. The Company's
seal shall be affixed to or reproduced on the Securities. Typographical or
other errors or defects in any such reproduction of the seal or any such
signature shall not affect the validity or enforceability of any Security
which has been duly authenticated and delivered by the Trustee.
If an officer whose signature is on a Security no longer holds that
office at the time the Trustee authenticates the Security, the Security
shall be valid nevertheless.
A Security shall not be valid until the Trustee manually signs the
certificate of authentication on the Security. The signature shall be
conclusive evidence that the Security has been authenticated under this
Indenture.
The aggregate principal amount of Securities which may be
authenticated and delivered under this Indenture is limited to $43,200,000
except for Securities authenticated and delivered upon registration of
transfer of, or in exchange for, or in lieu of, other Securities pursuant
to Sections 2.6, 2.7, 2.9, 4.15, or 9.5 or in conjunction with a Registered
Exchange Offer or any Private Exchange (as such terms are defined in the
Rule 144A Appendix).
The Securities shall be known and designated as the "11 3/8% Senior
Secured Notes due 2003" of the Company. Their Stated Maturity shall be
April 15, 2003, and, subject to the increases in the rate of interest set
forth in Section 4.12 hereof and in the Securities, they shall bear
interest at the rate of 11 3/8% per annum, from April 21, 1998 or from the
most recent Interest Payment Date to which interest and Special Interest,
if any, have been paid or duly provided for, as the case may be, payable
semi- annually in arrears on April 15 and October 15, commencing October
15, 1998, until the principal thereof is paid or made available for
payment.
Subject to the limits set forth in the second preceding paragraph of
this Indenture, the Trustee shall authenticate Securities for original
issue upon written order of the Company signed by an Officer and by a
Certifying Officer of the Company. The order shall specify the amount of
Securities to be authenticated and the date on which the original issue of
Securities is to be authenticated, shall provide instructions with respect
to the delivery thereof and shall be accompanied by the documents specified
in Sections 10.2 and 11.4 and by the following (provided, however, that the
Trustee shall be authorized conclusively to rely upon the documents
specified in Section 11.4):
(a) the grant to the Trustee, by assignment, pledge, or otherwise
pursuant to the Mortgage, of a security interest in the Collateral;
(b) Officers' Certificates or other satisfactory confirmation (i)
with respect to the Mortgage and the Collateral, that the Company is the
legal and beneficial owner of the Collateral, free and clear of all Liens
except Permitted Liens; and (ii) describing the actions taken to make,
obtain and accomplish all necessary filings, confirmations and
identifications referred to in Section 4.14 hereof;
(c) compliance with all applicable provisions of Sections 4.12 and
4.14 hereof;
(d) an Officers' Certificate confirming all representations and
warranties of the Company contained in this Indenture and the other
Operative Documents as of the date of authentication;
(e) an Officers' Certificate containing representations and warranties
of the type usual and customary to the issuance of the Securities such as,
but not limited to, representations regarding due authorization of this
Indenture; due authorization of the issuance and delivery of the
Securities; that the Securities, when so issued and delivered against
delivery of the Aircraft under the Aircraft Sale Agreement will be duly and
validly issued, and constitute valid and binding obligations of the
Company, enforceable in accordance with their terms; that no consent,
approval or authorization of, or designation, declaration, or filing with,
any governmental authority or any other person or entity is required of the
Company in connection with the execution and delivery of this Indenture or
the issuance and delivery of the Securities; and that the Securities have
been registered under the Securities Act or that registration is not
required in connection with the offer, issuance and delivery of the
Securities;
(f) an Opinion of Counsel to the effect that the Company has the
requisite corporate power and authority to execute, deliver and perform its
obligations under this Indenture and the other Operative Documents; that
the Securities have been duly authorized and validly issued; and that the
offer and issuance of the Securities have been registered or will be exempt
from the registration requirements under the Securities Act; and
(g) execution and delivery by the Company of the Securities and by all
parties thereto of this Indenture and all other Operative Documents;
provided, however, that any Securities in fact authenticated by the Trustee
upon written order of the Company as set forth in the first sentence of
this paragraph shall be deemed to have been duly authenticated hereunder
and to constitute an enforceable contractual obligation of the Company and
shall be entitled to all the benefits of this Indenture and the other
Operative Documents equally and proportionately with any and all other
Securities duly authenticated and delivered hereunder, in each case,
notwithstanding any failure of the Company to deliver any of the documents
specified in Sections 10.2 and 11.4 or above in this sentence.
The Securities shall be issuable only in registered form, without
coupons, in denominations of $1,000 and any integral multiple thereof,
except that the Global Securities may be issued in a different
denomination.
The Trustee may appoint an authenticating agent acceptable to the
Company to authenticate Securities. An authenticating agent may
authenticate Securities whenever the Trustee may do so. Each reference in
this Indenture to authentication by the Trustee includes authentication by
such agent. An authenticating agent has the same rights as an Agent to
deal with the Company, any guarantor or any Affiliate of the Company.
Section 2.3 Registrar and Paying Agent.
The Company shall maintain an office or agency where Securities
eligible for transfer or exchange may be presented for registration of
transfer or for exchange ("Registrar") and an office or agency where
Securities may be presented for payment or repurchase ("Paying Agent").
The Registrar shall keep a register of the Securities and of their transfer
and exchange ("Register"). Such Register shall be in written form in the
English language or any other form capable of being converted into such
form within a reasonable time. At all reasonable times such Register shall
be open for inspection by the Trustee. The Company may have one or more
co-Registrars and one or more additional paying agents. The term "Paying
Agent" includes any additional paying agent.
The Company may enter into an appropriate agency agreement with any
Agent not a party to this Indenture. Such agency agreement shall implement
the provisions of this Indenture that relate to such Agent. The Company
shall notify the Trustee of the name and address of any such Agent. If the
Company fails to maintain a Registrar or Paying Agent, the Trustee shall
act as such.
The Company initially appoints the Trustee as Registrar and Paying
Agent.
Section 2.4 Paying Agent to Hold Payments In Trust.
Each Paying Agent shall hold in trust for the benefit of
Securityholders or the Trustee all Payments held by the Paying Agent for
the payment of principal of, repurchase or redemption price, if any, of,
interest on, and Special Interest, if any, with respect to, the Securities
(whether such Payment has been paid to it by the Company or any other
obligor on the Securities), and shall promptly notify the Trustee of any
default by the Company (or any other obligor on the Securities) in making
any such Payment. The Company at any time may require a Paying Agent to
Pay all Payments held by it to the Trustee and account for any funds
disbursed and the Trustee may at any time during the continuance of any
payment default, upon written request to a Paying Agent, require such
Paying Agent to Pay all Payments held by it to the Trustee and to account
for any Payments distributed. Upon doing so the Paying Agent shall have no
further liability for the Payments.
If the Company shall at any time act as its own Paying Agent, it will,
on or before each due date of the principal of, repurchase or redemption
price, if any, of, interest on, or Special Interest, if any, with respect
to, any of the Securities, segregate and hold in trust for the benefit of
the Persons entitled thereto Payments sufficient to pay the principal,
repurchase or redemption price, if any, of, interest or Special Interest,
if any, so becoming due until such Payments shall be Paid to such Persons
or otherwise disposed of as herein provided, and will promptly notify the
Trustee of such action or any failure so to act.
The Company will, on or before each due date for the payment of the
principal of, repurchase or redemption price, if any, of, interest on, or
Special Interest, if any, with respect to any of the Securities, deposit
with a Paying Agent Payments (in same day funds) sufficient to pay the
principal, repurchase or redemption price, if any, of, interest or Special
Interest, if any, so becoming due, such Payments to be held in trust for
the benefit of the Persons entitled to such principal, repurchase or
redemption price, if any, of, interest, or Special Interest, if any, and
(unless such Paying Agent is the Trustee) the Company will promptly notify
the Trustee of such action or any failure so to act.
The Company will cause each Paying Agent other than the Trustee to
execute and deliver to the Trustee an instrument in which such Paying Agent
shall agree with the Trustee, subject to the provisions of this Section,
that such Paying Agent will:
(a) hold all Payments received by it as such agent for the payment of
the principal of, repurchase or redemption price, if any, of, interest on,
or Special Interest, if any, with respect to the Securities (whether such
Payments have been paid to it by the Company or by any other obligor on the
Securities) in trust for the benefit of the Persons entitled thereto until
such Payments shall be paid to such Persons or otherwise disposed of as
herein provided;
(b) promptly give the Trustee notice of any failure by the Company (or
any other obligor upon the Securities) to make any payment of the principal
of, repurchase or redemption price, if any, of, interest on, or Special
Interest, if any, with respect to, the Securities when the same shall be
due and payable; and
(c) at any time during the continuance of any such failure, upon the
written request of the Trustee, forthwith pay to the Trustee all Payments
so held in trust by such Paying Agent.
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, Pay,
or direct any Paying Agent to Pay, to the Trustee all Payments held in
trust by the Company or such Paying Agent, such Payments to be held by the
Trustee upon the same trusts as those upon which such Payments were held by
the Company or such Paying Agent; and, upon such Payment by any Paying
Agent to the Trustee, such Paying Agent shall be released from all further
liability with respect to such Payments held by it as Paying Agent.
Any Payments deposited with the Trustee or any Paying Agent, or then
held by the Company, in trust for the payment of the principal of,
redemption or repurchase price, if any, of, interest on or Special
Interest, if any, with respect to, any Security and unclaimed for two (2)
years after such principal, redemption, repurchase price, interest or
Special Interest has become due and payable shall be paid to the Company on
its request, or (if then held by the Company) shall be discharged from such
trust, unless otherwise required by mandatory provisions of applicable
escheat or abandoned or unclaimed property law, and the Holder of such
Security shall thereafter, as an unsecured general creditor, look only to
the Company for payment thereof and all liability of the Trustee or such
Paying Agent with regard to such Payments, and all liability of the Company
as trustee thereof, shall thereupon cease.
Section 2.5 Securityholder Lists.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses
of Securityholders. If the Trustee is not the Registrar, the Company shall
furnish to the Trustee on or before each Interest Payment Date and at such
other times as the Trustee may request in writing a list in such form and
as of such date as the Trustee may reasonably require of the names and
addresses of Securityholders.
Section 2.6 Transfer and Exchange.
When Securities are presented to the Registrar or a co-Registrar with
a request to register the transfer or to exchange them for an equal
principal amount of Securities of other authorized denominations, the
Registrar shall register the transfer or make the exchange as requested if
its requirements for such transactions are met. To permit registrations of
transfers and exchanges, the Company shall execute and the Trustee shall
authenticate Securities at the Registrar's request. All Securities
presented for registration of transfer, exchange, redemption or payment
shall (if so required by the Company or the Trustee) be duly endorsed by,
or be accompanied by a written instrument or instruments of transfer in
form satisfactory to the Company and the Trustee, duly executed by the
Holder or his attorney duly authorized in writing. The Company may require
payment of a sum sufficient to pay all taxes, assessments or other
governmental charges in connection with any registration of transfer or
exchange, but not for any exchange pursuant to Sections 2.9, 3.7, 4.15 or
9.5 or any other Tender not involving any transfer of Securities (other
than to the Company). No service charge shall be made for any such
transaction.
In the case of any Security which is Tendered in part only, upon such
Tender the Company shall execute and the Trustee shall authenticate and
make available for delivery to the Holder thereof, without service charge,
a new Security or Securities of any authorized denomination as requested by
such Holder in aggregate principal amount equal to the non-Tendered portion
of the principal of such Security. No Securities will be issued in
denominations of less than $1,000 upon tender of the Securities.
All Securities issued upon any transfer or exchange of Securities
shall be valid obligations of the Company, evidencing the same debt of the
same series and entitled to the same benefits under this Indenture, as the
Securities surrendered upon such transfer or exchange.
Section 2.7 Mutilated, Defaced, Destroyed, Lost and Stolen Securities.
In case any temporary or definitive Security shall become mutilated,
defaced or be apparently destroyed, lost or stolen, subject to compliance
with the following sentence and in the absence of notice to the Company or
the Trustee that such Security has been acquired by a bona fide purchaser,
the Company shall execute, and the Trustee shall authenticate and deliver,
a new Security, bearing a number not contemporaneously outstanding, in
exchange and substitution for the mutilated or defaced Security, or in lieu
of and substitution for the Security so apparently destroyed, lost or
stolen. In every case the applicant for a substitute Security shall
furnish to the Company and to the Trustee and any agent of the Company or
the Trustee such security or indemnity as may be reasonably required by
them to indemnify and defend and to save each of them harmless and, in
every case of destruction, loss or theft, evidence to their satisfaction of
the apparent destruction, loss or theft of such Security and of the
ownership thereof.
Upon the issuance of any substitute Security pursuant to the preceding
paragraph, the Company may require the payment of a sum sufficient to cover
any tax or other governmental charge that may be imposed in relation
thereto and any other expenses (including the fees and expenses of the
Trustee) connected therewith. In case any Security which has matured or is
about to mature, or has been tendered for repurchase pursuant to any of the
provisions hereof (as evidenced by an irrevocable written notice from the
Holder to the Company and the Trustee), shall become mutilated or defaced
or be apparently destroyed, lost or stolen, the Company may, instead of
issuing a substitute Security, pay or authorize the payment of such
Security (without surrender of such Security except in the case of a
mutilated or defaced Security), as applicable, if the applicant for such
payment shall furnish to the Company and to the Trustee and any agent of
the Company or the Trustee such security or indemnity as any of them may
reasonably require to save each of them harmless from all risks, however
remote, and, in every case of apparent destruction, loss or theft, the
applicant shall also furnish to the Company and the Trustee and any agent
of the Company or the Trustee evidence to their satisfaction of the
apparent destruction, loss or theft of such Security and of the ownership
thereof.
Every substitute Security issued pursuant to the provisions of this
Section by virtue of the fact that any Security is apparently destroyed,
lost or stolen shall constitute an additional contractual obligation of the
Company, whether or not the apparently destroyed, lost or stolen Security
shall be at any time enforceable by anyone and shall be entitled to all the
benefits of (but shall also be subject to all the limitations of rights set
forth in) this Indenture equally and proportionately with any and all other
Securities duly authenticated and delivered hereunder. Every substitute
Security issued pursuant to the provisions of this Section by virtue of the
fact that any Security is mutilated or defaced shall constitute an
additional contractual obligation of the Company and shall be entitled to
all the benefits of (but shall also be subject to all the limitations of
rights set forth in) this Indenture equally and proportionately with any
and all other Securities of the same series duly authenticated and
delivered hereunder. All Securities shall be held and owned upon the
express condition that, to the extent permitted by law, the foregoing
provisions are exclusive with respect to the replacement or payment of
mutilated or defaced or apparently destroyed, lost or stolen Securities and
shall preclude any and all other rights or remedies notwithstanding any law
or statute existing or hereafter enacted to the contrary with respect to
the replacement or payment of negotiable instruments or other securities
without their surrender.
Section 2.8 Treasury Securities.
In determining whether the Holders of the required principal amount of
Securities have given or concurred in any amendment, request, demand,
authorization, direction, notice, consent or waiver under this Indenture or
any other Operative Document, Securities owned by the Company (including
Securities Tendered), an Affiliate of the Company, any other obligor upon
the Securities, any Affiliate of such obligor upon the Securities or any
Person who has given or concurred in any such amendment, request, demand,
authorization, direction, notice, consent or waiver under the direction of,
by agreement with, or as a condition or in consideration of any exchange
offer by or transfer of such Person's Securities to the Company, an
Affiliate of the Company, any other obligor, any Affiliate of such obligor
or any such Person, shall be disregarded and deemed not to be Outstanding
for the purpose of any such determination, except that, for the purposes of
determining whether the Trustee shall be protected in relying on any such
amendment, request, demand, authorization, direction, notice, consent or
waiver, only Securities which the Trustee knows are so owned shall be so
disregarded. Securities so owned which have been pledged in good faith may
be regarded as Outstanding if the pledgee establishes to the satisfaction
of the Trustee that neither the Company nor any such other obligor,
Affiliate or Person is affiliated with the pledgee or any Affiliate of the
pledgee and that the pledgee has the present right (subject to no contrary
obligation or understanding) so to act with respect to the Securities on
the basis of its best interests as a Holder independently of any direction
by or interest of the Company. In case of a dispute as to such right, the
Trustee in good faith shall be entitled to rely upon the advice of counsel,
including counsel for the Company. Upon request of the Trustee, the
Company shall promptly furnish to the Trustee a certificate of a Certifying
Officer listing and identifying all Securities, if any, known by the
Company to be owned or held by or for the account of any of the above-
described Persons; and subject to Sections 7.1 and 7.2 herein, the Trustee
shall be entitled to accept such certificate as conclusive evidence of the
facts therein set forth and of the fact that all Securities not listed
therein are Outstanding for the purpose of any such determination. The
Company shall not, directly or indirectly, pay or cause to be paid any
remuneration, whether by way of supplemental or additional interest, fee or
otherwise, or grant any additional security, to any Holder of Securities as
consideration for or as an inducement to giving or concurring in any
amendment, request, demand, authorization, direction, notice, consent or
waiver under this Indenture or any other Operative Document unless such
remuneration is concurrently paid, or such security is concurrently
granted, as the case may be, on the same terms ratably to the Holders of
all Securities then Outstanding (regardless of whether any such Holder has
given or concurred in such amendment, request, demand, authorization,
direction, notice, consent or waiver under this Indenture or any other
Operative Document).
For purposes of this Section and without limiting the generality of
the foregoing, Securities which are subject to a binding contract or
irrevocable tender offer (including an offer which is in any way
conditioned upon or simultaneous with, or requires as a condition precedent
(whether by contract or otherwise) or which cannot be effected without, the
agreement or consent of the transferor to any amendment, request, demand,
authorization, direction, notice, consent or waiver hereunder) pursuant to
which ownership (direct or indirect) is to be transferred (including for
example, Securities tendered to the Company or any other Person in an
exchange transaction) shall be deemed owned by such transferee, and
therefore, any such simultaneous agreement or consent by the transferor
shall be invalid.
Section 2.9 Temporary Securities.
Until definitive Securities are ready for delivery, the Company may
prepare, and, upon written order of the Company, the Trustee shall
authenticate, temporary Securities in any authorized denominations.
Temporary Securities shall be substantially in the form of definitive
Securities of the same series but may have variations that the Company
reasonably considers appropriate and necessary for temporary Securities.
Without unreasonable delay, the Company shall prepare and the Trustee shall
authenticate and deliver definitive Securities in exchange for temporary
Securities. Until so exchanged, the temporary Securities shall be entitled
to the same benefits under this Indenture as definitive Securities of the
same series.
Section 2.10 Cancellation.
The Company may at any time deliver Securities to the Trustee for
cancellation. The Registrar and the Paying Agent shall forward to the
Trustee any Securities surrendered to them for transfer, exchange
(including without limitation, Initial Securities exchanged for Exchange
Securities, Private Exchange Securities or both), repurchase or payment.
All Securities purchased pursuant to any Offer to Purchase shall be
canceled. The Trustee and no one else shall cancel all Securities
surrendered for transfer, exchange, repurchase or cancellation. The
Company may not issue new Securities to replace Securities it has paid
(upon Tender or otherwise) or which have been delivered to the Trustee for
cancellation. The Trustee shall destroy all canceled Securities and, if
requested, deliver a certificate of such destruction to the Company. If
the Company shall acquire any of the Securities, such acquisition shall not
operate as a satisfaction of the indebtedness represented by such
Securities unless and until the same are delivered to the Trustee for
cancellation.
Section 2.11 Defaulted Interest; Interest on Defaulted Principal.
If the Company defaults in a payment of interest on, or Special
Interest, if any, with respect to, the Securities, it shall pay the
defaulted interest, plus interest on the defaulted interest or Special
Interest, as the case may be, at the rate then borne on the Securities to
the extent permitted by law and the terms thereof, to the persons who are
Securityholders on a subsequent Special Record Date. The Company shall fix
the Special Record Date and payment date. At least fifteen (15) days
before the Special Record Date, the Company shall mail to each
Securityholder a notice that states the Special Record Date, the payment
date and the amount of defaulted interest or Special Interest, as the case
may be, to be paid. If the Company defaults in the payment of principal on
the Securities (whether on acceleration, at maturity, upon tender for
repurchase, or otherwise), it shall pay interest on such defaulted
principal at the rate then borne by the Securities to the Trustee upon
demand. The Trustee shall apply any such payment in accordance with the
provisions of Section 6.10.
Section 2.12 CUSIP Numbers.
The Company in issuing the Securities may use "CUSIP" numbers (if then
generally in use) and, if so, the Trustee shall use "CUSIP" numbers in
notices of redemption as a convenience to Holders; provided, however, that
any such notice may state that no representation is made as to the
correctness of such numbers either as printed on the Securities or as
contained in any notice of a redemption and that reliance may be placed
only on the other identification numbers printed on the Securities, and any
such redemption shall not be affected by any defect in or omission of such
numbers.
ARTICLE 3.
REDEMPTIONS
Section 3.1 Optional Redemption.
The Securities Outstanding shall not be subject to redemption in whole
or in part at the option of the Company prior to April 15, 2001. On or
after April 15, 2001, the Securities may be redeemed at any time in whole
or in part (in any integral multiple of $1,000) by the Company at its sole
option at redemption prices (expressed as a percentage of principal amount)
as set forth below during the twelve-month periods beginning April 15 of
the years shown below, plus in each case an amount equal to accrued and
unpaid interest and Special Interest, if any, with respect to, the
Securities to and including the redemption date:
Redemption
Year Price
---- -----
2001 104.550%
2002 102.275%
Section 3.2 Redemption Notice to Trustee.
If the Company elects to redeem Securities as provided in Section 3.1,
it shall notify the Trustee of the redemption date, the principal amount of
Securities and all other information needed for the notice to be given by
the Trustee pursuant to Section 3.4.
The Company shall give the notice provided for in this Section at
least ten (10) days (unless a shorter notice shall be satisfactory to the
Trustee) prior to the date the Trustee must give notice pursuant to Section
3.4.
Section 3.3 Selection of Securities to be Redeemed.
If less than all the Securities are to be redeemed, the Trustee shall
select the Securities to be redeemed on either a pro rata basis or by lot.
The Trustee shall make the selection from Securities outstanding not
previously called for redemption. The Trustee may select for redemption
portions of the principal of Securities that have denominations larger than
$1,000. Securities and portions of them it selects shall be in amounts of
$1,000 or whole multiples of $1,000. Provisions of this Indenture that
apply to Securities called for redemption also apply to portions of
Securities called for redemption.
Section 3.4 Notice of Redemption.
At least 30 days but not more than 60 days before a redemption date,
the Company shall mail by first-class mail a notice of redemption to each
Holder whose Securities are to be redeemed.
The notice shall identify the Securities and the principal amount
thereof to be redeemed and shall state:
(a) the principal amount of each Security held by each such
Holder to be redeemed;
(b) the redemption date;
(c) the redemption price (including the amount of accrued and
unpaid interest and Special Interest, if any, to be paid on the
Securities called for redemption);
(d) if any Security is being redeemed in part, the portion of the
principal amount of such Security to be redeemed and that, after the
redemption date, upon surrender of such Security, a new Security or
Securities in principal amount equal to the unredeemed portion will be
issued;
(e) the name and address of the Paying Agent;
(f) that Securities called for redemption must be surrendered to
the Paying Agent to collect the redemption price;
(g) that, unless the Company defaults in making the redemption
payment, interest on the Securities to be redeemed ceases to accrue on
and after the redemption date and the only remaining right of the
Holders of such Securities is to receive payment of the redemption
price upon surrender to the Paying Agent of the Securities.
At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at the Company's expense.
Section 3.5 Effect of Notice of Redemption.
Once a notice of redemption is mailed, Securities called for
redemption become due and payable on the redemption date at the redemption
price and, on and after such date (unless the Company shall default in the
payment of the redemption price), such Securities shall cease to bear
interest. Upon surrender to the Paying Agent, such Securities shall be
paid at the redemption price plus accrued interest and Special Interest, if
any, to the redemption date.
Section 3.6 Deposit of Redemption Price.
On or before 10:00 a.m., Eastern Time, on the redemption date, the
Company shall deposit with the Paying Agent money in funds immediately
available on the redemption date sufficient to pay the redemption price of
and accrued interest on and Special Interest, if any, with respect to, all
Securities to be redeemed on that date.
Section 3.7 Securities Redeemed in Part.
Upon surrender of a Security that is redeemed in part, the Trustee
shall authenticate for the Holder a new Security equal in principal amount
to the unredeemed portion of the Security surrendered.
Section 3.8 Mandatory Redemption.
Subject to the other provisions of this Section 3.8, the Company
shall, until all the Securities are paid or payment thereof has been
provided for, deposit in accordance with Section 3.6, at least one Business
Day prior to October 15 in each year, commencing October 15, 2000 (each
such date being hereinafter referred to as a "Mandatory Redemption Date"),
an amount in cash sufficient to redeem an aggregate principal amount of
Securities (the "Mandatory Redemption Amount") equal to $1,840,000 on
October 15, 2000 and $1,838,000 on each of October 15, 2001 and October 15,
2002 (or, if the aggregate principal amount of Securities Outstanding on
any such Mandatory Redemption Date is less than the principal amount
required to so be redeemed, then all the Outstanding Securities shall be
redeemed on such date), at a redemption price (expressed as a percentage of
the aggregate principal amount of Securities Outstanding) of 100% plus
accrued and unpaid interest and Special Interest, if any, to the Mandatory
Redemption Date (subject to the right of holders of record on the relevant
record date to receive interest and Special Interest, if any, due on the
relevant Interest Payment Date). Each such deposit shall be applied to the
redemption of Securities on such Mandatory Redemption Date as herein
provided. The Trustee shall, on or before the thirtieth day prior to such
Mandatory Redemption Date (but not sooner than 45 days before such date),
select, in the manner provided in Section 3.3, the Securities to be
redeemed on the next Mandatory Redemption Date and cause notice of the
redemption thereof to be given in the name and at the expense of the
Company in the manner provided in Section 3.4. Such notice having been
duly given, the redemption of such Securities shall be made upon the terms
and in the manner set forth in Sections 3.5 and 3.7.
At its option the Company may at any time reduce its obligation to pay
any Mandatory Redemption Amount in cash by delivering to the Trustee at
least 45 days before the related Mandatory Redemption Date (i) Securities
which have been acquired by the Company in open market purchases (and, for
avoidance of doubt, not acquired by way of any redemption or Offer to
Purchase hereunder) and have not been called for redemption under any
provision of this Indenture, together with (ii) an Officers' Certificate
directing the Trustee to cancel the Securities and stating the election of
the Company to have credited against such Mandatory Redemption Amount on
such Mandatory Redemption Date a specified principal amount of Securities
so delivered. Each such Officers' Certificate shall state that the
Securities forming the basis of such credit do not include any Securities
theretofore credited against any Mandatory Redemption Amount pursuant to
this Section 3.8. All Securities made the basis of a credit against a
Mandatory Redemption Amount shall be credited at 100% of their principal
amount. Although the Company may obtain credit against any Mandatory
Redemption Amount in advance of the related Mandatory Redemption Date as
provided herein, any such credit shall be applied against such Mandatory
Redemption Amounts in the order in which they become due.
In case of the failure of the Company to deliver such Officers'
Certificate, the Mandatory Redemption Amount due on such Mandatory
Redemption Date shall be paid entirely in cash without the option to reduce
the Company's obligation to make such payment as specified in this Section
3.8.
Each Mandatory Redemption Amount shall be automatically reduced by
$613,000 for each Aircraft that is sold in accordance with Section 4.12(c)
or that is the subject of a Total Loss, provided, that in each case, the
Company has complied in full with the applicable provisions of Section 4.12
with respect to such sale or Total Loss, as the case may be. The effective
date of any such reduction shall be either the Payment Date with respect to
the related Offer to Purchase (so long as the Company does not default in
the payment of the purchase price with respect to such Offer to Purchase)
or, if no such Offer to Purchase is required pursuant to the provisions of
Section 4.12, then such effective date shall be (with respect to the sale
of an Aircraft) the date of consummation of the sale of such Aircraft or
(with respect to Total Loss of an Aircraft) the date that is twenty-five
days after the Total Loss Date with respect to such Total Loss, provided,
however, that such reduction shall not apply to any Mandatory Redemption
Amount for which a notice of redemption has been given under Section 3.8 on
or prior to such effective date.
On or after the Mandatory Redemption Date and upon Request (and so
long as no Event of Default has occurred and is continuing), the Trustee
shall promptly return to the Company any funds it is holding under this
Section 3.8 in excess of the Mandatory Redemption Amount (as reduced
pursuant to the provisions of this Section 3.8) related to such Mandatory
Redemption Date and shall promptly authenticate and mail to the Company a
new Security or Securities in an aggregate principal amount equal to that
portion (if any) of the Securities delivered to the Trustee and not used by
the Company as a credit under this Section 3.8 (provided, however, that the
Company has previously delivered to the Trustee sufficient executed
Securities to enable the Trustee to so authenticate such Securities).
ARTICLE 4.
COVENANTS, REPRESENTATIONS AND WARRANTIES
Section 4.1 Payment of Securities.
The Company shall pay the principal of, interest on and Special
Interest, if any, with respect to, the Securities on the dates and in the
manner provided in this Indenture and in the Securities.
The Company shall pay interest semi-annually in arrears on each
Interest Payment Date, commencing October 15, 1998. Interest shall be paid
on each Interest Payment Date in an amount equal to the interest accrued
for the period beginning from the Issue Date, or from the most recent date
to which interest and Special Interest, if any, have been paid. All
interest and Special Interest, if any, due and payable on the Securities
shall be paid in cash, except that the Company may at its option, make such
Payments by check mailed to the address of the Person entitled thereto as
it appears in the Register; provided, however, that such Payments on a
certificated Security will be made by wire transfer to a U.S. dollar
account maintained by a Holder with a bank in New York City if such Holder
owns at least $250,000 in aggregate principal amount of certificated
Securities and elects payment by wire transfer by giving written notice to
the Company and the Trustee to such effect designating such account no
later than 10 days immediately preceding the relevant due date for payment
(or such other date as the Company and the Trustee may accept in their
discretion).
An installment of principal, interest or Special Interest, if any,
shall be considered paid on the date due if the Trustee or Paying Agent
(other than the Company or any Affiliate thereof) holds on that date
Payments designated for and sufficient to pay such installment and the
Trustee or Paying Agent is not prohibited from Paying such Payments to the
Holders of the Securities pursuant to this Indenture.
The Company shall pay interest at the rate set forth in this Indenture
and the Securities and the Company shall pay interest on unpaid interest or
Special Interest, if any, at the same rate to the extent legally permitted.
Section 4.2 Maintenance of Office or Agency.
The Company shall maintain in the Borough of Manhattan, The City of
New York, an office or agency where Securities may be surrendered for
registration of transfer or exchange or for presentation for payment or
repurchase and where notices and demands to or upon the Company in respect
of the Securities and this Indenture may be served. At the request of the
Company, said office or agency may be the office of an agent appointed by
the Trustee for such purpose. The Company shall give prompt written notice
to the Trustee of the location, and any change in the location, of such
office or agency not designated or appointed by the Trustee. If at any
time the Company shall fail to maintain any such required office or agency
or shall fail to furnish the Trustee with the address thereof, such
presentations, surrenders, notices and demands may be made or served at the
Corporate Trust Office.
The Company may also from time to time designate one or more other
offices or agencies where the Securities may be presented or surrendered
for any or all such purposes and may from time to time rescind such
designations; provided, however, that no such designation or rescission
shall in any manner relieve the Company of its obligation to maintain an
office or agency in the Borough of Manhattan, The City of New York, for
such purposes. The Company will give prompt written notice to the Trustee
of any such designation or rescission and of any change in the location of
any such other office or agency.
Section 4.3 Limitation on Dividends and Acquisition of Common Stock.
The Company will not declare or pay any dividend or make any distribution
on its Common Stock, Employee Preferred Stock or other Capital Stock of the
Company (other than dividends or distributions payable in the Company's Common
Stock or Employee Preferred Stock or options, warrants or other rights to
acquire, subscribe for or purchase the Company's Common Stock or Employee
Preferred Stock) and will not, and will not permit any of its Subsidiaries to,
purchase, redeem or otherwise acquire for value any shares of its Common Stock,
Employee Preferred Stock or other Capital Stock of the Company, whether in cash
or Property or in obligations of the Company, if, at the time of such
declaration, payment, distribution, purchase, redemption or other acquisition
or, after giving effect thereto, a Default or Event of Default shall have
occurred and be continuing; provided, that notwithstanding anything to the
contrary written above, this Section 4.3 shall not apply to: (a) any purchase
or redemption of Common Stock or Preferred Stock by the Company or an employee
stock ownership or benefit plan (i) from union employees or former union
employees, or their respective transferees, pursuant to the terms of agreements
with labor unions existing on the date hereof; (ii) from recipients or their
transferees of such stock from employee stock ownership or benefit plans subject
to ERISA; (iii) from employee stock ownership or benefit plans subject to ERISA
in order to provide cash benefits to employees pursuant to the terms of such
plans; and (iv) as required by ERISA; (b) any purchase or redemption of Common
Stock or Preferred Stock by an employee stock ownership or benefit plan subject
to ERISA for an aggregate consideration, without regard to purchases or
redemptions pursuant to clause (a) above, of up to $200,000,000; (c) the
payment of fixed or mandatory dividends on or scheduled redemptions or exchanges
of any of the Company's 8% Preferred Stock and 9 1/4,% Preferred Stock and the
payment of any interest on the securities issuable upon such exchange; (d) the
payment of any dividends on or the purchase, redemption or other acquisition or
retirement of the Common Stock or Preferred Stock of the Company within sixty
(60) days after the date of declaration of such dividend or the commitment to
make such purchase, redemption or other acquisition or retirement, if at said
date of declaration or commitment such payment or commitment complied with this
Section 4.3; (e) the purchase, redemption, retirement or other acquisition of
any shares of the Company's Common Stock or Preferred Stock in exchange for, or
out of the proceeds of the substantially concurrent sale of, Common Stock or
Preferred Stock of the Company; (f) any consolidation or merger with or into
any Person or conveyance or transfer of all or substantially all of the
Company's Property to one or more Persons substantially as an entirety, not
prohibited by the terms of Section 5.1; and (g) the
conversion of Employee Preferred Stock into Common Stock.
Section 4.4 Corporate Existence.
(a) Except as otherwise provided in Article 5, the Company shall do
or cause to be done all things necessary to preserve and keep in full force
and effect its corporate existence and the corporate existence of each of
its Subsidiaries engaged in substantial business activity each in
accordance with the respective organizational documents of the Company and
each such Subsidiary and the rights (charter and statutory), licenses,
permits, approvals and governmental franchises of the Company and each such
Subsidiary necessary to the conduct of its respective business; provided,
however, that the Company shall not be required to preserve any such right,
license or franchise, or to preserve the corporate existence of any such
Subsidiary, if the Board of Directors shall determine that the preservation
thereof is no longer in the interest of the Company and that termination of
the corporate existence is not disadvantageous to the Holders in any
material respect.
(b) The Company shall continue to be an air carrier certificated
under Section 604(b) of the Federal Aviation Act.
(c) The Company is and, to the extent required to operate its
business as presently conducted and to perform its obligations under this
Indenture and the Operative Documents, shall remain a "citizen of the
United States" as defined in Section 101(16) of the Federal Aviation Act.
Section 4.5 Payment of Taxes and Other Claims.
The Company shall, and shall cause each of its Subsidiaries to, pay or
discharge or cause to be paid or discharged, before the same shall become
delinquent, (a) all taxes, assessments and governmental charges levied or
imposed upon the Company and each Subsidiary or upon the income, profits or
Property of the Company and each Subsidiary or upon the Collateral and (b)
all lawful claims for labor, materials and supplies which, if unpaid, might
by law become a Lien upon the Collateral or the other Property of the
Company or a Subsidiary; provided, however, that the Company or a
Subsidiary, as the case may be, shall not be required to pay or discharge
or cause to be paid or discharged any such tax, assessment, charge or claim
(i) the amount, applicability or validity of which is being contested in
good faith by appropriate proceedings as permitted by and in accordance
with the provisions of the Operative Documents, to the extent applicable,
and for which adequate reserves have been established in accordance with
GAAP, as in effect from time to time, or (ii) if the Company delivers to
the Trustee a Certificate of an Officer stating that such non-payment and
non-discharge is in the interest of the Company and not prejudicial in any
material respect to the Holders.
Nothing contained herein or in the Securities shall be deemed to
impose on the Trustee or on the Company any obligation to pay on behalf of
the Holder of any Securities any tax, assessment or governmental charge
required by any present or future law of the U.S. or of any state, county,
municipality or other taxing authority thereof to be paid on behalf of, or
withheld from the amount payable to, the Holder of any Securities; rather
any tax, assessment or governmental charge shall, to the extent required by
law, be withheld from the amounts provided for herein.
Section 4.6 Notices.
The Company shall notify the Trustee in writing of any of the
following promptly (and in any event within five (5) Business Days after
an Officer learns of the occurrence thereof) describing the same and, if
applicable, the steps being taken by the Person(s) affected with respect
thereto:
(a) In the event that any Indebtedness of the Company or any
Significant Subsidiary of the Company in a principal amount in excess of
$10,000,000 (i) is declared due and payable before its stated maturity
because of the occurrence of any default (or any event which, with notice
or the lapse of time, or both, shall constitute such default) under such
Indebtedness or (ii) is not paid at its stated maturity; or
(b) Any litigation, arbitration proceeding or governmental proceeding
involving damages or potential liability in excess of $10,000,000 is
instituted against the Company or any of its Subsidiaries which, if
adversely determined, would have a material adverse effect on the business,
operations or financial condition of the Company and its Subsidiaries taken
as a whole.
Section 4.7 Maintenance of Properties and Insurance.
Except as otherwise provided in this Indenture, the Company shall, and
shall cause each of its Subsidiaries to, cause all Collateral and other
Properties owned by or leased to it and used or useful in the conduct of
the business of the Company or any such Subsidiary, as the case may be, to
be maintained and kept in good repair, working order and condition, except
for reasonable wear and use, and supplied with all necessary equipment and
shall cause to be made all necessary repairs, renewals, replacements,
betterments and improvements thereof, all as in the judgment of the Company
may be necessary, so that the business carried on in connection therewith
may be properly and advantageously conducted at all times, except, in every
case, as and to the extent that the Company or any such Subsidiary may be
prevented by fire, strikes, lockouts, acts of God, inability to obtain
labor or materials, governmental restrictions, enemy action, civil
commotion or unavoidable casualty or similar causes beyond the control of
the Company or such Subsidiary; provided, however, that subject to all
requirements of the Operative Documents, nothing in this Section 4.7 shall
prevent the Company or any such Subsidiary from discontinuing the use,
operation or maintenance of any such Properties, or disposing of any of
them, if such discontinuance or disposal is, in the good faith judgment of
an Officer of the Company (or other agent employed by the Company) having
managerial responsibility for any such Property (or, in the case of any
materially important item, with respect to operations or value, in the good
faith judgment of the Company as expressed in a resolution of the Board of
Directors), desirable in the conduct of the Company's business or that of
its Subsidiaries.
For so long as any Collateral or Property is deemed to be useful to
the conduct of the business of the Company or its Subsidiaries, the Company
shall, or shall cause such Subsidiaries to, maintain appropriate insurance,
in accordance with industry practice, on such Collateral and Properties and
as required under the provisions of the applicable Operative Documents.
Notwithstanding the provisions of this Section 4.7, to the extent
there exists any inconsistency between the provisions hereof and the
provisions of the Mortgage relating to Property which constitutes
Collateral, the provisions of the Mortgage shall prevail as to all
Collateral.
Section 4.8 Default Notices and Compliance Certificates.
Contemporaneously with furnishing quarterly financial reports to the
Trustee under Section 4.9(a) or mailing quarterly statements to the Trustee
and Holders under Section 4.9(c), the Company shall furnish to the Trustee
a Certifying Officer's Certificate to the effect that no Default or Event
of Default has occurred or is continuing, or, if there is any such Default
or Event of Default, describing it and the steps, if any, being taken to
cure it.
The Company shall deliver to the Trustee within one hundred twenty
(120) days after the end of each fiscal year in which any of the Securities
remain Outstanding a certificate of the principal executive officer,
principal financial officer or principal accounting officer of the Company
(which need not comply with the provisions of Section 11.5) stating whether
or not, to the knowledge of the signer after due inquiry, the Company is in
compliance with all conditions and covenants under this Indenture and the
Operative Documents (determined without regard to any period of grace or
requirement of notice), and if the Company is not in compliance with all
such conditions and covenants, describing each Default or Event of Default
and its status. The first certificate to be delivered by the Company
pursuant to this Section 4.8 shall be for the fiscal year ending December
31, 1998.
Section 4.9 SEC Reports.
(a) The Company shall deliver to the Trustee as soon as practicable
after it files them with the SEC, copies of the annual reports and of the
information, documents, and other reports (or copies of such portions of
any of the foregoing as the SEC may by rules and regulations prescribe)
which the Company is required to file with the SEC pursuant to Sections 13
or 15(d) of the Exchange Act. The Company also shall comply with the other
provisions of TIA Section 314(a).
(b) So long as any of the Securities remain Outstanding, the Company
shall cause its annual report to stockholders and any quarterly or other
financial reports furnished by it to stockholders generally, to be mailed
to the Holders of such Outstanding Securities at their addresses appearing
in the Register.
(c) At any time the Company does not have a class of securities
registered, or is not otherwise required to file quarterly and other
reports under the Exchange Act, the Company will prepare or cause to be
prepared, for each of the first three (3) quarters of each fiscal year, an
unaudited balance sheet of the Company and its consolidated Subsidiaries as
at the end of such quarter and related unaudited consolidated statements of
income and retained earnings and cash flow of the Company and its
consolidated Subsidiaries for such quarter and the portion of the fiscal
year through such date, setting forth in each case in comparative form the
figures for the corresponding year-to-date period in the previous year,
certified by the principal financial officer of the Company, and for each
fiscal year, an audited balance sheet of the Company and its consolidated
Subsidiaries as at the end of such year and related audited consolidated
statements of income and retained earnings and cash flow of the Company and
its consolidated Subsidiaries for such year, setting forth in comparative
form the figures for the previous year, reported on without a qualification
arising out of the scope of the audit, by the Company's independent public
accountants. All financial statements will be prepared by a nationally
recognized auditing firm and will be prepared in accordance with generally
accepted accounting principles, as in effect from time to time,
consistently applied, except for changes with which the Company's
independent public accountants concur and except that quarterly statements
may be subject to year-end adjustments. The Company will cause a copy of
the respective financial statements to be mailed to the Trustee and each of
the Holders of the Securities within forty-five (45) days after the close
of each of the first three (3) quarters of each fiscal year and within one
hundred twenty (120) days after the close of each fiscal year, to the
addresses set forth in Section 11.2 or, in the case of each of the Holders,
to such Holder's address as set forth in the Register of the Securities.
Section 4.10 Waiver of Stay, Extension or Usury Laws.
The Company covenants (to the extent that it may lawfully do so) that
it will not at any time insist upon, or plead, or in any manner whatsoever
claim, and will resist any and all efforts to be compelled to take the
benefit or advantage of, any stay or extension law or any usury law or
other law that would prohibit or forgive the Company from paying all or any
portion of the principal of, interest on, or Special Interest, if any, with
respect to, the Securities as contemplated herein, wherever enacted, now or
at any time hereafter in force, or which may affect the covenants or the
performance of this Indenture and the Operative Documents; and (to the
extent that it may lawfully do so) the Company hereby expressly waives all
benefit or advantage of any such law, and covenants that it will not
hinder, delay or impede the execution of any power granted to the Trustee
herein and in the Operative Documents, but will suffer and permit the
execution of every such power as though no such law had been enacted.
Section 4.11 Amendment to Certain Agreements.
The Company shall not enter into or consent to any amendment,
supplement or other modification of the Operative Documents except as
permitted under Article 9 hereof.
Section 4.12 Title to Collateral and Limitation on Liens; Sale of
Aircraft; Total Loss With Respect to Aircraft.
(a) The Company represents and warrants that it has, and covenants
that it shall continue to have, full power and lawful authority to grant,
release, convey, assign, transfer, mortgage, pledge, hypothecate and
otherwise create the security interests in the Collateral referred to in
Article 10; the Company shall warrant, preserve and defend the interest and
title of the Trustee to the Collateral, against the claims of all persons
and will maintain and preserve the security interests contemplated by
Article 10; and the Company shall not, and not permit any of its
Subsidiaries to, directly or indirectly, incur, assume or suffer to exist
any Lien of any nature whatsoever upon or with respect to the Collateral,
other than Permitted Liens. The Company shall cause the Operative
Documents, including all necessary financing statements, notifications of
secured transactions and other assurances or instruments to be properly
recorded, registered and filed and to be kept, recorded, registered and
filed in such manner and in such places as may be required by law and shall
take all such other actions as may be required in order to make effective
the security interests intended to be created in connection with this
Indenture. The Company shall furnish to the Trustee the Opinions of
Counsel required by Section 10.2 to confirm such action.
(b) The Company shall not, directly or indirectly, consummate any
sale, lease, transfer or other disposition of any Collateral except as
permitted in paragraph (c) of this Section 4.12 or in the other Operative
Documents.
(c) (i) The Company may, at any time after the earlier to occur of
the conversion of the Equity Notes into Common Stock or such other
securities, cash or other Property, in each case, as provided in and in
accordance with Article 13 of the Equity Notes Indenture or the payment
in full of the Equity Notes, sell one or more of the Aircraft upon
compliance with the following requirements:
(A) the Company shall (unless the Company is not required to make
such Offer to Purchase pursuant to the proviso in this clause (A) or
the provisions of Section 4.12(e)) have commenced an Offer to Purchase
Securities in an aggregate principal amount (the "Sale OTP Amount")
equal to (for each Aircraft so sold) (1) the aggregate principal
amount of the Securities Outstanding on the date of the commencement
of such Offer to Purchase minus (2) the product of (x) the Redemption
Value as of such date multiplied by (y) the number of Aircraft that
will remain subject to the Mortgage after giving effect to such sale,
at a purchase price (expressed as a percentage of principal amount of
Securities to be purchased) equal to (I) 102%, if such Offer to
Purchase is commenced prior to the first anniversary of the Issue
Date, or (II) 101%, if such Offer to Purchase is commenced on or after
the first anniversary of the Issue Date, plus, in each case, accrued
and unpaid interest and Special Interest, if any, on such Securities
to and including the Payment Date, provided, however, that if the
foregoing calculation with respect to any such sale of an Aircraft
results in a negative number, no Offer to Purchase shall be required
with respect to such sale of such Aircraft;
(B) the Company shall have given the Trustee prior notice of the
pending sale of such Aircraft (which notice shall be given by the
Company at least 15 days prior to the date of commencement of the
Offer to Purchase (if any) for such Aircraft or, if no Offer to
Purchase is required pursuant to the proviso in Section 4.12(c)(i)(A)
or the provisions of Section 4.12(e), at least 15 days prior to the
date of consummation of the sale of such Aircraft);
(C) the Company shall have deposited with the Trustee an amount
in cash equal to the purchase price with respect to the Offer to
Purchase (if any) for such Aircraft on or prior to the date of sale of
such Aircraft (which cash amount shall remain on deposit with the
Trustee until the payment of the purchase price on the applicable
Payment Date with respect to such Offer to Purchase); and
(D) no Event of Default shall have occurred and be continuing or
would result from the sale of such Aircraft.
(ii) Effective as of the day immediately following the Payment
Date with respect to the Offer to Purchase in connection with any sale of
an Aircraft, the interest rate borne by the Securities then Outstanding
shall be automatically, without any further act or deed, increased, if at
all, by a per annum percent equal to the product of (A) 1.50 multiplied
by (B) a fraction, (x) the numerator of which shall be the aggregate
principal amount of Securities Outstanding on such Payment Date (after
giving effect to the purchase of Securities pursuant to the Offer to
Purchase on such Payment Date), minus the product of (1) the Redemption
Value as of such Payment Date multiplied by (2) the number of Aircraft
that will remain subject to the Mortgage after giving effect to such
sale, and (y) the denominator of which shall be the aggregate principal
amount of Securities Outstanding on such Payment Date (after giving
effect to the purchase of Securities pursuant to the Offer to Purchase on
such Payment Date). Any such increase shall be in addition to Special
Interest, if any, then accruing with respect to such Security which
Special Interest shall continue to accrue in accordance with the
provisions of such Security. If, pursuant to the proviso in Section
4.12(c)(i)(A) or the provisions of Section 4.12(e), the Company is not
required to make an Offer to Purchase in connection with a sale of
Aircraft, then there shall be no increase in the rate of interest with
respect to such sale. The amount of the increase in the interest rate
borne by the Securities will be recalculated and reset following each
sale of an Aircraft as of the Payment Date for the relevant Offer to
Purchase. If on any such Payment Date the foregoing calculation results
in a negative number or a numerator equal to zero, there shall be no
increase in the interest rate resulting from such calculation and any
such increase then in effect shall be reset to zero.
(iii) Upon Request by the Company, payment by the Company of the
Trustee's costs (including reasonable legal fees and disbursements)
incurred in complying with such Request and satisfaction of the
requirements of Section 4.12(c)(i), the Trustee shall release from the
Lien of the Operative Documents, all right, title and interest of the
Trustee in and to any Aircraft so sold and shall (so long as no Event of
Default then exists) promptly after the Payment Date with respect to any
Offer to Purchase made in connection with such sale, return to the
Company any cash held in excess of the purchase price of the Securities
tendered for purchase in connection with such Offer to Purchase. The
Trustee may enter into any arrangements (including, without limitation,
escrow arrangements) as it shall deem necessary or desirable to
accomplish the intents and purposes of this Section 4.12(c).
(d) In the event that there shall occur a Total Loss with respect to
any Aircraft, the Company shall (unless the Company is not required to
make such Offer to Purchase pursuant to the next succeeding sentence or
the provisions of Section 4.12(e)) make an Offer to Purchase an aggregate
principal amount of Outstanding Securities (the "Total Loss OTP Amount")
equal to (for each Aircraft subject to such Total Loss) (i) the
aggregate principal amount of the Securities Outstanding on the date such
Offer to Purchase (if any) is required to be commenced hereunder minus
(ii) the product of (A) the Redemption Value as of such date multiplied
by (B) the number of Aircraft remaining that were not subject to such
Total Loss, at a purchase price equal to 100% of the aggregate principal
amount of Securities to be purchased, plus accrued and unpaid interest
and Special Interest, if any, on such Securities, to and including the
Payment Date. If the foregoing calculation with respect to any such
Total Loss results in a negative number, no Offer to Purchase shall be
required with respect to such Total Loss. The Company shall commence
such Offer to Purchase (if any) within thirty (30) days after the Total
Loss Date with respect to any such Total Loss. Upon Request by the
Company and payment by the Company the purchase price with respect to
such Offer to Purchase (if any) and the Trustee's costs (including
reasonable legal fees and disbursements) incurred in complying with such
Request, the Trustee shall release from the Lien of the Operative
Documents, all right, title and interest of the Trustee in and to the
Aircraft that was the subject of such Total Loss.
(e) At its option the Company may reduce in whole or in part its
obligation to pay any Sale OTP Amount or Total Loss OTP Amount in cash by
delivering to the Trustee at least 15 days before the date of
commencement of the related Offer to Purchase (i) Securities which have
been acquired by the Company in open market purchases (and, for avoidance
of doubt, not acquired by way of any redemption or Offer to Purchase
hereunder) and have not been called for redemption under any provision of
this Indenture, together with (ii) an Officers' Certificate directing the
Trustee to cancel such Securities and stating the election of the Company
to have credited against such Sale OTP Amount or Total Loss OTP Amount,
as the case may be, a specified principal amount of Securities so
delivered. Each such Officers' Certificate shall state that the
Securities forming the basis of such credit do not include any Securities
theretofore credited against any Sale OTP Amount or Total Loss OTP Amount
pursuant to this Section 4.12(e). All Securities made the basis of a
credit against a Sale OTP Amount or Total Loss OTP Amount shall be
credited at 100% of their principal amount. Although the Company may
obtain credit against the Sale OTP Amount or Total Loss OTP Amount, as
the case may be, in advance of the related Payment Date as provided
herein, any such credit shall be applied against such Sale OTP Amounts or
Total Loss OTP Amounts, as the case may be, in the order in which they
become due. In case of the failure of the Company to deliver such
Officers' Certificate, the Sale OTP Amount or Total Loss OTP Amount, as
the case may be, due on the Payment Date therefor shall be paid entirely
in cash without the option to reduce the Company's obligation to make
such payment as specified in this Section 4.12(e). If the principal
amount of the Securities made the basis of a credit against any Sale OTP
Amount (calculated, for this purpose, as of the date the Company is
required to give to the Trustee the notice of the pending sale pursuant
to Section 4.12(c)(i)(B)) or Total Loss OTP Amount (calculated, for this
purpose, as of the date twenty-five days after the Total Loss Date with
respect to such Total Loss), as the case may be, equals or exceeds such
Sale OTP Amount or Total Loss OTP Amount, as the case may be, and the
Company has otherwise complied with the applicable provisions of this
Section 4.12(e), then the Company shall not be required to make the Offer
to Purchase for which such Sale OTP Amount or Total Loss OTP Amount, as
the case may be, was calculated. Such calculations shall be set forth in
detail in the Officers' Certificate required under this Section 4.12(e).
The Trustee shall promptly authenticate and mail to the Company a new
Security or Securities in an aggregate principal amount equal to that
portion (if any) of the Securities delivered to the Trustee and not used
by the Company as a credit under this Section 4.12(e) (provided, that
the Company has previously delivered to the Trustee sufficient executed
Securities to enable the Trustee to so authenticate such Securities).
Section 4.13 Books, Records, Access; Confidentiality.
(a) The Company shall, and shall cause each of its Subsidiaries to,
(i) maintain complete and accurate books and records in which full and
correct entries in conformity with GAAP shall be made of all dealings and
transactions in relation to its respective business and activities, and
(ii) permit authorized representatives of the Trustee to visit and inspect
the Properties of the Company or its Subsidiaries, and any or all books,
records and documents in the possession of the Company relating to the
Collateral, including the records, logs, and other materials referred to in
Section 2.1(c) of the Mortgage, and to make copies and take extracts
therefrom and to visit and inspect the Collateral, all upon reasonable
notice and at such reasonable times during normal business hours and as
often as may be reasonably requested.
(b) The Trustee and its authorized representatives referred to in
clause (a) above agree not to use any information obtained pursuant to this
Section 4.13 for any purpose other than as required in order to discharge
their respective duties hereunder and under the Operative Documents and
except as otherwise required for such purpose to keep confidential and not
to disclose any such information to any person except that (i) the
recipient of the information may disclose any information which becomes
publicly available other than as a result of disclosure by such recipient,
(ii) the recipient of the information may disclose any information which
its counsel reasonably concludes is necessary to be disclosed by law or
legal process, pursuant to any court or administrative order or ruling or
in any pending legal or administrative proceeding or investigation after
notice to the Company adequate, subject to applicable laws, to allow the
Company to obtain a protective order or other appropriate remedy, provided
that the recipient of the information will (if not otherwise required in
order to discharge its duties as aforesaid) cooperate at the Company's
expense with the Company's efforts to obtain a protective order or other
reliable assurance that confidential treatment will be accorded any such
information required to be so disclosed, and (iii) the recipient of the
information may disclose any information necessary to be disclosed pursuant
to any provision of the TIA.
Section 4.14 Security Interests.
The Company and its Subsidiaries shall perform any and all acts and
execute any and all documents (including, without limitation, the
execution, amendment or supplementation of any financing statement and
continuation statement or other statement) for filing under the provisions
of the Federal Aviation Act and the applicable Uniform Commercial Code and
the rules and regulations thereunder or any other statute, rule or
regulation of any applicable federal, state or local jurisdiction, which
are necessary or advisable, from time to time, in order to grant and
maintain in favor of the Trustee for the benefit of the Holders a valid,
perfected Lien on the Collateral.
The Company and its Subsidiaries shall deliver or cause to be
delivered to the Trustee from time to time such other documentation,
consents, authorizations, approvals and orders in form and substance
satisfactory to the Trustee as it shall deem reasonably necessary or
advisable to perfect or maintain the Liens for the benefit of the Holders.
Section 4.15 Repurchase of Securities Upon a Change in Control.
(a) In the event that there shall occur a Change in Control, the
Company shall make an Offer to Purchase all of the Outstanding Securities,
at a purchase price equal to 101% of the aggregate principal amount of the
Securities Outstanding, plus accrued and unpaid interest and Special
Interest, if any, to and including the repurchase date. The right to
require such repurchase of Securities shall not continue after a discharge
of the Company from its obligations with respect to the Securities in
accordance with Article 8.
(b) The Company shall commence such Offer to Purchase within thirty
(30) days after the occurrence of a Change in Control.
Section 4.16 Restrictions on Becoming an Investment Company.
The Company shall not become an investment company within the meaning
of the Investment Company Act of 1940 as such statute and the regulations
thereunder and any successor statute or regulations thereto may from time
to time be in effect.
Section 4.17 Listing.
No later than the earliest to occur of (i) the effectiveness of the
initial Exchange Offer Registration Statement and (ii) the effectiveness of
the initial Shelf Registration Statement, in either case, filed under (and
as defined in) the Registration Rights Agreement, the Company shall use its
reasonable best efforts to cause the Exchange Securities and the Private
Exchange Securities to be listed on the American Stock Exchange, or such
other stock exchange or market as the Common Stock of the Company is then
principally traded provided, that such Securities meet the minimum
requirements for listing on any such exchange or market, and, if
applicable, to use its reasonable best efforts to maintain such listing for
so long as any of the Exchange Securities or Private Exchange Securities
are Outstanding.
ARTICLE 5.
SUCCESSOR CORPORATION
Section 5.1 Covenant Not to Consolidate, Merge, Convey or Transfer
Except Under Certain Conditions.
The Company shall not consolidate with, or merge with or into, or
convey or transfer (excluding by way of lease) all or substantially all of
its Properties (as determined at the time of such transfer without regard
to any prior conveyance or transfer or series of conveyances or transfers
made on unrelated transactions) to any other Person, or permit any Person
to convey, lease or transfer all or substantially all of its Properties to
the Company, unless:
(a) The Company shall be the continuing Person or the Person (if
other than the Company) formed by such consolidation or into which the
Company is merged or to which all or substantially all of the Properties of
the Company are conveyed or transferred (the "surviving Person"): (i)
shall be a corporation organized and existing under the laws of the United
States of America or any state thereof or the District of Columbia; (ii)
shall expressly assume prior to or simultaneously with the consummation of
such transaction, by an indenture and other agreements supplemental hereto
and to the Operative Documents, executed and delivered to the Trustee in
form reasonably satisfactory to the Trustee, the due and punctual payment
of the principal of, interest on and Special Interest, if any, with respect
to, all the Securities and the observance and performance of every
covenant, condition and obligation of this Indenture, the Securities and
the Operative Documents on the part of the Company to be observed or
performed;
(b) Immediately before and immediately after giving effect to such
transaction, no Default or Event of Default shall have occurred and be
continuing hereunder;
(c) In the case of any such conveyance or transfer, such conveyance
or transfer includes, without limitation, all of the Collateral and in any
event such consolidation, merger, conveyance or transfer shall be on such
terms as shall fully preserve the Lien and security of each of the
Operative Documents, the priority thereof purported to be established
thereby and the rights and powers of the Trustee and the Holders of the
Securities under each of the Operative Documents; and
(d) The Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel each stating that (i) such merger, consolidation,
transfer, conveyance, or acquisition of assets and such supplemental
indenture (if any) comply with the terms of this Indenture, (ii) this
Indenture and the Securities constitute the valid and legally binding
obligations of the surviving Person, and (iii) this Indenture and the other
Operative Documents are enforceable against the surviving Person in
accordance with their terms.
Section 5.2 Successor Person Substituted.
Upon any consolidation or merger, or any conveyance or transfer
(excluding by way of lease) of all or substantially all of the Properties
of the Company in accordance with Section 5.1, the surviving entity formed
by such consolidation or into which the Company is merged or the surviving
entity to which such conveyance or transfer is made shall succeed to, and
be substituted for, and be bound by and obligated to pay the obligations
of, and may exercise every right and power of, the Company under this
Indenture, the Securities and the Operative Documents with the same effect
as if such successor had been named as the Company herein and therein, but
the predecessor Company in the event of any such conveyance or transfer
shall not be released from the obligation to pay the principal of, interest
on and Special Interest, if any, with respect to the Securities.
Such surviving entity may cause to be signed, and may issue either in
its own name or in the name of the Company prior to such succession any or
all of the Securities issuable hereunder which theretofore shall not have
been signed by the Company and delivered to the Trustee; and, upon the
order of such surviving entity, instead of the Company, and subject to all
the terms, conditions and limitations in this Indenture prescribed, the
Trustee shall authenticate and shall deliver any Securities which
previously shall have been signed and delivered by the officers of the
Company to the Trustee for authentication, and any Securities which such
surviving entity thereafter shall cause to be signed and delivered to the
Trustee for that purpose. All of the Securities so issued shall in all
respects have the same legal rank and benefit under this Indenture as the
Securities theretofore or thereafter issued in accordance with the terms of
this Indenture as though all of such Securities had been issued at the date
of the execution hereof.
In case of any such consolidation, merger, sale, transfer or
conveyance such changes in phraseology and form (but not in substance) may
be made in the Securities thereafter to be issued as may be appropriate.
Section 5.3 Limitation on Lease of Properties.
Without limitation of the prohibitions set forth in the other
Operative Documents, the Company shall not lease all or substantially all
of its Properties to any Person.
ARTICLE 6.
DEFAULT AND REMEDIES
Section 6.1 Events of Default.
An "Event of Default" occurs if:
(a) the Company defaults in the payment of interest on, or Special
Interest, if any, with respect to, any Security when the same becomes due
and payable and the default continues for thirty (30) days;
(b) the Company defaults in the payment of the principal amount of any
Securities when the same becomes due and payable at maturity, upon
acceleration, redemption, tender for repurchase or otherwise;
(c) the Company fails to comply with the agreements or covenants
contained in Sections 3.8, 4.3 or 4.12 hereof, takes or agrees to take any
action prohibited by Section 5.1 hereof, discontinues or agrees to
discontinue substantially all of its commercial airlines operations or
fails to comply with the covenants contained in Sections 3, 6.3, 6.5 or 6.8
of the Mortgage within the time periods (if any) provided therein;
(d) (i) the Company fails in any material respect to comply with any
of its other agreements contained in the Securities, this Indenture or the
other Operative Documents or (ii) any representation or warranty made by
the Company in this Indenture, the other Operative Documents or any
Mortgage Supplement or in any certificate of the Company delivered
hereunder or under any such document shall prove to have been untrue in any
material respect when made, and in any such case such default continues for
the period and after the notice specified below;
(e) there shall be a default or an event under or with respect to any
Indebtedness of the Company or any of its Significant Subsidiaries in
excess of $10,000,000 in principal amount, whether such Indebtedness now
exists or shall hereafter be created, and the effect of any such default or
event is to cause the principal amount of any such Indebtedness to become
due, to have the date of payment thereof fixed prior to its stated maturity
or the date it would otherwise become due and while any Securities are
Outstanding, or to be unpaid at maturity while any Securities are
Outstanding;
(f) the Company or any of its Significant Subsidiaries pursuant to or
within the meaning of any Bankruptcy Law (as hereinafter defined):
(i) commences a voluntary case or proceeding,
(ii) consents to the entry of an order for relief against it in
an involuntary case or proceeding,
(iii) consents to the appointment of a Custodian (as hereinafter
defined) of it or for all or substantially all of its Property,
(iv) makes a general assignment for the benefit of its creditors,
or
(v) generally is unable to pay its debts as the same become due;
(g) a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that:
(i) is for relief against the Company or any of its Significant
Subsidiaries in an involuntary case or proceeding,
(ii) appoints a Custodian of the Company or any of its
Significant Subsidiaries for all or substantially all of its
properties, or
(iii) orders the liquidation of the Company or any of its
Significant Subsidiaries,
and in each case the order and decree remains unstayed and in effect for
sixty (60) consecutive days;
(h) final, non-appealable judgments for the payment of money, which
judgments, in the aggregate, exceed $10,000,000 shall be rendered against
the Company or any of its Significant Subsidiaries by a court of competent
jurisdiction and remain undischarged, unstayed and unsatisfied for the
period and after the notice specified below; or
(i) any of the Operative Documents ceases, without the consent of the
Trustee, to be in full force and effect.
The term "Bankruptcy Law" means Title 11, U.S. Code or any similar
Federal or state law for the relief of debtors. The term "Custodian" means
any receiver, trustee, assignee, liquidator, sequestrator or similar
official under any Bankruptcy Law.
A Default under clause (d), (e) or (h) of this Section 6.1 is not an
Event of Default until the Trustee notifies the Company, or the Holders of
at least twenty-five percent (25%) in aggregate principal amount of the
Securities Outstanding notify the Company and the Trustee, of the Default
and the Company does not cure the Default within sixty (60) days with
respect to clauses (d) and (h), or within thirty (30) days with respect to
clause (e), after receipt of the notice; provided, however, that the
Company shall be permitted such longer period of time, if any, as may be
provided for under the other Operative Documents in respect of any
particular Default. The notice must specify the Default, demand that it be
remedied and state that the notice is a "Notice of Default." When a Default
is cured, it ceases.
Section 6.2 Acceleration.
If an Event of Default (other than an Event of Default specified in
Section 6.1(f) or (g)) occurs, and is continuing, the Trustee may, by
notice to the Company, or the Holders of at least twenty-five percent (25%)
in aggregate principal amount of the Securities Outstanding may, by notice
to the Company and the Trustee, and the Trustee shall, upon the request of
such Holders, declare all unpaid principal of, accrued interest and Special
Interest, if any, to the date of acceleration on the Securities Outstanding
(if not then due and payable) to be due and payable and upon any such
declaration, the same shall become and be immediately due and payable. If
an Event of Default specified in Section 6.1(f) or (g) occurs, all unpaid
principal of, accrued interest on and Special Interest, if any, with
respect to, the Securities Outstanding shall ipso facto become and be
immediately due and payable without any declaration or other act on the
part of the Trustee or any Securityholder. Upon payment of such principal
amount, interest, and Special Interest, if any, all of the Company's
obligations under the Securities and this Indenture, other than obligations
under Sections 7.7 and 8.4, shall terminate. The Holders of a majority in
principal amount of the Securities then Outstanding by notice to the
Trustee may rescind an acceleration and its consequences if (a) all
existing Events of Default, other than the non-payment as to the Securities
of the principal, interest or Special Interest, if any, which has become
due solely by such declaration of acceleration, have been cured or waived,
(b) to the extent the payment of such interest is permitted by law,
interest on overdue installments of interest and on overdue principal which
has become due otherwise than by such declaration of acceleration, has been
paid, (c) the rescission would not conflict with any judgment or decree of
a court of competent jurisdiction, and (d) all payments due to the Trustee
and any predecessor Trustee under Section 7.7 have been made.
Section 6.3 Other Remedies.
If an Event of Default occurs and is continuing, the Trustee may
pursue any available remedy by proceeding at law or in equity to collect
the payment of principal of, interest on or Special Interest, if any, with
respect to the Securities or to enforce the performance of any provision of
the Securities or this Indenture including, without limitation, instituting
proceedings and exercising and enforcing, or directing exercise and
enforcement of, all rights and remedies of the Trustee under the other
Operative Documents.
The Trustee may maintain a proceeding even if it does not possess any
of the Securities or does not produce any of them in the proceeding. A
delay or omission by the Trustee or any Securityholder in exercising any
right or remedy accruing upon an Event of Default shall not impair the
right or remedy or constitute a waiver of or acquiescence in the Event of
Default. No remedy is exclusive of any other remedy. All available
remedies are cumulative.
Section 6.4 Waiver of Past Defaults.
Subject to Sections 6.7, 9.2 and 9.6, the Holders of a majority in
aggregate principal amount of the Securities Outstanding by notice to the
Trustee may authorize the Trustee to waive an existing Default or Event of
Default and its consequences, except a Default (a) in the payment of
principal of, or interest on, or Special Interest with respect to, any
Security as specified in clauses (a) and (b) of Section 6.1 or (b) in
respect of a covenant or provision hereof which cannot be modified or
amended without the consent of the Holder of each Security affected. When
a Default or Event of Default is waived, it is cured and ceases, and the
Company, the Holders and the Trustee shall be restored to their former
positions and rights hereunder respectively; but no such waiver shall
extend to any subsequent or other Default or Event of Default or impair any
right consequent thereon.
Section 6.5 Control by Majority.
The Holders of a majority in aggregate principal amount of the
Securities Outstanding may direct the time, method and place of conducting
any proceeding for any remedy available to the Trustee or exercising any
trust or power conferred on it; provided that the Trustee may take any
other action deemed proper by the Trustee which is not inconsistent with
such direction. The Trustee may refuse to follow any direction hereunder
or authorization under Section 6.4 that legal counsel to the Trustee
determines in good faith conflicts with law or this Indenture, that the
Trustee reasonably determines may be unduly prejudicial to the rights of
another Securityholder, or that the Trustee reasonably determines may
subject the Trustee to personal liability. However, the Trustee shall have
no liability for any actions or omissions to act which are in accordance
with any such direction or authorization.
Section 6.6 Limitation on Suits.
A Securityholder may not pursue any remedy with respect to this
Indenture or the Securities unless:
(a) the Holder gives to the Trustee written notice of a continuing
Event of Default;
(b) the Holders of at least twenty-five percent (25%) in principal
amount of the Securities Outstanding make a written request to the Trustee
to pursue the remedy;
(c) such Holder or Holders offer to the Trustee indemnity reasonably
satisfactory to the Trustee against any loss, liability or expense;
(d) the Trustee does not comply with the request within sixty (60)
days after receipt of the request and the offer of indemnity; and
(e) during such 60-day period the Holders of a majority in aggregate
principal amount of the Securities Outstanding do not give the Trustee a
direction which, in the reasonable opinion of the Trustee, is inconsistent
with such request.
A Securityholder may not use this Indenture to prejudice the rights of
another Securityholder or to obtain a preference or priority over such
other Securityholder.
Section 6.7 Rights of Holders to Receive Payment.
Notwithstanding any other provision of this Indenture, the right of
any Holder of a Security to receive payment of principal of, interest on,
and Special Interest, if any, with respect to, the Security in cash, on or
after the respective due dates expressed in the Security, or to bring suit
for the enforcement of any such payment on or after such respective dates,
shall not be impaired or affected without the consent of the Holder.
It is hereby expressly understood, intended and agreed that any and
all actions which a Holder of the Securities may take to enforce the
provisions of this Indenture and/or collect Payments due hereunder or under
the Securities, except to the extent that such action is determined to be
on behalf of all Holders of the Securities, shall be in addition to and
shall not in any way change, adversely affect or impair the rights and
remedies of the Trustee or any other Holder of the Securities thereunder or
under this Indenture and the other Operative Documents, including the right
to foreclose upon and sell the Collateral or any part thereof and to apply
any proceeds realized in accordance with the provisions of this Indenture.
Section 6.8 Collection Suit by Trustee.
If an Event of Default in payment of interest or principal specified
in clause (a) or (b) of Section 6.1 occurs and is continuing, the Trustee
may recover judgment in its own name and as trustee of an express trust
against the Company or any other obligor on the Securities for the whole
amount of principal, accrued interest and Special Interest, if any,
remaining unpaid, together with interest on overdue principal and on
overdue installments of interest to the extent that payment of such
interest is permitted by law, in each case at the rate per annum provided
for by the Securities, and such further amount as shall be sufficient to
cover the costs and expenses of collection, including the reasonable
compensation, expenses, disbursements and advances of the Trustee, its
agents and counsel.
Section 6.9 Trustee May File Proofs of Claim.
The Trustee may file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of
the Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and the
Securityholders allowed in any judicial proceedings relative to the Company
(or any other obligor upon the Securities), its creditors or its Property
and shall be entitled and empowered to collect and receive any moneys or
other Property payable or deliverable on any such claims and to distribute
the same, and any Custodian in any such judicial proceedings is hereby
authorized by each Securityholder to make such payments to the Trustee and,
in the event that the Trustee shall consent to the making of such payments
directly to the Securityholders, to pay to the Trustee any amount due to it
for the reasonable compensation, expenses, disbursements and advances of
the Trustee, its agent and counsel, and any other amounts due the Trustee
under Section 7.7, and unless prohibited by law or applicable regulations
to vote on behalf of the Holders of Securities for the election of a
trustee in bankruptcy or other person performing similar functions.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Securityholder
any plan of reorganization, arrangement, adjustment or composition
affecting the Securities or the rights of any Holder thereof, or to
authorize the Trustee to vote in respect of the claim of any Securityholder
in any such proceeding except, as aforesaid, for the election of a trustee
in bankruptcy or person performing similar functions.
Section 6.10 Application of Proceeds.
Any moneys collected by the Trustee pursuant to this Article shall be
applied in the following order at the date or dates fixed by the Trustee
and, in case of the distribution of such moneys on account of principal,
interest, or Special Interest, if any, upon presentation of the several
Securities and stamping (or otherwise noting) thereon the payment, or
issuing Securities in reduced principal amounts in exchange for the
presented Securities if only partially paid, or upon surrender thereof if
fully paid:
FIRST: To the payment of reasonable costs and expenses actually
incurred, including reasonable compensation to the Trustee, its
predecessors, if any, and their respective agents and attorneys
(including amounts due and unpaid under Section 7.7), and of all
reasonable costs, fees, expenses and liabilities incurred and all
advances made by any and all of the foregoing (including amounts due
and unpaid under Section 7.7), except as a result of negligence or bad
faith;
SECOND: In case the entire principal of the Securities shall not
have become and be then due and payable, as to any Securities (a)
first to the payment of interest and Special Interest, if any, in
default in the order of the maturity of the installments of such
interest and Special Interest, if any, with interest (to the extent
that such interest has been collected by the Trustee) upon the overdue
installments of interest or Special Interest, if any, at the rate of
interest specified in the Securities and (b) second to the payment of
principal of the Securities as the same shall become due and payable,
such payments to be made ratably to the Persons entitled thereto,
without discrimination or preference;
THIRD: In case the entire principal of the Securities shall have
become and shall be then due and payable, as to any Securities, to the
payment of the whole amount then owing and unpaid upon all the
Securities for principal, interest and Special Interest, with interest
upon the overdue principal, and (to the extent that such interest has
been collected by the Trustee) upon overdue installments of interest
or Special Interest, if any, at the same rate as the rate of interest
specified in this Indenture or in the Securities; and in case such
moneys shall be insufficient to pay in full the whole amount so due
and unpaid upon the Securities, then to the payment of such principal,
interest and Special Interest, if any, without preference or priority
of any of principal, interest or Special Interest, if any, over the
other, or any installment of interest or Special Interest, if any,
over any other installment of interest or Special Interest, if any, or
of any Security over any other Security, ratably to the aggregate of
such principal, and accrued and unpaid interest and Special Interest;
and
FOURTH: To the payment of the remainder, if any, after payment
in full of the entire principal balance, if any, of the Securities and
all interest, Special Interest and other amounts due upon or in
respect of such Securities, to the Company or any other Person
lawfully entitled thereto.
The Trustee, upon prior written notice to the Company, may fix a
record date and payment date for any payment to Securityholders pursuant to
this Section 6.10.
Section 6.11 Undertaking for Costs.
All parties to this Indenture agree, and each Holder of any Security
by his acceptance thereof shall be deemed to have agreed, that any court of
competent jurisdiction in its discretion may require in any suit for the
enforcement of any right or remedy under this Indenture or in any suit
against the Trustee for any action taken or omitted by it as Trustee, the
filing by any party litigant in the suit of an undertaking to pay the costs
of the suit, and the court in its discretion may assess reasonable costs,
including reasonable attorneys' fees, against any party litigant in the
suit, having due regard to the merits and good faith of the claims or
defenses made by the party litigant. This Section 6.11 does not apply to a
suit by the Trustee, a suit by a Holder pursuant to Section 6.7, or a suit
by Holders of more than ten percent (10%) in principal amount of the
Securities Outstanding.
Section 6.12 Restoration of Rights on Abandonment of Proceedings.
In case the Trustee shall have proceeded to enforce any right under
this Indenture and such proceedings shall have been discontinued or
abandoned for any reason, or shall have been determined adversely to the
Trustee, then and in every such case the Company, the Trustee and the
Securityholders shall be restored respectively to their former positions
and rights hereunder, and all rights, remedies and powers of the Company,
the Trustee and the Securityholders shall continue as though no such
proceedings had been taken.
Section 6.13 Powers and Remedies Cumulative; Delay or Omission Not
Waiver of Default.
No right or remedy herein conferred upon or reserved to the Trustee or
to the Securityholders is intended to be exclusive of any other right or
remedy, and every right and remedy shall, to the extent permitted by law,
be cumulative and in addition to every other right and remedy given
hereunder or now or hereafter existing at law or in equity or otherwise.
The assertion or employment of any right or remedy hereunder, or otherwise,
shall not prevent the concurrent assertion or employment of any other
appropriate right or remedy.
No delay or omission of the Trustee or of any Holder of any of the
Securities to exercise any right or power accruing upon any Event of
Default occurring and continuing as aforesaid shall impair any such right
or power or shall be construed to be a waiver of any such Event of Default
or an acquiescence therein; and, subject to the other applicable provisions
of this Indenture, every power and remedy given by this Indenture or by law
to the Trustee or to the Securityholders may be exercised from time to
time, and as often as shall be deemed expedient, by the Trustee or by the
Securityholders.
Any right or remedy herein conferred upon or reserved to the Trustee
may be exercised by it in its capacity as Trustee, as it may deem most
efficacious, if it is then acting in such capacity.
ARTICLE 7.
TRUSTEE
Section 7.1 Duties of Trustee.
(a) If an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture and use the same degree of care and skill in their exercise as a
prudent person would exercise or use under the circumstances in the conduct
of his own affairs.
(b) Except during the continuance of an Event of Default:
(i) The Trustee need perform only those duties as are
specifically set forth in this Indenture and the other Operative
Documents and no others.
(ii) In the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Trustee and conforming to the requirements
of this Indenture. However, the Trustee shall examine the
certificates and opinions to determine whether or not they conform to
the requirements of this Indenture.
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act, or its own willful
misconduct or bad faith, except that:
(i) This paragraph (c) does not limit the effect of paragraph
(b) of this Section 7.1 or of Section 7.2.
(ii) The Trustee shall not be liable for any error of judgment
made in good faith by a Trust Officer, unless it is proved that the
Trustee was negligent in ascertaining the pertinent facts.
(iii) The Trustee shall not be liable with respect to any action
it takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.5.
(d) The Trustee shall be under no obligation to exercise any of the
rights, trusts or powers vested in it by this Indenture at the request,
order or direction of any of the Holders pursuant to this Indenture, unless
such Holders shall have offered to the Trustee security or indemnity
reasonably satisfactory to the Trustee against the costs, expenses and
liabilities which might be incurred by it in compliance with such request,
order or direction.
(e) Every provision of this Indenture that in any way relates to the
Trustee is subject to paragraphs (a), (b), (c) and (d) of this Section 7.1.
(f) Funds held in trust for the benefit of the Holders of the
Securities by the Trustee or any Paying Agent on deposit with itself or
elsewhere shall be held in distinct, identifiable accounts, and other funds
or investments of any nature or from any source whatsoever may be held in
such accounts, except, in each case, to the extent required by law. The
Trustee shall not be liable for interest on any money received by it except
as the Trustee may agree with the Company.
Section 7.2 Rights of Trustee.
(a) The Trustee may rely on any document reasonably believed by it to
be genuine and to have been signed or presented by the proper person.
Subject to Section 7.1(b)(ii), the Trustee need not investigate any fact or
matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may require
an Officers' Certificate or an Opinion of Counsel, which shall conform to
Section 11.5. The Trustee shall not be liable for any action it takes or
omits to take in good faith in reliance on such certificate or opinion.
(c) The Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through its attorneys
and agents and the Trustee shall not be responsible for the misconduct or
negligence of any agent or attorney appointed with due care.
(d) The Trustee shall not be liable for any action it takes or omits
to take in good faith which it reasonably believes to be authorized or
within its rights or powers.
Section 7.3 Individual Rights of Trustee.
The Trustee in its individual or any other capacity may become the
owner or pledgee of Securities and may otherwise deal with and collect
obligations owed to it by the Company or Affiliates of the Company with the
same rights it would have if it were not Trustee. Any Agent may do the
same with like rights. However, the Trustee is subject to Sections 7.10
and 7.11.
Section 7.4 Trustee's Disclaimer.
The Trustee makes no representation as to the validity or adequacy of
this Indenture or the Securities, it shall not be accountable for the
Company's use of the proceeds from the Securities, and it shall not be
responsible for any statement in the Securities or in this Indenture other
than its certificate of authentication.
Section 7.5 Notice of Defaults.
If a Default occurs and is continuing and if it is known to the
Trustee, the Trustee shall mail to each Securityholder notice of the
Default within ninety (90) days after the occurrence thereof except as
otherwise permitted by the TIA. Except in the case of a Default in payment
of principal of, or interest on, or Special Interest, if any, with respect
to, any Security, the Trustee may withhold the notice if and so long as it,
in good faith, determines that withholding the notice is in the interests
of the Securityholders.
Section 7.6 Reports by Trustee to Holders.
If circumstances require any report to Holders under TIA Section 313(a), it
shall be mailed to Securityholders within sixty (60) days after each May 15
(beginning with the May 15 following the date of this Indenture) as of
which such circumstances exist. The Trustee also shall comply with the
remainder of TIA Section 313.
The Company shall promptly notify the Trustee if the Securities become
listed on or delisted from any stock exchange or other recognized trading
market.
The Trustee shall, upon the written request of any Holder of
Securities but subject to applicable laws and contractual limitations,
provide to such Holder copies of any reports, certificates, opinions or
other materials of any kind or nature required to be delivered to the
Trustee under this Indenture or any of the other Operative Documents or
otherwise delivered by or on behalf of the Company to the Trustee.
Section 7.7 Compensation and Indemnity.
The Company shall pay to the Trustee from time to time reasonable
compensation, as agreed upon from time to time, for its services hereunder
and under the other Operative Documents. The Trustee's compensation shall
not be limited by any law on compensation of a trustee of an express trust.
The Company shall reimburse the Trustee upon request for all reasonable
disbursements, expenses and advances incurred or made by it in any such
capacities. Such expenses shall include the reasonable compensation,
disbursements and expenses of the Trustee's agents and counsel and all
agents and other persons not regularly in its employ.
The Company shall indemnify the Trustee and each predecessor Trustee
for, and hold each of them harmless against, any loss or liability incurred
by each of them in connection with the administration of this Indenture and
its duties hereunder. In connection with any defense of such a claim, the
Trustee may have separate counsel and the Company shall pay the reasonable
fees and expenses of such counsel. The Company need not reimburse any
expense or indemnify against any loss or liability incurred by the Trustee
or any predecessor Trustee through the negligence or bad faith of such
Trustee or each such predecessor Trustee.
To secure the Company's payment obligations in this Section 7.7, the
Trustee shall have a Lien (legal and equitable) prior to the Securities on
all money or Property held or collected by the Trustee, in its capacity as
Trustee, or otherwise distributable to Securityholders, except money,
securities or Property held in trust to pay principal of or interest on
particular Securities (including, without limitation, pursuant to Section
8.1(b) hereof).
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.1(f) or (g) occurs, the expenses and the
compensation for the services are intended to constitute expenses of
administration under any Bankruptcy Law.
Section 7.8 Replacement of Trustee.
The Trustee may resign by so notifying the Company and the Holders in
writing. The Holders of a majority in aggregate principal amount of the
Securities Outstanding may remove the Trustee by so notifying the Trustee
in writing and may appoint a successor Trustee with the Company's consent,
which consent shall not be unreasonably refused or delayed. The Company
may remove the Trustee if:
(a) the Trustee fails to comply with Section 7.10;
(b) the Trustee is adjudged a bankrupt or an insolvent;
(c) a receiver or other public officer takes charge of the Trustee or
its Property;
(d) the Trustee becomes incapable of acting; or
(e) no Default or Event of Default has occurred and is continuing and
the Company determines in good faith to remove the Trustee.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Company shall promptly appoint a
successor Trustee. Within one year after any such successor Trustee takes
office, the Holders of a majority in aggregate principal amount of the
Securities Outstanding may appoint a successor Trustee to replace the
successor Trustee appointed by the Company.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Immediately after
that, the retiring Trustee shall transfer all Property held by it as
Trustee to the successor Trustee, subject to the Lien provided in Section
7.7, the resignation or removal of the retiring Trustee shall become
effective, and the successor Trustee shall have all the rights, powers and
duties of the Trustee under this Indenture. A successor Trustee shall mail
notice of its succession to each Securityholder.
No resignation or removal of the Trustee and no appointment of a
successor Trustee, pursuant to this Article, shall become effective until
the acceptance of appointment by the successor Trustee under this Section
7.8. If a successor Trustee does not take office within sixty (60) days
after the retiring Trustee resigns or is removed, the retiring Trustee, the
Company or the Holders of at least ten percent (10%) in principal amount of
the Securities Outstanding may petition any court of competent jurisdiction
for the appointment of a successor Trustee.
If the Trustee fails to comply with Section 7.10, any Holder of
Securities may petition any court of competent jurisdiction for the removal
of the Trustee and the appointment of a successor Trustee.
Notwithstanding replacement of the Trustee pursuant to this Section
7.8, the Company's obligations under Section 7.7 shall continue for the
benefit of the retiring Trustee which shall retain its claim pursuant to
Section 7.7.
Section 7.9 Successor Trustee by Merger, etc.
If the Trustee consolidates with, merges or converts into, or
transfers all or substantially all of its corporate trust business to,
another corporation, the resulting, surviving or transferee corporation
without any further act shall be the successor Trustee.
Section 7.10 Eligibility; Disqualification.
This Indenture shall always have a Trustee who satisfies the requirements
of TIA Section 310(a)(1). The Trustee shall have a combined capital and surplus
of at least $50,000,000 as set forth in its most recent, published annual report
of condition. The Trustee shall comply with TIA Section 310(b); provided,
however, that there shall be excluded from the operation of TIA 310(b)(1) any
indenture or indentures under which other securities, or certificates of
interest or participation in other securities, of the Company are outstanding,
if the requirements for such exclusion set forth
in TIA Section 310(b)(1) are met.
Section 7.11 Preferential Collection of Claims Against Company.
The Trustee shall comply with TIA Section 311(a), excluding any creditor
relationship listed in TIA Section 311(b). A Trustee who has resigned or been
removed shall be subject to TIA Section 311(a) to the extent indicated.
ARTICLE 8.
DISCHARGE OF INDENTURE
Section 8.1 Termination of Company's Obligations.
(a) The Company may terminate its obligations under this Indenture,
except those obligations referred to in the last paragraph of Section
8.1(b), if all Securities previously authenticated and delivered (other
than destroyed, lost or stolen Securities which have been replaced or paid
or Securities for whose payment Payments have theretofore been held in
trust and thereafter repaid to the Company, as provided in Section 8.3)
have been delivered to the Trustee for cancellation and the Company has
paid all sums payable by it hereunder.
(b) The Company may terminate all its obligations under this
Indenture except those obligations referred to in the immediately
succeeding paragraph if
(i) the Company has irrevocably deposited or caused to be
irrevocably deposited with the Trustee or a Paying Agent, under the
terms of an irrevocable trust agreement in form and substance
satisfactory to the Trustee and any such Paying Agent, as trust funds
in trust solely for the benefit of the Holders for that purpose, cash
or U.S. Government Obligations maturing as to principal and interest,
in such amounts and at such times as are sufficient without
consideration of any reinvestment of any such interest to pay the then
maximum possible principal of, and the then maximum possible interest
and Special Interest with respect to, the Securities Outstanding to
maturity provided, that the Trustee or such Paying Agent shall have
been irrevocably instructed to apply such money or the proceeds of
such U.S. Government Obligations to the payment of said principal,
interest and Special Interest, if any, with respect to the Securities.
(ii) No Default or Event of Default with respect to the
Securities shall have occurred and be continuing (A) on the date of
such deposit described in clause (i), or (B) insofar as paragraph (f)
of Section 6.1 is concerned, at any time during the period ending on
the 91st day after the date of such deposit or, if longer, ending on
the day following the expiration of the longest preference period
applicable to the Company in respect of such deposit (it being
understood that the condition in this clause (B) is a condition
subsequent and shall not be deemed satisfied until the expiration of
such period);
(iii) Such termination and deposit described in clause (i) shall
not (A) cause the Trustee to have a conflicting interest as defined in
TIA Section 310(b) or otherwise for purposes of the TIA with respect
to any securities of the Company, or (B) result in the trust arising
from such deposit to constitute, unless it is qualified as, a
regulated investment company under the Investment Company Act of 1940,
as amended;
(iv) Such termination and deposit described in clause (i) shall
not result in a breach or violation of or constitute a default under,
this Indenture or any other material agreement or instrument to which
the Company is a party or by which it is bound;
(v) The Company shall have delivered to the Trustee an Opinion
of Counsel to the effect that the Holders of the Securities will not
recognize income, gain or loss for federal income tax purposes as a
result of such termination and deposit described in clause (i) 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
termination and deposit had not occurred; and
(vi) The Company shall have delivered to the Trustee and any
Paying Agent an Officer's Certificate and an Opinion of Counsel, each
stating that all conditions precedent and subsequent provided for
above in this Section 8.1(b) have been complied with.
Notwithstanding the foregoing paragraph, the Company's obligations in
Sections 2.3, 2.4, 2.5, 2.6, 2.7, 4.1, 4.2, 4.8, 4.17, 7.7, 7.8, 8.2, 8.3,
8.4 and 10.4 shall survive until the Securities are no longer Outstanding.
Thereafter, the Company's obligations in Sections 7.7 and 8.3 shall
survive.
(c) After the effectiveness of any termination of its obligations
(except, in the case of Section 8.1(b), as set forth in the last paragraph
thereof), under this Indenture in accordance with Section 8.1(a) or (b)
above (such effective date, the "Indenture Discharge Date") and payment of
all obligations of the Company accrued under Section 7.7, the Trustee upon
Request shall acknowledge in writing the discharge of the Company's
obligations under this Indenture except for those surviving obligations
specified above.
Section 8.2 Application of Trust Money.
The Trustee or Paying Agent shall hold in trust money or U.S. Government
Obligations deposited with it pursuant to Section 8.1, and shall apply the
deposited money and the money from U.S. Government Obligations in accordance
with this Indenture to the payment of principal of, and interest and Special
Interest, if any, on, the Securities. The obligations of the Trustee and Paying
Agent under this Section 8.2 shall survive, notwithstanding any termination or
discharge of the Company's obligations
pursuant to Section 8.1, until all Securities are paid in full.
The Company shall pay and indemnify the Trustee or Paying Agent, as
the case may be, against any tax, fee or other charge imposed on or
assessed against the money or U.S. Government Obligations deposited
pursuant to Section 8.1(b)(i) or the principal and interest received in
respect thereof.
Section 8.3 Repayment to Company.
Anything in Section 8.1(b) to the contrary notwithstanding, the
Trustee or Paying Agent, as the case may be, shall deliver or pay to the
Company from time to time upon Company Request any money or U.S.
Government Obligations (or other Property and any proceeds therefrom) held
by it as provided in Section 8.1(b) which, in the opinion of a nationally
recognized firm of independent public accountants expressed in a written
certification thereof delivered to the Trustee and to the Paying Agent, if
applicable, are in excess of the amount thereof which would then be
required to be deposited to effect an equivalent termination under said
Section 8.1(b). The Trustee and the Paying Agent shall Pay to the Company
any Payments held by them for the payment of principal, interest and
Special Interest, if any, that remains unclaimed for two (2) years after
the Stated Maturity of such payment of principal, interest or Special
Interest, as the case may be; provided, however, that the Trustee or such
Paying Agent before making any Payment shall at the expense of the Company
cause to be published once in the national edition of The New York Times or
The Wall Street Journal or, if such newspapers are not then in circulation,
in a newspaper of general circulation in the City of New York and mail to
each Holder entitled to such money, notice that such Payments remain
unclaimed and that, after a date specified therein which shall be at least
thirty (30) days from the date of such publication or mailing, any
unclaimed balance of such Payments then remaining will be repaid to the
Company. After payment to the Company, Securityholders entitled to
Payments must look to the Company for payment as general creditors unless
an applicable abandoned property law designates another person.
Section 8.4 Reinstatement.
Anything herein to the contrary notwithstanding, (i) if the Trustee or
Paying Agent, as the case may be, is unable to apply any money or U.S.
Government Obligations in accordance with Section 8.1 by reason of any legal
proceeding or by reason of any order or judgment of any court or governmental
authority enjoining, restraining or otherwise prohibiting such application, or
(ii) the deposited money or U.S. Government Obligations (or the proceeds
thereof) are, for any reason (including any repayment to the Company under
Section 8.3), insufficient in amount, then the Company's obligations under this
Indenture shall be revived and reinstated as though no deposit had occurred
pursuant to Section 8.1 until such time as the Trustee, or Paying Agent, as the
case may be, is permitted to apply all such money or U.S. Government
Obligations and the proceeds of the investment thereof in accordance with
Section 8.1, or the deficiency is cured in the manner set forth in Section
8.1(b), as the case may be. In such event, the Trustee will invest all such
money or the proceeds from U.S. Government Obligations at the Company's request
in other U.S. Government Obligations and, upon written notice from the Company,
so long as there exists no Event of Default, to the extent and only to the
extent provided in the first sentence of Section 8.3 return to the Company any
money or U.S. Government Obligations deposited with the Trustee pursuant to
Section 8.1. If the Company has made any payment of interest on, principal of,
or Special Interest, if any, with respect to any Securities because of an event
described in clause (i) of the first sentence of this Section 8.4, the Company
shall be subrogated to the rights of the Holders of such Securities to receive
such payment from the money or U.S. Government Obligations held by the Trustee
or Paying Agent, as the case may be.
ARTICLE 9.
AMENDMENTS, SUPPLEMENTS AND WAIVERS
Section 9.1 Without Consent of Holders.
The Company and the Trustee, as the case may be, may amend or
supplement this Indenture, the Securities or the other Operative Documents
without notice to or consent of any Securityholder:
(a) to provide for uncertificated Securities in addition to or in
place of certificated Securities;
(b) to provide for the assumption of the Company's obligations to the
Holders of the Securities in the case of a merger or consolidation or
transfer of all or substantially all of the assets of the Company or
otherwise to comply with Article 5;
(c) to comply with any requirements of the SEC in connection with the
qualification of this Indenture under the TIA; or
(d) to cure any ambiguity, defect or inconsistency or to make any
other change, in each case, provided that such action does not materially
adversely affect the interests of any Securityholder.
Section 9.2 With Consent of Holders.
Subject to Section 6.7, the Company (by resolution of its Board of
Directors if required) and the Trustee may amend or supplement this
Indenture, the Securities or the other Operative Documents without notice
to any Securityholder but with the written consent of the Required Holders.
Subject to Sections 6.4, 6.5 and 6.7, the Required Holders may authorize
the Trustee to, and the Trustee, subject to Section 9.6, upon such
authorization shall, waive compliance by the Company with any provision of
this Indenture, the Securities or the other Operative Documents. However,
an amendment, supplement or waiver, including a waiver pursuant to any
provision of Section 6.4, may not without the consent of each
Securityholder affected:
(a) reduce the amount of Securities whose Holders must consent to an
amendment, supplement or waiver;
(b) reduce the rate or extend the time for payment of interest on, or
Special Interest, if any, with respect to, any Security;
(c) reduce the principal of, or the amount of Special Interest, if
any, with respect to (in each case, whether on redemption, repurchase or
otherwise), or change the fixed maturity of any Security;
(d) change the place of payment where, or the coin or currency in
which, any Security (or the repurchase or redemption price thereof),
interest thereon, or Special Interest, if any, with respect thereto is
payable;
(e) waive a default in the payment of the principal of, or interest
on, or Special Interest with respect to any Security;
(f) make any changes in Sections 2.8, 6.4, 6.7 or 6.10 or the third
sentence of this Section 9.2 or change the time at which any Security may
or must be redeemed hereunder; or
(g) reduce any amount payable upon exercise of any repurchase rights
thereof or otherwise change any repurchase right provision or impair the
right of any Holder to institute suit for the enforcement of any such
payment on any Security when due or adversely effect any repurchase rights
hereunder.
It shall not be necessary for the consent of the Holders under this
Section to approve the particular form of any proposed amendment,
supplement or waiver, but it shall be sufficient if such consent approves
the substance thereof.
After an amendment, supplement or waiver under this Section 9.2
becomes effective, the Company shall mail to the Holders affected thereby a
brief notice describing such amendment, supplement or waiver. Any failure
of the Company to mail such notice, or any defect therein, shall not,
however, in any way impair or affect the validity of any such amendment,
supplement or waiver.
Section 9.3 Compliance with Trust Indenture Act.
Every amendment to or supplement of this Indenture or the Securities
shall comply with the TIA as then in effect.
Section 9.4 Revocation and Effect of Consents.
Until an amendment or waiver becomes effective, a consent to it by a
Holder is a continuing consent by the Holder and every subsequent Holder of
a Security or portion of a Security that evidences the same debt as the
consenting Holder's Security, even if notation of the consent is not made
on any Security. However, any such Holder or subsequent Holder may revoke
the consent as to his Security or portion of a Security. Such revocation
shall be effective only if the Trustee receives the notice of revocation
before the date the amendment, supplement or waiver becomes effective.
After an amendment, supplement or waiver becomes effective, it shall
bind every Securityholder, unless it makes a change described in any of
clauses (a) through (g) of Section 9.2. In that case the amendment,
supplement or waiver shall bind each Holder of a Security who has consented
to it and every subsequent Holder of a Security or portion of a Security
that evidences the same debt as the consenting Holder's Security; provided,
however, that no amendment, supplement or waiver relating to any impairment
of the right to receive principal, interest and Special Interest, if any,
when due and payable consented to by a Holder shall be binding upon any
subsequent Holder of a Security or a portion of a Security that evidences
the same debt as the consenting Holder's Security unless notation with
regard thereto is made upon such Security or the Security representing such
portion.
Section 9.5 Notation on or Exchange of Securities.
If an amendment, supplement or waiver changes the terms of a Security,
the Trustee may require the Holder of the Security to deliver it to the
Trustee. The Trustee may place an appropriate notation on the Security
about the changed terms and return it to the Holder. Alternatively, if the
Company or the Trustee so determines, the Company in exchange for the
Security shall issue and the Trustee shall authenticate a new Security that
reflects the changed terms.
Section 9.6 Trustee to Sign Amendments, etc.
The Trustee shall be entitled to receive and rely upon an Officers'
Certificate and an Opinion of Counsel stating that the execution of any
amendment, supplement or waiver authorized pursuant to this Article 9 has
been duly authorized by the Company and is authorized or permitted by this
Indenture and the other applicable Operative Documents. The Trustee may,
but shall not be obligated to, execute any such amendment, supplement or
waiver which affects the Trustee's own rights, duties or immunities under
this Indenture or otherwise.
Section 9.7 Effect of Supplement and/or Amendment.
Upon the execution of any supplemental indenture and/or any such
amendment or supplement to the other Operative Documents pursuant to the
provisions of this Article 9, this Indenture and such Operative Documents
shall be and be deemed to be modified and amended in accordance therewith
and the respective rights, limitations of rights, obligations, duties and
immunities under this Indenture and the other Operative Documents of the
Trustee, the Company and the Holders of Securities shall thereafter be
determined, exercised and enforced hereunder and thereunder subject in all
respects to such modifications and amendments, and all terms and conditions
of any such supplemental indenture and/or any such amendment or supplement
to the other Operative Documents shall be and be deemed to be part of the
terms and conditions of this Indenture and the other Operative Documents
for any and all purposes.
ARTICLE 10.
SECURITY
Section 10.1 Other Operative Documents.
To secure the due and punctual payment, performance and observance of
the Obligations, the Company has simultaneously with the execution of this
Indenture entered into or caused to be assigned to the Trustee the other
Operative Documents and has made an assignment and pledge of or otherwise
transferred or caused to be transferred its right, title and interest in
and to the Collateral to the Trustee pursuant to the other Operative
Documents and in the manner and to the extent therein provided. Each
Securityholder, by accepting a Security, agrees to all of the terms and
provisions of each Operative Document (including, without limitation, the
provisions providing for the release of Collateral), as the same may be in
effect or may be amended from time to time pursuant to its terms and the
terms hereof. The Company will execute, acknowledge and deliver to the
Trustee such further assignments, transfers, assurances or other
instruments as the Trustee may reasonably require or request, and will do
or cause to be done all such acts and things as may be necessary or proper,
or as may be reasonably required by the Trustee to assure and confirm to
the Trustee the security interest in the Collateral contemplated hereby and
by the other Operative Documents or any part thereof, as from time to time
constituted, so as to render the same available for the security and
benefit of this Indenture and of the Securities secured hereby, according
to the intent and purposes herein expressed.
Section 10.2 Opinions, Certificates and Appraisals.
(a) The Company shall furnish to the Trustee promptly after the
execution and delivery of this Indenture but prior to authentication of any
Securities, Opinions of Counsel covering such jurisdictions as the Owner
Trustee may reasonably request either (i) stating that in the opinion of
such Counsel the actions necessary to be taken under the Federal Aviation
Act, the Uniform Commercial Code of all applicable jurisdictions, or
otherwise with respect to the recording, registering and filing of this
Indenture, the other Operative Documents, financing statements or other
instruments to make effective and to perfect the Liens intended to be
created by the Mortgage have been taken and reciting with respect to the
security interests in the Collateral, the details of such actions, or (ii)
stating that, in the opinion of such Counsel, no such action is necessary
to make such Liens effective and perfected.
(b) The Company shall furnish to the Trustee within one hundred and
twenty (120) days after January 1 in each year beginning with January 1,
1999, an Opinion of Counsel, dated as of such date, either (i)(A) stating
that, in the opinion of such Counsel, action has been taken with respect to
the recording, registering, filing, rerecording, re-registering and
refiling (in this section, "recordation") of all supplemental indentures,
financing statements, continuation statements or other instruments of
further assurance as is necessary to maintain the Lien intended to be
created by the Mortgage (if not then terminated pursuant to its terms) and
the perfection thereof and reciting with respect to the security interests
in the Collateral the details of such action or referring to prior Opinions
of Counsel in which such details are given, and (B) stating that all
financing statements and continuation statements have been executed and
filed that are necessary as of such date and during the succeeding
seventeen (17) months fully to maintain the Lien of the Securityholders and
the Trustee intended to be created hereunder and under the Mortgage with
respect to the security interest in the Collateral and the perfection
thereof, or (ii) stating that, in the opinion of such Counsel, no such
action is necessary to maintain such Lien and the perfection thereof.
(c) The release of any Collateral from the terms of the Mortgage will not
be deemed to impair the security under this Indenture in contravention of the
provisions hereof if and to the extent the Collateral is released pursuant to
the Mortgage or this Indenture, as applicable. To the extent applicable, the
Company shall cause TIA Section 314(d) relating to the release of Property or
securities from the Lien of the Mortgage and relating to the substitution
therefor of any Property or securities to be subjected to the Lien of the
Mortgage, to be complied with. Any certificate or opinion required by TIA
Section 314(d) may be made by an Officer of the Company, except in cases where
TIA Section 314(d) requires that such certificate or opinion be made by
an independent person.
Section 10.3 Authorization of Actions to be Taken by the Trustee Under
the Operative Documents.
The Trustee may, in its sole discretion and without the consent of the
Securityholders, take all actions it deems necessary or appropriate to (a)
enforce any of the terms of the Operative Documents and (b) collect and
receive any and all amounts payable in respect of the obligations of the
Company hereunder and thereunder. Subject to the provisions of this
Indenture and the other Operative Documents, the Trustee shall have power
to institute and to maintain such suits and proceedings as it may deem
expedient to prevent any impairment of the Collateral by any acts which may
be unlawful or in violation of the other Operative Documents or this
Indenture, and such suits and proceedings as it may deem expedient to
preserve or protect its interest and the interests of the Securityholders
in the Collateral (including power to institute and maintain suits or
proceedings to restrain the enforcement of or compliance with any
legislative or other governmental enactment, rule or order that may be
unconstitutional or otherwise invalid if the enforcement of, or compliance
with, such enactment, rule or order would impair the security interest
hereunder or be prejudicial to the interests of the Securityholders or of
the Trustee).
Section 10.4 Payment of Expenses.
On demand of the Trustee, the Company forthwith shall pay or
satisfactorily provide for all reasonable expenditures incurred by the
Trustee under this Article 10, and all such sums shall be a Lien upon the
Collateral and shall be secured thereby.
Section 10.5 Authorization of Receipt of Funds by the Trustee Under
the Operative Documents.
The Trustee is authorized to receive any funds for the benefit of
Securityholders distributed under the Operative Documents, and to make
further distributions of such funds to the Holders according to the
provisions of this Indenture and the other Operative Documents.
ARTICLE 11.
MISCELLANEOUS
Section 11.1 Conflict with Trust Indenture Act of 1939.
If and to the extent that any provision of this Indenture limits,
qualifies, or conflicts with the duties imposed by Sections 310 to 317,
inclusive, of the TIA, such imposed duties shall control.
Section 11.2 Notices; Waivers.
Any request, demand, authorization, direction, notice, consent, waiver
or other document provided or permitted by this Indenture to be made upon,
given or furnished to, or filed with
(a) the Company shall be sufficient for every purpose hereunder if in
writing (including telecopied communications) and made, given, furnished or
filed by personal delivery or mailed by registered or certified mail or by
nationally recognized overnight courier, postage or courier charges, as the
case may be, prepaid, to or with the Company at:
Trans World Airlines, Inc.
One City Centre
515 N. 6th Street
St. Louis, Missouri 63101
Attention: Senior Vice President & General Counsel
Telecopier No.: (314) 589-3267
(b) the Trustee shall be sufficient for every purpose hereunder if in
writing (including telecopied communications) and made, given, furnished or
filed by personal delivery or mailed by registered or certified mail or by
nationally recognized overnight courier, postage or courier charges, as the
case may be, prepaid, to or with the Trustee at:
First Security Bank, National Association
79 South Main Street
Salt Lake City, Utah 84111
Attention: Corporate Trust Services
Telecopier No.: (801) 246-5053
or to any of the above parties at any other address or telecopier number
subsequently furnished in writing by it to each of the other parties listed
above. An affidavit by any person representing or acting on behalf of the
Company or the Trustee as to such mailing, having any registry receipt
required by this Section attached, shall be conclusive evidence of the
giving of such demand, notice or communication.
Any notice or communication mailed to a Holder shall be mailed to such
holder by first-class mail or by nationally recognized overnight courier,
postage or courier charges, as the case may be, prepaid, at such holder's
address as it appears on the Register and shall be sufficiently given to
such holder if so mailed within the time prescribed.
Failure to mail a notice or send a communication to a Holder or any
defect in it shall not affect its sufficiency with respect to other
Holders. Notices to the Trustee or to the Company are deemed given only
when received. Where this Indenture provides for notice in any manner,
such notice may be waived in writing by the Person entitled to receive such
notice, either before or after the event, and such waiver shall be the
equivalent of such notice. Waivers of notice by the Holders shall be filed
with the Trustee, but such filing shall not be a condition precedent to the
validity of any action taken in reliance upon such waiver.
Section 11.3 Communications by Holders with Other Holders.
Securityholders may communicate pursuant to TIA Section 312(b) with other
Securityholders with respect to their rights under this Indenture or the
Securities. The Company, the Trustee, the Registrar and any other person
shall have the protection of TIA section 312(c).
Section 11.4 Certificate and Opinion as to Conditions Precedent.
Upon any Request or application by the Company to the Trustee to take
any action under this Indenture or the other Operative Documents, the
Company shall furnish to the Trustee: (a) an Officers' Certificate, and
(b) an Opinion of Counsel, each stating that, in the opinion of the
signers, all conditions precedent, if any, provided for in this Indenture
relating to the proposed action have been complied with, provided, that in
the case of any such application or Request as to which the furnishing of
an Officers' Certificate or Opinion of Counsel is specifically required by
any provision of this Indenture or the other Operative Documents relating
to such particular application or Request, no additional certificate or
opinion, as the case may be, need be furnished.
Section 11.5 Statements Required in Certificate or Opinion.
Each certificate or opinion provided for and delivered to the Trustee
with respect to compliance with a condition or covenant provided for in
this Indenture or the other Operative Documents shall include: (a) a
statement that the Person signing such certificate or opinion has read such
condition or covenant and the definitions herein or therein relating
thereto; (b) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based; (c) a statement that,
in the opinion of such Person, he has made such examination or
investigation as is necessary to enable him to express an informed opinion
as to whether or not such condition or covenant has been complied with; and
(d) a statement as to whether or not in the opinion of such Person, such
condition or covenant has been complied with.
Any certificate or opinion of an Officer or an engineer, insurance
broker, accountant or other expert may be based, insofar as it relates to
legal matters, upon a certificate or opinion of or upon representations by
counsel, unless such officer, engineer, insurance broker, accountant or
other expert knows that the certificate or opinion or representations with
respect to the matters upon which his opinion may be based as aforesaid are
erroneous, or in the exercise of reasonable care should have known that the
same were erroneous.
Any certificate or Opinion of Counsel may be based, insofar as it
relates to factual matters, upon the certificate or opinion of or
representations by an officer or officers of the Company stating that the
information with respect to such factual matters is in possession of the
Company, unless such counsel knows that the certificate or opinion or
representations with respect to the matters upon which his opinion may be
based as aforesaid are erroneous and insofar as it relates to legal matters
in a jurisdiction or area of law beyond the expertise of such counsel, such
counsel may rely upon the opinion of counsel qualified in such other
jurisdiction or area of law.
Wherever in this Indenture or the other Operative Documents in
connection with any application, certificate or report to the Trustee it is
provided that the Company shall deliver any document as a condition of the
granting of such application or as evidence of the Company's compliance
with any term hereof, it is intended that the truth and accuracy at the
time of the granting of such application or at the effective date of such
certificate or report, as the case may be, of the facts and opinions stated
in such document shall in each such case be a condition precedent to the
right of the Company to have such application granted or to the sufficiency
of such certificate or report. Nevertheless, in the case of any such
application, certificate or report, any document required by any provision
of this Indenture or the other Operative Documents to be delivered to the
Trustee as a condition of the granting of such application or as evidence
of such compliance may be received by the Trustee as conclusive evidence of
any statement therein contained and shall be full warrant, authority and
protection to the Trustee acting on the faith thereof.
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that
all such matters be certified by, or covered by the opinion of, only one
such Person, or that they be so certified or covered by only one document,
but one such Person may certify or give an opinion with respect to some
matters and one or more other such Persons as to other matters, and any
such Person may certify or give an opinion as to such matters in one or
several documents.
Whenever any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements or opinions or
other instruments under this Indenture or any other Operative Document such
Person may, but need not, consolidate such instruments into one.
Section 11.6 Rules by Trustee, Paying Agent, Registrar.
The Trustee may make reasonable rules for action by or at a meeting of
Securityholders. The Registrar, Paying Agent or Tender Agent may make
reasonable rules for their respective functions.
Section 11.7 Holidays.
In the event that any date for the payment of any amount due hereunder
shall not be a Business Day, then (notwithstanding any other provision of
this Indenture) such payment need not be made on such date, but may be made
on the next succeeding Business Day with the same force and effect as if
made on the due date, and no interest or Special Interest, if any, shall
accrue from such due date to and including the next succeeding Business
Day.
Section 11.8 Governing Law; Waiver of Jury Trial.
(a) The laws of the State of New York shall govern this Indenture and
the Securities without regard to principles of conflict of laws.
(b) The Company and the Trustee each waive any right to have a jury
participate in resolving any dispute, whether sounding in contract, tort,
or otherwise arising out of, connected with, related to or incidental to
the relationship established between them in connection with this
Indenture. Instead, any disputes resolved in court will be resolved in a
bench trial without a jury.
Section 11.9 No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret any agreement of the
Company or any of its Subsidiaries which is unrelated to this Indenture,
the Securities or the other Operative Documents. Any such agreement may
not be used to interpret this Indenture.
Section 11.10 No Recourse Against Others.
A director, officer, employee or stockholder, as such, of the Company
shall not have any liability for any obligations of the Company under the
Securities or this Indenture or for any claim based on, in respect of or by
reason of such obligations or their creation. Each Securityholder by
accepting a Security waives and releases all such liability. The waiver
and release are part of the consideration for the issue of the Securities.
Section 11.11 Benefits of Indenture and the Securities Restricted.
Subject to the provisions of Section 11.12 hereof, nothing in this
Indenture or the Securities, express or implied, shall give or be construed
to give to any Person, firm or corporation, other than the parties hereto
and the Holders, any legal or equitable right, remedy or claim under or in
respect of this Indenture or under any covenant, condition, or provision
herein contained, all such covenants, conditions and provisions, subject to
Section 11.12 hereof, being for the sole benefit of the parties hereto and
of the Holders.
Section 11.12 Successors and Assigns.
This Indenture and all obligations of the Company hereunder shall be
binding upon the successors and permitted assigns of the Company, and
shall, together with the rights and remedies of the Trustee hereunder,
inure to the benefit of the Trustee, the Holders, and their respective
successors and assigns. Any assignment in violation hereof shall be null
and void ab initio.
Section 11.13 Counterpart Originals.
This Indenture may be signed in two or more counterparts, each of
which shall be deemed an original, but all of which shall together
constitute one and the same agreement.
Section 11.14 Severability.
The provisions of this Indenture are severable, and if any clause or
provision shall be held invalid, illegal or unenforceable in whole or in
part in any jurisdiction, then such invalidity or unenforceability shall
affect in that jurisdiction only such clause or provision, or part thereof,
and shall not in any manner affect such clause or provision in any other
jurisdiction or any other clause or provision of this Indenture in any
jurisdiction, and a Holder shall have no claim therefor against any party
hereto.
Section 11.15 Effect of Headings.
The Article and Section headings and the Table of Contents contained
in this Indenture have been inserted for convenience of reference only, and
are and shall be without substantive meaning or content of any kind
whatsoever and are not a part of this Indenture.
ARTICLE 12.
RELEASE OF COLLATERAL
Section 12.1 Release of Collateral.
The Collateral securing the obligations evidenced by the Securities
shall be subject to release from the Lien of this Indenture and the other
Operative Documents from and to the extent provided by this Indenture and
the other Operative Documents.
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed, all as of the date first written above.
TRANS WORLD AIRLINES, INC.
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
FIRST SECURITY BANK,
NATIONAL ASSOCIATION,
as Trustee
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
RULE 144A/REGULATION S APPENDIX
Appendix II
To the Indenture between
Trans World Airlines, Inc.
and
First Security Bank, National Association, as Trustee
dated as of April 21, 1998
for the Company's 11 3/8% Senior Secured Notes due 2003
RULE 144A/REGULATION S APPENDIX
FOR INITIAL ISSUANCE AND FOR
SUBSEQUENT OFFERINGS TO QUALIFIED INSTITUTIONAL BUYERS PURSUANT
TO
RULE 144A, INSTITUTIONAL "ACCREDITED INVESTORS" (AS DEFINED
IN RULE 501(A)(1), (2), (3) or (7)) AND TO CERTAIN PERSONS
IN OFFSHORE TRANSACTIONS IN RELIANCE ON REGULATION S
PROVISIONS RELATING TO INITIAL SECURITIES, RESALE SECURITIES,
-------------------------------------------------------------
PRIVATE EXCHANGE SECURITIES
---------------------------
AND EXCHANGE SECURITIES
-----------------------
1. Definitions
1.1 Definitions
For the purposes of this Appendix the following terms shall have the
meanings indicated below:
"Beneficiary" means Seven Sixty Seven Leasing, Inc., as beneficiary
under the Trust Agreement dated as of January 24, 1995 between the
Beneficiary and the Owner Trustee.
"Definitive Security" means a certificated Security bearing the
restricted securities legend set forth in Section 2.3(d) and which is held
by an IAI.
"Depository" means The Depository Trust Company, its nominees and
their respective successors.
"Exchange Securities" means the 11 3/8% Senior Secured Notes due 2003
to be issued pursuant to the Indenture in connection with a Registered
Exchange Offer pursuant to the Registration Rights Agreement.
"IAI" means an institutional "accredited investor" as described in
Rule 501(a)(1), (2), (3) or (7) under the Securities Act.
"Initial Securities" means the 11 3/8% Senior Secured Notes due 2003,
issued under the Indenture on or about the date of the Indenture to the
Owner Trustee, the Beneficiary, CL/PK, the Participants (as such terms are
defined in the Sale Agreement) and the Placement Agent as contemplated by
the Sale Agreement.
"Owner Trustee" means First Security Bank, National Association, not
in its individual capacity, but solely as Owner Trustee under the Trust
Agreement dated as of January 24, 1995 between the Beneficiary and the
Owner Trustee.
"Placement Agent" means Lazard Freres & Co. LLC.
"Placement Agreement" means the Placement Agreement, dated as of April
9, 1998, between the Company and the Placement Agent.
"Private Exchange" means the offer by the Company, pursuant to the
Registration Rights Agreement, to the Placement Agent to issue and deliver
to the Placement Agent, in exchange for the Initial Securities held by the
Placement Agent which constitute payment of fees, a like aggregate
principal amount of Private Exchange Securities.
"Private Exchange Securities" means the 11 3/8% Senior Secured Notes
due 2003 to be issued pursuant to the Indenture to the Placement Agent in a
Private Exchange.
"QIB" means a "qualified institutional buyer" as defined in Rule 144A
under the Securities Act.
"Registered Exchange Offer" means the offer by the Company, pursuant
to the Registration Rights Agreement, to certain Holders of Initial
Securities or Resale Securities, to issue and deliver to such Holders, in
exchange for the Initial Securities or Resale Securities, as the case may
be, a like aggregate principal amount of Exchange Securities registered
under the Securities Act.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of April 21, 1998, among the Company, the Placement
Agent and the Owner Trustee relating to the Registered Exchange Offer.
"Resale Securities" means the 11 3/8% Senior Secured Notes due 2003 to
be issued pursuant to the Indenture upon resales of (i) the Initial
Securities held by the holders of the Initial Securities or (ii) the Resale
Securities held by any subsequent transferee to, in each case, any of their
subsequent transferees (other than those transfers to persons that are
contemplated by the Sale Agreement to occur on the Closing Date as
described in Section 4.04 thereof).
"Sale Agreement" means the Aircraft Sale and Note Purchase Agreement,
made and entered into as of April 9, 1998, among the Company, the Owner
Trustee and the Beneficiary.
"Securities" means the Initial Securities, the Resale Securities, the
Exchange Securities and the Private Exchange Securities, treated as a
single class.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Custodian" means the custodian with respect to a Global
Security (as appointed by the Depository), or any successor person thereto
and shall initially be the Trustee.
"Shelf Registration Statement" means the registration statement of the
Company, in connection with the offer and sale of Initial Securities or
Private Exchange Securities, pursuant to the Registration Rights Agreement.
"Transfer Restricted Securities" means Securities that bear or are
required to bear the legend set forth in Section 2.3(d) hereto.
1.2 Other Definitions
Defined in this Rule 144A/Regulation S
---------------------------------------
Term Appendix in the Section indicated below
- ---- ---------------------------------------
"Agent Members"...........................................................2.1(b)
"Global Security".........................................................2.1(b)
"Indenture"..................................................................2.2
"Regulation S"............................................................2.1(c)
"Rule 144A"...............................................................2.1(a)
Unless otherwise indicated, all Section numbers referenced herein are
to Sections of this Rule 144A/Regulation S Appendix.
2. The Securities.
2.1 Form and Dating.
The Initial Securities are being offered and sold by the Company
pursuant to the Sale Agreement and the Placement Agreement in reliance on
Section 4(2) of the Securities Act and shall be issued initially in the
form of definitive, fully registered Securities without interest coupons
with the restricted securities legend set forth in Exhibit 1 hereto,
registered in the name of, or as instructed by, the Owner Trustee, duly
executed by the Company and authenticated by the Trustee as hereinafter
provided. Resales of Initial Securities shall be in the form or forms
provided below in this Section 2.1.
(a) Global Securities. Resale Securities resulting from
Securities offered and sold to a QIB in reliance on Rule 144A under the
Securities Act ("Rule 144A") as provided in the Sale Agreement, shall be
issued in the form of one permanent global Security in definitive, fully
registered form without interest coupons with the global securities legend
and restricted securities legend set forth in Exhibit 1 hereto (the "Global
Security"), which shall be deposited on behalf of the purchasers of the
Resale Securities represented thereby with the Trustee, at its New York
office, as custodian for the Depository (or with such other custodian as
the Depository may direct), and registered in the name of the Depository or
a nominee of the Depository, duly executed by the Company and authenticated
by the Trustee as hereinafter provided. The aggregate principal amount of
the Global Security may from time to time be increased or decreased by
adjustments made on the records of the Trustee and the Depository or its
nominee as hereinafter provided.
(b) Book-Entry Provisions. This Section 2.1(b) shall apply only
to the Global Security deposited with or on behalf of the Depository.
The Company shall execute and the Trustee shall, in accordance
with this Section 2.1(b), authenticate and deliver initially one Global
Security in respect of Resale Securities that are resold pursuant to Rule
144A that (a) shall be registered in the name of the Depository for such
Global Security or the nominee of such Depository and (b) shall be
delivered by the Trustee to such Depository or pursuant to such
Depository's instructions or held by the Trustee as custodian for the
Depository.
Members of, or participants in, the Depository ("Agent Members")
shall have no rights under the Indenture with respect to the Global
Security held on their behalf by the Depository or by the Trustee as the
custodian of the Depository or under any Global Security, and the
Depository may be treated by the Company, the Trustee and any agent of the
Company or the Trustee as the absolute owner of the Global Security for all
purposes whatsoever. Notwithstanding the foregoing, nothing herein shall
prevent the Company, the Trustee or any agent of the Company or the Trustee
from giving effect to any written certification, proxy or other
authorization furnished by the Depository or impair, as between the
Depository and its Agent Members, the operation of customary practices of
such Depository governing the exercise of the rights of a holder of a
beneficial interest in any Global Security.
(c) Certificated Securities. Except as provided in this Section
2.1 or Section 2.3 or 2.4, owners of beneficial interests in the Global
Security will not be entitled to receive physical delivery of certificated
Securities. Purchasers of Resale Securities who are IAI's and are not QIBs
or who are non-U.S. persons within the meaning of Regulation S under the
Securities Act ("Regulation S") will receive Definitive Securities;
provided, however, that upon transfer of such Definitive Securities to a
QIB in reliance on Rule 144A, such Definitive Securities will, unless the
applicable Global Security has previously been exchanged for Definitive
Securities, be exchanged for an interest in the Global Security pursuant to
the provisions of Section 2.3.
2.2 Authentication. The Trustee shall authenticate and deliver: (1)
Initial Securities for original issue on the Issue Date in an aggregate
principal amount of $43,200,000, (2) Resale Securities upon a transfer of
Initial Securities permitted in accordance with the terms of the Securities
and consistent with the applicable restrictions on transfer set forth in
the legend in Section 2.3(d) hereof and (3) Exchange Securities or Private
Exchange Securities for issue only in a Registered Exchange Offer or a
Private Exchange, respectively, pursuant to the Registration Rights
Agreement, for a like principal amount of Initial Securities or Resale
Securities, in the case of (1) and (3) above, upon a written order of the
Company signed by two Officers or by an Officer and either an Assistant
Treasurer or an Assistant Secretary of the Company. Such order shall
specify the amount of the Securities to be authenticated and the date on
which the original issue of Securities is to be authenticated and whether
the Securities are to be Initial Securities, Exchange Securities or Private
Exchange Securities. The aggregate principal amount of Securities
Outstanding at any time may not exceed $43,200,000 except as provided in
Section 2.7 of the Indenture of which this Rule 144A/Regulation S Appendix
forms a part (as it may be amended, restated, supplemented or otherwise
modified from time to time, the "Indenture").
2.3 Transfer and Exchange. (a) Transfer and Exchange of Definitive
Securities. When Definitive Securities are presented to the Registrar or a
co-Registrar with a request:
(i) to register the transfer of such Definitive Securities; or
(ii) to exchange such Definitive Securities for an equal
principal amount of Definitive Securities of other authorized
denominations,
the Registrar or co-Registrar shall register the transfer or make the
exchange as requested if its reasonable requirements for such transaction
are met; provided, however, that the Definitive Securities surrendered for
transfer or exchange shall be accompanied by a duly executed Assignment
Form in the form attached to Exhibit 1 hereto.
(b) Restrictions on Transfer of a Definitive Security for a
Beneficial Interest in the Global Security. A Definitive Security may not
be exchanged for a beneficial interest in the Global Security except upon
satisfaction of the requirements set forth below. Upon receipt by the
Trustee of a Definitive Security, duly endorsed or accompanied by
appropriate instruments of transfer, in form satisfactory to the Trustee,
together with:
(i) certification that such Definitive Security is being
transferred to a QIB in accordance with Rule 144A; and
(ii) written instructions directing the Trustee to make, or to
direct the Securities Custodian to make, an adjustment on its books
and records with respect to the Global Security to reflect an increase
in the aggregate principal amount of the Securities represented by
such Global Security, such instructions to contain information
regarding the Depository account to be credited with such increase,
then the Trustee shall cancel such Definitive Security and cause, or direct
the Securities Custodian to cause, in accordance with the standing
instructions and procedures existing between the Depository and the
Securities Custodian, the aggregate principal amount of Securities
represented by the Global Security to be increased by the aggregate
principal amount of the Definitive Security to be exchanged and shall
credit or cause to be credited to the account of the Person specified in
such instructions a beneficial interest in the Global Security equal to the
principal amount of the Definitive Security so canceled. If no Global
Security is then outstanding, the Company shall issue and the Trustee shall
authenticate, upon written order of the Company in the form of an Officers'
Certificate, a new Global Security in the appropriate principal amount.
(c) Transfer and Exchange of the Global Security.
(i) The transfer and exchange of the Global Security or
beneficial interests therein shall be effected through the Depository,
in accordance with the Indenture (including applicable restrictions on
transfer set forth herein, if any) and the procedures of the
Depository therefor. A transferor of a beneficial interest in the
Global Security shall deliver to the Registrar a written order given
in accordance with the Depository's procedures containing information
regarding the participant account of the Depository to be credited
with a beneficial interest in the Global Security. The Registrar
shall, in accordance with such instructions, instruct the Depository
to credit to the account of the Person specified in such instructions
a beneficial interest in the Global Security and to debit the account
of the Person making the transfer the beneficial interest in the
Global Security being transferred.
(ii) Notwithstanding any other provisions of this Rule
144A/Regulation S Appendix (other than the provision set forth in
Section 2.4 hereof), the Global Security may not be transferred as a
whole except by the Depository to a nominee of the Depository or by a
nominee of the Depository to the Depository or another nominee of the
Depository or by the Depository or any such nominee to a successor
Depository or a nominee of such successor Depository.
(iii) In the event that the Global Security is exchanged for
Securities in definitive registered form pursuant to Section 2.4
hereof or Section 2.9 of the Indenture prior to the consummation of a
Registered Exchange Offer or the effectiveness of a Shelf Registration
Statement with respect to such Securities, such Securities may be
exchanged only in accordance with such procedures as are substantially
consistent with the provisions of this Section 2.3 (including the
certification requirements intended to ensure that such transfers
comply with Rule 144A or Regulation S, as the case may be) and such
other procedures as may from time to time be adopted by the Company.
(d) Legends.
(i) Except as permitted by the following paragraphs (ii), (iii)
and (iv), each Security certificate evidencing the Global Securities
and the Definitive Securities (and all Securities issued in exchange
therefor or in substitution thereof) shall bear a legend in
substantially the following form:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT,
OR ANY STATE SECURITIES LAWS. NEITHER THESE SECURITIES NOR ANY
INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED,
TRANSFERRED, PLEDGED, ENCUMBERED, OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT
FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT. EACH PURCHASER OF THE SECURITY EVIDENCED HEREBY IS
HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON THE EXEMPTION FROM
THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE
144A THEREUNDER.
THE HOLDER OF THESE SECURITIES BY ITS ACCEPTANCE HEREOF AGREES TO
OFFER, SELL, OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE RESALE
RESTRICTION TERMINATION DATE WHICH IS THE DATE WHICH IS TWO YEARS
AFTER THE LATER OF THE DATE OF ORIGINAL ISSUANCE OF THESE SECURITIES
AND THE LAST DATE ON WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY
WAS THE OWNER OF THESE SECURITIES (OR ANY PREDECESSOR OF THESE
SECURITIES) ONLY (A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION
STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT,
(C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO
RULE 144A, TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED
INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A THAT PURCHASES FOR ITS
OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO
WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON
RULE 144A UNDER THE SECURITIES ACT, (D) PURSUANT TO OFFERS AND SALES
TO NON-U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE
MEANING OF REGULATION S UNDER THE SECURITIES ACT, (E) TO AN
INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH
(a)(1), (2), (3) OR (7) OF RULE 501 UNDER THE SECURITIES ACT THAT IS
ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF SUCH
AN INSTITUTIONAL "ACCREDITED INVESTOR," FOR INVESTMENT PURPOSES AND
NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY
DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (F) PURSUANT TO
ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT, SUBJECT TO THE COMPANY'S AND THE TRUSTEE'S RIGHT PRIOR
TO ANY SUCH OFFER, SALE, OR TRANSFER (i) PURSUANT TO CLAUSES (D), (E)
OR (F) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL,
CERTIFICATION AND OTHER INFORMATION SATISFACTORY TO EACH OF THEM, AND
(ii) IN EACH OF THE FOREGOING CASES, TO REQUIRE THAT A CERTIFICATE OF
TRANSFER IN THE FORM ATTACHED TO OR ON THE REVERSE SIDE OF THIS
SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE TRUSTEE.
THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE
RESALE RESTRICTION TERMINATION DATE."
"IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE
TRUSTEE SUCH CERTIFICATES AND OTHER INFORMATION AS THE TRUSTEE MAY
REASONABLY REQUIRE TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE
FOREGOING RESTRICTIONS."
Regulation S Securities will also bear the following additional legend:
[ON OR PRIOR TO THE 40TH DAY AFTER THE LATER OF THE COMMENCEMENT OF
THE OFFERING AND THE CLOSING DATE, TRANSFERS OF REGULATION S
SECURITIES TO U.S. PERSONS SHALL BE LIMITED TO TRANSFERS TO QUALIFIED
INSTITUTIONAL BUYERS PURSUANT TO RULE 144A UNDER THE SECURITIES ACT.]
(ii) Upon any sale or transfer of a Transfer Restricted Security
(including any Transfer Restricted Security represented by the Global
Security) pursuant to Rule 144 under the Securities Act:
(A) in the case of any Transfer Restricted Security that is
a Definitive Security, the Registrar shall permit the Holder
thereof to exchange such Transfer Restricted Security for a
certificated Security that does not bear the legend set forth
above and rescind any restriction on the transfer of such
Transfer Restricted Security; and
(B) in the case of any Transfer Restricted Security that is
represented by the Global Security, the Registrar shall permit
the Holder thereof to exchange such Transfer Restricted Security
for a certificated Security that does not bear the legend set
forth above and rescind any restriction on the transfer of such
Transfer Restricted Security, if the Holder certifies in writing
to the Registrar that its request for such exchange was made in
reliance on such Rule 144.
(iii) After a transfer of any Initial Securities, Resale
Securities or Private Exchange Securities during the period of the
effectiveness of a Shelf Registration Statement with respect to such
Initial Securities, Resale Securities or Private Exchange Securities,
as the case may be, all requirements pertaining to legends on such
Initial Security, Resale Security or such Private Exchange Security
will cease to apply, the requirements requiring any such Initial
Security, Resale Security or such Private Exchange Security issued to
certain Holders to be issued in global form will cease to apply, and a
certificated Initial Security, Resale Security or Private Exchange
Security without legends will be available to the transferee of the
Holder of such Initial Securities, Resale Securities or Private
Exchange Securities upon exchange of such transferring Holder's
certificated Initial Security, Resale Security or Private Exchange
Security or directions to transfer such Holder's interest in the
Global Security, as applicable.
(iv) Upon the consummation of a Registered Exchange Offer with
respect to the Initial Securities or Resale Securities pursuant to
which Holders of such Initial Securities or Resale Securities are
offered Exchange Securities in exchange for their Initial Securities
or Resale Securities, all requirements pertaining to such Initial
Securities or Resale Securities that Initial Securities or Resale
Securities issued to certain Holders be issued in global form will
cease to apply and certificated Initial Securities or Resale
Securities with the Restricted Securities Legend set forth in Exhibit
1 hereto will be available to Holders of such Initial Securities or
Resale Securities that do not exchange their Initial Securities or
Resale Securities, and Exchange Securities in certificated or global
form will be available to Holders that exchange such Initial
Securities or Resale Securities in such Registered Exchange Offer.
(v) Upon consummation of a Private Exchange with respect to the
Initial Securities pursuant to which Holders of such Initial
Securities are offered Private Exchange Securities in exchange for
their Initial Securities, Private Exchange Securities in definitive
form with the Restricted Securities Legend set forth in Exhibit 1
hereto will be available to Holders that exchange such Initial
Securities in such Private Exchange.
(e) Cancellation or Adjustment of the Global Security. At such
time as all beneficial interests in the Global Security have either been
exchanged for certificated or Definitive Securities, redeemed, repurchased
or canceled, such Global Security shall be returned to the Depository for
cancellation or retained and canceled by Trustee. At any time prior to
such cancellation, if any beneficial interest in the Global Security is
exchanged for certificated or Definitive Securities, redeemed, repurchased
or canceled, the principal amount of Securities represented by such Global
Security shall be reduced and an adjustment shall be made on the books and
records of the Trustee (if it is then the Securities Custodian for such
Global Security) with respect to the Custodian, to reflect such reduction.
(f) Obligations with Respect to Transfers and Exchanges of
Securities.
(i) To permit registrations of transfers and exchanges, the
Company shall execute and the Trustee shall authenticate certificated
Securities, Definitive Securities and any Global Security at the
Registrar's or co-Registrar's request.
(ii) No service charge shall be made for any registration of
transfer or exchange, but the Company may require payment of a sum
sufficient to cover any transfer tax, assessments or similar
governmental charge payable in connection therewith (other than any
such transfer taxes, assessment or similar governmental charge payable
upon exchange or transfer pursuant to Sections 2.9, 3.7, 4.15 or 9.5
of the Indenture).
(iii) The Registrar or co-Registrar shall not be required to
register the transfer or exchange of any certificated or Definitive
Security tendered for repurchase in whole or in part pursuant to an
Offer to Purchase (as defined in Appendix I to the Indenture), except
the unredeemed portion of any certificated or Definitive Security
being repurchased in part and except to the Company.
(iv) Prior to the due presentation for registration of transfer
of any Security, the Company, the Trustee, the Paying Agent, the
Registrar or any co-Registrar may deem and treat the person in whose
name a Security is registered as the absolute owner of such Security
for the purpose of receiving payment of principal of, premium, if any,
or, interest on, or Special Interest, if any, with respect to, such
Security and for all other purposes whatsoever, whether or not such
Security is overdue and none of the Company, the Trustee, the Paying
Agent, the Register or any co-Registrar shall be affected by notice to
the contrary.
(v) All Securities issued upon any transfer or exchange pursuant
to the terms of the Indenture shall evidence the same debt and shall
be entitled to the same benefits under the Indenture as the Securities
surrendered upon such transfer or exchange.
(g) No Obligation of the Trustee.
(i) The Trustee shall have no responsibility or obligation to
any beneficial owner of the Global Security, a member of or a
participant in the Depository or other Person with respect to the
accuracy of the records of the Depository or its nominee or of any
participant or member thereof with respect to any ownership interest
in the Securities or with respect to the delivery to any participant,
member, beneficial owner or other Person (other than the Depository)
of any notice (including any notice of redemption) or the payment of
any amount under or with respect to such Securities. All notices and
communications to be given to the Holders and all payments to be made
to Holders under the Securities shall be given or made only to or upon
the order of the registered Holders (which shall be the Depository or
its nominee in the case of the Global Security). The rights of
beneficial owners in the Global Security shall be exercised only
through the Depository subject to the applicable rules and procedures
of the Depository. The Trustee may rely and shall be fully protected
in relying upon information furnished by the Depository with respect
to its members, participants and any beneficial owners.
(ii) The Trustee shall have no obligation or duty to monitor,
determine or inquire as to compliance with any restrictions on
transfer imposed under the Indenture or under applicable law with
respect to any transfer of any interest in any Security (including any
transfers between or among Depository participants, members or
beneficial owners in the Global Security) other than to require
delivery of such certificates and other documentation or evidence as
are expressly required by, and to do so if and when expressly required
by, the terms of the Indenture, and to examine the same to determine
substantial compliance as to form with the express requirements
hereof.
2.4 Certificated Securities.
(a) All or any portion of the Global Security deposited with the
Depository or with the Trustee as custodian for the Depository pursuant to
Section 2.1 shall be transferable to the beneficial owners thereof in the
form of certificated Securities in an aggregate principal amount equal to
the principal amount of such certificated security, in exchange for such
interest in the applicable Global Security, only if such transfer complies
with Section 2.3 and (i) the Depository notifies the Company that it is
unwilling or unable to continue as Depository for such Global Security or
if at any time such Depository ceases to be a "clearing agency" registered
under the Exchange Act, or (ii) an Event of Default (as defined in the
Indenture) has occurred and is continuing or (iii) the Company, in its sole
discretion, notifies the Trustee in writing such Global Security or Global
Securities shall be exchangeable.
(b) Any Global Security that is transferable to the beneficial
owners thereof pursuant to this Section shall be surrendered by the
Depository to the Trustee located in the Borough of Manhattan, The City of
New York, to be so transferred, in whole or from time to time in part,
without charge, and the Trustee shall authenticate and deliver, upon such
transfer of each portion of such Global Security, an equal aggregate
principal amount of certificated Resale Securities of authorized
denominations. Any portion of the Global Security transferred pursuant to
this Section shall be executed, authenticated and delivered only in
denominations of $1,000 principal amount and any integral multiple thereof
(except that the Global Security may be issued in a different denomination)
and registered in such names as the Depository shall direct. Any
certificated Resale Security delivered in exchange for an interest in the
Global Security shall, except as otherwise provided by Section 2.3, bear
the legend set forth in Section 2.3(d).
(c) Subject to the provision of Section 2.4(b), the registered
Holder of the Global Security may grant proxies and otherwise authorize any
Person, including Agent Members and Persons that may hold interests through
Agent Members, to take any action which a Holder is entitled to take under
the Indenture or the Securities.
(d) In the event of the occurrence of any of the events
specified in Section 2.4(a), the Company will promptly make available to
the Trustee a reasonable supply of certificated Securities in definitive,
fully registered form without interest coupons.
EXHIBIT 1
to
RULE 144A/REGULATION S APPENDIX
[FORM OF FACE OF INITIAL SECURITY AND RESALE SECURITY]
[Global Securities Legend]*
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION
("DTC"), NEW YORK, NEW YORK, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF
TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE
NAME OF CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER
ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC) ANY TRANSFER,
PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS
IN WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR
SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY
SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET
FORTH IN THE INDENTURE REFERRED TO ON THE REVERSE HEREOF.
[Restricted Securities Legend]
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT, OR ANY STATE SECURITIES LAWS. NEITHER THESE SECURITIES NOR ANY INTEREST
OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED,
PLEDGED, ENCUMBERED, OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH
REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. EACH PURCHASER OF THE
SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON
THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED
BY RULE 144A THEREUNDER.
THE HOLDER OF THESE SECURITIES BY ITS ACCEPTANCE HEREOF AGREES
TO OFFER, SELL, OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE RESALE
RESTRICTION TERMINATION DATE WHICH IS THE DATE WHICH IS TWO YEARS AFTER THE
LATER OF THE DATE OF ORIGINAL ISSUANCE OF THESE SECURITIES AND THE LAST DATE
ON WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THESE
SECURITIES (OR ANY PREDECESSOR OF THESE SECURITIES) ONLY (A) TO THE COMPANY,
(B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE
UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR
RESALE PURSUANT TO RULE 144A, TO A PERSON IT REASONABLY BELIEVES IS A
"QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A THAT PURCHASES FOR ITS
OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM
NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A UNDER
THE SECURITIES ACT, (D) PURSUANT TO OFFERS AND SALES TO NON-U.S. PERSONS THAT
OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE
SECURITIES ACT, (E) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE
MEANING OF SUBPARAGRAPH (a)(1), (2) (3), OR (7) OF RULE 501 UNDER THE
SECURITIES ACT THAT IS ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT OR FOR THE
ACCOUNT OF SUCH AN INSTITUTIONAL "ACCREDITED INVESTOR," FOR INVESTMENT PURPOSES
AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY
DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (F) PURSUANT TO ANOTHER
AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT,
SUBJECT TO THE COMPANY'S AND THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER,
SALE, OR TRANSFER (i) PURSUANT TO CLAUSES (D), (E) OR (F) TO REQUIRE THE
DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND OTHER INFORMATION
SATISFACTORY TO EACH OF THEM, AND (ii) IN EACH OF THE FOREGOING CASES, TO
REQUIRE THAT A CERTIFICATE OF TRANSFER IN THE FORM ATTACHED TO OR ON THE
REVERSE SIDE OF THIS SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO
THE TRUSTEE. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER
THE RESALE RESTRICTION TERMINATION DATE.
IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE
TRUSTEE SUCH CERTIFICATES AND OTHER INFORMATION AS THE TRUSTEE MAY REASONABLY
REQUIRE TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE FOREGOING RESTRICTIONS.
[Regulation S Securities Legend]
[ON OR PRIOR TO THE 40TH DAY AFTER THE LATER OF THE
COMMENCEMENT OF THE OFFERING AND THE CLOSING DATE, TRANSFERS OF REGULATION S
SECURITIES TO U.S. PERSONS SHALL BE LIMITED TO TRANSFERS TO QUALIFIED
INSTITUTIONAL BUYERS PURSUANT TO RULE 144A UNDER THE SECURITIES ACT.]
No. CUSIP No.
$
11 3/8% Senior Secured Note due 2003
TRANS WORLD AIRLINES, INC., a Delaware corporation promises to
pay to __________, or registered assigns, the principal sum of __________
Dollars on April 15, 2003.
Interest Payment Dates: April 15 and October 15.
Record Dates: April 1 and October 1.
Additional provisions of this Security are set forth on the
other side of this Security.
Dated:
TRANS WORLD AIRLINES, INC.
By:________________________________
Name:
Title:
Attest:
________________________________
Name:
Title:
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
First Security Bank, National Association,
as Trustee, certifies that this is one of
the Securities referred to in the
Indenture.
By:_______________________________
Authorized Signatory
______________________
* Only if the Security is a Resale Security transferred pursuant to Rule
144A is the Global Securities Legend applicable.
[FORM OF REVERSE SIDE OF INITIAL SECURITY AND RESALE SECURITY]
11 3/8% Senior Secured Note due 2003
This Security is one of a duly authorized issue of securities
of the Company designated as its 11 3/8% Senior Secured Notes due 2003
(hereinafter called the "Securities"), limited in aggregate principal amount
Outstanding to $43,200,000, issued or to be issued pursuant to an Indenture,
dated as of April 21, 1998 (hereinafter called the "Indenture") between the
Company and First Security Bank, National Association, as Trustee (herein
called the "Trustee", which term includes any successor trustee under the
Indenture).
1. Interest; Special Interest. The Company promises to pay
interest on the principal amount of this Security at the rate of Eleven and
Three-Eighths percent (11 3/8%) per annum, subject to increase as provided in
paragraph 8 below; provided, however, that if a Registration Default (as
defined in and subject to the provisions of the Registration Rights Agreement)
occurs (each period during which a Registration Default has occurred and is
continuing referred to herein as a "Registration Default Period"), additional
interest will accrue on this Security at a per annum rate of 0.50% for the
first 90 days of the Registration Default Period, at a per annum rate of 1.0%
for the second 90 days of the Registration Default Period, at a per annum rate
of 1.5% for the third 90 days of the Registration Default Period and at a per
annum rate of 1.5% thereafter for the remaining portion of the Registration
Default Period (such additional interest is referred to herein as "Special
Interest"). The Company will pay interest and Special Interest, if any,
semi-annually on the Interest Payment Dates set forth on the face of this
Security, commencing October 15, 1998. Interest on the Securities will accrue
from April 21, 1998 or the most recent Interest Payment Date to which interest
and Special Interest, if any, have been paid. Interest will be computed on
the basis of a 360-day year of twelve 30-day months.
2. Method of Payment. The Company will pay interest on and
Special Interest, if any, with respect to, the Securities (except defaulted
interest and interest on defaulted principal) to the persons who are
registered Holders of Securities at the close of business on the Record Date
set forth on the face of this Security next preceding the applicable Interest
Payment Date. Defaulted interest and interest on defaulted principal will be
paid by the Company in accordance with the applicable provisions of the
Indenture. Holders must surrender Securities to a Paying Agent to collect
principal payments. The Company will pay principal, interest and Special
Interest, if any, at the office or agency of the Company maintained for that
purpose in the Borough of Manhattan, The City of New York and at any other
office or agency maintained by the Company for such purpose in money of the
United States that at the time of payment is legal tender for payment of
public and private debts; provided, however, that at the option of the
Company, payment of interest on and Special Interest, if any, with respect to,
the Securities may be by check payable in such money and mailed to a Holder's
registered address; provided further, however, that payments on a certificated
Security will be made by wire transfer to a U.S. dollar account maintained by
a Holder with a bank in New York City if such Holder owns at least $250,000 in
aggregate principal amount of certificated Securities and elects payment by
wire transfer by giving written notice to the Company and the Trustee to such
effect designating such account no later than 10 days immediately preceding
the relevant due date for payment (or such other date as the Company and the
Trustee may accept in their discretion). If a payment date is a legal holiday
at a place of payment, payment may be made at that place on the next
succeeding Business Day, and no interest shall accrue for the intervening
period.
3. Registrar, Paying Agent and Tender Agent. Initially, the
Trustee will act as Registrar and Paying Agent. The Company may change any
Paying Agent or Registrar or co-registrar without prior notice to any
Securityholder. The Company may act in any such capacity, except in certain
circumstances.
4. Indenture. The Company issued the Securities under the
Indenture. The terms of the Securities include those stated in the Indenture
and those made applicable to the Indenture by the TIA. The Securities are
subject to all such terms, and Securityholders are referred to the Indenture
and such Act for a statement of such terms. Subject to paragraph 7 hereof,
the Securities are senior secured obligations of the Company limited to
$43,200,000 aggregate principal amount, except as otherwise provided in the
Indenture. Terms used in this Security and not defined in this Security shall
have the meaning set forth in Section 1 of the Definitions Appendix attached
as Appendix I to the Indenture, which shall be a part of this Security as if
fully set forth in this place. The rules of construction for this Security
are set forth in Section 2 of the Definitions Appendix.
5. Optional and Mandatory Redemption. Except as set forth in
the second paragraph under this paragraph 5, the Securities may not be
redeemed prior to April 15, 2001. On and after that date, the Company may
redeem the Securities at any time in whole or in part (in any integral
multiple of $1,000) at its sole option at redemption prices (expressed as a
percentage of principal amount) as set forth below during the twelve month
periods beginning April 15 of the years shown below, plus in each case an
amount equal to accrued and unpaid interest and Special Interest, if any, with
respect to, the Securities to and including the redemption date:
Year Redemption Price
---- ----------------
2001 104.550%
2002 102.275%
In addition, subject to the provisions of the Indenture, the
Company shall, until all the Securities are paid or payment thereof provided
for, deposit in accordance with Section 3.6 of the Indenture, at least one
Business Day prior to October 15 in each year, commencing October 15, 2000
(each such date being hereinafter referred to as a "Mandatory Redemption
Date"), an amount in cash sufficient to redeem an aggregate principal amount
of Securities (the "Mandatory Redemption Amount") equal to $1,840,000 on
October 15, 2000 and $1,838,000 on each of October 15, 2001 and October 15,
2002 (or, if the aggregate principal amount of Securities Outstanding on any
such Mandatory Redemption Date is less than the principal amount required to
so be redeemed, then all the Outstanding Securities shall be redeemed on such
date), at a redemption price (expressed as a percentage of the aggregate
principal amount of Securities Outstanding) of 100% plus accrued and unpaid
interest and Special Interest, if any, to the Mandatory Redemption Date
(subject to the right of holders of record on the relevant record date to
receive interest and Special Interest, if any, due on the relevant Interest
Payment Date). Each such deposit shall be applied to the redemption of
Securities on such Mandatory Redemption Date as provided in the Indenture.
The Company may at its option receive credit against any or all of the cash
portion of the Mandatory Redemption Amount for open market purchases of
Securities, and such Mandatory Redemption Amount is subject to automatic
reduction in connection with any permitted sale of or Total Loss with respect
to any Aircraft, all as provided in the Indenture.
6. Notice of Redemption. Notice of any redemption will be
mailed at least 30 days but not more than 60 days before the redemption date
to each Holder of Securities to be redeemed at his registered address.
Securities in denominations larger than $1,000 may be redeemed in part but only
in whole multiples of $1,000. If money sufficient to pay the redemption price
of and accrued interest on, and Special Interest, if any, with respect to, all
Securities (or portions thereof) to be redeemed on the redemption date is
deposited with the Paying Agent on or before the redemption date and certain
other conditions are satisfied, on and after such date interest ceases to
accrue on such Securities (or such portions thereof) called for redemption.
7. Security. The Securities are secured by Liens on certain
Properties of the Company pursuant to the Mortgage and the other Operative
Documents described in the Indenture and such Liens are subject to release as
provided herein and in the Mortgage and the other Operative Documents.
8. Offers to Purchase. In the event that there shall occur a
Change in Control, the Company shall make an Offer to Purchase all of the
Outstanding Securities, at a purchase price equal to 101% of the aggregate
principal amount of the Securities Outstanding, plus accrued and unpaid
interest and Special Interest, if any, to and including the repurchase date.
The right to require such repurchase of Securities shall not continue after a
discharge of the Company from its obligations with respect to the Securities
in accordance with Article 8 of the Indenture. The Company shall commence
such Offer to Purchase within thirty (30) days after the occurrence of a
Change in Control.
In the event that the Company desires to sell any of the
Aircraft as and when permitted in Section 4.12 of the Indenture, the Company
shall (unless the Company is not required to make such Offer to Purchase
pursuant to the provisions of such Section 4.12) have commenced an Offer to
Purchase Securities in an aggregate principal amount (the "Sale OTP Amount")
equal to (for each Aircraft so sold) (a) the aggregate principal amount of the
Securities Outstanding on the date of the commencement of such Offer to
Purchase minus (b) the product of the (i) Redemption Value as of such date
multiplied by (ii) the number of Aircraft that will remain subject to the
Mortgage after giving effect to such sale, at a purchase price (expressed as a
percentage of principal amount of Securities to be purchased) equal to (A)
102%, if such Offer to Purchase is commenced prior to the first anniversary of
the Issue Date, or (B) 101%, if such Offer to Purchase is commenced on or after
the first anniversary of the Issue Date, plus in each case, accrued and unpaid
interest and Special Interest, if any, on such Securities to and including the
Payment Date. Effective as of the day immediately following the Payment Date
with respect to the Offer to Purchase in connection with any sale of an
Aircraft, the interest rate borne by the Securities then Outstanding shall be
subject to possible automatic increase as set forth in Section 4.12 of the
Indenture, and the Aircraft so sold shall be released from the Lien of the
Operative Documents in accordance with the provisions thereof. The Company
may receive credit against any or all of the Sale OTP Amount for open market
purchases of Securities as provided in the Indenture.
In the event that there shall occur a Total Loss with respect
to any Aircraft, the Company shall (unless the Company is not required to make
such Offer to Purchase pursuant to the provisions of Section 4.12 of the
Indenture) make an Offer to Purchase an aggregate principal amount of
Outstanding Securities (the "Total Loss OTP Amount") equal to (for each
Aircraft subject to such Total Loss) (a) the aggregate principal amount of the
Securities Outstanding on the date such Offer to Purchase (if any) is required
to be commenced under the Indenture minus (b) the product of (i) the
Redemption Value as of such date multiplied by (ii) the number of Aircraft
remaining that were not subject to such Total Loss, at a purchase price equal
to 100% of the aggregate principal amount of Securities to be purchased, plus
accrued and unpaid interest and Special Interest, if any, on such Securities,
to and including the Payment Date, and the Aircraft that was the subject of
such Total Loss shall be released from the Lien of the Operative Documents in
accordance with the provisions thereof. The Company shall commence such Offer
to Purchase (if any) within thirty (30) days after the Total Loss Date with
respect to any such Total Loss. The Company may receive credit against any or
all of the Total Loss OTP Amount for open market purchases of Securities as
provided in the Indenture.
"Offer to Purchase" means an offer to purchase all or a
portion, as the case may be, of the Securities by the Company from the Holders
commenced by the mailing (by first class mail, postage prepaid) by the Company
(or, if requested by the Company on at least five Business Days' prior notice
to the Trustee and at the Company's expense, by the Trustee) of a notice to
each Holder (and, if mailed by the Company, to the Trustee) at such Holder's
address appearing in the Register, stating: (i) the covenant pursuant to
which the offer is being made and that all Securities validly tendered will
be accepted for payment, provided, that if Securities in excess of the
aggregate principal amount that the Company has offered to purchase are
tendered by the Holders, then Securities will be purchased from the tendering
Holders pro rata, based on the aggregate principal amount of Securities
tendered by each such Holder; (ii) the purchase price and the date of purchase
(which shall be a Business Day no earlier than 30 days nor later than 60 days
from the date such notice is mailed) (the "Payment Date"); (iii) that any
Security not tendered will continue to accrue interest pursuant to its terms
(including, if such Offer to Purchase is being made pursuant to Section
4.12(c)(i)(A) of the Indenture, a statement that the rate of interest on such
Security may be subject to increase in accordance with the provisions of such
Section); (iv) that, unless the Company defaults in the payment of the
purchase price on the Payment Date, any Security accepted for payment pursuant
to the Offer to Purchase shall cease to accrue interest on and after the
Payment Date; (v) that Holders electing to have a Security purchased pursuant
to the Offer to Purchase will be required to surrender the Security, together
with the form entitled "Option of the Holder to Elect Purchase" attached to
or on the reverse side of the Security completed, to the Paying Agent at the
address specified in the notice at any time beginning with the date of such
notice but prior to the close of business on the Business Day immediately
preceding the Payment Date (or, if such day is a Legal Holiday, on the next
subsequent day which is not a Legal Holiday), and such Holder shall be
entitled to receive from the Paying Agent a non-transferable receipt of
deposit evidencing such deposit; (vi) that, unless the Company defaults in
making the payment of the purchase price or shall otherwise, in its sole
discretion, consent thereto, Holders will be entitled to withdraw their
election only if the Trustee receives, not later than the close of business on
the fifth Business Day immediately preceding the Payment Date, a telegram,
facsimile transmission or letter setting forth the name of such Holder, the
principal amount of Securities delivered for purchase and a statement that
such Holder is withdrawing his election to have such Securities purchased; and
(vii) that Holders whose Securities are being purchased only in part will be
promptly issued new Securities equal in principal amount to the unpurchased
portion of the Securities surrendered (which new Securities, if such Offer to
Purchase is being made pursuant to Section 4.12(c)(i)(A) of the Indenture,
will cease to be secured by the Aircraft released pursuant to such Section);
provided that each Security purchased and each new Security issued shall be in
a principal amount of $1,000 or integral multiples thereof. The Company shall
place such notice in the national edition of The New York Times or The Wall
Street Journal or, if such newspapers are not then in circulation, in a
financial newspaper of general circulation in New York City. No failure of
the Company to give the foregoing notice shall limit any Holder's right to
exercise a repurchase right. On the Payment Date, the Company shall (i)
accept for payment Securities or portions thereof tendered pursuant to an
Offer to Purchase, provided, that if Securities in excess of the aggregate
principal amount that the Company has offered to purchase are tendered by the
Holders, then Securities will be purchased from the tendering Holders pro
rata, based on the aggregate principal amount of Securities tendered by each
such Holder; (ii) deposit with the Trustee money sufficient to pay the
purchase price of all Securities or portions thereof so accepted; and (iii)
deliver, or cause to be delivered, to the Trustee all Securities or portions
thereof so accepted together with an Officers' Certificate specifying the
Securities or portions thereof accepted for payment by the Company. The
Trustee shall promptly mail to the Holders of Securities so accepted payment
in an amount equal to the purchase price, and the Trustee shall promptly
authenticate, and the Company shall promptly execute and mail (or cause to be
mailed) to such Holders a new Security equal in principal amount to any
unpurchased portion of the Securities surrendered; provided that each Security
purchased and each new Security issued shall be in a principal amount of
$1,000 or integral multiples thereof; provided further that if the Payment
Date is between a regular Record Date and the next succeeding Interest Payment
Date, Securities to be repurchased must be accompanied by payment of an amount
equal to the interest and Special Interest, if any, payable on such succeeding
Interest Payment Date on the principal amount to be repurchased, and the
interest on the principal amount of the Security being repurchased, and Special
Interest, if any, with respect thereto, will be paid on such next succeeding
Interest Payment Date to the registered holder of such Security on the
immediately preceding Record Date. A Security repurchased on an Interest
Payment Date need not be accompanied by any such payment, and the interest on
the principal amount of the Security being repurchased and Special Interest,
if any, with respect thereto, will be paid on such Interest Payment Date to
the registered holder of such Security on the corresponding Record Date. The
Company will publicly announce the results of an Offer to Purchase as soon as
practicable after the Payment Date. The Trustee shall act as the Paying Agent
for an Offer to Purchase. The Company will comply with Rule 14e-l under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable, in the event that the Company
is required to repurchase Securities pursuant to an Offer to Purchase. Both
the notice of the Company and the notice of the Holder having been given as
specified above, the Securities so to be repurchased shall, on the Payment
Date become due and payable at the purchase price applicable thereto and from
and after such date (unless the Company shall default in the payment of such
purchase price) such Securities shall cease to bear interest. If any Security
shall not be paid upon surrender thereof for repurchase, the principal shall,
until paid, bear interest from the Payment Date at the rate borne by such
Security. Any Security which is to be submitted for repurchase only in part
shall be delivered pursuant to the above provisions with (if the Company or
Trustee so requires) due endorsement by, or a written instrument of transfer
in form satisfactory to the Company and the Trustee duly executed by, the
Holder thereof or such Holder's attorney duly authorized in writing.
9. Denominations, Transfer, Exchange. The Securities shall be
issuable only in registered form without coupons and in denominations of
$1,000 and integral multiples thereof. The transfer of Securities may be
registered and Securities may be exchanged as provided in the Indenture. The
Registrar may require a Holder, among other things, to furnish appropriate
endorsements and transfer documents and to pay any taxes required by law or
permitted by the Indenture.
10. Persons Deemed Owners. The Company, the Trustee and any
agent of the Company or the Trustee may treat the person in whose name this
Security is registered with the Registrar as the owner for all purposes.
11. Discharge. Subject to certain conditions set forth in
Article 8 of the Indenture, the Company may terminate its obligations under
the Securities and the Indenture, except those obligations referred to in
Section 8.1(b) of the Indenture, if the Company deposits with the Trustee or a
Paying Agent cash or U.S. Government Obligations for the payment of principal
of, interest on, and Special Interest, if any, with respect to, the Securities
to Stated Maturity.
12. Amendments and Waivers. Subject to certain exceptions, the
Indenture, the Securities, or the other Operative Documents may be amended
with the consent of the Holders of at least a majority in principal amount of
the then Outstanding Securities, and any existing Default, Event of Default or
acceleration may be waived with the consent of the Holders of a majority in
principal amount of the then Securities Outstanding. Without the consent of
any Holder, the Indenture, the Securities or any of the Operative Documents
may be amended to, among other things, cure any ambiguity, defect or
inconsistency.
13. Defaults and Remedies. Events of Default under the
Indenture include the following: default for the period specified in the
Indenture in payment of interest on, or Special Interest, if any, with respect
to the Securities; default in payment of the principal amount of any
Securities when the same becomes due and payable (at maturity, upon
acceleration, redemption, tender for repurchase or otherwise); failure by the
Company to comply with specific covenants of the Indenture or of the Mortgage
within the time periods provided therein, discontinuing substantially all of
its commercial airlines operations, or failure to pay over amounts required
under the Mortgage; failure to comply in any material respect with any of its
other agreements contained in the Indenture, the other Operative Documents or
the Securities; a representation or warranty of the Company in the Indenture,
the other Operative Documents or any Mortgage Supplement or in any certificate
of the Company delivered under any such document proves to be untrue in any
material respect when made; the occurrence of certain defaults under any
Indebtedness of the Company or any of its Significant Subsidiaries in excess
of $10,000,000 in principal amount; the rendering or domestication of final
judgments by a court of competent jurisdiction against the Company or any of
its Significant Subsidiaries in an aggregate amount of $10,000,000 or more
which remain undischarged for a period (during which execution is not stayed)
of sixty (60) days after the date on which the right to appeal has expired;
cessation of effectiveness of Operative Documents without the consent of the
Trustee; and certain events of bankruptcy, insolvency or reorganization.
Subject to certain limitations in the Indenture, if an Event of Default occurs
and is continuing, the Trustee or the Holders of twenty-five percent (25%) in
principal amount of the Securities Outstanding may declare all the Securities
to be due and payable immediately, except that in the case of an Event of
Default arising from certain events of bankruptcy or insolvency, all
Securities Outstanding become due and payable immediately without further
action or notice. Securityholders may not enforce the Indenture or the
Securities except as provided in the Indenture. The Trustee may require
indemnity satisfactory to it before it enforces the Indenture or the
Securities. Subject to certain limitations, Holders of a majority in
principal amount of the then Outstanding Securities may direct the Trustee in
its exercise of any trust or power. The Trustee may withhold from
Securityholders notice of any continuing default (except a default in payment
of principal or interest) if it determines that withholding notice is in their
interests. The Company must furnish compliance certificates to the Trustee.
The above description of Events of Default and remedies is qualified by
reference, and subject in its entirety to the more complete description
thereof contained in the Indenture.
14. Trustee Dealings with Company. The Trustee under the
Indenture, in its individual or any other capacity, may become the owner or
pledgee of Securities and may otherwise deal with and collect obligations owed
to it by the Company or Affiliates of the Company with the same rights it
would have if it were not Trustee.
15. No Recourse Against Others. A director, officer, employee
or stockholder, as such, of the Company shall not have any liability for any
obligations of the Company under the Securities or the Indenture or for any
claim based on, in respect of or by reason of such obligations or their
creation. Each Securityholder by accepting a Security waives and releases all
such liability. The waiver and release are part of the consideration for the
issue of the Securities.
16. Authentication. This Security shall not be valid until
authenticated by the manual signature of the Trustee or an authenticating
agent.
17. Unclaimed Money. If money for the payment of principal of,
interest on, or Special Interest, with respect to, or the purchase price for
the Securities remains unclaimed for two (2) years, the Trustee or Paying
Agent will pay the money back to the Company at its request. After such
payment, Holders entitled to any portion of such money must look to the
Company for payment unless an applicable law designates another person.
18. Abbreviations. Customary abbreviations may be used in the
name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN
ENT (= tenants by the entireties), JT TEN (= joint tenants with right of
survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (=
Uniform Gifts to Minors Act).
19. CUSIP Numbers. The Company in issuing this Security may
use a "CUSIP" number (if then generally in use) and, if so, the Trustee shall
use "CUSIP" numbers in notices of redemption as a convenience to Holders;
provided, however, that any such notice may state that no representation is
made as to the correctness of such numbers either as printed on the Securities
or as contained in any notice of a redemption and that reliance may be placed
only on the other identification numbers printed on the Securities, and any
such redemption shall not be affected by any defect in or omission of such
numbers.
20. Holders' Compliance with Registration Rights Agreement.
Each Holder of a Security, by acceptance hereof, acknowledges and agrees to
the provisions of the Registration Rights Agreement, including, without
limitation, the obligations of the Holders with respect to a registration and
the indemnification of the Company to the extent provided therein.
21. Governing Law. THIS SECURITY SHALL BE GOVERNED BY THE LAWS
OF THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS.
The Company will furnish to any Holder of this Security, upon
written request and without charge, a copy of the Indenture. Request may be
made to: Trans World Airlines, Inc., One City Centre, 515 N. 6th Street, St.
Louis, Missouri 63101, Attention: Corporate Secretary.
ASSIGNMENT FORM
To assign this Security, fill in the form below:
I or we assign and transfer this Security to:
(Insert Assignee's Soc. Sec. or Tax I.D. No.)
(Print or type assignee's name, address and zip
code)
and irrevocably appoint ______________
agent to transfer this Security on the books of
the Company. The agent may substitute
another to act for him.
Date:________________________________ Signature(s):____________________________
____________________________
(Sign exactly as your name(s)
appear(s) on the other side
of this Security)
Signature(s) guaranteed by:
____________________________
(All signatures must be
guaranteed by a member of a
national securities exchange
or of the National
Association of Securities
Dealers, Inc. or by a
commercial bank or trust
company located in the United
States)
OPTION OF THE HOLDER TO ELECT PURCHASE
If you want to elect to have this Security repurchased by the
Company pursuant to any Offer to Purchase under the Indenture, check the box:
[ ]
If you want to elect to have only part of this Security
repurchased by the Company pursuant to any Offer to Purchase under the
Indenture, state the principal amount to be repurchased:
$___________________________
(in an integral multiple of $1,000)
Date:________________________________ Signature(s):____________________________
____________________________
(Sign exactly as your name(s) appear(s) on
the other side of this Security)
Signature(s) guaranteed by:
_________________________________________
(All signatures must be guaranteed
by a member of a national securities
exchange or of the National Association of
Securities Dealers, Inc. or by a
commercial bank or trust company located
in the United States)
CERTIFICATE OF TRANSFER
Re: 11 3/8% Senior Secured Notes due 2003 (the "Notes") of
Trans World Airlines, Inc. (the "Company")
This Certificate relates to Notes held in definitive form by
___________ (the "Transferor").
The Transferor has requested the Registrar by written order to
exchange or register the transfer of a Note or Notes. In connection with such
request and in respect of each such Note, the Transferor does hereby certify
that the Transferor is familiar with the Indenture relating to the above
captioned Notes and that the transfer of this Note does not require
registration under the Securities Act of 1933 (the "Securities Act"), because:*
[ ] Such Note is being transferred to the Company.
[ ] Such Note is being transferred pursuant to an effective
Registration Statement under the Securities Act.
[ ] Such Note is being transferred to a qualified
institutional buyer (as defined in Rule 144A under the Securities Act) in
reliance on Rule 144A.
[ ] Such Note is being transferred pursuant to an offshore
transaction in accordance with Rule 904 under the Securities Act.
[ ] Such Note is being transferred to an Institutional
"Accredited Investor" within the meaning of Subparagraph (a)(1), (2), (3) or (7)
of Rule 501 under the Securities Act.
[ ] Such Note is being transferred in a transaction meeting
the requirements of Rule 144 under the Securities Act.
The Registrar and the Company are entitled to rely upon this
Certificate and are irrevocably authorized to produce this Certificate or a
copy hereof to any interested party in any administrative or legal proceedings
or official inquiry with respect to the matters covered hereby.
________________________________________
[INSERT NAME OF TRANSFEROR]
By:_____________________________________
Date:________________________________
_____________________________________
* Please check applicable box.
EXHIBIT 2
to
RULE 144A/REGULATION S APPENDIX
[FORM OF FACE OF EXCHANGE SECURITY OR PRIVATE EXCHANGE SECURITY]
[*]
[**]
No. CUSIP No.
$
11 3/8% Senior Secured Note due 2003
TRANS WORLD AIRLINES, INC., a Delaware corporation promises to
pay to __________, or registered assigns, the principal sum of __________
Dollars on April 15, 2003.
Interest Payment Dates: April 15 and October 15.
Record Dates: April 1 and October 1.
Additional provisions of this Security are set forth on the
other side of this Security.
Dated:
TRANS WORLD AIRLINES, INC.
By:_____________________________________
Name:
Title:
Attest:
_____________________________________
Name:
Title:
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
First Security Bank, National Association,
as Trustee, certifies that this is one of
the Securities referred to in the
Indenture.
By:_____________________________
Authorized Signatory
______________________
* If the Security is to be issued in global form add the Global Securities
Legend from Exhibit 1 to the Rule 144A/Regulation S Appendix.
** If the Security is a Private Exchange Security issued in a Private
Exchange to the Placement Agent with respect to Securities acquired in other
than market making or trading activities, add the Restricted Securities Legend
from Exhibit 1 to the Rule 144A/Regulation S Appendix and add the Certificate
of Transfer from such Exhibit to the end of this Exhibit 2.
[FORM OF REVERSE SIDE OF EXCHANGE OR PRIVATE EXCHANGE SECURITY]
11 3/8% Senior Secured Note due 2003
This Security is one of a duly authorized issue of securities
of the Company designated as its 11 3/8% Senior Secured Notes due 2003
(hereinafter called the "Securities"), limited in aggregate principal amount
Outstanding to $43,200,000, issued or to be issued pursuant to an Indenture,
dated as of April 21, 1998 (hereinafter called the "Indenture") between the
Company and First Security Bank, National Association, as Trustee (herein
called the "Trustee", which term includes any successor trustee under the
Indenture).
1. Interest; Special Interest. The Company promises to pay
interest on the principal amount of this Security at the rate of Eleven and
Three-Eighths percent (11 3/8%) per annum, subject to increase as provided in
paragraph 8 below; provided, however, that if a Registration Default (as
defined in and subject to the provisions of the Registration Rights Agreement)
occurs (each period during which a Registration Default has occurred and is
continuing referred to herein as a "Registration Default Period"), additional
interest will accrue on this Security at a per annum rate of 0.50% for the
first 90 days of the Registration Default Period, at a per annum rate of 1.0%
for the second 90 days of the Registration Default Period, at a per annum rate
of 1.5% for the third 90 days of the Registration Default Period and at a per
annum rate of 1.5% thereafter for the remaining portion of the Registration
Default Period (such additional interest is referred to herein as "Special
Interest"). The Company will pay interest and Special Interest, if any,
semi-annually on the Interest Payment Dates set forth on the face of this
Security, commencing October 15, 1998. Interest on the Securities will accrue
from April 21, 1998 or the most recent Interest Payment Date to which interest
and Special Interest, if any, have been paid. Interest will be computed on
the basis of a 360-day year of twelve 30-day months.
2. Method of Payment. The Company will pay interest on and
Special Interest, if any, with respect to, the Securities (except defaulted
interest and interest on defaulted principal) to the persons who are
registered Holders of Securities at the close of business on the Record Date
set forth on the face of this Security next preceding the applicable Interest
Payment Date. Defaulted interest and interest on defaulted principal will be
paid by the Company in accordance with the applicable provisions of the
Indenture. Holders must surrender Securities to a Paying Agent to collect
principal payments. The Company will pay principal, interest and Special
Interest, if any, at the office or agency of the Company maintained for that
purpose in the Borough of Manhattan, The City of New York and at any other
office or agency maintained by the Company for such purpose in money of the
United States that at the time of payment is legal tender for payment of
public and private debts; provided, however, that at the option of the
Company, payment of interest on and Special Interest, if any, with respect to,
the Securities may be by check payable in such money and mailed to a Holder's
registered address; provided further, however, that payments on a certificated
Security will be made by wire transfer to a U.S. dollar account maintained by
a Holder with a bank in New York City if such Holder owns at least $250,000 in
aggregate principal amount of certificated Securities and elects payment by
wire transfer by giving written notice to the Company and the Trustee to such
effect designating such account no later than 10 days immediately preceding
the relevant due date for payment (or such other date as the Company and the
Trustee may accept in their discretion). If a payment date is a legal holiday
at a place of payment, payment may be made at that place on the next
succeeding Business Day, and no interest shall accrue for the intervening
period.
3. Registrar, Paying Agent and Tender Agent. Initially, the
Trustee will act as Registrar and Paying Agent. The Company may change any
Paying Agent or Registrar or co-registrar without prior notice to any
Securityholder. The Company may act in any such capacity, except in certain
circumstances.
4. Indenture. The Company issued the Securities under the
Indenture. The terms of the Securities include those stated in the Indenture
and those made applicable to the Indenture by the TIA. The Securities are
subject to all such terms, and Securityholders are referred to the Indenture
and such Act for a statement of such terms. Subject to paragraph 7 hereof,
the Securities are senior secured obligations of the Company limited to
$43,200,000 aggregate principal amount, except as otherwise provided in the
Indenture. Terms used in this Security and not defined in this Security shall
have the meaning set forth in Section 1 of the Definitions Appendix attached
as Appendix I to the Indenture, which shall be a part of this Security as if
fully set forth in this place. The rules of construction for this Security
are set forth in Section 2 of the Definitions Appendix.
5. Optional and Mandatory Redemption. Except as set forth in
the second paragraph under this paragraph 5, the Securities may not be
redeemed prior to April 15, 2001. On and after that date, the Company may
redeem the Securities at any time in whole or in part (in any integral
multiple of $1,000) at its sole option at redemption prices (expressed as a
percentage of principal amount) as set forth below during the twelve month
periods beginning April 15 of the years shown below, plus in each case an
amount equal to accrued and unpaid interest and Special Interest, if any, with
respect to, the Securities to and including the redemption date:
Year Redemption Price
---- ----------------
2001 104.550%
2002 102.275%
In addition, subject to the provisions of the Indenture, the
Company shall, until all the Securities are paid or payment thereof provided
for, deposit in accordance with Section 3.6 of the Indenture, at least one
Business Day prior to October 15 in each year, commencing October 15, 2000
(each such date being hereinafter referred to as a "Mandatory Redemption
Date"), an amount in cash sufficient to redeem an aggregate principal amount
of Securities (the "Mandatory Redemption Amount") equal to $1,840,000 on
October 15, 2000 and $1,838,000 on each of October 15, 2001 and October 15,
2002 (or, if the aggregate principal amount of Securities Outstanding on any
such Mandatory Redemption Date is less than the principal amount required to
so be redeemed, then all the Outstanding Securities shall be redeemed on such
date), at a redemption price (expressed as a percentage of the aggregate
principal amount of Securities Outstanding) of 100% plus accrued and unpaid
interest and Special Interest, if any, to the Mandatory Redemption Date
(subject to the right of holders of record on the relevant record date to
receive interest and Special Interest, if any, due on the relevant Interest
Payment Date). Each such deposit shall be applied to the redemption of
Securities on such Mandatory Redemption Date as provided in the Indenture.
The Company may at its option receive credit against any or all of the cash
portion of the Mandatory Redemption Amount for open market purchases of
Securities, and such Mandatory Redemption Amount is subject to automatic
reduction in connection with any permitted sale of or Total Loss with respect
to any Aircraft, all as provided in the Indenture.
6. Notice of Redemption. Notice of any redemption will be
mailed at least 30 days but not more than 60 days before the redemption date
to each Holder of Securities to be redeemed at his registered address.
Securities in denominations larger than $1,000 may be redeemed in part but only
in whole multiples of $1,000. If money sufficient to pay the redemption price
of and accrued interest on, and Special Interest, if any, with respect to, all
Securities (or portions thereof) to be redeemed on the redemption date is
deposited with the Paying Agent on or before the redemption date and certain
other conditions are satisfied, on and after such date interest ceases to
accrue on such Securities (or such portions thereof) called for redemption.
7. Security. The Securities are secured by Liens on certain
Properties of the Company pursuant to the Mortgage and the other Operative
Documents described in the Indenture and such Liens are subject to release as
provided herein and in the Mortgage and the other Operative Documents.
8. Offers to Purchase. In the event that there shall occur a
Change in Control, the Company shall make an Offer to Purchase all of the
Outstanding Securities, at a purchase price equal to 101% of the aggregate
principal amount of the Securities Outstanding, plus accrued and unpaid
interest and Special Interest, if any, to and including the repurchase date.
The right to require such repurchase of Securities shall not continue after a
discharge of the Company from its obligations with respect to the Securities
in accordance with Article 8 of the Indenture. The Company shall commence
such Offer to Purchase within thirty (30) days after the occurrence of a
Change in Control.
In the event that the Company desires to sell any of the
Aircraft as and when permitted in Section 4.12 of the Indenture, the Company
shall (unless the Company is not required to make such Offer to Purchase
pursuant to the provisions of such Section 4.12) have commenced an Offer to
Purchase Securities in an aggregate principal amount (the "Sale OTP Amount")
equal to (for each Aircraft so sold) (a) the aggregate principal amount of the
Securities Outstanding on the date of the commencement of such Offer to
Purchase minus (b) the product of the (i) Redemption Value as of such date
multiplied by (ii) the number of Aircraft that will remain subject to the
Mortgage after giving effect to such sale, at a purchase price (expressed as a
percentage of principal amount of Securities to be purchased) equal to (A)
102%, if such Offer to Purchase is commenced prior to the first anniversary of
the Issue Date, or (B) 101%, if such Offer to Purchase is commenced on or after
the first anniversary of the Issue Date, plus in each case, accrued and unpaid
interest and Special Interest, if any, on such Securities to and including the
Payment Date. Effective as of the day immediately following the Payment Date
with respect to the Offer to Purchase in connection with any sale of an
Aircraft, the interest rate borne by the Securities then Outstanding shall be
subject to possible automatic increase as set forth in Section 4.12 of the
Indenture, and the Aircraft so sold shall be released from the Lien of the
Operative Documents in accordance with the provisions thereof. The Company
may receive credit against any or all of the Sale OTP Amount for open market
purchases of Securities as provided in the Indenture.
In the event that there shall occur a Total Loss with respect
to any Aircraft, the Company shall (unless the Company is not required to make
such Offer to Purchase pursuant to the provisions of Section 4.12 of the
Indenture) make an Offer to Purchase an aggregate principal amount of
Outstanding Securities (the "Total Loss OTP Amount") equal to (for each
Aircraft subject to such Total Loss) (a) the aggregate principal amount of the
Securities Outstanding on the date such Offer to Purchase (if any) is required
to be commenced under the Indenture minus (b) the product of (i) the
Redemption Value as of such date multiplied by (ii) the number of Aircraft
remaining that were not subject to such Total Loss, at a purchase price equal
to 100% of the aggregate principal amount of Securities to be purchased, plus
accrued and unpaid interest and Special Interest, if any, on such Securities,
to and including the Payment Date, and the Aircraft that was the subject of
such Total Loss shall be released from the Lien of the Operative Documents in
accordance with the provisions thereof. The Company shall commence such Offer
to Purchase (if any) within thirty (30) days after the Total Loss Date with
respect to any such Total Loss. The Company may receive credit against any or
all of the Total Loss OTP Amount for open market purchases of Securities as
provided in the Indenture.
"Offer to Purchase" means an offer to purchase all or a
portion, as the case may be, of the Securities by the Company from the Holders
commenced by the mailing (by first class mail, postage prepaid) by the Company
(or, if requested by the Company on at least five Business Days' prior notice
to the Trustee and at the Company's expense, by the Trustee) of a notice to
each Holder (and, if mailed by the Company, to the Trustee) at such Holder's
address appearing in the Register, stating: (i) the covenant pursuant to
which the offer is being made and that all Securities validly tendered will
be accepted for payment, provided, that if Securities in excess of the
aggregate principal amount that the Company has offered to purchase are
tendered by the Holders, then Securities will be purchased from the tendering
Holders pro rata, based on the aggregate principal amount of Securities
tendered by each such Holder; (ii) the purchase price and the date of purchase
(which shall be a Business Day no earlier than 30 days nor later than 60 days
from the date such notice is mailed) (the "Payment Date"); (iii) that any
Security not tendered will continue to accrue interest pursuant to its terms
(including, if such Offer to Purchase is being made pursuant to Section
4.12(c)(i)(A) of the Indenture, a statement that the rate of interest on such
Security may be subject to increase in accordance with the provisions of such
Section); (iv) that, unless the Company defaults in the payment of the
purchase price on the Payment Date, any Security accepted for payment pursuant
to the Offer to Purchase shall cease to accrue interest on and after the
Payment Date; (v) that Holders electing to have a Security purchased pursuant
to the Offer to Purchase will be required to surrender the Security, together
with the form entitled "Option of the Holder to Elect Purchase" attached to
or on the reverse side of the Security completed, to the Paying Agent at the
address specified in the notice at any time beginning with the date of such
notice but prior to the close of business on the Business Day immediately
preceding the Payment Date (or, if such day is a Legal Holiday, on the next
subsequent day which is not a Legal Holiday), and such Holder shall be
entitled to receive from the Paying Agent a non-transferable receipt of
deposit evidencing such deposit; (vi) that, unless the Company defaults in
making the payment of the purchase price or shall otherwise, in its sole
discretion, consent thereto, Holders will be entitled to withdraw their
election only if the Trustee receives, not later than the close of business on
the fifth Business Day immediately preceding the Payment Date, a telegram,
facsimile transmission or letter setting forth the name of such Holder, the
principal amount of Securities delivered for purchase and a statement that
such Holder is withdrawing his election to have such Securities purchased; and
(vii) that Holders whose Securities are being purchased only in part will be
promptly issued new Securities equal in principal amount to the unpurchased
portion of the Securities surrendered (which new Securities, if such Offer to
Purchase is being made pursuant to Section 4.12(c)(i)(A) of the Indenture,
will cease to be secured by the Aircraft released pursuant to such Section);
provided that each Security purchased and each new Security issued shall be in
a principal amount of $1,000 or integral multiples thereof. The Company shall
place such notice in the national edition of The New York Times or The Wall
Street Journal or, if such newspapers are not then in circulation, in a
financial newspaper of general circulation in New York City. No failure of
the Company to give the foregoing notice shall limit any Holder's right to
exercise a repurchase right. On the Payment Date, the Company shall (i)
accept for payment Securities or portions thereof tendered pursuant to an
Offer to Purchase, provided, that if Securities in excess of the aggregate
principal amount that the Company has offered to purchase are tendered by the
Holders, then Securities will be purchased from the tendering Holders pro
rata, based on the aggregate principal amount of Securities tendered by each
such Holder; (ii) deposit with the Trustee money sufficient to pay the
purchase price of all Securities or portions thereof so accepted; and (iii)
deliver, or cause to be delivered, to the Trustee all Securities or portions
thereof so accepted together with an Officers' Certificate specifying the
Securities or portions thereof accepted for payment by the Company. The
Trustee shall promptly mail to the Holders of Securities so accepted payment
in an amount equal to the purchase price, and the Trustee shall promptly
authenticate, and the Company shall promptly execute and mail (or cause to be
mailed) to such Holders a new Security equal in principal amount to any
unpurchased portion of the Securities surrendered; provided that each Security
purchased and each new Security issued shall be in a principal amount of
$1,000 or integral multiples thereof; provided further that if the Payment
Date is between a regular Record Date and the next succeeding Interest Payment
Date, Securities to be repurchased must be accompanied by payment of an amount
equal to the interest and Special Interest, if any, payable on such succeeding
Interest Payment Date on the principal amount to be repurchased, and the
interest on the principal amount of the Security being repurchased, and Special
Interest, if any, with respect thereto, will be paid on such next succeeding
Interest Payment Date to the registered holder of such Security on the
immediately preceding Record Date. A Security repurchased on an Interest
Payment Date need not be accompanied by any such payment, and the interest on
the principal amount of the Security being repurchased and Special Interest,
if any, with respect thereto, will be paid on such Interest Payment Date to
the registered holder of such Security on the corresponding Record Date. The
Company will publicly announce the results of an Offer to Purchase as soon as
practicable after the Payment Date. The Trustee shall act as the Paying Agent
for an Offer to Purchase. The Company will comply with Rule 14e-l under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable, in the event that the Company
is required to repurchase Securities pursuant to an Offer to Purchase. Both
the notice of the Company and the notice of the Holder having been given as
specified above, the Securities so to be repurchased shall, on the Payment
Date become due and payable at the purchase price applicable thereto and from
and after such date (unless the Company shall default in the payment of such
purchase price) such Securities shall cease to bear interest. If any Security
shall not be paid upon surrender thereof for repurchase, the principal shall,
until paid, bear interest from the Payment Date at the rate borne by such
Security. Any Security which is to be submitted for repurchase only in part
shall be delivered pursuant to the above provisions with (if the Company or
Trustee so requires) due endorsement by, or a written instrument of transfer
in form satisfactory to the Company and the Trustee duly executed by, the
Holder thereof or such Holder's attorney duly authorized in writing.
9. Denominations, Transfer, Exchange. The Securities shall be
issuable only in registered form without coupons and in denominations of
$1,000 and integral multiples thereof. The transfer of Securities may be
registered and Securities may be exchanged as provided in the Indenture. The
Registrar may require a Holder, among other things, to furnish appropriate
endorsements and transfer documents and to pay any taxes required by law or
permitted by the Indenture.
10. Persons Deemed Owners. The Company, the Trustee and any
agent of the Company or the Trustee may treat the person in whose name this
Security is registered with the Registrar as the owner for all purposes.
11. Discharge. Subject to certain conditions set forth in
Article 8 of the Indenture, the Company may terminate its obligations under
the Securities and the Indenture, except those obligations referred to in
Section 8.1(b) of the Indenture, if the Company deposits with the Trustee or a
Paying Agent cash or U.S. Government Obligations for the payment of principal
of, interest on, and Special Interest, if any, with respect to, the Securities
to Stated Maturity.
12. Amendments and Waivers. Subject to certain exceptions, the
Indenture, the Securities, or the other Operative Documents may be amended
with the consent of the Holders of at least a majority in principal amount of
the then Outstanding Securities, and any existing Default, Event of Default or
acceleration may be waived with the consent of the Holders of a majority in
principal amount of the then Securities Outstanding. Without the consent of
any Holder, the Indenture, the Securities or any of the Operative Documents
may be amended to, among other things, cure any ambiguity, defect or
inconsistency.
13. Defaults and Remedies. Events of Default under the
Indenture include the following: default for the period specified in the
Indenture in payment of interest on, or Special Interest, if any, with respect
to the Securities; default in payment of the principal amount of any
Securities when the same becomes due and payable (at maturity, upon
acceleration, redemption, tender for repurchase or otherwise); failure by the
Company to comply with specific covenants of the Indenture or of the Mortgage
within the time periods provided therein, discontinuing substantially all of
its commercial airlines operations, or failure to pay over amounts required
under the Mortgage; failure to comply in any material respect with any of its
other agreements contained in the Indenture, the other Operative Documents or
the Securities; a representation or warranty of the Company in the Indenture,
the other Operative Documents or any Mortgage Supplement or in any certificate
of the Company delivered under any such document proves to be untrue in any
material respect when made; the occurrence of certain defaults under any
Indebtedness of the Company or any of its Significant Subsidiaries in excess
of $10,000,000 in principal amount; the rendering or domestication of final
judgments by a court of competent jurisdiction against the Company or any of
its Significant Subsidiaries in an aggregate amount of $10,000,000 or more
which remain undischarged for a period (during which execution is not stayed)
of sixty (60) days after the date on which the right to appeal has expired;
cessation of effectiveness of Operative Documents without the consent of the
Trustee; and certain events of bankruptcy, insolvency or reorganization.
Subject to certain limitations in the Indenture, if an Event of Default occurs
and is continuing, the Trustee or the Holders of twenty-five percent (25%) in
principal amount of the Securities Outstanding may declare all the Securities
to be due and payable immediately, except that in the case of an Event of
Default arising from certain events of bankruptcy or insolvency, all
Securities Outstanding become due and payable immediately without further
action or notice. Securityholders may not enforce the Indenture or the
Securities except as provided in the Indenture. The Trustee may require
indemnity satisfactory to it before it enforces the Indenture or the
Securities. Subject to certain limitations, Holders of a majority in
principal amount of the then Outstanding Securities may direct the Trustee in
its exercise of any trust or power. The Trustee may withhold from
Securityholders notice of any continuing default (except a default in payment
of principal or interest) if it determines that withholding notice is in their
interests. The Company must furnish compliance certificates to the Trustee.
The above description of Events of Default and remedies is qualified by
reference, and subject in its entirety to the more complete description
thereof contained in the Indenture.
14. Trustee Dealings with Company. The Trustee under the
Indenture, in its individual or any other capacity, may become the owner or
pledgee of Securities and may otherwise deal with and collect obligations owed
to it by the Company or Affiliates of the Company with the same rights it
would have if it were not Trustee.
15. No Recourse Against Others. A director, officer, employee
or stockholder, as such, of the Company shall not have any liability for any
obligations of the Company under the Securities or the Indenture or for any
claim based on, in respect of or by reason of such obligations or their
creation. Each Securityholder by accepting a Security waives and releases all
such liability. The waiver and release are part of the consideration for the
issue of the Securities.
16. Authentication. This Security shall not be valid until
authenticated by the manual signature of the Trustee or an authenticating
agent.
17. Unclaimed Money. If money for the payment of principal of,
interest on, or Special Interest, with respect to, or the purchase price for
the Securities remains unclaimed for two (2) years, the Trustee or Paying
Agent will pay the money back to the Company at its request. After such
payment, Holders entitled to any portion of such money must look to the
Company for payment unless an applicable law designates another person.
18. Abbreviations. Customary abbreviations may be used in the
name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN
ENT (= tenants by the entireties), JT TEN (= joint tenants with right of
survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (=
Uniform Gifts to Minors Act).
19. CUSIP Numbers. The Company in issuing this Security may
use a "CUSIP" number (if then generally in use) and, if so, the Trustee shall
use "CUSIP" numbers in notices of redemption as a convenience to Holders;
provided, however, that any such notice may state that no representation is
made as to the correctness of such numbers either as printed on the Securities
or as contained in any notice of a redemption and that reliance may be placed
only on the other identification numbers printed on the Securities, and any
such redemption shall not be affected by any defect in or omission of such
numbers.
20. Holders' Compliance with Registration Rights Agreement.
Each Holder of a Security, by acceptance hereof, acknowledges and agrees to
the provisions of the Registration Rights Agreement, including, without
limitation, the obligations of the Holders with respect to a registration and
the indemnification of the Company to the extent provided therein.
21. Governing Law. THIS SECURITY SHALL BE GOVERNED BY THE LAWS
OF THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS.
The Company will furnish to any Holder of this Security, upon
written request and without charge, a copy of the Indenture. Request may be
made to: Trans World Airlines, Inc., One City Centre, 515 N. 6th Street, St.
Louis, Missouri 63101, Attention: Corporate Secretary.
ASSIGNMENT FORM
To assign this Security, fill in the form below:
I or we assign and transfer this Security to:
(Insert Assignee's Soc. Sec. or Tax I.D. No.)
(Print or type assignee's name, address and zip
code)
and irrevocably appoint ______________
agent to transfer this Security on the books of
the Company. The agent may substitute
another to act for him.
Date:_________________________________ Signature(s):_________________________
______________________________________
(Sign exactly as your name(s) appear(s)
on the other side of this Security)
Signature(s) guaranteed by:
(All signatures must be guaranteed by a
member of a national securities exchange
or of the National Association of
Securities Dealers, Inc. or by a
commercial bank or trust company located
in the United States)
OPTION OF THE HOLDER TO ELECT PURCHASE
If you want to elect to have this Security repurchased by the
Company pursuant to any Offer to Purchase under the Indenture, check the box:
[ ]
If you want to elect to have only part of this Security
repurchased by the Company pursuant to any Offer to Purchase under the
Indenture, state the principal amount to be repurchased:
$___________________________
(in an integral multiple of $1,000)
Date:_________________________________ Signature(s):__________________________
_______________________________________
(Sign exactly as your name(s) appear(s)
on the other side of this Security)
Signature(s) guaranteed by:
_______________________________________
(All signatures must be guaranteed by a
member of a national securities exchange
or of the National Association of
Securities Dealers, Inc. or by a
commercial bank or trust company located
in the United States)
EXHIBIT A
to
INDENTURE
[FORM OF FACE OF SECURITY]
[Restricted Securities Legend]
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT, OR ANY STATE SECURITIES LAWS. NEITHER THESE SECURITIES NOR ANY
INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED,
TRANSFERRED, PLEDGED, ENCUMBERED, OR OTHERWISE DISPOSED OF IN THE ABSENCE
OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT
SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.
THE HOLDER OF THESE SECURITIES BY ITS ACCEPTANCE HEREOF AGREES TO
OFFER, SELL, OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE RESALE
RESTRICTION TERMINATION DATE WHICH IS THE DATE WHICH IS TWO YEARS AFTER THE
LATER OF THE DATE OF ORIGINAL ISSUANCE OF THESE SECURITIES AND THE LAST
DATE ON WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF
THESE SECURITIES (OR ANY PREDECESSOR OF THESE SECURITIES) ONLY (A) TO THE
COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED
EFFECTIVE UNDER THE SECURITIES ACT, (C) PURSUANT TO OFFERS AND SALES TO
NON-U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING
OF REGULATION S UNDER THE SECURITIES ACT, (D) TO AN INSTITUTIONAL
"ACCREDITED INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH (a)(1), (2) (3),
OR (7) OF RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THE SECURITY
FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL "ACCREDITED
INVESTOR," FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR
SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES
ACT, OR (E) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY'S AND THE
TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE, OR TRANSFER (i) PURSUANT TO
CLAUSES (C), (D) OR (E) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL,
CERTIFICATION AND OTHER INFORMATION SATISFACTORY TO EACH OF THEM, AND (ii)
IN EACH OF THE FOREGOING CASES, TO REQUIRE THAT A CERTIFICATE OF TRANSFER
IN THE FORM ATTACHED TO OR ON THE REVERSE SIDE OF THIS SECURITY IS
COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE TRUSTEE. THIS LEGEND WILL
BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION
TERMINATION DATE.
IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE
TRUSTEE SUCH CERTIFICATES AND OTHER INFORMATION AS THE TRUSTEE MAY
REASONABLY REQUIRE TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE FOREGOING
RESTRICTIONS.
No. CUSIP No.
$
Mandatory Conversion Equity Note due 1999
TRANS WORLD AIRLINES, INC., a Delaware corporation promises to
pay to __________, or registered assigns, the principal sum of __________
Dollars on April 15, 1999.
Interest Payment Dates (if any): The 15th day of each month.
Record Dates: The 1st day of each month.
Additional provisions of this Security are set forth on the other
side of this Security.
Dated:
TRANS WORLD AIRLINES, INC.
By:________________________________________
Name:
Title:
Attest:
________________________________________
Name:
Title:
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
First Security Bank, National Association,
as Trustee, certifies that this
is one of the Securities
referred to in the Indenture.
By:______________________________________
Authorized Signatory
[FORM OF REVERSE SIDE OF SECURITY]
Mandatory Conversion Equity Note due 1999
This Security is one of a duly authorized issue of securities of the
Company designated as its Mandatory Conversion Equity Notes due 1999
(hereinafter called the "Securities"), limited in aggregate principal amount
Outstanding to $31,800,000, issued or to be issued pursuant to an Indenture,
dated as of April 21, 1998 (hereinafter called the "Indenture") between the
Company and First Security Bank, National Association, as Trustee (herein called
the "Trustee", which term includes any successor trustee under the Indenture).
1. Interest. This Security shall not bear interest; provided,
however, that upon a default in payment of principal on the Securities
(whether on acceleration, at maturity, upon tender for repurchase or
otherwise) or a Registration Default (as for so long as such default or
Registration Default, as the case may be, shall continue uncured and
unwaived), this Security shall bear interest at the rate of Twelve percent
(12%) per annum, from the date of such default or Registration Default, as
the case may be, payable (a) in the case of a Registration Default, monthly
in arrears on the 15th day of each month commencing the 15th day of the
month next succeeding the month in which such Registration Default
occurred, and (b) in the case of a default in payment of principal, payable
on demand, in each case until the principal thereof is paid or made
available for payment. Interest will be computed on the basis of a 360-day
year of twelve 30-day months. The Company and each Holder of a Security,
by the acceptance hereof, agree that in the event a Registration Default
shall occur and be continuing and the Company shall have failed to use its
reasonable best efforts to avoid or cure such Registration Default, Holders
shall be entitled to make a claim for damages incurred as a result of such
Registration Default, which damages shall not necessarily be limited to the
increase in the interest rate hereunder to 12% per annum; provided,
however, that any amount of interest paid pursuant to this provision shall
be credited against any amount of damages to be paid by the Company in
connection with such claim.
2. Method of Payment. Subject to the provisions of paragraph 8
hereof, the Company will pay interest, if any, on the Securities (except
defaulted interest and interest on defaulted principal) to the persons who
are registered Holders of Securities at the close of business on the Record
Date set forth on the face of this Security next preceding the applicable
Interest Payment Date. Defaulted interest and interest on defaulted
principal will be paid by the Company in accordance with the applicable
provisions of the Indenture. Holders must surrender Securities to a Paying
Agent to collect principal payments. The Company will pay principal and
interest, if any, at the office or agency of the Company maintained for
that purpose in the Borough of Manhattan, The City of New York and at any
other office or agency maintained by the Company for such purpose in money
of the United States that at the time of payment is legal tender for
payment of public and private debts; provided, however, that at the option
of the Company, payment of interest, if any, on the Securities may be by
check payable in such money and mailed to a Holder's registered address;
provided further, however, that payments on a certificated Security will be
made by wire transfer to a U.S. dollar account maintained by a Holder with
a bank in New York City if such Holder owns at least $250,000 in aggregate
principal amount of certificated Securities and elects payment by wire
transfer by giving written notice to the Company and the Trustee to such
effect designating such account no later than 10 days immediately preceding
the relevant due date for payment (or such other date as the Company and
the Trustee may accept in their discretion). If a payment date is a legal
holiday at a place of payment, payment may be made at that place on the
next succeeding Business Day, and no interest shall accrue for the
intervening period.
3. Registrar, Paying Agent and Tender Agent. Initially, the Trustee
will act as Registrar and Paying Agent. The Company may change any Paying
Agent or Registrar or co-registrar without prior notice to any
Securityholder. The Company may act in any such capacity, except in
certain circumstances.
4. Indenture. The Company issued the Securities under the Indenture.
The terms of the Securities include those stated in the Indenture and those
made applicable to the Indenture by the TIA. The Securities are subject to
all such terms, and Securityholders are referred to the Indenture and such
Act for a statement of such terms. Until converted to Common Stock as
described in paragraph 8 hereof and in the Indenture and subject to
paragraphs 6 and 9 hereof, the Securities are senior secured obligations of
the Company limited to $31,800,000 aggregate principal amount, except as
otherwise provided in the Indenture. Terms used in this Security and not
defined in this Security shall have the meaning set forth in Section 1 of
the Definitions Appendix attached as Appendix I to the Indenture, which
shall be a part of this Security as if fully set forth in this place. The
rules of construction for this Security are set forth in Section 2 of the
Definitions Appendix.
5. Redemption. This Security is not subject to redemption in whole
or in part at any time.
6. Security. The Securities are secured by second priority Liens on
certain Properties of the Company pursuant to the Mortgage and the other
Operative Documents described in the Indenture and such Liens are subject
to release as provided herein and in the Mortgage and the other Operative
Documents. Enforcement of the Lien of the Mortgage is limited to an
aggregate amount of Obligations not exceeding $24,300,000 and is further
restricted due to its second priority status, as more fully set forth in
the Mortgage, and each Holder, by accepting a Security, agrees to all the
provisions thereof.
7. Offers to Purchase. In the event that there shall occur a Change
in Control, the Company shall make an Offer to Purchase all of the
Outstanding Securities, at a purchase price equal to 101% of the aggregate
principal amount of the Securities Outstanding, plus accrued and unpaid
interest, if any, to and including the repurchase date. The right to
require such repurchase of Securities shall not continue after a discharge
of the Company from its obligations with respect to the Securities in
accordance with Article 8 of the Indenture. The Company shall commence
such Offer to Purchase within thirty (30) days after the occurrence of a
Change in Control.
In the event that there shall occur a Total Loss with respect to any
Aircraft, the Company shall (unless the Company is not required to make
such Offer to Purchase pursuant to the provisions of Section 4.12 of the
Indenture) make an Offer to Purchase an aggregate principal amount of
Outstanding Securities (the "Total Loss OTP Amount") equal to (for each
Aircraft subject to such Total Loss) (a) the aggregate principal amount of
the Securities Outstanding on the date such Offer to Purchase (if any) is
required to be commenced under the Indenture, minus (b) the product of (i)
$10,600,000 multiplied by (ii) the number of Aircraft remaining that were
not subject to such Total Loss, at a purchase price equal to 100% of the
aggregate principal amount of Securities to be purchased, plus accrued and
unpaid interest, if any, on such Securities, to and including the Payment
Date, and the Aircraft that was the subject of such Total Loss shall be
released from the Lien of the Operative Documents in accordance with the
provisions thereof. The Company shall commence such Offer to Purchase (if
any) within thirty (30) days after the Total Loss Date with respect to any
such Total Loss. The Company may receive credit against any or all of the
Total Loss OTP Amount for open market purchases of Securities as provided
in the Indenture.
"Offer to Purchase" means an offer to purchase all, or a portion, as
the case may be, of the Securities by the Company from the Holders
commenced by the mailing (by first class mail, postage prepaid) by the
Company (or, if requested by the Company on at least five Business Days'
prior notice to the Trustee and at the Company's expense, by the Trustee)
of a notice to each Holder (and, if mailed by the Company, to the Trustee)
at such Holder's address appearing in the Register, stating: (i) the
covenant pursuant to which the offer is being made and that all Securities
validly tendered will be accepted for payment, provided, that if Securities
in excess of the aggregate principal amount that the Company has offered to
purchase are tendered by the Holders, then Securities will be purchased
from the tendering Holders pro rata, based on the aggregate principal
amount of Securities tendered by each such Holder; (ii) the purchase price
and the date of purchase (which shall be a Business Day no earlier than 30
days nor later than 60 days from the date such notice is mailed) (the
"Payment Date"); (iii) that any Security not tendered will continue to
accrue interest (if any) pursuant to its terms; (iv) that, unless the
Company defaults in the payment of the purchase price on the Payment Date,
any Security accepted for payment pursuant to the Offer to Purchase shall
cease to accrue interest on and after the Payment Date; (v) that Holders
electing to have a Security purchased pursuant to the Offer to Purchase
will be required to surrender the Security, together with the form entitled
"Option of the Holder to Elect Purchase" attached to or on the reverse side
of the Security completed, to the Paying Agent at the address specified in
the notice at any time beginning with the date of such notice but prior to
the close of business on the Business Day immediately preceding the Payment
Date (or, if such day is a Legal Holiday, on the next subsequent day which
is not a Legal Holiday), and such Holder shall be entitled to receive from
the Paying Agent a non-transferable receipt of deposit evidencing such
deposit; (vi) that, unless the Company defaults in making the payment of
the purchase price or shall otherwise, in its sole discretion, consent
thereto, Holders will be entitled to withdraw their election only if the
Trustee receives, not later than the close of business on the fifth
Business Day immediately preceding the Payment Date, a telegram, facsimile
transmission or letter setting forth the name of such Holder, the principal
amount of Securities delivered for purchase and a statement that such
Holder is withdrawing his election to have such Securities purchased; and
(vii) that Holders whose Securities are being purchased only in part will
be promptly issued new Securities equal in principal amount to the
unpurchased portion of the Securities surrendered; provided that each
Security purchased and each new Security issued shall be in a principal
amount of $1,000 or integral multiples thereof. The Company shall place
such notice in the national edition of The New York Times or The Wall
Street Journal or, if such newspapers are not then in circulation, in a
financial newspaper of general circulation in New York City. No failure of
the Company to give the foregoing notice shall limit any Holder's right to
exercise a repurchase right. On the Payment Date, the Company shall (i)
accept for payment Securities or portions thereof tendered pursuant to an
Offer to Purchase, provided, that if Securities in excess of the aggregate
principal amount that the Company has offered to purchase are tendered by
the Holders, then Securities will be purchased from the tendering Holders
pro rata, based on the aggregate principal amount of Securities tendered by
each such Holder; (ii) deposit with the Trustee money sufficient to pay
the purchase price of all Securities or portions thereof so accepted; and
(iii) deliver, or cause to be delivered, to the Trustee all Securities or
portions thereof so accepted together with an Officers' Certificate
specifying the Securities or portions thereof accepted for payment by the
Company. The Trustee shall promptly mail to the Holders of Securities so
accepted payment in an amount equal to the purchase price, and the Trustee
shall promptly authenticate, and the Company shall promptly execute and
mail (or cause to be mailed) to such Holders a new Security equal in
principal amount to any unpurchased portion of the Securities surrendered;
provided that each Security purchased and each new Security issued shall be
in a principal amount of $1,000 or integral multiples thereof; provided
further that if the Payment Date is between a regular Record Date and the
next succeeding Interest Payment Date, Securities to be repurchased must be
accompanied by payment of an amount equal to the interest, if any, payable
on such succeeding Interest Payment Date on the principal amount to be
repurchased, and the interest, if any, on the principal amount of the
Security being repurchased, will be paid on such next succeeding Interest
Payment Date to the registered holder of such Security on the immediately
preceding Record Date. A Security repurchased on an Interest Payment Date
need not be accompanied by any such payment, and the interest, if any, on
the principal amount of the Security being repurchased, will be paid on
such Interest Payment Date to the registered holder of such Security on the
corresponding Record Date. The Company will publicly announce the results
of an Offer to Purchase as soon as practicable after the Payment Date. The
Trustee shall act as the Paying Agent for an Offer to Purchase. The
Company will comply with Rule 14e-l under the Exchange Act and any other
securities laws and regulations thereunder to the extent such laws and
regulations are applicable, in the event that the Company is required to
repurchase Securities pursuant to an Offer to Purchase. Both the notice of
the Company and the notice of the Holder having been given as specified
above, the Securities so to be repurchased shall, on the Payment Date
become due and payable at the purchase price applicable thereto and from
and after such date (unless the Company shall default in the payment of
such purchase price) such Securities shall cease to bear interest. If any
Security shall not be paid upon surrender thereof for repurchase, the
principal shall, until paid, bear interest from the Payment Date at the
rate and in accordance with the provisions set forth in this Security and
the Indenture. Any Security which is to be submitted for repurchase only
in part shall be delivered pursuant to the above provisions with (if the
Company or Trustee so requires) due endorsement by, or a written instrument
of transfer in form satisfactory to the Company and the Trustee duly
executed by, the Holder thereof or such Holder's attorney duly authorized
in writing.
8. Mandatory Conversion. Subject to the provisions of Article 13 of
the Indenture, on the Conversion Date, so long as no Default or Event of
Default shall then exist, this Security (if then Outstanding) shall be
automatically converted into that number of fully paid and non-assessable
shares of Common Stock equal to the sum of (i) the then outstanding
principal amount of this Security, plus (ii) accrued and unpaid interest,
if any, on this Security to the Conversion Date, divided by the lesser of
(A) 0.95 multiplied by the Average Market Price per share of Common Stock
or (B) $10 7/8 (such lesser amount being hereinafter referred to as the
"Conversion Price").
Any such conversion is subject to the procedures, restrictions and
adjustments to the Conversion Price as set forth in Article 13 of the
Indenture, and on or after the effectiveness of the conversion, the Liens
on the Collateral are subject to release as provided in the Indenture.
9. Possible Subordination. If, on the Business Day immediately succeeding
the Issue Date, the Holders (other than Lazard Freres & Co. LLC, as Holder of
the Compensation Notes, as defined in the Placement Agreement) do not include at
least one of the Owner Trustee, Seven Sixty Seven Leasing, Inc. or any member of
the Bank Group, then this Security shall automatically, without any further act
or deed, become an unsecured obligation of the Company and shall rank junior in
priority to all secured indebtedness of the Company and pari passu with all
unsecured indebtedness of the Company, in each case whether such indebtedness is
existing on the Issue Date or thereafter incurred, and the Trustee shall be
authorized to enter into or execute and deliver such agreements, instruments or
other documents as may be reasonably requested by (and at the cost and expense
of) the Company to evidence or confirm the release of Liens on the Collateral or
such subordination of the Securities.
10. Denominations, Transfer, Exchange. The Securities shall be
issuable only in registered form without coupons and in denominations of
$1,000 and integral multiples thereof. The transfer of Securities may be
registered and Securities may be exchanged as provided in the Indenture.
The Registrar may require a Holder, among other things, to furnish
appropriate endorsements and transfer documents and to pay any taxes
required by law or permitted by the Indenture.
11. Persons Deemed Owners. The Company, the Trustee and any agent of
the Company or the Trustee may treat the person in whose name the Security
is registered with the Registrar as the owner for all purposes.
12. Discharge. Subject to certain conditions set forth in Article 8
of the Indenture, the Company may terminate its obligations under the
Securities and the Indenture, except those obligations referred to in
Section 8.1(b) of the Indenture, if the Company deposits with the Trustee
or a Paying Agent cash or U.S. Government Obligations for the payment of
principal of, interest, if any, on the Securities to Stated Maturity.
13. Amendments and Waivers. Subject to certain exceptions, the
Indenture, the Securities, or the other Operative Documents may be amended
with the consent of the Holders of at least a majority in principal amount
of the then Outstanding Securities, and any existing Default, Event of
Default or acceleration may be waived with the consent of the Holders of a
majority in principal amount of the then Securities Outstanding. Without
the consent of any Holder, the Indenture, the Securities or any of the
Operative Documents may be amended to, among other things, cure any
ambiguity, defect or inconsistency.
14. Defaults and Remedies. Events of Default under the Indenture
include the following: default for the period specified in the Indenture in
payment of interest, if any, on the Securities; default in payment of the
principal amount of any Securities when the same becomes due and payable
(at maturity, upon acceleration, redemption, tender for repurchase or
otherwise); failure by the Company to comply with specific covenants of the
Indenture or of the Mortgage within the time periods provided therein,
discontinuing substantially all of its commercial airlines operations, or
failure to pay over amounts required under the Mortgage; failure to comply
in any material respect with any of its other agreements contained in the
Indenture, the other Operative Documents or the Securities; a
representation or warranty of the Company in the Indenture, the other
Operative Documents or any Mortgage Supplement or in any certificate of the
Company delivered under any such document proves to be untrue in any
material respect when made; the occurrence of certain defaults under any
Indebtedness of the Company or any of its Significant Subsidiaries in
excess of $10,000,000 in principal amount; the rendering or domestication
of final judgments by a court of competent jurisdiction against the Company
or any of its Significant Subsidiaries in an aggregate amount of
$10,000,000 or more which remain undischarged for a period (during which
execution is not stayed) of sixty (60) days after the date on which the
right to appeal has expired; cessation of effectiveness of Operative
Documents without the consent of the Trustee; and certain events of
bankruptcy, insolvency or reorganization. Subject to certain limitations
in the Indenture, if an Event of Default occurs and is continuing, the
Trustee or the Holders of twenty-five percent (25%) in principal amount of
the Securities Outstanding may declare all the Securities to be due and
payable immediately, except that in the case of an Event of Default arising
from certain events of bankruptcy or insolvency, all Securities Outstanding
become due and payable immediately without further action or notice.
Securityholders may not enforce the Indenture or the Securities except as
provided in the Indenture and the Mortgage. Enforcement of the Lien of the
Mortgage is limited to an aggregate amount of Obligations not exceeding
$24,300,000 and is further restricted due to its second priority status, as
more fully set forth in the Mortgage. The Trustee may require indemnity
satisfactory to it before it enforces the Indenture or the Securities.
Subject to certain limitations, Holders of a majority in principal amount
of the then Outstanding Securities may direct the Trustee in its exercise
of any trust or power. The Trustee may withhold from Securityholders
notice of any continuing default (except a default in payment of principal
or interest) if it determines that withholding notice is in their
interests. The Company must furnish compliance certificates to the
Trustee. The above description of Events of Default and remedies is
qualified by reference, and subject in its entirety to the more complete
description thereof contained in the Indenture and the other Operative
Documents.
15. Trustee Dealings with Company. The Trustee under the Indenture,
in its individual or any other capacity, may become the owner or pledgee of
Securities and may otherwise deal with and collect obligations owed to it
by the Company or Affiliates of the Company with the same rights it would
have if it were not Trustee.
16. No Recourse Against Others. A director, officer, employee or
stockholder, as such, of the Company shall not have any liability for any
obligations of the Company under the Securities or the Indenture or for any
claim based on, in respect of or by reason of such obligations or their
creation. Each Securityholder by accepting a Security waives and releases
all such liability. The waiver and release are part of the consideration
for the issue of the Securities.
17. Authentication. This Security shall not be valid until
authenticated by the manual signature of the Trustee or an authenticating
agent.
18. Unclaimed Money. If money for the payment of principal of, or
interest, if any, on, or the purchase price for the Securities remains
unclaimed for two (2) years, the Trustee or Paying Agent will pay the money
back to the Company at its request. After such payment, Holders entitled
to any portion of such money must look to the Company for payment unless an
applicable law designates another person.
19. Abbreviations. Customary abbreviations may be used in the name
of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN
ENT (= tenants by the entireties), JT TEN (= joint tenants with right of
survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A
(= Uniform Gifts to Minors Act).
20. CUSIP Numbers. The Company in issuing this Security may use a
"CUSIP" number (if then generally in use) and, if so, the Trustee shall use
"CUSIP" numbers in notices of redemption as a convenience to Holders;
provided, however, that any such notice may state that no representation is
made as to the correctness of such numbers either as printed on the
Securities or as contained in any notice of a redemption and that reliance
may be placed only on the other identification numbers printed on the
Securities, and any such redemption shall not be affected by any defect in
or omission of such numbers.
21. Holders' Compliance with Registration Rights Agreement. Each
Holder of a Security, by acceptance hereof, acknowledges and agrees to the
provisions of the Registration Rights Agreement, including, without
limitation, the obligations of the Holders with respect to a registration
and the indemnification of the Company to the extent provided therein.
22. Governing Law. THIS SECURITY SHALL BE GOVERNED BY THE LAWS OF
THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS.
The Company will furnish to any Holder of this Security, upon written
request and without charge, a copy of the Indenture. Request may be made
to: Trans World Airlines, Inc., One City Centre, 515 N. 6th Street, St.
Louis, Missouri 63101, Attention: Corporate Secretary.
ASSIGNMENT FORM
To assign this Security, fill
in the form below:
I or we assign and transfer
this Security to:
(Insert Assignee's Soc. Sec. or
Tax I.D. No.)
(Print or type assignee's name,
address and zip code)
and irrevocably appoint
______________ agent to
transfer this Security on the
books of the Company. The
agent may substitute another to
act for him.
Date:_________________________ Signature(s):________________________________
________________________________
(Sign exactly as your name(s) appear(s) on the
other side of this Security)
Signature(s) guaranteed by:
______________________________________________
(All signatures must be guaranteed by a member
of a national securities exchange or of the
National Association of Securities Dealers,
Inc. or by a commercial bank or trust company
located in the United States)
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security repurchased
by the Company pursuant to any Offer to Purchase under the
Indenture, check the box:
[ ]
If you want to elect to have only part of this Security
repurchased by the Company pursuant to any Offer to Purchase
under the Indenture, state the amount to be repurchased:
$ __________________________
(in an integral multiple of $1,000)
Date:_________________________ Signature(s):________________________________
______________________________________________
(Sign exactly as your name(s) appear(s) on the
other side of this Security)
Signature(s) guaranteed by:
______________________________________________
(All signatures must be guaranteed by a member
of a national securities exchange or of the
National Association of Securities Dealers,
Inc. or by a commercial bank or trust company
located in the United States)
CERTIFICATE OF TRANSFER
Re: Mandatory Conversion Equity Notes due 1999 (the "Notes") of Trans World
Airlines, Inc. (the "Company")
This Certificate relates to Notes held in definitive form by
___________ (the "Transferor").
The Transferor has requested the Registrar by written order to
exchange or register the transfer of a Note or Notes. In connection with such
request and in respect of each such Note, the Transferor does hereby certify
that the Transferor is familiar with the Indenture relating to the above
captioned Notes and that the transfer of this Note does not require registration
under the Securities Act of 1933 (the "Securities Act"), because:*
[ ] Such Note is being transferred to the Company.
[ ] Such Note is being transferred pursuant to an effective
Registration Statement under the Securities Act.
[ ] Such Note is being transferred to a qualified institutional
buyer (as defined in Rule 144A under the Securities Act) in reliance on
Rule 144A.
[ ] Such Note is being transferred pursuant to an offshore
transaction in accordance with Rule 904 under the Securities Act.
[ ] Such Note is being transferred to an Institutional "Accredited
Investor" within the meaning of Subparagraph (a)(1), (2), (3) or (7) of Rule 501
under the Securities Act.
[ ] Such Note is being transferred in a transaction meeting the
requirements of Rule 144 under the Securities Act.
The Registrar and the Company are entitled to rely upon this
Certificate and are irrevocably authorized to produce this Certificate or a copy
hereof to any interested party in any administrative or legal proceedings or
official inquiry with respect to the matters covered hereby.
___________________________________________
[INSERT NAME OF TRANSFEROR]
By:________________________________________
Date:____________________________
_________________________________
* Please check applicable box.
/dpw/cw/005/20263/012/S4/EDGAR/ex5.ed
Exhibit 5
[Letterhead of Davis Polk & Wardwell]
May 1, 1998
Trans World Airlines, Inc.
One City Centre, 515 N. Sixth Street
St. Louis, Missouri 63101
Ladies and Gentlemen:
We have acted as special counsel to Trans World Airlines, Inc.
(the "Company") in connection with the Company's offer (the "Exchange Offer")
to exchange its 11 3/8% Senior Notes due 2006 (the "Exchange Notes") for any
and all of its outstanding 11 3/8% Senior Notes due 2006 (the "Old Notes").
We have examined originals or copies, certified or otherwise
identified to our satisfaction, of such documents, corporate records,
certificates of public officials and other instruments as we have deemed
necessary or advisable for the purpose of rendering this opinion.
Upon the basis of the foregoing and, assuming the due execution
and delivery of the Exchange Notes, we are of the opinion that the Exchange
Notes, when executed, authenticated and delivered in exchange for the Old
Notes in accordance with the Exchange Offer, will be valid and binding
obligations of the Company enforceable in accordance with their terms, subject
to applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance and similar laws affecting creditors' rights generally and
equitable principles.
We are members of the Bar of the State of New York and the
foregoing opinion is limited to the laws of the State of New York, the federal
laws of the United States of America and the General Corporation Law of the
State of Delaware.
We hereby consent to the filing of this opinion as an exhibit
to the Registration Statement relating to the Exchange Offer. We also consent
to the reference to us under the caption "Legal Matters" in the Prospectus
contained in such Registration Statement.
This opinion is rendered solely to you in connection with the
above matter. This opinion may not be relied upon by you for any other
purpose or relied upon by or furnished to any other person without written
consent.
Very truly yours,
/s/ DAVIS POLK & WARDWELL
---------------------------
Exhibit 23.1
AUDITORS' CONSENT
-----------------
The Board of Directors
Trans World Airlines, Inc.
We consent to the use of our report included herein and incorporated by
reference and to the reference to our firm under the hearing "Experts" in the
prospectus. Our report, dated March 4, 1998 refers to the application of fresh
start reporting as of September 1, 1995.
KPMG Peat Marwick LLP
Kansas City, Missouri
April 30, 1998
EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, John W. Bachmann, a Director of
TRANS WORLD AIRLINES, INC. (the "Company"), a Delaware corporation, do
constitute and appoint Gerald L. Gitner, Michael J. Palumbo and Kathleen A.
Soled, jointly and severally, my true and lawful attorneys-in-fact, with full
power of substitution and resubstitution for me in my name, place and stead, in
any and all capacities, to sign, pursuant to the requirements of the Securities
Act of 1933, the Registration Statement on Form S-4 for TRANS WORLD AIRLINES,
INC. in connection with the Company's registration of its Exchange Notes
issuable in exchange for the Company's 11-3/8% Senior Notes due 2006, and to
file the same with the Securities and Exchange Commission, together with all
exhibits thereto and other documents in connection therewith, and to sign on my
behalf and in my stead, in any and all capacities, any amendments (including
post-effective amendments) and supplements to said Registration Statement,
incorporating such changes as any of the said attorneys-in-fact deems
appropriate, in the matter of the proposed offering by the Company of the
securities registered pursuant to said Registration Statement, hereby ratifying
and confirming all that each of said attorneys-in-fact, or his substitute or
substitutes, may do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this 28 day of
April, 1998.
/s/ John W. Bachmann
--------------------------------
John W. Bachmann
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, William F. Compton, a
Director of TRANS WORLD AIRLINES, INC. (the "Company"), a Delaware
corporation, do constitute and appoint Gerald L. Gitner, Michael J.
Palumbo and Kathleen A. Soled, jointly and severally, my true and lawful
attorneys-in-fact, with full power of substitution and resubstitution for
me in my name, place and stead, in any and all capacities, to sign,
pursuant to the requirements of the Securities Act of 1933, the
Registration Statement on Form S-4 for TRANS WORLD AIRLINES, INC. in
connection with the Company's registration of its Exchange Notes issuable
in exchange for the Company's 11-3/8% Senior Notes due 2006, and to file
the same with the Securities and Exchange Commission, together with all
exhibits thereto and other documents in connection therewith, and to sign
on my behalf and in my stead, in any and all capacities, any amendments
(including post-effective amendments) and supplements to said Registration
Statement, incorporating such changes as any of the said attorneys-in-fact
deems appropriate, in the matter of the proposed offering by the Company of
the securities registered pursuant to said Registration Statement, hereby
ratifying and confirming all that each of said attorneys-in-fact, or his
substitute or substitutes, may do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this 28 day
of April, 1998.
/s/ William F. Compton
--------------------------------
William F. Compton
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, Eugene P. Conese, a Director
of TRANS WORLD AIRLINES, INC. (the "Company"), a Delaware corporation, do
constitute and appoint Gerald L. Gitner, Michael J. Palumbo and Kathleen
A. Soled, jointly and severally, my true and lawful attorneys-in-fact,
with full power of substitution and resubstitution for me in my name, place
and stead, in any and all capacities, to sign, pursuant to the requirements
of the Securities Act of 1933, the Registration Statement on Form S-4 for
TRANS WORLD AIRLINES, INC. in connection with the Company's registration of
its Exchange Notes issuable in exchange for the Company's 11-3/8% Senior
Notes due 2006, and to file the same with the Securities and Exchange
Commission, together with all exhibits thereto and other documents in
connection therewith, and to sign on my behalf and in my stead, in any and
all capacities, any amendments (including post-effective amendments) and
supplements to said Registration Statement, incorporating such changes as
any of the said attorneys-in-fact deems appropriate, in the matter of the
proposed offering by the Company of the securities registered pursuant to
said Registration Statement, hereby ratifying and confirming all that each
of said attorneys-in-fact, or his substitute or substitutes, may do or
cause to be done by virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this 29 day of
April, 1998.
/s/ Eugene P. Conese
--------------------------------
Eugene P. Conese
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, William M. Hoffman, a
Director of TRANS WORLD AIRLINES, INC. (the "Company"), a Delaware
corporation, do constitute and appoint Gerald L. Gitner, Michael J.
Palumbo and Kathleen A. Soled, jointly and severally, my true and lawful
attorneys-in-fact, with full power of substitution and resubstitution for
me in my name, place and stead, in any and all capacities, to sign,
pursuant to the requirements of the Securities Act of 1933, the
Registration Statement on Form S-4 for TRANS WORLD AIRLINES, INC. in
connection with the Company's registration of its Exchange Notes issuable
in exchange for the Company's 11-3/8% Senior Notes due 2006, and to file
the same with the Securities and Exchange Commission, together with all
exhibits thereto and other documents in connection therewith, and to sign
on my behalf and in my stead, in any and all capacities, any amendments
(including post-effective amendments) and supplements to said Registration
Statement, incorporating such changes as any of the said attorneys-in-fact
deems appropriate, in the matter of the proposed offering by the Company of
the securities registered pursuant to said Registration Statement, hereby
ratifying and confirming all that each of said attorneys-in-fact, or his
substitute or substitutes, may do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this 29th day of
April, 1998.
/s/ William M. Hoffman
--------------------------------
William M. Hoffman
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, Edgar M. House, a Director of
TRANS WORLD AIRLINES, INC. (the "Company"), a Delaware corporation, do
constitute and appoint Gerald L. Gitner, Michael J. Palumbo and Kathleen
A. Soled, jointly and severally, my true and lawful attorneys-in-fact,
with full power of substitution and resubstitution for me in my name, place
and stead, in any and all capacities, to sign, pursuant to the requirements
of the Securities Act of 1933, the Registration Statement on Form S-4 for
TRANS WORLD AIRLINES, INC. in connection with the Company's registration of
its Exchange Notes issuable in exchange for the Company's 11-3/8% Senior
Notes due 2006, and to file the same with the Securities and Exchange
Commission, together with all exhibits thereto and other documents in
connection therewith, and to sign on my behalf and in my stead, in any and
all capacities, any amendments (including post-effective amendments) and
supplements to said Registration Statement, incorporating such changes as
any of the said attorneys-in-fact deems appropriate, in the matter of the
proposed offering by the Company of the securities registered pursuant to
said Registration Statement, hereby ratifying and confirming all that each
of said attorneys-in-fact, or his substitute or substitutes, may do or
cause to be done by virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this 28 day
of April, 1998.
/s/ Edgar M. House
--------------------------------
Edgar M. House
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, Thomas H. Jacobsen, a
Director of TRANS WORLD AIRLINES, INC. (the "Company"), a Delaware
corporation, do constitute and appoint Gerald L. Gitner, Michael J.
Palumbo and Kathleen A. Soled, jointly and severally, my true and lawful
attorneys-in-fact, with full power of substitution and resubstitution for
me in my name, place and stead, in any and all capacities, to sign,
pursuant to the requirements of the Securities Act of 1933, the
Registration Statement on Form S-4 for TRANS WORLD AIRLINES, INC. in
connection with the Company's registration of its Exchange Notes issuable
in exchange for the Company's 11-3/8% Senior Notes due 2006, and to file
the same with the Securities and Exchange Commission, together with all
exhibits thereto and other documents in connection therewith, and to sign
on my behalf and in my stead, in any and all capacities, any amendments
(including post-effective amendments) and supplements to said Registration
Statement, incorporating such changes as any of the said attorneys-in-fact
deems appropriate, in the matter of the proposed offering by the Company of
the securities registered pursuant to said Registration Statement, hereby
ratifying and confirming all that each of said attorneys-in-fact, or his
substitute or substitutes, may do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this 27th day
of April, 1998.
/s/ Thomas H. Jacobsen
--------------------------------
Thomas H. Jacobsen
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, Myron Kaplan, a Director of
TRANS WORLD AIRLINES, INC. (the "Company"), a Delaware corporation, do
constitute and appoint Gerald L. Gitner, Michael J. Palumbo and Kathleen
A. Soled, jointly and severally, my true and lawful attorneys-in-fact,
with full power of substitution and resubstitution for me in my name, place
and stead, in any and all capacities, to sign, pursuant to the requirements
of the Securities Act of 1933, the Registration Statement on Form S-4 for
TRANS WORLD AIRLINES, INC. in connection with the Company's registration of
its Exchange Notes issuable in exchange for the Company's 11-3/8% Senior
Notes due 2006, and to file the same with the Securities and Exchange
Commission, together with all exhibits thereto and other documents in
connection therewith, and to sign on my behalf and in my stead, in any and
all capacities, any amendments (including post-effective amendments) and
supplements to said Registration Statement, incorporating such changes as
any of the said attorneys-in-fact deems appropriate, in the matter of the
proposed offering by the Company of the securities registered pursuant to
said Registration Statement, hereby ratifying and confirming all that each
of said attorneys-in-fact, or his substitute or substitutes, may do or
cause to be done by virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this 28th day
of April, 1998.
/s/ Myron Kaplan
--------------------------------
Myron Kaplan
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, David M. Kennedy, a Director
of TRANS WORLD AIRLINES, INC. (the "Company"), a Delaware corporation, do
constitute and appoint Gerald L. Gitner, Michael J. Palumbo and Kathleen
A. Soled, jointly and severally, my true and lawful attorneys-in-fact,
with full power of substitution and resubstitution for me in my name, place
and stead, in any and all capacities, to sign, pursuant to the requirements
of the Securities Act of 1933, the Registration Statement on Form S-4 for
TRANS WORLD AIRLINES, INC. in connection with the Company's registration of
its Exchange Notes issuable in exchange for the Company's 11-3/8% Senior
Notes due 2006, and to file the same with the Securities and Exchange
Commission, together with all exhibits thereto and other documents in
connection therewith, and to sign on my behalf and in my stead, in any and
all capacities, any amendments (including post-effective amendments) and
supplements to said Registration Statement, incorporating such changes as
any of the said attorneys-in-fact deems appropriate, in the matter of the
proposed offering by the Company of the securities registered pursuant to
said Registration Statement, hereby ratifying and confirming all that each
of said attorneys-in-fact, or his substitute or substitutes, may do or
cause to be done by virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this 27th day
of April, 1998.
/s/ David M. Kennedy
--------------------------------
David M. Kennedy
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, General Merrill A. McPeak, a
Director of TRANS WORLD AIRLINES, INC. (the "Company"), a Delaware
corporation, do constitute and appoint Gerald L. Gitner, Michael J.
Palumbo and Kathleen A. Soled, jointly and severally, my true and lawful
attorneys-in-fact, with full power of substitution and resubstitution for
me in my name, place and stead, in any and all capacities, to sign,
pursuant to the requirements of the Securities Act of 1933, the
Registration Statement on Form S-4 for TRANS WORLD AIRLINES, INC. in
connection with the Company's registration of its Exchange Notes issuable
in exchange for the Company's 11-3/8% Senior Notes due 2006, and to file
the same with the Securities and Exchange Commission, together with all
exhibits thereto and other documents in connection therewith, and to sign
on my behalf and in my stead, in any and all capacities, any amendments
(including post-effective amendments) and supplements to said Registration
Statement, incorporating such changes as any of the said attorneys-in-fact
deems appropriate, in the matter of the proposed offering by the Company of
the securities registered pursuant to said Registration Statement, hereby
ratifying and confirming all that each of said attorneys-in-fact, or his
substitute or substitutes, may do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this 30 day
of April, 1998.
/s/ General Merrill A. McPeak
--------------------------------
General Merrill A. McPeak
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, Thomas F. Meagher, a Director
of TRANS WORLD AIRLINES, INC. (the "Company"), a Delaware corporation, do
constitute and appoint Gerald L. Gitner, Michael J. Palumbo and Kathleen
A. Soled, jointly and severally, my true and lawful attorneys-in-fact,
with full power of substitution and resubstitution for me in my name, place
and stead, in any and all capacities, to sign, pursuant to the requirements
of the Securities Act of 1933, the Registration Statement on Form S-4 for
TRANS WORLD AIRLINES, INC. in connection with the Company's registration of
its Exchange Notes issuable in exchange for the Company's 11-3/8% Senior
Notes due 2006, and to file the same with the Securities and Exchange
Commission, together with all exhibits thereto and other documents in
connection therewith, and to sign on my behalf and in my stead, in any and
all capacities, any amendments (including post-effective amendments) and
supplements to said Registration Statement, incorporating such changes as
any of the said attorneys-in-fact deems appropriate, in the matter of the
proposed offering by the Company of the securities registered pursuant to
said Registration Statement, hereby ratifying and confirming all that each
of said attorneys-in-fact, or his substitute or substitutes, may do or
cause to be done by virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this 28 day
of April, 1998.
/s/ Thomas F. Meagher
--------------------------------
Thomas F. Meagher
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, G. Joseph Reddington, a
Director of TRANS WORLD AIRLINES, INC. (the "Company"), a Delaware
corporation, do constitute and appoint Gerald L. Gitner, Michael J.
Palumbo and Kathleen A. Soled, jointly and severally, my true and lawful
attorneys-in-fact, with full power of substitution and resubstitution for
me in my name, place and stead, in any and all capacities, to sign,
pursuant to the requirements of the Securities Act of 1933, the
Registration Statement on Form S-4 for TRANS WORLD AIRLINES, INC. in
connection with the Company's registration of its Exchange Notes issuable
in exchange for the Company's 11-3/8% Senior Notes due 2006, and to file
the same with the Securities and Exchange Commission, together with all
exhibits thereto and other documents in connection therewith, and to sign
on my behalf and in my stead, in any and all capacities, any amendments
(including post-effective amendments) and supplements to said Registration
Statement, incorporating such changes as any of the said attorneys-in-fact
deems appropriate, in the matter of the proposed offering by the Company of
the securities registered pursuant to said Registration Statement, hereby
ratifying and confirming all that each of said attorneys-in-fact, or his
substitute or substitutes, may do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this 29th day
of April, 1998.
/s/ G. Joseph Reddington
--------------------------------
G. Joseph Reddington
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, Blanche M. Touhill, a
Director of TRANS WORLD AIRLINES, INC. (the "Company"), a Delaware
corporation, do constitute and appoint Gerald L. Gitner, Michael J.
Palumbo and Kathleen A. Soled, jointly and severally, my true and lawful
attorneys-in-fact, with full power of substitution and resubstitution for
me in my name, place and stead, in any and all capacities, to sign,
pursuant to the requirements of the Securities Act of 1933, the
Registration Statement on Form S-4 for TRANS WORLD AIRLINES, INC. in
connection with the Company's registration of its Exchange Notes issuable
in exchange for the Company's 11-3/8% Senior Notes due 2006, and to file
the same with the Securities and Exchange Commission, together with all
exhibits thereto and other documents in connection therewith, and to sign
on my behalf and in my stead, in any and all capacities, any amendments
(including post-effective amendments) and supplements to said Registration
Statement, incorporating such changes as any of the said attorneys-in-fact
deems appropriate, in the matter of the proposed offering by the Company of
the securities registered pursuant to said Registration Statement, hereby
ratifying and confirming all that each of said attorneys-in-fact, or his
substitute or substitutes, may do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this 27 day
of April, 1998.
/s/ Blanche M. Touhill
--------------------------------
Blanche M. Touhill
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, Stephen M. Tumblin, a
Director of TRANS WORLD AIRLINES, INC. (the "Company"), a Delaware
corporation, do constitute and appoint Gerald L. Gitner, Michael J.
Palumbo and Kathleen A. Soled, jointly and severally, my true and lawful
attorneys-in-fact, with full power of substitution and resubstitution for
me in my name, place and stead, in any and all capacities, to sign,
pursuant to the requirements of the Securities Act of 1933, the
Registration Statement on Form S-4 for TRANS WORLD AIRLINES, INC. in
connection with the Company's registration of its Exchange Notes issuable
in exchange for the Company's 11-3/8% Senior Notes due 2006, and to file
the same with the Securities and Exchange Commission, together with all
exhibits thereto and other documents in connection therewith, and to sign
on my behalf and in my stead, in any and all capacities, any amendments
(including post-effective amendments) and supplements to said Registration
Statement, incorporating such changes as any of the said attorneys-in-fact
deems appropriate, in the matter of the proposed offering by the Company of
the securities registered pursuant to said Registration Statement, hereby
ratifying and confirming all that each of said attorneys-in-fact, or his
substitute or substitutes, may do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this 25th day
of April, 1998.
/s/ Stephen M. Tumblin
--------------------------------
Stephen M. Tumblin
Exhibit 25
FORM T-1
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
STATEMENT OF ELIGIBILITY UNDER THE
TRUST INDENTURE ACT OF 1939
OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
--------------
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF
A TRUSTEE PURSUANT TO SECTION 305(b)(2)
FIRST SECURITY BANK,
NATIONAL ASSOCIATION
(Exact name of trustee as specified in its charter)
NOT APPLICABLE 87-0131890
(Jurisdiction of Incorporation (I.R.S. Employer
if not a U.S. national bank) identification No.)
79 SOUTH MAIN STREET
SALT LAKE CITY, UTAH 84111
(Address of principal executive offices) (Zip Code)
NOT APPLICABLE
(Name, address and telephone number of agent for service)
TRAN WORLD AIRLINES, INC.
(Exact name of obligor as specified in its charter)
DELAWARE 43-1145889
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
One City Centre, 515 N. Sixth Street
St. Louis, Missouri 63101
(Address or principal executive offices) (Zip Code)
TRANS WORLD AIRLINES, INC.
OFFER TO EXCHANGE 11 3/8% SENIOR NOTES DUE 2006 WHICH HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, FOR ANY
AND ALL OUTSTANDING 11 3/8% SENIOR NOTES 2006
Item 1. General Information. Furnish the following information as to the
trustee:
(a) Name and address of each examining or supervising authority
to which it is subject.
Comptroller of the Currency, Washington, D.C. 20230; Federal
Reserve Bank of San Francisco, San Francisco, CA 94120; Federal
Deposit Insurance Corporation, Washington, D.C. 20429.
(b) Whether it is authorized to exercise corporate trust powers.
The Trustee is authorized to exercise corporate trust powers.
Item 2. Affiliations With The Obligor. If the obligor is an
affiliate of the trustee, describe each such affiliation.
Neither the obligor nor any underwriter for the obligor is an affiliate
of the Trustee.
Item 16. List of Exhibits. List below all exhibits filed as
part of this statement of eligibility and qualification.
Exhibit 1: copy of the articles of association as now in effect
Exhibit 2: certificate of authority to commence business including a
certificate of the Comptroller of the Currency evidencing
the change of the Trustee's name
Exhibit 3: copy of the authorization of the trustee to exercise
corporate trust powers
Exhibit 4: copy of the bylaws of the trustee
Exhibit 5: Not applicable
Exhibit 6: Not applicable
Exhibit 7: A copy of the latest report published pursuant to law or its
supervising or examining authority
Exhibit 8: Not applicable
Exhibit 9: Not applicable
Signature
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, First Security Bank, National Association, a national
banking association organized and existing under the laws of the United
States, has duly caused this statement of eligibility and qualification to be
signed on its behalf by the undersigned thereunder duly authorized, all in the
City of Salt Lake City, and State of Utah, on the 30(th) day of April, 1998.
FIRST SECURITY BANK,
NATIONAL ASSOCIATION, Trustee
By: /s/ Nancy M. Dahl
--------------------------------
Nancy M. Dahl
Vice President
EXHIBIT 1
ARTICLES OF ASSOCIATION
OF
FIRST SECURITY BANK
NATIONAL ASSOCIATION
(As Amended)
FIRST. The title of this Association, which shall carry on the business
of banking under the laws of the United States, shall be "First Security Bank,
National Association."
SECOND. The place where the main banking house or office of this
Association shall be located shall be Ogden, County of Weber, State of Utah.
Its general business and its operations of discount and deposit shall also be
carried on in said city, and the branch or branches established or maintained
by it in accordance with the provisions of Section 36 of Title 12, United
States Code. The Board of Directors shall the power to change the location of
the main office of this Association (i) to any other authorized branch
location within the limits of Ogden, Utah, without the approval of the
shareholders of this Association and upon notice to the Comptroller of the
Currency or, (ii) to any other place within Ogden, Utah, or within thirty (30)
miles of Ogden, Utah, with the approval of the shareholders and the
Comptroller of the Currency. The Board of Directors shall have the power to
change the location of any branch or branches of this Association to any other
location, without the approval of the shareholders of this Association but
subject to the approval of the Comptroller of the Currency.
THIRD. The Board of Directors of the consolidated association shall
consist of not less than five (5) nor more than twenty-five (25) of its
shareholders.
FOURTH. There shall be an annual meeting of the shareholders the purpose
of which shall be the election of Directors and the transaction of whatever
other business may be brought before said meeting. It shall be held at the
main office of the Bank or other convenient place as the Board of Directors
may designate, on the third Monday of March of each year, but if no election
is held on that day, it may be held on any subsequent day according to such
lawful rules as may be prescribed by the Board of Directors. Nominations for
election to the Board of Directors may be made by the Board of Directors or by
any stockholder of any outstanding class of capital stock of the Bank entitled
to vote for election of directors. Nominations, other than those made by or
on behalf of the existing management of the Bank, shall be made in writing and
shall be delivered or mailed to the President of the Bank and to the
Comptroller of the Currency, Washington, D.C., not less than 14 days nor more
than 50 days prior to any meeting of stockholders called for the election of
directors, provided, however, that if less than 21 days notice of the meeting
is given to shareholders, such nomination shall be mailed or delivered to the
President of the Bank and to the Comptroller of the Currency not later than
the close of business on the seventh day following the day on which the notice
of meeting was mailed. Such notification shall contain the following
information to the extent known to the notifying shareholder: (a) the name
and address of each proposed nominee; (b) the principal occupation of each
proposed nominee; (c) the total number of shares of capital stock of the Bank
that will be voted for each proposed nominee; (d) the name and residence
address of the notifying shareholder; and (e) the number of shares of capital
stock of the Bank owned by the notifying shareholder. Nominations not made in
accordance herewith may, in his discretion, be disregarded by the Chairman of
the meeting, and upon his instructions, the voting inspectors may disregard
all votes cast for each such nominee.
FIFTH. The authorized amount of capital stock of this Association shall
be One Hundred Million Dollars ($100,000,000.00), divided into 4,000,000
shares of common stock of the par value of Twenty-five Dollars ($25.00) each;
provided, however, that said capital stock may be increased or decreased from
time to time, in accordance with the provision of the laws of the United
States. The shareholders of this Association shall not have any pre-
emptive rights to acquire unissued shares of this Association.
SIXTH. (1) The Board of Directors shall appoint one of its members
President of this Association. It may also appoint a Chairman of the Board,
and one or more Vice Chairman. The Board of Directors shall have the power to
appoint one or more Vice Presidents, at least one of whom shall also be a
member of the Board of Directors, and who shall be authorized, in the absence
of the President, to perform all acts and duties pertaining to the office of
the President; to appoint a Cashier and such other officers and employees as
may be required to transact the business of this Association; to fix the
salaries to be paid to such officers or employees and appoint others to take
their place.
(2) The Board of Directors shall have the power to define the duties
of officers and employees of this Association and to require adequate bonds
from them for the faithful performance of their duties; to make all By-Laws
that may be lawful for the general regulation of the business of this
Association and the management of its affairs, and generally to do and perform
all acts that may be lawful for a Board of Directors to do and perform.
(3) Each 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, administrative or investigative (other than an action by or in
the right of the Association) by reason of the fact that he is or was a
director, officer, employee or agent of the Association or is or was serving
at the request of the Association as a director, officer, employee, fiduciary
or agent of another corporation, partnership, joint venture, trust, estate or
other enterprise or was acting in furtherance of the Association's business
shall be indemnified against expenses (including attorney's fees), judgments,
fines and amounts paid in settlement actually and reasonably incurred by him
in connection with such action, suit or proceeding if he acted in good faith
and in a manner he reasonably believed to be in or not opposed to the best
interests of the Association; provided, however, no indemnification shall be
given to a person adjudged guilty of, or liable for, willful misconduct, gross
neglect of duty, or criminal acts or where there is a final order assessing
civil money penalties or requiring affirmative action by such person in the
form of payments to the Association. The termination of any action, suit or
proceeding by judgment, order, settlement, or its equivalent, shall not of
itself, create a presumption that the person did not act in good faith and in
a manner which he reasonably believed to be in or not opposed to the best
interests of the Association.
(4) Each person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action or suit by or in the
right of the Association (such action or suit being known as a "derivative
proceeding") to procure a judgment in its favor by reason of the fact that he
is or was a director, officer, employee or agent of the Association or is or
was serving at the request of the Association as a director, officer,
employee, fiduciary or agent of another corporation, partnership, joint
venture, trust, estate or other enterprise shall be indemnified against
expenses (including attorney's fees) actually and reasonably incurred by him
in connection with the defense or settlement of such action or suit if he
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Association; provided, however, that no
indemnification shall be given where there is a final order assessing civil
money penalties or requiring affirmative action by such person in the form of
payments to the Association; and provided further that no indemnification
shall be made in respect of any claim, issue or matter as to which such person
shall have been adjudged to be liable for negligence or misconduct in the
performance of his duty to the Association, 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
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which such court shall deem proper.
(5) To the extent that a director, officer, employee or agent of a
corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in (3) or (4) of this Article or in
defense of any claim, issue or matter therein, he shall be indemnified against
expenses (including attorney's fees) actually and reasonably incurred by him
in connection therewith.
(6) Any indemnification under (3) or (4) of this Article (unless
ordered by a court) shall be made by the Association only as authorized in the
specific case upon a reasonable determination that indemnification of the
director, officer, employee or agent is proper in the circumstances because he
has met the applicable standard of conduct set forth in (3) or (4) of this
Article. Such determination shall be made (a) by the Board of Directors by
a majority vote of a quorum consisting of directors who were not parties to
such action, suit or proceeding, or (b) if such a quorum is not obtainable,
or, even if obtainable a quorum of disinterested directors so directs, by
independent legal counsel in written opinion, or (c) by the stockholders.
(7) Expenses incurred in defending a civil or criminal action, suit
or proceeding may be paid by the Association in advance of the final
disposition of such action, suit or proceeding as authorized in the manner
provided in (6) of this Article (i) if the Board of Directors determines, in
writing, that (1) the director, officer, employee or agent has a substantial
likelihood or prevailing on the merits; (2) in the event the director,
officer, employee or agent does not prevail, he or she will have the financial
capability or reimburse the Association; and (3) payment of expenses by the
Association will not adversely affect its safety and soundness; and (ii) upon
receipt of an undertaking by or on behalf of the director, officer, employee
or agent to repay such amount unless it shall ultimately be determined that he
is entitled to be indemnified by the Association as authorized in this Article.
(8) The indemnification provided by this Article shall not be deemed
exclusive of any other rights to which those indemnified may be entitled under
any By-
Law, agreement, vote of shareholders or disinterested directors or otherwise,
both as to action in his official capacity and as to action in another
capacity while holding such office and shall 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, successors in interest, and administrators of
such a person.
SEVENTH. This Association shall have succession from the date of its
organization certificate until such time as it be dissolved by the act of its
shareholders in accordance with the provisions of the banking laws of the
United States, or until its franchise becomes forfeited by reason of violation
of law, or until terminated by either a general or a special act of Congress,
or until its affairs be placed in the hands of a receiver and finally wound
up by him.
EIGHTH. The Board of Directors of this Association, or any three or more
shareholders owning, in the aggregate, not less than ten per centum of the
stock of this Association, may call a special meeting of shareholders at any
time: Provided, however, that unless otherwise provided by law, not less than
ten days prior to the date fixed for any such meeting, a notice of the time,
place and purpose of the meeting shall be given by first-class mail, postage
prepaid, to all shareholders of record of this Association. These Articles of
Association may be amended at any regular or special meeting of the
Shareholders by the affirmative vote of the shareholders owning at least a
majority of the stock of this Association, subject to the provisions of the
banking laws of the United States. The notice of any shareholders' meeting,
at which an amendment to the Articles of Association of this Association is to
be considered shall be given as hereinabove set forth.
EXHIBIT 2
CERTIFICATE
TREASURY DEPARTMENT )
Office of ) ss:
Comptroller of the Currency )
I, Thomas G. DeShazo, Deputy Comptroller of the Currency, do hereby certify
that:
Pursuant to Revised Statutes 324, et seq., as amended, 12 U.S.C. 1, et seq.,
the Comptroller of the Currency charters and exercises regulatory and
supervisory authority over all national banking associations;
On December 9, 1881, The First National Bank of Ogden, Ogden, Utah was
chartered as a National Banking Association under the laws of the United
States and under Charter No. 2597;
The document hereto attached is a true and complete copy of the Comptroller
Certificate issued to The First National Bank of Ogden, Ogden, Utah, the
original of which certificate was issued by this Office on December 9, 1881;
On October 2, 1922, in connection with a consolidation of The First Bank of
Ogden, Ogden, Utah, and The Utah National Bank of Ogden, Ogden, Utah, the
title was charged to "The First & Utah National Bank of Ogden"; on January 18,
1923, The First & Utah National Bank of Ogden changed its title to "First Utah
National Bank of Ogden"; on January 19, 1926, the title was changed to "First
National Bank of Ogden"; and on February 24, 1934, the title was changed to
"First Security Bank of Utah, National Association"; and
First Security Bank of Utah, National Association, Ogden, Utah, continues to
hold a valid certificate to do business as a National Banking Association.
IN TESTIMONY WHEREOF, I have hereunto
subscribed my name and caused the seal of
Office of the Comptroller of the Currency
to be affixed to these presents at the
Treasury Department, in the City of
Washington and District of Columbia, this
fourth day of April, A.D. 1972.
Thomas G. DeShazo
----------------------------------------
Deputy Comptroller of the Currency
TREASURY DEPARTMENT
Comptroller of the Currency,
Washington, December 9th, 1881
WHEREAS, by satisfactory evidence presented to the undersigned it has been made
to appear that "The First National Bank of Ogden" in Ogden City in the County of
Weber, and Territory of Utah has complied with all the provisions of the Revised
Statutes of the United States, required to be complied with before an
association shall be authorized to commence the business of Banking.
Now, therefore, I, John Jay Knox, Comptroller of the Currency, do hereby certify
that "The First National Bank of Ogden" in Ogden City in the County of Weber,
and Territory of Utah is authorized to commence the business of Banking, as
provided in Section Fifty-one hundred and sixty-nine of the Revised Statutes of
the United States.
In testimony whereof, witness my hand and
seal of office this 9th day of December,
1881.
John Jay Knox
-----------------------------------------
Comptroller of the Currency
EXHIBIT 3
FEDERAL RESERVE BOARD
WASHINGTON, D.C.
I, S.R. Carpenter, Assistant Secretary of the Federal Reserve Board, do
hereby certify that it appears from the records of the Federal Reserve Board
that:
(1) Pursuant to authority vested in the Federal Reserve Board by an Act
of Congress approved December 23, 1913, known as the Federal Reserve Act, as
amended, the Federal Reserve Board has heretofore granted to the First National
Bank of Ogden, Ogden, Utah, the right to act when not in contravention of State
or local law, as trustee, executor, administrator, registrar of stocks and
bonds, guardian of estates, assignee, receiver, committee of estates of
lunatics, or in any other fiduciary capacity in which State banks, trust
companies or other corporations which come into competition with national banks
are permitted to act under the laws of the State of Utah;
(2) On February 24, 1934, the First National Bank of Ogden, Ogden,
Utah, changed its title to First Security Bank of Utah, National Association,
under the provisions of an Act of Congress approved May 1, 1886, whereby all
of the rights, liabilities and powers of such national bank under its old name
devolved upon and inured to the bank under its new name; and
(3) Pursuant to the permission heretofore granted by the Federal Reserve
Board to the First National Bank of Ogden, Ogden, Utah, as aforesaid, and by
virtue of the change in the title of such bank, the First Security Bank of Utah,
National Association has authority to act, when not in contravention of State or
local law, as trustee, executor, administrator, registrar of stocks and bonds,
guardian of estates of lunatics, or in any other fiduciary capacity in which
State banks, trust companies or other corporations which come into competition
with national banks are permitted to act under the laws of the State of Utah,
subject to regulations prescribed by the Federal Reserve Board.
IN WITNESS WHEREOF, I have hereunto subscribed my name and caused the
seal of the Federal Reserve Board to be affixed at the City of Washington, in
the District of Columbia, on the 1st day of March, 1934.
S.R. Carpenter
-------------------------------------------
Assistant Secretary, Federal Reserve Board.
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
March 1, 1934.
First Security Bank of Utah, National Association,
Ogden, Utah.
Dear Sirs:
Reference is made to the change in the name of the First National Bank
of Ogden, Ogden, Utah, pursuant to the provisions of the Act of May 1, 1886,
to First Security Bank of Utah, National Association, and there is enclosed a
certificate issued by the Federal Reserve Board showing the trust powers
heretofore granted to the bank under its former name and that it is authorized
to exercise such powers under its new name.
Very truly yours,
S.R. Carpenter
S.R. Carpenter,
Assistant Secretary.
Enclosure
- -------------------------------------------------------------------------------
Comptroller of the Currency
Administrator of National Banks
- -------------------------------------------------------------------------------
Licensing Unit (Applications)
50 Fremont Street, Suite 3900
San Francisco, CA 94105
(415) 545-5900, FAX (415) 545-5925
June 20, 1996
Board of Directors
First Security Bank of Utah, N.A.
c/o First Security Corporation
Attn: Brad D. Hardy, EVP
Post Office Box 30006
Salt Lake City, Utah 84130
Re: Merger - First Security Bank of Idaho, N.A., Boise, Idaho into First
Security Bank of Utah, N.A., Ogden, Utah, under the title of First Security
Bank, N.A., Odgen, Utah. Control No: 96-WE-02-010
Dear Members of the Board:
This letter is the official certification of the Comptroller of the Currency
to merge First Security Bank of Idaho, National Association, Boise, Idaho into
First Security Bank of Utah, National Association, Ogden, Utah, effective as
of June 21, 1996. The resulting bank title is First Security Bank, National
Association and charter number is 2597.
This is also the official authorization given to First Security Bank, National
Association to operate the branches of the target institution and to operate
the main office of the target institution as a branch. Branches of a national
bank target are not listed since they are automatically carried over to the
resulting bank and retain their current OCC branch numbers.
Please be advised that the Charter Certificate for the merged bank, First
Security Bank of Idaho, National Association, must be returned to the Western
District Office for cancellation.
Very truly yours,
Robert G. Tornborg
Robert G. Tornborg
Acting Director of Bank Supervision - Compliance and Analysis
EXHIBIT 4
BY-LAWS OF THE
FIRST SECURITY BANK,
NATIONAL ASSOCIATION
Organized under the National Banking laws of the United States.
MEETINGS
SECTION 1. Unless otherwise provided by the articles of association a notice
of each shareholder's meeting, setting forth clearly the time, place and
purpose of the meeting, shall be given, by mail, to each shareholder of record
of this bank at lease 10 days prior to the date of such meeting. Any failure
to mail such notice or any irregularity therein, shall not affect the validity
of such meeting or of any of the proceedings thereat.
SECTION 2. A record shall be made of the shareholders represented in person
and by proxy, after which the shareholders shall proceed to the transaction of
any business that may properly come before the meeting. A record of the
shareholder's meeting, giving the names of the shareholders present and the
number of shares of stock held by each, the names of the shareholders
represented by proxy and the number of shares held by each, and the names of
the proxies, shall be entered in the records of the meeting in the minute book
of the bank. This record shall show the names of the shareholders and the
number of shares voted for each resolution or voted for each candidate for
director.
Proxies shall be secured for the annual meeting alone, shall be dated, and
shall be filed with the records of the meeting. No officer, director,
employee, or attorney for the bank may act as proxy.
The chairman or Secretary of the meeting shall notify the directors-elect of
their election and of the time at which they are required to meet at the
banking house for the purpose of organizing the new board. At the appointed
time, which as closely as possible shall follow their election, the
directors-elect shall convene and organize.
The president or cashier shall then forward to the office of the Comptroller
of the Currency a letter stating that a meeting of the shareholders was held
in accordance with these by-laws, stating the number of shares represented in
person and the number of shares represented by proxy, together with a list of
the directors elected and the report of the appointment and signatures of
officers.
OFFICERS
SECTION 3. Each officer and employee of this bank shall be responsible for all
such moneys, funds, valuables, and property of every kind as may be entrusted
to his care or otherwise come into his possession, and shall faithfully and
honestly discharge his duties and apply and account for all such moneys,
funds, valuables and other property that may come into his hands as such
officer or employee and pay over and deliver the same to the order of the
Board of Directors or to such person or persons as may be authorized to demand
and receive same.
SECTION 4. If the Board of Directors shall not require separate bonds, it
shall require a blanket bond in an amount deemed by it to be sufficient.
SECTION 5. The following is an impression of the seal adopted by the Board of
Directors of this bank: (Here in the original resolution was imprinted the
Association's seal).
SECTION 6. The various branches of this bank shall be open for business during
such hours as shall be customary in the vicinity, or as shall be fixed, as to
any branch, by the clearing house association of which such branch shall be a
member.
SECTION 7. The regular meeting of the board of directors shall be held on the
first Wednesday after the first Tuesday of each month. When any regular
meeting of the board of directors falls upon a holiday, the meeting shall be
held on such other day as the board may previously designate. Special
meetings may be called by the president, any vice-president, the secretary or
the cashier, or at the request of three or more directors.
MINUTE BOOK
SECTION 8. The organization papers of this bank, the returns of the elections,
the proceedings of all regular and special meetings of the directors and of the
shareholders, the by-laws and any amendments thereto, and reports of the
committees of directors shall be recorded in the minute book; and the minutes of
each meeting shall be signed by the chairman and attest by the secretary of the
meeting.
TRANSFERS OF STOCK
SECTION 9. The stock of this bank shall be assignable and transferable only on
the books of this bank, subject to the restrictions and provisions of the
national banking laws; and a transfer book shall be provided in which all
assignments and transfers of stock shall be made.
SECTION 10. Certificates of stock, signed by the president or vice-president,
and the secretary or the cashier or any assistant cashier, may be issued to
shareholders, and when stock is transferred the certificates thereof shall be
returned to the association, cancelled, preserved, and new certificates
issued. Certificates of stock shall state upon the face thereof that the
stock is transferable only upon the books of the association, and shall meet
the requirements of section 5139, United States Revised Statutes, as amended.
EXPENSES
SECTION 11. All the current expenses of the bank shall be paid by the cashier,
except that the current expenses of each branch shall be paid by the manager
thereof; and such officer shall, every six months, or more often if required,
make to the board a report thereof.
EXAMINATIONS
SECTION 12. There shall be appointed by the board of directors a committee of
three members, exclusive of the active officers of the bank, whose duty it
shall be to examine, at least once in each period of eighteen months, the
affairs of each branch as well as the head office of the association, count
its cash, and compare its assets and liabilities with the accounts of the
general ledgers, ascertain whether the accounts are correctly kept and that
the condition of the bank corresponds therewith, and whether the bank is in a
sound and solvent condition, and to recommend to the board such changes in the
manner of doing business, etc., as shall seem to be desirable, the result of
which examination shall be reported in writing to the board at the next
regular meeting thereafter, provided that the appointment of such committee and
the examinations by it may be dispensed with if the board shall cause such
examination to be made and reported to the board by accountants approved by it.
CHANGES IN BY-LAWS
SECTION 13. These by-laws may be changed or amended by the vote of a majority
of the directors at any regular or special meeting of the board, provided,
however, that the directors shall have been given 10 days notice of the
intention to change or offer an amended thereto.
REPEAL
SECTION 14. All by-laws heretofore adopted are repealed.
First Security Bank, N.A. EXHIBIT 7
P.O. Box 30011
Salt Lake City, UT 84130
Call Date: 03/31/97 ST-BK: 49-0290 FFIEC 031
Vendor ID: D CERT: 13718 Page RI-9
Transit Number: 12400001
Transmitted to EDS as 0042861 on 11
4/30/97 at 19:02:11 CST
Consolidated Report of Condition for Insured Commercial and
State-Chartered Savings Banks for March 31, 1997
All schedules are to be reported in thousands of dollars. Unless otherwise
indicated, report the amount outstanding as of the last business day of
the quarter.
Schedule RC - Balance Sheet
C400
Dollar Amounts in
Thousands
- -------------------------------------------------------------------------------
ASSETS
1. Cash and balances due from depository RCFD
institutions (from Schedule RC-A): ----
a. Noninterest-bearing balances and
currency and coin (1)....................... 0081 .... 655,052 1.a
b. Interest-bearing balances (2)............... 0071 .... 67 1.b
2. Securities:
a. Held-to-maturity securities (from
Schedule RC-B, column A).................... 1754 .... 0 2.a
b. Available-for-sale securities
(from Schedule RC-B, column D).............. 1773 .... 2,180,112 2.b
3. Federal funds sold and securities
purchased under agreements to resell......... 1350 .... 66,178 3.
4. Loans and lease financing
receivables:
a. Loans and leases, net of RCFD
unearned income (from ----
Schedule RC-C)............ 2122 .. 7,516,685 ......... 4.a
b. LESS: Allowance for loan
and lease losses.......... 3123 .. 99,148 ......... 4.b
c. LESS: Allocated transfer
risk reserve.............. 3128 .. 0 ......... 4.c
d. Loans and leases, net of
unearned income, allowance, and reserve
(item 4.a minus 4.b and 4.c)................ 2125 .... 7,417,537 4.d
5. Trading assets (from Schedule RC-D)............ 3545 .... 388,486 5.
6. Premises and fixed assets (including
capitalized leases)............................ 2145 .... 174,816 6.
7. Other real estate owned (from Schedule RC-M)... 2150 .... 825 7.
8. Investments in unconsolidated subsidiaries and
associated companies (from Schedule RC-M)....... 2130 .... 0 8.
9. Customers' liability to this bank on acceptances
outstanding..................................... 2155 .... 803 9.
10. Intangible assets (from Schedule RC-M).......... 2143 .... 157,257 10.
11. Other assets (from Schedule RC-F)............... 2160 .... 332,647 11.
12. Total assets (sum of items 1 through 11)........ 2170 .... 11,373,780 12.
- -------
(1) Includes cash items in process of collection and unposted debits.
(2) Includes time certificates of deposit not held for trading.
First Security Bank, N.A.
P.O. Box 30011
Salt Lake City, UT 84130 EXHIBIT 7
Call Date: 03/31/97 ST-BK: 49-0290 FFIEC 031
Vendor ID: D CERT: 13718 Page RI-10
Transit Number: 12400001
Transmitted to EDS as 0042861 on 12
4/30/97 at 19:01:12 CST
Consolidated Report of Condition for Insured Commercial and
State-Chartered Savings Banks for March 31, 1997
All schedules are to be reported in thousands of dollars. Unless otherwise
indicated, report the amount outstanding as of the last business day of
the quarter.
Schedule RC - Balance Sheet
Dollar Amounts in
Thousands
- -------------------------------------------------------------------------------
LIABILITIES
13. Deposits: RCOM
a. In domestic offices (sum of totals of ----
columns A and C from Schedule RC-E, part 1) 2200 .. 7,079,084 13.a
RCDN
----
(1) Noninterest-bearing (1). 6631 .. 1,582,595 ............. 13.a.1
(2) Interest-bearing........ 6636 .. 5,496,489 ............. 13.a.2
RCFN
----
b. In foreign offices, Edge and Agreement sub-
sidiaries, and IBFs (from Schedule RC-E,
part II)...................................... 2200 .. 51,656 13.b
RCFW
----
(1) Noninterest-bearing .... 6631 .. 0 ............. 13.b.1
(2) Interest-bearing........ 6636 .. 51,656 ............. 13.b.2
RCFD
----
14. Federal funds purchased and securities sold
under agreements to repurchase .................. 2800 .. 1,987,674 14.
RCOM
----
15. a. Demand notes issued to the U.S. Treasury...... 2840 .. 20,244 15.a
RCFD
----
b. Trading liabilities (from Schedule RC-D)...... 3548 .. 130 15.b
16. Other borrowed money (includes mortgage indebted-
ness and obligations under capitalized leases):
a. With a remaining maturity of one year or less. 2332 .. 552,757 16.a
b. With a remaining maturity of more than one
year......................................... 2333 .. 353,202 16.b
17. Not applicable.
18. Bank's liability on acceptances executed and
outstanding...................................... 2920 .. 803 18.
19. Subordinated notes and debentures (2)............ 3200 .. 45,000 19.
20. Other liabilities (from Schedule RC-G)........... 2930 .. 362,343 20.
21. Total liabilities (sum of items 13 through 20)... 2948 .. 10,452,893 21.
22. Not applicable.
EQUITY CAPITAL
RCFD
----
23. Perpetual preferred stock and related surplus.... 3838 .. 0 23.
24. Common stock..................................... 3230 .. 59,270 24.
25. Surplus (exclude all surplus related to
preferred stock)................................. 3839 .. 285,944 25.
26. a. Undivided profits and capital reserves........ 3632 .. 590,530 26.a
b. Net unrealized holding gains (losses) on
available-for-sale securities................. 8434 .. ( 14,857) 26.b
27. Cumulative foreign currency translation adjust-
ments............................................ 3284 .. 0 27.
28. Total equity capital (sum of items 23 through 27) 3210 .. 920,887 28.
29. Total liabilities, limited-life preferred stock,
and equity capital (sum of items 21 and 28)...... 3300 .. 11,373,780 29.
Memorandum
To be reported only with the March Report of
Condition.
1. Indicate in the box at the right the number
of the statement below that best describes
the most comprehensive level of audting work RCFD Number
performed for the bank by independent external ---- ------
auditors as of any date during 1996.............. 6724 .. 2 M.1
1 = Independent audit of the bank conducted in accordance with generally
accepted auditing standards by a certified public accounting firm
which submits a report on the bank
2 = Independent audit of the bank's parent holding company conducted
in accordance with generally accepted auditing standards by a
certified public accounting firm which submits a report on the
consolidated holding company (but not on the bank separately)
3 = Directors' examination of the bank conducted in accordance with
generally accepted auditing standards by a certified public
accounting firm (may be required by state chartering authority)
4 = Directors' examination of the bank performed by other external auditors
(may be required by state chartering authority)
5 = Review of the bank's financial statements by external auditors
6 = Compilation of the bank's financial statements by external auditors
7 = Other audit procedures (exluding tax preparation work)
8 = No external audit work
- ----------------
(1) Includes total demand deposits and noninterest-bearing time and savings
deposits.
(2) Includes limited-life preferred stock and related surplus.
