<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 22, 1998
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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TRANS WORLD AIRLINES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
43-1145889
DELAWARE 4512 (I.R.S. EMPLOYER
(STATE OF (PRIMARY STANDARD IDENTIFICATION NO.)
INCORPORATION) INDUSTRIAL
CLASSIFICATION CODE
NUMBER)
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)
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COPY TO:
GERALD L. GITNER DIANE G. KERR, ESQ.
CHAIRMAN AND CHIEF EXECUTIVE DAVIS POLK & WARDWELL
OFFICER 450 LEXINGTON AVENUE
ONE CITY CENTRE, 515 N. SIXTH NEW YORK, NEW YORK 10017
STREET (212) 450-4000
ST. LOUIS, MISSOURI 63101
(314) 589-3000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENTS FOR SERVICE)
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time
to time after the effective date of this registration statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. [_]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended (the "Securities Act"), other than securities offered only in
connection with dividend or interest reinvestment plans, check the following
box. [X]
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 number of the earlier
effective 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
under the Securities Act, please check the following box. [_]
CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
PROPOSED
PROPOSED MAXIMUM
AMOUNT MAXIMUM AGGREGATE AMOUNT OF
TITLE OF EACH CLASS OF TO BE AGGREGATE PRICE OFFERING REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED PER UNIT(1) PRICE(1) FEE
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<S> <C> <C> <C> <C>
9 1/4% Cumulative Convertible Ex-
changeable Preferred Stock, $0.1 1,725,000
par value per share................ shares $50(1) $86,250,000(1) $25,444(1)
$86,250,000
9 1/4% Convertible Subordinated De- principal
bentures due 2007.................. amount N/A N/A N/A(2)
Common Stock, $.01 par value per
share.............................. 10,917,823 N/A N/A N/A(3)
Total............................... N/A N/A N/A $25,444
</TABLE>
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(1) Estimated solely for the purpose of calculating the registration fee based
upon the $50 initial sale price of the 9 1/4% Cumulative Convertible
Exchangeable Preferred Stock, $.01 par value per share (the "Preferred
Stock").
(2) No additional consideration will be received by the Registrant for the
issuance of the 9 1/4% Convertible Subordinated Debentures due 2007 (the
"Debentures") upon exchange of the Preferred Stock. Accordingly, no
additional registration fee is required in respect of the Debentures
pursuant to Rule 457(i) under the Securities Act.
(3) No additional consideration will be received by the Registrant for the
issuance of shares of the Company's Common Stock, $.01 par value per share
(the "Common Stock") upon the conversion of the Preferred Stock or the
Debentures. Accordingly, no additional registration fee is required in
respect of such shares of Common Stock pursuant to Rule 157(i) under the
Securities Act.
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, OR UNTIL THE REGISTRATION STATEMENT SHALL
BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
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<PAGE>
PROSPECTUS
TRANS WORLD AIRLINES, INC.
1,725,000 SHARES OF 9 1/4% CUMULATIVE CONVERTIBLE
EXCHANGEABLE PREFERRED STOCK
(PAR VALUE $.01 PER SHARE)
$86,250,000 PRINCIPAL AMOUNT OF
9 1/4% CONVERTIBLE SUBORDINATED DEBENTURES DUE 2007
10,917,525 SHARES OF COMMON STOCK
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This Prospectus relates to the 1,725,000 shares of the 9 1/4% Cumulative
Convertible Exchangeable Preferred Stock, par value $.01 per share (the
"Preferred Stock"), of Trans World Airlines, Inc., a Delaware corporation
("TWA" or the "Company"), the $86,250,000 aggregate principal amount of the
Company's 9 1/4% Convertible Subordinated Debentures due 2007 (the
"Debentures") issuable upon exchange of the Preferred Stock and the 10,917,525
shares of the Company's Common Stock, $.01 par value per share (the "Common
Stock"), issuable upon conversion of the Preferred Stock or the Debentures,
subject to adjustment under certain circumstances.
The Preferred Stock was initially issued and sold by TWA to Lazard Freres &
Co. LLC and PaineWebber Incorporated (the "Initial Purchasers") and were
offered by the Initial Purchasers on December 2, 1997 (the "Original
Offering"), in transactions exempt from the registration requirements of the
Securities Act of 1933, as amended (the "Securities Act"), to persons
reasonably believed by the Initial Purchasers of the Preferred Stock to be
"qualified institutional buyers" (as defined by Rule 144A under the Securities
Act ("Rule 144A")) or "accredited investors" (as defined by Rule 501(a)(1),
(2), (3) or (7)) under the Securities Act or in transactions complying with
the provisions of Regulation S under the Securities Act ("Regulation S"). The
Preferred Stock, along with the Debentures issuable upon exchange of the
Preferred Stock and the Common Stock issuable upon conversion of the Preferred
Stock or the Debentures, may be offered and sold from time to time by the
holders named herein or by their transferees, pledgees, donees, or their
successors (collectively, the "Selling Holders") pursuant to this Prospectus.
The Registration Statement on Form S-3 of which this Prospectus is a part (the
"Registration Statement") has been filed with the Securities and Exchange
Commission (the "SEC" or the "Commission") pursuant to the Company's
obligations under a registration rights agreement dated as of December 2, 1997
(the "Registration Rights Agreement") among the Company and the Initial
Purchasers, which was entered into in connection with the Original Offering.
Dividends on the Preferred Stock are cumulative from the date of original
issuance and payable quarterly in arrears commencing March 15, 1998 at an
annual rate of 9 1/4% (equivalent to $4.625 per share per annum). The
Preferred Stock has a liquidation preference of $50.00 per share, plus accrued
and unpaid dividends.
Continued on next page
PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER MATTERS DISCUSSED UNDER THE
CAPTION "RISK FACTORS" ON PAGE 9.
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 REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF
ANY SUCH STATE.
THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON OR ENDORSED
THE MERITS OF THIS OFFERING. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
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THE DATE OF THIS PROSPECTUS IS JANUARY , 1998.
<PAGE>
Continued from cover page
Each share of the Preferred Stock (or, if issued, each $50.00 principal
amount of Debentures) 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 $7.90 per share or $50.00 principal amount of
Debentures (equivalent to a conversion rate of approximately 6.329 shares of
Common Stock for each share of Preferred Stock or $50.00 principal amount of
Debentures). The number of shares of Common Stock issuable upon conversion of
the Preferred Stock or the Debentures is subject to possible adjustment under
certain circumstances. Therefore, the number of shares of Common Stock
registered hereunder may increase or decrease. See "Description of Preferred
Stock--Conversion Rights."
The Preferred Stock may be exchanged, in whole but not in part, at the
option of the Company, for the Debentures on any dividend date beginning on
December 15, 1999 at the rate of $50.00 principal amount of Debentures for
each share of Preferred Stock outstanding at the time of exchange; provided,
that all accrued and unpaid dividends on the 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. The Debentures, if issued, will
bear interest payable semiannually and will have the terms and conditions set
forth elsewhere in this Prospectus. As of September 30, 1997, the amount of
the Company's Senior Indebtedness (as defined herein) aggregated approximately
$965.1 million, and the amount of the trade payables and other indebtedness of
the Company's subsidiaries was immaterial in amount. If issued, the Debentures
will be effectively subordinated to all rights of third party creditors of the
Company's subsidiaries. The Company and its subsidiaries expect from time to
time to incur additional indebtedness, including, but not limited to, Senior
Indebtedness. The Indenture will not prohibit or limit the incurrence of such
additional indebtedness. (All other obligations would rank pari passu to the
Debentures, including obligations under noncancellable operating leases,
advance ticket sales, and trade payables, among others, which obligations were
approximately $10.9 million, $272.1 million and $268.8 million, respectively,
at September 30, 1997.)
The Preferred Stock may not be redeemed prior to December 15, 2000. On or
after December 15, 2000, the Preferred Stock may be redeemed, in whole or in
part, at the option of the Company, at the redemption prices set forth
elsewhere in this Prospectus plus accrued and unpaid dividends thereon to the
date fixed for redemption. See "Description of Preferred Stock--Optional
Redemption by the Company."
Upon the occurrence of a Change in Control (as defined herein), the
conversion price of the Preferred Stock will be reduced for a limited period
of time in the event that the Market Value (as defined herein) of the Common
Stock is less than the then prevailing conversion price, but in no event will
the conversion price be lower than $4.67, subject to certain adjustments as
set forth herein.
The Preferred Stock, the Debentures and the shares of Common Stock issuable
upon conversion of the Preferred Stock or Debentures may be sold by the
Selling Holders from time to time directly to purchasers or through agents,
underwriters or dealers. See "Plan of Distribution." If required, the names of
any agents or underwriters involved in the sale of the securities in respect
of which this Prospectus is being delivered, along with any applicable agent's
commission, dealer's purchase price or underwriter's discount, will be set
forth in an accompanying supplement to this Prospectus (the "Prospectus
Supplement"). Furthermore, information concerning Selling Holders set forth
herein may change from time to time, and the changes will be set forth in such
a Prospectus Supplement.
The Selling Holders will receive all of the net proceeds from the sale of
the Preferred Stock, the Debentures and the shares of Common Stock issuable
upon conversion of the Preferred Stock or Debentures and will pay any and all
underwriting discounts and selling commissions applicable to the sale of such
securities. The Company is responsible for payment of all other expenses
incident to the registration of the securities registered hereunder.
The Selling Holders and any broker-dealers, agents or underwriters which
participate in the distribution of the securities offered hereby may be deemed
to be "underwriters" within the meaning of the Securities Act, and any
commission received by them or purchases by them of such securities at a price
less than the initial price to the public may be deemed to be underwriting
commission for discounts under the Securities Act.
2
<PAGE>
Pursuant to the Registration Rights Agreement, the Company has also agreed
to pay certain fees and expenses incident to the registration of the Preferred
Stock, the Debentures and the shares of Common Stock issuable upon conversion
of the Preferred Stock or Debentures. It is estimated that the aggregate
amount of fees and expenses payable by the Company in connection with the
registration of the securities offered hereby will be approximately
$ . The Company intends to keep the Registration Statement effective
until the earlier of (i) the sale of all securities covered by the
Registration Statement and (ii) the expiration of two years after the date of
the initial issuance of shares of Preferred Stock on December 2, 1997, or, if
the period applicable under Rule 144(k) under the Securities Act, or any
successor provision, is shortened, such shorter period.
The Company has listed the Common Stock into which the Preferred Stock is
convertible with the American Stock Exchange ("AMEX"). There has not
previously been any public market for the Preferred Stock, and there can be no
assurance that an active public trading market will ever develop for the
Preferred Stock, or, if issued, the Debentures. The Common Stock is listed on
AMEX under the symbol "TWA." On , 1998, the closing sale price on
AMEX for one share of the Common Stock was $ per share.
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
The Company is 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. Such reports, proxy statements and other information filed by the
Company with the Commission pursuant to the informational requirements of the
Exchange Act can be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street,
NW, Washington, D.C. 20549, and at the following Regional Offices of the
Commission: Northeast Regional Office, 7 World Trade Center, Suite 1300, New
York City, New York 10048 and Midwest Regional Office, Citicorp Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of such
material can also be obtained upon written request addressed to the Securities
and Exchange Commission, Public Reference Section, Room 1024, 450 Fifth
Street, NW, Washington, D.C. 20549 at prescribed rates. Such reports, proxy
statements and other information can also be inspected at the offices of the
American Stock Exchange, 86 Trinity Place, New York City, New York 10006-1881,
on which the Common Stock of the Company is listed. The Commission maintains a
Web Site that contains reports, proxy 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. In
addition, the Company has agreed, for so long as any of the securities offered
hereby remain outstanding, to make available to any prospective purchaser or
beneficial holder of such securities in connection with any sale thereof, the
information required by subsection (d) of Rule 144A under the Securities Act
("Rule 144A"), until such time as the holders thereof have disposed of such
securities pursuant to an effective registration statement filed by the
Company.
This Prospectus contains summaries believed to be accurate and complete in
all material respects of material 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.
3
<PAGE>
This Prospectus forms a part of the Registration Statement, including all
amendments (including post-effective amendments) and exhibits thereto, 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 in the preceding paragraph. 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 (i) the
Company's Annual Report on Form 10-K for the year ended December 31, 1996 and
Quarterly Report on Form 10-Q for the quarter ended September 30, 1997; (ii)
the Company's Amendment to its Quarterly Report on Form 10-Q for the quarter
ended September 30, 1997, as filed on Form 10-Q/A; (iii) the description of
the Common Stock and Warrants for Common Stock contained in the Company's Form
8-A dated September 5, 1997 filed under the Exchange Act, including any
amendment or reports filed for the purpose of updating such description; and
(iv) the Company's Proxy Statement and Notice of Meeting relating to the
Annual Stockholders held on May 29, 1997, each of which has been filed with
the Commission pursuant to the requirements of the Exchange Act.
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 of such documents. 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.
The Company hereby undertakes to furnish without charge to each person to
whom a copy of this Prospectus has been delivered, upon written or oral
request of such person, a copy of any and all documents incorporated herein by
reference (not including exhibits to such documents, unless such exhibits are
specifically incorporated by reference into such documents). Requests should
be directed to the Corporate Secretary of Trans World Airlines, Inc., One City
Centre, 515 N. Sixth Street, St. Louis, Missouri 63101, telephone (314) 589-
3285.
4
<PAGE>
PROSPECTUS SUMMARY
This summary does not purport to be complete and is qualified in its entirety
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 first nine months of 1997), whose primary business is
transporting passengers, cargo and mail. During the first nine months of 1997,
the Company carried more than 17.6 million passengers and flew approximately
19.2 billion RPMs. As of September 30, 1997, TWA provided regularly scheduled
jet service to 86 cities in the United States, Mexico, Europe, the Middle East,
Canada and the Caribbean. As of September 30, 1997, the Company operated a
fleet of 186 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 September 30, 1997 and approximately a 72% share of airline
passenger enplanements in St. Louis for the first nine months of 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 28 domestic and international cities with approximately 42
daily departures. JFK is both the Company's and the industry's largest
international gateway from North America. As of September 30, 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 has taken steps to refocus and improve the operating
and financial performance of its JFK operations.
RECENT FINANCIAL AND OPERATING RESULTS
For the third quarter of 1997, TWA reported operating income of $63.8 million
and pre-tax income of $47.2 million. These results compare to operating income
of $26.0 million and pre-tax income of $10.0 million in the third quarter of
1996. In addition, the Company's yield (passenger revenue per RPM) for the
third quarter of 1997 increased 3.2% to 11.24c versus the comparable prior year
period and passenger revenue per available seat mile ("RASM") increased 5.8% to
8.08c versus the comparable prior year period. The Company's unit costs
remained essentially unchanged at 8.29c, despite a 13.7% decrease in capacity
for the quarter versus the third quarter of 1996, as measured by total
available seat miles ("ASMs").
TWA also 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 ranked first among the
10 largest U.S. scheduled commercial airlines in domestic on-time performance
in both the second and third quarters of 1997. This compares to tenth (last)
and eighth place finishes, respectively, for the same periods of 1996. TWA has
also recorded a significant improvement in its percentage of scheduled flights
completed. In the second and third quarters of 1997, TWA completed an average
of approximately 99% of scheduled flights, which management believes is among
the highest in the industry. In contrast, TWA completed 97.4% of scheduled
flights in the second and third quarters of 1996 and 96.2% for 1996 overall.
5
<PAGE>
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 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.
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
at December 31, 1996. As a result, TWA's last L-1011 was retired in September
1997 and its last 747 is scheduled to leave active service in February 1998.
Under its fleet renewal plan, the Company has been replacing 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 a result of this fleet restructuring, it is
estimated that the Company's mix of narrow-body and wide-body aircraft shifted
to approximately 91%/9% as of December 31, 1997 versus approximately 80%/20% as
of year-end 1996, and that TWA's average number of seats per aircraft declined
to 141 from 161 over the same period. Management estimates that as of December
31, 1997, the average age of its fleet had decreased to slightly under 17 years
from 19 years at year-end 1996.
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 4.1%
in 1998, versus 26.2% in 1996 and 20.2% in 1997. 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
6
<PAGE>
(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 31.2% in the
first nine months of 1997 versus the same period in 1996 and represented 20.0%
of total scheduled capacity for the first nine months of 1997 versus 26.1% for
the same period in 1996.
Productivity Enhancements. The Company has sought to improve its financial
performance through productivity enhancements. During 1997, TWA has 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 as of December 31, 1996 to 121 as of September 30, 1997, and to 119 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 in the first quarter of
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 amount paid as well as miles flown, and by
joining the American Express Membership Miles 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 the SCORE Program (or Safe, Clean, On-time and
Reliable), TWA has sought to institutionalize throughout all levels of its
organization the importance of running an airline with operational reliability.
This program provides certain operating and procedural guidelines for enhancing
performance and improving overall product quality. In addition, in 1996 the
Company introduced Flight Plan 97, which pays eligible employees a $65 bonus
for each month that TWA finishes 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 ranks 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.
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
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Executive Officer. On March 27, 1997, the Board confirmed the appointment of
William F. Compton, a TWA pilot and a director of the Company since November
1993, as Executive Vice President, Operations. Mr. Compton had been named
acting Executive Vice President, Operations in December 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 3, 1997, the Board elected Mr. Compton President and
Chief Operating Officer. On December 31, 1997 Roden A. Brandt resigned as
Senior Vice President, Planning, but will remain as a consultant to the
Company. 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. 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 DEVELOPMENTS
On December 30, 1997, the Company consummated a Rule 144A/Regulation S
private placement offering (the "Receivables Securitization Offering") of $100
million aggregate principal amount of 9.80% Airline Receivable Asset Backed
Notes due 2001 (the "Receivables Securitization Notes"). Proceeds from the
offering were used to repay the Company's remaining debt to Karabu Corporation
pursuant to the Karabu Ticket Program Agreement between the Company and Karabu
Corporation. See the discussion of the "Icahn Loans" in "Management's
Discussion and Analysis of Financial Condition and Results of Operations
Liquidity and Capital Resources" incorporated herein by reference.
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.
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RISK FACTORS
In addition to the other information contained in this Prospectus, the
following factors should be considered carefully in evaluating the Company and
its business before purchasing any of the securities offered hereby.
Certain statements made in this Prospectus relating to plans, conditions,
objectives and economic performance go beyond historical information and may
provide an indication of future results. To that extent, they are forward-
looking statements within the meaning of Section 21E of the Exchange Act, and
each of them is therefore subject to risks, uncertainties, and assumptions
that could cause actual results to differ from those in the forward-looking
statement. Should one or more of these risks or uncertainties materialize, or
should underlying assumptions prove incorrect, actual results may vary
materially from those anticipated, estimated or projected. Some of the
uncertainties that might adversely impact TWA's future results of operations
include, but are not limited to, the "Risk Factors" described below.
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. The Company's auditors
included in their report dated March 24, 1997 on TWA's Consolidated Financial
Statements for the year ended December 31, 1996 an explanatory paragraph to
the effect that substantial doubt exists regarding the Company's ability to
continue as a going concern due to the Company's recurring losses from
operations and limited sources of additional liquidity. See the Company's 1996
consolidated financial statements incorporated by reference in this Prospectus
(including the notes thereto, the "1996 Consolidated Financial Statements")
and the Company's condensed consolidated financial statements for the nine
months ended September 30, 1997 (including the notes thereto, the "1997
Interim Consolidated Financial Statements") incorporated by reference herein,
together referred to herein as the "Consolidated Financial Statements."
The Company is highly leveraged and has and will continue to have
significant debt service obligations. As of September 30, 1997, the Company's
ratio of long-term debt and capital leases (including current maturities) to
shareholders' equity was 4.0 to 1. After giving effect to this Offering, the
application of the net proceeds therefrom and the Rule 144A/Regulation S
private placement offerings of $140 million of Senior Secured Notes due 2004
of the Company on December 9, 1997 (the "Senior Notes Offering") and the
Receivables Securitization Offering, the ratio of such long-term debt and
capital leases (including current maturities) to shareholders' equity would
have been approximately 3.32 to 1. TWA's estimated minimum payment obligations
under noncancellable operating leases in effect at September 30, 1997 were
approximately $330 million for 1998 and approximately $2,339 million for
periods thereafter. 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 $91.5 million and $75.4 million for the
nine months ended September 30, 1997 and 1996, respectively, $340.1 million
for the year ended December 31, 1996, $40.1 million for the four months ended
December 31, 1995, $357.3 million for the eight months ended August 31, 1995,
$459.6 million for the year ended December 31, 1994, $92.4 million for the two
months ended December 31, 1993, $481.3 million for the ten months ended
October 31, 1993, and $457.3 million for the year ended December 31, 1992. See
"Selected Consolidated Financial Data," and the Consolidated Financial
Statements.
The degree to which the Company is leveraged could have important
consequences to holders of the securities 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).
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On September 30, 1997, the Company's total cash and cash equivalents balance
was approximately $104.6 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 a decrease of approximately $77.0
million from the Company's corresponding cash balance at December 31, 1996.
This reduction in the Company's cash balance resulted primarily from the
repayment of long-term debt and capital lease obligations and from TWA's net
losses in the first half of 1997.
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.
Substantially all of TWA's strategic assets, including its owned aircraft,
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.
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"
incorporated herein by reference. While the Company has not finalized its
capital expenditure budget for 1998, the Company believes that its plans will
call for substantial capital expenditures during that period. 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. 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
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 have 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 (as defined below)), 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. For the first nine months of 1997, the Company reported a net loss of
$79.7 million, which represented a $53.5 million increase over the $26.2
million net loss for the first nine months of 1996, and a $29.8 million
operating loss, which represented a $63.7 million adverse change from the
$33.9 million operating profit reported for the first nine months of 1996.
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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" incorporated herein by
reference. 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".
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. 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.
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
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J. Coleman, Executive Vice President and Chief Financial Officer, 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. On
December 3, 1997, the Board elected Mr. Compton President and Chief Operating
Officer. On December 31, 1997, Mr. Brandt resigned as Senior Vice President,
Planning, but will act as a consultant to the Company. The Company does not
believe that such changes have unduly affected its ongoing operations or
implementation of the Company's business strategy.
'94 Labor Agreements
As of September 30, 1997, the Company had approximately 22,540 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.
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.
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Age of Fleet; Noise
At December 31, 1996, the average age of TWA's operating aircraft fleet was
19.0 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 the first ten months of 1997, TWA acquired 23 new or later-model used
aircraft. The Company expects to continue the process of acquiring a number of
new and later-model used aircraft and, including aircraft delivered in the
fourth quarter of 1997, TWA's composite fleet age was reduced to slightly
under 17.0 years at December 31, 1997. As of September 30, 1997, TWA's fleet
included 64 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 Federal Aviation Administration ("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 1995 and 1996, TWA spent approximately $2.6 million and
$3.4 million, respectively, to comply with aging aircraft maintenance
requirements and spent approximately $3.1 million on such requirements during
the first nine months of 1997. 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.
Potential Dilution
The Company underwent two financial restructurings during the period between
1992 and 1995, with the first of such restructurings effected in 1993 the
("'93 Reorganization") and the second of such restructurings effected in 1995
(the "'95 Reorganization ") (collectively, the '93 Reorganization and the '95
Reorganization are the "Reorganizations"). Pursuant to the '95 Reorganization,
the Company canceled its then outstanding equity securities in exchange for
new securities and other consideration and issued a special class of voting
preferred stock (the "Employee Preferred Stock") to its union employees and
shares of Common Stock to its non-union employees. Also 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. In exchange for the
concessions received in the '94 Labor Agreements, the Company, among other
things, adopted an employee stock incentive program (the "ESIP") to permit
TWA's employees to increase their level of ownership through grants by the
Company to its employees of additional shares of Employee Preferred Stock and
Common Stock.
The first stock grant under the ESIP was to be made on July 15, 1997 in an
amount sufficient to increase employee ownership of the combined total number
of then outstanding shares of Common Stock and Employee Preferred Stock by 2%
if the closing price of the Common Stock exceeded a target price of $11.00 per
share during the period from January 1, 1997 to July 15, 1997. Because such
target price was not reached, the grant will instead be made on July 15 of the
next year up to and including July 15, 2002, if any, that the Common Stock
exceeds such target price. In subsequent years through the end of the seven
year term of the ESIP, the additional number of shares of Employee Preferred
Stock subject to grant under this program would be equivalent to 1.5% in 1998,
1.5% in 1999, 1.0% in 2000, 1.0% in 2001 and 1.0% in 2002 of the combined
total number of shares of Common Stock and Employee Preferred Stock
outstanding as of the applicable July 15 grant date, with target prices
increasing 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. If TWA issues additional shares
of Common Stock with an aggregate value
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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 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 after 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. The employees' right to purchase additional shares of
Employee Preferred Stock is accelerated and becomes immediately exercisable in
the event of a merger, sale or consolidation of TWA (where TWA is not the
surviving entity) at a price equivalent to or in excess of $17.72 per share of
Common Stock at a 20% discount from the merger, sale or consolidation price
relating to such a transaction. 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% 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 also provided that if certain additional shares were distributed
following the '95 Effective Date (as defined) in respect of the '95
Reorganization, employees would be entitled to receive an additional number of
shares of Common Stock and Employee Preferred Stock (the "Fill-Up Shares")
such that the employees retain the same level of ownership as before the
additional distribution. Union representatives and the Company agreed that the
number of Fill-Up Shares to be issued pursuant to the ESIP was 525,856. In
addition, 405,750 additional shares of Employee Preferred Stock and Common
Stock were issued to the ESIP (the "Credit Shares") and, to the extent that
additional shares are granted to the ESIP, the Company will receive a credit
towards the new grant for the Credit Shares. The issuance of additional shares
of Common Stock under the ESIP could result in significant future dilution to
other holders of the Common Stock.
In 1994, the Board adopted the Company's 1994 Key Employee Stock Incentive
Plan (the "KESIP") to motivate, attract and retain the services of certain key
employees of the Company. As amended, the KESIP provides for the award of
incentive and nonqualified stock options for a cumulative total of up to 14%
of the aggregate number of shares of Common Stock and Employee Preferred Stock
outstanding as of January 1, of each year, subject to certain restrictions. As
of September 30, 1997, 69 employees had been granted options to purchase
shares of Common Stock at prices ranging from $4.64 to $18.37 per share. All
options granted under the KESIP have a five-year life and unless otherwise
approved by the Compensation Committee vest at a rate of 34%, 33% and 33% on
the first three anniversaries of the award date of such options.
In March 1996, the Company issued 3,869,000 shares of the Company's 8%
Cumulative Convertible Exchangeable Preferred Stock (the "8% Preferred
Stock"), which are convertible 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 under certain circumstances. Based on the current conversion price,
upon conversion of all shares of 8% Preferred Stock into shares of Common
Stock, an aggregate of 9,544,823 additional shares of Common Stock would be
issued.
In March 1997, the Company issued 50,000 Units (the "Units") each consisting
of (i) one 12% Senior Secured Note due April 1, 2002 (a "12% Note"), in the
principal amount of $1,000 of the Company and (ii) one Redeemable Warrant (a
"Warrant") to purchase 126.26 shares of Common Stock at an exercise price of
approximately $7.92 per share. The Warrants are exercisable commencing on the
first anniversary of the date of issuance through their expiration on April 1,
2002, unless previously redeemed by the Company. If all of the Warrants were
exercised an aggregate of 6,313,000 additional shares of Common Stock would be
issued.
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-
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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 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 "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 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
would be approximately $58 million based upon such target prices and the
number of shares of Common Stock and Employee Preferred Stock outstanding at
December 31, 1996. The charge for any year, however, could be substantially
higher if the then market price of the Common Stock exceeds certain target
prices.
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
15
<PAGE>
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.
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 in recent years as a result of mergers
and 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. 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,
16
<PAGE>
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 14.5% for the first nine
months of 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
57.0c per gallon to approximately 70.0c per gallon. During the first nine
months of 1997, the Company's average per gallon cost of fuel decreased
approximately 2.1%, from approximately 67.9c per gallon to approximately 66.5c
per gallon, over the same period in the prior year. A one cent change in the
cost per gallon of fuel (based on consumption during the first nine months of
1997) impacts operating expense by approximately $620,000 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.
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
17
<PAGE>
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.
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. 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 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.
RISK FACTORS RELATING TO THE OFFERING
Absence of Public Trading Market for Preferred Stock; Restrictions on Resale
Prior to the Original Offering, there was no trading market for the
Preferred Stock or the Debentures, and there can be no assurance that a
trading market will develop or, if one does develop, of its liquidity or
whether it will be maintained. The Preferred Stock, the Debentures and the
Common Stock issuable upon conversion of the Preferred Stock and the
Debentures have been designated as eligible for trading in the PORTAL market.
The Initial Purchasers have made a market in the Preferred Stock and have
informed the Company that they presently intend to make a market in the
Debentures, if issued; however, they are not obligated to do so and any such
market making activity may be terminated at any time without notice. In
addition, such market making activity will be subject to the limits of the
Securities Act and the Exchange Act. The Original Offering of Preferred Stock
(or the Debentures, if issued) and the underlying shares of Common Stock
issuable upon conversion thereof were not previously registered under the
Securities Act. Accordingly, the Preferred Stock (or the Debentures, if
issued), and the Common Stock issuable upon conversion thereof may only be
resold, pledged or transferred in accordance with the conditions set forth
herein, and only (a) to the Company, (b) pursuant to the registration
statement of which this Prospectus forms a part, once it is declared effective
under the Securities Act, or another registration statement that has been
declared effective under the Securities Act, (c) to a person the transferor
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, (d) pursuant to offers and sales to non-U.S. persons
that occur outside the United States within the meaning of 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 or (f) pursuant
to another available exemption from the registration requirements of the
Securities Act.
The Company is required to keep the Registration Statement of which this
Prospectus forms a part effective until the earlier of (i) the sale of all
securities covered by the Registration Statement and (ii) the expiration of
two years after the date of original issuance of the Preferred Stock or, if
the period applicable under Rule 144 under the Securities Act or any successor
provision for such securities is shortened, such shorter period. The Company
will be required to pay Liquidated Damages to holders of the Preferred Stock,
the Debentures or the
18
<PAGE>
underlying Common Stock, as applicable, under circumstances where the
Registration Statement is not filed or declared effective or otherwise does
not remain effective as herein provided. See "Registration Rights Agreement."
USE OF PROCEEDS
The Selling Holders (as defined herein) will receive all of the net proceeds
from any sale of the Preferred Stock, the Debentures issuable upon exchange of
the Preferred Stock and the shares of Common Stock issuable upon conversion of
the Preferred Stock or Debentures, and, accordingly, the Company will receive
none of the proceeds from the sales thereof.
19
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The selected financial data presented below relate to the year ended
December 31, 1992, the ten months ended October 31, 1993, the two months ended
December 31, 1993, the year ended December 31, 1994, the eight months ended
August 31, 1995, the four months ended December 31, 1995, the year ended
December 31, 1996, the nine months ended September 30, 1996 and 1997 and the
three months ended September 30, 1996 and 1997. 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 periods in the year ended December 31, 1992,
the ten months ended October 31, 1993, the two months ended December 31, 1993,
the year ended December 31, 1994, the eight months ended August 31, 1995, the
four months ended December 31, 1995 and the year ended December 31, 1996 were
derived from the audited consolidated financial statements of the Company.
Certain amounts have been reclassified to conform with presentations adopted
in 1997. See "Risk Factors--Risk Factors Related to the Company--Liquidity;
Substantial Indebtedness; Capital Expenditure Requirements" for a description
of the auditor's report issued in connection with the 1996 Consolidated
Financial Statements.
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.
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 the amounts are not
meaningful.
20
<PAGE>
<TABLE>
<CAPTION>
PRIOR PREDECESSOR
COMPANY PREDECESSOR COMPANY REORGANIZED COMPANY
------------------------ ------------------------------------ ----------------------------------------------
EIGHT
TEN MONTHS TWO MONTHS MONTHS FOUR MONTHS NINE MONTHS ENDED
YEAR ENDED ENDED ENDED YEAR ENDED ENDED ENDED YEAR ENDED SEPTEMBER 30
DECEMBER 31, OCTOBER 31, DECEMBER 31, DECEMBER 31, AUGUST 31, DECEMBER 31, DECEMBER 31, ------------------
1992 1993 1993 1994 1995 1995 1996 1996 1997
------------ ----------- ------------ ------------ ---------- ------------ ------------ -------- --------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS AND RATIOS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF
OPERATIONS DATA:
Operating
revenues....... $3,618.7 $2,633.9 $520.8 $3,407.7 $2,218.4 $1,098.5 $3,554.4 $2,751.1 $2,515.1
Operating income
(loss) (1)..... (420.4) (225.7) (58.3) (279.5) 14.6 10.4 (198.5) 33.9 (29.8)
Income (loss)
before income
taxes and
extraordinary
items (2)...... (314.3) (362.6) (88.1) (432.9) (338.3) (32.3) (274.6) (18.3) (68.3)
Provision
(credit) for
income taxes... 3.4 1.3 (0.2) 0.9 (0.1) 1.3 0.4 0.5 0.5
Income (loss)
before
extraordinary
items.......... (317.7) (363.9) (87.9) (433.8) (338.2) (33.6) (275.0) (18.8) (68.8)
Extraordinary
items (3)...... -- 1,075.6 -- (2.0) 140.9 3.5 (9.8) (7.4) (10.9)
Net income
(loss)......... (317.7) 711.7 (87.9) (435.8) (197.3) (30.1) (284.8) (26.2) (79.7)
Preferred stock
dividend
requirements
(4)............ 2.4 15.0 11.6 4.8 36.7 32.7 11.6
Income (loss)
applicable to
common shares.. (90.3) (450.8) (208.9) (34.9) (321.5) (58.9) (91.3)
Weighted average
shares
outstanding.... 33.3 44.2 43.2 52.0
Per share
amounts (5):
Income (loss)
before
extraordinary
items and
special
dividend
requirement.... (1.15) (6.60) (0.73) (1.54)
Net Income
(loss)......... (1.05) (7.27) (1.36) (1.75)
Ratio of
earnings to
combined fixed
charges and
preferred stock
dividends (6).. -- -- -- -- -- -- -- -- --
<CAPTION>
----------------
THREE MONTHS
ENDED
SEPTEMBER 30
----------------
1996 1997
-------- ------
<S> <C> <C>
STATEMENT OF
OPERATIONS DATA:
Operating
revenues....... $1,002.9 $908.4
Operating income
(loss) (1)..... 26.0 63.8
Income (loss)
before income
taxes and
extraordinary
items (2)...... 10.0 47.2
Provision
(credit) for
income taxes... 16.9 33.9
Income (loss)
before
extraordinary
items.......... (6.9) 13.3
Extraordinary
items (3)...... (7.4) (7.0)
Net income
(loss)......... (14.3) 6.3
Preferred stock
dividend
requirements
(4)............ 3.9 3.9
Income (loss)
applicable to
common shares.. (18.2) 2.4
Weighted average
shares
outstanding.... 45.1 56.1
Per share
amounts (5):
Income (loss)
before
extraordinary
items and
special
dividend
requirement.... (0.24) 0.17
Net Income
(loss)......... (.40) .04
Ratio of
earnings to
combined fixed
charges and
preferred stock
dividends (6).. -- 1.09
</TABLE>
<TABLE>
<CAPTION>
PRIOR
PREDECESSOR
COMPANY PREDECESSOR COMPANY REORGANIZED COMPANY
----------- ------------------- --------------------------------
DECEMBER 31, DECEMBER 31
--------------------------------- ------------------ SEPTEMBER 30
1992 1993 1994 1995 1996 1997
----------- --------- ---------- -------- -------- ------------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash
equivalents (7)....... $ 67.9 $ 187.7 $ 138.5 $ 304.3 $ 181.6 $ 104.6
Current assets......... 602.0 728.3 603.8 737.3 625.7 593.3
Net working capital
deficiency............ (316.2) (106.7) (1,238.2) (81.9) (336.4) (425.9)
Flight equipment, net.. 827.7 660.8 508.6 455.4 472.5 558.2
Total property and
equipment, net........ 1,114.3 886.1 693.0 600.1 614.2 678.5
Intangible assets, net. -- 1,024.8 921.7 1,276.0 1,184.8 1,134.7
Total assets........... 2,158.1 2,958.9 2,512.4 2,868.2 2,681.9 2,676.6
Current maturities of
long-term debt and
capital leases (8).... 327.3 108.3 1,149.7 110.4 134.9 104.6
Liabilities subject to
Chapter 11
reorganization
proceedings (9)....... 2,026.9 -- -- -- -- --
Long-term debt, less
current maturities
(8)................... -- 1,053.6 -- 764.0 608.5 593.8
Long-term obligations
under capital leases,
less current
maturities............ -- 376.6 339.9 259.6 220.8 189.6
Shareholders' equity
(deficiency) (10)..... (1,149.7) 18.4 (417.5) 302.9 238.1 219.8
</TABLE>
- -------
(1) Includes special charges of $138.8 million in 1994, $1.7 million in the
eight months ended August 31, 1995 and $85.9 million in 1996. For a
discussion of these and other non-recurring items, see Note 16 to the
1996 Consolidated Financial Statements.
(2) The 1992 results include non-recurring gains of $254.6 million from the
disposition of assets. 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. The eight
months ended August 31, 1995 includes charges of $242.2 million related
to reorganization items.
(3) The extraordinary item in 1993 represents the gain on discharge of
indebtedness pursuant to the consummation of the '93 Reorganization. The
extraordinary item in 1994 represents the charge for a prepayment premium
related to the sale and leaseback of four McDonnell Douglas MD-80
aircraft. 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, while the extraordinary item in
the four months ended December 31, 1995 was the result of the settlement
of a debt of a subsidiary. The extraordinary items in 1996 and 1997
result from the early extinguishment of certain debt.
21
<PAGE>
(4) On March 22, 1996, the Company called for redemption of all of its
outstanding 12% Preferred Stock. The excess of the early redemption price
over the carrying value of the 12% Preferred Stock is reflected as a
$20.0 million "special dividend requirement" in 1996.
(5) No effect has been given to stock options, warrants or potential
issuances of additional Employee Preferred Stock as the impact would have
been anti-dilutive.
(6) For purposes of determining the ratio of earnings to combined fixed
charges and preferred stock dividends, "earnings" consist of earnings
before income taxes, extraordinary items and fixed charges (excluding
capitalized interest), "fixed charges" consist of interest (including
capitalized interest) on all debt and that portion of rental expense that
management believes to be representative of interest and "preferred stock
dividends" consist of preferred stock dividend requirements divided by a
fraction equal to one less the effective income tax rate for the period.
Earnings were not sufficient to cover combined fixed charges and
preferred stock dividends as follows (in millions): for the year ended
December 31, 1992, $457.3; for the ten months ended October 31, 1993,
$481.3; for the two months ended December 31, 1993, $92.4; for the year
ended December 31, 1994, $459.6; for the eight months ended August 31,
1995, $357.3; for the four months ended December 31, 1995, $40.1; for the
year ended December 31, 1996, $340.1; for the three months ended
September 30, 1996, $14.9; and for the nine months ended September 30,
1996 and 1997, $75.4 and $91.5, respectively.
(7) 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.
(8) Long-term debt in 1994 was reclassified to current maturities as a result
of certain alleged defaults and payment defaults. See Note 7 to the 1995
Consolidated Financial Statements.
(9) For periods after January 31, 1992 and before the effective date of the
'93 Reorganization, certain prepetition liabilities, which were subject
to compromise pursuant to the '93 Reorganization, were classified as
liabilities subject to Chapter 11 reorganization proceedings, and the
accrual of interest was discontinued on prepetition debt that was
unsecured or estimated to be undersecured.
(10) No dividends were paid on the Company's outstanding common stock during
the periods presented above.
SELLING HOLDERS
The Preferred Stock was issued and sold in December 1997 pursuant to the
Original Offering in transactions exempt from the registration requirements of
the Securities Act to persons reasonably believed by the Initial Purchasers to
be "qualified institutional buyers" (as defined by Rule 144A) or in
transactions complying with the provisions of Regulation S. The Preferred
Stock, along with the Debentures issuable upon exchange of the Preferred Stock
and the shares of Common Stock issuable upon conversion of the Preferred Stock
or the Debentures, may be offered and sold from time to time by the Selling
Holders pursuant to this Prospectus. The Registration Statement of which this
Prospectus is a part has been filed with the SEC pursuant to the Registration
Rights Agreement.
The Registration Statement has been filed pursuant to Rule 415 under the
Securities Act to afford the holders of the securities offered hereby the
opportunity to sell such securities in a public transaction rather than
pursuant to an exemption from the registration and prospectus delivery
requirements of the Securities Act. In order for a Selling Holder to avail
himself of that opportunity, such holder must notify the Company in writing of
his intention to sell securities and request the Company to file a supplement
to this Prospectus or an amendment to the Registration Statement, if required,
identifying such holder as a Selling Holder and disclosing such other
information concerning the Selling Holder and the securities to be sold as may
then be required by the Securities Act and the rules of the Commission. No
offer or sale pursuant to this Prospectus may be made by any holder until such
a request has been made and until any such supplement has been filed or any
such amendment has become effective. The holders of securities who have made
such a request and as to which any such required supplement or amendment has
been filed or become effective are referred to herein as "Selling Holders."
As of the date of this Prospectus, no holder of securities has made such a
request and, accordingly, no Selling Holders are named herein. The Company
will from time to time supplement or amend this Prospectus to reflect the
required information concerning any Selling Holder.
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<PAGE>
DESCRIPTION OF PREFERRED STOCK
The following description of certain provisions of the Certificate of
Designations, Preferences and Rights Relating to the Preferred Stock (the
"Certificate of Designations") is intended as a summary only and is qualified
in its entirety by reference to the Certificate of Designations, including the
definitions in that document of certain terms. Whenever particular articles,
sections or defined terms of the Certificate of Designations or the
Registration Rights Agreement are referred to herein, it is intended that
those articles, sections or defined terms are to be incorporated by reference
into this Prospectus.
GENERAL
The outstanding shares of Preferred Stock have been duly and validly issued,
fully paid and nonassessable and the holders thereof will have no preemptive
rights in connection therewith. The Preferred Stock is not subject to any
sinking fund or other obligation of the Company to redeem or retire such
stock. Unless converted, redeemed or exchanged, the Preferred Stock will
remain outstanding indefinitely. Any share of Preferred Stock converted,
redeemed, exchanged or otherwise acquired by the Company will be retired and
canceled and will upon cancellation be restored to the status of authorized
but unissued preferred stock, subject to reissuance by the Board of Directors
as Preferred Stock or as shares of preferred stock of any one or more other
series. The Preferred Stock ranks on a parity with the 8% Preferred Stock as
to dividends and amounts payable upon any liquidation, dissolution or winding
up of the Company ("Liquidation"). The Preferred Stock ranks senior to the
Common Stock, the Series A Preferred Stock, if issued, and the Employee
Preferred Stock, and on a parity with all other preferred stock and any other
class or series of stock of the Company, the terms of which expressly provide
that it ranks on a parity with the Preferred Stock, with respect to the
payment of dividends and amounts payable upon any Liquidation of the Company.
No class or series of stock may be created that is senior to the Preferred
Stock with respect to the payment of dividends and amounts payable upon any
Liquidation of the Company without the approval of the holders of at least a
majority of shares of the Preferred Stock then outstanding.
DIVIDENDS
Holders of the Preferred Stock are entitled to receive, when, as and if
declared by the Board of Directors out of the funds of the Company legally
available therefor, a cash dividend at the annual rate of 9 1/4% (equivalent
to $4.625 per share per annum). Dividends and Liquidated Damages, if any, with
respect to the Preferred Stock will be payable quarterly in arrears on March
15, June 15, September 15 and December 15 of each year, commencing March 15,
1998 (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). Dividends on the Preferred Stock will be cumulative and will
accrue without interest from the date of original issuance. Dividends and
Liquidated Damages, if any, will be payable to the holders of record as they
appear on the stock books of the transfer agent for the Company on such record
dates, which shall be not more than 30 days nor less than 10 days preceding
the payment dates, as shall be fixed by the Board of Directors, provided that
holders of shares of Preferred Stock called for redemption on a redemption
date falling between a dividend payment record date and the dividend payment
date shall, in lieu of receiving such dividend payment and Liquidated Damages,
if any, on the dividend payment date fixed therefor, receive such dividend
payment together with all other accrued and unpaid dividends and Liquidated
Damages, if any, on the date fixed for redemption (unless such holders convert
such shares in accordance with the Certificate of Designations, in which case
such holders will receive such payment on the corresponding dividend payment
date). See "--Conversion Rights" below. Dividends payable on the Preferred
Stock for the initial dividend period and dividends payable for any period
shorter or longer than a full dividend period will be computed on the basis of
a 360-day year consisting of twelve 30-day months.
If dividends are not paid in full upon the Preferred Stock and any other
preferred stock ranking on a parity as to dividends with the Preferred Stock,
all dividends declared upon shares of Preferred Stock and such other preferred
stock ranking on a parity as to dividends with the Preferred Stock will be
declared pro rata so that in
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<PAGE>
all cases the amount of dividends declared per share on the 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 Preferred Stock and such
other preferred stock bear to each other. Except as set forth above, unless
full cumulative dividends on the 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 to the Preferred Stock and rights to
acquire the foregoing) 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 Preferred Stock
as to dividends and liquidation preference nor may any Common Stock or any
other stock of the Company ranking junior to or on a parity with the Preferred
Stock as to dividends and liquidation preference be redeemed, purchased, or
otherwise acquired for any consideration by the Company (except for
repurchases from employees under employee benefit plans in effect on the date
of this Prospectus and by conversion into or exchange for stock of the Company
ranking junior to the Preferred Stock as to dividends and liquidation
preference).
Under Delaware law, the Company may declare and pay dividends or make other
distributions on its capital stock only out of surplus, as defined in the DGCL
or, in the case there is no surplus, out of its net profits for the fiscal
year in which the dividend or distribution is declared and/or the prior fiscal
year. No dividend or distribution may be declared, paid or made if the Company
is or would be rendered insolvent by virtue of such dividend or distribution,
or if such declaration, payment or distribution would contravene the
Certificate of Incorporation.
CONVERSION RIGHTS
Each share of 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 Preferred Stock), subject to
adjustment in certain circumstances. The right to convert Preferred Stock
called for redemption will expire at the close of business on the second
business day prior to the redemption date (the "Conversion Termination Date").
For information as to notices of redemption, see "--Optional Redemption by the
Company." Whenever the Company issues shares of Common Stock upon conversion
of 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. See "Description of Capital Stock--Rights Plan."
Holders of shares of Preferred Stock at the close of business on a dividend
payment record date shall be entitled to receive the dividends and Liquidated
Damages, if any, payable on such shares on the corresponding dividend payment
date notwithstanding the conversion thereof following the close of business on
such dividend payment record date and prior to the close of business on such
dividend payment date. However, shares of Preferred Stock surrendered for
conversion during the period between the close of business on any dividend
payment record date and the close of business on the corresponding dividend
payment date (except shares of Preferred Stock called for redemption or
exchange on a redemption date or exchange date or with a Conversion
Termination Date during such period) must be accompanied by payment of an
amount equal to the dividend payment and Liquidated Damages, if any, to be
received on such dividend payment date with respect to such shares of
Preferred Stock presented for conversion; provided, however, that no such
payment need be made if, at the time of conversion, dividends payable on the
shares of Preferred Stock outstanding shall be in arrears for more than 30
days beyond the previous dividend payment date. Except as provided above, the
Company shall make no payment or allowance for unpaid dividends, whether or
not in arrears, on converted shares or for dividends on the shares of Common
Stock issued upon such conversion.
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 (as defined in the Certificate of Designations) on the last trading day
before the conversion date.
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<PAGE>
The conversion price is subject to adjustment upon the occurrence of certain
events, including (i) the issuance of shares of Common Stock as a dividend or
distribution on the Common Stock, (ii) the subdivision or combination of the
outstanding Common Stock, (iii) the issuance to all or substantially all
holders of Common Stock of warrants, options or other rights to subscribe for
or purchase Common Stock (or securities convertible into Common Stock) at a
price per share less than the then Average Current Market Price (as defined in
the Certificate of Designations), (iv) the distribution to all or
substantially all holders of Common Stock of shares of capital stock of the
Company (other than shares of Series A Preferred Stock upon exercise of a
Right), evidences of indebtedness, or other non-cash assets (including
securities of any company other than the Company), (v) the distribution to all
or substantially all holders of Common Stock of warrants, options or other
rights to subscribe for its securities (other than those referred to in (iii)
above) and (vi) the distribution to all or substantially all holders of Common
Stock of cash in an aggregate amount that (together with all other cash
distributions to all or substantially all holders of Common Stock made within
the preceding 12 months not triggering a conversion price adjustment) exceeds
an amount equal to 20% of the Average Current Market Price on the business day
immediately preceding the day on which the Company declares such distribution
multiplied by the number of shares of Common Stock outstanding on such date
(excluding shares held in treasury of the Company). Issuances of options and
securities convertible into Common Stock are deemed to be issuances of the
underlying Common Stock for purposes of adjustments to the conversion price.
Whenever the conversion price is adjusted, the Company will promptly mail to
holders of Preferred Stock a notice of adjustment briefly stating the facts
requiring the adjustment and the manner of computing it. No adjustment of the
conversion price will be required to be made in any case until cumulative
adjustments amount to a change in the conversion price of 1% or more, but any
such adjustment that would otherwise be required to be made shall be carried
forward and taken into account in any subsequent adjustment. All calculations
under the Certificate of Designations will be made either to the nearest cent
or the nearest 1/100 of a share.
Subject to the applicable right of the holders of shares of Preferred Stock
upon a Change in Control, if the Company reclassifies or changes its
outstanding Common Stock, or consolidates with or merges into or sells or
conveys all or substantially all of the assets of the Company as an entirety
to any person, or is a party to a merger or share exchange that reclassifies
or changes its outstanding Common Stock, shares of Preferred Stock will become
convertible into the kind and amount of shares of stock and other securities
and property (including cash) that the holders of shares of Preferred Stock
would have owned immediately after the transaction if the holders had
converted such shares of Preferred Stock into Common Stock immediately before
the effective date of the transaction. If in connection with any such
reclassification, consolidation, merger, sale, transfer, or share exchange
each holder of shares of Common Stock is entitled to elect to receive either
securities, cash or other assets upon completion of such transaction, the
Company will provide or cause to be provided to each holder of Preferred Stock
the right to elect to receive the securities, cash or other assets into which
the Preferred Stock held by such holder will be convertible after completion
of any such transaction on the same terms and subject to the same conditions
applicable to holders of the Common Stock (including, without limitation,
notice of the right to elect, limitations on the period in which such election
will be made and the effect of failing to exercise the election). The above
will similarly apply to successive reclassifications, consolidations, mergers,
sales, transfers or share exchanges.
The Company will reserve and at all times keep available out of its
authorized but unissued stock, for the purpose of effecting the conversion of
the Preferred Stock, such number of shares of its duly authorized Common Stock
as will from time to time be sufficient to effect the conversion of all
outstanding 9 1/4% Preferred Stock.
OPTIONAL REDEMPTION BY THE COMPANY
The Preferred Stock may not be redeemed prior to December 15, 2000. On and
after such date, shares of Preferred Stock may be redeemed at the option of
the Company, in whole or in part (in any integral number of shares), upon not
less than 30 nor more than 60 days' prior notice to each holder of record of
the shares to be redeemed, by first-class mail at the redemption prices set
forth below during the twelve-month periods beginning
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<PAGE>
on December 15 of the years shown below, plus in each case an amount equal to
accrued and unpaid dividends, if any, whether or not earned or declared, and
Liquidated Damages (as defined), if any, to the redemption date.
<TABLE>
<CAPTION>
REDEMPTION PRICE
YEAR PER SHARE
---- ----------------
<S> <C>
2000.................................. $53.24
2001.................................. 52.78
2002.................................. 52.31
2003.................................. 51.85
2004.................................. 51.39
2005.................................. 50.93
2006.................................. 50.46
2007 and thereafter................... 50.00
</TABLE>
If fewer than all of the shares of Preferred Stock are to be redeemed, the
shares to be redeemed shall be selected by lot or pro rata or by any other
equitable manner determined by the Board of Directors in its sole discretion.
In the event that the Company has failed to pay accrued and unpaid dividends
on, and Liquidated Damages, if any, with respect to, the Preferred Stock, it
may not redeem any of the then outstanding shares of the Preferred Stock until
all such accrued and unpaid dividends and Liquidated Damages (including
accrued and unpaid dividends, if any, whether or not earned or declared, and
Liquidated Damages, if any, from the most recent dividend payment date to and
including the redemption date) have been paid in full. On and after the date
fixed for redemption, provided that the redemption price (including any
accrued and unpaid dividends and Liquidated Damages, if any, to and including
the date fixed for redemption) has been duly paid or provided for, dividends
shall cease to accrue on the Preferred Stock called for redemption, such
shares shall no longer be deemed to be outstanding and all rights of the
holders of such shares as stockholders of the Company shall cease, except the
right to receive the monies payable upon such redemption, without interest
thereon, upon surrender of the certificates evidencing such shares.
SPECIAL CONVERSION RIGHTS UPON A CHANGE IN CONTROL
The Preferred Stock has a special conversion right that becomes effective
upon the occurrence of certain types of significant transactions affecting
corporate control or ownership of the Company or the market for the Common
Stock. The purpose of the special conversion right is to provide, as
applicable, partial loss protection to holders of the Preferred Stock upon the
occurrence of a Change in Control at a time when the Market Value (as defined
below) of the Common Stock is less than the then prevailing conversion price.
In such situations, the special conversion right would, for a limited period,
reduce the then prevailing conversion price to the Market Value of the Common
Stock, except that the conversion price will not be reduced to less than a
minimum conversion price of $4.67 per share of Common Stock (which is 66 2/3%
of the closing price of the Common Stock as of November 25, 1997, the date of
the Offering Memorandum relating to the Original Offering, and which is
subject to adjustment as described below). Consequently, to the extent that
the Market Value of the Common Stock is less than the minimum conversion
price, a holder will not be fully protected from loss upon exercise of the
special conversion right.
Under the Certificate of Designations, a "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 of the Company, (ii) the Company sells,
transfers or otherwise disposes of all or substantially all of the assets of
the Company, (iii) when, during any period of 12 consecutive months after the
date of original issuance of the Preferred Stock, individuals who at the
beginning of any such 12-month period constituted the Board of Directors of
the Company (together
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<PAGE>
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 who were either directors at the
beginning of such period or whose election or nomination for election was
previously so approved) cease for any reason to constitute a majority of the
Board of Directors of the Company 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 of the Company, 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.
As used herein, "Market Value" of a share of the Common Stock will be the
average of the Closing Prices (as defined) of the Common Stock for the five
trading days ending on the last trading day preceding the date of the Change
in Control.
As used herein, "Special Conversion Price" will mean the higher of the
Market Value of the Common Stock or $4.67 per share (which amount will, each
time the conversion price is adjusted, be adjusted so that the ratio of such
amount to the conversion price, after giving effect to such adjustment, shall
always be the same as the ratio of $4.67 to the initial conversion price
without giving effect to any such adjustment).
If a Change in Control occurs, a holder exercising a special conversion
right will receive Common Stock or such other securities, property or cash as
may be issuable upon conversion as provided in the Certificate of
Designations; provided, however, the Company or its successor may, at its
option, elect to provide the holder with cash equal to the Market Value of the
number of shares of Common Stock into which the holder's 9 1/4% Preferred
Stock is convertible at the Special Conversion Price. Preferred Stock that is
not converted pursuant to a special conversion right will continue to be
convertible pursuant to the general conversion rights described under the
caption "--Conversion Rights" above.
LIQUIDATION RIGHTS
In the event of any Liquidation of the Company, and after provision is made
for any preferential amounts to which the holders of any preferred stock
ranking senior to the Preferred Stock as to distributions of assets upon
Liquidation may be entitled, holders of Preferred Stock will be entitled to
receive from the Company's assets available for distribution to stockholders a
liquidation preference in the amount of $50.00 per share, plus all accrued and
unpaid dividends, whether or not declared, and Liquidated Damages, if any,
with respect thereto, to the date of Liquidation. Holders of Preferred Stock
will be entitled to receive such amount before any distribution is made on the
Common Stock, Employee Preferred Stock, Series A Preferred Stock, if issued,
or any other series or class of stock hereinafter issued that ranks junior as
to distribution upon Liquidation to the 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 Preferred
Stock as to distributions upon Liquidation. If the Company's assets are
insufficient to make the required payment to holders of Preferred Stock and to
the holders of the 8% Preferred Stock and all other series of then outstanding
preferred stock which rank on a parity as to distribution upon Liquidation
with the Preferred Stock, the Company's assets so available shall be
distributed on a pro rata basis among the holders of the respective series of
the parity preferred in proportion to the amount payable if the assets had
been sufficient. The Preferred Stock ranks on parity as to distribution upon
liquidation to the 8% Preferred Stock. 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 of the Company for these purposes.
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<PAGE>
VOTING RIGHTS
Except as indicated below or otherwise required by law, holders of Preferred
Stock will have no voting rights. If at any time the equivalent of six
quarterly dividends payable on the Preferred Stock are accrued and unpaid
(whether or not consecutive and whether or not earned or declared), the
holders of all outstanding shares of Preferred Stock, 8% Preferred Stock and
any other stock ranking on a parity as to dividends with the shares of
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 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.
In addition, without the vote or consent of the holders of at least a
majority of shares of the Preferred Stock then outstanding, the Company may
not (a) create or issue or increase the authorized number of shares of any
class or series of stock ranking senior to the Preferred Stock either as to
dividends or upon Liquidation, or any security convertible into or exercisable
or exchangeable for such stock, (b) amend, alter or repeal any of the
provisions of the Certificate of Designations or any other provision of the
Certificate of Incorporation so as to affect adversely any right, preference,
privilege or voting power of the Preferred Stock or the holders thereof,
including, without limitation, the right of the holders of the Preferred Stock
to receive Debentures upon the exercise of the option of the Company to
exchange the Preferred Stock for Debentures as described below under "--
Exchange Provisions" or (c) authorize any reclassification of the Preferred
Stock by merger or otherwise; provided, however, that any increase in the
amount of authorized shares of such series or of any other series of preferred
stock, in each case ranking on a parity with or junior to the Preferred Stock
as to dividends and the distribution of assets upon Liquidation, will not be
deemed to affect adversely such rights, preferences or voting powers.
EXCHANGE PROVISIONS
The Preferred Stock may be exchanged, in whole but not in part, at the
option of the Company, for Debentures on any dividend payment date beginning
on December 15, 1999 at the rate of $50.00 principal amount of Debentures for
each share of Preferred Stock outstanding at the time of exchange, provided
that all accrued and unpaid dividends on, and Liquidated Damages, if any, with
respect to, the Preferred Stock through the date of exchange have been paid or
set aside for payment and certain other conditions are met. See "Description
of Debentures." The Debentures will be issuable in denominations of $1,000 and
integral multiples thereof. If the exchange results in an amount of Debentures
that is not an integral multiple of $1,000, the amount in excess of the
closest integral multiple of $1,000 will be paid in cash by the Company. The
Company will mail written notice of its intention to exchange to each holder
of record of the Preferred Stock not less than 30 nor more than 60 days prior
to the date fixed for exchange.
Upon the date fixed for exchange of the Preferred Stock for Debentures (the
"Exchange Date"), the rights of holders of Preferred Stock as stockholders of
the Company shall cease (except the right to receive accrued and unpaid
dividends and Liquidated Damages, if any, to the Exchange Date) and their
shares of Preferred Stock no longer will be deemed outstanding and will
represent only the right to receive the Debentures and any accrued dividends
on, and any Liquidated Damages with respect to, the Preferred Stock. If full
cumulative dividends on, and Liquidated Damages, if any, with respect to, the
Preferred Stock through the Exchange Date have not been paid in full, or if
funds have not been set aside to provide for payment in full of such dividends
and Liquidated Damages, if any, the Company may not exercise its option to
exchange the Preferred Stock for the Debentures. The exchange of the Preferred
Stock for the Debentures will be a taxable event and, therefore, may result in
a tax liability for the holder exchanging such stock without any correlative
cash payment to such holder. See "Certain Federal Income Tax Considerations--
Exchange for Debentures."
28
<PAGE>
In the event that the Company elects to exchange the Preferred Stock for the
Debentures, the Company will endeavor to comply with all federal and state
securities laws regulating the offer and delivery of the Debentures upon
exchange of the Preferred Stock, including compliance with the Trust Indenture
Act of 1939 (the "Trust Indenture Act").
REGISTRATION RIGHTS AGREEMENT
At the initial closing of the sale (the "Initial Closing") of the Preferred
Stock to the Initial Purchasers, the Company and the Initial Purchasers
entered into the Registration Rights Agreement providing for the registration
of resales of the Transfer Restricted Securities (as defined herein). See
"Registration Rights Agreement."
TRANSFER AGENT, REGISTRAR AND DIVIDEND DISBURSING AGENT
American Stock Transfer & Trust Company acts as transfer agent and registrar
for the Common Stock and as transfer agent, registrar and dividend disbursing
agent for the Preferred Stock (the "Transfer Agent").
29
<PAGE>
DESCRIPTION OF DEBENTURES
If the Company elects to exchange the Preferred Stock for the Debentures,
the Company will issue the Debentures under an indenture (the "Indenture") to
be entered into between the Company and a trustee selected by the Company
reasonably satisfactory to the Initial Purchasers (together with any successor
trustee, the "Trustee"), at a rate of $50.00 principal amount of Debentures
for each share of Preferred Stock so exchanged. The terms of the Debentures
include those set forth in the Indenture and those made part of the Indenture
by reference to the Trust Indenture Act as in effect on the date of the
Indenture. The Debentures are subject to all such terms. Copies of the
proposed form of the Indenture can be obtained from the Initial Purchasers,
upon request. The following description of certain provisions of the Indenture
and the Debentures is intended as a summary only and is qualified in its
entirety by reference to the Indenture and the Debentures, including the
definitions in those documents of certain terms. Whenever particular articles,
sections or defined terms of the Debentures, the Indenture or the Registration
Rights Agreement are referred to, it is intended that those articles, sections
or defined terms are to be incorporated by reference into this Prospectus.
GENERAL
The Debentures will be unsecured, subordinated obligations of the Company,
will be limited to an aggregate principal amount equal to the aggregate
liquidation preference of the Preferred Stock and will mature on December 15,
2007. The Debentures will bear interest at the same annual rate as the annual
rate shown on the cover of the Prospectus for the dividends payable on the
Preferred Stock, from the date of issuance, or from the most recent interest
payment date to which interest has been paid or provided for, payable
semiannually in arrears on June 15 and December 15 of each year, commencing
with the first of such dates to occur after the Exchange Date, to the person
in whose name the Debenture is registered at the close of business on the
preceding June 1 and December 1, as the case may be. Interest and Liquidated
Damages, 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,
provided that holders of Debentures called for redemption on a redemption date
falling between an interest payment record date and the interest payment date
shall, in lieu of receiving such interest and Liquidated Damages, if any, on
the interest payment date fixed therefor, receive such interest payment
together with all other accrued and unpaid interest and Liquidated Damages, if
any, on the date fixed for redemption (unless such holders convert such
Debentures in accordance with the Indenture, in which case such holders will
receive such payment on the corresponding interest payment date). Interest
will be computed on the basis of a 360-day year of twelve 30-day months. The
Debentures will not be subject to any sinking fund. Principal of and premium,
if any, and interest on, and Liquidated Damages, if any, with respect to, the
Debentures will be payable, and the transfer of the Debentures will be
registrable, at the office or agency of the Company maintained for such
purposes. In addition, payment of interest and Liquidated Damages, 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
Debentures.
The Debentures will be issued only in fully registered form, without
coupons, in denominations of $1,000 and integral multiples of $1,000. No
service charge will be made for any registration of transfer or exchange of
the Debentures, 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.
The Indenture does not contain any restriction on the payment of dividends
or the repurchase of securities of the Company (except in the case of an event
of default under the Indenture) or any financial covenants. The covenants and
provisions contained in the Debentures and the Indenture would not necessarily
afford the holders of the Debentures protection in the event of a highly
leveraged transaction involving the Company.
SUBORDINATION
The payment of principal of and premium, if any, and interest on, and
Liquidated Damages, if any, with respect to, the Debentures will, to the
extent set forth in the Indenture, be subordinated and subject in right of
payment to the prior payment in full of all Senior Indebtedness of the Company
(as defined below), whether
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<PAGE>
outstanding at the date of the Indenture or later incurred. In the event of
any default in the payment of the principal of, or interest on, any Senior
Indebtedness or any default permitting the acceleration of Senior Indebtedness
where notice of such default has been given to the Company, no payment with
respect to the payment of principal of and premium, if any, and interest on,
and Liquidated Damages, if any, with respect to, the Debentures (including
repurchases of the Debentures at the option of the holder) may be made by the
Company unless and until such default has been cured or waived; provided that
nothing in the above-described provision will prevent the making of any
payment in respect of the Debentures for a period of more than 89 days after
the date such written notice of default is given unless the maturity of the
Senior Indebtedness has been accelerated, in which case no payment on the
Debentures may be made until such acceleration has been waived or such Senior
Indebtedness has been paid in full. Upon any payment or distribution of the
Company's assets to creditors upon any dissolution, winding up, liquidation,
reorganization, bankruptcy, insolvency, receivership or other proceedings
relating to the Company, whether voluntary or involuntary, the holders of
Senior Indebtedness will first be entitled to receive payment in full of all
amounts due thereon before the holders of the Debentures will be entitled to
receive any payment upon the principal of, premium, if any, and interest on,
and Liquidated Damages, if any, with respect to, the Debentures.
By reason of such subordination, in the event of the insolvency of the
Company, holders of Debentures may recover less ratably than holders of Senior
Indebtedness and other creditors of the Company.
"Senior Indebtedness" is defined in the Indenture as the principal of,
premium, if any, and interest on (a) any and all other indebtedness and
obligations of the Company (including indebtedness of others guaranteed by the
Company) other than the Debentures, whether or not contingent and whether
outstanding on the date of the Indenture or thereafter created, incurred or
assumed, which (i) is for money borrowed; (ii) is evidenced by any bond, note,
debenture or similar instrument; (iii) represents the unpaid balance on the
purchase price of any property, business, or asset of any kind; (iv) is an
obligation of the Company as lessee under any and all leases of property,
equipment or other assets required to be capitalized on the balance sheet of
the lessee under generally accepted accounting principles; (v) is a
reimbursement obligation of the Company with respect to letters of credit;
(vi) is an obligation of the Company with respect to interest swap obligations
and foreign exchange agreements; or (vii) is an obligation of others secured
by a lien to which any of the properties or assets (including, without
limitation, leasehold interests and any other tangible or intangible property
rights) of the Company are subject, whether or not the obligations secured
thereby shall have been assumed by the Company or shall otherwise be the
Company's legal liability, and (b) any deferrals, amendments, renewals,
extensions, modifications and refundings of any indebtedness or obligations of
the types referred to above; provided that Senior Indebtedness shall not
include (i) the Debentures; (ii) any indebtedness or obligation of the Company
which, by its terms or the terms of the instrument creating or evidencing it,
is both subordinated to any other indebtedness or obligations of the Company
and is not superior in right of payment to the Debentures (including
debentures issued in exchange for the 8% Preferred Stock as in accordance with
its terms); (iii) any indebtedness or obligation of the Company to any of its
subsidiaries; and (iv) any indebtedness or obligation which is both incurred
by the Company in connection with the purchase of assets, materials or
services in the ordinary course of business and constitutes an unsecured trade
payable.
As of September 30, 1997, the amount of the Company's Senior Indebtedness
aggregated approximately $965.1 million and the amount of the trade payables
and other indebtedness of the Company's subsidiaries was immaterial in amount.
The Debentures will be effectively subordinated to all rights of third party
creditors of the Company's subsidiaries. The Company and its subsidiaries
expect from time to time to incur additional indebtedness, including, but not
limited to, Senior Indebtedness. The Indenture will not prohibit or limit the
incurrence of such additional indebtedness.
CONVERSION RIGHTS
The Debentures may be converted in denominations of $1,000 or integral
multiples thereof at any time prior to maturity at the option of the holder
into fully paid, nonassessable shares of Common Stock at a conversion price
equal to the initial conversion price with respect to the Preferred Stock set
forth on the cover page of this
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<PAGE>
Prospectus, as subsequently adjusted. The right to convert Debentures called
for redemption will expire at the close of business on the second business day
prior to the redemption date (the "Conversion Termination Date") (unless the
Company shall default in making the redemption payment when due, in which case
the conversion right shall terminate at the close of business on the date such
default is cured and such Debenture is redeemed). In the case of redemption at
the option of the holder as a result of a Change in Control, such right will
terminate upon receipt by the Company of a written notice of the exercise of
such option (unless the Company shall default in making the repurchase payment
when due, in which case the conversion right shall terminate at the close of
business on the date such default is cured and such Debenture is repurchased).
For information as to notices of redemption, see "--Optional Redemption by the
Company." Whenever the Company issues shares of Common Stock upon conversion
of the Debentures, 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. See "Description of Capital Stock--Rights Plan."
Holders of Debentures at the close of business on an interest payment record
date shall be entitled to receive the interest and Liquidated Damages, if any,
payable on the corresponding interest payment date notwithstanding the
conversion thereof following the close of business on such interest payment
record date and prior to the close of business on such interest payment date.
However, Debentures surrendered for conversion during the period between the
close of business on any interest payment record date and the close of
business on the corresponding interest payment date (except Debentures called
for redemption on a redemption date or with a Conversion Termination Date
during such period) must be accompanied by payment of an amount equal to the
interest payment and Liquidated Damages, if any, to be received on such
interest payment date with respect to such Debentures presented for
conversion. Except as provided above, the Company shall make no payment or
allowance for unpaid interest on converted Debentures or for dividends on the
shares of Common Stock issued upon such conversion.
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 (as defined in the Indenture) on the last trading day before the
conversion date.
The conversion price is subject to adjustment upon the occurrence of certain
events, including (i) the issuance of shares of Common Stock as a dividend or
distribution on the Common Stock, (ii) the subdivision or combination of the
outstanding Common Stock, (iii) the issuance to all or substantially all
holders of Common Stock of warrants, options or other rights to subscribe for
or purchase Common Stock (or securities convertible into or exchangeable for
Common Stock) at a price per share less than the then Average Current Market
Price, (iv) the distribution to all or substantially all holders of Common
Stock of shares of capital stock of the Company (other than Common Stock and
shares of Series A Preferred Stock upon exercise of Rights), evidences of
indebtedness, or other non-cash assets (including securities of any company
other than the Company), (v) the distribution to all or substantially all
holders of Common Stock warrants, options or other rights to subscribe for its
securities (other than those referred to in clause (iii) above) and (vi) the
distribution to all or substantially all holders of Common Stock of cash in an
aggregate amount that (together with all other cash distributions to all or
substantially all holders of Common Stock made within the preceding 12 months
not triggering a conversion price adjustment) exceeds an amount equal to 20%
of the Average Current Market Price on the business day immediately preceding
the day on which the Company declares such distribution multiplied by the
number of shares of Common Stock outstanding on such date (excluding shares
held in the treasury of the Company). Issuances of options and securities
convertible into Common Stock are deemed to be issuances of the underlying
Common Stock for purposes of adjustments to the conversion price. Whenever the
conversion price is adjusted, the Company will promptly mail to holders of the
Debentures a notice of adjustment briefly stating the facts requiring the
adjustment and the manner of computing it. No adjustment of the conversion
price will be required to be made in any case until cumulative adjustments
amount to a change in the conversion price of 1% or more, but any such
adjustment that would otherwise be required to be made shall be carried
forward and taken into account in any subsequent adjustment. All calculations
under the Indenture will be made either to the nearest cent or the nearest
1/100 of a share.
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<PAGE>
Subject to the applicable right of the holders of the Debentures upon a
Change in Control, and subject to the provisions of the Indenture described
below under "--Merger, Sale or Consolidation," if the Company reclassifies or
changes its outstanding Common Stock, or consolidates with or merges into or
sells or conveys all or substantially all of the assets of the Company as an
entirety to any person, or is a party to a merger or share exchange that
reclassifies or changes its outstanding Common Stock, the Debentures will
become convertible into the kind and amount of shares of stock and other
securities and property (including cash) that the holders of the Debentures
would have owned immediately after the transaction if the holders had
converted the Debentures into Common Stock immediately before the effective
date of the transaction. If in connection with any such reclassification,
consolidation, merger, sale, transfer, or share exchange each holder of shares
of Common Stock is entitled to elect to receive either securities, cash or
other assets upon completion of such transaction, the Company will provide or
cause to be provided to each holder of the Debentures the right to elect to
receive the securities, cash or other assets into which the Debentures held by
such holder will be convertible after completion of any such transaction on
the same terms and subject to the same conditions applicable to holders of the
Common Stock (including, without limitation, notice of the right to elect,
limitations on the period in which such election will be made and the effect
of failing to exercise the election). The above will similarly apply to
successive reclassifications, consolidations, mergers, sales, transfers or
share exchanges.
The Company will reserve and at all times keep available out of its
authorized but unissued stock, for the purpose of effecting the conversion of
the Debentures, such number of shares of its duly authorized Common Stock as
will from time to time be sufficient to effect the conversion of all
outstanding Debentures.
OPTIONAL REDEMPTION BY THE COMPANY
The Debentures may not be redeemed prior to December 15, 2000. On or after
December 15, 2000, the Debentures may be redeemed at the option of the
Company, in whole or in part (in any integral multiple of $1,000), upon not
less than 30 and no more than 60 days' prior notice to each holder of the
Debentures to be redeemed, by first-class mail, at the redemption prices
(expressed as a percentage of principal amount) set forth below during the
twelve-month periods beginning on December 15 of the years shown below, plus
in each case an amount equal to accrued and unpaid interest and Liquidated
Damages, if any, with respect to the Debentures to and including the
redemption date.
<TABLE>
<CAPTION>
REDEMPTION PRICE
YEAR PER DEBENTURE
---- ----------------
<S> <C>
2000........................ 106.48%
2001........................ 105.55%
2002........................ 104.63%
2003........................ 103.70%
2004........................ 102.78%
2005........................ 101.85%
2006........................ 100.93%
</TABLE>
If less than all of the Debentures are to be redeemed, the Debentures to be
redeemed shall be selected by lot or pro rata or by any other equitable manner
determined by the Trustee in its sole discretion. On or after the redemption
date, interest will cease to accrue on the Debentures or portions thereof
called for redemption.
PURCHASE OF DEBENTURES AT THE OPTION OF HOLDERS UPON A CHANGE IN CONTROL
If at any time there occurs a Change in Control of the Company, each holder
of Debentures shall have the right upon receipt of a Repurchase Right Notice
(as defined in the Indenture), at such holder's option, to require the Company
to repurchase all of such holder's Debentures, or a portion thereof which is
$1,000 or any integral multiple thereof, on the date (the "Repurchase Date")
that is no later than 45 days after the date of the Repurchase Right Notice at
a repurchase price equal to 100% of the principal amount thereof, plus accrued
and unpaid interest to the Repurchase Date and Liquidated Damages, if any,
with respect to the Debentures.
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<PAGE>
On or before the 30th day following any Change in Control, the Company, or,
at the request of the Company, the Trustee, shall mail the Repurchase Right
Notice to each holder of record of the Debentures and the Trustee stating (i)
that a Change in Control has occurred and that such holder has the right to
require the Company to repurchase such holder's Debentures, (ii) the
Repurchase Date, (iii) the date by which the right to cause repurchase must be
exercised, (iv) the price at which such repurchase is to be made, if the right
to cause repurchase is exercised and (v) a description of the procedure which
such holder must follow to exercise a right to cause repurchase. The Company
shall deliver a copy of the Repurchase Right Notice to the Trustee. The
Company shall also 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 such holder's right to exercise a repurchase right.
To exercise the repurchase right, on or before the 30th day after the date
of the Repurchase Right Notice, holders of Debentures must deliver written
notice to the Company (or an agent designated by the Company for such
purposes) of the holder's exercise of such right, together with the Debentures
with respect to which the right is being exercised, duly endorsed for
transfer. Such written notice shall be irrevocable except with respect to
conversions permitted prior to the Repurchase Date.
The definition of "Change in Control" in the Indenture will be identical to
the definition of such term in the Certificate of Designations. See
"Description of Preferred Stock--Special Conversion Rights Upon a Change in
Control."
The right to require the repurchase of Debentures shall not continue after a
discharge of the Company from its obligations under the Debentures and the
Indenture in accordance therewith. See "--Satisfaction and Discharge of the
Indenture." Repurchase of the Debentures may, under certain circumstances,
constitute a default or event of default under Senior Indebtedness then
outstanding and, in such instances, repurchase of the Debentures would be
prohibited unless and until such default has been cured or waived. See "--
Subordination." The failure to repurchase the Debentures in such instance
would constitute an Event of Default. See "--Events of Default."
If the Repurchase Date is between a regular record date for the payment of
interest and the next succeeding interest payment date, any Debenture to be
repurchased must be accompanied by payment of an amount equal to the interest
and Liquidated Damages, 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 Debenture being repurchased, and Liquidated Damages,
if any, with respect thereto, will be paid on such next succeeding interest
payment date to the registered holder of such Debenture on the immediately
preceding record date. A Debenture repurchased on an interest payment date
need not be accompanied by any such payment, and the interest on the principal
amount of the Debenture being repurchased and Liquidated Damages, if any, with
respect thereto, will be paid on such interest payment date to the registered
holder of such Debenture on the corresponding record date.
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 Debentures 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 Debentures following the occurrence of a Change in Control may be
limited by the Company's then existing financial resources. There can be no
assurance that sufficient funds will be available when necessary to make any
required purchases. The provisions under the Indenture relative to the
Company's obligation to make an offer to repurchase the Debentures 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 Debentures.
If any repurchase pursuant to the foregoing provisions constitutes an
"issuer tender offer" as defined in Rule 13e-4 under the Exchange Act, the
Company will comply with the requirements of Rule 13e-4, Rule 14e-1 and any
other tender offer rules under the Exchange Act which then may be applicable,
including the filing of an
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<PAGE>
Issuer Tender Offer Statement on Schedule 13E-4 with the Commission and the
furnishing of certain information contained therein to the Debenture holders.
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 Debentures elect to require the Company to repurchase
the Debentures 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 Debentures. The Change in Control
purchase feature of the Debentures 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 management's knowledge of any specific effort to obtain control
of the Company by means of a merger, tender offer, solicitation or otherwise,
or part of a plan by management to adopt a series of anti-takeover provisions.
MERGER, SALE OR CONSOLIDATION
Without limitation of the provisions of the Indenture described above
regarding a Change in Control, the Company may merge, consolidate or transfer
all or substantially all of its properties and assets as an entirety and the
Company may permit any person to consolidate with or merge into the Company or
transfer all or substantially all of its properties and assets as an entirety
to the Company; provided that, among other things, (a) the successor person is
the Company or another corporation organized and existing under the laws of
the United States, any state thereof or the District of Columbia that assumes
the Company's obligations on the Debentures and under the Indenture and (b)
immediately before and immediately after giving effect to such transaction, no
Event of Default shall have occurred and be continuing.
EVENTS OF DEFAULT
The following shall constitute Events of Default with respect to the
Debentures: (i) failure to pay the principal of, premium, if any, on, and
Liquidated Damages, if any, with respect to, any Debenture when such amounts
become due and payable at maturity, upon acceleration or otherwise, whether or
not such payment is prohibited by the subordination provisions of the
Indenture; (ii) failure to pay interest on the Debentures when due, whether or
not such payment is prohibited by the subordination provisions of the
Indenture, and such failure continues for a 30-day period; (iii) a default in
the observance or performance of any other covenant or agreement of the
Company in the Debentures or the Indenture that continues for the period and
after the notice specified below; (iv) an event of default shall have occurred
and be continuing under any other evidence of indebtedness of the Company or
any of its subsidiaries, 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 million and such acceleration is not rescinded or
indebtedness is not paid or discharged for the period and after the notice
specified below; (v) any final judgment or judgments for payment of money in
excess of $15 million in the aggregate shall be rendered against the Company
or a subsidiary and shall remain unstayed, unsatisfied or undischarged for the
period and after the notice specified below; and (vi) certain events of
bankruptcy, insolvency or reorganization. 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 Debentures and, if
any default exists, describing such default.
A default under clause (iii), (iv) or (v) above is not an Event of Default
until the Trustee or the holders of at least 25% in principal amount of the
then outstanding Debentures notify the Company of the default and the Company
does not cure the default within 60 days with respect to clauses (iii) or (v),
and within 30 days with
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<PAGE>
respect to clause (iv), 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 Debentures 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) 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 Debentures then outstanding, by notice to
the Company and the Trustee, may declare the principal amount of the
Debentures, plus accrued interest and Liquidated Damages, if any, to be
immediately due and payable. In case an Event of Default resulting from
certain events of bankruptcy, insolvency or reorganization 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 Debentures. 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 Debentures then outstanding upon
conditions provided in the Indenture, except a default in the payment of
principal, or interest on, or Liquidated Damages, if any, with respect to, any
Debenture or in respect of a covenant or provision of the Indenture which
cannot be modified or amended without the consent of the holder of each
Debenture. Except to enforce the right to receive payment when due of
principal, premium, if any, interest, and Liquidated Damages, if any, no
holder of a Debenture may institute any proceeding with respect to the
Indenture 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 Debentures 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 Debentures
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 Debentures 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 Debenture 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 Debentures (or,
prior to the issuance or the Debentures, with the consent of the holders of
not less than a majority of the number of then outstanding shares of Preferred
Stock); provided, however, that no such modification or amendment may, without
the consent of all of the holders of the Debentures then outstanding (or,
prior to the issuance of the Debentures, without the consent of all of the
holders of the then outstanding shares of Preferred Stock), (i) extend the
fixed maturity of any Debenture, reduce the rate or extend the time of payment
of interest on, or Liquidated Damages, if any, with respect to, any Debenture,
reduce the principal amount, or premium, if any, on, or Liquidated Damages, if
any, with respect to, any Debenture, alter the redemption or mandatory
repurchase provisions or adversely affect the repurchase rights with respect
to any Debenture, impair the right of a holder to institute suit for payment
thereof, change the currency in which the Debentures are payable or impair the
right to convert the Debentures into stock, securities or other property or
assets (including cash) subject to the terms set forth in the Indenture, (ii)
except as permitted under the Indenture, increase the conversion price or
otherwise modify or affect in any manner adverse to the holders of the
Debentures the conversion provisions of the Indenture or (iii) reduce the
percentage of Debentures (or the number of shares of Preferred Stock), the
consent of the holders of which is required for any modification or waiver.
The Indenture may not be amended to alter the subordination of any outstanding
Debentures without consent of each holder of Senior Indebtedness then
outstanding that would be adversely affected thereby. Without the consent of
any holders of the Debentures, the Company and the Trustee may amend or
supplement the Debentures or the Indenture to cure any ambiguity, defect or
inconsistency, to provide for uncertificated Debentures in addition to or in
place of certificated Debentures, to provide for the assumption of the
Company's obligations to holders of
36
<PAGE>
the Debentures in the case of a merger or consolidation or transfer of all or
substantially all of the Company's assets, or to make any change that does not
materially adversely affect the rights of any holder of the Debentures.
The holders of a majority in aggregate principal amount of outstanding
Debentures may waive any past default under the Indenture, except a default in
the payment of principal, premium, if any, interest or Liquidated Damages, if
any, or default with respect to certain covenants under the Indenture.
The consent of the holders of the Debentures 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 Debentures a notice briefly describing such
amendment. However, the failure to give such notice to all holders of the
Debentures, or any defect therein, will not impair or affect the validity of
the amendment.
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 Debentures 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 Debentures by accepting a
Debenture waives and releases all such liability.
SATISFACTION AND DISCHARGE OF THE INDENTURE
The Indenture will provide that the Company may terminate its obligations
under the Indenture at any time by delivering all outstanding Debentures to
the Trustee for cancellation and paying all sums required to be paid pursuant
to the terms of the Indenture. In addition, the Company will be permitted to
terminate all of its obligations under the Indenture by irrevocably depositing
with the Trustee money or U.S. government obligations sufficient to pay
principal of and interest on and Liquidated Damages, if any, with respect to
the Debentures to maturity or redemption and all other sums payable pursuant
to the terms of the Indenture, after complying with certain other procedures
set forth in the Indenture.
TRANSFER AND EXCHANGE
A holder may transfer or exchange the Debentures 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 Company is not required to
transfer or exchange any Debenture selected for redemption. Also, the Company
is not required to transfer or exchange any Debenture for a period of 15 days
before a selection of Debentures to be redeemed.
The registered holder of a Debenture may be treated as the owner of it for
all purposes.
DELIVERY AND FORM
The Debentures to be issued upon exchange of the Preferred Stock as set
forth herein will be issued in registered form. Transfers of Debentures must
be made in accordance with the terms of the Indenture.
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 Trust Indenture Act, the
Trustee will be permitted to engage in other transactions; however, if it
acquires any conflicting interest, as described in the Trust Indenture Act, it
must eliminate such conflict or resign.
REGISTRATION RIGHTS AGREEMENT
At the Initial Closing, the Company and the Initial Purchasers entered into
the Registration Rights Agreement providing for the registration of the
resales of Transfer Restricted Securities. See "Registration Rights
Agreement."
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<PAGE>
REGISTRATION RIGHTS AGREEMENT
Pursuant to the Registration Rights Agreement between the Company and the
Initial Purchasers, the Company was required to file and did file with the
Commission, within 60 days after the date of original issuance of the
Preferred Stock, the Registration Statement to register the resales of
Transfer Restricted Securities by the holders thereof who satisfy certain
conditions relating to the provision of information in connection with the
Registration Statement. The Company is obligated to use its reasonable best
efforts to cause the Registration Statement to become effective within 150
days from the date of original issuance of the Preferred Stock and to keep
such Registration Statement effective until the earlier of (i) the sale of all
securities covered by the Registration Statement and (ii) the expiration of
two years after the date of original issuance of the Preferred Stock or, if
the period applicable under Rule 144(k) under the Securities Act, or any
successor provision for such securities is shortened, such shorter period. For
purposes of the foregoing, "Transfer Restricted Securities" means each share
of Preferred Stock, each Debenture, or each underlying share of Common Stock,
as applicable, until the date on which such share of Preferred Stock,
Debenture or underlying share of Common Stock, as applicable, has been
effectively registered under the Securities Act and disposed of in accordance
with the Registration Statement, the date on which such share of Preferred
Stock, Debenture or underlying share of Common Stock, as applicable, is
distributed to the public pursuant to Rule 144 or the date on which such share
of Preferred Stock, Debenture or underlying share of Common Stock, as
applicable, may be sold or transferred pursuant to Rule 144(k) (or any similar
provisions then in force).
If the Registration Statement (i) has not been declared effective by the
Commission within 150 days after December 2, 1997, or (ii) is filed and
declared effective but shall thereafter cease to be effective (without being
succeeded immediately by an additional Registration Statement filed and
declared effective for any reason) for a period of time which shall exceed 90
days in the aggregate during any calendar year (each such event referred to in
clauses (i) through (iii), a "Registration Default"), the Company will pay
liquidated damages (the "Liquidated Damages") to each holder of Transfer
Restricted Securities, during the first 90-day period immediately following
the occurrence of such Registration Default in an amount equal to $0.0025 per
week per share of Preferred Stock (subject to adjustment in the event of stock
splits, stock recombinations, stock dividends and the like), $0.05 per week
per $1,000 principal amount of Debentures and $0.01 per week per share
(subject to adjustment in the event of stock splits, stock recombinations,
stock dividends and the like) of Common Stock constituting Transfer Restricted
Securities held by such holder. The amount of the Liquidated Damages will
increase by an additional $0.0025 per week per share of Preferred Stock
(subject to adjustment as set forth above), $0.05 per week per $1,000
principal amount of Debentures or $0.01 per week per share (subject to
adjustment as set forth above) of Common Stock constituting Transfer
Restricted Securities for each subsequent 90-day period until the Registration
Statement is filed, declared effective, or the Registration Statement again
becomes effective, as the case may be, up to a maximum amount of Liquidated
Damages with respect to any Registration Default of $0.0125 per week per share
of Preferred Stock (subject to adjustment as set forth above), $0.25 per week
per $1,000 principal amount of Debentures or $0.05 per week per share (subject
to adjustment as set forth above) of Common Stock constituting Transfer
Restricted Securities. All accrued Liquidated Damages shall be paid to holders
of Transfer Restricted Securities by wire transfer of immediately available
funds or by Federal funds check by the Company on each dividend payment date,
interest payment date, Repurchase Date (as defined in the Indenture),
redemption date under the Indenture or Redemption Date (as defined in the
Certificate of Designations), as applicable. If all of the outstanding shares
of Preferred Stock or all of the outstanding principal amount of the
Debentures have been converted, then the Liquidated Damages payment date will
be the dividend payment date that would have been applicable had such
Preferred Stock not been converted (unless all of the shares of Preferred
Stock have been exchanged for Debentures, in which case the Liquidated Damages
payment date will be the interest payment date that would have been applicable
had such Debentures not been converted). Following the cure of a Registration
Default, Liquidated Damages will cease to accrue with respect to such
Registration Default. Liquidated Damages, to the extent payable, must be paid
on the applicable dividend payment date regardless of whether or not a
dividend on the Preferred Stock is paid on such date.
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Holders of the Preferred Stock, Debentures and Common Stock will be required
to make certain representations to the Company (as described in the
Registration Rights Agreement) and will be required to deliver information to
be used in connection with the Registration Statement and to provide comments
on the Registration Statement within the time periods set forth in the
Registration Rights Agreement in order to have their Preferred Stock,
Debentures and Common Stock included in the Registration Statement and benefit
from the provisions regarding Liquidated Damages set forth in the preceding
paragraph. The Company has agreed to 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 any beneficial owner of Preferred Stock, Debentures or
shares of Common Stock issuable upon conversion thereof to sell Transfer
Restricted Securities without registration under the Securities Act within the
limitation of the exemptions provided by (i) Rule 144, as such rule may be
amended from time to time, (ii) Rule 144A, as such rule may be amended from
time to time, or (iii) any similar rules or regulations hereafter adopted by
the Commission.
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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 Prospectus, there are no
plans, agreements or understandings relative to the issuance of any additional
series of preferred stock other than the Preferred Stock and 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 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 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
Preferred Stock and, if issued, upon conversion of the Debentures, will be,
upon issuance, fully paid and nonassessable. As of December 31, 1997,
51,392,950 shares of Common Stock were issued and outstanding and were held by
approximately 20,155 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").
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
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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 (including
shares issued upon conversion of the Preferred Stock or the Debentures) 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 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).
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"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 will
be junior to the 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 Preferred Stock and 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.
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Liquidation Preference and Other Rights
Subject to the issuance by the Company of preferred stock with senior rights
(including the Preferred Stock and 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 Corporation 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 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, 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% (equivalent to $4.00 per share per annum),
when, as and if declared by the Board of Directors out of funds legally
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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 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 in respect of distributions of assets upon
Liquidation. Neither a consolidation or merger of the Company with another
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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 Convertible Subordinated Debentures due 2006 (the "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
nonassessable shares of Common Stock and may be redeemed on and after March
15, 1999 at the option of the Company.
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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
"Description of Capital Stock--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 (as
defined herein), 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
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of the total number of directors that the Corporation 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
Preferred Stock and 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 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.
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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,
48
<PAGE>
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 66 2/3% 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 66 2/3%
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.
49
<PAGE>
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
PROSPECTIVE PURCHASERS ARE STRONGLY URGED TO CONSULT THEIR OWN TAX ADVISORS
REGARDING THE TAX CONSEQUENCES OF ACQUIRING, HOLDING OR DISPOSING OF THE
PREFERRED STOCK OR DEBENTURES IN LIGHT OF THEIR PARTICULAR CIRCUMSTANCES, AND
THE CONSEQUENCES UNDER FEDERAL, STATE, LOCAL AND FOREIGN TAX LAWS.
PLAN OF DISTRIBUTION
The Company will not receive any of the proceeds from the sale of any
Preferred Stock, Debentures or shares of Common Stock issuable upon conversion
of the Preferred Stock or the Debentures pursuant to this Prospectus, all of
which will be sold by Selling Holders. Such securities as offered hereby may
be sold from time to time to purchasers directly by the Selling Holders;
alternatively, the Selling Holders may from time to time offer such securities
to and through underwriters, broker/dealers or agents, who may receive
compensation in the form of underwriting discounts, concessions or commissions
from the Selling Holders or the purchasers of such securities for whom they
may act as agents. The Selling Holders and any underwriters, broker/dealers or
agents that participate in the distribution of such securities may be deemed
to be "underwriters" within the meaning of the Securities Act and any profit
on the sale of such securities by them and any discounts, commissions or other
compensation received by any such underwriter, broker/dealer or agent may be
deemed to be underwriting discounts and commissions under the Securities Act.
The Preferred Stock, the Debentures and the shares of Common Stock issuable
upon conversion of such Preferred Stock or Debentures offered hereby may be
sold from time to time in one or more transactions at fixed prices, at
prevailing market prices at the time of sale, at varying prices determined at
the time of sale or at negotiated prices. The sale of the such securities may
be effected in transactions (which may involve crosses or block transactions)
(i) on any national securities exchange or quotation service on which the such
securities may be listed or quoted at the time of sale, (ii) in the over-the-
counter market, (iii) in transactions otherwise than on such exchanges or in
the over-the-counter market, or (iv) through the writing of options. At the
time a particular offering of such securities is made, a Prospectus
Supplement, if required, will be distributed which will set forth the
aggregate amount and type of securities being offered and the terms of the
offering, including the name or names of any underwriters, broker/dealers or
agents, any discounts, commissions and other terms constituting compensation
from the Selling Holders and any discounts, commissions or concessions allowed
or reallowed or paid to broker/dealers.
To comply with the securities laws of certain jurisdictions, if applicable,
the Preferred Stock, the Debentures and the shares of Common Stock issuable
upon conversion of such Preferred Stock or Debentures will be offered or sold
in such jurisdictions only through registered or licensed brokers or dealers.
In addition, in certain jurisdictions, such securities may not be offered or
sold unless they have been registered or qualified for sale in such
jurisdictions or any exemption from registration or qualification is available
and is complied with.
Pursuant to the Registration Rights Agreement, all expenses of the
registration of Preferred Stock, the Debentures and the shares of Common Stock
issuable upon conversion of such Preferred Stock or Debentures will be paid by
the Company, including, without limitation, SEC filing fees and expenses of
compliance with state securities or "blue sky" laws; provided, however, that
the Selling Holders will pay all underwriting discounts and selling
commissions, if any. The Company will indemnify the Selling Holders against
certain civil liabilities, including certain liabilities under the Securities
Act, or will be entitled to contribution in connection therewith.
50
<PAGE>
LEGAL MATTERS
The validity of the Preferred Stock offered hereby was passed upon for the
Company by Davis Polk & Wardwell of New York, New York.
EXPERTS
The consolidated financial statements of the Company of December 31, 1995
and 1996 and for each of the periods in the three year period ended December
31, 1996 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 upon their authority as experts in accounting
and auditing. The report of KPMG Peat Marwick LLP contains an explanatory
paragraph indicating that the Company's recurring losses from operations and
its limited sources of additional liquidity raise substantial doubt about the
Company's ability to continue as a going concern. In addition, their report
refers to the application of fresh start reporting in connection with the '95
Reorganization.
51
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NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST
NOT BE RELIED UPON. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION
IS NOT AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS
NOT QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH
OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE
MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE
HEREOF OR THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE
THE DATE HEREOF.
---------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Available Information..................................................... 3
Incorporation of Certain Documents by Reference........................... 4
Prospectus Summary........................................................ 5
Risk Factors.............................................................. 9
Use of Proceeds........................................................... 19
Selected Consolidated Financial Data...................................... 20
Selling Holders........................................................... 22
Description of Preferred Stock............................................ 23
Description of Debentures................................................. 30
Registration Rights Agreement............................................. 38
Description of Capital Stock.............................................. 40
Certain Provisions of the Certificate of Incorporation, the By-laws and
Delaware Law............................................................. 46
Certain Federal Income Tax Considerations................................. 50
Plan of Distribution ..................................................... 58
Legal Matters ............................................................ 59
Experts................................................................... 59
</TABLE>
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TRANS WORLD
AIRLINES, INC.
1,725,000 SHARES OF
9 1/4% CUMULATIVE CONVERTIBLE
EXCHANGEABLE PREFERRED STOCK
(PAR VALUE $.01 PER SHARE)
$86,250,000 PRINCIPAL AMOUNT
OF 9 1/4% CONVERTIBLE SUBORDINATED
DEBENTURES DUE 2007
10,917,525 SHARES OF COMMON STOCK
------------------
PROSPECTUS
------------------
JANUARY , 1998
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<PAGE>
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
<TABLE>
<S> <C>
SEC registration fee............................................ $ 25,444
--------
Accounting fees................................................. 12,500*
--------
Legal fees...................................................... 100,000*
--------
Miscellaneous................................................... 50,000*
--------
TOTAL.......................................................... $187,944
========
</TABLE>
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* Estimated
ITEM 15. 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.
II-1
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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 16. EXHIBITS
(a) Exhibits
<TABLE>
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*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)
*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)
</TABLE>
II-2
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<TABLE>
<S> <C>
*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, Registration
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)
*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
4.20 --Registration Rights Agreement dated as of December 2, 1997 between the Company and
the Initial Purchases
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(1)
4.22 --Form of 11 1/2% Senior Secured Note due 2004 (contained in Indenture filed as
Exhibit 4.21)
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(1)
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(1)
5 --Opinion of Davis Polk & Wardell, Counsel of the Registrant, regarding the validity
of the securities being registered
</TABLE>
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<TABLE>
<S> <C>
12 --Statement of Computation of Ratio of Earnings to Combined Fixed Charges and
Preferred Stock Dividends
23.1 --Consent of KPMG Peat Marwick LLP
23.2 --Consent of Davis Polk & Wardwell (included in Exhibit 5 hereto)
24 --Powers of Attorney
*27 --Financial Data Schedule (included in the Company's 12/31/96 10-K)
</TABLE>
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* Incorporated by reference
(1) Incorporated herein by reference to the exhibit of the same number in the
Registrant's Registration Statement on Form S-4, Registration Number 333-
filed on January 21, 1998.
II-4
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REPORTS ON FORM 8-K
NONE
ITEM 17. UNDERTAKINGS
A. Undertaking Pursuant to Rule 415
The Company hereby undertakes:
(1) To file, during any period in which offers of 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;
(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;
(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(1)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the Registrant
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, 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. Undertaking Regarding Filings Incorporating Subsequent Exchange Act
Documents by Reference
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of its Annual
Report pursuant to Section 13(a) or Section 15(d) of the Exchange Act (and,
where applicable, each filing of an employee benefit plan's annual report
pursuant to Section 15(d) of the Exchange Act); 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. Undertaking in Respect of Indemnification
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions referred to in Item 15 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
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
II-5
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE
REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS REGISTRATION
STATEMENT ON FORM S-3 TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO
DULY AUTHORIZED IN THE CITY OF ST. LOUIS, STATE OF MISSOURI, ON JANUARY 22,
1998.
TRANS WORLD AIRLINES, INC.
/s/ Michael J. Palumbo
By__________________________________
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-3 HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN
THE CAPACITIES AND ON THE DATES INDICATED.
SIGNATURES TITLE DATE
/s/ Gerald L. Gitner Chairman, Chief January 22, 1998
- ------------------------------------- Executive Officer
GERALD L. GITNER and Director
(Principal
Executive Officer)
/s/ Michael J. Palumbo Senior Vice January 22, 1998
- ------------------------------------- President and Chief
MICHAEL J. PALUMBO Financial Officer
(Principal
Financial Officer
and Principal
Accounting Officer)
* Director January 22, 1998
- -------------------------------------
WILLIAM F. COMPTON
* Director January 22, 1998
- -------------------------------------
JOHN W. BACHMANN
* Director January 22, 1998
- -------------------------------------
EUGENE P. CONESE
* Director January 22, 1998
- -------------------------------------
WILLIAM M. HOFFMAN
* Director January 22, 1998
- -------------------------------------
THOMAS H. JACOBSEN
* Director January 22, 1998
- -------------------------------------
MYRON KAPLAN
* Director January 22, 1998
- ------------------------------------- 1998
DAVID M. KENNEDY
II-6
<PAGE>
SIGNATURES TITLE DATE
Director January , 1998
- -------------------------------------
MERRILL A. MCPEAK
* Director January 22, 1998
- -------------------------------------
THOMAS F. MEAGHER
* Director January 22, 1998
- -------------------------------------
WILLIAM O'DRISCOLL
* Director January 22, 1998
- -------------------------------------
G. JOSEPH REDDINGTON
* Director January 22, 1998
- -------------------------------------
BLANCHE M. TOUHILL
* Director January 22, 1998
- -------------------------------------
STEPHEN M. TUMBLIN
* By: /s/ Richard P. Magurno
--------------------------------------
RICHARD P. MAGURNO, AS ATTORNEY-IN-FACT
II-7
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<S> <C>
*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)
*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, Registration
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)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<S> <C>
*4.16 --Form of 12% Senior Secured Note due 2002 (contained in Indenture filed as Exhibit
4.15)
*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
4.20 --Registration Rights Agreement dated as of December 2, 1997 between the Company and
the Initial Purchases
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(1)
4.22 --Form of 11 1/2% Senior Secured Note due 2004 (contained in Indenture filed as
Exhibit 4.21)
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(1)
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(1)
5 --Opinion of Davis Polk & Wardell, Counsel of the Registrant, regarding the validity
of the securities being registered
12 --Statement of Computation of Ratio of Earnings to Combined Fixed Charges and
Preferred Stock Dividends
23.1 --Consent of KPMG Peat Marwick LLP
23.2 --Consent of Davis Polk & Wardwell (included in Exhibit 5 hereto)
24 --Powers of Attorney
*27 --Financial Data Schedule (included in the Company's 12/31/96 10-K)
</TABLE>
- --------
* Incorporated by reference
(1) Incorporated herein by reference to the exhibit of the same number in the
Registrant's Registration Statement on Form S-4, Registration Number 333-
filed on January 21, 1998.
<PAGE>
EXHIBIT 4.19
- --------------------------------------------------------------------------------
TRANS WORLD AIRLINES, INC.
AND
[a trustee selected by the Company reasonably satisfactory
to Lazard Freres & Co. LLC and PaineWebber Incorporated]
as
Trustee
_______________________
Indenture
Dated as of [effective date of exchange]
_______________________
$__________
9 1/4% CONVERTIBLE SUBORDINATED DEBENTURES DUE 2007
- --------------------------------------------------------------------------------
<PAGE>
CROSS-REFERENCE TABLE
<TABLE>
<CAPTION>
TIA Indenture
Section Section
- ------- ----------
<S> <C>
310(a)(1).................................. 7.10
(a)(2)................................... 7.10
(a)(3)................................... N.A.
(a)(4)................................... N.A.
(b)...................................... 7.08; 7.10; 7.12; 12.02
(c)...................................... N.A.
311(a)..................................... 7.11
(b)...................................... 7.11
(c)...................................... N.A.
312(a)..................................... 2.05
(b)...................................... 12.03
(c)...................................... 12.03
313(a)..................................... 7.06
(b)(1)................................... N.A.
(b)(2)................................... N.A.
(c)...................................... 7.06; 12.02
(d)...................................... 7.06
314(a)..................................... 4.03; 12.02
(b)...................................... N.A.
(c)(1)................................... 12.04
(c)(2)................................... 12.04
(c)(3)................................... N.A.
(d)...................................... N.A.
(e)...................................... 12.05
(f)...................................... N.A.
315(a)..................................... 7.01(b)
(b)...................................... 7.05; 12.02
(c)...................................... 7.01(a)
(d)...................................... 7.01(c)
(e)...................................... 6.11
316(a)(last sentence)...................... 2.09
(a)(l)(A)................................ 6.06
(a)(l)(B)................................ 6.05
(a)(2)................................... N.A.
(b)...................................... 6.08
(c)...................................... N.A.
317(a)(01)................................. 6.03
(a)(2)................................... 6.09
(b)...................................... 2.04
318(a)..................................... 12.01
</TABLE>
- ---------------
N.A. means Not Applicable.
This cross-reference table does not constitute a part of the Indenture.
<PAGE>
TABLE OF CONTENTS
-----------------
Section Page
- ------- ----
ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions.......................................... 1
SECTION 1.02. Other Definitions.................................... 4
SECTION 1.03. Incorporation by Reference of Trust Indenture Act.... 5
SECTION 1.04. Rules of Construction................................ 5
ARTICLE 2
THE SECURITIES
SECTION 2.01. Form and Dating...................................... 6
SECTION 2.02. Execution and Authentication......................... 6
SECTION 2.03. Registrar, Paying Agent and Conversion Agent......... 7
SECTION 2.04. Paying Agent to Hold Money in Trust.................. 7
SECTION 2.05. Securityholder Lists................................. 8
SECTION 2.06. Transfer and Exchange................................ 8
SECTION 2.07. Replacement Securities............................... 9
SECTION 2.08. Outstanding Securities............................... 9
SECTION 2.09. Securities Held by the Company or an Affiliate....... 10
SECTION 2.10. Temporary Securities................................. 10
SECTION 2.11. Cancellation......................................... 10
SECTION 2.12. Defaulted Interest................................... 10
ARTICLE 3
REDEMPTION
SECTION 3.01. Redemption; Notices to Trustee and DTC............... 11
SECTION 3.02. Selection of Securities to Be Redeemed............... 11
SECTION 3.03. Notice of Redemption................................. 11
SECTION 3.04. Effect of Notice of Redemption....................... 12
SECTION 3.05. Deposit of Redemption Price.......................... 12
SECTION 3.06. Securities Redeemed in Part.......................... 13
ARTICLE 4
COVENANTS
SECTION 4.01. Payment of Securities................................ 13
SECTION 4.02. Maintenance of Office or Agency...................... 13
SECTION 4.03. SEC Reports.......................................... 14
SECTION 4.04. Compliance Certificate............................... 14
SECTION 4.05. Stay, Extension and Usury Laws....................... 14
SECTION 4.06. Corporate Existence.................................. 14
SECTION 4.07. Notice of Default.................................... 15
SECTION 4.08. Change in Control.................................... 15
<PAGE>
SECTION 4.09. Maintenance of Properties............................ 18
SECTION 4.10. Payment of Taxes and Other Claims.................... 18
SECTION 4.11. Restrictions on Becoming an Investment Company....... 19
SECTION 4.12. Limitation on Dividends and Acquisition
of Common Stock...................................... 19
ARTICLE 5
SUCCESSORS
SECTION 5.01. When Company May Merge, etc.......................... 19
SECTION 5.02. Successor Substituted................................ 20
ARTICLE 6
DEFAULTS AND REMEDIES
SECTION 6.01. Events of Default.................................... 20
SECTION 6.02. Acceleration......................................... 22
SECTION 6.03. Collection of Indebtedness and Suits for
Enforcement by Trustee............................... 22
SECTION 6.04. Other Remedies....................................... 23
SECTION 6.05. Waiver of Past Defaults.............................. 23
SECTION 6.06. Control by Majority.................................. 23
SECTION 6.07. Limitation on Suits.................................. 23
SECTION 6.08. Rights of Holders to Receive Payment................. 24
SECTION 6.09. Trustee May File Proofs of Claim..................... 24
SECTION 6.10. Priorities........................................... 24
SECTION 6.11. Undertaking for Costs................................ 25
ARTICLE 7
TRUSTEE
SECTION 7.01. Duties of Trustee.................................... 25
SECTION 7.02. Rights of Trustee.................................... 26
SECTION 7.03. Individual Rights of Trustee......................... 26
SECTION 7.04. Trustee's Disclaimer................................. 27
SECTION 7.05. Notice of Defaults................................... 27
SECTION 7.06. Reports by Trustee to Holders........................ 27
SECTION 7.07. Compensations and Indemnity.......................... 27
SECTION 7.08. Replacement of Trustee............................... 28
SECTION 7.09. Successor Trustee by Merger, etc..................... 29
SECTION 7.10. Eligibility; Disqualification........................ 29
SECTION 7.11. Preferential Collection of Claims Against Company.... 29
SECTION 7.12. Conflicting Interests................................ 29
ARTICLE 8
DISCHARGE OF INDENTURE
SECTION 8.01. Termination of Company's Obligations................. 29
SECTION 8.02. Application of Trust Money........................... 30
(ii)
<PAGE>
SECTION 8.03. Repayment to Company................................. 31
SECTION 8.04. Reinstatement........................................ 31
ARTICLE 9
AMENDMENTS
SECTION 9.01. Without Consent of Holders........................... 31
SECTION 9.02. With Consent of Holders.............................. 32
SECTION 9.03. Compliance with Trust Indenture Act.................. 33
SECTION 9.04. Revocation and Effect of Consents.................... 33
SECTION 9.05. Notation on or Exchange of Securities................ 33
SECTION 9.06. Trustee Protected.................................... 34
ARTICLE 10
CONVERSION
SECTION 10.01. Conversion Privilege................................. 34
SECTION 10.02. Conversion Procedure................................. 35
SECTION 10.03. Fractional Shares.................................... 36
SECTION 10.04. Taxes on Conversion.................................. 36
SECTION 10.05. Company to Provide Stock............................. 36
SECTION 10.06. Adjustment of Conversion Price....................... 37
SECTION 10.07. No Adjustment........................................ 39
SECTION 10.08. Equivalent Adjustments............................... 40
SECTION 10.09. Adjustment for Tax Purposes.......................... 40
SECTION 10.10. Notice of Adjustment................................. 40
SECTION 10.11. Notice of Certain Transactions....................... 40
SECTION 10.12. Effect of Reclassification, Consolidation, Merger or
Sale on Conversion Privilege......................... 41
SECTION 10.13. Trustee's Disclaimer................................. 42
SECTION 10.14. Voluntary Reduction.................................. 42
ARTICLE 11
SUBORDINATION
SECTION 11.01. Agreement to Subordinate............................. 42
SECTION 11.02. Certain Definitions.................................. 43
SECTION 11.03. Liquidation; Dissolution; Bankruptcy................. 43
SECTION 11.04. Company Not to Make Payments with Respect to
Securities in Certain Circumstances.................. 44
SECTION 11.05. Acceleration of Securities........................... 44
SECTION 11.06. When Distribution Must be Paid Over.................. 45
SECTION 11.07. Notice by Company.................................... 45
SECTION 11.08. Subrogation.......................................... 45
SECTION 11.09. Subordination May Not be Impaired by Company......... 45
SECTION 11.10. Distribution or Notice to Representative............. 46
SECTION 11.11. Rights of Trustee and Paying Agent................... 46
SECTION 11.12. Officers'Certificate................................. 46
(iii)
<PAGE>
SECTION 11.13. Obligation of Company Unconditional.................. 47
ARTICLE 12
MISCELLANEOUS
SECTION 12.01. Trust Indenture Act Controls......................... 47
SECTION 12.02. Notices.............................................. 47
SECTION 12.03. Communication by Holders with Other Holders.......... 48
SECTION 12.04. Certificate and Opinion as to Conditions Precedent... 48
SECTION 12.05. Statements Required in Certificate or Opinion........ 49
SECTION 12.06. Rules by Trustee and Agents.......................... 49
SECTION 12.07. Legal Holidays....................................... 49
SECTION 12.08. No Recourse Against Others........................... 50
SECTION 12.09. Duplicate Originals.................................. 50
SECTION 12.10. Governing Law........................................ 50
SECTION 12.11. No Adverse Interpretation of Other Agreements........ 50
SECTION 12.12. Successors........................................... 50
SECTION 12.13. Separability......................................... 50
SECTION 12.14. Table of Contents, Headings, etc..................... 50
SIGNATURES
EXHIBIT A - FORM OF SECURITY
EXHIBIT B - FORM OF LEGEND FOR GLOBAL SECURITIES
(iv)
<PAGE>
INDENTURE dated as of [effective date of exchange], between TRANS
WORLD AIRLINES, INC., a Delaware corporation (the "Company"), and [a trustee
selected by the Company reasonably satisfactory to Lazard Freres & Co. LLC and
PaineWebber Incorporated] 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 9 1/4%
Convertible Subordinated Debentures due 2007 (the "Securities").
ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions.
-----------
"Affiliate" means any person directly or indirectly controlling or
---------
controlled by or under direct or indirect common control with the Company. For
this purpose, "control" shall mean the power to direct the management and
policies of a person through the ownership of securities, by contract or
otherwise; provided, however, that beneficial ownership of 10% or more of the
-------- -------
voting securities of a person shall constitute a rebuttable presumption of
control.
"Agent" means any Registrar, Paying Agent, Conversion Agent or co-
-----
Registrar.
"Board of Directors" means the Board of Directors of the Company or
------------------
any committee of the Board authorized to act for it hereunder.
"Board Resolution" means a copy of a resolution certified by the
----------------
Corporate Secretary or an Assistant Secretary of the Company to have been duly
adopted by the Board of Directors and to be in full force and effect on the date
of such certification, and delivered to the Trustee.
"Closing Price" for each day shall be the last reported sales price,
-------------
regular way or, in case no such reported sale takes place on such date, the
average of the reported closing bid and asked prices, regular way, in either
case on the American Stock Exchange or, if the Common Stock is not listed or
admitted to trading on the American Stock Exchange, on the principal national
securities exchange on which the Common Stock is listed or admitted to trading
or, if not listed or admitted to trading on any national securities exchange,
the closing sales price, regular way, of the Common Stock as quoted by National
Association of Securities Dealers Automated Quotation System ("NASDAQ") or, in
case no reported sales takes place, the average of the closing bid and asked
prices, regular way, as quoted by NASDAQ or any comparable system or, if the
Common Stock is not quoted on NASDAQ or any comparable system, the closing sales
price, regular way, or, in case no reported sale takes place, the average of the
closing bid and asked prices, regular way, as furnished by any two members of
the National
<PAGE>
2
Association of Securities Dealers, Inc. selected from time to time
by the Company for that purpose.
"Common Stock" includes any stock of any class of the Company which
------------
has no preference in respect of 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. However, subject
to the provisions of Section 10.12, shares issuable upon conversion of the
Securities shall include only shares of the class designated as Common Stock of
the Company at the date of this instrument or shares of any class or classes
resulting from any reclassification or reclassifications thereof (including any
such reclassification in connection with a consolidation or merger in which the
Company is the continuing corporation) and which have no preference in respect
of dividends or of amounts payable in the event of any voluntary or involuntary
liquidation, dissolution or winding up of the Company and which are not subject
to redemption by the Company, provided that if at any time there shall be more
--------
than one such resulting class, the shares of each such class then so issuable
shall be substantially in the proportion which the total number of shares of
such class resulting from all such reclassifications bears to the total number
of shares of all such classes resulting from all such reclassifications.
"Company" means the party named as such above and any other obligor
-------
until a successor replaces it pursuant to the applicable provision hereof and
thereafter means such successor.
"Company Request" or "Company Order" means a written request or order
--------------- -------------
signed in the name of the Company by its Chairman of the Board, its Vice
Chairman of the Board, its President or a Vice President, and by its Treasurer,
an Assistant Treasurer, its Corporate Secretary or an Assistant Secretary, and
delivered to the Trustee.
"Conversion Termination Date" means the second business day
---------------------------
immediately preceding the redemption date for a Security.
"Corporate Trust Office of the Trustee" shall be at the address of the
-------------------------------------
Trustee specified in Section 12.02 or such other address as the Trustee may give
notice of to the Company.
"Default" means any event which is, or after notice or passage of time
-------
or both would be, an Event of Default.
"Depositary" means, with respect to Securities issuable in whole or in
----------
part in the form of one or more Global Securities, a clearing agency registered
under the Exchange Act that is designated to act as Depositary for such
Securities.
"DTC" means The Depository Trust Company.
---
"Eligible Institution" means a commercial banking institution that has
--------------------
combined capital and surplus of not less than $500 million or its equivalent in
foreign currency and whose
<PAGE>
3
debt is rated at the highest rating obtainable from
Standard & Poor's Corporation ("S&P") or Moody's Investor Services, Inc.
("Moody's") at the time as of which any investment or rollover herein is made.
"Employee Preferred Stock" means the ALPA Preferred Stock, par value
------------------------
$.01 per share, the IFFA Preferred Stock, par value $.01 per share and the IAM
Preferred Stock, par value $.01 per share, of the Company.
"GAAP" means generally accepted accounting principles set forth in the
----
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession, which are in effect on the date of the Indenture.
"Global Security" means a Security that evidences all or part of the
---------------
Securities of any series and bears the legend set forth in Exhibit B.
"Governmental Securities" means direct obligations of, or obligations
-----------------------
guaranteed by, the United States of America, for the payment of which the full
faith and credit of the United States is pledged.
"Holder" or "Securityholders" means a person in whose name a Security
------ ---------------
is registered on the Registrar's books.
"Indenture" means this Indenture as amended from time to time.
---------
"Liquidated Damages" means the liquidated damages payable pursuant to
------------------
the Registration Rights Agreement.
"Maturity," when used with respect to any Security, means the date on
--------
which the principal of such Security or Liquidated Damages, if any, with respect
thereto, or an installment of principal or Liquidated Damages, if any, becomes
due and payable as therein or herein provided, whether at the Stated Maturity or
by declaration of acceleration, call for redemption, occurrence of any
Repurchase Date or otherwise.
"Officers" means the Chief Executive Officer, the President, the Chief
--------
Operating Officer, any Vice President, the Treasurer or the Corporate Secretary
of the Company.
"Officers' Certificate" means a certificate signed by two Officers or
---------------------
by an Officer and an Assistant Treasurer or an Assistant Secretary of the
Company.
"Opinion of Counsel" means a written opinion from legal counsel who
------------------
may be an employee of or counsel for the Company or other counsel reasonably
acceptable to the Trustee.
"person" means any individual, corporation, partnership, joint
------
venture, association, joint-stock company, trust, unincorporated organization or
government or other agency or political subdivision thereof.
<PAGE>
4
"9 1/4% Preferred Stock" means the 9 1/4% Cumulative Convertible
----------------------
Exchangeable Preferred Stock of the Company.
"principal" of a debt security (including, without limitation, any
---------
Security) means the principal of the security plus the premium, if any, on the
security.
"Registration Rights Agreement" means the Registration Rights
-----------------------------
Agreement dated December 2, 1997 among the Company, Lazard Freres & Co. LLC and
PaineWebber Incorporated, as it may be amended from time to time.
"SEC" means the Securities and Exchange Commission.
---
"Securities" means the Securities described above issued under this
----------
Indenture.
"Stated Maturity," when used with respect to any Security or any
---------------
installment of principal thereof, interest thereon or Liquidated Damages, if
any, with respect thereto, means the date specified in such Security as the
fixed date on which the principal of such Security or such installment of
principal, interest or Liquidated Damages, if any, is due and payable.
"subsidiary" means (i) a corporation a majority of whose capital stock
----------
with voting power, under ordinary circumstances, to elect directors is at the
time, directly or indirectly, owned by the Company, by one or more subsidiaries
of the Company or by the Company and one or more subsidiaries thereof or (ii)
any other person (other than a corporation) in which the Company, one or more
subsidiaries thereof or the Company and one or more subsidiaries thereof,
directly or indirectly, at the date of determination thereof have at least
majority ownership interest.
"TIA" means the Trust Indenture Act of 1939, as amended (15 U.S. Code
---
(S)(S) 77aaa-77bbbb) as in effect on the date of this Indenture, except as
provided in Section 9.03.
"Trading Day" means, with respect to any security, each Monday,
-----------
Tuesday, Wednesday, Thursday and Friday, other than any day on which securities
are not generally traded on the exchange or market in which such security is
traded.
"Trustee" means the party named as such in this Indenture until a
-------
successor replaces it and thereafter means the successor.
"Trust Officer" means any officer of the Trustee assigned by the
-------------
Trustee to administer its corporate trust matters.
SECTION 1.02. Other Definitions.
-----------------
Term Defined in Section
- ------ ------------------
"Average Current Market Price".................................. 10.06
"business day".................................................. 12.07
"Change in Control"............................................. 4.08
<PAGE>
5
"Conversion Agent".............................................. 2.03
"Conversion Date"............................................... 10.02
"Conversion Price".............................................. 4.08(i)
"Determination Date"............................................ 10.06(d)
"Event of Default".............................................. 6.01
"Exchange Act".................................................. 4.03
"Legal Holiday"................................................. 12.07
"Paying Agent".................................................. 2.03
"Registrar"..................................................... 2.03
"Representative"................................................ 11.02
"Repurchase Date"............................................... 4.08
"Repurchase Price".............................................. 4.08
"Repurchase Right".............................................. 4.08
"Repurchase Right Notice"....................................... 4.08
"Senior Indebtedness"........................................... 11.02
"Series A Preferred Stock"...................................... 10.06(c)
"Triggering Distribution"....................................... 10.06(d)
"U.S. Government Obligations"................................... 8.01
SECTION 1.03. Incorporation by Reference of Trust Indenture Act.
-------------------------------------------------
Whenever this Indenture refers to a provision of the TIA, the
provision is incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the following
meanings:
"indenture securities" means the Securities.
"indenture securityholder" means a Securityholder.
"indenture to be qualified" means this Indenture.
"Indenture Trustee" or "institutional trustee" means the Trustee.
"obligor" on the indenture securities means the Company.
All other terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by SEC rule under the TIA
have the meanings so assigned to them.
SECTION 1.04. Rules of Construction.
---------------------
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
<PAGE>
6
(2) an accounting term not otherwise defined has the meaning assigned
to it in accordance with GAAP in effect on the date hereof;
(3) "or" is not exclusive;
(4) words in the singular include the plural and in the plural include
the singular;
(5) provisions apply to successive events and transactions; and
(6) "herein," "hereof" and other words of similar import refer to this
Indenture as a whole and not to any particular Article, Section or other
Subdivision.
ARTICLE 2
THE SECURITIES
SECTION 2.01. Form and Dating.
---------------
The Securities and the Trustee's certificate of authentication shall
be substantially in the form set forth in Exhibit A (with such appropriate
insertions, omissions, substitutions and other variations as are required or
permitted by this Indenture), which Exhibit A is incorporated in and forms a
part of this Indenture. The Securities may have notations, legends or
endorsements required by law, stock exchange rule or usage. Each Security shall
be dated the date of its authentication.
The definitive Securities shall be printed, lithographed or engraved
or produced by any combination of these methods on steel engraved borders or may
be produced in any other manner permitted by the rules of any securities
exchange on which the Securities may be listed, all as determined by the
officers executing such Securities, as evidenced by their execution thereof.
SECTION 2.02. Execution and Authentication.
----------------------------
Two Officers shall sign the Securities for the Company by manual or
facsimile signature. The Company's seal shall be reproduced on the Securities.
If an Officer whose signature is on a Security no longer holds that
office at the time the Security is authenticated, the Security shall
nevertheless be valid.
A Security shall not be valid until authenticated by the manual
signature of the Trustee. The signature shall be conclusive evidence that the
Security has been authenticated under this Indenture.
The Trustee shall authenticate Securities for original issue in the
aggregate principal amount of up to [insert aggregate liquidation preference for
outstanding shares of
<PAGE>
7
9 1/4% Preferred Stock at date of exchange], upon a written order of the Company
signed by two Officers or by an Officer and an Assistant Treasurer or Assistant
Secretary of the Company. Each order shall specify the amount of Securities to
be authenticated and the date on which the original issue of Securities is to be
authenticated. The aggregate principal amount of Securities outstanding at any
time may not exceed the amount of Securities issued pursuant to this paragraph
except as provided in Section 2.07.
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 or
an Affiliate.
The Securities shall be issuable only in registered form without
coupons and only in denominations of $1,000 and any integral multiple thereof.
SECTION 2.03. Registrar, Paying Agent and Conversion Agent.
---------------------------------------------
The Company shall maintain in the Borough of Manhattan, The City of
New York, an office or agency where Securities may be presented for registration
of transfer or for exchange ("Registrar"), an office or agency where Securities
may be presented for payment ("Paying Agent") and an office or agency where
Securities may be presented for conversion ("Conversion Agent"). The Registrar
shall keep a register of the Securities and of their transfer and exchange. The
Company may appoint or change one or more co-registrars, one or more additional
paying agents and one or more additional conversion agents without notice and
may act in any such capacity on its own behalf. The term "Paying Agent"
includes any additional paying agent; the term "Conversion Agent" includes any
additional conversion agent.
The Company shall 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 Agent not a party to this
Indenture. If the Company fails to maintain a Registrar, Paying Agent or
Conversion Agent, the Trustee shall act as such.
The Company initially appoints the Trustee as Paying Agent, Registrar
and Conversion Agent.
SECTION 2.04. Paying Agent to Hold Money in Trust.
-----------------------------------
Each Paying Agent shall hold in trust for the benefit of the
Securityholders or the Trustee all moneys held by such Paying Agent for the
payment of principal of, interest on or Liquidated Damages, if any, with respect
to, the Securities, and shall notify the Trustee of any default by the Company
in making any such payment. While any such default continues, the Trustee may
require a Paying Agent to pay all money held by it to the Trustee. The Company
at any time may require a Paying Agent to pay all money held by it to the
Trustee. Upon payment over to the Trustee, such Paying Agent shall have no
further liability for the money. If the
<PAGE>
8
Company acts as Paying Agent, it shall segregate and hold as a separate trust
fund all money held by it as Paying Agent.
SECTION 2.05. 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 2.06. Transfer and Exchange.
---------------------
Where 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 if the requirements of Section 8-
401(1) of the New York Uniform Commercial Code are met. To permit registrations
of transfer and exchanges, the Trustee shall authenticate Securities at the
Registrar's request. The Company or the Trustee, as the case may be, shall not
be required (a) to issue, authenticate, register the transfer of or exchange any
Security during a period beginning at the opening of business 15 days before the
mailing of a notice of redemption of the Securities selected for redemption
under Section 3.02 and ending at the close of business on the day of such
mailing, or (b) to register the transfer of or exchange any Security so selected
for redemption, in whole or in part, except the unredeemed portion of Securities
being redeemed in part. No service charge shall be made for any registration of
transfer or exchange of Securities, but the Company may require a Holder to,
among other things, furnish appropriate endorsements and transfer documents and
pay a sum sufficient to cover any tax or other governmental charge that may be
imposed in connection with any transfer, registration of transfer or exchange of
Securities, other than exchanges pursuant to Section 2.10, 3.06, 9.05 or 10.02
not involving any transfer.
The provisions of clauses (1), (2), (3) and (4) below shall apply only
to Global Securities:
(1) Each Global Security authenticated under this Indenture shall be
registered in the name of the Depositary designated for such Global
Security or a nominee thereof and delivered to such Depositary or a nominee
thereof or custodian therefor, and each such Global Security shall
constitute a single Security for all purposes of this Indenture.
(2) Notwithstanding any other provision in this Indenture, no Global
Security may be exchanged in whole or in part for Securities registered,
and no transfer of a Global Security in whole or in part may be registered,
in the name of any person other than the Depositary for such Global
Security or a nominee thereof unless (A) such Depositary (i) has notified
the Company that it is unwilling or unable to continue as Depositary for
such Global Security or (ii) has ceased to be a clearing agency registered
under the Exchange Act or (B) there shall have occurred and be continuing
an Event of Default with respect to such Global Security.
<PAGE>
9
(3) Subject to clause (2) above, any exchange of a Global Security for
other Securities may be made in whole or in part, and all Securities issued
in exchange for a Global Security or any portion thereof shall be
registered in such names as the Depositary for such Global Security shall
direct.
(4) Every Security authenticated and delivered upon registration of
transfer of, or in exchange for or in lieu of, a Global Security or any
portion thereof, whether pursuant to this Section, Section 2.07, 2.10, 3.06
or 9.05 or otherwise, shall be authenticated and delivered in the form of,
and shall be, a Global Security, unless such Security is registered in the
name of a person other than the Depositary for such Global Security or a
nominee thereof.
SECTION 2.07. Replacement Securities.
-----------------------
If the Holder of a Security claims that the Security has been
mutilated, lost, destroyed or wrongfully taken, the Company shall issue and the
Trustee shall authenticate a replacement Security if the requirements of Section
8-405 of the New York Uniform Commercial Code are met and, in the case of a
mutilated Security, such mutilated Security is surrendered to the Trustee. If
required by the Trustee or the Company, an indemnity bond must be sufficient in
the judgment of both to protect the Company, the Trustee, or any Agent from any
loss which any of them may suffer if a Security is replaced. The Company or the
Trustee may charge for its expenses in replacing a Security.
In case any such mutilated, destroyed or wrongfully taken Security has
become or is about to become due and payable, the Company in its discretion may,
instead of issuing a new Security, pay such Security when due.
Every replacement Security is an additional obligation of the Company.
SECTION 2.08. Outstanding Securities.
----------------------
Securities outstanding at any time are all the Securities
authenticated by the Trustee except for those converted, those canceled by it,
those delivered to it for cancellation and those described in this Section as
not outstanding. A Security does not cease to be outstanding because the
Company or one of its subsidiaries or Affiliates holds the Security.
If a Security is replaced pursuant to Section 2.07, it ceases to be
outstanding unless the Trustee receives proof satisfactory to it, or a court
holds, that the replaced Security is held by a bona fide purchaser.
---- ----
If the Paying Agent (other than the Company) holds on a redemption
date, repurchase date or maturity date money sufficient to pay Securities
payable on that date, then on and after that date, such Securities shall be
deemed to be no longer outstanding and interest on them shall cease to accrue.
<PAGE>
10
SECTION 2.09. Securities Held by the Company or an Affiliate.
----------------------------------------------
In determining whether the Holders of the required principal amount of
Securities have concurred in any direction, waiver or consent, Securities owned
by the Company or a subsidiary or an Affiliate shall be disregarded, except that
for the purposes of determining whether the Trustee shall be protected in
relying on any such direction, waiver or consent, only Securities which the
Trustee actually knows are so owned shall be so disregarded.
SECTION 2.10. Temporary Securities.
--------------------
Until definitive Securities are ready for delivery, the Company may
prepare and the Trustee shall authenticate temporary Securities. Temporary
Securities shall be substantially in the form of definitive Securities but may
have variations that the Company considers appropriate for temporary Securities.
Without unreasonable delay, the Company shall prepare and the Trustee shall
authenticate definitive Securities in exchange for temporary Securities.
SECTION 2.11. Cancellation.
------------
The Company at any time may deliver Securities to the Trustee for
cancellation. The Registrar, Paying Agent and Conversion Agent shall forward to
the Trustee any Securities surrendered to them for registration of transfer,
exchange, payment or conversion. The Trustee shall cancel all Securities
surrendered for registration of transfer, exchange, payment, conversion or
cancellation and may destroy canceled Securities and deliver a certificate of
any such destruction to the Company. The Company may not issue new Securities
to replace Securities that it has paid or delivered to the Trustee for
cancellation or that any Securityholder has converted pursuant to Article 10.
SECTION 2.12. Defaulted Interest.
------------------
If and to the extent the Company defaults in a payment of interest on
the Securities, it shall pay the defaulted interest in any lawful manner plus,
to the extent not prohibited by applicable statute or case law, interest payable
on the defaulted interest. It may pay the defaulted interest to the persons who
are Securityholders on a subsequent special record date. The Company shall fix
such record date and payment date. At least 15 days before the record date, the
Company shall mail to Securityholders a notice that states the record date,
payment date and amount of interest to be paid.
ARTICLE 3
REDEMPTION
SECTION 3.01. Redemption; Notices to Trustee and DTC.
--------------------------------------
If the Company wants to redeem Securities pursuant to paragraph 5 of
the Securities, it shall notify the Trustee at least 15 days prior to the date
on which the notice of
<PAGE>
11
redemption is mailed to each Holder (unless a shorter notice period shall be
satisfactory to the Trustee) of the redemption date and the principal amount of
Securities to be redeemed.
If the Company wants to redeem Securities pursuant to paragraph 5 of
the Securities and DTC is a Securityholder, the Company shall notify DTC at
least 30 days prior to the redemption date if the operational arrangements of
DTC in effect at the time of any such redemption require such notice period.
SECTION 3.02. 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 or
such other method as the Trustee shall deem fair and equitable, but in any
event, in such manner as complies with applicable legal and stock exchange
requirements. 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 3.03. 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:
(1) the redemption date;
(2) the redemption price (including the amount of accrued and unpaid
interest and Liquidated Damages, if any, to be paid on the Securities
called for redemption);
(3) the then Conversion Price;
(4) the name and address of the Paying Agent;
(5) that the right to convert Securities called for redemption shall
terminate at the close of business on the second business day before the
redemption date;
(6) that Holders who want to convert Securities must satisfy the
requirements in paragraph 8 of the Securities;
(7) that Securities called for redemption must be surrendered to the
Paying Agent to collect the redemption price;
<PAGE>
12
(8) that interest on Securities called for redemption ceases to accrue
on and after the redemption date; and
(9) the CUSIP number 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 3.04. 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 Liquidated Damages, if any, to the redemption
date.
SECTION 3.05. 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 Liquidated Damages, if any, with respect to, all Securities to
be redeemed on that date. The Paying Agent shall return to the Company, as soon
as practicable, any money not required for that purpose because of conversion of
Securities.
SECTION 3.06. 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.
If any Security selected for partial redemption is converted in part,
the converted portion of such Security shall be deemed (so far as may be) to be
the portion selected for redemption.
ARTICLE 4
COVENANTS
SECTION 4.01. Payment of Securities.
---------------------
The Company shall pay the principal of, interest on and Liquidated
Damages, if any, with respect to, the Securities on the dates and in the manner
provided in the Securities and Registration Rights Agreement. Principal,
interest and Liquidated Damages, if any, shall be considered paid on the date
due if the Paying Agent holds on that date money sufficient to pay all
principal, interest and Liquidated Damages, if any, then due.
<PAGE>
13
SECTION 4.02. Maintenance of Office or Agency.
-------------------------------
The Company will 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 conversion and where notices and demands to or upon
the Company in respect of the Securities and this Indenture may be served. The
Company will give prompt written notice to the Trustee of the location, and any
change in the location, of such office or agency. 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 of the
Trustee.
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.
The Company hereby designates the Corporate Trust Office of the
Trustee in the Borough of Manhattan, the City of New York, an agency of the
Company in accordance with Section 2.03.
SECTION 4.03. SEC Reports.
-----------
The Company shall file with the Trustee within 30 days 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 Section 13 or 15(d) of the Securities Exchange Act of
1934, as amended (the "Exchange Act "). The Company also shall comply with the
other provisions of TIA (S) 314(a).
So long as the Securities remain outstanding, the Company shall cause
its annual reports to shareholders and any other financial reports furnished by
it to shareholders generally to be mailed to the Holders at their addresses
appearing in the register of Securities maintained by the Registrar.
SECTION 4.04. Compliance Certificate.
----------------------
The Company shall deliver to the Trustee within 120 days after the end
of each fiscal year of the Company an Officers' Certificate stating whether or
not the signatories know of any Default by the Company in performing any of its
obligations under this Indenture or the Securities. If they do know of any such
Default, the certificate shall describe the Default and its status. One of the
officers signing such certificate shall be the principal executive, principal
financial or principal accounting officer of the Company.
<PAGE>
14
SECTION 4.05. Stay, Extension and Usury Laws.
------------------------------
The Company covenants (to the extent that it may lawfully do so) that
it will not at any time insist upon, plead, or in any manner whatsoever claim or
take the benefit or advantage of, any stay, extension or usury law wherever
enacted, now or at any time hereafter in force, which may affect the covenants
or the performance of this Indenture; and the Company (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such
law, and covenants that it will not, by resort to any such law, hinder, delay or
impede the execution of any power herein granted to the Trustee, but will suffer
and permit the execution of every such power as though no such law had been
enacted.
SECTION 4.06. Corporate Existence.
-------------------
Subject to Article 5, the Company will do or cause to be done all
things necessary to preserve and keep in full force and effect its corporate
existence and the corporate existence of each subsidiary in accordance with the
respective organizational documents of each subsidiary and the rights (charter
and statutory), licenses and franchises to the Company and its subsidiaries;
provided, however, that the Company shall not be required to preserve any such
- -------- -------
right, license or franchise, or the corporate existence of any subsidiary, if in
the judgment of the Board of Directors, (i) such preservation or existence is
not material to the conduct of business of the Company and (ii) the loss of such
right, license or franchise or the dissolution of such subsidiary does not have
a material adverse impact on the Holders.
SECTION 4.07. Notice of Default.
-----------------
In the event that any Default under Section 6.01 hereof shall occur,
the Company will give prompt written notice of such Default to the Trustee.
SECTION 4.08. Change in Control.
-----------------
(a) In the event that there shall occur a Change in Control (as
defined below) each Holder shall have the right (the "Repurchase Right") upon
receipt of a Repurchase Right Notice (as defined below), at such Holder's
option, to require the Company to repurchase any Security of such Holder or any
portion of the principal amount thereof which is $1,000 or an integral multiple
of $1,000, on the date (the "Repurchase Date") specified by the Company in its
Repurchase Right Notice, which date shall not be later than 45 days after the
date of the Repurchase Right Notice, or, if such 45th day is a Legal Holiday,
the next subsequent day which is not a Legal Holiday, unless otherwise required
by applicable law, at a purchase price equal to 100% of the principal amount
thereof, plus accrued and unpaid interest and Liquidated Damages, if any, to and
including the Repurchase Date (the "Repurchase Price"). The right to require
the 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) Within 30 days after the occurrence of a Change in Control, the
Company, or, at the request of the Company and at the Company's expense, the
Trustee, shall give notice of the occurrence of the Change in Control and of the
Repurchase Right set forth herein (the
<PAGE>
15
"Repurchase Right Notice") by first-class mail, postage prepaid, to each Holder
at such Holder's address appearing in the registry books of the Company kept by
the Registrar. The Company shall deliver a copy of the Repurchase Right Notice
to the Trustee. The Company shall also 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 such Holder's right to exercise a
Repurchase Right. Any such notice shall state that a Change in Control has
occurred and that such Holder has the right to require the Company to repurchase
such Holder's Securities and shall contain all instructions and materials
necessary to enable such Holders to deliver Securities pursuant to the
Repurchase Right including, without limitation, the following:
(1) the Repurchase Date;
(2) the date by which the Repurchase Right must be exercised;
(3) the Repurchase Price;
(4) that Securities are to be surrendered for payment of the
Repurchase Price;
(5) that the exercise of the Repurchase Right is irrevocable, unless
the Company shall default in making the repurchase payment when due, in
which case Holders who elect to exercise the Repurchase Right will retain
the right to convert Securities submitted for repurchase until the close of
business on the date such default is cured and such Security is
repurchased; and
(6) the then existing Conversion Price for conversion of Securities,
the date on which the right to convert the principal of the Securities to
be repurchased will terminate and the place or places where such Securities
may be surrendered for conversion.
(c) To exercise a Repurchase Right, a Holder shall deliver to the
Company (if it is acting as its own Paying Agent) or to a Paying Agent
designated by the Company for such purpose in the notice referred to above on or
before the 30th day after the date of the Repurchase Right Notice, or, if such
day is a Legal Holiday, the next subsequent day which is not a Legal Holiday,
(i) written notice (which notice shall be deemed to be delivered when received)
of the Holder's exercise of such right, which notice shall set forth the name of
the Holder, the principal amount of Securities (or portions thereof) to be
repurchased, a statement that an election to exercise the Repurchase Right is
being made thereby and (ii) the Securities with respect to which the Repurchase
Right is being exercised, duly endorsed for transfer to the Company, and the
Holder of such Securities shall be entitled to receive from the Company (if it
is acting as its own Paying Agent) or such Paying Agent a nontransferable
receipt of deposit evidencing such deposit. Such written notice shall be
irrevocable, except as provided in Section 4.08(b) above. If the Repurchase
Date is between a regular record date for the payment of interest and the next
succeeding interest payment date, any Security to be repurchased must be
accompanied by funds equal to the interest payable on such succeeding interest
payment date on the principal amount to be repurchased and Liquidated Damages,
if any, and the interest on the principal amount of the Security being
repurchased and Liquidated Damages, if any with respect thereto, will be paid on
such next succeeding interest payment date to the registered holder of such
Security on the
<PAGE>
16
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 Liquidated Damages,
if any, with respect thereto, will be paid on such interest payment date to the
registered holder of such Security on the immediately preceding record date.
(d) In the event a Repurchase Right shall be exercised in accordance
with the terms hereof, the Company shall pay or cause to be paid the applicable
Repurchase Price with respect to the Securities as to which the Repurchase Right
shall have been exercised to the Holder on the Repurchase Date.
(e) Prior to a Repurchase Date, the Company shall deposit with the
Trustee or with a Paying Agent (or if the Company is acting as its own Paying
Agent, segregate and hold in trust in accordance with Section 2.04) an amount of
money sufficient to pay the Repurchase Price payable in respect of all of the
Securities which are to be repurchased on that date. If any Security submitted
for repurchase is converted prior to the repurchase thereof, any money deposited
with the Trustee or with the Paying Agent or so segregated and held in trust for
the redemption of such Security shall be paid to the Company upon its request,
or, if then held by the Company, shall be discharged from such trust.
(f) Both the notice of the Company and the notice of the Holder having
been given as specified in this Section 4.08, the Securities so to be
repurchased shall, on the Repurchase Date become due and payable at the
Repurchase Price applicable thereto and from and after such date (unless the
Company shall default in the payment of the Repurchase Price) such Securities
shall cease to bear interest. Upon surrender of any such Security for
repurchase in accordance with said notice, such Security shall be paid by the
Company at the Repurchase Price. If any Security shall not be paid upon
surrender thereof for repurchase, the principal shall, until paid, bear interest
from the Repurchase Date at the rate borne by such Security.
(g) Any Security which is to be submitted for repurchase only in part
shall be delivered pursuant to this Section 4.08 (with, if the Company or the
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 his attorney duly authorized in writing) and the Company shall
execute, and the Trustee shall authenticate and make available for delivery to
the Holder of such Security without any service charge, a new Security or
Securities, of any authorized denomination as requested by such Holder, of the
same tenor and in aggregate principal amount equal to and in exchange for the
portion of the principal of such Security not submitted for repurchase.
(h) If any repurchase pursuant to the foregoing provisions constitutes
an "issuer tender offer" as defined in Rule 13e-4 under the Exchange Act, the
Company will comply with the requirements of Rule 13e-4, Rule 14e-1 and any
other tender offer rules under the Exchange Act which then may be applicable,
including the filing of an Issuer Tender Offer Statement on Schedule 13E-4 with
the SEC and the furnishing of certain information contained therein to the
Holders.
<PAGE>
17
(i) As used in this Section 4.08:
A "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, (ii) the Company sells, transfers or otherwise disposes of all or
substantially all of the assets of the Company, (iii) when, during any period of
12 consecutive months after the date of original issuance of the 9 1/4%
Preferred Stock, 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 who were either directors at the beginning of such period or whose
election or nomination for election was previously so approved), 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.
"Conversion Price" shall be deemed to equal the conversion price of
----------------
the 9 1/4% Preferred Stock per share of Common Stock immediately prior to the
issuance of the Securities specified in the form of Security attached hereto, as
such Conversion Price may be adjusted from time to time pursuant to Section
10.06 hereof.
SECTION 4.09. Maintenance of Properties.
-------------------------
The Company will cause all properties used or useful in the conduct of
its business or the business of any subsidiary to be maintained and kept in good
condition, repair and working order and supplied with all necessary equipment
and will 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; provided, however, that
nothing in this Section shall prevent the Company from discontinuing the
operation or maintenance of any of such properties if such discontinuance is, in
the judgment of the Company, desirable in the conduct of its business or the
business of any subsidiary and not disadvantageous in any material respect to
the Holders.
<PAGE>
18
SECTION 4.10. Payment of Taxes and Other Claims.
---------------------------------
The Company will pay or discharge or cause to be paid or discharged,
before the same shall become delinquent, (1) all taxes, assessments and
governmental charges levied or imposed upon the Company or any subsidiary or
upon the income, profits or property of the Company or any subsidiary, and (2)
all lawful claims for labor, materials and supplies which, if unpaid, might by
law become a lien upon the property of the Company or any subsidiary; provided,
--------
however, that the Company shall not be required to pay or discharge or cause to
- -------
be paid or discharged any such tax, assessment, charge or claim whose amount,
applicability or validity is being contested in good faith by appropriate
proceedings.
SECTION 4.11. 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 4.12. 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) or 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, an Event of Default shall
have occurred and be continuing or a Default that with notice or lapse of time
or both would constitute an Event of Default shall have occurred and be
continuing.
ARTICLE 5
SUCCESSORS
SECTION 5.01. When Company May Merge, etc.
----------------------------
The Company shall not consolidate with or merge into, or directly or
indirectly transfer or lease all or substantially all of its assets to, any
person and the Company shall not permit any person to consolidate with or merge
into the Company or transfer all or substantially all of its properties and
assets to the Company unless:
(1) the person formed by or surviving any such consolidation or merger
(if other than the Company), or to which such sale or conveyance shall have
been made, is a
<PAGE>
19
person organized and existing under the laws of the United States, any
State thereof or the District of Columbia;
(2) the person formed by or surviving any such consolidation or merger
(if other than the Company), or to which such sale or conveyance shall have
been made, assumes by supplemental indenture all the obligations of the
Company under the Securities and this Indenture, including, without
limitation, the provision of conversion rights in accordance with Section
10.12;
(3) immediately before and immediately after giving effect to such
transaction no Default or Event of Default shall have occurred and be
continuing; and
(4) the Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that such consolidation, merger,
conveyance, transfer or lease and, if a supplemental indenture is required
in connection with such transaction, such supplemental indenture comply
with this Article and that all conditions precedent herein provided for
relating to such transaction have been complied with.
The Company shall deliver to the Trustee prior to the consummation of
the proposed transaction an Officers' Certificate to the foregoing effect and an
Opinion of Counsel stating that the proposed transaction and such supplemental
indenture comply with this Indenture.
SECTION 5.02. Successor Substituted.
---------------------
Upon any consolidation or merger or transfer or lease of all or
substantially all of the assets of the Company in accordance with Section 5.01,
the successor person formed by such consolidation or into which the Company is
merged or to which such transfer or lease is made shall succeed to, and be
substituted for, and may exercise every right and power of, and shall assume
every duty and obligation of, the Company under this Indenture with the same
effect as if such successor corporation had been named as the Company herein.
When the successor corporation assumes all obligations of the Company hereunder,
all obligations of the predecessor corporation shall terminate.
ARTICLE 6
DEFAULTS AND REMEDIES
SECTION 6.01. Events of Default.
-----------------
An "Event of Default" occurs if:
(1) the Company defaults in the payment of interest on any Security
when the same becomes due and payable and the default continues for a
period of 30 days, whether or not such payment shall be prohibited by the
provisions of Article 11 hereof;
<PAGE>
20
(2) the Company defaults in the payment of the principal of or
Liquidated Damages, if any, with respect to, any Security when the same
becomes due and payable at Maturity, whether or not such payment shall be
prohibited by the provisions of Article 11 hereof:
(3) the Company fails to comply with any of its other agreements in
the Securities or this Indenture and the default continues for the period
and after the notice specified below;
(4) an event of default shall have occurred and be continuing under
any mortgage, indenture, instrument or other evidence of indebtedness under
which there may be issued or by which there may be secured or evidenced any
indebtedness for money borrowed by the Company or any subsidiary, whether
such indebtedness now exists or is created hereafter, which event of
default results in the acceleration of such indebtedness prior to its
express maturity and such acceleration is not rescinded or indebtedness is
not paid or discharged for the period and after the notice specified below
and the principal amount of such indebtedness, together with the principal
amount of any other such indebtedness the maturity of which has been
accelerated, aggregates $15 million or more;
(5) a final judgment or judgments for the payment of money in excess
of $15 million in the aggregate are rendered against the Company or a
subsidiary and such judgment or judgments remain unstayed, unsatisfied or
undischarged for the period and after the notice specified below;
(6) the entry by a court having jurisdiction in the premises of (A) a
decree or order for relief in respect of the Company in an involuntary case
or proceeding under any applicable Federal or State bankruptcy, insolvency,
reorganization or other similar law or (B) a decree or order adjudging the
Company bankrupt or insolvent, or approving as properly filed a petition
seeking reorganization, arrangement, adjustment or composition of or in
respect of the Company under any applicable Federal or State law, or
appointing a custodian, receiver, liquidator, assignee, trustee,
sequestrator or other similar official of the Company or of any substantial
part of its property, or ordering the winding up or liquidation of its
affairs, and the continuance of any such decree or order for relief or any
such other decree or order unstayed and in effect for a period of 60
consecutive days; or
(7) the commencement by the Company of a voluntary case or proceeding
under any applicable Federal or State bankruptcy, insolvency,
reorganization or other similar law or of any other case or proceeding to
be adjudicated bankrupt or insolvent, or the consent by it to the entry of
a decree or order for relief in respect of the Company in an involuntary
case or proceeding under any applicable Federal or State bankruptcy,
insolvency, reorganization or other similar law or to the commencement of
any bankruptcy or insolvency case or proceeding against it, or the filing
by it of a petition or answer or consent seeking reorganization or relief
under any applicable Federal or State law, or the consent by it to the
filing of such petition or to the appointment of or taking possession by a
custodian, receiver, liquidator, assignee, trustee, sequestrator or other
<PAGE>
21
similar official of the Company or of any substantial part of its property,
or the making by it of an assignment for the benefit of creditors, or the
admission by it in writing of its inability to pay its debts generally as
they become due, or the taking of corporate action by the Company in
furtherance of any such action.
A default under clause (3), (4) or (5) is not an Event of Default
until the Trustee or the Holders of at least 25% in principal amount of the
Securities notify the Company of the default and the Company does not cure the
default within 60 days with respect to clauses (3) or (5), and within 30 days
with respect to clause (4), 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% in principal amount of the
outstanding Securities request the Trustee to give such notice on their behalf,
the Trustee shall do so.
The Trustee shall not be deemed to have notice of any Default
hereunder unless it shall have actual knowledge of such Default or it shall have
received written notice thereof making specific reference to such Default as a
Default.
SECTION 6.02. Acceleration.
------------
If an Event of Default (other than an Event of Default specified in
Section 6.01(6) or (7)) occurs and is continuing, the Trustee by notice to the
Company, or the Holders of at least 25% in principal amount of the Securities by
notice to the Company and the Trustee, may declare the principal of and accrued
interest on and Liquidated Damages, if any, with respect to all the Securities
to be immediately due and payable. Upon such declaration such principal,
interest and Liquidated Damages, if any, shall be due and payable immediately.
If an Event of Default specified in Section 6.01(6) or (7) occurs, all unpaid
principal and accrued interest on and Liquidated Damages, if any, with respect
to the Securities then outstanding shall ipso facto become and be immediately
---- -----
due and payable without any declaration or other act on the part of the Trustee
or any Securityholder. The Holders of a majority in principal amount of the
Securities by notice to the Trustee may rescind an acceleration and its
consequences if the rescission would not conflict with any judgment or decree
and if all existing Events of Default have been cured or waived except
nonpayment of principal, interest or Liquidated Damages, if any, that has become
due solely because of the acceleration.
SECTION 6.03. Collection of Indebtedness and Suits for Enforcement by
-------------------------------------------------------
Trustee.
-------
The Company covenants that if
(1) default is made in the payment of any interest on any Security
when such interest becomes due and payable and such default continues for a
period of 30 days, or
(2) default is made in the payment of the principal of or Liquidated
Damages, if any, with respect to, any Security at the Maturity thereof,
the Company will, upon demand of the Trustee, pay to it, for the benefit of the
Holders of such Securities, the whole amount then due and payable on such
Securities for principal, any
<PAGE>
22
Liquidated Damages and interest and, to the extent that payment of such interest
shall be legally enforceable, interest on any overdue principal and Liquidated
Damages and on any overdue interest, at the rate or rates prescribed therefor in
such Securities, and, in addition thereto, 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.
If an Event of Default with respect to Securities occurs and is
continuing, the Trustee may in its discretion proceed to protect and enforce its
rights and the rights of the holders of Securities by such appropriate judicial
proceedings as the Trustee shall deem most effectual to protect and enforce any
such rights, whether for the specific enforcement of any covenant or agreement
in this Indenture or in aid of the exercise of any power granted herein, or to
enforce any other proper remedy.
SECTION 6.04. Other Remedies.
--------------
Notwithstanding any other provision of this Indenture, 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 and Liquidated Damages, if any, with respect to, the Securities or to enforce
the performance of any provision of the Securities or 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. All remedies
are cumulative.
SECTION 6.05. Waiver of Past Defaults.
-----------------------
Subject to Sections 6.08 and 9.02, the Holders of a majority in
principal amount of the Securities by notice to the Trustee may waive an
existing Default and its consequences. When a Default is waived, it is cured
and ceases.
SECTION 6.06. Control by Majority.
-------------------
The Holders of a majority in principal amount of the Securities 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.
However, the Trustee may refuse to follow any direction that conflicts with law
or this Indenture, is unduly prejudicial to the rights of other Securityholders
or 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.
<PAGE>
23
SECTION 6.07. Limitation on Suits.
-------------------
Except as provided in Section 6.08, a Securityholder may pursue a
remedy with respect to this Indenture or the Securities only if:
(1) the Holder gives to the Trustee written notice of a continuing
Event of Default;
(2) the Holders of at least 25% in principal amount of the Securities
make a written request to the Trustee to institute proceedings in respect
of such Event of Default;
(3) such Holder or Holders offer to the Trustee reasonable indemnity
against any loss, liability or expense;
(4) the Trustee does not comply with the request within 60 days after
receipt of the request and the offer of indemnity; and
(5) during such 60-day period the Holders of a majority in principal
amount of the Securities do not give the Trustee a direction inconsistent
with the request.
A Securityholder may not use this Indenture to prejudice the rights of
another Securityholder or to obtain a preference or priority over another
Securityholder.
SECTION 6.08. 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 or
Liquidated Damages, if any, with respect to, such Security, on or after the
respective due dates expressed in such Security or Registration Rights
Agreement, 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
such Holder.
SECTION 6.09. Trustee May File Proofs of Claim.
--------------------------------
The Trustee may file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of the
Trustee, any predecessor Trustee and the Securityholders allowed in any judicial
proceedings relative to the Company, its creditors or its property.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder of the
Securities 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 Holder of the Securities in
any such proceeding.
<PAGE>
24
SECTION 6.10. Priorities.
----------
If the Trustee collects any money pursuant to this Article, it shall
pay out the money in the following order:
First: to the Trustee for amounts due under Section 7.07;
-----
Second: to holders of Senior Indebtedness to the extent required by
------
Article 11;
Third: to Securityholders for amounts due and unpaid on the Securities
-----
for principal, interest and Liquidated Damages, if any, ratably, without
preference or priority of any kind, according to the amounts due and
payable on or with respect to, the Securities for principal, interest and
Liquidated Damages, if any, respectively; and
Fourth: to the Company or as otherwise required by applicable law or a
------
court of competent jurisdiction.
The Trustee may fix a record date and payment date for any payment by
it to Securityholders pursuant to this Section.
SECTION 6.11. Undertaking for Costs.
---------------------
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as Trustee, a court in its discretion may require the filing by any party
litigant in the suit other than the Trustee 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 does not apply to a suit by the Trustee, a
suit by a Holder pursuant to Section 6.08 or a suit by Holders of more than 10%
in principal amount of the Securities.
ARTICLE 7
TRUSTEE
SECTION 7.01. 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:
(1) The Trustee need perform only those duties that are specifically
set forth in this Indenture and no others.
<PAGE>
25
(2) 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:
(1) This paragraph does not limit the effect of paragraph (b) of this
Section 7.01.
(2) 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.
(3) 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 6.06.
(d) Every provision of this Indenture that in any way relates to the
Trustee is subject to paragraphs (a), (b) and (c) of this Section 7.01.
(e) The Trustee may refuse to perform any duty or exercise any right
or power unless it receives indemnity satisfactory to it against any loss,
liability or expense.
(f) The Trustee shall not be liable for interest on any money received
by it except as the Trustee may agree with the Company. Money held in trust by
the Trustee need not be segregated from other funds except to the extent
required by law.
SECTION 7.02. Rights of Trustee.
-----------------
(a) The Trustee may rely on any document 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 and/or an Opinion of Counsel. 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 act through agents and shall not be responsible
for the misconduct or negligence of any agent appointed with due care.
(d) The Trustee shall not be liable for any action it takes or omits
to take in good faith which it believes to be authorized or within its rights or
powers.
<PAGE>
26
SECTION 7.03. 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 the Company or an
Affiliate thereof with the same rights it would have if it were not Trustee.
Any Agent may do the same with like rights. The Trustee, however, must comply
with Sections 7.10 and 7.11.
SECTION 7.04. 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 other than its certificate of authentication.
SECTION 7.05. Notice of Defaults.
------------------
If a Default occurs and is continuing and if it is actually known to
the Trustee or the Trustee has received written notice thereof, the Trustee
shall mail to each Securityholder a notice of the Default within 90 days after
it occurs. Except in the case of a Default in payment of principal of or
interest on or Liquidated Damages, 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 Securityholders.
SECTION 7.06. Reports by Trustee to Holders.
-----------------------------
If required by TIA (S) 313(a), within 60 days after each May 1
beginning with May 1, 1998, the Trustee shall mail to each Securityholder as
required by TIA (S) 313(c) a brief report dated as of such date that complies
with TIA (S) 313(a). The Trustee also shall comply with TIA (S) 313(b).
A copy of each report at the time of its mailing to Securityholders
shall be filed by the Trustee with the SEC and each stock exchange, if any, on
which the Securities are listed. The Company shall notify the Trustee when the
Securities are listed on or delisted from any stock exchange.
SECTION 7.07. Compensations and Indemnity.
---------------------------
The Company shall pay to the Trustee from time to time such
compensation for its services as shall be agreed upon in writing. 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 out-of-pocket expenses incurred by it. Such expenses shall include
the reasonable compensation and out-of-pocket expenses of the Trustee's agents
and counsel.
The Company shall indemnify the Trustee against any loss or liability
(including the fees and expenses of counsel) incurred by it in connection with
the administration of this trust
<PAGE>
27
and the performance of its duties hereunder. The Company need not pay for any
settlement made without its consent. The Trustee shall notify the Company
promptly of any claim for which it may seek indemnification. The Company need
not reimburse any expense or indemnify against any loss or liability incurred by
the Trustee through the Trustee's negligence or bad faith.
To secure the Company's payment obligations in this Section, the
Trustee shall have a lien prior to the Securities on all money or property held
or collected by the Trustee, except that held in trust to pay principal and
interest on or Liquidated Damages, if any, with respect to, particular
Securities.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.01(6) or (7) occurs, the expenses and the
compensation for the services are intended to constitute expenses of
administration under any bankruptcy law.
SECTION 7.08. Replacement of Trustee.
----------------------
A resignation or removal of the Trustee and appointment of a successor
Trustee shall become effective only upon the successor Trustee's acceptance of
appointment as provided in this Section.
The Trustee may resign by so notifying the Company. The Holders of a
majority in principal amount of the Securities may remove the Trustee by so
notifying the Trustee and the Company and may appoint a successor Trustee with
the Company's consent. The Company may remove the Trustee if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged a bankrupt or an insolvent;
(3) a receiver or other public officer takes charge of the Trustee or
its property; or
(4) the Trustee becomes incapable of acting.
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 principal amount of the Securities may appoint a successor
Trustee to replace the successor Trustee appointed by the Company.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or the
Holders of at least 10% in principal amount of the Securities may petition any
court of competent jurisdiction for the appointment of a successor Trustee.
If the Trustee fails to comply with Section 7.10, any Holder may
petition any court of competent jurisdiction for the removal of the Trustee and
the appointment of a successor Trustee.
<PAGE>
28
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. The successor Trustee shall mail a notice of its
succession to Securityholders. The retiring Trustee shall promptly transfer all
property held by it as Trustee to the successor Trustee, subject to the lien
provided for in Section 7.07.
SECTION 7.09. Successor Trustee by Merger, etc.
---------------------------------
If the Trustee consolidates, merges or converts into, or transfers all
or substantially all of its corporate trust business to another corporation, the
successor 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 (S) 310(a)(1). The Trustee shall always 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 (S)
310(b).
SECTION 7.11. Preferential Collection of Claims Against Company.
-------------------------------------------------
The Trustee shall comply with TIA (S) 311(a), excluding any creditor
relationship listed in TIA (S) 311(b). A Trustee who has resigned or been
removed shall be subject to TIA (S) 311(a) to the extent indicated.
SECTION 7.12. Conflicting Interests.
---------------------
If the Trustee has or shall acquire a conflicting interest within the
meaning of the Trust Indenture Act, the Trustee shall either eliminate such
interest or resign, to the extent and in the manner provided by, and subject to
the provisions of, the Trust Indenture Act and this Indenture.
ARTICLE 8
DISCHARGE OF INDENTURE
SECTION 8.01. Termination of Company's Obligations'.
------------------------------------
The Company may terminate all of its obligations under this Indenture
if all sums required to be paid hereunder have been paid and all Securities
previously authenticated and delivered (other than mutilated, destroyed, lost or
stolen Securities which have been replaced or paid) have been delivered to the
Trustee for cancellation or if:
<PAGE>
29
(1) the Securities mature within one year or all of them are to be
called for redemption within one year under arrangements satisfactory to
the Trustee for giving the notice of redemption;
(2) the Company irrevocably deposits in trust with the Trustee money
or U.S. Government Obligations sufficient to pay principal of, interest on
and Liquidated Damages, if any, with respect to, the Securities to maturity
or redemption, as the case may be. Immediately after making the deposit,
the Company shall give notice of such event to the Securityholders;
(3) the Company has paid or caused to be paid all sums then payable by
the Company to the Trustee hereunder as of the date of such deposit; and
(4) the Company has delivered to the Trustee an Officers' Certificate
stating that all conditions precedent provided for herein relating to the
satisfaction and discharge of this Indenture have been complied with. The
Company may make the deposit only during the one-year period and only if
Article 11 permits it.
However, the Company's obligations in Sections 2.03, 2.04, 2.05, 2.06, 2.07,
2.10, 2.11, 4.01, 4.02, 7.07, 7.08, 8.02, 8.03 and 8.04, and in Article 10 shall
survive until the Securities are no longer outstanding. Thereafter the
Company's obligations in Sections 7.07 and 8.03 shall survive.
After a deposit pursuant to this Section 8.01, the Trustee upon
request shall acknowledge in writing the discharge of the Company's obligations
under the Securities and this Indenture except for those surviving obligations
specified above.
In order to have money available on a payment date to pay principal,
interest on or Liquidated Damages, if any, with respect to, the Securities, the
U.S. Government Obligations shall be payable as to principal or interest on or
before such payment date in such amounts as will provide the necessary money.
"U.S. Government Obligations" means direct non-callable obligations
---------------------------
of, or non-callable obligations guaranteed by, the United States of America for
the payment of which the full faith and credit of the United States of America
is pledged.
SECTION 8.02. Application of Trust Money.
--------------------------
The Trustee shall hold in trust money or U.S. Government Obligations
deposited with it pursuant to Section 8.01. 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
Liquidated Damages, if any, with respect to, the Securities. Money and
securities so held in trust are not subject to the subordination provisions of
Article 11.
<PAGE>
30
SECTION 8.03. Repayment to Company.
--------------------
The Trustee and the Paying Agent shall promptly pay to the Company
upon request any excess money or securities held by them at any time. 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 Liquidated Damages, if
any, that remains unclaimed for three years; provided, however, that the Trustee
or such Paying Agent, before being required to make any such repayment, may, at
the expense of the Company, cause to be published once in a newspaper of general
circulation in the City of New York or cause to be mailed to each Holder notice
stating that such money remains and that, after a date specified therein, which
shall not be less than 30 days from the date of such publication or mailing, any
unclaimed balance of such money then remaining will be repaid to the Company.
After payment to the Company, Securityholders entitled to the money must look to
the Company for payment as general creditors unless an applicable abandoned
property law designates another person.
SECTION 8.04. Reinstatement.
-------------
If the Trustee or Paying Agent is unable to apply any money or U.S.
Government Obligations in accordance with Section 8.01 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 Section 8.01 until
such time as the Trustee or Paying Agent is permitted to apply all such money or
U.S. Government Obligations in accordance with Section 8.01; provided, however,
-------- -------
that if the Company has made any payment of principal of, or interest on, or
Liquidated Damages, if any, with respect to, 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 from the money or U.S.
Government Obligations held by the Trustee or Paying Agent.
ARTICLE 9
AMENDMENTS
SECTION 9.01. Without Consent of Holders.
--------------------------
The Company, with the consent of the Trustee, may amend or supplement
this Indenture or the Securities without notice to or the consent of any
Securityholder:
(1) to cure any ambiguity, omission, defect or inconsistency;
(2) to comply with Sections 5.01 and 10.12;
(3) to provide for uncertificated Securities in addition to or in
place of certificated Securities; or
<PAGE>
31
(4) to make any change that does not materially adversely affect the
rights of any Securityholder.
SECTION 9.02. With Consent of Holders.
-----------------------
The Company, with the consent of the Trustee, may amend or supplement
this Indenture or the Securities without notice to any Securityholder but with
the written consent of the Holders of at least a majority in principal amount of
the Securities then outstanding. Subject to Section 6.08, the Holders of a
majority in principal amount of the Securities then outstanding may waive
compliance by the Company with any provision of this Indenture or the Securities
without notice to any Securityholder. However, without the consent of each
Securityholder affected, an amendment, supplement or waiver, including a waiver
pursuant to Section 6.05, may not:
(1) reduce the percentage of Securities whose Holders must consent to
an amendment, supplement or waiver;
(2) reduce the rate of or extend the time for payment of interest on
or Liquidated Damages, if any, with respect to, any Security;
(3) reduce the principal amount of, or Liquidated Damages, if any,
with respect to, or extend the Stated Maturity of any Security (including,
without limitation, the optional redemption provisions);
(4) change the place of payment where, or the coin or currency in
which, any Security or interest thereon is payable;
(5) waive a default in the payment of principal of, interest on or
Liquidated Damages, if any, with respect to, any Security;
(6) reduce any amount payable on redemption at the option of the
Company or upon exercise of the Repurchase Right thereof or otherwise
change the redemption or Repurchase Right provisions or adversely affect
any repurchase rights, or impair the right of a Holder to institute suit
for the enforcement of any such payment on any Security when due;
(7) make any change in Section 6.05, Section 6.08 or Section 9.02; or
(8) impair the right to convert any Security into stock, securities or
other property or assets (including cash), subject to the terms set forth
in this Indenture, or except as permitted under this Indenture, increase
the Conversion Price or otherwise modify or affect in any manner adverse to
the Holders the conversion provisions hereof.
Promptly after an amendment under this Section becomes effective, the
Company shall mail to Securityholders a notice briefly describing the amendment.
However, the failure to
<PAGE>
32
give such notice to all Holders, or any defect therein, will not impair or
affect the validity of the amendment.
It shall not be necessary for the consent of the Holders under this
Section to approve the particular form of any proposed amendment or supplement,
but it shall be sufficient if such consent approves the substance thereof.
The Indenture may not be amended to alter the subordination of any
outstanding Securities without consent of each holder of Senior Indebtedness
then outstanding that would be adversely affected thereby.
SECTION 9.03. Compliance with Trust Indenture Act.
-----------------------------------
Every amendment to this Indenture or the Securities shall comply with
the TIA as then in effect.
SECTION 9.04. Revocation and Effect of Consents.
---------------------------------
Until an amendment, supplement or waiver becomes effective, a consent
to it by a Holder is a continuing consent by such 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 if the Trustee receives the
notice of revocation before the date the amendment, supplement or waiver becomes
effective. An amendment, supplement or waiver becomes effective in accordance
with its terms and thereafter binds every Securityholder.
After an amendment, supplement or waiver becomes effective with
respect to the Securities, it shall bind every Securityholder unless it makes a
change described in any of clauses (1) through (8) of Section 9.02. In that
case the amendment, supplement or waiver shall bind each Holder who has
consented to it and, provided that notice of such amendment, supplement or
waiver is reflected on a Security that evidences the same debt as the consenting
Holder's Security, every subsequent Holder of a Security or portion of a
Security that evidences the same debt as the consenting Holder's Security.
SECTION 9.05. Notation on or Exchange of Securities.
-------------------------------------
If an amendment, supplement or waiver changes the terms of a Security,
the Trustee may require the Holder 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.
<PAGE>
33
SECTION 9.06. Trustee Protected.
-----------------
The Trustee need not sign any amendment, supplement or waiver
authorized pursuant to this Article that adversely affects the Trustee's rights.
The Trustee shall be entitled to receive and rely upon an Opinion of Counsel and
an Officers' Certificate that any supplemental indenture complies with the
Indenture.
ARTICLE 10
CONVERSION
SECTION 10.01. Conversion Privilege.
--------------------
A Holder of a Security may convert such Security into Common Stock at
any time prior to maturity, at the Conversion Price then in effect; provided,
--------
however, that, if such Security is called for redemption pursuant to Article 3,
- -------
such conversion right shall terminate at the close of business on the Conversion
Termination Date (unless the Company shall default in making the redemption
payment when due, in which case the conversion right shall terminate at the
close of business on the date such default is cured and such Security is
redeemed); provided, further, that, if the Holder of a Security presents such
-------- -------
Security for redemption prior to the close of business on the Conversion
Termination Date, the right of conversion shall terminate upon presentation of
the Security to the Trustee (unless the Company shall default in making the
redemption payment when due, in which case the conversion right shall terminate
at the close of business on the date such default is cured and such Security is
redeemed). The number of shares of Common Stock issuable upon conversion of a
Security shall be determined by dividing the principal amount of the Security or
portion thereof surrendered for conversion by the Conversion Price in effect on
the Conversion Date. The initial Conversion Price is set forth in paragraph 8
of the Securities and is subject to adjustment as provided in this Article 10.
A Holder may convert a portion of a Security equal to $1,000 or any
integral multiple thereof. Provisions of this Indenture that apply to
conversion of all of a Security also apply to conversion of a portion of a
Security.
In the case of redemption at the option of the Holder as a result of a
Change in Control, such conversion right will terminate upon receipt by the
Company of a written notice of the exercise of such option (unless the Company
shall default in making the repurchase payment when due, in which case the
conversion right shall terminate at the close of business on the date such
default is cured and such Security is repurchased).
A Holder of Securities is not entitled to any rights of a holder of
Common Stock until such Holder has converted his or her Securities to Common
Stock, and only to the extent such Securities are deemed to have been converted
into Common Stock pursuant to this Article 10.
<PAGE>
34
SECTION 10.02. Conversion Procedure.
--------------------
To convert a Security, a Holder must (a) complete and manually sign
the conversion notice on the back of the Security and deliver such notice to the
Conversion Agent, (b) surrender the Security to the Conversion Agent, (c)
furnish appropriate endorsements and transfer documents if required by the
Registrar or the Conversion Agent, and (d) pay any transfer or similar tax, if
required. The date on which the Holder satisfies all of the above requirements
is the "Conversion Date." As soon as practicable after the Conversion Date, the
Company shall deliver to the Holder through the Conversion Agent a certificate
for the number of whole shares of Common Stock issuable upon the conversion and
cash in lieu of any fractional shares pursuant to Section 10.03.
The person in whose name the certificate is registered shall be deemed
to be a shareholder of record on the Conversion Date; provided, however, that no
-------- -------
surrender of a Security on any date when the stock transfer books of the Company
shall be closed shall be effective to constitute the person or persons entitled
to receive the shares of Common Stock upon such conversion as the record holder
or holders of such shares of Common Stock on such date, but such surrender shall
be effective to constitute the person or persons entitled to receive such shares
of Common Stock as the record holder or holders thereof for all purposes at the
close of business on the next succeeding day on which such stock transfer books
are open; provided, further, that such conversion shall be at the Conversion
-------- -------
Price in effect on the Conversion Date as if the stock transfer books of the
Company had not been closed. Upon conversion of a Security, such person shall
no longer be a Holder of such Security. No payment or adjustment will be made
for dividends or distributions on shares of Common Stock issued upon conversion
of a Security.
No payment or adjustment will be made for accrued interest on or
Liquidated Damages, if any, with respect to, a converted Security. If any
Holder surrenders a Security for conversion after the close of business on the
record date for the payment of an installment of interest and before the close
of business on the related interest payment date, then, notwithstanding such
conversion, the interest and Liquidated Damages, if any, payable on or with
respect to, such interest payment date shall be paid to the Holder of such
Security on such record date. In such event, such Security (except Securities
called for redemption on a redemption date or with a Conversion Termination Date
during such period), when surrendered for conversion, must be accompanied by
delivery of a check or draft payable to the Conversion Agent in an amount equal
to the interest and Liquidated Damages, if any, payable on such interest payment
date on the portion so converted. If such payment does not accompany such
Security, the Security shall not be converted. If the Company defaults in the
payment of interest and Liquidated Damages, if any, payable on the interest
payment date, the Conversion Agent shall repay such funds to the Holder.
If a Holder converts more than one Security at the same time, the
number of shares of Common Stock issuable upon the conversion shall be based on
the aggregate principal amount of Securities converted.
<PAGE>
35
Upon surrender of a Security that is converted in part, the Company
shall execute, and the Trustee shall authenticate and deliver to the Holder, a
new Security equal in principal amount to the unconverted portion of the
Security surrendered.
SECTION 10.03. Fractional Shares.
-----------------
The Company will not issue fractional shares of Common Stock upon
conversion of Securities. In lieu thereof, the Company will pay an amount in
cash based upon the Closing Price of the Common Stock on the Trading Day
immediately prior to the date of conversion.
SECTION 10.04. Taxes on Conversion.
-------------------
If a Holder converts a Security, the Company shall pay any
documentary, stamp or similar issue or transfer tax due on the issue of shares
of Common Stock upon such conversion. However, the Holder shall pay any such
tax which is due because the Holder requests the shares to be issued in a name
other than the Holder's name. The Conversion Agent may refuse to deliver the
certificate representing the Common Stock being issued in a name other than the
Holder's name until the Conversion Agent receives a sum sufficient to pay any
tax which will be due because the shares are to be issued in a name other than
the Holder's name. Nothing herein shall preclude any tax withholding required
by law or regulation.
SECTION 10.05. Company to Provide Stock.
------------------------
The Company shall, prior to issuance of any Securities hereunder, and
from time to time as it may be necessary, reserve, out of its authorized but
unissued Common Stock, a sufficient number of shares of Common Stock to permit
the conversion of all outstanding Securities into shares of Common Stock.
All shares of Common Stock delivered upon conversion of the Securities
shall be newly issued shares or treasury shares, shall be duly authorized,
validly issued, fully paid and nonassessable and shall be free from preemptive
rights and free of any lien or adverse claim.
The Company will endeavor promptly to comply with all federal and
state securities laws regulating the offer and delivery of shares of Common
Stock upon conversion of Securities, if any, and will list or cause to have
quoted such shares of Common Stock on each national securities exchange or in
the over-the-counter market or such other market on which the Common Stock is
then listed or quoted.
SECTION 10.06. Adjustment of Conversion Price.
------------------------------
The Conversion Price as stated in paragraph 8 of the Securities shall
be adjusted from time to time by the Company as follows:
(a) In case the Company shall (i) pay a dividend in shares of Common
Stock to all holders of Common Stock, (ii) make a distribution in shares of
Common Stock to all holders of Common Stock, (iii) subdivide its outstanding
Common Stock into a greater number
<PAGE>
36
of shares, or (iv) combine its outstanding Common Stock into a smaller number of
shares, the Conversion Price in effect immediately prior thereto shall be
adjusted so that the holder of any Security thereafter surrendered for
conversion shall receive that number of shares of Common Stock which would have
been received upon consummation of such event by a holder of the number of
shares of Common Stock into which such Security might have been converted
immediately prior to such event. An adjustment made pursuant to this subsection
(a) shall become effective immediately after the record date in the case of a
dividend in shares or distribution and shall become effective immediately after
the effective date in the case of subdivision or combination.
(b) In case the Company shall issue warrants, options or other rights
to all or substantially all holders of its Common Stock entitling them (for a
period commencing no earlier than the record date described below and expiring
not more than 60 days after such record date) to subscribe for or purchase
shares of Common Stock (or securities convertible into or exchangeable for
Common Stock) at a price per share less than the Average Current Market Price
per share (as defined in subsection (e) of this Section 10.06) of Common Stock
at the record date for the determination of stockholders entitled to receive
such warrants, options or other rights, the Conversion Price in effect
immediately prior thereto shall be adjusted so that the same shall equal the
price determined by multiplying the Conversion Price in effect immediately prior
to such record date by a fraction of which the numerator shall be the number of
shares of Common Stock outstanding on such record date, plus the number of
shares which the aggregate offering price of the total number of shares of
Common Stock so offered (or the aggregate Conversion Price of the convertible or
exchangeable securities so offered) would purchase at such Average Current
Market Price, and of which the denominator shall be the number of shares of
Common Stock outstanding on such record date plus the number of additional
shares of Common Stock offered (or into which the convertible or exchangeable
securities so offered are convertible or exchangeable for). Such adjustment
shall be made successively whenever any such warrants, options or other rights
are issued, and shall become effective immediately after such record date. If
at the end of the period during which such warrants, options or other rights are
exercisable, not all warrants, options or other rights shall have been
exercised, the adjusted Conversion Price shall be immediately readjusted to what
it would have been based upon the number of additional shares of Common Stock
actually issued (or the number of shares of Common Stock issuable upon
conversion of convertible securities or exchange of exchangeable securities
actually issued). The Company shall not issue any warrants, options or other
rights in respect of shares of Common Stock held in the treasury of the Company.
(c) In case the Company shall distribute to all or substantially all
holders of its Common Stock (i) any shares of capital stock of the Company
(other than shares of the Company's Series A Participating Cumulative Preferred
Stock ("Series A Preferred Stock") upon exercise of the rights of holders of
Common Stock and Employee Preferred Stock to purchase one one-hundredth of a
share of Series A Preferred Stock), (ii) evidences of indebtedness, (iii) other
non-cash assets (including securities of any company other than the Company), or
(iv) warrants, options or other rights to subscribe for or purchase any of its
securities (excluding those referred to in subsection (b) of this Section
10.06), then in each such case the Conversion Price shall be adjusted so that
the same shall equal the price determined by multiplying the Conversion
<PAGE>
37
Price in effect immediately prior to the date of such distribution by a fraction
of which the numerator shall be the Average Current Market Price per share of
Common Stock on the record date mentioned below less the fair market value on
such record date (as determined by the Board of Directors, whose determination
shall be conclusive evidence of such fair market value) of the portion of the
capital stock or assets or evidences of indebtedness so distributed or of such
warrants, options or other rights applicable to one share of Common Stock
(determined on the basis of the number of shares of Common Stock outstanding on
the record date), and of which the denominator shall be the Average Current
Market Price per share of the Common Stock on such record date. Such adjustment
shall become effective immediately after the record date for the determination
of stockholders entitled to receive such distribution.
(d) In case the Company shall, by dividend or otherwise, at any time
distribute (a "Triggering Distribution") to all or substantially all holders of
its Common Stock cash in an aggregate amount that, together with the aggregate
amount of any other cash distributions to all or substantially all holders of
its Common Stock made within the 12 months preceding the date of payment of the
Triggering Distribution and in respect of which no Conversion Price adjustment
pursuant to this Section 10.06 has been made, exceeds 20% of the Average Current
Market Price per share of Common Stock on the Trading Day (the "Determination
Date") immediately preceding the day on which such Triggering Distribution is
declared by the Company multiplied by the number of shares of Common Stock
outstanding on such date (excluding shares held in the treasury of the Company),
the Conversion Price shall be reduced so that the same shall equal the price
determined by multiplying such Conversion Price in effect immediately prior to
the Determination Date by a fraction of which the numerator shall be the Average
Current Market Price per share of the Common Stock on the Determination Date
less the amount of cash so distributed within such 12 months (including, without
limitation, the Triggering Distribution) applicable to one share of Common Stock
(determined on the basis of the number of shares of Common Stock outstanding on
the Determination Date) and the denominator shall be such Average Current Market
Price per share of the Common Stock on the Determination Date, such reduction to
become effective immediately prior to the opening of business on the day
following the date on which the Triggering Distribution is paid.
(e) For the purpose of any computation under subsections (b), (c) and
(d) of this Section 10.06, the "Average Current Market Price" per share of
Common Stock on any date shall be deemed to be the average of the daily Closing
Prices for the 30 consecutive Trading Days commencing 45 Trading Days before (i)
the Determination Date with respect to distributions under subsection (d) of
this Section 10.06 or (ii) the record date with respect to distributions,
issuances or other events requiring such computation under subsection (b) or (c)
of this Section 10.06. The Average Current Market Price of Common Stock will be
appropriately and equitably adjusted to reflect the effects of any stock
dividend, stock split, reclassification, recapitalization, combination or
distribution of assets, securities or other property (other than ordinary course
cash dividends) to holders of Common Stock by the Company affecting the Common
Stock, the record date, ex-dividend date or similar date of which occurs during
the period in which the Average Current Market Price is to be determined.
Issuances of options and securities convertible into Common Stock are deemed to
be issuances of the underlying Common Stock for purposes of adjustments to the
Conversion Price.
<PAGE>
38
(f) In any case in which this Section 10.06 shall require that an
adjustment be made following a record date or a Determination Date, as the case
may be, established for purposes of this Section 10.06, the Company may elect to
defer (but only until five Trading Days following the filing by the Company with
the Trustee of the certificate described in Section 10.10) issuing to the Holder
of any Security converted after such record date or Determination Date the
shares of Common Stock and other capital stock of the Company issuable upon such
conversion over and above the shares of Common Stock and other capital stock of
the Company issuable upon such conversion only on the basis of the Conversion
Price prior to adjustment; and, in lieu of the shares the issuance of which is
so deferred, the Company shall issue or cause its transfer agents to issue due
bills or other appropriate evidence prepared by the Company of the right to
receive such shares.
SECTION 10.07. No Adjustment.
-------------
No adjustment in the Conversion Price shall be required unless the
adjustment would require an increase or decrease of at least 1% in the
Conversion Price as last adjusted; provided, however, that any adjustments which
-------- -------
by reason of this Section 10.07 are not required to be made shall be carried
forward and taken into account in any subsequent adjustment. All calculations
under this Article 10 shall be made to the nearest cent or to the nearest one-
hundredth of a share, as the case may be.
No adjustment need be made for a transaction referred to in Section
10.06 if all Securityholders are entitled to participate in the transaction on a
basis and with notice that the Board of Directors determines to be fair and
appropriate in light of the basis and notice on which holders of Common Stock
participate in the transaction. The Company shall give notice to the Trustee of
any such determination.
No adjustment need be made for a change in the par value or a change
to no par value of the Common Stock.
To the extent that the Securities become convertible into the right to
receive cash, no adjustment need be made thereafter as to the cash. Interest
will not accrue on the cash.
SECTION 10.08. Equivalent Adjustments.
----------------------
In the event that, as a result of an adjustment made pursuant to this
Section 10.08, the holder of any Security thereafter surrendered for conversion
shall become entitled to receive any shares of capital stock of the Company
other than shares of its Common Stock, thereafter the Conversion Price of such
other shares so receivable upon conversion of any Securities shall be subject to
adjustment from time to time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to Common Stock contained in this
Article 10.
SECTION 10.09. Adjustment for Tax Purposes.
---------------------------
The Company shall be entitled to make such reductions in the
Conversion Price, in addition to those required by Section 10.06, as it in its
discretion shall determine to be
<PAGE>
39
advisable in order that any stock dividends, subdivisions of shares,
distributions of rights to purchase stock or securities or distributions of
securities convertible into or exchangeable for stock hereafter made by the
Company to its stockholders shall not be taxable.
SECTION 10.10. Notice of Adjustment.
--------------------
Whenever the Conversion Price is adjusted, the Company shall promptly
mail to Securityholders a notice of the adjustment and file with the Trustee an
Officers' Certificate briefly stating the facts requiring the adjustment and the
manner of computing it. The certificate shall be conclusive evidence of the
correctness of such adjustment.
SECTION 10.11. Notice of Certain Transactions.
------------------------------
In the event that:
(1) the Company takes any action which would require an adjustment in
the Conversion Price;
(2) the Company consolidates or merges with, or transfers all or
substantially all of its assets to, another corporation and stockholders of
the Company must approve the transaction; or
(3) there is a dissolution or liquidation of the Company, the Company
shall mail to Securityholders and file with the Trustee a notice stating
the proposed record or effective date, as the case may be. The Company
shall mail the notice at least ten days before such date. Failure to mail
such notice or any defect therein shall not affect the validity of any
transaction referred to in clause (1), (2) or (3) of this Section 10.11.
SECTION 10.12. Effect of Reclassification, Consolidation, Merger or Sale on
------------------------------------------------------------
Conversion Privilege.
--------------------
If any of the following shall occur, namely: (a) any
reclassification, reorganization or other change of shares of Common Stock
issuable upon conversion of the Securities (other than a change in par value, or
from par value to no par value, or from no par value to par value, or as a
result of a subdivision or combination); (b) any consolidation or merger to
which the Company is a party other than a merger in which the Company is the
continuing corporation and which does not result in any reclassification of, or
change (other than a change in name, or in par value, or from par value to no
par value, or from no par value to par value, or as a result of a subdivision or
combination) in, outstanding shares of Common Stock; (c) any sale or transfer or
other conveyance of all or substantially all of the assets of the Company; or
(d) any share exchange pursuant to which all of the outstanding shares of Common
Stock are converted into or exchanged for other securities or property
(including cash), then the Company, or such successor or purchasing corporation,
as the case may be, shall, as a condition precedent to such reclassification,
reorganization, change, consolidation, merger, sale or conveyance, execute and
deliver to the Trustee a supplemental indenture providing that the Holder of
each Security then outstanding shall have the right thereafter to convert such
Security
<PAGE>
40
into the kind and amount of shares of stock and other securities and property
(including cash) receivable upon such reclassification, reorganization, change,
consolidation, merger, sale, transfer or share exchange by a holder of the
number of shares of Common Stock deliverable upon conversion of such Security
immediately prior to the effective date of such reclassification,
reorganization, change, consolidation, merger, sale, transfer or share exchange.
Such supplemental indenture shall provide for adjustments of the Conversion
Price which shall be as nearly equivalent as may be practicable to the
adjustments of the Conversion Price provided for in this Article 10. If, in the
case of any such reclassification, reorganization, change, consolidation,
merger, sale, transfer or share exchange, the stock or other securities and
property (including cash) receivable thereupon by a holder of Common Stock
include shares of stock or other securities and property of a corporation other
than the successor or purchasing corporation, as the case may be, in such
reclassification, reorganization, change, consolidation, merger, sale, transfer
or share exchange, then such supplemental indenture shall also be executed by
such other corporation and shall contain such additional provisions to protect
the interests of the Holders as the Board of Directors shall reasonably consider
necessary by reason of the foregoing. If in connection with any such
reclassification, reorganization, change, consolidation, merger, sale, transfer,
or share exchange each holder of shares of Common Stock is entitled to elect to
receive either securities, cash or other assets upon completion of such
transaction, the Company will provide or cause to be provided to each Holder the
right to elect to receive the securities, cash or other assets into which the
Securities held by such Holder will be convertible after completion of any such
transaction on the same terms and subject to the same conditions applicable to
holders of the Common Stock (including, without limitation, notice of the right
to elect, limitations on the period in which such election will be made and the
effect of failing to exercise the election). The provisions of this Section
10.12 shall similarly apply to successive reclassifications, reorganizations,
changes, consolidations, mergers, sales, transfers or share exchanges.
In the event the Company shall execute a supplemental indenture
pursuant to this Section 10.12, the Company shall promptly file with the Trustee
(x) an Officers' Certificate briefly stating the reasons therefor, the kind or
amount of shares of stock or securities or property (including cash) receivable
by Holders upon the conversion of their Securities after any such
reclassification, reorganization, change, consolidation, merger, sale or
conveyance, any adjustment to be made with respect thereto and that all
conditions precedent have been complied with and (y) an Opinion of Counsel that
all conditions precedent have been complied with.
SECTION 10.13. Trustee's Disclaimer.
--------------------
The Trustee has no duty to determine when an adjustment under this
Article 10 should be made, how it should be made or what such adjustment should
be, but may accept as conclusive evidence of the correctness of any such
adjustment, and shall be protected in relying upon, the Officers' Certificate
with respect thereto which the Company is obligated to file with the Trustee
pursuant to Section 10.10. The Trustee makes no representation as to the
validity or value of any securities or assets issued upon conversion of
Securities, and the Trustee shall not be responsible for the Company's failure
to comply with any provisions of this Article 10.
<PAGE>
41
The Trustee shall not be under any responsibility to determine the
correctness of any provisions contained in any supplemental indenture executed
pursuant to Section 10.12, but may accept as conclusive evidence of the
correctness thereof, and shall be protected in relying upon, the Officers'
Certificate with respect thereto which the Company is obligated to file with the
Trustee pursuant to Section 10.12.
SECTION 10.14. Voluntary Reduction.
-------------------
The Company from time to time may reduce the Conversion Price by any
amount for any period of time if the period is at least 20 days or such longer
period as may be required by law and if the reduction is irrevocable during the
period; provided, however, that in no event may the Conversion Price be less
-------- -------
than the par value of a share of Common Stock.
ARTICLE 11
SUBORDINATION
SECTION 11.01. Agreement to Subordinate.
------------------------
The Company agrees, and each Securityholder by accepting a Security
agrees, that the indebtedness evidenced by the Securities and the payment of
principal thereof and interest thereon and Liquidated Damages, if any, are
subordinated in right of payment, to the extent and in the manner provided in
this Article 11, to the prior payment in full of all Senior Indebtedness and
that the subordination is for the benefit of the holders of Senior Indebtedness.
Money and securities held in trust pursuant to Article 8 are not
subject to the subordination provisions of this Article 11.
SECTION 11.02. Certain Definitions.
-------------------
"Representative" means the indenture trustee or other trustee, agent
--------------
or representative for an issue of Senior Indebtedness.
"Senior Indebtedness" means the principal of, premium, if any, and
-------------------
interest on (a) any and all other indebtedness and obligations of the Company
(including indebtedness of others guaranteed by the Company) other than the
Securities, whether or not contingent and whether outstanding on the date of
this Indenture or thereafter created, incurred or assumed, which (i) is for
money borrowed; (ii) is evidenced by any bond, note, debenture or similar
instrument; (iii) represents the unpaid balance on the purchase price of any
property, business or asset of any kind; (iv) is an obligation of the Company as
lessee under any and all leases of property, equipment or other assets required
to be capitalized on the balance sheet of the lessee under GAAP; (v) is a
reimbursement obligation of the Company with respect to letters of credit; (vi)
is an obligation of the Company with respect to interest swap obligations and
foreign exchange agreements; or (vii) is an obligation of others secured by a
lien to which any of the properties or assets (including, without limitation,
leasehold interests and any other tangible or intangible
<PAGE>
42
property rights) of the Company are subject, whether or not the obligations
secured thereby shall have been assumed by the Company or shall otherwise be the
Company's legal liability and (b) any deferrals, amendments, renewals,
extensions, modifications and refundings of any indebtedness or obligations of
the types referred to above; provided that Senior Indebtedness shall not include
--------
(i) the Securities; (ii) any indebtedness or obligation of the Company which, by
its terms or the terms of the instrument creating or evidencing it, is both
subordinated to any other indebtedness or obligations of the Company and is not
superior in right of payment to the Securities (including the debentures issued
in exchange for the 8% Cumulative Convertible Exchangeable Preferred Stock in
accordance with its terms); (iii) any indebtedness or obligation of the Company
to any of its subsidiaries and (iv) any indebtedness or obligation which both is
incurred by the Company in connection with the purchase of assets, materials or
services in the ordinary course of business and constitutes an unsecured trade
payable.
SECTION 11.03. Liquidation; Dissolution; Bankruptcy.
--------------------------------------
Upon any distribution to creditors of the Company in a liquidation,
dissolution or winding up of the Company or in a bankruptcy, reorganization,
insolvency, receivership or similar proceeding relating to the Company or its
property, whether voluntary or involuntary:
(1) holders of Senior Indebtedness shall be entitled to receive
payment in full of the principal of and interest to the date of payment on
the Senior Indebtedness before Securityholders shall be entitled to receive
any payment of principal of or interest on or Liquidated Damages, if any
with respect to, the Securities; and
(2) until the Senior Indebtedness is paid in full, any distribution to
which Securityholders would be entitled but for this Article 11 shall be
made to holders of Senior Indebtedness as their interests may appear,
except the Securityholders may receive securities that are subordinated to
Senior Indebtedness to at least the same extent as the Securities.
SECTION 11.04. Company Not to Make Payments with Respect to Securities in
----------------------------------------------------------
Certain Circumstances.
---------------------
Except for payment in or distribution of securities that are
subordinated to Senior Indebtedness to at least the same extent as the
Securities, the Company shall not make any payment with respect to the principal
of or interest on or Liquidated Damages, if any, with respect to, any of the
Securities or make any other payment with respect to the purchase or other
acquisition of any of the Securities:
(a) if there shall have occurred a default in the payment of the
principal of or interest on any Senior Indebtedness; or
(b) if there shall exist at the time of such payment, or such payment
would create, an event of default (or an event which, with the giving of notice
or the passage of time or both, would become an event of default) with respect
to any Senior Indebtedness which would permit the holders (or any specified
proportion of such holders) of such Senior Indebtedness to
<PAGE>
43
accelerate the maturity thereof, and if notification of such default or event of
default has been given to the Company by a holder of such Senior Indebtedness or
by a trustee, agent or Representative for an issue of Senior Indebtedness;
provided, however, that this clause (b) shall not prevent the making of any such
- -------- -------
payment (which is not otherwise prohibited by clause (a) of this Section 11.04)
for more than 89 days after a written notice of default shall have been given
unless the Senior Indebtedness in respect of which such event of default exists
has been declared due and payable in its entirety, in which case no such payment
may be made;
unless and until, in each case, whether described in clause (a) or clause (b),
such default or event of default shall have been cured or waived in the manner
required by the instrument relating to such Senior Indebtedness or shall
otherwise have ceased to exist.
Regardless of anything to the contrary herein, nothing shall prevent
(a) any payment by the Trustee to the Securityholders of amounts deposited with
it pursuant to Article 8 or (b) any payment by the Trustee or the Paying Agent
as permitted by Section 11.11.
SECTION 11.05. Acceleration of Securities.
--------------------------
If payment of the Securities is accelerated because of an Event of
Default, the Company shall promptly notify holders of Senior Indebtedness of the
acceleration.
SECTION 11.06. When Distribution Must be Paid Over.
-----------------------------------
In the event that the Company shall make any payment to the Trustee of
the principal of, interest on or Liquidated Damages, if any, with respect to,
the Securities at a time when such payment is prohibited by Section 11.03 or
11.04, such payment shall be held by the Trustee, in trust for the benefit of,
and shall be paid forthwith over and delivered to, the holders of Senior
Indebtedness (pro rata as to each of such holders on the basis of the respective
amounts of Senior Indebtedness held by them) or their Representative or the
trustee under the indenture or other agreement (if any) pursuant to which Senior
Indebtedness may have been issued, as their respective interests may appear, for
application to the payment of all Senior Indebtedness remaining unpaid to the
extent necessary to pay all Senior Indebtedness in full in accordance with its
terms, after giving effect to any concurrent payment or distribution to or for
the holders of Senior Indebtedness.
If a distribution is made to Securityholders that because of this
Article 11 should not have been made to them, the Securityholders who receive
the distribution shall hold it in trust for holders of Senior Indebtedness and
pay it over to them as their interests may appear.
SECTION 11.07. Notice by Company.
-------------------
The Company shall promptly notify the Trustee and the Paying Agent in
writing of any facts known to the Company that would cause a payment of
principal of, interest on or Liquidated Damages, if any, with respect to,
Securities to violate this Article 11.
<PAGE>
44
SECTION 11.08. Subrogation.
-------------
After all Senior Indebtedness is paid in full and until the Securities
are paid in full, Securityholders shall be subrogated to the rights of holders
of Senior Indebtedness to receive distributions applicable to Senior
Indebtedness to the extent that distributions otherwise payable to the
Securityholders have been applied to the payment of Senior Indebtedness. A
distribution made under this Article 11 to holders of Senior Indebtedness which
otherwise would have been made to Securityholders is not, as between the Company
and Securityholders, a payment by the Company on Senior Indebtedness.
SECTION 11.09. Subordination May Not be Impaired by Company.
--------------------------------------------
No right of any holder of Senior Indebtedness to enforce the
subordination of the indebtedness evidenced by the Securities shall be impaired
by any act or failure to act by the Company or by its failure to comply with
this Indenture.
SECTION 11.10. Distribution or Notice to Representative.
----------------------------------------
Whenever a distribution is to be made or a notice given to holders of
Senior Indebtedness, the distribution may be made and the notice given to their
Representative.
SECTION 11.11. Rights of Trustee and Paying Agent.
----------------------------------
The Trustee or Paying Agent may continue to make payments on the
Securities until it receives written notice of facts that would cause a payment
of principal of, interest on or Liquidated Damages, if any, with respect to, the
Securities to violate this Article 11. Only the Company, a Representative or a
holder of an issue of Senior Indebtedness that has no Representative may give
the notice.
The Trustee shall be entitled to rely on the delivery to it of a
written notice by a person representing himself to be a holder of Senior
Indebtedness (or a Representative on behalf of such holder) to establish that
such notice has been given by a holder of Senior Indebtedness or a
Representative on behalf of any such holder. In the event that the Trustee
determines in good faith that further evidence is required with respect to the
right of any person who is a holder of Senior Indebtedness to participate in any
payment or distribution pursuant to this Article 11, the Trustee may request
such person to furnish evidence to the reasonable satisfaction of the Trustee as
to the amount of Senior Indebtedness held by such person, the extent to which
such person is entitled to participate in such payment or distribution and any
other facts pertinent to the rights of such person under this Article 11, and if
such evidence is not furnished the Trustee may defer any payment to such person
pending judicial determination as to the right of such person to receive such
payment or until such time as the Trustee shall be otherwise satisfied as to the
right of such person to receive such payment.
The Trustee in its individual or any other capacity may hold Senior
Indebtedness with the same rights it would have if it were not Trustee. Any
Agent may do the same with like rights.
<PAGE>
45
The Trustee shall not be deemed to owe any fiduciary duty to the
holders of Senior Indebtedness and shall not be liable to any such holder if it
shall mistakenly pay over or distribute to Securityholders or the Company or any
other person money or assets to which any holders of Senior Indebtedness shall
be entitled by virtue of this Article 11 or otherwise.
SECTION 11.12. Officers' Certificate.
---------------------
If there occurs an event referred to in Section 11.03 or 11.04, the
Company shall promptly give to the Trustee an Officers' Certificate (on which
the Trustee may conclusively rely) identifying all holders of Senior
Indebtedness or their Representatives and the principal amount of Senior
Indebtedness then outstanding held by each such holder and stating the reasons
why such Officers' Certificate is being delivered to the Trustee.
SECTION 11.13. Obligation of Company Unconditional.
-----------------------------------
Nothing contained in this Article 11 or elsewhere in this Indenture or
in any Security is intended to or shall impair, as between the Company, its
creditors other than holders of Senior Indebtedness and the Holders of the
Securities, the obligation of the Company, which is absolute and unconditional,
to pay to the Holders of the Securities the principal of, interest on and
Liquidated Damages, if any, with respect to, the Securities as and when the same
shall become due and payable in accordance with their terms, or is intended to
or shall affect the relative rights of the Holders of the Securities and
creditors of the Company other than the holders of the Senior Indebtedness, nor
shall anything herein or therein prevent the Trustee or the Holder of any
Security from exercising all remedies otherwise permitted by applicable law upon
default under this Indenture, subject to the rights, if any, under this Article
11 of the holders of Senior Indebtedness in respect of cash, property or
securities of the Company received upon the exercise of any such remedy. Upon
any distribution of assets of the Company referred to in this Article 11, the
Trustee, subject to the provisions of Sections 7.01 and 7.02, and the Holders of
the Securities shall be entitled to rely upon any order or decree by any court
of competent jurisdiction in which such dissolution, winding up, liquidation or
reorganization proceedings are pending, or a certificate of the liquidating
trustee or agent or other person making any distribution to the Trustee or the
Holders of the Securities, for the purpose of ascertaining the persons entitled
to participate in such distribution, the holders of the Senior Indebtedness and
other indebtedness of the Company, the amount thereof or payable thereon, the
amount or amounts paid or distributed thereon and all other facts pertinent
thereto or to this Article 11. Nothing contained in this Article 11 or
elsewhere in this Indenture or in any Security is intended to or shall affect
the obligation of the Company to make, or prevent the Company from making, at
any time except during the pendency of any dissolution, winding up, liquidation
or reorganization proceeding, and except during the continuance of any default
specified in Section 11.04 (not cured or waived), payments at any time of the
principal of, interest on or Liquidated Damages, if any, with respect to, the
Securities.
<PAGE>
46
ARTICLE 12
MISCELLANEOUS
SECTION 12.01. Trust Indenture Act Controls.
----------------------------
If any provision of this Indenture limits, qualifies or conflicts with
another provision which is required to be included in this Indenture by the TIA,
the required provision shall control.
SECTION 12.02. Notices.
-------
Any notice or communication by the Company or the Trustee to the other
is duly given if in writing and delivered in person, mailed by first-class mail
or by express delivery to the other's address stated in this Section 12.02. The
Company or the Trustee by notice to the other may designate additional or
different addresses for subsequent notices or communications.
Any notice or communication to a Securityholder shall be mailed by
first-class mail to his address shown on the register kept by the Registrar.
Failure to mail a notice or communication to a Securityholder or any defect in
it shall not affect its sufficiency with respect to other Securityholders.
If a notice or communication is mailed in the manner provided above
within the time prescribed, it is duly given, whether or not the addressee
receives it.
If the Company mails a notice or communication to Securityholders, it
shall mail a copy to the Trustee and each Agent at the same time.
All notices or communications shall be in writing.
The Company's address is:
Trans World Airlines, Inc.
One City Centre
515 N. 6th Street
St. Louis, Missouri 63101
Attention: Corporate Secretary
The Trustee's address is:
____________________________
____________________________
____________________________
Attention: ___________________
<PAGE>
47
SECTION 12.03. Communication by Holders with Other Holders.
-------------------------------------------
Securityholders may communicate pursuant to TIA (S) 312(b) with other
Securityholders with respect to their rights under this Indenture or the
Securities. The Company, the Trustee, the Registrar and anyone else shall have
the protection of TIA (S) 312(c).
SECTION 12.04. Certificate and Opinion as to Conditions Precedent.
--------------------------------------------------
Upon any request or application by the Company to the Trustee to take
any action under this Indenture the Company shall furnish to the Trustee:
(1) an Officer's Certificate 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; and
(2) an Opinion of Counsel stating that, in the opinion of such
counsel, all such conditions precedent have been complied with.
Each signer of an Officers' Certificate or an Opinion of Counsel may
(if so stated) rely, effectively, upon an Opinion of Counsel as to legal matters
and an Officers' Certificate as to factual matters if such signer reasonably and
in good faith believes in the accuracy of the document relied upon.
SECTION 12.05. Statements Required in Certificate or Opinion.
---------------------------------------------
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
(1) a statement that the person making such certificate or opinion has
read such covenant or condition;
(2) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of such person, he has made such
examination or investigation as is necessary to enable him to express an
informed opinion as to whether or not such covenant or condition has been
complied with; and
(4) a statement as to whether or not, in the opinion of such person,
such condition or covenant has been complied with.
SECTION 12.06. Rules by Trustee and Agents.
---------------------------
The Trustee may make reasonable rules for action by or at a meeting of
Securityholders. The Registrar, Paying Agent or Conversion Agent may make
reasonable rules and set reasonable requirements for their respective functions.
<PAGE>
48
SECTION 12.07. Legal Holidays.
--------------
A "Legal Holiday" is a Saturday, a Sunday or a day on which banking
institutions are not required to be open in the City of New York, in the State
of New York or in the city in which the Trustee administers its corporate trust
business. If a payment date is a Legal Holiday at a place of payment, payment
may be made at that place on the next succeeding day that is not a Legal
Holiday, and no interest shall accrue on that payment for the intervening
period.
A "business day" is a day other than a Legal Holiday.
SECTION 12.08. No Recourse Against Others.
--------------------------
No past, present or future director, officer, employee, agent,
manager, stockholder, or Affiliate, as such, of the Company shall 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. Such waiver and release are part of the
consideration for the issuance of the Securities.
SECTION 12.09. Duplicate Originals.
-------------------
The parties may sign any number of copies of this Indenture. Each
signed copy shall be an original, but all of them together represent the same
agreement.
SECTION 12.10. Governing Law.
-------------
The laws of the State of New York, without regard to principles or
conflicts of law, shall govern this Indenture and the Securities.
SECTION 12.11. No Adverse Interpretation of Other Agreements.
---------------------------------------------
This Indenture may not be used to interpret another indenture, loan or
debt agreement of the Company or a subsidiary. Any such indenture, loan or debt
agreement may not be used to interpret this Indenture
SECTION 12.12. Successors.
----------
All agreements of the Company in this Indenture and the Securities
shall bind its successors. All agreements of the Trustee in this Indenture
shall bind its successors.
SECTION 12.13. Separability.
------------
In case any provision in this Indenture or in the Securities shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby
and a Holder shall have no claim therefor against any party hereto.
<PAGE>
49
SECTION 12.14. Table of Contents, Headings, etc.
---------------------------------
The Table of Contents, Cross-Reference Table and headings of the
Articles and Sections of this Indenture have been inserted for convenience of
reference only, are not to be considered a part hereof and shall in no way
modify or restrict any of the terms or provisions hereof.
<PAGE>
50
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed, and their respective corporate seals to be hereunto affixed
and attested, all as of the day and year first above written.
TRANS WORLD AIRLINES, INC.
By:
-----------------------------------
Title:
__________________, as Trustee
By:
-----------------------------------
Title:
<PAGE>
51
EXHIBIT A
REGISTERED [Face of Security] REGISTERED
NUMBER DOLLARS
TRANS WORLD AIRLINES, INC.
. . . . . . . . . . . . . . . . . .
9 1/4% CONVERTIBLE SUBORDINATED DEBENTURE DUE 2007
TRANS WORLD AIRLINES, INC., a Delaware corporation (herein called the
"Company," which term includes any successor person under the Indenture
hereinafter referred to), for value received, hereby promises to pay to
_____________, or registered assigns, the principal sum of _____________ Dollars
on December 15, 2007, and to pay interest thereon as provided on the reverse
hereof, until the principal hereof is paid or duly provided for.
Interest Payment Dates: June 15 and December 15
Record Dates: June 1 and December 1
The provisions on the back of this certificate are incorporated as if
set forth on the face hereof.
IN WITNESS WHEREOF, TRANS WORLD AIRLINES, INC. has caused this
instrument to be duly signed under its corporate seal.
[SEAL] TRANS WORLD AIRLINES, INC.
By:
-------------------------------------
[Title]
By:
-------------------------------------
[Title]
<PAGE>
A-2
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Securities referred to in the within-mentioned Indenture.
______________________, as Trustee
By:
-------------------------------------
Authorized Signatory
Dated:
---------------
<PAGE>
A-3
[REVERSE OF SECURITY]
TRANS WORLD AIRLINES, INC.
9 1/4% CONVERTIBLE SUBORDINATED DEBENTURE DUE 2007
This Security is one of a duly authorized issue of Securities of the
Company designated as its 9 1/4% Convertible Subordinated Debentures due 2007
(hereinafter called the "Securities"), limited in aggregate principal amount to
$[Insert an amount equal to the aggregate liquidation preference on the 9 1/4%
Preferred Stock outstanding immediately prior to Exchange Date] issued pursuant
to the Indenture, dated as of [insert Exchange Date] (hereinafter called the
"Indenture"), between the Company and
___________________________________________, as Trustee (herein called the
"Trustee," which term includes any successor trustee under the Indenture).
1. Interest; Liquidated Damages. The Company promises to pay
----------------------------
interest on the principal amount of this Security at the rate per annum shown
--- -----
above. The Company will pay interest and Liquidated Damages, if any,
semiannually in arrears on June 15 and December 15 of each year, commencing
[insert first of such dates to occur after date of Indenture], to the person in
whose name this Security is registered at the close of business on the preceding
June 1 and December 1, as the case may be. Interest on the Securities will
accrue from the most recent date to which interest has been paid or, if no
interest has been paid, from the date of original issuance of the Securities set
forth on the face of this Security. Interest and Liquidated Damages, 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, provided that holders of
Securities called for redemption on a redemption date falling between an
interest payment record date and the interest payment date shall, in lieu of
receiving such interest and Liquidated Damages, if any, on the interest payment
date fixed therefor, receive such interest payment together with all other
accrued and unpaid interest and Liquidated Damages, if any, on the date fixed
for redemption (unless such holders convert such Securities in accordance with
the Indenture, in which case such holders will receive such payment on the
corresponding interest payment date). 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
-----------------
Liquidated Damages, if any, with respect to, the Securities (except defaulted
interest) 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. Holders must surrender
Securities to a Paying Agent to collect principal payments. The Company will
pay principal, interest and Liquidated Damages, 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 Liquidated Damages, if any,
with respect to, the Securities may be by check payable in such money and mailed
to a Holder's registered address.
<PAGE>
A-4
3. Paying Agent, Registrar, Conversion Agent. Initially, the Trustee
-----------------------------------------
will act as Paying Agent, Registrar and Conversion Agent. The Company may change
any Paying Agent, Registrar, Conversion Agent or co-registrar without notice.
The Company may act in any such capacity.
4. Indenture. The terms of this Security include those stated in the
Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939, as amended (15 U.S. Code (S)(S) 77aaa-77bbbb) (the
"Act"), as in effect on the date of the Indenture. This Security is subject to
all such terms, and the holder hereof is referred to the Indenture and the Act
for a statement of such terms. Terms used herein which are defined in the
Indenture have the meanings assigned to them in the Indenture.
5. Optional Redemption. This Security may be redeemed on at least 30
-------------------
and not more than 60 days' prior notice at the option of the Company on or after
December 15, 2000, in whole at any time or in part from time to time (in any
integral multiple of $1,000), at the redemption prices (expressed as a
percentage of principal amount) set forth below during the 12-month periods
beginning on December 15 of the years shown below, plus in each case an amount
equal to accrued and unpaid interest and Liquidated Damages, if any, to (and
including) the redemption date:
Year Redemption Price
---- ----------------
2000................. 106.48
2001................. 105.55
2002................. 104.63
2003................. 103.70
2004................. 102.78
2005................. 101.85
2006................. 100.93
6. Notice of Redemption. Notice of 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. On and after the
redemption date, interest will cease to accrue on Securities called for
redemption.
7. Change in Control. In the event of a Change in Control (as
-----------------
hereinafter defined), then each Holder shall have the right, at the Holder's
option, to require the Company to repurchase such Holder's Securities including
any portion thereof which is $1,000 or any integral multiple thereof on the date
(the "Repurchase Date") that is 45 days after the date of the Repurchase Right
Notice at a purchase price equal to 100% of the principal amount thereof, plus
accrued and unpaid interest and Liquidated Damages, if any to and including the
Repurchase Date (the "Repurchase Price").
Within 30 days after the occurrence of a Change in Control, the
Company is obligated to give notice of the occurrence of such Change in Control,
and of the procedure which such Holder must follow to exercise such right. To
exercise the redemption option, the Holder of a Security must deliver on or
before the 30th day after the date of the Repurchase Right Notice,
<PAGE>
A-5
written notice to the Company of the Holder's exercise of such option together
with the Security or Securities with respect to which the option is being
exercised, duly endorsed for transfer. Exercise of the Repurchase Right by the
Holder of a Security will be irrevocable, unless the Company shall default in
making the repurchase payment when due, in which case a Holder who elects to
exercise the Repurchase Right will retain the right to convert such Security
into Common Stock until the close of business on the date such default is cured
and such Security is repurchased. If the Repurchase Date falls between any
interest payment record date and the next succeeding interest payment date,
Securities must be accompanied by payment of an amount equal to the interest
thereon and Liquidated Damages, if any, with respect thereto which the
registered Holder is to receive on such interest payment date.
If any repurchase pursuant to the foregoing provisions constitutes an
"issuer tender offer" as defined in Rule 13e-4 under the Exchange Act, the
Company will comply with the requirements of Rule 13e-4, Rule 14e-1 and any
other tender offer rules under the Exchange Act which then may be applicable,
including the filing of an Issuer Tender Offer Statement on Schedule 13E-4 with
the SEC and the furnishing of certain information contained therein to the
Holders.
A "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, (ii) the Company sells, transfers or otherwise disposes of all or
substantially all of the assets of the Company, (iii) when, during any period of
12 consecutive months after the date of original issuance of the 9 1/4%
Preferred Stock, 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 who were either directors at the beginning of such period or whose
election or nomination for election was previously so approved), 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.
8. Conversion. A Holder of a Security may convert such Security into
----------
shares of Common Stock of the Company at any time prior to maturity; provided,
--------
however, that if the
- -------
<PAGE>
A-6
Security is called for redemption, the conversion right will terminate at the
close of business on the second business day immediately preceding the
redemption date for such Security (the "Conversion Termination Date") (unless
the Company shall default in making the redemption payment when due, in which
case the conversion right shall terminate at the close of business on the date
such default is cured and such Security is redeemed); provided, further, that if
-------- -------
the Holder of a Security presents such Security for redemption prior to the
close of business on the Conversion Termination Date, the right of conversion
shall terminate upon presentation of the Security to the Trustee (unless the
Company shall default in making the redemption payment when due, in which case
the conversion right shall terminate on the close of business on the date such
default is cured and such Security is redeemed). The initial Conversion Price
is [insert conversion price of 9 1/4% Preferred Stock on the date of exchange]
per share, subject to adjustment under certain circumstances. The number of
shares issuable upon conversion of a Security is determined by dividing the
principal amount converted by the Conversion Price in effect on the Conversion
Date. No payment or adjustment will be made for accrued interest or Liquidated
Damages, if any, on a converted Security or for dividends or distributions on
shares of Common Stock issued upon conversion of Security. No fractional shares
will be issued upon conversion; in lieu thereof, an amount will be paid in cash
based upon the Closing Price of the Common Stock on the Trading Day immediately
prior to the Conversion Date.
To convert a Security, a Holder must (a) complete and manually sign
the conversion notice set forth below and deliver such notice to the Conversion
Agent, (b) surrender the Security to the Conversion Agent, (c) furnish
appropriate endorsements and transfer documents if required by the Registrar or
the Conversion Agent, and (d) pay a transfer or similar tax, if required. A
holder of a Security at the close of business on an interest payment record date
shall be entitled to receive the interest and Liquidated Damages, if any,
payable on the corresponding interest payment date notwithstanding the
conversion thereof following the close of business on such interest payment
record date and prior to the close of business on such interest payment date.
However, if a Holder surrenders a Security for conversion after the close of
business on the record date for the payment of an installment of interest and
before the close of business on the related interest payment date then,
notwithstanding such conversion, the interest and Liquidated Damages, if any,
payable on such interest payment date shall be paid to the Holder of such
Security on such record date. In such event, the Security (except Securities
called for redemption on a redemption date or with a Conversion Termination Date
during such period) must be accompanied by payment of an amount equal to the
interest and Liquidated Damages, if any, payable on such interest payment date
on the principal amount of the Security or portion thereof then converted. A
Holder may convert a portion of a Security equal to $1,000 or any integral
multiple thereof.
9. Subordination. The Securities are subordinated in right of
-------------
payment, in the manner and to the extent set forth in the Indenture, to the
prior payment in full of all Senior Indebtedness. Each Holder by accepting a
Security agrees to such subordination and authorizes the Trustee to give it
effect.
10. Denominations, Transfer, Exchange. The Securities are in
---------------------------------
registered form without coupons in denominations of $1,000 and whole multiples
of $1,000. The transfer of
<PAGE>
A-7
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. No service charge shall be made
for any such registration or transfer or exchange, but the Company may require
payment of a sum sufficient to cover any tax or other governmental charge
payable in connection therewith. The Registrar need not exchange or register the
transfer of any Security selected for redemption. Also, it need not exchange or
register the transfer of any Securities for a period of 15 days before a
selection of Securities to be redeemed.
11. Persons Deemed Owners. The registered Holder of a Security may
---------------------
be treated as its owner for all purposes.
12. Merger or Consolidation. The Company may not consolidate with,
-----------------------
or merge into, or directly or indirectly transfer or lease all or substantially
all of its assets to, another person unless, among other things, the person is a
corporation; such corporation assumes by supplemental indenture all the
obligations of the Company under the Securities and the Indenture; and giving
effect to the transaction, no Default or Event of Default (as defined in the
Indenture) shall exist.
13. Amendments and Waivers. Subject to certain exceptions, the
----------------------
Indenture or the Securities may be amended with the consent of the Holders of at
least a majority in principal amount of the Securities outstanding; and any
existing default may be waived with the consent of the Holders of a majority in
principal amount of the Securities. Without the consent of any Securityholder,
the Indenture or the Securities may be amended to cure any ambiguity, omission,
defect or inconsistency or to provide for uncertificated Securities in addition
to certificated Securities, to comply with Sections 5.01 and 10.12 of the
Indenture or to make any change that does not materially adversely affect the
rights of any Securityholder.
14. Defaults and Remedies. An Event of Default is: a continuing
---------------------
default for 30 days in payment of interest on the Securities; default in payment
of principal of or Liquidated Damages, if any, with respect to, the Securities
when due; failure by the Company for 60 days after written notice to the Company
by the Trustee or to the Company and the Trustee by the holders of at least 25%
in principal amount of the outstanding Securities specifying such breach or
default and requiring it to be remedied and stating that such notice is a notice
of default hereunder; acceleration prior to maturity of other indebtedness in
excess of an aggregate of $15 million which acceleration is not rescinded or
indebtedness is not paid or discharged for 30 days after notice; the rendering
of a final judgment or judgments against the Company in excess of $15 million,
which is not discharged, satisfied or stayed within a period of 60 days after
notice; and certain events of bankruptcy or insolvency. If any Event of Default
occurs and is continuing, the Trustee or the Holders of at least 25% in
principal amount of the Securities may declare all the Securities to be due and
payable immediately. The Holders of a majority in principal amount of the
Securities by notice to the Trustee may waive a Default and its consequences.
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
<PAGE>
A-8
amount of the 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, interest or Liquidated
Damages) if it determines that withholding notice is in their interests. The
Company must furnish an annual compliance certificate to the Trustee.
15. Trustee Dealings with Company. The Trustee under the Indenture,
-----------------------------
or any banking institution serving as successor Trustee thereunder, in its
individual or any other capacity, may make loans to, accept deposits from, and
perform services for the Company or its Affiliates, and may otherwise deal with
the Company or its Affiliates, as if it were not Trustee.
16. No Recourse Against Others. A director, officer, employee,
--------------------------
agent, manager, stockholder or Affiliate, as such, of the Company shall not have
any liability for any obligations of the Company under this Security 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 releases are part of the
consideration for the issue of this Security.
17. Authentication. This Security shall not be valid until
--------------
authenticated by the manual signature of the Trustee or an authenticating agent.
18. Abbreviations. Customary abbreviations may be used in the name
-------------
of a Securityholder or an assignee, such as: TEN COM (= tenants in common), TEN
ENT (= tenant 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).
THE COMPANY WILL FURNISH TO ANY SECURITYHOLDER UPON WRITTEN REQUEST
AND WITHOUT CHARGE A COPY OF THE INDENTURE. REQUESTS MAY BE MADE TO: Trans
World Airlines, Inc., One City Centre, 515 N. 6th Street, St. Louis, Missouri
63101, Attention: Corporate Secretary.
<PAGE>
A-9
<TABLE>
<CAPTION>
<S> <C>
ASSIGNMENT FORM CONVERSION NOTICE
To assign this Security, fill in the form below: To convert this Security into Common Stock of the Company, check the
box:
[ ]
I or we assign and transfer this Security to:
- ---------------------------------------
(Insert Assignee's Soc. Sec. or Tax I.D. No.) To convert only part of this Security, state the amount to be converted
(must be in multiples of $1,000):
$
-------------------------------------------------------------
- --------------------------------------- If you want the stock certificate made out in another person's name,
- --------------------------------------- fill in the form below:
- ---------------------------------------
- ---------------------------------------
(Print or type assignee's name, address and zip code) (Insert other person's Soc. Sec. or Tax I.D. no.)
and irrevocably appoint __________________ agent to --------------------------------------------------------
transfer this Security on the books of the --------------------------------------------------------
Company. The agent may substitute another --------------------------------------------------------
to act for him. --------------------------------------------------------
(Print or type other person's name, address and zip code)
- -----------------------------------------------------------------------------------------------------------------------
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)
</TABLE>
<PAGE>
A-10
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security repurchased by the Company
pursuant to Section 4.08 of the Indenture, check the box:
[ ]
If you want to elect to have only part of this Security repurchased by
the Company pursuant to Section 4.08 of the Indenture, state the amount to be
repurchased:
$
---------------------------------
(in an integral multiple of $1,000)
<TABLE>
<CAPTION>
<S> <C>
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)
</TABLE>
<PAGE>
EXHIBIT B
Form of Legend for Global Securities
Every Global Security authenticated and delivered hereunder shall bear
a legend in substantially the following form:
Unless this certificate is presented by an authorized representative of The
Depository Trust Company, a New York corporation ("DTC"), to Issuer or its
agent for registration of transfer, exchange, or payment, and any
certificate issued is registered in the name of Cede & Co. or in such other
name as is requested by an authorized representative of DTC (and any
payment 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.
<PAGE>
EXHIBIT 4.21
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is made and
---------
entered into as of December 2, 1997, by and among Trans World Airlines, Inc., a
Delaware corporation (the "Company"), and Lazard Freres & Co. LLC and
-------
PaineWebber Incorporated (together, the "Initial Purchasers"), who have (i)
------------------
purchased 1,500,000 shares of 9 1/4% Cumulative Convertible Exchangeable
Preferred Stock, par value $.01 per share of the Company (the "9 1/4% Preferred
Stock") exchangeable for 9 1/4% Convertible Subordinated Debentures due 2007
(the "Debentures") of the Company and (ii) been granted the right to acquire an
----------
additional 225,000 shares of 9 1/4% Preferred Stock (the "Option Shares"), in
each case pursuant to the Purchase Agreement dated as of November 25, 1997 (the
"Purchase Agreement"), among the Company and the Initial Purchasers.
------------------
This Agreement is made pursuant to the Purchase Agreement. In order
to induce the Initial Purchasers to enter into the Purchase Agreement, the
Company has agreed to provide the registration rights set forth in this
Agreement. The execution and delivery of this Agreement is a condition to the
closing of the Purchase Agreement. All capitalized terms used but not defined
herein shall have the meanings ascribed to them in the Indenture (as defined
below) governing the Debentures.
The parties hereby agree as follows:
SECTION 1. DEFINITIONS
As used in this Agreement, the following capitalized terms shall have
the following meanings:
Act: The Securities Act of 1933, as amended.
---
Closing Date: The date on which the initial closing of the sale of
------------
shares of 9 1/4% Preferred Stock to the Initial Purchasers is consummated.
Commission: The United States Securities and Exchange Commission and
----------
any successor federal agency having similar powers.
Common Stock: Includes any stock of any class of the Company which
------------
has no preference in respect of 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. Unless the
context otherwise requires, all references to Common Stock shall include the
associated Rights.
Damages Payment Date: With respect to the 9 1/4% Preferred Stock, the
--------------------
Damages Payment Date shall be each dividend payment date and each Redemption
Date (as defined in the Designation of the Preferred). With respect to the
Debentures, the Damages Payment Date shall
<PAGE>
2
be each interest payment date, each Repurchase Date (as defined in the
Indenture) and each redemption date under the Indenture. In the event the 9 1/4%
Preferred Stock or the Debentures are called for redemption on a redemption date
falling between a dividend payment record date or an interest payment record
date and the dividend payment date or interest payment date, holders of shares
of 9 1/4% Preferred Stock or Debentures shall in lieu of receiving liquidated
damages on the dividend payment date or interest payment date receive such
liquidated damages on the date fixed for redemption (unless such holders convert
such shares or Debentures in accordance with the Designation of the Preferred or
the Indenture, in which case such holders will receive such payment on the
corresponding dividend payment date or interest payment date). With respect to
Common Stock issuable upon conversion of the 9 1/4% Preferred Stock or the
Debentures, the Damages Payment Date shall be the dividend payment date
applicable to the 9 1/4% Preferred Stock (unless all of the shares of 9 1/4%
Preferred Stock have been exchanged for Debentures, in which case the Damages
Payment Date will be the interest payment date applicable to the Debentures).
Designation of the Preferred: The Certificate of Designations,
----------------------------
Preferences and Rights Relating to the 9 1/4% Preferred Stock.
Effectiveness Target Date: As defined in Section 3.
-------------------------
Exchange Act: The Securities Exchange Act of 1934, as amended.
------------
Exempt Resales: The transactions in which the Initial Purchasers
--------------
propose to sell the 9 1/4% Preferred Stock (i) inside the United States to (A)
certain "qualified institutional buyers" (as such term is defined in Rule 144A
under the Act) and (B) certain institutional "accredited investors" (as defined
in Rule 501 of Regulation D under the Act), and (ii) outside the United States
in reliance on Regulation S under the Act.
Holder: As defined in Section 2(b) hereof.
------
Indenture: The Indenture, dated as of the Exchange Date (as defined
---------
in the Designation of the Preferred), between the Company and a trustee selected
by the Company and reasonably satisfactory to the Initial Purchasers (the
"Trustee"), pursuant to which the Debentures are to be issued, as such Indenture
- --------
is amended or supplemented from time to time in accordance with the terms
thereof.
NASD: National Association of Securities Dealers, Inc.
----
Offering Memorandum: The Offering Memorandum, dated November 25,
-------------------
1997, and all amendments and supplements thereto, relating to the 9 1/4%
Preferred Stock and prepared by the Company pursuant to the Purchase Agreement.
Option Closing Date: The date on which the closing of the sale of the
-------------------
Option Shares to the Initial Purchasers is consummated.
<PAGE>
3
Person: An individual, partnership, corporation, limited liability
------
company, trust or unincorporated organization or other entity, or a government
or agency or political subdivision thereof.
9 1/4% Preferred Stock: 9 1/4% Cumulative Convertible Exchangeable
----------------------
Preferred Stock, par value $.01 per share, of the Company.
Prospectus: The prospectus included in the Shelf Registration
----------
Statement, as amended or supplemented by any prospectus supplement and by all
other amendments and supplements to the prospectus included in the Shelf
Registration Statement, including post-effective amendments, and all material
which may be incorporated by reference into such prospectus.
Record Holder: (i) With respect to any Damages Payment Date relating
-------------
to the 9 1/4% Preferred Stock, each Person who is a Holder of 9 1/4% Preferred
Stock on the record date with respect to the dividend payment date on which such
Damages Payment Date shall occur, (ii) with respect to any Damages Payment Date
relating to the Debentures, each Person who is a Holder of Debentures on the
record date with respect to the interest payment date on which such Damages
Payment Date shall occur and (iii) with respect to any Damages Payment Date
relating to the Common Stock, each Person who is a Holder of Common Stock issued
upon conversion of 9 1/4% Preferred Stock or Debentures on the record date with
respect to the dividend payment date on which such Damages Payment Date shall
occur (unless all of the shares of 9 1/4% Preferred Stock have been exchanged
for Debentures, in which case the Record Holder shall be each Person who is a
Holder of Common Stock on the record date with respect to the interest payment
date on which such Damages Payment Date shall occur).
Registrar: As defined in the Indenture.
---------
Registration Default: As defined in Section 4 hereof.
--------------------
Rights: The Rights of the Company entitling the holder to purchase
------
one one-hundredth of a share of the Company's Series A Participating Preferred
Stock, par value $.01 per share, under certain circumstances issued pursuant to
the Rights Agreement dated as of December 19, 1995 between the Company and
American Stock Transfer & Trust Company, as Rights Agent, supplemented as of
March 18, 1996 and as it may be further amended or supplemented from time to
time.
Securities Act: The Securities Act of 1933, as amended.
--------------
Shelf Registration Statement: As defined in Section 3(a) hereof.
----------------------------
TIA: The Trust Indenture Act of 1939, as amended, as in effect on the
---
date of the Indenture.
Transfer Restricted Securities: Each share of 9 1/4% Preferred Stock,
------------------------------
each Debenture issued upon exchange thereof, and each share of Common Stock
issued upon
<PAGE>
4
conversion of the 9 1/4% Preferred Stock or the Debentures, until the date on
which each such share of 9 1/4% Preferred Stock, Debenture or share of Common
Stock (i) has been effectively registered under the Act and disposed of in
accordance with the Shelf Registration Statement or (ii) is distributed to the
public pursuant to Rule 144 under the Act or is saleable pursuant to Rule 144(k)
under the Act (or similar provisions then in force).
Usable: Complies with the applicable rules and regulations of the
------
Securities Act of 1933, as amended, including, without limitation, Rule 3-12 of
Regulation S-X and Item 512 of Regulation S-K.
SECTION 2. SECURITIES SUBJECT TO THIS AGREEMENT
(a) Transfer Restricted Securities. The securities entitled to the
------------------------------
benefits of this Agreement are the Transfer Restricted Securities.
(b) Holders of Transfer Restricted Securities. A Person is deemed to
-----------------------------------------
be a holder of record of Transfer Restricted Securities (each, a "Holder")
------
whenever such Person owns Transfer Restricted Securities.
SECTION 3. SHELF REGISTRATION
(a) The Company shall file with the Commission, as soon as practicable
after the Closing Date, but in any event on or prior to the date 60 days after
the Closing Date, a shelf registration statement pursuant to Rule 415 under the
Act (the "Shelf Registration Statement") on Form S-1, Form S-2 or Form S-3, as
----------------------------
determined by the Company, if the use of such form is then available, to cover
resales of all Transfer Restricted Securities by the Holders thereof who have
provided the information required by Section 3(b) hereof. The Company will use
its reasonable best efforts to cause such Shelf Registration Statement to be
declared effective by the Commission within 150 days after the Closing Date (the
"Effectiveness Target Date"). The Company shall use its reasonable best efforts
-------------------------
to keep such Shelf Registration Statement continuously effective, subject to the
provisions of Section 5 hereof, until the earlier of (i) the sale of all
Transfer Restricted Securities covered by the Shelf Registration Statement, and
(ii) the expiration of two years after the date of original issuance of the 9
1/4% Preferred Stock or, if the period applicable under Rule 144(k) under the
Securities Act, or any successor provision for such securities is shortened,
such shorter period. Subject to the right of the Company to have the Shelf
Registration Statement not be effective for periods of time set forth in Section
5 hereof, the Company further agrees to use its reasonable best efforts to
prevent the happening of any event that would cause the Shelf Registration
Statement to contain a material misstatement or omission or to be not effective
and usable for resale of the Transfer Restricted Securities during the period
that such Shelf Registration Statement is required to be effective and usable.
Upon the occurrence of any event that would cause the Shelf Registration
Statement (i) to contain a material misstatement or omission or (ii) to not be
effective or usable for resale of Transfer Restricted Securities during the
period that such Shelf Registration Statement is required to be effective and
usable, the Company shall promptly file an amendment to the Shelf Registration
Statement, in the case of clause (i), correcting any such misstatement or
omission, and in the case of either clause (i) or (ii), use its reasonable best
efforts to cause such amendment to be declared
<PAGE>
5
effective and such Shelf Registration Statement to become usable as soon as
practicable thereafter.
(b) No Holder of Transfer Restricted Securities may include any of its
Transfer Restricted Securities in any Shelf Registration Statement pursuant to
this Agreement 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
any Shelf Registration Statement or Prospectus or preliminary Prospectus
included therein. No Holder of Transfer Restricted Securities shall be entitled
to liquidated damages pursuant to Section 4 hereof if such Holder's Transfer
Restricted Securities are excluded from a 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 such Shelf Registration Statement or Prospectus or preliminary
Prospectus included therein. Each Holder as to which any 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 materially misleading.
SECTION 4. LIQUIDATED DAMAGES
Each of the Company and the Initial Purchasers (on behalf of
themselves and each subsequent Holder of Transfer Restricted Securities) agrees
that (a) the Holders of Transfer Restricted Securities will suffer damages if
the Shelf Registration Statement is not filed with and declared effective by,
the Commission and maintained in the manner and within the time periods
contemplated by Section 3 hereof and (b) it would not be feasible to ascertain
the extent of such damages with precision. Accordingly, if (i) the Shelf
Registration Statement is not filed with the Commission on or prior to the date
60 days after the Closing Date, (ii) the Shelf Registration Statement has not
been declared effective by the Commission on or prior to the Effectiveness
Target Date or (iii) the Shelf Registration Statement is filed and declared
effective but shall thereafter cease to be effective (without being succeeded
immediately by an additional Shelf Registration Statement filed and declared
effective) or usable for a period of time which shall exceed 90 days in the
aggregate during any year (defined as any period of 365 days commencing on or
after the date the Shelf Registration Statement is declared effective or the
Effectiveness Target Date, as the case may be) (each such event referred to in
clauses (i) through (iii), a "Registration Default"), the Company shall pay
--------------------
liquidated damages to each Holder of Transfer Restricted Securities who has
complied with such Holder's obligations hereunder, during the first 90-day
period immediately following the occurrence of such Registration Default in an
amount equal to $0.0025 per week per share of
<PAGE>
6
9 1/4% Preferred Stock (subject to adjustment in the event of stock splits,
stock recombinations, stock dividends and the like), and, if applicable, $0.05
per week per $1,000 principal amount of Debentures and, if applicable, $0.01 per
week per share (subject to adjustment in the event of stock splits, stock
recombinations, stock dividends and the like) of Common Stock constituting
Transfer Restricted Securities held by such Holder. The amount of the liquidated
damages will increase by an additional $0.0025 per week per share of 9 1/4%
Preferred Stock (subject to adjustment as set forth above), $0.05 per week per
$1,000 principal amount of Debentures or $0.01 per week per share (subject to
adjustment as set forth above) of Common Stock constituting Transfer Restricted
Securities held by such Holder for each subsequent 90-day period until the Shelf
Registration Statement is filed, declared effective or again becomes effective
and usable, as the case may be, up to a maximum amount of liquidated damages
with respect to any such Registration Default of $0.0125 per week per share of 9
1/4% Preferred Stock (subject to adjustment as set forth above), $0.25 per week
per $1,000 principal amount of Debentures or $0.05 per week per share (subject
to adjustment as set forth above) of Common Stock constituting Transfer
Restricted Securities. All accrued and unpaid liquidated damages shall be paid
to Record Holders by wire transfer of immediately available funds or by federal
funds check by the Company on each Damages Payment Date. Following the cure of a
Registration Default, liquidated damages will cease to accrue with respect to
such Registration Default.
All of the Company's obligations to pay accrued but unpaid liquidated
damages set forth in the preceding paragraph which are outstanding with respect
to any Transfer Restricted Security at the time such security ceases to be a
Transfer Restricted Security shall survive until such time as all such
obligations with respect to such security shall have been satisfied in full.
The parties hereto agree that the liquidated damages provided in this
Section 4 constitute a reasonable estimate of the damages that will be incurred
by Holders of Transfer Restricted Securities by reason of the failure of the
Shelf Registration Statement to be filed, declared effective or to remain
effective, as the case may be.
SECTION 5. REGISTRATION PROCEDURES
In connection with the Shelf Registration Statement, the Company will
use its reasonable best efforts to effect such registration to permit the sale
of the Transfer Restricted Securities being sold in accordance with the intended
method or methods of distribution or disposition thereof, and pursuant thereto
the Company will as expeditiously as possible:
(a) on or prior to the date 60 days after the Closing Date, prepare
and file with the Commission a Shelf Registration Statement relating to the
registration on any appropriate form under the Act, as selected by the Company,
which form shall be available for the sale of the Transfer Restricted Securities
in accordance with the intended method or methods of distribution thereof and
shall include or incorporate all required financial statements, reports,
schedules, exhibits and other documents; cooperate and assist in any filings
required to be made with the NASD and use its reasonable best efforts to cause
such Shelf Registration Statement to become effective and approved on or prior
to the Target Effectiveness Date by such governmental agencies or authorities as
may be necessary to enable the selling Holders to consummate the disposition of
such Transfer Restricted Securities; provided that before filing a Shelf
Registration Statement or any Prospectus, or any amendments or supplements
thereto, including documents incorporated by reference after the initial filing
of the Shelf Registration Statement, the Company shall furnish to such Holders
and underwriters, if any, copies of all such documents proposed to
<PAGE>
7
be filed, which documents shall be subject to the review of such Holders, and
the Company shall not file any Shelf Registration Statement or amendment thereto
or any Prospectus or any supplement thereto (including such documents
incorporated by reference) to which the Holders of the Transfer Restricted
Securities covered by such Shelf Registration Statement or the underwriters, if
any, shall reasonably object on the grounds that such Shelf Registration
Statement, Prospectus, amendment or supplement does not comply in all material
respects with the requirements of the Act or the rules and regulations
thereunder in writing within four business days after the receipt thereof;
(b) prepare and file with the Commission such amendments and post-
effective amendments to the Shelf Registration Statement as may be necessary to
keep the Shelf Registration Statement effective for the applicable period set
forth in Section 3(a) hereof; cause the Prospectus to be supplemented by any
required Prospectus supplement, and as so supplemented to be filed pursuant to
Rule 424 under the Act, and to comply fully with the applicable provisions of
Rule 424 under the Act in a timely manner; and comply with the provisions of the
Act with respect to the disposition of all securities covered by such Shelf
Registration Statement during the applicable period in accordance with the
intended method or methods of distribution by the sellers thereof set forth in
such Shelf Registration Statement or supplement to the Prospectus;
(c) advise the selling Holders promptly and, if requested by such
Persons, to confirm such advice in writing, (i) when the Prospectus or any
Prospectus supplement or post-effective amendment has been filed, and, with
respect to the Shelf Registration Statement or any post-effective amendment
thereto, when the same has become effective, (ii) of any request by the
Commission for amendments to the Shelf Registration Statement or amendments or
supplements to the Prospectus or for additional information relating thereto,
(iii) of the issuance by the Commission of any stop order suspending the
effectiveness of the Shelf Registration Statement under the Act or of the
suspension by any state securities commission of the qualification of the
Transfer Restricted Securities for offering or sale in any jurisdiction, or the
initiation of any proceeding for any of the preceding purposes, (iv) if at any
time the representations and warranties of the Company contemplated by paragraph
(l)(i) below cease to be true and correct, and (v) of the existence of any fact
and the happening of any event that makes any statement of a material fact made
in the Shelf Registration Statement, the Prospectus, any amendment or supplement
thereto, or any document incorporated by reference therein untrue, or that
requires the making of any additions to or changes in the Shelf Registration
Statement or the Prospectus, any amendment or supplement thereto, or any
document incorporated by reference therein in order to make the statements
therein not misleading in the light of the circumstances then existing. If at
any time the Commission shall issue any stop order suspending the effectiveness
of the Shelf Registration Statement, or any state securities commission or other
regulatory authority shall issue an order suspending the qualification or
exemption from qualification of the Transfer Restricted Securities under state
securities or Blue Sky laws, the Company shall use its best efforts to obtain
the withdrawal or lifting of such order at the earliest possible time;
(d) promptly prior to the filing of any document that is to be
incorporated by reference into the Shelf Registration Statement or the
Prospectus (after the initial filing of the
<PAGE>
8
Shelf Registration Statement), provide copies of such document to the selling
Holders and underwriters, if any, make the Company's representatives available
at reasonable times for discussion of such document and include such information
in such document prior to the filing thereof as such selling Holders or
underwriters may reasonably and timely request;
(e) furnish to each selling Holder and underwriter, if any, without
charge, at least one copy of the Shelf Registration Statement, as first filed
with the Commission, and of each amendment thereto, including all documents
incorporated by reference therein and all exhibits (including exhibits
incorporated therein by reference);
(f) deliver to each selling Holder and underwriter, if any, without
charge, as many copies of the Prospectus (including each preliminary Prospectus)
and any amendment or supplement thereto as such Persons may reasonably request;
the Company consents to the use of the Prospectus and any amendment or
supplement thereto by each of the selling Holders and underwriters, if any, in
connection with the public offering and sale of the Transfer Restricted
Securities covered by the Prospectus or any amendment or supplement thereto;
(g) prior to any public offering of Transfer Restricted Securities,
cooperate with the selling Holders and underwriters, if any, and their
respective counsel in connection with the registration and qualification of the
Transfer Restricted Securities under the securities or Blue Sky laws of such
jurisdictions as the selling Holders and underwriters, if any, may reasonably
request and do any and all other acts or things necessary or advisable to enable
the disposition in such jurisdictions of the Transfer Restricted Securities
covered by the Shelf Registration Statement; provided, however, that the Company
shall be required neither to register or qualify as a foreign corporation where
it is not now so qualified nor to take any action that would subject it to the
service of process in suits or to taxation, other than as to matters and
transactions relating to the Shelf Registration Statement, in any jurisdiction
where it is not now so subject;
(h) in connection with any sale of Transfer Restricted Securities that
will result in such securities no longer being Transfer Restricted Securities,
cooperate with the selling Holders to facilitate the timely preparation and
delivery of certificates representing Transfer Restricted Securities to be sold
and not bearing any restrictive legends; and enable such Transfer Restricted
Securities to be in such denominations and registered in such names as the
Holders may request at least two business days prior to any sale of Transfer
Restricted Securities made by such Holders;
(i) use its best efforts to cause the Transfer Restricted Securities
covered by the Shelf Registration Statement to be registered with or approved by
such other governmental agencies or authorities as may be necessary to enable
the seller or sellers thereof to consummate the disposition of such Transfer
Restricted Securities, subject to the proviso contained in clause (g) above;
(j) if any fact or event contemplated by clause (v) of paragraph (c)
above shall exist or have occurred, as promptly as practicable thereafter,
prepare a supplement or post-effective amendment to the Shelf Registration
Statement or related Prospectus or any document incorporated therein by
reference or file any other required document so that, as thereafter
<PAGE>
9
delivered to the purchasers of Transfer Restricted Securities, the Prospectus
will not contain an untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein not misleading;
(k) provide CUSIP numbers for all Transfer Restricted Securities not
later than the effective date of the Shelf Registration Statement and provide
the Trustee under the Indenture and the transfer agent for the 9 1/4% Preferred
Stock and Common Stock with printed certificates for the Transfer Restricted
Securities which are in a form eligible for deposit with the Depositary Trust
Company;
(l) enter into such agreements and take all such other actions
consistent with its obligations hereunder in connection therewith and as may be
reasonably required in order to expedite or facilitate the disposition of the
Transfer Restricted Securities pursuant to the Shelf Registration Agreement, and
in such connection the Company shall (i) make such representations and
warranties to the Holders and underwriters, if any, in form, substance and scope
as are customarily made by issuers to underwriters in primary underwritten
offerings and covering matters including, but not limited to, those set forth in
the Purchase Agreement; (ii) obtain opinions of counsel to the Company and
updates thereof (which counsel and opinions (in form, scope and substance) shall
be reasonably satisfactory to the Holders of the Transfer Restricted Securities
being sold and underwriters, if any) addressed to each selling Holder requesting
the same and covering such matters as are customarily covered in company counsel
opinions to underwriters in primary underwritten offerings; (iii) obtain "cold
comfort" letters and updates thereof from the Company's independent certified
public accountants addressed to the selling Holders of Transfer Restricted
Securities and underwriters, if any, requesting the same, such letters to be in
customary form and covering matters of the type customarily covered in "cold
comfort" letters to underwriters in connection with primary underwritten
offerings; and (iv) deliver such documents and certificates as may be reasonably
requested by the Holders of the Transfer Restricted Securities being sold and
underwriters, if any, to evidence compliance with clause (i) above and with any
customary conditions contained in the underwriting agreement or other agreement
entered into by the Company pursuant to this clause (1);
(m) subject to appropriate confidentiality arrangements being entered
into, make available at reasonable times for inspection by the Holders of the
Transfer Restricted Securities participating in any disposition pursuant to such
Shelf Registration Statement, any underwriters and any attorney or accountant
retained by such selling Holders or underwriters, all financial and other
records, pertinent corporate documents and properties of the Company and cause
the Company's officers, directors and employees to supply all information
reasonably requested by any such Holder, underwriter, attorney or accountant at
reasonable times in connection with such Shelf Registration Statement subsequent
to the filing thereof and prior to its effectiveness;
(n) otherwise use its best efforts to comply with all applicable rules
and regulations of the Commission, and make generally available to its security
holders, as soon as reasonably practicable, a consolidated earnings statement
(which need not be audited) for the
<PAGE>
10
twelve-month period, beginning with the first month of the Company's first
fiscal quarter commencing after the effective date of the Shelf Registration
Statement;
(o) cause the Indenture to be qualified under the TIA, and, in
connection therewith, cooperate with the Trustee and the Holders to effect such
changes to the Indenture as may be required for such Indenture to be so
qualified in accordance with the terms of the TIA; and execute and use its best
efforts to cause the Trustee to execute, all documents as may be required to
effect such changes and all other forms and documents required to be filed with
the Commission to enable such Indenture to be so qualified in a timely manner;
(p) use its reasonable best efforts to obtain the withdrawal of any
order suspending the effectiveness of the Shelf Registration Statement at the
earliest possible moment; use its reasonable best efforts (i) to prevent the
entry of any stop order affecting the Registration Statement and (ii) to remove
any such stop order if entered;
(q) cause all Transfer Restricted Securities which are Common Stock
covered by the Shelf Registration Statement to be listed on each securities
exchange or quotation system on which the Company's Common Stock is then listed
no later than the date the Shelf Registration Statement is declared effective;
(r) cooperate and assist in any filings required to be made with the
NASD; and
(s) use its best efforts to cause the Transfer Restricted Securities
to be eligible for inclusion in the National Association of Securities Dealers,
Inc. Private Offerings, Resales and Trading through Automated Linkages
("PORTAL") trading system.
------
The Company agrees that it will not include in the registration
contemplated by the Shelf Registration Statement any securities other than the
Transfer Restricted Securities. The Company represents and warrants to the
Initial Purchasers that they will not be required to include under the Shelf
Registration Statement the securities required to be registered by the Company
pursuant to the Registration Rights Agreement, dated as of August 23, 1995, by
and among the Company, American National Bank and Trust Company of Chicago as
Settlement Trustee under the Settlement Fund Agreement dated as of January 5,
1993, as amended, by and among the Company and American National Bank and Trust
Company of Chicago, the Pension Benefit Guaranty Corporation and Pichin Corp.
The Initial Purchasers on behalf of themselves and each subsequent
Holder of Transfer Restricted Securities agree by acquisition of such Transfer
Restricted Securities that, upon receipt of any notice from the Company of the
existence of any fact or the happening of any event of the kind described in
clause (v) of Section 5(c) hereof, such Holder will forthwith discontinue
disposition of Transfer Restricted Securities pursuant to the Shelf Registration
Statement until such Holder's receipt of the copies of the supplemented or
amended Prospectus contemplated by Section 5(j) hereof, or until it is advised
in writing (the "Advice") by the Company that the use of the Prospectus may be
------
resumed, and has received copies of any additional or supplemental filings which
are incorporated by reference in the Prospectus. If so
<PAGE>
11
directed by the Company, each Holder will, or will request the managing
underwriter or underwriters, if any, to deliver to the Company (at the Company's
expense) all copies, other than permanent file copies then in such Holder's
possession, of the Prospectus covering such Transfer Restricted Securities
current at the time of receipt of such notice.
SECTION 6. REGISTRATION EXPENSES
All expenses incident to the Company's performance of or compliance
with this Agreement will be borne by the Company, regardless whether a Shelf
Registration Statement becomes effective, including without limitation:
(i) all registration and filing fees and expenses;
(ii) fees and expenses of compliance with federal securities or
state blue sky laws (including reasonable fees and disbursements of counsel
to the Holders and the underwriters, if any, in connection with blue sky
qualifications of the Transfer Restricted Securities);
(iii) expenses of printing (including, without limitation,
expenses of printing or engraving certificates for the Transfer Restricted
Securities in a form eligible for deposit with Depository Trust Company,
expenses of printing or engraving certificates for the Common Stock, the
Debentures and the 9 1/4% Preferred Stock and expenses of printing
prospectuses), messenger and delivery services and telephone;
(iv) fees and disbursements of counsel for the Company and
reasonable fees and disbursements of one counsel for the Holders of the
Transfer Restricted Securities chosen by the Holders of a majority of the
outstanding Transfer Restricted Securities (determined as provided in
Section 10(d));
(v) fees and disbursements of all independent certified public
accountants of the Company (including the expenses of any special audit and
"cold comfort" letters required by or incident to such performance);
(vi) filing fees associated with any NASD filing required to be
made in connection with the Shelf Registration Statement;
(vii) fees and expenses of listing the Transfer Restricted
Securities on any securities exchange or quotation system in accordance
with Section 5(q) hereof or on PORTAL pursuant to Section 5(s); and
(viii) securities acts liability insurance, if the Company
desires such insurance.
All such expenses, including without limitation those described in the
foregoing clauses (i) to (viii) are referred to herein as "Registration
------------
Expenses."
- ---------
<PAGE>
12
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 of Transfer Restricted Securities shall bear the expense
of any broker's commission or underwriters' discount or commission.
SECTION 7. UNDERWRITING
If any of the Transfer Restricted Securities 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 Securities (determined in accordance with Section 10(d)) included in
such offering (after consultation with the Company as to such selection and upon
the written consent of the Company, which consent shall 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 8 hereof. The Holders of Transfer Restricted
Securities 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 Securities (other than that
the Holders are conveying such securities free and clear of all pledges,
security 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 8). 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 Securities may participate in any
underwritten distribution hereunder unless such Holder (a) agrees to sell such
Holder's Transfer Restricted Securities 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 8. INDEMNIFICATION
(a) The Company agrees to indemnify and hold harmless each Holder
(each such Holder an "Indemnified Holder") and each person that controls each
------------------
Indemnified Holder within the meaning of Section 15 of the Act or Section 20 of
the Exchange Act, and the agents,
<PAGE>
13
employees, officers and directors of any such Indemnified Holder or any such
controlling person of any Indemnified Holder from and against any and all
losses, claims, damages, judgments, liabilities and expenses (including the
reasonable fees and expenses of counsel and other expenses in connection with
investigating, defending or settling any such action or claim), joint or
several, as they are incurred arising out of or based upon any untrue statement
or alleged untrue statement of a material fact contained in the Prospectus or
Shelf Registration Statement or any supplement or amendment thereto, or arising
out of or based upon any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, except the Company shall not be liable to any
Indemnified Holder in any such case insofar as such losses, claims, damages,
judgments, liabilities or expenses arise out of, or are based upon, any such
untrue statement or omission or alleged untrue statement or omission made in
reliance on and in conformity with information relating to such Indemnified
Holder furnished in writing by such Indemnified Holder to the Company expressly
for use therein; provided, however, that the Company shall not be liable in any
such case to the extent that any such loss, claim, damage, liability or expense
arises out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission made on any preliminary Prospectus if (i) such
Holder failed to send or deliver a copy of the Prospectus with or prior to the
delivery of written confirmation of the sale of Transfer Restricted Securities
if the Company furnished the Holder with sufficient copies thereof, and (ii) the
Prospectus would have corrected such untrue statement or omission; and provided
further, that the Company shall not be liable in any case to the extent that any
loss, claim, damage, liability or expense arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission in
the Prospectus, if such untrue statement or alleged untrue statement or omission
or alleged omission is corrected in an amendment or supplement to the Prospectus
if, having previously been furnished by or on behalf of the Company with copies
of the Prospectus as so amended or supplemented, such Holder thereafter fails to
deliver such Prospectus as so amended or supplemented, prior to or concurrently
with the sale of a Transfer Restricted Security to the person asserting such
loss, claim, damage, liability or expense who purchased such Transfer Restricted
Security which is the subject thereof from such Holder.
(b) If any action or proceeding (including any governmental or
regulatory investigation or proceeding) shall be brought or asserted against any
Indemnified Holder with respect to which indemnity may be sought against the
Company pursuant to this Section 8, such Indemnified Holder shall promptly
notify the Company in writing, and the Company shall have the right to assume
the defense thereof, including the employment of counsel reasonably satisfactory
to such Indemnified Holder and payment of all fees and expenses; provided, that
the omission so to notify the Company shall not relieve the Company from any
liability that it may have to any Indemnified Holder (except to the extent that
the Company is actually materially prejudiced or otherwise forfeited material
substantive rights or defenses by reason of such failure). An Indemnified
Holder shall have the right to employ separate counsel in any such action or
proceeding and to participate in the defense thereof, but the fees and expenses
of such counsel shall be at the expense of such Indemnified Holder unless (i)
the employment of such counsel has been specifically authorized in writing by
the Company, which authorization shall not be unreasonably withheld, (ii) the
Company has failed promptly to assume the defense and employ counsel reasonably
satisfactory to the Indemnified Holder, (iii) the named parties to any
<PAGE>
14
such action or proceeding (including any impleaded parties) include both the
Indemnified Holder and the Company and such Indemnified Holder shall have been
advised by its counsel that there may be one or more legal defenses available to
it that are different from or additional to those available to the Company (in
which case the Company shall not have the right to assume the defense of such
action on behalf of such Indemnified Holder) or (iv) a conflict or potential
conflict exists (based on advice of counsel to the Indemnified Holder) between
the Indemnified Holder and the Company (in which case the Company will not have
the right to direct the defense of such action on behalf of the Indemnified
Holder). It is understood that the Company shall not, in connection with any one
such action or separate but substantially similar or related actions in the same
jurisdiction arising out of the same general allegations or circumstances, be
liable for the fees and expenses of more than one separate firm of attorneys (in
addition to any local counsel) at any time for such Indemnified Holder, which
firm shall be designated in writing by the Indemnified Holder, and that all such
fees and expenses shall be reimbursed promptly following receipt of invoices
therefor as they are incurred. The Company shall not be liable for any
settlement of any such action effected without the written consent of the
Company, such consent not to be unreasonably withheld or delayed, but if settled
with the written consent of the Company, or if there is a final judgment with
respect thereto, the Company agrees to indemnify and hold harmless each
Indemnified Holder from and against any loss or liability by reason of such
settlement or judgment. The Company shall not, without the prior written consent
of each Indemnified Holder affected thereby, effect any settlement of any
pending or threatened proceeding in which such Indemnified Holder has sought
indemnity hereunder, which (x) does not include an unconditional release of such
Indemnified Holder from all liability arising out of such action, claim,
litigation or proceeding and/or (y) would impose injunctive relief on such
Indemnified Holder.
(c) Each Indemnified Holder is hereby deemed to have agreed to
indemnify and hold harmless the Company, its directors, any person controlling
the Company and such person's agents, employees, officers and directors
(collectively, the "Company Indemnified Parties") to the same extent as the
---------------------------
foregoing indemnity from the Company to any Indemnified Holder, but only with
respect to information relating to each Indemnified Holder furnished to the
Company in writing by each Indemnified Holder, respectively, expressly for use
in a Prospectus, the Shelf Registration Statement or any supplement or amendment
thereto. In case any action shall be brought against any Company Indemnified
Party based on a Prospectus, Shelf Registration Statement or any supplement or
amendment thereto and in respect of which indemnity may be sought against each
Indemnified Holder pursuant to this Section 8(c), each Indemnified Holder shall
have the rights and duties given to the Company by Section 8(b) (except that if
the Company shall have assumed the defense thereof, each Indemnified Holder may,
but shall not be required to employ separate counsel therein and participate in
the defense thereof and the fees and expenses of such counsel shall be at the
expense of the Indemnified Holder) and the Company Indemnified Parties shall
have the rights and duties given to the Indemnified Holders by Section 8(b).
(d) If the indemnification provided for in this Section 8 is
unavailable to any party entitled to indemnification pursuant to Section 8(a) or
8(c), or is insufficient to hold any party entitled to indemnification pursuant
to 8(a) or 8(c) harmless with respect to any losses,
<PAGE>
15
claims, damages, judgments, liabilities and expenses referred to in Section 8(a)
or 8(c), then each indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified party
as a result of such losses, claims, damages, judgments, liabilities and expenses
(including any investigative, legal and other expenses reasonably incurred in
connection with, and any amount paid in settlement of, any action, suit or
proceeding or any claim asserted, but after deducting any contribution received
by the Company from persons other than the Indemnified Holders, such as persons
who control the Company within the meaning of the Act or the Exchange Act and
officers and directors of the Company, who also may be liable for contribution)
(i) in such proportion as is appropriate to reflect the relative benefits
received by the Company on the one hand and each Indemnified Holder on the other
from the offering of the Transfer Restricted Securities pursuant to the Shelf
Registration Statement or (ii) if the allocation provided by clause (i) above is
not permitted by applicable law, in such proportion as is appropriate to reflect
not only the relative benefits referred to in clause (i) above but also the
relative fault of the Company on the one hand and each Indemnified Holder on the
other in connection with the statements or omissions which resulted in such
losses, claims, damages, judgments, liabilities or expenses, as well as any
other relevant equitable considerations. The relative benefits received by the
Company on the one hand and each Indemnified Holder on the other shall be deemed
to be in the same proportions as the total net proceeds from the initial sale of
9 1/4% Preferred Stock to the Initial Purchasers (before deducting expenses)
received by the Company bear to the total proceeds (before expenses) to the
applicable Indemnified Holder from the offering of the Transfer Restricted
Securities pursuant to the Shelf Registration Statement, in the case of an
Indemnified Holder. The relative fault of the Company on the one hand and each
Indemnified Holder on the other 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 by each Indemnified Holder on the
other and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.
(e) The Company and each Indemnified Holder agree that it would not be
just and equitable if contributions pursuant to Section 8(d) were determined by
pro rata allocation or by any other method of allocation that does not take
account of the equitable considerations referred to in Section 8(d). The amount
paid or payable by an indemnified party as a result of the losses, claims,
damages, liabilities or expenses referred to in the immediately preceding
paragraph shall be deemed to include, subject to the limitations set forth
above, any legal or other expenses reasonably incurred by such indemnified party
in connection with investigating or defending any such action or claim. No
person found guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Act) shall be entitled to contribution from any person who
was not found guilty of such fraudulent misrepresentation.
(f) The indemnity and contribution agreements contained in this
Section 8 are in addition to any liability that any indemnifying party may
otherwise have to any indemnified party.
<PAGE>
16
SECTION 9. 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 Securities without registration
under the Act within the limitation of the exemptions provided by (a) Rule 144
under the Act, as such Rule may be amended from time to time, (b) Rule 144A
under the 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 Securities, the Company will deliver a
written statement as to whether it has complied with such requirements and will,
at its expense, forthwith upon the request of the Initial Purchasers, deliver to
the Initial Purchasers 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 10. MISCELLANEOUS
(a) Remedies. Each Holder of Transfer Restricted 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 Liquidated Damages 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
Transfer Restricted Securities in this Agreement or otherwise conflicts with the
provisions hereof. The rights granted to the Holders of Transfer Restricted
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 securities under any other agreements. No holder of 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 Shelf Registration Statement.
(c) No Adverse Action Affecting the Transfer Restricted Securities.
--------------------------------------------------------------
The Company has not taken and will not take, any action, or permit any change to
occur with respect to the Transfer Restricted Securities which would adversely
affect the ability of any of the
<PAGE>
17
Holders of Transfer Restricted Securities to include such Transfer Restricted
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 shares of 9 1/4% Preferred Stock, principal
amount of Debentures and shares of Common Stock constituting Transfer Restricted
Securities, as the case may be (with Holders of shares of 9 1/4% Preferred Stock
or Debentures deemed to be Holders of the Common Stock into which such
securities may be converted for purposes of such calculation). Notwithstanding
the foregoing, a waiver or consent to departure from the provisions hereof that
relates exclusively to the rights of Holders of Transfer Restricted Securities
whose securities 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 Securities may be given by the Holders of a majority of the
Transfer Restricted Securities 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 deliver:
(i) if to a Holder of Transfer Restricted Securities, at the
address set forth on the records of the Company or the Registrar under the
Indenture, with a copy to the Registrar, and if to each of the Initial
Purchasers, at the addresses 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
----------------------
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 Transfer Restricted Securities.
<PAGE>
18
(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 sold pursuant to the Purchase Agreement except as provided in the
Designation of the Preferred or the Indenture and in the Purchase Agreement.
This Agreement supersedes all prior agreements and understandings between the
parties with respect to such subject matter.
<PAGE>
19
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
TRANS WORLD AIRLINES, INC.
By: /s/ Michael J. Lichty
---------------------
Name: Michael J. Lichty
Title: V.P., Corp. Finance
LAZARD FRERES & CO. LLC
PAINEWEBBER INCORPORATED
By: Lazard Freres & Co. LLC
- --- -----------------------
By: /s/ James L. Kempner
--------------------
Name: James L. Kempner
Title: Managing Director
<PAGE>
EXHIBIT 5
Davis Polk & Wardwell
450 Lexington Avenue
New York, NY 10017
January 19, 1998
Trans World Airlines, Inc.
One City Centre
515 N. Sixth Street
St. Louis, Missouri 63101
Re: Registration Statement on Form S-3
Ladies and Gentlemen:
We have served as counsel for Trans World Airlines, Inc., a Delaware
corporation (the "Company"), in connection with the registration under the
Securities Act of 1933, as amended, pursuant to a Registration Statement on Form
S-3 (the "Registration Statement"), of 1,725,000 shares of the Company's 9 1/4%
Cumulative Convertible Exchangeable Preferred Stock, $.01 par value per share
(the "Preferred Stock") along with 86,250,000 aggregate principal amount of the
Company's 9 1/4% Convertible Subordinated Debentures due 2007 (the "Debentures")
issuable upon exchange of the Preferred Stock and up to 10,917,525 shares of the
Company's Common Stock, $.01 par value per share (the "Common Stock"), issuable
upon conversion of the Preferred Stock or the Debentures, subject to adjustment
under certain circumstances (the Preferred Stock, the Debentures and the Common
Stock are collectively referred to herein as the "Securities").
We have examined and are familiar with originals or copies (certified,
photostatic or otherwise identified to our satisfaction) of such documents,
corporate records and other instruments relating to the incorporation of the
Company and the authorization and issuance of the Securities as we have deemed
necessary and advisable.
<PAGE>
In all such examinations, we have assumed the genuineness of all signatures
on all originals and copies of documents we have examined, the authenticity of
all documents submitted to us as originals and the conformity to original
documents of all certified, conformed or photostatic copies. As to questions of
fact material and relevant to our opinion, we have relied upon certificates or
representations of Company officials and of appropriate public officials.
We express no opinion as to matters under or involving laws of any
jurisdiction other than the State of Delaware and its political subdivisions.
Based upon and subject to the foregoing and having regard for such legal
considerations as we have deemed relevant, it is our opinion that:
i. the Company is a corporation in good standing, duly organized and
validly existing under the laws of the State of Delaware;
ii. the necessary corporate proceedings and actions legally required
for the registration of the Securities have been held and taken;
iii. the issuance and sale of the Preferred Stock have been duly and
validly authorized;
iv. the Common Stock issuable upon conversion of the Preferred Stock
or the Debentures, have been duly and validly authorized;
v. the Debentures issuable upon exchange of the Preferred Stock when
executed, authenticated and delivered 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; and
vi. the Preferred Stock and the Common Stock issuable upon conversion
of the Preferred Stock or the Debentures when issued will be
fully paid, non-assessable and free of preemptive rights.
We hereby consent to the filing of this opinion as Exhibit 5 to the
Registration Statement and to the reference to this firm under the caption
"Legal Matters" in the Prospectus. In giving this consent, we do not
thereby admit we come within the category of persons whose consent is required
under Section 7 of the Securities Act of 1933, or the rules and regulations of
the Securities and Exchange Commission thereunder.
Very truly yours,
/s/ Davis Polk & Wardwell
Davis Polk & Wardwell
2
<PAGE>
<TABLE>
<CAPTION>
TRANS WORLD AIRLINES, INC.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
Reorganized
Prior Predecessor Company Predecessor Company Company
-------------------------- --------------------------------------- -------------
Ten months Two months Eight months Four months
---------- ---------- ------------ -----------
Year ended ended ended Year ended ended ended
---------- ----- ----- ---------- ----- -----
December 31, October 31, December 31, December 31, August 31, December 31,
------------ ----------- ------------ ------------ ---------- ------------
1992 1993 1993 1994 1995 1995
---- ---- ---- ---- ---- ----
(Amounts in Thousands, except for ratio)
--------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Loss from operations
before income taxes ($314,292) ($362,620) ($88,140) ($432,869) ($338,309) ($32,268)
Add:
Interest on
indebtedness (1) 110,096 91,877 31,204 195,352 123,247 45,917
Portion of rents
representative of the
interest factor 67,700 57,821 12,198 87,122 60,849 32,131
--------- --------- -------- --------- --------- -------
Income as adjusted ($136,496) ($212,922) ($44,738) ($150,395) ($154,213) $45,780
--------- --------- -------- --------- --------- -------
Fixed Charges:
Interest on
indebtedness $110,096 $91,877 $31,204 $195,352 $123,247 $45,917
Capitalized interest 3,099 2,104 267 2,133 - -
Portion of rents
representative of the
interest factor 67,700 57,821 12,198 87,122 60,849 32,131
-------- -------- ------- -------- -------- -------
Fixed Charges $180,895 $151,802 $43,669 $284,607 $184,096 $78,048
-------- -------- ------- -------- -------- -------
Ratio of earnings to
fixed charges (0.75) (1.40) (1.02) (0.53) (0.84) 0.59
-------- -------- ------- -------- -------- -------
Deficiency (coverage) $317,391 $364,724 $88,407 $435,002 $338,309 $32,268
-------- -------- ------- -------- -------- -------
(1) Includes amoritization of debt expense.
</TABLE>
<TABLE>
<CAPTION>
Exhibit 12
--------------------------------------------------------------
Year 9 months 9 months 3 months 3 months
---- -------- -------- -------- --------
ended ended ended ended ended
----- ----- ----- ----- -----
December 31, Sept 30, Sept 30, Sept 30, Sept 30,
------------ -------- -------- -------- --------
1996 1997 1996 1997 1996
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Loss from operations
before income taxes ($274,577) ($68,272) ($18,257) $13,276 ($6,905)
Add:
Interest on
indebtedness (1) 126,822 85,518 95,483 27,404 30,864
Portion of rents
representative of the
interest factor 100,997 89,616 74,028 31,480 25,757
--------- -------- -------- ------- -------
Income as adjusted ($46,758) $106,862 $151,254 $72,160 $49,716
--------- -------- -------- ------- -------
Fixed Charges:
Interest on
indebtedness $126,822 $85,518 $95,483 $27,404 $30,864
Capitalized interest 5,463 4,204 3,563 899 1,619
Portion of rents
representative of the
interest factor 100,997 89,616 74,028 31,480 25,757
--------- -------- -------- ------- -------
Fixed Charges $233,282 $179,338 $173,074 $59,783 $58,240
--------- -------- -------- ------- -------
Ratio of earnings to
fixed charges (0.20) 0.60 0.87 1.21 0.85
--------- -------- -------- ------- -------
Deficiency (coverage) $280,040 $72,476 $21,820 ($12,377) $8,524
--------- -------- -------- ------- -------
</TABLE>
<PAGE>
Exhibit 23.1
AUDITORS' CONSENT
-----------------
The Board of Directors
We consent to the use of our report incorporated herein by reference and to the
reference to our firm under the heading "Experts" in the prospectus. Our report,
dated March 24, 1997, contains an explanatory paragraph that states that the
Company's recurring losses from operations and its limited sources of additional
liquidity raise substantial doubt about the Company's ability to continue as a
going concern. The consolidated financial statements do not include any
adjustments that might result from the outcome of that uncertainty. In addition,
our report refers to the application of fresh start reporting as of September 1,
1995.
KPMG Peat Marwick LLP
Kansas City, Missouri
January 19, 1998
<PAGE>
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 Michael J. Palumbo, Richard P. Magurno and Kathleen A.
Soled, jointly and severally, my true and lawful attorneys-in-fact, with full
power of substitution for me in any and all capacities, to sign, pursuant to the
requirements of the Securities Act of 1933, the Registration Statement on
Form S-3 for TRANS WORLD AIRLINES, INC. in connection with the Company's
registration of its 9 1/4 % Cumulative Convertible Exchangeable Preferred Stock
(the "Preferred Stock") and its 9 1/4 % Convertible Subordinated Debentures due
2007 (the "Debentures") and shares of Common Stock issuable in exchange and
conversion of the Preferred Stock or the Debentures, respectively, 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 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 substitutes may do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this ____ day of
___________, 1998.
/s/ John W. Bachmann
------------------------------------
John W. Bachmann
<PAGE>
EXHIBIT 24
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 Michael J. Palumbo, Richard P. Magurno and Kathleen A.
Soled, jointly and severally, my true and lawful attorneys-in-fact, with full
power of substitution for me in any and all capacities, to sign, pursuant to the
requirements of the Securities Act of 1933, the Registration Statement on
Form S-3 for TRANS WORLD AIRLINES, INC. in connection with the Company's
registration of its 9 1/4 % Cumulative Convertible Exchangeable Preferred Stock
(the "Preferred Stock") and its 9 1/4 % Convertible Subordinated Debentures due
2007 (the "Debentures") and shares of Common Stock issuable in exchange and
conversion of the Preferred Stock or the Debentures, respectively, 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 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 substitutes may do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this ____ day of
___________, 1998.
/s/ William F. Compton
------------------------------------
William F. Compton
<PAGE>
EXHIBIT 24
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 Michael J. Palumbo, Richard P. Magurno and Kathleen A.
Soled, jointly and severally, my true and lawful attorneys-in-fact, with full
power of substitution for me in any and all capacities, to sign, pursuant to the
requirements of the Securities Act of 1933, the Registration Statement on
Form S-3 for TRANS WORLD AIRLINES, INC. in connection with the Company's
registration of its 9 1/4 % Cumulative Convertible Exchangeable Preferred Stock
(the "Preferred Stock") and its 9 1/4 % Convertible Subordinated Debentures due
2007 (the "Debentures") and shares of Common Stock issuable in exchange and
conversion of the Preferred Stock or the Debentures, respectively, 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 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 substitutes may do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this 12th day of
January, 1998.
/s/ Eugene P. Conese
------------------------------------
Eugene P. Conese
<PAGE>
EXHIBIT 24
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 Michael J. Palumbo, Richard P. Magurno and Kathleen A.
Soled, jointly and severally, my true and lawful attorneys-in-fact, with full
power of substitution for me in any and all capacities, to sign, pursuant to the
requirements of the Securities Act of 1933, the Registration Statement on
Form S-3 for TRANS WORLD AIRLINES, INC. in connection with the Company's
registration of its 9 1/4 % Cumulative Convertible Exchangeable Preferred Stock
(the "Preferred Stock") and its 9 1/4 % Convertible Subordinated Debentures due
2007 (the "Debentures") and shares of Common Stock issuable in exchange and
conversion of the Preferred Stock or the Debentures, respectively, 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 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 substitutes may do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this 13th day of
January, 1998.
/s/ William M. Hoffman
------------------------------------
William M. Hoffman
<PAGE>
EXHIBIT 24
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 Michael J. Palumbo, Richard P. Magurno and Kathleen A.
Soled, jointly and severally, my true and lawful attorneys-in-fact, with full
power of substitution for me in any and all capacities, to sign, pursuant to the
requirements of the Securities Act of 1933, the Registration Statement on
Form S-3 for TRANS WORLD AIRLINES, INC. in connection with the Company's
registration of its 9 1/4 % Cumulative Convertible Exchangeable Preferred Stock
(the "Preferred Stock") and its 9 1/4 % Convertible Subordinated Debentures due
2007 (the "Debentures") and shares of Common Stock issuable in exchange and
conversion of the Preferred Stock or the Debentures, respectively, 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 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 substitutes may do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this 15th day of
January, 1998.
/s/ Thomas H. Jacobsen
------------------------------------
Thomas H. Jacobsen
<PAGE>
EXHIBIT 24
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 Michael J. Palumbo, Richard P. Magurno and Kathleen A.
Soled, jointly and severally, my true and lawful attorneys-in-fact, with full
power of substitution for me in any and all capacities, to sign, pursuant to the
requirements of the Securities Act of 1933, the Registration Statement on
Form S-3 for TRANS WORLD AIRLINES, INC. in connection with the Company's
registration of its 9 1/4 % Cumulative Convertible Exchangeable Preferred Stock
(the "Preferred Stock") and its 9 1/4 % Convertible Subordinated Debentures due
2007 (the "Debentures") and shares of Common Stock issuable in exchange and
conversion of the Preferred Stock or the Debentures, respectively, 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 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 substitutes may do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this 12th day of
January, 1998.
/s/ Myron Kaplan
------------------------------------
Myron Kaplan
<PAGE>
EXHIBIT 24
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 Michael J. Palumbo, Richard P. Magurno and Kathleen A.
Soled, jointly and severally, my true and lawful attorneys-in-fact, with full
power of substitution for me in any and all capacities, to sign, pursuant to the
requirements of the Securities Act of 1933, the Registration Statement on
Form S-3 for TRANS WORLD AIRLINES, INC. in connection with the Company's
registration of its 9 1/4 % Cumulative Convertible Exchangeable Preferred Stock
(the "Preferred Stock") and its 9 1/4 % Convertible Subordinated Debentures due
2007 (the "Debentures") and shares of Common Stock issuable in exchange and
conversion of the Preferred Stock or the Debentures, respectively, 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 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 substitutes may do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this 12th day of
January, 1998.
/s/ Thomas F. Meagher
------------------------------------
Thomas F. Meagher
<PAGE>
EXHIBIT 24
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 Michael J. Palumbo, Richard P. Magurno and Kathleen A.
Soled, jointly and severally, my true and lawful attorneys-in-fact, with full
power of substitution for me in any and all capacities, to sign, pursuant to the
requirements of the Securities Act of 1933, the Registration Statement on
Form S-3 for TRANS WORLD AIRLINES, INC. in connection with the Company's
registration of its 9 1/4 % Cumulative Convertible Exchangeable Preferred Stock
(the "Preferred Stock") and its 9 1/4 % Convertible Subordinated Debentures due
2007 (the "Debentures") and shares of Common Stock issuable in exchange and
conversion of the Preferred Stock or the Debentures, respectively, 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 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 substitutes may do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this ____ day of
___________, 1998.
/s/ G. Joseph Reddington
------------------------------------
G. Joseph Reddington
<PAGE>
EXHIBIT 24
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 Michael J. Palumbo, Richard P. Magurno and Kathleen A.
Soled, jointly and severally, my true and lawful attorneys-in-fact, with full
power of substitution for me in any and all capacities, to sign, pursuant to the
requirements of the Securities Act of 1933, the Registration Statement on
Form S-3 for TRANS WORLD AIRLINES, INC. in connection with the Company's
registration of its 9 1/4 % Cumulative Convertible Exchangeable Preferred Stock
(the "Preferred Stock") and its 9 1/4 % Convertible Subordinated Debentures due
2007 (the "Debentures") and shares of Common Stock issuable in exchange and
conversion of the Preferred Stock or the Debentures, respectively, 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 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 substitutes may do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this 12th day of
January, 1998.
/s/ Blanche M. Touhill
------------------------------------
Blanche M. Touhill
<PAGE>
EXHIBIT 24
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 Michael J. Palumbo, Richard P. Magurno and Kathleen A.
Soled, jointly and severally, my true and lawful attorneys-in-fact, with full
power of substitution for me in any and all capacities, to sign, pursuant to the
requirements of the Securities Act of 1933, the Registration Statement on
Form S-3 for TRANS WORLD AIRLINES, INC. in connection with the Company's
registration of its 9 1/4 % Cumulative Convertible Exchangeable Preferred Stock
(the "Preferred Stock") and its 9 1/4 % Convertible Subordinated Debentures due
2007 (the "Debentures") and shares of Common Stock issuable in exchange and
conversion of the Preferred Stock or the Debentures, respectively, 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 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 substitutes may do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this 12th day of
January, 1998.
/s/ Stephen M. Tumblin
------------------------------------
Stephen M. Tumblin
<PAGE>
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 Michael J. Palumbo, Richard P. Magurno and Kathleen A.
Soled, jointly and severally, my true and lawful attorneys-in-fact, with full
power of substitution for me in any and all capacities, to sign, pursuant to the
requirements of the Securities Act of 1933, the Registration Statement on
Form S-3 for TRANS WORLD AIRLINES, INC. in connection with the Company's
registration of its 9 1/4 % Cumulative Convertible Exchangeable Preferred Stock
(the "Preferred Stock") and its 9 1/4 % Convertible Subordinated Debentures due
2007 (the "Debentures") and shares of Common Stock issuable in exchange and
conversion of the Preferred Stock or the Debentures, respectively, 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 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 substitutes may do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this 19th day of
January, 1998.
/s/ David M. Kennedy
------------------------------------
David M. Kennedy
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, William O'Driscoll, a Director of
TRANS WORLD AIRLINES, INC. (the "Company"), a Delaware corporation, do
constitute and appoint Michael J. Palumbo, Richard P. Magurno and Kathleen A.
Soled, jointly and severally, my true and lawful attorneys-in-fact, with full
power of substitution for me in any and all capacities, to sign, pursuant to the
requirements of the Securities Act of 1933, the Registration Statement on
Form S-3 for TRANS WORLD AIRLINES, INC. in connection with the Company's
registration of its 9 1/4 % Cumulative Convertible Exchangeable Preferred Stock
(the "Preferred Stock") and its 9 1/4 % Convertible Subordinated Debentures due
2007 (the "Debentures") and shares of Common Stock issuable in exchange and
conversion of the Preferred Stock or the Debentures, respectively, 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 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 substitutes may do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this _____day
of _________, 1998.
/s/ William O'Driscol
------------------------------------
William O'Driscol
<PAGE>
Exhibit 25
AUDITORS' CONSENT
-----------------
The Board of Directors
Trans World Airlines, Inc.:
We consent to the use of our report incorporated herein by reference and to the
reference to our firm under the heading "Experts" in the prospectus. Our
report, dated March 24, 1997, contains an explanatory paragraph that states that
the Company's recurring losses from operations and its limited sources of
additional liquidity raise substantial doubt about the Company's ability to
continue as a going concern. The consolidated financial statements do not
include any adjustments that might result from the outcome of that uncertainty.
In addition, our report refers to the application of fresh start reporting as of
September 1, 1995.
KPMG Peat Marwick LLP
Kansas City, Missouri
January 19, 1998
