MARKED TO SHOW CHANGES
As filed with the Securities and Exchange Commission on July 6, 1998
Registration No. 333-56991
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------
AMENDMENT NO. 1
TO
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)
DELAWARE 4512 43-1145889
(State of (Primary Standard Industrial (I.R.S. Employer
Incorporation) Classification Code Number) Identification No.)
One City Centre, 515
N. Sixth Street
St. Louis, Missouri
63101
(314) 589-3000
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
Gerald L. Gitner ---------- Joseph P. Hadley, Esq.
Chairman and Chief Executive Officer Copies to: Davis Polk & Wardwell
One City Centre, 515 N. Sixth Street ---------- 450 Lexington Avenue
St. Louis, Missouri 63101 New York, New York 10017
(314) 589-3000 (212) 450-4000
(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. [ ]
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
==========================================================================================================================
<S> <C> <C> <C> <C>
Proposed Maximum Proposed
Amount Offering Maximum Amount of
Title of Each Class of to be Price Aggregate Offering Registration
Securities to be Registered Registered Per Unit Price Fee
- --------------------------------------------------------------------------------------------------------------------------
Common Stock, $.01 par value per share... 3,350,000 shares(1) $10.44(2) $34,974,000 $10,317
==========================================================================================================================
</TABLE>
- ----------
(1) Estimated based upon $31,800,000 outstanding principal amount of Mandatory
Conversion Equity Notes to be converted into Common Stock.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) on the basis of the average of the high and low
reported sales prices on July 1, 1998.
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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PROSPECTUS
TRANS WORLD AIRLINES, INC.
3,350,000 SHARES OF COMMON STOCK
----------
This Prospectus relates to 3,350,000 shares of common stock,
$0.01 par value per share (the "Common Stock") of Trans World Airlines, Inc.,
a Delaware corporation ("TWA" or the "Company") which are issuable upon
conversion of $31.8 million principal amount of the Company's Mandatory
Conversion Equity Notes due 1999 (the "Equity Notes"). The Equity Notes were
initially issued and delivered by TWA to First Security Bank, National
Association, as owner trustee (the "Owner Trustee") under the trust agreement
(the "Trust") dated as of January 24, 1995 between Seven Sixty Seven Leasing,
Inc., the beneficiary named therein (the "Beneficiary") and the Owner Trustee,
in partial payment of the aggregate purchase price of $75.0 million ($25.0
million per Aircraft) for three Boeing 767-231 ETOPS airframes and six
associated engines (collectively, the "Aircraft"). See "Description of Equity
Notes".
The Common Stock issuable upon conversion of the Equity Notes
may be offered and sold from time to time by the holders named herein or by
their transferees, pledgees, donees, or their successors (the "Selling
Holders") pursuant to this Prospectus. The Registration Statement 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 April 21, 1998 (the "Registration Rights Agreement") among the
Company, the Owner Trustee and Lazard Freres & Co. LLC.
The Common Stock issuable upon conversion of the Equity Notes
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
Common Stock 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 shares of the Common Stock issuable upon conversion of the
Equity Notes and will pay any and all underwriting discounts and selling
commissions applicable to the sale of such Common Stock. The Company is
responsible for payment of all other expenses incident to the registration of
such Common Stock.
The Selling Holders and any broker-dealers, agents or
underwriters that 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 commissions for discounts under the Securities Act.
Pursuant to the Registration Rights Agreement, the Company has
also agreed to pay certain fees and expenses incident to the registration of
the Common Stock issuable upon conversion of the Equity Notes. 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 $123,526. The Company intends to keep the Registration
Statement effective until the earlier of (i) the sale of all Common Stock
covered by the Registration Statement and (ii) the expiration of two years
after the date of the initial issuance of the Equity Notes on April 21, 1998,
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 issuable upon
conversion of the Equity Notes on the ASE under the symbol "TWA." On July 1,
1998, the closing sale price on the American Stock Exchange ("ASE") for one
share of the Common Stock was $10.44 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, 450 Fifth
Street, NW, Washington, D.C. 20549, and at the Commission's regional offices
located at Room 1400, 75 Park Place, New York, New York 10007 and Suite 1400,
Northwestern Atrium, 500 West Madison Street, 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, 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.
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
the following documents filed with the Commission pursuant to the requirements
of the Exchange Act (File No. 001-07815): (i) the Company's Annual Report on
Form 10-K (the "1997-10K") for the fiscal year ended December 31, 1997; (ii)
the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended March
31, 1998; (iii) the description of the Common Stock contained in the Company's
Form 8-A dated August 1, 1995 filed under the Exchange Act, including any
amendment or reports filed for the purpose of updating such description; and
(iv) the Company's Proxy Statement and Notice of Meeting related to the Annual
Meeting of Stockholders held on May 19, 1998.
All documents filed by the Company pursuant to Sections 13(a),
13(c), 14 and 15(d) of the Exchange Act after the date of this Prospectus and
prior to the termination of the offering of the securities offered hereby
shall be deemed to be incorporated by reference in this Prospectus and to be a
part hereof from the respective dates of filing 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.
PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER MATTERS
DISCUSSED UNDER THE CAPTION "RISK FACTORS" ON PAGE 6.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE 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 JULY 6, 1998.
THE COMPANY
TWA is the eighth largest U.S. air carrier (based on revenue
passenger miles ("RPMs") for the full year 1997), whose primary business is
transporting passengers, cargo and mail. During 1997, the Company carried
approximately 23.4 million passengers and flew approximately 25.1 billion
RPMs. As of March 31, 1998, TWA provided regularly scheduled jet service to 89
cities in the United States, Mexico, Europe, the Middle East, Canada and the
Caribbean. As of March 31, 1998, the Company operated a fleet of 181 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 360
scheduled daily departures as of March 31, 1998 and approximately a 74.5%
share of airline passenger enplanements in St. Louis for the full year 1997.
Given its location in the center of the country, St. Louis is well-suited to
function as an omni-directional hub for both north-south and east-west
transcontinental traffic. Therefore, TWA believes it can offer more
frequencies and connecting opportunities to many travelers in its key
Midwestern markets than competing airlines.
TWA's international operations are concentrated at JFK, from
which TWA currently serves 26 domestic and international cities with
approximately 40 daily departures. JFK is both the Company's and the
industry's largest international gateway from North America. As of March 31,
1998, the Company offered non-stop flights from JFK to 8 cities in Europe and
the Middle East as well as 17 destinations in the U.S. and the Caribbean. As
described below, during 1997, the Company implemented certain steps to refocus
and improve the operating and financial performance of its JFK operations.
TWA is a Delaware corporation organized in 1978 and is the
successor to the business of its predecessor corporation, Transcontinental &
Western Air, Inc., originally formed in 1934. The Company's principal
executive offices are located at One City Centre, 515 N. Sixth Street, St.
Louis, Missouri 63101 and its telephone number is (314) 589-3000.
THE OFFERING
The Prospectus relates to 3,350,000 shares of Common Stock
issuable upon conversion of the Equity Notes issued in connection with the
purchase of the Aircraft. The Company will not receive any proceeds from this
Offering.
RISK FACTORS
In addition to the other information appearing in this
Prospectus, the following risk factors should be considered carefully in
evaluating the Company and its business before purchasing the securities
offered hereby.
Risk Factors Related to the Company
Substantial Indebtedness
The Company is highly leveraged and has and will continue to have
significant debt service obligations. As of March 31, 1998, the Company's ratio
of long-term debt and capital leases (including current maturities, but net of
unamortized discounts) to shareholders' equity was 5.39 to 1. As of March 31,
1998, after giving effect to the issuance of the Company's 11 3/8% Senior
Secured Notes due 2003 and the Equity Notes, the issuance on June 16, 1998 of
the Company's 10 1/4% Senior Secured Notes due 2003 (the "June Secured Notes")
and the 10 1/4% Mandatory Conversion Equity Notes due 1999 (the "June Equity
Notes") and the conversion into Common Stock of the Equity Notes and the June
Equity Notes on the date hereof, the aggregate principal amount of the Company's
total outstanding indebtedness would be $1,204.9 million ($1,173.8 million net
of unamortized discounts), and the ratio of such long-term debt and capital
leases (including current maturities, but net of unamortized discounts) to
stockholders' equity would have been 4.68 to 1. TWA's estimated minimum payment
obligations under noncancellable operating leases in effect at March 31, 1998
were approximately $284.1 million for 1998 and approximately $3,346.0 million
for periods thereafter. These amounts exclude payment obligations of the Company
that will arise from financing arrangements relating to the 24 MD-83 aircraft.
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 $80.6 million and $105.7 million for the three months ended March 31,
1998 and 1997, respectively, $94.1 million for the year ended December 31,
1997, $280.0 million for the year ended December 31, 1996, $32.3 million for
the four months ended December 31, 1995, $338.3 million for the eight months
ended August 31, 1995, $435.0 million for the year ended December 31, 1994,
$88.4 million for the two months ended December 31, 1993 and $364.7 million for
the ten months ended October 31, 1993. See "Selected Consolidated Financial
Data."
The degree to which the Company is leveraged could have
important consequences to holders of the Common Stock, 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).
Capital Expenditure Requirements
The Company's capital expenditures for 1998 are currently
anticipated to total approximately $90.4 million compared to capital
expenditures totaling approximately $100.1 million for 1997. The Company's
capital expenditures budget for 1998 includes $60.0 million for flight
equipment related expenditures (including pre-delivery deposits for aircraft
and the purchase of aircraft engines and spare parts). 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.
Liquidity
The Company's ability to improve its financial position and
meet its financial obligations will depend upon a variety of factors,
including: significantly improved operating results, favorable domestic and
international airfare pricing environments, absence of adverse general
economic conditions, more effective operating cost controls and efficiencies,
and the Company's ability to attract new capital and maintain adequate
liquidity. On December 31, 1997, the Company's total cash and cash
equivalents balance was approximately $237.8 million (including amounts held in
TWA's international operations and by subsidiaries which, based upon various
monetary regulations and other factors, might not be immediately available to
the Company). This balance represented an increase of approximately $56.2
million from the Company's corresponding cash balance at December 31, 1996.
This increase in the Company's cash balance resulted primarily from the
proceeds from various capital markets offerings during 1997 and asset
dispositions offset by capital expenditures and debt repayments. Due to
improvements in operating results experienced by the Company, cash used by
operations in 1997 was reduced from the prior year. On March 31, 1998, the
Company had total cash and cash equivalents of $346.1 million.
TWA has no unused credit lines and must satisfy all of its
working capital and capital expenditure requirements from cash provided by
operating activities, from external capital sources or from the sale of
assets. As a result of the financings consummated in the fourth quarter of
1997 and the repayment of certain debt in connection therewith, assets with
an approximate appraised value of $165.0 million were released from
collateral liens. Since that time, the Company has sold and subsequently
leased back 15 B-727 aircraft and sold two L-1011 aircraft leaving assets with
an approximate appraised value of $100.0 million free and clear of liens and
encumbrances. Further pledging of these unencumbered assets, however, may be
limited by negative pledge restrictions in outstanding indebtedness.
Substantially all of TWA's other strategic assets, have been pledged to
secure various issues of outstanding indebtedness of the Company. To the
extent that 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. 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. Therefore, there can be
no assurance that the Company's operating results and financing activities
will be sufficient in the foreseeable future to meet its debt and other
obligations and future capital commitments.
Prior Operating Losses and Future Uncertainties Relating to
Results of Operations; Results for First Quarter 1998
TWA's long-term viability depends on its ability to achieve and
maintain profitable operations. Although the airline industry has generally
seen strengthened performance in recent years, particularly since 1995 when
many airlines reported record profits, the Company has reported significant
net losses. For example, the Company reported a net loss of $227.5 million
for the combined 12-month period ended December 31, 1995 (including
extraordinary gains related to the '95 Reorganization), while reporting an
operating profit of $25.1 million (including $58.0 million of non-cash expense
relating to the distribution of stock to employees as part of the '95
Reorganization), which represented the Company's first operating profit since
1989. The Company's reported net loss of $284.8 million for 1996 represented
a $57.3 million increase over the 1995 net loss, while the Company reported a
$198.5 million operating loss for 1996 (including special charges of $85.9
million), which represented a $223.6 million decline from its operating profit
in 1995. The Company's 1997 financial results reflected a net loss of $110.8
million, which represented an improvement of $174.0 million over the $284.8
million net loss for the full year 1996, and a $29.3 million operating loss,
which represented a $169.2 million improvement over the $198.5 million
operating loss reported for the full year 1996. 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.
On April 22, 1998, the Company reported financial results for
the first quarter 1998 reflecting an operating loss of $68.7 million and a net
loss before extraordinary items of $54.1 million for the three months ended
March 31, 1998, including a non-cash operating expense of $26.5 million
relating to the distribution in July 1998 of Common Stock to employee stock
plans. These results compare with an operating loss of $99.5 million and a
net loss before extraordinary items of $70.0 million in the first quarter
1997. Excluding the effect of non-cash expense associated with earned stock
compensation, the first quarter 1998 operating loss was $42.2 million compared
to the first quarter 1997 operating loss of $98.2 million. Similarly
calculated, the net loss before extraordinary items for the first quarter 1998
and 1997 were $38.0 million and $69.3 million, respectively. Operating
revenue for the first quarter 1998 was $765.4 million versus $762.3 million in
the first quarter 1997 despite a slight reduction in capacity from the first
quarter 1997 to 1998 resulting from the replacement of B747 and L-1011
aircraft with smaller B767, B757 and MD-80 aircraft.
TWA has historically experienced significant variations in
quarterly and annual operating revenues and operating expenses and expects
such variations to continue. Due to the greater demand for air travel during
the summer months, airline industry revenues for the third quarter of the year
are generally significantly greater than revenues in the first and fourth
quarters of the year and moderately greater than revenues in the second
quarter of the year. In the past, given the Company's historical dependence
on summer leisure travel, TWA's results of operations have been particularly
sensitive to such seasonality. While the Company, through an acceleration of
its fleet renewal program and restructuring of its JFK operations, anticipates
that the deseasonalization of operations affected thereby will reduce quarter
to quarter fluctuations in the future, there can be no assurance that such
deseasonalization will occur.
The Company's results of operations have also been impacted by
numerous other factors that are not necessarily seasonal. Among the
uncertainties that might adversely impact TWA's future results of operations
are: (i) competitive pricing and scheduling initiatives; (ii) the availability
and cost of capital; (iii) increases in fuel and other operating costs; (iv)
insufficient levels of air passenger traffic resulting from, among other
things, war, threat of war, terrorism or changes in the economy; (v)
governmental limitations on the ability of TWA to service certain airports
and/or foreign markets; (vi) regulatory requirements necessitating additional
capital or operating expenditures; (vii) the outcome of certain ongoing labor
negotiations (see "--'94 Labor Agreements"); and (viii) the reduction in yield
due to the continued implementation of a discount ticket program entered into
by the Company with Karabu Corporation ("Karabu"), a Delaware corporation
controlled by Carl Icahn, in connection with the '95 Reorganization on the
terms currently 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.
On March 20, 1996, the Company filed a Petition (the "TWA
Petition") in the Circuit Court for St. Louis County, Missouri, commencing a
lawsuit against Carl Icahn, Karabu and certain other entities affiliated with
Icahn (collectively, the "Icahn Defendants"). The TWA Petition alleged that
the Icahn Defendants are violating the Ticket Program Agreement between the
Company and Karabu (the "Ticket Agreement") relating to the discount ticket
program and otherwise tortuously interfering with the Company's business
expectancy and contractual relationships by, among other things, marketing and
selling tickets purchased under the Ticket Agreement to the general public.
The TWA Petition sought a declaratory judgment finding that the Icahn
Defendants have violated the Ticket Agreement, and also sought liquidated,
compensatory and punitive damages, in addition to the Company's costs and
attorney's fees. On May 7, 1998 the court denied the TWA Petition and
dismissed the Icahn Defendants' counterclaims. The court concluded that the
Icahn Defendants could sell discount tickets under the Ticket Agreement to any
person who actually uses the ticket, including non-business travelers, and
that the Icahn Defendants had not breached the Ticket Agreement. No damages
were assessed in respect to either plaintiff's or defendants' petitions.
The court's ruling could have an adverse effect on TWA's
revenue, which could be significant but the impact of which will depend on a
number of factors, including yield, load factors and whether any resulting
incremental sales by the Icahn Defendants will be to passengers that would not
otherwise have flown on TWA. The Icahn Defendants have moved to amend or
modify the court's ruling to include a declaratory judgment that the Icahn
Defendants are permitted to sell tickets to any person for any purpose which
could include use by the purchaser's family members or friends. TWA has
opposed this motion and has requested that the court clarify the ruling to
limit its scope consistent with the reasoning set forth in the decision,
specifically that the person purchasing the ticket must use the ticket (with
certain enumerated exceptions) and may not purchase a ticket for any other
person. TWA also intends to appeal the court's ruling in its entirety.
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. Although the Company
believes that a stable executive management team has now been put in place,
there can be no assurance that future changes will not occur or, that if such
changes do occur, that they will not adversely affect future operations.
<TABLE>
<CAPTION>
Current Executives of the Company
---------------------------------
DATE OF
ELECTION OR
APPOINTMENT
NAME CURRENT TITLE AS EXECUTIVE
---- ------------- ------------
<S> <C> <C>
Gerald L. Gitner(1) Chairman & CEO December 1996
William F. Compton(2) President & COO December 1996
Michael J. Palumbo Senior Vice President & CFO December 1996
Donald M. Casey Executive Vice President, Marketing May 1997
James F. Martin Senior Vice President, Human Resources November 1997
Kathleen A. Soled Senior Vice President & General Counsel January 1998
</TABLE>
- ----------
(1) Mr. Gitner, a director since November 1993, was Vice Chairman and Acting
CEO from December 1996 until February 1997.
(2) Mr. Compton, a director since November 1993, was Acting Executive Vice
President, Operations from December 1996 until March 1997 and Executive Vice
President, Operations from March 1997 until December 1997.
In addition, David M. Kennedy, a director, served as Acting Executive Vice
President and Chief Operating Officer from December 1996 until June 1997.
'94 Labor Agreements
As of March 31, 1998, the Company had approximately 22,203
full-time employees (based upon full-time equivalents which include part-time
employees). Of these, approximately 84.6% were represented by ALPA and the
IAM. On March 6, 1997, the IAM was certified to replace IFFA as the
bargaining representative of the Company's flight attendants. The Company's
currently effective collective bargaining agreement with each such union
(collectively the " '94 Labor Agreements") contain more favorable work rules
than in prior contracts and wage levels which the Company believes to be below
many other U.S. airlines. The '94 Labor Agreements are three year agreements
which became amendable as of August 31, 1997. Negotiations on a new
collective bargaining agreement with the IAM with regard to the flight
attendants commenced in July 1997 and are currently ongoing and negotiations
regarding the Company's ground employees represented by the IAM commenced in
February 1997 and are also currently ongoing. Negotiations on a new
collective bargaining agreement with ALPA commenced in June 1997 and are
currently ongoing. Under the Railway Labor Act (the "RLA"), workers whose
contracts have become amendable are required to continue to work under the
"status quo" (i.e., under the terms of employment antedating the amendable
date) until the RLA's procedures are exhausted. Under the RLA, the Company
and its unions are obligated to continue to bargain until agreement is reached
or until a mediator is appointed and concludes that negotiations are
deadlocked and mediation efforts have failed. The mediator must then further
attempt to induce the parties to agree to arbitrate the dispute. If either
party refuses to arbitrate, then the mediator must notify the parties that his
efforts have failed and, after a 30-day cooling-off period, a strike or other
direct action may be taken by the parties. At the request of the IAM, a
mediator was appointed on August 6, 1997 with respect to ground employees
represented by the IAM. On March 27, 1998, at the request of the IAM, a
mediator was appointed with respect to the flight attendants represented by
the IAM.
In the opinion of management, the Company's financial resources
are not as great as those of most of its competitors, and, therefore,
management believes that any substantial increase in its labor costs as a
result of any new labor agreements or any cessation or disruption of
operations due to any strike or work action could be particularly damaging to
the Company.
In connection with certain wage scale adjustments afforded to
non-contract employees, employees previously represented by the IFFA have
asserted and won an arbitration ruling with respect to the comparability of
wage concessions made in 1994 that, if sustained, would require that the
Company provide additional compensation to such employees. The Company
estimates that at December 31, 1997 such additional compensation that would be
payable pursuant to the arbitration ruling would be approximately $12.0
million. The Company denies any such obligation and is pursuing an appeal of
the arbitration ruling and a court award affirming the ruling. Effective
September 1, 1997, the Company also reduced the overall compensation and
benefits package for non-contract employees so as to offset, in the Company's
view, any claims by such employees previously represented by IFFA for any
retroactive or prospective wage increases. As such, no liability has been
recorded by the Company.
Age of Fleet; Noise
At March 31, 1998, the average age of TWA's operating aircraft
fleet was 16.5 years, making TWA's fleet one of the oldest of U.S. air
carriers. As a result, TWA has incurred increased overall operating costs due
to the higher maintenance, fuel and other operating costs associated with
older aircraft. During 1997, TWA acquired 27 new or later-model used
aircraft. The Company expects to continue the process of acquiring a number
of new and later-model used aircraft. As of March 31, 1998, TWA's fleet
included 55 aircraft which did not meet the noise reduction requirements under
the Airport Noise and Capacity Act of 1990 (the "Noise Act") and must
therefore be retired or substantially modified by the end of 1999. Although
the Company has plans to meet the Noise Act's noise reduction requirement,
there can be no assurance that such plans will be achieved. In addition, in
1990, the FAA issued several Airworthiness Directives ("ADs") mandating
changes to maintenance programs for older aircraft to ensure that the oldest
portion of the nation's fleet remains airworthy. Many of the Company's
aircraft are currently affected by these aging aircraft ADs. In 1996 and
1997, TWA spent approximately $3.4 million and $4.2 million, respectively, to
comply with aging aircraft maintenance requirements. Based on information
currently available to TWA and its current fleet plan, TWA estimates that
costs associated with complying with these aging aircraft maintenance
requirements will aggregate an additional approximately $19.8 million through
the year 2001. These cost estimates assume, among other things, that newer
aircraft will replace certain of TWA's existing aircraft and that as a result
certain aircraft will be retired by the Company before TWA would be required
to make certain aging aircraft maintenance expenditures. There can be no
assurance that TWA will be able to implement fully its fleet plan or that the
cost of complying with aging aircraft maintenance requirements will not be
significantly increased. See "--Liquidity; Substantial Indebtedness; Capital
Expenditure Requirements" and "--Aging Aircraft Maintenance."
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" and, together with the '93
Reorganization, 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 in three series (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 2.0% if the average Closing Price of the Common Stock for 30
consecutive trading days (the "Average Closing Price") exceeded a target price
of $11.00 per share during the period from January 1, 1997 to July 14, 1997.
Because such target price was not reached, the grant would instead be made on
July 15 of the next year (up to and including July 15, 2002) in which the
Average Closing Price of the Common Stock exceeded such target price prior to
July 15 of that year. In each of 1998 through 2002, additional shares of
Employee Preferred Stock and Common Stock will become subject to grant under
this program in an amount sufficient to increase the employee ownership by
1.5% in 1998, 1.5% in 1999, 1.0% in 2000, 1.0% in 2001 and 1.0% in 2002
(subject to adjustment as described below) based on the combined total number
of shares of Common Stock and Employee Preferred Stock outstanding as of the
applicable July 15 grant date, with the target price applicable to the
additional shares made available for grant in such year equal to $12.10 in
1998, $13.31 in 1999, $14.64 in 2000, $16.11 in 2001 and $17.72 in 2002. Each
such grant is cumulative and, where the applicable target price is not met in
the initial grant year, the applicable grant is carried forward and is subject
to grant in future years up to and including July 15, 2002 in the manner
described above. To protect against the dilutive effect of certain stock
issuances, the ESIP provides for an adjustment (the "Adjustment") to the grants
described above in the event the Company issues additional Common Stock to
third parties for cash or property or in lieu of cash payments on the 12%
Senior Secured Reset Notes due 1998 (the "12% Reset Notes") or the Company's
Mandatorily Redeemable 12% Preferred Stock (both the 12% Reset Notes and the
Mandatorily Redeemable 12% Preferred Stock have been retired). To the extent
that a sale of additional capital stock for cash results in a decline in the
percentage of employee ownership of the combined total number of shares of
Common Stock and Employee Preferred Stock below a level equal to the Adjusted
Base Ownership Percentage (as defined in the ESIP), one-quarter of the
difference between the new percentage of employee ownership and the Adjusted
Base Ownership Percentage (but in no event greater than 1.0% in each year)
would be added to the percentage of Employee Preferred Stock and Common Stock
to be granted to union employees and non-union employees, respectively, under
the ESIP in each of the years 1999 through 2002, assuming the target prices
are met. Furthermore, if TWA issues additional shares of Common Stock with an
aggregate value of more than $20 million to third parties for cash or a
reduction in debt at a price equal to or greater than $11.00 per share (the
"Equity Issuance Acceleration Trigger"), the last two scheduled grants under
the ESIP are to be aggregated and these shares allocated equally to the
remaining installments in the program. In addition, pursuant to the ESIP,
employees have the right commencing July 15, 1997 through July 15, 2002, to
purchase additional shares of Employee Preferred Stock in amounts up to an
aggregate of 2.0% of the combined total number of outstanding shares of Common
Stock and Employee Preferred Stock at a discount of 20.0% from the then
current market price. Should all of the target prices be met or exceeded
within the time periods specified and should the entire discount stock
purchase option be exercised, the various employee stock trusts would receive
a total of 10.0% (as adjusted as described below) of the Company's outstanding
Common Stock, with the exact amount issued dependent upon the number of shares
outstanding as of the date of each grant and option exercise.
The ESIP separately provides that if additional shares of
Employee Preferred Stock and Common Stock are distributed following the '95
Effective Date in respect of the '95 Reorganization, employees will be
entitled to receive an additional number of shares of Employee Preferred Stock
and Common Stock such that the employees will retain the same level of
ownership. Union representatives and the Company agreed to a one-time
distribution pursuant to this provision of the ESIP in an aggregate amount of
525,856 shares of Employee Preferred Stock and Common Stock. As part of that
agreement, since additional ESIP shares were not issued to the employees in
July 1997, an additional 405,750 shares of Employee Preferred Stock and Common
Stock were issued to the employee trusts and, to the extent that additional
shares are granted under the ESIP, the Company will receive a credit towards
the new grant for these previously issued shares, in that amount.
While the $11.00 target price was not exceeded as of July 15,
1997 and no grant was made on that date, on February 17, 1998, the Average
Closing Price for the Company's Common Stock did exceed the $11.00 target price
with respect to the first scheduled grant. As a result, the initial grant in
an amount sufficient to increase the employee ownership by 2.0% based on the
then outstanding Common Stock and Employee Preferred Stock will be made on July
15, 1998. Based on the current outstanding Voting Equity (as defined in the
ESIP) of 57,890,907, the number of shares of Employee Preferred Stock and
Common Stock to be issued to the employees under the ESIP on that date is
1,515,472. TWA is entitled to a credit against this number in the amount of
405,750 shares due to the prior grant to employees as described above. In
addition, on March 4, 1998, the Average Closing Price for the Company's Common
Stock exceeded the $12.10 target price with respect to the 1998 grant of 1.5%.
As a result, the 1998 grant in an amount sufficient to increase the employee
ownership by 1.5% based on the then outstanding Common Stock and Employee
Preferred Stock will also be made on July 15, 1998. Based on the current
outstanding Voting Equity, the number of additional shares of Employee
Preferred Stock and Common Stock to be issued under the ESIP on that date for
the 1998 grant is 1,172,354 shares, which together with the shares to be
issued in connection with the 1997 grant equals a total of 2,282,076 shares.
The number of shares to be granted could be increased if the last two grants
are accelerated pursuant to the Equity Issuance Acceleration Trigger.
Furthermore, based on issuances of Common Stock to date, the Adjustment has
resulted in a revised grant schedule of 1.5% in 1998, 1.84% in 1999, 1.34% in
2000, 1.34% in 2001 and 1.34% in 2002. Assuming the Transaction is
consummated and taking into account the Common Stock issued upon conversion of
the Equity Notes, the grants for the years 1999 through 2002 would further
increase pursuant to the Adjustment to: 2.13% in 1999, 1.63% in 2000, 1.63% in
2001 and 1.63% in 2002. Finally, in the event that the Transaction is
consummated and the final conversion price of the Equity Notes to be issued in
connection with the Transaction is in excess of $11.00 per share, the Equity
Issuance Acceleration Trigger will be met and the final two scheduled
installments will be aggregated and these shares will be allocated equally to
the remaining installments in the program. As a result, the remaining grants
would be as follows: 2.81% in 1997 (already vested and payable on July 15,
1998); 2.31% in 1998 (already vested and payable on July 15, 1998); 2.94% in
1999 if the Average Closing Price exceeds $13.31 and 2.44% in 2000 if the
Average Closing Price exceeds $14.64.
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 June 1, 1998, 88 employees had been
granted options to purchase shares of Common Stock or Employee Preferred 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. See "Business--Employees."
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 March 31, 1998 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.
In December 1997, the Company issued 1,725,000 shares of the
Company's 9(1)/(4)% Cumulative Convertible Exchangeable 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 $7.90 per share
(equivalent to a conversion rate of approximately 6.329 shares of Common Stock
for each share of 1997 Preferred Stock), subject to adjustment under certain
circumstances. Based on the current conversion price, upon conversion of all
shares of 1997 Preferred Stock into shares of Common Stock, an aggregate of
10,917,525 additional shares of Common Stock would be issued.
In June 1998, the Company negotiated the acquisition of an
additional Boeing 767-231 ETOPS airframe and accompanying engines previously
leased by the Company in exchange for the issuance of $14.5 million of June
Secured Notes and $13.0 million of June Equity Notes. The June Equity Notes are
convertible into shares of Common Stock at a conversion price equal to 100% of
the closing price of the Common Stock on the last trading day prior to the
Conversion Date (as defined in the indenture for the June Equity Notes). Based
on the closing price of the Common Stock on July 1, 1998, upon conversion of all
of the June Equity Notes into shares of Common Stock, an aggregate of 1,245,508
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-laws") contain provisions (the "Blocking Coalition Provisions") which
allow certain corporate actions requiring board approval, including mergers,
consolidations and sale of all or substantially all the assets of the Company,
to be blocked by a vote of six (four union elected directors and two other
directors) of the Company's fifteen directors, which together constitute a
"Blocking Coalition". Actions subject to disapproval by the Blocking Coalition
include: (a) any sale, transfer or disposition, in a single or series of
transactions, of at least 20% of the Company's assets, except for transactions
in the ordinary course of business including aircraft transactions as part of
a fleet management plan; (b) any merger of the Company into or with, or
consolidation of the Company with any other entity; (c) any business
combination within the meaning of Section 203 of the Delaware General
Corporation Law (the "DGCL"); (d) any dissolution or liquidation of the
Company; (e) any filing of a petition for bankruptcy, reorganization or
receivership under any state or federal bankruptcy, reorganization or
insolvency law; (f) any repurchase, retirement or redemption of the Company's
capital stock or other equity securities prior to their scheduled maturity or
expiration, except for redemptions out of the proceeds of any substantially
concurrent offering of comparable or junior securities and mandatory
redemptions of any redeemable preferred stock of the Company; (g) any
acquisition of assets, not related to the Company's current business as an air
carrier, in a single transaction or a series of related transactions exceeding
$50 million adjusted annually by the consumer price index; or (h) any sale of
the Company's capital stock or securities convertible into capital stock of
the Company to any person if (i) at the time of issuance or (ii) assuming
conversion of all outstanding securities of the Company convertible into
capital stock, such person or entity would beneficially own at least 20% of
the capital stock of the Company.
Anti-takeover Provisions in Certificate of Incorporation and
By-laws; Rights Plan
The Certificate of Incorporation and By-laws contain provisions
which authorize the Board of Directors to issue preferred stock without
stockholder approval, prohibit action by written consent of the stockholders,
authorize only the Chairman of the Board of Directors or a majority of the
Board of Directors to call special meetings of the stockholders and require
advance notice for director nominations. These provisions of the Certificate
of Incorporation and By-laws and the Blocking Coalition Provisions, as well as
federal laws limiting foreign ownership of U.S. flag carriers and the
prohibition on certain business combinations contained in Section 203 of the
DGCL, could have the effect of delaying, deferring or preventing a change in
control or the removal of existing management. In addition, the Board of
Directors declared a dividend distribution of one Right for each outstanding
share of Common Stock and Employee Preferred Stock payable to holders of
record as of the close of business on January 12, 1996 and, thereafter all
Common Stock issued by the Company has had an equivalent number of rights
attendant to it. The Rights are intended to protect TWA's shareholders from
certain non-negotiated takeover attempts which present the risk of a change of
control on terms which may be less favorable to TWA's stockholders than would
be available in a transaction negotiated with and approved by the Board of
Directors of the Company. See "Certain Provisions of the Certificate of
Incorporation, the By-laws and Delaware Law" and "Description of Capital
Stock--Rights Plan."
Certain Potential Future Earnings Charges
There are a number of uncertainties relating to agreements with
employees of the Company, the resolution of which could result in significant
non-cash charges to TWA's future operating results. Shares granted or
purchased at a discount under the employee stock incentive plan (the "ESIP")
will generally result in a charge equal to the fair market value of shares
granted plus the discount for shares purchased at the time when such shares
are earned. If the ESIP's target prices for the Common Stock are realized,
the minimum aggregate charge for the years 1997 to 2002 (the 1997 and 1998
target prices having been met) would be approximately $108.8 million based
upon such target prices and the number of shares of Common Stock and Employee
Preferred Stock outstanding at January 30, 1998. The charge for any year,
however, could be substantially higher if the then market price of the Common
Stock exceeds certain target prices. On February 17, 1998, the first target
price of $11.00 was realized and a grant of 2.0% of the outstanding Common
Stock and Employee Preferred Stock will be made on July 15, 1998. Based on
the current number of outstanding shares of Common Stock and Employee
Preferred Stock and taking into account a credit with respect to the Company's
required contribution, the net contribution will be 1,109,722 shares. In
addition, on March 4, 1998 the market price of the Company's Common Stock
exceeded the $12.10 target price for the 30-day period necessary to earn the
1998 grant. As a result, on July 15, 1998 the Company will be required to
make an additional contribution to the relevant employee trusts of 1.5% of its
Common Stock and Employee Preferred Stock. Based on the current number of
outstanding shares of Common Stock and Employee Preferred Stock, that
contribution would be 1,172,354 shares. As a result of the grants earned in
1998, an aggregate non-cash charge in connection with such issuance was
recorded in the first quarter of 1998 in the amount of $26.5 million. However,
the actual number of shares and the actual charge will not be known until the
shares are issued on July 15, 1998.
Fresh Start Reporting
In connection with the '95 Reorganization, the Company adopted
fresh start reporting in accordance with the American Institute of Certified
Public Accountants' Statement of Position 90-7 "--Financial Reporting by
Entities in Reorganization Under the Bankruptcy Code" ("SOP 90-7"). The fresh
start reporting common equity value of the Company was determined by the
Company, with the assistance of its financial advisors, to be approximately
$270.0 million based, in part, on assumptions as to future results of
operations. The carrying value of the Company's assets does not reflect
historical cost but rather reflects current values determined by the Company
as of the August 23, 1995 effective date (the "'95 Effective Date") of the '95
Reorganization (including values for intangible assets such as routes, gates
and slots of approximately $458.4 million). The difference between (i) the
equity valuation of the Company plus the estimated fair market value of the
Company's liabilities and (ii) the estimated fair market value of its
identifiable assets was allocated to "reorganization value in excess of
amounts allocable to identifiable assets" in the amount of approximately
$839.1 million. In future periods, these intangible assets will be evaluated
for recoverability based upon estimated future cash flows. If expectations
are not substantially achieved, charges to future operations for impairment
of these assets might be required and such charges could be material. Due to
the significant adjustments relating to the '95 Reorganization and the
adoption of fresh start reporting, the pre-reorganization consolidated
financial statements are not comparable to the post-reorganization
consolidated financial statements. A vertical black line is shown in the
Consolidated Financial Statements and Selected Consolidated Financial Data
presented herein to separate TWA's post-reorganization Consolidated Financial
Statements from its pre-'95 Reorganization consolidated financial statements
since they have not been prepared on a consistent basis of accounting.
In the fourth quarter of 1996, the Company reported a special
charge of $26.7 million relating to the write-down of the carrying value of
TWA's JFK-Athens route authority, reflecting the Company's decision to
terminate service on such route after April 18, 1997.
Risk Factors Related to the Industry
Competition
The airline industry operates in an intensely competitive
environment. TWA competes with one or more major airlines on most of its
routes (including on all routes between major cities) and with various forms
of surface transportation. The airline industry is also cyclical due to,
among other things, a close relationship of yields and traffic to general U.S.
and worldwide economic conditions. Small fluctuations in RASM and cost per
available seat mile ("CASM") can have a significant impact on the Company's
financial results. Airline profit levels are highly sensitive to, and during
recent years have been adversely affected by, among other things, changes in
fuel costs, fare levels and passenger demand. Vigorous price competition
exists, and TWA and its competitors have frequently offered sharply reduced
discount fares in many markets. Airlines, including TWA, use discount fares
and other promotions to stimulate traffic during normally slack travel
periods, to generate cash flow and to increase relative market share in
selected markets. TWA has often elected to initiate or match discount or
promotional fares in certain markets in order to compete vigorously in those
discounted markets or to stimulate traffic. Passenger demand and fare levels
have also been affected adversely by, among other factors, the state of the
economy and international events.
The airline industry has consolidated as a result of mergers
and liquidations and more recently through alliances, and further
consolidation may occur in the future. This consolidation has, among other
things, enabled certain of the Company's major competitors to expand their
international operations and increase their domestic market presence. In
addition, many of the major U.S. carriers have announced plans for alliances
with other major U.S. carriers. Such alliances could further intensify the
competitive environment. In addition, certain of the Company's competitors
have in recent years established alliances with one or more large foreign
carriers, allowing those competitors to strengthen their overall operations
by, among other things, transporting passengers connecting with or otherwise
traveling on the alliance carriers. Although the Company has established a
code share arrangement with one foreign carrier and has filed an application
with the DOT to establish an alliance with another foreign carrier, it does
not have an alliance with a large foreign carrier.
The emergence and growth of low cost, low fare carriers in
domestic markets represents an intense competitive challenge for the Company,
which has higher operating costs than many of such low fare carriers and fewer
financial resources than many of its major competitors. In many cases, such
low cost carriers have initiated or triggered price discounting. In part as a
result of the industry consolidation referred to above, aircraft, skilled
labor and gates at most airports continue to be readily available to start-up
carriers. To the extent new carriers or other lower cost competitors enter
markets in which the Company operates, such competition could have a material
adverse effect on the Company. Certain of the traditional carriers that
compete with TWA have implemented, or are in the process of implementing,
measures to reduce their operating costs including the creation of low cost
regional jet airline affiliates. In addition, the Company is more highly
leveraged and has significantly less liquidity (and in certain cases, a higher
cost structure) than certain of its competitors, several of whom have
available lines of credit, significant unencumbered assets and/or greater
access to capital markets. Accordingly, TWA may be less able than certain of
its competitors to withstand a prolonged recession in the airline industry or
prolonged periods of competitive pressure.
Demand for air transportation has historically tended to mirror
general economic conditions. During the most recent economic recession in the
United States, the change in industry capacity failed to mirror the reduction
in demand for domestic air transportation due primarily to continued delivery
of new aircraft. While in the period following such recession, industry
capacity leveled off, such capacity has again begun to expand. TWA expects
that the airline industry will remain extremely competitive for the
foreseeable future.
Aircraft Fuel
Since fuel costs constitute a significant portion of the
Company's operating costs (approximately 15.6% in 1996 and approximately 14.3%
in 1997), significant increases in fuel costs would materially and adversely
affect the Company's operating results. Fuel prices continue to be
susceptible to, among other factors, political events and market factors
beyond the Company's control, and the Company cannot predict near or
longer-term fuel prices. In the event of a fuel supply shortage resulting
from a disruption of oil imports or otherwise, higher fuel prices or
curtailment of scheduled service could result. During 1996, the Company's
average per gallon cost of fuel increased approximately 22.3% versus 1995,
from approximately 57.0 Cents per gallon to approximately 69.8 Cents per
gallon. During 1997, the Company's average per gallon cost of fuel decreased
approximately 5.6%, from approximately 69.8 Cents per gallon to approximately
65.9 Cents per gallon. During the first quarter of 1998, the Company's
average per gallon cost of fuel decreased approximately 25.0%, from
approximately 74.1 Cents per gallon to approximately 55.6 Cents per gallon,
over the same period in 1997. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations." A one cent change in the cost
per gallon of fuel (based on consumption during 1997) impacts operating
expense by approximately $609,000 per month. Increases in fuel prices may
have a greater proportionate and more immediate impact on TWA than many of its
competitors because of the composition of its fleet and because the Company
does not presently maintain substantial reserves of fuel required for its
operations or otherwise hedge the cost of anticipated purchases of fuel.
Regulatory Matters
The airline industry is subject to extensive federal and
international government regulations relating to airline safety, security and
scheduling, as well as to local, state, federal, and international
environmental laws. Adoption of newly proposed regulations relating to these
matters could increase the Company's cost of compliance with governmental
regulations, and could therefore increase operating expenses and in some cases
restrict the operations of airlines, including TWA, thereby adversely
affecting TWA's results of operations.
During the last several years, the FAA has issued a number of
maintenance directives and other regulations relating to, among other things,
collision avoidance systems, airborne windshear avoidance systems, noise
abatement and increased inspection requirements, including added requirements
for aging aircraft. TWA believes, based on its current fleet, that it will
incur substantial capital expenditures to comply with the aging aircraft and
noise abatement regulations. The Company expects that a number of aircraft
will be retired before major aging aircraft modifications and noise compliance
will be required; however, required capital expenditures will vary depending
upon changes in TWA's fleet composition. Management expects that the cost of
compliance will be funded through a combination of internally generated funds
and utilization of cost sharing and/or funding provisions under certain lease
agreements and loan agreements. See "--Risk Factors Related to the
Company--Liquidity; Substantial Indebtedness; Capital Expenditure
Requirements."
Additional laws and regulations have been proposed from time to
time which could significantly increase the cost of airline operations by, for
instance, imposing additional requirements or restrictions on operations. For
example, several airports have recently sought to increase substantially the
rates charged to airlines, and the ability of airlines to contest such
increases has been restricted by federal legislation, DOT resolutions and
judicial decisions. In addition, laws and regulations have also been
considered from time to time that would prohibit or restrict the ownership
and/or transfer of airline routes or takeoff and landing slots. Also, the
award of international routes to U.S. carriers (and their retention) is
regulated by treaties and related agreements between the United States and
foreign governments which are amended from time to time. The Company cannot
predict what laws and regulations will be adopted or what changes to
international air transportation treaties will be effected, if any, or how
they will affect TWA.
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 has passed tax legislation reimposing and significantly modifying the
Ticket Tax, effective October 1, 1997. The legislation includes the
imposition of new excise tax and significant fee tax formulas over a multiple
year period, an increase in the international departure tax, the imposition
of a new arrivals tax, and the extension of the Ticket Tax to cover items such
as the sale of frequent flier miles. Management believes that the
reimposition and modification of the Ticket Tax will have a negative impact on
the Company, although neither the amount of such negative impact nor the
benefit previously realized by its expiration can be precisely determined.
However, management believes that the recent tax legislation and any other
increases of the Ticket Tax will result in higher costs to the Company and/or,
if passed on to consumers in the form of increased ticket prices, might have
an adverse effect on passenger traffic, revenue and/or margins.
USE OF PROCEEDS
The Selling Holders (as defined herein) will receive all of the
net proceeds from any sale of the Common Stock, and, accordingly, the Company
will receive none of the proceeds from the sales thereof.
SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data presented below relate
to periods in the three months ended March 31, 1998 and 1997, years ended
December 31, 1997 and 1996, the four months ended December 31, 1995, the eight
months ended August 31, 1995, the year ended December 31, 1994, the two months
ended December 31, 1993 and the ten months ended October 31, 1993. The
consolidated financial data for the above periods were derived from the
audited consolidated financial statements of the Company. Certain amounts
have been reclassified to conform with presentations adopted in 1997.
During the period from 1992 through 1995, TWA underwent two
separate Chapter 11 reorganizations, the first in 1992-93 and the second in
1995. In connection with the '95 Reorganization, TWA has applied fresh start
reporting in accordance with the American Institute of Certified Public
Accountants Statement of Position 90-7, "Financial Reporting by Entities in
Reorganization Under the Bankruptcy Code" ("SOP 90-7"), which has resulted in
the creation of a new reporting entity for accounting purposes and the
Company's assets and liabilities being adjusted to reflect fair values on the
'95 Effective Date. A description of the adjustments to the financial
statements arising from the consummation of the '95 Reorganization and the
application of fresh start reporting is contained in Note 19 to the
Consolidated Financial Statements. For accounting purposes, the '95 Effective
Date is deemed to be September 1, 1995. Because of the application of fresh
start reporting, the financial statements for periods after the '95
Reorganization are not comparable in all respects to the financial statements
for periods prior to the reorganization. Similarly, the Consolidated
Financial Statements for the periods prior to the '93 Reorganization are not
consistent with periods subsequent to the '93 Reorganization. Accordingly, a
vertical black line separates these periods. Preferred stock dividend
requirements and earnings per share of the predecessor companies have not been
presented as these amounts are not meaningful
<TABLE>
<CAPTION>
Reorganized Company
-----------------------------------------------------------------------
Three Months Ended Four Months
March 31, Year Ended December 31, Ended
----------------------- --------------------------- December 31,
1998 1997 1997 1996 1995
----------- --------- ------------- ----------- --------------
(Dollars in thousands, except per share amounts)
Statement of Operations
Data:
<S> <C> <C> <C> <C> <C>
Operating revenues..... $765,389 $762,306 $3,327,952 $3,554,407 $1,098,474
Operating income
(loss)(1)............ (68,707) (99,486) (29,260) (198,527) 10,446
Loss before income
taxes and
extraordinary
items(2)............. (79,558) (105,193) (89,335) (274,577) (32,268)
Provision (credit) for
income taxes......... (25,418) (35,161) 527 450 1,370
Loss before
extraordinary items.. (54,140) (70,032) (89,862) (275,027) (33,638)
Extraordinary items,
net of income
taxes(3)............. (1,380) (1,532) (20,973) (9,788) 3,500
Net income (loss)...... (55,520) (71,564) (110,835) (284,815) (30,138)
Preferred Stock
dividend
requirements........... 5,863 3,869 16,119 36,649 4,751
Income (loss)
applicable to common
shares................. (61,383) (75,433) (126,954) (321,464) (34,889)
Weighted average
shares outstanding..... 57,889 49,036 53,477 44,189 33,330
Ratio of earnings to
fixed charges (4).... -- -- -- -- --
Per share amounts(5):
Loss before
extraordinary
items.............. $(1.04) $(1.51) $(1.98) $(6.60) $(1.15)
Net loss............. (1.06) (1.54) (2.37) (7.27) (1.05)
Prior
<CAPTION> Predecessor
Predecessor Company Company
----------------------------------------------- -------------
Eight Months Two Months Ten Months
Ended Year Ended Ended Ended
August 31, December 31, December 31, October 31,
1995 1994 1993 1993
------------- -------------- -------------- -------------
(Dollars in thousands, except per share amounts)
Statement of Operations
Data:
<S> <C> <C> <C> <C>
Operating revenues..... $2,218,355 $3,407,702 $520,821 $2,633,937
Operating income
(loss)(1)............ 14,642 (279,494) (58,251) (225,729)
Loss before income
taxes and
extraordinary
items(2)............. (338,309) (432,869) (88,140) (362,620)
Provision (credit) for
income taxes......... (96) 960 (248) 1,312
Loss before
extraordinary items.. (338,213) (433,829) (87,892) (363,932)
Extraordinary items,
net of income
taxes(3)............. 140,898 (2,005) -- 1,075,581
Net income (loss)...... (197,315) (435,834) (87,892) 711,649
Preferred Stock
dividend
requirements........... 11,554 15,000 2,425
Income (loss)
applicable to common
shares................. (208,869) (450,834) (90,317)
Weighted average
shares outstanding.....
Ratio of earnings to
fixed charges (4).... -- -- -- --
Per share amounts(5):
Loss before
extraordinary
items..............
Net loss.............
</TABLE>
<TABLE>
<CAPTION>
Reorganized Company Predecessor Company
------------------------------------------------------ ------------------------
December 31,
March 31, ------------------------------------------------------------------
1998 1997 1996 1995 1994 1993
----------- ---------- ------------ ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Selected Balance Sheet Data:
Cash and cash equivalents(6)...... $346,134 $237,765 $181,586 $304,340 $138,531 $187,717
Current assets.................... 860,591 632,957 625,745 737,301 603,806 728,303
Net working capital (deficiency).. (211,471) (303,988) (336,416) (81,913) (1,238,216) (106,703)
Flight equipment, net............. 594,399 626,382 472,495 455,434 508,625 660,797
Total property and equipment, net. 706,718 741,765 614,207 600,066 693,045 886,116
Intangible assets, net............ 1,103,034 1,118,864 1,184,786 1,275,995 921,659 1,024,846
Total assets...................... 2,974,701 2,773,848 2,681,939 2,868,211 2,512,435 2,958,862
Current maturities of long-term
debt and capital leases(7)...... 85,779 88,460 134,948 110,401 1,149,739 108,345
Long-term debt, less current
maturities(7)................... 855,771 736,540 608,485 764,031 -- 1,053,644
Long-term obligations under
capital leases, less current
maturities...................... 174,520 182,922 220,790 259,630 339,895 376,646
Shareholders' equity
(deficiency)(8)................. 207,151 268,284 238,105 302,855 (417,476) 18,358
</TABLE>
- ----------
(1) Includes special charges of $85.9 million in 1996, $1.7 million in the
eight months ended August 31, 1995 and $138.8 million in 1994. For a
discussion of these and other non-recurring items, see Note 16 to the
Consolidated Financial Statements.
(2) The eight months ended August 31, 1995 includes charges of $242.2 million
related to reorganization items. The ten months ended October 31, 1993
includes a charge of $342.4 million related to the settlement of pension
obligations and income of $268.1 million related to reorganization items.
(3) The extraordinary items in 1997 and 1996 are the result of the early
extinguishment of certain debt. The extraordinary item in the four months
ended December 31, 1995 was the result of the settlement of a debt of a
subsidiary, while the extraordinary item in the eight months ended August
31, 1995 represents the gain on the discharge of indebtedness pursuant to
the consummation of the '95 Reorganization. The extraordinary item in 1994
represents the charge for a prepayment premium related to the sale and
lease back of four McDonnell Douglas MD-80 aircraft. The extraordinary
item in 1993 represents the gain on discharge of indebtedness pursuant to
the consummation of the '93 Reorganization.
(4) For purposes of determining the ratio of earnings to fixed charges,
"earnings" consist of earnings before income taxes, extraordinary items and
fixed charges (excluding capitalized interest) and "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. Earnings were not sufficient to cover fixed charges as follows
(in millions): for the three months ended March 31, 1998 and 1997, $80.6
and $105.7, respectively; for the years ended December 31, 1997 and 1996,
$94.1 and $280.0, respectively; for the four months ended December 31,
1995, $32.3; for the eight months ended August 31, 1995, $338.3; for the
year ended December 31, 1994, $435.0; for the two months ended December 31,
1993, $88.4; and for the ten months ended October 31, 1993, $364.7.
(5) No effect has been given to stock options, warrants, convertible preferred
stock or potential issuances of additional Employee Preferred Stock as the
impact would have been anti-dilutive.
(6) Includes cash and cash equivalents held in international operations and by
subsidiaries which, based upon foreign monetary regulations and other
factors, might not be immediately available to the Company.
(7) Long-term debt in 1994 was reclassified to current maturities as a result
of certain alleged defaults and payment defaults.
(8) No dividends were paid on the Company's outstanding common stock during
the periods presented above.
SELLING HOLDERS
The Registration Statement has been filed pursuant to Rule 415
under the Securities Act of 1933, as amended (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 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.
DESCRIPTION OF EQUITY NOTES
The Equity Notes were initially issued and delivered by TWA to
First Security Bank, National Association, as owner trustee (the "Owner
Trustee") under the trust agreement (the "Trust") dated as of January 24, 1995
between Seven Sixty Seven Leasing, Inc., the beneficiary named therein (the
"Beneficiary") and the Owner Trustee, in partial payment of the aggregate
purchase price of $75.0 million ($25.0 million per Aircraft) for three Boeing
767-231 ETOPS airframes and six associated engines (collectively, the
"Aircraft").
Mandatory Conversion
Immediately following the occurrence of both (i) the
effectiveness of the Registration Statement and (ii) the approval for listing
of the Common Stock on the ASE, or such other stock exchange or market on
which the Common Stock is then principally traded, each Equity Note will be
automatically converted into fully paid and non-assessable shares of Common
Stock in accordance with the provisions of the Indenture dated as of April 21,
1998 by and between the Company and First Security Bank, National Association,
as Trustee.
Registration Rights
Pursuant to the Registration Rights Agreement, the Company was
required to file and did file with the Commission, on or prior to the 60th day
after the date of original issuance of the Equity Notes, the Registration
Statement to register resales of the shares of Common Stock into which the
Equity Notes are convertible (the "Restricted Common Stock"). The Company will
use its reasonable best efforts to cause the Registration Statement to become
effective within 150 days after the date of original issuance of the Equity
Notes 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 Equity
Notes 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.
The Company has listed the shares of Restricted Common Stock on
the ASE and has agreed that it will use its reasonable efforts to maintain
such listing until the earlier of (i) the sale of all securities covered by
the Shelf Registration Statement and (ii) the expiration of two years after
the date of original issuance of the Equity Notes 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.
Prior to the termination of the Company's obligations under the
Registration Rights Agreement, if after the date of original issuance of the
Equity Notes either the Registration Statement shall cease to be effective
(without being succeeded immediately by an additional shelf registration
statement registering resales of the Company's Common Stock filed and declared
effective for any reason) or the Company shall fail to maintain the listing of
the Common Stock on the ASE, or such other stock exchange or market on which
the Common Stock is then principally traded, for a period of time which shall
in the aggregate exceed 60 days during any 365-day period (each such event, an
"Effectiveness Default"), the Company will pay liquidated damages ("Liquidated
Damages") to each holder of Restricted Common Stock issued upon conversion of
the Equity Notes, during the first 90-day period immediately following the
occurrence of such Effectiveness Default in an amount equal to $0.01 per week
per share (subject to adjustment in the event of stock splits, stock
recombinations, stock dividends and the like) of such Restricted Common Stock.
The amount of the Liquidated Damages will increase by an additional $0.01 per
week per share (subject to adjustment as set forth above) of Restricted Common
Stock for each subsequent 90-day period until the Registration Statement again
becomes effective or the shares of Common Stock have again been approved for
listing on the ASE, or such other stock exchange or market on which the Common
Stock is then principally traded, up to a maximum amount of Liquidated Damages
with respect to any Effectiveness Default of $0.05 per week per share (subject
to adjustment as set forth above) of Restricted Common Stock. All accrued
Liquidated Damages shall be paid to holders of the Restricted Common Stock by
wire transfer of immediately available funds or by federal funds check by the
Company on the last business day in each month. Following the cure of an
Effectiveness Default, Liquidated Damages will cease to accrue with respect to
such Effectiveness Default.
Holders of Restricted Common Stock will be required to make
certain representations to the Company (as described in the Registration
Rights Agreement) in order to 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 Restricted Common Stock to sell such or Restricted Common Stock
without registration under the Securities Act within the limitation of the
exemptions provided by Rule 144, as such rule may be amended from time to
time, or any similar rules or regulations hereafter adopted by the Commission.
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 Series A Preferred
Stock issuable pursuant to the Rights.
Description of Common Stock
The holders of the Common Stock are entitled to one vote per
share on all matters voted on by stockholders, including elections of
directors, and, except for the voting rights of the holders of Employee
Preferred Stock (who are entitled to elect a total of four directors to the
Board) and, under certain circumstances, the 1997 Preferred Stock and 8%
Preferred Stock, and as otherwise required by law or provided in any
resolution adopted by the Board of Directors with respect to any series of the
preferred stock, the holders of such shares exclusively possess all voting
power. The Certificate of Incorporation does not provide for cumulative
voting in the election of directors but the Board is classified, which means
that the holders of a majority of the shares entitled to vote at a meeting at
which a quorum is present can elect all of the directors of the class then to
be elected (except that the holders of a majority of the shares of Employee
Preferred Stock are exclusively entitled to elect four labor directors) and
the holders of the remaining shares would not be able to elect any directors
at that meeting. Subject to any preferential rights of the 8% Preferred
Stock, the 1997 Preferred Stock or any other outstanding series of Preferred
Stock entitled to vote in the election of directors, the holders of Common
Stock are entitled to such dividends as may be declared from time to time by
the Board of Directors from funds available therefor, and upon liquidation are
entitled to receive pro rata all assets of the Company available for
distribution to such holders. The holders of Common Stock have no preemptive
rights and no rights to convert their shares of Common Stock into any other
security. It is not presently anticipated that dividends will be paid on the
Common Stock in the foreseeable future. All outstanding shares of Common
Stock are fully paid and nonassessable, and the shares of Common Stock
issuable upon conversion of the 1997 Preferred Stock and the 8% Preferred
Stock and, if issued, upon conversion of the 91/4% Convertible Subordinated
Debentures due 2007 (the "2007 Debentures") and the 8% Convertible
Subordinated Debentures due 2006 (the "2006 Debentures") will be, upon
issuance, fully paid and nonassessable. As of May 29, 1998, 52,242,014 shares
of Common Stock were issued and outstanding and were held by approximately
21,581 holders of record.
Rights Plan
The Board of Directors of the Company declared a dividend
distribution of one right (a "Right") for each outstanding share of Common
Stock and Employee Preferred Stock (collectively, the "Voting Stock") payable
to holders of record as of the close of business on January 12, 1996 (the
"Record Date") and, thereafter, all Common Stock issued by the Company has had
an equivalent number of Rights attendant to it. Each Right entitles the
holder to purchase, after the Distribution Date (as defined below), from the
Company one one-hundredth of a share of Series A Preferred Stock of the
Company at a price of $47.50 (the "Purchase Price"). The description and
terms of the Rights are set forth in a Rights Agreement, dated as of December
19, 1995 between the Company and American Stock Transfer & Trust Company, as
Rights Agent (the "Rights Agent") as supplemented. The Rights Plan is set
forth in full in the Rights Agreement and the description thereof herein is
qualified in its entirety by reference to such Rights Agreement.
Until the earlier to occur of (a) the tenth day after public
announcement that any person or group has become the beneficial owner of at
least 15% of the Company's Voting Stock (other than pursuant to a "Permitted
Offer," as defined below) and (b) the tenth business day after the date of the
commencement of a tender or exchange offer (other than a Permitted Offer) by
any person which would, if consummated, result in such person becoming the
beneficial owner of at least 20% of the Voting Stock (the earlier of such
dates being hereinafter called the "Distribution Date"), the Rights will be
evidenced, with respect to any of the Voting Stock certificates outstanding as
of the Record Date, by such Voting Stock certificates.
Each share of Voting Stock issued or delivered by the Company
after the Record Date but prior to the earlier of the Distribution Date or the
expiration of the Rights shall be accompanied by one Right.
The Rights Agreement provides that, until the Distribution
Date, the Rights will be transferred with and only with the Voting Stock.
Until the Distribution Date (or earlier redemption or expiration of the
Rights), the surrender or transfer of any certificates for Voting Stock in
respect of which Rights have been issued will also constitute the transfer of
the Rights associated with the Voting Stock represented by such certificates.
As soon as practicable after the Distribution Date, separate certificates
evidencing the Rights (the "Right Certificates") will be mailed to holders of
record of the Voting Stock as of the close of business on the Distribution
Date and such separate Right Certificates alone will evidence the Rights.
No Right is exercisable at any time prior to the Distribution
Date. The Rights will expire on January 12, 2006 (the "Final Expiration
Date") unless earlier exchanged or redeemed by the Company as described below.
Until a Right is exercised, the holder thereof, as such, will have no rights
as a stockholder of the Company, including without limitation the right to
vote or to receive dividends.
Upon exercise, each Right shall be converted into one
one-hundredth of a share of the Series A Preferred Stock. Holders of shares
of Series A Preferred Stock are entitled to receive, when, as and if declared
by the Board of Directors out of funds legally available therefor, quarterly
dividends in an amount per share equal to the greater of (a) $1.00 and (b) 100
times the aggregate per share amount of all cash dividends or other
distributions (other than dividends payable solely in shares of Common Stock),
declared on the Common Stock since the first dividend payment date with respect
to the Series A Preferred Stock. Dividends payable on the Series A Preferred
Stock are cumulative. In addition, in the event the Company enters into any
consolidation, merger, combination or other transaction in which shares of
Common Stock are exchanged for or changed into other stock or securities,
shares of Series A Preferred Stock shall be similarly exchanged for or changed
into 100 times the aggregate amount of stock, securities, cash or other
consideration.
Subject to the rights of holders of the 1997 Preferred Stock
and the 8% Preferred Stock, holders of shares of Series A Preferred Stock are
entitled to 100 votes on all matters submitted to a vote of the stockholders
of TWA, voting together as a single class, except as otherwise required by
applicable law. In the event dividends payable on the Series A Preferred
Stock shall be in arrears in an amount equal to six quarterly payments, all
holders of the Series A Preferred Stock together with other holders of
preferred stock entitled to vote, shall, voting together as a single class be
entitled to elect one director to the Company's Board of Directors.
In the event that any person or group (an "Acquiring Person")
becomes the beneficial owner of at least 15% of the Company's Voting Stock,
then each Right (other than Rights beneficially owned by the Acquiring Person
and certain affiliated persons) will entitle the holder to elect to receive,
without payment of the Purchase Price, a number of shares of the Company's
Common Stock having a market value equal to the Purchase Price. The term
"Acquiring Person" does not include (i) the Company, any of its subsidiaries
or any employee benefit plan of the Company, except for any such employee
benefit plan acting in concert with a third party (other than another employee
benefit plan of the Company) or (ii) any person or group which becomes the
beneficial owner of at least 15% of the Voting Stock pursuant to a "Permitted
Offer" (as defined below).
"Permitted Offer" means a tender or exchange offer by a Person
for all outstanding shares of Voting Stock, which is made at a price and on
such other terms determined by at least a majority of the Continuing Directors
(as defined below) to be in the best interests of the Company and its
stockholders.
In the event that, after any person has become an Acquiring
Person, (i) the Company is involved in a merger or other business combination
in which the Company is not the surviving corporation or its Voting Stock is
exchanged for other securities or assets or (ii) the Company and/or one or
more of its subsidiaries sell or otherwise transfer assets or earning power
aggregating more than 50% of the assets or earning power of the Company and
its subsidiaries, taken as a whole, then each Right will entitle the holder to
purchase, for the Purchase Price, a number of shares of Common stock of the
other party to such business combination or sale (or in certain circumstances,
an affiliate) having a market value of two times the Purchase Price.
At any time after any person has become an Acquiring Person
(but before any person becomes the beneficial owner of at least 50% of the
Voting Stock), a majority of the Company's Continuing Directors may exchange
all or part of the Rights (other than the Rights beneficially owned by the
Acquiring Person and certain affiliated persons) for shares of Common Stock at
an exchange ratio of one share of Common Stock per Right.
"Continuing Director" means (i) any member of the Board of
Directors who was a member of the Board prior to the time an Acquiring Person
becomes such or (ii) any person subsequently elected to the Board if he is
recommended or approved by a majority of the Continuing Directors or, in the
case of a successor to a director elected by holders of a series of Employee
Preferred Stock, if such person is elected pursuant to the applicable terms of
such Employee Preferred Stock. Continuing Directors do not include an
Acquiring Person, an affiliate or associate of an Acquiring Person or any
representative or nominee of the foregoing.
The Company may redeem the Rights, in whole but not in part, at
a price of $.01 per Right at any time prior to the close of business on the
tenth day after public announcement that any person has become an Acquiring
Person (subject to extension by a majority of the Continuing Directors).
After the Distribution Date, the Rights Agreement may be
amended in any respect that does not adversely affect the Rights holders
(other than any Acquiring Person and certain affiliated persons). In addition,
after any person has become an Acquiring Person, the Rights Agreement may be
amended only with the approval of a majority of the Continuing Directors.
Description of Employee Preferred Stock
Pursuant to the '95 Reorganization, the Company issued an
aggregate of 6,425,118 shares of Employee Preferred Stock to employee stock
trusts for the benefit of certain domestic employees of the Company then
represented by ALPA, IFFA and IAM pursuant to the terms of the '94 Labor
Agreements (collectively, the "Employee Stock Trusts"). The Employee Preferred
Stock was issued in three series designated ALPA Preferred Stock, IAM
Preferred Stock and IFFA Preferred Stock. Except for an exclusive right to
elect a certain number of directors to the Board of Directors and the
liquidation preference described below under "--Liquidation Preference and
Other Rights," the Employee Preferred Stock is the functional equivalent of
Common Stock. The Employee Preferred Stock is junior to the 1997 Preferred
Stock and the 8% Preferred Stock, as to the payment of dividends and the
distribution of assets upon Liquidation.
Dividends
Subject to the issuance by the Company of preferred stock with
senior rights (including the 1997 Preferred Stock and the 8% Preferred Stock),
the holders of the Employee Preferred Stock are entitled to receive, when, as
and if declared by the Board of Directors out of funds legally available
therefor, dividends payable in cash, stock or otherwise. No dividends may be
paid on the Common Stock unless an equivalent dividend is paid on the Employee
Preferred Stock, and no dividends may be paid on the Employee Preferred Stock
unless an equivalent dividend is paid on the Common Stock. It is not presently
anticipated that dividends will be paid on the Employee Preferred Stock in the
foreseeable future.
Liquidation Preference and Other Rights
Subject to the issuance by the Company of preferred stock with
senior rights (including the 1997 Preferred Stock and the 8% Preferred Stock),
upon any liquidation of the Company, holders of the Employee Preferred. Stock
will be entitled to a liquidation preference equal to $.01 per share from
TWA's net assets before any amounts are paid to, or on account of, the holders
of Common Stock, and thereafter the remaining net assets of the Company will
be distributed pro rata to the holders of the Employee Preferred Stock, the
Common Stock and other equity securities of the Company which rank on a parity
with such stock and with respect to such rights, all in accordance with their
respective rights and interests. The Employee Preferred Stock does not have
redemption rights.
Automatic Conversion
Each share of Employee Preferred Stock will automatically
convert into one share of Common Stock upon the withdrawal of such share of
Employee Preferred Stock from the Employee Stock Trust in which such share is
held.
Voting
So long as any shares of ALPA Preferred Stock are outstanding,
the holders of the ALPA Preferred Stock are entitled to one vote per share (i)
on each matter submitted to a vote at a meeting of stockholders other than the
election of directors and (ii) for the ALPA Director (defined below) to be
elected at an annual meeting of stockholders. Such holders have the exclusive
right to elect to the Board one director (the "ALPA Director"), which director
shall be a Class II director.
So long as any shares of IFFA Preferred Stock are outstanding,
the holders of the IFFA Preferred Stock are entitled to one vote per share (i)
on each matter submitted to a vote at a meeting of stockholders other than the
election of directors and (ii) for the IFFA Director (defined below) to be
elected at an annual meeting of stockholders. Such holders have the exclusive
right to elect to the Board one director (the "IFFA Director"), which director
shall be a Class II director.
So long as any shares of IAM Preferred Stock are outstanding,
the holders of the IAM Preferred Stock are entitled to one vote per share (i)
on each matter submitted to a vote at a meeting of stockholders other than the
election of directors and (ii) for the IAM Directors (defined below) to be
elected at an annual meeting of stockholders. Such holders have the exclusive
right to elect to the Board two directors (the "IAM Directors"), one of which
directors shall be a Class II director and one of which shall be a Class III
director.
Amendment
The Certificate of Designations, Preferences and Rights
relating to each series of Employee Preferred Stock may be amended only upon
the unanimous approval of the holders of the outstanding shares of such series
of Employee Preferred Stock.
Description of the 8% Preferred Stock
The 8% Preferred Stock ranks on a parity with the 1997
Preferred Stock and on a parity with all other Preferred Stock, the terms of
which expressly provide that it ranks on a parity with the 8% Preferred Stock
with respect to dividends and amounts payable upon Liquidation. The 8%
Preferred Stock ranks senior to the Common Stock, the Series A Preferred
Stock, if issued, and the Employee Preferred Stock with respect to payment of
dividends and amounts payable upon Liquidation.
Dividends
The holders of the 8% Preferred Stock are entitled to receive
cumulative cash dividends at the rate of 8% per annum (equivalent to $4.00 per
share per annum), when, as and if declared by the Board of Directors out of
funds legally available therefor. Dividends and liquidated damages, if any,
are payable quarterly in arrears on March 15, June 15, September 15 and
December 15 of each year (and, in the case of any accrued but unpaid
dividends, at such additional times and for such interim periods, if any, as
determined by the Board of Directors) to the holders of record on the record
dates, which shall be not more than 30 days nor less than 10 days preceding
the payment dates. Dividends on the 8% Preferred Stock commenced to accrue on
March 18, 1996
If dividends are not paid in full upon the 8% Preferred Stock
and any other preferred stock ranking on a parity as to dividends with the 8%
Preferred Stock, all dividends declared upon shares of 8% Preferred Stock and
such other preferred stock ranking on a parity as to dividends with the 8%
Preferred Stock will be declared pro rata so that in all cases the amount of
dividends declared per share on the 8% Preferred Stock and such other
preferred stock bear to each other the same ratio that accrued and unpaid
dividends per share on the shares of the 8% Preferred Stock and such other
preferred stock bear to each other. Except as set forth above, unless full
cumulative dividends or the 8% Preferred Stock have been paid and funds set
aside, and all liquidated damages, if any, paid, dividends (other than
dividends paid solely in Common Stock or other stock ranking junior as to
dividends and liquidation preference) may not be paid or declared and set
aside for payment and other distributions may not be made upon the Common
Stock or on any other stock of the Company ranking junior to or on a parity
with the 8% Preferred Stock as to dividends and liquidation preference. Under
such circumstances, such stock may not be redeemed, purchased, or otherwise
acquired for any consideration by the Company.
Conversion Rights
Each share of 8% Preferred Stock may be converted at any time
at the option of the holder, unless previously redeemed or exchanged, into
fully paid, nonassessable shares of Common Stock at an initial conversion
price of $20.269 per share of Common Stock (equivalent to a conversion rate of
approximately 2.467 shares of Common Stock for each share of 8% Preferred
Stock), subject to adjustments in certain circumstances. The right to convert
8% Preferred Stock called for redemption will expire at the close of business
on the fifth business day prior to the redemption date. Whenever the Company
issues shares of Common Stock upon conversion of 8% Preferred Stock, the
Company will, subject to certain conditions, issue, together with each share
of Common Stock, one Right, entitling the holder to purchase one one-hundredth
of a share of Series A Preferred Stock under certain circumstances.
No fractional shares of Common Stock will be issued upon
conversion but, in lieu thereof, an appropriate amount will be paid in cash
based on the Closing Price on the last trading day before the conversion date.
The conversion price is subject to adjustment upon the occurrence of certain
events.
Optional Redemption by the Company
The 8% Preferred Stock may not be redeemed prior to March 15,
1999. On or after March 15, 1999, the 8% Preferred Stock may be redeemed, in
whole or in part, at the option of the Company, at a redemption price of $52.80
in 1999 and at a redemption price decreasing by $0.40 increments each March 15
thereafter until 2006, from which time the redemption price shall be and
remain $50.00, in each case, plus accrued and unpaid dividends thereon to the
date fixed for redemption.
Liquidation Rights
Upon any Liquidation of the Company, and after provision is
made for any preferential amounts to which the holders of any senior preferred
stock may be entitled, holders of 8% Preferred Stock will be entitled to
receive from the Company's assets available for distribution to all
stockholders $50.00 per share plus all accrued and unpaid dividends through
the date of distribution or determination whether or not declared, and
liquidated damages, if any, before any distribution is made on the Employee
Preferred Stock or Common Stock, Series A Preferred Stock (if issued) or any
other capital stock ranking junior to the 8% Preferred Stock and will be
entitled to such amount on a parity with the 1997 Preferred Stock and every
other series of the Company's preferred stock that ranks on a parity with the
8% Preferred Stock in respect of distributions of assets upon Liquidation.
Neither a consolidation or merger of the Company with another corporation nor
a sale or transfer of all or substantially all of the Company's assets for
cash, securities or other property will be considered a liquidation,
dissolution or winding up of the Company for these purposes.
Voting Rights
Except as indicated below or otherwise required by law, holders
of 8% Preferred Stock have no voting rights. If at any time the equivalent of
six quarterly dividends payable on the 8% Preferred Stock are accrued and
unpaid, the holders of all outstanding shares of 8% Preferred Stock and any
stock ranking on a parity as to dividends with the shares of 8% Preferred
Stock and having similar voting rights then exercisable, voting separately as
a class without regard to series, will be entitled to elect at the next annual
or special meeting of the stockholders of the Company, two directors to serve
until all dividends accumulated and unpaid have been paid or declared and
funds set aside to provide for payment in full. In exercising any such vote,
each outstanding share of 8% Preferred Stock will be entitled to one vote,
excluding shares held by the Company or any entity controlled by the Company,
which shares shall have no vote.
Exchange Provisions
Provided that all accrued and unpaid dividends and liquidated
damages, if any, then owing on the 8% Preferred Stock have been paid, the 8%
Preferred Stock is exchangeable in whole, but not in part, at the Company's
option for the Company's 2006 Debentures on any dividend payment date,
beginning on March 15, 1998, at the rate of $50.00 principal amount thereof
for each share of 8% Preferred stock outstanding at the time of exchange. The
2006 Debentures are issuable in denominations of $1,000 and integral multiples
thereof. The 2006 Debentures, if issued, will be unsecured, subordinated
obligations of the Company and will mature on March 15, 2006. The 2006
Debentures are convertible into fully paid non assessable shares of Common
Stock and may be redeemed on and after March 15, 1999 at the option of the
Company.
Description of the 1997 Preferred Stock
The 1997 Preferred Stock ranks on a parity with the 8%
Preferred Stock and on a parity with all other Preferred Stock, the terms of
which expressly provide that it ranks on a parity with the 1997 Preferred
Stock with respect to dividends and amounts payable upon Liquidation. The 1997
Preferred Stock ranks senior to the Common Stock, the Series A Preferred
Stock, if issued, and the Employee Preferred Stock with respect to payment of
dividends and amounts payable upon Liquidation.
Dividends
The holders of the 1997 Preferred Stock are entitled to receive
cumulative cash dividends at the rate of 91/4% per annum (equivalent to $4.625
per share per annum), when, as and if declared by the Board of Directors out
of funds legally available therefor. Dividends and liquidated damages, if any,
are payable quarterly in arrears on March 15, June 15, September 15 and
December 15 of each year (and, in the case of any accrued but unpaid
dividends, at such additional times and for such interim periods, if any, as
determined by the Board of Directors) to the holders of record on the record
dates, which shall be not more than 30 days nor less than 10 days preceding
the payment dates. Dividends on the 1997 Preferred Stock commenced accruing on
December 2, 1997.
If dividends are not paid in full upon the 1997 Preferred Stock
and any other preferred stock ranking on a parity as to dividends with the
1997 Preferred Stock, all dividends declared upon shares of 1997 Preferred
Stock and such other preferred stock ranking on a parity as to dividends with
the 1997 Preferred Stock will be declared pro rata so that in all cases the
amount of dividends declared per share on the 1997 Preferred Stock and such
other preferred stock bear to each other the same ratio that accrued and
unpaid dividends per share on the shares of the 1997 Preferred Stock and such
other preferred stock bear to each other. Except as set forth above, unless
full cumulative dividends or the 1997 Preferred Stock have been paid and funds
set aside, and all liquidated damages, if any, paid, dividends (other than
dividends paid solely in Common Stock or other stock ranking junior as to
dividends and liquidation preference) may not be paid or declared and set
aside for payment and other distributions may not be made upon the Common Stock
or on any other stock of the Company ranking junior to or on a parity with the
1997 Preferred Stock as to dividends and liquidation preference. Under such
circumstances, such stock may not be redeemed, purchased, or otherwise
acquired for any consideration by the Company.
Conversion Rights
Each share of 1997 Preferred Stock may be converted at any time
at the option of the holder, unless previously redeemed or exchanged, into
fully paid, nonassessable shares of Common Stock at an initial conversion
price of $7.90 per share of Common Stock (equivalent to a conversion rate of
approximately 6.329 shares of Common Stock for each share of 1997 Preferred
Stock), subject to adjustments in certain circumstances. The right to convert
1997 Preferred Stock called for redemption will expire at the close of
business on the second business day prior to the redemption date. Whenever the
Company issues shares of Common Stock upon conversion of 1997 Preferred Stock,
the Company will, subject to certain conditions, issue, together with each
share of Common Stock, one Right, entitling the holder to purchase one
one-hundredth of a share of Series A Preferred Stock under certain
circumstances.
No fractional shares of Common Stock will be issued upon
conversion but, in lieu thereof, an appropriate amount will be paid in cash
based on the Closing Price on the last trading day before the conversion date.
The conversion price is subject to adjustment upon the occurrence of certain
events.
Optional Redemption by the Company
The 1997 Preferred Stock may not be redeemed prior to December
15, 2000. On or after December 15, 2000, the 1997 Preferred Stock may be
redeemed, in whole or in part, at the option of the Company, at a redemption
price of $53.24 in 2000 and at a redemption price decreasing by approximately
$0.46 each December 15 thereafter until 2007, from which time the redemption
price shall be and remain $50.00, in each case, plus accrued and unpaid
dividends thereon to the date fixed for redemption.
Liquidation Rights
Upon any Liquidation of the Company, and after provision is
made for any preferential amounts to which the holders of any senior preferred
stock may be entitled, holders of 1997 Preferred Stock will be entitled to
receive from the Company's assets available for distribution to all
stockholders $50.00 per share plus all accrued and unpaid dividends through
the date of distribution or determination whether or not declared, and
liquidated damages, if any, before any distribution is made on the Employee
Preferred Stock or Common Stock, Series A Preferred Stock (if issued) or any
other capital stock ranking junior to the 1997 Preferred Stock and will be
entitled to such amount on a parity with the 8% Preferred Stock and every
other series of the Company's preferred stock that ranks on a parity with the
1997 Preferred Stock in respect of distributions of assets upon Liquidation.
Neither a consolidation or merger of the Company with another corporation nor
a sale or transfer of all or substantially all of the Company's assets for
cash, securities or other property will be considered a liquidation,
dissolution or winding up of the Company for these purposes.
Voting Rights
Except as indicated below or otherwise required by law, holders
of 1997 Preferred Stock have no voting rights. If at any time the equivalent
of six quarterly dividends payable on the 1997 Preferred Stock are accrued and
unpaid, the holders of all outstanding shares of 1997 Preferred Stock and any
stock ranking on a parity as to dividends with the shares of 1997 Preferred
Stock and having similar voting rights then exercisable, voting separately as
a class without regard to series, will be entitled to elect at the next annual
or special meeting of the stockholders of the Company, two directors to serve
until all dividends accumulated and unpaid have been paid or declared and
funds set aside to provide for payment in full. In exercising any such vote,
each outstanding share of 1997 Preferred Stock will be entitled to one vote,
excluding shares held by the Company or any entity controlled by the Company,
which shares shall have no vote.
Exchange Provisions
Provided that all accrued and unpaid dividends and liquidated
damages, if any, then owing on the 1997 Preferred Stock have been paid, the
1997 Preferred Stock is exchangeable in whole, but not in part, at the
Company's option for the 2007 Debentures on any dividend payment date,
beginning on December 15, 1999, at the rate of $50.00 principal amount thereof
for each share of 1997 Preferred Stock outstanding at the time of exchange.
The 2007 Debentures are issuable in denominations of $1,000 and integral
multiples thereof. The 2007 Debentures, if issued, will be unsecured,
subordinated obligations of the Company and will mature on December 15, 2007.
The 2007 Debentures are convertible into fully paid non assessable shares of
Common Stock and may be redeemed on and after December 15, 2000 at the option
of the Company.
CERTAIN PROVISIONS OF THE CERTIFICATE OF INCORPORATION,
THE BY-LAWS AND DELAWARE LAW
The Certificate of Incorporation and the By-laws contain
certain provisions that could make more difficult the acquisition of the
Company by means of a tender offer, a proxy contest or otherwise. These
provisions are expected to discourage certain types of coercive takeover
practices and inadequate takeover bids and to encourage persons seeking to
acquire control of the Company first to negotiate with the Company. The
Company believes that the benefits of increased protection of the Company's
potential ability to negotiate with the proponent of an unfriendly or
unsolicited proposal to acquire or restructure the Company outweigh the
disadvantages of discouraging such proposals because, among other things,
negotiation of such proposals could result in an improvement of their terms.
In addition, pursuant to the '95 Reorganization and in connection with the
adoption of the '94 Labor Agreements, the Company adopted certain amendments,
both to the Certificate of Incorporation and the By-laws, relating to
corporate governance matters. These amendments are designed to enhance the
input of the Company's union employees or the directors nominated by them in
the governance of the Company and to limit the ability to change the
provisions of the Certificate of Incorporation in general and the By-laws in
particular without broad support from the Company's voting stockholders. Such
provisions will also make it more difficult to enact any change in the By-laws
or to take any of the specified actions, if such changes or actions are
opposed by a substantial constituency, including the Company's employees who
are represented by organized labor. The description set forth below is
intended as a summary only and is qualified in its entirety by reference to
the Certificate of Incorporation and the By-laws.
Board of Directors
The Certificate of Incorporation and the By-laws provide,
subject to any rights of holders of the Company's preferred stock to elect
additional directors under certain circumstances, that the number of directors
constituting the entire Board of Directors will be fifteen. The Certificate
of Incorporation also provides that, as of the 1999 annual meeting of
stockholders, the term of service for each director will be one 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--Description of Employee Preferred Stock." Any director elected to fill
a vacancy will hold office for the remainder of the full term of the class of
directors in which the vacancy occurred and until the director's successor is
elected and qualified. The Certificate of Incorporation provides that
directors may be removed only by the affirmative vote of at least a majority
of the voting power of all the then outstanding shares of stock entitled to
vote generally in the election of directors, voting together as a single
class. The affirmative vote of at least 80% of the Voting Stock, voting
together as a single class, is required to amend or repeal, or adopt any
provision inconsistent with, the provision of the Certificate of Incorporation
relating to the number, election and terms of directors.
"Original Nominating Entity" means, as applicable, each of the
Management of the Company, ALPA, IAM and IFFA. Upon being certified to
replace IFFA as the bargaining representative for the Company's flight
attendants, the IAM became the nominating entity with respect to the director
to be elected by holders of IFFA Preferred Stock.
Stockholder Actions and Special Meetings
The Certificate of Incorporation provides that stockholder
action can be taken only at an annual or special meeting of stockholders, and
prohibits, subject to the rights of holders of any class or series of the
Company's preferred stock to the contrary, stockholder action by written
consent in lieu of a meeting. The Certificate of Incorporation and By-laws
provide that, subject to the rights of holders of any series of preferred
stock, special meetings of stockholders can be called only by (i) the Chairman
of the Board of Directors of the Company, (ii) the Corporate Secretary of the
Company within ten calendar days after receipt of the written request of a
majority of the total number of directors that the 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 1997 Preferred Stock and the 8% Preferred
Stock are not Voting Stock. See "Description of Capital Stock."
Blocking Coalition
Pursuant to the '94 Labor Agreements and in connection with the
'95 Reorganization, the Company amended the By-laws to provide that certain
actions (as set forth in the next paragraph) may not be approved by the Board
of Directors if votes are cast against such actions by directors sufficient to
constitute a "Blocking Coalition." A Blocking Coalition is defined as the
negative votes of (i) a total of the four directors elected by the holders of
the Employee Preferred Stock plus (ii) the negative votes of any two of the
Company's other directors.
Actions subject to disapproval by the Blocking Coalition
include: (a) any sale, transfer or disposition, in a single or series of
transactions, of at least 20% of the Company's assets, except for transactions
in the ordinary course of business including aircraft transactions as part of
a fleet management plan; (b) any merger of the Company into or with, or
consolidation of the Company with any other entity; (c) any business
combination within the meaning of Section 203 of the DGCL; (d) any dissolution
or liquidation of the Company; (e) any filing of a petition for bankruptcy,
reorganization or receivership under any state or federal bankruptcy,
reorganization or insolvency law; (f) any repurchase, retirement or redemption
of the Company's capital stock or other equity securities prior to their
scheduled maturity or expiration, except for redemptions out of the proceeds
of any substantially concurrent offering of comparable or junior securities
and mandatory redemptions of any redeemable preferred stock of the Company;
(g) any acquisition of assets, not related to the Company's current business
as an air carrier, in a single transaction or a series of related transactions
exceeding $50.0 million adjusted annually by the consumer price index; or (h)
any sale of the Company's capital stock or securities convertible into capital
stock of the Company to any person if (i) at the time of issuance or (ii)
assuming conversion of all outstanding securities of the Company convertible
into capital stock, such person or entity would beneficially own at least 20%
of the capital stock of the Company.
Super Majority Voting Provisions
At all times before September 1, 2000, the Company must obtain
the approval of at least two-thirds of the issued and outstanding Voting Stock
of the Company, voting as a single class and not as separate classes, for the
holders of such Voting Stock to approve certain actions, unless such matters
have been approved by a vote of at least 80% of the Board of Directors then in
office. Actions requiring such approval are the following: (i) any merger of
the Company into or with, or consolidation of the Company with, any other
entity; (ii) any business combination within the meaning of Section 203 of the
DGCL; (iii) any dissolution or liquidation of the Company; or (iv) any
repurchase, retirement or redemption of the Company's capital stock or other
equity securities prior to their scheduled maturity or expiration, except for
redemptions out of the proceeds of any substantially concurrent offering of
comparable or junior securities, and mandatory redemptions of any redeemable
preferred stock of the Company.
Preferred Stock
The Company believes that the ability of the Board of Directors
to issue one or more series of preferred stock of the Company provides TWA
with increased flexibility in structuring possible future financings and in
meeting other corporate needs that might arise. The authorized shares of
preferred stock, as well as shares of Common Stock, will be available for
issuance without further action by TWA's stockholders, unless such action is
required by applicable law or the rules of any stock exchange on which TWA
securities may be listed. If the approval of TWA's stockholders is not
required for the issuance of shares of preferred stock or Common Stock, the
Board of Directors does not intend to seek stockholder approval. Although the
Board of Directors has no intention of doing so, it could issue a series of
preferred stock that could, depending on the terms of such series, impede the
completion of a merger, tender offer or other takeover attempt. The Board of
Directors will make any determination to issue such shares based on its
judgment as to the best interests of TWA and its stockholders. The Board of
Directors, in so acting, could issue preferred stock having terms that could
discourage an acquisition attempt or other transaction that some, or a
majority, of the stockholders might believe to be in their best interests or
in which stockholders might receive a premium for their stock over the then
current market price of such stock.
Rights to Purchase Stock
The Rights are intended to protect TWA's stockholders from
certain non-negotiated takeover attempts which present the risk of a change of
control on terms which may be less favorable to TWA's stockholders than would
be available in a transaction negotiated with and approved by the Board of
Directors of the Company. Although there can be no certainty as to the results
of any particular negotiation, the Board of Directors believes that the
interests of the stockholders are best served if any acquisition of TWA or a
substantial percentage of the Common Stock results from arms-length
negotiations and reflects the Board's or stockholders' careful consideration
of the proposed terms of a transaction. In particular, the Rights are intended
to help (a) reduce the risk of coercive, two-tiered, front-end loaded or
partial offers which may not offer fair value to all stockholders, (b)
mitigate against market accumulators who through open market or private
purchases may achieve a position of substantial influence or control without
paying to selling or remaining stockholders a fair control premium, and (c)
deter market accumulators who are simply interested in putting a Company "in
play." See "Description of Capital Stock--Rights Plan."
Anti-Takeover Statute
Section 203 of the DGCL is applicable to corporate takeovers in
Delaware. Subject to certain exceptions set forth therein, Section 203 of the
DGCL provides that a corporation shall not engage in any business combination
with any "interested stockholder" for a three-year period following the date
that such stockholder becomes an interested stockholder unless (a) prior to
such date, the board of directors of the corporation approved either the
business combination or the transaction which resulted in the stockholder
becoming an interested stockholder, (b) upon consummation of the transaction
which resulted in the stockholder becoming an interested stockholder, the
interested stockholder owned at least 85% of the voting stock of the
corporation outstanding at the time the transaction commenced (excluding
certain shares) or (c) on or subsequent to such date, the business combination
is approved by the board of directors of the corporation and by the
affirmative vote of at least 662/3% of the outstanding voting stock which is
not owned by the interested stockholder. Except as specified therein, an
interested stockholder is defined to include any person that is the owner of
15% or more of the outstanding voting stock of the corporation, or is an
affiliate or associate of the corporation and was the owner of 15% or more of
the outstanding voting stock of the corporation, at any time within three
years immediately prior to the relevant date, and the affiliates and
associates of such person. Under certain circumstances, Section 203 of the
DGCL makes it more difficult for an "interested stockholder" to effect various
business combinations with a corporation for a three-year period, although the
stockholders may, by adopting an amendment to the corporation's certificate of
incorporation or by-laws, elect not to be governed by this section, effective
twelve months after adoption. The Certificate of Incorporation and the By-laws
do not exclude TWA from the restrictions imposed under Section 203 of the
DGCL, but do provide that a business combination within the meaning of Section
203 of the DGCL (i) may be approved without the approval of at least 662/3% of
the Voting Stock if the business combination is approved by at least 80% of
the directors then in office and (ii) may not be approved if votes are cast
against the action by the Blocking Coalition. It is anticipated that the
provisions of Section 203 of the DGCL and the provisions of the Certificate of
Incorporation may encourage companies interested in acquiring TWA to negotiate
in advance with the Board of Directors of TWA since the stockholder approval
requirement would be avoided if 80% of the directors then in office approve
either the business combination or the transaction which resulted in the
stockholder becoming an interested stockholder.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
PROSPECTIVE PURCHASERS ARE STRONGLY URGED TO CONSULT THEIR OWN
TAX ADVISORS REGARDING THE TAX CONSEQUENCES OF ACQUIRING, HOLDING OR DISPOSING
OF THE COMMON STOCK 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 the Common Stock pursuant to this Prospectus, all of which will be sold by
Selling Holders. Such securities as are 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 and 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 discount 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 Common Stock 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 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 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 of
Common Stock 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 Common Stock 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 the Common Stock 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.
LEGAL MATTERS
The validity of the Common Stock offered hereby was passed upon
for the Company by Davis Polk & Wardwell, New York, New York.
EXPERTS
The consolidated financial statements of the Company as of
December 31, 1996 and 1997 and for each of the periods in the three year
periods ended December 31, 1997 included or incorporated by reference in this
Prospectus, have been audited by KPMG Peat Marwick LLP, independent auditors,
as set forth in their report appearing herein and are included in reliance
upon the report of such firm given and upon their authority as experts in
accounting and auditing. The report of KPMG Peat Marwick LLP refers to the
application of fresh start reporting in connection with the '95
Reorganization.
<TABLE>
<S> <C> <C>
================================================================= ===========================================
No dealer, salesperson or other person has been
authorized to give any information or to make any TRANS WORLD
representations other than those contained in this AIRLINES, INC.
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 3,350,000 Shares (par value $0.01
it is unlawful to make such offer or solicitation. per share) of Common Stock
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. ----------
PROSPECTUS
---------- ----------
TABLE OF CONTENTS
Page
Available Information..........................................4
Incorporation of Certain Documents by
Reference................................................5
Prospectus Summary.............................................6
Risk Factors..................................................11
Use of Proceeds...............................................19
Selected Consolidated Financial Data..........................20
Selling Holders...............................................22
Description of Equity Notes...................................22
Description of Capital Stock..................................24
Certain Provisions of the Certificate of
Incorporation, the By-laws and Delaware
Law.....................................................31
Certain Federal Income Tax Considerations.....................34 July 6, 1998
Plan of Distribution..........................................35
Legal Matters.................................................35
Experts.......................................................35
================================================================= ===========================================
</TABLE>
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
<TABLE>
<S> <C>
ITEM 14. Other Expenses of Issuance and Distribution
SEC registration fee............................ $ 10,317
Accounting fees................................. 15,000*
Legal fees...................................... 50,000*
Miscellaneous................................... 50,000*
TOTAL................................................... $ 124,462*
</TABLE>
- ----------
* 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.
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
*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, No. 333-04977)
*4.15 --Indenture dated as of March 31, 1997 between TWA and First Security
Bank, National Association relating to TWA's 12% Senior Secured Notes
due 2002 (Exhibit 4.15 to Registrant's Registration Statement on Form
S-4, No. 333-26645)
*4.16 --Form of 12% Senior Secured Note due 2002 (contained in Indenture
filed as Exhibit 4.15 to 12/31/97 Form 10-K)
*4.17 --Registration Rights Agreement dated as of March 31, 1997 between the
Company and the Initial Purchaser relating to the 12% Senior Secured
Notes due 2002 and the warrants to purchase 126.26 shares of TWA
Common Stock (Exhibit 4.17 to Registrant's Registration Statement on
Form S-4, No. 333-26645)
*4.18 --Warrant Agreement dated as of March 31, 1997 between the Company and
American Stock Transfer & Trust Company, as Warrant Agent, relating
to warrants to purchase 126.26 shares of TWA Common Stock (Exhibit
4.18 to Registrant's Registration Statement on Form S-4, No.
333-26645)
*4.19 --Form of Indenture relating to TWA's 9 1/4% Convertible Subordinated
Debentures due 2007 (Exhibit 4.19 to Registrant's Registration
Statement on Form S-3, No. 33-44689)
*4.20 --Registration Rights Agreement dated as of December 2, 1997 between
the Company and the Initial Purchasers (Exhibit 4.20 to Registrant's
Registration Statement on Form S-3, No. 33-44689)
*4.21 --Indenture dated as of December 9, 1997 by and between TWA and First
Security Bank, National Association, as Trustee, relating to TWA's 11
1/2% Senior Secured Notes due 2004 (Exhibit 4.21 to Registrant's
Registration Statement on Form S-3, No. 33-44661)
*4.22 --Form of 11 1/2% Senior Secured Note due 2004 (contained in Indenture
filed as Exhibit 4.21 to 12/31/97 Form 10-K)
*4.23 --Registration Rights Agreement dated as of December 9, 1997 among the
Company and Lazard Freres & Co. LLC and PaineWebber Incorporated, as
initial purchasers, relating to TWA's 11 1/2% Senior Secured Notes
due 2004 (Exhibit 4.23 to Registrant's Registration Statement on
Form S-3, No. 33-44661)
*4.24 --Sale and Service Agreement dated as of December 30, 1997 between TWA
and Constellation Finance LLC, as purchaser, relating to TWA's
receivables (Exhibit 4.24 to Registrant's Registration Statement on
Form S-3, No. 33-44661)
*4.25 --Registration Rights Agreement dated as of March 3, 1998 between the
Company and the Initial Purchaser Exhibit 4.25 to Registrant's
Registration Statement on Form S-4, No. 333-51581)
*4.26 --Indenture dated as of March 3, 1998 by and between TWA and First
Security Bank, National Association, as Trustee, relating to TWA's 11
3/8% Senior Notes due 2006 (Exhibit 4.26 to Registrant's
Registration Statement on Form S-4, No. 333-51581)
*4.27 --Aircraft Sale and Note Purchase Agreement dated as of April 9, 1998
among TWA, First Security Bank, National Association, as Owner Trustee
and Seven Sixty Seven Leasing, Inc. (Exhibit 4.27 to Registrant's
Registration Statement on Form S-4, No. 333-51581)
*4.28 --Indenture dated as of April 21, 1998 by and between TWA and First
Security Bank, National Association, as Trustee, relating to TWA's 11
3/8% Senior Secured Notes due 2003 (Exhibit 4.28 to Registrant's
Registration Statement on Form S-4, No. 333-51581)
*4.29 --Form of 11 3/8% Senior Secured Notes due 2003 (contained as Exhibit 1
to Rule 144A/Regulation S Appendix to Indenture in Exhibit 4.28)
*4.30 --Form of Mandatory Conversion Equity Note due 1999 (contained as
Exhibit A to Indenture in Exhibit 4.28)
4.31 --Registration Rights Agreement dated as of April 21, 1998 between the
Company, Lazard Freres & Co. LLC and First Security Bank, National
Association relating to the 11 3/8% Senior Secured Notes Due 2003(1)
4.32 --Registration Rights Agreement dated as of April 21, 1998 between the
Company, Lazard Freres & Co. LLC and First Security Bank, National
Association relating to the Mandatory Conversion Equity Notes
Due 1999(1)
5 --Opinion of Davis Polk & Wardwell, Counsel of the Registrant, regarding
the validity of the securities being registered(1)
*12 --Statement of Computation of Ratio of Earnings to Fixed Charges
(Exhibit 12 to Registrant's Registration Statement on Form S-4,
Registration Number 333-56997, filed on June 16, 1998)
23.1 --Consent of KPMG Peat Marwick LLP(1)
23.2 --Consent of Davis Polk & Wardwell, counsel of the Registrant (included
in Exhibit 5)
24 --Powers of Attorney(1)
*27 --Financial Data Schedule (included in 12/31/97 Form 10-K)
- ----------
* Incorporated by reference
(1) Previously filed with this Registration Statement on June 16, 1998.
Item 17. Undertakings
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and price represent no more than
a 20% change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective registration
statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement:
provided, however, that paragraphs (a)(1)(i) and (a)(2)(ii) above do not apply
if the registration statement is on Form S-3, Form S-8 or Form F-3, and the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Commission by the Company pursuant to section 13 or section 15(d) of the
Exchange Act that are incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned registrant hereby undertakes that, for
purposes of determining any liability under the Securities Act of 1933, each
filing of the registrant's annual report pursuant to section 13(a) or section
15(d) of the Securities Exchange Act of 1934 (and, where applicable, each
filing of an employee benefit plan's annual report pursuant to section 15(d)
of the Securities Exchange Act of 1934) that is incorporated by reference in
the registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission, such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the registrant
will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question of whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
(c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission, such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the registrant
will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question of whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
(d) The undersigned registrant hereby undertakes that (1) for
purposes of determining any liability under the Securities Act of 1933, the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective, and (2) for the purpose of
determining any liability under the Securities Act of 1933, each post-
effective amendment that contains a form of prospectus 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.
(e) The undersigned registrant hereby undertakes to file an
application for the purpose of determining the eligibility of the Trustee to
act under subsection (a) of Section 310 of the Trust Indenture Act ("Act") in
accordance with the rules and regulations prescribed by the Commission under
Section 305(b)(2) of the Act.
(f) The undersigned registrant hereby undertakes to respond to
requests for information that is incorporated by reference into the prospectus
pursuant to Items 4, 10(b), 11, or 13 of this Form, within one business day of
receipt of such request, and to send the incorporated documents by first class
mail or other equally prompt means. This includes information contained in
documents filed subsequent to the effective date of the registration statement
through the date of responding to the request.
(g) The undersigned registrant hereby undertakes to supply by
means of a post-effective amendment all information concerning a transaction,
and the company being acquired involved therein, that was not the subject of
and included in the registration statement when it became effective.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this Amendment No. 1 to the 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, July 6, 1998.
TRANS WORLD AIRLINES, INC.
July 6, 1998
By /s/ Michael J. Palumbo
---------------------------
Michael J. Palumbo,
Senior Vice President
and Chief Financial
Officer
Pursuant to the requirements of the Securities Act of 1933,
this Amendment No. 1 to the Registration Statement on Form S-3 has been signed
by the following persons in the capacities and on the dates indicated.
<TABLE>
<S> <C> <C>
Signatures Title Date
/s/ Gerald L. Gitner Director, Chairman of the Board and July 6, 1998
- -------------------------------------- Chief Executive Officer (Principal
Gerald L. Gitner Executive Officer)
/s/ Michael J. Palumbo Senior Vice President and Chief July 6, 1998
- -------------------------------------- Financial Officer (Principal Financial
Michael J. Palumbo Officer and Principal Accounting
Officer)
* Director July 6, 1998
- --------------------------------------
John W. Bachmann
* Director July 6, 1998
- --------------------------------------
William F. Compton
* Director July 6, 1998
- --------------------------------------
Eugene P. Conese
* Director July 6, 1998
- --------------------------------------
Sherry L. Cooper
* Director July 6, 1998
- --------------------------------------
Edgar M. House
* Director July 6, 1998
- --------------------------------------
Thomas H. Jacobsen
* Director July 6, 1998
- --------------------------------------
Myron Kaplan
Director
- --------------------------------------
David M. Kennedy
* Director July 6, 1998
- --------------------------------------
Merrill A. McPeak
* Director July 6, 1998
- --------------------------------------
Thomas F. Meagher
* Director July 6, 1998
- --------------------------------------
Brent S. Miller
* Director July 6, 1998
- --------------------------------------
William O'Driscoll
* Director July 6, 1998
- --------------------------------------
G. Joseph Reddington
* Director July 6, 1998
- --------------------------------------
Blanche M. Touhill
*By:/s/ Kathleen A. Soled July 6, 1998
- --------------------------------------
Kathleen A. Soled,
as Attorney-in-fact
</TABLE>
EXHIBIT INDEX
*2.1 --Joint Plan of Reorganization, dated May 12, 1995 (Appendix B to the
Registrant's Registration Statement on Form S-4, Registration Number
33-84944, as amended)
*2.2 --Modifications to Joint Plan of Reorganization, dated July 14, 1995 and
Supplemental Modifications to Joint Plan of Reorganization dated
August 2, 1995 (Exhibit 2.5 to 6/95 10-Q)
*2.3 --Findings of Fact, Conclusions of Law and Order Confirming Modified
Joint Plan of Reorganization, dated August 4, 1995, with Exhibits A-B
attached (Exhibit 2.6 to 6/95 10-Q)
*2.4 --Final Decree, dated December 28, 1995, related to the '95
Reorganization (Exhibit 2.7 to 12/31/95 Form 10-K)
*3(i) --Third Amended and Restated Certificate of Incorporation of the
Registrant (Exhibit 3(i) to the Registrant's Registration Statement
on Form S-4, Registration Number 333-26645)
*3(ii)--Amended and Restated By-Laws of Trans World Airlines, Inc.,
effective May 24, 1996 (Exhibit 3(ii) to 6/96 10-Q)
*4.1 --Voting Trust Agreement, dated November 3, 1993, between TWA and
LaSalle National Trust, N.A. as trustee (Exhibit 4.3 to 9/93 10-Q)
*4.2 --IAM Trans World Employees' Stock Ownership Plan and related Trust
Agreement, dated August 31, 1993, between TWA, the IAM Plan Trustee
Committee and the IAM Trustee (Exhibit to 9/93 10-Q)
*4.3 --IFFA Trans World Employees' Stock Ownership Plan and related Trust
Agreement, dated August 31, 1993, between TWA, the IFFA Plan Trustee
Committee and the IFFA Trustee (Exhibit 4.5 to 9/93 10-Q)
*4.4 --Trans World Airlines, Inc. Employee Stock Ownership Plan, dated August
31, 1993, First Amendment thereto, dated October 31, 1993, and
related Trust Agreement, dated August 31, 1993, between TWA and the
ESOP Trustee (Exhibit 4.6 to 9/93 10-Q)
*4.5 --ALPA Stock Trust, dated August 31, 1993, between TWA and the ALPA
Trustee (Exhibit 4.7 to 9/93 10-Q)
*4.6 --Stockholders Agreement, dated November 3, 1993, among TWA, LaSalle
National Trust, N.A., as Voting Trustee and the ALPA Trustee, IAM
Trustee, IFFA Trustee and Other Employee Trustee (each as defined
therein), as amended by the Addendum to Stockholders dated November
3, 1993 (Exhibit 4.8 to 9/93 10-Q)
*4.7 --Registration Rights Agreement, dated November 3, 1993, between TWA and
the Initial Significant Holders (Exhibit 4.9 to 9/93 10-Q)
*4.8 --Indenture between TWA and Harris Trust and Savings Bank, dated
November 3, 1993 relating to TWA's 8% Senior Secured Notes Due 2000
(Exhibit 4.11 to 9/93 10-Q)
*4.9 --Indenture between TWA and American National Bank and Trust Company of
Chicago, N.A., dated November 3, 1993 relating to TWA's 8% Secured
Notes Due 2001 (Exhibit 4.12 to 9/93 10-Q)
*4.10 --The TWA Air Line Pilots 1995 Employee Stock Ownership Plan, effective
as of January 1, 1995 (Exhibit 4.12 to 9/95 10-Q)
*4.11 --TWA Air Line Pilots Supplemental Stock Plan, effective September 1,
1994 (Exhibit 4.13 to 9/95 10-Q)
*4.12 --TWA Air Line Pilots Supplemental Stock Plan Trust, effective August
23, 1995 (Exhibit 4.14 to 9/95 10-Q)
*4.13 --TWA Air Line Pilots Supplemental Stock Plan Custodial Agreement,
effective August 23, 1995 (Exhibit 4.15 to 9/95 10-Q)
*4.14 --Form of Indenture relating to TWA's 8% Convertible Subordinated
Debentures Due 2006 (Exhibit 4.16 to Registrant's Registration
Statement on Form S-3, No. 333-04977)
*4.15 --Indenture dated as of March 31, 1997 between TWA and First Security
Bank, National Association relating to TWA's 12% Senior Secured Notes
due 2002 (Exhibit 4.15 to Registrant's Registration Statement on Form
S-4, No. 333-26645)
*4.16 --Form of 12% Senior Secured Note due 2002 (contained in Indenture filed
as Exhibit 4.15 to 12/31/97 Form 10-K)
*4.17 --Registration Rights Agreement dated as of March 31, 1997 between the
Company and the Initial Purchaser relating to the 12% Senior Secured
Notes due 2002 and the warrants to purchase 126.26 shares of TWA
Common Stock (Exhibit 4.17 to Registrant's Registration Statement on
Form S-4, No. 333-26645)
*4.18 --Warrant Agreement dated as of March 31, 1997 between the Company and
American Stock Transfer & Trust Company, as Warrant Agent, relating
to warrants to purchase 126.26 shares of TWA Common Stock (Exhibit
4.18 to Registrant's Registration Statement on Form S-4, No.
333-26645)
*4.19 --Form of Indenture relating to TWA's 9 1/4% Convertible Subordinated
Debentures due 2007 (Exhibit 4.19 to Registrant's Registration
Statement on Form S-3, No. 33-44689)
*4.20 --Registration Rights Agreement dated as of December 2, 1997 between the
Company and the Initial Purchasers (Exhibit 4.20 to Registrant's
Registration Statement on Form S-3, No. 33-44689)
*4.21 --Indenture dated as of December 9, 1997 by and between TWA and First
Security Bank, National Association, as Trustee, relating to TWA's 11
1/2% Senior Secured Notes due 2004 (Exhibit 4.21 to Registrant's
Registration Statement on Form S-3, No. 33-44661)
*4.22 --Form of 11 1/2% Senior Secured Note due 2004 (contained in Indenture
filed as Exhibit 4.21 to 12/31/97 Form 10-K)
*4.23 --Registration Rights Agreement dated as of December 9, 1997 among the
Company and Lazard Freres & Co. LLC and PaineWebber Incorporated, as
initial purchasers, relating to TWA's 11 1/2% Senior Secured Notes
due 2004 (Exhibit 4.23 to Registrant's Registration Statement on
Form S-3, No. 33-44661)
*4.24 --Sale and Service Agreement dated as of December 30, 1997 between TWA
and Constellation Finance LLC, as purchaser, relating to TWA's
receivables (Exhibit 4.24 to Registrant's Registration Statement on
Form S-3, No. 33-44661)
*4.25 --Registration Rights Agreement dated as of March 3, 1998 between the
Company and the Initial Purchaser (Exhibit 4.25 to Registrant's
Registration Statement on Form S-4, No. 333-51581)
*4.26 --Indenture dated as of March 3, 1998 by and between TWA and First
Security Bank, National Association, as Trustee, relating to TWA's 11
3/8% Senior Notes due 2006 (Exhibit 4.26 to Registrant's Registration
Statement on Form S-4, No. 333-51581)
*4.27 --Aircraft Sale and Note Purchase Agreement dated as of April 9, 1998
among TWA, First Security Bank, National Association, as Owner Trustee
and Seven Sixty Seven Leasing, Inc. (Exhibit 4.27 to Registrant's
Registration Statement on Form S-4, No. 333-51581)
*4.28 --Indenture dated as of April 21, 1998 by and between TWA and First
Security Bank, National Association, as Trustee, relating to TWA's 11
3/8% Senior Secured Notes due 2003 (Exhibit 4.28 to Registrant's
Registration Statement on Form S-4, No. 333-51581)
*4.29 --Form of 11 3/8% Senior Secured Notes due 2003 (contained as Exhibit 1 to
Rule 144A/Regulation S Appendix to Indenture in Exhibit 4.28)
*4.30 --Form of Mandatory Conversion Equity Note due 1999 (contained as
Exhibit A to Indenture in Exhibit 4.28)
4.31 --Registration Rights Agreement dated as of April 21, 1998 between the
Company, Lazard Freres & Co. LLC and First Security Bank, National
Association relating to the 11 3/8% Senior Secured Notes Due 2003(1)
4.32 --Registration Rights Agreement dated as of April 21, 1998 between the
Company Lazard Freres & Co. LLC and First Security Bank, National
Association relating to the Mandatory Conversion Equity Notes Due
1999(1)
5 --Opinion of Davis Polk & Wardwell, Counsel of the Registrant, regarding
the validity of the securities being registered(1)
*12 --Statement of Computation of Ratio of Earnings to Fixed Charges
(Exhibit 12 to Registrant's Registration Statement, Registration
Number 333-____________, filed on June 16, 1998)
23.1 --Consent of KPMG Peat Marwick LLP(1)
23.2 --Consent of Davis Polk & Wardwell, counsel of the Registrant (included
in Exhibit 5)
24 --Powers of Attorney(1)
*27 --Financial Data Schedule (included in 12/31/97 Form 10-K)
- ----------
* Incorporated by reference
(1) Previously filed with this Registration Statement on June 16, 1998.
