<PAGE>
<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 6, 1997
REGISTRATION NO. 333-
________________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
AMTRAN, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
------------------------
<TABLE>
<S> <C> <C>
INDIANA 6719 35-1617970
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
7337 WEST WASHINGTON STREET
INDIANAPOLIS, INDIANA 46231
(317) 247-4000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
MR. KENNETH K. WOLFF
CHIEF FINANCIAL OFFICER
AMTRAN, INC.
7337 WEST WASHINGTON STREET
INDIANAPOLIS, INDIANA 46231
(317) 247-4000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
------------------------
COPY TO:
WILLIAM P. ROGERS, JR., ESQ.
CRAVATH, SWAINE & MOORE
WORLDWIDE PLAZA
825 EIGTH AVENUE
NEW YORK, NY 10019
(212) 474-1000
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: As soon as practicable after the effective date of this Registration
Statement.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ].......
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ].......
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
OFFERING PRICE AGGREGATE AMOUNT OF
TITLE OF EACH CLASS AMOUNT TO BE PER OFFERING REGISTRATION
OF SECURITIES TO BE REGISTERED REGISTERED NOTE(1) PRICE(1) FEE(2)
<S> <C> <C> <C> <C>
10 1/2% Senior Exchange Notes due 2004.................... $100,000,000 100% $100,000,000 $30,304
</TABLE>
(1) Estimated solely for purposes of calculating the registration fee.
(2) Calculated pursuant to Rule 457.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
________________________________________________________________________________
<PAGE>
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
SUBJECT TO COMPLETION, DATED OCTOBER 6, 1997
PROSPECTUS
$100,000,000
OFFER FOR ALL OUTSTANDING 10 1/2% SENIOR NOTES DUE 2004
OF
AMTRAN, INC.
[LOGO]
------------------------
THE EXCHANGE OFFER WILL EXPIRE AT MIDNIGHT, NEW YORK
CITY TIME ON , 1997, UNLESS EXTENDED.
------------------------
Amtran, Inc., an Indiana corporation ('Amtran' or the 'Company'), hereby
offers (the 'Exchange Offer'), upon the terms and subject to the conditions set
forth in this Prospectus and the accompanying Letter of Transmittal (the 'Letter
of Transmittal'), to exchange up to $100,000,000 aggregate principal amount of
its 10 1/2% Senior Exchange Notes due 2004 (the 'Exchange Notes') that have been
registered under the Securities Act of 1933, as amended (the 'Securities Act'),
pursuant to a Registration Statement (as defined herein) of which this
Prospectus constitutes a part, for a like principal amount of its 10 1/2% Senior
Notes due 2004 (the 'Outstanding Notes' and, together with the Exchange Notes,
the 'Notes') with the holders thereof. The terms of the Exchange Notes are
identical in all material respects to the Outstanding Notes except for certain
transfer restrictions and registration rights relating to the Outstanding Notes
and except that, if the Exchange Offer is not consummated by January 24, 1998,
the interest rate borne by the Outstanding Notes will increase by amounts
specified herein until the Exchange Offer is consummated. The Outstanding Notes
were issued on July 24, 1997, pursuant to an offering (the 'Original Offering')
exempt from registration under the Securities Act.
Interest on the Exchange Notes is payable semi-annually on February 1 and
August 1 of each year, commencing February 1, 1998, at a rate of 10 1/2% per
annum. The Exchange Notes are redeemable, at the option of the Company, in whole
or in part, at any time on or after August 1, 2002, initially at 105.25% of
their principal amount, plus accrued interest, declining ratably to 100% of
their principal amount at maturity. In addition, at any time prior to August 1,
2000, the Company may redeem in aggregate up to 35% of the original principal
amount of the Exchange Notes with the proceeds of one or more sales of common
stock, at 110.50% of their principal amount, plus accrued interest. Upon the
occurrence of a Change of Control, each holder of the Exchange Notes has the
right, subject to certain conditions, to require the Company to purchase
such holder's Notes at a purchase price equal to 101% of the principal amount
thereof, plus accrued and unpaid interest, if any, to the date of purchase.
There can be no assurance that the Company will have the financial resources
necessary to repurchase the Notes upon a Change of Control.
The Exchange Notes will be unconditionally guaranteed by American Trans
Air, Inc. ('ATA') and each of the other active subsidiaries of the Company. The
Exchange Notes and the Guarantees (as defined herein) will be general, unsecured
senior obligations of the Company and the Guarantors, respectively, ranking pari
passu in right of payment with all existing and future unsecured unsubordinated
obligations, and senior in right of payment to all existing and future
subordinated indebtedness of the Company and the Guarantors, respectively. At
June 30, 1997, on a pro forma basis after giving effect to the Original Offering
and the application of the net proceeds thereof, the Company on a consolidated
basis would have had outstanding approximately $172.7 million of indebtedness,
approximately $63.9 million of which would have been secured.
The Company will accept for exchange any and all Outstanding Notes that are
validly tendered and not withdrawn on or prior to midnight, New York City time,
on the date the Exchange Offer expires (the 'Expiration Date'), which will be
, 1997 (20 business days following the commencement of the Exchange
Offer), unless the Exchange Offer is extended. Tenders of Outstanding Notes may
be withdrawn at any time prior to midnight, New York City time, on the
Expiration Date. The Exchange Offer is not conditioned upon any minimum
principal amount of Outstanding Notes being tendered for exchange. Outstanding
Notes may be tendered only in integral multiples of $1,000. See 'The Exchange
Offer.'
For each Outstanding Note accepted for exchange, the holder of such
Outstanding Note will receive an Exchange Note having a principal amount equal
to that of the surrendered Outstanding Note. Interest on the Exchange Notes will
accrue from July 24, 1997. Holders of Outstanding Notes whose Outstanding Notes
are accepted for exchange will be deemed to have waived the right to receive any
payment in respect of interest on such Outstanding Notes accrued from July 24,
1997 to the date of the issuance of the Exchange Notes. Consequently, holders
who exchange their Outstanding Notes for Exchange Notes will receive the same
interest payment on February 1, 1998 (the first interest payment date with
respect to the Outstanding Notes and the Exchange Notes) that they would have
received had they not accepted the Exchange Offer. See 'The Exchange Offer
- -- Interest on the Exchange Notes.'
(cover continued on next page)
-------------------------
SEE 'RISK FACTORS' BEGINNING ON PAGE 16 OF THIS PROSPECTUS FOR A
DESCRIPTION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY HOLDERS WHO TENDER
THEIR OUTSTANDING NOTES IN THE EXCHANGE OFFER.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
THE DATE OF THIS PROSPECTUS IS , 1997.
<PAGE>
<PAGE>
(cover continued from previous page)
The Exchange Notes are being offered hereunder in order to satisfy certain
obligations of the Company contained in the Registration Rights Agreement (as
defined herein). See 'The Exchange Offer -- Consequences of Exchanging
Outstanding Notes' for a discussion of the Company's belief, based on
interpretations by the staff of the Securities and Exchange Commission (the
'Commission') as set forth in no-action letters issued to third parties, as to
the transferability of the Exchange Notes upon satisfaction of certain
conditions. Each broker-dealer that receives Exchange Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. The Letter of
Transmittal states that by so acknowledging and by delivered a prospectus, a
broker-dealer will not be deemed to admit that it is an 'underwriter' within the
meaning of the Securities Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of Exchange Notes received in exchange for Outstanding Notes where
such Outstanding Notes were acquired by such broker-dealer as a result of
market-making activities or other trading activities. The Company has agreed
that for a period of 180 days after the Expiration Date, it will make this
Prospectus available to any broker-dealer for use in connection with any resale
of Exchange Notes. See 'Plan of Distribution'.
There is no established trading market for the Exchange Notes. The Company
does not currently intend to list the Exchange Notes on any securities exchange
or to seek approval for quotation through any automated quotation system.
Accordingly, there can be no assurance as to the development or liquidity of any
market for the Exchange Notes.
The Company will not receive any proceeds from the Exchange Offer. The
Company will pay all of the expenses incident to the Exchange Offer. In the
event the Company terminates the Exchange Offer and does not accept for exchange
any Outstanding Notes, the Company will promptly return the Outstanding Notes to
the holders thereof. See 'The Exchange Offer.'
2
<PAGE>
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company hereby incorporates by reference into this Prospectus the
following documents or information filed with the Commission:
(a) The Company's Annual Report on Form 10-K/A for the fiscal year
ended December 31, 1996;
(b) The Company's Quarterly Report on Form 10-Q for the period
ended March 31, 1997;
(c) The Company's Quarterly Report on Form 10-Q for the period
ended June 30, 1997; and
(d) The Company's Current Report on Form 8-K dated June 19, 1997.
Any statement contained in any documents incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for the purpose of this Prospectus to the extent that a subsequent statement
contained herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus.
THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT
REPRESENTED HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS ARE AVAILABLE WITHOUT
CHARGE UPON WRITTEN OR ORAL REQUEST FROM KENNETH K. WOLFF, CHIEF FINANCIAL
OFFICER OF THE COMPANY, AT THE COMPANY'S PRINCIPAL EXECUTIVE OFFICES LOCATED AT
7337 WEST WASHINGTON STREET, INDIANAPOLIS, INDIANA 46231, TELEPHONE NUMBER (317)
247-4000. IN ORDER TO ENSURE TIMELY DELIVERY OF SUCH DOCUMENTS, ANY REQUEST
SHOULD BE MADE AT LEAST 5 DAYS PRIOR TO THE EXPIRATION 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 periodic reports, proxy statements and other information with
the Commission. In addition, pursuant to the Indenture covering the Notes, the
Company has agreed to file with the Commission the annual reports and the
information, documents and other reports otherwise required pursuant to Section
13 of the Exchange Act. All such information may be inspected and copied at the
public reference facilities maintained by the Commission at Room 1024, 450 Fifth
Street, N.W., Judiciary Plaza, Washington, D.C. 20549 and the website
(http://www.sec.gov) maintained by the Commission and at the regional offices of
the Commission located at 7 World Trade Center, 13th Floor, New York, New York
10048 and Suite 1400, Citicorp Center, 14th Floor, 500 West Madison Street,
Chicago, Illinois 60661. Copies of such material can also be obtained at
prescribed rates by writing to the Commission, Public Reference Section, 450
Fifth Street, N.W., Washington, D.C. 20549.
This Prospectus constitutes a part of a registration statement on Form S-4
(the 'Registration Statement') filed by the Company with the Commission under
the Securities Act. As permitted by the rules and regulations of the Commission,
this Prospectus does not contain all of the information contained in the
Registration Statement and the exhibits and schedules thereto and reference is
hereby made to the Registration Statement and the exhibits and schedules thereto
for further information with respect to the Company and the securities offered
hereby. Statements contained herein concerning the provisions of any documents
filed as an exhibit to the Registration Statement or otherwise filed with the
Commission are not necessarily complete, and in each instance reference is made
to the copy of such document so filed. Each such statement is qualified in its
entirety by such reference.
3
<PAGE>
<PAGE>
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
Market data and certain industry forecasts used throughout this Prospectus
were obtained from internal surveys, market research, publicly available
information and industry publications. Industry publications generally state
that the information contained therein has been obtained from sources believed
to be reliable, but that the accuracy and completeness of such information is
not guaranteed. Similarly, internal surveys, industry forecasts and market
research, while believed to be reliable, have not been independently verified,
and the Company makes no representation as to the accuracy of such information.
This Prospectus includes 'forward-looking statements' within the meaning of
various provisions of the Securities Act and the Exchange Act. Such
'forward-looking statements' can be identified by the use of forward-looking
terminology such as 'believes', 'expects', 'may', 'will', 'should', or
'anticipates' or the negative thereof or other variations thereon or comparable
terminology, or by discussions of strategy. All statements, other than
statements of historical facts, included in this Prospectus which address
activities, events or developments which the Company expects or anticipates will
or may occur in the future, including such things as estimated future net
revenues from airline services (including charter and scheduled service), future
capital expenditures (including the amount and nature thereof), business
strategy and measures to implement strategy, competitive strengths, goals,
expansion and growth of the Company's business and operations, plans, references
to future success, references to intentions as to future matters and other such
matters are forward-looking statements. See, e.g., 'Summary -- The
Company -- Strategy' and 'Summary -- The Company -- 1996 Restructuring of
Scheduled Service Operations', 'Management's Discussion and Analysis of
Financial Condition and Results of Operations' and 'Business.' These statements
are based on certain assumptions and analyses made by the Company in light of
its experience and its perception of historical trends, current conditions and
expected future developments as well as other factors it believes are
appropriate in the circumstances. However, whether actual results and
developments will conform with the Company's expectations and predictions is
subject to a number of risks and uncertainties, including the risk factors
discussed in this Prospectus; general economic, market or business conditions;
the opportunities (or lack thereof) that may be presented to and pursued by the
Company; competitive actions by other airline carriers; changes in laws or
regulations; and other factors, many of which are beyond the control of the
Company. Consequently, all of the forward-looking statements made in this
Prospectus are qualified by these cautionary statements and there can be no
assurance that the actual results or developments anticipated by the Company
will be realized or, even if substantially realized, that they will have the
expected consequences or effects on the Company or its business or operations.
------------------------
Amtran is an Indiana corporation which was organized in 1984. The Company's
executive offices are located at 7337 West Washington Street, Indianapolis,
Indiana 46231, and its telephone number is (317) 247-4000. The Company's common
stock is listed on the Nasdaq Stock Market under the symbol 'AMTR.'
4
<PAGE>
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and the consolidated
financial statements of the Company and notes thereto included elsewhere in this
Prospectus. All references to the 'Company' in this Prospectus refer to Amtran,
Inc. and its subsidiaries collectively, unless the context otherwise requires.
THE COMPANY
Amtran is a leading provider of charter airline services, and on a targeted
basis scheduled airline services, to leisure and other value-oriented travelers.
Amtran, through its principal subsidiary, ATA, has been in operation for 24
years and currently operates the eleventh largest airline in the United States
in terms of 1996 revenue passenger miles ('RPMs'). ATA provides charter services
throughout the world to independent tour operators, corporations and the U.S.
military. The Company provides scheduled service primarily from its gateway
cities of Indianapolis, Chicago-Midway and Milwaukee to popular vacation
destinations such as Hawaii, Las Vegas, Florida, California, Mexico and the
Caribbean.
CHARTER SERVICE
The Company is the largest charter airline in the United States and
provides charter airline services throughout the world to U.S. and European tour
operators, U.S. military and government agencies and corporations. In 1996,
Amtran derived approximately 41% of consolidated revenues from charter
operations. The charter business is an attractive niche because it provides
contractual revenues that are more stable than revenues provided by scheduled
service. The customer generally pays a fixed price for the use of the aircraft
and assumes the responsibility and risk for the actual sale of the seats, as
well as most of the risk of fuel price increases. In addition, the Company is
the largest domestic provider to this niche charter market. As a result of the
Company's 1996 restructuring of its scheduled service operations, as described
below (the '1996 Restructuring'), the Company expects that in 1997 as much as
half of its consolidated revenues will be from charter operations.
Tour Operator Programs
Independent tour operators comprise the largest component of the Company's
charter service operations (representing approximately 30% of the Company's 1996
consolidated revenues). Independent tour operators typically contract with the
Company to provide repetitive, round-trip patterns to leisure destinations for
specified periods ranging from several weeks to several years. The Company
believes that its long standing relationships with tour operators provide it
with a competitive advantage. In addition, the Company believes that the low
cost leisure travel services provided by independent tour operators have
historically been less volatile than scheduled service operations as indicated
by the Company's 1990 to 1995 revenue and profitability, as compared to the
major scheduled service carriers for the same period.
Military/Government
The Company expects U.S. military and other government flight activity,
which has historically averaged 10-15% of consolidated revenues, to increase to
over 15% of Amtran's 1997 revenues. The Company has provided charter service to
the U.S. military since 1983. Because this business is generally less seasonal
than leisure travel, it tends to have a stabilizing impact on the Company's
operations and earnings. The U.S. Government awards one year contracts for its
military charter business, and pre-negotiates contract prices for each type of
aircraft a carrier makes available. Such contracts are priced utilizing the
participating airlines' average costs, and are therefore more profitable for low
cost providers such as the Company. The Company believes its fleet of aircraft,
in particular its Boeing 757-200ERs, is well suited for the changing
requirements of military passenger service.
5
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<PAGE>
SCHEDULED SERVICE
The Company provides scheduled service primarily from its gateway cities of
Indianapolis, Chicago-Midway and Milwaukee to popular vacation destinations such
as Hawaii, Las Vegas, Florida, California, Mexico and the Caribbean. In its
scheduled service operations, the Company focuses primarily on providing low
cost, low frequency nonstop or direct flights from airports where there is only
limited competition. In 1996, based on Department of Transportation ('DOT')
statistics, the Company had the lowest operating expense per available seat mile
('ASM'), approximately 6[c], of the eleven largest U.S. scheduled airlines.
Notwithstanding the Company's competitive cost position and business focus, the
Company began to incur losses in its scheduled service in the second half of
1995. In response to these losses, the Company, as part of the 1996
Restructuring described below, reduced its scheduled service by more than one
third of its departures and ASMs. As a result, the Company expects scheduled
service operations, which comprised 52% of consolidated revenues in 1996, to
comprise approximately 45% of consolidated revenues in 1997. The Company
believes that the 1996 Restructuring strengthened its competitive position and
improved both load factors and yields in its scheduled service operations. The
Company has substantially improved its profitability in this segment in the
first six months of 1997, versus the first six months of 1996.
STRATEGY
The Company intends to enhance its position as a leading supplier of
charter airline services and of targeted scheduled airline services by pursuing
a strategy designed to increase revenues and profitability. The key components
of this strategy are:
(i) Maintain Low Cost Position. The Company believes it has one of the
lowest operating cost per ASM in the industry, with an average cost per ASM
of approximately 6[c] for the fiscal year ended December 31, 1996. The
Company believes that its low cost structure provides a significant
competitive advantage, which allows it to compete effectively in both the
charter and scheduled service markets. The Company has achieved its low
cost position primarily as a result of its low overhead and distribution
costs, productive and flexible workforce and low aircraft rental and
ownership costs.
(ii) Strengthen Leading Position in Niche Charter Business. The
Company has successfully operated in the charter service business since
1981, and it expects to continue to enhance its leading position in this
business. By offering low cost air travel products that can be tailored to
meet the particular needs of its customers, primarily the tour operators,
the Company believes it is able to differentiate itself from most major
airlines, whose principal focus is on scheduled service, as well as from
smaller charter airlines, which do not have comparably diverse fleets or
the ability to provide a similar level of customer support. In addition to
its low cost, the Company believes that its product quality, reputation,
long standing relationships and ability to deliver a customized service
have become increasingly important to tour operators. Furthermore, the
Company's long history of serving the military, its contractor teaming
arrangement and its fleet of preferred aircraft result in a strong
competitive position for acquiring and servicing military charter
contracts.
(iii) Selectively Participate in Scheduled Service. The Company's
strategy for its scheduled service is to focus primarily on providing low
cost, low frequency nonstop or direct flights from airports where there is
only limited competition. The Company believes that its high performance
Boeing 757 and 727 aircraft give it a competitive advantage in the
Chicago-Midway market. Unlike the aircraft used by most of the Company's
competitors at Chicago-Midway, the Boeing 757 and 727 can fly larger
passenger capacities substantially longer distances while operating from
the airport's short runways. In the Milwaukee market, the Company is the
only low cost scheduled alternative. In Indianapolis, the Company has a
name recognition advantage by being the city's hometown airline. The
Company significantly reduced its scheduled service operations in 1996 by
exiting, or reducing service to, unprofitable markets such as Boston and
intra-Florida and has substantially improved its profitability in the first
six months of 1997, versus the first six months of
6
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<PAGE>
1996. The Company is continuing to evaluate its scheduled service
operations and believes that it may be able, on a selective basis, to
expand this business.
(iv) Capitalize on Selected Growth Opportunities. The Company seeks to
increase revenues and profitability by capitalizing on selected growth
opportunities in its core businesses. The Company believes that, as a
result of its low cost structure and its strong relationships with tour
operators and military contractors, it is well positioned to capture
additional opportunities to serve these markets. The Company intends to
purchase additional aircraft to meet demand from its military and tour
operator charter customers, and potentially scheduled service. In addition,
at various times since the second quarter of 1996 the Company has actively
considered possible business combinations with other air carriers and
others. The Company intends to continue to evaluate such transactions.
Accordingly, it is possible that the Company will enter into a transaction
in the second half of 1997 or thereafter that will result in a merger or
other change of control of the Company.
1996 RESTRUCTURING OF SCHEDULED SERVICE OPERATIONS
An analysis by the Company in 1996 of the profitability of its scheduled
service and charter service business units revealed that a significant number of
scheduled service markets being served by the Company had become increasingly
unprofitable. The Company believes that several key factors contributed to the
deterioration of the profitability of its scheduled service in late 1995 and
1996, including (i) a significant increase in competition from larger carriers
in the scheduled service markets served by the Company, (ii) the negative impact
on low fare carriers resulting from unfavorable media coverage of the effects of
the ValuJet Airlines, Inc. ('ValuJet') accident in Florida and, to a lesser
extent, the Company's own decompression incident, (iii) a significant increase
in fuel costs and (iv) a federal excise tax on jet fuel beginning in the fourth
quarter of 1995.
In August 1996, the Company announced a significant reduction in scheduled
service operations. More than one-third of scheduled service departures and ASMs
were included in this schedule reduction. The Company eliminated its
unprofitable Boston and intra-Florida operations. The Company also exited, or
reduced in frequency, operations to other selected markets from Chicago-Midway,
Indianapolis and Milwaukee. In conjunction with its scheduled service reduction,
the Company announced a 15% reduction of its work force, including both
employees and contractors.
In addition, in 1996 the Company optimized its mix of aircraft. The Company
reduced the number of Boeing 757-200 aircraft it operates from eleven to seven.
An advantage of the new fleet configuration is that all seven Boeing 757-200
aircraft have been assigned to mission-specific routes that could not have been
served by the Company's other aircraft. The Company also reduced operating costs
by switching to an all Rolls-Royce powered Boeing 757 fleet. The commonality of
aircraft and engines yields benefits to the Company in the form of decreased
maintenance and training costs.
As a result of the 1996 Restructuring, the Company believes it has
established a better platform from which to pursue its strategy. The Company
also incurred substantial costs in 1996, which it does not expect to incur in
future years.
NEW CHIEF EXECUTIVE OFFICER
On June 19, 1997, the Company announced the election of John P. Tague as
President and Chief Executive Officer of the Company. Mr. Tague originally
joined the Company in 1991, as Vice President of Marketing, and was elected
President and Chief Operating Officer in September 1993, a position he held
until his resignation in 1995. Mr. Tague subsequently served as Co-Chairman and
Chief Executive Officer of the Pointe Group, an aviation consulting firm, and as
Chief Executive Officer for both Vanguard Airlines, Inc. and Air South Airlines,
Inc. Mr. Tague brings over twelve years of management experience in the airline
industry to the Company.
7
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<PAGE>
THE EXCHANGE OFFER
The Exchange Offer relates to the exchange of up to $100 million aggregate
principal amount of Outstanding Notes for an equal aggregate principal amount of
Exchange Notes. The Exchange Notes are obligations of the Company entitled to
the benefits of the Indenture relating to the Outstanding Notes. The form and
terms of the Exchange Notes are the same as the form of the Outstanding Notes
except that the Exchange Notes have been registered under the Securities Act,
and following the completion of the Exchange Offer, the Exchange Notes generally
will not be entitled to a contingent increase in the interest rate otherwise
provided under certain circumstances.
<TABLE>
<S> <C>
Securities Offered........................ Up to $100,000,000 aggregate principal amount of 10 1/2% Senior
Exchange Notes due August 1, 2004, which have been registered under
the Securities Act. The terms of the Exchange Notes are identical
in all material respects to the Outstanding Notes except for
certain transfer restrictions and registration rights relating to
the Outstanding Notes and except that, if the Exchange Offer is not
consummated by January 24, 1998, the interest rate borne by the
Outstanding Notes will increase by amounts specified herein until
the Exchange Offer is consummated.
The Exchange Offer........................ $1,000 principal amount of Exchange Notes will be issued in exchange
for each $1,000 principal amount of Outstanding Notes validly
tendered pursuant to the Exchange Offer. As of the date hereof,
$100 million in aggregate principal amount of Outstanding Notes are
outstanding. The Company will issue the Exchange Notes to tendering
holders of Outstanding Notes on or promptly after the Expiration
Date.
Expiration of Exchange Offer.............. Midnight, New York City time, on the Expiration Date, unless the
Exchange Offer is extended, in which case the term 'Expiration
Date' means the latest date and time to which the Exchange Offer is
extended. See 'The Exchange Offer -- Expiration Date; Extensions;
Amendments.'
Conditions to the Exchange Offer.......... The Exchange Offer shall not be subject to any conditions, other than
that the Exchange Offer does not violate applicable law or any
applicable interpretation of the staff of the Commission. There can
be no assurance that any such condition will not occur. Holders of
Outstanding Notes will have certain rights against the Company
under the Registration Rights Agreement should the Company fail to
consummate the Exchange Offer. See 'The Exchange Offer -- Certain
Conditions to the Exchange Offer.'
Procedures for Tendering Outstanding
Notes................................... Each holder of Outstanding Notes wishing to accept the Exchange Offer
must complete, sign and date the Letter of Transmittal, or a
facsimile thereof, in accordance with the instructions contained
herein and therein, and mail or otherwise deliver such Letter of
Transmittal, or such facsimile, together with any other required
documentation, to First Security Bank, N.A., the Exchange Agent, at
the address set forth herein and therein. See 'The Exchange
Offer -- Procedures for Tendering.'
By executing the Letter of Transmittal, each holder will represent to
the Company that, among other things, (i) the Exchange Notes
acquired pursuant to the Exchange Offer are being obtained in the
ordinary course of business of the person receiving such Exchange
Notes, whether or not such person is the holder, (ii) neither the
holder nor any such other person has an arrangement or
understanding with any person to participate in the distribution of
such Exchange Notes and (iii) neither the holder nor any such other
person is an 'affiliate,' as defined in Rule 405 under the
Securities
</TABLE>
8
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<TABLE>
<S> <C>
Act, of the Company or, if an 'affiliate', such holder will comply
with the registration and prospectus delivery requirements of the
Securities Act to the extent applicable.
Special Procedures for Beneficial
Holders................................. Any beneficial holder whose Outstanding Notes are registered in the
name of a broker, dealer, commercial bank, trust company or other
nominee and who wishes to tender in the Exchange Offer should
contact such registered holder promptly and instruct such
registered holder to tender on its behalf. If such beneficial
holder wishes to tender on his own behalf, such beneficial holder
must, prior to completing and executing the Letter of Transmittal
and delivering its Outstanding Notes, either make appropriate
arrangements to register ownership of the Outstanding Notes in such
holder's name or obtain a properly competed bond power from the
registered holder. The transfer of record ownership may take
considerable time. See 'The Exchange Offer -- Procedures for
Tendering.'
Guaranteed Delivery Procedures............ Holders of Outstanding Notes who wish to tender their Outstanding
Notes and whose Outstanding Notes are not immediately available or
who cannot deliver their Outstanding Notes (or who cannot complete
the procedure for book-entry transfer on a timely basis) and a
properly completed Letter of Transmittal or any other documents
required by the Letter of Transmittal to the Exchange Agent prior
to the Expiration Date may tender their Outstanding Notes according
to the guaranteed delivery procedures set forth in 'The Exchange
Offer -- Guaranteed Delivery Procedures.'
Withdrawal Rights......................... Tenders of Outstanding Notes may be withdrawn at any time prior to
midnight, New York City time, on the Expiration Date. See 'The
Exchange Offer -- Withdrawal of Tenders.'
Acceptance of Outstanding Notes and
Delivery of Exchange Notes.............. Subject to certain conditions (as summarized above in 'Conditions of
the Exchange Offer' and described more fully under 'The Exchange
Offer -- Certain Conditions to the Exchange Offer'), the Company
will accept for exchange any and all Outstanding Notes which are
properly tendered in the Exchange Offer and not validly withdrawn
prior to midnight, New York City time, on the Expiration Date. The
Exchange Notes issued pursuant to the Exchange Offer will be
delivered promptly following the Expiration Date. See 'The Exchange
Offer -- Terms of the Exchange Offer; Period for Tendering
Outstanding Notes.'
Certain Tax Considerations................ The exchange pursuant to the Exchange Offer should not be a taxable
event for federal income tax purposes. See 'Certain United States
Federal Income Tax Considerations.'
Exchange Agent............................ The First Security Bank, N.A., the Trustee under the Indenture, is
serving as exchange agent (the 'Exchange Agent') in connection with
the Exchange Offer. The address of the Exchange Agent is: First
Security Bank, N.A., 79 South Main Street, Salt Lake City, Utah
84111, Attention: Corporate Trust Services. For information with
respect to the Exchange Offer, the telephone number for the
Exchange Agent is (801) 246-5822 and the facsimile number for the
Exchange Agent is (801) 246-5053.
Use of Proceeds........................... There will be no cash proceeds payable to the Company from the
issuance of the Exchange Notes pursuant to the Exchange Offer.
</TABLE>
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CONSEQUENCES OF EXCHANGING OUTSTANDING NOTES
Holders of Outstanding Notes who do not exchange their Outstanding Notes
for Exchange Notes pursuant to the Exchange Offer will continue to be subject to
the provisions in the Indenture regarding transfer and exchange of the
Outstanding Notes and the restrictions on transfer of such Outstanding Notes as
set forth in the legend thereon as a consequence of the issuance of the
Outstanding Notes pursuant to exemptions from, or in transactions not subject
to, the registration requirements of the Securities Act and applicable state
securities laws. In general, the Outstanding Notes may not be offered or sold,
unless registered under the Securities Act, except pursuant to an exemption
from, or in a transaction not subject to, the Securities Act and applicable
state securities laws. The Company does not currently anticipate that it will
register Outstanding Notes under the Securities Act. Based on interpretations by
the staff of the Commission, as set forth in no-action letters issued to third
parties, the Company believes that Exchange Notes issued pursuant to the
Exchange Offer in exchange for Outstanding Notes may be offered for resale,
resold or otherwise transferred by holders thereof (other than any such holder
which is an 'affiliate' of the Company within the meaning of Rule 405 under the
Securities Act) without compliance with the registration and prospectus delivery
provisions of the Securities Act, provided that such Exchange Notes are acquired
in the ordinary course of such holders' business and such holders have no
arrangement with any person to participate in the distribution of such Exchange
Notes. However, the Company does not intend to request the Commission to
consider, and the Commission has not considered, the Exchange Offer in the
context of a no-action letter and there can be no assurance that the staff of
the Commission would make a similar determination with respect to the Exchange
Offer as in such other circumstances. Each holder, other than a broker-dealer,
must acknowledge that (i) the Exchange Notes received by such holder will be
acquired in the ordinary course of its business, (ii) at the time of the
consummation of the Exchange Offer such holder will have not engaged in, and
does not intend to engage in, a distribution of Exchange Notes and has no
arrangement or understanding to participate in a distribution of Exchange Notes
and (iii) such holder is not an affiliate of the Company within the meaning of
Rule 405 of the Securities Act or if it is such an affiliate, that it will
comply with the registration and prospectus delivery requirements of the
Securities Act, to the extent applicable. If any holder is an affiliate of the
Company, is engaged in or intends to engage in or has any arrangement or
understanding with respect to the distribution of the Exchange Notes to be
acquired pursuant to the Exchange Offer, such holder (i) could not rely on the
applicable interpretations of the staff of the Commission and (ii) must comply
with the registration and prospectus delivery requirement of the Securities Act
in connection with any resale transaction. Each broker-dealer that receives
Exchange Notes for its own account pursuant to the Exchange Offer must
acknowledge that it will deliver a prospectus in connection with any resale of
such Exchange Notes. The Letter of Transmittal states that by so acknowledging
and by delivering a prospectus, a broker-dealer will not be deemed to admit that
it is an 'underwriter' within the meaning of the Securities Act. This
Prospectus, as it may be amended or supplemented from time to time, may be used
by a broker-dealer in connection with resales of Exchange Notes received in
exchange for Outstanding Notes, where such Outstanding Notes were acquired by
such broker-dealer as a result of market-making activities or other trading
activities. The Company has agreed that, for a period of 180 days after the
Expiration Date, it will make this Prospectus available to any broker-dealer for
use in connection with any such resale. See 'Plan of Distribution.' However, to
comply with state securities laws, the Exchange Notes may not be offered or sold
in any state unless they have been registered or qualified for sale in such
state or an exemption from registration or qualification is available and is
complied with. The offer and sale of the Exchange Notes to 'qualified
institutional buyers' (as such term is defined under Rule 144A of the Securities
Act) is generally exempt from registration or qualification under state
securities laws. The Company currently does not intend to register or qualify
the sale of the Exchange Notes in any state where an exemption from registration
or qualification is required and not available. See 'The Exchange
Offer -- Consequences of Failure to Exchange and Requirements for Transfer for
Exchange Notes.'
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SUMMARY DESCRIPTION OF THE EXCHANGE NOTES
The terms of the Exchange Notes are identical in all material respects to
the terms of the Outstanding Notes, except for certain transfer restrictions and
registration rights relating to the Outstanding Notes and except that, if an
exchange offer with respect to the Exchange Notes is not consummated by January
24, 1998, the rate per annum at which the Outstanding Notes bear interest will
be increased temporarily. See 'Registration Rights Agreement for Outstanding
Notes.' Interest on the Exchange Notes will accrue from July 24, 1997. Holders
of Outstanding Notes whose Outstanding Notes are accepted for exchange will be
deemed to have waived the right to receive any payment in respect of interest on
such Outstanding Notes accrued from July 24, 1997 to the date of the issuance of
the Exchange Notes. Consequently, holders who exchange their Outstanding Notes
for Exchange Notes will receive the same interest payment on February 1, 1998
(the first interest payment date with respect to the Outstanding Notes and the
Exchange Notes) that they would have received had they not accepted the Exchange
Offer. See 'The Exchange Offer -- Interest on the Exchange Notes.'
<TABLE>
<S> <C>
Securities Offered........................ $100,000,000 aggregate principal amount of 10 1/2% Senior Exchange
Notes due August 1, 2004, which have been registered under the
Securities Act, issued by the Company.
Interest.................................. Interest on the Notes is payable semiannually in cash on February 1
and August 1, commencing on February 1, 1998.
Optional Redemption by the Company........ The Notes are redeemable at the option of the Company, in whole or in
part, at any time on or after August 1, 2002, initially at 105.25%
of their principal amount, plus accrued and unpaid interest, if
any, declining to 100% of their principal amount, plus accrued and
unpaid interest, if any, at maturity. See 'Description of the
Notes -- Optional Redemption.' In addition, at any time prior to
August 1, 2000, the Company may redeem up to 35% of the aggregate
principal amount of the Notes with the proceeds of sales of common
stock by the Company at a redemption price of 110.50% of their
principal amount; provided that at least $65.0 million aggregate
principal amount of Notes remains outstanding after each such
redemption.
Ranking................................... The Notes will rank pari passu with all unsecured, unsubordinated
indebtedness of the Company existing or created in the future, will
be effectively subordinated to the Company's obligations under
secured indebtedness to the extent of such security and will be
senior to all subordinated indebtedness of the Company created in
the future. At June 30, 1997, on a pro forma basis after giving
effect to the Offering and the application of the net proceeds
thereof, the Company and the Guarantors on a consolidated basis
would have had outstanding approximately $172.7 million of
indebtedness, approximately $63.9 million of which would have been
secured. See 'Description of the Notes -- Ranking.'
Guarantee................................. All payments with respect to the Notes (including principal and
interest) are unconditionally guaranteed on an unsecured
unsubordinated basis jointly and severally by each of the active
subsidiaries of the Company as of July 24, 1997 (the 'Closing
Date'), consisting of American Trans Air, Inc., Ambassadair Travel
Club, Inc., ATA Vacations, Inc., Amber Travel, Inc., American Trans
Air Training Corporation, American Trans Air ExecuJet, Inc. and
Amber Air Freight Corporation (collectively, the 'Guarantors').
Such guarantees (the 'Guarantees') will rank pari passu with all
existing and future unsecured unsubordinated indebtedness of the
Guarantors, will be effectively
</TABLE>
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11
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<TABLE>
<S> <C>
subordinated to secured indebtedness of the Guarantors to the
extent of such security and will be senior in right of payment to
all future subordinated indebtedness of the Guarantors. At June 30,
1997, on a pro forma basis after giving effect to the Offering and
the application of the net proceeds thereof, including to repay
certain Guarantor indebtedness, the Guarantors (on a consolidated
basis excluding indebtedness owed to the Company and indebtedness
of Amtran) would have had approximately $72.7 million of
indebtedness outstanding (other than the Guarantees), $63.9 million
of which would have been secured indebtedness.
Certain Covenants......................... The Indenture will contain certain covenants for the benefit of the
holders of the Notes, including, among other things, covenants
limiting the incurrence of indebtedness, restricted payments,
dividend and other payment restrictions affecting restricted
subsidiaries, the issuance and sale of capital stock of restricted
subsidiaries, the issuance of guarantees by restricted
subsidiaries, transactions with shareholders and affiliates, liens,
sale-leaseback transactions, asset sales and certain mergers and
consolidations. See 'Description of the Notes -- Covenants.'
Change of Control......................... Upon a Change of Control (as defined in 'Description of the Notes'),
each holder of the Notes will have the right, subject to certain
conditions, to require the Company to purchase such holder's Notes
at a purchase price equal to 101% of the principal amount thereof,
plus accrued and unpaid interest, if any, to the date of purchase.
There can be no assurance that the Company will have the financial
resources necessary to purchase the Notes upon a Change of Control.
See 'Description of the Notes -- Repurchase of Notes upon a Change
of Control.'
Book-Entry; Delivery and Form............. The Exchange Notes will be represented by one permanent global
Exchange Note in definitive, fully registered form deposited with a
custodian for, and registered in the name of a nominee of, The
Depository Trust Company ('DTC') See 'Description of the
Notes -- Book-Entry; Delivery and Form.'
</TABLE>
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USE OF PROCEEDS
There will be no cash proceeds to the Company from the Exchange Offer.
This Exchange Offer is intended to satisfy certain of the Company's
obligations under the Placement Agreement and the Registration Rights Agreement.
The Company will not receive any cash proceeds from the issuance of the Exchange
Notes offered hereby. In consideration for issuing the Exchange Notes
contemplated in this Prospectus, the Company will receive Outstanding Notes in
like principal amount, the form and terms of which are the same as the form and
terms of the Exchange Notes (which they replace), except as otherwise described
herein. The Outstanding Notes surrendered in exchange for Exchange Notes will be
retired and canceled and cannot be reissued. Accordingly, issuance of the
Exchange Notes will not result in any increase or decrease in the indebtedness
of the Company.
The net proceeds from the offering of Outstanding Notes (the 'Original
Offering') were approximately $97 million. The net proceeds from the Original
Offering were used by the Company to repay bank indebtedness and for general
corporate purposes, which may include the purchase of additional aircraft and
the refinancing of existing aircraft. See 'Use of Proceeds.'
RISK FACTORS
For a description of certain factors that should be considered by holders
who tender their Outstanding Notes in the Exchange Offer, see 'Risk Factors'
beginning on page 16.
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SUMMARY CONSOLIDATED FINANCIAL AND OPERATING DATA
The following summary consolidated financial data are derived from the
consolidated financial statements of Amtran for the periods presented. The
consolidated financial statements for each of the five years ended December 31,
1996, have been audited by Ernst & Young LLP, independent auditors. The
consolidated financial data for the six month periods ended June 30, 1996 and
1997 are unaudited but include all adjustments, consisting only of normal
recurring adjustments, which, in the opinion of management, are necessary for a
fair presentation of the financial position and results of operations for these
periods. The results for the six months ended June 30, 1997 are not necessarily
indicative of the results to be expected for the full year. The consolidated
financial data should be read in conjunction with the consolidated financial
statements of the Company and notes thereto and 'Management's Discussion and
Analysis of Financial Condition and Results of Operations' included elsewhere in
this Prospectus.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------------------------------------ -------------------
1992 1993 1994 1995 1996 1996 1997
-------- -------- -------- -------- -------- -------- --------
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Operating revenues...................... $421,790 $467,909 $580,522 $715,009 $750,851 $402,530 $386,471
Depreciation and amortization(1)........ 40,820 37,418 46,178 55,827 61,661 30,705 29,436
Operating income (loss)(2).............. 2,592 6,620 8,415 17,936 (36,056) 2,505 8,749
Interest expense........................ 6,898 3,872 3,656 4,163 4,465 2,177 3,320
Income (loss) before income taxes....... (2,643) 3,866 5,879 14,653 (39,581) 788 5,837
Net income (loss)....................... (2,140) 3,035 3,486 8,524 (26,674) 68 2,473
Net income (loss) per adjusted
share(3).............................. (0.24) 0.28 0.30 0.74 (2.31) 0.01 0.21
BALANCE SHEET DATA (AT END OF PERIOD):
Cash.................................... $ 35,719 $ 45,024 $ 61,752 $ 92,741 $ 73,382 $ 86,621 $ 65,396
Non-cash working capital
(deficiency)(4)....................... (62,308) (48,601) (68,166) (80,639) (65,472) (83,292) (64,645)
Property and equipment, net............. 166,882 172,244 223,104 240,768 224,540 274,961 231.298
Total assets............................ 239,029 269,830 346,288 413,137 370,287 437,967 376,732
Short-term debt (including current
maturities)........................... 20,375 18,242 8,447 3,606 30,271 1,770 35,226
Long-term debt.......................... 67,574 61,090 109,659 134,641 119,786 156,185 109,493
Total debt.............................. 87,949 79,332 118,106 138,247 150,057 157,955 144,719
Shareholders' equity(5)................. 32,469 69,941 72,753 81,185 54,744 81,461 57,812
OTHER FINANCIAL DATA:
EBITDAR(6).............................. $ 82,446 $ 89,584 $103,868 $130,381 $ 91,972 $ 68,066 $ 66,877
EBITDA(6)............................... 45,075 45,156 55,713 74,643 26,545 33,670 38,593
Net cash provided by operating
activities............................ 53,741 33,896 75,297 87,078 32,171 35,610 38,049
Net cash used in investing activities... (28,325) (37,440) (80,400) (44,032) (63,161) (42,859) (40,698)
Net cash provided by (used in) financing
activities............................ (15,884) 12,849 21,831 (12,057) 11,631 1,129 (5,337)
Ratio of earnings to fixed charges(7)... -- 1.24 1.32 1.60 -- -- 1.35
Deficiency of earnings available to
cover fixed charges(7)................ $ 2,643 -- -- -- $ 40,931 $ 912 --
Pro forma interest expense.............. $ 10,744 $ 5,741
Pro forma ratio of earnings to fixed
charges(7)............................ -- 1.13
Pro forma deficiency of earnings
available to cover fixed charges(7)... $ 47,359 --
</TABLE>
(footnotes on next page)
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<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------------------------------------ --------------------
1992 1993 1994 1995 1996 1996 1997
------- ------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
SELECTED OPERATING DATA FOR PASSENGER
SERVICE(8):
Available seat miles (millions)(9)... 7,521.2 8,232.5 10,443.1 12,521.4 13,295.5 6,942.3 6,090.1
Revenue passenger miles
(millions)(10)..................... 5,547.1 5,593.5 7,158.8 8,907.7 9,172.4 4,793.3 4,415.4
Passenger load factor(11)............ 73.8% 67.9% 68.6% 71.1% 69.0% 69.0% 72.5%
Revenue per available seat mile...... 5.61[c] 5.68[c] 5.56[c] 5.71[c] 5.65[c] 5.80[c] 6.35[c]
Operating expense per ASM(12)........ 5.57[c] 5.60[c] 5.48[c] 5.56[c] 5.92[c] 5.77[c] 6.21
Block hours flown(13)................ 65,583 76,542 103,657 126,295 138,114 73,040 65,672
Average daily aircraft utilization
(block hours per day)(14):
Lockheed L-1011................. 7.36 7.07 7.24 8.88 6.55 6.76 6.34
Boeing 727-100.................. 5.28 -- -- -- -- -- --
Boeing 727-200ADV............... -- 7.96 8.24 9.28 7.62 8.08 7.61
Boeing 757-200.................. 9.73 10.26 10.91 11.71 11.06 11.49 10.61
Total aircraft....................... 25 31 41 46 45 49 45
</TABLE>
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(1) As of January 1, 1992, Amtran lengthened its estimate of the useful lives
of its L-1011 aircraft, which reduced depreciation expense by $3.4 million
in 1992.
(2) Amtran has reclassified gain (loss) on sale of operating assets for
1992-1995 from nonoperating gain (loss) to operating income (loss) to be
consistent with the 1996 presentation. Also, in the third quarter of 1996,
Amtran recorded a $4.7 million loss on the disposal of leased assets
associated with both Boeing 757-200 aircraft transactions. See
'Business -- 1996 Restructuring of Scheduled Service Operations.'
(3) Net income (loss) per adjusted share is based on average shares outstanding
during the period, adjusted to give effect to the reclassification effected
in December 1992 and the retroactive effect of the stock dividend
distributed in March 1993, which resulted in 9,090,000 shares outstanding
during all periods presented.
(4) Non-cash working capital consists of total current assets (excluding cash)
less total current liabilities (excluding current maturities of long term
debt).
(5) No dividends were paid in any of the periods presented.
(6) EBITDAR represents net income plus interest expense (net of capitalized
interest), income tax expense, depreciation, amortization and aircraft
rentals. EBITDA represents net income plus interest expense (net of
capitalized interest), income tax expense, depreciation and amortization.
EBITDAR and EBITDA are presented because each is a widely accepted
financial indicator of a company's ability to incur and service debt.
However, EBITDAR and EBITDA should not be considered in isolation, as a
substitute for net income or cash flow data prepared in accordance with
generally accepted accounting principles or as a measure of a company's
profitability or liquidity.
(7) The 'ratio of earnings to fixed charges' represents earnings divided by
fixed charges, as defined in the following paragraph. The 'deficiency'
represents the amount of fixed charges in excess of earnings.
For purposes of these computations, earnings consist of income (loss)
before income taxes, plus fixed charges, adjusted to exclude the amount of
any interest capitalized during the period. Fixed charges include the total
of: (i) interest, whether expensed or capitalized; (ii) amortization of
debt expense relating to any indebtedness, whether expensed or capitalized;
and (iii) such portion of rental expense as can be demonstrated to be
representative of the interest factor.
(8) The operating data (other than revenue per ASM and operating expense per
ASM) pertain only to ATA and do not include information for other
subsidiaries of Amtran.
(9) 'Available seat miles' or 'ASMs' represent the number of seats available
for sale to passengers multiplied by the number of miles those seats are
flown.
(10) 'Revenue passenger miles' or 'RPMs' represent the number of miles flown by
revenue passengers.
(11) 'Passenger load factor' represents revenue passenger miles divided by
available seat miles.
(12) 'Operating expense per ASM' for any period represents the amount determined
by dividing total operating expense for such period by the total ASMs for
such period.
(13) 'Block hours flown' for any aircraft represents the elapsed time computed
from the moment the aircraft first moves under its own power from the
boarding ramp at one airport to the time it comes to rest at the boarding
ramp of the next point of landing.
(14) 'Average daily aircraft utilization' is determined with respect to each
aircraft type for any period by dividing the block hours flown by all
aircraft of such type during such period by the number of days during such
period that aircraft of such type were owned or leased by the Company.
15
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RISK FACTORS
This Prospectus contains certain forward-looking statements. While the
Company believes these statements are reasonable, prospective holders of the
Exchange Notes should be aware that actual results could differ materially from
those projected by such forward-looking statements as a result of the risk
factors set forth below or other factors.
Prospective holders of the Exchange Notes should consider carefully the
following factors as well as the other information and data included in this
Prospectus before tendering their Outstanding Notes in the Exchange Offer. The
Company cautions the reader, however, that this list of factors may not be
exhaustive and that these or other factors could have an adverse effect on the
Company's ability to service its indebtedness, including principal and interest
payments on the Exchange Notes.
SUBSTANTIAL LEVERAGE
At June 30, 1997, on a pro forma basis after giving effect to the Offering
and the application of the net proceeds thereof, the Company on a consolidated
basis would have had outstanding approximately $172.7 million of indebtedness,
approximately $63.9 million of which would have been secured. Total
shareholders' equity of the Company on a consolidated basis as of June 30, 1997
was approximately $57.8 million. As of June 30, 1997, on a pro forma basis after
giving effect to the Offering, the application of the net proceeds thereof and
entering into the New Credit Facility, the Company's total debt was 74.9% of
total capitalization, which represents significant financial leverage, even in
the highly leveraged airline industry. In addition, the Company had substantial
obligations under operating leases for aircraft. See 'Capitalization' and
'Business -- Aircraft Fleet.'
On a pro forma basis, after giving effect to the Offering as if it had
occurred at the beginning of the period, the Company would have had interest
expense of approximately $10.7 million and $5.7 million, respectively, for 1996
and for the six months ended June 30, 1997 which would have resulted in an
EBITDA to interest expense ratio for the Company of approximately 2.5 times and
6.7 times, respectively. Earnings of the Company were insufficient to cover
fixed charges by approximately $2.6 million and $40.9 million for the years
ended December 31, 1992 and 1996, respectively. The Company's ability to satisfy
its obligations will be dependent upon its future performance, which is subject
to general economic conditions and to financial, business and other factors,
including factors beyond the Company's control. The Company's operating results
and cash flow could be adversely affected by such factors as price competition,
increases in fuel costs, a downturn in general economic conditions and adverse
regulatory changes.
The degree to which the Company and the Guarantors are leveraged could have
important consequences to holders of Notes, including the following: (i) the
Company's and the Guarantors' ability to obtain additional financing in the
future for working capital, capital expenditures, acquisitions or other purposes
may be impaired; (ii) the Company's and the Guarantors' degree of leverage and
related debt service obligations, as well as their obligations under operating
leases for aircraft, may make them more vulnerable than some of their
competitors in a prolonged economic downturn; and (iii) the Company's and the
Guarantors' financial position may restrict their ability to exploit new
business opportunities and limit their flexibility to respond to changing
business conditions. The Company's and the Guarantors' competitive positions may
also be affected by the fact that they may be more highly leveraged than some of
their competitors.
EFFECTIVE SUBORDINATION OF NOTES TO SECURED OBLIGATIONS OF SUBSIDIARIES
Claims of secured creditors of the Company's subsidiaries will have
priority to the extent of the security interests granted in the assets of such
subsidiaries over the claims of the Company and the holders of the Company's
indebtedness, including the Notes. ATA has implemented a new four-year secured
revolving credit facility (the 'New Credit Facility'), which provides for a $50
million revolving line of credit for general working capital purposes. Amounts
owed under the New Credit Facility are secured by a first priority perfected
security interest in certain aircraft and related engines. Accordingly, the
lenders under the New Credit Facility have priority over the holders of the
Notes with respect to,
16
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<PAGE>
and to the extent of, the pledged assets, and the Notes will be effectively
subordinated to such secured indebtedness, and to any other secured
indebtedness, of the Company's subsidiaries.
LIQUIDITY AND DEBT SERVICE
Although the Company, like most other airlines, generally operates with a
working capital deficit, it has been able to meet its obligations as they have
become due. In order to meet short-term cash needs, ATA had revolving credit
facility (the 'Existing Credit Facility') which provided up to $125.0 million of
maximum available credit, and a $5.0 million revolving credit facility for
short-term borrowing needs and securing the issuance of letters of credit. At
June 30, 1997, the Company's current assets were $135.7 million, and current
liabilities were $170.2 million. If the Existing Credit Facility had not been
fully drawn, at June 30, 1997 cash (and therefore current assets) and long-term
liabilities would decrease by approximately $57.0 million. On July 24, 1997, ATA
entered into the New Credit Facility which resulted in the termination of the
Existing Credit Facility and provided for a revolving line of credit of $50.0
million. See 'Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources -- Credit Facilities'
and 'Description of the New Credit Facility.'
The Company would have been required during 1997, 1998 and 1999, to make
payments on long-term debt under its Existing Credit Facility totalling $10.5
million, $18.0 million and $4.5 million, respectively with the $83.0 million
balance of this facility maturing on April 1, 1999. The Company will be required
to make no payments on the New Credit Facility of $50.0 million until its
maturity date of April 1, 2001. The Company expects to incur expenses under
non-cancellable operating leases during 1997, 1998, 1999, 2000 and 2001 and
thereafter of $61.1 million, $52.1 million, $49.9 million, $36.8 million, $34.6
million and $220.6 million, respectively. Following the implementation of the
New Credit Facility, the Company on a pro forma basis will be required during
the years ended 1997, 1998, 1999, 2000 and 2001 and thereafter to make payments
on long-term debt totalling $10.4 million, $1.5 million, $1.5 million, $1.5
million, $39.5 million and $117.6 million, respectively. The Company may seek to
supplement its current sources of financing with other sources of long-term
financing, including vendor financing, sale-leaseback transactions and public
and private debt. The Company may from time to time also seek additional equity
financing. There can be no assurance that any such external financing would be
available on satisfactory terms.
The Company currently expects that capital expenditures for 1997 will total
approximately $73 million. Such expenditures will be mainly for scheduled heavy
maintenance on the Company's aircraft. See 'Business -- Aircraft Fleet.'
NET LOSSES AND RESTRUCTURING
For the year ended 1996 the Company incurred operating and net losses of
$36.1 million and $26.7 million, respectively, as compared to operating and net
income of $17.9 million and $8.5 million, respectively, during 1995. The losses
in the 1996 period reflected a number of factors, including: (i) a significant
increase in competition from larger carriers in the scheduled service markets
served by the Company, (ii) the negative impact on low fare carriers resulting
from unfavorable media coverage of the effects of the ValuJet accident in
Florida and, to a lesser extent, the Company's own decompression incident, (iii)
a significant increase in fuel costs and (iv) a federal excise tax on jet fuel
that became effective on October 1, 1995. As a result, the Company entered into
the 1996 Restructuring. Although the Company realized a profit for the first six
months of 1997, there can be no assurance that the Company will continue to be
profitable. See 'Management's Discussion and Analysis of Financial Condition and
Results of Operations.'
STRATEGIC ALTERNATIVES
In the second and third quarters of 1996, the Company undertook an analysis
of the profitability of its scheduled service, military and tour operator
operations, as well as the relative economics of the Company's three aircraft
fleet types. As a result of that analysis, among other things, the Company
significantly reduced its scheduled service operations, entered into
arrangements to reduce the growth
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of its Boeing 757 fleet and reallocated aircraft from scheduled service to
charter operations. The Company is continuing to evaluate the profitability of
each segment of its operations and to consider further restructuring or other
alternatives with respect to those operations. See 'Business -- 1996
Restructuring of Scheduled Service Operations.'
In addition, at various times since the second quarter of 1996 the Company
has actively considered possible business combinations with other air carriers
and others. The Company intends to continue to evaluate such transactions.
Accordingly, it is possible that the Company will enter into a transaction in
the second half of 1997 or thereafter that will result in a merger or other
change of control of the Company.
The New Credit Facility may be accelerated upon a merger or consolidation
of the Company or ATA, including any such transaction resulting in a change of
control of the Company or ATA. If any of the Company's credit facilities were to
be accelerated, there can be no assurance that the Company would have sufficient
liquidity to satisfy such obligations or that it would be able to secure
alternative financing. Failure to satisfy such obligations could cause a default
under the Notes and accelerate payment of principal and accrued interest
thereon. See 'Description of the Notes -- Events of Default.'
RESTRICTIONS UNDER FINANCING AGREEMENTS
The financing agreements relating to the Company's outstanding indebtedness
impose significant operating and financial restrictions on the Company. For
example, the New Credit Facility is secured by liens on certain Company-owned
L-1011 aircraft and engines. In addition, the New Credit Facility prohibits or
restricts in many respects the Company's ability to incur additional
indebtedness, create material liens on its assets, sell assets or engage in
mergers or consolidations, redeem or repurchase Notes, make certain investments,
pay cash dividends or engage in other significant transactions. See 'Description
of the New Credit Facility.'
Under certain of such financing agreements, the Company is required to
maintain compliance with certain specified covenants, restrictions, financial
ratios and other financial and operating tests. The Company's ability to comply
with any of the foregoing restrictions and with loan repayment provisions will
depend upon its future performance, which will be subject to prevailing economic
conditions and other factors, including factors beyond the control of the
Company. A failure to comply with any of these obligations could result in an
event of default under one or more of such financing agreements, which could
permit acceleration of the debt under such instrument and acceleration of debt
under the Company's other principal financing agreements and termination of the
Company's aircraft operating leases, some of which contain cross-default or
cross-acceleration provisions. See 'Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources -- Credit Facilities.'
POSSIBLE LIMITATION ON NOL CARRYFORWARDS
The Company has approximately $81.7 million of net operating loss
carryforwards and $4.7 million of investment and other tax credit carryforwards
(as of December 31, 1996) which may, depending on the circumstances, be
available to reduce U.S. federal income taxes payable by the Company in the
future. However, if the Company undergoes an 'ownership change' within the
meaning of Section 382 of the Internal Revenue Code of 1986, as amended (the
'Code'), the Company's utilization of its net operating loss carryforwards and
investment tax credit carryforwards could be subject to limitation.
In general, an ownership change under Section 382 will occur if, over a
three-year period, certain stockholders who own directly or indirectly 5% or
more of the capital stock of the corporation (including the so-called 'public
group') increase their percentage ownership by more than 50 percentage points in
the aggregate. The effect on the Company of the imposition of a limitation on
the use of its tax attributes in the event of an ownership change in the future
would depend on a number of factors, including the profitability of the Company
and the timing of the sale of certain assets, some of which factors are beyond
the control of the Company. The impact on the Company of such a limitation could
be materially adverse under certain circumstances. In addition, for financial
reporting purposes,
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such an ownership change could, in certain circumstances, require the Company to
reduce the amount of its deferred tax benefits, with a resulting charge to
earnings.
BONDING REQUIREMENTS
Under current DOT regulations with respect to charter transportation
originating in the United States, all charter airline tickets must generally be
paid for in cash and all funds received from the sale of charter seats (and in
some cases the costs of land arrangements) must be placed into escrow by the
tour operator or protected by a surety bond satisfying certain prescribed
standards. Currently, the Company provides a third-party bond which is unlimited
in amount in order to satisfy its obligations under these regulations. Under the
terms of its bonding arrangements, the issuer of the bond has the right to
terminate the bond at any time on 30 days' notice. The Company provides a $2.5
million letter of credit to secure its potential obligations to the issuer of
the bond. If the bond were to be materially limited or canceled, the Company,
like all other U.S. charter airlines, would be required to escrow funds to
comply with the DOT requirements summarized above. Compliance with such
requirements would reduce the Company's liquidity and require it to fund higher
levels of working capital ranging up to $16.0 million based on anticipated 1997
peak travel periods.
INSURANCE COVERAGE
The Company is subject to potential losses which may be incurred in the
event of an aircraft accident. Any such accident could involve not only repair
or replacement of a damaged aircraft and its consequent temporary or permanent
loss from service, but also potential claims of injured passengers and others.
The Company is required by the DOT to carry liability insurance on each of its
aircraft. The Company currently maintains public liability insurance in the
amount of $1.25 billion. Although the Company currently believes its insurance
coverage is adequate, there can be no assurance that the amount of such coverage
will not be changed or that the Company will not be forced to bear substantial
losses from accidents. Substantial claims resulting from an accident could have
a material adverse effect on the business, financial condition and results of
operations of the Company, and could seriously inhibit passenger acceptance of
the Company's services. The Company's insurance policies also impose certain
geographic restrictions on where the Company may provide airline service. See
'Business -- Insurance.'
CUSTOMERS
The Company's largest customer during each of 1994, 1995 and 1996 was the
U.S. military, accounting for approximately 16%, 11% and 11%, respectively, of
the Company's total operating revenues. The Company expects that during 1997 the
U.S. military will continue to be its largest customer. In 1996, the Company's
five largest non-military customers accounted for approximately 22% of total
operating revenues, and the Company's ten largest non-military customers
accounted for approximately 30% of total operating revenues. No single
non-military customer accounted for more than 10% of total operating revenues
during this period.
The Company is subject to the risk that a customer which has contracted
with the Company will cancel or default on its contract or contracts and the
Company will be unable to obtain other business to cover the resulting loss in
revenues. If the size of the contract or contracts is significant enough, any
such default or cancelation could have a material adverse effect on the Company.
Included in the Company's scheduled service sales are bulk sales agreements
with tour operators. Under these arrangements, which are very similar to charter
sales, the tour operator may take up to 85% of an aircraft as a bulk-seat
purchase. To minimize its exposure in the event of non-payment by a tour
operator, the Company requires bonding or a security deposit for a significant
portion of the bulk-seat fare; however, the Company is still responsible for
providing travel to customers who have purchased tickets under bulk-sale
agreements.
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EFFECTS OF SEASONALITY OF BUSINESS ON THE COMPANY
The Company's airline businesses are significantly affected by seasonal
factors. Typically, the Company experiences reduced demand during the second and
fourth quarters as demand for leisure airline services during such periods is
lower relative to other times of the year. The Company has recently experienced
its strongest operating results in the first quarter. As a result, the Company's
results of operations for any one quarter are not necessarily indicative of the
Company's annual results of operations.
EMPLOYEE RELATIONS
In June 1991, the Company's flight attendants elected the Association of
Flight Attendants ('AFA') as their representative. In December 1994, the flight
attendants ratified a four-year collective bargaining agreement. In June 1993,
the Company's cockpit crews elected the International Brotherhood of Teamsters
('IBT') as their representative. Following three years of negotiations, in
September 1996 a four-year collective bargaining agreement was ratified by the
cockpit crews. The Company believes that its relations with its employees are
good. However, the existence of a significant dispute with any sizable number of
its employees could have a material adverse effect on the Company's operations.
RELIANCE ON TRAVEL AGENTS AND TOUR OPERATORS FOR TICKET SALES
Approximately 65% of the Company's revenues for the year ended December 31,
1996, were derived from tickets sold by travel agents or tour operators. Travel
agents and tour operators generally have a choice between one or more airlines
when booking a customer's flight. Accordingly, any effort by travel agencies or
tour operators to favor another airline or to disfavor the Company could
adversely impact the Company. The Company's relations with travel agencies and
tour operators could be affected for instance, by override commissions offered
by other airlines, by an increase in the Company's arrangements with other
distributors of its tickets or by the introduction of alternative methods of
selling tickets. Although management intends to continue to offer attractive and
competitive products to travel agencies and tour operators and to maintain
favorable relations with travel agencies and tour operators, there can be no
assurance that travel agencies or tour operators will not disfavor the Company
or favor other airlines in the future.
INDUSTRY CONDITIONS AND COMPETITION
The Company's products and services face varying degrees of competition in
diverse markets. The Airline Deregulation Act of 1978 has substantially
eliminated governmental authority to regulate domestic routes and fares and has
increased the ability of airlines to compete with higher flight frequencies and
lower fares. The Company generally competes on the basis of price, availability
of equipment, quality of service and convenience. In the leisure travel market,
the Company's principal focus of operations, the Company faces significant
competition from a large number of U.S., European and Mexican charter and
scheduled airlines, many of which are larger and have substantially greater
financial resources than the Company. The scheduled carriers compete for leisure
travel customers in a variety of ways, including wholesaling discounted seats on
scheduled flights to tour operators, promoting to travel agents prepackaged
tours for sale to retail customers and selling discounted, excursion airfare-
only products to the public. As a result, all charter airlines, including the
Company, generally are required to compete for customers against the lowest
revenue-generating seats of the scheduled airlines. During periods of dramatic
fare cuts by the scheduled airlines, the Company is forced to respond
competitively to these deeply discounted seats.
The Company also competes against scheduled airlines on the basis of
convenience. Due in part to the creation of numerous hub-and-spoke route
systems, many smaller cities are not served by direct or nonstop flights to
leisure destinations, and many secondary leisure destinations do not receive
direct or nonstop service from more than a few major U.S. cities. The Company
targets these markets by providing travelers with nonstop service to leisure
destinations on a limited-frequency basis.
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In the United States, there are few barriers to entry into the airline
business, apart from the need for certain government licenses and the need for
and availability of financing, particularly for those seeking to operate on a
small scale with limited infrastructure and other support systems. As a result,
the Company may face increased competition from start-up airlines in selected
markets from time to time.
The emergence in recent years of several new carriers, typically with low
cost structures, has further increased the competitive pressures on U.S.
airlines. In some cases, the new entrants have initiated or triggered price
discounting. Aircraft, skilled labor and gates at most airports continue to be
available to start-up carriers. The commencement of service by new carriers on
ATA's routes could negatively impact ATA's operating results. Although the
domestic airline industry has at present abandoned deeply discounted general
pricing structures, and fare levels have continued to increase from 1992 levels,
significant industry-wide discounts could be reimplemented at any time, and the
introduction of broadly available, deeply discounted fares by a major U.S.
airline would result in lower yields for the entire industry and could have a
material adverse effect on the Company's operating results.
The Company also competes directly against other charter airlines. In the
United States, these charter airlines are smaller in size than the Company. In
Europe, several charter airlines are at least as large or larger than the
Company. Certain of these charter airlines are affiliates of major scheduled
airlines or tour operators. As a result, in addition to greater access to
financial resources, these charter airlines may have greater distribution
capabilities, including, in certain cases, exclusive or preferential
relationships with affiliated tour operators.
Based upon bilateral aviation agreements between the U.S. and other
nations, and, in the absence of such agreements, comity and reciprocity
principles, the Company's charter operations are generally not restricted as to
the number or frequency of its flights to and from most destinations in Europe.
However, these agreements and reciprocity principles generally restrict the
Company to the carriage of passengers and cargo on flights which either
originate in the U.S. and terminate in a single European nation, or which
originate in a single European nation and terminate in the U.S. Proposals for
any additional charter service must generally be specifically approved by the
civil aeronautics authorities in the relevant countries. Approval of such a
proposal is typically based on considerations of comity and reciprocity and
cannot be guaranteed. As a consequence, the Company typically does not compete
in the large intra-European travel market. See 'Business -- Regulation.'
AIRCRAFT FUEL
Because fuel costs are a significant portion of the Company's operating
costs (approximately 21% for 1996), significant changes in fuel costs would
materially affect the Company's operating results. Fuel prices continue to be
susceptible to, among other factors, political and economic influences and the
Company cannot control 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. However, the
Company has been able to reduce certain of the risks associated with a rise in
fuel costs. For each of 1995 and 1996, approximately 52% and 49%, respectively,
of the Company's total operating revenues were derived from contracts which
enabled the Company to pass through increases in fuel costs, including contracts
with the U.S. military. The Company is exposed to increases in fuel costs that
occur within 14 days of flight time, to all increases associated with its
scheduled service (other than bulk seat sales) and to increases affecting
contracts that do not include fuel cost escalation provisions. The Company is
also exposed to the risk that a substantial rise in fuel costs could cause a
reduction in leisure travel and/or the cancellation or renegotiation of
previously-booked commitments from tour operators.
EFFECT OF GENERAL ECONOMIC CONDITIONS
The profitability of the Company's operations is influenced by the
condition of the U.S. and European economies, including fluctuations in currency
exchange rates, that may impact the demand for leisure travel and the Company's
competitive pricing position. The vast majority of the Company's charter and
scheduled airline business, other than military, is leisure travel. Because
leisure travel is
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discretionary, the Company has historically tended to experience somewhat weaker
financial results during economic downturns and other events affecting
international leisure travel, such as the Persian Gulf War. Nevertheless, the
Company's performance during these periods has been significantly better than
that of the U.S. airline industry as a whole.
REGULATORY MATTERS
The Company is subject to regulation by the DOT and the Federal Aviation
Administration (the 'FAA') under the provisions of the Federal Aviation Act of
1958, as amended (the 'Federal Aviation Act'), and by certain other governmental
agencies. The DOT regulates principally economic issues affecting air service,
including, among other matters, air carrier certification and fitness,
insurance, certain leasing arrangements, allocation of route rights and
authorization of proposed scheduled and charter operations, consumer protection
and competitive practices. The FAA primarily regulates flight operations,
especially matters affecting air safety, including, among other matters,
airworthiness requirements for each type of aircraft the Company operates and
pilot and crew certification. The Company believes it is in compliance with all
requirements necessary to maintain in good standing its operating authority
granted by the DOT and its air carrier operating certificate issued by the FAA.
A modification, suspension or revocation of any of the Company's DOT or FAA
authorizations or certificates could have a material adverse effect upon the
Company.
In 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. ATA expects to continue to incur expenditures
for the purpose of complying with the FAA's noise and aging aircraft
regulations.
On June 17, 1996, ValuJet temporarily suspended its flight operations at
the request of the FAA after an intensive inspection by the FAA. As a result of
events related to ValuJet, the FAA has announced that it will be increasing its
scrutiny of airlines, particularly in the areas of contract maintenance and
contract training. The Company currently maintains ten permanent maintenance
facilities and operates an internal training corporation. See
'Business -- Aircraft Fleet -- Maintenance and Support' and 'Business -- Other
Activities.' Additional operational or maintenance requirements mandated by the
FAA could have a material adverse impact on the Company.
The Company has a Certificate of Public Convenience and Necessity from the
DOT and an operating certificate from the FAA. Each such authority is subject to
continued compliance with applicable stated rules and regulations pertaining to
the airline industry, including any new rules or regulations that may be adopted
in the future.
The Company is subject to the jurisdiction of the Federal Communications
Commission regarding the use of radio facilities. In addition, the Company is
subject to regulation on its international flights by the Commerce Department,
the Customs Service, the Immigration and Naturalization Service, and the Animal
and Plant Health Inspection Service of the Department of Agriculture. Also,
while its aircraft are in foreign countries on international flights, the
Company must comply with the requirements of similar authorities in such
countries. The Company is also subject to compliance with standards for aircraft
exhaust emissions promulgated by the Environmental Protection Agency (the 'EPA')
pursuant to the Clean Air Act of 1970, as amended. The Company is also subject
to regulations adopted by the various local authorities which operate the
airports it serves throughout its route network, including but not limited to
aircraft noise regulations and curfews. While the Company intends to maintain
all appropriate government licenses and to comply with all appropriate
standards, there can be no assurance that such licenses can be maintained or
that such standards will not be changed in the future. See
'Business -- Regulation.'
At its aircraft line maintenance facilities, the Company uses materials
which are regulated as hazardous under federal, state and local law. The Company
is required to maintain programs to protect the safety of its employees who use
these materials and to manage and dispose of any waste generated by the use of
these materials in compliance with all such laws. More generally, the Company is
also subject at these facilities to federal, state and local regulations
relating to protection of the environment and to discharge of materials into the
environment. The Company does not expect that the costs
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associated with ongoing compliance with any such regulations at these facilities
will have a material adverse effect upon the Company's capital expenditures,
earnings or competitive position.
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. Laws and
regulations also have 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 ATA.
LOW MARGINS AND HIGH FIXED COSTS
The airline industry as a whole and scheduled service in particular is
characterized by low gross profit margins and high fixed costs. The costs of
operating each flight do not vary significantly with the number of passengers
carried and, therefore, a relatively small change in the number of passengers or
in fare pricing or traffic mix could, in the aggregate, have a significant
effect on operating and financial results. Accordingly, a minor shortfall from
expected revenue levels could have a material adverse effect on the Company's
growth or financial performance.
PAYMENT UPON A CHANGE OF CONTROL
Upon the occurrence of a Change of Control, each holder of the Notes may
require the Company to repurchase all or a portion of such holder's Notes at
101% of the principal amount of the Notes, together with accrued and unpaid
interest to the date of repurchase. If a Change of Control were to occur, the
Company may not have the financial resources to repay the Notes, its credit
facilities and any other indebtedness that would become payable upon the
occurrence of such Change of Control. See ' -- Strategic Alternatives.' The
'Repurchase of Notes upon a Change of Control' covenant requiring the Company to
repurchase the Notes will, unless consents are obtained, require the Company to
repay all indebtedness then outstanding which by its terms would prohibit such
Note repurchase, including in particular the New Credit Facility, either prior
to or concurrently with such Note repurchase. See 'Description of the
Notes -- Repurchase of Notes upon a Change of Control' and 'Description of the
New Credit Facility.'
FRAUDULENT TRANSFER LAWS
Under federal or state fraudulent transfer laws, if a court of competent
jurisdiction were to find, in a lawsuit by an unpaid creditor or a
representative of creditors, a trustee in bankruptcy or a debtor-in-possession,
that the Company issued the Notes with the intent to hinder, delay or defraud
present or future creditors, or received less than a reasonably equivalent value
or fair consideration for any such indebtedness, and at the time of such
incurrence (i) was insolvent, (ii) was rendered insolvent by reason of such
incurrence, (iii) was engaged or about to engage in a business or transaction
for which its remaining assets constituted unreasonably small capital to carry
on its business or (iv) intended to incur, or believed or reasonably should have
believed that it would incur, debts beyond its ability to pay as such debts
matured, such court could avoid the Company's obligations to the holders of the
Notes, subordinate the Company's obligations to the holders of the Notes to all
other indebtedness of the Company or take other action detrimental to the
holders of the Notes. In that event, there can be no assurance that any
repayment of principal and accrued interest on the Notes could ever be recovered
by the holders of the Notes. Any Guarantee may also be subject to challenge
under fraudulent transfer laws and, in any case, will be limited to amounts that
any such Guarantor can guarantee without violating such laws. See 'Description
of the Exchange Notes -- Guarantee.'
LACK OF PUBLIC MARKET FOR THE EXCHANGE NOTES
The Outstanding Notes are currently owned by a small number of beneficial
owners. The Outstanding Notes have not been registered under the Securities Act
and are subject to significant
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restrictions on resale. The Exchange Notes will be a new issue of securities for
which there is currently no trading market. If the Notes are traded after their
initial issuance, they may trade at a discount from their initial offering
price, depending upon prevailing interest rates, the market for similar
securities and other factors, including general economic conditions and the
financial condition and performance of, and prospects for, the Company.
EXCHANGE OFFER PROCEDURES
Issuance of the Exchange Notes in exchange for Outstanding Notes pursuant
to the Exchange Offer will be made only after a timely receipt by the Company of
Outstanding Notes, a properly completed and duly executed Letter of Transmittal
and all other required documents. Therefore, holders of the Outstanding Notes
desiring to tender their Outstanding Notes in exchange for Exchange Notes should
allow sufficient time to ensure timely delivery. The Company is under no duty to
give notification of defects or irregularities with respect to the tenders of
Outstanding Notes for exchange. Outstanding Notes that are not tendered or are
tendered but not accepted will, following the consummation of the Exchange
Offer, continue to be subject to the existing restrictions on transfer thereof.
On consummation of the Exchange Offer, the registration rights under the
Registration Rights Agreement will terminate except that if (i) the Company
determines that the Exchange Offer is not available or may not be consummated as
soon as practicable after the date upon which the last Outstanding Note has been
tendered because it would violate applicable law or the applicable
interpretations of the staff of the Commission, (ii) the Exchange Offer is not
for any other reason consummated by January 24, 1998 or (iii) the Exchange Offer
has been completed and in the opinion of counsel for the Placement Agents a
Registration Statement must be filed and a prospectus must be delivered by the
Placement Agents in connection with any offering or sale of Exchange Notes, the
Company has agreed to file and maintain a shelf registration statement that
would allow resales of transfer restricted Outstanding Notes or Exchange Notes
owned by the holders. In addition, any holder of Outstanding Notes who tenders
in the Exchange Offer for the purpose of participating in a distribution of the
Exchange Notes may be deemed to have received restricted securities and, if so,
will be required to comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any resale transaction.
Each broker-dealer that receives Exchange Notes for its own account in exchange
for Outstanding Notes, where the Outstanding Notes were acquired by the
broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of those Exchange Notes. See 'Plan of Distribution.' To the
extent that Outstanding Notes are tendered and accepted in the Exchange Offer,
the trading market for untendered and tendered but unaccepted Outstanding Notes
could be adversely affected. See 'The Exchange Offer.'
CONSEQUENCES OF FAILURE TO EXCHANGE AND REQUIREMENTS FOR TRANSFER OF EXCHANGE
NOTES
Holders of Outstanding Notes who do not exchange their Outstanding Notes
for Exchange Notes pursuant to the Exchange Offer will continue to be subject to
the provisions in the Indenture regarding transfer and exchange of the
Outstanding Notes and the restrictions on transfer of such Outstanding Notes as
set forth in the legend thereon as a consequence of the issuance of the
Outstanding Notes pursuant to exemptions from, or in transactions not subject
to, the registration requirements of the Securities Act and applicable state
securities laws. In general, the Outstanding Notes may not be offered or sold,
unless registered under the Securities Act, except pursuant to an exemption
from, or in a transaction not subject to, the Securities Act and applicable
state securities laws. The Company does not currently anticipate that it will
register Outstanding Notes under the Securities Act. Based on interpretations by
the staff of the Commission, as set forth in no-action letters issued to third
parties, the Company believes that Exchange Notes issued pursuant to the
Exchange Offer in exchange for Outstanding Notes may be offered for resale,
resold or otherwise transferred by holders thereof (other than any such holder
which is an 'affiliate' of the Company within the meaning of Rule 405 under the
Securities Act) without compliance with the registration and prospectus delivery
provisions of the Securities Act, provided that such Exchange Notes are acquired
in the ordinary course of such holders' business and such holders have no
arrangement with any person to participate in the distribution of such Exchange
Notes. However, the Company does not intend to request the Commission to
consider,
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and the Commission has not considered, the Exchange Offer in the context of a
no-action letter and there can be no assurance that the staff of the Commission
would make a similar determination with respect to the Exchange Offer as in such
other circumstances. Each holder, other than a broker-dealer, must acknowledge
that (i) the Exchange Notes received by such holder will be acquired in the
ordinary course of its business, (ii) at the time of the consummation of the
Exchange Offer such holder will have not engaged in, and does not intend to
engage in, a distribution of Exchange Notes and has no arrangement or
understanding to participate in a distribution of Exchange Notes and (iii) such
holder is not an affiliate of the Company within the meaning of Rule 405 of the
Securities Act or if it is such an affiliate, that it will comply with the
registration and prospectus delivery requirements of the Securities Act, to the
extent applicable. If any holder is an affiliate of the Company, is engaged in
or intends to engage in or has any arrangement or understanding with respect to
the distribution of the Exchange Notes to be acquired pursuant to the Exchange
Offer, such holder (i) could not rely on the applicable interpretations of the
staff of the Commission and (ii) must comply with the registration and
prospectus delivery requirement of the Securities Act in connection with any
resale transaction. Each broker-dealer that receives Exchange Notes for its own
account pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. The Letter of
Transmittal states that by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an 'underwriter' within the
meaning of the Securities Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of Exchange Notes received in exchange for Outstanding Notes, where
such Outstanding Notes were acquired by such broker-dealer as a result of
market-making activities or other trading activities. The Company has agreed
that, for a period of 180 days after the Expiration Date, it will make this
Prospectus available to any broker-dealer for use in connection with any such
resale. See 'Plan of Distribution.' However, to comply with state securities
laws, the Exchange Notes may not be offered or sold in any state unless they
have been registered or qualified for sale in such state or an exemption from
registration or qualification is available and is complied with. The offer and
sale of the Exchange Notes to 'qualified institutional buyers' (as such term is
defined under Rule 144A of the Securities Act) is generally exempt from
registration or qualification under state securities laws. The Company currently
does not intend to register or qualify the sale of the Exchange Notes in any
state where an exemption from registration or qualification is required and not
available. See 'The Exchange Offer -- Consequences of Failure to Exchange and
Requirements for Transfer for Exchange Notes.'
25
<PAGE>
<PAGE>
THE EXCHANGE OFFER
TERMS OF THE EXCHANGE OFFER; PERIOD FOR TENDERING OUTSTANDING NOTES
Upon the terms and subject to the conditions set forth in this Prospectus
and in the accompanying Letter of Transmittal, the Company will accept for
exchange Outstanding Notes which are properly tendered on or prior to the
Expiration Date and not withdrawn as permitted below. As used herein, the term
'Expiration Date' means midnight, New York City time, on 1997;
provided, however, that if the Company, in its sole discretion, has extended the
period of time for which the Exchange Offer is open, the term 'Expiration Date'
means the latest time and date to which the Exchange Offer is extended.
As of the date of this Prospectus, $100 million aggregate principal amount
of the Outstanding Notes is outstanding. This Prospectus, together with the
Letter of Transmittal, is first being sent on or about , 1997, to
all holders of Outstanding Notes known to the Company. The Company's obligation
to accept Outstanding Notes for exchange pursuant to the Exchange Offer is
subject to certain conditions as set forth below under 'Certain Conditions to
the Exchange Offer.'
The Company expressly reserves the right, at any time or from time to time,
to extend the period of time during which the Exchange Offer remains open, and
thereby delay acceptance for exchange of any Outstanding Notes, by giving oral
or written notice of such extension in the manner described below. During any
such extension, all Outstanding Notes previously tendered will remain subject to
the Exchange Offer and may be accepted for exchange by the Company. Any
Outstanding Notes not accepted for exchange for any reason will be returned
without expense to the tendering holder thereof as promptly as practicable after
the expiration or termination of the Exchange Offer.
Outstanding Notes tendered in the Exchange Offer must be in denominations
of principal amounts of $1,000 and any integral multiples thereof.
The Company expressly reserves the right to amend or terminate the Exchange
Offer, and not to accept for exchange any Outstanding Notes not theretofore
accepted for exchange, upon the occurrence of any of the events specified below
under ' -- Certain Conditions to the Exchange Offer.' The Company will give oral
or written notice of any extension, amendment, non-acceptance or termination to
the holders of the Outstanding Notes as promptly as practicable, such notice in
the case of any extension to be issued by means of press release or other public
announcement no later than 9:00 a.m., New York City time, on the next business
day after the previously scheduled Expiration Date.
INTEREST ON THE EXCHANGE NOTES
The Exchange Notes will bear interest from July 24, 1997, payable
semiannually on February 1 and August 1 of each year commencing on February 1,
1998, at the rate of 10 1/2% per annum. Holders of Outstanding Notes accepted
for exchange will be deemed to have waived the right to receive any payment in
respect of interest on the Outstanding Notes accrued from July 24, 1997 until
the date of the issuance of the Exchange Notes. Consequently holders who
exchange their Outstanding Notes for Exchange Notes will receive the same
interest payment on February 1, 1998 (the first interest payment date with
respect to the Outstanding Notes and the Exchange Notes) that they would have
received had they not accepted the Exchange Offer.
PROCEDURES FOR TENDERING
To tender in the Exchange Offer, a holder must complete, sign and date the
Letter of Transmittal, or a facsimile thereof, have the signatures thereon
guaranteed if required by the Letter of Transmittal, and mail or otherwise
deliver such Letter of Transmittal or such facsimile, together with the
Outstanding Notes (unless such tender is being effected pursuant to the
procedure for book-entry transfer described below) and any other required
documents, to the Exchange Agent prior to midnight, New York City time, on the
Expiration Date.
Any financial institution that is a participant in DTC's Book-Entry
Transfer Facility system may make book-entry delivery of the Outstanding Notes
by causing DTC to transfer such Outstanding Notes into the Exchange Agent's
account in accordance with DTC's procedure for such transfer. Although
26
<PAGE>
<PAGE>
delivery of Outstanding Notes may be effected through book-entry transfer into
the Exchange Agent's account at DTC, the Letter of Transmittal (or facsimile
thereof), with any required signature guarantees and any other required
documents must, in any case, be transmitted to and received or confirmed by the
Exchange Agent at its addresses set forth herein under ' -- Exchange Agent'
prior to midnight, New York City time, on the Expiration Date. DELIVERY OF
DOCUMENTS TO DTC IN ACCORDANCE WITH ITS PROCEDURES DOES NOT CONSTITUTE DELIVERY
TO THE EXCHANGE AGENT.
The tender by a holder of Outstanding Notes will constitute an agreement
between such holder and the Company in accordance with the terms and subject to
the conditions set forth herein and in the Letter of Transmittal.
Delivery of all documents must be made to the Exchange Agent at its address
set forth herein. Holders may also request that their respective brokers,
dealers, commercial banks, trust companies or nominees effect such tender for
the holders.
The method of delivery of Outstanding Notes and the Letters of Transmittal
and all other required documents to the Exchange Agent is at the election and
risk of the holders. Instead of delivery by mail, it is recommended that holders
use an overnight or hand delivery service. In all cases, sufficient time should
be allowed to assure timely delivery. NO LETTER OF TRANSMITTAL OR OUTSTANDING
NOTES SHOULD BE SENT TO THE COMPANY.
Only a holder of Outstanding Notes may tender such Outstanding Notes in the
Exchange Offer. The term 'holder' with respect to the Exchange Offer means any
person in whose name Outstanding Notes are registered on the books of the
Company or any other person who has obtained a properly completed bond power
from the registered holder, or any person whose Outstanding Notes are held of
record by DTC who desires to deliver such Outstanding Notes by book-entry
transfer at DTC.
Any beneficial holder whose Outstanding Notes are registered in the name of
his broker, dealer, commercial bank, trust company or other nominee and who
wishes to tender should contact such registered holder properly and instruct
such registered holder to tender on his behalf. If such beneficial holder wishes
to tender on his own behalf, such beneficial holder must, prior to completing
and executing the Letter of Transmittal and delivering his Outstanding Notes,
either make appropriate arrangements to register ownership of the Outstanding
Notes in such holder's name or obtain a properly completed bond power from the
registered holder. The transfer of record ownership may take considerable time.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed by a member firm of a registered national
securities exchange or of the National Association of Securities Dealers, Inc.,
a commercial bank or trust company having an office or correspondent in the
United States or an 'eligible guarantor institution' within the meaning of Rule
17Ad-15 under the Exchange Act (an 'Eligible Institution') unless the
Outstanding Notes tendered pursuant thereto are tendered (i) by a registered
holder who has not completed the box entitled 'Special Issuance Instructions' or
'Special Delivery Instructions' on the Letter of Transmittal or (ii) for the
account of an Eligible Institution.
If the Letter of Transmittal is signed by a person other than the
registered holder of any Outstanding Notes listed therein, such Outstanding
Notes must be endorsed or accompanied by appropriate bond powers which authorize
such person to tender the Outstanding Notes on behalf of the registered holder,
in either case signed as the name of the registered holder or holders appears on
the Outstanding Notes.
If the Letter of Transmittal or any Outstanding Notes or bond powers are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing, and unless waived by the
Company, evidence satisfactory to the Company of their authority to so act must
be submitted with the Letter of Transmittal.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of the tendered Outstanding Notes will be
determined by the Company in its sole discretion, which determination will be
final and binding. The Company reserves the absolute right to reject any
27
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<PAGE>
and all Outstanding Notes not properly tendered or any Outstanding Notes the
Company's acceptance of which would, in the opinion of counsel for the Company,
be unlawful. The Company also reserves the absolute right to waive any
irregularities or conditions of tender as to particular Outstanding Notes. The
Company's interpretation of the terms and conditions of the Exchange Offer
(including the instructions in the Letter of Transmittal) will be final and
binding on all parties. Unless waived, any defects or irregularities in
connection with tenders of Outstanding Notes must be cured within such time as
the Company shall determine. Neither the Company, the Exchange Agent nor any
other person shall be under any duty to give notification of defects or
irregularities with respect to tenders of Outstanding Notes nor shall any of
them incur any liability for failure to give such notification. Tenders of
Outstanding Notes will not be deemed to have been made until such irregularities
have been cured or waived. Any Outstanding Notes received by the Exchange Agent
that are not properly tendered and as to which the defects or irregularities
have not been cured or waived will be returned without cost by the Exchange
Agent to the tendering holder of such Outstanding Notes unless otherwise
provided in the Letter of Transmittal as soon as practicable following the
Expiration Date.
In addition, the Company reserves the right in its sole discretion to (a)
purchase or make offers for any Outstanding Notes that remain outstanding
subsequent to the Expiration Date, or, as set forth under ' -- Certain
Conditions to the Exchange Offer,' to terminate the Exchange Offer and (b) to
the extent permitted by applicable law, purchase Outstanding Notes in the open
market, in privately negotiated transactions or otherwise. The terms of any such
purchases or offers may differ from the terms of the Exchange Offer.
By tendering, each holder of Outstanding Notes will represent to the
Company that, among other things, the Exchange Notes acquired pursuant to the
Exchange Offer are being obtained in the ordinary course of business of the
person receiving such Exchange Notes, whether or not such person is the holder,
that neither the holder nor any other person has an arrangement or understanding
with any person to participate in the distribution of the Exchange Notes and
that neither the holder nor any such other person is an 'affiliate' of the
Company within the meaning of Rule 405 under the Securities Act or, if an
affiliate, such holder or such other person will comply with the registration
and prospectus delivery requirements of the Securities Act to the extent
applicable.
ACCEPTANCE OF OUTSTANDING NOTES FOR EXCHANGE; DELIVERY OF EXCHANGE NOTES
Upon satisfaction or waiver of all of the conditions to the Exchange Offer,
the Company will accept, promptly after the Expiration Date, all Outstanding
Notes properly tendered and will issue the Exchange Notes promptly, after
acceptance of the Outstanding Notes. See -- 'Certain Conditions to the Exchange
Offer'.
For purposes of the Exchange Offer, the Company shall be deemed to have
accepted properly tendered Outstanding Notes for exchange when, as and if the
Company has given oral or written notice thereof to the Exchange Agent, with
written confirmation of any oral notice to be given promptly thereafter.
For each Outstanding Note accepted for exchange, the holder of such
Outstanding Note will receive an Exchange Note having a principal amount equal
to that of the surrendered Outstanding Note. Interest on the Exchange Notes will
accrue from July 24, 1997. Holders of Outstanding Notes whose Outstanding Notes
are accepted for exchange will be deemed to have waived the right to receive any
payment in respect of interest on such Outstanding Notes accrued from July 24,
1997 to the date of the issuance of the Exchange Notes. Consequently, holders
who echange their Outstanding Notes for Exchange Notes will receive the same
interest payment on February 1, 1998 (the first interest payment date with
respect to the Outstanding Notes and the Exchange Notes) that they would have
received had they not accepted the Exchange Offer.
In all cases, issuance of Exchange Notes for Outstanding Notes that are
accepted for exchange pursuant to the Exchange Offer will be made only after
timely receipt by the Exchange Agent of certificates for such Outstanding Notes
or a timely Book-Entry Confirmation of such Outstanding Notes into the Exchange
Agent's account at the Book-Entry Transfer Facility, a properly completed and
duly executed Letter of Transmittal and all other required documents. If any
tendered Outstanding Notes
28
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<PAGE>
are not accepted for any reason set forth in the terms and conditions of the
Exchange Offer or if Outstanding Notes are submitted for a greater principal
amount that the holder desired to exchange, such unaccepted or non-exchanged
Outstanding Notes will be returned without expense to the tendering holder
thereof (or, in the case of Outstanding Notes tendered by book-entry transfer
into the Exchange Agent's account at the Book-Entry Transfer Facility pursuant
to the book-entry procedures described below, such non- exchanged Outstanding
Notes will be credited to an account maintained with such Book-Entry Transfer
Facility) as promptly as practicable after the expiration or termination of the
Exchange Offer.
BOOK-ENTRY TRANSFER
The Exchange Agent will make a request to establish an account with respect
to the Outstanding Notes at the Book- Entry Transfer Facility for purposes of
the Exchange Offer within two business days after the date of this Prospectus,
and any financial institution that is a participant in the Book-Entry Transfer
Facility's systems may make book-entry delivery of Outstanding Notes by causing
the Book-Entry Transfer Facility to transfer such Outstanding Notes into the
Exchange Agent's account at the Book-Entry Transfer Facility in accordance with
such Book-Entry Transfer Facility's procedures for transfer. However, although
delivery of Outstanding Notes may be effected through book-entry transfer at the
Book-Entry Transfer Facility, the Letter of Transmittal or a facsimile thereof,
with any required signature guarantees and any other required documents, must,
in any case, be transmitted to and received by the Exchange Agent at one of the
addresses set forth below, under ' -- Exchange Agent' on or prior to the
Expiration Date or the guaranteed delivery procedures described below must be
complied with.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Outstanding Notes and (i) whose
Outstanding Notes are not immediately available, or (ii) who cannot deliver
their Outstanding Notes, the Letter of Transmittal, or any other required
documents to the Exchange Agent prior to the Expiration Date, or if such holder
cannot complete the procedure for book-entry transfer on a timely basis, may
effect a tender if:
(a) The tender is made through an Eligible Institution;
(b) Prior to the Expiration Date, the Exchange Agent receives from
such Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery (by facsimile transmission, mail or hand delivery)
setting forth the name and address of the holder of the Outstanding Notes,
the certificate number or numbers of such Outstanding Notes and the
principal amount of Outstanding Notes tendered, stating that the tender is
being made thereby, and guaranteeing that, within five business days after
the Expiration Date, the Letter of Transmittal (or facsimile thereof),
together with the certificate(s) representing the Outstanding Notes to be
tendered in proper form for transfer and any other documents required by
the Letter of Transmittal, will be deposited by the Eligible Institution
with the Exchange Agent; and
(c) Such properly completed and executed Letter of Transmittal (or
facsimile thereof), together with the certificate(s) representing all
tendered Outstanding Notes in proper form for transfer (or confirmation of
a book-entry transfer into the Exchange Agent's account at DTC of
Outstanding Notes delivered electronically) and all other documents
required by the Letter of Transmittal are received by the Exchange Agent
within five business days after the Expiration Date.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Outstanding Notes may be
withdrawn at any time prior to midnight, New York City time, on the Expiration
Date.
To withdraw a tender of Outstanding Notes in the Exchange Offer, a
facsimile transmission or letter notice of withdrawal must be received by the
Exchange Agent at its address set forth herein prior to midnight, New York City
time, on the Expiration Date. Any such notice of withdrawal must
29
<PAGE>
<PAGE>
(i) specify the name of the person having deposited the Outstanding Notes to be
withdrawn (the 'Depositor'), (ii) include a statement that the Depositor is
withdrawing its election to have Outstanding Notes exchanged, and identify the
Outstanding Notes to be withdrawn (including the certificate number or numbers
and principal amount of such Outstanding Notes), (iii) be signed by the
Depositor in the same manner as the original signature on the Letter of
Transmittal by which such Outstanding Notes were tendered (including any
required signature guarantees) or be accompanied by documents of transfer
sufficient to permit the Trustee with respect to the Notes to register the
transfer of such Outstanding Notes into the name of the Depositor withdrawing
the tender and (iv) specify the name in which any such Outstanding Notes are to
be registered, if different from that of the Depositor. All questions as to the
validity, form and eligibility (including time of receipt) for such withdrawal
notices will be determined by the Company, whose determination shall be final
and binding on all parties. Any Outstanding Notes so withdrawn will be deemed
not to have been validly tendered for purposes of the Exchange Offer and no
Exchange Notes will be issued with respect thereto unless the Outstanding Notes
so withdrawn are validly retendered. Any Outstanding Notes which have been
tendered but which are not accepted for exchange will be returned to the holder
thereof without cost to such holder as soon as practicable after withdrawal,
rejection of tender or termination of the Exchange Offer. Properly withdrawn
Outstanding Notes may be re-tendered by following one of the procedures
described above under ' -- Procedures for Tendering' at any time prior to the
Expiration Date.
CERTAIN CONDITIONS TO THE EXCHANGE OFFER
The Exchange Offer is not subject to any conditions, other than that the
Exchange Offer does not violate applicable law or any applicable interpretation
of the staff of the Commission. There can be no assurance that any such
condition will not occur. Holders of Outstanding Notes will have certain rights
against the Company under the Registration Rights Agreement should the Company
fail to consummate the Exchange Offer.
If the Company determines that it may terminate the Exchange Offer, as set
forth above, the Company may (i) refuse to accept any Outstanding Notes and
return any Outstanding Notes that have been tendered to the holders thereof,
(ii) extend the Exchange Offer and retain all Outstanding Notes tendered prior
to the Expiration Date, subject to the rights of such holders of tendered
Outstanding Notes to withdraw their tendered Outstanding Notes, or (iii) waive
such termination event with respect to the Exchange Offer and accept all
properly tendered Outstanding Notes that have not been withdrawn. If such waiver
constitutes a material change in the Exchange Offer, the Company will disclose
such change by means of a supplement to this Prospectus that will be distributed
to each registered holder of Outstanding Notes, and the Company will extend the
Exchange Offer for a period of five to ten business days, depending upon the
significance of the waiver and the manner of disclosure to the registered
holders of the Outstanding Notes, if the Exchange Offer would otherwise expire
during such period.
EXCHANGE AGENT
First Security Bank, N.A., the Trustee under the Indenture, has been
appointed as Exchange Agent for the Exchange Offer. Questions and requests for
assistance and inquiries for additional copies of this Prospectus or of the
Letter of Transmittal should be directed to the Exchange Agent addressed as
follows:
<TABLE>
<S> <C> <C>
By Mail or Overnight Courier By Hand Facsimile Transmission Number
First Security Bank, N.A. First Security Bank, N.A. (801) 246-5053
79 South Main Street Attention: Corporate Trust Services (For Eligible
Salt Lake City, UT 84111 In Care Of: Institutions Only)
Attention: Corporate IBJ Schroder Bank & Trust Company Confirm by Telephone
Trust Services One State Street Plaza (801) 246-5822
(If by Mail, Registered or New York, NY 10004
Certified Mail Recommended)
</TABLE>
30
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DELIVERY OF THE LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH
ABOVE DOES NOT CONSTITUTE A VALID DELIVERY OF SUCH LETTER OF TRANSMITTAL.
FEES AND EXPENSES
The Company will not make any payments to brokers, dealers or other persons
soliciting acceptances of the Exchange Offer.
The estimated cash expenses to be incurred in connection with the Exchange
Offer will be paid by the Company and are estimated to be $ .
TRANSFER TAXES
Holders who tender their Outstanding Notes for exchange will not be
obligated to pay any transfer taxes in connection therewith, except that holders
who instruct the Company to register Exchange Notes in the name of, or request
that Outstanding Notes not tendered or not accepted in the Exchange Offer be
returned to, a person other than the registered tendering holder will be
responsible for the payment of any applicable transfer tax thereon.
CONSEQUENCES OF EXCHANGING OUTSTANDING NOTES
Holders of Outstanding Notes who do not exchange their Outstanding Notes
for Exchange Notes pursuant to the Exchange Offer will continue to be subject to
the provisions in the Indenture regarding transfer and exchange of the
Outstanding Notes and the restrictions on transfer of such Outstanding Notes as
set forth in the legend thereon as a consequence of the issuance of the
Outstanding Notes pursuant to exemptions from, or in transactions not subject
to, the registration requirements of the Securities Act and applicable state
securities laws. In general, the Outstanding Notes may not be offered or sold,
unless registered under the Securities Act, except pursuant to an exemption
from, or in a transaction not subject to, the Securities Act and applicable
state securities laws. The Company does not currently anticipate that it will
register Outstanding Notes under the Securities Act. Based on interpretations by
the staff of the Commission, as set forth in no-action letters issued to third
parties, the Company believes that Exchange Notes issued pursuant to the
Exchange Offer in exchange for Outstanding Notes may be offered for resale,
resold or otherwise transferred by holders thereof (other than any such holder
which is an 'affiliate' of the Company within the meaning of Rule 405 under the
Securities Act) without compliance with the registration and prospectus delivery
provisions of the Securities Act, provided that such Exchange Notes are acquired
in the ordinary course of such holders' business and such holders have no
arrangement with any person to participate in the distribution of such Exchange
Notes. However, the Company does not intend to request the Commission to
consider, and the Commission has not considered, the Exchange Offer in the
context of a no-action letter and there can be no assurance that the staff of
the Commission would make a similar determination with respect to the Exchange
Offer as in such other circumstances. Each holder, other than a broker-dealer,
must acknowledge that (i) the Exchange Notes received by such holder will be
acquired in the ordinary course of its business, (ii) at the time of the
consummation of the Exchange Offer such holder will have not engaged in, and
does not intend to engage in, a distribution of Exchange Notes and has no
arrangement or understanding to participate in a distribution of Exchange Notes
and (iii) such holder is not an affiliate of the Company within the meaning of
Rule 405 of the Securities Act or if it is such an affiliate, that it will
comply with the registration and prospectus delivery requirements of the
Securities Act, to the extent applicable. If any holder is an affiliate of the
Company, is engaged in or intends to engage in or has any arrangement or
understanding with respect to the distribution of the Exchange Notes to be
acquired pursuant to the Exchange Offer, such holder (i) could not rely on the
applicable interpretations of the staff of the Commission and (ii) must comply
with the registration and prospectus delivery requirement of the Securities Act
in connection with any resale transaction. Each broker-dealer that receives
Exchange Notes for its own account pursuant to the Exchange Offer must
acknowledge that it will deliver a prospectus in connection with any resale of
such Exchange Notes. The Letter of
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Transmittal states that by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an 'underwriter' within the
meaning of the Securities Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of Exchange Notes received in exchange for Outstanding Notes, where
such Outstanding Notes were acquired by such broker-dealer as a result of
market-making activities or other trading activities. The Company has agreed
that, for a period of 180 days after the Expiration Date, it will make this
Prospectus available to any broker-dealer for use in connection with any such
resale. See 'Plan of Distribution.' However, to comply with state securities
laws, the Exchange Notes may not be offered or sold in any state unless they
have been registered or qualified for sale in such state or an exemption from
registration or qualification is available and is complied with. The offer and
sale of the Exchange Notes to 'qualified institutional buyers' (as such term is
defined under Rule 144A of the Securities Act) is generally exempt from
registration or qualification under state securities laws. The Company currently
does not intend to register or qualify the sale of the Exchange Notes in any
state where an exemption from registration or qualification is required and not
available.
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USE OF PROCEEDS
There will be no cash proceeds to the Company from the Exchange Offer.
This Exchange Offer is intended to satisfy certain of the Company's
obligations under the Placement Agreement and the Registration Rights Agreement.
The Company will not receive any cash proceeds from the issuance of the Exchange
Notes offered hereby. In consideration for issuing the Exchange Notes
contemplated in this Prospectus, the Company will receive Outstanding Notes in
like principal amount, the form and terms of which are the same as the form and
terms of the Exchange Notes (which they replace), except as otherwise described
herein. The Outstanding Notes surrendered in exchange for Exchange Notes will be
retired and canceled and cannot be reissued. Accordingly, issuance of the
Exchange Notes will not result in any increase or decrease in the indebtedness
of the Company.
The net proceeds of the Original Offering were approximately $97 million.
The net proceeds from the Original Offering were used by the Company to repay
bank indebtedness and for general corporate purposes, which may include the
purchase of additional aircraft and the refinancing of existing aircraft. As of
June 30, 1997, the weighted average interest rate on borrowings under the
Existing Credit Facility was approximately 8.3% per annum.
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CAPITALIZATION
The following table sets forth (i) the unaudited actual consolidated
capitalization of the Company as of June 30, 1997 and (ii) the unaudited pro
forma consolidated capitalization of the Company as of June 30, 1997 after
giving effect to (w) the repayment of $112 million of indebtedness under the
Existing Credit Facility out of available cash on June 30, 1997, (x) the
Original Offering, and (y) the borrowing of the maximum availability under the
New Credit Facility with the proceeds therefrom held in cash. This table should
be read in conjunction with the consolidated financial statements of the Company
and notes thereto included elsewhere in this Prospectus. Other than as disclosed
in this Prospectus, there has been no material change in the capitalization of
the Company since June 30, 1997 to the date hereof. See 'Management's Discussion
and Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources' and 'Use of Proceeds.'
<TABLE>
<CAPTION>
JUNE 30, 1997
----------------------
ACTUAL PRO FORMA
-------- ---------
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Cash(1)(2).................................................................... $ 65,396 $ 90,396
-------- ---------
-------- ---------
Short-term debt (consisting of current maturities of long-term debt).......... $ 35,226 $ 9,356
-------- ---------
Long-term debt
Secured bank debt, due 1999(1)........................................... 86,130 0
Secured bank debt, due 2001(3)........................................... -- 40,000
Tax-exempt mortgage bonds, due 2020...................................... 6,000 6,000
Tax-exempt mortgage bonds, due 2025...................................... 10,000 10,000
10 1/2% Senior Notes due 2004............................................ -- 100,000
Unsecured debt........................................................... 7,342 7,342
Other notes.............................................................. 21 21
-------- ---------
Total long-term debt................................................ 109,493 163,363
-------- ---------
Total debt..................................................... 144,719 172,719
-------- ---------
Total shareholders' equity................................ 57,812 57,812
-------- ---------
Total capitalization...................................... $202,531 $230,531
-------- ---------
-------- ---------
</TABLE>
- ------------
(1) At June 30, 1997, the Company had borrowed $112 million under the Existing
Credit Facility (less $10 million for outstanding letters of credit), the
proceeds of which were held in cash. On July 1, 1997, $57 million was
repaid.
(2) The remaining net proceeds from the Original Offering, after using a portion
to repay bank indebtedness, will be used for general corporate purposes,
which may include the purchase of additional aircraft and the refinancing of
existing aircraft.
(3) Following the consummation of the Original Offering, the Company implemented
a $50 million revolving line of credit under the New Credit Facility (which
for comparison purposes has been shown as fully drawn (less $10 million for
outstanding letters of credit) with the proceeds held in cash). See
'Description of the New Credit Facility.'
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SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data are derived from the
consolidated financial statements of Amtran for the respective periods
presented. The consolidated financial statements for each of the five years
ended December 31, 1996, have been audited by Ernst & Young LLP, independent
auditors. The consolidated financial data for the six month periods ended June
30, 1996 and 1997 are unaudited but include all adjustments, consisting only of
normal recurring adjustments, which, in the opinion of management, are necessary
for a fair presentation of the financial position and results of operations for
these periods. The results for the six months ended June 30, 1997 are not
necessarily indicative of the results to be expected for the full year. The
consolidated financial data should be read in conjunction with the consolidated
financial statements of the Company and notes thereto and 'Management's
Discussion and Analysis of Financial Condition and Results of Operations'
included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
---------------------------------------------------- -------------------
1992 1993 1994 1995 1996 1996 1997
-------- -------- -------- -------- -------- -------- --------
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Operating revenues:
Charter............................. $324,064 $292,032 $295,890 $307,091 $310,569 $156,230 $193,365
Scheduled service................... 61,117 138,089 240,675 361,967 386,488 216,119 169,257
Ground package...................... 17,641 17,189 20,248 20,421 22,302 12,862 11,025
Other............................... 18,968 20,599 23,709 25,530 31,492 17,319 12,824
-------- -------- -------- -------- -------- -------- --------
Total operating
revenues................ 421,790 467,909 580,522 715,009 750,851 402,530 386,471
-------- -------- -------- -------- -------- -------- --------
Operating expenses:
Salaries, wages and benefits........ 84,254 96,104 113,789 141,072 163,990 81,906 84,407
Fuel and oil........................ 80,217 85,418 106,057 129,636 161,226 80,671 77,070
Handling, landing and navigational
fees.............................. 42,870 48,918 60,872 74,400 70,122 36,347 34,462
Passenger service................... 23,904 20,918 29,804 34,831 32,745 16,914 15,774
Aircraft rentals.................... 37,371 44,428 48,155 55,738 65,427 34,396 28,284
Aircraft maintenance, materials and
repairs........................... 34,037 32,838 46,092 55,423 55,175 27,883 24,925
Depreciation and amortization(1).... 40,820 37,418 46,178 55,827 61,661 30,705 29,436
Other............................... 75,725 95,247 121,160 150,146 176,561 91,203 83,364
-------- -------- -------- -------- -------- -------- --------
Total operating
expenses................ 419,198 461,289 572,107 697,073 786,907 400,025 377,722
-------- -------- -------- -------- -------- -------- --------
Operating income (loss)(2).......... 2,592 6,620 8,415 17,936 (36,056) 2,505 8,749
-------- -------- -------- -------- -------- -------- --------
Other income (expense):
Gain on sale of surplus
takeoff/landing slots............. 500 -- -- -- -- -- --
Interest income..................... 223 292 191 410 617 268 225
Interest expense.................... (6,898) (3,872) (3,656) (4,163) (4,465) (2,177) (3,320)
Other............................... 940 826 929 470 323 192 183
-------- -------- -------- -------- -------- -------- --------
Other income (expense),
net..................... (5,235) (2,754) (2,536) (3,283) (3,525) (1,717) (2,912)
-------- -------- -------- -------- -------- -------- --------
Income (loss) before income taxes...... (2,643) 3,866 5,879 14,653 (39,581) 788 5,837
Income taxes (credits)................. (503) 831 2,393 6,129 (12,907) 720 3,364
-------- -------- -------- -------- -------- -------- --------
Net income (loss)...................... $ (2,140) $ 3,035 $ 3,486 $ 8,524 $(26,674) $ 68 $ 2,473
-------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- --------
Net income (loss) per adjusted
share(3)............................ $ (0.24) $ 0.28 $ 0.30 $ 0.74 $ (2.31) $ 0.01 $ 0.21
-------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- --------
</TABLE>
35
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
---------------------------------------------------- -------------------
1992 1993 1994 1995 1996 1996 1997
-------- -------- -------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA (AT END OF
PERIOD):
Cash............................. $ 35,719 $ 45,024 $ 61,752 $ 92,741 $ 73,382 $ 86,621 $ 65,396
Non-cash working capital
(deficiency)(4)............... (62,308) (48,601) (68,166) (80,639) (65,472) (83,292) (64,645)
Property and equipment, net...... 166,882 172,244 223,104 240,768 224,540 274,961 231,298
Total assets..................... 239,029 269,830 346,288 413,137 370,287 437,967 376,732
Short-term debt (including
current maturities)........... 20,375 18,242 8,447 3,606 30,271 1,770 35,226
Long-term debt................... 67,574 61,090 109,659 134,641 119,786 156,185 109,493
Total debt....................... 87,949 79,332 118,106 138,247 150,057 157,955 144,719
Shareholders' equity(5).......... 32,469 69,941 72,753 81,185 54,744 81,461 57,812
OTHER FINANCIAL DATA:
EBITDAR(6)....................... $ 82,446 $ 89,584 $103,868 $130,381 $ 91,972 $ 68,066 66,877
EBITDA(6)........................ 45,075 45,156 55,713 74,643 26,545 33,670 38,593
Net cash provided by operating
activities.................... 53,741 33,896 75,297 87,078 32,171 35,610 38,049
Net cash used in investing
activities.................... (28,325) (37,440) (80,400) (44,032) (63,161) (42,859) (40,698)
Net cash provided by (used in)
financing activities.......... (15,884) 12,849 21,831 (12,057) 11,631 1,129 (5,337)
Ratio of earnings to fixed
charges(7).................... -- 1.24 1.32 1.60 -- -- 1.35
Deficiency of earnings available
to cover fixed charges(7)..... $ 2,643 -- -- -- $ 40,931 $ 912 --
</TABLE>
- ------------
(1) As of January 1, 1992, Amtran lengthened its estimate of the useful lives of
its L-1011 aircraft, which reduced depreciation expense by $3.4 million in
1992.
(2) Amtran has reclassified gain (loss) on sale of operating assets for
1992-1995 from nonoperating gain (loss) to operating income (loss) to be
consistent with the 1996 presentation. Also, in the third quarter of 1996,
Amtran recorded a $4.7 million loss on the disposal of leased assets
associated with both Boeing 757-200 aircraft transactions. See
'Business -- 1996 Restructuring of Scheduled Service Operations.'
(3) Net income (loss) per adjusted share is based on average shares outstanding
during the period, adjusted to give effect to the reclassification effected
in December 1992 and the retroactive effect of the stock dividend
distributed in March 1993, which resulted in 9,090,000 shares outstanding
during all periods presented.
(4) Non-cash working capital consists of total current assets (excluding cash)
less total current liabilities (excluding current maturities of long term
debt).
(5) No dividends were paid in any of the periods presented.
(6) EBITDAR represents net income plus interest expense (net of capitalized
interest), income tax expense, depreciation, amortization and aircraft
rentals. EBITDA represents net income plus interest expense (net of
capitalized interest), income tax expense, depreciation and amortization.
EBITDAR and EBITDA are presented because each is a widely accepted financial
indicator of a company's ability to incur and service debt. However, EBITDAR
and EBITDA should not be considered in isolation, as a substitute for net
income or cash flow data prepared in accordance with generally accepted
accounting principles or as a measure of a company's profitability or
liquidity.
(7) The 'ratio of earnings to fixed charges' represents earnings divided by
fixed charges, as defined in the following paragraph. The 'deficiency'
represents the amount of fixed charges in excess of earnings.
For purposes of these computations, earnings consist of income (loss) before
income taxes, plus fixed charges, adjusted to exclude the amount of any
interest capitalized during the period. Fixed charges include the total of:
(i) interest, whether expensed or capitalized; (ii) amortization of debt
expense relating to any indebtedness, whether expensed or capitalized; and
(iii) such portion of rental expense as can be demonstrated to be
representative of the interest factor.
36
<PAGE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
Amtran is a leading provider of charter airline services, and on a targeted
basis scheduled airline services, to leisure and other value-oriented travelers.
Amtran, through its principal subsidiary, ATA, has been in operation for 24
years and currently operates the eleventh largest airline in the United States
in terms of 1996 RPMs. ATA provides charter services throughout the world to
independent tour operators and the U.S. military. The Company provides scheduled
nonstop service primarily from its gateway cities of Indianapolis,
Chicago-Midway, and Milwaukee to popular vacation destinations such as Hawaii,
Las Vegas, Florida, California, Mexico and the Caribbean.
An analysis by the Company in 1996 of the profitability of its scheduled
service and charter service business units revealed that a significant number of
scheduled service markets being served by the Company had become increasingly
unprofitable. The Company believes that several key factors contributed to the
deterioration of the profitability of its scheduled service in late 1995 and
1996, including (i) a significant increase in competition from larger carriers
in the scheduled service markets served by the Company, (ii) the negative impact
on low fare carriers resulting from unfavorable media coverage of the effects of
the ValuJet accident in Florida and, to a lesser extent, the Company's own
decompression incident, (iii) a significant increase in fuel costs and (iv) a
federal excise tax on jet fuel beginning in the fourth quarter of 1995.
In August 1996, the Company announced a significant reduction in scheduled
service operations. More than one-third of scheduled service departures and ASMs
were included in this schedule reduction. The Company eliminated its
unprofitable Boston and intra-Florida operations. The Company also exited, or
reduced in frequency, operations to other selected markets from Chicago-Midway,
Indianapolis and Milwaukee. In conjunction with its scheduled service reduction,
the Company announced a 15% reduction of its work force, including both
employees and contractors.
In addition, in 1996 the Company optimized its mix of aircraft. The Company
reduced the number of Boeing 757-200 aircraft from thirteen to seven units. An
advantage of the new fleet configuration is that all seven Boeing 757-200
aircraft have been assigned to mission-specific routes that could not have been
served by the Company's other aircraft. The Company also reduced operating costs
by switching to an all Rolls-Royce powered Boeing 757 fleet. The commonality of
aircraft and engines yield benefits to the Company in the form of decreased
maintenance and training costs.
As a result of the 1996 Restructuring, the Company believes it has
established a better platform from which to pursue its strategy. The Company
also incurred substantial costs in 1996, which it does not expect to incur in
future years.
37
<PAGE>
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, operating
revenues and expenses expressed as cents per ASM.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDING DECEMBER 31, JUNE 30,
------------------------------- ----------------
1994 1995 1996 1996 1997
---- ---- ----- ---- ----
(CENTS PER ASM)
<S> <C> <C> <C> <C> <C>
Operating revenues................................ 5.56 5.71 5.65 5.80 6.35
Operating expenses:
Salaries, wages and benefits................. 1.09 1.13 1.23 1.18 1.39
Fuel and oil................................. 1.02 1.03 1.21 1.16 1.27
Handling, landing and navigation fees........ 0.58 0.59 0.53 0.52 0.57
Depreciation and amortization................ 0.44 0.45 0.47 0.44 0.48
Aircraft rentals............................. 0.46 0.44 0.49 0.50 0.46
Aircraft maintenance, materials and
repairs.................................... 0.44 0.44 0.42 0.40 0.41
Passenger service............................ 0.29 0.28 0.25 0.24 0.26
Crew and other employee travel............... 0.25 0.25 0.27 0.25 0.28
Commissions.................................. 0.17 0.20 0.20 0.22 0.21
Ground package cost.......................... 0.14 0.13 0.14 0.15 0.16
Other selling expenses....................... 0.08 0.12 0.13 0.15 0.11
Advertising.................................. 0.07 0.07 0.08 0.08 0.11
Facilities and other rents................... 0.05 0.06 0.07 0.06 0.07
Disposal of assets........................... -- -- 0.03 -- --
Other........................................ 0.40 0.37 0.40 0.42 0.43
---- ---- ----- ---- ----
Total operating expenses................ 5.48 5.56 5.92 5.77 6.21
---- ---- ----- ---- ----
Operating income (loss)........................... 0.08 0.15 (0.27) 0.03 0.14
---- ---- ----- ---- ----
---- ---- ----- ---- ----
ASMs (in thousands)............................... 10,443,123 12,521,405 13,295,505 6,942,394 6,090,142
</TABLE>
SIX MONTHS ENDED JUNE 30, 1997, VERSUS SIX MONTHS ENDED JUNE 30, 1996
Operating Revenues
Total operating revenues for the six months ended June 30, 1997 decreased
4.0% to $386.5 million from $402.5 million in the six months ended June 30,
1996. This decrease was due to a $46.8 million decrease in scheduled service
revenues, a $1.8 million decrease in ground package revenues and a $4.5 million
decrease in other revenues, partially offset by a $37.1 million increase in
charter revenues.
Operating revenues for the six months ended June 30, 1997, were 6.35 cents
per ASM, an increase of 9.5% from the six months ended June 30, 1996, of 5.80
cents per ASM.
Charter Revenues. The Company's charter revenues are derived principally
from independent tour operators, specialty charter customers and from the United
States military. The Company's charter product provides full-service air
transportation to hundreds of customer-designated destinations throughout the
world. Total charter revenues increased 23.8% to $193.4 million in the first six
months of 1997, as compared to $156.2 million in the same period of 1996.
Charter revenue growth, prior to scheduled service restructuring in late 1996,
had been constrained by the dedication of a significant portion of the Company's
fleet to scheduled service expansion, including the utilization of two Lockheed
L-1011 aircraft for scheduled services to Ireland and Northern Ireland between
May and September 1996. The Company's restructuring strategy, as reflected in
the Company's results of operations during the first six months of 1997,
included a renewed emphasis on charter revenue sources. The Company believes
that tour operator, specialty charter, and military operations are businesses
where the Company's experience and size provide meaningful competitive
advantage. Charter revenues represented 50.0% of total operating revenues in the
first six months of 1997, as compared to 38.8% in the comparable period of 1996.
38
<PAGE>
<PAGE>
Charter revenues derived from independent tour operators increased 1.3% to
$120.8 million in the six months ended June 30, 1997, as compared to $119.3
million in the six months ended June 30, 1996. Tour operator RPMs decreased 3.1%
to 1.740 billion in the six months ended June 30, 1997, from 1.796 billion in
the comparable 1996 period, while ASMs decreased 5.9% to 2.119 billion from
2.252 billion. Tour operator RASM increased 7.5% to 5.70 cents from 5.30 cents
between the same periods. Tour operator passengers boarded increased 3.3% to
1,118,596 in the six months ended June 30, 1997, as compared to 1,082,899 in the
comparable period of 1996; tour operator departures decreased 3.9% to 6,002 in
the six months ended June 30, 1997, as compared to 6,244 in the six months ended
June 30, 1996; and tour operator block hours decreased 4.5% to 19,843 in the six
months ended June 30, 1997, as compared to 20,772 in the six months ended June
30, 1996.
The Company operates in two principal components of the tour operator
business, known as 'track charter' and 'specialty charter.' The larger track
charter business component is generally comprised of low frequency but
repetitive domestic and international flights between city pairs, which support
high passenger load factors and are marketed through tour operators, providing
value-priced and convenient non-stop service to vacation destinations for the
leisure traveler. Since track charter resembles scheduled service in terms of
its repetitive flying patterns between fixed city pairs, it allows the Company
to achieve reasonable levels of crew and aircraft utilization (although less
than for scheduled service), and provides the Company with meaningful protection
from some fuel price increases through the use of fuel escalation reimbursement
clauses in tour operator contracts.
During the late 1996 restructuring of scheduled service operations, the
Company also sought to implement changes in track charter programs to provide
improved profit performance for this business unit. Although some tour programs
were unable to meet required economics and were therefore eliminated, other
programs have been improved, and new programs have been added, which are
anticipated to produce improved profit performance for this business unit during
the summer months of 1997. Some of the revenue per block hour and RASM
improvement noted in the second quarter of 1997 for tour operator programs was
attributable to changes in these programs which had become effective during that
quarter.
The Company believes that although price is the principal competitive
criterion for its tour operator programs, product quality, reputation for
reliability and delivery of services which are customized to specific needs have
become increasingly important to the buyer of this product. Accordingly, as the
Company continues to emphasize the growth and profitability of this business
unit, it will seek to maintain its low-cost pricing advantage, while
differentiating itself from competitors through the delivery of customized
services and the maintenance of consistent and dependable operations. In this
manner, the Company believes that it will produce significant value for its tour
operator partners by delivering an attractively priced product which exceeds the
leisure traveler's expectations.
Specialty charter is a product which is especially designed to meet the
unique requirements of the customer and is a business characterized by lower
frequency of operation and by greater variation in city pairs served than the
track charter business. Specialty charter might include such diverse contracts
as flying university alumni to football games, transporting political candidates
on campaign trips, and moving NASA space shuttle ground crews to alternate
landing sites. The Company also operates an increasing number of trips in
all-first-class configuration for certain corporate and high-end leisure
clients. Although lower utilization of crews and aircraft and infrequent service
to specialty destinations often result in higher average operating costs, the
Company has determined that the revenue premium earned by meeting special
customer requirements usually more than compensates for these increased costs.
In addition, specialty charter programs sometimes permit the Company to increase
overall aircraft utilization by providing filler traffic during periods of low
demand from other programs such as tour-operator-generated track charter. The
Company believes that it is competitively advantaged to attract this type of
business due to the size and geographic dispersion of its fleet, which reduces
costly ferry time for aircraft and crews and thus permits more competitive
pricing. The diversity of the Company's three fleet types also permits the
Company to meet a customer's particular needs by choosing the aircraft type
which provides the most economical solution for those requirements.
39
<PAGE>
<PAGE>
Charter revenues derived from the U.S. military increased 96.7% to $72.6
million in the six months ended June 30, 1997, as compared to $36.9 million in
the six months ended June 30, 1996. U.S. military RPMs increased 103.7% to 596.5
million in the six months ended June 30, 1997, from 292.8 million in the
comparable 1996 period, while ASMs increased 84.8% to 1.231 billion from 666.2
million. Military RASM increased 6.5% to 5.90 cents from 5.54 cents between the
same time periods. U.S. military passengers boarded increased 90.1% to 156,843
in the six months ended June 30, 1997, as compared to 82,512 in the comparable
period of 1996; U.S. military departures increased 97.9% to 2,727 in the six
months ended June 30, 1997, as compared to 1,378 in the six months ended June
30, 1996; and U.S. military block hours increased 105.4% to 10,596 in the first
six months of 1997 as compared to 5,158 in the first six months of 1996.
The Company participates in two related military programs known as 'fixed
award' and 'short-term expansion.' Pursuant to the U.S. military's fixed award
system, each participating airline is awarded certain 'mobilization value
points' based upon the number and type of aircraft made available by that
airline for military flying. In order to increase the number of points so
awarded, in 1992 the Company entered into a contractor teaming arrangement with
four other cargo and passenger airlines serving the U.S. military. Under this
arrangement, the team has a greater likelihood of receiving fixed award business
and, to the extent that the award includes passenger transport, the opportunity
for the Company to operate this flying is enhanced, since the Company represents
a significant portion of the total passenger transport capacity of the team. As
part of its participation in this teaming arrangement, the Company pays a
commission to the team, which passes that revenue on to all team members based
upon their mobilization points. All airlines participating in the fixed award
business contract annually with the U.S. military from October 1 to the
following September 30. For each contract year, reimbursement rates are
determined for aircraft types and mission categories based upon operating cost
data submitted by the participating airlines.
Short-term expansion business is awarded by the U.S. military first on a
pro rata basis to those carriers who have been awarded fixed contract business,
and then to any other carrier with aircraft availability. Expansion flying is
generally offered to airlines on very short notice.
The U.S. military business grew at the fastest year-over-year rate of any
business unit of the Company during the first half of 1997. In the first six
months of 1997, the Company's U.S. military revenues represented 18.8% of total
operating revenues, as compared to 9.2% in the same period of 1996. As a result
of the restructuring of scheduled service and the rationalization of the
Company's fleet in 1996, the Company committed four of its seven remaining
Boeing 757-200 aircraft to the U.S. military for the year ending September 30,
1997. As a result of an analysis undertaken during 1996, the Company was also
successful in more accurately documenting the actual costs associated with
military flying and was therefore able to obtain rate increases for the contract
year ending September 30, 1997. The Company has obtained additional rate
increases for the contract year ending September 30, 1998.
Because military flying is generally less seasonal than leisure travel
programs, the Company believes that a larger U.S. military business operation
will tend to have a stabilizing impact on seasonal earnings fluctuations. The
Company is also contractually protected from changes in fuel prices. The Company
further believes that its fleet of aircraft is competitively advantaged to
serving the transportation needs of the U.S. military. Although foreign bases
have been reduced in troop size, the U.S. military still desires to maintain its
service frequency to those bases and therefore often has a preference for
smaller-capacity, long-range aircraft such as the Company's Boeing 757-200.
Furthermore, in 1993, the Company became the first North American carrier to
receive FAA certification to operate Boeing 757-200 aircraft with 180-minute
Extended Twin Engine Operation (ETOPS), which permits these aircraft to operate
missions over water which can be up to three hours from the nearest alternate
airport. The Company believes that this certification, which applies to all of
the Company's Boeing 757-200 fleet, provides a competitive advantage in
receiving awards of certain military flying. Despite these advantages the
Company believes that increases in U.S. military flying will moderate in future
periods.
Scheduled Service Revenues. Scheduled service revenues in the six months
ended June 30, 1997, decreased 21.7% to $169.3 million from $216.1 million in
the six months ended June 30, 1996. Scheduled service revenues comprised 43.8%
of total operating revenues in the six months ended June 30, 1997, as compared
to 53.7% of operating revenues in the same period of the prior year. Scheduled
service RPMs
40
<PAGE>
<PAGE>
decreased 20.8% to 2.071 billion from 2.615 billion, while ASMs decreased 29.8%
to 2.724 billion from 3.883 billion, resulting in an increase of 8.6 points in
passenger load factor to 76.0% in the six months ended June 30, 1997, from 67.4%
in the six months ended June 30, 1996. Scheduled service yield in the six months
ended June 30, 1997, decreased 1.1% to 8.17 cents from 8.26 cents in the same
period of 1996, while RASM increased 11.5% to 6.21 cents from 5.57 cents between
the same comparable periods. Scheduled service departures in the six months
ended June 30, 1997, decreased 22.5% to 13,391 from 17,273 in the six months
ended June 30, 1996; block hours decreased 23.6% to 35,001 in the six months
ended June 30, 1997, from 45,791 in the same period of 1996; and passengers
boarded decreased 25.3% between periods to 1,469,860, as compared to 1,968,133.
The Company added scheduled service capacity during the second quarter of
1996 which primarily included expanded direct and connecting frequencies through
the Company's four major gateway cities of Chicago-Midway, Indianapolis,
Milwaukee and Boston to west coast and Florida markets already being served. New
seasonal scheduled service was also introduced in the second quarter of 1996
from New York to Shannon and Dublin, Ireland, and Belfast, Northern Ireland, and
from the midwest to Seattle. New year-round service was also added to San Diego,
California, in the second quarter of 1996.
The introduction of this new capacity coincided closely, however, with the
May 11, 1996 ValuJet accident in Florida and the resulting persistent negative
media attention directed toward airline safety, and especially toward low-fare
airlines. On May 12, the Company experienced a cabin decompression incident on
one of its own flights which, although it resulted in no serious injury to crew
or passengers, nevertheless attracted additional negative media attention,
occurring as it did one day after the ValuJet tragedy. As a consequence, during
the second half of May and the month of June 1996, the Company estimates that it
lost significant scheduled service revenues from both canceled reservations and
reservations which were never received.
In association with the 1996 restructuring of the Company's scheduled
service operations, a significant reduction in scheduled service was announced
on August 26, 1996. Between September 4 and December 2, 1996, more than
one-third of the scheduled service capacity operating during the 1996 summer
months was eliminated. All scheduled service flights to and from Boston were
eliminated by December 2, 1996, including service to West Palm Beach, San Juan,
Montego Bay, St. Petersburg, Las Vegas, Orlando and Ft. Lauderdale.
Intra-Florida services connecting the cities of Ft. Lauderdale, Orlando, Miami,
Sarasota, St. Petersburg and Ft. Myers were eliminated as of October 27, 1996.
Other selected services from Indianapolis, Chicago-Midway and Milwaukee to
Florida and to west-coast destinations were also reduced or eliminated by
October 27, 1996. The Company's scheduled service between Chicago-Midway and the
cities of Indianapolis and Milwaukee was replaced with a code share agreement
with Chicago Express on October 27, 1996 as discussed further below. In
association with this service reduction, all scheduled service ceased at
Seattle, Grand Cayman, West Palm Beach, Montego Bay, Miami and San Diego.
After this scheduled service reduction, the Company's core scheduled
service flying included flights between Chicago-Midway and five Florida cities,
Las Vegas, Phoenix, Los Angeles and San Francisco; Indianapolis to four Florida
cities, Las Vegas and Cancun; Milwaukee to three Florida cities; Hawaii service
to San Francisco, Los Angeles and Phoenix; and service between Orlando and San
Juan and Nassau.
As a result of the restructuring of scheduled service operations in the
manner described above, the scheduled service component of the Company's
operations was profitable in the first and second quarters of 1997.
Profitability was achieved through a combination of significantly higher load
factors between periods, generating improved RASM, even though total revenues in
scheduled service declined between years. The Company believes that
profitability was enhanced in this business unit through the selective
elimination of flights which had previously produced below-average load factors
and yield, and that the elimination of intra-Florida flying in particular was a
prominent factor in this improvement. Profitability was further enhanced in
certain scheduled service markets through the reassignment of aircraft fleet
types to provide better balance within markets between revenues, costs, and
aircraft operational capabilities.
On October 27, 1996 the Company also implemented a commuter code share
partnership with Chicago Express to provide incremental connecting traffic
between Indianapolis, Milwaukee and other
41
<PAGE>
<PAGE>
smaller midwestern cities into the Company's Chicago-Midway connections with
certain Florida and west-coast destinations. This partnership was replaced with
an agreement effective April 1, 1997, under which the Company now operates
19-seat Jetstream 31 propeller aircraft between its Chicago-Midway hub and the
cities of Indianapolis, Milwaukee, Des Moines, Dayton and Grand Rapids.
In addition to the rationalization of markets, schedules and aircraft,
during the first half of 1997, the Company also achieved a more profitable
balance between scheduled service seat inventory and price-driven customer
demand for those seats, consistent with competitive conditions in those markets.
A decline in yield between periods was more than offset by the positive impact
of load factor growth for scheduled service. Yield in the first six months of
1997 decreased 1.0% to 8.17 cents from 8.26 cents in the same period of 1996.
Load factor growth was 12.9% between the six months ended June 30, 1997 and the
comparable period of 1996. Due to the high proportion of fixed versus variable
costs associated with operating a scheduled flight, the positive profit
contribution of increased load factor was much more significant than the
offsetting loss in average yield which resulted from more aggressive pricing of
certain seat inventory.
Scheduled service profitability improvement in the second quarter of 1997
was accomplished in spite of what would normally have been a demand-dampening
effect from the reintroduction of the U.S. departure and 10% federal excise
taxes on tickets on March 7, 1997, which had expired on January 1, 1997. In
August, 1997, federal legislation was enacted which indefinitely extends these
taxes. The U.S. departure tax for international destinations was increased from
$6 to $12 per passenger, and a new U.S. arrivals tax of $12 per passenger was
added for passengers arriving into the United States from international cities.
Effective October 1, 1997, the new tax law also changes the method of
computation of the federal excise tax from a simple 10% of ticket sale value to
a declining percentage of ticket sale value (ranging from 9.0% to 7.5%), plus an
increasing inflation-indexed charge per passenger segment flown (ranging from $1
to $3). The Company does not currently expect that the change in federal excise
tax computation will place it at either a significant pricing advantage or
disadvantage as compared to the previous computation method.
The Company continues to evaluate the profit and loss performance of its
scheduled service business, and the Company may further reduce or potentially
restore some scheduled service operations. The Company began new service in June
1997, between New York's John F. Kennedy International Airport and
Chicago-Midway, Indianapolis and St. Petersburg, and has added several
frequencies between the midwest and the west coast for the summer season. New
York service to Chicago-Midway and St. Petersburg has been retained for the
1997-98 winter season.
Ground Package Revenues. The Company earns ground package revenues through
the sale of hotel, car rental and cruise accommodations in conjunction with the
Company's air transportation product. The Company markets these ground packages
through its Ambassadair Travel Club subsidiary exclusively to club members and
through its ATA Vacations subsidiary to the general public. For the six months
ended June 30, 1997, ground package revenues decreased 14.7% to $11.0 million
from $12.9 million in the similar 1996 period.
The Company's Ambassadair Travel Club offers hundreds of
tour-guide-accompanied vacation packages to its approximately 34,000 individual
and family members annually. For the six months ended June 30, 1997, the Club
recorded a 3.9% increase in packages sold over the same 1996 period. During the
six months ended June 30, 1997, average package price was unchanged as compared
to the same period in 1996.
ATA Vacations offers numerous ground package combinations to the general
public for use on the Company's scheduled service flights throughout the United
States and to selected Florida, Mexico and Caribbean destinations. These
packages are marketed through travel agents as well as directly by the Company's
own reservations centers. For the six months ended June 30, 1997, the number of
ground packages sold decreased 4.8% as compared to the same 1996 period.
Reductions in the number of ground packages sold was mainly due to the reduction
of the Company's scheduled service operations between years. For each ground
package sold decreased 8.3% as compared to the second quarter of 1996, and for
the six months ended June 30, 1997, the average package price decreased by 22.9%
as compared to the same 1996 period.
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The average revenue earned by the Company for a ground package sale is a
function of the mix of vacation destinations served, the quality and types of
ground accommodations offered, and general competitive conditions with other air
carriers offering similar products in the Company's markets, all of which
factors can change from period to period.
Other Revenues. Other revenues are comprised of the consolidated revenues
of affiliated companies, together with miscellaneous categories of revenue
associated with the scheduled and charter operations of ATA. Other revenues
decreased 26.0% to $12.8 million in the six months ended June 30, 1997, as
compared to $17.3 million in the comparable 1996 period, primarily due to a
reduction of $4.2 million in revenues earned between periods through providing
substitute service to other airlines. A substitute service agreement typically
provides for the Company to operate an aircraft with its own crews on routes
designated by the customer airline to carry the passengers of that airline for a
limited period of time.
OPERATING EXPENSES
Salaries, Wages and Benefits. Salaries, wages and benefits include the cost
of salaries and wages paid to the Company's employees, together with the
Company's cost of employee benefits and payroll-related state and federal taxes.
Salaries, wages and benefits expense for the six months ended June 30, 1997,
increased 3.1% to $84.4 million from $81.9 million for the six months ended June
30, 1996.
Approximately $3.2 million of the increase between the six month periods
ending June 30, 1997 and 1996, was attributable to changes made in the third
quarter of 1996 in senior executive positions and associated senior executive
compensation plans. A $3.0 million compensation package was prepaid to the
Company's former President and Chief Executive Officer during the fourth quarter
of 1996 and the first quarter of 1997, which was being amortized to expense over
the anticipated two year term of his employment ending August 1998. Due to his
resignation in late May 1997, a one-time charge to expense for the unamortized
$2.0 million prepaid balance was made in the second quarter of 1997 to salaries,
wages and benefits, whereas no such charge to expense was incurred in the prior
year.
The cost of salaries and wages earned by cockpit crew members and related
support staff for the six months ended June 30, 1997 were approximately $3.0
million higher than for the same period in 1996. These cost increases were
incurred even though jet block hours flown by cockpit crew members declined by
14.4% in the six months ended June 30, 1997, as compared to the same period in
1996. This increase in the unit cost of cockpit crews was attributable to the
following significant factors: (i) the implementation of the cockpit crew
collective bargaining agreement in August 1996, under which a 7.5% rate increase
and more restrictive work rules became effective; (ii) crew utilization for U.S.
military flying is significantly lower than for scheduled service and tour
operator flying, and the increase in U.S. military block hours as a percentage
of total block hours to 16.9% in the first half of 1997, as compared to 7.1% in
the first half of 1996, contributed to lower average productivity; (iii) cockpit
crew shortages during the first and second quarters of 1997 resulted in the need
to increase premium pay to cockpit crew members in order to adequately staff the
spring and early summer flying schedule; and (iv) cockpit crew productivity was
further reduced by the fleet restructuring completed during 1996, which
increased the percentage of jet block hours flown by three-crew-member jet
aircraft (Lockheed L-1011 and Boeing 727-200) to 78.5% in the first six months
of 1997, as compared to 68.7% in the comparable period of 1996. The Company
estimates that, as a result of these factors, a cockpit crew cost per ASM
increase equivalent to approximately $5.6 million was incurred for the six
months ended June 30, 1997, as compared to the same period of 1996. With the
exception of costs resulting from the temporary crew shortages, which the
Company expects to have resolved by the end of 1997, unit costs for cockpit
crews are expected to remain at current levels.
The salaries, wages and benefits cost for employee groups other than senior
executives and cockpit crews declined by $3.7 million in the six months ended
June 30, 1997, as compared to the same period in 1996. These costs declined as a
result of the decline in equivalent full-time employment between periods, as
well as due to the restructuring of certain employee benefit plans effective
January 1, 1997. Total equivalent full-time employment for labor groups other
than cockpit and cabin crews declined by 11.0% for the six months ended June 30,
1997, as compared to the same period in 1996.
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Salaries, wages and benefits expense for the six months ended June 30,
1997, was 1.39 cents per ASM, an increase of 17.8% from the six months ended
June 30, 1996, of 1.18 cents per ASM.
Fuel and Oil. Fuel and oil expense for the six months ended June 30, 1997,
decreased 4.5% to $77.1 million from $80.7 million in the six months ended June
30, 1996. During the six months ended June 30, 1997, as compared to the same
period in 1996, the Company consumed 9.6% fewer gallons of jet fuel for flying
operations, which resulted in a reduction in fuel expense of approximately $8.8
million between periods. The reduction in jet fuel consumed was due to the
reduced number of block hours of flying operations between periods. The Company
flew 62,543 jet block hours in the six months ended June 30, 1997, as compared
to 73,040 jet block hours in the six months ended June 30, 1996, a decrease of
14.4% between periods. During the six months ended June 30, 1997, the Company's
average cost per gallon of fuel consumed increased by 6.7% as compared to the
same period in 1996, which resulted in an increase in fuel and oil expense of
approximately $4.9 million between years. Virtually all of this jet fuel price
increase was experienced during the first quarter of 1997, as compared to the
first quarter of 1996. Also during the six months ended June 30, 1997, the
Company incurred approximately $0.3 million in fuel and oil expense to operate
the Jetstream 31 aircraft under its agreement with Chicago Express, which
agreement was not in effect in the six months ended June 30, 1996.
Fuel and oil expense for the six months ended June 30, 1997, was 1.27 cents
per ASM, an increase of 9.5% from the six months ended June 30, 1996 of 1.16 per
ASM. The increase in the cost per ASM of fuel and oil expense for both sets of
comparative periods was partly due to the change in mix of jet block hours flown
from the more-fuel-efficient twin-engine Boeing 757-200 aircraft to the
less-fuel-efficient three-engine Boeing 727-200 and Lockheed L-1011 aircraft. In
the six months ended June 30, 1997, 21.5% of total jet block hours were flown by
the Boeing 757-200 fleet, as compared to 31.3% in the comparable period of 1996.
First quarter 1997 jet fuel price increases also contributed to the increase in
cost per ASM for fuel and oil for the six months ended June 30, 1997, as
compared to the same period of the prior year, although jet fuel prices were
essentially unchanged between the second quarters of 1997 and 1996.
Handling, Landing and Navigation Fees. Handling and landing fees include
the costs incurred by the Company at airports to land and service its aircraft
and to handle passenger check-in, security and baggage where the Company elects
to use third-party contract services in lieu of its own employees. Where the
Company uses its own employees to perform ground handling functions, the
resulting cost appears within salaries, wages and benefits. Air navigation fees
are assessed when the Company's aircraft fly over certain foreign airspace.
Handling, landing and navigation fees decreased by 5.0% to $34.5 million in
the six months ended June 30, 1997, as compared to $36.3 million in the same
period of 1996. During the six months ended June 30, 1997, the average cost per
system jet departure for third-party aircraft handling increased 7.4% as
compared to the same period of 1996, and the average cost of landing fees per
system jet departure increased 4.4% between the same periods. The absolute
number of system-wide jet departures between the six months ended June 30, 1997
and 1996, declined by 23.9% to 19,273 from 25,334, which resulted in
approximately $5.9 million in volume-related handling and landing expense
reductions between periods. This volume-related decline was offset, however, by
an approximately $2.2 million price-related handling and landing expense
increase between periods attributable to a change in jet departure mix. Because
each airport served by the Company has a different schedule of fees, including
variable prices for different aircraft types, average handling and landing fee
costs are a function of the mix of airports served and the fleet composition of
departing aircraft. On average, handling and landing fee costs for Lockheed
L-1011 wide-body aircraft are higher than for narrow-body aircraft, and average
costs at foreign airports are higher than at many U.S. domestic airports. As a
result of the downsizing of the Company's narrow-body Boeing 757-200 fleet and
the shift of revenue production emphasis towards charter operations, the
Company's jet departures in the first half of 1997 included proportionately more
international and wide-body operations than in the first half of 1996. In the
six months ended June 30, 1997, 22.4% of the Company's jet departures were
operated with wide-body aircraft, as compared to 19.8% in the comparable period
of 1996, and 23.9% of the Company's jet departures in the six months ended June
30, 1997, were from international locations, as compared to 16.9% in the same
period of the prior year. During the six months ended June 30, 1997, an increase
of approximately $1.4 million in air
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navigation fees and first quarter 1997 de-icing costs was also incurred as
compared to the same period in 1996.
The cost per ASM for handling, landing and navigation fees increased 9.6%
to 0.57 cents in the six months ended June 30, 1997, as compared to 0.52 cents
in the comparable period of 1996.
Depreciation and Amortization. Depreciation reflects the periodic expensing
of the recorded cost of owned Lockheed L-1011 airframes and engines, and rotable
parts for all fleet types, together with other property and equipment owned by
the Company. Amortization is the periodic expensing of capitalized airframe and
engine overhauls for all fleet types on a units-of-production basis using
aircraft flight hours and cycles (landings) as the units of measure.
Depreciation and amortization expense for the six months ended June 30, 1997,
decreased 4.2% to $29.4 million as compared to $30.7 million in the comparable
period of 1996.
Depreciation expense attributable to owned airframes and engines decreased
$0.5 million in the six months ended June 30, 1997, as compared to the six
months ended June 30, 1996. The Company reduced its year-over-year investment in
engines and airframe improvements due to the restructuring of the Boeing 757-200
fleet in the fourth quarter of 1996. As a result of the net reduction of four
Boeing 757-200 aircraft at the end of 1996 as compared to the end of 1995, and
the complete elimination of Pratt-&-Whitney-powered Boeing 757-200s from the
fleet, some airframe and leasehold improvements were disposed of, and all spare
Pratt & Whitney engines and rotable parts were reclassified as Assets Held for
Sale in the accompanying balance sheet. None of these assets therefore gave rise
to depreciation expense in the first two quarters of 1997. The Company did
increase its investment in computer equipment and furniture and fixtures between
years; placed the west bay of the renovated Midway Hangar No. 2 into service in
mid-1996; and incurred increased debt issue costs between years relating to debt
facility and aircraft lease negotiations completed primarily in the fourth
quarter of 1996. These changes, together with increased costs pertaining to
remaining rotable components and the provision for obsolescence of aircraft
parts inventories, resulted in an increase in depreciation expense of $0.5
million in the six months ended June 30, 1997 as compared to the same period of
1996.
Amortization of capitalized engine and airframe overhauls decreased by $1.1
million for the six months ended June 30, 1997, as compared to the six months
ended June 30, 1996. The reduced cost of overhaul amortization is partly due to
the reduction of total block hours and cycles flown between comparable periods.
This expense was also favorably impacted by the late-1996 restructuring of the
Boeing 757-200 fleet and, in particular, the disposal of all
Pratt-&-Whitney-powered Boeing 757-200 aircraft. All unamortized net book values
of engine and airframe overhauls pertaining to the Pratt-&-Whitney-powered
aircraft were charged to the cost of the disposal of these assets in the fourth
quarter of 1996. The Company's seven remaining Rolls-Royce-powered Boeing
757-200 aircraft, four of which were delivered new from the manufacturer in late
1995 and late 1996, are not presently generating any engine and airframe
overhaul expense since the initial post-delivery overhauls for the Rolls-Royce-
powered Boeing 757-200s are not yet due under the Company's maintenance
programs. The net reduction in engine and airframe amortization expense in the
six months ended June 30, 1997, as compared to the same period of 1996 was
approximately $2.7 million. Engine and airframe amortization for the Company's
fleet of Boeing 727-200 aircraft increased by approximately $1.2 million between
the six month periods ended June 30, 1997 and 1996, due to the ongoing expansion
of this fleet type and due to the completion of new overhauls for Boeing 727-200
aircraft. The increase between years in engine and airframe amortization expense
for the Company's Lockheed L-1011 fleet was approximately $0.3 million and $0.1
million for the six months ended June 30, 1997 and 1996.
The cost of engine overhauls that become worthless due to early engine
failures and which cannot be economically repaired is charged to depreciation
and amortization expense in the period the engine fails. Depreciation and
amortization expense attributable to these write-offs were essentially unchanged
between the six months ended June 30, 1997, and the comparable 1996 period. When
these engine failures can be economically repaired, the related repairs are
charged to aircraft maintenance, materials and repairs expense.
Depreciation and amortization expense per ASM increased 9.1% to 0.48 cents
in the six months ended June 30, 1997, as compared to 0.44 cents in the six
months ended June 30, 1996.
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Aircraft Rentals. Aircraft rentals expense in the six months ended June 30,
1997, decreased 17.7% to $28.3 million from $34.4 million in the same period of
1996. These decreases were primarily attributable to the restructuring of the
Company's Boeing 757-200 fleet in the fourth quarter of 1996, as a result of
which the number of Boeing 757-200 aircraft operated by the Company was reduced
by four units. The reduction in the size of the Boeing 757-200 fleet was an
integral component of the Company's 1996 restructuring of scheduled service,
based upon profitability analysis which disclosed that, for some uses of the
Boeing 757-200 in the Company's markets, it was more profitable to substitute
other aircraft with lower ownership costs. Aircraft rentals expense declined by
$8.4 million between the six month periods ended June 30, 1997 and 1996, as a
result of the Boeing 757-200 fleet restructuring.
Four additional Boeing 727-200 aircraft were acquired and financed by
sale/leasebacks at various times during the first two quarters of 1996. All of
these Boeing 727-200 aircraft were operated during the entire first six months
of 1997, although most were operated during only a portion of the first six
months of 1996. These fleet additions added approximately $2.1 million in
aircraft rentals expense during the six months ended June 30, 1997, as compared
to the same period of 1996.
Aircraft rentals expense for the six months ended June 30, 1997, was 0.46
cents, a decrease of 8.0% from 0.50 cents for the same period of 1996. The
period-to-period decrease in the size of the Boeing 757-200 fleet was a
significant factor in this change since the rental cost of ASMs produced by this
fleet type is significantly higher than for the Company's other aircraft. With
the reduction in the higher-ownership-cost Boeing 757-200 aircraft in late 1996,
the Company anticipates that the cost per ASM produced by its leased aircraft
fleet will continue to be lower in future quarters.
Aircraft Maintenance, Materials and Repairs. This expense includes the cost
of expendable aircraft spare parts, repairs to repairable and rotable aircraft
components, contract labor for base and line maintenance activities, and other
non-capitalized direct costs related to fleet maintenance, including spare
engine leases, parts loan and exchange fees, and related shipping costs.
Aircraft maintenance, materials and repairs expense decreased 10.8% to $24.9
million in the six months ended June 30, 1997, from $27.9 million in the same
period of 1996. The cost per ASM increased 2.5% to 0.41 cents in the six months
ended June 30, 1997, from 0.40 cents in the same period of 1996.
Although the cost of repairs for repairable and rotable components
decreased by only $0.3 million between the first quarters of 1997 and 1996,
repair costs were $2.0 million lower in the second quarter of 1997 as compared
to the prior year, and thus $2.3 million lower for the six months ended June 30,
1997, as compared to the same period of 1996. This was due to a reduction in
both the total number of repairs performed and the average unit cost of repairs
between periods. Negotiations were completed in early 1997 with several repair
vendors which resulted in reduced unit charges for some repair activity.
Additionally, the Company established a maintenance disposition board in late
1996 which carefully reviews significant repair decisions in light of
anticipated fleet requirements and the available quantity of serviceable
components in stock.
The cost of expendable parts consumed decreased $0.6 million between the
six-month periods ended June 30, 1997 and 1996. The quarterly variations in the
cost of expendable parts consumed is closely related to seasonal differences in
the Company's heavy maintenance check programs for its fleet, which were
scheduled more effectively into lower periods of aircraft utilization occurring
in the second quarter of 1997 than they were in 1996, when aircraft availability
was more constrained due to several late deliveries of Boeing 727-200 aircraft.
The cost of maintenance contract labor increased by $1.2 million for the
six months ended June 30, 1997, as compared to the same period in 1996. The
Company contracts with third-party vendors to perform some of its heavy
maintenance checks on the Boeing 727-200 fleet, and these quarterly cost
increases were consistent with the expendable materials cost increases noted
above to complete these maintenance checks during the second quarter of 1997.
The cost of parts loans and exchanges declined by $1.3 million in the six
months ended June 30, 1997, as compared to the same period in 1996, due to
improved internal procedures to limit the need for such loans and exchanges,
which can create significant costs in very short periods of time.
All of the Company's aircraft under operating leases have certain return
conditions applicable to the maintenance status of airframes and engines as of
the termination of the lease. The Company
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accrues estimated return condition costs as a component of maintenance,
materials and repairs expense based upon the actual condition of the aircraft as
each lease termination date approaches, and based upon the Company's ability to
estimate the expected cost of conforming to these conditions. Return condition
expenses accrued in the six months ended June 30, 1997, were $0.5 million higher
than for the six months ended June 30, 1996. This increase was primarily due to
changes in the mix of aircraft leases and associated return conditions which
became effective between years.
Crew and Other Employee Travel. Crew and other employee travel is primarily
the cost of air transportation, hotels and per diem reimbursements to cockpit
and cabin crew members that is incurred to position crews away from their bases
to operate all Company flights throughout the world. The cost of air
transportation is generally more significant for the charter business unit since
these flights often operate between cities in which Company crews are not
normally based and may involve extensive international positioning of crews.
Hotel and per diem expenses are incurred for both scheduled and charter
services, although higher per diem and hotel rates generally apply to
international assignments.
The cost of crew and other employee travel increased 0.6% to $17.3 million
in the six months ended June 30, 1997, from $17.2 million in the same period of
1996. During the first six months of 1997, the Company's average
full-time-equivalent cockpit and cabin crew employment was 16.4% lower as
compared to the prior year, even though jet block hours decreased by only 14.4%
between periods. Although the Company did experience some crew shortages in the
first quarter of 1996 associated with severe winter weather, shortages of both
cockpit and cabin crews were more chronic in the first six months of 1997, and
per-crew-member travel costs were consequently higher since crews spent greater
amounts of time away from their bases to operate the Company's schedule. In
addition, average crew travel costs for the U.S. military and specialty charter
businesses are much higher than for track charter and scheduled service since
these flights more often operate away from crew bases.
The cost per ASM for crew and other employee travel increased 12.0% to 0.28
cents in the six months ended June 30, 1997, from 0.25 cents in the same period
of 1996.
Passenger Service. Passenger service expense includes the onboard costs of
meal and non-alcoholic beverage catering, the cost of alcoholic beverages and
headsets sold, and the cost of onboard entertainment programs, together with
certain costs incurred for mishandled baggage and passengers inconvenienced due
to flight delays or cancellations. For the six-month periods ended June 30, 1997
and 1996, catering represented 82.4% and 78.4%, respectively, of total passenger
service expense.
The cost of passenger service decreased 6.5% to $15.8 million in the six
months ended June 30, 1997, from $16.9 million in the same period of 1996. This
reduction was primarily caused by fewer system-wide jet passengers boarded,
which declined by 15.0% to 2,719,253 in the six months ended June 30, 1997, as
compared to 3,199,502 in the same period of 1996. However, the average cost to
cater each passenger boarded increased by 12.7% between the six-month periods
ended June 30, 1997 and 1996, due to the shift in the Company's business mix
away from scheduled service, which is lower cost with respect to catering, and
toward tour operator and military programs which have longer average stage
lengths and also generally provide a more expensive catering service.
The cost per ASM of passenger service increased 8.3% to 0.26 cents in the
six months ended June 30, 1997, from 0.24 cents in the same period of 1996.
Commissions. The Company incurs significant commissions expense in
association with the sale by travel agents of single seats on scheduled service.
In addition, the Company pays commissions to secure some tour operator and
military business. Commissions expense decreased 16.0% to $12.6 million in the
six months ended June 30, 1997 from $15.0 million in the same period of 1996.
Scheduled service commissions expense declined by $3.5 million in the six-month
period ended June 30, 1997 and 1996, as a result of the decline in scheduled
service revenues earned. Military and tour operator commissions expense
increased by $1.1 million in the same period, due to the increased level of
commissionable revenues earned in those business units in 1997 as compared to
1996.
The cost per ASM of commissions expense declined by 4.5% to 0.21 cents from
0.22 cents in the six months ended June 30, 1997, as compared to the same period
of 1996.
Ground Package Cost. Ground package cost includes the expenses incurred by
the Company for hotels, car rental companies, cruise lines and similar vendors
to provide ground and cruise
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accommodations to Ambassadair and ATA Vacations customers. Ground package cost
decreased 5.9% to $9.5 million in the six months ended June 30, 1997, as
compared to $10.1 million in the same period of 1996. This decrease in cost was
partly due to a 1.5% decrease in the total number of ground packages sold
between the six months ended June 30, 1997 and 1996 for both Ambassadair and ATA
Vacations, as well as a 10.2% decline in the average cost of ground packages
sold between periods.
Ground package cost per ASM increased by 6.7% to 0.16 cents in the six
months ended June 30, 1997, from 0.15 cents in the same period of 1996. The
higher cost per ASM in 1997 resulted from a greater decline in total ASMs as
compared to the decline in ground package sales volumes between periods.
Other Selling Expenses. Other selling expenses are comprised of (i) booking
fees paid to computer reservation systems (CRSs) to reserve single-seat sales
for scheduled service; (ii) credit card discount expenses incurred when selling
single seats and ground packages to customers using credit cards for payment;
(iii) costs of providing toll-free telephone services, primarily to single-seat
and vacation package customers who contact the Company directly to book
reservations; and (iv) miscellaneous other selling expenses that are primarily
associated with single-seat sales. Other selling expenses decreased 33.3% to
$6.8 million in the six months ended June 30, 1997, as compared to $10.2 million
in the same period of 1996.
Credit card discount expense decreased $0.7 million in the six months ended
June 30, 1997, as compared to the same period in 1996, as a result of the
reduction in size of the scheduled service business unit of the Company and the
consequent reduction in total credit card sales, and due to a reduction in the
blended credit card discount rate between years. CRS fees decreased $1.6
million, in the six months ended June 30, 1997, as compared to the same period
in 1996, due to the smaller number of bookings made for the downsized scheduled
service business unit between periods. Toll-free telephone usage also declined
$1.0 million, for the same period between years due to less usage and lower
rates.
Other selling cost per ASM decreased 26.7% to 0.11 cents in the six months
ended June 30, 1997, as compared to 0.15 cents in the same period of 1996.
Advertising. Advertising expense increased 15.5% to $6.7 million in the six
months ended June 30, 1997, as compared to $5.8 million in the six months ended
June 30, 1996. The Company incurs advertising costs primarily to support
single-seat scheduled service sales and the sale of air-and-ground packages.
Advertising support for these lines of business was increased in 1997 consistent
with the Company's overall strategy to enhance RASM in these businesses through
increases in load factor.
The cost per ASM of advertising increased 37.5% to 0.11 cents in the six
months ended June 30, 1997, as compared to 0.08 cents in the same period of
1996. These increases in cost per ASM resulted from higher absolute advertising
dollars being spent in a period of declining ASMs, but was nevertheless an
integral part of the Company's successful strategy in the first half of 1997 to
build load factor and profitability in the scheduled service business.
Facility and Other Rentals. Facility and other rentals includes the costs
of all ground facilities that are leased by the Company such as airport space,
regional sales offices and general offices. The cost of facility and other
rentals was unchanged at $4.4 million for the six months ended June 30, 1997 and
1996. Although there were some changes in specific facilities utilized by the
Company between periods (such as the addition of hangar space at Chicago-Midway
and the elimination of airport facilities at Boston), there was no significant
total change in facility commitments between periods. The cost per ASM for
facility and other rentals increased by 16.7% to 0.07 cents for the six months
ended June 30, 1997, as compared to 0.06 cents in the six months ended June 30,
1996.
Other Operating Expenses. Other operating expenses decreased 8.1% to $26.2
million in the six months ended June 30, 1997, as compared to $28.5 million in
the same period in 1996. These reductions in other operating expenses generally
resulted from the smaller size of the airline between periods as reflected in
expense items such as insurance, professional fees and general supplies. Other
operating cost per ASM increased 2.4% to 0.43 cents as compared to 0.42 cents
for the six months ended June 30, 1997, as compared to the same period of 1996.
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INCOME TAX EXPENSE
For the six months ended June 30, 1997, income tax expense of $3.4 million
was recorded, as compared to $0.7 million in the same period of 1996. The
effective tax rates for the six months ended June 30, 1997 and 1996 were 57.6%
and 91.4%, respectively.
Income tax expense in both sets of comparative periods is significantly
affected by the non-deductibility for federal income tax purposes of 50% of
amounts paid for crew per diem. The effect of this permanent difference on the
effective income tax expense rate for financial accounting purposes becomes more
pronounced in cases where before-tax income or loss approaches zero, which was
the reason for the high effective tax rate of 91.4% applicable to the six months
ended June 30, 1996.
Income tax expense for the second quarter of 1997 was also significantly
affected by the one-time $2.0 million charge to salaries, wages and benefits for
the prepaid executive compensation package provided to the Company's former
President and Chief Executive Officer. Of the total compensation paid to this
former executive of the Company in 1997, approximately $1.7 million is
non-deductible against the Company's federal income taxes and thus constitutes a
permanent difference between income for federal income tax purposes and
financial accounting income. This additional permanent difference contributed to
the effective tax rate increase to 57.6% for the six months ended June 30, 1997.
YEAR ENDED DECEMBER 31, 1996, VERSUS YEAR ENDED DECEMBER 31, 1995
OPERATING REVENUES
Total operating revenues in 1996 increased 5.0% to $750.9 million from
$715.0 million in 1995. This increase was due to a $24.5 million increase in
scheduled service revenues, a $3.5 million increase in charter revenues, a $1.9
million increase in ground package revenues, and a $6.0 million increase in
other revenues.
Scheduled Service Revenues. Scheduled service revenues in 1996 increased
6.8% to $386.5 million from $362.0 million in 1995. Scheduled service revenues
comprised 51.5% of total operating revenues in 1996, as compared to 50.6% of
operating revenues in 1995. Scheduled service RPMs increased 5.2% to 4.918
billion from 4.673 billion, while ASMs increased 10.6% to 7.305 billion from
6.605 billion, resulting in a reduction in passenger load factor to 67.3% in
1996 from 70.9% in 1995. Yield on scheduled service in 1996 increased 1.4% to
7.86 cents per RPM from 7.75 cents per RPM in 1995. Scheduled service departures
in 1996 increased 14.1% to 31,467 from 27,573 in 1995, while passengers boarded
increased 7.5% over such period to 3,551,141, as compared to 3,304,369.
Charter Revenues. Total charter revenues increased 1.1% to $310.6 million
in 1996, as compared to $307.1 million in 1995. Charter revenue growth, prior to
scheduled service restructuring in late 1996, was constrained by the dedication
of a significant portion of the Company's fleet to scheduled service expansion,
including the utilization of two Lockheed L-1011 aircraft for scheduled services
to Ireland and Northern Ireland between May and September 1996.
The analysis of profitability by business component which was performed by
the Company for the six quarters ended June 30, 1996, disclosed that both
military and tour operator components had produced consistent profits over the
period studied. The Company's Lockheed L-1011 fleet performed well in a charter
environment based upon relatively low frequency of operating and high passenger
load factors, and the Boeing 757-200 performed well in the military business
component while the Boeing 727-200 worked well with certain tour operators. The
Company began to implement strategies to improve the financial performance of
charter operations in the third and fourth quarters of 1996, and both tour
operator and military flying are expected to play a role of growing significance
in the Company's future business operations.
Charter revenues derived from independent tour operators (including the
Ambassadair Travel Club) decreased 1.4% to $226.4 million in 1996, as compared
to $229.5 million in 1995. Tour operator revenues comprised 30.2% of operating
revenues in 1996, as compared to 32.1% of operating revenues in 1995. Tour
operator ASMs decreased 2.0% to 4.363 billion from 4.450 billion and the revenue
per ASM (RASM) on tour operator revenues in 1996 increased 0.6% to 5.19 cents,
as compared to 5.16
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cents in 1995. Tour operator passengers boarded increased 0.8% to 1,854,262 in
1996, as compared to 1,839,386 in 1995, and tour operator departures decreased
3.6% to 10,920 in 1996, as compared to 11,324 in 1995.
Charter revenues derived from the U.S. military increased 8.7% to $84.2
million in 1996, as compared to $77.5 million in 1995. Military revenues
comprised 11.2% of total operating revenues in 1996, as compared to 10.8% of
total operating revenues in 1995. U.S. military ASMs increased 4.3% to 1.442
billion from 1.382 billion. The RASM on U.S. military revenues in 1996 increased
4.1% to 5.84 cents as compared to 5.61 cents in 1995. U.S. military passengers
boarded decreased 6.6% to 185,575 in 1996, as compared to 198,711 in 1995, and
U.S. military departures decreased 8.1% to 3,414 in 1996, as compared to 3,713
in 1995.
Ground Package Revenues. Ground package revenues increased 9.3% to $22.3
million in 1996, as compared to $20.4 million in 1995.
In 1996, total vacation packages sold by the Company's Ambassadair Travel
Club increased 2.4% as compared to 1995, and the average price of each ground
package sold increased 18.0% as compared to the prior year.
During 1996, the number of ATA Vacations ground packages sold increased
21.8% as compared to 1995, but the average price of each ground package sold
decreased 16.9% as compared to the prior year. The average price paid to the
Company for a ground package sale is a function of the mix of vacation
destinations served, the quality and types of ground accommodations offered, and
general competitive conditions with other air carriers offering similar products
in the Company's markets. Some ATA Vacations markets have experienced price
reductions in 1996 due to intense price competition. The average gross margin on
ATA Vacations ground packages sold in 1996 declined to 21.6% as compared to
26.6% in 1995, while the average gross margin on Ambassadair Travel Club ground
package sales declined to 14.5% in 1996, as compared to 15.9% in the prior year.
Other Revenues. Other revenues increased 23.5% to $31.5 million in 1996, as
compared to $25.5 million in 1995. Approximately $3.8 million of the revenue
increase between years was attributable to an increase in the number of block
hours of substitute service provided by the Company to other airlines. A
substitute service agreement typically provides for the Company to operate an
aircraft with its own crews on routes designated by the customer airline to
carry the passengers of that airline for a limited period of time. The remaining
increase in other revenues between periods was primarily due to revenue growth
in several of the Company's affiliated businesses.
OPERATING EXPENSES
Salaries, Wages and Benefits. Salaries, wages and benefits expense for 1996
increased 16.2% to $164.0 million from $141.1 million in 1995. Approximately
$15.9 million of the increase in 1996 was attributable to the addition of
cockpit and cabin crews, reservations agents, base station staff and maintenance
staff to support the Company's growth in capacity between periods, and
approximately $3.6 million of the increase was attributable to the related
growth in employee benefits costs. Average Company full-time-equivalent
employees increased by 11.7% in 1996 as compared to the prior year, although the
reduction-in-force implemented in late 1996 resulted in approximately 6.1% fewer
full-time-equivalent employees in the fourth quarter of 1996 as compared to the
fourth quarter of 1995. The Company substantially completed this reduction in
force in the fourth quarter of 1996, and recorded $183,000 in related severance
costs in 1996.
Salaries, wages and benefits expense in 1996 was 1.23 cents per ASM, an
increase of 8.9% from a cost of 1.13 cents per ASM in 1995. The cost per ASM
increased partially as a result of a 3.4% increase in the average rate of pay
for the Company's employees as compared to the prior year. In addition, the
Company has increased employment in several maintenance and base station
locations in lieu of continuing the use of third-party contractors, as it
believes it can provide more reliable operations and better customer service at
a lower total cost by using its own employees in these selected locations. The
Company has experienced related savings in the expense lines of handling,
landing and navigation fees, and in aircraft maintenance, materials and repairs,
as further described in those following sections.
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Fuel and Oil. Fuel and oil expense for 1996 increased 24.4% to $161.2
million from $129.6 million in 1995, due to an increase in fuel consumed to
operate the Company's expanded block hours of flying, an increase in the average
price paid per gallon of fuel consumed and the imposition of a 4.3-cent-per-
gallon excise tax on jet fuel consumed for domestic use effective October 1,
1995.
During 1996, the Company consumed 7.4% more gallons of jet fuel for flying
operations and flew 9.4% more block hours than in 1995, which accounted for
approximately $9.l million in additional fuel and oil expense between years
(excluding price and tax changes). The growth in gallons of fuel consumed was
lower than the growth in block hours flown between years due to a change in the
mix of block hours flown by fleet type. Of greatest significance was the 4.1%
reduction of total block hours flown by the Lockheed L-1011 fleet between
periods, since the fuel burn per block hour for this wide-body aircraft is
approximately twice as high as the burn rates for the Company's other fleet
types.
During 1996, the Company's average price paid per gallon of fuel consumed
(excluding the excise tax described in the following paragraph) increased by
12.8% as compared to 1995. Fuel price increases paid by the Company reflected
generally tighter supply conditions for aviation fuel, which persisted
throughout most of 1996 as compared to the prior year. The Company estimates
that the year-over-year increase in average price paid for jet fuel resulted in
approximately $16.1 million in additional fuel and oil expense between periods.
On October 1, 1995, the Company became subject to a 4.3-cent-per-gallon
excise tax on jet fuel consumed for domestic use by commercial air carriers. The
effect of this tax in the first three quarters of 1996, as compared to the first
three quarters of 1995, was to increase the Company's cost of jet fuel by
approximately $6.4 million.
Fuel and oil expense for 1996 was 1.21 cents per ASM, an increase of 17.5%
as compared to 1.03 cents per ASM in 1995. The increase in the cost per ASM of
fuel and oil expense was primarily as a result of higher prices and the new
excise tax, partially offset by the expanded use of the more fuel efficient
twin-engine Boeing 757-200 aircraft in the Company's fleet. During 1996, the
Company's Boeing 757-200 aircraft accounted for 29.4% of total block hours
flown, as compared to 27.8% of total block hours flown in 1995. Due to the
reduction of the Company's Boeing 757-200 fleet in late 1996, the Company's mix
of block hours flown in future years is expected to reflect a lower proportion
of fuel-efficient Boeing 757-200 block hours, and a higher proportion of the
less-fuel-efficient Boeing 727-200 and Lockheed L-1011 fleet types.
Handling, Landing and Navigation Fees. Handling, landing and navigation
fees decreased by 5.8% to $70.1 million in 1996, as compared to $74.4 million in
1995. During 1996, the average cost per system departure for third-party
aircraft handling declined 15.0% as compared to the prior year, and the average
cost of landing fees per system departure decreased 12.2% between the same
periods.
Because each airport served by the Company has a different schedule of
fees, including variable prices for different aircraft types, average handling
and landing fee costs are a function of the mix of airports served as well as
the fleet composition of departing aircraft. On average, these costs for narrow-
body aircraft are less than for wide-body aircraft, and the average costs at
domestic U.S. airports are less than the average costs at most foreign airports.
In 1996, 80.6% of the Company's departures were operated with narrow-body
aircraft, as compared to 77.6% in 1995, and 81.1% of the Company's departures
were from U.S. domestic locations, as compared to 79.6% in 1995.
The implementation by the Company in 1996 of a policy of 'self-handling' at
four domestic U.S. airports with significant operations resulted in lower
absolute third-party handling costs for these locations and contributed to lower
system average contract handling costs per departure for 1996, as compared to
1995. The Company incurred higher salaries, wages and benefits expense as a
result of this policy change, as noted in 'Salaries, Wages and Benefits.'
The cost per ASM for handling, landing and navigation fees decreased 10.2%
to 0.53 cents in 1996 from 0.59 cents in 1995.
Aircraft Rentals. Aircraft rentals expense for 1996 increased 17.4% to
$65.4 million from $55.7 million in 1995. This increase was attributable to
continued growth in the size of the Company's leased aircraft fleet, although
the Company significantly reduced the size of its Boeing 757-200 fleet in the
fourth quarter of 1996, as is more fully described in 'Disposal of Assets.'
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The addition of three leased Boeing 757-200 aircraft in the first three
quarters of 1996 resulted in approximately $10.6 million of increased aircraft
rentals for that time period, as compared to the prior year. The subsequent
reduction of this fleet type by a net four units (after including two new
deliveries from the manufacturer in December 1996) resulted in a year-over-year
fourth quarter reduction of aircraft rent expense of approximately $3.6 million.
The reduction in the size of the Boeing 757-200 fleet was an integral component
of the Company's restructuring of scheduled service, based upon profitability
analysis which disclosed that for some uses of the Boeing 757-200 in the
Company's markets prior to restructuring, it was more profitable to substitute
other aircraft with lower ownership costs.
Several additional Boeing-727-200 and Lockheed L-1011 aircraft leased in
1996 contributed $2.8 million and $0.5 million, respectively, in incremental
aircraft rentals between years. Aircraft rentals expense was reduced by $0.6
million for the first four months of 1996, as compared to the prior year, due to
the purchase of four Pratt & Whitney spare engines in May 1995, which had been
previously leased. Due to the elimination of all Pratt-&-Whitney-powered Boeing
757-200 aircraft from the Company's fleet, the Company has reclassified these
owned spare engines as 'Assets Held for Sale' in the accompanying balance sheet,
and is actively marketing these assets to users of Pratt-&-Whitney-powered
aircraft.
Aircraft rentals expense for 1996 was 0.49 cents per ASM, an increase of
11.4% from 0.44 cents per ASM in 1995. The period-over period increase in the
size of the Boeing 757-200 feet was a significant factor in this change, since
the rental cost of ASMs produced by this fleet type is significantly higher than
for the Company's other aircraft.
Depreciation and Amortization. Depreciation and amortization expense for
1996 increased 10.6% to $61.7 million from $55.8 million in 1995.
Depreciation expense attributable to owned airframes and engines, and other
property and equipment owned by the Company, increased $2.9 million in 1996 as
compared to the prior year. The Company increased its year-over-year ownership
of engines and rotable aircraft components to support the expanding fleet, and
increased its investment in computer equipment and furniture and fixtures. The
Company also placed the west bay of the renovated Midway Hangar No. 2 into
service in mid-1996 and incurred increased debt issue costs between years
related to debt facility and aircraft lease negotiations completed in 1996.
Amortization of capitalized engine and airframe overhauls increased $1.9
million in 1996 as compared to the prior year, after including the offsetting
amortization of approximately $1.0 million in associated manufacturers' credits.
The increasing cost of overhaul amortization reflects the increase in the number
of aircraft added to the Company's fleet and the increase in cycles and block
hours flown between years. New aircraft introduced into the Company's fleet
generally do not require airframe or engine overhauls until one or more years
after first entering service. Therefore, the resulting amortization of these
overhauls generally occurs on a delayed basis from the date the aircraft is
placed into service. Accordingly, the Company anticipates that the average cost
of engine and airframe amortization per block hour and cycle will increase in
future years for all fleet types, as all aircraft receive their initial engine
and airframe overhauls after being placed into service.
Depreciation and amortization expense attributable to write-offs relating
to the cost of engine overhauls that become worthless due to early engine
failures, and which cannot be economically repaired increased $1.1 million
between years.
Depreciation and amortization cost per ASM increased 4.4% to 0.47 cents in
1996, as compared to 0.45 cents in 1995.
Aircraft Maintenance, Materials and Repairs. Aircraft maintenance,
materials and repairs expense decreased 0.4% to $55.2 million in 1996, as
compared to $55.4 million in 1995. The cost per ASM decreased by 4.8% to 0.42
cents in 1996, as compared to 0.44 cents in the prior year.
Although the cost of repairs for repairable and rotable components
increased $1.4 million between periods, the cost of expendable parts consumed
decreased $2.1 million, and the cost of parts loans and exchanges increased $0.6
million. Aircraft maintenance, materials and repairs cost was also reduced by
$0.8 million in 1996, as compared to 1995, due to a planned reduction in the use
of third-party maintenance staff in favor of using more Company maintenance
employees for both base and line
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maintenance activities. The Company incurred higher salaries, wages and benefits
expense as a result of this policy change, as noted above.
The cost of the Company's maintenance, materials and repairs remained
essentially unchanged in 1996, as contrasted to the 6.2% increase in ASMs
between years, and the 9.4% increase in block hours. This favorable comparison
is partly due to the significant expansion of the Company's fleet during 1996.
The more favorable comparison to block hours between years is also indicative of
the faster growth in the Company's twin-engine Boeing 757-200 fleet, which is
composed of newer and more technologically advanced aircraft which require
relatively less routine maintenance than the Company's older three-engine
Lockheed L-1011 and Boeing 727-200 fleets. The Boeing 757-200 fleet accounted
for 29.4% of block hours in 1996, as compared to 27.8% in 1995. Nevertheless,
due to the reduction of the Company's Boeing 757-200 fleet in late 1996, the
Company's mix of block hours flown in future years is expected to reflect a
lower proportion of Boeing 757-200 block hours, and a higher proportion of block
hours flown by the older three-engine Lockheed L-1011 and Boeing 727-200 fleets.
Return condition expenses accrued in 1996 were $1.1 million more than in
1995. This increase was primarily due to changes in the mix of aircraft leases
and associated return conditions which became effective during 1996, offset by
both the extensive restructuring of the Boeing 757-200 fleet and the
sale/leaseback of six hushkitted Boeing 727-200 aircraft during 1996 under new
lease terms and conditions.
Crew and Other Employee Travel. The cost of crew and other employee travel
increased 14.0% to $35.9 million in 1996, as compared to $31.5 million in 1995.
During 1996, the Company increased its average full-time-equivalent crew head
count by 4.1% as compared to the prior year, even though departures increased by
8.4% and block hours increased by 9.4% between periods. In the first quarter of
1996, the Company experienced crew shortages, which were exacerbated by severe
winter weather, which caused significant flight delays, diversions and
cancellations. The Company's crew complement in the third quarter of 1996 was
again insufficient to effectively operate the flying schedule and resulted in
more crew time being spent away from base during that quarter.
The cost per ASM for crew and other employee travel increased 8.0% to 0.27
cents in 1996, as compared to 0.25 cents in the prior year. This increase in
unit cost was approximately equivalent to a 9.0% average increase in the cost
per crew member of hotel, positioning and per diem expenses between years.
Passenger Service. For 1996 and 1995, catering represented 80.3% and 84.9%,
respectively, of total passenger service expense. The cost of passenger service
decreased 6.0% in 1996 to $32.7 million, as compared to $34.8 million in 1995.
Although total passengers boarded increased by 5.8% to 5.68 million in 1996, as
compared to 5.37 million in 1995, the average cost to cater each passenger
declined 19.1% between years due to a planned reduction in catering service
levels in select charter and scheduled service markets beginning in the second
quarter of 1995. This cost reduction was partially offset by a 6.6% increase in
military passengers boarded between years, who are the most expensive passengers
to cater in the Company's business mix.
The cost of servicing passengers who were inconvenienced by trip
interruptions increased by $1.4 million between years. Approximately $0.7
million of this increase was incurred in association with the severe winter
weather and consequent flight schedule disruptions which occurred in the first
quarter of 1996.
The cost per ASM of passenger service decreased 10.7% to 0.25 cents in
1996, as compared to 0.28 cents in the prior year. The lower cost per ASM was
primarily due to the lower cost of catering per passenger boarded, partially
offset by the higher cost per ASM of servicing inconvenienced passengers.
Commissions. Commissions expense increased 7.7% to $26.7 million in 1996,
as compared to $24.8 million in 1995. The primary reason for the increase
between years was the corresponding increase in scheduled service revenues
earned, approximately two-thirds of which was generated through travel agencies
which received a commission on such sales. The cost per ASM of commissions
expense was unchanged at 0.20 cents for both 1996 and 1995.
Ground Package Cost. Ground package cost increased 14.5% to $18.2 million
in 1996, as compared to $15.9 million in 1995. This increase in cost is
primarily due to the increase in the number of ground
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packages sold between periods. In 1996, Ambassadair sold 2.4% more ground
packages, and ATA Vacations sold 21.8% more ground packages, than in 1995. The
average cost of each ground package sold by Ambassadair increased 19.9% between
years, while the average price of each ground package sold by ATA Vacations
decreased by 11.2% between periods.
Ground package cost per ASM increased by 7.7% to 0.14 cents in 1996, as
compared to 0.13 cents in 1995, which reflects the comparatively faster growth
in ground package sales produced by Ambassadair and ATA Vacations as compared to
the overall ASM growth of the Company between years.
Other Selling Expenses. Other selling expenses increased 18.1% to $17.6
million in 1996, as compared to $14.9 million in 1995. Approximately $1.1
million and $0.2 million, respectively, of this increase was attributable to
more credit card discounts and CRS fees incurred to support the growth in
scheduled service between years. Another $1.2 million of the increase was due to
higher usage of toll-free telephone service between periods, some of which was
associated with the accommodation of passengers onto other carriers' flights due
to the Company's reduction of scheduled service in the third and fourth quarters
of 1996.
Other selling cost per ASM increased 8.3% to 0.13 cents in 1996, as
compared to 0.12 cents in 1995.
Advertising. Advertising expense increased 15.7% to $10.3 million in 1996,
as compared to $8.9 million in 1995. Advertising support for single-seat
scheduled service sales and the sale of ground packages increased consistent
with the growth in associated revenues and the need to meet competitive actions
in the Company's markets.
The cost per ASM of advertising increased 14.3% to 0.08 cents in 1996, as
compared to 0.07 cents in 1995.
Facilities and Other Rentals. The cost of facilities and other rentals
increased 29.7% to $9.6 million in 1996, as compared to $7.4 million in 1995.
The increase in expense noted for 1996 was partly attributable to higher
facility costs resulting from the Company becoming a signatory carrier at
Orlando International Airport, together with a year-over-year increase in
facility costs for Boston operations prior to the elimination of scheduled
service at Boston in the fourth quarter of 1996. The increased facility costs at
Orlando International Airport have associated savings in lower handling and
landing fees for the Company's flights at Orlando International Airport.
Also in 1996, the Company incurred facility rental expense in association
with the late 1995 sale/leaseback of the Indianapolis hangar to the City of
Indianapolis, for the Chicago-Midway Hangar No. 2 and for the new Chicago
Reservations facility, which was first occupied in September 1995.
The cost per ASM for facility and other rents increased 16.7% to 0.07 cents
in 1996, as compared to 0.06 cents in 1995.
Disposal of Assets. During the third quarter of 1996, the Company committed
to a plan to dispose of up to seven Boeing 757-200 aircraft. A letter of intent
(the 'Letter of Intent') was signed with a major lessor on July 29, which
included the cancellation of operating leases on five aircraft and the return of
those aircraft to the lessor before the end of 1996. Negotiations also commenced
with a major lessor during the third quarter for the cancellation of operating
leases on two additional aircraft in 1996.
During the third quarter, the Company recorded a loss on disposal of the
initial five aircraft according to the terms and conditions negotiated and
agreed in the Letter of Intent. An estimate of the expected loss on disposal of
the additional two aircraft was also recorded in the third quarter, although a
specific Letter of Intent had not yet been signed. The total loss on disposal
recorded in the third quarter was $4.7 million for all aircraft. These aircraft
transactions were all completed during the fourth quarter of 1996, at which time
the estimated loss on disposal was reduced by $0.2 million to an actual loss of
$4.5 million.
The source of the loss on the termination of these aircraft leases was
primarily from the write-off of the unused net book value of the associated
airframe and engine overhauls. For several aircraft, the Company was required to
meet additional maintenance return conditions associated with airframes and
engines, the cost of which was charged to the loss on disposal. These costs were
partially offset by cash
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proceeds received from the lessor and by the application of associated deferred
aircraft rent credits and manufacturers' credits.
In addition to these costs, the Company owns four spare Pratt & Whitney
engines, together with consumable, repairable and rotable components that are
specific to the Pratt-&-Whitney-powered Boeing 757-200s. The net book value of
these engines and parts approximates $14.1 million as of December 31, 1996. The
Company was actively seeking to sell these assets and therefore reclassified
their net book value as Assets Held For Sale under current assets in the
accompanying balance sheet.
Other Expenses. Other operating expenses increased 15.2% to $53.8 million
in 1996, as compared to $46.7 million in 1995. Significant components of the
year-over-year variances include increases in substitute service and passenger
reprotection costs, professional fees, data communications costs, insurance
costs and consulting fees in connection with the detailed route profitability
study.
Other operating cost per ASM increased 8.1% to 0.40 cents in 1996, as
compared to 0.37 cents in 1995.
INCOME TAX EXPENSE
In 1996, the Company recorded ($12.9) million in tax credits applicable to
the loss before income taxes for that year, while income tax expense of $6.1
million was recognized pertaining to income before taxes for 1995. The effective
tax rate applicable to tax credits in 1996 was 32.6%, and the effective tax rate
for income earned in 1995 was 41.8%. The Company's effective income tax rates
were unfavorably affected by the permanent non-deductibility from taxable income
of 50% of crew per diem expenses incurred in both years. The impact of these
permanent differences on effective tax rates becomes more pronounced as taxable
income declines or losses increase.
YEAR ENDED DECEMBER 31, 1995, VERSUS YEAR ENDED DECEMBER 31, 1994
OPERATING REVENUES
Total operating revenues for 1995 increased $134.5 million, or 23.2%, to
$715.0 million. This increase from 1994 was due to a $121.3 million increase in
scheduled service revenues, a $11.2 million increase in charter revenues, a $0.2
million increase in ground package sales and a $1.8 million increase in other
revenues.
Operating revenues for 1995 were 5.71 cents per ASM, an increase of 2.7%
from 1994 revenues of 5.56 cents per ASM.
Scheduled Service Revenues. Scheduled service revenues increased 50.4% from
$240.7 million in 1994 to $362.0 million in 1995. The majority of this increase
was due to strong scheduled service traffic growth between periods, together
with an improvement in scheduled service yield.
Scheduled service RPMs increased 46.9% in 1995 compared to 1994 on a
capacity increase of 39.5% in ASMs between years, resulting in an improved
passenger load factor of 70.8% in 1995 as compared to 67.2% in 1994. Passengers
boarded increased 47.3% from 2.24 million in 1994 to 3.30 million in 1995.
Scheduled service departures increased 39.4% from 19,800 in 1994 to 27,600 in
1995. The Company increased scheduled service traffic from Indianapolis,
Chicago-Midway, Milwaukee and Boston to Florida, Las Vegas, Hawaii and selected
Caribbean destinations. Scheduled service flown in 1995 from St. Louis and
Boston had no comparable service in 1994. The Company ceased scheduled service
operations in St. Louis in August 1995, but continued to serve important charter
markets from St. Louis.
Scheduled service yield in 1995 was 7.75 cents per RPM, an increase of 2.4%
over the 1994 scheduled service yield of 7.57 cents per RPM. This yield
improvement was achieved gradually throughout 1995 as the result of several
revenue enhancement initiatives. During the first quarter of 1995, the Company
installed a yield management system which allowed for the introduction of
multiple fare levels for various classes of the Company's inventory of scheduled
service seats. These yield management procedures were applied with increasing
effectiveness through the final three quarters of 1995. Whereas first quarter
1995 yields were 15.2% lower than the first quarter of 1994, second quarter
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1995 yields were 4.8% higher than the second quarter of 1994; third quarter 1995
yields were 10.0% higher than the third quarter of 1994; and fourth quarter 1995
yields were 9.7% higher than the fourth quarter of 1994.
In the third quarter of 1994, the Company increased its level of
participation and effectiveness of schedule display in several important CRSs
used by travel agencies. In May 1995, the Company also introduced connecting
fares which offered new displays of multiple-city pairs for sale in CRS systems
which had previously not been offered against competing carriers serving those
connecting markets.
Charter Revenues. Charter revenues increased 3.8% from $295.9 million in
1994 to $307.1 million in 1995. Charter revenues derived from independent tour
operators increased 12.5% from $204.0 million in 1994 to $229.5 million in 1995.
Most of this revenue increase was derived from stronger tour operator traffic
between years, while tour operator yield improved 0.8% from 6.21 cents per RPM
in 1994 to 6.26 cents per RPM in 1995. Tour operator RPMs increased 12.0% from
3.17 billion in 1994 to 3.55 billion in 1995, while ASMs increased 11.0% from
4.01 billion in 1994 to 4.45 billion in 1995, resulting in an improved passenger
load factor of 79.8% in 1995 as compared to 79.1% in the prior year. Passengers
boarded increased 7.0% from 1.72 million in 1994 to 1.84 million in 1995, while
departures increased 9.7% from 10,300 in 1994 to 11,300 in 1995. Tour operator
departures for both 1994 and 1995 served numerous U.S. leisure destinations,
together with cities in Europe, Mexico, South America and Asia.
Charter revenues derived from the U.S. military decreased 15.6% from $91.8
million in 1994 to $77.5 million in 1995. Military revenues were unfavorably
impacted by declines in both traffic and yield between periods. Military RPMs
declined 9.9% from 0.71 billion in 1994 to 0.64 billion in 1995, while ASMs
decreased 12.1% from 1.57 billion in 1994 to 1.38 billion in 1995, resulting in
an improved passenger load factor of 46.4% in 1995 as compared to 45.2% in the
prior year. Passengers boarded decreased 13.0% from 0.23 million in 1994 to 0.20
million in 1995, while departures declined 14.0% from 4,300 in 1994 to 3,700 in
1995.
The Company and other competing air carriers are compensated for U.S.
military flying based upon reimbursement rates set by the United States
government. These reimbursement rates have generally declined over the last
several contract years, resulting in lower yields for this business segment.
Military yield in 1995 declined 6.1% to 12.11 cents per RPM as compared to 12.89
cents per RPM in 1994. Although the Company's military yields are comparatively
higher than for tour operators and scheduled service business segments, military
passenger load factors are comparatively much lower, and the Company can incur
substantial non-recurring costs to accommodate military flying which often
becomes available on short notice. The Company's reduction of military ASMs in
1995 was largely the result of decisions to deploy the Company's aircraft into
selected scheduled service and tour operator markets, where the Company believed
that more repetitive frequencies and more predictable revenues and costs could
be achieved in the long-term.
Ground Package Revenues. Ground package revenues increased 1.0% from $20.2
million in 1994 to $20.4 million in 1995. Ground packages, such as hotel and car
rentals, are sold in conjunction with the Company's air transportation product
to Ambassadair Travel Club members and to the general public through ATA
Vacations, Inc., its tour operator subsidiary.
Other Revenues. Other revenues increased 7.6% from $23.7 million in 1994 to
$25.5 million in 1995. Significant components of the change in other revenue
between 1994 and 1995 include a $2.1 million reduction in revenues derived from
subcontracting the Company's aircraft to fly short-term substitute service for
other airlines; a $1.0 million increase in administrative ticketing fees charged
to scheduled service passengers; a $0.7 million increase from the onboard sale
of liquor and headsets; a $0.6 million increase in cargo revenues; a $0.5
million increase from the sale of trip protection insurance to passengers
purchasing tour packages; a $0.5 million increase in commissions earned for the
sale of car rentals; and a $0.4 million increase in excess baggage fees.
OPERATING EXPENSES
Total operating expenses increased 21.8% from $572.1 million in 1994 to
$697.1 million in 1995. Operating expense increases were principally due to
increases in scheduled service capacity, traffic and passengers boarded between
years which affected most expense categories.
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Operating cost per ASM increased 1.5% from 5.48 cents in 1994 to 5.56 cents
in 1995. This increase in cost per ASM generally reflects growth in the
distribution costs of single-seat sales (such as travel agency commissions and
CRS fees), salaries and benefits, fuel and oil, aircraft handling and facility
rents, partially offset by reductions in the cost per ASM of aircraft rentals,
passenger service, ground package cost, and other operating expenses. There was
no change in cost per ASM between years for aircraft maintenance materials and
repairs, crew and other employee travel, and advertising.
Salaries, Wages and Benefits. This expense increased 24.0% from $113.8
million in 1994 to $141.1 million in 1995. The majority of the increase was due
to the addition of new employees (primarily cockpit and cabin crew, base
station, maintenance and reservations staff) to support the growth in scheduled
service and the addition of new aircraft to the Company's fleet. The Company
recorded additional vacation accrual costs of $1.4 million in 1995 to recognize
the phased implementation of a new vacation policy which became applicable to
most employees during 1995. The Company also recorded variable compensation
costs in association with higher 1995 profits which were not incurred in 1994.
These additional 1995 benefit and compensation costs contributed to a 3.7%
increase in the cost per ASM from 1.09 cents in 1994 to 1.13 cents in 1995.
The Company implemented a collective bargaining agreement with flight
attendants in December 1994, at which time this employee group received a base
pay rate increase of approximately 5%, together with some adjustments to
variable pay factors. In December 1995, the Company reached a tentative
agreement with cockpit crews on a collective bargaining agreement covering that
group of employees. In February of 1996, the Company was notified that the
cockpit crews had failed to ratify the tentative agreement. A new tentative
four-year collective bargaining agreement was reached with cockpit crews on
August 6, 1996, which was subsequently ratified by the IBT on September 23,
1996.
Fuel and Oil. The cost of fuel and oil increased 22.1% from $106.1 million
in 1994 to $129.6 million in 1995. Although the average price paid for fuel was
slightly higher in 1995, this unfavorable price effect was partially offset by
the fact that a larger proportion of the block hours in 1995 were flown by the
more fuel-efficient Boeing 757-200 fleet.
Total block hours flown increased 21.8% from 103,700 hours in 1994 to
126,300 hours in 1995. The Company's Boeing 757-200 fleet accounted for 27.8% of
block hours in 1995, as compared to 24.0% in 1994. The less fuel-efficient
Lockheed L-1011 fleet accounted for 28.1% of 1995 block hours, as compared to
30.8% in 1994. Block hours for the Boeing 727-200 fleet were also lower in 1995,
accounting for 44.1% of block hours as compared to 45.2% in 1994.
Effective October 1, 1995, the Company became subject to a 4.3
cent-per-gallon excise tax on jet fuel consumed for domestic use by commercial
air carriers. The effect of this tax in the fourth quarter of 1995 was to
increase the Company's cost of fuel subject to this tax by approximately 6%,
which added $1.6 million to total fuel and oil expense in the fourth quarter of
1995. The fuel tax caused the Company's 1995 cost per ASM for fuel and oil to
increase by 1.0% to 1.03 cents from 1.02 cents in 1994.
Handling, Landing and Navigation Fees. Handling, landing and navigation
fees increased 22.2% from $60.9 million in 1994 to $74.4 million in 1995. Most
of this increase was attributable to a 23.3% increase in the total number of
departures between years, from 34,700 in 1994 to 42,800 in 1995.
The average cost per departure declined 1.0% in 1995 as compared to 1994.
Because each airport served by the Company has a different schedule of fees
(including variable prices for different aircraft types), average departure
costs are a function of the mix of airports served and the fleet composition of
departing aircraft. On average, operations to international airports are more
expensive per departure than for U.S. domestic airports. In 1995, the share of
the Company's departures which operated from international airports declined
from 22.5% to 20.4% because the Company's growth in 1995 was concentrated mostly
in domestic scheduled service markets.
The cost per ASM for handling, landing and air navigation fees increased
1.7% from 0.58 cents in 1994 to 0.59 cents in 1995. This increase resulted from
a small decline in the average number of ASMs per departure between years and is
indicative of the growing proportion of departures which employ the Company's
smaller-capacity Boeing 727-200 and Boeing 757-200 aircraft rather than the
larger Lockheed L-1011 wide-body. In 1995, the percentage of departures made
with narrow-body aircraft increased to 77.6%, as compared to 75.0% in 1994.
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Depreciation and Amortization. Depreciation and amortization expense
increased 20.8% from $46.2 million in 1994 to $55.8 million in 1995. The cost
per ASM increased 2.3% from 0.44 cents in 1994 to 0.45 cents in 1995.
Depreciation expense increased approximately $5.0 million in 1995 as
compared to 1994 due to the addition of one Lockheed L-1011 and four Pratt &
Whitney engines, together with the purchase of other property, furniture and
equipment to support the Company's growth in operations.
Amortization of airframe and engine overhauls increased $4.6 million in
1995 as compared to 1994, net of $3.3 million in overhaul credits earned by the
Company under an engine purchase agreement with Rolls-Royce Commercial Aero
Engines Limited. The increasing cost of amortization expense reflects the recent
increase in the number of aircraft added to the Company's fleet. New aircraft
introduced into the fleet generally do not require airframe or engine overhauls
until as many as 12 or more months after first entering service. Therefore,
resulting amortization of these overhauls generally occurs on a delayed basis
from the date the aircraft is placed into service.
Aircraft Rentals. Aircraft rental expense increased 15.6% from $48.2
million in 1994 to $55.7 million in 1995. This increase in expense was due to
the addition of leased Lockheed L-1011, Boeing 757-200 and Boeing 727-200
aircraft into the Company's fleet during 1995, offset partially by reduced lease
costs on certain Boeing 757-200 aircraft under terms of operating leases
renegotiated in late 1994, and by the purchase of four previously leased Pratt &
Whitney engines.
Aircraft rental cost per ASM decreased 4.3% from 0.46 cents in 1994 to 0.44
cents in 1995. The year-over-year benefit realized from Boeing 757-200 operating
lease renegotiations in late 1994 was a significant factor in this change since
the ownership costs of each Boeing 757-200 aircraft are comparatively higher
than for the Company's other fleet types.
Aircraft Maintenance, Materials and Repairs. The cost of aircraft
maintenance, materials and repairs increased 20.2% from $46.1 million in 1994 to
$55.4 million in 1995. The cost per ASM remained unchanged at 0.44 cents for
both 1995 and 1994.
The cost of the Company's maintenance, materials and repairs increased in
1995 at approximately the same rate as the 19.9% increase in ASMs between years
and slightly slower than the 21.8% increase in block hours. The more favorable
comparison to block hours between years is indicative of the faster growth in
the twin-engine Boeing 757-200 fleet, which is also composed of newer and more
technologically advanced aircraft which require relatively less routine
maintenance than the Company's older three-engine Lockheed L-1011 and Boeing
727-200 fleets. The Boeing 757-200 fleet accounted for 27.8% of block hours in
1995, as compared to 24.0% in 1994.
All of the Company's aircraft under operating leases have certain return
conditions applicable to the maintenance status of airframes and engines as of
the termination of the lease. The Company accrues estimated return condition
costs as a component of maintenance, materials and repairs expense based upon
the actual condition of the aircraft as each lease termination date approaches.
Return condition expenses accrued in 1995 were $1.1 million less than in 1994,
primarily due to a change in return conditions negotiated on certain Boeing
757-200 aircraft leases in late 1994.
Passenger Service. The most significant portion of passenger service cost
is catering, which represented 84.9% and 85.8%, respectively, of total passenger
service expense in 1995 and 1994.
The cost of passenger service increased 16.8% from $29.8 million in 1994 to
$34.8 million in 1995. This increase was primarily due to the 26.7% increase in
the total number of passengers boarded from 4.24 million in 1994 to 5.37 million
in 1995. The cost of passenger service increased less rapidly than the increase
in passengers boarded due to a reduction in catering service levels in select
charter and scheduled service markets beginning late in the second quarter of
1995. In addition to this planned reduction in catering, the 13.0% reduction in
military passengers boarded between years also reduced the average cost of
catering since military catering is one of the most expensive per passenger in
the Company's business mix.
The cost per ASM of passenger service declined 3.4% from 0.29 cents in 1994
to 0.28 cents in 1995. This reduction was primarily due to reduced catering
costs, as the cost per ASM of the total of other components of passenger service
did not change materially between years.
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Crew and Other Employee Travel. The cost of crew and other employee travel
increased 20.2% from $26.2 million in 1994 to $31.5 million in 1995. The cost
per ASM remained unchanged at 0.25 cents for both years.
Commissions. Commissions expense increased 41.7% from $17.5 million in 1994
to $24.8 million in 1995. The cost of commissions per ASM increased 17.6% from
0.17 cents in 1994 to 0.20 cents in 1995.
Scheduled service commissions expense accounted for all of the increase in
this cost in 1995, which was consistent with the significant growth in
commissionable scheduled service sold by travel agencies. The average rate of
commission paid to travel agencies declined slightly between years due to the
elimination of selected sales incentives. The average percentage of revenues
sold by travel agencies increased between years due to the Company's
implementation of full participation in several CRSs in the third quarter of
1994 and because of the introduction of connecting fares in the second quarter
of 1995 which offered significantly expanded ATA schedule choices to travel
agencies.
Commissions paid for military flying were reduced in 1995 due to the
reduction in military departures between years. Commissions paid for tour
operator departures also declined slightly between years.
Ground Package Cost. Ground package cost for 1995 increased 7.4% from $14.8
million in 1994 to $15.9 million in 1995. The cost per ASM declined 7.1% from
0.14 cents in 1994 to 0.13 cents in 1995. The cost per ASM declined between
years due to the slower growth in ground package sales as compared to overall
growth in the Company's capacity as measured by ASMs. The cost of ground
accommodations sold to Ambassadair and ATA Vacations customers increased in some
markets in 1995, resulting in slightly lower gross margins in 1995 as compared
to 1994.
Other Selling Expenses. Other selling expenses are comprised primarily of
fees paid to CRS and the cost of inbound reservations lines provided for the use
of the Company's customers. These costs increased 86.3% from $8.0 million in
1994 to $14.9 million in 1995 and were generally incurred to support the sale of
scheduled services. Other selling cost per ASM increased 50.0% from 0.08 cents
in 1994 to 0.12 cents in 1995. Scheduled service passengers boarded increased
47.3% from 2.24 million to 3.30 million over the same comparative period, while
scheduled service ASMs increased 39.5% from 4.73 billion to 6.60 billion between
years.
The Company participates in SABRE as a multi-host user and is also
displayed in Galileo, Worldspan and System One. These CRSs, which display
competitive schedules and fares for all participating airlines, offer different
levels of services at different transaction costs. In order to expand the
Company's visibility of schedules and fares with travel agencies, the Company's
CRS service levels were increased in all of these systems effective in July
1994, resulting in a significant increase in billable transactions and higher
transaction rates. Although the Company believes that CRS participation has been
essential to rapid development of name recognition and sales in the Company's
new markets, more economic scheduled service distribution alternatives to CRSs
are now being evaluated.
Advertising. Advertising expense for 1995 increased 14.1% from $7.8 million
in 1994 to $8.9 million in 1995. The cost per ASM remained unchanged between
years at 0.07 cents. The Company incurs advertising costs primarily to support
scheduled service sales. Scheduled service ASMs increased 39.5% in 1995 compared
to 1994, and the cost of advertising per scheduled service ASM declined 18.8%
from 0.16 cents in 1994 to 0.13 cents in 1995.
Facilities and Other Rents. The cost of facilities and other rents
increased 34.5% from $5.5 million in 1994 to $7.4 million in 1995. The cost per
ASM increased 20.0% from 0.05 cents in 1994 to 0.06 cents in 1995. The
significant portion of growth in facilities leasing has originated from the
expansion of scheduled services, which has required the Company to add new
leased facilities at airport locations to accommodate the space needs of airport
passenger service and maintenance staff. The rate of increase in facilities
costs between years (34.5%) has been slightly lower than the 39.5% rate of
increase in scheduled service ASMs since the utilization of the Company's
facilities has improved with expanded scheduled service frequencies at certain
airports.
Other Expenses. Other expenses increased 12.5% from $41.5 million in 1994
to $46.7 million in 1995. The cost per ASM for other expenses declined 7.5% from
0.40 cents in 1994 to 0.37 cents in 1995. Significant components of the increase
of $6.6 million in other expenses between years include: $2.0
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million in additional general, hull and liability insurance expense associated
with the Company's expanded size and flying activity; $1.5 million in additional
property and sales taxes assessed on the Company's expanding asset base and
purchasing activity; and $1.5 million in additional communications costs related
to the Company's data network infrastructure for worldwide airport operations.
In 1995, the Company recognized a gain of $1.3 million on a transaction with the
City of Indianapolis involving the Company's headquarters facility (see Note 6
of Notes to Consolidated Financial Statements included elsewhere in this
Memorandum). There was no comparable gain recognized in 1994.
INCOME TAX EXPENSE
Income tax expense increased 154.2% from $2.4 million in 1994 to $6.1
million in 1995. The effective income tax rates were 41.8% and 40.7% for 1995
and 1994, respectively. Income tax expense increased in close proportion to the
149.2% increase in taxable income between years. The effective tax rate for 1994
included a more significant negative impact from non-deductible crew per diem
expense than did 1995. However, this effect was more than offset by the 1994 tax
benefit of adjustments in state tax rates and other tax reserve adjustments
recognized in that year.
LIQUIDITY AND CAPITAL RESOURCES
CASH FLOW
The Company has historically financed its working capital and capital
expenditure requirements from cash flow from operations and long-term borrowings
from banks and other lenders. In 1993, the Company successfully completed an
initial public offering of common stock which generated $37.4 million in
proceeds, net of offering expenses.
For the six months ended June 30, 1997 and 1996, net cash provided by
operating activities was $38.0 million and $35.6 million, respectively. For
1996, 1995 and 1994, net cash provided by operating activities was $32.2
million, $87.1 million and $75.3 million, respectively.
Net cash used in investing activities was $40.7 million and $42.9 million,
respectively, for the six months ended June 30, 1997 and 1996. Such amounts
primarily reflected cash capital expenditures totaling $36.7 million in the six
months ended June 30, 1997, and $60.3 million in the same period of 1996, for
engine overhauls, airframe improvements and the purchase of rotable parts. Cash
capital expenditures for the six months ended June 30, 1996, were supplemented
with other capital expenditures, financed directly with debt, totaling $18.4
million; there were no capital expenditures financed directly with debt in the
six months ended June 30, 1997. The Company's capital spending program in the
first six months of 1997 was significantly curtailed as compared to the prior
year due to (i) the downsizing of the Boeing 757-200 fleet in the fourth quarter
of 1996, and the absence of any aircraft deliveries during the first six months
of 1997; and (ii) the accomplishment of statutory requirements for a 65% Stage 3
fleet as of December 31, 1996, which resulted in the hushkitting of six Boeing
727-200 aircraft during calendar year 1996. The Company is not required to
increase its Stage 3 fleet composition until December 31, 1998, at which time
75% of the Company's fleet must meet Stage 3 requirements.
Net cash used in investing activities was $63.2 million, $44.0 million and,
$80.4 million for 1996, 1995 and 1994, respectively. Such amounts primarily
reflected cash capital expenditures totaling $69.9 million, $57.8 million and
$81.0 million in 1996, 1995 and 1994, respectively, for engine overhauls,
airframe improvements and the purchase of aircraft, engines and rotable parts.
These cash capital expenditures were supplemented by other capital expenditures
of $31.7 million in 1995 and $15.9 million in 1994 which were financed directly
with debt. The Company currently expects that capital expenditures for 1997 will
total approximately $73 million. Such expenditures will be mainly for scheduled
heavy maintenance on the Company's aircraft.
Net cash used in financing activities was $5.3 million for the six months
ended June 30, 1997, while net cash provided by financing activities was $1.1
million for the six months ended June 30, 1996. The primary difference between
years was the addition of $15.0 million in bank facility availability for
financing the installation of hushkits on Boeing 727-200 aircraft during the
1996 period.
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For the six months ended June 30, 1997 and 1996, cash and cash equivalents
declined by $8.0 million and $6.1 million, respectively.
In 1995, $21.6 million in proceeds were generated from the sale of certain
facilities and equipment. Net cash provided by (used in) financing activities
was $11.6 million in 1996, $(12.1) million in 1995 and $21.8 million in 1994.
AIRCRAFT FLEET ADJUSTMENTS
In November 1994, the Company signed a purchase agreement for six new
Boeing 757-200s which, as subsequently amended, provides for aircraft to be
delivered between 1995 and 1998. In conjunction with the Boeing purchase
agreement, the Company entered into a separate agreement with Rolls-Royce
Commercial Aero Engines Limited for 13 RB211-535E4 engines to power the six
Boeing 757-200 aircraft and to provide one spare engine. Under the Rolls-Royce
agreement, which became effective January 1, 1995, Rolls-Royce has provided the
Company various spare parts credits and engine overhaul cost guarantees. If the
Company does not take delivery of the engines, a prorated amount of the credits
that have been used are required to be refunded to Rolls-Royce. The aggregate
purchase price under these two agreements is approximately $50.0 million per
aircraft, subject to escalation. The Company accepted delivery of the first four
aircraft under these agreements in September and December 1995, and November and
December 1996, all of which were financed under leases accounted for as
operating leases. The final two deliveries under this agreement are scheduled
for November 1997 and December 1998. Advanced payments and interest totaling
approximately $18.0 million ($9.0 million per aircraft) are required prior to
delivery of the two remaining aircraft, with the remaining purchase price
payable at delivery. As of June 30, 1997 and 1996, the Company had recorded $9.3
million and $19.7 million, respectively, in advanced payments and interest
applicable to aircraft scheduled for future delivery. The Company intends to
finance future deliveries under this agreement through sale/leaseback
transactions accounted for as operating leases.
In the first quarter of 1996, the Company purchased four Boeing 727-200
aircraft, financing all of these through sale/leasebacks accounted for as
operating leases by the end of the third quarter of 1996. In the second quarter
of 1996, the Company purchased a fifth Boeing 727-200 aircraft which had been
previously financed by the Company through a lease accounted for as an operating
lease. This aircraft was financed through a separate bridge debt facility as of
June 30, 1997, but is expected to be financed long-term through a sale/leaseback
transaction during the third quarter of 1997.
On July 29, 1996, the Company entered into a letter of intent with a major
lessor to cancel several Boeing 757-200 and Lockheed L-1011 operating aircraft
leases then in effect. Under the terms of the letter of intent, the Company
canceled leases on five Boeing 757-200 aircraft powered by Pratt & Whitney
engines and returned these aircraft to the lessor by the end of 1996. The
Company was required to meet certain return conditions associated with several
aircraft, such as providing maintenance checks to airframes. The lessor
reimbursed the Company for certain leasehold improvements made to some aircraft
and credited the Company for certain prepayments made in earlier years to
satisfy qualified maintenance expenditures for several aircraft over their
original lease terms. The cancellation of these leases reduced the Company's
fleet of Pratt-&-Whitney-powered Boeing 757-200 aircraft from seven to two
units. The Company also agreed to terminate existing operating leases on three
Lockheed L-1011 aircraft and to purchase the airframes pertaining to these
aircraft for $1.5 million, while signing a new operating lease covering only the
nine related engines. The Lockheed L-1011 airframe and engine portion of this
transaction was not completed until the second quarter of 1997. The lessor also
provided the Company with approximately $6.9 million in additional unsecured
financing for a term of seven years. This transaction resulted in the
recognition of a $2.3 million loss on disposal of assets in the third quarter of
1996.
The Company also agreed to purchase one Rolls-Royce-powered Boeing 757-200
aircraft from the same lessor in the fourth quarter of 1996. This purchase was
not completed, and the aircraft was acquired from the lessor on a short-term
rental agreement. The Company expects to purchase this aircraft in the second
half of 1997, and intends to finance it through a sale/leaseback accounted for
as an operating lease. The acquisition of this aircraft, together with the
delivery of two new Rolls-Royce-powered Boeing 757-200 aircraft from the
manufacturer in the fourth quarter of 1996, and the return of
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the last two Pratt-&-Whitney-powered Boeing 757-200 aircraft discussed in the
next paragraph, resulted in an all-Rolls-Royce-powered Boeing 757-200 fleet of
seven units at the end of 1996.
In September 1996, the Company began negotiations with a major lessor to
cancel existing operating leases on the Company's remaining two
Pratt-&-Whitney-powered Boeing 757-200 aircraft. These aircraft were returned to
the lessor by the end of 1996. This transaction resulted in the recognition of a
$2.4 million loss on disposal of assets in the third quarter of 1996.
CREDIT FACILITIES
The Company's former bank credit facility initially provided a maximum of
$125.0 million, including a $25.0 million letter of credit facility, subject to
the maintenance of certain collateral value. The total availability under this
facility had declined to $122.0 million as of June 30, 1997 for the reasons
discussed in the next paragraph. The collateral for the facility consists of
certain owned Lockheed L-1011 aircraft, certain receivables, and certain
rotables and spare parts. At June 30, 1997 and 1996, the Company had borrowed
the maximum amount then available under the bank credit facility, of which $57.0
million was repaid on July 1, 1997, and $75.0 million was repaid on July 1,
1996.
As a result of the Company's need to restructure its scheduled service
business, the Company renegotiated certain terms of the bank credit facility
effective September 30, 1996. The new agreement also modified certain loan
covenants to take into account the expected losses in the third and fourth
quarters of 1996. In return for this covenant relief, the Company agreed to
implement changes to the underlying collateral for the facility and to change
the interest rates applicable to borrowings under the facility. The Company
pledged additional owned engines and equipment as collateral for the facility as
of the implementation date of the new agreement. The Company further agreed to
reduce the $63.0 million of available credit secured by the owned Lockheed
L-1011 fleet by $1.0 million per month from April 1997 through September 1997,
and by $1.5 million per month from October 1997 through April 1999. As of June
30, 1997 the Company had borrowed the maximum amount of $122.0 million then
available, less $10.0 million in certain letters of credit outstanding. Loans
under the renegotiated facility bear interest, at the Company's option, at
either (i) prime to prime plus 0.75%, or (ii) the Eurodollar rate plus 1.50% to
2.75%. The facility matures on April 1, 1999, and contains various covenants and
events of default, including: maintenance of a specified debt-to-equity ratio
and a minimum level of net worth; achievement of a minimum level of cash flow;
and restrictions on aircraft acquisitions, liens, loans to officers, change of
control, indebtedness, lease commitments and payment of dividends.
At June 30, 1997, the Company has classified $25.9 million of bank credit
facility borrowings to current maturities of long-term debt. Of this amount,
$16.5 million is attributable to the scheduled reduction of availability secured
by the owned Lockheed L-1011 fleet during the 12 months ending June 30, 1998.
The remaining $9.4 million represents the amount of the spare Pratt & Whitney
engines which are pledged to the bank facility and which will be repaid from the
anticipated sale. The net book value of these spare engines, which approximates
estimated market value, is classified as Assets Held for Sale in the
accompanying balance sheet. In July 1997, the Company subsequently sold two of
the four spare Pratt & Whitney engines and received a letter of intent on the
third spare engine, which is expected to be sold during the third quarter.
On July 24, 1997, the Company completed two new debt transactions which
materially changed the capital structure of the Company. On that date, the
Company issued $100.0 million in unsecured senior notes and negotiated a new
secured revolving credit facility of $50.0 million, that includes up to $25.0
million for stand-by letters of credit. ATA is the borrower under the new credit
facility, which is guaranteed by the Company and each of the Company's other
active subsidiaries. The principal amount of the new facility matures on April
1, 2001, and borrowings are secured by certain Lockheed L-1011 aircraft and
engines. The loan-to-value ratio for collateral securing the new facility may
not exceed 75% at any time. Borrowings under the new facility bear interest, at
the option of ATA, at either (i) LIBOR plus 1.50% to 2.50% (depending upon
certain financial ratios); or (ii) the agent bank's prime rate plus 0.0% to 0.5%
(depending upon certain financial ratios). The facility contains various
covenants including, among other things: (i) limitations on incurrence of debt
and liens on assets; (ii) limitations on capital expenditures; (iii)
restrictions on payment of dividends and other distributions to stockholders;
(iv) limitations on mergers and the sale of assets; (v) restrictions on the
prepayment or
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redemption of certain indebtedness including the 10.5% notes; (vi) maintenance
of certain financial ratios such as minimum tangible net worth, cash flow to
interest expense and aircraft rentals and total adjusted liabilities to tangible
net worth.
The Company also maintains a $5.0 million revolving credit facility
available for its short-term borrowing needs and for securing the issuance of
letters of credit. Borrowings against this credit facility bear interest at the
lender's prime rate plus 0.25% per annum. There were no borrowings against this
facility as of June 30, 1997 or 1996; however, the Company did have outstanding
letters of credit secured by this facility aggregating $3.6 million and $4.3
million, respectively.
STOCK REPURCHASE PROGRAM
In February 1994, the Board of Directors approved the repurchase of up to
250,000 shares of the Company's common stock. During 1996, the Company
repurchased 16,000 shares, bringing the total number of shares it has
repurchased under the program to 185,000 shares. No shares were repurchased
during the first six months of 1997. The Company does not currently expect to
complete this stock repurchase program.
OTHER CAPITAL USES
In the third quarter of 1995, the Company completed the lease of Hangar No.
2 at Chicago's Midway Airport for an initial lease term of ten years, subject to
two five-year renewal options. Under this lease, the Company acquired the use of
both the west and east bays of the hangar and associated ramp and parking areas.
The Company is obligated to perform certain lease-mandated improvements to the
west bay and may, at its option, perform additional improvements to the east
bay. In the fourth quarter of 1995, the Company financed these improvements,
together with separate passenger terminal improvements at Midway, through the
issuance of $6 million in tax-exempt bonds. Initial construction activities in
the west bay area began in the fourth quarter of 1995.
RECENT DEVELOPMENTS
On September 15, 1997 the Company purchased one Boeing 757-200 aircraft
which had previously been on an operating lease. The Company paid cash of $5.0
million, and executed a $30,650,000 note for the remainder of the purchase
price. The note provides for monthly payments of $400,000 in principal and
interest from October 15, 1997 through September 15, 1998, with the remainder of
the note payable in full on October 15, 1998. Interest of 7.08% applies to the
initial twelve payments, and the final payment is subject to interest of 8.08%.
The purchase of this aircraft will increase the current portion of long-term
debt at September 30, 1997 by $2,700,000, and long-term debt by $27,950,000.
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BUSINESS
GENERAL
Amtran is a leading provider of charter airline services, and on a targeted
basis scheduled airline services, to leisure and other value-oriented travelers.
Amtran, through its principal subsidiary, ATA, has been in operation for 24
years and currently operates the eleventh largest airline in the United States
in terms of 1996 RPMs. ATA provides charter services throughout the world to
independent tour operators, corporations and the U.S. military. The Company
provides scheduled service primarily from its gateway cities of Indianapolis,
Chicago-Midway and Milwaukee to popular vacation destinations such as Hawaii,
Las Vegas, Florida, California, Mexico and the Caribbean.
CHARTER SERVICE
The Company is the largest charter airline in the United States and
provides charter airline services throughout the world to U.S. and European tour
operators, U.S. military and government agencies and to corporations. In 1996,
Amtran derived approximately 41% of consolidated revenues from charter
operations. The charter business is an attractive niche because it provides
contractual revenues that are more stable than revenues provided by scheduled
service. The customer generally pays a fixed price for the use of the aircraft
and assumes the responsibility and risk for the actual sale of the seats, as
well as most of the risk of fuel price increases. In addition, the Company is
the largest domestic provider to this niche charter market. As a result of the
1996 Restructuring, the Company expects that in 1997 as much as half of its
consolidated revenues will be from charter operations.
TOUR OPERATOR PROGRAMS
Independent tour operators comprise the largest component of the Company's
charter service operations (representing approximately 30% of the Company's 1996
consolidated revenues). Independent tour operators typically contract with the
Company to provide repetitive, round-trip patterns to leisure destinations for
specified periods ranging from several weeks to several years. The Company
believes that its long standing relationships with tour operators provide it
with a competitive advantage. In addition, the Company believes that the low
cost leisure travel services provided by independent tour operators have
historically been less volatile than scheduled service operations as indicated
by the Company's 1990 to 1995 revenue and profitability, as compared to the
major scheduled service carriers for the same period.
MILITARY/GOVERNMENT
The Company expects U.S. military and other government flight activity,
which has historically averaged 10-15% of consolidated revenues, to increase to
over 15% of Amtran's 1997 revenues. The Company has provided charter service to
the U.S. military since 1983. Because this business is generally less seasonal
than leisure travel, it tends to have a stabilizing impact on the Company's
operations and earnings. The U.S. Government awards one year contracts for its
military charter business, and pre-negotiates contract prices for each type of
aircraft a carrier makes available. Such contracts are priced utilizing the
participating airlines' average costs, and are therefore more profitable for low
cost providers such as the Company. The Company believes its fleet of aircraft,
in particular its Boeing 757-200ERs, is well suited for the changing
requirements of military passenger service.
SCHEDULED SERVICE
The Company provides scheduled nonstop service primarily from its gateway
cities of Indianapolis, Chicago-Midway and Milwaukee to popular vacation
destinations such as Hawaii, Las Vegas, Florida, California, Mexico and the
Caribbean. In its scheduled service operations, the Company focuses primarily on
providing low cost, low frequency nonstop or direct flights from airports where
there is only limited competition. In 1996, based on DOT statistics, the Company
had the lowest operating expense per ASM, approximately 6, of the eleven largest
U.S. scheduled airlines. Notwithstanding the Company's competitive cost position
and business focus, the Company began to incur losses in its scheduled service
in the second half of 1995. In response to these losses, the Company, as part of
the
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1996 Restructuring described below, reduced its scheduled service by more than
one third of its departures and ASMs. As a result, the Company expects scheduled
service operations, which comprised 52% of consolidated revenues in 1996, to
comprise approximately 45% of consolidated revenues in 1997. The Company
believes that the 1996 Restructuring strengthened its competitive position and
improved both load factors and yields in its scheduled service operations. The
Company has substantially improved its profitability in this segment in the
first six months of 1997, versus the first six months of 1996.
FLEET/OPERATIONS
As of June 30, 1997, the Company operated a fleet of 45 aircraft consisting
of 14 Lockheed L-1011s, 24 Boeing 727-200ADVs and 7 Boeing 757-200s. This fleet
gives the Company the flexibility to respond to a wide variety of market
opportunities. To support its operations, the Company has a Maintenance and
Engineering Center at Indianapolis International Airport, maintains permanent
support facilities at ten other U.S. airports and has the ability to dispatch
maintenance and operational personnel and equipment as necessary to support
temporary operations throughout the world.
STRATEGY
The Company intends to enhance its position as a leading supplier of
charter airline services and of targeted scheduled airline services by pursuing
a strategy designed to increase revenues and profitability. The key components
of this strategy are:
(i) Maintain Low Cost Position. The Company believes it has one of the
lowest operating cost per ASM in the industry, with an average cost per ASM
of approximately 6[c] for the fiscal year ended December 31, 1996. The
Company believes that its low cost structure provides a significant
competitive advantage, which allows it to compete effectively in both the
charter and scheduled service markets. The Company has achieved its low
cost position primarily as a result of its low overhead and distribution
costs, productive and flexible workforce and low aircraft rental and
ownership costs.
(ii) Strengthen Leading Position in Niche Charter Business. The
Company has successfully operated in the charter service business since
1981, and it expects to continue to enhance its leading position in this
segment. By offering low cost air travel products that can be tailored to
meet the particular needs of its customers, primarily the tour operators,
the Company believes it is able to differentiate itself from most major
airlines, whose principal focus is on scheduled service, as well as from
smaller charter airlines, which do not have comparably diverse fleets or
the ability to provide a similar level of customer support. In addition to
its low cost, the Company believes that its product quality, reputation,
long standing relationships and ability to deliver a customized service
have become increasingly important to tour operators. Furthermore, the
Company's long history of serving the military, its contractor teaming
arrangement and its fleet of preferred aircraft result in a strong
competitive position for acquiring and servicing military charter
contracts.
(iii) Selectively Participate in Scheduled Service. The Company's
strategy for its scheduled service is to focus primarily on providing low
cost, low frequency nonstop or direct flights from airports where there is
only limited competition. The Company believes that its high performance
Boeing 757 and 727 aircraft give it a competitive advantage in the
Chicago-Midway market. Unlike the aircraft used by most of the Company's
competitors at Chicago-Midway, the Boeing 757 and 727 can fly larger
passenger capacities substantially longer distances while operating from
the airport's short runways. In the Milwaukee market, the Company is the
only low cost scheduled alternative. In Indianapolis, the Company has a
name recognition advantage by being the city's home town airline. The
Company significantly reduced its scheduled service operations in 1996 by
exiting, or reducing service to, unprofitable markets such as Boston and
intra-Florida and has substantially improved its profitability in the first
six months of 1997, versus the first six months of 1996. The Company is
continuing to evaluate its scheduled service operations and believes that
it may be able, on a selective basis, to expand this business.
(iv) Capitalize on Selected Growth Opportunities. The Company seeks to
increase revenues and profitability by capitalizing on selected growth
opportunities in its core businesses. The Company
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believes that, as a result of its low cost structure and its strong
relationships with tour operators and military contractors, it is well
positioned to capture additional opportunities to serve these markets. The
Company intends to purchase additional aircraft to meet demand from its
military and tour operator charter customers, and potentially scheduled
service.
1996 RESTRUCTURING OF SCHEDULED SERVICE OPERATIONS
An analysis by the Company in 1996, of the profitability of its scheduled
service and charter service business units revealed that a significant number of
scheduled service markets being served by the Company had become increasingly
unprofitable. This analysis also showed that the Company's charter operations
were generally profitable during the same periods, although results from these
operations were also adversely affected by many of the factors that affected
scheduled service.
The Company believes that several key factors contributed to the
deterioration of profitability of scheduled service over this time period.
Beginning in January 1996, a growing amount of low-fare competition entered the
Boston-Florida and midwest-Florida markets, which increased total capacity in
these markets and decreased the average fares earned by the Company. Operating
revenues in all scheduled service markets were further adversely affected by the
ValuJet accident in Florida on May 11, which was closely followed on May 12 by a
decompression incident on one of the Company's own flights. This incident
involved the loss of cabin pressure by one of ATA's aircraft while flying at
approximately 33,000 feet and the subsequent reduction in altitude to 15,000
feet in order to restore cabin pressure. No serious injuries resulted from the
incident. These events focused significant negative media attention on airline
safety, and on low-fare carriers in particular. In spite of the Company's
excellent safety record since its inception in 1973, during which no serious
injuries or fatalities had ever occurred, the Company estimates that it lost
significant scheduled service revenues in the second and third quarters of 1996
from canceled reservations and reservations which were never received.
Additionally, effective October 1, 1995, the Company became subject to a federal
excise tax of 4.3 per gallon on jet fuel consumed in domestic use, which added
approximately 3.5 to the average cost of each gallon of jet fuel purchased.
During 1996, the market price of jet fuel also increased significantly as
compared to prices paid in comparable 1995 periods, largely due to tight jet
fuel inventories relative to demand throughout this period. See 'Management's
Discussion and Analysis of Financial Condition and Results of Operations.'
In August 1996, the Company announced a significant reduction in scheduled
service operations. More than one-third of scheduled service departures and ASMs
were included in this schedule reduction. The Company eliminated its
unprofitable Boston and intra-Florida operations. The Company also exited, or
reduced in frequency, operations to other selected markets from Chicago-Midway,
Indianapolis and Milwaukee. Exited operations were phased out over a three-month
period ended December 2, 1996. The Company believes this process strengthened
its competitive position and improved both load factors and yields in its
remaining scheduled service operations. The Company has substantially improved
its profitability in this segment in the first six months of 1997, versus the
first six months of 1996.
In conjunction with its scheduled service reduction, the Company announced
a 15% reduction of its work force, including both employees and contractors. A
significant portion of this reduction in force was attributable to furloughs of
cockpit and cabin crews, with the remainder attributable to base station and
administrative staff. Maintenance staff reductions were accomplished primarily
through the reduction of base and line maintenance contract labor.
In addition, in 1996 the Company optimized its mix of aircraft. The Company
reduced the number of Boeing 757-200 aircraft it operates from eleven to seven,
all of which are powered by Rolls-Royce engines. One advantage of the new fleet
configuration is that all seven Boeing 757-200 aircraft have been assigned to
mission-specific routes that could not have been served by the Company's other
aircraft. The commonality of aircraft and engines yields benefits to the Company
in the form of decreased maintenance and training costs. The Company also
expects to sell surplus spare engines and parts inventory, which are unique to
the Pratt & Whitney-powered Boeing 757-200s for approximately $14 million. In
the third quarter of 1996, the Company recorded a loss on disposal of assets
associated with both Boeing 757-200 aircraft transactions of $4.7 million.
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As noted above, the Company's tour operator and military operations were
profitable for 1996, and the Company has allocated additional aircraft to these
operations. As a result, the Company was able to contract for significantly more
tour operator and military flights than it had at the same time last year.
Additionally, after adjusting for the reduction in scheduled service capacity,
bookings for the remaining scheduled service are ahead of the same time as of
last year.
As a result of the 1996 Restructuring, the Company believes it has
established a better platform from which to pursue its strategy. The Company
also incurred substantial costs in 1996 which it does not expect to incur in
future years.
NEW CHIEF EXECUTIVE OFFICER
On June 19, 1997, the Company announced the election of John P. Tague as
President and Chief Executive Officer of the Company. Mr. Tague originally
joined the Company in 1991, as Vice President of Marketing, and was elected
President and Chief Operating Officer in September 1993, a position he held
until his resignation in 1995. Mr. Tague subsequently served as Co-Chairman and
Chief Executive Officer of the Pointe Group, an aviation consulting firm, and as
Chief Executive Officer for both Vanguard Airlines, Inc. and Air South Airlines,
Inc. Mr. Tague brings over twelve years of management experience in the airline
industry to the Company.
BACKGROUND
ATA flew its maiden flight on a Boeing 720 between Indianapolis and Orlando
in December 1973. It was certificated as a public charter carrier in 1981 and as
a scheduled air carrier in 1985. ATA grew from flying approximately 355 million
RPMs in 1982, its first full year as a public charter carrier, to approximately
9.2 billion RPMs in 1996. In 1973, the Company's fleet consisted of a single
leased Boeing 720. As of June 30, 1997, the Company operated a fleet of 45
aircraft. The following table illustrates the growth of the Company over the
past ten years:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------
1987 1988 1989 1990 1991
------- ------- ------- ------- -------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Operating
revenues.......... $ 254.4 $ 253.9 $ 279.1 $ 371.4 $ 414.0
EBITDA(1)........... $ 34.0 $ 49.9 $ 47.5 $ 45.5 $ 61.9
Net income (loss)... $ 3.2 $ 7.0 $ 4.4 $ (2.0) $ 5.6
Total assets........ $ 183.0 $ 193.4 $ 238.4 $ 251.8 $ 237.4
Block hours......... 48,870 42,642 49,222 57,847 60,177
ASMs (in
millions)......... 5,287 4,857 5,374 6,755 7,111
Employees (at period
end).............. 1,675 1,789 2,134 2,310 2,205
<CAPTION>
1992 1993 1994 1995 1996
------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Operating
revenues..........$ 421.8 $ 467.9 $ 580.5 $ 715.0 $ 750.9
EBITDA(1)...........$ 45.1 $ 45.2 $ 55.7 $ 74.6 $ 26.5
Net income (loss)...$ (2.1) $ 3.0 $ 3.5 $ 8.5 $ (26.7)
Total assets........$ 239.0 $ 269.8 $ 346.3 $ 413.1 $ 370.3
Block hours......... 65,583 76,542 103,657 126,295 138,114
ASMs (in
millions)......... 7,521 8,232 10,443 12,522 13,296
Employees (at period
end).............. 2,412 3,418 4,136 4,830 4,435
</TABLE>
- ------------
(1) EBITDA represents net income plus interest expense (net of capitalized
interest), income tax expense, depreciation and amortization.
SERVICES OFFERED
The Company generally provides its airline services to its customers in the
form of charter and scheduled service. The following table provides a summary of
the Company's total revenue for the periods indicated:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------
1992 1993 1994 1995 1996
------ ------ ------ ------ ------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Charter
Tour operator..................................... $276.9 $213.7 $204.0 $229.5 $226.4
Military.......................................... 47.1 78.4 91.8 77.5 84.2
------ ------ ------ ------ ------
Total charter..................................... 324.0 292.1 295.8 307.0 310.6
Scheduled service...................................... 61.1 138.0 240.7 362.0 386.5
Other.................................................. 36.7 37.8 44.0 46.0 53.8
------ ------ ------ ------ ------
Total............................................. $421.8 $467.9 $580.5 $715.0 $750.9
------ ------ ------ ------ ------
------ ------ ------ ------ ------
</TABLE>
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CHARTER SALES
As illustrated in the above table, charter sales represented 41.4% of the
Company's total revenues for 1996. The Company's principal customers for charter
sales are tour operators, military and government agencies, sponsors of
incentive travel packages and specialty charter customers.
TOUR OPERATOR PROGRAMS
Sales to tour operators accounted for approximately 33% of the Company's
ASMs for 1996. These leisure market programs are generally contracted for
repetitive, round-trip patterns, operating over extended periods of time. In
such an arrangement, the tour operator pays a fixed price for use of the
aircraft (which includes the services of the cockpit crew and flight attendants,
together with check-in, baggage handling and maintenance services, catering and
all necessary aircraft handling services) and assumes responsibility and risk
for the actual sale of the available aircraft seats. Because the Company
operates primarily on a contract basis, it can, subject to competitive
constraints, structure the terms of each contract to reflect the costs of
providing the specific service, together with an acceptable return.
In connection with its sales to tour operators, the Company seeks to
minimize its exposure to unexpected changes in operating costs. Under its
contracts with tour operators, the Company is able to pass through most
increases in fuel costs from a contracted price. Under these contracts, if the
fuel increase causes the tour operator's price to rise in excess of 10%, the
tour operator has the option of canceling the contract. These contracts provide
that the final fuel price is to be determined based on a blended average of the
Company's fuel costs two weeks prior to the flight date. The Company is exposed
to increases in fuel costs that occur within 14 days of flight time, to all
increases associated with its scheduled service (other than bulk-seat sales) and
to increases affecting any contracts that do not include fuel cost escalation
provisions. See 'Risk Factors -- Aircraft Fuel.'
The Company believes that although price is the principal competitive
criterion, product quality, reputation and the ability to deliver a service that
is customized to the customer's particular needs have become increasingly
important to independent tour operators. Accordingly, the Company seeks to
differentiate itself through increased emphasis on its ability to deliver
customized in-flight service (such as food service, foreign language flight
attendants and movie selections), consistency of product delivery, customer
handling, delivery support and operational reliability for the tour operator.
The ability to deliver a low cost tour product exceeding the leisure traveler's
quality expectations provides a significant marketing advantage to the tour
operator.
Although the Company serves tour operators on a worldwide basis, its
primary customers are U.S.-based and European-based tour operators. For 1996,
the Company's five largest tour operator customers represented approximately 22%
of the Company's consolidated revenues, and the ten largest tour operator
customers represented approximately 30% of the Company's consolidated revenues.
MILITARY/GOVERNMENT
In 1996 military/government sales were 11.2% of the Company's total
revenues and 10.8% of total ASMs. Traditionally, the Company's focus has been on
short-term 'contract expansion' business which is routinely awarded by the U.S.
Government based on price and availability of appropriate aircraft. The U.S.
Government awards one year contracts for its military charter business, and
pre-negotiates contract prices for each type of aircraft a carrier makes
available. Such contracts are awarded based upon the participating airlines'
average costs, and are therefore more profitable for low cost providers such as
Amtran. The short-term expansion business is awarded pro rata to the carriers
with aircraft availability who have been awarded the most fixed-award business,
and then to any additional carrier that has aircraft available. The Company's
contractor teaming arrangement with four other cargo and passenger airlines
significantly increases the likelihood that the team will receive both
fixed-award and contract expansion business, and increases the Company's
opportunity to provide such services because the Company represents a
significant portion of the team's passenger transport capacity. See ' -- Sales
and Marketing.'
Military and other government flight activity is expected to remain a
significant factor in the Company's business mix. Because this business is
generally less seasonal than leisure travel, it tends to
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have a stabilizing impact on the Company's operations and earnings. The Company
believes its fleet of aircraft is well suited for the changing requirements of
military passenger service. Although the military is reducing its troop size at
foreign bases, the military still desires to maintain its schedule frequency to
these bases. Therefore, the military has a need for smaller capacity aircraft
possessing long-range capability, such as the Company's Boeing 757-200ER
aircraft. In 1993, the Company became the first North American carrier to
receive FAA certification to operate Boeing 757-200 aircraft with 180-minute
ETOPS. This certification permits specially equipped Boeing 757-200 aircraft to
participate in long-range missions over water in which the aircraft may be up to
three hours from the nearest alternate airport. All of the Company's Boeing
757-200s are so equipped and certified. The Company believes that this
180-minute ETOPS capability has enhanced the Company's ability to obtain awards
for certain long-range missions.
The Company is subject to biennial inspections by the military as a
condition of retaining its eligibility to perform military charter flights. The
last such inspection was undertaken in 1995 and the next is expected to occur in
the third or fourth quarter of 1997. As a result of the Company's military
business, it has been required to implement measures beyond those required by
the DOT, FAA, and other government agencies.
OTHER CHARTER SERVICES
Incentive Travel Programs. Many corporations offer travel to leisure
destinations or special events as incentive awards for employees. The Company
has historically provided air travel for many corporate incentive programs.
Incentive travel customers range from national incentive marketing companies to
large corporations that handle their incentive travel programs on an in-house
basis.
The Company believes that its flexibility, diversity of aircraft and
attention to detail have helped to establish it as one of the leaders in
providing the air portion of incentive travel airline charter service.
Generally, incentive travel operations are a demanding and highly customized
part of the charter airline business. Incentive travel operations can vary from
a single round-trip to an extensive overseas pattern involving thousands of
employees and their families.
Specialty Charters. The Company operates a significant number of specialty
charter flights. These programs are normally contracted on a single round-trip
basis and vary extensively in nature, from flying university alumni to a
football game, to transporting political candidates on campaign trips, to moving
the NASA space shuttle ground crew to an alternate landing site. Traditionally,
these flights which are arranged on very short notice based on aircraft
availability, allow the Company to increase aircraft utilization during off-peak
periods.
The Company believes it is able to attract this business due to its fleet
size and diversity of aircraft. The size and location of the Company's fleet
reduces nonproductive ferry time for aircraft and crews, resulting in more
competitive pricing. The diversity of aircraft types in its fleet also allows
the Company to better match a customer's particular needs with the type of
aircraft best suited to satisfy those requirements.
SCHEDULED SERVICE SALES
In scheduled service, the Company markets air travel, as well as packaged
leisure travel products, directly to retail consumers in selected markets.
During 1996, scheduled service provided 51.5% of the Company's consolidated
revenues and 54.9% of ASMs. The Company's strategy for its scheduled service is
to offer routine, low-frequency service which stresses nonstop convenience and a
simplified pricing structure oriented to the buyer of leisure travel services.
The Company focuses primarily on serving selected leisure destinations with low
cost, nonstop or direct flights from cities which do not have service or where
there is only limited competition.
The Company's scheduled service operations link the Company's gateway
cities of Indianapolis, Chicago-Midway and Milwaukee with several popular
vacation destinations such as Hawaii, Las Vegas, Florida and the Caribbean. In
August 1996, the Company announced a significant reduction in scheduled service
operations. More than one-third of scheduled service departures and ASMs were
included in this schedule reduction. The Company completely eliminated its
unprofitable Boston and
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intra-Florida operations. The Company also exited, or reduced in frequency,
operations to other selected markets from Chicago-Midway, Indianapolis and
Milwaukee. The Company is continuing to evaluate its scheduled service
operations and believes that it may be able, on a selective basis, to expand
this business.
Included in the Company's scheduled service sales are bulk sales agreements
with tour operators. Under these arrangements, which are very similar to charter
sales, the tour operator may take up to 85% of an aircraft as a bulk-seat
purchase. The portion which the Company retains is sold through its own
scheduled service distribution. The advantage for the tour operators is that
their product appears in the CRS and through other scheduled service
distribution channels. Under this arrangement, the Company is obligated to
provide service to the tour operators' customers even in the event of
non-payment by the tour operator. To minimize its exposure under these
arrangements, the Company requires bonding or a security deposit for a
significant portion of the bulk-seat fare. Bulk seat sales amounted to $67.3
million in 1996, which represented 9.0% of the Company's 1996 total consolidated
revenue.
OTHER REVENUES
In addition to its core charter and scheduled service businesses, the
Company operates several other smaller businesses that complement its core
businesses. In aggregate, these businesses accounted for 7.1% of the Company's
revenues in 1996.
SALES AND MARKETING
CHARTER SALES
TOUR OPERATOR PROGRAMS
The Company markets its charter services to tour operators primarily
through its own sales force. The charter sales department's principal office is
in Indianapolis, but it also has offices in Orlando, New York, San Francisco,
Seattle, Boston, Chicago, Detroit, London and Frankfurt. Through this sales
force, the Company markets its charter, sub-service, military and specialty
products. While most of ATA's charter or customized sales are transacted
directly with the end customer, the Company also utilizes brokers with certain
customers.
In general, tour operators either package the Company's flights with
traditional ground components (e.g., hotels, rental cars, attractions) or sell
only the airline passage ('airfare only'). Tickets on the Company's flights
contracted to tour operators are issued by the tour operator either directly to
passengers or through retail travel agencies. Under the current DOT regulations
with respect to charter transportation originating in the United States, all
charter airline tickets must generally be paid for in cash and all funds
received from the sale of charter seats (and in some cases the costs of land
arrangements) must be placed into escrow by the tour operator or protected by a
surety bond satisfying certain prescribed standards. Currently, the Company
provides a third-party bond which is unlimited in amount in order to satisfy its
obligations under these regulations. Under the terms of its bonding
arrangements, the issuer of the bond has the right to terminate the bond at any
time on 30 days' notice. The Company provides a $2.5 million letter of credit to
secure its potential obligations to the issuer of the bond. If the bond were to
be materially limited or canceled, the Company, like all other U.S. charter
airlines, would be required to escrow funds to comply with the DOT requirements
summarized above. Compliance with such requirements would reduce the Company's
liquidity and require it to fund higher levels of working capital ranging up to
$16.0 million based on anticipated 1997 peak travel periods. See
' -- Regulation.'
In general, the Company enters into contracts with tour operators four to
nine months in advance of the commencement of the service to be provided.
Pursuant to these contracts, tour operators, who are often thinly capitalized,
are required generally to pay to the Company at the time the contract is
executed a deposit for as much as one week's revenue due under the contract (in
the case of recurring pattern contracts) to 10% to 30% of the total charter
payment (in the case of nonrecurring pattern contracts). Tour operators are
required to pay the remaining balance of the charter payment to the Company at
least two weeks prior to the flight date. In the event the tour operator fails
to make the
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remaining payment when due, the Company must either cancel the flight at least
ten days prior to the flight date or, pursuant to DOT regulations, perform under
the contract notwithstanding the breach by the tour operator. In the event the
tour operator cancels or defaults under the contract with the Company or
otherwise notifies the Company that such tour operator no longer needs charter
service, the Company is entitled under the contract to keep the contractually
established cancellation fees, which may be more or less than the deposit.
Whether the Company elects to exercise this right in a particular case will
depend upon a number of factors, including the Company's ability to redeploy the
aircraft, the amount of money on deposit or secured by a letter or credit, the
relationship the Company has with the tour operator and the general market
conditions existing at the time. The Company may choose to renegotiate a
contract with a tour operator from time to time based on market conditions. As
part of any such renegotiations a tour operator may seek to reduce the per-seat
price or the number of flights or seats per flight which the tour operator is
obligated to purchase.
MILITARY/GOVERNMENT
Traditionally, the Company's focus has been on short-term contract
expansion business which is routinely awarded by the U.S. Government based on
price and availability of appropriate aircraft. The short-term expansion
business is awarded pro rata to the carriers with aircraft availability who have
been awarded the most fixed-award business, and then to any additional carrier
that has aircraft available. Pursuant to the military's fixed-award system, each
participating airline is given certain 'mobilization value points' based on the
number and type of aircraft then available from such airline. A participant may
increase the number of its mobilization value points by teaming up with one or
more other airlines to increase the total number of mobilization value points of
the team. Generally, a charter passenger airline will seek to team up with one
or more cargo airlines and vice versa. When the military determines its
requirements for a particular period, it determines how much of each particular
type of service it will need (e.g., narrow-body, passenger service). It will
then award each type of business to those carriers or teams that have committed
to make available that type of aircraft and service, with the carriers or teams
with the highest amount of mobilization value points given a preference. When an
award is presented to a team, the charter passenger airline will generally
perform the passenger part of the award and a cargo airline will perform the
cargo part of the award.
In 1992, the Company entered into a contractor teaming arrangement with
four other cargo and passenger airlines serving the military. If the Company
used only its own mobilization value points, it would be entitled to a
fixed-award of approximately 1% of total awards under the system; however, when
all of the Company's team members are taken into account, their portion of the
fixed-award is approximately 34% of total awards under the system. As a result,
the contractor teaming arrangement significantly increases the likelihood that
the team will receive a fixed-award contract, and, to the extent the award
includes passenger transport, increases the Company's opportunity to provide
such service because the Company represents a significant portion of the team's
passenger transport capacity. In addition, since the expansion business is also
awarded as a function of the fixed-award system, the Company, through its
contractor teaming arrangement, should also receive a greater percentage of the
short-term expansion business. As part of its participation in this contract
teaming arrangement, the Company pays certain utilization fees to other team
members.
SCHEDULED SERVICE
In scheduled service, the Company markets air travel, as well as packaged
leisure travel products, directly, as well as through travel agents, to retail
consumers in selected markets. Approximately 67% of the Company's scheduled
service tickets are sold by travel agents through computer reservation systems
that have been developed and are controlled by other airlines. Travel agents
generally receive commissions based on the price of tickets sold. Accordingly,
airlines compete not only with respect to the price of tickets sold but also
with respect to the amount of commissions paid. Airlines often pay additional
commissions in connection with special revenue programs. Federal regulations
have been promulgated that are intended to diminish preferential schedule
displays and other practices with respect to the reservation systems that place
the Company and other similar users at a competitive disadvantage to the
airlines controlling the systems. The Company believes that by reducing its
scheduled service operations to a few selected markets, its marketing and
advertising expenditures are
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much more effective. The Company believes this process will strengthen its
competitive position and improve both load factors and yields in its scheduled
service operations.
AIRCRAFT FLEET
As of June 30, 1997, the Company operated a fleet of 14 Lockheed L-1011s,
24 Boeing 727-200ADVs and 7 Boeing 757-200s.
Lockheed L-1011 Aircraft. The Company's 14 Lockheed L-1011 aircraft are
wide-body aircraft, 12 of which have a range of 2,971 nautical miles and 2 of
which have a range of 3,425 nautical miles. These aircraft conform to the FAA's
Stage 3 noise requirements and have a low ownership cost relative to most other
wide-body aircraft types. See ' -- Environmental Matters.' As a result, the
Company believes these aircraft offer a competitive advantage when operated on
long-range routes, such as on transatlantic, Caribbean and West Coast-Hawaii
routes. These aircraft have an average age of approximately 22 years. As of June
30, 1997, thirteen of these aircraft were owned by the Company and one was under
an operating lease that expires in March 2001. Certain of the L-1011 aircraft
owned by the Company are subject to mortgages and other security interests
granted in favor of the Company's lenders under its bank credit. The terms of
such security arrangements prohibit any sale or lease of such aircraft without
the consent of the secured party, subject, however, to certain exceptions,
including in most cases leases not in excess of six months where the Company
maintains operational control of the property. See 'Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources Credit Facilities.'
Boeing 727-200ADV Aircraft. The Company's 24 Boeing 727-200ADV aircraft are
narrow-body aircraft equipped with high thrust, JT8D-15/-15A/-17/-17A engines
and have a range of 2,050 nautical miles. These aircraft, of which 16 conform to
Stage 2 and 8 conform to Stage 3 noise requirements as of June 30, 1997, have an
average age of approximately 17 years. The Company leases 23 of these aircraft,
with initial lease terms that expire between December 1997 and November 2002,
subject to the Company's right to extend each lease for varying terms. The
Company may be required prior to December 31, 1998 and will be required prior to
December 31, 1999, to make expenditures for engine 'hushkits' or to acquire
replacement aircraft so that its entire fleet conforms to Stage 3 noise
requirements in accordance with FAA regulations. In general, the lessors of the
Company's Boeing 727-200ADVs have agreed to finance hushkits for these aircraft
which, if accepted by the Company, will result in an automatic extension of the
lease term for each aircraft. Although Boeing 727-200ADV aircraft are subject to
the FAA's Aging Aircraft program, the Company does not expect that its cost of
compliance for these aircraft over the next two years will be material. See
' -- Regulation.'
Boeing 757-200ADV Aircraft. The Company's 7 Boeing 757-200 aircraft are
modern, narrow-body aircraft, all of which have a range of 3,679 nautical miles.
These aircraft, all of which are leased, have an average age of approximately 3
years and meet Stage 3 noise requirements. The Company's Boeing 757-200s have
higher ownership costs than the Company's Lockheed L-1011 and Boeing 727-200ADV
aircraft, but relatively low operational costs. In addition, unlike most other
aircraft of similar size, the Boeing 757-200 has the capacity to operate on
extended flights over water. The leases for the Company's Boeing 757-200
aircraft have initial terms that expire on various dates between October 1997
and March 2015, subject to the Company's right to extend each lease for varying
terms.
FLIGHT OPERATIONS
Worldwide flight operations are planned and controlled by the Company's
Flight Operations Group operating out of its facilities located in Indianapolis,
Indiana, which are staffed on a 24-hour basis seven days a week. Logistical
support necessary for extended operations away from the Company's fixed bases
are coordinated through its global communications network. ATA's complex
operating environment demands a high degree of skill and flexibility from its
Flight Operations Group.
In order to enhance the reliability of its service, the Company seeks to
maintain at least two spare L-1011 and three spare Boeing 727 aircraft at all
times. The spare aircraft can be dispatched on short notice to most locations in
the world where a substitute aircraft is needed for mechanical or other
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reasons. The spare aircraft allows the Company to provide to its customers a
dispatch reliability that is hard for an airline of comparable or smaller size
to match.
MAINTENANCE AND SUPPORT
The Company's Maintenance and Engineering Center is located at Indianapolis
International Airport. The 120,000 square-foot facility was designed to meet the
maintenance needs of the Company's operations as well as provide contract
control of purchased services. The Company performs approximately 75% of its own
maintenance work, excluding engine overhauls and L-1011 and 727 heavy airframe
checks.
The Company currently maintains ten permanent maintenance facilities,
including its Indianapolis facility. In addition, the Company utilizes 'Road
Teams,' which are dispatched as flight operations require to arrange for and
supervise maintenance services at temporary locations. The Company sends Road
Teams to oversee the 25% of its airframe maintenance not performed in house.
The Maintenance and Engineering Center is an FAA-certificated repair
station and has the expertise to perform routine, as well as non-routine,
maintenance on L-1011, 727, and 757 aircraft. Capabilities of the Maintenance
and Engineering Center include: (i) airworthiness directive and service bulletin
compliance; (ii) modular teardown and buildup of Rolls Royce RB211-22B engines;
(iii) nondestructive testing, including radiographics, x-ray, ultrasound,
magnetic particle and eddy current; (iv) avionics component repair; (v) on-wing
engine testing; (vi) interior modification; (vii) repair and overhaul of
accessories and components, including hydraulic units and wheel and brake
assemblies; and (viii) sheet metal repair with hot bonding and composite
material capabilities. The Company contracts with third parties for certain
engine and airframe overhaul and other services if the Company does not have the
technical capability or facility capacity, or if such services can be obtained
on a more cost-effective basis from outside sources.
COMPETITION
The Company competes in a number of different markets because it offers
different products and services, and the nature and intensity of such
competition varies from market to market. In marketing its charter and scheduled
airline services, the Company emphasizes its ability to provide a simplified
product designed to meet the primary needs of leisure travelers. This includes
offering low fares, nonstop or direct flights from the customer's city of origin
and in-flight services that are comparable to standard coach service on
scheduled airlines. By offering low cost air travel products that can be
tailored to meet the specific needs of its customers, particularly independent
tour operators, the Company believes it is able to differentiate itself from
most major scheduled airlines, whose principal focus is on frequent scheduled
service on established routes, as well as from smaller charter airlines, which
often do not have comparably diverse fleets or the ability to provide similar
support or customization.
In the United States, there are few barriers to entry into the airline
business, apart from the need for certain government licenses and the need for
and availability of financing, particularly for those seeking to operate on a
small scale with limited infrastructure and other support systems. As a result,
the Company may face increased competition from startup airlines in selected
markets from time to time. In the leisure travel market, the Company's principal
business, the competition for airline passengers is significant. The Company
competes with both scheduled and charter airlines, both in the U.S. and
internationally. The Company generally competes on the basis of price,
availability of equipment, quality of service and convenience. See 'Risk
Factors -- Industry Conditions and Competition.'
COMPETITION FROM SCHEDULED AIRLINES
The Company competes against U.S., European and Mexican scheduled airlines,
most of which are significantly larger than the Company and many of which have
greater access to capital than the Company. These airlines compete for leisure
travel customers in a variety of ways, including wholesaling to tour operators
discounted seats on scheduled flights, promoting prepackaged tours to travel
agents for sale to retail customers and selling discounted, airfare-only
products to the public. As a result, all
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charter airlines, including the Company, generally are required to compete for
customers against the lowest revenue-generating seats of the scheduled airlines.
Charter airlines generally have a lower cost structure than most scheduled
airlines. The major scheduled airlines typically incur higher costs related to
labor, marketing, reservation systems and airport facilities, among other items.
Because of their cost structures, the scheduled airlines generally do not
compete directly with charter airlines on a price basis. However, during periods
of dramatic fare cuts by the scheduled airlines, the Company is forced to
compete against these deeply discounted seats. The scheduled airlines do compete
with charter airlines by selling excess capacity to tour operators and
consolidators at bulk rates and also selling charter services on a limited
basis.
The Company's charter service also competes against the scheduled airlines
on the basis of convenience and quality of service. As the U.S. scheduled
airline industry has consolidated, the traffic patterns have evolved into what
is commonly referred to as the 'hub-and-spoke' system. Partially as a result of
the creation of numerous hub-and-spoke route systems, many smaller cities are
not served by direct or nonstop flights to leisure destinations, and many
secondary leisure destinations do not receive direct or nonstop service from
more than a few major U.S. cities. The Company, through tour operators, targets
these markets by offering nonstop service to leisure destinations on a
limited-frequency basis designed to appeal to the leisure traveler and to
provide relatively high load factors. The Company believes that a significant
amount of its charter flights provide nonstop convenience to destinations not
available to passengers through scheduled airlines.
The Company competes directly with several scheduled airlines on certain
leisure routes, particularly in the Indianapolis, Milwaukee and Chicago-Midway
markets. Although several airlines serve these markets, historically, the
Company has been able to compete successfully for the leisure customer. The
Company is continually evaluating these markets for their future potential.
COMPETITION FROM CHARTER AIRLINES
In addition to competing with major domestic, European and Mexican
scheduled airlines, the Company also faces competition from charter airlines. In
the U.S., the Company competes primarily with two smaller U.S. charter airlines.
This is the lowest number of charter carriers competing for business in many
years, a situation that could promote additional entries into the charter
market. In Europe, the Company competes with several large European charter
airlines, many of which are part of entities which also own tour operators and
travel agencies or scheduled airlines. To date, the Company has been able to
compete successfully against both the U.S. and European charter airlines. In the
case of the European charter airlines, the Company believes that its success has
been primarily due to the higher operating costs of such European airlines. In
Mexico, the Company competes against several Mexican charter airlines operating
charters between the U.S. and Mexico.
Based upon bilateral aviation agreements between the U.S. and other
nations, and, in the absence of such agreements, comity and reciprocity
principles, the Company, as a charter carrier, is generally not restricted as to
the number of frequency of its flights to and from most destinations in Europe.
However, these agreements generally restrict the Company to the carriage of
passengers and cargo on flights which either originate in the U.S. and terminate
in a single European nation, or which originate in a single European nation and
terminate in the U.S. Proposals for any additional charter service must
generally be specifically approved by the civil aeronautics authorities in the
relevant countries. Approval of such a proposal is typically based on
considerations of comity and reciprocity and cannot be guaranteed. See
' -- Regulation.'
PROPERTIES
The Company leases three adjacent office buildings in Indianapolis,
consisting of approximately 136,000 square feet. These buildings are located
approximately one mile from the Indianapolis International Airport and are used
for headquarters staff and for the operation of the Indianapolis reservations
center.
The Company's Maintenance and Engineering Center is located at Indianapolis
International Airport. This 120,000 square-foot facility was designed to meet
the base maintenance needs of the Company's operations, as well as to provide
support services for other maintenance locations. The
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Indianapolis Maintenance and Engineering Center is an FAA-certificated repair
station and has the capability to perform routine, as well as non-routine,
maintenance on the Company's aircraft.
In 1995, the Company completed the lease of Hangar No. 2 at Chicago's
Midway Airport for an initial lease term of ten years, subject to two five-year
renewal options. With the reduction in scheduled service in 1996, the Company is
reconsidering other options for the use of this hangar.
Also in 1995, the Company relocated and expanded its Chicago area
reservations unit to an 18,700 square-foot facility located near Chicago's
O'Hare Airport. This new property is expected to accommodate the continued
growth of the Company's scheduled service into the foreseeable future.
INSURANCE
The Company carries types and amounts of insurance customary in the airline
industry, including coverage for public liability, passenger liability, property
damage, aircraft loss or damage, baggage and cargo liability and workers
compensation. Under the Company's current insurance policies, it will not be
covered by such insurance were it to fly, without the consent of its insurance
provider, to certain high risk countries. The Company does not consider the
inability to operate into or out of any of these countries to be a significant
limitation on its business. The Company will support certain U.S. government
operations in areas where its insurance policy does not provide coverage for
losses when the U.S. government provides sufficient replacement insurance
coverage.
EMPLOYEES
As of June 30, 1997, the Company had 4,754 employees. In June 1991, the
Company's flight attendants elected the AFA as their representative. In December
1994, the flight attendants ratified a four-year collective agreement. In June
1993, the Company's cockpit crews elected the IBT as their representative. In
September 1996, following three years of negotiation, a four-year collective
agreement was ratified by the cockpit crews.
The Company believes that its relations with its employees are good.
However, the existence of a significant dispute with any sizable number of its
employees could have a material adverse effect on the Company's operations.
REGULATION
The Company is an air carrier subject to the jurisdiction of and regulation
by the DOT and the FAA. The DOT is primarily responsible for regulating consumer
protection and other economic issues affecting air services and determining a
carrier's fitness to engage in air transportation. In 1981, the Company was
granted a Certificate of Public Convenience and Necessity pursuant to Section
401 of the Federal Aviation Act authorizing it to engage in air transportation.
The Company is also subject to the jurisdiction of the FAA with respect to its
aircraft maintenance and operations. The FAA requires each carrier to obtain an
operating certificate and operations specifications authorizing the carrier to
operate to specific airports using specified equipment. All of the Company's
aircraft must have and maintain certificates of airworthiness issued by the FAA.
The Company holds an FAA air carrier operating certificate under Part 121 of the
Federal Aviation Regulations.
The Company believes it is in compliance with all requirements necessary to
maintain in good standing its operating authority granted by the DOT and its air
carrier operating certificate issued by the FAA. A modification, suspension or
revocation of any of the Company's DOT or FAA authorizations or certificates
could have a material adverse effect upon the Company.
The FAA has issued a series of Airworthiness Directives under its 'Aging
Aircraft' program which are applicable to the Company's Lockheed L-1011 and
Boeing 727-200 aircraft. The Company does not currently expect the future cost
of these directives to be material.
Several aspects of airline operations are subject to regulation or
oversight by Federal agencies other than the DOT and FAA. The United States
Postal Service has jurisdiction over certain aspects of the transportation of
mail and related services provided by the Company through its cargo affiliate.
Labor relations in the air transportation industry are generally regulated under
the Railway Labor Act, which vests in the National Mediation Board certain
regulatory powers with respect to disputes between airlines and labor unions
arising under collective bargaining agreements. The Company is subject to the
jurisdiction of the Federal Communications Commission regarding the utilization
of its radio facilities.
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In addition, the Immigration and Naturalization Service, the U.S. Customs
Service, and the Animal and Plant Health Inspection Service of the Department of
Agriculture have jurisdiction over inspection of the Company's aircraft,
passengers and cargo to ensure the Company's compliance with U.S. immigration,
customs and import laws. The Commerce Department also regulates the export and
reexport of the Company's U.S.-manufactured aircraft and equipment.
In addition to various federal regulations, local governments and
authorities in certain markets have adopted regulations governing various
aspects of aircraft operations, including noise abatement, curfews and use of
airport facilities. Many U.S. airports have adopted or are considering adopting
a 'Passenger Facility Charge' of up to $3.00 generally payable by each passenger
departing from the airport. This charge must be collected from passengers by
transporting air carriers, such as ATA, and must be remitted to the applicable
airport authority. Airport operators must obtain approval of the FAA before they
may implement a Passenger Facility Charge.
Based upon bilateral aviation agreements between the U.S. and other
nations, and, in the absence of such agreements, comity and reciprocity
principles, the Company, as a charter carrier, is generally not restricted as to
the frequency of its flights to and from most destinations in Europe. However,
these agreements generally restrict the Company to the carriage of passengers
and cargo on flights which either originate in the U.S. and terminate in a
single European nation, or which originate in a single European nation and
terminate in the U.S.
Proposals for any additional charter service must generally be specifically
approved by the civil aeronautics authorities in the relevant countries.
Approval of such requests is typically based on considerations of comity and
reciprocity and cannot be guaranteed.
ENVIRONMENTAL MATTERS
Under the Airport Noise and Capacity Act of 1990 and related FAA
regulations, the Company's aircraft fleet must comply with certain Stage 3 noise
restrictions by certain specified deadlines. These regulations require that the
Company achieve a 75% Stage 3 fleet by December 31, 1998. In general, the
Company would be prohibited from operating any Stage 2 aircraft after December
31, 1999. As of June 30, 1997, 65% of the Company's fleet met Stage 3
requirements. The Company expects to meet future Stage 3 fleet requirements
through Boeing 727-200 hushkit modifications, combined with additional future
deliveries of Stage 3 aircraft.
In addition to the aircraft noise regulations administered by the FAA, the
EPA regulates operations, including air carrier operations, which affect the
quality of air in the United States. The Company has made all necessary
modifications to its operating fleet to meet fuel-venting requirements and
smoke-emissions standards.
The Company maintains on its property in Indiana two underground storage
tanks which contain quantities of deicing fluid and emergency generator fuel.
These tanks are subject to various EPA and State of Indiana regulations. The
Company believes it is in substantial compliance with applicable regulatory
requirements with respect to these storage facilities.
At its aircraft line maintenance facilities, the Company uses materials
which are regulated as hazardous under federal, state and local law. The Company
maintains programs to protect the safety of its employees who use these
materials and to manage and dispose of any waste generated by the use of these
materials, and believes that it is in substantial compliance with all applicable
laws and regulations.
LEGAL PROCEEDINGS
Various claims, contractual disputes and lawsuits against the Company arise
periodically involving complaints which are normal and reasonably foreseeable in
light of the nature of the Company's business. The majority of these suits are
covered by insurance. In the opinion of management, the resolution of these
claims will not have a material adverse effect on the business, operating
results or financial condition of the Company.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following serve as executive officers and directors of the Company:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------------------ --- -----------------------------------------------------
<S> <C> <C>
J. George Mikelsons....................... 60 Chairman of the Board of Directors
John P. Tague............................. 35 President, Chief Executive Officer and Director
James W. Hlavacek......................... 61 Executive Vice President, Chief Operating Officer and
Director
Kenneth K. Wolff.......................... 51 Executive Vice President, Chief Financial Officer and
Director
Dalen D. Thomas........................... 30 Senior Vice President, Marketing, Sales and Strategic
Planning and Director
Robert A. Abel............................ 43 Director
William P. Rogers, Jr. ................... 46 Director
Andrejs P. Stipnieks...................... 56 Director
</TABLE>
J. George Mikelsons is the founder, Chairman of the Board of Directors and,
prior to the Company's initial public offering in May 1993, was the sole
shareholder of Amtran. Mr. Mikelsons founded American Trans Air, Inc. and
Ambassadair Travel Club, Inc. in 1973. Mr. Mikelsons currently serves on several
boards of directors, including the Allison Engine Company, where he is Chairman
of the Board, the Indianapolis Convention and Visitors Association, where he is
a member of the Executive Committee, the Air Transport Association, the National
Air Carrier Association and TWC Resources Corporation (formerly the Indianapolis
Water Company). Mr. Mikelsons has been an airline Captain since 1966 and remains
current on several jet aircraft.
John P. Tague was appointed President and Chief Executive Officer, and
elected a Director, in June 1997. Mr. Tague originally joined the Company in
1991, and in 1993 was promoted to the position of President and Chief Operating
Officer. Mr. Tague resigned from the Company in 1995, and founded and served as
Co-Chairman and Chief Executive Officer of the Pointe Group, an aviation
consulting firm. Recently, Mr. Tague served as the Chief Executive Officer of
both Vanguard Airlines, Inc. and Air South Airlines, Inc. Mr. Tague has over 12
years of management experience in the airline industry.
James W. Hlavacek was appointed Chief Operating Officer in 1995. He
continues to serve as Executive Vice President and President of ATA Training
Corporation. From 1986 to 1989, he was Vice President of Operations. Mr.
Hlavacek has been a commercial airline pilot for more than 30 years and has held
the rank of Captain for nearly 27 years. He was ATA's Chief Pilot from 1985 to
1986. Mr. Hlavacek is a graduate of the University of Illinois.
Kenneth K. Wolff was appointed Executive Vice President and Chief Financial
Officer in 1991. From 1990 to 1991, he was Senior Vice President and Chief
Financial Officer. From 1989 to 1990, he was President and Chief Executive
Officer of First of America Bank -- Indianapolis (which is a lender under
certain of the Company's credit facilities). From 1988 to 1989, he was President
and Chief Operating Officer of such bank. Prior to his appointment as President,
he held various positions at the bank since 1969. He is a graduate of Purdue
University with a B.S. Degree in Industrial Management. Mr. Wolff also holds a
Masters in Business Administration from Indiana University and was a member of
the faculty there for five years.
Dalen D. Thomas was appointed Senior Vice President, Marketing, Sales and
Strategic Planning, and was elected a Director, in August 1996. Mr. Thomas
worked at Bain & Company, Inc. for seven years. While at Bain, he worked on the
team that restructured Continental Airlines. He graduated and received a Masters
in Business Administration from Stanford University.
Robert A. Abel is a director in the public accounting firm of Blue & Co.,
LLC. Mr. Abel is a magna cum laude graduate of Indiana State University with a
B.S. Degree in Accounting. He is a certified public accountant with over 18
years of experience in the areas of auditing and corporate tax and has been
involved with aviation accounting and finance since 1976.
William P. Rogers, Jr., is a partner in the New York law firm of Cravath,
Swaine & Moore. After graduating from Case Western Reserve University School of
Law in 1978, he served as a clerk in the
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United States Court of Appeals for the Sixth Circuit based in Cincinnati. He
joined the Cravath firm a year later and became a partner in 1985. His practice
includes a wide variety of corporate matters, including public and private
financings, mergers and acquisitions and corporate restructurings.
Andrejs P. Stipnieks is a Senior Government Solicitor in the Office of
Commercial Law. Australian Government Solicitor's Office. He graduated from the
University of Adelaide, South Australia, and is a Barrister and Solicitor of the
Supreme Courts of South Australia and the Australian Capital Territory and of
the High Court of Australia. He has specialized in transport law and practice,
especially aviation law and practice and represented Australia on the Legal
Committee of the International Civil Aviation Organization at Montreal in 1983.
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PRINCIPAL SHAREHOLDERS
The following table sets forth, as of September 1, 1997, the number of
shares of Common Stock of the Company owned by any person known by management to
beneficially own more than 5% of such stock and by all directors and executive
officers of the Company as a group:
<TABLE>
<CAPTION>
NUMBER OF
SHARES
BENEFICIALLY PERCENT
NAME AND ADDRESS OF INDIVIDUAL/GROUP OWNED OF CLASS
- ----------------------------------------------------------------------------- ------------ ---------
<S> <C> <C>
J. George Mikelsons.......................................................... 8,479,000 73.0
Dimensional Fund Advisors Inc. ............................................. 610,600(2) 5.3
1299 Ocean Avenue
11th Floor
Santa Monica, CA 90401
Heartland Advisors, Inc. ................................................... 600,000(3) 5.2
790 N. Milwaukee Street
Milwaukee, WI 53202
All directors and executive officers as a group(1) (excluding J. George
Mikelsons)................................................................. 263,300(4) -- (5)
</TABLE>
- ------------
(1) Group consists of six persons (Messrs. Hlavacek, Wolff, Thomas, Abel, Rogers
and Stipnicks).
(2) Dimensional Fund Advisors Inc. ('Dimensional'), a registered investment
advisor, has filed with the Commission its statement on Schedule 13G, dated
February 5, 1997, to the effect that it has sole voting power over 413,400
shares, and sole dispositive power over 610,600 shares. Such statement of
Dimensional's beneficial ownership, voting power, dispositive power and
percent of class as stated herein, is based solely on information stated
therein. Dismensional is deemed to have beneficial ownership of 610,600
shares of Amtran, Inc. stock as of December 31, 1996, all of which shares
are held in portfolios of DFA Investment Dimensions Group Inc., a registered
open-end investment company, or in a series of the DFA Investment Trust
Company, a Delaware business trust, or the DFA Group Trust and DFA
Participation Group Trust, investment vehicles for qualified employee
benefit plans, all of which Dimensional Fund Advisors Inc. serves as
investment manager. Dimensional disclaims beneficial ownership of all of
such shares.
(3) Heartland Advisors, Inc. ('Heartland'), a registered investment advisor,
filed with the Commission its statement on Schedule 13G, dated February 12,
1997, to the effect that it has sole voting and sole dispositive power over
all these shares. Such statement of Heartland's beneficial ownership, voting
power, dispositive owner and percent of class as stated herein, is based
solely on information stated therein.
(4) Includes (a) presently exercisable options to purchase 36,000 shares each
granted to Messrs. Wolff and Hlavacek on July 7, 1993, under the Company's
1993 Incentive Stock Plan for Key Employees; (b) presently exercisable
options to purchase 10,000 shares each granted to Messrs. Hlavacek and Wolff
on February 25, 1994, under said Plan; (c) presently exercisable options to
purchase 12,000 shares each granted to Messrs. Wolff and Hlavacek on
February 14, 1995, under said Plan; (d) presently exercisable options to
purchase 10,000 shares each granted to Messrs. Wolff and Hlavacek on March
21, 1996, under said Plan; (e) presently exercisable options to purchase
75,000 shares granted to Mr. Thomas on August 9, 1996, under the Company's
1996 Incentive Stock Plan; and (f) presently exercisable options to purchase
3,500 shares each granted to Messrs. Abel, Rogers and Stipnicks under the
Company's Stock Option Plan for Non-Employee Directors.
(5) Represents less than 3% of the outstanding stock of the Company.
CERTAIN RELATED PARTY TRANSACTIONS
Mr. Mikelsons is the sole owner of Betaco, Inc., a Delaware corporation
('Betaco'). Betaco currently owns two helicopters (a Bell 206B JetRanger III and
an Aerospatiale 355F2), both of which are leased to ATA. The lease for the
JetRanger III currently requires a monthly payment of $7,000 and provides either
party the right to terminate the lease upon six months' notice. The lease for
the Aerospatiale 355F2 is on an 'as used' basis. The Company believes that the
current terms of the leases with Betaco for this equipment are, in general, no
less favorable to the Company than those that could be obtained from third
parties.
Prior to January 1, 1997, the Company had an arrangement with Betaco under
which Betaco made certain vessels available to the Company and the Company paid
or reimbursed certain cash operating expenses relating to the use and
maintenance of these vessels. Such arrangement was terminated as of January 1,
1997. For the year ending December 31, 1996, the Company made payments totaling
$194,000 pursuant to this arrangement.
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DESCRIPTION OF THE NEW CREDIT FACILITY
Concurrently with the closing of the Original Offering, the Company entered
into the New Credit Facility. The following summary of the material provisions
of the New Credit Facility does not purport to be complete, and is subject to,
and qualified in its entirety by reference to, the New Credit Facility, a copy
of which is available from the Company upon request.
ATA is the borrower under the New Credit Facility which is guaranteed by
the Company and each of the Company's other subsidiaries (including future
subsidiaries) that are Guarantors. The New Credit Facility provides for a $50
million revolving line of credit, including up to $25 million for stand-by
letters of credit. The New Credit Facility will terminate, and all amounts
borrowed thereunder will become due and payable on April 1, 2001. Borrowings
under the New Credit Facility are secured by certain L-1011 aircraft and engines
and such additional assets as may be required to provide a loan to value ratio
not in excess of 75%.
So long as no event of default (as defined in the New Credit Facility) is
continuing, borrowings under the New Credit Facility bear interest, at the
option of ATA, at either (i) LIBOR plus 1.50% to 2.50% (depending on certain
financial ratios) or (ii) the Agent Bank's prime rate plus 0% to 0.50%
(depending on certain financial ratios). ATA incurs a quarterly commitment fee
ranging from 0.25% to 0.50% per annum on the average unused portion of the
commitment (depending on certain financial ratios).
The New Credit Facility contains covenants which, absent the prior written
consent of the Required Banks (as defined in the New Credit Facility), among
other things, limit the amount of debt that the Company, ATA or any of their
subsidiaries may incur, limit the placement of liens on the Company's, ATA's or
any of their subsidiaries' assets, restrict the ability of the Company, ATA or
any of their subsidiaries to make capital expenditures, restrict the payment of
dividends, distributions to stockholders and other similar payments, restrict
the ability of the Company, ATA or any of their subsidiaries to merge with or
into another person or sell or dispose of their assets and prevent the Company,
ATA or any of their subsidiaries from prepaying or redeeming indebtedness,
including the Notes. Further, covenants require that, for specified periods, ATA
maintain a minimum tangible net worth of at least $50 million plus 50% of net
profits as of the end of each fiscal quarter, certain specified ratios of cash
flow to interest expense and aircraft rentals, and total adjusted liabilities to
tangible net worth.
Among other events of default, a reduction below 51% in (i) J. George
Mikelsons' or his heirs' beneficial ownership of the Company's outstanding
capital stock, or (ii) the Company's beneficial ownership of ATA's outstanding
capital stock, are both specified as events of default.
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DESCRIPTION OF THE NOTES
The Outstanding Notes were, and the Exchange Notes will be, issued under an
Indenture, dated as of July 24, 1997, among the Company, as issuer, American
Trans Air, Inc., Ambassadair Travel Club, Inc., ATA Vacations, Inc. (formerly
Amber Tours, Inc.), Amber Travel, Inc., American Trans Air Training Corporation,
American Trans Air ExecuJet, Inc., and Amber Air Freight Corporation, as
guarantors (collectively, the 'Guarantors'), and First Security Bank, N.A., as
trustee (the 'Trustee'). The following summary of certain provisions of the
Indenture and the Notes does not purport to be complete and is subject to, and
is qualified in its entirety by reference to, all the provisions of the
Indenture, including the definitions of certain terms therein and those terms
made a part thereof by the Trust Indenture Act of 1939, as amended (the 'Trust
Indenture Act'). Copies of the Indenture and the Notes are available upon
request from the Company. Whenever particular defined terms of the Indenture not
otherwise defined herein are referred to, such defined terms are incorporated
herein by reference. For definitions of certain capitalized terms used in the
following summary, see ' -- Certain Definitions.'
GENERAL
The Notes are unsecured senior obligations of the Company, initially
limited to $100 million aggregate principal amount, and will mature on August 1,
2004. Each Note will initially bear interest at 10 1/2% per annum from the
Closing Date or from the most recent Interest Payment Date to which interest has
been paid or provided for, payable semiannually (to Holders of record at the
close of business on the January 15 or July 15 immediately preceding the
Interest Payment Date) on February 1 and August 1 of each year, commencing
February 1, 1998.
Principal of, premium, if any, and interest on the Notes will be payable,
and the Notes may be exchanged or transferred, at the office or agency of the
Company in the Borough of Manhattan, the City of New York; provided that, at the
option of the Company, payment of interest may be made by check mailed to the
Holders at their addresses as they appear in the Security Register.
The Notes will be issued only in fully registered form, without coupons, in
denominations of $1,000 of principal amount and any integral multiple thereof.
See ' -- Book-Entry; Delivery and Form.' No service charge will be made for any
registration of transfer or exchange of Notes, but the Company may require
payment of a sum sufficient to cover any transfer tax or other similar
governmental charge payable in connection therewith.
For each Outstanding Note accepted for exchange, the Holder thereof will
receive an Exchange Note having a principal amount equal to that of the
surrendered Outstanding Note.
The terms of the Exchange Notes are identical in all material respects to
the terms of the Outstanding Notes, except for certain transfer restrictions and
registration rights relating to the Outstanding Notes and except that, if an
exchange offer with respect to the Exchange Notes is not consummated by January
24, 1998, the rate per annum at with the Outstanding Notes bear interest will be
increased temporarily. See 'Registration Rights Agreement for Outstanding
Notes.'
All Outstanding Notes and Exchange Notes will be treated as a single class
of securities for all purposes under the Indenture.
OPTIONAL REDEMPTION
In the event that more than 98% of the outstanding principal amount of the
Notes are tendered pursuant to an Offer to Purchase, as required by the
'Limitation on Asset Sales' or 'Repurchase of Notes upon a Change of Control'
covenant, the balance of the Notes will be redeemable, at the Company's option,
in whole or in part, at any time or from time to time thereafter and prior to
maturity, upon not less than 30 nor more than 60 days' prior notice mailed by
first class mail to each Holder's last address as it appears in the Security
Register, at a Redemption Price equal to the price specified in such Offer to
Purchase plus accrued and unpaid interest, if any, to the Redemption Date
(subject to the right
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of Holders of record on the relevant Regular Record Date that is on or prior to
the Redemption Date to receive interest due on an Interest Payment Date).
The Notes will also be redeemable, at the Company's option, in whole or in
part, at any time or from time to time, on or after August 1, 2002 and prior to
maturity, upon not less than 30 nor more than 60 days' prior notice mailed by
first class mail to each Holders' last address as it appears in the Security
Register, at the following Redemption Prices (expressed in percentages of
principal amount), plus accrued and unpaid interest, if any, to the Redemption
Date (subject to the right of Holders of record on the relevant Regular Record
Date that is on or prior to the Redemption Date to receive interest due on an
Interest Payment Date), if redeemed during the 12-month period commencing August
1 of the years set forth below:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
- ----------------------------------------------------------------------- ----------
<S> <C>
2002................................................................... 105.250%
2003................................................................... 102.625%
</TABLE>
In addition, at any time prior to August 1, 2000, the Company may redeem up
to 35% of the principal amount of the Notes with the proceeds of one or more
sales of its Common Stock, at any time or from time to time in part, at a
Redemption Price (expressed as a percentage of principal amount) of 110.500%,
plus accrued and unpaid interest to the Redemption Date (subject to the rights
of Holders of record on the relevant Regular Record Date that is prior to the
Redemption Date to receive interest due on an Interest Payment Date); provided
that at least $65 million aggregate principal amount of Notes remains
outstanding after each such redemption.
In the case of any partial redemption, selection of the Notes for
redemption will be made by the Trustee in compliance with the requirements of
the principal national securities exchange, if any, on which the Notes are
listed or, if the Notes are not listed on a national securities exchange, by lot
or by such other method as the Trustee in its sole discretion shall deem to be
fair and appropriate; provided that no Note of $1,000 in principal amount or
less shall be redeemed in part. If any Note is to be redeemed in part only, the
notice of redemption relating to such Note shall state the portion of the
principal amount thereof to be redeemed. A new Note in principal amount equal to
the unredeemed portion thereof will be issued in the name of the Holder thereof
upon cancellation of the original Note.
SINKING FUND
There will be no sinking fund payments for the Notes.
GUARANTEE
The Company's obligations under the Notes are fully and unconditionally
guaranteed (the 'Note Guarantees') on an unsecured, unsubordinated basis,
jointly and severally, by the Guarantors; provided that no Note Guarantee shall
be enforceable against any Guarantor in an amount in excess of the net worth of
such Guarantor at the time that determination of such net worth is, under
applicable law, relevant to the enforceability of such Note Guarantee. Such net
worth shall include any claim of such Guarantor against the Company for
reimbursement and any claim against any other Guarantor for contribution.
Each Note Guarantee, other than the Note Guarantee provided by ATA, will
provide by its terms that it shall be automatically and unconditionally released
and discharged upon any sale, exchange or transfer to any Person that is not an
Affiliate of the Company, of all of the Company's and each Restricted
Subsidiary's Capital Stock issued by, or all or substantially all the assets of,
such Guarantor (which sale, exchange or transfer is not prohibited by the
Indenture).
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RANKING
The Indebtedness evidenced by the Notes and the Note Guarantees will rank
pari passu in right of payment with all existing and future unsubordinated
indebtedness of the Company and the Guarantors, respectively, and senior in
right of payment to all existing and future subordinated indebtedness of the
Company and the Guarantors, respectively. The Notes and Note Guarantees will
also be effectively subordinated to all existing and future secured indebtedness
of the Company and the Guarantors, to the extent of such security. At June 30,
1997, after giving pro forma effect to the Offering and the application of the
net proceeds thereof, the Company (on a consolidated basis) would have had
outstanding approximately $172.7 million of indebtedness (including the Notes),
approximately $63.9 million of which would have been secured. At June 30, 1997,
after giving pro forma effect to the Offering and the application of the net
proceeds thereof, the Guarantors (on a consolidated basis excluding indebtedness
owed to the Company and indebtedness of Amtran) would have had approximately
$72.7 million of indebtedness outstanding (other than the Note Guarantees),
approximately $63.9 million of which would have been secured indebtedness. See
'Capitalization.' The Credit Agreement is secured by thirteen L-1011 aircraft
and related engines, including spares and may be secured by other assets as
provided thereunder. See 'Description of the New Credit Facility.' The Notes
will be effectively subordinated to such indebtedness to the extent of such
security interests. See 'Risk Factors -- Effective Subordination of Notes to
Secured Obligations of Subsidiaries.'
CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in the
covenants and other provisions of the Indenture. Reference is made to the
Indenture for the full definition of all terms as well as any other capitalized
term used herein for which no definition is provided.
'Acquired Indebtedness' means Indebtedness of a Person existing at the time
such Person becomes a Restricted Subsidiary or assumed in connection with an
Asset Acquisition by a Restricted Subsidiary and not Incurred in connection
with, or in anticipation of, such Person becoming a Restricted Subsidiary or
such Asset Acquisition; provided that Indebtedness of such Person which is
redeemed, defeased, retired or otherwise repaid at the time of or immediately
upon consummation of the transactions by which such Person becomes a Restricted
Subsidiary or such Asset Acquisition shall not be Acquired Indebtedness.
'Adjusted Consolidated Net Income' means, for any period, the aggregate net
income (or loss) of the Company and its Restricted Subsidiaries for such period
determined in conformity with GAAP; provided that the following items shall be
excluded in computing Adjusted Consolidated Net Income (without duplication):
(i) the net income of any Person that is not a Restricted Subsidiary, except to
the extent of the amount of dividends or other distributions actually paid to
the Company or any of its Restricted Subsidiaries by such Person during such
period; (ii) solely for the purposes of calculating the amount of Restricted
Payments that may be made pursuant to clause (C) of the first paragraph of the
'Limitation on Restricted Payments' covenant described below (and in such case,
except to the extent includable pursuant to clause (i) above), the net income
(or loss) of any Person accrued prior to the date it becomes a Restricted
Subsidiary or is merged into or consolidated with the Company or any of its
Restricted Subsidiaries or all or substantially all of the property and assets
of such Person are acquired by the Company or any of its Restricted
Subsidiaries; (iii) the net income of any Restricted Subsidiary which is not a
Guarantor to the extent that the declaration or payment of dividends or similar
distributions by such Restricted Subsidiary of such net income is not at the
time permitted by the operation of the terms of its charter or any agreement,
instrument, judgment, decree, order, statute, rule or governmental regulation
applicable to such Restricted Subsidiary; (iv) any gains or losses (on an
after-tax basis) attributable to Asset Sales; (v) except for purposes of
calculating the amount of Restricted Payments that may be made pursuant to
clause (C) of the first paragraph of the 'Limitation on Restricted Payments'
covenant described below, any amount paid or accrued as dividends on Preferred
Stock of the Company or any Restricted Subsidiary owned by Persons other than
the Company and any of its Restricted Subsidiaries; and (vi) all extraordinary
gains and extraordinary losses.
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'Adjusted Consolidated Net Tangible Assets' means the total amount of
assets of the Company and its Restricted Subsidiaries (less applicable
depreciation, amortization and other valuation reserves), except to the extent
resulting from write-ups of capital assets (excluding write-ups in connection
with accounting for acquisitions in conformity with GAAP), after deducting
therefrom (i) all current liabilities of the Company and its Restricted
Subsidiaries (excluding intercompany items) and (ii) all goodwill, trade names,
trademarks, patents, unamortized debt discount and expense and other like
intangibles, all as set forth on the most recent quarterly or annual
consolidated balance sheet of the Company and its Restricted Subsidiaries,
prepared in conformity with GAAP and filed with the Commission or provided to
the Trustee pursuant to the 'Commission Reports and Reports to Holders'
covenant.
'Affiliate' means, as applied to any Person, any other Person directly or
indirectly controlling, controlled by, or under direct or indirect common
control with, such Person. For purposes of this definition, 'control'
(including, with correlative meanings, the terms 'controlling,' 'controlled by'
and 'under common control with'), as applied to any Person, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities, by contract or otherwise.
'Asset Acquisition' means (i) an investment by the Company or any of its
Restricted Subsidiaries in any other Person pursuant to which such Person shall
become a Restricted Subsidiary or shall be merged into or consolidated with the
Company or any of its Restricted Subsidiaries; provided that such Person's
primary business is related, ancillary or complementary to the businesses of the
Company and its Restricted Subsidiaries on the date of such investment or (ii)
an acquisition by the Company or any of its Restricted Subsidiaries of the
property and assets of any Person other than the Company or any of its
Restricted Subsidiaries that constitute substantially all of a division or line
of business of such Person; provided that the property and assets acquired are
related, ancillary or complementary to the businesses of the Company and its
Restricted Subsidiaries on the date of such acquisition.
'Asset Disposition' means the sale or other disposition by the Company or
any of its Restricted Subsidiaries (other than to the Company or another
Restricted Subsidiary) of (i) all or substantially all of the Capital Stock of
any Restricted Subsidiary of the Company or (ii) all or substantially all of the
assets that constitute a division or line of business of the Company or any of
its Restricted Subsidiaries.
'Asset Sale' means any sale, transfer or other disposition (including by
way of merger, consolidation or sale-leaseback transaction) in one transaction
or a series of related transactions by the Company or any of its Restricted
Subsidiaries to any Person other than the Company or any of its Restricted
Subsidiaries of (i) all or any of the Capital Stock of any Restricted Subsidiary
(other than directors' qualifying shares), (ii) all or substantially all of the
property and assets of an operating unit or business of the Company or any of
its Restricted Subsidiaries or (iii) any other property and assets of the
Company or any of its Restricted Subsidiaries outside the ordinary course of
business of the Company or such Restricted Subsidiary and, in each case, that is
not governed by the provisions of the Indenture applicable to mergers,
consolidations and sales of assets of the Company; provided that 'Asset Sale'
shall not include (a) sales or other dispositions of inventory, receivables and
other current assets, (b) sales or other dispositions of assets for
consideration at least equal to the fair market value of the assets sold or
disposed of, to the extent that the consideration received would satisfy clause
(B) of the 'Limitation on Asset Sales' covenant or (c) sales or other
dispositions of assets in a single transaction or series of related transactions
having a fair market value, as determined in good faith by the Board of
Directors, of $2 million or less.
'Average Life' means, at any date of determination with respect to any debt
security, the quotient obtained by dividing (i) the sum of the products of (a)
the number of years from such date of determination to the dates of each
successive scheduled principal payment of such debt security and (b) the amount
of such principal payment by (ii) the sum of all such principal payments.
'Capital Stock' means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated, whether
voting or non-voting) in equity of such Person, whether outstanding on the
Closing Date or issued thereafter, including, without limitation, all Common
Stock and Preferred Stock.
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'Capitalized Lease' means, as applied to any Person, any lease of any
property (whether real, personal or mixed) of which the discounted present value
of the rental obligations of such Person as lessee, in conformity with GAAP, is
required to be capitalized on the balance sheet of such Person.
'Capitalized Lease Obligations' means the discounted present value of the
rental obligations under a Capitalized Lease.
'Change of Control' means such time as (i) (x) a 'person' or 'group'
(within the meaning of Sections 13(d) and 14(d)(2) of the Exchange Act) becomes
the ultimate 'beneficial owner' (as defined in Rule 13d-3 under the Exchange
Act) of more than 35% of the total voting power of the Voting Stock of the
Company on a fully diluted basis and such ownership represents a greater
percentage of the total voting power of the Voting Stock of the Company, on a
fully diluted basis, than is held by the Existing Stockholders and their
Affiliates on such date and (y) immediately following the occurrence of the
events specified in subsection (x), there shall have occurred any downgrading,
or notice shall have been given of any intended or potential downgrading, in the
rating accorded any of the Company's securities or (ii) individuals who on the
Closing Date constitute the Board of Directors (together with any new directors
whose election by the Board of Directors or whose nomination by the Board of
Directors for election by the Company's stockholders was approved by a vote of
at least two-thirds of the members of the Board of Directors then in office who
either were members of the Board of Directors on the Closing Date or whose
election or nomination for election was previously so approved) cease for any
reason to constitute a majority of the members of the Board of Directors then in
office.
'Closing Date' means the date on which the Notes are originally issued
under the Indenture.
'Consolidated EBITDA' means, for any period, Adjusted Consolidated Net
Income for such period plus, to the extent such amount was deducted in
calculating such Adjusted Consolidated Net Income, (i) Consolidated Interest
Expense, (ii) income taxes (other than income taxes (either positive or
negative) attributable to extraordinary and non-recurring gains or losses
arising out of sales of assets), (iii) depreciation expense, (iv) amortization
expense and (v) all other non-cash items reducing Adjusted Consolidated Net
Income (other than items that will require cash payments and for which an
accrual or reserve is, or is required by GAAP to be, made), less all non-cash
items increasing Adjusted Consolidated Net Income, all as determined on a
consolidated basis for the Company and its Restricted Subsidiaries in conformity
with GAAP; provided that, if any Restricted Subsidiary is not a Wholly Owned
Restricted Subsidiary, Consolidated EBITDA shall be reduced (to the extent not
otherwise reduced in the calculation of Adjusted Consolidated Net Income in
accordance with GAAP) by an amount equal to (A) the amount of the Adjusted
Consolidated Net Income attributable to such Restricted Subsidiary multiplied by
(B) the quotient of (1) the number of shares of outstanding Common Stock of such
Restricted Subsidiary not owned on the last day of such period by the Company or
any of its Restricted Subsidiaries divided by (2) the total number of shares of
outstanding Common Stock of such Restricted Subsidiary on the last day of such
period.
'Consolidated Interest Expense' means, for any period, the aggregate amount
of interest in respect of Indebtedness (including, without limitation but
without duplication, amortization of original issue discount on any Indebtedness
and the interest portion of any deferred purchase price payment obligation,
calculated in accordance with the effective interest method of accounting; all
commissions, discounts and other fees and charges owed with respect to letters
of credit and bankers' acceptance financing; the net costs associated with
Interest Rate Agreements; and Indebtedness that is Guaranteed or secured by the
Company or any of its Restricted Subsidiaries) and the interest component of
rentals in respect of Capitalized Lease Obligations paid, accrued or scheduled
to be paid or to be accrued by the Company and its Restricted Subsidiaries
during such period; excluding, however, (i) any amount of such interest of any
Restricted Subsidiary if the net income of such Restricted Subsidiary is
excluded in the calculation of Adjusted Consolidated Net Income pursuant to
clause (iii) of the definition thereof (but only in the same proportion as the
net income of such Restricted Subsidiary is excluded from the calculation of
Adjusted Consolidated Net Income pursuant to clause (iii) of the definition
thereof), (ii) any premiums, fees and expenses (and any amortization thereof)
payable in connection with the offering of the Notes or the Credit Agreement,
all as determined on a consolidated basis (without taking into account
Unrestricted Subsidiaries) in conformity with GAAP, and (iii) any interest or
other
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financing costs associated with loans to students of the Company's training
academy, unless such costs are paid by the Company or any Restricted Subsidiary.
'Consolidated Net Worth' means, at any date of determination, stockholders'
equity as set forth on the most recently available quarterly or annual
consolidated balance sheet of the Company and its Restricted Subsidiaries (which
shall be as of a date not more than 90 days prior to the date of such
computation, and which shall not take into account Unrestricted Subsidiaries),
less any amounts attributable to Disqualified Stock or any equity security
convertible into or exchangeable for Indebtedness, the cost of treasury stock
and the principal amount of any promissory notes receivable from the sale of the
Capital Stock of the Company or any of its Restricted Subsidiaries, each item to
be determined in conformity with GAAP (excluding the effects of foreign currency
exchange adjustments under Financial Accounting Standards Board Statement of
Financial Accounting Standards No. 52).
'Credit Agreement' means the credit agreement among ATA, NBD Bank, N.A., as
agent, the lenders named therein, the Company and the other Guarantors, as
guarantors, together with all other loan or credit agreements entered into from
time to time with one or more banks or other institutional lenders and all
instruments and documents executed or delivered pursuant thereto, in each case
as such agreements, instruments or documents may be amended (including any
amendment and restatement thereof), supplemented, replaced or otherwise modified
from time to time in one or more successive transactions (including any such
transaction that changes the amount available, replaces the relevant agreement
or changes one or more lenders).
'Currency Agreement' means any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement.
'Default' means any event that is, or after notice or passage of time or
both would be, an Event of Default.
'Disqualified Stock' means any class or series of Capital Stock of any
Person that by its terms or otherwise is (i) required to be redeemed prior to
the Stated Maturity of the Notes, (ii) redeemable at the option of the holder of
such class or series of Capital Stock at any time prior to the Stated Maturity
of the Notes or (iii) convertible into or exchangeable for Capital Stock
referred to in clause (i) or (ii) above or Indebtedness having a scheduled
maturity prior to the Stated Maturity of the Notes; provided that any Capital
Stock that would not constitute Disqualified Stock but for provisions thereof
giving holders thereof the right to require such Person to repurchase or redeem
such Capital Stock upon the occurrence of an 'asset sale' or 'change of control'
occurring prior to the Stated Maturity of the Notes shall not constitute
Disqualified Stock if the 'asset sale' or 'change of control' provisions
applicable to such Capital Stock are no more favorable to the holders of such
Capital Stock than the provisions contained in 'Limitation on Asset Sales' and
'Repurchase of Notes upon a Change of Control' covenants described below and
such Capital Stock specifically provides that such Person will not repurchase or
redeem any such stock pursuant to such provision prior to the Company's
repurchase of such Notes as are required to be repurchased pursuant to the
'Limitation on Asset Sales' and 'Repurchase of Notes upon a Change of Control'
covenants described below.
'Existing Stockholders' means J. George Mikelsons, his spouse, his issue,
any trust for any of the foregoing and any Affiliate of any of the foregoing.
'fair market value' means the price that would be paid in an arm's-length
transaction between an informed and willing seller under no compulsion to sell
and an informed and willing buyer under no compulsion to buy, as determined in
good faith by the Board of Directors, whose determination shall be conclusive if
evidenced by a Board Resolution.
'GAAP' means generally accepted accounting principles in the United States
of America as in effect as of the Closing Date, including, without limitation,
those set forth in the opinions and pronouncements of the Accounting Principles
Board of the American Institute of Certified Public Accountants and statements
and pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as approved by a significant segment of the
accounting profession. All ratios and computations contained or referred to in
the Indenture (i) shall be computed in conformity with GAAP applied on a
consistent basis, except that calculations made for purposes of determining
compliance with the terms of the covenants and with other provisions of the
Indenture
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shall be made without giving effect to (A) the amortization of any expenses
incurred in connection with the offering of the Notes and (B) except as
otherwise provided, the amortization of any amounts required or permitted by
Accounting Principles Board Opinion Nos. 16 and 17 and (ii) shall, insofar as
they involve the treatment for financial reporting purposes of amounts incurred
with engine overhauls, reflect the accounting policy of the Company as in effect
as of the Closing Date.
'Guarantee' means, without duplication, any obligation, contingent or
otherwise, of any Person directly or indirectly guaranteeing any Indebtedness of
any other Person and, without limiting the generality of the foregoing, any
obligation, direct or indirect, contingent or otherwise, of such Person (i) to
purchase or pay (or advance or supply funds for the purchase or payment of) such
Indebtedness of such other Person (whether arising by virtue of partnership
arrangements, or by agreements to keep-well, to purchase assets, goods,
securities or services (unless such purchase arrangements are on arm's-length
terms and are entered into in the ordinary course of business), to take-or-pay,
or to maintain financial statement conditions or otherwise) or (ii) entered into
for purposes of assuring in any other manner the obligee of such Indebtedness of
the payment thereof or to protect such obligee against loss in respect thereof
(in whole or in part); provided that the term 'Guarantee' shall not include
endorsements for collection or deposit in the ordinary course of business. The
term 'Guarantee' used as a verb has a corresponding meaning.
'Incur' means, with respect to any Indebtedness, to incur, create, issue,
assume, Guarantee or otherwise become liable for or with respect to, or become
responsible for, the payment of, contingently or otherwise, such Indebtedness,
including an 'Incurrence' of Acquired Indebtedness; provided that neither the
accrual of interest nor the accretion of original issue discount shall be
considered an Incurrence of Indebtedness.
'Indebtedness' means, with respect to any Person at any date of
determination (without duplication), (i) all indebtedness of such Person for
borrowed money, (ii) all obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments, (iii) all obligations of such
Person in respect of letters of credit or other similar instruments (including
reimbursement obligations with respect thereto, but excluding obligations with
respect to letters of credit (including trade letters of credit) securing
obligations (other than obligations described in (i) or (ii) above or (v), (vi)
or (vii) below) entered into in the ordinary course of business of such Person
to the extent such letters of credit are not drawn upon or, if drawn upon, to
the extent such drawing is reimbursed no later than the third Business Day
following receipt by such Person of a demand for reimbursement), (iv) all
obligations of such Person to pay the deferred and unpaid purchase price of
property or services, which purchase price is due more than six months after the
date of placing such property in service or taking delivery and title thereto or
the completion of such services, except Trade Payables, (v) all Capitalized
Lease Obligations, (vi) all Indebtedness of other Persons secured by a Lien on
any asset of such Person, whether or not such Indebtedness is assumed by such
Person; provided that the amount of such Indebtedness shall be the lesser of (A)
the fair market value of such asset at such date of determination and (B) the
amount of such Indebtedness, (vii) all Indebtedness of other Persons Guaranteed
by such Person to the extent such Indebtedness is Guaranteed by such Person and
(viii) to the extent not otherwise included in this definition, obligations
under Currency Agreements and Interest Rate Agreements. The amount of
Indebtedness of any Person at any date shall be the outstanding balance at such
date of all unconditional obligations as described above and, with respect to
contingent obligations, the maximum liability upon the occurrence of the
contingency giving rise to the obligation, provided (A) that the amount
outstanding at any time of any Indebtedness issued with original issue discount
is the face amount of such Indebtedness less the remaining unamortized portion
of the original issue discount of such Indebtedness at the time of its issuance
as determined in conformity with GAAP, (B) that money borrowed and set aside at
the time of the Incurrence of any Indebtedness in order to prefund the payment
of the interest on such Indebtedness shall not be deemed to be 'Indebtedness'
and (C) that Indebtedness shall not include any liability for federal, state,
local or other taxes.
'Interest Coverage Ratio' means, on any Transaction Date, the ratio of (i)
the aggregate amount of Consolidated EBITDA for the then most recent four fiscal
quarters prior to such Transaction Date for which reports have been filed with
the Commission (the 'Four Quarter Period') to (ii) the aggregate Consolidated
Interest Expense during such Four Quarter Period. In making the foregoing
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calculation, (A) pro forma effect shall be given to any Indebtedness Incurred or
repaid during the period (the 'Reference Period') commencing on the first day of
the Four Quarter Period and ending on the Transaction Date (other than
Indebtedness Incurred or repaid under a revolving credit or similar arrangement
to the extent of the commitment thereunder (or under any predecessor revolving
credit or similar arrangement) in effect on the last day of such Four Quarter
Period unless any portion of such Indebtedness is projected, in the reasonable
judgment of the senior management of the Company, to remain outstanding for a
period in excess of 12 months from the date of the Incurrence thereof), in each
case as if such Indebtedness had been Incurred or repaid on the first day of
such Reference Period; (B) Consolidated Interest Expense attributable to
interest on any Indebtedness (whether existing or being Incurred) computed on a
pro forma basis and bearing a floating interest rate shall be computed as if the
rate in effect on the Transaction Date (taking into account any Interest Rate
Agreement applicable to such Indebtedness if such Interest Rate Agreement has a
remaining term in excess of 12 months or, if shorter, at least equal to the
remaining term of such Indebtedness) had been the applicable rate for the entire
period; (C) pro forma effect shall be given to Asset Dispositions and Asset
Acquisitions (including giving pro forma effect to the application of proceeds
of any Asset Disposition) that occur during such Reference Period as if they had
occurred and such proceeds had been applied on the first day of such Reference
Period; and (D) pro forma effect shall be given to asset dispositions and asset
acquisitions (including giving pro forma effect to the application of proceeds
of any asset disposition) that have been made by any Person that has become a
Restricted Subsidiary or has been merged with or into the Company or any
Restricted Subsidiary during such Reference Period and that would have
constituted Asset Dispositions or Asset Acquisitions had such transactions
occurred when such Person was a Restricted Subsidiary as if such asset
dispositions or asset acquisitions were Asset Dispositions or Asset Acquisitions
that occurred on the first day of such Reference Period; provided that to the
extent that clause (C) or (D) of this sentence requires that pro forma effect be
given to an Asset Acquisition or Asset Disposition, such pro forma calculation
shall be based upon the four full fiscal quarters immediately preceding the
Transaction Date of the Person, or division or line of business of the Person,
that is acquired or disposed for which financial information is available.
'Interest Rate Agreement' means any interest rate protection agreement,
interest rate future agreement, interest rate option agreement, interest rate
swap agreement, interest rate cap agreement, interest rate collar agreement,
interest rate hedge agreement, option or future contract or other similar
agreement or arrangement.
'Investment' in any Person means any direct or indirect advance, loan or
other extension of credit (including, without limitation, by way of Guarantee or
similar arrangement; but excluding advances to customers in the ordinary course
of business that are, in conformity with GAAP, recorded as accounts receivable
on the balance sheet of the Company or its Restricted Subsidiaries) or capital
contribution to (by means of any transfer of cash or other property to others or
any payment for property or services for the account or use of others), or any
purchase or acquisition of Capital Stock, bonds, notes, debentures or other
similar instruments issued by, such Person and shall include (i) the designation
of a Restricted Subsidiary as an Unrestricted Subsidiary and (ii) the fair
market value of the Capital Stock (or any other Investment), held by the Company
or any of its Restricted Subsidiaries, of (or in) any Person that has ceased to
be a Restricted Subsidiary, including without limitation, by reason of any
transaction permitted by clause (iii) of the 'Limitation on the Issuance and
Sale of Capital Stock of Restricted Subsidiaries' covenant; provided that the
fair market value of the Investment remaining in any Person that has ceased to
be a Restricted Subsidiary shall not exceed the aggregate amount of Investments
previously made in such Person valued at the time such Investments were made
less the net reduction of such Investments. For purposes of the definition of
'Unrestricted Subsidiary' and the 'Limitation on Restricted Payments' covenant
described below, (i) 'Investment' shall include the fair market value of the
assets (net of liabilities (other than liabilities to the Company or any of its
Restricted Subsidiaries)) of any Restricted Subsidiary at the time that such
Restricted Subsidiary is designated an Unrestricted Subsidiary, (ii) the fair
market value of the assets (net of liabilities (other than liabilities to the
Company or any of its Restricted Subsidiaries)) of any Unrestricted Subsidiary
at the time that such Unrestricted Subsidiary is designated a Restricted
Subsidiary shall be considered a reduction in outstanding Investments and (iii)
any property transferred to or from an Unrestricted Subsidiary shall be valued
at its fair market value at the time of such transfer.
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'Lien' means any mortgage, pledge, security interest, encumbrance, lien or
charge of any kind (including, without limitation, any conditional sale or other
title retention agreement or lease in the nature thereof or any agreement to
give any security interest).
'Moody's' means Moody's Investors Service, Inc. and its successors.
'Net Cash Proceeds' means, (a) with respect to any Asset Sale, the proceeds
of such Asset Sale in the form of cash or cash equivalents, including payments
in respect of deferred payment obligations (to the extent corresponding to the
principal, but not interest, component thereof) when received in the form of
cash or cash equivalents (except to the extent such obligations are financed or
sold with recourse to the Company or any Restricted Subsidiary) and proceeds
from the conversion of other property received when converted to cash or cash
equivalents, net of (i) brokerage commissions and other fees and expenses
(including fees and expenses of counsel and investment bankers) related to such
Asset Sale, (ii) provisions for all taxes (whether or not such taxes will
actually be paid or are payable) as a result of such Asset Sale without regard
to the consolidated results of operations of the Company and its Restricted
Subsidiaries, taken as a whole, (iii) payments made to repay Indebtedness or any
other obligation outstanding at the time of such Asset Sale that either (A) is
secured by a Lien on the property or assets sold or (B) is required to be paid
as a result of such sale and (iv) appropriate amounts to be provided by the
Company or any Restricted Subsidiary as a reserve against any liabilities
associated with such Asset Sale, including, without limitation, pension and
other post-employment benefit liabilities, liabilities related to environmental
matters and liabilities under any indemnification obligations associated with
such Asset Sale, all as determined in conformity with GAAP and (b) with respect
to any issuance or sale of Capital Stock, the proceeds of such issuance or sale
in the form of cash or cash equivalents, including payments in respect of
deferred payment obligations (to the extent corresponding to the principal, but
not interest, component thereof) when received in the form of cash or cash
equivalents (except to the extent such obligations are financed or sold with
recourse to the Company or any Restricted Subsidiary) and proceeds from the
conversion of other property received when converted to cash or cash
equivalents, net of attorney's fees, accountants' fees, underwriters' or
placement agents' fees, discounts or commissions and brokerage, consultant and
other fees incurred in connection with such issuance or sale and net of taxes
paid or payable as a result thereof.
'Note Guarantee' means any Guarantee of the Notes by a Guarantor.
'Offer to Purchase' means an offer to purchase Notes by the Company from
the Holders commenced by mailing a notice to the Trustee and each Holder
stating: (i) the covenant pursuant to which the offer is being made and that all
Notes validly tendered will be accepted for payment on a pro rata basis; (ii)
the purchase price and the date of purchase (which shall be a Business Day no
earlier than 30 days nor later than 60 days from the date such notice is mailed)
(the 'Payment Date'); (iii) that any Note not tendered will continue to accrue
interest pursuant to its terms; (iv) that, unless the Company defaults in the
payment of the purchase price, any Note accepted for payment pursuant to the
Offer to Purchase shall cease to accrue interest on and after the Payment Date;
(v) that Holders electing to have a Note purchased pursuant to the Offer to
Purchase will be required to surrender the Note, together with the form entitled
'Option of the Holder to Elect Purchase' on the reverse side of the Note
completed, to the Paying Agent at the address specified in the notice prior to
the close of business on the Business Day immediately preceding the Payment
Date; (vi) that Holders will be entitled to withdraw their election if the
Paying Agent receives, not later than the close of business on the third
Business Day immediately preceding the Payment Date, a telegram, facsimile
transmission or letter setting forth the name of such Holder, the principal
amount of Notes delivered for purchase and a statement that such Holder is
withdrawing his election to have such Notes purchased; (vii) that Holders whose
Notes are being purchased only in part will be issued new Notes equal in
principal amount to the unpurchased portion of the Notes surrendered; provided
that each Note purchased and each new Note issued shall be in a principal amount
of $1,000 or integral multiples thereof; and (viii) if more than 98% of the
outstanding principal amount of the Notes is tendered pursuant to an Offer to
Purchase, the Company shall have the right to redeem the balance of the Notes at
the purchase price specified in such Offer to Purchase, plus (without
duplication) accrued and unpaid interest, if any, to the Redemption Date on the
principal amount of the Notes to be redeemed. On the Payment Date, the Company
shall (i) accept for payment on a pro rata basis Notes or portions thereof
tendered pursuant to an Offer to
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Purchase; (ii) deposit with the Paying Agent money sufficient to pay the
purchase price of all Notes or portions thereof so accepted; and (iii) deliver,
or cause to be delivered, to the Trustee all Notes or portions thereof so
accepted together with an Officers' Certificate specifying the Notes or portions
thereof accepted for payment by the Company. The Paying Agent shall promptly
mail to the Holders of Notes so accepted payment in an amount equal to the
purchase price, and the Trustee shall promptly authenticate and mail to such
Holders a new Note equal in principal amount to any unpurchased portion of the
Note surrendered; provided that each Note purchased and each new Note issued
shall be in a principal amount of $1,000 or integral multiples thereof. The
Company will publicly announce the results of an Offer to Purchase as soon as
practicable after the Payment Date. The Trustee shall act as the Paying Agent
for an Offer to Purchase. The Company will comply with Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable, in the event that the Company
is required to repurchase Notes pursuant to an Offer to Purchase.
'Permitted Investment' means (i) an Investment in the Company or a
Restricted Subsidiary or a Person which will, upon the making of such
Investment, become a Restricted Subsidiary or be merged or consolidated with or
into or transfer or convey all or substantially all its assets to, the Company
or a Restricted Subsidiary; provided that such person's primary business is
related, ancillary or complementary to the businesses of the Company and its
Restricted Subsidiaries on the date of such Investment; (ii) Temporary Cash
Investments; (iii) payroll, travel and similar advances to cover matters that
are expected at the time of such advances ultimately to be treated as expenses
in accordance with GAAP; (iv) stock, obligations or securities received in
settlement or satisfaction of judgments or claims; (v) loans or advances to
employees in the ordinary course of business; and (vi) the non-cash portion of
the consideration received for any Asset Sale.
'Permitted Liens' means (i) Liens for taxes, assessments, governmental
charges or claims that are being contested in good faith by appropriate legal
proceedings promptly instituted and diligently conducted and for which a reserve
or other appropriate provision, if any, as shall be required in conformity with
GAAP shall have been made; (ii) statutory and common law Liens of landlords and
carriers, warehousemen, mechanics, suppliers, materialmen, repairmen or other
similar Liens arising in the ordinary course of business and with respect to
amounts not yet delinquent or being contested in good faith by appropriate legal
proceedings promptly instituted and diligently conducted and for which a reserve
or other appropriate provision, if any, as shall be required in conformity with
GAAP shall have been made; (iii) Liens incurred or deposits made in the ordinary
course of business in connection with workers' compensation, unemployment
insurance and other types of social security; (iv) Liens incurred or deposits
made to secure the performance of tenders, bids, leases, statutory or regulatory
obligations, bankers' acceptances, surety and appeal bonds, government
contracts, performance and return-of-money bonds and other obligations of a
similar nature incurred in the ordinary course of business (exclusive of
obligations for the payment of borrowed money); (v) easements, rights-of-way,
municipal and zoning ordinances and similar charges, encumbrances, title defects
or other irregularities that do not materially interfere with the ordinary
course of business of the Company or any of its Restricted Subsidiaries; (vi)
Liens (including extensions and renewals thereof) upon real or personal property
acquired after the Closing Date; provided that (a) each such Lien is created
solely for the purpose of securing Indebtedness Incurred to finance the costs
(including transaction costs and the costs of improvement or construction) of
the item of property or assets subject thereto and such Lien is created prior
to, at the time of or within twelve months after, the later of the acquisition,
the completion of construction or the commencement of full operation of such
property or assets (b) the principal amount of the Indebtedness secured by such
Lien does not exceed 100% of such costs and (c) any such Lien shall not extend
to or cover any property or assets other than such item of property or assets
and any improvements on such item; (vii) Liens upon aircraft, engines and
buyer-furnished equipment attached thereto or incorporated therein other than as
permitted by the foregoing clause (vi); provided that, after giving effect
thereto and the Indebtedness secured thereby, the book value of assets of the
Company not subject to any Lien (other than Liens described in clauses (i)
through (v), (xiii) and (xvi) of the definition of 'Permitted Liens') shall be
not less than $125 million; (viii) leases or subleases granted to others that do
not materially interfere with the ordinary course of business of the Company and
its Restricted Subsidiaries, taken as a whole; (ix) Liens encumbering property
or assets under
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construction arising from progress or partial payments by a customer of the
Company or its Restricted Subsidiaries relating to such property or assets; (x)
any interest or title of a lessor in the property subject to any Capitalized
Lease or operating lease; (xi) Liens arising from filing Uniform Commercial Code
financing statements regarding leases; (xii) Liens on property of, or on shares
of Capital Stock or Indebtedness of, any Person existing at the time such Person
becomes, or becomes a part of, any Restricted Subsidiary; provided that such
Liens do not extend to or cover any property or assets of the Company or any
Restricted Subsidiary other than the property or assets acquired; (xiii) Liens
with respect to the assets of a Restricted Subsidiary granted by such Restricted
Subsidiary to the Company or a Wholly Owned Restricted Subsidiary to secure
Indebtedness owing to the Company or such other Restricted Subsidiary; (xiv)
Liens arising from the rendering of a final judgment or order against the
Company or any Restricted Subsidiary that does not give rise to an Event of
Default; (xv) Liens securing reimbursement obligations with respect to letters
of credit that encumber documents and other property relating to such letters of
credit and the products and proceeds thereof; (xvi) Liens in favor of customs
and revenue authorities arising as a matter of law to secure payment of customs
duties in connection with the importation of goods; (xvii) Liens encumbering
customary initial deposits and margin deposits, and other Liens that are within
the general parameters customary in the industry and incurred in the ordinary
course of business, in each case, securing Indebtedness under Interest Rate
Agreements and Currency Agreements and forward contracts, options, future
contracts, futures options or similar agreements or arrangements designed solely
to protect the Company or any of its Restricted Subsidiaries from fluctuations
in interest rates, currencies or the price of commodities; (xviii) Liens arising
out of conditional sale, title retention, consignment or similar arrangements
for the sale of goods entered into by the Company or any of its Restricted
Subsidiaries in the ordinary course of business in accordance with the past
practices of the Company and its Restricted Subsidiaries prior to the Closing
Date; and (xix) Liens on or sales of receivables.
'Restricted Subsidiary' means any Subsidiary of the Company other than an
Unrestricted Subsidiary.
'S&P' means Standard & Poor's Ratings Service and its successors.
'Significant Subsidiary' means, at any date of determination, any
Restricted Subsidiary that, together with its Subsidiaries, (i) for the most
recent fiscal year of the Company, accounted for more than 10% of the
consolidated revenues of the Company and its Restricted Subsidiaries or (ii) as
of the end of such fiscal year, was the owner of more than 10% of the
consolidated assets of the Company and its Restricted Subsidiaries, all as set
forth on the most recently available consolidated financial statements of the
Company for such fiscal year.
'Stated Maturity' means, (i) with respect to any debt security, the date
specified in such debt security as the fixed date on which the final installment
of principal of such debt security is due and payable and (ii) with respect to
any scheduled installment of principal of or interest on any debt security, the
date specified in such debt security as the fixed date on which such installment
is due and payable.
'Subsidiary' means, with respect to any Person, any corporation,
association or other business entity of which more than 50% of the voting power
of the outstanding Voting Stock is owned, directly or indirectly, by such Person
and one or more other Subsidiaries of such Person.
'Temporary Cash Investment' means any of the following: (i) direct
obligations of the United States of America or any agency thereof or obligations
fully and unconditionally guaranteed by the United States of America or any
agency thereof, (ii) time deposit accounts, certificates of deposit and money
market deposits maturing within 180 days of the date of acquisition thereof
issued by a bank or trust company which is organized under the laws of the
United States of America, any state thereof or any foreign country recognized by
the United States of America, and which bank or trust company has capital,
surplus and undivided profits aggregating in excess of $50 million (or the
foreign currency equivalent thereof) and has outstanding debt which is rated 'A'
(or such similar equivalent rating) or higher by at least one nationally
recognized statistical rating organization (as defined in Rule 436 under the
Securities Act) or any money-market fund sponsored by a registered broker dealer
or mutual fund distributor, (iii) repurchase obligations with a term of not more
than 30 days for underlying securities of the types described in clause (i)
above entered into with a bank meeting the qualifications described in
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clause (ii) above, (iv) commercial paper, maturing not more than 90 days after
the date of acquisition, issued by a corporation (other than an Affiliate of the
Company) organized and in existence under the laws of the United States of
America, any state thereof or any foreign country recognized by the United
States of America with a rating at the time as of which any investment therein
is made of 'P-1' (or higher) according to Moody's or 'A-1' (or higher) according
to S&P, and (v) securities with maturities of six months or less from the date
of acquisition issued or fully and unconditionally guaranteed by any state,
commonwealth or territory of the United States of America, or by any political
subdivision or taxing authority thereof, and rated at least 'A' by S&P or
Moody's.
'Trade Payables' means, with respect to any Person, any accounts payable or
any other indebtedness or monetary obligation to trade creditors created,
assumed or Guaranteed by such Person or any of its Subsidiaries arising in the
ordinary course of business in connection with the acquisition of goods or
services.
'Transaction Date' means, with respect to the Incurrence of any
Indebtedness by the Company or any of its Restricted Subsidiaries, the date such
Indebtedness is to be Incurred and, with respect to any Restricted Payment, the
date such Restricted Payment is to be made.
'Unrestricted Subsidiary' means (i) any Subsidiary of the Company that at
the time of determination shall be designated an Unrestricted Subsidiary by the
Board of Directors in the manner provided below; and (ii) any Subsidiary of an
Unrestricted Subsidiary. The Board of Directors may designate any Restricted
Subsidiary (including any newly acquired or newly formed Subsidiary of the
Company) to be an Unrestricted Subsidiary unless such Subsidiary owns any
Capital Stock of, or owns or holds any Lien on any property of, the Company or
any Restricted Subsidiary; provided that (A) any Guarantee by the Company or any
Restricted Subsidiary of any Indebtedness of the Subsidiary being so designated
shall be deemed an 'Incurrence' of such Indebtedness and an 'Investment' by the
Company or such Restricted Subsidiary (or both, if applicable) at the time of
such designation; (B) either (I) the Subsidiary to be so designated has total
assets of $1,000 or less or (II) if such Subsidiary has assets greater than
$1,000, such designation would be permitted under the 'Limitation on Restricted
Payments' covenant described below and (C) if applicable, the Incurrence of
Indebtedness and the Investment referred to in clause (A) of this proviso would
be permitted under the 'Limitation on Indebtedness' and 'Limitation on
Restricted Payments' covenants described below. The Board of Directors may
designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided
that (i) no Default or Event of Default shall have occurred and be continuing at
the time of or after giving effect to such designation and (ii) all Liens and
Indebtedness of such Unrestricted Subsidiary outstanding immediately after such
designation would, if Incurred at such time, have been permitted to be Incurred
(and shall be deemed to have been Incurred) for all purposes of the Indenture.
Any such designation by the Board of Directors shall be evidenced to the Trustee
by promptly filing with the Trustee a copy of the Board Resolution giving effect
to such designation and an Officers' Certificate certifying that such
designation complied with the foregoing provisions.
'Voting Stock' means with respect to any Person, Capital Stock of any class
or kind ordinarily having the power to vote for the election of directors,
managers or other voting members of the governing body of such Person.
'Wholly Owned' means, with respect to any Subsidiary of any Person, the
ownership of all of the outstanding Capital Stock of such Subsidiary (other than
any director's qualifying shares or Investments by foreign nationals mandated by
applicable law) by such Person or one or more Wholly Owned Subsidiaries of such
Person.
COVENANTS
Limitation on Indebtedness
(a) The Company will not, and will not permit any of its Restricted
Subsidiaries to, Incur any Indebtedness (other than the Notes, the Note
Guarantees and Indebtedness existing on the Closing Date); provided that the
Company may Incur Indebtedness if, after giving effect to the Incurrence of
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such Indebtedness and the receipt and application of the proceeds therefrom, the
Interest Coverage Ratio would be greater than 3:1.
Notwithstanding the foregoing, the Company and any Restricted Subsidiary
(except as specified below) may Incur each and all of the following: (i)
Indebtedness of the Company or any Restricted Subsidiary that is a Guarantor
outstanding at any time under the Credit Agreement; provided, that after giving
effect to the Incurrence of any such Indebtedness, the book value of assets of
the Company not subject to any Lien (other than Liens described in clauses (i)
through (v), (xiii) and (xvi) of the definition of 'Permitted Liens') shall not
be less than $125 million; (ii) Indebtedness owed (A) to the Company evidenced
by an unsubordinated promissory note or (B) to any of its Restricted
Subsidiaries; provided that any event which results in any such Restricted
Subsidiary ceasing to be a Restricted Subsidiary or any subsequent transfer of
such Indebtedness (other than to the Company or another Restricted Subsidiary)
shall be deemed, in each case, to constitute an Incurrence of such Indebtedness
not permitted by this clause (ii); (iii) Indebtedness issued in exchange for, or
the net proceeds of which are used to refinance or refund, then outstanding
Indebtedness Incurred under clause (v) of this paragraph and any refinancings
thereof in an amount not to exceed the amount so refinanced or refunded (plus
premiums, accrued interest, fees and expenses); provided that Indebtedness the
proceeds of which are used to refinance or refund the Notes or Indebtedness that
is pari passu with, or subordinated in right of payment to, the Notes or Note
Guarantees shall only be permitted under this clause (iii) if (A) in case the
Notes are refinanced in part or the Indebtedness to be refinanced is pari passu
with the Notes or Note Guarantees, such new Indebtedness, by its terms or by the
terms of any agreement or instrument pursuant to which such new Indebtedness is
outstanding, is expressly made pari passu with, or subordinate in right of
payment to, the remaining Notes or Note Guarantees, as the case may be, (B) in
case the Indebtedness to be refinanced is subordinated in right of payment to
the Notes or Note Guarantees, as the case may be, such new Indebtedness, by its
terms or by the terms of any agreement or instrument pursuant to which such new
Indebtedness is issued or remains outstanding, is expressly made subordinate in
right of payment to the Notes or the Note Guarantees, as the case may be, at
least to the extent that the Indebtedness to be refinanced is subordinated to
the Notes or the Note Guarantees, as the case may be, and (C) such new
Indebtedness, determined as of the date of Incurrence of such new Indebtedness,
does not mature prior to the Stated Maturity of the Indebtedness to be
refinanced or refunded, and the Average Life of such new Indebtedness is at
least equal to the remaining Average Life of the Indebtedness to be refinanced
or refunded; and provided further that in no event may Indebtedness of the
Company be refinanced by means of any Indebtedness of any Restricted Subsidiary
pursuant to this clause (iii) (other than pursuant to an Offer to Purchase);
(iv) Indebtedness (A) in respect of performance, surety or appeal bonds provided
in the ordinary course of business, (B) under Currency Agreements and Interest
Rate Agreements; provided that such agreements (a) are designed solely to
protect the Company or its Restricted Subsidiaries against fluctuations in
foreign currency exchange rates or interest rates and (b) do not increase the
Indebtedness of the obligor outstanding at any time other than as a result of
fluctuations in foreign currency exchange rates or interest rates or by reason
of fees, indemnities and compensation payable thereunder; and (C) arising from
agreements providing for indemnification, adjustment of purchase price or
similar obligations, or from Guarantees or letters of credit, surety bonds or
performance bonds securing any obligations of the Company or any of its
Restricted Subsidiaries pursuant to such agreements, in any case Incurred in
connection with the disposition of any business, assets or Restricted Subsidiary
(other than Guarantees of Indebtedness Incurred by any Person acquiring all or
any portion of such business, assets or Restricted Subsidiary for the purpose of
financing such acquisition), in a principal amount not to exceed the gross
proceeds actually received by the Company or any Restricted Subsidiary in
connection with such disposition; (v) Indebtedness of the Company, to the extent
the net proceeds thereof are promptly (A) used to purchase Notes tendered in an
Offer to Purchase made as a result of a Change in Control or (B) deposited to
defease the Notes as described below under 'Defeasance'; (vi) Guarantees of the
Notes, Guarantees by the Company or Restricted Subsidiaries of Indebtedness of
ATA under the Credit Agreement, and Guarantees of Indebtedness of the Company by
any Restricted Subsidiary provided the Guarantee of such Indebtedness is
permitted by and made in accordance with the 'Limitation on Issuance of
Guarantees by Restricted Subsidiaries' covenant described below; (vii)
Indebtedness of the Company or any Restricted Subsidiary Incurred to finance
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the cost of aircraft, engines and buyer-furnished equipment attached thereto or
incorporated therein; provided, that such Indebtedness is created solely for the
purpose of financing the costs (including transaction costs and the costs of
improvement or construction) of property or assets and is incurred prior to, at
the time of or within 12 months after, the later of the acquisition, the
completion of construction or the commencement of full operation of such
property or assets, and (b) the principal amount of such Indebtedness does not
exceed 100% of such costs; and (viii) Indebtedness of the Company (in addition
to Indebtedness permitted under clauses (i) through (vii) above) in an aggregate
principal amount outstanding at any time not to exceed $10 million.
(b) Notwithstanding any other provision of this 'Limitation on
Indebtedness' covenant, the maximum amount of Indebtedness that the Company or a
Restricted Subsidiary may Incur pursuant to this 'Limitation on Indebtedness'
covenant shall not be deemed to be exceeded, with respect to any outstanding
Indebtedness due solely to the result of fluctuations in the exchange rates of
currencies.
(c) For purposes of determining any particular amount of Indebtedness under
this 'Limitation on Indebtedness' covenant, (1) Indebtedness Incurred under the
Credit Agreement on or prior to the Closing Date shall be treated as Incurred
pursuant to clause (i) of the second paragraph of this 'Limitation on
Indebtedness' covenant, (2) Guarantees, Liens or obligations with respect to
letters of credit supporting Indebtedness otherwise included in the
determination of such particular amount shall not be included and (3) any Liens
granted pursuant to the equal and ratable provisions referred to in the
'Limitation on Liens' covenant described below shall not be treated as
Indebtedness. For purposes of determining compliance with this 'Limitation on
Indebtedness' covenant, in the event that an item of Indebtedness meets the
criteria of more than one of the types of Indebtedness described in the above
clauses (other than Indebtedness referred to in clause (1) of the preceding
sentence), the Company, in its sole discretion, shall classify such item of
Indebtedness and only be required to include the amount and type of such
Indebtedness in one of such clauses.
Limitation on Restricted Payments
The Company will not, and will not permit any Restricted Subsidiary to,
directly or indirectly, (i) declare or pay any dividend or make any distribution
on or with respect to its Capital Stock (other than (x) dividends or
distributions payable solely in shares of its Capital Stock (other than
Disqualified Stock) or in options, warrants or other rights to acquire shares of
such Capital Stock and (y) pro rata dividends or distributions on Common Stock
of Restricted Subsidiaries held by minority stockholders) held by Persons other
than the Company or any of its Restricted Subsidiaries, (ii) purchase, redeem,
retire or otherwise acquire for value any shares of Capital Stock of (A) the
Company or an Unrestricted Subsidiary (including options, warrants or other
rights to acquire such shares of Capital Stock) held by any Person or (B) a
Restricted Subsidiary (including options, warrants or other rights to acquire
such shares of Capital Stock) held by any Affiliate of the Company (other than a
Wholly Owned Restricted Subsidiary) or any holder (or any Affiliate of such
holder) of 5% or more of the Capital Stock of the Company, (iii) make any
voluntary or optional principal payment, or voluntary or optional redemption,
repurchase, defeasance, or other acquisition or retirement for value, of
Indebtedness of the Company or any Guarantor that is subordinated in right of
payment to the Notes or to a Guarantor's Note Guarantee, as the case may be, or
(iv) make any Investment, other than a Permitted Investment, in any Person (such
payments or any other actions described in clauses (i) through (iv) above being
collectively 'Restricted Payments') if, at the time of, and after giving effect
to, the proposed Restricted Payment: (A) a Default or Event of Default shall
have occurred and be continuing, (B) the Company could not Incur at least $1.00
of Indebtedness under the first paragraph of the 'Limitation on Indebtedness'
covenant or (C) the aggregate amount of all Restricted Payments (the amount, if
other than in cash, to be determined in good faith by the Board of Directors,
whose determination shall be conclusive and evidenced by a Board Resolution)
made after the Closing Date shall exceed the sum of (1) 50% of the aggregate
amount of the Adjusted Consolidated Net Income (or, if the Adjusted Consolidated
Net Income is a loss, minus 100% of the amount of such loss) (determined by
excluding income resulting from transfers of assets by the Company or a
Restricted Subsidiary to an Unrestricted Subsidiary) accrued on a cumulative
basis during the period (taken as one accounting period) beginning on the first
day of the fiscal quarter immediately following the Closing Date and ending on
the last day of the last
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fiscal quarter preceding the Transaction Date for which reports have been filed
with the Commission or provided to the Trustee pursuant to the 'Commission
Reports and Reports to Holders' covenant, plus (2) the aggregate Net Cash
Proceeds received by the Company after the Closing Date from the issuance and
sale permitted by the Indenture of its Capital Stock (other than Disqualified
Stock) to a Person who is not a Subsidiary of the Company, including an issuance
or sale permitted by the Indenture of Indebtedness of the Company for cash
subsequent to the Closing Date upon the conversion of such Indebtedness into
Capital Stock (other than Disqualified Stock) of the Company, or from the
issuance to a Person who is not a Subsidiary of the Company of any options,
warrants or other rights to acquire Capital Stock of the Company (in each case,
exclusive of any Disqualified Stock or any options, warrants or other rights
that are redeemable at the option of the holder, or are required to be redeemed,
prior to the Stated Maturity of the Notes), plus (3) an amount equal to the net
reduction in Investments (other than reductions in Permitted Investments) in any
Person resulting from payments of interest on Indebtedness, dividends,
repayments of loans or advances, or other transfers of assets, in each case to
the Company or any Restricted Subsidiary or from the Net Cash Proceeds from the
sale of any such Investment (except, in each case, to the extent any such
payment or proceeds are included in the calculation of Adjusted Consolidated Net
Income), or from redesignations of Unrestricted Subsidiaries as Restricted
Subsidiaries (valued in each case as provided in the definition of
'Investments'), not to exceed, in each case, the amount of Investments
previously made by the Company or any Restricted Subsidiary in such Person or
Unrestricted Subsidiary, minus (4) the sum of the amounts by which the Pro Forma
Consolidated Net Worth after giving effect to each consolidation, merger and
sale of assets effectuated pursuant to clause (iii) under the 'Consolidation,
Merger and Sale of Assets' covenant was less than the Base Consolidated Net
Worth immediately prior to such consolidation, merger and sale of assets, plus
(5) $5 million.
The foregoing provision shall not be violated by reason of: (i) the payment
of any dividend within 60 days after the date of declaration thereof if, at said
date of declaration, such payment would comply with the foregoing paragraph;
(ii) the redemption, repurchase, defeasance or other acquisition or retirement
for value of Indebtedness that is subordinated in right of payment to the Notes
including premium, if any, and accrued and unpaid interest, with the proceeds
of, or in exchange for, Indebtedness Incurred under clause (iii) of the second
paragraph of part (a) of the 'Limitation on Indebtedness' covenant; (iii) the
repurchase, redemption or other acquisition of Capital Stock of the Company or
an Unrestricted Subsidiary (or options, warrants or other rights to acquire such
Capital Stock) in exchange for, or out of the proceeds of a substantially
concurrent offering of, shares of Capital Stock (other than Disqualified Stock)
of the Company (or options, warrants or other rights to acquire such Capital
Stock); (iv) the making of any principal payment or the repurchase, redemption,
retirement, defeasance or other acquisition for value of Indebtedness of the
Company or any Guarantor which is subordinated in right of payment to the Notes
or the Note Guarantees, as the case may be, in exchange for, or out of the
proceeds of, a substantially concurrent offering of, shares of the Capital Stock
(other than Disqualified Stock) of the Company or any Guarantor (or options,
warrants or other rights to acquire such Capital Stock); (v) payments or
distributions, to dissenting stockholders pursuant to applicable law, pursuant
to or in connection with a consolidation, merger or transfer of assets that
complies with the provisions of the Indenture applicable to mergers,
consolidations and transfers of all or substantially all of the property and
assets of the Company; (vi) Investments acquired in exchange for Capital Stock
(other than Disqualified Stock) of the Company; provided that, except in the
case of clauses (i) and (iii), no Default or Event of Default shall have
occurred and be continuing or occur as a consequence of the actions or payments
set forth therein; or (vii) the purchase or redemption of subordinated
Indebtedness pursuant to asset sale or change of control provisions contained in
the Indenture or other governing instrument relating thereto; provided, however,
that (a) no offer or purchase obligation may be triggered in respect of such
Indebtedness unless a corresponding obligation also arises for the Notes and (b)
in all events, no repurchase or redemption of such Indebtedness may be
consummated unless and until the Company shall have satisfied all repurchase
obligations with respect to any required purchase offer made with respect to the
Notes.
Each Restricted Payment permitted pursuant to the preceding paragraph
(other than the Restricted Payment referred to in clause (ii) thereof, an
exchange of Capital Stock for Capital Stock or Indebtedness referred to in
clause (iii) or (iv) thereof and an Investment referred to in clause (vi)
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thereof), and the Net Cash Proceeds from any issuance of Capital Stock referred
to in clauses (iii) and (iv), shall be included in calculating whether the
conditions of clause (C) of the first paragraph of this 'Limitation on
Restricted Payments' covenant have been met with respect to any subsequent
Restricted Payments. In the event the proceeds of an issuance of Capital Stock
of the Company are used for the redemption, repurchase or other acquisition of
the Notes, or Indebtedness that is pari passu with the Notes, then the Net Cash
Proceeds of such issuance shall be included in clause (C) of the first paragraph
of this 'Limitation on Restricted Payments' covenant only to the extent such
proceeds are not used for such redemption, repurchase or other acquisition of
Indebtedness.
Limitation on Dividend and Other Payment Restrictions Affecting Restricted
Subsidiaries
The Company will not, and will not permit any Restricted Subsidiary to,
create or otherwise cause or suffer to exist or become effective any consensual
encumbrance or restriction of any kind on the ability of any Restricted
Subsidiary that is not a Guarantor to (i) pay dividends or make any other
distributions permitted by applicable law on any Capital Stock of such
Restricted Subsidiary owned by the Company or any other Restricted Subsidiary,
(ii) pay any Indebtedness owed to the Company or any other Restricted
Subsidiary, (iii) make loans or advances to the Company or any other Restricted
Subsidiary or (iv) transfer any of its property or assets to the Company or any
other Restricted Subsidiary.
The foregoing provisions shall not restrict any encumbrances or
restrictions: (i) existing on the Closing Date in the Credit Agreement, the
Indenture or any other agreements in effect on the Closing Date, and any
extensions, refinancings, renewals or replacements of such agreements; provided
that the encumbrances and restrictions in any such extensions, refinancings,
renewals or replacements are no less favorable in any material respect to the
Holders than those encumbrances or restrictions that are then in effect and that
are being extended, refinanced, renewed or replaced; (ii) existing under or by
reason of applicable law; (iii) existing with respect to any Person or the
property or assets of such Person acquired by the Company or any Restricted
Subsidiary, existing at the time of such acquisition and not incurred in
contemplation thereof, which encumbrances or restrictions are not applicable to
any Person or the property or assets of any Person other than such Person or the
property or assets of such Person so acquired; (iv) in the case of clause (iv)
of the first paragraph of this 'Limitation on Dividend and Other Payment
Restrictions Affecting Restricted Subsidiaries' covenant, (A) that restrict in a
customary manner the subletting, assignment or transfer of any property or asset
that is a lease, license, conveyance or contract or similar property or asset,
(B) existing by virtue of any transfer of, agreement to transfer, option or
right with respect to, or Lien on, any property or assets of the Company or any
Restricted Subsidiary not otherwise prohibited by the Indenture or (C) arising
or agreed to in the ordinary course of business, not relating to any
Indebtedness, and that do not, individually or in the aggregate, detract from
the value of property or assets of the Company or any Restricted Subsidiary in
any manner material to the Company or any Restricted Subsidiary; (v) with
respect to a Restricted Subsidiary and imposed pursuant to an agreement that has
been entered into for the sale or disposition of all or substantially all of the
Capital Stock of, or property and assets of, such Restricted Subsidiary; or (vi)
contained in the terms of any Indebtedness or any agreement pursuant to which
such Indebtedness was issued if (A) the encumbrance or restriction applies only
in the event of a payment default or a default with respect to a financial
covenant contained in such Indebtedness or agreement, (B) the encumbrance or
restriction is not materially more disadvantageous to the Holders of the Notes
than is customary in comparable financings (as determined by the Company) and
(C) the Company determines that any such encumbrance or restriction will not
materially affect the Company's ability to make principal or interest payments
on the Notes. Nothing contained in this 'Limitation on Dividend and Other
Payment Restrictions Affecting Restricted Subsidiaries' covenant shall prevent
the Company or any Restricted Subsidiary from (1) creating, incurring, assuming
or suffering to exist any Liens otherwise permitted in the 'Limitation on Liens'
covenant or (2) restricting the sale or other disposition of property or assets
of the Company or any of its Restricted Subsidiaries that secure Indebtedness of
the Company or any of its Restricted Subsidiaries.
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Limitation on the Issuance and Sale of Capital Stock of Restricted
Subsidiaries
The Company will not sell, and will not permit any Restricted Subsidiary,
directly or indirectly, to issue or sell, any shares of Capital Stock of a
Restricted Subsidiary (including options, warrants or other rights to purchase
shares of such Capital Stock) except (i) to the Company or a Wholly Owned
Restricted Subsidiary; (ii) issuances of director's qualifying shares or sales
to foreign nationals of shares of Capital Stock of foreign Restricted
Subsidiaries, to the extent required by applicable law; or (iii) if, immediately
after giving effect to such issuance or sale, such Restricted Subsidiary would
no longer constitute a Restricted Subsidiary and any Investment in such Person
remaining after giving effect to such issuance or sale would have been permitted
to be made under the 'Limitation on Restricted Payments' covenant if made on the
date of such issuance or sale.
Limitation on Issuances of Guarantees by Restricted Subsidiaries
The Company will not permit any Restricted Subsidiary that is not a
Guarantor, directly or indirectly, to Guarantee any Indebtedness of the Company
which is pari passu with or subordinate in right of payment to the Notes
('Guaranteed Indebtedness'), unless (i) such Restricted Subsidiary
simultaneously executes and delivers a supplemental indenture to the Indenture
providing for a Guarantee (a 'Subsidiary Guarantee') of payment of the Notes by
such Restricted Subsidiary and (ii) such Restricted Subsidiary waives and will
not in any manner whatsoever claim or take the benefit or advantage of, any
rights of reimbursement, indemnity or subrogation or any other rights against
the Company or any other Restricted Subsidiary as a result of any payment by
such Restricted Subsidiary under its Subsidiary Guarantee; provided that this
paragraph shall not be applicable to any Guarantee of any Restricted Subsidiary
that existed at the time such Person became a Restricted Subsidiary and was not
Incurred in connection with, or in contemplation of, such Person becoming a
Restricted Subsidiary. If the Guaranteed Indebtedness is (A) pari passu with the
Notes or the Note Guarantees, then the Guarantee of such Guaranteed Indebtedness
shall be pari passu with, or subordinated to, the Subsidiary Guarantee or (B)
subordinated to the Notes or the Note Guarantees, then the Guarantee of such
Guaranteed Indebtedness shall be subordinated to the Subsidiary Guarantee at
least to the extent that the Guaranteed Indebtedness is subordinated to the
Notes or the Note Guarantees, as the case may be.
Notwithstanding the foregoing, any Subsidiary Guarantee by a Restricted
Subsidiary may provide by its terms that it shall be automatically and
unconditionally released and discharged upon (i) any sale, exchange or transfer,
to any Person not an Affiliate of the Company, of all of the Company's and each
Restricted Subsidiary's Capital Stock in, or all or substantially all the assets
of, such Restricted Subsidiary (which sale, exchange or transfer is not
prohibited by the Indenture) or (ii) the release or discharge of the Guarantee
which resulted in the creation of such Subsidiary Guarantee, except a discharge
or release by or as a result of payment under such Guarantee.
Limitation on Transactions with Shareholders and Affiliates
The Company will not, and will not permit any Restricted Subsidiary to,
directly or indirectly, enter into, renew or extend any transaction (including,
without limitation, the purchase, sale, lease or exchange of property or assets,
or the rendering of any service) with any holder (or any Affiliate of such
holder) of 5% or more of any class of Capital Stock of the Company or with any
Affiliate of the Company or any Restricted Subsidiary, except upon fair and
reasonable terms no less favorable to the Company or such Restricted Subsidiary
than could be obtained, at the time of such transaction or, if such transaction
is pursuant to a written agreement, at the time of the execution of the
agreement providing therefor, in a comparable arm's-length transaction with a
Person that is not such a holder or an Affiliate.
The foregoing limitation does not limit, and shall not apply to (i)
transactions (A) approved by a majority of the disinterested members of the
Board of Directors, or (B) for which the Company or a Restricted Subsidiary
delivers to the Trustee a written opinion of a nationally recognized investment
banking firm stating that the transaction is fair to the Company or such
Restricted Subsidiary from a financial point of view; (ii) any transaction
solely between the Company and any of its Wholly Owned
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Restricted Subsidiaries or solely between Wholly Owned Restricted Subsidiaries;
(iii) the payment of reasonable and customary regular compensation (whether in
cash or securities) and expense reimbursements to directors of the Company who
are not employees of the Company; (iv) any payments or other transactions
pursuant to any tax-sharing agreement between the Company and any other Person
with which the Company files a consolidated tax return or with which the Company
is part of a consolidated group for tax purposes; or (v) any Restricted Payments
not prohibited by the 'Limitation on Restricted Payments' covenant.
Notwithstanding the foregoing, any transaction or series of related transactions
covered by the first paragraph of this 'Limitation on Transactions with
Shareholders and Affiliates' covenant and not covered by clauses (ii) through
(v) of this paragraph, (a) the aggregate amount of which exceeds $1 million in
value, must be approved or determined to be fair in the manner provided for in
clause (i)(A) or (B) above and (b) the aggregate amount of which exceeds $3
million in value, must be determined to be fair in the manner provided for in
clause (i)(B) above.
Limitation on Liens
The Company will not, and will not permit any Restricted Subsidiary to,
create, incur, assume or suffer to exist any Lien on any of its assets or
properties of any character, or any shares of Capital Stock or Indebtedness of
any Restricted Subsidiary, without making effective provision for all of the
Notes (or in the case of a Lien on assets or properties of a Guarantor, the Note
Guarantee of such Guarantor) and all other amounts due under the Indenture to be
directly secured equally and ratably with (or, if the obligation or liability to
be secured by such Lien is subordinated in right of payment to the Notes or the
Note Guarantee, prior to) the obligation or liability secured by such Lien.
The foregoing limitation does not apply to (i) Liens existing on the
Closing Date, including Liens securing obligations under the Credit Agreement;
(ii) Liens granted after the Closing Date on any assets or Capital Stock of the
Company or its Restricted Subsidiaries created in favor of the Holders; (iii)
Liens with respect to the assets of a Restricted Subsidiary granted by such
Restricted Subsidiary to the Company or a Wholly Owned Restricted Subsidiary to
secure Indebtedness owing to the Company or such other Restricted Subsidiary;
(iv) Liens securing Indebtedness which is Incurred to refinance secured
Indebtedness which is permitted to be Incurred under clause (iii) of the second
paragraph of the 'Limitation on Indebtedness' covenant; provided that such Liens
do not extend to or cover any property or assets of the Company or any
Restricted Subsidiary other than the property or assets securing the
Indebtedness being refinanced; (v) Liens on any property or assets of a
Restricted Subsidiary securing Indebtedness of such Restricted Subsidiary
permitted under the 'Limitation on Indebtedness' covenant; or (vi) Permitted
Liens.
Limitation on Sale-Leaseback Transactions
The Company will not, and will not permit any Restricted Subsidiary to,
enter into any sale-leaseback transaction involving any of its assets or
properties whether now owned or hereafter acquired, whereby the Company or a
Restricted Subsidiary sells or transfers such assets or properties and then or
thereafter leases such assets or properties or any part thereof or any other
assets or properties which the Company or such Restricted Subsidiary, as the
case may be, intends to use for substantially the same purpose or purposes as
the assets or properties sold or transferred.
The foregoing restriction does not apply to any sale-leaseback transaction
if (i) the lease is for a period, including renewal rights, of not in excess of
three years; (ii) the lease secures or relates to industrial revenue or
pollution control bonds; (iii) the transaction is solely between the Company and
any Wholly Owned Restricted Subsidiary or solely between Wholly Owned Restricted
Subsidiaries; or (iv) the Company or such Restricted Subsidiary, within 12
months after the sale or transfer of any assets or properties is completed,
applies an amount not less than the net proceeds received from such sale in
accordance with clause (A) or (B) of the first paragraph of the 'Limitation on
Asset Sales' covenant described below.
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Limitation on Asset Sales
The Company will not, and will not permit any Restricted Subsidiary to,
consummate any Asset Sale, unless (i) the consideration received by the Company
or such Restricted Subsidiary is at least equal to the fair market value of the
assets sold or disposed of and (ii) at least 75% of the consideration received
(including the fair market value, as determined in good faith by the Board of
Directors, of any non-cash consideration) consists of (w) cash, (x) Temporary
Cash Investments, (y) marketable securities which are liquidated for cash within
90 days following the consummation of such Asset Sale, and (z) the assumption of
Indebtedness of the Company or any Restricted Subsidiary (other than the Notes
and the Note Guarantees); provided, that (1) such Indebtedness is not
subordinate in right of payment to the Notes and the Note Guarantees and (2) the
Company or such Restricted Subsidiary is irrevocably released and discharged
from such Indebtedness. In the event and to the extent that the Net Cash
Proceeds received by the Company or any of its Restricted Subsidiaries from one
or more Asset Sales occurring on or after the Closing Date in any period of 12
consecutive months exceed 10% of Adjusted Consolidated Net Tangible Assets
(determined as of the date closest to the commencement of such 12-month period
for which a consolidated balance sheet of the Company and its Subsidiaries has
been filed with the Commission), then the Company shall or shall cause the
relevant Restricted Subsidiary to (i) within twelve months after the date Net
Cash Proceeds so received exceed 10% of Adjusted Consolidated Net Tangible
Assets (A) apply an amount equal to such excess Net Cash Proceeds to permanently
repay unsubordinated Indebtedness of the Company, or any Restricted Subsidiary
providing a Subsidiary Guarantee pursuant to the 'Limitation on Issuances of
Guarantees by Restricted Subsidiaries' covenant described above or Indebtedness
of any other Restricted Subsidiary, in each case owing to a Person other than
the Company or any of its Restricted Subsidiaries or (B) invest an equal amount,
or the amount not so applied pursuant to clause (A) (or enter into a definitive
agreement committing to so invest within 12 months after the date of such
agreement), in property or assets (other than current assets) of a nature or
type or that are used in a business (or in a company having property and assets
of a nature or type, or engaged in a business) similar or related to the nature
or type of the property and assets of, or the business of, the Company and its
Restricted Subsidiaries existing on the date of such investment and (ii) apply
(no later than the end of the 12-month period referred to in clause (i)) such
excess Net Cash Proceeds (to the extent not applied pursuant to clause (i)) as
provided in the following paragraph of this 'Limitation on Asset Sales'
covenant. The amount of such excess Net Cash Proceeds required to be applied (or
to be committed to be applied) during such 12-month period as set forth in
clause (i) of the preceding sentence and not applied as so required by the end
of such period shall constitute 'Excess Proceeds.'
If, as of the first day of any calendar month, the aggregate amount of
Excess Proceeds not theretofore subject to an Offer to Purchase pursuant to this
'Limitation on Asset Sales' covenant totals at least $10 million, the Company
must commence, not later than the fifteenth Business Day of such month, and
consummate an Offer to Purchase from the Holders on a pro rata basis an
aggregate principal amount of Notes equal to the Excess Proceeds on such date,
at a purchase price equal to 100% of the principal amount of the Notes, plus, in
each case, accrued interest (if any) to the Payment Date. In the event that more
than 98% of the outstanding principal amount of the Notes are tendered pursuant
to such Offer to Purchase, the balance of the Notes will be redeemable, at the
Company's option, in whole or in part, at any time or from time to time
thereafter, at a Redemption Price equal to the price specified in such Offer to
Purchase plus accrued and unpaid interest, if any, to the Redemption Date
(subject to the right of Holders of record on the relevant Regular Record Date
that is on or prior to the Redemption Date to receive interest due on an
Interest Payment Date).
REPURCHASE OF NOTES UPON A CHANGE OF CONTROL
The Company must commence, within 30 days of the occurrence of a Change of
Control, and consummate an Offer to Purchase for all Notes then outstanding, at
a purchase price equal to 101% of the principal amount thereof, plus accrued
interest (if any) to the Payment Date. In the event that more than 98% of the
outstanding principal amount of the Notes are tendered pursuant to such Offer to
Purchase, the balance of the Notes will be redeemable, at the Company's option,
in whole or in part, at any time or from time to time thereafter, at a
Redemption Price equal to the price specified in such
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Offer to Purchase plus accrued and unpaid interest, if any, to the Redemption
Date (subject to the right of Holders of record on the relevant Regular Record
Date that is on or prior to the Redemption Date to receive interest due on an
Interest Payment Date).
There can be no assurance that the Company will have sufficient funds
available at the time of any Change of Control to make any debt payment
(including repurchases of Notes) required by the foregoing covenant (as well as
may be contained in other securities of the Company which might be outstanding
at the time). The above covenant requiring the Company to repurchase the Notes
will, unless consents are obtained, require the Company to repay all
indebtedness then outstanding which by its terms would prohibit such Note
repurchase, including in particular the New Credit Facility, either prior to or
concurrently with such Note repurchase. See 'Description of the New Credit
Facility.'
COMMISSION REPORTS AND REPORTS TO HOLDERS
Whether or not the Company or any Guarantor is then required to file
reports with the Commission, the Company and each Guarantor shall file with the
Commission all such reports and other information as they would be required to
file with the Commission by Sections 13(a) or 15(d) under the Exchange Act if
they were subject thereto. The Company shall supply the Trustee and each Holder
or shall supply to the Trustee for forwarding to each such Holder, without cost
to such Holder, copies of such reports and other information.
EVENTS OF DEFAULT
The following events will be defined as 'Events of Default' in the
Indenture: (a) default in the payment of principal of (or premium, if any, on)
any Note when the same becomes due and payable at maturity, upon acceleration,
redemption or otherwise; (b) default in the payment of interest on any Note when
the same becomes due and payable, and such default continues for a period of 30
days; (c) default in the performance or breach of the provisions of the
Indenture applicable to mergers, consolidations and transfers of all or
substantially all of the assets of the Company or a Guarantor or the failure to
make or consummate an Offer to Purchase in accordance with the 'Limitation on
Asset Sales' or 'Repurchase of Notes upon a Change of Control' covenant; (d) the
Company or a Guarantor defaults in the performance of or breaches any other
covenant or agreement of the Company or a Guarantor in the Indenture or under
the Notes (other than a default specified in clause (a), (b) or (c) above) and
such default or breach continues for a period of 30 consecutive days after
written notice by the Trustee or the Holders of 25% or more in aggregate
principal amount of the Notes; (e) there occurs with respect to any issue or
issues of Indebtedness of the Company, any Guarantor or any Significant
Subsidiary having an outstanding principal amount of $10 million or more in the
aggregate for all such issues of all such Persons, whether such Indebtedness now
exists or shall hereafter be created, (I) an event of default that has caused
the holder thereof to declare such Indebtedness to be due and payable prior to
its Stated Maturity and such Indebtedness has not been discharged in full or
such acceleration has not been rescinded or annulled within 30 days of such
acceleration and/or (II) the failure to make a principal payment at the final
(but not any interim) fixed maturity and such defaulted payment shall not have
been made, waived or extended within 30 days of such payment default; (f) any
final judgment or order (not covered by insurance) for the payment of money in
excess of $10 million in the aggregate for all such final judgments or orders
against all such Persons (treating any deductibles, self-insurance or retention
as not so covered) shall be rendered against the Company, any Guarantor or any
Significant Subsidiary and shall not be paid or discharged, and there shall be
any period of 30 consecutive days during which a stay of enforcement of such
final judgment or order, by reason of a pending appeal or otherwise, shall not
be in effect; (g) a court having jurisdiction in the premises enters a decree or
order for (A) relief in respect of the Company or any Significant Subsidiary in
an involuntary case under any applicable bankruptcy, insolvency or other similar
law now or hereafter in effect, (B) appointment of a receiver, liquidator,
assignee, custodian, trustee, sequestrator or similar official of the Company or
any Significant Subsidiary or for all or substantially all of the property and
assets of the Company or any Significant Subsidiary or (C) the winding up or
liquidation of the affairs of the Company or any Significant Subsidiary and, in
each case, such decree or order shall remain unstayed and in effect for a period
of 30 consecutive days; (h) the Company or any Significant Subsidiary (A)
commences a
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voluntary case under any applicable bankruptcy, insolvency or other similar law
now or hereafter in effect, or consents to the entry of an order for relief in
an involuntary case under any such law, (B) consents to the appointment of or
taking possession by a receiver, liquidator, assignee, custodian, trustee,
sequestrator or similar official of the Company or any Significant Subsidiary or
for all or substantially all of the property and assets of the Company or any
Significant Subsidiary or (C) effects any general assignment for the benefit of
creditors or (i) any Note Guarantee ceases to be in full force and effect
(except pursuant to its terms) or is declared null and void or any Guarantor
denies that it has any further liability under any Note Guarantee, or gives
notice to such effect.
If an Event of Default (other than an Event of Default specified in clause
(g) or (h) above that occurs with respect to the Company or any Guarantor)
occurs and is continuing under the Indenture, the Trustee or the Holders of at
least 25% in aggregate principal amount of the Notes, then outstanding, by
written notice to the Company (and to the Trustee if such notice is given by the
Holders), may, and the Trustee at the request of such Holders shall, declare the
principal of, premium, if any, and accrued interest on the Notes to be
immediately due and payable. Upon a declaration of acceleration, such principal
of, premium, if any, and accrued interest shall be immediately due and payable.
In the event of a declaration of acceleration because an Event of Default set
forth in clause (e) above has occurred and is continuing, such declaration of
acceleration shall be automatically rescinded and annulled if the event of
default triggering such Event of Default pursuant to clause (e) shall be
remedied or cured by the Company, any Guarantor or the relevant Significant
Subsidiary or waived by the holders of the relevant Indebtedness within 60 days
after the declaration of acceleration with respect thereto. If an Event of
Default specified in clause (g) or (h) above occurs with respect to the Company
or any Significant Subsidiary, the principal of, premium, if any, and accrued
interest on the Notes then outstanding shall ipso facto become and be
immediately due and payable without any declaration or other act on the part of
the Trustee or any Holder. The Holders of at least a majority in principal
amount of the outstanding Notes by written notice to the Company and to the
Trustee, may waive all past defaults and rescind and annul a declaration of
acceleration and its consequences if (i) all existing Events of Default, other
than the nonpayment of the principal of, premium, if any, and interest on the
Notes that have become due solely by such declaration of acceleration, have been
cured or waived and (ii) the rescission would not conflict with any judgment or
decree of a court of competent jurisdiction. For information as to the waiver of
defaults, see ' -- Modification and Waiver.'
The Holders of at least a majority in aggregate principal amount of the
outstanding Notes may direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or exercising any trust or
power conferred on the Trustee. However, the Trustee may refuse to follow any
direction that conflicts with law or the Indenture, that may involve the Trustee
in personal liability, or that the Trustee determines in good faith may be
unduly prejudicial to the rights of Holders of Notes not joining in the giving
of such direction and may take any other action it deems proper that is not
inconsistent with any such direction received from Holders of Notes. A Holder
may not pursue any remedy with respect to the Indenture or the Notes unless: (i)
the Holder gives the Trustee written notice of a continuing Event of Default;
(ii) the Holders of at least 25% in aggregate principal amount of outstanding
Notes make a written request to the Trustee to pursue the remedy; (iii) such
Holder or Holders offer the Trustee indemnity satisfactory to the Trustee
against any costs, liability or expense; (iv) the Trustee does not comply with
the request within 60 days after receipt of the request and the offer of
indemnity; and (v) during such 60-day period, the Holders of a majority in
aggregate principal amount of the outstanding Notes do not give the Trustee a
direction that is inconsistent with the request. However, such limitations do
not apply to the right of any Holder of a Note to receive payment of the
principal of, premium, if any, or interest on, such Note or to bring suit for
the enforcement of any such payment, on or after the due date expressed in the
Notes, which right shall not be impaired or affected without the consent of the
Holder.
The Indenture will require certain officers of the Company and each
Guarantor to deliver to the Trustee on or before a date not more than 90 days
after the end of each fiscal year, an Officers' Certificate stating whether or
not such officers know of any Default or Event of Default that occurred during
such fiscal year. The Company and each Guarantor will also be obligated to
notify the Trustee of any default or defaults in the performance of any
covenants or agreements under the Indenture.
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CONSOLIDATION, MERGER AND SALE OF ASSETS
Neither the Company nor any Guarantor will consolidate with, merge with or
into, or sell, convey, transfer, lease or otherwise dispose of all or
substantially all of its property and assets (as an entirety or substantially an
entirety in one transaction or a series of related transactions) to, any Person
or permit any Person to merge with or into the Company or any Guarantor unless:
(i) the Company or the Guarantor shall be the continuing Person, or the Person
(if other than the Company or the Guarantor) formed by such consolidation or
into which the Company or the Guarantor is merged or that acquired or leased
such property and assets of the Company or the Guarantor shall be a corporation
organized and validly existing under the laws of the United States of America or
any jurisdiction thereof and shall expressly assume, by a supplemental
indenture, executed and delivered to the Trustee, all of the obligations of the
Company or the Guarantor, as the case may be, on all of the Notes or the Note
Guarantees, as the case may be, and under the Indenture; (ii) immediately after
giving effect to such transaction, no Default or Event of Default shall have
occurred and be continuing; (iii) immediately after giving effect to such
transaction on a pro forma basis, the Company or any Guarantor, as the case may
be, or any Person becoming the successor obligor of the Notes or the Note
Guarantees, as the case may be, shall have a Consolidated Net Worth (a 'Pro
Forma Consolidated Net Worth') which is equal to or greater than the
Consolidated Net Worth of the Company or the Guarantor, as the case may be,
immediately prior to such transaction (the 'Base Consolidated Net Worth'), or if
the Pro Forma Consolidated Net Worth is less than the Base Consolidated Net
Worth, the amount by which the Pro Forma Consolidated Net Worth is less than the
Base Consolidated Net Worth shall, if considered as a Restricted Payment, be
permitted to be paid at the time under the 'Limitation on Restricted Payments'
covenant; (iv) immediately after giving effect to such transaction on a pro
forma basis the Company or any Guarantor, as the case may be, or any Person
becoming the successor obligor of the Notes or the Note Guarantees, as the case
may be, could Incur at least $1.00 of Indebtedness under the first paragraph of
the 'Limitation on Indebtedness' covenant; provided that this clause (iv) shall
not apply to a consolidation or merger with or into a Wholly Owned Restricted
Subsidiary with a positive net worth; and provided further that, in connection
with any such merger or consolidation, no consideration (other than Capital
Stock (other than Disqualified Stock) in the surviving Person, the Company or
any Guarantor) shall be issued or distributed to the stockholders of the Company
or the Guarantor; and (v) the Company delivers to the Trustee an Officers'
Certificate (attaching the arithmetic computations to demonstrate compliance
with clauses (iii) and (iv)) and Opinion of Counsel, in each case stating that
such consolidation, merger or transfer and such supplemental indenture complies
with this provision and that all conditions precedent provided for herein
relating to such transaction have been complied with; provided, however, that
clauses (iii) and (iv) above do not apply if, in the good faith determination of
the Board of Directors of the Company, whose determination shall be evidenced by
a Board Resolution, the principal purpose of such transaction is to change the
state of incorporation of the Company or any Guarantor; and provided further
that any such transaction shall not have as one of its purposes the evasion of
the foregoing limitations.
DEFEASANCE
Defeasance and Discharge. The Indenture will provide that the Company and
each Guarantor will be deemed to have paid and will be discharged from any and
all obligations in respect of the Notes and the Note Guarantees on the 123rd day
after the deposit referred to below, and the provisions of the Indenture will no
longer be in effect with respect to the Notes and the Note Guarantees (except
for, among other matters, certain obligations to register the transfer or
exchange of the Notes, to replace stolen, lost or mutilated Notes, to maintain
paying agencies and to hold monies for payment in trust) if, among other things,
(A) the Company or the Guarantors have deposited with the Trustee, in trust,
money and/or U.S. Government Obligations that through the payment of interest
and principal in respect thereof in accordance with their terms will provide
money in an amount sufficient to pay the principal of, premium, if any, and
accrued interest on the Notes on the Stated Maturity of such payments in
accordance with the terms of the Indenture and the Notes, (B) the Company has
delivered to the Trustee (i) either (x) an Opinion of Counsel to the effect that
Holders will not recognize income, gain or loss for federal income tax purposes
as a result of the Company's exercise of its option under this 'Defeasance'
provision and will be subject to federal income tax on the same amount and in
the
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same manner and at the same times as would have been the case if such deposit,
defeasance and discharge had not occurred, which Opinion of Counsel must be
based upon (and accompanied by a copy of) a ruling of the Internal Revenue
Service to the same effect unless there has been a change in applicable federal
income tax law after the Closing Date such that a ruling is no longer required
or (y) a ruling directed to the Trustee received from the Internal Revenue
Service to the same effect as the aforementioned Opinion of Counsel and (ii) an
Opinion of Counsel to the effect that the creation of the defeasance trust does
not violate the Investment Company Act of 1940, (C) immediately after giving
effect to such deposit on a pro forma basis, no Event of Default, or event that
after the giving of notice or lapse of time or both would become an Event of
Default, shall have occurred and be continuing on the date of such deposit or
during the period ending on the 123rd day after the date of such deposit, and
such deposit shall not result in a breach or violation of, or constitute a
default under, any other agreement or instrument to which the Company or any of
its Subsidiaries is a party or by which the Company or any of its Subsidiaries
is bound and (D) if at such time the Notes are listed on a national securities
exchange, the Company has delivered to the Trustee an Opinion of Counsel to the
effect that the Notes will not be delisted as a result of such deposit,
defeasance and discharge.
Defeasance of Certain Covenants and Certain Events of Default. The
Indenture further will provide that the provisions of the Indenture will no
longer be in effect with respect to clauses (iii) and (iv) under 'Consolidation,
Merger and Sale of Assets' and all the covenants described herein under
'Covenants,' clause (c) under 'Events of Default' with respect to such clauses
(iii) and (iv) under 'Consolidation, Merger and Sale of Assets,' clause (d) with
respect to such other covenants and clauses (e) and (f) under 'Events of
Default' shall be deemed not to be Events of Default upon, among other things,
the deposit with the Trustee, in trust, of money and/or U.S. Government
Obligations that through the payment of interest and principal in respect
thereof in accordance with their terms will provide money in an amount
sufficient to pay the principal of, premium, if any, and accrued interest on the
Notes on the Stated Maturity of such payments in accordance with the terms of
the Indenture and the Notes, the satisfaction of the provisions described in
clauses (B)(ii), (C) and (D) of the preceding paragraph and the delivery by the
Company to the Trustee of an Opinion of Counsel to the effect that, among other
things, the Holders will not recognize income, gain or loss for federal income
tax purposes as a result of such deposit and defeasance of certain covenants and
Events of Default and will be subject to federal income tax on the same amount
and in the same manner and at the same times as would have been the case if such
deposit and defeasance had not occurred.
Defeasance and Certain Other Events of Default. In the event the Company
exercises its option to omit compliance with certain covenants and provisions of
the Indenture with respect to the Notes as described in the immediately
preceding paragraph and the Notes are declared due and payable because of the
occurrence of an Event of Default that remains applicable, the amount of money
and/or U.S. Government Obligations on deposit with the Trustee will be
sufficient to pay amounts due on the Notes at the time of their Stated Maturity
but may not be sufficient to pay amounts due on the Notes at the time of the
acceleration resulting from such Event of Default. However, the Company will
remain liable for such payments and the Guarantors' Note Guarantees with respect
to such payments will remain in effect.
MODIFICATION AND WAIVER
Modifications and amendments of the Indenture may be made by the Company,
the Guarantors and the Trustee with the consent of the Holders of not less than
a majority in aggregate principal amount of the outstanding Notes; provided,
however, that no such modification or amendment may, without the consent of each
Holder affected thereby, (i) change the Stated Maturity of the principal of, or
any installment of interest on, any Note, (ii) reduce the principal amount of,
or premium, if any, or interest on, any Note, (iii) change the place or currency
of payment of principal of, or premium, if any, or interest on, any Note, (iv)
impair the right to institute suit for the enforcement of any payment on or
after the Stated Maturity (or, in the case of a redemption, on or after the
Redemption Date) of any Note, (v) reduce the above-stated percentage of
outstanding Notes the consent of whose Holders is necessary to modify or amend
the Indenture, (vi) waive a default in the payment of principal of, premium, if
any, or interest on the Notes, (vii) reduce the percentage or aggregate
principal amount of
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outstanding Notes the consent of whose Holders is necessary for waiver of
compliance with certain provisions of the Indenture or for waiver of certain
defaults or (viii) release any Guarantor from its Note Guarantee or otherwise
modify the terms of the Note Guarantees in a material respect adverse to the
Holders.
Modifications and amendments of the Indenture may be made by the Company,
the Guarantors and the Trustee without notice to or the consent of any Holder
(i) to cure any ambiguity, defect or inconsistency, (ii) to comply with the
'Consolidation, Merger and Sale of Assets' covenant, (iii) to comply with any
requirements of the Commission in connection with the qualification of the
Indenture under the Trust Indenture Act, (iv) to evidence and provide for the
acceptance of appointment by a successor Trustee, (v) to provide for
uncertificated Notes in addition to or in place of certificated Notes, (vi) to
add one or more Subsidiary Guarantees on the terms required by the Indenture, or
(vii) to make any change that does not adversely affect the rights of any Holder
in any material respect.
NO PERSONAL LIABILITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS, DIRECTORS, OR
EMPLOYEES
The Indenture provides that no recourse for the payment of the principal
of, premium, if any, or interest on any of the Notes or for any claim based
thereon or otherwise in respect thereof, and no recourse under or upon any
obligation, covenant or agreement of the Company or the Guarantors in the
Indenture, or in any of the Notes or because of the creation of any Indebtedness
represented thereby, shall be had against any incorporator, stockholder,
officer, director, employee or controlling person of the Company or the
Guarantors or of any successor Person thereof. Each Holder, by accepting the
Notes, waives and releases all such liability.
CONCERNING THE TRUSTEE
The Indenture provides that, except during the continuance of a Default,
the Trustee will not be liable, except for the performance of such duties as are
specifically set forth in such Indenture. If an Event of Default has occurred
and is continuing, the Trustee will use the same degree of care and skill in its
exercise as a prudent person would exercise under the circumstances in the
conduct of such person's own affairs.
The Indenture and provisions of the Trust Indenture Act incorporated by
reference therein contain limitations on the rights of the Trustee, should it
become a creditor of the Company or a Guarantor, to obtain payment of claims in
certain cases or to realize on certain property received by it in respect of any
such claims, as security or otherwise. The Trustee is permitted to engage in
other transactions; provided, however, that if it acquires any conflicting
interest, it must eliminate such conflict or resign.
BOOK-ENTRY; DELIVERY AND FORM
The Exchange Notes will be represented by one permanent global Exchange
Note in definitive, fully registered form without interest coupons (the 'Global
Exchange Note') and will be deposited with the Trustee as custodian for, and
registered in the name of a nominee of, DTC.
Ownership of beneficial interests in the Global Exchange Note will be
limited to persons who have accounts with DTC ('participants') or persons who
hold interests through participants. Ownership of beneficial interests in the
Global Exchange Note will be shown on, and the transfer of that ownership will
be effected only through, records maintained by DTC or its nominee (with respect
to interests of participants) and the records of participants (with respect to
interests of persons other than participants).
So long as DTC, or its nominee, is the registered owner or holder of the
Global Exchange Note, DTC or such nominee, as the case may be, will be
considered the sole owner or holder of the Notes represented by the Global
Exchange Note for all purposes under the Indenture and the Notes. No beneficial
owner of an interest in the Global Exchange Note will be able to transfer that
interest except in accordance with DTC's applicable procedures, in addition to
those provided for under the Indenture.
Payments of the principal of, and interest on, the Global Exchange Note
will be made to DTC or its nominee, as the case may be, as the registered owner
thereof. Neither the Company, the Trustee nor
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any Paying Agent will have any responsibility or liability for any aspect of the
records relating to or payments made on account of beneficial ownership
interests in the Global Exchange Note or for maintaining, supervising or
reviewing any records relating to such beneficial ownership interests.
The Company expects that DTC or its nominee, upon receipt of any payment of
principal or interest in respect of the Global Exchange Note, will credit
participants' accounts with payments in amounts proportionate to their
respective beneficial interests in the principal amount of such Global Exchange
Note as shown on the records of DTC or its nominee. The Company also expects
that payments by participants to owners of beneficial interests in such Global
Exchange Note held through such participants will be governed by standing
instructions and customary practices, as is now the case with securities held
for the accounts of customers registered in the names of nominees for such
customers. Such payments will be the responsibility of such participants.
Transfers between participants in DTC will be effected in the ordinary way
in accordance with DTC rules and will be settled in same-day funds.
The Company expects that DTC will take any action permitted to be taken by
a holder of Notes (including the presentation of Notes for exchange as described
below) only at the direction of one or more participants to whose account the
DTC interests in the Global Exchange Note is credited and only in respect of
such portion of the aggregate principal amount of Notes as to which such
participant or participants has or have given such direction. However, if there
is an Event of Default under the Notes, DTC will exchange the Global Exchange
Note for definitive Exchange Notes in certificated form, which it will
distribute to its participants.
The Company understands that: DTC is a limited purpose trust company
organized under the laws of the State of New York, a 'banking organization'
within the meaning of New York Banking Law, a member of the Federal Reserve
System, a 'clearing corporation' within the meaning of the Uniform Commercial
Code and a 'Clearing Agency' registered pursuant to the provisions of Section
17A of the Exchange Act. DTC was created to hold securities for its participants
and facilitate the clearance and settlement of securities transactions between
participants through electronic book-entry changes in accounts of its
participants, thereby eliminating the need for physical movement of certificates
and certain other organizations. Indirect access to the DTC system is available
to others such as banks, brokers, dealers and trust companies that clear through
or maintain a custodial relationship with a participant, either directly or
indirectly ('indirect participants').
Although DTC is expected to follow the foregoing procedures in order to
facilitate transfers of interests in the Global Exchange Note among participants
of DTC it is under no obligation to perform or continue to perform such
procedures, and such procedures may be discontinued at any time. Neither the
Company nor the Trustee will have any responsibility for the performance by DTC
or its respective participants or indirect participants of its respective
obligations under the rules and procedures governing its operations.
If DTC is at any time unwilling or unable to continue as a depositary for
the Global Exchange Note and a successor depositary is not appointed by the
Company within 90 days, the Company will issue definitive Exchange Notes in
certificated form in exchange for the Global Exchange Note.
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REGISTRATION RIGHTS AGREEMENT FOR OUTSTANDING NOTES
Holders of Exchange Notes are not entitled to any registration rights with
respect to the Exchange Notes. The Company has agreed pursuant to the
Registration Rights Agreement with the Placement Agents, for the benefit of the
holders of the Notes, that the Company will, at its cost, (i) as expeditiously
as possible prepare and file a Registration Statement with the Commission with
respect to a registered offer to exchange the Outstanding Notes for Exchange
Notes of the Company having terms substantially identical in all material
respects to the Outstanding Notes (except that the Exchange Notes will not
contain terms with respect to transfer restrictions), (ii) promptly commence the
Exchange Offer after the Registration Statement has been declared effective and
(iii) use its best efforts to cause the Exchange Offer to be consummated not
later than 60 days after the date the Registration Statement has been declared
effective. Upon the effectiveness of the Registration Statement, the Company
will offer the Exchange Notes in exchange for the surrender of the Outstanding
Notes. The Company will keep the Exchange Offer open for not less than 20
business days (or longer if required by applicable law) after the date notice of
the Exchange Offer is mailed to the holders of the Notes. For each Outstanding
Note surrendered to the Company pursuant to the Exchange Offer, the holder of
such Outstanding Note will receive an Exchange Note having a principal amount
equal to that of the surrendered Outstanding Note. The Exchange Notes will bear
interest from July 24, 1997, payable semiannually on February 1 and August 1 of
each year commencing on February 1, 1998, at the rate of 10 1/2% per annum.
Holders of Outstanding Notes accepted for exchange will be deemed to have waived
the right to receive any payment in respect of interest on the Outstanding Notes
accrued from July 24, 1997 until the date of the issuance of the Exchange Notes.
Consequently holders who exchange their Outstanding Notes for Exchange Notes
will receive the same interest payment on February 1, 1998 (the first interest
payment date with respect to the Outstanding Notes and the Exchange Notes) that
they would have received had they not accepted the Exchange Offer.
In the event that (i) the Company determines that the Exchange Offer is not
available or may not be consummated as soon as practicable after the date upon
which the last Outstanding Note has been tendered because it would violate
applicable law or the applicable interpretations of the staff of the Commission,
(ii) the Exchange Offer is not for any other reason consummated by January 24,
1998 or (iii) the Exchange Offer has been completed and in the opinion of
counsel for the Placement Agents a Registration Statement must be filed and a
prospectus must be delivered by the Placement Agents in connection with any
offering or sale of Exchange Notes, the Company will, at its cost, (a) as
promptly as practicable, file a Shelf Registration Statement covering resales of
the Outstanding Notes or the Exchange Notes, as the case may be, (b) use all
reasonable efforts to cause the Shelf Registration Statement to be declared
effective under the Securities Act and (c) keep the Shelf Registration Statement
effective until July 24, 1999. The Company will, in the event a Shelf
Registration Statement is filed, among other things, provide to each holder for
whom such Shelf Registration Statement was filed copies of the prospectus which
is a part of the Shelf Registration Statement, notify each such holder when the
Shelf Registration Statement has become effective and take certain other actions
as are required to permit unrestricted resales of the Outstanding Notes or the
Exchange Notes, as the case may be. A holder selling such Outstanding Notes or
Exchange Notes pursuant to the Shelf Registration Statement generally will be
required to be named as a selling security holder in the related prospectus and
to deliver a prospectus to purchasers, will be subject to certain of the civil
liability provisions under the Securities Act in connection with such sales and
will be bound by the provisions of the Registration Rights Agreement which are
applicable to such holder (including certain indemnification obligations).
In the event the Exchange Offer is not consummated and a Shelf Registration
Statement is not declared effective on or prior to January 24, 1998 (a 'Failure
to Register'), additional interest will accrue on the Outstanding Notes at the
rate of 0.5% per annum from and including the date on which any such Failure to
Register shall occur until the date on which such Failure to Register has been
cured. Such interest is payable in addition to any other interest payable from
time to time with respect to the Outstanding Notes.
The Company will be entitled to close the Exchange Offer 20 business days
after the commencement thereof provided that it has accepted all Outstanding
Notes theretofore validly tendered in accordance with the terms of the Exchange
Offer.
In the case of a Shelf Registration Statement, the Company may suspend the
availability of such Shelf Registration Statement (i) during any consecutive
365-day period, for up to two periods of up to 30 consecutive days each (except
that none of such periods may occur during the 60-day period immediately prior
to the maturity of the Notes) if the Company's Board of Directors determines in
good faith that there is a valid purpose for the suspension and (ii) upon giving
notice to the holders of the Outstanding Notes of the happening of any event
during the period a Shelf Registration Statement is effective which makes any
statement made in such Registration Statement or the related prospectus
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untrue in any material respect or which requires the making of any changes in
such Registration Statement or prospectus in order to make the statements
therein not misleading, until such holder receives copies of a supplemented or
amended prospectus, provided, that any such notice may be given only twice
during any 365-day period and any such suspensions may not exceed 30 days for
each suspension and there may not be more than two suspensions in effect during
any 365 day period.
The summary herein of certain provisions of the Registration Rights
Agreement does not purport to be complete and is subject to, and is qualified in
its entirety by reference to, all the provisions of the Registration Rights
Agreement, a copy of which is available upon request to the Company.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following is a general discussion of the principal United States
federal income tax consequences of the purchase, ownership and disposition of
the Notes to initial purchasers of Outstanding Notes who are United States
Holders (as defined below) and the principal United States federal income and
estate tax consequences of the purchase, ownership, exchange and disposition of
the Notes to initial purchasers of Outstanding Notes who are Foreign Holders (as
defined below). This discussion was prepared by representatives of the Company
and is based on currently existing provisions of the Code, existing, temporary
and proposed Treasury regulations promulgated thereunder, and administrative and
judicial interpretations thereof, all as in effect or proposed on the date
hereof and all of which are subject to change, possibly with retroactive effect,
or different interpretations. This discussion does not address the tax
consequences to subsequent purchasers of Notes and is limited to purchasers of
Outstanding Notes who hold the Notes as capital assets, within the meaning of
section 1221 of the Code. This discussion also does not address the tax
consequences to Foreign Holders that are subject to United States federal income
tax on a net basis on income realized with respect to a Note because such income
is effectively connected with the conduct of a U.S. trade or business. Such
Foreign Holders are generally taxed in a similar manner to United States
Holders, but certain special rules do apply. Moreover, this discussion is for
general information only and does not address all of the tax consequences that
may be relevant to particular initial purchasers of Outstanding Notes in light
of their personal circumstances or to certain types of initial purchasers of
Outstanding Notes (such as certain financial institutions, insurance companies,
tax-exempt entities, dealers in securities or persons who have hedged the risk
of owning a Note).
PROSPECTIVE PURCHASERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO
THE PARTICULAR TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND
DISPOSITION OF THE NOTES, INCLUDING THE APPLICABILITY OF ANY FEDERAL TAX LAWS OR
ANY STATE, LOCAL OR FOREIGN TAX LAWS, AND ANY CHANGES (OR PROPOSED CHANGES) IN
APPLICABLE TAX LAWS OR INTERPRETATIONS THEREOF.
UNITED STATES FEDERAL INCOME TAXATION OF UNITED STATES HOLDERS
As used herein, the term 'United States Holder' means a holder of a Note
that is, for United States federal income tax purposes, (a) a citizen or
resident of the United States, (b) a corporation, partnership or other entity
created or organized in or under the laws of the United States or any political
subdivision thereof or (c) an estate or trust the income of which is subject to
United States federal income taxation regardless of source.
Payment of Interest on Notes. Interest paid or payable on a Note will be
taxable to a United States Holder as ordinary interest income, generally at the
time it is received or accrued, in accordance with such holder's regular method
of accounting for United States federal income tax purposes.
Sale, Exchange or Retirement of the Notes. The exchange of an Outstanding
Note by a United States Holder for an Exchange Note should not constitute a
taxable exchange. For purposes of determining gain or loss on the subsequent
sale or exchange of the Exchange Notes, a Holder's basis in the Exchange Notes
should be the same as the Holder's basis in the Outstanding Notes exchanged
therefor. Holders should be considered to have held the Exchange Notes from the
time of their original acquisition of the Outstanding Notes.
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Upon the sale, exchange, redemption, retirement at maturity or other
disposition of a Note, a United States Holder generally will recognize taxable
gain or loss equal to the difference between the sum of cash plus the fair
market value of all other property received on such disposition (except to the
extent such cash or property is attributable to accrued but unpaid interest,
which will be taxable as ordinary income and such United States Holder's
adjusted tax basis in the Note. A United States Holder's adjusted tax basis in a
Note generally will equal the cost of the Note to such United States Holder,
less any principal payments received by such United States Holder.
Gain or loss recognized on the disposition of a Note generally will be
capital gain or loss and will be long-term capital gain or loss if, at the time
of such disposition, the United States Holder's holding period for the Note is
more than one year.
Backup Withholding and Information Reporting. Backup withholding and
information reporting requirements may apply to certain payments of principal,
premium, if any, and interest on a Note, and to proceeds of the sale or
redemption of a Note before maturity. The Company, its agent, a broker, the
Trustee or any paying agent, as the case may be, will be required to withhold
from any payment that is subject to backup withholding a tax equal to 30% of
such payment if a United States Holder fails to furnish his taxpayer
identification number (social security or employer identification number),
certify that such number is correct, certify that such holder is not subject to
backup withholding or otherwise comply with the applicable requirements of the
backup withholding rules. Certain United States Holders, including all
corporations, are not subject to backup withholding and information reporting
requirements. Any amounts withheld under the backup withholding rules from a
payment to a United States Holder will be allowed as a credit against such
United States Holder's United States federal income tax and may entitle the
holder to a refund, provided that the required information is furnished to the
Internal Revenue Service ('IRS').
UNITED STATES FEDERAL INCOME TAXATION OF FOREIGN HOLDERS
As used herein, the term 'Foreign Holder' means a holder of a Note that is,
for United States federal income tax purposes, (a) a nonresident alien
individual, (b) a foreign corporation, (c) a nonresident alien fiduciary of a
foreign estate or trust or (d) a foreign partnership.
Payment of Interest on Notes. In general, payments of interest received by
a Foreign Holder will not be subject to a United States federal withholding tax,
provided that (i)(a) the Foreign Holder does not actually or constructively own
10% or more of the total combined voting power of all classes of stock of the
Company entitled to vote, (b) the Foreign Holder is not a controlled foreign
corporation that is related to the Company actually or constructively through
stock ownership, (c) the Foreign Holder is not a bank receiving interest
described in Section 881(c)(3)(A) of the Code, and (d) either (I) the beneficial
owner of the Note, under penalties of perjury, provides the Company or its agent
with such beneficial owner's name and address and certifies on Form W-8 (or a
suitable substitute form) that it is not a United States Holder or (II) a
securities clearing or business (a 'financial institution') holds the Note and
provides a statement to the Company or its agent under penalties or perjury in
which it certifies that such an IRS Form W-8 (or a suitable substitute) has been
received by it from the beneficial owner of the Notes or qualifying intermediary
and furnishes the Company or its agent a copy thereof or (ii) the Foreign Holder
is entitled to the benefits of an income tax treaty under which interest on the
Notes is exempt from United States withholding tax and the Foreign Holder or
such Foreign Holder's agent provides a properly executed IRS Form 1001 claiming
the exemption. Payments of interest not exempt from United States federal
withholding tax as described above will be subject to such withholding tax at
the rate of 30% (subject to reduction under an applicable income tax treaty).
Sale, Exchange or Retirement of the Notes. The exchange of an Outstanding
Note by a Foreign Holder for an Exchange Note should not constitute a taxable
exchange. For purposes of determining gain or loss on the subsequent sale or
exchange of the Exchange Notes, a Holder's basis in the Exchange Notes should be
the same as the Holder's basis in the Outstanding Notes exchanged therefor.
Holders should be considered to have held the Exchange Notes from the time of
their original acquisition of the Outstanding Notes. Moreover, a Foreign Holder
generally will not be subject to United States federal income tax (and generally
no tax will be withheld) with respect to gain realized on the sale, exchange,
redemption, retirement at maturity or other disposition of a Note unless the
Foreign
108
<PAGE>
<PAGE>
Holder is an individual who is present in the United States for a period or
periods aggregating 183 or more days in the taxable year of the disposition and,
generally, either has a 'tax home' or an 'office or other fixed place of
business' in the United States.
Backup Withholding and Information Reporting. Backup withholding and
information reporting requirements do not apply to payments of interest made by
the Company or a paying agent to Foreign Holders if the certification described
above under ' -- United States Federal Income Taxation of Foreign
Holders -- Payment of Interest on Notes' is received, provided that the payor
does not have actual knowledge that the holder is a United States Holder. If any
payments of principal and interest are made to the beneficial owner of a Note by
or through the foreign office of a foreign custodian, foreign nominee or other
foreign agent of such beneficial owner, or if the foreign office of a foreign
'broker' (as defined in applicable Treasury regulations) pays the proceeds of
the sale of a Note or a coupon to the seller thereof, backup withholding and
information reporting will not apply. Information reporting requirements (but
not backup withholding) will apply, however, to a payment by a foreign office of
a broker that is a United States person, that derives 50% or more of its gross
income for certain periods from the conduct of a trade or business in the United
States, or that is a 'controlled foreign corporation' (generally, a foreign
corporation controlled by certain United States shareholders) with respect to
the United States unless the broker has documentary evidence in its records that
the holder is a Foreign Holder and certain other conditions are met or the
holder otherwise establishes an exemption. Payment by a United States office of
a broker is subject to both backup withholding at a rate of 31% and information
reporting unless the holder certifies under penalties of perjury that it is a
Foreign Holder or otherwise establishes an exemption.
The procedures described above for withholding tax on interest payments,
and some of the associated backup withholding and information reporting rules,
are currently the subject of new proposed regulations, which are proposed to be
effective for payments made after December 31, 1997, subject to certain
transition rules. The proposed regulations, if adopted in their current form,
would not substantially change the treatment of Foreign Holders described above,
except that a Form W-8 generally would be required for certification purposes.
Federal Estate Taxes. Subject to applicable estate tax treaty provisions,
Notes held at the time of death (or Notes transferred before death but subject
to certain retained rights or powers) by an individual who at the time of death
is a Foreign Holder will not be included in such Foreign Holder's gross estate
for United States federal estate tax purposes provided that the individual does
not actually or constructively own 10% or more of the total combined voting
power of all classes of stock of the Company entitled to vote or hold the Notes
in connection with a U.S. trade or business.
109
<PAGE>
<PAGE>
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. This
Prospectus, as it may be amended or supplemented from time to time, may be used
by a broker-dealer in connection with resales of Exchange Notes received in
exchange for Outstanding Notes where such Outstanding Notes were acquired as a
result of market-making activities or other trading activities. The Company has
agreed that for a period of 180 days after the Expiration Date, it will make
this Prospectus, as amended or supplemented, available to any broker-dealer for
use in connection with any such resales. In addition, until ,
1997, all dealers effecting transactions in the Exchange Notes may be required
to deliver a prospectus.
The Company will not receive any proceeds from any sale of Exchange Notes
by broker-dealers or any other holder of Exchange Notes. Exchange Notes received
by broker-dealers for their own account pursuant to the Exchange Offer may be
sold from time to time in one or more transactions in the over-the-counter
market, in negotiated transactions, through the writing of options on the
Exchange Notes or a combination of such methods of resale, at market prices
prevailing at the time of resale, at prices related to such prevailing market
prices or negotiated prices. Any such resale may be made directly to purchasers
or to or through brokers or dealers who may receive compensation in the form of
commissions or concessions from any such broker-dealer and/or the purchasers of
any such Exchange Notes. Any broker-dealer that resells Exchange Notes that were
received by it for its own account pursuant to the Exchange Offer and any broker
or dealer that participates in a distribution of such Exchange Notes may be
deemed to be an 'underwriter' within the meaning of the Securities Act and any
profit on any such resale of Exchange Notes and any commissions or concessions
received by any such persons may be deemed to be underwriting compensation under
the Securities Act. The Letter of Transmittal states that by acknowledging that
it will deliver and by delivering a prospectus, a broker-dealer will not be
deemed to admit that it is an 'underwriter' within the meaning of the Securities
Act.
For a period of 180 days after the Expiration Date the Company will
promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any broker-dealer that requests such documents
in the Letter of Transmittal. The Company has agreed to pay all expenses
incident to the Exchange Offer other than commissions or concessions of any
brokers or dealers and will indemnify the holders of the Notes (including any
broker-dealers) against certain liabilities, including liabilities under the
Securities Act.
By acceptance of this Exchange Offer, each broker-dealer that receives
Exchange Notes for its own account pursuant to the Exchange Offer agrees that,
in the case that the Company is required to file a Shelf Registration Statement,
on receipt of notice from the Company (i) that the Company is suspending the
availability of the Shelf Registration Statement or (ii) of the happening of any
event which makes any statement in the Shelf Registration Statement or the
related prospectus untrue in any material respect or which requires the making
of any changes in the Shelf Registration Statement or the related prospectus in
order to make the statements therein not misleading (which notice the Company
agrees to deliver promptly to the broker-dealer), the broker-dealer will suspend
use of such prospectus until the Company has amended or supplemented the
prospectus to correct the misstatement or omission and has furnished copies of
the amended or supplemental prospectus to the broker-dealer. If the Company
shall give any such notice to suspend the use of the prospectus, it shall extend
the 180-day period referred to above by the number of days during the period
from and including the date of the giving of the notice to and including when
broker-dealers shall have received copies of the supplemented or amended
prospectus necessary to permit resales of the Exchange Notes.
LEGAL PROCEEDINGS
The Company and the Guarantors are not currently involved in any material
litigation and, to the Company's and the Guarantor's knowledge, no material
litigation is currently threatened against such entities, other then routine
litigation arising in the ordinary course of business, most of which is expected
to be covered by liability insurance.
110
<PAGE>
<PAGE>
LEGAL MATTERS
Certain legal matters with respect to the issuance of the Exchange Notes in
connection with the Exchange Offer are being passed upon for the Company by
Cravath, Swaine & Moore, New York, New York. William P. Rogers, Jr., a partner
at Cravath, Swaine & Moore, is a director of the Company, and beneficially owns
4,500 shares of common stock of the Company and options to purchase 4,000 shares
of such common stock.
EXPERTS
The consolidated financial statements of the Company at December 31, 1996
and 1995, and for each of the three years in the period ended December 31, 1996,
included in this Prospectus and Registration Statement have been audited by
Ernst & Young LLP, independent auditors as set forth in their report thereon
appearing elsewhere herein, and are included in reliance upon such report given
upon the authority of such firm as experts in accounting and auditing.
LISTING INFORMATION
The Company intends to file an application to list the Notes on the
Luxembourg Stock Exchange. In connection with the listing application, the
Restated Articles of Incorporation and By-laws of the Company and a legal notice
relating to the issuance of the Notes will be deposited prior to listing with
the Chief Registrar of the District Court of Luxembourg, where copies thereof
may be obtained upon request.
Copies of the Restated Articles of Incorporation and By-laws of the Company
and the Indenture, including the form of the Notes, will be available for
inspection, and copies of the Company's annual and quarterly reports to
shareholders will be obtainable at the offices of Banque Internationale a
Luxembourg, the listing agent for the Notes, at 69, route d'Esch, L-1470
Luxembourg, during the term of the Notes.
The Board of Directors of the Company authorized the issuance and sale of
the Notes on June 19, 1997. The Boards of Directors of the Guarantors authorized
the issuance and sale of the Guarantees on July 17, 1997.
Other than as disclosed in this Prospectus, there have been no material
adverse changes in the condition (financial or otherwise), business, properties
or results of operations of the Company since June 30, 1997 to the date hereof.
111
<PAGE>
<PAGE>
AMTRAN, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Audited Financial Statements:
Reports of Independent Auditors....................................................................... F-2
Consolidated Balance Sheets at December 31, 1996 and 1995............................................. F-3
Consolidated Statements of Operations for the Years Ended December 31, 1996, 1995 and 1994............ F-4
Consolidated Statements of Changes in Shareholders' Equity for the Years Ended December 31, 1996, 1995
and 1994............................................................................................. F-5
Consolidated Statements of Cash Flows for the Years Ended December 31, 1996, 1995 and 1994............ F-6
Notes to Consolidated Financial Statements............................................................ F-7
Unaudited Interim Financial Statements
Consolidated Balance Sheet at June 30, 1997 and 1996.................................................. F-17
Consolidated Statements of Operations for the Three Months and Six Months Ended June 30, 1997 and
1996................................................................................................. F-18
Consolidated Statements of Cash Flows for the Six Months Ended June 30, 1997 and 1996................. F-19
Notes to Consolidated Financial Statements............................................................ F-20
</TABLE>
F-1
<PAGE>
<PAGE>
REPORT OF ERNST & YOUNG LLP INDEPENDENT AUDITORS
Board of Directors
AMTRAN, INC.
We have audited the accompanying consolidated balance sheets of Amtran,
Inc. and subsidiaries as of December 31, 1996 and 1995, and the related
consolidated statements of operations, changes in shareholders' equity and cash
flows for each of the three years in the period ended December 31, 1996. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Amtran, Inc.
and subsidiaries at December 31, 1996 and 1995, and the consolidated results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1996, in conformity with generally accepted accounting
principles.
Indianapolis, Indiana
February 7, 1997
F-2
<PAGE>
<PAGE>
AMTRAN, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1996 1995
--------- ---------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.......................................................... $ 73,382 $ 92,741
Receivables, net of allowance for doubtful accounts (1996 -- $1,274;
1995 -- $1,303)................................................................... 20,239 24,158
Inventories, net................................................................... 13,888 13,959
Assets held for sale............................................................... 14,112 --
Prepaid expenses and other current assets.......................................... 14,672 25,239
--------- ---------
Total current assets.......................................................... 136,293 156,097
--------- ---------
Property and equipment:
Flight equipment................................................................... 381,186 384,476
Facilities and ground equipment.................................................... 51,874 40,290
--------- ---------
433,060 424,766
Accumulated depreciation........................................................... (208,520) (183,998)
--------- ---------
224,540 240,768
Deposits and other assets............................................................... 9,454 16,272
--------- ---------
Total Assets............................................................. $ 370,287 $ 413,137
--------- ---------
--------- ---------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt............................................... $ 30,271 $ 3,606
Accounts payable................................................................... 13,671 11,152
Air traffic liabilities............................................................ 49,899 56,531
Accrued expenses................................................................... 64,813 76,312
--------- ---------
Total current liabilities..................................................... 158,654 147,601
Long-term debt, less current maturities................................................. 119,786 134,641
Deferred income taxes................................................................... 20,216 37,949
Other deferred items.................................................................... 16,887 11,761
Commitments and contingencies
Shareholders' equity:
Preferred stock; authorized 10,000,000 shares; none issued......................... -- --
Common stock, without par value; authorized 30,000,000 shares; issued
11,799,852 -- 1996; 11,790,752 -- 1995............................................ 38,341 38,259
Additional paid-in capital......................................................... 15,618 15,821
Treasury stock: 185,000 shares -- 1996; 169,000 shares -- 1995..................... (1,760) (1,581)
Retained earnings.................................................................. 4,678 31,352
Deferred compensation -- ESOP...................................................... (2,133) (2,666)
--------- ---------
54,744 81,185
--------- ---------
Total Liabilities and Shareholders' Equity............................... $ 370,287 $ 413,137
--------- ---------
--------- ---------
</TABLE>
See accompanying notes.
F-3
<PAGE>
<PAGE>
AMTRAN, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Operating revenues:
Scheduled service.............................................. $ 386,488 $ 361,967 $ 240,675
Charter........................................................ 310,569 307,091 295,890
Ground package................................................. 22,302 20,421 20,248
Other.......................................................... 31,492 25,530 23,709
----------- ----------- -----------
Total operating revenues.................................. 750,851 715,009 580,522
----------- ----------- -----------
Operating expenses:
Salaries, wages and benefits................................... 163,990 141,072 113,789
Fuel and oil................................................... 161,226 129,636 106,057
Handling, landing and navigation fees.......................... 70,122 74,400 60,872
Aircraft rentals............................................... 65,427 55,738 48,155
Depreciation and amortization.................................. 61,661 55,827 46,178
Aircraft maintenance, materials and repairs.................... 55,175 55,423 46,092
Crew and other employee travel................................. 35,855 31,466 26,171
Passenger service.............................................. 32,745 34,831 29,804
Commissions.................................................... 26,677 24,837 17,469
Ground package cost............................................ 18,246 15,926 14,767
Other selling expenses......................................... 17,563 14,934 8,008
Advertising.................................................... 10,320 8,852 7,759
Facilities and other rentals................................... 9,625 7,414 5,500
Disposal of assets............................................. 4,475 -- --
Other.......................................................... 53,800 46,717 41,486
----------- ----------- -----------
Total operating expenses.................................. 786,907 697,073 572,107
----------- ----------- -----------
Operating income (loss)............................................. (36,056) 17,936 8,415
Other income (expense):
Interest income................................................ 617 410 191
Interest (expense)............................................. (4,465) (4,163) (3,656)
Other.......................................................... 323 470 929
----------- ----------- -----------
Total other expenses...................................... (3,525) (3,283) (2,536)
----------- ----------- -----------
Income (loss) before income taxes................................... (39,581) 14,653 5,879
Income taxes (credits).............................................. (12,907) 6,129 2,393
----------- ----------- -----------
Net income (loss)................................................... $ (26,674) $ 8,524 $ 3,486
----------- ----------- -----------
----------- ----------- -----------
Net income (loss) per share......................................... $ (2.31) $ 0.74 $ 0.30
----------- ----------- -----------
----------- ----------- -----------
Average shares outstanding.......................................... 11,535,425 11,481,861 11,616,196
</TABLE>
See accompanying notes.
F-4
<PAGE>
<PAGE>
AMTRAN, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONAL DEFERRED
COMMON TREASURY PAID-IN RETAINED COMPENSATION
STOCK STOCK CAPITAL EARNINGS ESOP
------- -------- ---------- --------- ------------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1993.......................... $37,667 $ -- $ 16,132 $ 19,342 $ (3,200)
Net income..................................... -- -- -- 3,486 --
Issuance of common stock for ESOP.............. -- -- (46) -- 267
Restricted stock grants........................ 274 -- (78) -- --
Purchase of 115,000 shares of treasury stock... -- (1,091) -- -- --
------- -------- ---------- --------- ------------
Balance, December 31, 1994.......................... 37,941 (1,091) 16,008 22,828 (2,933)
Net income..................................... -- -- -- 8,524 --
Issuance of common stock for ESOP.............. -- -- (111) -- 267
Restricted stock grants........................ 152 -- (19) -- --
Stock options exercised........................ 166 -- (57) -- --
Purchase of 54,000 shares of treasury stock.... -- (490) -- -- --
------- -------- ---------- --------- ------------
Balance, December 31, 1995.......................... 38,259 (1,581) 15,821 31,352 (2,666)
Net loss....................................... -- -- -- (26,674) --
Issuance of common stock for ESOP.............. -- -- (173) -- 533
Restricted stock grants........................ 32 -- (7) -- --
Stock options exercised........................ 50 -- (23) -- --
Purchase of 16,000 shares of treasury stock.... -- (179) -- -- --
------- -------- ---------- --------- ------------
Balance, December 31, 1996.......................... $38,341 $ (1,760) $ 15,618 $ 4,678 $ (2,133)
------- -------- ---------- --------- ------------
------- -------- ---------- --------- ------------
</TABLE>
See accompanying notes.
F-5
<PAGE>
<PAGE>
AMTRAN, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1996 1995 1994
-------- ------- -------
<S> <C> <C> <C>
Operating activities:
Net income (loss)............................................................... $(26,674) $ 8,524 $ 3,486
Adjustments to reconcile net income (loss) to net cash provided by operating
activities:
Depreciation and amortization.............................................. 61,661 55,827 46,178
Deferred income taxes (credits)............................................ (13,246) 4,025 2,226
Other non-cash items....................................................... 28,185 9,699 2,131
Changes in operating assets and liabilities:
Receivables................................................................ 3,919 (6,768) (1,728)
Inventories................................................................ (948) 2,739 (3,027)
Assets held for sale....................................................... (14,112) -- --
Prepaid expenses........................................................... 6,081 (4,061) (3,572)
Accounts payable........................................................... 2,519 (166) (4,243)
Air traffic liabilities.................................................... (6,632) 10,466 1,293
Accrued expenses........................................................... (8,582) 6,793 32,553
-------- ------- -------
Net cash provided by operating activities....................................... 32,171 87,078 75,297
-------- ------- -------
Investing activities:
Proceeds from sales of property and equipment.............................. 529 21,564 358
Capital expenditures....................................................... (69,884) (57,835) (81,015)
Reductions of (additions to) other assets.................................. 6,194 (7,761) 257
-------- ------- -------
Net cash used in investing activities........................................... (63,161) (44,032) (80,400)
-------- ------- -------
Financing activities:
Proceeds from long-term debt............................................... 21,390 6,000 45,000
Payments on long-term debt................................................. (9,580) (17,567) (22,078)
Purchase of treasury stock................................................. (179) (490) (1,091)
-------- ------- -------
Net cash provided by (used in) financing activities............................. 11,631 (12,057) 21,831
-------- ------- -------
Increase (decrease) in cash and cash equivalents................................ (19,359) 30,989 16,728
Cash and cash equivalents, beginning of period.................................. 92,741 61,752 45,024
-------- ------- -------
Cash and cash equivalents, end of period........................................ $ 73,382 $92,741 $61,752
-------- ------- -------
-------- ------- -------
Supplemental disclosures:
Cash payments for:
Interest.............................................................. $ 3,823 $ 4,515 $ 3,376
Income taxes.......................................................... 515 1,069 835
Financing and investing activities not affecting cash:
Issuance of long-term debt directly for capital expenditures............... $ -- $31,708 $15,851
</TABLE>
See accompanying notes.
F-6
<PAGE>
<PAGE>
AMTRAN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION AND BUSINESS DESCRIPTION
The consolidated financial statements include the accounts of Amtran, Inc.
(the 'Company') and its wholly owned subsidiaries. All significant intercompany
accounts and transactions have been eliminated.
The Company operates principally in one business segment through American
Trans Air, Inc. ('ATA'), its principal subsidiary, which accounts for
approximately 95% of the Company's operating revenues. ATA is a
U.S.-certificated air carrier providing domestic and international charter and
scheduled passenger services. Approximately 51.5% of the Company's 1996
operating revenues were generated through scheduled services to such
destinations as Hawaii, Las Vegas, Florida and the Caribbean, while
approximately 41.4% of 1996 operating revenues were derived from charter
operations with independent tour operators and U.S. military services to
numerous destinations throughout the world.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
CASH EQUIVALENTS
Cash equivalents are carried at cost and are primarily comprised of
investments in U.S. Treasury bills and time deposits which are purchased with
original maturities of three months or less (see Note 2).
ASSETS HELD FOR SALE
Assets held for sale are carried at the lower of net book value or
estimated net realizable value.
INVENTORIES
Inventories consist primarily of expendable aircraft spare parts, fuel and
other supplies. Aircraft parts inventories are stated at cost and reduced by an
allowance for obsolescence. The obsolescence allowance is provided by amortizing
the cost of the aircraft parts inventory, net of an estimated residual value,
over its estimated useful service life. The obsolescence allowance at December
31, 1996 and 1995, was $6.6 million and $5.6 million, respectively. Inventories
are charged to expense when consumed.
REVENUE RECOGNITION
Revenues are recognized when the transportation is provided. Customer
flight deposits and unused passenger tickets sold are included in air traffic
liability. As is customary within the industry, the Company performs periodic
evaluations of this estimated liability, and any adjustments resulting
therefrom, which can be significant, are included in the results of operations
for the periods in which the evaluations are completed.
PASSENGER TRAFFIC COMMISSIONS
Passenger traffic commissions are recognized as expense when the
transportation is provided and the related revenue is recognized. The amount of
passenger traffic commissions paid but not yet recognized as expense is included
in prepaid expenses and other current assets in the accompanying consolidated
balance sheets.
PROPERTY AND EQUIPMENT
Property and equipment is recorded at cost and is depreciated to residual
value over its estimated useful service life using the straight-line method.
Advanced payments for future aircraft purchases are
F-7
<PAGE>
<PAGE>
AMTRAN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
recorded at cost. As of December 31, 1996 and 1995, the Company had made
advanced payments for future aircraft deliveries totaling $2.7 million and $4.9
million, respectively. The estimated useful service lives for the principal
depreciable asset classifications are as follows:
<TABLE>
<CAPTION>
ASSET ESTIMATED USEFUL SERVICE LIFE
- --------------------------------------------------- ---------------------------------------------------
<S> <C>
Aircraft and related equipment:
Lockheed L-1011............................... 16 years
Major rotable parts, avionics and assemblies....... Life of equipment to which applicable (Generally
ranging from 10 - 16 years)
Improvements to leased flight equipment............ Period of benefit or term of lease
Other property and equipment....................... 3 - 7 years
</TABLE>
The costs of major airframe and engine overhauls are capitalized and
amortized over their estimated useful lives based upon usage (or to earlier
fleet common retirement dates) for both owned and leased aircraft.
FINANCIAL INSTRUMENTS
The carrying amounts of cash equivalents, receivables and both
variable-rate and fixed-rate debt (see Note 5) approximate fair value. The fair
value of fixed-rate debt, including current maturities, is estimated using
discounted cash flow analysis based on the Company's current incremental rates
for similar types of borrowing arrangements.
INCOME (LOSS) PER SHARE
Income (loss) per share is computed by dividing net income (loss) by the
weighted average number of common shares outstanding plus common share
equivalents arising from restricted shares issued during the period. No effect
has been given to options outstanding under the Company's incentive stock plans,
as no material dilutive effect would result from their exercise (see Note 9).
2. CASH AND CASH EQUIVALENTS
Cash and cash equivalents consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1996 1995
------- -------
(IN THOUSANDS)
<S> <C> <C>
Cash.............................................................................. $18,523 $21,714
U.S. Treasury bill repurchase agreements.......................................... 54,859 71,027
------- -------
$73,382 $92,741
------- -------
------- -------
</TABLE>
Cash equivalents of $6.3 million and $6.0 million at December 31, 1996 and
1995, respectively, are pledged to collateralize amounts which could become due
under letters of credit. At December 31, 1996 and 1995, there were no amounts
drawn against letters of credit (see Note 4).
F-8
<PAGE>
<PAGE>
AMTRAN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
3. PROPERTY AND EQUIPMENT
The Company's property and equipment consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1996 1995
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Flight equipment, including airframes, engines and other........................ $381,186 $384,476
Less accumulated depreciation................................................... 182,392 163,846
-------- --------
198,794 220,630
-------- --------
Facilities and ground equipment................................................. 51,874 40,290
Less accumulated depreciation................................................... 26,128 20,152
-------- --------
25,746 20,138
-------- --------
$224,540 $240,768
-------- --------
-------- --------
</TABLE>
4. SHORT-TERM BORROWINGS
The Company maintains a $5.0 million revolving credit facility available
for its short-term borrowing needs and for issuance of letters of credit. The
credit facility is available until June 1997 and is collateralized by certain
aircraft engines. Borrowings against the facility bear interest at the bank's
prime rate plus .25%. There were no borrowings against this credit facility at
December 31, 1996 or 1995. At December 31, 1996 and 1995, the Company had
outstanding letters of credit aggregating $4.1 million and $2.9 million,
respectively, under such facility.
5. LONG-TERM DEBT
Long-term debt consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1996 1995
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Notes payable to banks; prime to prime plus .75% (8.25% and 9% at December 31,
1996), payable in varying installments through April 1999..................... $123,246 $112,337
Note payable to institutional lender; fixed rate of 7.8% payable in varying
installments through September 2003........................................... 9,106 2,860
City of Indianapolis Economic Development Revenue Bond; 9.88%, payable in
quarterly installments through July 1997...................................... 875 1,375
City of Chicago variable rate special facility revenue bonds (4.75% at December
31, 1996), payable in December 2020........................................... 6,000 6,000
Notes payable to banks and institutional lenders................................ -- 4,205
Capitalized lease obligations and other......................................... 10,830 11,470
-------- --------
150,057 138,247
Less current maturities......................................................... 30,271 3,606
-------- --------
$119,786 $134,641
-------- --------
-------- --------
</TABLE>
The Company's 1996 credit facility provides a maximum of $125.0 million,
including a $25.0 million letter of credit facility. The collateral for the
facility consists of certain owned Lockheed L-1011 aircraft, certain receivables
and certain rotables and spare parts. Effective September 30, 1996, the Company
renegotiated certain terms of the bank credit facility along with the
modification of certain loan covenants. In return for this covenant relief, the
Company has agreed to implement changes to the underlying collateral for the
facility and to change the interest rate applicable to borrowings under the
facility. The Company has pledged additional owned engines and equipment as
collateral for the facility
F-9
<PAGE>
<PAGE>
AMTRAN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
as of the implementation date of the new agreement. The Company has further
agreed to begin reducing the maximum borrowing availability of $63.0 million
collateralized by the owned Lockheed L-1011 fleet by $1.0 million per month from
April 1997 through September 1997, and by $1.5 million per month from October
1997 through April 1999. Loans outstanding under the renegotiated facility bear
interest, at the Company's option, at either (i) prime to prime plus 0.75%, or
(ii) the Eurodollar rate plus 1.50% to 2.75%. The facility matures on April 1,
1999, and contains various covenants and events of default, including:
maintenance of a specified debt-to-equity ratio and a minimum level of net
worth; achievement of a minimum level of cash flow; and restrictions on aircraft
acquisitions, liens, loans to officers, change of control, indebtedness, lease
commitments and payment of dividends.
In December 1995, the Company issued $6.0 million in variable rate special
revenue bonds through the City of Chicago. The Company is obligated to perform
certain mandatory improvements to its Chicago-Midway Airport Maintenance
facility with the bond proceeds.
In December 1995, the Company entered into a sale/lease transaction with
the City of Indianapolis on its maintenance facility at the Indianapolis
International Airport which resulted in the advance of $10.0 million in cash to
the Company, as secured by the maintenance facility. The Company is obligated to
pay $0.6 million per year to the City of Indianapolis for five years, which
represents interest on the City's associated outstanding debt obligation. As of
December 2000, the Company is required to repay the advance of $10.0 million to
the City of Indianapolis, and may elect to repay the balance using special
facility bonds underwritten by the City's Airport Authority, or by using the
Company's own funds.
At December 31, 1996, the Company has reclassified $19.9 million of bank
credit facility borrowings from long-term debt to current maturities of
long-term debt. Of this amount, $10.5 million is attributable to the scheduled
reduction of availability collateralized by the owned Lockheed L-1011 fleet over
the next 12 months. The remaining $9.4 million represents the amount of the
spare Pratt & Whitney engines which are pledged to the bank facility and which
will be repaid from the anticipated sale of the engines. The estimated market
value of these spare engines is classified under current assets.
The Company has made voluntary prepayments of long-term debt which has had
the effect of reducing interest expense by approximately $5.9 million and $5.5
million during 1996 and 1995, respectively. The Company reborrowed the full
amounts available to it as of December 31, 1996 and 1995.
Future maturities of long-term debt are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1996
-----------------
(IN THOUSANDS)
<S> <C>
1997.................................................. $ 30,271
1998.................................................. 19,486
1999.................................................. 79,615
2000.................................................. 1,483
2001.................................................. 1,476
Thereafter............................................ 17,726
-----------------
$ 150,057
-----------------
-----------------
</TABLE>
Interest capitalized in connection with long-term asset purchase agreements
was $1.4 million and $1.3 million in 1996 and 1995, respectively.
6. LEASE COMMITMENTS
At December 31, 1996, the Company had aircraft leases on four Lockheed
L-1011s, 23 Boeing 727-200s, and seven Boeing 757-200s. The Lockheed L-1011s
have an initial term of 60 months. The Boeing 757-200s have initial lease terms
that expire from 1997 through 2015. The Boeing 727-200s have initial terms of
three to seven years.
F-10
<PAGE>
<PAGE>
AMTRAN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company is responsible for all maintenance costs on these aircraft and
must meet specified airframe and engine return conditions. The Company had
previously been required to make maintenance reserve payments based upon the
usage of certain leased aircraft, but is no longer subject to such requirements.
As of December 31, 1996, the Company had other long-term leases related to
certain ground facilities, including terminal space and maintenance facilities,
with original lease terms that vary from 3 to 40 years and expire at various
dates through 2035. The lease agreements relating to the ground facilities,
which are primarily owned by governmental units or authorities, generally do not
provide for transfer of ownership nor do they contain options to purchase.
In December 1995, the Company sold its option to purchase its headquarters
facility to the City of Indianapolis for $2.9 million, and thereafter entered
into a capital lease agreement with the City relating to the continued use of
the headquarters and maintenance facility. A gain on the sale of the option
equal to $1.3 million was recognized in income in 1995, with the remainder of
the gain to be amortized to income during the periods the headquarters
facilities are used. The headquarters agreement has an initial term of four
years, with two options to extend of three and five years, respectively, and is
cancelable after two years with advance notice. The maintenance facility lease
has a term of 39 years. The Company is responsible for maintenance, taxes,
insurance and other expenses incidental to the operation of the facilities.
Future minimum lease payments at December 31, 1996, for noncancelable
operating leases with initial terms of more than one year are as follows:
<TABLE>
<CAPTION>
FACILITIES
FLIGHT AND GROUND
EQUIPMENT EQUIPMENT TOTAL
--------- ---------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
1997.................................................. $ 55,513 $ 5,572 $ 61,085
1998.................................................. 46,890 5,229 52,119
1999.................................................. 45,205 4,662 49,867
2000.................................................. 32,272 4,505 36,777
2001.................................................. 31,457 3,143 34,600
Thereafter............................................ 200,209 20,377 220,586
--------- ---------- --------
$411,546 $ 43,488 $455,034
--------- ---------- --------
--------- ---------- --------
</TABLE>
Rental expense for all operating leases in 1996, 1995 and 1994 was $65.0
million, $63.0 million and $53.0 million, respectively, including maintenance
reserve payments of $3.4 million in 1994.
7. INCOME TAXES
The provision for income tax expense (credit) consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
1996 1995 1994
-------- ------ ------
(IN THOUSANDS)
<S> <C> <C> <C>
Federal
Current................................................... $ -- $1,280 $ (14)
Deferred.................................................. (11,798) 4,399 2,357
-------- ------ ------
(11,798) 5,679 2,343
State
Current................................................... 161 107 181
Deferred.................................................. (1,270) 343 (131)
-------- ------ ------
(1,109) 450 50
-------- ------ ------
Income tax expense (credit)............................... $(12,907) $6,129 $2,393
-------- ------ ------
-------- ------ ------
</TABLE>
F-11
<PAGE>
<PAGE>
AMTRAN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The provision for income taxes differed from the amount obtained by
applying the statutory federal income tax rate to income before income taxes as
follows:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
1996 1995 1994
-------- ------ ------
(IN THOUSANDS)
<S> <C> <C> <C>
Federal income taxes at statutory rate (credit)................ $(13,457) $4,982 $1,999
State income taxes, net of federal benefit..................... (732) 535 295
Non-deductible expenses........................................ 1,282 998 1,155
Benefit of change in estimate of state income tax rate......... -- (258) (468)
Benefit of tax reserve adjustments............................. -- (203) (610)
Other, net..................................................... -- 75 22
-------- ------ ------
Income tax expense (credit).................................... $(12,907) $6,129 $2,393
-------- ------ ------
-------- ------ ------
</TABLE>
Deferred income taxes arise from temporary differences between the tax
basis of assets and liabilities and their reported amounts in the financial
statements. The principal temporary differences relate to the use of accelerated
methods of depreciation and amortization for tax purposes. Deferred income tax
liability components are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1996 1995
------- -------
(IN THOUSANDS)
<S> <C> <C>
Deferred tax liabilities:
Tax depreciation in excess of book depreciation................... $56,885 $57,167
Other taxable temporary differences............................... 476 228
------- -------
Deferred tax liabilities..................................... 57,361 57,395
Deferred tax assets:
Amortization of lease credits..................................... 2,044 2,109
Tax benefit of net operating loss carryforwards................... 29,852 17,420
Investment and other tax credit carryforwards..................... 4,720 4,506
Other deductible temporary differences............................ 4,928 4,296
------- -------
Deferred tax assets.......................................... 41,544 28,331
Deferred taxes classified as:
Current asset.......................................................... 4,399 8,885
------- -------
Non-current liability.................................................. $20,216 $37,949
------- -------
------- -------
</TABLE>
At December 31, 1996, for federal tax reporting purposes, the Company had
approximately $81.7 million of net operating loss carryforwards available to
offset future federal taxable income and $4.7 million of investment and other
tax credit carryforwards available to offset future federal tax liabilities. The
net operating loss carryforwards expire as follows: 2002, $11.9 million; 2003,
$8.1 million; 2004, $9.0 million; 2005, $3.6 million; 2009, $14.8 million; 2011,
$34.4 million. Investment tax credit carryforwards of $.9 million expire
principally in 2000 and other tax credit carryforwards of $3.8 million have no
expiration dates.
8. RETIREMENT PLAN
The Company has a defined contribution 401(k) savings plan which provides
for participation by substantially all the Company's employees who have
completed one year of service. The Company has elected to contribute an amount
equal to 30% of the amount contributed by each participant up to the first six
percent of eligible compensation. Company matching contributions expensed in
1996, 1995 and 1994 were $1.3 million, $1.2 million, and $1.0 million,
respectively.
F-12
<PAGE>
<PAGE>
AMTRAN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In 1993, the Company added an Employee Stock Ownership Plan ('ESOP')
feature to its existing 401(k) savings plan. The ESOP used the proceeds of a
$3.2 million loan from the Company to purchase 200,000 shares of the Company's
common stock. The selling shareholder was the Company's principal shareholder.
The Company recognized $0.3 million, $0.4 million, and $0.2 million in 1996,
1995 and 1994, respectively, as compensation expense related to the ESOP. Shares
of common stock held by the ESOP will be allocated to participating employees
annually as part of the Company's 401(k) savings plan contribution. The fair
value of the shares allocated during the year is recognized as compensation
expense.
9. SHAREHOLDERS' EQUITY
In the first quarter of 1994, the Board of Directors approved the
repurchase of up to 250,000 shares of the Company's common stock. As of December
31, 1996, the Company had repurchased 185,000 shares at a total cost of $1.8
million.
The Company's 1993 Incentive Stock Plan (1993 Plan) authorizes the grant of
options to key employees for up to 900,000 shares of the Company's common stock.
The Company's 1996 Incentive Stock Plan for key employees (1996 Plan),
authorizes the grant of options to key employees for up to 3,000,000 shares of
the Company's common stock. Options granted have 5 to 10-year terms and
generally vest and become fully exercisable over specified periods up to three
years of continued employment.
A summary of common stock option changes follows:
<TABLE>
<CAPTION>
NUMBER OF WEIGHTED-AVERAGE
SHARES EXERCISE PRICE
--------- ----------------
<S> <C> <C>
Outstanding at December 31, 1994.............................. 313,050 $13.73
Granted....................................................... 190,000 $ 8.71
Exercised..................................................... 10,417 $10.56
Canceled...................................................... 97,333 $11.73
---------
Outstanding at December 31, 1995.............................. 395,300 $11.92
Granted....................................................... 1,302,400 $ 7.87
Exercised..................................................... 3,100 $ 8.94
Canceled...................................................... 64,700 $10.87
---------
Outstanding at December 31, 1996.............................. 1,629,900 $ 8.74
---------
---------
Options exercisable at December 31, 1996...................... 497,015 $ 9.99
---------
---------
</TABLE>
During 1996, the Company adopted FASB Statement No. 123 'Accounting for
Stock-Based Compensation' (FAS 123) with respect to its stock options. As
permitted by FAS 123, the Company has elected to continue to account for
employee stock options following Accounting Principles Board Opinion No. 25,
'Accounting for Stock Issued to Employees' (APB 25) and related Interpretations.
Under APB 25, because the exercise price of the Company's employee stock options
equals the market price of the underlying stock on the date of grant, no
compensation expense is recognized.
The weighted-average fair value of options granted during 1996 and 1995 is
estimated at $4.49 and $5.74 per share, respectively, on the grant date. These
estimates were made using the Black-Scholes option pricing model with the
following weighted-average assumptions for 1996 and 1995, respectively:
risk-free interest rates of 6% and 7.92%; expected market price volatility of
.48 and .40; weighted-average expected option life equal to the contractual
term; estimated forfeitures of 5%; and no dividends.
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting restrictions
and are fully transferable. In addition, option valuation models use highly
subjective assumptions including the expected stock price volatility.
F-13
<PAGE>
<PAGE>
AMTRAN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Because the Company's employee stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion the existing models do not necessarily provide a reliable single measure
of the fair value of its employees' stock options.
For purposes of pro forma disclosure, the estimated fair value of the
options is amortized to expense over the options' vesting period (1 to 3 years).
Therefore, because FAS 123 is applicable only to options granted subsequent to
December 31, 1994, its pro forma effect will not be fully reflected until 1998.
The Company's pro forma information follows:
<TABLE>
<CAPTION>
1996 1995
------------------ ------------------
(IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C>
Net income (loss) as reported.................................... $(26,674) $8,524
Net income (loss) pro forma...................................... (28,864) 8,456
Earnings (loss) per share as reported............................ (2.31) .74
Earnings (loss) per share pro forma.............................. (2.50) .74
</TABLE>
Options outstanding at December 31, 1996 expire from August 2001 to
February 2006. A total of 2,270,100 shares are reserved for future grants as of
December 31, 1996 under the 1993 and 1996 Plans. The following table summarizes
information concerning outstanding and exercisable options at December 31, 1996:
<TABLE>
<S> <C> <C>
Range of Exercise Prices......................................... $7 - 11 $12 - 16
Options outstanding:
Weighted-Average Remaining Contractual Life................. 3.3 years 8.3 years
Weighted-Average Exercise Price............................. $7.48 $14.28
Number...................................................... 1,328,700 301,200
Options exercisable:
Weighted-Average Exercise Price............................. $7.67 $16.00
Number...................................................... 358,315 138,700
</TABLE>
10. MAJOR CUSTOMER
The United States Government is the only customer that accounted for more
than 10% of consolidated revenues. U.S. Government revenues accounted for 11%,
11% and 16% of consolidated revenues for 1996, 1995 and 1994, respectively.
11. COMMITMENTS AND CONTINGENCIES
In November 1994, the Company signed a purchase agreement for six new
Boeing 757-200s which, as subsequently amended, provides for deliveries of
aircraft between 1995 and 1998. As of December 31, 1996, the Company had taken
delivery of four Boeing 757-200s under this purchase agreement and financed
those aircraft using operating leases. In conjunction with the Boeing purchase
agreement, the Company entered into a separate agreement with Rolls-Royce
Commercial Aero Engines Limited for 13 RB211-535E4 engines to power the six
Boeing 757 aircraft and to provide one spare engine. Under the Rolls-Royce
agreement, which was effective January 1, 1995, Rolls-Royce provides the Company
various credits for spare parts and maintenance purchases, together with engine
overhaul cost guarantees for certain qualified Rolls-Royce engines currently
used by the Company.
If the Company does not take delivery of the purchased engines, the credits
and cost guarantees that have been used are refundable to Rolls-Royce. These two
agreements have an aggregate purchase price of approximately $50.0 million per
aircraft, subject to escalation. Advance payments totaling approximately $22.0
million ($11.0 million per aircraft) are required to be made for the undelivered
aircraft, with the balance due upon delivery. As of December 31, 1996 and 1995,
the Company had
F-14
<PAGE>
<PAGE>
AMTRAN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
made $2.7 million and $5.0 million in advanced payments, respectively,
pertaining to aircraft deliveries scheduled to take place within one year.
In the first quarter of 1996, the Company purchased four additional Boeing
727-200 aircraft, and had financed all of these through sale/leasebacks
accounted for as operating leases by the end of the third quarter of 1996. In
the second quarter of 1996, the Company purchased a fifth Boeing 727-200
aircraft which had been previously financed by the Company through an operating
lease. This aircraft was financed through the separate bridge debt facility as
of September 30, 1996, but is expected to be financed long-term through a
sale/leaseback transaction.
The Company entered into an agreement in October 1995 with a supplier which
provides for the purchase of four engine hushkits and for the option to purchase
three additional hushkits on the same terms, for installation on newly acquired
Boeing 727-200 aircraft.
Various claims, contractual disputes and lawsuits against the Company arise
periodically involving complaints which are normal and reasonably foreseeable in
light of the nature of the Company's business. The majority of these suits are
covered by insurance. In the opinion of management, the resolution of these
claims will not have a material adverse effect on the business, operating
results or financial condition of the Company.
F-15
<PAGE>
<PAGE>
AMTRAN, INC. AND SUBSIDIARIES
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
1996 QUARTERLY FINANCIAL SUMMARY
(UNAUDITED)
<TABLE>
<CAPTION>
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
-------- -------- ------------ -----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Operating revenues......................................... $207,135 $195,395 $199,698 $ 148,623
Operating expenses......................................... 201,918 198,498 218,776 168,106
Operating income (loss).................................... 5,217 (3,103) (19,078) (19,483)
Other expenses............................................. (855) (471) (355) (1,453)
Income (loss) before income taxes.......................... 4,362 (3,574) (19,433) (20,936)
Income taxes (credits)..................................... 2,009 (1,289) (6,800) (6,827)
Net income (loss).......................................... $ 2,353 $ (2,285) $(12,633) $ (14,109)
Net income (loss) per share................................ $ .21 $ (.20) $ (1.09) $ (1.23)
</TABLE>
1995 QUARTERLY FINANCIAL SUMMARY
(UNAUDITED)
<TABLE>
<CAPTION>
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
-------- -------- ------------ -----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Operating revenues......................................... $182,618 $173,338 $194,427 $ 164,626
Operating expenses......................................... 171,811 167,332 186,783 171,147
Operating income (loss).................................... 10,807 6,006 7,644 (6,521)
Other expenses............................................. (825) (597) (758) (1,103)
Income (loss) before income taxes.......................... 9,982 5,409 6,886 (7,624)
Income taxes (credits)..................................... 4,578 2,085 3,295 (3,829)
Net income (loss).......................................... $ 5,404 $ 3,324 $ 3,591 $ (3,795)
Net income (loss) per share................................ $ .46 $ .29 $ .31 $ (.32)
</TABLE>
F-16
<PAGE>
<PAGE>
AMTRAN, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
JUNE 30,
----------------------
1997 1996
--------- ---------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.......................................................... $ 65,396 $ 86,621
Receivables, net of allowance for doubtful accounts (1997 -- $1,430;
1996 -- $1,280)................................................................... 23,246 24,334
Inventories, net................................................................... 14,863 14,605
Assets held for sale............................................................... 13,838 --
Prepaid expenses and other current assets.......................................... 18,367 23,782
--------- ---------
Total current assets.......................................................... 135,710 149,342
Property and equipment:
Flight equipment................................................................... 408,779 426,180
Facilities and ground equipment.................................................... 52,725 47,551
--------- ---------
461,504 473,731
Accumulated depreciation........................................................... (230,206) (198,770)
--------- ---------
231,298 274,961
Deposits and other assets............................................................... 9,724 13,664
--------- ---------
Total Assets.................................................................. $ 376,732 $ 437,967
--------- ---------
--------- ---------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt............................................... $ 35,226 $ 1,770
Accounts payable................................................................... 8,015 10,573
Air traffic liabilities............................................................ 57,788 57,030
Accrued expenses................................................................... 69,156 78,410
--------- ---------
Total current liabilities............................................................... 170,185 147,783
Long-term debt, less current maturities................................................. 109,493 156,185
Deferred income taxes................................................................... 25,539 38,661
Other deferred items.................................................................... 13,703 13,877
Commitments and contingencies
Shareholders' equity:
Preferred stock: authorized 10,000,000 shares; none issued......................... -- --
Common stock, without par value: Authorized 30,000,000 shares; issued
11,798,852 -- 1997; 11,793,852 -- 1996............................................ 38,353 38,309
Additional paid-in capital......................................................... 15,667 15,625
Treasury stock: 185,000 shares -- 1997; 185,000 shares -- 1996..................... (1,760) (1,760)
Retained earnings.................................................................. 7,152 31,420
Deferred compensation -- ESOP...................................................... (1,600) (2,133)
--------- ---------
57,812 81,461
--------- ---------
Total Liabilities and Shareholders' Equity.................................... $ 376,732 $ 437,967
--------- ---------
--------- ---------
</TABLE>
See accompanying notes.
F-17
<PAGE>
<PAGE>
AMTRAN, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30,
----------------------------------------------------------
1997 1996
--------------------------- ---------------------------
(UNAUDITED)
<S> <C> <C>
Operating revenues:
Charter..................................... $ 93,019 $ 73,025
Scheduled service........................... 87,253 105,666
Ground package.............................. 5,171 5,614
Other....................................... 6,744 11,090
----------- -----------
Total operating revenues............... 192,187 195,395
----------- -----------
Operating expenses:
Salaries, wages and benefits................ 43,917 41,560
Fuel and oil................................ 36,399 39,522
Handling, landing and navigation fees....... 17,214 16,576
Depreciation and amortization............... 15,296 15,144
Aircraft rentals............................ 14,137 17,271
Aircraft maintenance, materials and
repairs................................... 13,840 14,259
Crew and other employee travel.............. 9,386 9,455
Passenger service........................... 7,588 7,699
Commissions................................. 6,655 7,586
Ground package cost......................... 4,279 4,663
Other selling expenses...................... 3,595 4,577
Advertising................................. 3,144 3,295
Facility and other rentals.................. 2,232 2,383
Other operating expenses.................... 13,484 14,331
----------- -----------
Total operating expenses............... 191,166 198,321
----------- -----------
Operating income (loss).......................... 1,021 (2,926)
Other income (expense):
Interest income............................. 79 65
Interest (expense).......................... (1,708) (819)
Other....................................... 128 106
----------- -----------
Other expenses................................... (1,501) (648)
----------- -----------
Income (loss) before income taxes................ (480) (3,574)
Income taxes (credits)........................... 269 (1,289)
----------- -----------
Net income (loss)................................ $ (749) $ (2,285)
----------- -----------
----------- -----------
Net income (loss) per share...................... $ (0.06) $ (0.20)
----------- -----------
----------- -----------
Average shares outstanding....................... 11,575,653 11,493,757
<CAPTION>
SIX MONTHS ENDED JUNE 30,
------------------------------------------------------
1997 1996
------------------------- -------------------------
(UNAUDITED)
<S> <C> <C>
Operating revenues:
Charter..................................... $ 193,365 $ 156,230
Scheduled service........................... 169,257 216,119
Ground package.............................. 11,025 12,862
Other....................................... 12,824 17,319
----------- -----------
Total operating revenues............... 386,471 402,530
----------- -----------
Operating expenses:
Salaries, wages and benefits................ 84,407 81,906
Fuel and oil................................ 77,070 80,671
Handling, landing and navigation fees....... 34,462 36,347
Depreciation and amortization............... 29,436 30,705
Aircraft rentals............................ 28,284 34,396
Aircraft maintenance, materials and
repairs................................... 24,925 27,883
Crew and other employee travel.............. 17,306 17,243
Passenger service........................... 15,774 16,914
Commissions................................. 12,589 14,964
Ground package cost......................... 9,494 10,091
Other selling expenses...................... 6,794 10,155
Advertising................................. 6,658 5,822
Facility and other rentals.................. 4,351 4,428
Other operating expenses.................... 26,172 28,500
----------- -----------
Total operating expenses............... 377,722 400,025
----------- -----------
Operating income (loss).......................... 8,749 2,505
Other income (expense):
Interest income............................. 225 268
Interest (expense).......................... (3,320) (2,177)
Other....................................... 183 192
----------- -----------
Other expenses................................... (2,912) (1,717)
----------- -----------
Income (loss) before income taxes................ 5,837 788
Income taxes (credits)........................... 3,364 720
----------- -----------
Net income (loss)................................ $ 2,473 $ 68
----------- -----------
----------- -----------
Net income (loss) per share...................... $ 0.21 $ 0.01
----------- -----------
----------- -----------
Average shares outstanding....................... 11,573,761 11,492,941
</TABLE>
See accompanying notes.
F-18
<PAGE>
<PAGE>
AMTRAN, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
-------------------------
1997
-------------------------
(UNAUDITED)
<S> <C>
Operating activities:
Net income.................................................................... $ 2,473
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization............................................ 29,436
Deferred income taxes.................................................... 5,323
Other non-cash items..................................................... 2,312
Changes in operating assets and liabilities:
Receivables................................................................... (3,007)
Inventories................................................................... (1,627)
Assets held for sale.......................................................... 273
Prepaid expenses.............................................................. (3,695)
Accounts payable.............................................................. (5,656)
Air traffic liabilities....................................................... 7,889
Accrued expenses.............................................................. 4,328
-----------
Net cash provided by operating activities........................... 38,049
-----------
Investing activities:
Proceeds from sales of property and equipment................................. 391
Capital expenditures.......................................................... (36,720)
Reductions of (additions to) other assets..................................... (4,369)
-----------
Net cash used in investing activities............................... (40,698)
-----------
Financing activities:
Proceeds from long-term debt.................................................. --
Payments on long-term debt.................................................... (5,337)
Purchase of treasury stock.................................................... --
-----------
Net cash provided by (used in) financing activities................. (5,337)
-----------
Decrease in cash and cash equivalents.............................................. (7,986)
Cash and cash equivalents, beginning of period..................................... 73,382
-----------
Cash and cash equivalents, end of period........................................... $ 65,396
-----------
-----------
Supplemental disclosures:
Cash payments (refunds) for:
Interest................................................................. $ 3,656
Income taxes............................................................. (320)
Financing and investing activities not affecting cash:
Issuance of long-term debt directly for capital expenditures............. $ --
<CAPTION>
1996
-------------------------
<S> <C>
Operating activities:
Net income.................................................................... $ 68
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization............................................ 30,705
Deferred income taxes.................................................... 712
Other non-cash items..................................................... 2,153
Changes in operating assets and liabilities:
Receivables................................................................... (176)
Inventories................................................................... (1,251)
Assets held for sale.......................................................... --
Prepaid expenses.............................................................. 1,457
Accounts payable.............................................................. (579)
Air traffic liabilities....................................................... 499
Accrued expenses.............................................................. 2,022
-----------
Net cash provided by operating activities........................... 35,610
-----------
Investing activities:
Proceeds from sales of property and equipment.................................. 14,957
Capital expenditures.......................................................... (60,294)
Reductions of (additions to) other assets..................................... 2,478
-----------
Net cash used in investing activities............................... (42,859)
-----------
Financing activities:
Proceeds from long-term debt.................................................. 11,786
Payments on long-term debt.................................................... (10,478)
Purchase of treasury stock.................................................... (179)
-----------
Net cash provided by (used in) financing activities................. 1,129
-----------
Decrease in cash and cash equivalents.............................................. (6,120)
Cash and cash equivalents, beginning of period..................................... 92,741
-----------
Cash and cash equivalents, end of period........................................... $ 86,621
-----------
-----------
Supplemental disclosures:
Cash payments (refunds) for:
Interest................................................................. $ 1,907
Income taxes............................................................. 384
Financing and investing activities not affecting cash:
Issuance of long-term debt directly for capital expenditures............. $ 18,400
</TABLE>
See accompanying notes.
F-19
<PAGE>
<PAGE>
AMTRAN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying interim consolidated financial statements of Amtran, Inc.
and subsidiaries (the 'Company') have been prepared in accordance with
instructions for reporting interim financial information on Form 10-Q and,
therefore, do not include all information and footnotes necessary for a fair
presentation of financial position, results of operations and cash flows in
conformity with generally accepted accounting principles.
The consolidated financial statements for the quarters ended June 30, 1997
and 1996 reflect, in the opinion of management, all adjustments (which include
only normal recurring adjustments) necessary to present fairly the financial
position, results of operations and cash flows for such periods. Results for the
six months ended June 30, 1997, are not necessarily indicative of results to be
expected for the full fiscal year ending December 31, 1997. For further
information, refer to the consolidated financial statements and footnotes
thereto included in the Company's Annual Report on Form 10-K/A for the year
ended December 31, 1996.
2. ACCOUNTING PRONOUNCEMENTS PENDING ADOPTION
In February 1997, the Financial Accounting Standards Board ('FASB') issued
Statement 128, 'Earnings Per Share,' which establishes new standards for the
calculation of earnings per share effective for interim and annual periods
ending after December 15, 1997. Subsequent to this effective date, all prior
period earnings per share amounts disclosed in financial statements are required
to be restated to conform to the new standards under Statement 128. Due to the
small number of dilutive common stock equivalents currently included in earnings
per share calculations, the Company does not currently expect that the impact
from restatement of prior period earnings per share will be material.
3. SUBSEQUENT DEBT TRANSACTIONS
On July 24, 1997, the Company completed two separate financings designed to
lengthen the maturity of the Company's long-term debt and diversify its credit
sources. On that date the Company (i) sold $100.0 million principal amount of
10.5% unsecured seven year notes in a private offering under rule 144A, and (ii)
entered into a new $50.0 million secured revolving credit facility. The net
proceeds of the unsecured notes were approximately $97.0 million, after
application of costs and fees of issuance. The Company used a portion of the net
proceeds to repay in full the Company's prior bank facility and will use the
balance of the proceeds for general corporate purposes, which may include the
purchase of additional aircraft and/or the refinancing of existing leased
aircraft.
F-20
<PAGE>
<PAGE>
_____________________________ _____________________________
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THE OFFER
CONTAINED HEREIN OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL
OR THE SOLICITATION OF AN OFFER TO BUY TO ANY PERSON IN ANY JURISDICTION IN
WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING
SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT
IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE AN
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE
THE DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY
TIME SUBSEQUENT TO THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Incorporation of Certain Documents by Reference............................................................................ 3
Available Information...................................................................................................... 3
Disclosure Regarding Forward-Looking Statements............................................................................ 4
Prospectus Summary......................................................................................................... 5
Risk Factors............................................................................................................... 16
The Exchange Offer......................................................................................................... 26
Use of Proceeds............................................................................................................ 33
Capitalization............................................................................................................. 34
Selected Consolidated Financial Data....................................................................................... 35
Management's Discussion and Analysis of Financial Condition and Results of Operations...................................... 37
Business................................................................................................................... 64
Management................................................................................................................. 77
Principal Shareholders..................................................................................................... 79
Certain Related Party Transactions......................................................................................... 79
Description of the New Credit Facility..................................................................................... 80
Description of the Notes................................................................................................... 81
Registration Rights Agreement for Outstanding Notes........................................................................ 106
Certain United States Federal Income Tax Considerations.................................................................... 107
Plan of Distribution....................................................................................................... 110
Legal Proceedings.......................................................................................................... 110
Legal Matters.............................................................................................................. 111
Experts.................................................................................................................... 111
Listing Information........................................................................................................ 111
Index to Consolidated Financial Statements................................................................................. F-1
</TABLE>
$100,000,000
[LOGO]
AMTRAN, INC.
10 1/2% SENIOR EXCHANGE
NOTES DUE 2004
---------------------
PROSPECTUS
---------------------
, 1997
_____________________________ _____________________________
<PAGE>
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Information relating to indemnification of directors and officers is
incorporated by reference herein from Item 14 of the Company's Registration
Statement on Form S-1 (No. 33-59630).
ITEM 21. EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------ ------------------------------------------------------------------------------------------------------
<C> <S>
*3.1 -- Restated Articles of Incorporation of the Company.
*3.2 -- By-laws of the Company.
4.1 -- Indenture, dated as of July 24, 1997, between the Company, the Guarantors and First Security Bank,
N.A., as trustee.
4.2 -- Form of 10 1/2% Senior Exchange Note due 2004 (included in Exhibit 4.1).
4.3 -- Placement Agreement, dated July 17, 1997, between the Company, the Guarantors and Morgan Stanley &
Co. Incorporated and Salomon Brothers Inc.
4.4 -- Registration Rights Agreement, dated July 24, 1997, between the Company, the Guarantors and Morgan
Stanley & Co. Incorporated and Salomon Brothers Inc.
**5.1 -- Opinion of Brian T. Hunt, General Counsel of the Company.
**5.2 -- Opinion of Cravath, Swaine & Moore
**10.1 -- Credit Agreement, dated July 24, 1997, among ATA, the Company, NBD Bank, N.A., as agent, and the
banks party thereto.
**10.2 -- Guarantee Agreement, dated July 24, 1997, among the Company, Ambassadair Travel Club, Inc., ATA
Vacations, Inc., Amber Travel, Inc., American Trans Air Training Corporation, American Trans Air
ExecuJet, Inc., Amber Air Freight Corporation and the lenders party thereto.
**10.3 -- Security Agreement, dated July 24, 1997, between ATA and NBD Bank, N.A. as agent.
12.1 -- Statements re computation of ratios.
23.1 -- Consent of Ernst & Young LLP.
**23.2 -- Consent of Brian T. Hunt, General Counsel of the Company (included in Exhibit 5.1).
**23.3 -- Consent of Cravath, Swaine & Moore (included in Exhibit 5.2).
24.1 -- Powers of Attorney (contained on signature page).
25.1 -- Statement of Eligibility under the Trust Indenture Act of 1939, as amended, of First Security Bank,
N.A. on Form T-1.
99.1 -- Form of Letter of Transmittal.
99.2 -- Form of Notice of Guaranteed Delivery.
99.3 -- Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees.
99.4 -- Form of Letter to Clients.
</TABLE>
- ------------
* Previously filed as an exhibit to the Company's Registration Statement on
Form S-1 (File No. 33-59630), and incorporated herein by reference.
** To be filed by amendment.
ITEM 22. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes to deliver or cause
to be delivered with the prospectus, to each person to whom the prospectus
is sent or given, the latest annual report to security holders that is
incorporated by reference in the prospectus and furnished pursuant to and
meeting the requirements of Rule 14a-3 or Rule 14c-3 under the Securities
Exchange Act of 1934; and, where interim financial information required to
be presented by Article 3 of Regulation S-X are not set forth in the
prospectus, to deliver, or cause to be delivered to each person to whom the
prospectus is sent or given, the latest quarterly report that is
specifically incorporated by reference in the prospectus to provide such
interim financial information.
II-1
<PAGE>
<PAGE>
(b) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or
otherwise, the registrant has been advised that in the opinion of the
Commission such indemnification is against public policy as expressed in
the Securities Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment
by the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
(c) 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 document 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.
(d) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-2
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Indianapolis, State of
Indiana, on this 30th day of September, 1997.
AMTRAN, INC.
By /s/ J. GEORGE MIKELSONS
-----------------------
J. GEORGE MIKELSONS
CHAIRMAN OF THE BOARD OF DIRECTORS
Each person whose signature appears below appoints J. George Mikelsons, as
his true and lawful attorney-in-fact and agent, with full power of substitution
and resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments (including post-effective amendments)
to this Registration Statement, and to file the same, with all exhibits thereto
and all other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorney-in-fact and agent full power
and authority to do and perform each and every act and anything appropriate or
necessary to be done, as fully and for all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent or his substitute or substitutes may lawfully do or
cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLES DATES
- ------------------------------------------ -------------------------------------------- -------------------
<C> <S> <C>
/s/ J. GEORGE MIKELSONS Chairman of the Board of Directors September 30, 1997
- ------------------------------------------
(J. GEORGE MIKELSONS)
/s/ JOHN P. TAGUE President and Chief Executive Officer and September 30, 1997
- ------------------------------------------ Director
(JOHN P. TAGUE)
/s/ JAMES W. HLAVACEK Executive Vice President and Chief Operating September 30, 1997
- ------------------------------------------ Officer and Director
(JAMES W. HLAVACEK)
/s/ KENNETH K. WOLFF Executive Vice President and Chief Financial September 30, 1997
- ------------------------------------------ Officer and Director
(KENNETH K. WOLFF)
/s/ DALEN D. THOMAS Senior Vice President, Sales, Marketing and September 30, 1997
- ------------------------------------------ Strategic Planning and Director
(DALEN D. THOMAS)
Director , 1997
- ------------------------------------------
(ROBERT A. ABEL)
/s/ WILLIAM P. ROGERS, JR. Director October 3, 1997
- ------------------------------------------
(WILLIAM P. ROGERS, JR.)
Director , 1997
- ------------------------------------------
(ANDREJS P. STIPNIEKS)
</TABLE>
II-3
<PAGE>
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
------ ----------------------------------------------------------------------------------------------- ----
<C> <S> <C>
*3.1 -- Restated Articles of Incorporation of the Company...........................................
*3.2 -- By-laws of the Company......................................................................
4.1 -- Indenture, dated as of July 24, 1997, between the Company, the Guarantors and First Security
Bank, N.A., as trustee......................................................................
4.2 -- Form of 10 1/2% Senior Exchange Note due 2004 (included in Exhibit 4.1).....................
4.3 -- Placement Agreement, dated July 17, 1997, between the Company, the Guarantors and Morgan
Stanley & Co. Incorporated and Salomon Brothers Inc.........................................
4.4 -- Registration Rights Agreement, dated July 24, 1997, between the Company, the Guarantors and
Morgan Stanley & Co. Incorporated and Salomon Brothers Inc..................................
**5.1 -- Opinion of Brian T. Hunt, General Counsel of the Company....................................
**5.2 -- Opinion of Cravath, Swaine & Moore..........................................................
**10.1 -- Credit Agreement, dated July 24, 1997, among ATA, the Company, NBD Bank, N.A., as agent, and
the banks party thereto.....................................................................
**10.2 -- Guarantee Agreement, dated July 24, 1997, among the Company, Ambassadair Travel Club, Inc.,
ATA Vacations, Inc., Amber Travel, Inc., American Trans Air Training Corporation, American
Trans Air ExecuJet, Inc., Amber Air Freight Corporation and the lenders party thereto.......
**10.3 -- Security Agreement, dated July 24, 1997, between ATA and NBD Bank, N.A. as agent............
12.1 -- Statements re computation of ratios.........................................................
23.1 -- Consent of Ernst & Young LLP................................................................
**23.2 -- Consent of Brian T. Hunt, General Counsel of the Company (included in Exhibit 5.1)..........
**23.3 -- Consent of Cravath, Swaine & Moore (included in Exhibit 5.2)................................
24.1 -- Powers of Attorney (contained on signature page)............................................
25.1 -- Statement of Eligibility under the Trust Indenture Act of 1939, as amended, of First
Security Bank, N.A. on Form T-1.............................................................
99.1 -- Form of Letter of Transmittal...............................................................
99.2 -- Form of Notice of Guaranteed Delivery.......................................................
99.3 -- Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees....
99.4 -- Form of Letter to Clients...................................................................
</TABLE>
- ------------
* Previously filed as an exhibit to the Company's Registration Statement on
Form S-1 (File No. 33-59630), and incorporated herein by reference.
** To be filed by amendment.
STATEMENT OF DIFFERENCES
------------------------
The section symbol shall be expressed as ....................... 'SS'
The cent symbol shall be expressed as .......................... [c]
<PAGE>
<PAGE>
============================
AMTRAN, INC.,
as Issuer
and
THE GUARANTORS NAMED HEREIN,
as Guarantors
and
FIRST SECURITY BANK, N.A.,
as Trustee
-------------
Indenture
Dated as of July 24, 1997
-------------
10 1/2% Senior Notes due 2004
============================
<PAGE>
<PAGE>
CROSS-REFERENCE TABLE
TIA Sections Indenture Sections
- ------------ ------------------
'SS' 310(a)(1) ..................................... 7.09
(a)(2) ..................................... 7.09
(b) ........................................ 7.02; 7.07
'SS' 311(a) ........................................ 7.02
(b) ........................................ 7.02
'SS' 312(a) ........................................ 2.03
'SS' 313(a) ........................................ 7.05
(c) ........................................ 7.04; 7.05; 11.02
(d) ........................................ 7.05
'SS' 314(a) ........................................ 4.17; 7.04; 11.02
(a)(4) ..................................... 4.16; 11.02
(c)(1) ..................................... 11.03
(c)(2) ..................................... 11.03
(e) ........................................ 4.16; 11.04
'SS' 315(a) ........................................ 7.01
(b) ........................................ 7.04; 11.02
(c) ........................................ 7.01
(d) ........................................ 7.01
(e) ........................................ 6.11
'SS' 316(a)(1)(A) .................................. 6.05
(a)(1)(B) .................................. 6.04
(b) ........................................ 6.07
(c) ........................................ 9.03
'SS' 317(a)(1) ..................................... 6.08
(a)(2) ..................................... 6.09
(b) ........................................ 2.04
'SS' 318(a) ........................................ 11.01
(c) ........................................ 11.01
Note: The Cross-Reference Table shall not for any purpose be deemed to be a
part of the Indenture.
<PAGE>
<PAGE>
TABLE OF CONTENTS*
<TABLE>
<CAPTION>
Page
----
<S> <C>
RECITALS OF THE COMPANY................................................................................ 1
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions............................................................................. 1
SECTION 1.02. Incorporation by Reference of Trust Indenture Act....................................... 20
SECTION 1.03. Rules of Construction................................................................... 21
ARTICLE TWO
THE NOTES
SECTION 2.01. Form and Dating......................................................................... 22
SECTION 2.02. Restrictive Legends..................................................................... 23
SECTION 2.03. Execution, Authentication and Denominations............................................. 25
SECTION 2.04. Registrar and Paying Agent.............................................................. 25
SECTION 2.05. Paying Agent to Hold Money in Trust..................................................... 26
SECTION 2.06. Transfer and Exchange................................................................... 27
SECTION 2.07. Book-Entry Provisions for Global Notes.................................................. 28
SECTION 2.08. Special Transfer Provisions............................................................. 29
SECTION 2.09. Replacement Notes....................................................................... 32
SECTION 2.10. Outstanding Notes....................................................................... 33
SECTION 2.11. Temporary Notes......................................................................... 34
SECTION 2.12. Cancellation............................................................................ 34
SECTION 2.13. CUSIP Numbers........................................................................... 34
SECTION 2.14. Defaulted Interest...................................................................... 34
SECTION 2.15. Issuance of Additional Notes............................................................ 35
ARTICLE THREE
REDEMPTION
SECTION 3.01. Right of Redemption..................................................................... 35
SECTION 3.02. Notices to Trustee...................................................................... 36
SECTION 3.03. Selection of Notes to Be Redeemed....................................................... 36
- --------
</TABLE>
* Note: The Table of Contents shall not for any purposes be deemed to be a
part of the Indenture.
i
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 3.04. Notice of Redemption.................................................................... 36
SECTION 3.05. Effect of Notice of Redemption.......................................................... 37
SECTION 3.06. Deposit of Redemption Price............................................................. 38
SECTION 3.07. Payment of Notes Called for Redemption.................................................. 38
SECTION 3.08. Notes Redeemed in Part.................................................................. 38
ARTICLE FOUR
COVENANTS
SECTION 4.01. Payment of Notes........................................................................ 38
SECTION 4.02. Maintenance of Office or Agency......................................................... 39
SECTION 4.03. Limitation on Indebtedness.............................................................. 39
SECTION 4.04. Limitation on Restricted Payments....................................................... 41
SECTION 4.05. Limitation on Dividend and Other Payment Restrictions
Affecting Restricted Subsidiaries.................................................... 44
SECTION 4.06. Limitation on the Issuance and Sale of Capital Stock of
Restricted Subsidiaries.............................................................. 45
SECTION 4.07. Limitation on Issuances of Guarantees by Restricted
Subsidiaries......................................................................... 45
SECTION 4.08. Limitation on Transactions with Shareholders and Affiliates............................. 46
SECTION 4.09. Limitation on Liens..................................................................... 46
SECTION 4.10. Limitation on Sale-Leaseback Transactions............................................... 47
SECTION 4.11. Limitation on Asset Sales............................................................... 47
SECTION 4.12. Repurchase of Notes upon a Change of Control............................................ 49
SECTION 4.13. Existence............................................................................... 49
SECTION 4.14. Payment of Taxes and Other Claims....................................................... 49
SECTION 4.15. Maintenance of Properties and Insurance................................................. 49
SECTION 4.16. Compliance Certificates................................................................. 50
SECTION 4.17. Commission Reports and Reports to Holders............................................... 50
SECTION 4.18. Waiver of Stay, Extension or Usury Laws................................................. 50
ARTICLE FIVE
SUCCESSOR CORPORATION
SECTION 5.01. When Company May Merge, Etc............................................................. 51
SECTION 5.02. Successor Substituted................................................................... 52
</TABLE>
ii
<PAGE>
<PAGE>
ARTICLE SIX
DEFAULT AND REMEDIES
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 6.01. Events of Default....................................................................... 52
SECTION 6.02. Acceleration............................................................................ 54
SECTION 6.03. Other Remedies.......................................................................... 55
SECTION 6.04. Waiver of Past Defaults................................................................. 55
SECTION 6.05. Control by Majority..................................................................... 55
SECTION 6.06. Limitation on Suits..................................................................... 55
SECTION 6.07. Rights of Holders to Receive Payment.................................................... 56
SECTION 6.08. Collection Suit by Trustee.............................................................. 56
SECTION 6.09. Trustee May File Proofs of Claim........................................................ 56
SECTION 6.10. Priorities.............................................................................. 57
SECTION 6.11. Undertaking for Costs................................................................... 57
SECTION 6.12. Restoration of Rights and Remedies...................................................... 58
SECTION 6.13. Rights and Remedies Cumulative.......................................................... 58
SECTION 6.14. Delay or Omission Not Waiver............................................................ 58
ARTICLE SEVEN
TRUSTEE
SECTION 7.01. Rights and Duties of Trustee............................................................ 58
SECTION 7.02. Individual Rights of Trustee............................................................ 61
SECTION 7.03. Trustee's Disclaimer.................................................................... 61
SECTION 7.04. Notice of Default....................................................................... 61
SECTION 7.05. Reports by Trustee to Holders........................................................... 62
SECTION 7.06. Compensation and Indemnity.............................................................. 62
SECTION 7.07. Replacement of Trustee.................................................................. 63
SECTION 7.08. Successor Trustee by Merger, Etc........................................................ 64
SECTION 7.09. Eligibility; Disqualification........................................................... 64
SECTION 7.10. Money Held in Trust..................................................................... 64
SECTION 7.11. Preferential Collection of Claims Against Company....................................... 64
ARTICLE EIGHT
DISCHARGE OF INDENTURE
SECTION 8.01. Termination of Company's Obligations.................................................... 65
SECTION 8.02. Defeasance and Discharge of Indenture................................................... 66
SECTION 8.03. Defeasance of Certain Obligations....................................................... 68
SECTION 8.04. Application of Trust Money.............................................................. 69
SECTION 8.05. Repayment to Company.................................................................... 69
SECTION 8.06. Reinstatement........................................................................... 70
iii
<PAGE>
<PAGE>
ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS
</TABLE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 9.01. Without Consent of Holders.............................................................. 70
SECTION 9.02. With Consent of Holders................................................................. 71
SECTION 9.03. Revocation and Effect of Consent........................................................ 72
SECTION 9.04. Notation on or Exchange of Notes........................................................ 72
SECTION 9.05. Trustee to Sign Amendments, Etc......................................................... 73
SECTION 9.06. Conformity with Trust Indenture Act..................................................... 73
ARTICLE TEN
GUARANTEE OF NOTES
SECTION 10.01. Note Guarantee......................................................................... 73
SECTION 10.02. Obligations Unconditional.............................................................. 75
SECTION 10.03. Notice to Trustee...................................................................... 75
SECTION 10.04. This Article Not to Prevent Events of Default.......................................... 75
SECTION 10.05. Net Worth Limitation................................................................... 75
ARTICLE ELEVEN
MISCELLANEOUS
SECTION 11.01. Trust Indenture Act of 1939............................................................ 76
SECTION 11.02. Notices................................................................................ 76
SECTION 11.03. Certificate and Opinion As to Conditions Precedent..................................... 77
SECTION 11.04. Statements Required in Certificate or Opinion.......................................... 77
SECTION 11.05. Acts of Holders........................................................................ 78
SECTION 11.06. Rules by Trustee, Paying Agent or Registrar............................................ 79
SECTION 11.07. Payment Date Other Than a Business Day................................................. 79
SECTION 11.08. Governing Law.......................................................................... 79
SECTION 11.09. No Adverse Interpretation of Other Agreements.......................................... 79
SECTION 11.10. No Recourse Against Others............................................................. 79
SECTION 11.11. Successors............................................................................. 80
SECTION 11.12. Duplicate Originals.................................................................... 80
SECTION 11.13. Separability........................................................................... 80
SECTION 11.14. Table of Contents, Headings, Etc....................................................... 80
ARTICLE TWELVE
MEETINGS OF HOLDERS
SECTION 12.01. Purposes for Which Meetings May Be Called.............................................. 80
SECTION 12.02. Manner of Calling Meetings............................................................. 81
iv
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SECTION 12.03. Call of Meetings by the Company or Holders............................................. 81
SECTION 12.04. Who May Attend and Vote at Meetings.................................................... 81
SECTION 12.05. Quorum; Action......................................................................... 81
SECTION 12.06. Regulations May Be Made by Trustee; Conduct of the
Meeting; Voting Rights; Adjournment................................................. 82
SECTION 12.07. Voting at the Meeting and Record to Be Kept............................................ 83
SECTION 12.08. Exercise of Rights of Trustee or Holders May Not Be
Hindered or Delayed by Call of Meeting.............................................. 83
SECTION 12.09. Procedures Not Exclusive............................................................... 84
SIGNATURES
EXHIBIT A Form of Note
EXHIBIT B Form of Certificate
EXHIBIT C Form of Certificate to Be Delivered in Connection with Transfers to
Non-QIB Accredited Investors
EXHIBIT D Form of Certificate to Be Delivered in Connection with Transfers
Pursuant to Regulation S
v
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INDENTURE, dated as of July 24, 1997, among AMTRAN, INC., an Indiana
corporation, as issuer (the "Company"), American Trans Air, Inc., Ambassadair
Travel Club, Inc., ATA Vacations, Inc., Amber Travel, Inc., American Trans Air
Training Corporation, American Trans Air Execujet, Inc. and Amber Air Freight
Corporation (each, an Indiana corporation), as guarantors (together, the
"Guarantors"), and First Security Bank, N.A., a national banking association, as
trustee (the "Trustee").
RECITALS OF THE COMPANY
The Company has duly authorized the execution and delivery of this
Indenture to provide for the issuance of up to $100,000,000 aggregate principal
amount of the Company's 10 1/2% Senior Notes due 2004 (the "Notes"), issuable as
provided in this Indenture. Pursuant to the terms of the Placement Agreement
dated July 17, 1997 (the "Placement Agreement"), among the Company, the
Guarantors and Morgan Stanley & Co. Incorporated and Salomon Brothers Inc, as
the placement agents (the "Placement Agents"), the Company has agreed to issue
and sell, and the Placement Agents have agreed to purchase, the Notes. All
things necessary to make this Indenture a valid agreement of the Company and
each Guarantor, in accordance with its terms, have been done, and the Company
and each Guarantor have done all things necessary to make the Notes, when duly
executed and issued by the Company and authenticated and delivered by the
Trustee hereunder, the valid obligations of the Company as hereinafter provided.
This Indenture is subject to, and shall be governed by, the provisions
of the Trust Indenture Act of 1939, as amended, that are required to be a part
of and to govern indentures qualified under the Trust Indenture Act of 1939, as
amended.
AND THIS INDENTURE FURTHER WITNESSETH
For and in consideration of the premises and the purchase of the Notes
by the Holders thereof, it is mutually covenanted and agreed, for the equal and
proportionate benefit of all Holders, as follows:
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions.
"Acquired Indebtedness" means Indebtedness of a Person existing at the
time such Person becomes a Restricted Subsidiary or assumed in connection with
an Asset Acquisition by a Restricted Subsidiary and not Incurred in connection
with, or in anticipation of, such Person
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2
becoming a Restricted Subsidiary or such Asset Acquisition; provided that
Indebtedness of such Person which is redeemed, defeased, retired or otherwise
repaid at the time of or immediately upon consummation of the transactions by
which such Person becomes a Restricted Subsidiary or such Asset Acquisition
shall not be Acquired Indebtedness.
"Adjusted Consolidated Net Income" means, for any period, the
aggregate net income (or loss) of the Company and its Restricted Subsidiaries
for such period determined in conformity with GAAP; provided that the following
items shall be excluded in computing Adjusted Consolidated Net Income (without
duplication): (i) the net income of any Person that is not a Restricted
Subsidiary, except to the extent of the amount of dividends or other
distributions actually paid to the Company or any of its Restricted Subsidiaries
by such Person during such period; (ii) solely for the purposes of calculating
the amount of Restricted Payments that may be made pursuant to clause (C) of the
first paragraph of Section 4.04 (and in such case, except to the extent
includable pursuant to clause (i) above), the net income (or loss) of any Person
accrued prior to the date it becomes a Restricted Subsidiary or is merged into
or consolidated with the Company or any of its Restricted Subsidiaries or all or
substantially all of the property and assets of such Person are acquired by the
Company or any of its Restricted Subsidiaries; (iii) the net income of any
Restricted Subsidiary which is not a Guarantor to the extent that the
declaration or payment of dividends or similar distributions by such Restricted
Subsidiary of such net income is not at the time permitted by the operation of
the terms of its charter or any agreement, instrument, judgment, decree, order,
statute, rule or governmental regulation applicable to such Restricted
Subsidiary; (iv) any gains or losses (on an after-tax basis) attributable to
Asset Sales; (v) except for purposes of calculating the amount of Restricted
Payments that may be made pursuant to clause (C) of the first paragraph of
Section 4.04, any amount paid or accrued as dividends on Preferred Stock of the
Company or any Restricted Subsidiary owned by Persons other than the Company and
any of its Restricted Subsidiaries; and (vi) all extraordinary gains and
extraordinary losses.
"Adjusted Consolidated Net Tangible Assets" means the total amount of
assets of the Company and its Restricted Subsidiaries (less applicable
depreciation, amortization and other valuation reserves), except to the extent
resulting from write-ups of capital assets (excluding write-ups in connection
with accounting for acquisitions in conformity with GAAP), after deducting
therefrom (i) all current liabilities of the Company and its Restricted
Subsidiaries (excluding intercompany items) and (ii) all goodwill, trade names,
trademarks, patents, unamortized debt discount and expense and other like
intangibles, all as set forth on the most recent quarterly or annual
consolidated balance sheet of the Company and its Restricted Subsidiaries,
prepared in conformity with GAAP and filed with the Commission or provided to
the Trustee pursuant to Section 4.17.
"Affiliate" means, as applied to any Person, any other Person directly
or indirectly controlling, controlled by, or under direct or indirect common
control with, such Person. For
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3
purposes of this definition, "control" (including, with correlative meanings,
theterms "controlling," "controlled by" and "under common control with"), as
applied to any Person, means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of such
Person, whether through the ownership of voting securities, by contract or
otherwise.
"Agent" means any Registrar, Paying Agent, authenticating agent or
co-Registrar.
"Agent Members" has the meaning provided in Section 2.07(a).
"Asset Acquisition" means (i) an investment by the Company or any of
its Restricted Subsidiaries in any other Person pursuant to which such Person
shall become a Restricted Subsidiary or shall be merged into or consolidated
with the Company or any of its Restricted Subsidiaries; provided that such
Person's primary business is related, ancillary or complementary to the
businesses of the Company and its Restricted Subsidiaries on the date of such
investment or (ii) an acquisition by the Company or any of its Restricted
Subsidiaries of the property and assets of any Person other than the Company or
any of its Restricted Subsidiaries that constitute substantially all of a
division or line of business of such Person; provided that the property and
assets acquired are related, ancillary or complementary to the businesses of the
Company and its Restricted Subsidiaries on the date of such acquisition.
"Asset Disposition" means the sale or other disposition by the Company
or any of its Restricted Subsidiaries (other than to the Company or another
Restricted Subsidiary) of (i) all or substantially all of the Capital Stock of
any Restricted Subsidiary of the Company or (ii) all or substantially all of the
assets that constitute a division or line of business of the Company or any of
its Restricted Subsidiaries.
"Asset Sale" means any sale, transfer or other disposition (including
by way of merger, consolidation or sale-leaseback transaction) in one
transaction or a series of related transactions by the Company or any of its
Restricted Subsidiaries to any Person other than the Company or any of its
Restricted Subsidiaries of (i) all or any of the Capital Stock of any Restricted
Subsidiary (other than directors' qualifying shares), (ii) all or substantially
all of the property and assets of an operating unit or business of the Company
or any of its Restricted Subsidiaries or (iii) any other property and assets of
the Company or any of its Restricted Subsidiaries outside the ordinary course of
business of the Company or such Restricted Subsidiary and, in each case, that is
not governed by Article Five; provided that "Asset Sale" shall not include (a)
sales or other dispositions of inventory, receivables and other current assets,
(b) sales or other dispositions of assets for consideration at least equal to
the fair market value of the assets sold or disposed of, to the extent that the
consideration received would satisfy clause (B) of Section 4.11 or (c) sales or
other dispositions of assets in a single transaction or series of related
transactions
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4
having a fair market value, as determined in good faith by the Board of
Directors, of $2 million or less.
"ATA" means American Trans Air, Inc.
"Average Life" means, at any date of determination with respect to any
debt security, the quotient obtained by dividing (i) the sum of the products of
(a) the number of years from such date of determination to the dates of each
successive scheduled principal payment of such debt security and (b) the amount
of such principal payment by (ii) the sum of all such principal payments.
"Board of Directors" means the Board of Directors of the Company or
any committee of such Board of Directors duly authorized to act under this
Indenture.
"Board Resolution" means a copy of a resolution, certified by the
Secretary of the Company to have been duly adopted by the Board of Directors and
to be in full force and effect on the date of such certification, and delivered
to the Trustee.
"Business Day" means any day except a Saturday, Sunday or other day on
which commercial banks in The City of New York, or in the city of the Corporate
Trust Office of the Trustee, are authorized by law to close.
"Capital Stock" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated, whether
voting or non-voting) in equity of such Person, whether outstanding on the
Closing Date or issued thereafter, including, without limitation, all Common
Stock and Preferred Stock.
"Capitalized Lease" means, as applied to any Person, any lease of any
property (whether real, personal or mixed) of which the discounted present value
of the rental obligations of such Person as lessee, in conformity with GAAP, is
required to be capitalized on the balance sheet of such Person.
"Capitalized Lease Obligations" means the discounted present value of
the rental obligations under a Capitalized Lease.
"Change of Control" means such time as (i) (x) a "person" or "group"
(within the meaning of Sections 13(d) and 14(d)(2) of the Exchange Act) becomes
the ultimate "beneficial owner" (as defined in Rule 13d-3 under the Exchange
Act) of more than 35% of the total voting power of the Voting Stock of the
Company on a fully diluted basis and such ownership represents a greater
percentage of the total voting power of the Voting Stock of the Company, on a
fully diluted basis, than is held by the Existing Stockholders and their
Affiliates on such date and (y)
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5
immediately following the occurrence of the events specified in subsection (x),
there shall have occurred any downgrading, or notice shall have been given of
any intended or potential downgrading, in the rating accorded any of the
Company's securities or (ii) individuals who on the Closing Date constitute the
Board of Directors (together with any new directors whose election by the Board
of Directors or whose nomination by the Board of Directors for election by the
Company's stockholders was approved by a vote of at least two-thirds of the
members of the Board of Directors then in office who either were members of the
Board of Directors on the Closing Date or whose election or nomination for
election was previously so approved) cease for any reason to constitute a
majority of the members of the Board of Directors then in office.
"Closing Date" means the date on which the Notes are originally issued
under this Indenture.
"Commission" means the Securities and Exchange Commission, as from
time to time constituted, created under the Exchange Act or, if at any time
after the execution of this instrument such Commission is not existing and
performing the duties now assigned to it under the TIA, then the body performing
such duties at such time.
"Common Stock" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated, whether
voting or non-voting) of such Person's equity, other than Preferred Stock of
such Person, whether now outstanding or issued after the Closing Date, including
without limitation, all series and classes of such common stock.
"Company" means the party named as such in this Indenture until a
successor replaces it pursuant to Article Five of this Indenture and,
thereafter, means the successor.
"Company Order" means a written request or order signed in the name of
the Company (i) by its Chairman, a Vice Chairman, its President or a Vice
President and (ii) by its Treasurer, an Assistant Treasurer, its Secretary or an
Assistant Secretary and delivered to the Trustee; provided, however, that such
written request or order may be signed by any two of the Persons listed in
clause (i) above in lieu of being signed by one of such Persons listed in such
clause (i) and one of the officers listed in clause (ii) above.
"Consolidated EBITDA" means, for any period, Adjusted Consolidated Net
Income for such period plus, to the extent such amount was deducted in
calculating such Adjusted Consolidated Net Income, (i) Consolidated Interest
Expense, (ii) income taxes (other than income taxes (either positive or
negative) attributable to extraordinary and non-recurring gains or losses
arising out of sales of assets), (iii) depreciation expense, (iv) amortization
expense and (v) all other non-cash items reducing Adjusted Consolidated Net
Income (other than items that will require cash payments and for which an
accrual or reserve is, or is required by GAAP to be, made), less all non-cash
items increasing Adjusted Consolidated Net Income, all as determined
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6
on a consolidated basis for the Company and its Restricted Subsidiaries in
conformity with GAAP; provided that, if any Restricted Subsidiary is not a
Wholly Owned Restricted Subsidiary, Consolidated EBITDA shall be reduced (to the
extent not otherwise reduced in the calculation of Adjusted Consolidated Net
Income in accordance with GAAP) by an amount equal to (A) the amount of the
Adjusted Consolidated Net Income attributable to such Restricted Subsidiary
multiplied by (B) the quotient of (1) the number of shares of outstanding Common
Stock of such Restricted Subsidiary not owned on the last day of such period by
the Company or any of its Restricted Subsidiaries divided by (2) the total
number of shares of outstanding Common Stock of such Restricted Subsidiary on
the last day of such period.
"Consolidated Interest Expense" means, for any period, the aggregate
amount of interest in respect of Indebtedness (including, without limitation but
without duplication, amortization of original issue discount on any Indebtedness
and the interest portion of any deferred purchase price payment obligation,
calculated in accordance with the effective interest method of accounting; all
commissions, discounts and other fees and charges owed with respect to letters
of credit and bankers' acceptance financing; the net costs associated with
Interest Rate Agreements; and Indebtedness that is Guaranteed or secured by the
Company or any of its Restricted Subsidiaries) and the interest component of
rentals in respect of Capitalized Lease Obligations paid, accrued or scheduled
to be paid or to be accrued by the Company and its Restricted Subsidiaries
during such period; excluding, however, (i) any amount of such interest of any
Restricted Subsidiary if the net income of such Restricted Subsidiary is
excluded in the calculation of Adjusted Consolidated Net Income pursuant to
clause (iii) of the definition thereof (but only in the same proportion as the
net income of such Restricted Subsidiary is excluded from the calculation of
Adjusted Consolidated Net Income pursuant to clause (iii) of the definition
thereof), (ii) any premiums, fees and expenses (and any amortization thereof)
payable in connection with the offering of the Notes or the Credit Agreement,
all as determined on a consolidated basis (without taking into account
Unrestricted Subsidiaries) in conformity with GAAP, and (iii) any interest or
other financing costs associated with loans to students of the Company's
training academy, unless such costs are paid by the Company or any Restricted
Subsidiary.
"Consolidated Net Worth" means, at any date of determination,
stockholders' equity as set forth on the most recently available quarterly or
annual consolidated balance sheet of the Company and its Restricted Subsidiaries
(which shall be as of a date not more than 90 days prior to the date of such
computation, and which shall not take into account Unrestricted Subsidiaries),
less any amounts attributable to Disqualified Stock or any equity security
convertible into or exchangeable for Indebtedness, the cost of treasury stock
and the principal amount of any promissory notes receivable from the sale of the
Capital Stock of the Company or any of its Restricted Subsidiaries, each item to
be determined in conformity with GAAP (excluding the effects of foreign currency
exchange adjustments under Financial Accounting Standards Board Statement of
Financial Accounting Standards No. 52).
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7
"Corporate Trust Office" means the office of the Trustee at which the
corporate trust business of the Trustee shall, at any particular time, be
principally administered, which office is, at the date of this Indenture,
located at 79 South Main Street, Salt Lake City, Utah, 84111, Attention:
Corporate Trust Services.
"Credit Agreement" means the credit agreement among ATA, NBD Bank,
N.A., as agent, the lenders named therein, the Company and the other Guarantors,
as guarantors, together with all other loan or credit agreements entered into
from time to time with one or more banks or other institutional lenders and all
instruments and documents executed or delivered pursuant thereto, in each case
as such agreements, instruments or documents may be amended (including any
amendment and restatement thereof), supplemented, replaced or otherwise modified
from time to time in one or more successive transactions (including any such
transaction that changes the amount available, replaces the relevant agreement
or changes one or more lenders).
"Currency Agreement" means any foreign exchange contract, currency
swap agreement or other similar agreement or arrangement.
"Default" means any event that is, or after notice or passage of time
or both would be, an Event of Default.
"Depositary" means The Depository Trust Company, its nominees, and
their respective successors, until a successor Depositary shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Depositary" shall mean or include each Person who is then a Depositary
hereunder.
"Disqualified Stock" means any class or series of Capital Stock of any
Person that by its terms or otherwise is (i) required to be redeemed prior to
the Stated Maturity of the Notes, (ii) redeemable at the option of the holder of
such class or series of Capital Stock at any time prior to the Stated Maturity
of the Notes or (iii) convertible into or exchangeable for Capital Stock
referred to in clause (i) or (ii) above or Indebtedness having a scheduled
maturity prior to the Stated Maturity of the Notes; provided that any Capital
Stock that would not constitute Disqualified Stock but for provisions thereof
giving holders thereof the right to require such Person to repurchase or redeem
such Capital Stock upon the occurrence of an "asset sale" or "change of control"
occurring prior to the Stated Maturity of the Notes shall not constitute
Disqualified Stock if the "asset sale" or "change of control" provisions
applicable to such Capital Stock are no more favorable to the holders of such
Capital Stock than the provisions contained in Section 4.11 and Section 4.12 and
such Capital Stock specifically provides that such Person will not repurchase or
redeem any such stock pursuant to such provision prior to the Company's
repurchase of such Notes as are required to be repurchased pursuant to Section
4.11 and Section 4.12.
"Event of Default" has the meaning provided in Section 6.01.
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8
"Excess Proceeds" has the meaning provided in Section 4.11.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Notes" means any securities of the Company containing terms
identical to the Notes (except that such Exchange Notes shall be registered
under the Securities Act) that are issued and exchanged for the Notes pursuant
to the Registration Rights Agreement and this Indenture.
"Existing Stockholders" means J. George Mikelsons, his spouse, his
issue, any trust for any of the foregoing and any Affiliate of any of the
foregoing.
"Fair market value" means the price that would be paid in an
arm's-length transaction between an informed and willing seller under no
compulsion to sell and an informed and willing buyer under no compulsion to buy,
as determined in good faith by the Board of Directors, whose determination shall
be conclusive if evidenced by a Board Resolution.
"GAAP" means generally accepted accounting principles in the United
States of America as in effect as of the Closing Date, including, without
limitation, those set forth in the opinions and pronouncements of the Accounting
Principles Board of the American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting Standards Board or in
such other statements by such other entity as approved by a significant segment
of the accounting profession. All ratios and computations contained or referred
to herein (i) shall be computed in conformity with GAAP applied on a consistent
basis, except that calculations made for purposes of determining compliance with
the terms of this Indenture shall be made without giving effect to (A) the
amortization of any expenses incurred in connection with the offering of the
Notes and (B) except as otherwise provided, the amortization of any amounts
required or permitted by Accounting Principles Board Opinion Nos. 16 and 17 and
(ii) shall, insofar as they involve the treatment for financial reporting
purposes of amounts incurred with engine overhauls, reflect the accounting
policy of the Company as in effect as of the Closing Date.
"Global Notes" has the meaning provided in Section 2.01.
"Guarantee" means, without duplication, any obligation, contingent or
otherwise, of any Person directly or indirectly guaranteeing any Indebtedness of
any other Person and, without limiting the generality of the foregoing, any
obligation, direct or indirect, contingent or otherwise, of such Person (i) to
purchase or pay (or advance or supply funds for the purchase or payment of) such
Indebtedness of such other Person (whether arising by virtue of partnership
arrangements, or by agreements to keep-well, to purchase assets, goods,
securities or services (unless such purchase arrangements are on arm's-length
terms and are entered into in the ordinary course of business), to take-or-pay,
or to maintain financial statement conditions or otherwise) or
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9
(ii) entered into for purposes of assuring in any other manner the obligee of
such Indebtedness of the payment thereof or to protect such obligee against loss
in respect thereof (in whole or in part); provided that the term "Guarantee"
shall not include endorsements for collection or deposit in the ordinary course
of business. The term "Guarantee" used as a verb has a corresponding meaning.
"Guaranteed Indebtedness" has the meaning provided in Section 4.07.
"Guarantors" means American Trans Air, Inc., Ambassadair Travel Club,
Inc., ATA Vacations, Inc., Amber Travel, Inc., American Trans Air Training
Corporation, American Trans Air Execujet, Inc. and Amber Air Freight Corporation
(each, an Indiana corporation), until a successor replaces any Guarantor
pursuant to Article Five of this Indenture and thereafter means the successor of
such Guarantor.
"Holder" or "Noteholder" means the registered holder of any Note.
"Incur" means, with respect to any Indebtedness, to incur, create,
issue, assume, Guarantee or otherwise become liable for or with respect to, or
become responsible for, the payment of, contingently or otherwise, such
Indebtedness, including an "Incurrence" of Acquired Indebtedness; provided that
neither the accrual of interest nor the accretion of original issue discount
shall be considered an Incurrence of Indebtedness.
"Indebtedness" means, with respect to any Person at any date of
determination (without duplication), (i) all indebtedness of such Person for
borrowed money, (ii) all obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments, (iii) all obligations of such
Person in respect of letters of credit or other similar instruments (including
reimbursement obligations with respect thereto, but excluding obligations with
respect to letters of credit (including trade letters of credit) securing
obligations (other than obligations described in (i) or (ii) above or (v), (vi)
or (vii) below) entered into in the ordinary course of business of such Person
to the extent such letters of credit are not drawn upon or, if drawn upon, to
the extent such drawing is reimbursed no later than the third Business Day
following receipt by such Person of a demand for reimbursement), (iv) all
obligations of such Person to pay the deferred and unpaid purchase price of
property or services, which purchase price is due more than six months after the
date of placing such property in service or taking delivery and title thereto or
the completion of such services, except Trade Payables, (v) all Capitalized
Lease Obligations, (vi) all Indebtedness of other Persons secured by a Lien on
any asset of such Person, whether or not such Indebtedness is assumed by such
Person; provided that the amount of such Indebtedness shall be the lesser of (A)
the fair market value of such asset at such date of determination and (B) the
amount of such Indebtedness, (vii) all Indebtedness of other Persons Guaranteed
by such Person to the extent such Indebtedness is Guaranteed by such Person and
(viii) to the extent not otherwise included in this definition, obligations
under Currency Agreements and Interest Rate Agreements. The amount of
Indebtedness of any Person at any date shall be the outstanding balance at such
date of all
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10
unconditional obligations as described above and, with respect to contingent
obligations, the maximum liability upon the occurrence of the contingency giving
rise to the obligation, provided (A) that the amount outstanding at any time of
any Indebtedness issued with original issue discount is the face amount of such
Indebtedness less the remaining unamortized portion of the original issue
discount of such Indebtedness at the time of its issuance as determined in
conformity with GAAP, (B) that money borrowed and set aside at the time of the
Incurrence of any Indebtedness in order to prefund the payment of the interest
on such Indebtedness shall not be deemed to be "Indebtedness" and (C) that
Indebtedness shall not include any liability for federal, state, local or other
taxes.
"Indenture" means this Indenture as originally executed or as it may
be amended or supplemented from time to time by one or more indentures
supplemental to this Indenture entered into pursuant to the applicable
provisions of this Indenture.
"Institutional Accredited Investor" means an institution that is an
"accredited investor" as that term is defined in Rule 501(a)(1), (2), (3) or (7)
under the Securities Act.
"Interest Coverage Ratio" means, on any Transaction Date, the ratio of
(i) the aggregate amount of Consolidated EBITDA for the then most recent four
fiscal quarters prior to such Transaction Date for which reports have been filed
with the Commission (the "Four Quarter Period") to (ii) the aggregate
Consolidated Interest Expense during such Four Quarter Period. In making the
foregoing calculation, (A) pro forma effect shall be given to any Indebtedness
Incurred or repaid during the period (the "Reference Period") commencing on the
first day of the Four Quarter Period and ending on the Transaction Date (other
than Indebtedness Incurred or repaid under a revolving credit or similar
arrangement to the extent of the commitment thereunder (or under any predecessor
revolving credit or similar arrangement) in effect on the last day of such Four
Quarter Period unless any portion of such Indebtedness is projected, in the
reasonable judgment of the senior management of the Company, to remain
outstanding for a period in excess of 12 months from the date of the Incurrence
thereof), in each case as if such Indebtedness had been Incurred or repaid on
the first day of such Reference Period; (B) Consolidated Interest Expense
attributable to interest on any Indebtedness (whether existing or being
Incurred) computed on a pro forma basis and bearing a floating interest rate
shall be computed as if the rate in effect on the Transaction Date (taking into
account any Interest Rate Agreement applicable to such Indebtedness if such
Interest Rate Agreement has a remaining term in excess of 12 months or, if
shorter, at least equal to the remaining term of such Indebtedness) had been the
applicable rate for the entire period; (C) pro forma effect shall be given to
Asset Dispositions and Asset Acquisitions (including giving pro forma effect to
the application of proceeds of any Asset Disposition) that occur during such
Reference Period as if they had occurred and such proceeds had been applied on
the first day of such Reference Period; and (D) pro forma effect shall be given
to asset dispositions and asset acquisitions (including giving pro forma effect
to the application of proceeds of any asset disposition) that have been made by
any Person that has become a Restricted
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11
Subsidiary or has been merged with or into the Company or any Restricted
Subsidiary during such Reference Period and that would have constituted Asset
Dispositions or Asset Acquisitions had such transactions occurred when such
Person was a Restricted Subsidiary as if such asset dispositions or asset
acquisitions were Asset Dispositions or Asset Acquisitions that occurred on the
first day of such Reference Period; provided that to the extent that clause (C)
or (D) of this sentence requires that pro forma effect be given to an Asset
Acquisition or Asset Disposition, such pro forma calculation shall be based upon
the four full fiscal quarters immediately preceding the Transaction Date of the
Person, or division or line of business of the Person, that is acquired or
disposed for which financial information is available.
"Interest Payment Date" means each semiannual interest payment date on
February 1 and August 1 of each year, commencing February 1, 1998.
"Interest Rate Agreement" means any interest rate protection
agreement, interest rate future agreement, interest rate option agreement,
interest rate swap agreement, interest rate cap agreement, interest rate collar
agreement, interest rate hedge agreement, option or future contract or other
similar agreement or arrangement.
"Investment" in any Person means any direct or indirect advance, loan
or other extension of credit (including, without limitation, by way of Guarantee
or similar arrangement; but excluding advances to customers in the ordinary
course of business that are, in conformity with GAAP, recorded as accounts
receivable on the balance sheet of the Company or its Restricted Subsidiaries)
or capital contribution to (by means of any transfer of cash or other property
to others or any payment for property or services for the account or use of
others), or any purchase or acquisition of Capital Stock, bonds, notes,
debentures or other similar instruments issued by, such Person and shall include
(i) the designation of a Restricted Subsidiary as an Unrestricted Subsidiary and
(ii) the fair market value of the Capital Stock (or any other Investment), held
by the Company or any of its Restricted Subsidiaries, of (or in) any Person that
has ceased to be a Restricted Subsidiary, including without limitation, by
reason of any transaction permitted by clause (iii) of Section 4.06; provided
that the fair market value of the Investment remaining in any Person that has
ceased to be a Restricted Subsidiary shall not exceed the aggregate amount of
Investments previously made in such Person valued at the time such Investments
were made less the net reduction of such Investments. For purposes of the
definition of "Unrestricted Subsidiary" and Section 4.04, (i) "Investment" shall
include the fair market value of the assets (net of liabilities (other than
liabilities to the Company or any of its Restricted Subsidiaries)) of any
Restricted Subsidiary at the time that such Restricted Subsidiary is designated
an Unrestricted Subsidiary, (ii) the fair market value of the assets (net of
liabilities (other than liabilities to the Company or any of its Restricted
Subsidiaries)) of any Unrestricted Subsidiary at the time that such Unrestricted
Subsidiary is designated a Restricted Subsidiary shall be considered a reduction
in outstanding Investments and (iii) any property transferred to or from an
Unrestricted Subsidiary shall be valued at its fair market value at the time of
such transfer.
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12
"Lien" means any mortgage, pledge, security interest, encumbrance,
lien or charge of any kind (including, without limitation, any conditional sale
or other title retention agreement or lease in the nature thereof or any
agreement to give any security interest).
"Moody's" means Moody's Investors Service, Inc. and its successors.
"Net Cash Proceeds" means, (a) with respect to any Asset Sale, the
proceeds of such Asset Sale in the form of cash or cash equivalents, including
payments in respect of deferred payment obligations (to the extent corresponding
to the principal, but not interest, component thereof) when received in the form
of cash or cash equivalents (except to the extent such obligations are financed
or sold with recourse to the Company or any Restricted Subsidiary) and proceeds
from the conversion of other property received when converted to cash or cash
equivalents, net of (i) brokerage commissions and other fees and expenses
(including fees and expenses of counsel and investment bankers) related to such
Asset Sale, (ii) provisions for all taxes (whether or not such taxes will
actually be paid or are payable) as a result of such Asset Sale without regard
to the consolidated results of operations of the Company and its Restricted
Subsidiaries, taken as a whole, (iii) payments made to repay Indebtedness or any
other obligation outstanding at the time of such Asset Sale that either (A) is
secured by a Lien on the property or assets sold or (B) is required to be paid
as a result of such sale and (iv) appropriate amounts to be provided by the
Company or any Restricted Subsidiary as a reserve against any liabilities
associated with such Asset Sale, including, without limitation, pension and
other post-employment benefit liabilities, liabilities related to environmental
matters and liabilities under any indemnification obligations associated with
such Asset Sale, all as determined in conformity with GAAP and (b) with respect
to any issuance or sale of Capital Stock, the proceeds of such issuance or sale
in the form of cash or cash equivalents, including payments in respect of
deferred payment obligations (to the extent corresponding to the principal, but
not interest, component thereof) when received in the form of cash or cash
equivalents (except to the extent such obligations are financed or sold with
recourse to the Company or any Restricted Subsidiary) and proceeds from the
conversion of other property received when converted to cash or cash
equivalents, net of attorney's fees, accountants' fees, underwriters' or
placement agents' fees, discounts or commissions and brokerage, consultant and
other fees incurred in connection with such issuance or sale and net of taxes
paid or payable as a result thereof.
"Non-U.S. Person" means a person who is not a "U.S. person" (as
defined in Regulation S).
"Note Guarantee" means any Guarantee of the Notes by a Guarantor as
set forth in Article Ten.
"Note Register" has the meaning provided in Section 2.04.
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13
"Notes" means any of the securities, as defined in the first paragraph
of the recitals hereof, that are authenticated and delivered under this
Indenture. For all purposes of this Indenture, the term "Notes" shall include
the Notes initially issued on the Closing Date, any Exchange Notes to be issued
and exchanged for any Notes pursuant to the Registration Rights Agreement and
this Indenture and any other Notes issued after the Closing Date under this
Indenture. For purposes of this Indenture, all Notes shall vote together as one
series of Notes under this Indenture.
"Offer to Purchase" means an offer to purchase Notes by the Company
from the Holders commenced by mailing a notice to the Trustee and each Holder
stating: (i) the covenant pursuant to which the offer is being made and that all
Notes validly tendered will be accepted for payment on a pro rata basis; (ii)
the purchase price and the date of purchase (which shall be a Business Day no
earlier than 30 days nor later than 60 days from the date such notice is mailed)
(the "Payment Date"); (iii) that any Note not tendered will continue to accrue
interest pursuant to its terms; (iv) that, unless the Company defaults in the
payment of the purchase price, any Note accepted for payment pursuant to the
Offer to Purchase shall cease to accrue interest on and after the Payment Date;
(v) that Holders electing to have a Note purchased pursuant to the Offer to
Purchase will be required to surrender the Note, together with the form entitled
"Option of the Holder to Elect Purchase" on the reverse side of the Note
completed, to the Paying Agent at the address specified in the notice prior to
the close of business on the Business Day immediately preceding the Payment
Date; (vi) that Holders will be entitled to withdraw their election if the
Paying Agent receives, not later than the close of business on the third
Business Day immediately preceding the Payment Date, a telegram, facsimile
transmission or letter setting forth the name of such Holder, the principal
amount of Notes delivered for purchase and a statement that such Holder is
withdrawing his election to have such Notes purchased; (vii) that Holders whose
Notes are being purchased only in part will be issued new Notes equal in
principal amount to the unpurchased portion of the Notes surrendered; provided
that each Note purchased and each new Note issued shall be in a principal amount
of $1,000 or integral multiples thereof; and (viii) if more than 98% of the
outstanding principal amount of the Notes is tendered pursuant to an Offer to
Purchase, the Company shall have the right to redeem the balance of the Notes at
the purchase price specified in such Offer to Purchase, plus (without
duplication) accrued and unpaid interest, if any, to the Redemption Date on the
principal amount of the Notes to be redeemed. On the Payment Date, the Company
shall (i) accept for payment on a pro rata basis Notes or portions thereof
tendered pursuant to an Offer to Purchase; (ii) deposit with the Paying Agent
money sufficient to pay the purchase price of all Notes or portions thereof so
accepted; and (iii) deliver, or cause to be delivered, to the Trustee all Notes
or portions thereof so accepted together with an Officers' Certificate
specifying the Notes or portions thereof accepted for payment by the Company.
The Paying Agent shall promptly mail to the Holders of Notes so accepted payment
in an amount equal to the purchase price, and the Trustee shall promptly
authenticate and mail to such Holders a new Note equal in principal amount to
any unpurchased portion of the Note surrendered; provided that each Note
purchased and each new Note issued shall be in a principal
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14
amount of $1,000 or integral multiples thereof. The Company will publicly
announce the results of an Offer to Purchase as soon as practicable after the
Payment Date. The Trustee shall act as the Paying Agent for an Offer to
Purchase. The Company will comply with Rule 14e-1 under the Exchange Act and any
other securities laws and regulations thereunder to the extent such laws and
regulations are applicable, in the event that the Company is required to
repurchase Notes pursuant to an Offer to Purchase.
"Officer" means with respect to the Company or any Guarantor, the
Chairman of the Board, the President, any Vice President, the Chief Financial
Officer, the Treasurer or any Assistant Treasurer, or the Secretary or any
Assistant Secretary.
"Officers' Certificate" means a certificate signed by two Officers.
Each Officers' Certificate (other than certificates provided pursuant to TIA
Section 314(a)(4)) shall include the statements provided for in TIA Section
314(e).
"Offshore Global Note" has the meaning provided the Section 2.01.
"Offshore Physical Note" has the meaning provided the Section 2.01.
"Opinion of Counsel" means a written opinion signed by legal counsel
who may be an employee of or counsel to the Company or any Guarantor. Each such
Opinion of Counsel shall include the statements provided for in TIA Section
314(e). Opinions of Counsel required to be delivered may have qualifications
customary for opinions of the type required.
"Paying Agent" has the meaning provided in Section 2.04, except that,
for the purposes of Article Eight, the Paying Agent shall not be the Company or
a Subsidiary of the Company or an Affiliate of any of them. The term "Paying
Agent" includes any additional Paying Agent.
"Permitted Investment" means (i) an Investment in the Company or a
Restricted Subsidiary or a Person which will, upon the making of such
Investment, become a Restricted Subsidiary or be merged or consolidated with or
into or transfer or convey all or substantially all its assets to, the Company
or a Restricted Subsidiary; provided that such person's primary business is
related, ancillary or complementary to the businesses of the Company and its
Restricted Subsidiaries on the date of such Investment; (ii) Temporary Cash
Investments; (iii) payroll, travel and similar advances to cover matters that
are expected at the time of such advances ultimately to be treated as expenses
in accordance with GAAP; (iv) stock, obligations or securities received in
settlement or satisfaction of judgments or claims; (v) loans or advances to
employees in the ordinary course of business; and (vi) the non-cash portion of
the consideration received for any Asset Sale.
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15
"Permitted Liens" means (i) Liens for taxes, assessments, governmental
charges or claims that are being contested in good faith by appropriate legal
proceedings promptly instituted and diligently conducted and for which a reserve
or other appropriate provision, if any, as shall be required in conformity with
GAAP shall have been made; (ii) statutory and common law Liens of landlords and
carriers, warehousemen, mechanics, suppliers, materialmen, repairmen or other
similar Liens arising in the ordinary course of business and with respect to
amounts not yet delinquent or being contested in good faith by appropriate legal
proceedings promptly instituted and diligently conducted and for which a reserve
or other appropriate provision, if any, as shall be required in conformity with
GAAP shall have been made; (iii) Liens incurred or deposits made in the ordinary
course of business in connection with workers' compensation, unemployment
insurance and other types of social security; (iv) Liens incurred or deposits
made to secure the performance of tenders, bids, leases, statutory or regulatory
obligations, bankers' acceptances, surety and appeal bonds, government
contracts, performance and return-of-money bonds and other obligations of a
similar nature incurred in the ordinary course of business (exclusive of
obligations for the payment of borrowed money); (v) easements, rights-of-way,
municipal and zoning ordinances and similar charges, encumbrances, title defects
or other irregularities that do not materially interfere with the ordinary
course of business of the Company or any of its Restricted Subsidiaries; (vi)
Liens (including extensions and renewals thereof) upon real or personal property
acquired after the Closing Date; provided that (a) each such Lien is created
solely for the purpose of securing Indebtedness Incurred to finance the costs
(including transaction costs and the costs of improvement or construction) of
the item of property or assets subject thereto and such Lien is created prior
to, at the time of or within twelve months after, the later of the acquisition,
the completion of construction or the commencement of full operation of such
property or assets (b) the principal amount of the Indebtedness secured by such
Lien does not exceed 100% of such costs and (c) any such Lien shall not extend
to or cover any property or assets other than such item of property or assets
and any improvements on such item; (vii) Liens upon aircraft, engines and
buyer-furnished equipment attached thereto or incorporated therein other than as
permitted by the foregoing clause (vi); provided that, after giving effect
thereto and the Indebtedness secured thereby, the book value of assets of the
Company not subject to any Lien (other than Liens described in clauses (i)
through (v), (xiii) and (xvi) of the definition of "Permitted Liens") shall be
not less than $125 million; (viii) leases or subleases granted to others that do
not materially interfere with the ordinary course of business of the Company and
its Restricted Subsidiaries, taken as a whole; (ix) Liens encumbering property
or assets under construction arising from progress or partial payments by a
customer of the Company or its Restricted Subsidiaries relating to such property
or assets; (x) any interest or title of a lessor in the property subject to any
Capitalized Lease or operating lease; (xi) Liens arising from filing Uniform
Commercial Code financing statements regarding leases; (xii) Liens on property
of, or on shares of Capital Stock or Indebtedness of, any Person existing at the
time such Person becomes, or becomes a part of, any Restricted Subsidiary;
provided that such Liens do not extend to or cover any property or assets of the
Company or any Restricted Subsidiary other than the property or assets acquired;
(xiii) Liens with respect to the assets of a Restricted Subsidiary
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16
granted by such Restricted Subsidiary to the Company or a Wholly Owned
Restricted Subsidiary to secure Indebtedness owing to the Company or such other
Restricted Subsidiary; (xiv) Liens arising from the rendering of a final
judgment or order against the Company or any Restricted Subsidiary that does not
give rise to an Event of Default; (xv) Liens securing reimbursement obligations
with respect to letters of credit that encumber documents and other property
relating to such letters of credit and the products and proceeds thereof; (xvi)
Liens in favor of customs and revenue authorities arising as a matter of law to
secure payment of customs duties in connection with the importation of goods;
(xvii) Liens encumbering customary initial deposits and margin deposits, and
other Liens that are within the general parameters customary in the industry and
incurred in the ordinary course of business, in each case, securing Indebtedness
under Interest Rate Agreements and Currency Agreements and forward contracts,
options, future contracts, futures options or similar agreements or arrangements
designed solely to protect the Company or any of its Restricted Subsidiaries
from fluctuations in interest rates, currencies or the price of commodities;
(xviii) Liens arising out of conditional sale, title retention, consignment or
similar arrangements for the sale of goods entered into by the Company or any of
its Restricted Subsidiaries in the ordinary course of business in accordance
with the past practices of the Company and its Restricted Subsidiaries prior to
the Closing Date; and (xix) Liens on or sales of receivables.
"Person" means an individual, a corporation, a partnership, a limited
liability company, an association, a trust or any other entity or organization,
including a government or political subdivision or an agency or instrumentality
thereof.
"Physical Notes" has the meaning provided in Section 2.01.
"Principal" of a debt security, including the Notes, means the
principal amount due on the Stated Maturity as shown on such debt security.
"Private Placement Legend" means the legend initially set forth on the
Notes in the form set forth in Section 2.02.
"QIB" means a "qualified institutional buyer" as defined in Rule 144A.
"Redemption Date", when used with respect to any Note to be redeemed,
means the date fixed for such redemption by or pursuant to this Indenture.
"Redemption Price", when used with respect to any Note to be redeemed,
means the price at which such Note is to be redeemed pursuant to this Indenture.
"Registrar" has the meaning provided in Section 2.04.
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17
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of July 24, 1997, among the Company, the Guarantors and
Morgan Stanley & Co. Incorporated and Salomon Brothers Inc.
"Registration Statement" means the Registration Statement as defined
and described in the Registration Rights Agreement.
"Regular Record Date" for the interest payable on any Interest Payment
Date means the January 15 or July 15 (whether or not a Business Day), as the
case may be, next preceding such Interest Payment Date.
"Regulation S" means Regulation S under the Securities Act.
"Responsible Officer", when used with respect to the Trustee, means
the chairman or any vice chairman of the board of directors, the chairman or any
vice chairman of the executive committee of the board of directors, the chairman
of the trust committee, the president, any vice president, any assistant vice
president, the secretary, any assistant secretary, the treasurer, any assistant
treasurer, the cashier, any assistant cashier, any trust officer or assistant
trust officer, the controller or any assistant controller or any other officer
of the Trustee customarily performing functions similar to those performed by
any of the above designated officers (including any officer within the Corporate
Trust and Agency Group (or any successor group) of the Trustee) and also means,
with respect to a particular corporate trust matter, any other officer to whom
such matter is referred because of his or her knowledge of and familiarity with
the particular subject.
"Restricted Payments" has the meaning provided in Section 4.04.
"Restricted Subsidiary" means any Subsidiary of the Company other than
an Unrestricted Subsidiary.
"Rule 144A" means Rule 144A under the Securities Act.
"S&P" means Standard & Poor's Ratings Service and its successors.
"Securities Act" means the Securities Act of 1933, as amended.
"Shelf Registration Statement" has the meaning provided in the
Registration Rights Agreement.
"Significant Subsidiary" means, at any date of determination, any
Restricted Subsidiary that, together with its Subsidiaries, (i) for the most
recent fiscal year of the Company, accounted for more than 10% of the
consolidated revenues of the Company and its Restricted
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18
Subsidiaries or (ii) as of the end of such fiscal year, was the owner of more
than 10% of the consolidated assets of the Company and its Restricted
Subsidiaries, all as set forth on the most recently available consolidated
financial statements of the Company for such fiscal year.
"Specified Date" means any Redemption Date, any Payment Date for an
Offer to Purchase pursuant to Section 4.11 or Section 4.12 or any date on which
the Notes are due and payable after an Event of Default.
"Stated Maturity" means, (i) with respect to any debt security, the
date specified in such debt security as the fixed date on which the final
installment of principal of such debt security is due and payable and (ii) with
respect to any scheduled installment of principal of or interest on any debt
security, the date specified in such debt security as the fixed date on which
such installment is due and payable.
"Subsidiary" means, with respect to any Person, any corporation,
association or other business entity of which more than 50% of the voting power
of the outstanding Voting Stock is owned, directly or indirectly, by such Person
and one or more other Subsidiaries of such Person.
"Subsidiary Guarantee" has the meaning provided in Section 4.07.
"Temporary Cash Investment" means any of the following: (i) direct
obligations of the United States of America or any agency thereof or obligations
fully and unconditionally guaranteed by the United States of America or any
agency thereof, (ii) time deposit accounts, certificates of deposit and money
market deposits maturing within 180 days of the date of acquisition thereof
issued by a bank or trust company which is organized under the laws of the
United States of America, any state thereof or any foreign country recognized by
the United States of America, and which bank or trust company has capital,
surplus and undivided profits aggregating in excess of $50 million (or the
foreign currency equivalent thereof) and has outstanding debt which is rated "A"
(or such similar equivalent rating) or higher by at least one nationally
recognized statistical rating organization (as defined in Rule 436 under the
Securities Act) or any money-market fund sponsored by a registered broker dealer
or mutual fund distributor, (iii) repurchase obligations with a term of not more
than 30 days for underlying securities of the types described in clause (i)
above entered into with a bank meeting the qualifications described in clause
(ii) above, (iv) commercial paper, maturing not more than 90 days after the date
of acquisition, issued by a corporation (other than an Affiliate of the Company)
organized and in existence under the laws of the United States of America, any
state thereof or any foreign country recognized by the United States of America
with a rating at the time as of which any investment therein is made of "P-1"
(or higher) according to Moody's or "A-1" (or higher) according to S&P, and (v)
securities with maturities of six months or less from the date of acquisition
issued or fully and unconditionally guaranteed by any state, commonwealth or
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19
territory of the United States of America, or by any political subdivision or
taxing authority thereof, and rated at least "A" by S&P or Moody's.
"TIA" or "Trust Indenture Act" means the Trust Indenture Act of 1939,
as amended (15 U.S. Code ss.ss. 77aaa-77bbb), as in effect on the date this
Indenture was executed, except as provided in Section 9.06.
"Trade Payables" means, with respect to any Person, any accounts
payable or any other indebtedness or monetary obligation to trade creditors
created, assumed or Guaranteed by such Person or any of its Subsidiaries arising
in the ordinary course of business in connection with the acquisition of goods
or services.
"Transaction Date" means, with respect to the Incurrence of any
Indebtedness by the Company or any of its Restricted Subsidiaries, the date such
Indebtedness is to be Incurred and, with respect to any Restricted Payment, the
date such Restricted Payment is to be made.
"Trustee" means the party named as such in the first paragraph of this
Indenture until a successor replaces it in accordance with the provisions of
Article Seven of this Indenture and thereafter means such successor.
"United States Bankruptcy Code" means the Bankruptcy Reform Act of
1978, as amended and as codified in Title 11 of the United States Code, as
amended from time to time hereafter, or any successor federal bankruptcy law.
"Unrestricted Subsidiary" means (i) any Subsidiary of the Company that
at the time of determination shall be designated an Unrestricted Subsidiary by
the Board of Directors in the manner provided below; and (ii) any Subsidiary of
an Unrestricted Subsidiary. The Board of Directors may designate any Restricted
Subsidiary (including any newly acquired or newly formed Subsidiary of the
Company) to be an Unrestricted Subsidiary unless such Subsidiary owns any
Capital Stock of, or owns or holds any Lien on any property of, the Company or
any Restricted Subsidiary; provided that (A) any Guarantee by the Company or any
Restricted Subsidiary of any Indebtedness of the Subsidiary being so designated
shall be deemed an "Incurrence" of such Indebtedness and an "Investment" by the
Company or such Restricted Subsidiary (or both, if applicable) at the time of
such designation; (B) either (I) the Subsidiary to be so designated has total
assets of $1,000 or less or (II) if such Subsidiary has assets greater than
$1,000, such designation would be permitted under Section 4.04 and (C) if
applicable, the Incurrence of Indebtedness and the Investment referred to in
clause (A) of this proviso would be permitted under Section 4.03 and Section
4.04. The Board of Directors may designate any Unrestricted Subsidiary to be a
Restricted Subsidiary; provided that (i) no Default or Event of Default shall
have occurred and be continuing at the time of or after giving effect to such
designation and (ii) all Liens and Indebtedness of such Unrestricted Subsidiary
outstanding immediately after such designation
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20
would, if Incurred at such time, have been permitted to be Incurred (and shall
be deemed to have been Incurred) for all purposes of the Indenture. Any such
designation by the Board of Directors shall be evidenced to the Trustee by
promptly filing with the Trustee a copy of the Board Resolution giving effect
to such designation and an Officers' Certificate certifying that such
designation complied with the foregoing provisions.
"U.S. Global Notes" has the meaning provided in Section 2.01.
"U.S. Government Obligations" means securities that are (i) direct
obligations of the United States of America for the payment of which its full
faith and credit is pledged or (ii) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States of
America the payment of which is unconditionally guaranteed as a full faith and
credit obligation by the United States of America, which, in either case, are
not callable or redeemable at the option of the issuer thereof at any time prior
to the Stated Maturity of the Notes, and shall also include a depository receipt
issued by a bank or trust company as custodian with respect to any such U.S.
Government Obligation or a specific payment of interest on or principal of any
such U.S. Government Obligation held by such custodian for the account of the
holder of a depository receipt; provided that (except as required by law) such
custodian is not authorized to make any deduction from the amount payable to the
holder of such depository receipt from any amount received by the custodian in
respect of the U.S. Government Obligation or the specific payment of interest on
or principal of the U.S. Government Obligation evidenced by such depository
receipt.
"U.S. Physical Notes" has the meaning provided in Section 2.01.
"Voting Stock" means with respect to any Person, Capital Stock of any
class or kind ordinarily having the power to vote for the election of directors,
managers or other voting members of the governing body of such Person.
"Wholly Owned" means, with respect to any Subsidiary of any Person,
the ownership of all of the outstanding Capital Stock of such Subsidiary (other
than any director's qualifying shares or Investments by foreign nationals
mandated by applicable law) by such Person or one or more Wholly Owned
Subsidiaries of such Person.
SECTION 1.02. Incorporation by Reference of Trust Indenture Act.
Whenever this Indenture refers to a provision of the TIA, the provision is
incorporated by reference in and made a part of this Indenture. The following
TIA terms used in this Indenture have the following meanings:
"indenture securities" means the Notes;
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21
"indenture security holder" means a Holder or a Noteholder;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee; and
"obligor" on the indenture securities means the Company, the
Guarantors or any other obligor on the Notes.
All other TIA terms used in this Indenture that are defined by the
TIA, defined by TIA reference to another statute or defined by a rule of the
Commission and not otherwise defined herein have the meanings assigned to them
therein.
SECTION 1.03. Rules of Construction. Unless the context otherwise
requires:
(i) a term has the meaning assigned to it;
(ii) an accounting term not otherwise defined has the meaning assigned
to it in accordance with GAAP;
(iii) "or" is not exclusive;
(iv) words in the singular include the plural, and words in the plural
include the singular;
(v) provisions apply to successive events and transactions;
(vi) "herein," "hereof" and other words of similar import refer to
this Indenture as a whole and not to any particular Article, Section or
other subdivision;
(vii) all ratios and computations based on GAAP contained in this
Indenture shall be computed in accordance with the definition of GAAP set
forth in Section 1.01; and
(viii) all references to Sections or Articles refer to Sections or
Articles of this Indenture unless otherwise indicated.
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22
ARTICLE TWO
THE NOTES
SECTION 2.01. Form and Dating. The Notes and the Trustee's certificate
of authentication shall be substantially in the form annexed hereto as Exhibit
A. The Notes may have notations, legends or endorsements required by law, stock
exchange agreements to which the Company is subject or usage. The Company shall
approve the form of the Notes and any notation, legend or endorsement on the
Notes. Each Note shall be dated the date of its authentication.
The terms and provisions contained in the form of the Notes annexed
hereto as Exhibit A shall constitute, and are hereby expressly made, a part of
this Indenture. To the extent applicable, the Company, the Guarantors and the
Trustee, by their execution and delivery of this Indenture, expressly agree to
such terms and provisions and to be bound thereby.
Notes offered and sold in reliance on Rule 144A shall be issued
initially in the form of one or more permanent global Notes in registered form,
substantially in the form set forth in Exhibit A (the "U.S. Global Notes"),
deposited with the Trustee, as custodian for the Depositary, duly executed by
the Company and authenticated by the Trustee as hereinafter provided. The
aggregate principal amount of the U.S. Global Notes may from time to time be
increased or decreased by adjustments made on the records of the Trustee, as
custodian for the Depositary or its nominee, as hereinafter provided.
Notes offered and sold in offshore transactions in reliance on
Regulation S shall be issued initially in the form of one or more permanent
global Notes in registered form substantially in the form set forth in Exhibit A
(the "Offshore Global Notes") deposited with the Trustee, as custodian for the
Depositary, duly executed by the Company and authenticated by the Trustee as
hereinafter provided. The aggregate principal amount of the Offshore Global
Notes may from time to time be increased or decreased by adjustments made on the
records of the Trustee, as custodian for the Depositary or its nominee, as
hereinafter provided.
Notes offered and sold in reliance on Regulation D under the
Securities Act shall be issued in the form of permanent certificated Notes in
registered form in substantially the form set forth in Exhibit A (the "U.S.
Physical Notes"). Notes issued pursuant to Section 2.07 in exchange for
interests in the Offshore Global Notes shall be in the form of permanent
certificated Notes in registered form substantially in the form set forth in
Exhibit A (the "Offshore Physical Notes").
The Offshore Physical Notes and U.S. Physical Notes are sometimes
collectively herein referred to as the "Physical Notes". The U.S. Global Note
and the Offshore Global Note are sometimes referred to herein as the "Global
Notes."
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23
The definitive Notes shall be typed, printed, lithographed or
engraved or produced by any combination of these methods or may be produced in
any other manner permitted by the rules of any securities exchange on which the
Notes may be listed, all as determined by the Officers executing such Notes, as
evidenced by their execution of such Notes.
SECTION 2.02. Restrictive Legends. Unless and until a Note is
exchanged for an Exchange Note in connection with an effective Registration
Statement pursuant to the Registration Rights Agreement, (i) each U.S. Global
Note and each U.S. Physical Note shall bear the legend, set forth below on the
face thereof and (ii) each Offshore Physical Note and each Offshore Global Note
shall bear the legend set forth below on the face thereof until at least the
41st day after the Closing Date and receipt by the Company and the Trustee of a
certificate substantially in the form of Exhibit B hereto.
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), AND ACCORDINGLY, MAY NOT BE OFFERED OR SOLD
WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S.
PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION
HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL
BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS AN
INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2), (3)
OR (7) OF REGULATION D UNDER THE SECURITIES ACT) (AN "INSTITUTIONAL
ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS
NOTE IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE
SECURITIES ACT, (2) AGREES THAT IT WILL NOT, WITHIN TWO YEARS AFTER THE
ORIGINAL ISSUANCE OF THE NOTES, RESELL OR OTHERWISE TRANSFER THIS NOTE
EXCEPT (A) TO THE COMPANY OR ANY SUBSIDIARY THEREOF, (B) TO A QUALIFIED
INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT,
(C) INSIDE THE UNITED STATES TO AN INSTITUTIONAL ACCREDITED INVESTOR THAT,
PRIOR TO SUCH TRANSFER, FURNISHES TO THE TRUSTEE A SIGNED LETTER CONTAINING
CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON
TRANSFER OF THIS NOTE (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE
TRUSTEE) AND IF SUCH TRANSFER IS IN RESPECT OF AN AGGREGATE PRINCIPAL
AMOUNT OF NOTES AT THE TIME OF TRANSFER OF LESS THAN $100,000, AN OPINION
OF COUNSEL ACCEPTABLE TO THE COMPANY THAT SUCH TRANSFER IS IN COMPLIANCE
WITH THE SECURITIES ACT, (D) OUTSIDE THE UNITED STATES IN AN OFFSHORE
TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (E)
PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER
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24
THE SECURITIES ACT (IF AVAILABLE) OR (F) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND (3) AGREES THAT IT WILL
DELIVER TO EACH PERSON TO WHOM THIS NOTE IS TRANSFERRED A NOTICE
SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER
OF THIS NOTE WITHIN TWO YEARS AFTER THE ORIGINAL ISSUANCE OF THE NOTES, THE
HOLDER MUST CHECK THE APPROPRIATE BOX SET FORTH ON THE REVERSE HEREOF
RELATING TO THE MANNER OF SUCH TRANSFER AND SUBMIT THIS NOTE TO THE
TRUSTEE. IF THE PROPOSED TRANSFEREE IS AN INSTITUTIONAL ACCREDITED
INVESTOR, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE TRUSTEE
AND THE COMPANY SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS
EITHER OF THEM MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS
BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT
TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. AS USED HEREIN,
THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE
THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT. THE
INDENTURE CONTAINS A PROVISION REQUIRING THE TRUSTEE TO REFUSE TO REGISTER
ANY TRANSFER OF THIS NOTE IN VIOLATION OF THE FOREGOING RESTRICTIONS.
Each Global Note, whether or not an Exchange Note, shall also bear the
following legend on the face thereof:
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF
TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN
THE NAME OF CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY OR SUCH OTHER
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY OR SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY
(AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY),
ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO
ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS
AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT
NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A
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25
SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF
THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE
RESTRICTIONS SET FORTH IN SECTION 2.08 OF THE INDENTURE.
SECTION 2.03. Execution, Authentication and Denominations. Subject to
Article Four, the aggregate principal amount of Notes which may be authenticated
and delivered under this Indenture is unlimited. The Notes shall be executed by
two Officers of the Company, by facsimile or manual signature, in the name and
on behalf of the Company.
If an Officer whose signature is on a Note no longer holds that office
at the time the Trustee or authenticating agent authenticates the Note, the Note
shall be valid nevertheless.
A Note shall not be valid until the Trustee or authenticating agent
manually signs the certificate of authentication on the Note. The signature
shall be conclusive evidence that the Note has been authenticated under this
Indenture.
At any time and from time to time after the execution of this
Indenture, the Trustee or an authenticating agent shall upon receipt of a
Company Order authenticate for original issue Notes in the aggregate principal
amount specified in such Company Order; provided that the Trustee shall be
entitled to receive an Officers' Certificate and an Opinion of Counsel of the
Company that it may reasonably request in connection with such authentication of
Notes. Such Company Order shall specify the amount of Notes to be authenticated,
the date on which the original issue of Notes is to be authenticated and the
aggregate principal amount of Notes then authorized and in case of an issuance
of Notes pursuant to Section 2.15, shall certify that such issuance is in
compliance with Article Four.
The Trustee may appoint an authenticating agent to authenticate Notes.
If the appointment of such authenticating agent is not at the discretion and for
the convenience of the Trustee, then such authenticating agent shall be
compensated by the Company. An authenticating agent may authenticate Notes
whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such authenticating
agent. An authenticating agent has the same rights as an Agent to deal with the
Company or an Affiliate of the Company.
The Notes shall be issuable only in registered form without coupons
and only in denominations of $1,000 in principal amount and any integral
multiple thereof.
SECTION 2.04. Registrar and Paying Agent. The Company shall maintain
an office or agency where Notes may be presented for registration of transfer or
for exchange (the "Registrar"), an office or agency where Notes may be presented
for payment (the "Paying Agent")
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26
and an office or agency where notices and demands to or upon the Company in
respect of the Notes and this Indenture may be served, which shall be in the
Borough of Manhattan and the City of New York. The Company shall cause the
Registrar to keep a register of the Notes and of their transfer and exchange
(the "Note Register"). The Note Register shall be in written form or any other
form capable of being converted into written form within a reasonable time. The
Company may have one or more co-Registrars and one or more additional Paying
Agents.
The Company shall enter into an appropriate agency agreement with any
Agent not a party to this Indenture, which shall incorporate the terms of the
TIA. The agreement shall implement the provisions of this Indenture that relate
to such Agent. The Company shall give prompt written notice to the Trustee of
the name and address of any such Agent and any change in the address of such
Agent. If the Company fails to maintain a Registrar, Paying Agent and/or agent
for service of notices and demands, the Trustee shall act as such Registrar,
Paying Agent and/or agent for service of notices and demands. The Company may
remove any Agent upon written notice to such Agent and the Trustee; provided
that no such removal shall become effective until (i) the acceptance of an
appointment by a successor Agent to such Agent as evidenced by an appropriate
agency agreement entered into by the Company and such successor Agent and
delivered to the Trustee or (ii) notification to the Trustee that the Trustee
shall serve as such Agent until the appointment of a successor Agent in
accordance with clause (i) of this proviso. The Company, any Subsidiary of the
Company, or any Affiliate of any of them may act as Paying Agent, Registrar or
co-Registrar, and/or agent for service of notice and demands.
The Company initially appoints the Trustee as Registrar, Paying Agent,
authenticating agent and agent for service of notice and demands. If, at any
time, the Trustee is not the Registrar, the Company shall furnish, or cause to
be furnished, to the Trustee at least seven Business Days before each Interest
Payment Date and at such other times as the Trustee may reasonably request, the
names and addresses of the Holders as they appear in the Note Register. At the
option of the Company, payment of interest may be made by check mailed to the
address of the Holders as such address appears in the Note Register.
SECTION 2.05. Paying Agent to Hold Money in Trust. Not later
than each due date of the principal, premium, if any, and interest on any Notes,
the Company shall deposit with the Paying Agent money in immediately available
funds sufficient to pay such principal, premium, if any, and interest so
becoming due. The Company shall require each Paying Agent other than the Trustee
to agree in writing that such Paying Agent shall hold in trust for the benefit
of the Holders or the Trustee all money held by the Paying Agent for the payment
of principal of, premium, if any, and interest on the Notes (whether such money
has been paid to it by the Company or any other obligor on the Notes), and such
Paying Agent shall promptly notify the Trustee of any default by the Company (or
any other obligor on the Notes) in making any such payment. The Company at any
time may require a Paying Agent to pay all money held by it to the Trustee and
account for any funds disbursed, and the Trustee may at any time during the
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27
continuance of any payment default, upon written request to a Paying Agent,
require such Paying Agent to pay all money held by it to the Trustee and to
account for any funds disbursed. Upon doing so, the Paying Agent shall have no
further liability for the money so paid over to the Trustee. If the Company or
any Subsidiary of the Company or any Affiliate of any of them acts as Paying
Agent, it will, on or before each due date of any principal of, premium, if any,
or interest on the Notes, segregate and hold in a separate trust fund for the
benefit of the Holders a sum of money sufficient to pay such principal, premium,
if any, or interest so becoming due until such sum of money shall be paid to
such Holders or otherwise disposed of as provided in this Indenture, and will
promptly notify the Trustee of its action or failure to act.
SECTION 2.06. Transfer and Exchange. The Notes are issuable only in
registered form. A Holder may transfer a Note by written application to the
Registrar stating the name of the proposed transferee and otherwise complying
with the terms of this Indenture. No such transfer shall be effected until, and
such transferee shall succeed to the rights of a Holder only upon, final
acceptance and registration of the transfer by the Registrar in the Note
Register. Prior to the registration of any transfer by a Holder as provided
herein, the Company, the Guarantors, the Trustee, and any agent of the Company,
the Guarantors or the Trustee shall treat the person in whose name the Note is
registered as the owner thereof for all purposes whether or not the Note shall
be overdue, and neither the Company, the Trustee, nor any such agent shall be
affected by notice to the contrary. Furthermore, any Holder of a Global Note
shall, by acceptance of such Global Note, agree that transfers of beneficial
interests in such Global Note may be effected only through a book entry system
maintained by the Registrar for such Global Note (or its agent) and that
ownership of a beneficial interest in the Note shall be required to be reflected
in a book entry. When Notes are presented to the Registrar or a co-Registrar
with a request to register the transfer or to exchange them for an equal
principal amount of Notes of other authorized denominations (including an
exchange of Notes for Exchange Notes), the Registrar shall register the transfer
or make the exchange as requested if its requirements for such transactions are
met; provided, that no exchanges of Notes for Exchange Notes shall occur until a
Registration Statement shall have been declared effective by the Commission
(confirmed in an Officers' Certificate delivered to the Trustee) and that any
Notes that are exchanged for Exchange Notes shall be cancelled by the Trustee.
To permit registrations of transfers and exchanges, the Company shall execute
and the Trustee shall authenticate Notes at the Registrar's request. No service
charge shall be made for any registration of transfer or exchange or redemption
of the Notes, but the Company may require payment of a sum sufficient to cover
any transfer tax or similar governmental charge payable in connection therewith
(other than any such transfer taxes or other similar governmental charge payable
upon exchanges pursuant to Section 2.11, 3.08 or 9.04).
The Registrar shall not be required (i) to issue, register the
transfer of or exchange any Note during a period beginning at the opening of
business 15 days before the day of the mailing of a notice of redemption of
Notes selected for redemption under Section 3.03 and ending at the close of
business on the day of such mailing, or (ii) to register the transfer of
or exchange
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28
any Note so selected for redemption in whole or in part, except the unredeemed
portion of any Note being redeemed in part.
SECTION 2.07. Book-Entry Provisions for Global Notes. (a) The U.S.
Global Notes and Offshore Global Notes initially shall (i) be registered in the
name of the Depositary for such Global Notes or the nominee of such Depositary,
(ii) be delivered to the Trustee as custodian for such Depositary and (iii) bear
legends as set forth in Section 2.02.
Members of, or participants in, the Depositary (the "Agent Members")
shall have no rights under this Indenture with respect to any Global Note held
on their behalf by the Depositary, or the Trustee as its custodian, or under the
Global Note, and the Depositary may be treated by the Company, the Guarantors,
the Trustee and any agent of the Company, the Guarantors or the Trustee as the
absolute owner of such Global Note for all purposes whatsoever. Notwithstanding
the foregoing, nothing herein shall prevent the Company, the Guarantors, the
Trustee or any agent of the Company, the Guarantors or the Trustee, from giving
effect to any written certification, proxy or other authorization furnished by
the Depositary or impair, as between the Depositary and its Agent Members, the
operation of customary practices governing the exercise of the rights of a
Holder of any Note.
(b) Transfers of a Global Note shall be limited to transfers of such
Global Note in whole, but not in part, to the Depositary, its successors or
their respective nominees. Interests of beneficial owners in a Global Note may
be transferred in accordance with the rules and procedures of the Depositary and
the provisions of Section 2.08. In addition, U.S. Physical Notes and Offshore
Physical Notes shall be transferred to all beneficial owners in exchange for
their beneficial interests in the U.S. Global Notes or the Offshore Global
Notes, respectively, if (i) the Depositary notifies the Company that it is
unwilling or unable to continue as Depositary for the U.S. Global Notes or the
Offshore Global Notes, as the case may be, and a successor depositary is not
appointed by the Company within 90 days of such notice or (ii) an Event of
Default has occurred and is continuing and the Registrar has received a request
to the foregoing effect from the Depositary.
(c) Any beneficial interest in one of the Global Notes that is
transferred to a person who takes delivery in the form of an interest in the
other Global Note will, upon transfer, cease to be an interest in such Global
Note and become an interest in the other Global Note and, accordingly, will
thereafter be subject to all transfer restrictions, if any, and other procedures
applicable to beneficial interests in such other Global Note for as long as it
remains such an interest.
(d) In connection with any transfer of a portion of the beneficial
interests in a U.S. Global Note or Offshore Global Note to beneficial owners
pursuant to paragraph (b) of this Section, the Registrar shall reflect on its
books and records the date and a decrease in the principal
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29
amount of the U.S. Global Notes or Offshore Global Notes in an amount equal to
the principal amount of the beneficial interest in such Global Notes to be
transferred, and the Company shall execute, and the Trustee shall authenticate
and deliver, one or more U.S. Physical Notes or Offshore Physical Notes, as the
case may be, of like tenor and amount.
(e) In connection with the transfer of the entire U.S. Global Note or
Offshore Global Note to beneficial owners pursuant to paragraph (b) of this
Section, the U.S. Global Note or Offshore Global Note, as the case may be, shall
be deemed to be surrendered to the Trustee for cancellation, and the Company
shall execute, and the Trustee shall authenticate and deliver, to each
beneficial owner identified by the Depositary in exchange for its beneficial
interest in the U.S. Global Note or Offshore Global Note, as the case may be, an
equal aggregate principal amount of U.S. Physical Notes or Offshore Physical
Notes, as the case may be, of authorized denominations.
(f) Any U.S. Physical Note delivered in exchange for an interest in
the U.S. Global Note pursuant to paragraph (b), (d) or (e) of this Section
shall, except as otherwise provided by paragraph (e) of Section 2.08, bear the
legend regarding transfer restrictions applicable to the U.S. Physical Note set
forth in Section 2.02.
(g) Any Offshore Physical Note delivered in exchange for an interest
in the Offshore Global Note pursuant to paragraph (b), (d) or (e) of this
Section shall, except as otherwise provided by paragraph (e) of Section 2.08,
bear the legend regarding transfer restrictions applicable to the Offshore
Physical Note set forth in Section 2.02.
(h) The registered holder of a Global Note may grant proxies and
otherwise authorize any person, including Agent Members and persons that may
hold interests through Agent Members, to take any action which a Holder is
entitled to take under this Indenture or the Notes.
(i) Beneficial owners of interests in a U.S. Global Note may receive
U.S. Physical Notes (which shall bear the Private Placement Legend if required
by Section 2.02) in accordance with the procedures of the Depositary. In
connection with the execution, authentication and delivery of such U.S. Physical
Notes, the Registrar shall reflect on its books and records a decrease in the
principal amount of the relevant U.S. Global Note equal to the principal amount
of such U.S. Physical Notes and the Company shall execute and the Trustee shall
authenticate and deliver one or more U.S. Physical Notes having an equal
aggregate principal amount.
SECTION 2.08. Special Transfer Provisions. Unless and until a Note is
exchanged for an Exchange Note in connection with an effective Registration
Statement pursuant to the Registration Rights Agreement, the following
provisions shall apply:
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30
(a) Transfers to Non-QIB Institutional Accredited Investors. The
following provisions shall apply with respect to the registration of any
proposed transfer of a Note to any Institutional Accredited Investor which is
not a QIB (excluding Non-U.S. Persons):
(i) The Registrar shall register the transfer of any Note, whether or
not such Note bears the Private Placement Legend, if (x) the requested
transfer is after the time period referred to in Rule 144(k) under the
Securities Act as in effect with respect to such transfer or (y) the
proposed transferee has delivered to the Registrar (A) a certificate
substantially in the form of Exhibit C hereto and (B) if the aggregate
principal amount of the Notes being transferred is less than $100,000 at
the time of such transfer, an opinion of counsel acceptable to the Company
that such transfer is in compliance with the Securities Act.
(ii) If the proposed transferor is an Agent Member holding a
beneficial interest in the U.S. Global Note, upon receipt by the Registrar
of (x) the documents, if any, required by paragraph (i) and (y)
instructions given in accordance with the Depositary's and the Registrar's
procedures, the Registrar shall reflect on its books and records the date
and a decrease in the principal amount of the U.S. Global Note in an amount
equal to the principal amount of the beneficial interest in the U.S. Global
Note to be transferred, and the Company shall execute, and the Trustee
shall authenticate and deliver, one or more U.S. Physical Notes of like
tenor and amount.
(b) Transfers to QIBs. The following provisions shall apply with
respect to the registration of any proposed transfer of a U.S. Physical Note, an
interest in a U.S. Global Note or an interest in an Offshore Global Note prior
to the removal of the Private Placement Legend to a QIB (excluding Non-U.S.
Persons):
(i) If the Note to be transferred consists of (x) either (A) an
interest in a Offshore Global Note prior to the removal of the Private
Placement Legend or (B) U.S. Physical Notes, the Registrar shall register
the transfer if such transfer is being made by a proposed transferor who
has checked the box provided for on the form of Note stating, or has
otherwise advised the Company and the Registrar in writing, that the sale
has been made in compliance with the provisions of Rule 144A to a
transferee who has signed the certification provided for on the form of
Note stating, or has otherwise advised the Company and the Registrar in
writing, that it is purchasing the Note for its own account or an account
with respect to which it exercises sole investment discretion and that it
and any such account is a QIB within the meaning of Rule 144A, and is aware
that the sale to it is being made in reliance on Rule 144A and acknowledges
that it has received such information regarding the Company as it has
requested pursuant to Rule 144A or has determined not to request such
information and that it is aware that the transferor is relying upon its
foregoing representations in order to claim the exemption from registration
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31
provided by Rule 144A or (y) an interest in the U.S. Global Notes, the
transfer of such interest may be effected only through the book entry
system maintained by the Depositary.
(ii) If the proposed transferee is an Agent Member, and the Note to be
transferred consists of U.S. Physical Notes, upon receipt by the Registrar
of the documents referred to in clause (i) and instructions given in
accordance with the Depositary's and the Registrar's procedures, the
Registrar shall reflect on its books and records the date and an increase
in the principal amount of the U.S. Global Notes in an amount equal to the
principal amount of the U.S. Physical Notes, to be transferred, and the
Trustee shall cancel the U.S. Physical Notes so transferred.
(c) Transfers of Interests in the Offshore Global Note or Offshore
Physical Notes. The following provisions shall apply with respect to any
transfer of interests in the
Offshore Global Notes or Offshore Physical Notes:
(i) prior to the removal of the Private Placement Legend from a
Offshore Global Note or Offshore Physical Note pursuant to Section 2.02,
the Registrar shall refuse to register such transfer unless such transfer
complies with Section 2.08(b) or Section 2.08(d), as the case may be; and
(ii) after such removal, the Registrar shall register the transfer of
any such Note without requiring any additional certification.
(d) Transfers to Non-U.S. Persons at Any Time. The following
provisions shall apply with respect to any transfer of a Note to a Non-U.S.
Person:
(i) The Registrar shall register any proposed transfer to any Non-U.S.
Person if the Note to be transferred is a U.S. Physical Note or an interest
in the U.S. Global Note only upon receipt of a certificate substantially in
the form of Exhibit D from the proposed transferor.
(ii) (a) If the proposed Transferor is an Agent Member holding a
beneficial interest in a U.S. Global Note, upon receipt by the Registrar of
(x) the documents required by paragraph (i) and (y) instructions in
accordance with the Depositary's and the Registrar's procedures, the
Registrar shall reflect on its books and records the date and a decrease in
the principal amount of such U.S. Global Note in an amount equal to the
principal amount of the beneficial interest in the U.S. Global Note to be
transferred, and (b) if the proposed transferee is an Agent Member, upon
receipt by the Registrar of instructions given in accordance with the
Depositary's and the Registrar's procedures, the Registrar shall reflect on
its books and records the date and an increase in the principal amount of
the Offshore Global Note in an amount equal to the principal amount of the
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32
U.S. Physical Notes or the U.S. Global Note, as the case may be, to be
transferred, and the Trustee shall cancel the Physical Note, if any, so
transferred or decrease the amount of the U.S. Global Note.
(e) Private Placement Legend. Upon the transfer, exchange or
replacement of Notes not bearing the Private Placement Legend, the Registrar
shall deliver Notes that do not bear the Private Placement Legend. Upon the
transfer, exchange or replacement of Notes bearing the Private Placement Legend,
the Registrar shall deliver only Notes that bear the Private Placement Legend
unless either (i) the circumstances contemplated by paragraphs (a)(i)(x) or
(c)(ii) of this Section 2.08 exist or (ii) there is delivered to the Registrar
an Opinion of Counsel reasonably satisfactory to the Company and the Trustee to
the effect that neither such legend nor the related restrictions on transfer are
required in order to maintain compliance with the provisions of the Securities
Act.
(f) General. By its acceptance of any Note bearing the Private
Placement Legend, each Holder of such a Note acknowledges the restrictions on
transfer of such Note set forth in this Indenture and in the Private Placement
Legend and agrees that it will transfer such Note only as provided in this
Indenture. The Registrar shall not register a transfer of any Note unless such
transfer complies with the restrictions on transfer of such Note set forth in
this Indenture. In connection with any transfer of Notes, each Holder agrees by
its acceptance of the Notes to furnish the Registrar or the Company such
certifications, legal opinions or other information as either of them may
reasonably require to confirm that such transfer is being made pursuant to an
exemption from, or a transaction not subject to, the registration requirements
of the Securities Act; provided that the Registrar shall not be required to
determine (but may conclusively rely on a determination made by the Company with
respect to) the sufficiency of any such certifications, legal opinions or other
information.
The Registrar shall retain copies of all letters, notices and other
written communications received pursuant to Section 2.07 or this Section 2.08.
The Company shall have the right to inspect and make copies of all such letters,
notices or other written communications at any reasonable time upon the giving
of reasonable written notice to the Registrar.
SECTION 2.09. Replacement Notes. If a mutilated Note is surrendered to
the Trustee or if the Holder claims that the Note has been lost, destroyed or
wrongfully taken, then, in the absence of notice to the Company or the Trustee
that such Note has been acquired by a bona fide purchaser, the Company shall
issue and the Trustee shall authenticate a replacement Note of like tenor and
principal amount; provided that the requirements of this Section 2.09 are met.
If required by the Trustee or the Company, an indemnity bond must be furnished
that is sufficient in the judgment of both the Trustee and the Company to
protect the Company, the Trustee or any Agent from any loss that any of them may
suffer if a Note is replaced. The Company may charge such Holder for the
expenses of the Company and the Trustee in replacing a Note. In case any
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33
such mutilated, lost, destroyed or wrongfully taken Note has become or is about
to become due and payable, the Company in its discretion may pay such Note
instead of issuing a new Note in replacement thereof.
Every replacement Note is an additional obligation of the Company and
shall be entitled to the benefits of this Indenture.
The provisions of this Section 2.09 are exclusive and shall preclude
(to the extent lawful) all other rights and remedies against the Company and the
Trustee with respect to the replacement or payment of mutilated, destroyed, lost
or wrongfully taken Notes.
SECTION 2.10. Outstanding Notes. Notes outstanding at any time are all
Notes that have been authenticated by the Trustee except for those cancelled by
it, those delivered to it for cancellation and those described in this Section
2.10 as not outstanding.
If a Note is replaced pursuant to Section 2.09, it ceases to be
outstanding unless and until the Trustee and the Company receive proof
satisfactory to each of them that the replaced Note is held by a bona fide
purchaser.
If the Paying Agent (other than the Company or an Affiliate of the
Company) holds on a Redemption Date or the Stated Maturity of the Notes money
sufficient to pay Notes payable on that date, then on and after that date such
Notes cease to be outstanding and interest on them shall cease to accrue.
Notes, or portions thereof, for the payment or redemption of which
moneys or U.S. Government Obligations (as provided for in Article Eight) in the
necessary amount shall have been deposited in trust with the Trustee or with any
Paying Agent (other than the Company) or shall have been set aside, segregated
and held in trust by the Company for the Holders of such Notes (if the Company
shall act as its own Paying Agent), on and after that time shall cease to be
outstanding and, in the case of redemption, interest on such Notes shall cease
to accrue, provided that if such Notes, or portions thereof, are to be redeemed
prior to the maturity thereof, notice of such redemption shall have been given
as herein provided, or provision satisfactory to the Trustee shall have been
made for giving such notice.
A Note does not cease to be outstanding because the Company or one of
its Affiliates holds such Note, provided, however, that, in determining whether
the Holders of the requisite principal amount of the outstanding Notes have
given any request, demand, authorization, direction, notice, consent or waiver
hereunder, Notes owned by the Company or any other obligor upon the Notes or any
Affiliate of the Company or of such other obligor shall be disregarded and
deemed not to be outstanding, except that, in determining whether the Trustee
shall be protected in relying upon any such request, demand, authorization,
direction, notice,
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34
consent or waiver, only Notes which the Trustee has actual knowledge to be so
owned shall be so disregarded. Notes so owned which have been pledged in good
faith may be regarded as outstanding if the pledgee establishes to the
satisfaction of the Trustee the pledgee's right so to act with respect to such
Notes and that the pledgee is not the Company or any other obligor upon the
Notes or any Affiliate of the Company or of such other obligor.
SECTION 2.11. Temporary Notes. Until definitive Notes are ready for
delivery, the Company may prepare and execute and the Trustee shall authenticate
temporary Notes. Temporary Notes shall be substantially in the form of
definitive Notes but may have insertions, substitutions, omissions and other
variations determined to be appropriate by the Officers executing the temporary
Notes, as evidenced by their execution of such temporary Notes. If temporary
Notes are issued, the Company will cause definitive Notes to be prepared without
unreasonable delay. After the preparation of definitive Notes, the temporary
Notes shall be exchangeable for definitive Notes upon surrender of the temporary
Notes at the office or agency of the Company designated for such purpose
pursuant to Section 4.02, without charge to the Holder. Upon surrender for
cancellation of any one or more temporary Notes the Company shall execute and
the Trustee shall authenticate and deliver in exchange therefor a like principal
amount of definitive Notes of authorized denominations. Until so exchanged, the
temporary Notes shall be entitled to the same benefits under this Indenture as
definitive Notes.
SECTION 2.12. Cancellation. The Company at any time may deliver, or
cause to be delivered, Notes to the Trustee for cancellation. The Registrar and
the Paying Agent shall forward to the Trustee any Notes surrendered to them for
transfer, exchange or payment. The Trustee (and no one else) shall cancel all
Notes surrendered for transfer, exchange, payment, replacement or cancellation
and shall destroy them in accordance with its normal procedure.
SECTION 2.13. CUSIP Numbers. The Company in issuing the Notes may use
"CUSIP," "CINS" and "ISIN" numbers (if then generally in use), and the Trustee
shall use CUSIP, CINS or ISIN numbers, as the case may be, in notices of
redemption or exchange as a convenience to Holders; provided that any such
notice shall state that no representation is made as to the correctness of such
CUSIP, CINS or ISIN numbers either as printed on the Notes or as contained in
any notice of redemption or exchange and that reliance may be placed only on the
other identification numbers printed on the Notes; and provided further that
failure to use CUSIP, CINS or ISIN numbers in any notice of redemption or
exchange shall not affect the validity or sufficiency of such notice. The
Company shall promptly notify the Trustee of any change in CUSIP numbers.
SECTION 2.14. Defaulted Interest. If the Company defaults in a payment
of interest on the Notes, it shall pay, or shall deposit with the Paying Agent
money in immediately available funds sufficient to pay the defaulted interest,
plus (to the extent lawful) any interest
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35
payable on the defaulted interest, to the Persons who are Holders on a
subsequent special record date. A special record date, as used in this Section
2.14 with respect to the payment of any defaulted interest, shall mean the 15th
day next preceding the date fixed by the Company for the payment of defaulted
interest, whether or not such day is a Business Day. At least 15 days before the
subsequent special record date, the Company shall mail to each Holder and to the
Trustee a notice that states the subsequent special record date, the payment
date and the amount of defaulted interest to be paid.
SECTION 2.15. Issuance of Additional Notes. The Company may, subject
to Article Four of this Indenture, issue additional Notes under this Indenture.
The Notes issued on the Closing Date and any additional Notes subsequently
issued shall be treated as a single class for all purposes under this Indenture.
ARTICLE THREE
REDEMPTION
SECTION 3.01. Right of Redemption. (a) The Notes will also be
redeemable, at the Company's option, in whole or in part, at any time or from
time to time, on or after August 1, 2002 and prior to maturity, upon not less
than 30 nor more than 60 days' prior notice mailed by first class mail to each
Holders' last address as it appears in the Note Register, at the following
Redemption Prices (expressed in percentages of principal amount), plus accrued
and unpaid interest, if any, to the Redemption Date (subject to the right of
Holders of record on the relevant Regular Record Date that is on or prior to the
Redemption Date to receive interest due on an Interest Payment Date), if
redeemed during the 12-month period commencing August 1 of the years set forth
below:
Redemption
Year Price
---- -----
2002 .......................... 105.250%
2003 .......................... 102.625%
(b) In addition, at any time prior to August 1, 2000, the Company may
redeem up to 35% of the principal amount of the Notes with the proceeds of one
or more sales of its Common Stock, at any time or from time to time in part, at
a Redemption Price (expressed as a percentage of principal amount) of 110.50%,
plus accrued and unpaid interest to the Redemption
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36
Date (subject to the rights of Holders of record on the relevant Regular Record
Date that is prior to the Redemption Date to receive interest due on an Interest
Payment Date); provided that at least $65 million aggregate principal amount of
Notes remains outstanding after each such redemption.
(c) In the event that more than 98% of the outstanding principal
amount of the Notes are tendered pursuant to an Offer to Purchase, as required
by Section 4.11 or Section 4.12, the balance of the Notes will be redeemable, at
the Company's option, in whole or in part, at any time or from time to time
thereafter and prior to maturity, upon not less than 30 nor more than 60 days'
prior notice mailed by first class mail to each Holder's last address as it
appears in the Note Register, at a Redemption Price equal to the price specified
in such Offer to Purchase plus accrued and unpaid interest, if any, to the
Redemption Date (subject to the right of Holders of record on the relevant
Regular Record Date that is on or prior to the Redemption Date to receive
interest due on an Interest Payment Date).
SECTION 3.02. Notices to Trustee. If the Company elects to redeem
Notes pursuant to Section 3.01(a), (b) or (c), it shall notify the Trustee in
writing of the Redemption Date, the principal amount at Stated Maturity of Notes
to be redeemed and the clause of this Indenture pursuant to which the redemption
shall occur.
The Company shall give each notice provided for in this Section 3.02
in an Officers' Certificate at least 45 days before the Redemption Date (unless
a shorter period shall be satisfactory to the Trustee).
SECTION 3.03. Selection of Notes to Be Redeemed. If less than all of
the Notes are to be redeemed at any time, the Trustee will select the Notes, or
portions thereof, for redemption in compliance with the requirements of the
principal national securities exchange, if any, on which the Notes are listed
or, if the Notes are not listed on a national securities exchange, by lot or by
such other method as the Trustee in its sole discretion shall deem to be fair
and appropriate; provided that no Note of $1,000 in principal amount or less
shall be redeemed in part. If any Note is to be redeemed in part only, the
notice of redemption relating to such Note shall state the portion of the
principal amount thereof to be redeemed. A new Note in principal amount equal to
the unredeemed portion thereof will be issued in the name of the Holder thereof
upon cancellation of the original Note.
The Trustee shall make the selection from the Notes outstanding and
not previously called for redemption. Notes in denominations of $1,000 in
principal amount at Stated Maturity may only be redeemed in whole. The Trustee
may select for redemption portions (equal to $1,000 in principal amount at
Stated Maturity or any integral multiple thereof) of Notes that have
denominations larger than $1,000 in principal amount at Stated Maturity.
Provisions of this Indenture that apply to Notes called for redemption also
apply to portions of Notes called for
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37
redemption. The Trustee shall notify the Company and the Registrar promptly in
writing of the Notes or portions of Notes to be called for redemption.
SECTION 3.04. Notice of Redemption. With respect to any redemption of
Notes pursuant to Section 3.01(a), (b) or (c), at least 30 days but not more
than 60 days before a Redemption Date the Company shall mail or cause to be
mailed, a notice of redemption by first class mail (pursuant to the requirements
of Section 11.02) to each Holder whose Notes are to be redeemed.
The notice shall identify the Notes to be redeemed and shall state:
(i) the Redemption Date;
(ii) the Redemption Price;
(iii) the name and address of the Paying Agent;
(iv) that Notes called for redemption must be surrendered to the
Paying Agent in order to collect the Redemption Price;
(v) that, unless the Company defaults in making the redemption
payment, interest on Notes called for redemption ceases to accrue on and
after the Redemption Date and the only remaining right of the Holders is to
receive payment of the Redemption Price plus accrued and unpaid interest to
the Redemption Date upon surrender of the Notes to the Paying Agent;
(vi) that, if any Note is being redeemed in part, the portion of the
principal amount (equal to $1,000 in principal amount at Stated Maturity or
any integral multiple thereof) of such Note to be redeemed and that, on and
after the Redemption Date, upon surrender of such Note, a new Note or Notes
in principal amount equal to the unredeemed portion thereof will be
reissued;
(vii) that, if any Note contains a CUSIP, CINS or ISIN number as
provided in Section 2.13, no representation is being made as to the
correctness of the CUSIP, CINS or ISIN number either as printed on the
Notes or as contained in the notice of redemption and that reliance may be
placed only on the other identification numbers printed on the Notes; and
(viii) the aggregate principal amount at Stated Maturity of Notes
being redeemed.
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At the Company's request (which request may be revoked by the Company
at any time prior to the time at which the Trustee shall have given such notice
to the Holders), made in writing to the Trustee, at least 45 days (or such
shorter period as shall be satisfactory to the Trustee) before a Redemption
Date, the Trustee shall give the notice of redemption in the name and at the
expense of the Company. If, however, the Company gives such notice to the
Holders, the Company shall concurrently deliver to the Trustee an Officers'
Certificate stating that such notice has been given.
SECTION 3.05. Effect of Notice of Redemption. Once notice of
redemption is mailed, Notes called for redemption become due and payable on the
Redemption Date and at the Redemption Price. Upon surrender of any Notes to the
Paying Agent, such Notes shall be paid at the Redemption Price, plus accrued and
unpaid interest to the Redemption Date.
Notice of redemption shall be deemed to be given when mailed, whether
or not the Holder receives the notice. In any event, failure to give such
notice, or any defect therein, shall not affect the validity of the proceedings
for the redemption of Notes held by Holders to whom such notice was properly
given.
SECTION 3.06. Deposit of Redemption Price. On or prior to 10:00 a.m.
New York City time on any Redemption Date, the Company shall deposit with the
Paying Agent (or, if the Company is acting as its own Paying Agent, shall
segregate and hold in trust as provided in Section 2.05) money in immediately
available funds sufficient to pay the Redemption Price of and accrued and unpaid
interest on all Notes to be redeemed on that date other than Notes or portions
thereof called for redemption on that date that have been delivered by the
Company to the Trustee for cancellation.
SECTION 3.07. Payment of Notes Called for Redemption. If notice of
redemption has been given in the manner provided above, the Notes or portion of
Notes specified in such notice to be redeemed shall become due and payable on
the Redemption Date at the Redemption Price stated therein, together with
accrued and unpaid interest to such Redemption Date, and on and after such date
(unless the Company shall default in the payment of such Notes at the Redemption
Price and accrued and unpaid interest to the Redemption Date, in which case the
principal, until paid, shall bear interest from the Redemption Date at the rate
prescribed in the Notes), such Notes shall cease to accrue interest. Upon
surrender of any Note for redemption in accordance with a notice of redemption,
such Note shall be paid and redeemed by the Company at the Redemption Price,
together with accrued and unpaid interest to the Redemption Date; provided that
installments of interest whose record date is prior to the Redemption Date shall
be payable to the Holders registered as such at the close of business such
record date, if any.
SECTION 3.08. Notes Redeemed in Part. Upon surrender of any Note that
is redeemed in part, the Company shall at its expense issue and execute and the
Trustee shall
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39
authenticate and deliver for the Holder a new Note equal in principal amount to
the unredeemed portion of such surrendered Note.
ARTICLE FOUR
COVENANTS
SECTION 4.01. Payment of Notes. The Company shall pay the principal
of, premium, if any, and interest on the Notes on the dates and in the manner
provided in the Notes and this Indenture. An installment of principal, premium,
if any, or interest shall be considered paid on the date due if the Trustee or
Paying Agent (other than the Company, a Subsidiary of the Company, or any
Affiliate of any of them) holds as of 10:00 A.M. New York City time on the due
date money deposited by the Company in immediately available funds and
designated for and sufficient to pay the installment. If the Company or any
Subsidiary of the Company or any Affiliate of any of them, acts as Paying Agent,
an installment of principal, premium, if any, or interest shall be considered
paid on the due date if the entity acting as Paying Agent complies with the last
sentence of Section 2.05. As provided in Section 6.09, upon any bankruptcy or
reorganization procedure relative to the Company, the Trustee shall serve as the
Paying Agent and conversion agent, if any, for the Notes.
The Company shall pay interest on overdue principal, premium, if any,
and interest on overdue installments of interest, to the extent lawful, at the
rate per annum specified in the Notes.
SECTION 4.02. Maintenance of Office or Agency. The Company will
maintain an office or agency where Notes may be surrendered for registration of
transfer or exchange or for presentation for payment and where notices and
demands to or upon the Company in respect of the Notes and this Indenture may be
served. The Company will give prompt written notice to the Trustee of the
location, and any change in the location, of such office or agency. If at any
time the Company shall fail to maintain any such required office or agency or
shall fail to furnish the Trustee with the address thereof, such presentations,
surrenders, notices and demands may be made or served at the address of the
Trustee set forth in Section 11.02.
The Company may also from time to time designate one or more other
offices or agencies where the Notes may be presented or surrendered for any or
all such purposes and may from time to time rescind such designations. The
Company shall give prompt written notice to the Trustee of any such designation
or rescission and of any change in the location of any such other office or
agency.
The Company hereby initially designates the [ ] of the Trustee
as such office of the Company in accordance with Section 2.04.
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SECTION 4.03. Limitation on Indebtedness. (a) The Company will
not, and will not permit any of its Restricted Subsidiaries to, Incur any
Indebtedness (other than the Notes, the Note Guarantees and Indebtedness
existing on the Closing Date); provided that the Company may Incur Indebtedness
if, after giving effect to the Incurrence of such Indebtedness and the receipt
and application of the proceeds therefrom, the Interest Coverage Ratio would be
greater than 3:1.
Notwithstanding the foregoing, the Company and any Restricted
Subsidiary (except as specified below) may Incur each and all of the following:
(i) Indebtedness of the Company or any Restricted Subsidiary that is a Guarantor
outstanding at any time under the Credit Agreement; provided, that after giving
effect to the Incurrence of any such Indebtedness, the book value of assets of
the Company not subject to any Lien (other than Liens described in clauses (i)
through (v), (xiii) and (xvi) of the definition of "Permitted Liens") shall not
be less than $125 million; (ii) Indebtedness owed (A) to the Company evidenced
by an unsubordinated promissory note or (B) to any of its Restricted
Subsidiaries; provided that any event which results in any such Restricted
Subsidiary ceasing to be a Restricted Subsidiary or any subsequent transfer of
such Indebtedness (other than to the Company or another Restricted Subsidiary)
shall be deemed, in each case, to constitute an Incurrence of such Indebtedness
not permitted by this clause (ii); (iii) Indebtedness issued in exchange for, or
the net proceeds of which are used to refinance or refund, then outstanding
Indebtedness Incurred under clause (v) of this paragraph and any refinancings
thereof in an amount not to exceed the amount so refinanced or refunded (plus
premiums, accrued interest, fees and expenses); provided that Indebtedness the
proceeds of which are used to refinance or refund the Notes or Indebtedness that
is pari passu with, or subordinated in right of payment to, the Notes or Note
Guarantees shall only be permitted under this clause (iii) if (A) in case the
Notes are refinanced in part or the Indebtedness to be refinanced is pari passu
with the Notes or Note Guarantees, such new Indebtedness, by its terms or by the
terms of any agreement or instrument pursuant to which such new Indebtedness is
outstanding, is expressly made pari passu with, or subordinate in right of
payment to, the remaining Notes or Note Guarantees, as the case may be, (B) in
case the Indebtedness to be refinanced is subordinated in right of payment to
the Notes or Note Guarantees, as the case may be, such new Indebtedness, by its
terms or by the terms of any agreement or instrument pursuant to which such new
Indebtedness is issued or remains outstanding, is expressly made subordinate in
right of payment to the Notes or the Note Guarantees, as the case may be, at
least to the extent that the Indebtedness to be refinanced is subordinated to
the Notes or the Note Guarantees, as the case may be, and (C) such new
Indebtedness, determined as of the date of Incurrence of such new Indebtedness,
does not mature prior to the Stated Maturity of the Indebtedness to be
refinanced or refunded, and the Average Life of such new Indebtedness is at
least equal to the remaining Average Life of the Indebtedness to be refinanced
or refunded; and provided further that in no event may Indebtedness of the
Company be refinanced by means of any Indebtedness of any Restricted Subsidiary
pursuant to this clause (iii) (other than pursuant to an Offer to Purchase);
(iv) Indebtedness (A) in respect of performance, surety or appeal bonds provided
in the ordinary course of business, (B) under Currency Agreements and Interest
Rate Agreements; provided that such agreements (a) are
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41
designed solely to protect the Company or its Restricted Subsidiaries against
fluctuations in foreign currency exchange rates or interest rates and (b) do not
increase the Indebtedness of the obligor outstanding at any time other than as a
result of fluctuations in foreign currency exchange rates or interest rates or
by reason of fees, indemnities and compensation payable thereunder; and (C)
arising from agreements providing for indemnification, adjustment of purchase
price or similar obligations, or from Guarantees or letters of credit, surety
bonds or performance bonds securing any obligations of the Company or any of its
Restricted Subsidiaries pursuant to such agreements, in any case Incurred in
connection with the disposition of any business, assets or Restricted Subsidiary
(other than Guarantees of Indebtedness Incurred by any Person acquiring all or
any portion of such business, assets or Restricted Subsidiary for the purpose of
financing such acquisition), in a principal amount not to exceed the gross
proceeds actually received by the Company or any Restricted Subsidiary in
connection with such disposition; (v) Indebtedness of the Company, to the extent
the net proceeds thereof are promptly (A) used to purchase Notes tendered in an
Offer to Purchase made as a result of a Change in Control or (B) deposited to
defease the Notes as described below under "Defeasance"; (vi) Guarantees of the
Notes, Guarantees by the Company or Restricted Subsidiaries of Indebtedness of
ATA under the Credit Agreement, and Guarantees of Indebtedness of the Company by
any Restricted Subsidiary provided the Guarantee of such Indebtedness is
permitted by and made in accordance with Section 4.07; (vii) Indebtedness of the
Company or any Restricted Subsidiary Incurred to finance the cost of aircraft,
engines and buyer-furnished equipment attached thereto or incorporated therein;
provided, that such Indebtedness is created solely for the purpose of financing
the costs (including transaction costs and the costs of improvement or
construction) of property or assets and is incurred prior to, at the time of or
within 12 months after, the later of the acquisition, the completion of
construction or the commencement of full operation of such property or assets,
and (b) the principal amount of such Indebtedness does not exceed 100% of such
costs; and (viii) Indebtedness of the Company (in addition to Indebtedness
permitted under clauses (i) through (vii) above) in an aggregate principal
amount outstanding at any time not to exceed $10 million.
(b) Notwithstanding any other provision of this Section 4.03, the
maximum amount of Indebtedness that the Company or a Restricted Subsidiary may
Incur pursuant to this Section 4.03 shall not be deemed to be exceeded, with
respect to any outstanding Indebtedness due solely to the result of fluctuations
in the exchange rates of currencies.
(c) For purposes of determining any particular amount of Indebtedness
under this Section 4.03, (1) Indebtedness Incurred under the Credit Agreement on
or prior to the Closing Date shall be treated as Incurred pursuant to clause (i)
of the second paragraph of this Section 4.03, (2) Guarantees, Liens or
obligations with respect to letters of credit supporting Indebtedness otherwise
included in the determination of such particular amount shall not be included
and (3) any Liens granted pursuant to the equal and ratable provisions referred
to in Section 4.09 shall not be treated as Indebtedness. For purposes of
determining compliance with this Section 4.03, in the event that an item of
Indebtedness meets the criteria of more than one of the types of Indebtedness
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42
described in the above clauses (other than Indebtedness referred to in clause
(1) of the preceding sentence), the Company, in its sole discretion, shall
classify such item of Indebtedness and only be required to include the amount
and type of such Indebtedness in one of such clauses.
SECTION 4.04. Limitation on Restricted Payments. The Company will not,
and will not permit any Restricted Subsidiary to, directly or indirectly, (i)
declare or pay any dividend or make any distribution on or with respect to its
Capital Stock (other than (x) dividends or distributions payable solely in
shares of its Capital Stock (other than Disqualified Stock) or in options,
warrants or other rights to acquire shares of such Capital Stock and (y) pro
rata dividends or distributions on Common Stock of Restricted Subsidiaries held
by minority stockholders) held by Persons other than the Company or any of its
Restricted Subsidiaries, (ii) purchase, redeem, retire or otherwise acquire for
value any shares of Capital Stock of (A) the Company or an Unrestricted
Subsidiary (including options, warrants or other rights to acquire such shares
of Capital Stock) held by any Person or (B) a Restricted Subsidiary (including
options, warrants or other rights to acquire such shares of Capital Stock) held
by any Affiliate of the Company (other than a Wholly Owned Restricted
Subsidiary) or any holder (or any Affiliate of such holder) of 5% or more of the
Capital Stock of the Company, (iii) make any voluntary or optional principal
payment, or voluntary or optional redemption, repurchase, defeasance, or other
acquisition or retirement for value, of Indebtedness of the Company or any
Guarantor that is subordinated in right of payment to the Notes or to a
Guarantor's Note Guarantee, as the case may be, or (iv) make any Investment,
other than a Permitted Investment, in any Person (such payments or any other
actions described in clauses (i) through (iv) above being collectively
"Restricted Payments") if, at the time of, and after giving effect to, the
proposed Restricted Payment: (A) a Default or Event of Default shall have
occurred and be continuing, (B) the Company could not Incur at least $1.00 of
Indebtedness under the first paragraph of Section 4.03 or (C) the aggregate
amount of all Restricted Payments (the amount, if other than in cash, to be
determined in good faith by the Board of Directors, whose determination shall be
conclusive and evidenced by a Board Resolution) made after the Closing Date
shall exceed the sum of (1) 50% of the aggregate amount of the Adjusted
Consolidated Net Income (or, if the Adjusted Consolidated Net Income is a loss,
minus 100% of the amount of such loss) (determined by excluding income resulting
from transfers of assets by the Company or a Restricted Subsidiary to an
Unrestricted Subsidiary) accrued on a cumulative basis during the period (taken
as one accounting period) beginning on the first day of the fiscal quarter
immediately following the Closing Date and ending on the last day of the last
fiscal quarter preceding the Transaction Date for which reports have been filed
with the Commission or provided to the Trustee pursuant to Section 4.17, plus
(2) the aggregate Net Cash Proceeds received by the Company after the Closing
Date from the issuance and sale permitted by the Indenture of its Capital Stock
(other than Disqualified Stock) to a Person who is not a Subsidiary of the
Company, including an issuance or sale permitted by the Indenture of
Indebtedness of the Company for cash subsequent to the Closing Date upon the
conversion of such Indebtedness into Capital Stock (other than Disqualified
Stock) of the Company, or from the issuance to a Person who is not a Subsidiary
of the Company of any options, warrants or other
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43
rights to acquire Capital Stock of the Company (in each case, exclusive of any
Disqualified Stock or any options, warrants or other rights that are redeemable
at the option of the holder, or are required to be redeemed, prior to the Stated
Maturity of the Notes), plus (3) an amount equal to the net reduction in
Investments (other than reductions in Permitted Investments) in any Person
resulting from payments of interest on Indebtedness, dividends, repayments of
loans or advances, or other transfers of assets, in each case to the Company or
any Restricted Subsidiary or from the Net Cash Proceeds from the sale of any
such Investment (except, in each case, to the extent any such payment or
proceeds are included in the calculation of Adjusted Consolidated Net Income),
or from redesignations of Unrestricted Subsidiaries as Restricted Subsidiaries
(valued in each case as provided in the definition of "Investments"), not to
exceed, in each case, the amount of Investments previously made by the Company
or any Restricted Subsidiary in such Person or Unrestricted Subsidiary, minus
(4) the sum of the amounts by which the Pro Forma Consolidated Net Worth after
giving effect to each consolidation, merger and sale of assets effectuated
pursuant to clause (iii) under Section 5.01 was less than the Base Consolidated
Net Worth immediately prior to such consolidation, merger and sale of assets,
plus (5) $5 million.
The foregoing provision shall not be violated by reason of: (i) the
payment of any dividend within 60 days after the date of declaration thereof if,
at said date of declaration, such payment would comply with the foregoing
paragraph; (ii) the redemption, repurchase, defeasance or other acquisition or
retirement for value of Indebtedness that is subordinated in right of payment to
the Notes including premium, if any, and accrued and unpaid interest, with the
proceeds of, or in exchange for, Indebtedness Incurred under clause (iii) of the
second paragraph of part (a) of Section 4.03; (iii) the repurchase, redemption
or other acquisition of Capital Stock of the Company or an Unrestricted
Subsidiary (or options, warrants or other rights to acquire such Capital Stock)
in exchange for, or out of the proceeds of a substantially concurrent offering
of, shares of Capital Stock (other than Disqualified Stock) of the Company (or
options, warrants or other rights to acquire such Capital Stock); (iv) the
making of any principal payment or the repurchase, redemption, retirement,
defeasance or other acquisition for value of Indebtedness of the Company or any
Guarantor which is subordinated in right of payment to the Notes or the Note
Guarantees, as the case may be, in exchange for, or out of the proceeds of, a
substantially concurrent offering of, shares of the Capital Stock (other than
Disqualified Stock) of the Company or any Guarantor (or options, warrants or
other rights to acquire such Capital Stock); (v) payments or distributions, to
dissenting stockholders pursuant to applicable law, pursuant to or in connection
with a consolidation, merger or transfer of assets that complies with the
provisions of the Indenture applicable to mergers, consolidations and transfers
of all or substantially all of the property and assets of the Company; (vi)
Investments acquired in exchange for Capital Stock (other than Disqualified
Stock) of the Company; provided that, except in the case of clauses (i) and
(iii), no Default or Event of Default shall have occurred and be continuing or
occur as a consequence of the actions or payments set forth therein; or (vii)
the purchase or redemption of subordinated Indebtedness pursuant to asset sale
or change of control provisions contained in the Indenture or other governing
instrument relating thereto; provided, however, that (a) no offer or
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purchase obligation may be triggered in respect of such Indebtedness unless a
corresponding obligation also arises for the Notes and (b) in all events, no
repurchase or redemption of such Indebtedness may be consummated unless and
until the Company shall have satisfied all repurchase obligations with respect
to any required purchase offer made with respect to the Notes.
Each Restricted Payment permitted pursuant to the preceding paragraph
(other than the Restricted Payment referred to in clause (ii) thereof, an
exchange of Capital Stock for Capital Stock or Indebtedness referred to in
clause (iii) or (iv) thereof and an Investment referred to in clause (vi)
thereof), and the Net Cash Proceeds from any issuance of Capital Stock referred
to in clauses (iii) and (iv), shall be included in calculating whether the
conditions of clause (C) of the first paragraph of this Section 4.04 have been
met with respect to any subsequent Restricted Payments. In the event the
proceeds of an issuance of Capital Stock of the Company are used for the
redemption, repurchase or other acquisition of the Notes, or Indebtedness that
is pari passu with the Notes, then the Net Cash Proceeds of such issuance shall
be included in clause (C) of the first paragraph of this Section 4.04 only to
the extent such proceeds are not used for such redemption, repurchase or other
acquisition of Indebtedness.
SECTION 4.05. Limitation on Dividend and Other Payment Restrictions
Affecting Restricted Subsidiaries. The Company will not, and will not permit any
Restricted Subsidiary to, create or otherwise cause or suffer to exist or become
effective any consensual encumbrance or restriction of any kind on the ability
of any Restricted Subsidiary that is not a Guarantor to (i) pay dividends or
make any other distributions permitted by applicable law on any Capital Stock of
such Restricted Subsidiary owned by the Company or any other Restricted
Subsidiary, (ii) pay any Indebtedness owed to the Company or any other
Restricted Subsidiary, (iii) make loans or advances to the Company or any other
Restricted Subsidiary or (iv) transfer any of its property or assets to the
Company or any other Restricted Subsidiary.
The foregoing provisions shall not restrict any encumbrances or
restrictions: (i) existing on the Closing Date in the Credit Agreement, the
Indenture or any other agreements in effect on the Closing Date, and any
extensions, refinancings, renewals or replacements of such agreements; provided
that the encumbrances and restrictions in any such extensions, refinancings,
renewals or replacements are no less favorable in any material respect to the
Holders than those encumbrances or restrictions that are then in effect and that
are being extended, refinanced, renewed or replaced; (ii) existing under or by
reason of applicable law; (iii) existing with respect to any Person or the
property or assets of such Person acquired by the Company or any Restricted
Subsidiary, existing at the time of such acquisition and not incurred in
contemplation thereof, which encumbrances or restrictions are not applicable to
any Person or the property or assets of any Person other than such Person or the
property or assets of such Person so acquired; (iv) in the case of clause (iv)
of the first paragraph of this Section 4.05, (A) that restrict in a customary
manner the subletting, assignment or transfer of any property or asset that is a
lease, license, conveyance or contract or similar property or asset, (B)
existing by virtue of any transfer of,
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45
agreement to transfer, option or right with respect to, or Lien on, any property
or assets of the Company or any Restricted Subsidiary not otherwise prohibited
by the Indenture or (C) arising or agreed to in the ordinary course of business,
not relating to any Indebtedness, and that do not, individually or in the
aggregate, detract from the value of property or assets of the Company or any
Restricted Subsidiary in any manner material to the Company or any Restricted
Subsidiary; (v) with respect to a Restricted Subsidiary and imposed pursuant to
an agreement that has been entered into for the sale or disposition of all or
substantially all of the Capital Stock of, or property and assets of, such
Restricted Subsidiary; or (vi) contained in the terms of any Indebtedness or any
agreement pursuant to which such Indebtedness was issued if (A) the encumbrance
or restriction applies only in the event of a payment default or a default with
respect to a financial covenant contained in such Indebtedness or agreement, (B)
the encumbrance or restriction is not materially more disadvantageous to the
Holders of the Notes than is customary in comparable financings (as determined
by the Company) and (C) the Company determines that any such encumbrance or
restriction will not materially affect the Company's ability to make principal
or interest payments on the Notes. Nothing contained in this Section 4.05 shall
prevent the Company or any Restricted Subsidiary from (1) creating, incurring,
assuming or suffering to exist any Liens otherwise permitted in Section 4.09 or
(2) restricting the sale or other disposition of property or assets of the
Company or any of its Restricted Subsidiaries that secure Indebtedness of the
Company or any of its Restricted Subsidiaries.
SECTION 4.06. Limitation on the Issuance and Sale of Capital Stock of
Restricted Subsidiaries. The Company will not sell, and will not permit any
Restricted Subsidiary, directly or indirectly, to issue or sell, any shares of
Capital Stock of a Restricted Subsidiary (including options, warrants or other
rights to purchase shares of such Capital Stock) except (i) to the Company or a
Wholly Owned Restricted Subsidiary; (ii) issuances of director's qualifying
shares or sales to foreign nationals of shares of Capital Stock of foreign
Restricted Subsidiaries, to the extent required by applicable law; or (iii) if,
immediately after giving effect to such issuance or sale, such Restricted
Subsidiary would no longer constitute a Restricted Subsidiary and any Investment
in such Person remaining after giving effect to such issuance or sale would have
been permitted to be made under Section 4.04 if made on the date of such
issuance or sale.
SECTION 4.07. Limitation on Issuances of Guarantees by Restricted
Subsidiaries. The Company will not permit any Restricted Subsidiary that is not
a Guarantor, directly or indirectly, to Guarantee any Indebtedness of the
Company which is pari passu with or subordinate in right of payment to the Notes
("Guaranteed Indebtedness"), unless (i) such Restricted Subsidiary
simultaneously executes and delivers a supplemental indenture to the Indenture
providing for a Guarantee (a "Subsidiary Guarantee") of payment of the Notes by
such Restricted Subsidiary and (ii) such Restricted Subsidiary waives and will
not in any manner whatsoever claim or take the benefit or advantage of, any
rights of reimbursement, indemnity or subrogation or any other rights against
the Company or any other Restricted Subsidiary as a result of any payment by
such Restricted Subsidiary under its Subsidiary Guarantee; provided that this
paragraph shall
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46
not be applicable to any Guarantee of any Restricted Subsidiary that existed at
the time such Person became a Restricted Subsidiary and was not Incurred in
connection with, or in contemplation of, such Person becoming a Restricted
Subsidiary. If the Guaranteed Indebtedness is (A) pari passu with the Notes or
the Note Guarantees, then the Guarantee of such Guaranteed Indebtedness shall be
pari passu with, or subordinated to, the Subsidiary Guarantee or (B)
subordinated to the Notes or the Note Guarantees, then the Guarantee of such
Guaranteed Indebtedness shall be subordinated to the Subsidiary Guarantee at
least to the extent that the Guaranteed Indebtedness is subordinated to the
Notes or the Note Guarantees, as the case may be.
Notwithstanding the foregoing, any Subsidiary Guarantee by a
Restricted Subsidiary may provide by its terms that it shall be automatically
and unconditionally released and discharged upon (i) any sale, exchange or
transfer, to any Person not an Affiliate of the Company, of all of the Company's
and each Restricted Subsidiary's Capital Stock in, or all or substantially all
the assets of, such Restricted Subsidiary (which sale, exchange or transfer is
not prohibited by the Indenture) or (ii) the release or discharge of the
Guarantee which resulted in the creation of such Subsidiary Guarantee, except a
discharge or release by or as a result of payment under such Guarantee.
SECTION 4.08. Limitation on Transactions with Shareholders and
Affiliates. The Company will not, and will not permit any Restricted Subsidiary
to, directly or indirectly, enter into, renew or extend any transaction
(including, without limitation, the purchase, sale, lease or exchange of
property or assets, or the rendering of any service) with any holder (or any
Affiliate of such holder) of 5% or more of any class of Capital Stock of the
Company or with any Affiliate of the Company or any Restricted Subsidiary,
except upon fair and reasonable terms no less favorable to the Company or such
Restricted Subsidiary than could be obtained, at the time of such transaction
or, if such transaction is pursuant to a written agreement, at the time of the
execution of the agreement providing therefor, in a comparable arm's-length
transaction with a Person that is not such a holder or an Affiliate.
The foregoing limitation does not limit, and shall not apply to (i)
transactions (A) approved by a majority of the disinterested members of the
Board of Directors, or (B) for which the Company or a Restricted Subsidiary
delivers to the Trustee a written opinion of a nationally recognized investment
banking firm stating that the transaction is fair to the Company or such
Restricted Subsidiary from a financial point of view; (ii) any transaction
solely between the Company and any of its Wholly Owned Restricted Subsidiaries
or solely between Wholly Owned Restricted Subsidiaries; (iii) the payment of
reasonable and customary regular compensation (whether in cash or securities)
and expense reimbursements to directors of the Company who are not employees of
the Company; (iv) any payments or other transactions pursuant to any tax-sharing
agreement between the Company and any other Person with which the Company files
a consolidated tax return or with which the Company is part of a consolidated
group for tax purposes; or (v) any Restricted Payments not prohibited by Section
4.04. Notwithstanding the
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47
foregoing, any transaction or series of related transactions covered by the
first paragraph of this Section 4.08 and not covered by clauses (ii) through
(v) of this paragraph, (a) the aggregate amount of which exceeds $1 million in
value, must be approved or determined to be fair in the manner provided for
in clause (i)(A) or (B) above and (b) the aggregate amount of which exceeds
$3 million in value, must be determined to be fair in the manner provided
for in clause (i)(B) above.
SECTION 4.09. Limitation on Liens. The Company will not, and will not
permit any Restricted Subsidiary to, create, incur, assume or suffer to exist
any Lien on any of its assets or properties of any character, or any shares of
Capital Stock or Indebtedness of any Restricted Subsidiary, without making
effective provision for all of the Notes (or in the case of a Lien on assets or
properties of a Guarantor, the Note Guarantee of such Guarantor) and all other
amounts due under the Indenture to be directly secured equally and ratably with
(or, if the obligation or liability to be secured by such Lien is subordinated
in right of payment to the Notes or the Note Guarantee, prior to) the obligation
or liability secured by such Lien. The foregoing limitation does not apply to
(i) Liens existing on the Closing Date, including Liens securing obligations
under the Credit Agreement; (ii) Liens granted after the Closing Date on any
assets or Capital Stock of the Company or its Restricted Subsidiaries created in
favor of the Holders; (iii) Liens with respect to the assets of a Restricted
Subsidiary granted by such Restricted Subsidiary to the Company or a Wholly
Owned Restricted Subsidiary to secure Indebtedness owing to the Company or such
other Restricted Subsidiary; (iv) Liens securing Indebtedness which is Incurred
to refinance secured Indebtedness which is permitted to be Incurred under clause
(iii) of the second paragraph of Section 4.03; provided that such Liens do not
extend to or cover any property or assets of the Company or any Restricted
Subsidiary other than the property or assets securing the Indebtedness being
refinanced; (v) Liens on any property or assets of a Restricted Subsidiary
securing Indebtedness of such Restricted Subsidiary permitted under Section
4.03; or (vi) Permitted Liens.
SECTION 4.10. Limitation on Sale-Leaseback Transactions. The Company
will not, and will not permit any Restricted Subsidiary to, enter into any
sale-leaseback transaction involving any of its assets or properties whether now
owned or hereafter acquired, whereby the Company or a Restricted Subsidiary
sells or transfers such assets or properties and then or thereafter leases such
assets or properties or any part thereof or any other assets or properties which
the Company or such Restricted Subsidiary, as the case may be, intends to use
for substantially the same purpose or purposes as the assets or properties sold
or transferred.
The foregoing restriction does not apply to any sale-leaseback
transaction if (i) the lease is for a period, including renewal rights, of not
in excess of three years; (ii) the lease secures or relates to industrial
revenue or pollution control bonds; (iii) the transaction is solely between the
Company and any Wholly Owned Restricted Subsidiary or solely between Wholly
Owned Restricted Subsidiaries; or (iv) the Company or such Restricted
Subsidiary, within 12 months after
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48
the sale or transfer of any assets or properties is completed, applies an amount
not less than the net proceeds received from such sale in accordance with clause
(A) or (B) of the first paragraph of Section 4.11.
SECTION 4.11. Limitation on Asset Sales. The Company will not, and
will not permit any Restricted Subsidiary to, consummate any Asset Sale, unless
(i) the consideration received by the Company or such Restricted Subsidiary is
at least equal to the fair market value of the assets sold or disposed of and
(ii) at least 75% of the consideration received (including the fair market
value, as determined in good faith by the Board of Directors, of any non-cash
consideration) consists of (w) cash, (x) Temporary Cash Investments, (y)
marketable securities which are liquidated for cash within 90 days following the
consummation of such Asset Sale, and (z) the assumption of Indebtedness of the
Company or any Restricted Subsidiary (other than the Notes and the Note
Guarantees); provided that (1) such Indebtedness is not subordinate in right of
payment to the Notes and the Note Guarantees and (2) the Company or such
Restricted Subsidiary is irrevocably released and discharged from such
Indebtedness. In the event and to the extent that the Net Cash Proceeds received
by the Company or any of its Restricted Subsidiaries from one or more Asset
Sales occurring on or after the Closing Date in any period of 12 consecutive
months exceed 10% of Adjusted Consolidated Net Tangible Assets (determined as of
the date closest to the commencement of such 12-month period for which a
consolidated balance sheet of the Company and its Subsidiaries has been filed
with the Commission), then the Company shall or shall cause the relevant
Restricted Subsidiary to (i) within twelve months after the date Net Cash
Proceeds so received exceed 10% of Adjusted Consolidated Net Tangible Assets (A)
apply an amount equal to such excess Net Cash Proceeds to permanently repay
unsubordinated Indebtedness of the Company, or any Restricted Subsidiary
providing a Subsidiary Guarantee pursuant to Section 4.07 described above or
Indebtedness of any other Restricted Subsidiary, in each case owing to a Person
other than the Company or any of its Restricted Subsidiaries or (B) invest an
equal amount, or the amount not so applied pursuant to clause (A) (or enter into
a definitive agreement committing to so invest within 12 months after the date
of such agreement), in property or assets (other than current assets) of a
nature or type or that are used in a business (or in a company having property
and assets of a nature or type, or engaged in a business) similar or related to
the nature or type of the property and assets of, or the business of, the
Company and its Restricted Subsidiaries existing on the date of such investment
and (ii) apply (no later than the end of the 12-month period referred to in
clause (i)) such excess Net Cash Proceeds (to the extent not applied pursuant to
clause (i)) as provided in the following paragraph of this Section 4.11. The
amount of such excess Net Cash Proceeds required to be applied (or to be
committed to be applied) during such 12-month period as set forth in clause (i)
of the preceding sentence and not applied as so required by the end of such
period shall constitute "Excess Proceeds."
If, as of the first day of any calendar month, the aggregate amount of Excess
Proceeds not theretofore subject to an Offer to Purchase pursuant to this
Section 4.11 totals at least $10 million, the Company must commence, not later
than the fifteenth Business Day of such
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49
month, and consummate an Offer to Purchase from the Holders on a pro rata basis
an aggregate principal amount of Notes equal to the Excess Proceeds on such
date, at a purchase price equal to 100% of the principal amount of the Notes,
plus, in each case, accrued interest (if any) to the Payment Date. In the event
that more than 98% of the outstanding principal amount of the Notes are tendered
pursuant to such Offer to Purchase, the balance of the Notes will be redeemable,
at the Company's option, in whole or in part, at any time or from time to time
thereafter, at a Redemption Price equal to the price specified in such Offer to
Purchase plus accrued and unpaid interest, if any, to the Redemption Date
(subject to the right of Holders of record on the relevant Regular Record Date
that is on or prior to the Redemption Date to receive interest due on an
Interest Payment Date).
SECTION 4.12. Repurchase of Notes upon a Change of Control. The
Company must commence, within 30 days of the occurrence of a Change of Control,
and consummate an Offer to Purchase for all Notes then outstanding, at a
purchase price equal to 101% of the principal amount thereof, plus accrued
interest (if any) to the Payment Date. In the event that more than 98% of the
outstanding principal amount of the Notes are tendered pursuant to such Offer to
Purchase, the balance of the Notes will be redeemable, at the Company's option,
in whole or in part, at any time or from time to time thereafter, at a
Redemption Price equal to the price specified in such Offer to Purchase plus
accrued and unpaid interest, if any, to the Redemption Date (subject to the
right of Holders of record on the relevant Regular Record Date that is on or
prior to the Redemption Date to receive interest due on an Interest Payment
Date).
SECTION 4.13. Existence. Subject to Articles Four and Five of this
Indenture, the Company will do or cause to be done all things necessary to
preserve and keep in full force and effect its existence and the existence of
each of its Restricted Subsidiaries in accordance with the respective
organizational documents of the Company and each such Restricted Subsidiary and
the rights (whether pursuant to charter, partnership certificate, agreement,
statute or otherwise), licenses and franchises of the Company and each such
Restricted Subsidiary; provided that the Company shall not be required to
preserve any such right, license or franchise, or the existence of any
Restricted Subsidiary, if the maintenance or preservation thereof is no longer
desirable in the conduct of the business of the Company and its Restricted
Subsidiaries taken as a whole.
SECTION 4.14. Payment of Taxes and Other Claims. The Company will pay
or discharge and shall cause each of its Restricted Subsidiaries to pay or
discharge, or cause to be paid or discharged, before the same shall become
delinquent (i) all material taxes, assessments and governmental charges levied
or imposed upon (a) the Company or any such Restricted Subsidiary, (b) the
income or profits of any such Subsidiary which is a corporation or (c) the
property of the Company or any such Restricted Subsidiary and (ii) all material
lawful claims for labor, materials and supplies that, if unpaid, might by law
become a lien upon the property of the Company or any such Restricted
Subsidiary; provided that the Company shall not be required to pay or discharge,
or cause to be paid or discharged, any such tax, assessment, charge or claim the
amount,
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applicability or validity of which is being contested in good faith by
appropriate proceedings and for which adequate reserves have been established.
SECTION 4.15. Maintenance of Properties and Insurance. The Company
will cause all properties used or useful in the conduct of its business or the
business of any Restricted Subsidiary and material to the Company and its
Restricted Subsidiaries taken as a whole, to be maintained and kept in good
condition, repair and working order and supplied with all necessary equipment
and will cause to be made all necessary repairs, renewals, replacements,
betterments and improvements thereof, all as in the judgment of the Company may
be necessary so that the business carried on in connection therewith may be
properly and advantageously conducted at all times; provided that nothing in
this Section 4.15 shall prevent the Company or any such Restricted Subsidiary
from discontinuing the use, operation or maintenance of any of such properties
or disposing of any of them, if such discontinuance or disposal is, in the
judgment of the Company or of such Restricted Subsidiary having managerial
responsibility for any such property, desirable in the conduct of the business
of the Company or such Restricted Subsidiary.
The Company will provide or cause to be provided, for itself and its
Restricted Subsidiaries, insurance (including appropriate self-insurance)
against loss or damage of the kinds customarily insured against by corporations
similarly situated and owning like properties, with reputable insurers or with
the government of the United States of America, or an agency or instrumentality
thereof, in such amounts, with such deductibles and by such methods as the
Company in good faith shall determine to be reasonable and appropriate in the
circumstances.
SECTION 4.16. Compliance Certificates. (a) Each of the Company and
each Guarantor shall deliver to the Trustee, within 90 days after the end of the
Company's and each Guarantor's fiscal year, an Officers' Certificate signed by
the Chief Financial Officer of the Company or the Guarantor, as applicable, and
another senior executive Officer of the Company or the Guarantor, as applicable,
stating whether or not the signers know of any Default or Event of Default that
occurred during such fiscal year. If any of the signers of the Officers'
Certificate have knowledge of such a Default or Event of Default, the
certificate shall describe any such Default or Event of Default and its status.
(b) The Company shall, so long as any of the Notes are outstanding,
deliver to the Trustee, forthwith upon any Officer becoming aware of any Default
or Event of Default, an Officers' Certificate specifying such Default or Event
of Default and what action the Company is taking or proposes to take with
respect thereto.
SECTION 4.17. Commission Reports and Reports to Holders. The Company
shall file with the Commission the annual, quarterly and other reports and other
information required by Section 13(a) or 15(d) of the Exchange Act, regardless
of whether such sections of the Exchange Act are applicable to the Company, and
shall mail or cause to be mailed copies of such
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reports to Holders and the Trustee within 15 days after the date it would have
been required to file such reports with the Commission had it been subject to
such sections; provided, however, that the copies of such reports mailed to
Holders may omit exhibits, which the Company will supply to any Holder at such
Holder's request. The Company also shall comply with the other provisions of TIA
Section 314(a).
SECTION 4.18. Waiver of Stay, Extension or Usury Laws. The Company and
each of the Guarantors covenant (to the extent that it may lawfully do so) that
it will not at any time insist upon, or plead, or in any manner whatsoever claim
or take the benefit or advantage of, any stay or extension law or any usury law
or other law that would prohibit or forgive the Company or any Guarantor from
paying all or any portion of the principal of, premium, if any, or interest on
the Notes as contemplated herein, wherever enacted, now or at any time hereafter
in force, or that may affect the covenants or the performance of this Indenture;
and (to the extent that it may lawfully do so) the Company and each of the
Guarantors hereby expressly waive all benefit or advantage of any such law and
covenants that it will not hinder, delay or impede the execution of any power
herein granted to the Trustee, but will suffer and permit the execution of every
such power as though no such law had been enacted.
ARTICLE FIVE
SUCCESSOR CORPORATION
SECTION 5.01. When Company May Merge, Etc. Neither the Company nor any
Guarantor will consolidate with, merge with or into, or sell, convey, transfer,
lease or otherwise dispose of all or substantially all of its property and
assets (as an entirety or substantially an entirety in one transaction or a
series of related transactions) to, any Person or permit any Person to merge
with or into the Company or any Guarantor unless:
(i) the Company or the Guarantor, as the case may be, shall be the
continuing Person, or the Person (if other than the Company or the
Guarantor) formed by such consolidation or into which the Company or the
Guarantor, as the case may be, is merged or that acquired or leased such
property and assets of the Company or the Guarantor, as the case may be,
shall be a corporation organized and validly existing under the laws of the
United States of America or any jurisdiction thereof and shall expressly
assume, by a supplemental indenture, executed and delivered to the Trustee,
all of the obligations of the Company or the Guarantor, as the case may be,
on all of the Notes or the Note Guarantees, as the case may be, and under
the Indenture;
(ii) immediately after giving effect to such transaction, no Default
or Event of Default shall have occurred and be continuing;
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52
(iii) immediately after giving effect to such transaction on a pro
forma basis, the Company or any Guarantor, as the case may be, or any
Person becoming the successor obligor of the Notes or the Note Guarantees,
as the case may be, shall have a Consolidated Net Worth (a "Pro Forma
Consolidated Net Worth") which is equal to or greater than the Consolidated
Net Worth of the Company or the Guarantor, as the case may be, immediately
prior to such transaction (the "Base Consolidated Net Worth"), or if the
Pro Forma Consolidated Net Worth is less than the Base Consolidated Net
Worth, the amount by which the Pro Forma Consolidated Net Worth is less
than the Base Consolidated Net Worth shall, if considered as a Restricted
Payment, be permitted to be paid at the time under Section 4.04;
(iv) immediately after giving effect to such transaction on a pro
forma basis the Company or any Guarantor, as the case may be, or any Person
becoming the successor obligor of the Notes or the Note Guarantees, as the
case may be, could Incur at least $1.00 of Indebtedness under the first
paragraph of Section 4.03; provided that this clause (iv) shall not apply
to a consolidation or merger with or into a Wholly Owned Restricted
Subsidiary with a positive net worth; and provided further that, in
connection with any such merger or consolidation, no consideration (other
than Capital Stock (other than Disqualified Stock) in the surviving Person,
the Company or any Guarantor) shall be issued or distributed to the
stockholders of the Company or the Guarantor; and
(v) the Company delivers to the Trustee an Officers' Certificate
(attaching the arithmetic computations to demonstrate compliance with
clauses (iii) and (iv)) and Opinion of Counsel, in each case stating that
such consolidation, merger or transfer and such supplemental indenture
complies with this provision and that all conditions precedent provided for
herein relating to such transaction have been complied with;
provided, however, that clauses (iii) and (iv) above do not apply if, in the
good faith determination of the Board of Directors of the Company, whose
determination shall be evidenced by a Board Resolution, the principal purpose of
such transaction is to change the state of incorporation of the Company or any
Guarantor; and provided further that any such transaction shall not have as one
of its purposes the evasion of the foregoing limitations.
SECTION 5.02. Successor Substituted. Upon any consolidation or merger,
or any sale, conveyance, transfer or other disposition of all or substantially
all of the property and assets of the Company or any Guarantor in accordance
with Section 5.01 of this Indenture, the successor Person formed by such
consolidation or into which the Company or any Guarantor is merged or to which
such sale, conveyance, transfer or other disposition is made shall succeed to,
and be substituted for, and may exercise every right and power of, the Company
or any Guarantor, as the case may be, under this Indenture with the same effect
as if such successor Person had been named as the Company or any Guarantor, as
the case may be, herein; provided, however, that in
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53
the case of a lease, the Company or any Guarantor, as the case may be, shall
not be released from the obligation to pay the principal of and interest on
the Notes.
ARTICLE SIX
DEFAULT AND REMEDIES
SECTION 6.01. Events of Default. An "Event of Default" shall occur
with respect to the Notes if:
(a) the Company or any Guarantor, as the case may be, defaults in the
payment of principal of (or premium, if any, on) any Note when the same
becomes due and payable at Stated Maturity, upon acceleration, redemption
or otherwise;
(b) the Company or any Guarantor, as the case may be, defaults in the
payment of interest on any Note when the same becomes due and payable, and
such default continues for a period of 30 days;
(c) the Company or any Guarantor, as the case may be, defaults in the
performance or breaches the provisions of Article Five or fails to make or
consummate an Offer to Purchase in accordance with Section 4.11 or Section
4.12 of this Indenture;
(d) the Company or any Guarantor, as the case may be, defaults in the
performance of or breaches any other covenant or agreement of the Company
or a Guarantor in this Indenture or under the Notes (other than a default
specified in clause (a), (b) or (c) above) and such default or breach
continues for a period of 30 consecutive days after written notice by the
Trustee or the Holders of 25% or more in aggregate principal amount of the
Notes;
(e) there occurs with respect to any issue or issues of Indebtedness
of the Company, any Guarantor or any Significant Subsidiary having an
outstanding principal amount of $10 million or more in the aggregate for
all such issues of all such Persons, whether such Indebtedness now exists
or shall hereafter be created, (I) an event of default that has caused the
holder thereof to declare such Indebtedness to be due and payable prior to
its Stated Maturity and such Indebtedness has not been discharged in full
or such acceleration has not been rescinded or annulled within 30 days of
such acceleration and/or (II) the failure to make a principal payment at
the final (but not any interim) fixed maturity and such defaulted payment
shall not have been made, waived or extended within 30 days of such payment
default;
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(f) any final judgment or order (not covered by insurance) for the
payment of money in excess of $10 million in the aggregate for all such
final judgments or orders against all such Persons (treating any
deductibles, self-insurance or retention as not so covered) shall be
rendered against the Company, any Guarantor or any Significant Subsidiary
and shall not be paid or discharged, and there shall be any period of 30
consecutive days during which a stay of enforcement of such final judgment
or order, by reason of a pending appeal or otherwise, shall not be in
effect;
(g) a court having jurisdiction in the premises enters a decree or
order for (A) relief in respect of the Company or any Significant
Subsidiary in an involuntary case under any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect, (B) appointment
of a receiver, liquidator, assignee, custodian, trustee, sequestrator or
similar official of the Company or any Significant Subsidiary or for all or
substantially all of the property and assets of the Company or any
Significant Subsidiary or (C) the winding up or liquidation of the affairs
of the Company or any Significant Subsidiary and, in each case, such decree
or order shall remain unstayed and in effect for a period of 30 consecutive
days;
(h) the Company or any Significant Subsidiary (A) commences a
voluntary case under any applicable bankruptcy, insolvency or other similar
law now or hereafter in effect, or consents to the entry of an order for
relief in an involuntary case under any such law, (B) consents to the
appointment of or taking possession by a receiver, liquidator, assignee,
custodian, trustee, sequestrator or similar official of the Company or any
Significant Subsidiary or for all or substantially all of the property and
assets of the Company or any Significant Subsidiary or (C) effects any
general assignment for the benefit of creditors; or
(i) any Note Guarantee ceases to be in full force and effect (except
pursuant to its terms) or is declared null and void or any Guarantor denies
that it has any further liability under any Note Guarantee, or gives notice
to such effect.
SECTION 6.02. Acceleration. If an Event of Default (other than an
Event of Default specified in clause (g) or (h) of Section 6.01 that occurs
with respect to the Company or any Guarantor) occurs and is continuing under
this Indenture, the Trustee or the Holders of at least 25% in aggregate
principal amount of the Notes, then outstanding, by written notice to the
Company (and to the Trustee if such notice is given by the Holders), may, and
the Trustee at the request of such Holders shall, declare the principal of,
premium, if any, and accrued interest on the Notes to be immediately due and
payable. Upon a declaration of acceleration, such principal of, premium, if any,
and accrued interest shall be immediately due and payable. In the event of a
declaration of acceleration because an Event of Default set forth in clause (e)
of Section 6.01 has occurred and is continuing, such declaration of acceleration
shall be automatically rescinded
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and annulled if the event of default triggering such Event of Default pursuant
to clause (e) shall be remedied or cured by the Company, any Guarantor or the
relevant Significant Subsidiary or waived by the holders of the relevant
Indebtedness within 60 days after the declaration of acceleration with respect
thereto. If an Event of Default specified in clause (g) or (h) of Section 6.01
occurs with respect to the Company or any Significant Subsidiary, the principal
of, premium, if any, and accrued interest on the Notes then outstanding shall
ipso facto become and be immediately due and payable without any declaration or
other act on the part of the Trustee or any Holder.
At any time after such a declaration of acceleration, but before a
judgment or decree for the payment of the money due has been obtained by the
Trustee, the Holders of at least a majority in principal amount of the
outstanding Notes by written notice to the Company and to the Trustee, may waive
all past defaults and rescind and annul a declaration of acceleration and its
consequences if (i) all existing Events of Default, other than the nonpayment of
the principal of, premium, if any, and interest on the Notes that have become
due solely by such declaration of acceleration, have been cured or waived and
(ii) the rescission would not conflict with any judgment or decree of a court of
competent jurisdiction.
SECTION 6.03. Other Remedies. If an Event of Default occurs and is
continuing, the Trustee may pursue any available remedy by proceeding at law or
in equity to collect the payment of principal of, premium, if any, or interest
on the Notes or to enforce the performance of any provision of the Notes or this
Indenture.
The Trustee may maintain a proceeding even if it does not possess any
of the Notes or does not produce any of them in the proceeding.
SECTION 6.04. Waiver of Past Defaults. Subject to Sections 6.02, 6.07
and 9.02, the Holders of at least a majority in aggregate principal amount of
the outstanding Notes, by notice to the Trustee, may waive an existing Default
or Event of Default and its consequences, except a Default in the payment of
principal of, premium, if any, or interest on any Note as specified in clause
(a) or (b) of Section 6.01 (including in connection with an Offer to Purchase)
or in respect of a covenant or provision of this Indenture which cannot be
modified or amended without the consent of the Holder of each outstanding Note
affected. Upon any such waiver, such Default shall cease to exist, and any Event
of Default arising therefrom shall be deemed to have been cured, for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other Default or Event of Default or impair any right consequent thereto.
SECTION 6.05. Control by Majority. The Holders of at least a majority
in aggregate principal amount of the outstanding Notes, by notice to the
Trustee, may direct the time, method and place of conducting any proceeding for
exercising any remedy available to the Trustee or exercising any trust or power
conferred on the Trustee; provided that the Trustee may
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refuse to follow any direction that conflicts with law or this Indenture, that
may involve the Trustee in personal liability, or that the Trustee determines in
good faith may be unduly prejudicial to the rights of Holders not joining in the
giving of such direction; and provided further that the Trustee may take any
other action it deems proper that is not inconsistent with any directions
received from Holders of Notes pursuant to this Section 6.05.
SECTION 6.06. Limitation on Suits. A Holder may not institute any
proceeding, judicial or otherwise, with respect to this Indenture or the Notes,
or for the appointment of a receiver or trustee, or pursue any other remedy
hereunder, unless:
(i) such Holder has previously given the Trustee written notice of a
continuing Event of Default;
(ii) the Holders of at least 25% in aggregate principal amount of
outstanding Notes shall have made a written request to the Trustee to
institute proceedings in respect of such Event of Default in its own name
as Trustee hereunder;
(iii) such Holder or Holders have offered to the Trustee indemnity
satisfactory to the Trustee against any costs, liability or expense
incurred in compliance with such request;
(iv) the Trustee for 60 days after its receipt of such notice, request
and offer of indemnity has failed to institute any such proceeding; and
(v) during such 60-day period, the Holders of a majority in aggregate
principal amount of the outstanding Notes have not given the Trustee a
direction that is inconsistent with such written request.
For purposes of Section 6.05 of this Indenture and this Section 6.06,
the Trustee shall comply with TIA Section 316(a) in making any determination of
whether the Holders of the required aggregate principal amount of outstanding
Notes have concurred in any request or direction of the Trustee to pursue any
remedy available to the Trustee or the Holders with respect to this Indenture or
the Notes or otherwise under the law.
A Holder may not use this Indenture to prejudice the rights of another
Holder or to obtain a preference or priority over such other Holder.
SECTION 6.07. Rights of Holders to Receive Payment. Notwithstanding
any other provision of this Indenture, the right of any Holder of a Note to
receive payment of the principal amount of, premium, if any, or interest on such
Holder's Note on or after the respective due dates expressed on such Note
(including in a notice with respect to an Offer to Purchase), or
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to bring suit for the enforcement of any such payment on or after such
respective dates, shall not be impaired or affected without the consent of
such Holder.
SECTION 6.08. Collection Suit by Trustee. If an Event of Default in
payment of principal, premium or interest specified in clause (a) or (b) of
Section 6.01 occurs and is continuing, the Trustee may recover judgment in its
own name and as trustee of an express trust against the Company or any other
obligor of the Notes for the whole amount of principal, premium, if any, and
accrued interest remaining unpaid, together with interest on overdue principal,
premium, if any, and, to the extent that payment of such interest is lawful,
interest on overdue installments of interest, in each case at the rate specified
in the Notes, and such further amount as shall be sufficient to cover the costs
and expenses of collection, including the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel.
SECTION 6.09. Trustee May File Proofs of Claim. The Trustee may file
such proofs of claim and other papers or documents as may be necessary or
advisable in order to have the claims of the Trustee (including any claim for
the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, and any other amounts due the Trustee under
Section 7.06) and the Holders allowed in any judicial proceedings relative to
the Company (or any other obligor of the Notes), its creditors or its property
and shall be entitled and empowered to collect and receive any monies,
securities or other property payable or deliverable upon conversion or exchange
of the Notes or upon any such claims and to distribute the same, and any
custodian, receiver, assignee, trustee, liquidator, sequestrator or other
similar official in any such judicial proceeding is hereby authorized by each
Holder to make such payments to the Trustee and, in the event that the Trustee
shall consent to the making of such payments directly to the Holders, to pay to
the Trustee any amount due to it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agent and counsel, and any other
amounts due the Trustee under Section 7.06. Nothing herein contained shall be
deemed to empower the Trustee to authorize or consent to, or accept or adopt on
behalf of any Holder, any plan of reorganization, arrangement, adjustment or
composition affecting the Notes or the rights of any Holder thereof, or to
authorize the Trustee to vote in respect of the claim of any Holder in any such
proceeding.
SECTION 6.10. Priorities. If the Trustee collects any money pursuant
to this Article Six, it shall pay out the money in the following order:
First: to the Trustee for amounts due under Section 7.06, including
payment of all compensation, expense and liabilities incurred, and all
advances made, by the Trustee and the costs and expenses of collection;
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Second: to Holders for amounts then due and unpaid for
principal amount of, premium, if any, and interest on the Notes in
respect of which or for the benefit of which such money has been
collected, ratably, without preference or priority of any kind,
according to the amounts due and payable on such Notes for principal,
premium, if any, and interest, respectively; and
Third: to the Company or any other obligors of the Notes, as their
interests may appear, or as a court of competent jurisdiction may direct.
The Trustee, upon prior written notice to the Company, may fix a
record date and payment date for any payment to Holders pursuant to this Section
6.10.
SECTION 6.11. Undertaking for Costs. In any suit for the enforcement
of any right or remedy under this Indenture or in any suit against the Trustee
for any action taken or omitted by it as Trustee, a court in its discretion may
require the filing by any party litigant in the suit of an undertaking to pay
the costs of the suit, and the court in its discretion may assess reasonable
costs, including reasonable attorneys' fees, against any party litigant in the
suit having due regard to the merits and good faith of the claims or defenses
made by the party litigant. This Section 6.11 does not apply to a suit by the
Trustee, a suit by a Holder pursuant to Section 6.07 of this Indenture, or a
suit by Holders of more than 10% in principal amount of the outstanding Notes.
SECTION 6.12. Restoration of Rights and Remedies. If the Trustee or
any Holder has instituted any proceeding to enforce any right or remedy under
this Indenture and such proceeding has been discontinued or abandoned for any
reason, or has been determined adversely to the Trustee or to such Holder, then,
and in every such case, subject to any determination in such proceeding, the
Company, the Trustee and the Holders shall be restored severally and
respectively to their former positions hereunder and thereafter all rights and
remedies of the Company, Trustee and the Holders shall continue as though no
such proceeding had been instituted.
SECTION 6.13. Rights and Remedies Cumulative. Except as otherwise
provided with respect to the replacement or payment of mutilated, destroyed,
lost or wrongfully taken Notes in Section 2.09, no right or remedy herein
conferred upon or reserved to the Trustee or to the Holders is intended to be
exclusive of any other right or remedy, and every right and remedy shall, to the
extent permitted by law, be cumulative and in addition to every other right and
remedy given hereunder or now or hereafter existing at law or in equity or
otherwise. The assertion or employment of any right or remedy hereunder, or
otherwise, shall not prevent the concurrent assertion or employment of any other
appropriate right or remedy.
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SECTION 6.14. Delay or Omission Not Waiver. No delay or omission of
the Trustee or of any Holder to exercise any right or remedy accruing upon any
Event of Default shall impair any such right or remedy or constitute a waiver of
any such Event of Default or an acquiescence therein. Every right and remedy
given by this Article Six or by law to the Trustee or to the Holders may be
exercised from time to time, and as often as may be deemed expedient, by the
Trustee or by the Holders, as the case may be.
ARTICLE SEVEN
TRUSTEE
SECTION 7.01. Rights and Duties of Trustee. (i) Except during the
continuance of an Event of Default,
(a) the Trustee undertakes to perform such duties and only such duties
as are specifically set forth in this Indenture, and no implied covenants
or obligations shall be read into this Indenture against the Trustee; and
(b) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth and correctness of the statements and
certificates or opinions furnished to it and conforming to the requirements
of this Indenture; but in the case of any such certificates or opinions
which by any provision hereof are specifically required to be furnished to
the Trustee, the Trustee shall be under a duty to examine the same to
determine whether or not they conform to the requirements of this
Indenture.
(ii) In case an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture, and use the same degree of care and skill in its exercise, as a
prudent person would exercise or use under the circumstances in the conduct of
such person's own affairs.
(iii) No provision of this Indenture shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act, or its own willful misconduct, except that:
(a) this Subsection shall not be construed to limit the effect of
Subsection (i) of this Section;
(b) the Trustee shall not be liable for any error of judgment made in
good faith by a Responsible Officer, unless it shall be proved that the
Trustee was negligent in ascertaining the pertinent facts; and
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(c) the Trustee shall not be liable with respect to any action taken
or omitted to be taken by it in good faith in accordance with the direction
of the Holders of a majority in principal amount of the outstanding Notes,
relating to the time, method and place of conducting any proceeding for
exercising any remedy available to the Trustee, or exercising any trust or
power conferred upon the Trustee, under this Indenture with respect to the
Notes.
(iv) Subject to TIA Sections 315(a) through (d):
(a) the Trustee may rely upon any document believed by it to be
genuine and to have been signed or presented by the proper person. The
Trustee need not investigate any fact or matter stated in the document;
(b) before the Trustee acts or refrains from acting, it may require an
Officers' Certificate or an Opinion of Counsel, which shall conform to
Section 11.04. The Trustee shall not be liable for any action it takes or
omits to take in good faith in reliance on such certificate or opinion;
(c) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction
of any of the Holders, unless such Holders shall have offered to the
Trustee reasonable security or indemnity against the costs, expenses and
liabilities that might be incurred by it in compliance with such request or
direction;
(d) the Trustee shall not be liable for any action it takes or omits
to take in good faith that it believes to be authorized or within its
rights or powers; provided that the Trustee's conduct does not constitute
negligence or bad faith;
(e) no provision of this Indenture shall require the Trustee to expend
or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder, or in the exercise of any of
its rights or powers, if it shall have reasonable grounds for believing
that repayment of such funds or adequate indemnity against such risk or
liability is not reasonably assured to it;
(f) whenever in the administration of this Indenture the Trustee shall
deem it desirable that a matter be proved or established prior to taking,
suffering or omitting any action hereunder, the Trustee (unless other
evidence be herein specifically prescribed), may, in the absence of bad
faith on its part, rely upon an Officers' Certificate;
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(g) the Trustee may consult with counsel and the advice of such
counsel or any opinion of counsel shall be full and complete authorization
and protection in respect of any action taken, suffered or omitted by it
hereunder in good faith and in reliance thereon;
(h) the Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture, note, other evidence of indebtedness or other paper or
document, but the Trustee, in its discretion, may make such further inquiry
or investigation into such facts or matters as it may see fit, and, if the
Trustee shall determine to make such further inquiry or investigation, it
shall be entitled to examine the books, records and premises of the Company
or any Guarantor, personally or by agent or attorney;
(i) the Trustee may execute any of the trusts or powers hereunder
either directly or by or through agents or attorneys and the Trustee shall
not be responsible for any misconduct or negligence on the part of any
agent or attorney appointed with due care by it hereunder;
(j) the Trustee may conclusively rely as to the identity and addresses
of Holders and other matters contained therein on the register of the Notes
maintained by the Registrar pursuant to Section 2.04 hereof and shall not
be affected by notice to the contrary; and
(k) unless otherwise specifically provided in this Indenture, any
demand, request, direction or notice from the Company shall be sufficient
if signed by an Officer of the Company.
SECTION 7.02. Individual Rights of Trustee. The Trustee, in its
individual or any other capacity, may become the owner or pledgee of Notes and
may otherwise deal with the Company, the Guarantors or their Affiliates with the
same rights it would have if it were not the Trustee. Any Agent may do the same
with like rights. However, the Trustee must comply with Sections 7.09 and 7.11.
SECTION 7.03. Trustee's Disclaimer. The Trustee (i) shall not be
responsible for and makes no representation as to the validity or adequacy of
this Indenture or the Notes, (ii) shall not be accountable for the Company's use
of the proceeds from the Notes (iii) shall not be responsible for the use or
application of any money received by any Paying Agent other than the Trustee,
and (iv) shall not be responsible for any statement in the Notes other than its
certificate of authentication.
SECTION 7.04. Notice of Default. If any Default or any Event of
Default occurs and is continuing and if such Default or Event of Default is
known to a Responsible Officer of the
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Trustee, the Trustee shall mail to each Holder in the manner and to the extent
provided in TIA Section 313(c) notice of the Default or Event of Default within
45 days after it occurs, unless such Default or Event of Default has been cured
or waived; provided, however, that, except in the case of a default in the
payment of the principal of, premium, if any, or interest on any Note, the
Trustee shall be protected in withholding such notice if and so long as the
board of directors, the executive committee or a trust committee of directors
and/or Responsible Officers of the Trustee in good faith determine that the
withholding of such notice is in the interest of the Holders.
The Trustee shall not be deemed to have knowledge of any Default or
Event of Default except (i) a default described in Section 6.01(a) or (b) so
long as the Trustee is the Paying Agent or (ii) any Default or Event of Default
of which the Trustee shall have received written notification or a Responsible
Officer charged with the administration of this Indenture shall have obtained
actual knowledge, and such notification shall not be deemed to include receipt
of information obtained in any report or other reports and documents furnished
under Section 4.16 of this Indenture which reports and documents the Trustee
shall have no duty to examine.
SECTION 7.05. Reports by Trustee to Holders. Within 60 days after each
May 15, beginning with May 15, 1998, the Trustee shall mail to each Holder as
provided in TIA Section 313(c) a brief report dated as of such May 15, if
required by TIA Section 313(a).
A copy of each report at the time of its mailing to the Holders of
Notes shall be mailed to the Company and filed with the Commission and each
stock exchange on which the Notes are listed in accordance with TIA Section
313(d). The Company shall promptly notify the Trustee when the Notes are listed
on any stock exchange or of any delisting thereof.
SECTION 7.06. Compensation and Indemnity. The Company and the
Guarantors, jointly and severally, shall pay to the Trustee such compensation as
shall be agreed upon in writing for its services hereunder. The compensation of
the Trustee shall not be limited by any law on compensation of a trustee of an
express trust. The Company and the Guarantors, jointly and severally, shall
reimburse the Trustee promptly upon request for all reasonable disbursements,
expenses and advances incurred or made by it in addition to compensation for its
services. Such expenses shall include the reasonable compensation, disbursements
and expenses of the Trustee's agents and counsel.
The Company and the Guarantors, jointly and severally, shall indemnify
the Trustee for, and hold it harmless against, any loss or liability or expense
incurred by it without negligence or bad faith on its part in connection with
the acceptance or administration of this Indenture and its duties under this
Indenture and the Notes, including the costs and expenses of defending itself
against any claim or liability and of complying with any process served upon it
or any of its officers in connection with the exercise or performance of any of
its powers or duties under this Indenture and the Notes. The Trustee shall
notify the Company promptly of any claim asserted
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against the Trustee for which it may seek indemnity. The Company shall defend
the claim and the Trustee shall cooperate in the defense. The Trustee may have
separate counsel and the Company shall pay reasonable fees and expenses of such
counsel. The Company need not pay for any settlements made without its consent;
provided that such consent shall not be unreasonably withheld. The Company need
not reimburse any expense or indemnity against any loss or liability incurred by
the Trustee through negligence or bad faith.
The Trustee shall have a claim prior to the Notes on all money or
property held or collected by the Trustee, in its capacity as Trustee, for any
amount owing it pursuant to this Section 7.06, except money or property held in
trust to pay principal of, premium, if any, and interest on particular Notes.
If the Trustee incurs expenses or renders services after the
occurrence of an Event of Default specified in clause (g) or (h) of Section
6.01, the expenses and the compensation for the services (including the
reasonable fees and expenses of its agents and counsel) will be intended to
constitute expenses of administration under Title 11 of the United States
Bankruptcy Code or any applicable federal or state law for the relief of
debtors.
To the extent that the payment of any such compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any other
amounts due the Trustee under this Section 7.06 out of the estate in any such
proceeding, shall be denied for any reason, other than solely because of the
misconduct of the Trustee or its Agents, payment of the same shall be secured by
a Lien on, and shall be paid out of, any and all distributions, dividends,
money, securities and other properties that the Holders may be entitled to
receive in such proceeding whether in liquidation or under any plan of
reorganization or arrangement or otherwise.
The provisions of this Section 7.06 shall survive the termination of
this Indenture.
The Trustee shall comply with the provisions of TIA Section 313(b)(2)
to the extent applicable.
SECTION 7.07. Replacement of Trustee. A resignation or removal of the
Trustee and appointment of a successor Trustee shall become effective only upon
the successor Trustee's acceptance of appointment as provided in this Section
7.07.
The Trustee may resign by so notifying the Company in writing at least
30 days prior to the date of the proposed resignation. The Holders of a majority
in principal amount of the outstanding Notes may remove the Trustee by so
notifying the Trustee in writing and may appoint a successor Trustee with the
consent of the Company. The Company may remove the Trustee if:
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(i) the Trustee fails to comply with Section 7.09;
(ii) the Trustee is adjudged a bankrupt or an insolvent;
(iii) a receiver or other public officer takes charge of the Trustee
or its property;
or
(iv) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed, or if a vacancy exists in the
office of Trustee for any reason, the Company shall promptly appoint a successor
Trustee. Within one year after the successor Trustee takes office, the Holders
of a majority in aggregate principal amount of the outstanding Notes may appoint
a successor Trustee to replace the successor Trustee appointed by the Company.
If the successor Trustee does not take office within 60 days after the retiring
Trustee resigns or is removed, the retiring Trustee, the Company or the Holders
of a majority in principal amount of the outstanding Notes may petition any
court of competent jurisdiction for the appointment of a successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Immediately after the
delivery of such written acceptance, subject to the lien provided in Section
7.06, (i) the retiring Trustee shall transfer all property held by it as Trustee
to the successor Trustee, (ii) the resignation or removal of the retiring
Trustee shall become effective and (iii) the successor Trustee shall have all
the rights, powers and duties of the Trustee under this Indenture. A successor
Trustee shall mail notice of its succession to each Holder.
If the Trustee fails to comply with Section 7.09, any Holder who
satisfies the requirements of TIA Section 310(b) may petition any court of
competent jurisdiction for the removal of the Trustee and the appointment of a
successor Trustee. If at any time the Trustee shall cease to be eligible in
accordance with the provisions of this Section, the Trustee shall resign
immediately in the manner and with the effect provided in this Section.
Notwithstanding replacement of the Trustee pursuant to this Section
7.07, the Company's obligation under Section 7.06 shall continue for the benefit
of the retiring Trustee.
SECTION 7.08. Successor Trustee by Merger, Etc. If the Trustee
consolidates with, merges or converts into, or transfers all or substantially
all of its corporate trust business to, another corporation or national banking
association, the resulting, surviving or transferee corporation or national
banking association without any further act shall be the successor Trustee with
the same effect as if the successor Trustee had been named as the Trustee
herein.
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SECTION 7.09. Eligibility; Disqualification. Any Trustee serving
hereunder shall be a bank or trust company, within or without the state, which
is authorized by law to perform all of the duties imposed upon it hereby and
which either (i) has a reported capital and surplus aggregating at least $25
million or (ii) is a wholly owned subsidiary of a bank, a trust company or a
bank holding company having a reported capital and surplus aggregating at least
$25 million, and shall at all times satisfy the requirements of TIA Section
310(a)(i). The Trustee shall comply with TIA Section 310(b); provided, however,
that there shall be excluded from the operation of TIA Section 310(b)(1) any
indenture or indentures under which other securities or certificates of interest
or participation in other securities of the Company are outstanding if the
requirements for such exclusion set forth in TIA Section 310(b)(1) are met.
SECTION 7.10. Money Held in Trust. The Trustee shall not be liable for
interest on any money received by it except as the Trustee may agree with the
Company. Money held in trust by the Trustee need not be segregated from other
funds except to the extent required by law and except for money held in trust
under Article Eight of this Indenture.
SECTION 7.11. Preferential Collection of Claims Against Company. The
Trustee shall comply with TIA Section 311(a), excluding any creditor
relationship listed in TIA Section 311(b). A Trustee who has resigned or been
removed shall be subject to TIA Section 311(a) to the extent indicated.
ARTICLE EIGHT
DISCHARGE OF INDENTURE
SECTION 8.01. Termination of Company's Obligations. Except as
otherwise provided in this Section 8.01, the Company and the Guarantors may
terminate their obligations under the Notes and this Indenture if:
(i) all Notes previously authenticated and delivered (other than
destroyed, lost or stolen Notes that have been replaced or Notes that are
paid pursuant to Section 4.01 or Notes for whose payment money or
securities have theretofore been held in trust and thereafter repaid to the
Company, as provided in Section 8.05) have been delivered to the Trustee
for cancellation and the Company has paid all sums payable by it hereunder;
or
(ii) (A) the Notes have become due and payable, mature within one year
or all of them are to be called for redemption within one year under
arrangements satisfactory to the Trustee for giving the notice of
redemption, (B) the Company or any Guarantor irrevocably deposits in trust
with the Trustee during such one-year period, under the terms of an
irrevocable trust agreement in form and substance satisfactory to the
Trustee, as trust funds solely for the benefit of the Holders for that
purpose, money or U.S. Government
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Obligations sufficient (in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification thereof
delivered to the Trustee), without consideration of any reinvestment of any
interest thereon, to pay, through the payment of principal and interest in
accordance with their terms not later than one day prior to the relevant
due date, principal, premium, if, any, and interest on the Notes to
maturity or redemption, as the case may be, and to pay all other sums
payable by it hereunder, (C) no Default or Event of Default with respect to
the Notes shall have occurred and be continuing on the date of such
deposit, (D) such deposit will not result in a breach or violation of, or
constitute a default under, this Indenture or any other agreement or
instrument to which the Company or any Guarantor is a party or by which it
is bound and (E) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, in each case stating that all
conditions precedent provided for herein relating to the satisfaction and
discharge of this Indenture have been complied with.
With respect to the foregoing clause (i), the Company's obligations
under Section 7.06 shall survive. With respect to the foregoing clause (ii), the
Company's and the Guarantors' obligations in Sections 2.03, 2.04, 2.05, 2.06,
2.09, 2.14, 4.01, 4.02, 7.06, 7.07, 8.04, 8.05 and 8.06 and Article Ten shall
survive until the Notes and the Note Guarantees are no longer outstanding.
Thereafter, only the Company's and the Guarantors' obligations in Sections 7.06,
8.04, 8.05 and 8.06 shall survive. After any such irrevocable deposit, the
Trustee upon request shall acknowledge in writing the discharge of the Company's
and the Guarantors' obligations under the Notes, the Note Guarantees and this
Indenture except for those surviving obligations specified above.
SECTION 8.02. Defeasance and Discharge of Indenture. The Company and
each Guarantor will be deemed to have paid and will be discharged from any and
all obligations in respect of the Notes and the Note Guarantees on the 123rd day
after the date of the deposit referred to in clause (A) of this Section 8.02,
and the provisions of this Indenture will no longer be in effect with respect to
the Notes and the Note Guarantees, and the Trustee, at the expense of the
Company, shall execute proper instruments acknowledging the same, except as to
(i) rights of registration of transfer and exchange, (ii) substitution of
apparently mutilated, defaced, destroyed, lost or stolen Notes, (iii) rights of
Holders to receive payments of principal thereof and interest thereon, (iv) the
Company's obligations under Section 4.02, (v) the rights, obligations and
immunities of the Trustee hereunder and (vi) the rights of the Holders as
beneficiaries of this Indenture with respect to the property so deposited with
the Trustee payable to all or any of them; provided that the following
conditions shall have been satisfied:
(A) the Company or the Guarantors have deposited with the Trustee, in
trust, money and/or U.S. Government Obligations that through the payment of
interest and principal in respect thereof in accordance with their terms
will provide, not later than one day before the due date of any payment
referred to in this clause (A), money in an amount
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sufficient in the opinion of a nationally recognized firm of independent
public accountants expressed in a written certification thereof delivered
to the Trustee to pay the principal of, premium, if any, and accrued
interest on the Notes on the Stated Maturity of such payments in accordance
with the terms of the Indenture and the Notes and shall have irrevocably
instructed the Trustee to apply such money to the payment of such
principal, premium and interest;
(B) the Company has delivered to the Trustee (i) either (x) an Opinion
of Counsel to the effect that Holders will not recognize income, gain or
loss for federal income tax purposes as a result of the Company's or any
Guarantor's exercise of its option under this Section 8.02 provision and
will be subject to federal income tax on the same amount and in the same
manner and at the same times as would have been the case if such deposit,
defeasance and discharge had not occurred, which Opinion of Counsel must be
based upon (and accompanied by a copy of) a ruling of the Internal Revenue
Service to the same effect unless there has been a change in applicable
federal income tax law after the date of this Indenture such that a ruling
is no longer required or (y) a ruling directed to the Trustee received from
the Internal Revenue Service to the same effect as the aforementioned
Opinion of Counsel and (ii) an Opinion of Counsel to the effect that the
creation of the defeasance trust does not violate the Investment Company
Act of 1940;
(C) immediately after giving effect to such deposit on a pro forma
basis, no Event of Default, or event that after the giving of notice or
lapse of time or both would become an Event of Default, shall have occurred
and be continuing on the date of such deposit or during the period ending
on the 123rd day after the date of such deposit, and such deposit shall not
result in a breach or violation of, or constitute a default under, any
other agreement or instrument to which the Company or any of its
Subsidiaries is a party or by which the Company or any of its Subsidiaries
is bound;
(D) if at such time the Notes are listed on a national securities
exchange, the Company has delivered to the Trustee an Opinion of Counsel to
the effect that the Notes will not be delisted as a result of such deposit,
defeasance and discharge; and
(E) the Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, in each case stating that all conditions
precedent provided for herein relating to the defeasance contemplated by
this Section 8.02 have been complied with.
Notwithstanding the foregoing, prior to the end of the 123-day (or one
year) period referred to in clause (B)(ii) of this Section 8.02, none of the
Company's or Guarantors' obligations under this Indenture shall be discharged.
Subsequent to the end of such 123-day (or one year) period with respect to this
Section 8.02, the Company's and each Guarantor's obligations in Sections 2.03,
2.04, 2.05, 2.06, 2.09, 2.14, 4.01, 4.02, 7.06, 7.07, 8.04, 8.05 and 8.06 shall
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survive until the Notes are no longer outstanding. Thereafter, only the
Company's and the Guarantors' obligations in Sections 7.06, 8.05 and 8.06 shall
survive. If and when a ruling from the Internal Revenue Service or an Opinion of
Counsel referred to in clause (B)(i) of this Section 8.02 is able to be provided
specifically without regard to, and not in reliance upon, the continuance of the
Company's obligations under Section 4.01 and the Guarantors' obligations under
Article Ten, then the Company's obligations under such Section 4.01 and the
Guarantors' obligations under Article Ten shall cease upon delivery to the
Trustee of such ruling or Opinion of Counsel and compliance with the other
conditions precedent provided for herein relating to the defeasance contemplated
by this Section 8.02.
After any such irrevocable deposit, the Trustee upon request shall
acknowledge in writing the discharge of the Company's and each Guarantor's
obligations under the Notes and the Note Guarantees, respectively, and this
Indenture except for those surviving obligations in the immediately preceding
paragraph.
SECTION 8.03. Defeasance of Certain Obligations. The Company (and the
Guarantors) may omit to comply with any term, provision or condition set forth
in clauses (iii) and (iv) of Section 5.01 and Sections 4.03 through 4.16, and
clause (c) of Section 6.01, with respect to such clauses (iii) and (iv) of
Section 5.01, and clause (d) of Section 6.01, with respect to Sections 4.03
through 4.16, and clauses (e) and (f) of Section 6.01 shall be deemed not to be
Events of Default, in each case with respect to the outstanding Notes if:
(i) the Company has deposited with the Trustee in trust, money and/or
U.S. Government Obligations that, through the payment of interest and
principal in respect thereof in accordance with their terms, will provide,
not later than one day before the due date of any payment referred to in
this clause (i), money in an amount sufficient in the opinion of a
nationally recognized firm of independent public accountants expressed in a
written certification thereof delivered to the Trustee to pay the principal
of, premium, if any, and accrued interest on the Notes on the Stated
Maturity of such payments in accordance with the terms of this Indenture
and the Notes and shall have irrevocably instructed the Trustee to apply
such money to the payment of such principal, premium and interest;
(ii) immediately after giving effect to such deposit on a pro forma
basis, no Event of Default, or event that after the giving of notice or
lapse of time or both would become an Event of Default, shall have occurred
and be continuing on the date of such deposit or during the period ending
on the 123rd day after the date of such deposit, and such deposit shall not
result in a breach or violation of, or constitute a default under, any
other agreement or instrument to which the Company, any of its Subsidiaries
or any Guarantor is a party or by which the Company, the Guarantors, any of
its Subsidiaries or any Guarantor is bound;
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(iii) the Company has delivered to the Trustee an Opinion of Counsel
to the effect that (A) the creation of the defeasance trust does not
violate the Investment Company Act of 1940 and (B) the Holders will not
recognize income, gain or loss for federal income tax purposes as a result
of such deposit and defeasance of certain obligations and will be subject
to federal income tax on the same amount and in the same manner and at the
same times as would have been the case if such deposit and defeasance had
not occurred;
(iv) at such time the Notes are listed on a national securities
exchange, the Company has delivered to the Trustee an Opinion of Counsel to
the effect that the Notes will not be delisted as a result of such deposit,
defeasance and discharge; and
(v) the Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, in each case stating that all conditions
precedent provided for herein relating to the defeasance contemplated by
this Section 8.03 have been complied with.
SECTION 8.04. Application of Trust Money. Subject to Sections 8.05 and
8.06, the Trustee or Paying Agent shall hold in trust money or U.S. Government
Obligations deposited with it pursuant to Section 8.01, 8.02 or 8.03, as the
case may be, and shall apply the deposited money and the money from U.S.
Government Obligations in accordance with the Notes and this Indenture to the
payment of principal of, premium, if any, and interest on the Notes; but such
money need not be segregated from other funds except to the extent required by
law.
SECTION 8.05. Repayment to Company. Subject to Sections 7.06, 8.01,
8.02 and 8.03, the Trustee and the Paying Agent shall promptly pay to the
Company upon request set forth in an Officers' Certificate any excess money held
by them at any time and thereupon shall be relieved from all liability with
respect to such money. The Trustee and the Paying Agent shall pay to the Company
upon written request any money held by them for the payment of principal,
premium, if any, or interest that remains unclaimed for two years; provided that
the Trustee or such Paying Agent before being required to make any payment may
cause to be published at the expense of the Company once in a newspaper of
general circulation in the City of New York or mail to each Holder entitled to
such money at such Holder's address (as set forth in the Note Register) notice
that such money remains unclaimed and that after a date specified therein (which
shall be at least 30 days from the date of such publication or mailing) any
unclaimed balance of such money then remaining will be repaid to the Company.
After payment to the Company, Holders entitled to such money must look to the
Company for payment as general creditors unless an applicable law designates
another Person, and all liability of the Trustee and such Paying Agent with
respect to such money shall cease.
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SECTION 8.06. Reinstatement. If the Trustee or Paying Agent is unable
to apply any money or U.S. Government Obligations in accordance with Section
8.01, 8.02 or 8.03, as the case may be, by reason of any legal proceeding or by
reason of any order or judgment of any court or governmental authority
enjoining, restraining or otherwise prohibiting such application, the Company's
and the Guarantors' obligations under this Indenture and the Notes shall be
revived and reinstated as though no deposit had occurred pursuant to Section
8.01, 8.02 or 8.03, as the case may be, until such time as the Trustee or Paying
Agent is permitted to apply all such money or U.S. Government Obligations in
accordance with Section 8.01, 8.02 or 8.03, as the case may be; provided that,
if the Company or the Guarantors have made any payment of principal of, premium,
if any, or interest on any Notes because of the reinstatement of its
obligations, the Company or the Guarantors, as the case may be, shall be
subrogated to the rights of the Holders of such Notes to receive such payment
from the money or U.S. Government Obligations held by the Trustee or Paying
Agent.
ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.01. Without Consent of Holders. The Company and the
Guarantors, when authorized by a resolution of their Board of Directors, and the
Trustee may amend or supplement this Indenture or the Notes without notice to or
the consent of any Holder:
(1) to cure any ambiguity, defect or inconsistency;
(2) to comply with Article Five;
(3) to comply with any requirements of the Commission in connection
with the qualification of this Indenture under the TIA;
(4) to evidence and provide for the acceptance of appointment
hereunder of a successor Trustee;
(5) to provide for uncertificated Notes in addition to or in place of
certificated Notes;
(6) to add one or more Subsidiary Guarantees on the terms required by
this Indenture; or
(7) to make any change that does not adversely affect the rights of
any Holder in any material respect.
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SECTION 9.02. With Consent of Holders. Subject to Sections 6.04 and
6.07 and without prior notice to the Holders, the Company and the Guarantors,
when authorized by their respective Boards of Directors (as evidenced by a Board
Resolution), and the Trustee may amend this Indenture and the Notes with the
written consent of the Holders of not less than a majority in principal amount
of the Notes then outstanding, and the Holders of not less than a majority in
principal amount of the Notes then outstanding by written notice to the Trustee
may waive future compliance by the Company or the Guarantors with any provision
of this Indenture or the Notes.
Notwithstanding the provisions of this Section 9.02, without the
consent of each Holder affected, an amendment or waiver, including a waiver
pursuant to Section 6.04, may not:
(i) change the Stated Maturity of the principal of, or any installment
of interest on, any Note;
(ii) reduce the principal of, or premium, if any, or interest on, any
Note;
(iii) change the place or currency of payment of principal of, or
premium, if any, or interest on, any Note;
(iv) impair the right to institute suit for the enforcement of any
payment on or after the Stated Maturity (or, in the case of a redemption,
on or after the Redemption Date) of any Note;
(v) reduce the above-stated percentage of outstanding Notes the
consent of whose Holders is necessary to modify or amend this Indenture;
(vi) waive a default in the payment of principal of, premium, if any,
or interest on the Notes;
(vii) reduce the percentage or aggregate principal amount of
outstanding Notes the consent of whose Holders is necessary for waiver of
compliance with certain provisions of this Indenture or for waiver of
certain defaults;
(viii) release any Guarantor from its Note Guarantee or otherwise
modify the terms of the Note Guarantees in a material respect adverse to
the Holders; or
(ix) modify any of the provisions of this Section 9.02, except to
increase any such percentage or to provide that certain other provisions of
this Indenture cannot be modified or waived without the consent of the
Holder of each outstanding Note affected thereby.
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It shall not be necessary for the consent of the Holders under this
Section 9.02 to approve the particular form of any proposed amendment,
supplement or waiver, but it shall be sufficient if such consent approves the
substance thereof.
After an amendment, supplement or waiver under this Section 9.02
becomes effective, the Company shall mail to the Holders affected thereby a
notice briefly describing the amendment, supplement or waiver. The Company will
mail supplemental indentures to Holders upon request. Any failure of the Company
to mail such notice, or any defect therein, shall not, however, in any way
impair or affect the validity of any such supplemental indenture or waiver.
SECTION 9.03. Revocation and Effect of Consent. Until an amendment or
waiver becomes effective, a consent to it by a Holder is a continuing consent by
the Holder and every subsequent Holder of a Note or portion of a Note that
evidences the same debt as the Note of the consenting Holder, even if notation
of the consent is not made on any Note. However, any such Holder or subsequent
Holder may revoke the consent as to its Note or portion of its Note. Such
revocation shall be effective only if the Trustee receives the notice of
revocation before the date the amendment, supplement or waiver becomes
effective. An amendment, supplement or waiver shall become effective on receipt
by the Trustee of written consents from the Holders of the requisite percentage
principal amount of the outstanding Notes.
The Company may, but shall not be obligated to, fix a record date for
the purpose of determining the Holders entitled to consent to any amendment,
supplement or waiver. If a record date is fixed, then, notwithstanding the last
two sentences of the immediately preceding paragraph, those persons who were
Holders at such record date (or their duly designated proxies) and only those
persons shall be entitled to consent to such amendment, supplement or waiver or
to revoke any consent previously given, whether or not such persons continue to
be Holders after such record date. No such consent shall be valid or effective
for more than 90 days after such record date.
After an amendment, supplement or waiver becomes effective, it shall
bind every Holder unless it is of the type described in any of clauses (i)
through (v) of Section 9.02. In case of an amendment or waiver of the type
described in clauses (i) through (v) of Section 9.02, the amendment or waiver
shall bind each Holder who has consented to it and every subsequent Holder of a
Note that evidences the same indebtedness as the Note of the consenting Holder.
SECTION 9.04. Notation on or Exchange of Notes. If an amendment,
supplement or waiver changes the terms of a Note, the Trustee may require the
Holder to deliver it to the Trustee. The Trustee may place an appropriate
notation on the Note about the changed terms and return it to the Holder and the
Trustee may place an appropriate notation on any Note thereafter authenticated.
Alternatively, if the Company or the Trustee so determines, the Company in
exchange for the Note shall issue and the Trustee shall authenticate a new Note
that reflects the
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changed terms. Failure to make the appropriate notation or issue a new Note
shall not affect the validity and effect of such amendment,supplement or waiver.
SECTION 9.05. Trustee to Sign Amendments, Etc. The Trustee shall be
entitled to receive, and shall be fully protected in relying upon, an Opinion of
Counsel stating that the execution of any amendment, supplement or waiver
authorized pursuant to this Article Nine is authorized or permitted by this
Indenture. Subject to the preceding sentence, the Trustee shall sign such
amendment, supplement or waiver if the same does not adversely affect the rights
of the Trustee. The Trustee may, but shall not be obligated to, execute any such
amendment, supplement or waiver that affects the Trustee's own rights, duties or
immunities under this Indenture or otherwise.
SECTION 9.06. Conformity with Trust Indenture Act. Every supplemental
indenture executed pursuant to this Article Nine shall conform to the
requirements of the TIA as then in effect.
ARTICLE TEN
GUARANTEE OF NOTES
SECTION 10.01. Note Guarantee. Subject to the provisions of this
Article Ten, each of the Guarantors, as primary obligors and not merely as
sureties, hereby fully, unconditionally and irrevocably guarantees on a senior
basis to each Holder and to the Trustee on behalf of the Holders: (i) the due
and punctual payment of the principal of, premium, if any, on and interest on
each Note, when and as the same shall become due and payable, whether, by
acceleration, required repurchase (including by reason of Change of Control),
call for redemption or otherwise, the due and punctual payment of interest on
the overdue principal of and interest, if any, on the Notes, to the extent
lawful (in each case including interest accruing on or after filing of any
petition in bankruptcy or reorganization relating to the Company or any
Guarantor, whether or not a claim for post filing interest is allowed in such
proceeding), and the due and punctual performance of all other obligations of
the Company to the Holders or the Trustee, all in accordance with the terms of
such Note and this Indenture and (ii) in the case of any extension of time of
payment or renewal of any Note or any of such other obligations, that the same
will be promptly paid in full when due or performed in accordance with the terms
of the extension or renewal, at Stated Maturity, by acceleration, required
repurchase (including by reason of Change of Control), call for redemption or
otherwise. Each of the Guarantors hereby waives diligence, presentment, demand
of payment, filing of claims with a court in the event of merger or bankruptcy
of the Company, any right to require a proceeding first against the Company, the
benefit of discussion, protest or notice with respect to any such Note or the
debt evidenced thereby and all demands whatsoever, and covenants that this Note
Guarantee will not be discharged as to any such Note except by payment in full
of the principal thereof and interest thereon and as
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provided in Section 8.01 and Section 8.02 (subject to Section 8.06). The
obligations of the Guarantors hereunder shall not be affected by any failure or
delay of the Trustee to exercise any right or remedy under this Indenture, the
Notes or this Note Guarantee. The maturity of the obligations guaranteed hereby
may be accelerated as provided in Article Six for the purposes of this Article
Ten. In the event of any declaration of acceleration of such obligations as
provided in Article Six, such obligations (whether or not due and payable) shall
forthwith become due and payable by the Guarantors for the purpose of this
Article Ten. In addition, without limiting the foregoing provisions, upon the
effectiveness of an acceleration under Article Six, the Trustee shall promptly
make a demand for payment on the Notes under the Note Guarantee provided for in
this Article Ten.
The Note Guarantee shall remain in full force and effect and continue
to be effective should any petition be filed by or against the Company for
liquidation or reorganization, should the Company become insolvent or make an
assignment for the benefit of creditors or should a receiver or trustee be
appointed for all or any significant portion of the Company's assets, and if the
Trustee or the Holder of any Note is required by any court or otherwise to
return to the Company or any Guarantor, or any custodian, receiver, liquidator,
trustee, sequestrator or other similar official acting in relation to the
Company or the Guarantors, any amount paid to the Trustee or such Holder in
respect of a Note, this Note Guarantee, to the extent theretofore discharged,
shall continue to be effective or be reinstated in full force and effect, as the
case may be, all as though such payment has not been made. Each of the
Guarantors further agrees, to the fullest extent that it may lawfully do so,
that, as between the Guarantors, on the one hand, and the Holders and the
Trustee, on the other hand, the maturity of the obligations guaranteed hereby
may be accelerated as provided in Article Six hereof for the purposes of this
Note Guarantee, notwithstanding any stay, injunction or other prohibition extant
under any applicable bankruptcy law preventing such acceleration in respect of
the obligations Guaranteed hereby.
Each of the Guarantors hereby irrevocably waives any claim or other
rights which it may now or hereafter acquire against the Company that arise from
the existence, payment, performance or enforcement of its obligations under this
Note Guarantee and this Indenture, including, without limitation, any right of
subrogation, reimbursement, exoneration, contribution, indemnification, any
right to participate in any claim or remedy of the Holders against the Company
or any collateral which any such Holder or the Trustee on behalf of such Holder
hereafter acquires, whether or not such claim, remedy or right arises in equity,
or under contract, statute or common law, including, without limitation, the
right to take or receive from the Company, directly or indirectly, in cash or
other property or by set-off or in any other manner, payment or security on
account of such claim or other rights until such time as the Notes and all of
the Company's other obligations being guaranteed hereby shall have been
indefeasibly paid in full. If any amount shall be paid to the Guarantors in
violation of the preceding sentence and the principal of, premium, if any, and
accrued interest on the Notes shall not have been paid in full, such amount
shall be deemed to have been paid to the Guarantors for the benefit of, and held
in
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trust for the benefit of, the Holders, and shall forthwith be paid to the
Trustee for the benefit of the Holders to be credited and applied upon the
principal of, premium, if any, and accrued interest on the Notes. Each of the
Guarantors acknowledges that it will receive direct and indirect benefits from
the issuance of the Notes pursuant to this Indenture and that the waivers set
forth in this Section 10.01 are knowingly made in contemplation of such
benefits.
The Note Guarantee set forth in this Section 10.01 shall not be valid
or become obligatory for any purpose with respect to a Note until the
certificate of authentication on such Note shall have been signed by or on
behalf of the Trustee.
SECTION 10.02. Obligations Unconditional. Subject to Section 10.05,
nothing contained in this Article Ten or elsewhere in this Indenture or in the
Notes is intended to or shall impair, as among any Guarantor and the Holders,
the obligation of such Guarantor, which is absolute, unconditional and
irrevocable, upon failure by the Company, to pay to the Holders the principal
of, premium, if any, and interest on the Notes as and when the same shall become
due and payable in accordance with their terms, or is intended to or shall
affect the relative rights of the Holders and creditors of such Guarantor, nor
shall anything herein or therein prevent the Holder of any Note or the Trustee
on their behalf from exercising all remedies otherwise permitted by applicable
law upon default under this Indenture.
Without limiting the foregoing, nothing contained in this Article Ten
will restrict the right of the Trustee or the Holders to take any action to
declare the Note Guarantee to be due and payable prior to the Stated Maturity of
the Notes pursuant to Section 6.02 or to pursue any rights or remedies
hereunder.
SECTION 10.03. Notice to Trustee. The Guarantors shall give prompt
written notice to the Trustee of any fact known to the Guarantors which would
prohibit the making of any payment to or by the Trustee in respect of the Note
Guarantee pursuant to the provisions of this Article Ten.
SECTION 10.04. This Article Not to Prevent Events of Default. The
failure to make a payment on account of principal of, premium, if any, or
interest on the Notes by reason of any provision of this Article Ten will not be
construed as preventing the occurrence of an Event of Default.
SECTION 10.05. Net Worth Limitation. Notwithstanding any other
provision of this Indenture or the Notes, the Note Guarantee shall not be
enforceable against any Guarantor in an amount in excess of the net worth of
such Guarantor at the time that determination of such net worth is, under
applicable law, relevant to the enforceability of the Note Guarantee. Such net
worth shall include any claim of any Guarantor against the Company for
reimbursement and any claim against any grantor of a Subsidiary Guarantee for
contribution.
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ARTICLE ELEVEN
MISCELLANEOUS
SECTION 11.01. Trust Indenture Act of 1939. This Indenture is subject
to the provisions of the TIA that are required to be a part of this Indenture
and shall, to the extent applicable, be governed by such provisions.
SECTION 11.02. Notices. Any notice or communication shall be
sufficiently given if in writing and delivered in person or mailed by first
class mail (registered or certified, return receipt requested), telex,
telecopier or overnight air courier guaranteeing next day delivery addressed as
follows:
if to the Company:
------------------
Amtran, Inc.
7337 West Washington Street
Indianapolis, IN 46231
Telecopier No.: (317) 240-7091
Attention: Kenneth K. Wolff, Chief Financial Officer
if to the Trustee:
------------------
First Security Bank, N.A.
79 South Main Street
Salt Lake City, Utah 84111
Telecopier No.: (801) 246-5053
Attention: Corporate Trust Services
The Company, the Guarantors or the Trustee by notice to the other may
designate additional or different addresses for subsequent notices or
communications.
All notices and communications (other than those sent to Holders)
shall be deemed to have been duly given: (i) at the time delivered by hand, if
personally delivered; five Business Days after being deposited in the mail,
postage prepaid, if mailed; when answered back, if telexed; when receipt
acknowledged, if telecopied; and the next Business Day after timely delivery to
the courier, if sent by overnight air courier guaranteeing next day delivery.
Any notice or communication to a Holder shall be mailed by first class
mail (certified or registered, return receipt requested) to its address shown on
the register kept by the Registrar and shall be sufficiently given to such
Holder if so mailed or delivered within the time
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presented. Any notice or communication shall also be so mailed to any Person
described in TIA Section 313(c), to the extent required by the TIA.
Failure to mail a notice or communication to a Holder or any defect in
it shall not affect its sufficiency with respect to other Holders. Except for a
notice to the Trustee, which is deemed given only when received, and except as
otherwise provided in this Indenture, if a notice or communication is mailed in
the manner provided in this Section 11.02, it is duly given, whether or not the
addressee receives it.
Holders may communicate pursuant to TIA Section 312(b) with other
Holders with respect to their rights under this Indenture or the Notes. The
Company, the Trustee, the Registrar and anyone else shall have the protection of
TIA Section 312(c).
SECTION 11.03. Certificate and Opinion As to Conditions Precedent.
Upon any request or application by the Company or the Guarantors to the Trustee
to take any action under this Indenture, the Company or the Guarantors shall
furnish to the Trustee:
(i) an Officers' Certificate reasonably satisfactory to the Trustee
stating that, in the opinion of the signers, all conditions precedent, if
any, provided for in this Indenture relating to the proposed action have
been complied with; and
(ii) an Opinion of Counsel reasonably satisfactory to the Trustee
stating that, in the opinion of such Counsel, all such conditions precedent
have been complied with.
SECTION 11.04. Statements Required in Certificate or Opinion. Each
certificate or opinion with respect to compliance with a condition or covenant
provided for in this Indenture shall include:
(i) a statement that the person making such certificate or opinion has
read such covenant or condition;
(ii) a brief statement as to the nature and scope of the examination
or investigation upon which the statement or opinion contained in such
certificate or opinion is based;
(iii) a statement that, in the opinion of such person, he has made
such examination or investigation as is necessary to enable him to express
an informed opinion as to whether or not such covenant or condition has
been complied with; and
(iv) a statement as to whether or not, in the opinion of such person,
such condition or covenant has been complied with, and such other opinions
as the Trustee may
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78
reasonably request; provided, however, that, with respect to matters of
fact, an Opinion of Counsel may rely on an Officers' Certificate or
certificates of public officials.
SECTION 11.05. Acts of Holders. (a) Any request, demand,
authorization, direction, notice, consent, waiver or other action provided by
this Indenture to be given or taken by Holders may be embodied in and evidenced
by one or more instruments of substantially similar tenor signed by such Holders
in person or by an agent duly appointed in writing; and, except as herein
otherwise expressly provided, such action shall become effective when such
instrument or instruments are delivered to the Trustee and, where it is hereby
expressly required, to the Company. Proof of execution of any such instrument or
of a writing appointing any such agent shall be sufficient for any purpose of
this Indenture and conclusive in favor of the Trustee and the Company, if made
in the manner provided in this Section.
(b) The ownership of Notes shall be proved by the Note Register.
(c) Any request, demand, authorization, direction, notice, consent,
waiver or other action by the Holder of any Note shall bind every future Holder
of the same Note or the Holder of every Note issued upon the transfer thereof or
in exchange therefor or in lieu thereof, in respect of anything done, suffered
or omitted to be done by the Trustee, any Paying Agent or the Company in
reliance thereon, whether or not notation of such action is made upon such Note.
(d) If the Company shall solicit from the Holders any request, demand,
authorization, direction, notice, consent or waiver or other act, the Company
may, at its option, by or pursuant to a Board Resolution, fix in advance a
record date for the determination of such Holders entitled to give such request,
demand, authorization, direction, notice, consent, waiver or other act, but the
Company shall have no obligation to do so. Notwithstanding Trust Indenture Act
Section 316(c), any such record date shall be the record date specified in or
pursuant to such Board Resolution, which shall be a date not more than 30 days
prior to the first solicitation of Holders generally in connection therewith and
no later than the date such solicitation is completed.
If such a record date is fixed, such request, demand, authorization,
direction, notice, consent, waiver or other act may be given before or after
such record date, but only the Holders of record at the close of business on
such record date shall be deemed to be Holders for purposes of determining
whether Holders of the requisite proportion of Notes then outstanding have
authorized or agreed or consented to such request, demand, authorization,
direction, notice, consent, waiver or other act, and for this purpose the Notes
then outstanding shall be computed as of such record date; provided that no such
request, demand, authorization, direction, notice, consent, waiver or other act
by the Holders on such record date shall be deemed effective unless it shall
become effective pursuant to the provisions of this Indenture not later than six
months after the record date.
<PAGE>
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79
SECTION 11.06. Rules by Trustee, Paying Agent or Registrar. The
Trustee may make reasonable rules for action by or at a meeting of Holders. The
Paying Agent or Registrar may make reasonable rules for its functions.
SECTION 11.07. Payment Date Other Than a Business Day. If an Interest
Payment Date, Redemption Date, Payment Date for an Offer to Purchase, Stated
Maturity or date of maturity of any Note shall not be a Business Day at any
place of payment, then payment of principal of, premium, if any, or interest on
such Note, as the case may be, need not be made on such date, but may be made on
the next succeeding Business Day at such place of payment with the same force
and effect as if made on the Interest Payment Date, Payment Date for an Offer to
Purchase, or Redemption Date, or at the Stated Maturity or date of maturity of
such Note; provided that no interest shall accrue for the period from and after
such Interest Payment Date, Payment Date for an Offer to Purchase, Redemption
Date, Stated Maturity or date of maturity, as the case may be.
SECTION 11.08. Governing Law. This Indenture and the Notes shall be
governed by and construed in accordance with the internal laws of the State of
New York. The Trustee, the Company, each of the Guarantors and the Holders agree
to submit to the jurisdiction of the courts of the State of New York in any
action or proceeding arising out of or relating to this Indenture or the Notes.
SECTION 11.09. No Adverse Interpretation of Other Agreements. This
Indenture may not be used to interpret another indenture, loan or debt agreement
of the Company, the Guarantors or any Subsidiary of the Company. Any such
indenture, loan or debt agreement may not be used to interpret this Indenture.
SECTION 11.10. No Recourse Against Others. No recourse for the payment
of the principal of, premium, if any, or interest on any of the Notes, or for
any claim based thereon or otherwise in respect thereof, and no recourse under
or upon any obligation, covenant or agreement of the Company or the Guarantors
contained in this Indenture, any Guarantee or in any of the Notes, or because of
the creation of any Indebtedness represented thereby, shall be had against any
incorporator or against any past, present or future partner, shareholder, other
equityholder, officer, director, employee or controlling person, as such, of the
Company or of any successor Person, either directly or through the Company or
the Guarantors or any successor Person, whether by virtue of any constitution,
statute or rule of law, or by the enforcement of any assessment or penalty or
otherwise; it being expressly understood that all such liability is hereby
expressly waived and released as a condition of, and as a consideration for, the
execution of this Indenture and the issue of the Notes.
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80
SECTION 11.11. Successors. All agreements of the Company and the
Guarantors in this Indenture and the Notes shall bind its successors. All
agreements of the Trustee in this Indenture shall bind its successor.
SECTION 11.12. Duplicate Originals. The parties may sign any number of
copies of this Indenture. Each signed copy shall be an original, but all of them
together represent the same agreement.
SECTION 11.13. Separability. In case any provision in this Indenture
or in the Notes shall be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby.
SECTION 11.14. Table of Contents, Headings, Etc. The Table of
Contents, Cross-Reference Table and headings of the Articles and Sections of
this Indenture have been inserted for convenience of reference only, are not to
be considered a part hereof and shall in no way modify or restrict any of the
terms and provisions hereof.
ARTICLE TWELVE
MEETINGS OF HOLDERS
SECTION 12.01. Purposes for Which Meetings May Be Called. A meeting of
Holders may be called at any time and from time to time pursuant to the
provisions of this Article Twelve for any of the following purposes:
(a) to give any notice to the Company or to the Trustee, or to give
any directions to the Trustee, or to waive or to consent to the waiving of
any Default or Event of Default hereunder and its consequences, or to take
any other action authorized to be taken by Holders pursuant to any of the
provisions of Article Six;
(b) to remove the Trustee or appoint a successor Trustee pursuant to
the provisions of Article Seven;
(c) to consent to an amendment, supplement or waiver pursuant to the
provisions of Section 9.02; or
(d) to take any other action authorized to be taken by or on behalf of
the Holders of any specified aggregate principal amount of the Notes under
any other provision of this Indenture, or authorized or permitted by law.
<PAGE>
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81
SECTION 12.02. Manner of Calling Meetings. The Trustee may at any time
call a meeting of Holders to take any action specified in Section 12.01, to be
held at such time and at such place in The City of New York, New York or
elsewhere as the Trustee will determine. Notice of every meeting of Holders,
setting forth the time and place of such meeting and in general terms the action
proposed to be taken at such meeting, will be mailed by the Trustee, first-class
postage prepaid, to the Company and to the Holders at their last addresses as
they will appear on the registration books of the Registrar not less than 10 nor
more than 60 days prior to the date fixed for a meeting.
Any meeting of Holders will be valid without notice if the Holders of
all outstanding Notes are present in Person or by proxy, or if notice is waived
before or after the meeting by the Holders of all outstanding Notes, and if the
Company and the Trustee are either present by duly authorized representatives or
have, before or after the meeting, waived notice.
SECTION 12.03. Call of Meetings by the Company or Holders. In case at
any time the Company, pursuant to a Board Resolution, or the Holders of not less
than 10% in aggregate principal amount of the outstanding Notes will have
requested the Trustee to call a meeting of Holders to take any action specified
in Section 12.01, by written request setting forth in reasonable detail the
action proposed to be taken at the meeting, and the Trustee will not have mailed
the notice of such meeting within 20 days after receipt of such request, then
the Company or the Holders of Notes in the amount above specified may determine
the time and place in The City of New York, New York or elsewhere for such
meeting and may call such meeting for the purpose of taking such action, by
mailing or causing to be mailed notice thereof as provided in Section 12.02, or
by causing notice thereof to be published at least once in each of two
successive calendar weeks (on any Business Day during such week) in a newspaper
or newspapers printed in the English language, customarily published at least
five days a week of a general circulation in The City of New York, State of New
York, the first such publication to be not less than 10 nor more than 60 days
prior to the date fixed for the meeting.
SECTION 12.04. Who May Attend and Vote at Meetings. To be entitled to
vote at any meeting of Holders, a Person will (i) be a registered Holder of one
or more Notes, or (ii) be a Person appointed by an instrument in writing as
proxy for the registered Holder or Holders of Notes. The only Persons who will
be entitled to be present or to speak at any meeting of Holders will be the
Persons entitled to vote at such meeting and their counsel and any
representatives of the Trustee and its counsel and any representatives of the
Company and their counsel.
SECTION 12.05. Quorum; Action. The Persons entitled to vote a majority
in principal amount of the outstanding Notes shall constitute a quorum. In the
absence of a quorum within 30 minutes of the time appointed for any such
meeting, the meeting shall, if convened at the request of Holders of Notes, be
dissolved. In any other case the meeting may be adjourned
<PAGE>
<PAGE>
82
for a period of not less than 10 days as determined by the chairman of the
meeting prior to the adjournment of such meeting. In the absence of a quorum at
any such adjourned meeting, such adjourned meeting may be further adjourned for
a period of not less than 10 days as determined by the chairman of the meeting
prior to the adjournment of such adjourned meeting. Notice of the reconvening of
any adjourned meeting shall be given as provided in Section 12.02, except that
such notice need be given only once and not less than five days prior to the
date on which the meeting is scheduled to be reconvened. Notice of the
reconvening of an adjourned meeting shall state expressly the percentage of the
principal amount of the outstanding Notes which shall constitute a quorum.
Subject to the foregoing, at the reconvening of any meeting adjourned
for a lack of a quorum, the Persons entitled to vote 25% in principal amount of
the outstanding Notes at the time shall constitute a quorum for the taking of
any action set forth in the notice of the original meeting.
At a meeting or an adjourned meeting duly reconvened and at which a
quorum is present as aforesaid, any action or matter, except as otherwise
specified herein, shall be effectively passed and decided if passed or decided
by the Persons entitled to vote not less than a majority in principal amount of
outstanding Notes represented and voting at such meeting.
Any action or matter passed or decision taken at any meeting of
Holders of Notes duly held in accordance with this Section 12.05 shall be
binding on all the Holders of Notes, whether or not present or represented at
the meeting.
SECTION 12.06. Regulations May Be Made by Trustee; Conduct of the
Meeting; Voting Rights; Adjournment. Notwithstanding any other provision of this
Indenture, the Trustee may make such reasonable regulations as it may deem
advisable for any action by or any meeting of Holders, in regard to proof of the
holding of Notes and of the appointment of proxies, and in regard to the
appointment and duties of inspectors of votes, and submission and examination of
proxies, certificates and other evidence of the right to vote, and such other
matters concerning the conduct of the meeting as it will think appropriate. Such
regulations may fix a record date and time for determining the Holders of record
of Notes entitled to vote at such meeting, in which case those and only those
Persons who are Holders of Notes at the record date and time so fixed, or their
proxies, will be entitled to vote at such meeting whether or not they will be
such Holders at the time of the meeting.
The Trustee will, by an instrument in writing, appoint a temporary
chairman of the meeting, unless the meeting will have been called by the Company
or by Holders as provided in Section 12.03, in which case the Company or the
Holders calling the meeting, as the case may be, will in like manner appoint a
temporary chairman. A permanent chairman and a permanent
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83
secretary of the meeting will be elected by vote of the Holders of a majority in
principal amount of the Notes represented at the meeting and entitled to vote.
At any meeting each Holder or proxy will, subject to the provisions of
Section 12.04 hereof, be entitled to one vote for each $1,000 principal amount
of Notes held or represented by him or her; provided, however, that no vote will
be cast or counted at any meeting in respect of any Notes challenged as not
outstanding and ruled by the chairman of the meeting to be not outstanding. The
chairman may adjourn any such meeting if he is unable to determine whether any
Holder or proxy will be entitled to vote at such meeting. The chairman of the
meeting will have no right to vote other than by virtue of Notes held by him or
instruments in writing as aforesaid duly designating him as the proxy to vote on
behalf of other Holders. Any meeting of Holders duly called pursuant to the
provisions of Section 12.02 or Section 12.03 may be adjourned from time to time
by vote of the Holders of a majority in aggregate principal amount of the Notes
represented at the meeting and entitled to vote, and the meeting may be held as
so adjourned without further notice.
SECTION 12.07. Voting at the Meeting and Record to Be Kept. The vote
upon any resolution submitted to any meeting of Holders will be by written
ballots on which will be subscribed the signatures of the Holders of Notes or/of
their representatives by proxy and the principal amount of the Notes voted by
the ballot. The permanent chairman of the meeting will appoint two inspectors of
votes, who will count all votes cast at the meeting for or against any
resolution and will make and file with the secretary of the meeting their
verified written reports in duplicate of all votes cast at the meeting. A record
in duplicate of the proceedings of each meeting of Holders will be prepared by
the secretary of the meeting and there will be attached to such record the
original reports of the inspectors of votes on any vote by ballot taken thereat
and affidavits by one or more Persons having knowledge of the facts, setting
forth a copy of the notice of the meeting and showing that such notice was
mailed as provided in Section 12.02. The record will be signed and verified by
the affidavits of the permanent chairman and the secretary of the meeting and
one of the duplicates will be delivered to the Company and the other to the
Trustee to be preserved by the Trustee, the latter to have attached thereto the
ballots voted at the meeting.
Any record so signed and verified will be conclusive evidence of the
matters therein stated.
SECTION 12.08. Exercise of Rights of Trustee or Holders May Not Be
Hindered or Delayed by Call of Meeting. Nothing contained in this Article Twelve
will be deemed or construed to authorize or permit, by reason of any call of a
meeting of Holders or any rights expressly or impliedly conferred hereunder to
make such call, any hindrance or delay in the exercise of any right or rights
conferred upon or reserved to the Trustee or to the Holders under any of the
provisions of this Indenture or of the Notes.
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84
SECTION 12.09. Procedures Not Exclusive. The procedures set forth in
this Article Twelve are not exclusive and the rights and obligations of the
Company, the Trustee and the Holders under other Articles of this Indenture
(including, without limitation, Articles Six, Seven, Eight and Nine) will in no
way be limited by the provisions of this Article Twelve.
<PAGE>
<PAGE>
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed, all as of the date first written above.
AMTRAN, INC.,
as Issuer
By:
---------------------------
Name:
Title:
AMERICAN TRANS AIR, INC.,
as Guarantor
By:
---------------------------
Name:
Title:
AMBASSADAIR TRAVEL CLUB, INC.,
as Guarantor
By:
---------------------------
Name:
Title:
ATA VACATIONS, INC.,
as Guarantor
By:
---------------------------
Name:
Title:
<PAGE>
<PAGE>
AMBER TRAVEL, INC.,
as Guarantor
By:
---------------------------
Name:
Title:
AMERICAN TRANS AIR TRAINING
CORPORATION,
as Guarantor
By:
---------------------------
Name:
Title:
AMERICAN TRANS AIR
EXECUJET, INC.,
as Guarantor
By:
---------------------------
Name:
Title:
AMBER AIR FREIGHT CORPORATION,
as Guarantor
By:
By:
---------------------------
Name:
Title:
<PAGE>
<PAGE>
FIRST SECURITY BANK, N.A.,
as Trustee
By:
---------------------------
Name:
Title:
<PAGE>
<PAGE>
EXHIBIT A
---------
GLOBAL NOTE
[FACE OF NOTE]
AMTRAN, INC.
10 1/2% Senior Notes due 2004
[CUSIP] [CINS] [__________]
No. $_________
AMTRAN INC., an Indiana corporation (the "Company", which term
includes any successor under the Indenture hereinafter referred to), for value
received, promises to pay to _____________, or its registered assigns, the
principal sum of ____________ ($____) on August 1, 2004.
Interest Payment Dates: February 1 and August 1, commencing February
1, 1998.
Regular Record Dates: January 15 and July 15.
Reference is hereby made to the further provisions of this Note set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
<PAGE>
<PAGE>
A-2
IN WITNESS WHEREOF, the Company has caused this Note to be signed
manually or by facsimile by its duly authorized officers.
Date: July 24, 1997 AMTRAN, INC.
By:
---------------------------
Name:
Title:
By:
---------------------------
Name:
Title:
<PAGE>
<PAGE>
A-3
(Trustee's Certificate of Authentication)
This is one of the 10 1/2% Senior Notes due 2004 described in the
within-mentioned Indenture.
FIRST SECURITY BANK, N.A.,
as Trustee
By:
--------------------------
Authorized Signatory
<PAGE>
<PAGE>
A-4
[REVERSE SIDE OF NOTE]
AMTRAN, INC.
10 1/2% Senior Note due 2004
1. Principal and Interest.
The Company will pay the principal of this Note on August 1, 2004.
The Company promises to pay interest on the principal amount of this
Note on each Interest Payment Date, as set forth below, at the rate per annum
shown above.
Interest will be payable semiannually (to the holders of record of the
Notes at the close of business on the January 15 or July 15 immediately
preceding the Interest Payment Date) on each Interest Payment Date, commencing
February 1, 1998.
If an exchange offer registered under the Securities Act is not
consummated and a shelf registration statement under the Securities Act with
respect to resales of the Notes is not declared effective by the Commission, on
or before January 24, 1998 in accordance with the terms of the Registration
Rights Agreement dated as of July 24, 1997 among the Company, the Guarantors (as
defined therein) and Morgan Stanley & Co. Incorporated and Salomon Brothers Inc,
the annual interest rate borne by the Notes shall be increased by .5% from the
rate shown above accruing from January 24, 1998, payable in cash semiannually,
in arrears, on each February 1 and August 1, commencing February 1, 1998, until
the exchange offer is completed or the shelf registration statement is declared
effective. The Holder of this Note is entitled to the benefits of such
Registration Rights Agreement.
Interest on the Notes will accrue from the most recent date to which
interest has been paid or, if no interest has been paid, from July 24, 1997;
provided that, if there is no existing default in the payment of interest and
this Note is authenticated between a Regular Record Date referred to on the face
hereof and the next succeeding Interest Payment Date, interest shall accrue from
such Interest Payment Date. Interest will be computed on the basis of a 360-day
year of twelve 30-day months.
The Company shall pay interest on overdue principal and premium, if
any, and interest on overdue installments of interest, to the extent lawful, at
a rate borne by the Notes.
<PAGE>
<PAGE>
A-5
2. Method of Payment.
The Company will pay interest (except defaulted interest) on the
principal amount of the Notes as provided above on each February 1 and August 1
to the persons who are Holders (as reflected in the Note Register at the close
of business on the January 15 and July 15 immediately preceding the Interest
Payment Date), in each case, even if the Note is cancelled on registration of
transfer, registration of exchange, redemption or repurchase after such record
date; provided that, with respect to the payment of principal, the Company will
make payment to the Holder that surrenders this Note to a Paying Agent on or
after August 1, 2004.
The Company will pay principal, premium, if any, and as provided
above, interest in money of the United States that at the time of payment is
legal tender for payment of public and private debts. However, the Company, at
its option, may pay principal, premium, if any, and interest by its check
payable in such money. It may mail an interest check to a Holder's registered
address (as reflected in the Note Register). If a payment date is a date other
than a Business Day at a place of payment, payment may be made at that place on
the next succeeding day that is a Business Day and no interest shall accrue for
the intervening period.
3. Paying Agent and Registrar.
Initially, the Trustee will act as authenticating agent, Paying Agent
and Registrar. The Company may change any authenticating agent, Paying Agent or
Registrar without notice. The Company, any Subsidiary or any Affiliate of any of
them may act as Paying Agent, Registrar or co-Registrar.
4. Indenture; Limitations.
The Company issued the Notes under an Indenture dated as of July 24,
1997 (the "Indenture"), between the Company, the Guarantors and First Security
Bank, N.A., as trustee (the "Trustee"). Capitalized terms herein are used as
defined in the Indenture unless otherwise indicated. The terms of the Notes
include those stated in the Indenture and those made part of the Indenture by
reference to the Trust Indenture Act. The Notes are subject to all such terms,
and Holders are referred to the Indenture and the Trust Indenture Act for a
statement of all such terms. To the extent permitted by applicable law, in the
event of any inconsistency between the terms of this Note and the terms of the
Indenture, the terms of the Indenture shall control.
The Notes are unsecured senior obligations of the Company. The Company
may, subject to Article Four of the Indenture, issue additional Notes under the
Indenture.
<PAGE>
<PAGE>
A-6
5. Redemption.
The Notes will be redeemable, at the Company's option, in whole or in
part, at any time or from time to time, on or after August 1, 2002 and prior to
maturity, upon not less than 30 nor more than 60 days' prior notice mailed by
first class mail to each Holders' last address as it appears in the Note
Register, at the following Redemption Prices (expressed in percentages of
principal amount), plus accrued and unpaid interest, if any, to the Redemption
Date (subject to the right of Holders of record on the relevant Regular Record
Date that is on or prior to the Redemption Date to receive interest due on an
Interest Payment Date), if redeemed during the 12-month period commencing August
1 of the years set forth below:
Redemption
Year Price
---- -----
2002 .......................... 105.250%
2003 .......................... 102.625%
In addition, at any time prior to August 1, 2000, the Company may
redeem up to 35% of the principal amount of the Notes with the proceeds of one
or more sales of its Common Stock, at any time or from time to time in part, at
a Redemption Price (expressed as a percentage of principal amount) of 110.50%,
plus accrued and unpaid interest to the Redemption Date (subject to the rights
of Holders of record on the relevant Regular Record Date that is prior to the
Redemption Date to receive interest due on an Interest Payment Date); provided
that at least $65 million aggregate principal amount of Notes remains
outstanding after each such redemption.
In the event that more than 98% of the outstanding principal amount of
the Notes are tendered pursuant to an Offer to Purchase, as required by Section
4.11 or Section 4.12, the balance of the Notes will be redeemable, at the
Company's option, in whole or in part, at any time or from time to time
thereafter and prior to maturity, upon not less than 30 nor more than 60 days'
prior notice mailed by first class mail to each Holder's last address as it
appears in the Note Register, at a Redemption Price equal to the price specified
in such Offer to Purchase plus accrued and unpaid interest, if any, to the
Redemption Date (subject to the right of Holders of record on the relevant
Regular Record Date that is on or prior to the Redemption Date to receive
interest due on an Interest Payment Date).
Notice of any optional redemption will be mailed at least 30 days but
not more than 60 days before the Redemption Date to each Holder of Notes to be
redeemed at his last address
<PAGE>
<PAGE>
A-7
as it appears in the Note Register. Notes in denominations larger than $1,000
may be redeemed in part. On and after the Redemption Date, interest ceases to
accrue on Notes or portions of Notes called for redemption, unless the Company
defaults in the payment of the Redemption Price.
6. Repurchase upon a Change of Control.
Upon the occurrence of any Change of Control, each Holder shall have
the right to require the repurchase of its Notes by the Company in cash pursuant
to the offer described in the Indenture at a purchase price equal to 101% of the
principal amount thereof plus accrued and unpaid interest, if any, to the
Payment Date (the "Change of Control Payment").
A notice of such Change of Control will be mailed within 30 days after
any Change of Control occurs to each Holder at his last address as it appears in
the Note Register. Notes in denominations larger than $1,000 may be sold to the
Company in part. On and after the Payment Date, interest ceases to accrue on
Notes or portions of Notes surrendered for purchase by the Company, unless the
Company defaults in the payment of the Change of Control Payment.
7. Denominations; Transfer; Exchange.
The Notes are in registered form without coupons in denominations of
$1,000 of principal amount and multiples of $1,000 in excess thereof. A Holder
may register the transfer or exchange of Notes in accordance with the Indenture.
The Registrar may require a Holder, among other things, to furnish appropriate
endorsements and transfer documents and to pay any taxes and fees required by
law or permitted by the Indenture. The Registrar need not register the transfer
or exchange of any Notes selected for redemption. Also, it need not register the
transfer or exchange of any Notes for a period of 15 days before the day of the
mailing of a notice of redemption of Notes selected for redemption.
8. Persons Deemed Owners.
A Holder shall be treated as the owner of a Note for all purposes.
9. Unclaimed Money.
If money for the payment of principal, premium, if any, or interest
remains unclaimed for two years, the Trustee and the Paying Agent will pay the
money back to the Company at its written request. After that, Holders entitled
to the money must look to the
<PAGE>
<PAGE>
A-8
Company for payment, unless an abandoned property law designates another Person,
and all liability of the Trustee and such Paying Agent with respect to such
money shall cease.
10. Discharge Prior to Redemption or Maturity.
If the Company deposits with the Trustee money or U.S. Government
Obligations sufficient to pay the then outstanding principal of, premium, if
any, and accrued interest on the Notes (a) to redemption or maturity, the
Company and the Guarantors will be discharged from the Indenture and the Notes,
except in certain circumstances for certain sections thereof, and (b) to the
Stated Maturity, the Company and the Guarantors will be discharged from certain
covenants set forth in the Indenture.
11. Amendment; Supplement; Waiver.
Subject to certain exceptions, the Indenture or the Notes may be
amended or supplemented with the consent of the Holders of at least a majority
in principal amount of the Notes then outstanding, and any existing default or
compliance with any provision may be waived with the consent of the Holders of
at least a majority in principal amount of the Notes then outstanding. Without
notice to or the consent of any Holder, the parties thereto may amend or
supplement the Indenture or the Notes to, among other things, cure any
ambiguity, defect or inconsistency and make any change that does not adversely
affect the rights of any Holder.
12. Restrictive Covenants.
The Indenture imposes certain limitations on the ability of the
Company and its Restricted Subsidiaries, among other things, to Incur additional
Indebtedness, make Restricted Payments, use the proceeds from Asset Sales,
suffer to exist restrictions on the ability of Restricted Subsidiaries to make
certain payments to the Company, issue Capital Stock of Restricted Subsidiaries,
engage in transactions with Affiliates, suffer to exist or incur Liens, engage
in certain sale-leaseback transactions, Guarantee Indebtedness of the Company or
merge, consolidate or transfer substantially all of its assets. Within 90 days
after the end of each fiscal year, the Company shall deliver to the Trustee an
Officers' Certificate stating whether or not the signers know of any Default or
Event of Default under such restrictive covenants.
<PAGE>
<PAGE>
A-9
13. Successor Persons.
When a successor person or other entity assumes all the obligations of
its predecessor under the Notes and the Indenture, the predecessor person will
be released from those obligations.
14. Defaults and Remedies.
The following events constitute "Events of Default" with respect to
the Notes under the Indenture: (a) the Company or any Guarantor, as the case may
be, defaults in the payment of principal of (or premium, if any, on) any Note
when the same becomes due and payable at Stated Maturity, upon acceleration,
redemption or otherwise; (b) the Company or any Guarantor, as the case may be,
defaults in the payment of interest on any Note when the same becomes due and
payable, and such default continues for a period of 30 days; (c) the Company or
any Guarantor, as the case may be, defaults in the performance or breaches
Article Five or fails to make or consummate an Offer to Purchase in accordance
with Section 4.11 or Section 4.12 of the Indenture; (d) the Company or a
Guarantor defaults in the performance of or breaches any other covenant or
agreement of the Company or a Guarantor in this Indenture or under the Notes
(other than a default specified in clause (a), (b) or (c) above) and such
default or breach continues for a period of 30 consecutive days after written
notice by the Trustee or the Holders of 25% or more in aggregate principal
amount of the Notes; (e) there occurs with respect to any issue or issues of
Indebtedness of the Company, any Guarantor or any Significant Subsidiary having
an outstanding principal amount of $10 million or more in the aggregate for all
such issues of all such Persons, whether such Indebtedness now exists or shall
hereafter be created, (I) an event of default that has caused the holder thereof
to declare such Indebtedness to be due and payable prior to its Stated Maturity
and such Indebtedness has not been discharged in full or such acceleration has
not been rescinded or annulled within 30 days of such acceleration and/or (II)
the failure to make a principal payment at the final (but not any interim) fixed
maturity and such defaulted payment shall not have been made, waived or extended
within 30 days of such payment default; (f) any final judgment or order (not
covered by insurance) for the payment of money in excess of $10 million in the
aggregate for all such final judgments or orders against all such Persons
(treating any deductibles, self-insurance or retention as not so covered) shall
be rendered against the Company, any Guarantor or any Significant Subsidiary and
shall not be paid or discharged, and there shall be any period of 30 consecutive
days during which a stay of enforcement of such final judgment or order, by
reason of a pending appeal or otherwise, shall not be in effect; (g) a court
having jurisdiction in the premises enters a decree or order for (A) relief in
respect of the Company or any Significant Subsidiary in an involuntary case
under any applicable bankruptcy, insolvency or other similar law now or
hereafter in effect, (B) appointment of a receiver, liquidator, assignee,
custodian, trustee, sequestrator or similar official of the Company or any
Significant Subsidiary or for all or substantially all of the property and
assets of the Company or
<PAGE>
<PAGE>
A-10
any Significant Subsidiary or (C) the winding up or liquidation of the affairs
of the Company or any Significant Subsidiary and, in each case, such decree or
order shall remain unstayed and in effect for a period of 30 consecutive days;
(h) the Company or any Significant Subsidiary (A) commences a voluntary case
under any applicable bankruptcy, insolvency or other similar law now or
hereafter in effect, or consents to the entry of an order for relief in an
involuntary case under any such law, (B) consents to the appointment of or
taking possession by a receiver, liquidator, assignee, custodian, trustee,
sequestrator or similar official of the Company or any Significant Subsidiary or
for all or substantially all of the property and assets of the Company or any
Significant Subsidiary or (C) effects any general assignment for the benefit of
creditors; or (i) any Note Guarantee ceases to be in full force and effect
(except pursuant to its terms) or is declared null and void or any Guarantor
denies that it has any further liability under any Note Guarantee, or gives
notice to such effect.
If an Event of Default, as defined in the Indenture, occurs and is
continuing, the Trustee or the Holders of at least 25% in aggregate principal
amount of the Notes may declare all the Notes to be due and payable. If a
bankruptcy or insolvency default with respect to the Company occurs and is
continuing, the Notes automatically become due and payable. Holders may not
enforce the Indenture or the Notes except as provided in the Indenture. The
Trustee may require indemnity satisfactory to it before it enforces the
Indenture or the Notes. Subject to certain limitations, Holders of at least a
majority in principal amount of the Notes then outstanding may direct the
Trustee in its exercise of any trust or power.
15. Note Guarantee.
The Company's obligations under the Notes are fully, unconditionally
and irrevocably guaranteed by each Guarantor.
16. Trustee Dealings with the Company or the Guarantors.
The Trustee under the Indenture, in its individual or any other
capacity, may make loans to, accept deposits from and perform services for the
Guarantors or the Company or their Affiliates and may otherwise deal with the
Guarantors or the Company or their Affiliates as if it were not the Trustee.
17. No Recourse Against Others.
No incorporator or any past, present or future partner, shareholder,
other equity holder, officer, director, employee or controlling person as such,
of the Company or the
<PAGE>
<PAGE>
A-11
Guarantors or of any successor Person shall have any liability for any
obligations of the Company or the Guarantors under the Notes or the Indenture
or for any claim based on, in respect of or by reason of, such obligations or
their creation. Each Holder by accepting a Note expressly waives and releases
all such liability. The waiver and release are a condition of, and part of
the consideration for the issuance of the Notes.
18. Authentication.
This Note shall not be valid until the Trustee or authenticating agent
signs the certificate of authentication on the other side of this Note.
19. Abbreviations.
Customary abbreviations may be used in the name of a Holder or an
assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the
entireties), JT TEN (= joint tenants with right of survivorship and not as
tenants in common), CUST (= Custodian) and U/G/M/A (= Uniform Gifts to Minors
Act).
The Company will furnish to any Holder upon written request and
without charge a copy of the Indenture. Requests may be made to Amtran, Inc.,
7337 West Washington Street, Indianapolis, Indiana 46231, Attention: Chief
Financial Officer.
20. Defeasance
The Indenture contains provisions for defeasance, at any time, of the
Indebtedness represented by this Note or the covenants governing the
Indebtedness represented by this Note, upon compliance by the Company with
certain conditions set forth in the Indenture.
21. Holders' Compliance with Registration Rights Agreement
Each Holder of a Note, by acceptance hereof, acknowledges and agrees
to the provisions of the Registration Rights Agreement, including, without
limitation, the obligations of the Holders with respect to a registration and
the indemnification of the Company and each of the Guarantors to the extent
provided therein.
<PAGE>
<PAGE>
A-12
22. Governing Law
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
INTERNAL LAWS OF THE STATE OF NEW YORK.
<PAGE>
<PAGE>
A-13
[FORM OF TRANSFER NOTICE]
FOR VALUE RECEIVED the undersigned registered holder hereby sell(s),
assign(s) and transfer(s) unto
Insert Taxpayer Identification No.
- --------------------------------------------------------------------------------
Please print or typewrite name and address including zip code of assignee
- --------------------------------------------------------------------------------
the within Note and all rights thereunder, hereby irrevocably constituting and
appointing ___________________ attorney to transfer said Note on the books of
the Company with full power of substitution in the premises.
[THE FOLLOWING PROVISION TO BE INCLUDED
ON ALL NOTES OTHER THAN EXCHANGE NOTES,
UNLEGENDED OFFSHORE GLOBAL NOTES AND
UNLEGENDED OFFSHORE PHYSICAL NOTES]
In connection with any transfer of this Note occurring prior to the
date which is the earlier of (i) the date the shelf registration statement is
declared effective or (ii) the end of the period referred to in Rule 144(k)
under the Securities Act, the undersigned confirms that without utilizing any
general solicitation or general advertising that:
[Check One]
[ ] (a) this Note is being transferred in compliance with the exemption
from registration under the Securities Act of 1933 provided by Rule
144A thereunder.
or
[ ] (b) this Note is being transferred other than in accordance with (a)
above and documents are being furnished which comply with the
conditions of transfer set forth in this Note and the Indenture.
<PAGE>
<PAGE>
A-14
If none of the foregoing boxes is checked, the Trustee or other Registrar shall
not be obligated to register this Note in the name of any Person other than the
Holder hereof unless and until the conditions to any such transfer of
registration set forth herein and in Section 2.08 of the Indenture shall have
been satisfied.
Date:
-------------- -----------------------------------------------------
NOTICE: The signature to this assignment must
correspond with the name as written upon the face of
the within-mentioned instrument in every particular,
without alteration or any change whatsoever.
TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing this
Note for its own account or an account with respect to which it exercises sole
investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act of
1933 and is aware that the sale to it is being made in reliance on Rule 144A and
acknowledges that it has received such information regarding the Company as the
undersigned has requested pursuant to Rule 144A or has determined not to request
such information and that it is aware that the transferor is relying upon the
undersigned's foregoing representations in order to claim the exemption from
registration provided by Rule 144A.
Dated:
-------------- -----------------------------------------------------
NOTICE: To be executed by an executive officer
<PAGE>
<PAGE>
A-15
OPTION OF HOLDER TO ELECT PURCHASE
If you wish to have this Note purchased by the Company pursuant to
Section 4.11 or Section 4.12 of the Indenture, check the Box: [ ]
If you wish to have a portion of this Note purchased by the Company
pursuant to Section 4.11 or Section 4.12 of the Indenture, state the amount:
$___________________.
Date:
-------------
Your Signature:
------------------------------------------------------------------
(Sign exactly as your name appears on the other side of this Note)
Signature Guarantee:(1)
----------------------------------------
- ---------------------
(1) The Holder's signature must be guaranteed by a member firm of a registered
national securities exchange or of the National Association of Securities
Dealers, Inc., a commercial bank or trust company having an office or
correspondent in the United States or an "eligible guarantor institution"
as defined by Rule 17Ad-15 under the Exchange Act.
<PAGE>
<PAGE>
EXHIBIT B
Form of Certificate
_____________ , ___
First Security Bank, N.A.
79 South Main Street
Salt Lake City, Utah 84111
Attention: Corporate Trust Services
Re: Amtran Inc. (the "Company") 10 1/2% Senior Notes due 2004 (the "Notes")
Dear Sirs:
This letter relates to U.S. $_________ principal amount of Notes
represented by a Note (the "Legended Note") which bears a legend outlining
restrictions upon transfer of such Legended Note. Pursuant to Section 2.02 of
the Indenture dated as of July 24, 1997 (the "Indenture") relating to the Notes,
we hereby certify that we are (or we will hold such securities on behalf of) a
person outside the United States to whom the Notes could be transferred in
accordance with Rule 904 of Regulation S promulgated under the U.S. Securities
Act of 1933. Accordingly, you are hereby requested to exchange the legended
certificate for an unlegended certificate representing an identical principal
amount of Notes, all in the manner provided for in the Indenture.
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceedings or official inquiry with
respect to the matters covered hereby. Terms used in this certificate have the
meanings set forth in Regulation S.
Very truly yours,
[Name of Holder]
By:
-----------------------------
Authorized Signature
<PAGE>
<PAGE>
EXHIBIT C
Form of Certificate to Be
Delivered in Connection with
Transfers to Non-QIB Accredited Investors
______________ , ___
First Security Bank, N.A.
79 South Main Street
Salt Lake City, Utah 84111
Attention: Corporate Trust Services
Re: Amtran, Inc. (the "Company") 10 1/2% Senior Notes due 2004 (the "Notes")
Dear Sirs:
In connection with our proposed purchase of $ _____________ aggregate
principal amount of the Notes, we confirm that:
1. We understand that any subsequent transfer of the Notes is subject
to certain restrictions and conditions set forth in the Indenture dated as of
July [ ], 1997 (the "Indenture"), relating to the Notes, and the undersigned
agrees to be bound by, and not to resell, pledge or otherwise transfer the Notes
except in compliance with, such restrictions and conditions and the Securities
Act of 1933 (the "Securities Act").
2. We understand that the offer and sale of the Notes have not been
registered under the Securities Act, and that the Notes may not be offered or
sold except as permitted in the following sentence. We agree, on our own behalf
and on behalf of any accounts for which we are acting as hereinafter stated,
that if we should sell any Notes, we will do so only (A) to the Company or any
subsidiary thereof, (B) in accordance with Rule 144A under the Securities Act to
a "qualified institutional buyer" (as defined therein), (C) to an institutional
"accredited investor" (as defined below) that, prior to such transfer, furnishes
(or has furnished on its behalf by a U.S. broker-dealer) to you and to the
Company a signed letter substantially in the form of this letter, (D) outside
the United States in accordance with Rule 904 of Regulation S under the
Securities Act, (E) pursuant to the exemption from registration provided by Rule
144 under the Securities Act, or (F) pursuant to an effective registration
statement under the Securities Act, and we further
<PAGE>
<PAGE>
C-2
agree to provide to any person purchasing any of the Notes from us a notice
advising such purchaser that resales of the Notes are restricted as stated
herein.
3. We understand that, on any proposed resale of any Notes, we will be
required to furnish to you and the Company such certifications, legal opinions
and other information as you and the Company may reasonably require to confirm
that the proposed sale complies with the foregoing restrictions. We further
understand that the Notes purchased by us will bear a legend to the foregoing
effect.
4. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and have
such knowledge and experience in financial and business matters as to be capable
of evaluating the merits and risks of our investment in the Notes, and we and
any accounts for which we are acting are each able to bear the economic risk of
our or its investment.
5. We are acquiring the Notes purchased by us for our own account or
for one or more accounts (each of which is an institutional "accredited
investor") as to each of which we exercise sole investment discretion.
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceedings or official inquiry with
respect to the matters covered hereby.
Very truly yours,
[Name of Transferee]
By:
--------------------------------
Authorized Signature
<PAGE>
<PAGE>
EXHIBIT D
Form of Certificate to Be Delivered
in Connection with Transfers
Pursuant to Regulation S
____________ , ___
First Security Bank, N.A.
79 South Main Street
Salt Lake City, Utah 84111
Attention: Corporate Trust Services
Re: Amtran, Inc. (the "Company") 10 1/2% Senior Notes due 2004 (the "Notes")
Dear Sirs:
In connection with our proposed sale of U.S.$____________ aggregate
principal amount of the Notes, we confirm that such sale has been effected
pursuant to and in accordance with Regulation S under the Securities Act of 1933
and, accordingly, we represent that:
(1) the offer of the Notes was not made to a person in the United
States;
(2) at the time the buy order was originated, the transferee was
outside the United States or we and any person acting on our behalf reasonably
believed that the transferee was outside the United States;
(3) no directed selling efforts have been made by us in the United
States in contravention of the requirements of Rule 903(b) or Rule 904(b) of
Regulation S, as applicable; and
(4) the transaction is not part of a plan or scheme to evade the
registration requirements of the U.S. Securities Act of 1933.
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative
<PAGE>
<PAGE>
D-2
or legal proceedings or official inquiry with respect to the matters covered
hereby. Terms used in this certificate have the meanings set forth in
Regulation S.
Very truly yours,
[Name of Transferor]
By:
---------------------------------
Authorized Signature
<PAGE>
</TABLE>
<PAGE>
PLACEMENT AGREEMENT
July 17, 1997
Morgan Stanley & Co. Incorporated
1585 Broadway
New York, New York 10036-8293
Salomon Brothers Inc
7 World Trade Center
New York, NY 10048
Dear Sirs:
Amtran, Inc., an Indiana corporation (the "Company"), proposes
to issue and sell to Morgan Stanley & Co. Incorporated and Salomon Brothers Inc
(collectively, the "Placement Agents") $100,000,000 aggregate principal amount
of its 10.5% Senior Notes due 2004 (the "Securities") to be issued pursuant to
the provisions of an Indenture dated as of July 24, 1997 (the "Indenture") among
the Company, as issuer, American Trans Air, Inc. ("ATA"), Ambassadair Travel
Club, Inc., ATA Vacations, Inc., Amber Travel, Inc., American Trans Air Training
Corporation, American Trans Air Execujet, Inc. and Amber Air Freight Corporation
(each, an Indiana corporation), as guarantors (together, the "Guarantors"), and
First Security Bank, N.A., as trustee (the "Trustee"). Pursuant to the terms of
the Indenture the Guarantors will guarantee (each, a "Guarantee") on a joint and
several basis the obligations of the Company under the Securities and the
Indenture.
The Securities will be offered without being registered under
the Securities Act of 1933, as amended (the "Securities Act"), to "qualified
institutional buyers" (as defined in Rule 144A under the Securities Act) in
compliance with the exemption from registration provided by Rule 144A under the
Securities Act ("Rule 144A"), in offshore transactions in reliance on Regulation
S under the Securities Act ("Regulation S") and to institutional "accredited
investors" (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities
Act) that, prior to their purchase of Securities, deliver to the Placement
Agents a letter in the form annexed to the Final Memorandum (as defined below).
The Placement Agents and their direct and indirect transferees
will be entitled to the benefits of a registration rights agreement (the
"Registration Rights Agreement"), to be
<PAGE>
<PAGE>
2
dated the Closing Date (as defined below) and to be substantially in the form
attached hereto as Exhibit A.
In connection with the sale of the Securities, the Company has
prepared a preliminary private placement memorandum (the "Preliminary
Memorandum") and will prepare a final private placement memorandum (the "Final
Memorandum" and, with the Preliminary Memorandum, each a "Memorandum") setting
forth or including a description of the terms of the Securities, the terms of
the offering and a description of the Company and its business.
1. Representations and Warranties. Each of the Guarantors and
the Company represents and warrants to, and agrees with, the Placement Agents
that as of the date hereof:
(a) The Final Memorandum, in the form used by the Placement
Agents to confirm sales and on the Closing Date (as defined below),
will not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements therein, in the
light of the circumstances under which they were made, not misleading,
except that the representations and warranties set forth in this
Section 1(a) do not apply to statements or omissions in either
Memorandum based upon information relating to any Placement Agent
furnished to the Company or any Guarantor in writing by such Placement
Agent through you expressly for use therein.
(b) None of the Guarantors, the Company nor any affiliate (as
defined in Rule 501(b) of Regulation D under the Securities Act, an
"Affiliate") of the Guarantors or the Company has directly, or through
any agent, (i) sold, offered for sale, solicited offers to buy or
otherwise negotiated in respect of, any security (as defined in the
Securities Act) which is or will be integrated with the sale of the
Securities in a manner that would require the registration under the
Securities Act of the Securities or (ii) engaged in any form of general
solicitation or general advertising in connection with the offering of
the Securities (as those terms are used in Regulation D under the
Securities Act) or in any manner involving a public offering within the
meaning of Section 4(2) of the Securities Act except that no
representation is made as to the activities of the Placement Agents.
(c) None of the Guarantors, the Company, their Affiliates nor
any person acting on its or their behalf (other than the Placement
Agents) has engaged in any directed selling efforts (as that term is
defined in Regulation S) with respect to the Securities and each of the
Guarantors, the Company and its Affiliates and any person acting on its
or their behalf (other than the Placement Agents) have complied with
the offering restrictions requirement of Regulation S.
<PAGE>
<PAGE>
3
(d) The Company is subject to Section 13 or 15(d) of the
Securities Exchange Act of 1934, as amended.
(e) Assuming the accuracy of the representations and
warranties of the Placement Agents in Section 6 and the compliance by
them with their agreements in Section 6, it is not necessary in
connection with the offer, sale and delivery of the Securities and the
Guarantees to the Placement Agents in the manner contemplated by this
Agreement to register the Securities or Guarantees under the Securities
Act or to qualify the Indenture under the Trust Indenture Act of 1939,
as amended, except as provided in the Registration Rights Agreement.
(f) The Securities satisfy the eligibility requirements of
Rule 144A(d)(3) under the Securities Act.
(g) Neither the Company nor any of the Guarantors is required
to register as an "investment company" and, after giving effect to the
offer, issuance and delivery of the Securities to you in accordance
with the terms of this Agreement and the application of the proceeds
thereof as described in the Final Memorandum, neither the Company nor
any of the Guarantors will be required to register as an "investment
company" under the Investment Company Act of 1940, as amended (the
"Investment Company Act").
(h) The accountants that examined and issued an auditors
report with respect to the consolidated financial statements of the
Company and its consolidated subsidiaries included in the Final
Memorandum are independent public accountants within the meaning of the
Securities Act and the regulations thereunder.
(i) This Agreement has been duly authorized, executed and
delivered by each of the Guarantors and the Company.
(j) The consolidated financial statements included in the
Final Memorandum present fairly the consolidated financial position of
the Company and its consolidated subsidiaries as of the dates indicated
and the consolidated results of operations and cash flows or changes in
financial position of the Company and its consolidated subsidiaries for
the periods specified. Such financial statements have been prepared in
conformity with generally accepted accounting principles applied on a
consistent basis throughout the periods involved. The financial
statement schedules, if any, included in the Final Memorandum present
fairly the information required to be stated therein.
<PAGE>
<PAGE>
4
(k) Each of the Guarantors and the Company is a corporation
duly organized, validly existing and in good standing under the laws of
the State of Indiana with power and authority (corporate and other)
under such laws to own, lease and operate its properties and conduct
its business as described in the Final Memorandum and to perform its
obligations under this Agreement, the Registration Rights Agreement,
the Indenture, the Securities (in the case of the Company) and the
Guarantees (in the case of the Guarantors); and each of the Guarantors
and the Company is duly qualified to transact business as a foreign
corporation and is in good standing in each other jurisdiction in which
it owns or leases property of a nature, or transacts business of a
type, that would make such qualification necessary, except to the
extent that the failure to so qualify or be in good standing would not
have a material adverse effect on the condition (financial or other),
business, prospects or results of operations of the Company and the
Guarantors, taken as a whole (a "Material Adverse Effect").
(l) The Securities have been duly authorized and, when
executed, authenticated and delivered to and paid for by the Placement
Agents in accordance with the terms of this Agreement, will be (x)
valid and binding obligations of the Company enforceable in accordance
with their terms, except as (A) the enforceability thereof may be
limited by bankruptcy, insolvency or similar laws affecting creditors'
rights generally and (B) rights of acceleration, if applicable, and the
availability of equitable remedies may be limited by equitable
principles of general applicability, and (y) be entitled to the
benefits of the Indenture and the Registration Rights Agreement.
(m) The Guarantees have been duly authorized by each of the
Guarantors and, upon execution and delivery of the Indenture by each of
the Guarantors and the Company, will be (x) valid and binding
obligations of the each of the Guarantors enforceable in accordance
with their terms, except as (A) the enforceability thereof may be
limited by bankruptcy, insolvency or similar laws affecting creditors'
rights generally and (B) rights of acceleration, if applicable, and the
availability of equitable remedies may be limited by equitable
principles of general applicability, and (y) be entitled to the
benefits of the Indenture and the Registration Rights Agreement.
(n) Each of the Indenture and the Registration Rights
Agreement has been duly authorized, executed and delivered by, and is a
valid and binding agreement of, the Company and each of the Guarantors,
enforceable in accordance with their terms except as the enforceability
thereof, except as (A) the enforceability thereof may be limited by
bankruptcy, insolvency or similar laws relating to or affecting
creditors' rights generally, (B) rights of acceleration, if applicable,
and the availability of equitable remedies may be limited by equitable
principles of general applicability and
<PAGE>
<PAGE>
5
(C) the rights to indemnification or contribution may be limited by
applicable law and public policy.
(o) ATA is a "citizen of the United States" (as defined in
Section 40102(a)(15) of Title 49 of the United States Code, as amended)
and is an air carrier operating under a certificate issued by the
Secretary of Transportation pursuant to Chapter 447 of Title 49, United
States Code, for aircraft capable of carrying 10 or more individuals or
6,000 pounds or more of cargo. There is in force with respect to ATA an
air carrier operating certificate issued pursuant to Part 121 of the
regulations under the sections of Title 49, United States Code,
relating to aviation (the "Federal Aviation Act"). All of the
outstanding shares of capital stock of each of the Guarantors have been
duly authorized and validly issued and are fully paid and
non-assessable and are owned by the Company, free and clear of any
pledge, lien, security interest, charge, claim, equity or encumbrance
of any kind.
(p) There has not occurred any material adverse change, or any
development involving a prospective material adverse change, in the
condition, financial or otherwise, or in the earnings, business or
operations of the Guarantors and the Company taken as a whole, from
that set forth in the Final Memorandum.
(q) Except as described in the Final Memorandum, none of the
Guarantors or the Company is in default in the performance or
observance of any obligation, agreement, covenant or condition
contained in any contract, indenture, mortgage, loan agreement, note,
lease or other agreement or instrument to which it is a party or by
which they may be bound or to which any of their properties may be
subject, except for such defaults that would not have a Material
Adverse Effect.
(r) The execution and delivery by each of the Guarantors and
the Company of this Agreement, the Registration Rights Agreement, the
Indenture, the Securities (in the case of the Company) and the
Guarantees (in the case of the Guarantors) (collectively, the
"Operative Documents"), the consummation by each of the Guarantors and
the Company of the transactions contemplated in this Agreement and the
Operative Documents and compliance by each of the Guarantors and the
Company with the terms of this Agreement and the Operative Documents
will not contravene (i) any provision of applicable law or the articles
of incorporation or by-laws of the Guarantors or the Company, as the
case may be, (ii) any agreement or other instrument binding upon the
Guarantors or the Company or (iii) any judgment, order or decree of any
governmental body, agency or court having jurisdiction over the
Guarantors or the Company other than, in the case of clauses (ii) and
(iii) above, such contraventions that would not individually or in the
aggregate have a Material Adverse Effect, and no consent, approval,
authorization or order of, or qualification with, any governmental
<PAGE>
<PAGE>
6
body or agency is required for the valid authorization, execution,
delivery and performance by each of the Guarantors and the Company of
this Agreement or the consummation by the Guarantors or the Company of
the transactions contemplated by this Agreement and the Operative
Documents, the consummation by each of the Guarantors and the Company
of the transactions contemplated in this Agreement and the Operative
Documents, except such as may be required by the securities or Blue
Sky laws of the various states in connection with the offer and sale
of the Securities and the Guarantees.
(s) There are no legal or governmental proceedings pending or
threatened to which the Company or any of the Guarantors is a party, or
to which any of the properties of the Company or any of the Guarantors
is subject, other than proceedings accurately described in all material
respects in the Final Memorandum and proceedings that would not have a
Material Adverse Effect, or a material adverse effect on the power or
ability of any of the Guarantors or the Company to perform their
respective obligations under this Agreement or any of the Operative
Documents, or to consummate the transactions contemplated by the Final
Memorandum.
(t) The Company and each of the Guarantors possess adequate
certificates, authorities and permits issued by appropriate
governmental agencies or bodies necessary to conduct, in all material
respects, the business now operated by them and have not received any
notice of proceedings relating to the revocation or modification of any
such certificate, authority or permit that reasonably would be likely
to, individually or in the aggregate, have a Material Adverse Effect.
(u) Except as disclosed in the Final Memorandum, no labor
dispute with the employees of the Company or any of the Guarantors
exists or to the knowledge of the Company or any of the Guarantors is
imminent that might have a Material Adverse Effect.
(v) Except as disclosed in the Final Memorandum, the Company
and each of the Guarantors (i) are in compliance with any and all
applicable foreign, federal, state and local laws and regulations
relating to the protection of human health and safety, the environment
or hazardous or toxic substances or wastes, pollutants or contaminants
("Environmental Laws"), (ii) have received all permits, licenses or
other approvals required of them under applicable Environmental Laws to
conduct their respective businesses and (iii) are in compliance with
all terms and conditions of any such permit, license or approval,
except where such noncompliance with Environmental Laws, failure to
receive required permits, licenses or other approvals or failure to
comply with the terms and conditions of such permits, licenses or
approvals would not, singly or in the aggregate, have a Material
Adverse Effect.
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7
(w) Except as disclosed in the Final Memorandum, each of the
Guarantors and the Company have good and marketable title to all real
properties and all other properties and assets owned by them, in each
case free from liens, encumbrances and defects except where the failure
to have such title would not have a Material Adverse Effect; and except
as disclosed in the Final Memorandum, each of the Guarantors and the
Company hold any leased real or personal property under valid and
enforceable leases with no exceptions that would have a Material
Adverse Effect.
The representations and warranties contained in this Agreement
shall be true and correct as of the date of this Agreement and as of the Closing
Date.
2. Offering.
You have advised the Company and the Guarantors that the
Placement Agents will make an offering of the Securities received and paid for
by the Placement Agents hereunder on the terms set forth in the Final Memorandum
as soon as practicable after this Agreement is entered into as in your judgment
is advisable.
3. Issuance and Delivery.
(a) The Company hereby agrees to sell to the Placement Agents,
and the Placement Agents, upon the basis of the representations and warranties
herein contained, but subject to the conditions hereinafter stated, agree,
severally and not jointly, to purchase from the Company the respective principal
amount of Securities set forth in Schedule I hereto opposite their names at a
purchase price of 97% of the principal amount thereof.
(b) Payment for the Securities shall be made against delivery
of the Securities at a closing (the "Closing") to be held at the office of
Shearman & Sterling at 599 Lexington Avenue, New York, New York 10022 at 10:00
A.M., local time, on July 22, 1997, or at such other time on the same or such
other date, not later than August 2, 1997, as shall be agreed upon by the
Company and you. The time and date of such payment are herein referred to as the
Closing Date. Delivery of the Securities shall be made to your account at The
Depository Trust Company against payment by the Placement Agents of the purchase
price thereof by wire transfer in immediately available funds.
(c) Certificates for the Securities shall be in global or
definitive form and registered in such names and in such denominations as you
shall request in writing not less than two full business days prior to the
Closing Date. The certificates evidencing the Securities shall be delivered to
you on the Closing Date for the respective account of each Placement Agent, with
any transfer taxes payable in connection with the transfer of the Securities to
the Placement Agents duly paid, against payment of the purchase price therefor.
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8
4. Conditions to Closing. The several obligations of the
Placement Agents under this Agreement to purchase the Securities will be subject
to the following conditions:
(a) Subsequent to the date of this Agreement and prior to the
Closing Date,
(i) there shall not have occurred any downgrading, nor shall
any notice have been given of any intended or potential downgrading or
of any review for a possible change that does not indicate the
direction of the possible change, in the rating accorded any securities
of any of the Guarantors or the Company by any "nationally recognized
statistical rating organization," as such term is defined for purposes
of Rule 436(g)(2) under the Securities Act; and
(ii) there shall not have occurred any change, or any
development involving a prospective change, in the condition, financial
or otherwise, or in the earnings, business or operations, of the
Company and the Guarantors, taken as a whole, from that set forth in
the Preliminary Memorandum that, in your judgment, is material and
adverse and that makes it, in your judgment, impracticable to market
the Securities on the terms and in the manner contemplated in the Final
Memorandum.
(b) You shall have received on the Closing Date (i) a
certificate, dated the Closing Date and signed by an executive officer of the
Company and (ii) a certificate, dated the Closing Date and signed by an
executive officer of each Guarantor, in each case, to the effect set forth in
clause (a)(i) above and to the effect that the representations and warranties of
the Company and the Guarantors contained in this Agreement are true and correct
as of the Closing Date and that the Company and each of the Guarantors have
complied with all of the agreements and satisfied all of the conditions on their
part to be performed or satisfied on or before the Closing Date.
The officers signing and delivering such certificates may rely
upon the best of their knowledge as to proceedings threatened.
(c) You shall have received on the Closing Date an opinion of
Cravath, Swaine & Moore, independent counsel for the Company, dated the Closing
Date, to the effect set forth in Exhibit B.
(d) You shall have received on the Closing Date an opinion of
the General Counsel of the Guarantor(s) and the Company, dated the Closing Date,
to the effect set forth in Exhibit C.
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9
(e) You shall have received on the Closing Date an opinion of
Shearman & Sterling, counsel for the Placement Agents, dated the Closing Date,
in form and substance satisfactory to you.
(f) You shall have received on each of the date hereof and the
Closing Date a letter, dated the date hereof or the Closing Date, as the case
may be, in form and substance satisfactory to you, from the Guarantors' and the
Company's independent public accountants, containing statements and information
of the type ordinarily included in accountants' "comfort letters" to
underwriters with respect to the financial statements and certain financial
information contained in the Final Memorandum.
(g) Each of the Guarantors and the Company shall have
furnished to you and to counsel for the Placement Agents, in form and substance
satisfactory to you and to them, such other documents, certificates and opinions
as such counsel may reasonably request in order to pass upon the matters
referred to in Section 4(e) and in order to evidence the accuracy and
completeness of any of the representations, warranties or statements, the
performance of any covenant by any of the Guarantors or the Company theretofore
to be performed, or the compliance with any of the conditions herein contained.
(h) On or before the Closing Date, the agreement covering the
New Credit Facility, as such term is defined in the Offering Memorandum, shall
have been entered into substantially in the form heretofore delivered to you,
and shall be in full force and effect.
5. Covenants of the Company. In further consideration of the
agreements of the Placement Agents contained in this Agreement, the Company and
each of the Guarantors covenant as follows:
(a) To furnish to you, without charge, during the period
mentioned in paragraph (c) below, as many copies of the Final
Memorandum and any supplements and amendments thereto as you may
reasonably request and to deliver such copies to you by 8:00 a.m. (New
York time) on the second business day following the execution of this
Agreement.
(b) Before amending or supplementing either Memorandum, to
furnish to you a copy of each such proposed amendment or supplement and
not to use any such proposed amendment or supplement to which you
reasonably object.
(c) If, during such period after the date hereof and prior to
the date on which all of the Securities shall have been sold by the
Placement Agents, any event shall occur or condition exist as a result
of which it is necessary in your judgment to amend or supplement the
Final Memorandum in order to make the statements therein,
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<PAGE>
10
in the light of the circumstances when such Memorandum is delivered to
a purchaser, not misleading, or if, with the opinion of counsel to the
Placement Agents it is necessary to amend or supplement such
Memorandum to comply with applicable law, forthwith to prepare and
furnish, at its own expense, to the Placement Agents, either
amendments or supplements to such Memorandum so that the statements in
such Memorandum as so amended or supplemented will not, in the light
of the circumstances when such Memorandum is delivered to a purchaser,
be misleading or so that such Memorandum, as so amended or
supplemented, will comply with applicable law.
(d) So long as any of the Securities are "restricted
securities" within the meaning of Rule 144(a)(3) under the Securities
Act, at any time when the Company is not subject to Section 13 or 15(d)
of the Exchange Act, each of the Guarantors and the Company will
provide to any holder of such restricted securities, or to any
prospective purchaser of such restricted securities designated by a
holder, upon the request of such holder or prospective purchaser, any
information required to be delivered to holders and prospective
purchasers of the Securities pursuant to Rule 144A(d)(4) under the
Securities Act.
(e) To endeavor to qualify the Securities and the Guarantees
for offer and sale under the applicable securities or Blue Sky laws of
such jurisdictions as you shall reasonably request.
(f) For a period of five years after the Closing Date, the
Guarantors and the Company will make available to the Placement Agents
copies of all annual reports, quarterly reports and current reports
filed by the Company with the Securities and Exchange Commission (the
"Commission") on Forms 10-K, 10-Q and 8-K, or such other similar forms
as may be designated by the Commission, and such other documents,
reports and information as shall be furnished by the Company to the
holders of the Securities or the Guarantors to their security holders
generally; provided that at such time the Company has securities
registered under Section 12(b) or 12(g) of the Exchange Act.
(g) During the period of two years after the Closing Date,
each of the Guarantors and the Company will, upon request, furnish to
the Placement Agents and any holder of the Securities a copy of the
restrictions on transfer applicable to the Securities.
(h) During the period of two years after the Closing Date,
none of the Guarantors or the Company will, and none of the Guarantors
or the Company will
<PAGE>
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11
permit any of their affiliates (as defined in Rule 144 under the
Securities Act) to, resell any of the Securities that have been
reacquired by any of them.
(i) During the period of two years after the Closing Date,
none of the Guarantors or the Company will be or become an open-end
investment company, unit investment trust or face-amount certificate
company that is or is required to be registered under Section 8 of the
Investment Company Act, or a closed-end investment company required to
be registered, but not registered, under the Investment Company Act.
(j) Whether or not any sale of such Securities is consummated,
to pay all expenses incident to the performance of its obligations
under this Agreement, including: (i) the preparation of each Memorandum
and all amendments and supplements thereto, (ii) the preparation,
issuance and delivery of the Securities, (iii) the fees and
disbursements of the Company's counsel and accountants and the Trustee
and its counsel, (iv) the qualification of such Securities under
securities or Blue Sky laws in accordance with the provisions of
Section 5(e), including filing fees and the fees and disbursements of
counsel for the Placement Agents in connection therewith and in
connection with the preparation of any Blue Sky or legal investment
memoranda, (v) the printing and delivery to the Placement Agents in
quantities as hereinabove stated of copies of each Memorandum and any
amendments or supplements thereto, (vi) any fees charged by rating
agencies for the rating of such Securities, (vii) all reasonable fees
and expenses of counsel to the Placement Agents (including their fees
for professional services) in connection with the preparation of this
Agreement, (viii) the fees and expenses, if any, incurred in connection
with the admission of such Securities for trading in PORTAL or in any
other appropriate market system, (ix) the costs and expenses of the
Company and the Guarantors relating to investor presentations on any
"road show" undertaken in connection with the marketing of the
Securities, including, without limitation, expenses associated with the
production of road show slides and graphics, fees and expenses of any
consultants engaged in connection with the road show presentations with
the prior approval of the Company or any of the Guarantors, travel and
lodging expense of the representatives and officers of the Company and
the Guarantors and any such consultants, and the cost of any aircraft
chartered in connection with the road show, and (x) all other costs nd
expenses incident to the performance of the obligations of the Company
and the Guarantors hereunder for which provision is not otherwise made
in this Section.
(k) In connection with the offering, until the Placement
Agents shall have notified the Guarantors and the Company of the
completion of the resale of the Securities, neither the Company, any
Guarantor nor any of their affiliates has bid for or purchased or will
bid for or purchase, either alone or with one or more other persons,
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<PAGE>
12
for any account in which they or any of their affiliates have a
beneficial interest in any Securities, and neither they nor any of
their affiliates will make bids or purchases for the purpose of
creating actual, or apparent, active trading in, or of raising the
price of, the Securities, in either case in violation of Regulation M
under the Exchange Act.
(l) Between the date of this Agreement and the Closing Date,
none of the Guarantors or the Company will without your prior written
consent offer, sell, or enter into any agreement to sell, any public
debt securities registered under the Securities Act or any debt
securities which may be resold in a transaction exempt from the
registration requirements of the Securities Act in reliance on Rule
144A thereunder and which are marketed through the use of a disclosure
document containing substantially the same information as a prospectus
for similar debt securities registered under the Securities Act (other
than the Securities).
(m) Not to solicit any offer to buy or offer or sell the
Securities by means of any form of general solicitation or general
advertising (as those terms are used in Regulation D under the
Securities Act) or in any manner involving a public offering within the
meaning of Section 4(2) of the Securities Act.
(n) If requested by you, to use its reasonable efforts to
permit the Securities to be designated PORTAL securities in accordance
with the rules and regulations adopted by the National Association of
Securities Dealers, Inc. relating to trading in the PORTAL Market.
(o) None of the Company, the Guarantors, their Affiliates or
any person acting on its or their behalf (other than the Placement
Agents) will engage in any directed selling efforts (as that term is
defined in Regulation S) with respect to the Securities, and the
Company, each of the Guarantors and their Affiliates and each person
acting on its or their behalf (other than the Placement Agents) will
comply with the offering restrictions of Regulation S.
(p) Neither the Company, any Guarantor nor any Affiliate will
sell, offer for sale or solicit offers to buy or otherwise negotiate in
respect of any security (as defined in the Securities Act) which could
be integrated with the sale of the Securities in a manner which would
require the registration under the Securities Act.
6. Offering of Securities; Restrictions on Transfer. (a) Each
Placement Agent, severally and not jointly, represents and warrants that such
Placement Agent is a qualified institutional buyer as defined in Rule 144A under
the Securities Act (a "QIB"). Each Placement Agent, severally and not jointly,
agrees with the Company that (i) it has not and will not solicit offers for, and
has not offered or sold and will not offer or sell, such Securities
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<PAGE>
13
by any form of general solicitation or general advertising (as those terms are
used in Regulation D under the Securities Act) or in any manner involving a
public offering within the meaning of Section 4(2) of the Securities Act and
(ii) it has and will solicit offers for such Securities only from, and has
offered and will offer such Securities only to, persons that it reasonably
believes to be (A) in the case of offers inside the United States, (x) QIBs or
(y) other institutional accredited investors (as defined in Rule 501(a) (1),
(2), (3) or (7) under the Securities Act) ("institutional accredited investors")
that, prior to their purchase of the Securities, deliver to such Placement Agent
a letter containing the representations and agreements set forth in Appendix A
to the Memorandum and (B) in the case of offers outside the United States, to
persons other than U.S. persons ("foreign purchasers", which term shall include
dealers or other professional fiduciaries in the United States acting on a
discretionary basis for foreign beneficial owners (other than an estate or
trust)) that, in each case, in purchasing such Securities are deemed to have
represented and agreed as provided in the Final Memorandum under the caption
"Transfer Restrictions."
(b) Each Placement Agent, severally and not jointly,
represents, warrants, and agrees with respect to offers and sales outside the
United States that:
(i) it understands that no action has been or will be taken in
any jurisdiction by any Guarantor or the Company that would permit a
public offering of the Securities, or possession or distribution of
either Memorandum or any other offering or publicity material relating
to the Securities, in any country or jurisdiction where action for that
purpose is required;
(ii) such Placement Agent will comply with all applicable laws
and regulations in each jurisdiction in which it acquires, offers,
sells or delivers Securities or has in its possession or distributes
either Memorandum or any such other material, in all cases at its own
expense;
(iii) the Securities have not been and will not be registered
under the Securities Act and may not be offered or sold within the
United States or to, or for the account or benefit of, U.S. persons
except in accordance with Regulation S or pursuant to an exemption from
the registration requirements of the Securities Act;
(iv) such Placement Agent has offered the Securities and will
offer and sell the Securities (A) as part of their distribution at any
time and (B) otherwise until 40 days after the later of the
commencement of the offering of the Securities and the Closing Date,
only in accordance with Rule 903 of Regulation S or another exemption
from the registration requirements of the Securities Act. Accordingly,
neither such Placement Agent, its Affiliates nor any persons acting on
its or their behalf have engaged or will engage in any directed selling
efforts (within the meaning of
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14
Regulation S) with respect to the Securities, and any such Placement
Agent, its Affiliates and any such persons have complied and will
comply with the offering restrictions requirements of Regulation S;
(v) such Placement Agent has (A) not offered or sold and,
during the period of six months from the Closing Date, will not offer
or sell any Securities to persons in the United Kingdom except to
persons whose ordinary activities involve them in acquiring, holding,
managing or disposing of investments (as principal or agent) for the
purposes of their businesses or otherwise in circumstances which have
not resulted and will not result in an offer to the public in the
United Kingdom within the meaning of the Public Offers of Securities
Regulations 1995 (the "Regulations"); (B) complied and will comply with
all applicable provisions of the Financial Services Act 1986 and the
Regulations with respect to anything done by it in relation to the
Securities in, from or otherwise involving the United Kingdom; and (C)
only issued or passed on and will only issue or pass on to any person
in the United Kingdom any document received by it in connection with
the issue of the Securities if that person is of a kind described in
Article 11(3) of the Financial Services Act 1986 (Investment
Advertisements) (Exemptions) Order 1996 or is a person to whom such
document may otherwise lawfully be issued or passed on;
(vi) such Placement Agent understands that the Securities have
not been and will not be registered under the Securities and Exchange
Law of Japan, and represents that it has not offered or sold, and
agrees that it will not offer or sell, any Securities, directly or
indirectly in Japan or to any resident of Japan except (A) pursuant to
an exemption from the registration requirements of the Securities and
Exchange Law of Japan and (B) in compliance with any other applicable
requirements of Japanese law; and
(vii) such Placement Agent agrees that, at or prior to
confirmation of sales of the Securities, it will have sent to each
distributor, dealer or person receiving a selling concession, fee or
other remuneration that purchases Securities from it during the
restricted period a confirmation or notice to substantially the
following effect:
"The Securities covered hereby have not been
registered under the U.S. Securities Act of 1933 (the
"Securities Act") and may not be offered and sold within
the United States or to, or for the account or benefit of,
U.S. persons (i) as part of their distribution at any time
or (ii) otherwise until 40 days after the later of the
commencement of the offering and the closing date, except
in either case in accordance with Regulation S (or Rule
144A if available) under the Securities Act. Terms used
above have the meanings given to them by Regulation S."
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15
Terms used in this Section 6 have the meaning given to them by Regulation S of
the Securities Act.
7. Indemnification and Contribution. (a) Each of the Company
and each Guarantor, jointly and severally, agrees to indemnify and hold harmless
each Placement Agent, and each person, if any, who controls such Placement Agent
within the meaning of either Section 15 of the Securities Act or Section 20 of
the Exchange Act, or is under common control with, or is controlled by, such
Placement Agent, from and against any and all losses, claims, damages and
liabilities (including, without limitation, any legal or other expenses
reasonably incurred by any Placement Agent or any such controlling of affiliated
person in connection with defending or investigating any such action or claim)
caused by any untrue statement or alleged untrue statement of a material fact
contained in either Memorandum (as amended or supplemented if the Company shall
have furnished any amendments or supplements thereto), or caused by any omission
or alleged omission to state therein a material fact necessary to make the
statements therein in light of the circumstances under which they were made not
misleading, except insofar as such losses, claims, damages or liabilities are
caused by any such untrue statement or omission or alleged untrue statement or
omission based upon information relating to any Placement Agent furnished to any
Guarantor or the Company in writing by such Placement Agent through you
expressly for use therein; provided however, that the foregoing indemnity
agreement with respect to any Preliminary Memorandum shall not inure to the
benefit of any Placement Agent from whom the person asserting any such losses,
claims, damages or liabilities purchased Securities, or any person controlling
such Placement Agent, if a copy of the Final Memorandum (as then amended or
supplemented if any Guarantor or the Company shall have furnished any amendments
or supplements thereto) was not sent or given by or on behalf of such Placement
Agent to such person, if required by law so to have been delivered, at or prior
to the written confirmation of the sale of the Securities to such person, and if
the Final Memorandum (as so amended or supplemented) would have cured the defect
giving rise to such losses, claims, damages or liabilities, unless such failure
is the result of noncompliance by any Guarantor or the Company with Section 5(a)
hereof.
(b) Each Placement Agent agrees, severally and not jointly, to
indemnify and hold harmless each Guarantor and the Company, their directors,
their officers and each person, if any, who controls the Company or any
Guarantor within the meaning of either Section 15 of the Securities Act or
Section 20 of the Exchange Act to the same extent as the foregoing indemnity
from each Guarantor and the Company to such Placement Agent, but only with
reference to information relating to such Placement Agent furnished to any
Guarantor or the Company in writing by such Placement Agent through you
expressly for use in either Memorandum or any amendments or supplements thereto.
(c) In case any proceeding (including any governmental
investigation) shall be instituted involving any person in respect of which
indemnity may be sought pursuant to
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16
either paragraph (a) or (b) above, such person (the "indemnified party") shall
promptly notify the person against whom such indemnity may be sought (the
"indemnifying party") in writing and the indemnifying party, upon request of the
indemnified party, shall retain counsel reasonably satisfactory to the
indemnified party to represent the indemnified party and any others the
indemnifying party may designate in such proceeding and shall pay the fees and
disbursements of such counsel related to such proceeding. In any such
proceeding, any indemnified party shall have the right to retain its own
counsel, but the fees and expenses of such counsel shall be at the expense of
such indemnified party unless (i) the indemnifying party and the indemnified
party shall have mutually agreed to the retention of such counsel or
(ii) the named parties to any such proceeding (including any impleaded parties)
include both the indemnifying party and the indemnified party and representation
of both parties by the same counsel would be inappropriate due to actual or
potential differing interests between them. It is understood that the
indemnifying party shall not, in connection with any proceeding or related
proceedings in the same jurisdiction, be liable for the fees and expenses of
more than one separate firm (in addition to any local counsel) for all such
indemnified parties and that all such fees and expenses shall be reimbursed as
they are incurred. Such firm shall be designated in writing by Morgan Stanley &
Co. Incorporated, in the case of parties indemnified pursuant to paragraph (a)
above, and by the Guarantors and the Company in the case of parties indemnified
pursuant to paragraph (b) above. The indemnifying party shall not be liable for
any settlement of any proceeding effected without its written consent, but if
settled with such consent or if there be a final judgment for the plaintiff, the
indemnifying party agrees to indemnify the indemnified party from and against
any loss or liability by reason of such settlement or judgment. Notwithstanding
the foregoing sentence, if at any time an indemnified party shall have requested
an indemnifying party to reimburse the indemnified party for fees and expenses
of counsel as contemplated by the second and third sentences of this paragraph,
the indemnifying party agrees that it shall be liable for any settlement of any
proceeding effected without its written consent if (i) such settlement is
entered into more than 30 days after receipt by such indemnifying party of the
aforesaid request and (ii) such indemnifying party shall not have reimbursed the
indemnified party in accordance with such request prior to the date of such
settlement. No indemnifying party shall, without the prior written consent of
the indemnified party, effect any settlement of any pending or threatened
proceeding in respect of which any indemnified party is or could have been a
party and indemnity could have been sought hereunder by such indemnified party,
unless such settlement includes an unconditional release of such indemnified
party from all liability on claims that are the subject matter of such
proceeding.
(d) To the extent the indemnification provided for in
paragraph (a) or (b) of this Section 7 is unavailable to an indemnified party or
insufficient in respect of any losses, claims, damages or liabilities, then each
indemnifying party under such paragraph, in lieu of indemnifying such
indemnified party thereunder, shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages or
liabilities
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17
(i) in such proportion as is appropriate to reflect the relative benefits
received by the Guarantors and the Company, on the one hand, and the Placement
Agents, on the other hand, from the offering of such Securities or (ii) if the
allocation provided by clause (i) above is not permitted by applicable law, in
such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the Guarantors
and the Company on the one hand and the Placement Agents on the other hand in
connection with the statements or omissions that resulted in such losses,
claims, damages or liabilities, as well as any other relevant equitable
considerations. The relative benefits received by the Guarantors and the Company
on the one hand and the Placement Agents on the other hand in connection with
the offering of such Securities shall be deemed to be in the same respective
proportions as the net proceeds from the offering of such Securities (before
deducting expenses) received by the Guarantors and the Company and the total
discounts and commissions received by the Placement Agents in respect thereof
bear to the aggregate offering price of such Securities. The relative fault of
the Guarantors and the Company on the one hand and of the Placement Agents on
the other hand shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by any
Guarantor or the Company or by the Placement Agents and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission. The Placement Agents' respective obligations to
contribute pursuant to this Section 7 are several in proportion to the
respective principal amount of Securities they have purchased hereunder, and not
joint.
(e) The Guarantors, the Company and the Placement Agents agree
that it would not be just or equitable if contribution pursuant to this Section
7 were determined by pro rata allocation (even if the Placement Agents were
treated as one entity for such purpose) or by any other method of allocation
that does not take account of the equitable considerations referred to in
paragraph (d) above. The amount paid or payable by an indemnified party as a
result of the losses, claims, damages and liabilities referred to in paragraph
(d) above shall be deemed to include, subject to the limitations set forth
above, any legal or other expenses reasonably incurred by such indemnified party
in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 7, no Placement Agent shall be
required to contribute any amount in excess of the amount by which the total
price at which the Securities resold by it in the initial placement of such
Securities were offered to investors exceeds the amount of any damages that such
Placement Agent has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.
(f) The indemnity and contribution provisions contained in
this Section 7 and the representations and warranties of the Guarantors and the
Company contained in this
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18
Agreement shall remain operative and in full force and effect regardless
of (i) any termination of this Agreement, (ii) any investigation
made by or on behalf of the Placement Agents or any person controlling
the Placement Agents or by or on behalf of any Guarantor or the Company,
their officers or directors or any person controlling any Guarantor or
the Company and (iii) acceptance of and payment for any of the Securities. The
remedies provided for in this Section 7 are not exclusive and shall not limit
any rights or remedies which may otherwise be available to any indemnified party
at law or in equity.
8. Termination. This Agreement shall be subject to termination
in your absolute discretion, by notice given by you to the Company, if (a) after
the execution and delivery of this Agreement and prior to the Closing Date (i)
trading generally shall have been suspended or materially limited on or by, as
the case may be, the New York Stock Exchange, the American Stock Exchange, or
the National Association of Securities Dealers, Inc., (ii) trading of any
securities of any Guarantor or the Company shall have been suspended on any
exchange or in any over-the-counter market, (iii) a general moratorium on
commercial banking activities in New York shall have been declared by either
Federal or New York State authorities or (iv) there shall have occurred any
outbreak or escalation of hostilities or any change in financial markets or any
calamity or crisis that, in your judgment, is material and adverse and (b) in
the case of any of the events specified in clauses (a)(i) through (iv), such
event singly or together with any other such event makes it, in your judgment,
impracticable to market the Securities on the terms and in the manner
contemplated in the Final Memorandum.
9. Miscellaneous. (a) If, on the Closing Date, either
Placement Agent shall fail or refuse to purchase Securities that it has agreed
to purchase hereunder on such date, and the aggregate principal amount of
Securities which such defaulting Placement Agent agreed but failed or refused to
purchase is not more than one-tenth of the aggregate principal amount of
Securities to be purchased on such date, the other Placement Agent shall be
obligated to purchase the Securities which such defaulting Placement Agent
agreed but failed or refused to purchase on such date; provided that in no event
shall the principal amount of Securities that any Placement Agent has agreed to
purchase pursuant to Section 3 be increased pursuant to this Section 9 by an
amount in excess of one-ninth of such principal amount of Securities without the
written consent of such Placement Agent. If, on the Closing Date either
Placement Agent shall fail or refuse to purchase Securities which it agreed to
purchase hereunder on such date and the aggregate principal amount of Securities
with respect to which such default occurs is more than one-tenth of the
aggregate principal amount of Securities to be purchased on such date and
arrangements satisfactory to you and the Company for the purchase of such
Securities are not made within 36 hours after such default, this Agreement shall
terminate without liability on the part of any non-defaulting Placement Agent,
the Company or any Guarantor. In any such case either you or the Company shall
have the right to postpone the Closing Date, but in no event for longer than
seven days, in order that the required changes, if any, in the Final Memorandum
or in any other documents or
<PAGE>
<PAGE>
19
arrangements may be effected. Any action taken under this paragraph shall not
relieve any defaulting Placement Agent from liability in respect of any default
of such Placement Agent under this Agreement.
(b) This Agreement may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
(c) If this Agreement shall be terminated by either Placement
Agent because of any failure or refusal on the part of any Guarantor or the
Company to comply with the terms or to fulfill any of the conditions of this
Agreement, or if for any reason any Guarantor or the Company shall be unable to
perform its obligations under this Agreement, the Guarantors and the Company
will reimburse the Placement Agents or such Placement Agent as has so terminated
this Agreement with respect to itself, severally, for all out-of-pocket expenses
(including the reasonable fees and disbursements of their counsel) reasonably
incurred by such Placement Agent in connection with this Agreement or the
offering contemplated hereunder.
(d) All notices and other communications under this Agreement
shall be in writing, and, if sent the Placement Agents, be mailed, delivered or
sent by facsimile transmission to:
Morgan Stanley & Co. Incorporated
1585 Broadway
New York, New York 10036
Attention: High Yield New Issue Group
Facsimile Number: (212) 761-0587
and to:
Salomon Brothers Inc
Seven World Trade Center
New York, New York 10048
Attention: John F. Grier
Facsimile Number: (212) 783 - 2043
or, if sent to the Company or the Guarantors, will be mailed, delivered or sent
by facsimile transmission to the Company at:
with a copy to:
Amtran, Inc. Cravath, Swaine & Moore
<PAGE>
<PAGE>
20
7337 West Washington Street Worldwide Plaza, 825 Eighth Avenue
Indianapolis, IN 46231 New York, NY 10019
Attention: Brian T. Hunt, Esq. Attention: William P. Rogers, Jr., Esq.
Facsimile Number: (317) 240-7091 Facsimile Number: (212) 474-3700
(e) This Agreement shall be governed by and construed in
accordance with the internal laws of the State of New York.
(f) The headings of the sections of this Agreement have been
inserted for convenience of reference only and shall not be deemed a part of
this Agreement.
<PAGE>
<PAGE>
Please confirm your agreement to the foregoing by signing in
the space provided below for that purpose and returning to us a copy hereof,
whereupon this Agreement shall constitute a binding agreement between us.
Very truly yours,
AMTRAN, INC.
By: __________________________
Name:
Title:
AMERICAN TRANS AIR, INC.
By: __________________________
Name:
Title:
AMBASSADAIR TRAVEL CLUB, INC.
By: __________________________
Name:
Title:
ATA VACATIONS, INC.
By: __________________________
Name:
Title:
AMBER TRAVEL, INC.
By: __________________________
Name:
Title:
<PAGE>
<PAGE>
AMERICAN TRANS AIR TRAINING
CORPORATION
By: __________________________
Name:
Title:
AMERICAN TRANS AIR EXECUJET, INC.
By: __________________________
Name:
Title:
AMBER AIR FREIGHT CORPORATION
By: __________________________
Name:
Title:
<PAGE>
<PAGE>
Accepted as of the date first
above written:
MORGAN STANLEY & CO.
INCORPORATED
SALOMON BROTHERS INC
By: Morgan Stanley & Co. Incorporated
By:
_____________________________________
Name:
Title:
<PAGE>
<PAGE>
SCHEDULE I
<TABLE>
<CAPTION>
Principal Amount of
Securities
Placement Agent To Be Purchased
--------------- -------------------
<S> <C>
Morgan Stanley & Co. Incorporated 66,666,667
Salomon Brothers Inc 33,333,333
----------
Total............... $100,000,000
============
</TABLE>
<PAGE>
<PAGE>
EXHIBIT A
Form of Registration Rights Agreement
<PAGE>
<PAGE>
EXHIBIT B
Form of Opinion of
Cravath, Swaine & Moore
(i) No authorization, approval or other action by, and no
notice to, consent of, order of, or filing with, any United States Federal, New
York or, to the extent required under the General Corporation Law of the State
of Delaware, governmental authority or regulatory body is required for the
consummation of the transactions contemplated by the Placement Agreement, except
such as may be required under the blue sky laws of any jurisdiction in
connection with the purchase and distribution of the Securities by the Placement
Agents;
(ii) (A) The statements in the Final Memorandum under the
captions "Description of the Notes" and "Description of the New Credit
Facility", insofar as such statements purport to summarize provisions of the
Securities and the New Credit Facility, respectively, fairly summarize such
provisions, and (B) the statements in the Final Memorandum under the caption
"Certain United States Federal Income Tax Consequences", insofar as they purport
to describe the material tax consequences of an investment in the Securities,
fairly summarize the matters therein described;
(iii) Assuming (i) the accuracy of the representations and
warranties of the Company, each of the Guarantors and you set forth in the
Placement Agreement, (ii) the due performance by the Company, each of the
Guarantors and you, of the covenants and agreements set forth in the Placement
Agreement, (iii) your compliance with the offering and transfer procedures and
restrictions described in the Final Memorandum and (iv) the accuracy of the
representations and warranties made in accordance with the Placement Agreement
and the Final Memorandum by purchasers to whom you initially resell the
Securities, the offer, sale and delivery of the Securities to you in the manner
contemplated by the Placement Agreement and the Final Memorandum and the initial
resale of the Securities by you in the manner contemplated in the Final
Memorandum and the Placement Agreement, do not require registration under the
Securities Act of 1933, as amended, and the Indenture does not require
qualification under the Trust Indenture Act of 1939, as amended, it being
understood that no opinion is expressed as to any subsequent resale of any
Securities;
(iv) Neither the Company nor any of the Guarantors is required
to register as an "investment company" and, after giving effect to the offer,
issuance and delivery of the Securities in accordance with the terms of the
Placement Agreement and the application of the proceeds thereof as described in
the Final Memorandum, neither the Company nor any of the Guarantors will be
required to register as an "investment Company" under the Investment Company Act
of 1940, as amended;
(v) Each of the Indenture and the Registration Rights
Agreements constitute legal, valid and binding obligations of the Company and
each Guarantor, enforceable against
<PAGE>
<PAGE>
B-2
the Company and each Guarantor in accordance with their terms (subject to
applicable bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium or other similar laws affecting creditors' rights generally from time
to time in effect and to general principles of equity, including, without
limitation, concepts of materiality, reasonableness, good faith and fair
dealing, regardless of whether such enforceability is considered in a proceeding
in equity or at law);
(vi) The Securities when executed, issued and authenticated in
accordance with the provisions of the Indenture and delivered to you against
payment therefor in accordance with the provisions of the Placement Agreement,
will be legal, valid and binding obligations of the Company, enforceable against
the Company in accordance with their terms and entitled to the benefits of the
Indenture (subject to applicable bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium or other laws affecting creditors' rights generally
from time to time in effect and to general principles of equity, including,
without limitation, concepts of materiality, reasonableness, good faith and fair
dealing, regardless of whether such enforceability is considered in a proceeding
in equity or at law); in expressing the opinion set forth in this paragraph
(vi), such counsel may assume, with the consent of the Placement Agents, that
the form of the Securities will conform to that included in the Indenture; and
(vii) Upon execution and delivery of the Indenture by the
Guarantors and the Company, the Guarantees will be legal, valid and binding
obligations of each of the Guarantors, enforceable against each of the
Guarantors in accordance with their terms and entitled to the benefits of the
Indenture (subject to applicable bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium or other laws affecting creditors' rights generally
from time to time in effect and to general principles of equity, including,
without limitation, concepts of materiality, reasonableness, good faith and fair
dealing, regardless of whether such enforceability is considered in a proceeding
in equity or at law);
and to such further effect with respect to other legal matters relating to the
Placement Agreement and the sale of the Securities thereunder as counsel for the
Placement Agents may reasonably request.
Such opinion shall also state that, in connection with the
preparation of the Final Memorandum, such counsel has participated in
conferences with certain officers of, and with the accountants and counsel for,
the Guarantors and the Company concerning the preparation of the Final
Memorandum. Such opinion may state that although such counsel has made certain
inquiries and investigations in connection with the preparation of the Final
Memorandum, the limitations inherent in the role of outside counsel are such
that such counsel does not assume responsibility for the accuracy or
completeness of the statements made in the Final Memorandum, except insofar as
the statements relate to such counsel and except to the extent set forth in
paragraph (ii) of such counsel's opinion dated the date hereof. Subject to the
foregoing, such opinion shall state that such counsel advises the Placement
Agents that their work in connection with this matter did not disclose any
information that gave such counsel reason to believe that the Final Memorandum
(except the financial statements and other information of a statistical,
accounting or financial nature included therein, as to which such counsel does
not express any view) as of its date or the date hereof, included or includes
<PAGE>
<PAGE>
B-3
an untrue statement of a material fact or omitted or omits to state a material
fact necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
<PAGE>
<PAGE>
EXHIBIT C
Form of Opinion of the General Counsel
of the Guarantors and the Company
(i) Each of the Guarantors and the Company is a corporation
duly incorporated, validly existing and in good standing under the laws of the
State of Indiana with corporate power and authority under such laws to own,
lease and operate its properties and conduct its business as described in the
Final Memorandum and to perform its obligations under the Placement Agreement,
the Registration Rights Agreement, the Securities (with respect to the Company),
the Guarantees (with respect to the Guarantors), and the Indenture;
(ii) Each of the Guarantors and the Company are duly qualified
to transact business as a foreign corporation and are in good standing in each
other jurisdiction in which they own or lease property of a nature, or transact
business of a type, that would make such qualification necessary, except to the
extent that the failure to so qualify or be in good standing would not have a
Material Adverse Effect;
(iii) ATA is a "citizen of the United States" (as defined in
Section 40102(a)(15) of Title 49 of the United States Code) and is an air
carrier operating under a certificate issued by the Secretary of Transportation
pursuant to Chapter 447 of Title 49, United States Code, for aircraft capable of
carrying 10 or more individuals or 6,000 pounds or more of cargo; there is in
force with respect to ATA an air carrier operating certificate issued pursuant
to Part 121 of the regulations under the Federal Aviation Act; all of the
outstanding shares of capital stock of each of the Guarantors have been duly
authorized and validly issued and are fully paid and non-assessable and are
owned by the Company, free and clear of any pledge, lien, security interest,
charge, claim, equity or encumbrance of any kind;
(iv) No consent, approval, authorization or order of, or
qualification with, any governmental body or agency is required for the valid
authorization, issuance and delivery of the Securities, the valid authorization,
execution, delivery and performance by each of the Guarantors and the Company of
the Placement Agreement and the Operative Documents, or the consummation by each
of the Guarantors and the Company of the transactions contemplated by the
Placement Agreement and the Operative Documents, except such as may be required
by the securities or Blue Sky laws of the various states in connection with the
offer and sale of the Securities;
(v) The execution and delivery by each of the Guarantors and
the Company of the Placement Agreement and the Operative Documents, the issuance
and sale of the Securities, the consummation by each of the Guarantors and the
Company of the transactions contemplated in the Placement Agreement and the
Operative Documents, and compliance by each of the Guarantors and the Company
with the terms thereof will not contravene (i) any provision of applicable law,
(ii) the certificate of incorporation or by-laws of any Guarantor and the
Company, (iii) to such counsel's knowledge, any agreement or other instrument
binding upon any Guarantor or any of its subsidiaries that is material to such
Guarantor and the Company, taken as a whole, or (iv) to such counsel's
knowledge, any judgment, order or
<PAGE>
<PAGE>
C-2
decree of any governmental body, agency or court having jurisdiction over, any
Guarantor or the Company;
(vi) Each of the Registration Rights Agreements and the
Indenture has been duly authorized, executed and delivered by each of the
Guarantors and the Company;
(vii) The Placement Agreement has been duly authorized,
executed and delivered by each of the Guarantors and the Company; and the sale
of the Securities by the Company pursuant to the Placement Agreement has been
duly authorized;
(viii) There are no legal or governmental proceedings pending
or threatened to which any Guarantor or the Company is a party, or to which any
of the properties of any Guarantor or the Company is subject, other than
proceedings accurately described in all material respects in the Final
Memorandum and proceedings that would not have a Material Adverse Effect, or a
material adverse effect on the power or ability of any Guarantor or the Company
to perform its obligations under this Agreement or the Operative Documents, or
to consummate the transactions contemplated by the Final Memorandum.
In addition, counsel shall state that such counsel or lawyers
on his staff have participated in the preparation of the Final Memorandum and
nothing has come to such counsel's attention that leads him to believe that the
Final Memorandum as of the date of the Placement Agreement or at the Closing
Date contained or contains an untrue statement of a material fact or omitted or
omits to state a material fact necessary in order to make the statements therein
in the light of the circumstances under which they were made not misleading,
except that such counsel need express no opinion with respect to the financial
statements, schedules and other financial data included in the Final Memorandum.
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
REGISTRATION RIGHTS AGREEMENT
Dated July 24, 1997
among
AMTRAN, INC.
AMERICAN TRANS AIR, INC.
AMBASSADAIR TRAVEL CLUB, INC.
ATA VACATIONS, INC.
AMBER TRAVEL, INC.
AMERICAN TRANS AIR TRAINING CORPORATION
AMERICAN TRANS AIR EXECUJET, INC.
AMBER AIR FREIGHT CORPORATION
and
MORGAN STANLEY & CO. INCORPORATED
SALOMON BROTHERS INC
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made
and entered into July 24, 1997, among Amtran, Inc., an Indiana corporation (the
"Company"), American Trans Air, Inc. ("ATA"), Ambassadair Travel Club, Inc.
("Ambassadair"), ATA Vacations, Inc. ("Vacations"), Amber Travel, Inc. ("Amber
Travel"), American Trans Air Training Corporation ("Training"), American Trans
Air Execujet, Inc. ("Execujet") and Amber Air Freight Corporation ("Amber
Freight" and together with ATA, Ambassadair, Vacations, Amber Travel, Training
and Execujet, the "Subsidiary Guarantors") and MORGAN STANLEY & CO. INCORPORATED
and SALOMON BROTHERS INC (collectively, the "Placement Agents").
This Agreement is made pursuant to the Placement Agreement
dated July 17, 1997, among the Company, the Subsidiary Guarantors and the
Placement Agents (the "Placement Agreement"), which provides for the sale by the
Company to the Placement Agents of an aggregate of $100,000,000 principal amount
of the Company's 10 1/2% Senior Notes due 2004 (the "Securities"). In order to
induce the Placement Agents to enter into the Placement Agreement, the Company
and the Subsidiary Guarantors have agreed to provide to the Placement Agents and
their direct and indirect transferees the registration rights set forth in this
Agreement. The execution of this Agreement is a condition to the closing under
the Placement Agreement.
In consideration of the foregoing, the parties hereto agree as
follows:
1. Definitions.
As used in this Agreement, the following capitalized defined
terms shall have the following meanings:
"1933 Act" shall mean the Securities Act of 1933, as amended
from time to time.
"1934 Act" shall mean the Securities Exchange Act of 1934, as
amended from time to time.
"Closing Date" shall mean the Closing Date as defined in the
Placement Agreement.
"Company" shall have the meaning set forth in the preamble and
shall also include the Company's successors.
"Exchange Offer" shall mean the exchange offer by the Company
of Exchange Securities for Registrable Securities pursuant to Section
2(a) hereof.
<PAGE>
<PAGE>
2
"Exchange Offer Registration" shall mean a registration under
the 1933 Act effected pursuant to Section 2(a) hereof.
"Exchange Offer Registration Statement" shall mean an exchange
offer registration statement on Form S-4 (or, if applicable, on another
appropriate form) and all amendments and supplements to such
registration statement, in each case including the Prospectus contained
therein, all exhibits thereto and all material incorporated by
reference therein.
"Exchange Securities" shall mean securities issued by the
Company and which are jointly and severally guaranteed by the
Subsidiary Guarantors under the Indenture containing terms identical to
the Securities (except that (i) interest thereon shall accrue from the
last date on which interest was paid on the Securities or, if no such
interest has been paid, from July 24, 1997 and (ii) the Exchange
Securities will not contain terms with respect to transfer
restrictions) and to be offered to Holders of Securities in exchange
for Securities pursuant to the Exchange Offer.
"Holder" shall mean the Placement Agents, for so long as they
own any Registrable Securities, and each of their successors, assigns
and direct and indirect transferees who become registered owners of
Registrable Securities under the Indenture; provided that for purposes
of Sections 4 and 5 of this Agreement, the term "Holder" shall include
Participating Broker-Dealers (as defined in Section 4(a)).
"Indenture" shall mean the Indenture relating to the
Securities dated as of July 24, 1997 between the Company, the
Subsidiary Guarantors and First Security Bank, N.A., as trustee, and as
the same may be amended from time to time in accordance with the terms
thereof.
"Majority Holders" shall mean the Holders of a majority of the
aggregate principal amount of outstanding Registrable Securities;
provided that whenever the consent or approval of Holders of a
specified percentage of Registrable Securities is required hereunder,
Registrable Securities held by the Company or any of its affiliates (as
such term is defined in Rule 405 under the 1933 Act) (other than the
Placement Agents or subsequent holders of Registrable Securities if
such subsequent holders are deemed to be such affiliates solely by
reason of their holding of such Registrable Securities) shall not be
counted in determining whether such consent or approval was given by
the Holders of such required percentage or amount.
"Person" shall mean an individual, partnership, corporation,
trust or unincorporated organization, or a government or agency or
political subdivision thereof.
"Placement Agents" shall have the meaning set forth in the
preamble.
<PAGE>
<PAGE>
3
"Placement Agreement" shall have the meaning set forth in the
preamble.
"Prospectus" shall mean the prospectus included in a
Registration Statement, including any preliminary prospectus, and any
such prospectus as amended or supplemented by any prospectus
supplement, including a prospectus supplement with respect to the terms
of the offering of any portion of the Registrable Securities covered by
a Shelf Registration Statement, and by all other amendments and
supplements to such prospectus, and in each case including all material
incorporated by reference therein.
"Registrable Securities" shall mean the Securities and the
guarantees thereof by the Subsidiary Guarantors; provided, however,
that the Securities and the guarantees thereof shall cease to be
Registrable Securities (i) when a Registration Statement with respect
to such Securities and the guarantees thereof shall have been declared
effective under the 1933 Act and such Securities and the guarantees
thereof shall have been disposed of pursuant to such Registration
Statement, (ii) when such Securities and the guarantees thereof have
been sold to the public pursuant to Rule 144(k) (or any similar
provision then in force, but not Rule 144A) under the 1933 Act or (iii)
when such Securities and the guarantees thereof shall have ceased to be
outstanding.
"Registration Expenses" shall mean any and all expenses
incident to performance of or compliance by the Company and the
Subsidiary Guarantors with this Agreement, including without
limitation: (i) all SEC, stock exchange or National Association of
Securities Dealers, Inc. registration and filing fees, (ii) all fees
and expenses incurred in connection with compliance with state
securities or blue sky laws (including reasonable fees and
disbursements of counsel for any underwriters or Holders in connection
with blue sky qualification of any of the Exchange Securities or
Registrable Securities), (iii) all expenses of any Persons in preparing
or assisting in preparing, word processing, printing and distributing
any Registration Statement, any Prospectus, any amendments or
supplements thereto, any underwriting agreements, securities sales
agreements and other documents relating to the performance of and
compliance with this Agreement, (iv) all rating agency fees, (v) all
fees and disbursements relating to the qualification of the Indenture
under applicable securities laws, (vi) the fees and disbursements of
the Trustee and its counsel, (vii) the fees and disbursements of
counsel for the Company and the Subsidiary Guarantors and, in the case
of a Shelf Registration Statement, the fees and disbursements of one
counsel for the Holders (which counsel shall be selected by the
Majority Holders and which counsel may also be counsel for the
Placement Agents) and (viii) the fees and disbursements of the
independent public accountants of the Company and the Subsidiary
Guarantors, including the expenses of any special audits or "cold
comfort" letters required by or incident to such performance and
compliance, but excluding fees and expenses of counsel to the
underwriters (other than fees and expenses set forth in clause (ii)
above) or the Holders and underwriting discounts and commissions
<PAGE>
<PAGE>
4
and transfer taxes, if any, relating to the sale or disposition of
Registrable Securities by a Holder.
"Registration Statement" shall mean any registration statement
of the Company and the Subsidiary Guarantors that covers any of the
Exchange Securities or Registrable Securities pursuant to the
provisions of this Agreement and all amendments and supplements to any
such Registration Statement, including post-effective amendments, in
each case including the Prospectus contained therein, all exhibits
thereto and all material incorporated by reference therein.
"SEC" shall mean the Securities and Exchange Commission.
"Shelf Registration" shall mean a registration effected
pursuant to Section 2(b) hereof.
"Shelf Registration Statement" shall mean a "shelf"
registration statement of the Company and the Subsidiary Guarantors
pursuant to the provisions of Section 2(b) of this Agreement which
covers all of the Registrable Securities (but no other securities
unless approved by the Holders whose Registrable Securities are covered
by such Shelf Registration Statement) on an appropriate form under Rule
415 under the 1933 Act, or any similar rule that may be adopted by the
SEC, and all amendments and supplements to such registration statement,
including post-effective amendments, in each case including the
Prospectus contained therein, all exhibits thereto and all material
incorporated by reference therein.
"Trustee" shall mean the trustee with respect to the
Securities under the Indenture.
"Underwritten Registration" or "Underwritten Offering" shall
mean a registration in which Registrable Securities are sold to an
Underwriter (as hereinafter defined) for reoffering to the public.
2. Registration Under the 1933 Act.
(a) To the extent not prohibited by any applicable law or
applicable interpretation of the Staff of the SEC, the Company and the
Subsidiary Guarantors shall use their best efforts to cause to be filed an
Exchange Offer Registration Statement covering the offer by the Company and the
Subsidiary Guarantors to the Holders to exchange all of the Registrable
Securities for Exchange Securities and to have such Registration Statement
remain effective until the closing of the Exchange Offer. The Company and the
Subsidiary Guarantors shall commence the Exchange Offer promptly after the
Exchange Offer Registration Statement has been declared effective by the SEC and
use their best efforts to have the Exchange Offer consummated not later than 60
days
<PAGE>
<PAGE>
5
after such effective date. The Company and the Subsidiary Guarantors shall
commence the Exchange Offer by mailing the related exchange offer Prospectus and
accompanying documents to each Holder stating, in addition to such other
disclosures as are required by applicable law:
(i) that the Exchange Offer is being made pursuant to this
Registration Rights Agreement and that all Registrable Securities
validly tendered will be accepted for exchange;
(ii) the dates of acceptance for exchange (which shall be a
period of at least 20 Business Days from the date such notice is
mailed) (the "Exchange Dates");
(iii) that any Registrable Security not tendered will remain
outstanding and continue to accrue interest, but will not retain any
rights under this Registration Rights Agreement;
(iv) that Holders electing to have a Registrable Security
exchanged pursuant to the Exchange Offer will be required to surrender
such Registrable Security, together with the enclosed letters of
transmittal, to the institution and at the address (located in the
Borough of Manhattan, The City of New York) specified in the notice
prior to the close of business on the last Exchange Date; and
(v) that Holders will be entitled to withdraw their election,
not later than the close of business on the last Exchange Date, by
sending to the institution and at the address (located in the Borough
of Manhattan, The City of New York) specified in the notice a telegram,
telex, facsimile transmission or letter setting forth the name of such
Holder, the principal amount of Registrable Securities delivered for
exchange and a statement that such Holder is withdrawing his election
to have such Securities exchanged.
As soon as practicable after the last Exchange Date, the
Company shall:
(i) accept for exchange Registrable Securities or portions
thereof tendered and not validly withdrawn pursuant to the Exchange
Offer; and
(ii) deliver, or cause to be delivered, to the Trustee for
cancellation all Registrable Securities or portions thereof so accepted
for exchange by the Company and issue, and cause the Trustee to
promptly authenticate and mail to each Holder, an Exchange Security
equal in principal amount to the principal amount of the Registrable
Securities surrendered by such Holder.
The Company and the Subsidiary Guarantors shall use their best efforts to
complete the Exchange Offer as provided above and shall comply with the
applicable requirements of the 1933 Act, the
<PAGE>
<PAGE>
6
1934 Act and other applicable laws and regulations in connection with the
Exchange Offer. The Exchange Offer shall not be subject to any conditions, other
than that the Exchange Offer does not violate applicable law or any applicable
interpretation of the Staff of the SEC. The Company shall inform the Placement
Agents of the names and addresses of the Holders to whom the Exchange Offer is
made, and the Placement Agents shall have the right, subject to applicable law,
to contact such Holders and otherwise facilitate the tender of Registrable
Securities in the Exchange Offer.
(b) In the event that (i) the Company and the Subsidiary
Guarantors determine that the Exchange Offer Registration provided for in
Section 2(a) above is not available or may not be consummated as soon as
practicable after the last Exchange Date because it would violate applicable law
or the applicable interpretations of the Staff of the SEC, (ii) the Exchange
Offer is not for any other reason consummated by January 24, 1998 or (iii) the
Exchange Offer has been completed and in the opinion of counsel for the
Placement Agents a Registration Statement must be filed and a Prospectus must be
delivered by the Placement Agents in connection with any offering or sale of
Registrable Securities, the Company and the Subsidiary Guarantors shall use
their best efforts to cause to be filed as soon as practicable after such
determination, date or notice of such opinion of counsel is given to the
Company, as the case may be, a Shelf Registration Statement providing for the
sale by the Holders of all of the Registrable Securities and to have such Shelf
Registration Statement declared effective by the SEC. The Company and the
Subsidiary Guarantors agree to use their best efforts to keep the Shelf
Registration Statement continuously effective until the second anniversary of
the Closing Date or such shorter period that will terminate when all of the
Registrable Securities covered by the Shelf Registration Statement have been
sold pursuant to the Shelf Registration Statement. Notwithstanding the
foregoing, during any consecutive 365-day period, the Company will have the
ability to suspend the availability of the Shelf Registration Statement for up
to two periods of up to 30 consecutive days each (except that none of such
periods may occur during the 60-day period immediately prior to the maturity of
the Securities) if the Company's Board of Directors determines in good faith
that there is a valid purpose for the suspension. The Company and the Subsidiary
Guarantors further agree to supplement or amend the Shelf Registration Statement
if required by the rules, regulations or instructions applicable to the
registration form used by the Company and the Subsidiary Guarantors for such
Shelf Registration Statement or by the 1933 Act or by any other rules and
regulations thereunder for shelf registration or if reasonably requested by a
Holder with respect to information relating to such Holder, and to use their
best efforts to cause any such amendment to become effective and such Shelf
Registration Statement to become usable as soon as thereafter practicable. The
Company and the Subsidiary Guarantors agree to furnish to the Holders of
Registrable Securities copies of any such supplement or amendment promptly after
its being used or filed with the SEC.
(c) The Company and the Subsidiary Guarantors shall pay all
Registration Expenses in connection with the registration pursuant to Section
2(a) or Section 2(b). Each
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7
Holder shall pay all underwriting discounts and commissions and transfer taxes,
if any, relating to the sale or disposition of such Holder's Registrable
Securities pursuant to the Shelf Registration Statement.
(d) An Exchange Offer Registration Statement pursuant to
Section 2(a) hereof or a Shelf Registration Statement pursuant to Section 2(b)
hereof will not be deemed to have become effective unless it has been declared
effective by the SEC; provided, however, that, if, after it has been declared
effective, the offering of Registrable Securities pursuant to a Shelf
Registration Statement is interfered with by any stop order, injunction or other
order or requirement of the SEC or any other governmental agency or court, such
Registration Statement will be deemed not to have become effective during the
period of such interference until the offering of Registrable Securities
pursuant to such Registration Statement may legally resume. As provided for in
the Indenture, in the event the Exchange Offer is not consummated and a Shelf
Registration Statement is not declared effective on or prior to January 24,
1998, the annual interest rate borne by the Securities shall be increased by
0.5% per annum until the Exchange Offer is consummated or the Shelf Registration
Statement is declared effective.
(e) Without limiting the remedies available to the Placement
Agents and the Holders, the Company and the Subsidiary Guarantors acknowledge
that any failure by the Company and the Subsidiary Guarantors to comply with
their obligations under Section 2(a) and Section 2(b) hereof may result in
material irreparable injury to the Placement Agents or the Holders for which
there is no adequate remedy at law, that it will not be possible to measure
damages for such injuries precisely and that, in the event of any such failure,
the Placement Agents or any Holder may obtain such relief as may be required to
specifically enforce the Company's and the Subsidiary Guarantors' obligations
under Section 2(a) and Section 2(b) hereof.
3. Registration Procedures.
In connection with the obligations of the Company and the
Subsidiary Guarantors with respect to the Registration Statements pursuant to
Section 2(a) and Section 2(b) hereof, the Company and the Subsidiary Guarantors
shall as expeditiously as possible:
(a) prepare and file with the SEC a Registration Statement on
the appropriate form under the 1933 Act, which form (x) shall be
selected by the Company and the Subsidiary Guarantors and (y) shall, in
the case of a Shelf Registration, be available for the sale of the
Registrable Securities by the selling Holders thereof and (z) shall
comply as to form in all material respects with the requirements of the
applicable form and include all financial statements required by the
SEC to be filed therewith, and use its best efforts to cause such
Registration Statement to become effective and remain effective in
accordance with Section 2 hereof;
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8
(b) prepare and file with the SEC such amendments and
post-effective amendments to each Registration Statement as may be
necessary to keep such Registration Statement effective for the
applicable period and cause each Prospectus to be supplemented by any
required prospectus supplement and, as so supplemented, to be filed
pursuant to Rule 424 under the 1933 Act; to keep each Prospectus
current during the period described under Section 4(3) and Rule 174
under the 1933 Act that is applicable to transactions by brokers or
dealers with respect to the Registrable Securities or Exchange
Securities;
(c) in the case of a Shelf Registration, furnish to each
Holder of Registrable Securities, to counsel for the Placement Agents,
to counsel for the Holders and to each Underwriter of an Underwritten
Offering of Registrable Securities, if any, without charge, as many
copies of each Prospectus, including each preliminary Prospectus, and
any amendment or supplement thereto and such other documents as such
Holder or Underwriter may reasonably request, in order to facilitate
the public sale or other disposition of the Registrable Securities; and
the Company and each of the Subsidiary Guarantors consent to the use of
such Prospectus and any amendment or supplement thereto in accordance
with applicable law by each of the selling holders of Registrable
Securities and any such Underwriters in connection with the offering
and sale of the Registrable Securities covered by and in the manner
described in such Prospectus or any amendment or supplement thereto in
accordance with applicable law;
(d) use its best efforts to register or qualify the
Registrable Securities under all applicable state securities or "blue
sky" laws of such jurisdictions within the United States as any Holder
of Registrable Securities covered by a Registration Statement shall
reasonably request in writing by the time the applicable Registration
Statement is declared effective by the SEC, to cooperate with such
Holders in connection with any filings required to be made with the
National Association of Securities Dealers, Inc. and do any and all
other acts and things which may be reasonably necessary or advisable to
enable such Holder to consummate the disposition in each such
jurisdiction of such Registrable Securities owned by such Holder;
provided, however, that neither the Company nor any Subsidiary
Guarantor shall be required to (i) qualify as a foreign corporation or
as a dealer in securities in any jurisdiction where it would not
otherwise be required to qualify but for this Section 3(d), (ii) file
any general consent to service of process or (iii) subject itself to
taxation in any such jurisdiction if it is not so subject;
(e) in the case of a Shelf Registration, notify each Holder of
Registrable Securities, counsel for the Holders and counsel for the
Placement Agents promptly and, if requested by any such Holder or
counsel, confirm such advice in writing (i) when a Registration
Statement has become effective and when any post-effective amendment
thereto has been filed and becomes effective, (ii) of any request by
the SEC or any state securities authority for amendments and
supplements to a Registration Statement and
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9
Prospectus or for additional information after the Registration
Statement has become effective, (iii) of the issuance by the SEC or any
state securities authority of any stop order suspending the
effectiveness of a Registration Statement or the initiation of any
proceedings for that purpose, (iv) if, between the effective date of a
Registration Statement and the closing of any sale of Registrable
Securities covered thereby, the representations and warranties of the
Company and each Subsidiary Guarantor contained in any underwriting
agreement, securities sales agreement or other similar agreement, if
any, relating to the offering cease to be true and correct in all
material respects or if the Company or any Subsidiary Guarantor
receives any notification with respect to the suspension of the
qualification of the Registrable Securities for sale in any
jurisdiction or the initiation of any proceeding for such purpose, (v)
of the happening of any event during the period a Shelf Registration
Statement is effective which makes any statement made in such
Registration Statement or the related Prospectus untrue in any material
respect or which requires the making of any changes in such
Registration Statement or Prospectus in order to make the statements
therein not misleading and (vi) of any determination by the Company or
any Subsidiary Guarantor that a post-effective amendment to a
Registration Statement would be appropriate;
(f) make every reasonable effort to obtain the withdrawal of
any order suspending the effectiveness of a Registration Statement at
the earliest possible moment and provide immediate notice to each
Holder of the withdrawal of any such order;
(g) in the case of a Shelf Registration, furnish to each
Holder of Registrable Securities, without charge, at least one
conformed copy of each Registration Statement and any post-effective
amendment thereto (without documents incorporated therein by reference
or exhibits thereto, unless requested);
(h) in the case of a Shelf Registration, cooperate with the
selling Holders of Registrable Securities to facilitate the timely
preparation and delivery of certificates representing Registrable
Securities to be sold and not bearing any restrictive legends and
enable such Registrable Securities to be in such denominations
(consistent with the provisions of the Indenture) and registered in
such names as the selling Holders may reasonably request at least two
business days prior to the closing of any sale of Registrable
Securities;
(i) in the case of a Shelf Registration, upon the occurrence
of any event contemplated by Section 3(e)(v) hereof, use its best
efforts to prepare and file with the SEC a supplement or post-effective
amendment to a Registration Statement or the related Prospectus or any
document incorporated therein by reference or file any other required
document so that, as thereafter delivered to the purchasers of the
Registrable Securities, such Prospectus will not contain any untrue
statement of a material fact or omit to state a
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10
material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The Company
and each of the Subsidiary Guarantors agree to notify the Holders to
suspend use of the Prospectus as promptly as practicable after the
occurrence of such an event, and the Holders hereby agree to suspend
use of the Prospectus until the Company has amended or supplemented the
Prospectus to correct such misstatement or omission;
(j) a reasonable time prior to the filing of any Registration
Statement, any Prospectus, any amendment to a Registration Statement or
amendment or supplement to a Prospectus or any document which is to be
incorporated by reference into a Registration Statement or a Prospectus
after initial filing of a Registration Statement, provide copies of
such document to the Placement Agents and their counsel (and, in the
case of a Shelf Registration Statement, the Holders and their counsel)
and make such of the representatives of the Company and the Subsidiary
Guarantors as shall be reasonably requested by the Placement Agents or
their counsel (and, in the case of a Shelf Registration Statement, the
Holders or their counsel) available for discussion of such document,
and shall not at any time file or make any amendment to the
Registration Statement, any Prospectus or any amendment of or
supplement to a Registration Statement or a Prospectus or any document
which is to be incorporated by reference into a Registration Statement
or a Prospectus, of which the Placement Agents and their counsel (and,
in the case of a Shelf Registration Statement, the Holders and their
counsel) shall not have previously been advised and furnished a copy or
to which the Placement Agents or their counsel (and, in the case of a
Shelf Registration Statement, the Holders or their counsel) shall
reasonably object;
(k) obtain a CUSIP number for all Exchange Securities or
Registrable Securities, as the case may be, not later than the
effective date of a Registration Statement;
(l) cause the Indenture to be qualified under the Trust
Indenture Act of 1939, as amended (the "TIA"), in connection with the
registration of the Exchange Securities or Registrable Securities, as
the case may be, cooperate with the Trustee and the Holders to effect
such changes to the Indenture as may be required for the Indenture to
be so qualified in accordance with the terms of the TIA and execute,
and use its best efforts to cause the Trustee to execute, all documents
as may be required to effect such changes and all other forms and
documents required to be filed with the SEC to enable the Indenture to
be so qualified in a timely manner;
(m) in the case of a Shelf Registration, make available for
inspection by a representative of the Holders of the Registrable
Securities, any Underwriter participating in any disposition pursuant
to such Shelf Registration Statement, and attorneys and accountants
designated by the Holders, at reasonable times and in a reasonable
manner,
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11
all financial and other records, pertinent documents and properties of
the Company and the Subsidiary Guarantors, and cause the respective
officers, directors and employees of the Company and the Subsidiary
Guarantors to supply all information reasonably requested by any such
representative, Underwriter, attorney or accountant in connection with
a Shelf Registration Statement;
(n) in the case of a Shelf Registration, use their best
efforts to cause all Registrable Securities to be listed on any
securities exchange or any automated quotation system on which similar
securities issued by the Company or any of the Subsidiary Guarantors
are then listed if requested by the Majority Holders, to the extent
such Registrable Securities satisfy applicable listing requirements;
provided, however, that the Company's and the Guarantors' obligations
pursuant to this Section 3(n) shall terminate upon (i) the approval for
listing of the Notes by the Luxembourg Stock Exchange, the London Stock
Exchange or any other securities exchange or automated quotation system
designated by the Majority Holders or (ii) the rejection by any such
exchange of the Notes for such listing, if it is established that such
rejection is due to actions or omissions of either or both of the
Placement Agents or any of the Holders;
(o) use their best efforts to cause the Exchange Securities or
Registrable Securities, as the case may be, to be rated by two
nationally recognized statistical rating organizations (as such term is
defined in Rule 436(g)(2) under the 1933 Act);
(p) if reasonably requested by any Holder of Registrable
Securities covered by a Registration Statement, (i) promptly
incorporate in a Prospectus supplement or post-effective amendment such
information with respect to such Holder as such Holder reasonably
requests to be included therein and (ii) make all required filings of
such Prospectus supplement or such post-effective amendment as soon as
the Company has received notification of the matters to be incorporated
in such filing; and
(q) in the case of a Shelf Registration, enter into such
customary agreements and take all such other actions in connection
therewith (including those requested by the Holders of a majority of
the Registrable Securities being sold) in order to expedite or
facilitate the disposition of such Registrable Securities including,
but not limited to, an Underwritten Offering and in such connection,
(i) to the extent possible, make such representations and warranties to
the Holders and any Underwriters of such Registrable Securities with
respect to the business of the Company and the Subsidiary Guarantors
and their respective subsidiaries, the Registration Statement,
Prospectus and documents incorporated by reference or deemed
incorporated by reference, if any, in each case, in form, substance and
scope as are customarily made by issuers to underwriters in
underwritten offerings and confirm the same if and when requested, (ii)
obtain opinions of counsel to the Company and the Subsidiary Guarantors
(which counsel and opinions,
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12
in form, scope and substance, shall be reasonably satisfactory to the
Holders and such Underwriters and their respective counsel) addressed
to each selling Holder and Underwriter of Registrable Securities,
covering the matters customarily covered in opinions requested in
underwritten offerings, (iii) obtain "cold comfort" letters from the
independent certified public accountants of the Company and the
Subsidiary Guarantors (and, if necessary, any other certified public
accountant of any subsidiary of the Company, or of any business
acquired by the Company or any of the Subsidiary Guarantors for which
financial statements and financial data are required to be included in
the Registration Statement) addressed to each selling Holder and
Underwriter of Registrable Securities, such letters to be in customary
form and covering matters of the type customarily covered in "cold
comfort" letters in connection with underwritten offerings, and (iv)
deliver such documents and certificates as may be reasonably requested
by the Holders of a majority in principal amount of the Registrable
Securities being sold or the Underwriters, and which are customarily
delivered in underwritten offerings, to evidence the continued validity
of the representations and warranties of the Company and the Subsidiary
Guarantors made pursuant to clause (i) above and to evidence compliance
with any customary conditions contained in an underwriting agreement.
In the case of a Shelf Registration Statement, the Company and
the Subsidiary Guarantors may require each Holder of Registrable Securities to
furnish to the Company and the Subsidiary Guarantors such information regarding
the Holder and the proposed distribution by such Holder of such Registrable
Securities as the Company and the Subsidiary Guarantors may from time to time
reasonably request in writing.
In the case of a Shelf Registration Statement, each Holder
agrees that, upon receipt of any notice from the Company and the Subsidiary
Guarantors of the happening of any event of the kind described in Section
3(e)(v) hereof, such Holder will forthwith discontinue disposition of
Registrable Securities pursuant to a Registration Statement until such Holder's
receipt of the copies of the supplemented or amended Prospectus contemplated by
Section 3(i) hereof, and, if so directed by the Company, such Holder will
deliver to the Company (at its expense) all copies in its possession, other than
permanent file copies then in such Holder's possession, of the Prospectus
covering such Registrable Securities current at the time of receipt of such
notice. If the Company shall give any such notice to suspend the disposition of
Registrable Securities pursuant to a Registration Statement, the Company shall
extend the period during which the Registration Statement shall be maintained
effective pursuant to this Agreement by the number of days during the period
from and including the date of the giving of such notice to and including the
date when the Holders shall have received copies of the supplemented or amended
Prospectus necessary to resume such dispositions. The Company may give any such
notice only twice during any 365 day period and any such suspensions may not
exceed 30 days for each suspension and there may not be more than two
suspensions in effect during any 365 day period.
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13
The Holders of Registrable Securities covered by a Shelf
Registration Statement who desire to do so may sell such Registrable Securities
in an Underwritten Offering. In any such Underwritten Offering, the investment
banker or investment bankers and manager or managers (the "Underwriters") that
will administer the offering will be selected by the Majority Holders of the
Registrable Securities included in such offering.
4. Participation of Broker-Dealers in Exchange Offer.
(a) The Staff of the SEC has taken the position that any
broker-dealer that receives Exchange Securities for its own account in the
Exchange Offer in exchange for Securities that were acquired by such
broker-dealer as a result of market-making or other trading activities (a
"Participating Broker-Dealer"), may be deemed to be an "underwriter" within the
meaning of the 1933 Act and must deliver a prospectus meeting the requirements
of the 1933 Act in connection with any resale of such Exchange Securities.
The Company and the Subsidiary Guarantors understand that it
is the Staff's position that if the Prospectus contained in the Exchange Offer
Registration Statement includes a plan of distribution containing a statement to
the above effect and the means by which Participating Broker-Dealers may resell
the Exchange Securities, without naming the Participating Broker-Dealers or
specifying the amount of Exchange Securities owned by them, such Prospectus may
be delivered by Participating Broker-Dealers to satisfy their prospectus
delivery obligation under the 1933 Act in connection with resales of Exchange
Securities for their own accounts, so long as the Prospectus otherwise meets the
requirements of the 1933 Act.
(b) In light of the above, notwithstanding the other
provisions of this Agreement, the Company and the Subsidiary Guarantors agree
that the provisions of this Agreement as they relate to a Shelf Registration
shall also apply to an Exchange Offer Registration to the extent, and with such
reasonable modifications thereto as may be, reasonably requested by the
Placement Agents or by one or more Participating Broker-Dealers, in each case as
provided in clause (ii) below, in order to expedite or facilitate the
disposition of any Exchange Securities by Participating Broker-Dealers
consistent with the positions of the Staff recited in Section 4(a) above;
provided that:
(i) the Company and the Subsidiary Guarantors shall not be
required to amend or supplement the Prospectus contained in the
Exchange Offer Registration Statement, as would otherwise be
contemplated by Section 3(i), for a period exceeding 180 days after the
last Exchange Date (as such period may be extended pursuant to the
penultimate paragraph of Section 3 of this Agreement) and Participating
Broker-Dealers shall not be authorized by the Company or the Subsidiary
Guarantors to deliver and shall not deliver such Prospectus after such
period in connection with the resales contemplated by this Section 4;
and
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14
(ii) the application of the Shelf Registration procedures set
forth in Section 3 of this Agreement to an Exchange Offer Registration,
to the extent not required by the positions of the Staff of the SEC or
the 1933 Act and the rules and regulations thereunder, will be in
conformity with the reasonable request to the Company and the
Subsidiary Guarantors by the Placement Agents or with the reasonable
request in writing to the Company and the Subsidiary Guarantors by one
or more broker-dealers who certify to the Placement Agents, the Company
and the Subsidiary Guarantors in writing that they anticipate that they
will be Participating Broker-Dealers; and provided further that, in
connection with such application of the Shelf Registration procedures
set forth in Section 3 to an Exchange Offer Registration, the Company
and the Subsidiary Guarantors shall be obligated (x) to deal only with
one entity representing the Participating Broker-Dealers, which shall
be the Placement Agents unless it elects not to act as such
representative, (y) to pay the fees and expenses of only one counsel
representing the Participating Broker-Dealers, which shall be counsel
to the Placement Agents unless such counsel elects not to so act and
(z) to cause to be delivered only one, if any, "cold comfort" letter
with respect to the Prospectus in the form existing on the last
Exchange Date and with respect to each subsequent amendment or
supplement, if any, effected during the period specified in clause (i)
above.
(c) The Placement Agents shall have no liability to the
Company, any Subsidiary Guarantor or any Holder with respect to any request that
they may make pursuant to Section 4(b) above.
5. Indemnification and Contribution.
(a) The Company and each of the Subsidiary Guarantors, jointly
and severally, agree to indemnify and hold harmless the Placement Agents, each
Holder and each person, if any, who controls the Placement Agents or any Holder
within the meaning of either Section 15 of the 1933 Act or Section 20 of the
1934 Act, or is under common control with, or is controlled by, the Placement
Agents or any Holder, from and against all losses, claims, damages and
liabilities (including, without limitation, any legal or other expenses
reasonably incurred by the Placement Agents, any Holder or any such controlling
or affiliated person in connection with defending or investigating any such
action or claim) caused by any untrue statement or alleged untrue statement of a
material fact contained in any Registration Statement (or any amendment thereto)
pursuant to which Exchange Securities or Registrable Securities were registered
under the 1933 Act, including all documents incorporated therein by reference,
or caused by any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, or caused by any untrue statement or alleged untrue statement of a
material fact contained in any Prospectus (as amended or supplemented if the
Company and the Subsidiary Guarantors shall have furnished any amendments or
supplements thereto), or caused by any omission or alleged omission to state
therein a material fact necessary to make the
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15
statements therein in light of the circumstances under which they were made not
misleading, except insofar as such losses, claims, damages or liabilities are
caused by any such untrue statement or omission or alleged untrue statement or
omission based upon information relating to the Placement Agents or any Holder
furnished to the Company and the Subsidiary Guarantors in writing by the
Placement Agents or any selling Holder expressly for use therein; provided,
however, that the foregoing indemnity agreement with respect to any preliminary
prospectus contained in any such Registration Statement shall not inure to the
benefit of any Holder from whom the person asserting any such losses, claims,
damages or liabilities purchased Securities, or any person controlling such
Holder if a copy of the Prospectus (as then amended or supplemented if any
Guarantor or the Company shall have furnished any amendments or supplements
thereto) was not sent or given by or on behalf of such Holder to such person, at
or prior to the written confirmation of the sale of the Securities to such
person, and if the Prospectus (as so amended or supplemented) would have cured
the defect giving rise to such losses, claims, damages or liabilities, unless
such failure was the result of noncompliance by any Guarantor or the Company
with Section 3(j) hereof. In connection with any Underwritten Offering permitted
by Section 3, each of the Company and each of the Subsidiary Guarantors will
also indemnify the Underwriters, if any, selling brokers, dealers and similar
securities industry professionals participating in the distribution, their
officers and directors and each Person who controls such Persons (within the
meaning of the Securities Act and the Exchange Act) to the same extent as
provided above with respect to the indemnification of the Holders, if requested
in connection with any Registration Statement.
(b) Each Holder agrees, severally and not jointly, to
indemnify and hold harmless the Company, the Subsidiary Guarantors, the
Placement Agents and the other selling Holders, and each of their respective
directors, officers who sign the Registration Statement and each Person, if any,
who controls the Company, the Subsidiary Guarantors, the Placement Agents and
any other selling Holder within the meaning of either Section 15 of the 1933 Act
or Section 20 of the 1934 Act to the same extent as the foregoing indemnity from
the Company and each Subsidiary Guarantor to the Placement Agents and the
Holders, but only with reference to information relating to such Holder
furnished to the Company and the Subsidiary Guarantors in writing by such Holder
expressly for use in any Registration Statement (or any amendment thereto) or
any Prospectus (or any amendment or supplement thereto).
(c) In case any proceeding (including any governmental
investigation) shall be instituted involving any person in respect of which
indemnity may be sought pursuant to either paragraph (a) or paragraph (b) above,
such person (the "indemnified party") shall promptly notify the person against
whom such indemnity may be sought (the "indemnifying party") in writing and the
indemnifying party, upon request of the indemnified party, shall retain counsel
reasonably satisfactory to the indemnified party to represent the indemnified
party and any others the indemnifying party may designate in such proceeding and
shall pay the fees and disbursements of such counsel related to such proceeding.
In any such proceeding, any indemnified party shall have
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16
the right to retain its own counsel, but the fees and expenses of such counsel
shall be at the expense of such indemnified party unless (i) the indemnifying
party and the indemnified party shall have mutually agreed to the retention of
such counsel or (ii) the named parties to any such proceeding (including any
impleaded parties) include both the indemnifying party and the indemnified party
and representation of both parties by the same counsel would be inappropriate
due to actual or potential differing interests between them. It is understood
that the indemnifying party shall not, in connection with any proceeding or
related proceedings in the same jurisdiction, be liable for (a) the fees and
expenses of more than one separate firm (in addition to any local counsel) for
the Placement Agents and all persons, if any, who control the Placement Agents
within the meaning of either Section 15 of the 1933 Act or Section 20 of the
1934 Act, and (b) the fees and expenses of more than one separate firm (in
addition to any local counsel) for the Company and the Subsidiary Guarantors,
their directors, their officers who sign the Registration Statement and each
person, if any, who controls the Company or any of the Subsidiary Guarantors
within the meaning of either such Section and (c) the fees and expenses of more
than one separate firm (in addition to any local counsel) for all Holders and
all persons, if any, who control any Holders within the meaning of either such
Section, and that all such fees and expenses shall be reimbursed as they are
incurred. In such case involving the Placement Agents and persons who control
the Placement Agents, such firm shall be designated in writing by the Placement
Agents. In such case involving the Holders and such persons who control Holders,
such firm shall be designated in writing by the Majority Holders. In all other
cases, such firm shall be designated by the Company and the Subsidiary
Guarantors. The indemnifying party shall not be liable for any settlement of any
proceeding effected without its written consent but, if settled with such
consent or if there be a final judgment for the plaintiff, the indemnifying
party agrees to indemnify the indemnified party from and against any loss or
liability by reason of such settlement or judgment. Notwithstanding the
foregoing sentence, if at any time an indemnified party shall have requested an
indemnifying party to reimburse the indemnified party for fees and expenses of
counsel as contemplated by the second and third sentences of this paragraph, the
indemnifying party agrees that it shall be liable for any settlement of any
proceeding effected without its written consent if (i) such settlement is
entered into more than 30 days after receipt by such indemnifying party of the
aforesaid request and (ii) such indemnifying party shall not have reimbursed the
indemnified party for such fees and expenses of counsel in accordance with such
request prior to the date of such settlement. No indemnifying party shall,
without the prior written consent of the indemnified party, effect any
settlement of any pending or threatened proceeding in respect of which such
indemnified party is or could have been a party and indemnity could have been
sought hereunder by such indemnified party, unless such settlement includes an
unconditional release of such indemnified party from all liability on claims
that are the subject matter of such proceeding.
(d) If the indemnification provided for in paragraph (a) or
paragraph (b) of this Section 4 is unavailable to an indemnified party or
insufficient in respect of any losses, claims, damages or liabilities, then each
indemnifying party under such paragraph, in lieu of indemnifying such
indemnified party thereunder, shall contribute to the amount paid or payable by
such
<PAGE>
<PAGE>
17
indemnified party as a result of such losses, claims, damages or liabilities in
such proportion as is appropriate to reflect the relative fault of the
indemnifying party or parties on the one hand and of the indemnified party or
parties on the other hand in connection with the statements or omissions that
resulted in such losses, claims, damages or liabilities, as well as any other
relevant equitable considerations. The relative fault of the Company, the
Subsidiary Guarantors and the Holders shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to
information supplied by the Company or the Subsidiary Guarantors or by the
Holders and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The Holders'
respective obligations to contribute pursuant to this Section 5(d) are several
in proportion to the respective number of Registrable Securities of such Holder
that were registered pursuant to a Registration Statement.
(e) The Company, each Subsidiary Guarantor and each Holder
agree that it would not be just or equitable if contribution pursuant to this
Section 5 were determined by pro rata allocation or by any other method of
allocation that does not take account of the equitable considerations referred
to in paragraph (d) above. The amount paid or payable by an indemnified party as
a result of the losses, claims, damages and liabilities referred to in paragraph
(d) above shall be deemed to include, subject to the limitations set forth
above, any legal or other expenses reasonably incurred by such indemnified party
in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 5, no Holder shall be required to
indemnify or contribute any amount in excess of the amount by which the total
price at which Registrable Securities were sold by such Holder exceeds the
amount of any damages that such Holder has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the 1933 Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation. The remedies
provided for in this Section 5 are not exclusive and shall not limit any rights
or remedies which may otherwise be available to any indemnified party at law or
in equity.
The indemnity and contribution provisions contained in this
Section 5 shall remain operative and in full force and effect regardless of (i)
any termination of this Agreement, (ii) any investigation made by or on behalf
of the Placement Agents, any Holder or any person controlling the Placement
Agents or any Holder, or by or on behalf of the Company or any Subsidiary
Guarantor, its officers or directors or any person controlling the Company or
any Subsidiary Guarantor, (iii) acceptance of any of the Exchange Securities and
(iv) any sale of Registrable Securities pursuant to a Shelf Registration
Statement.
<PAGE>
<PAGE>
18
6. Miscellaneous.
(a) No Inconsistent Agreements. Neither the Company nor any
Subsidiary Guarantor has entered into, and on or after the date of this
Agreement will not enter into, any agreement which is inconsistent with the
rights granted to the Holders of Registrable Securities in this Agreement or
otherwise conflicts with the provisions hereof. The rights granted to the
Holders hereunder do not in any way conflict with and are not inconsistent with
the rights granted to the holders of the Company's or the Subsidiary Guarantors'
other issued and outstanding securities under any such agreements.
(b) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given unless the Company and the Subsidiary Guarantors have obtained
the written consent of Holders of at least a majority in aggregate principal
amount of the outstanding Registrable Securities affected by such amendment,
modification, supplement, waiver or consent; provided, however, that no
amendment, modification, supplement, waiver or consents to any departure from
the provisions of Section 5 hereof shall be effective as against any Holder of
Registrable Securities unless consented to in writing by such Holder.
(c) Notices. All notices and other communications provided for
or permitted hereunder shall be made in writing by hand-delivery, registered
first-class mail, telex, telecopier, or any courier guaranteeing overnight
delivery (i) if to a Holder, at the most current address given by such Holder to
the Company by means of a notice given in accordance with the provisions of this
Section 6(c), which address initially is, with respect to the Placement Agents,
the address set forth in the Placement Agreement; and (ii) if to the Company and
the Subsidiary Guarantors, initially at the Company's and Subsidiary Guarantors'
addresses set forth in the Placement Agreement and thereafter at such other
addresses, notice of which is given in accordance with the provisions of this
Section 6(c).
All such notices and communications shall be deemed to have
been duly given: at the time delivered by hand, if personally delivered; five
business days after being deposited in the mail, postage prepaid, if mailed;
when answered back, if telexed; when receipt is acknowledged, if telecopied; and
on the next business day if timely delivered to an air courier guaranteeing
overnight delivery.
Copies of all such notices, demands, or other communications
shall be concurrently delivered by the person giving the same to the Trustee, at
the address specified in the Indenture.
<PAGE>
<PAGE>
19
(d) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors, assigns and transferees of each
of the parties, including, without limitation and without the need for an
express assignment, subsequent Holders; provided that nothing herein shall be
deemed to permit any assignment, transfer or other disposition of Registrable
Securities in violation of the terms of the Placement Agreement. If any
transferee of any Holder shall acquire Registrable Securities, in any manner,
whether by operation of law or otherwise, such Registrable Securities shall be
held subject to all of the terms of this Agreement, and by taking and holding
such Registrable Securities such person shall be conclusively deemed to have
agreed to be bound by and to perform all of the terms and provisions of this
Agreement and such person shall be entitled to receive the benefits hereof. The
Placement Agents (in their capacity as Placement Agents) shall have no liability
or obligation to the Company or any Subsidiary Guarantor with respect to any
failure by a Holder to comply with, or any breach by any Holder of, any of the
obligations of such Holder under this Agreement.
(e) Purchases and Sales of Notes. The Company and each
Subsidiary Guarantor shall not, and shall use their best efforts to cause their
affiliates (as defined in Rule 405 under the 1933 Act) not to, purchase and then
resell or otherwise transfer any Securities.
(f) Third Party Beneficiary. The Holders shall be third party
beneficiaries to the agreements made hereunder among the Company, the Subsidiary
Guarantors, and the Placement Agents, and shall have the right to enforce such
agreements directly to the extent it deems such enforcement necessary or
advisable to protect its rights or the rights of Holders hereunder.
(g) Counterparts. This Agreement may be executed in any number
of counterparts and by the parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(h) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(i) Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of New York.
(j) Severability. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstance, is
held invalid, illegal or unenforceable, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions contained herein shall not be affected or impaired thereby.
<PAGE>
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first written above.
AMTRAN, INC.
By
------------------------------------------
Name:
Title:
AMERICAN TRANS AIR, INC.
By
------------------------------------------
Name:
Title:
AMBASSADAIR TRAVEL CLUB, INC.
By
------------------------------------------
Name:
Title:
ATA VACATIONS, INC.
By
------------------------------------------
Name:
Title:
<PAGE>
<PAGE>
AMBER TRAVEL, INC.
By
------------------------------------------
Name:
Title:
AMERICAN TRANS AIR TRAINING CORPORATION
By
------------------------------------------
Name:
Title:
AMERICAN TRANS AIR EXECUJET, INC.
By
------------------------------------------
Name:
Title:
AMBER AIR FREIGHT CORPORATION
By
------------------------------------------
Name:
Title:
<PAGE>
<PAGE>
Confirmed and accepted as of
the date first above written:
MORGAN STANLEY & CO. INCORPORATED
SALOMON BROTHERS INC
By: Morgan Stanley & Co. Incorporated
By
------------------------------------
Name:
Title:
<PAGE>
<PAGE>
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
YEAR ENDED DECEMBER 31,
<TABLE>
<CAPTION>
ACTUAL ACTUAL ACTUAL ACTUAL
----------- ----------- ----------- -----------
1992 1993 1994 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Income (loss) before income
taxes....................... (2,643,000) 3,866,000 5,879,000 14,653,000
Add:
Interest expense.... 6,898,000 3,872,000 3,656,000 4,163,000
Bank commitment
fees.............. 525,833 409,166 452,876 535,003
Amortization of debt
expense........... 24,311 38,616 419,223 649,138
Portion of rents
representative of
interest factor... 10,278,750 12,116,500 13,413,750 15,788,000
----------- ----------- ----------- -----------
Income as adjusted............ 15,083,894 20,302,282 23,820,849 35,788,142
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Fixed Charges:
Interest incurred:
Amount expensed..... 6,898,000 3,872,000 3,656,000 4,163,000
Amount capitalized.. -- -- 140,000 1,295,000
Bank commitment fees..... 525,833 409,166 452,876 535,003
Amortization of debt
expense................ 24,311 38,616 419,223 649,139
Portion of rents
representative of
interest factor........ 10,278,750 12,116,500 13,413,750 15,788,000
----------- ----------- ----------- -----------
Total fixed charges........... 17,726,894 16,436,282 18,081,849 22,430,142
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Ratio of earnings to fixed
charges..................... (a) 1.24 1.32 1.60
<CAPTION>
SIX MONTHS
ENDED JUNE 30,
ACTUAL --------------
------------ ACTUAL ACTUAL PROFORMA
1996 1996 1997 1997
------------ ----------- -------------- -----------
<S> <C> <C> <C> <C>
Income (loss) before income
taxes....................... (39,581,000) 788,000 5,837,000 3,299,454
Add:
Interest expense.... 4,465,000 2,177,000 3,320,000 5,740,899
Bank commitment
fees.............. 695,801 321,315 418,303 350,837
Amortization of debt
expense........... 881,239 419,097 546,593 663,240
Portion of rents
representative of
interest factor... 18,763,000 9,706,00 8,158,750 8,158,750
------------ ----------- -------------- -----------
Income as adjusted............ (14,775,960) 13,411,412 18,280,646 18,213,180
------------ ----------- -------------- -----------
------------ ----------- -------------- -----------
Fixed Charges:
Interest incurred:
Amount expensed..... 4,465,000 2,177,000 3,320,000 5,740,899
Amount capitalized.. 1,350,218 1,700,363 1,131,007 1,242,991
Bank commitment fees..... 695,801 321,315 418,303 350,837
Amortization of debt
expense................ 881,239 419,097 546,593 663,240
Portion of rents
representative of
interest factor........ 18,763,000 9,706,000 8,158,750 8,158,750
------------ ----------- -------------- -----------
Total fixed charges........... 26,155,258 14,323,775 13,574,653 16,156,717
------------ ----------- -------------- -----------
------------ ----------- -------------- -----------
Ratio of earnings to fixed
charges..................... (a) (a) 1.35 1.13
</TABLE>
- ------------
(a) Earnings were inadequate to cover fixed charges by the amount of $912,363,
$40,931,218 and $2,643,000 in the six months ended June 30, 1996, the year
ended 1996 and the year ended 1992, respectively.
<PAGE>
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions 'Summary
Consolidated Financial and Operational Data,' 'Selected Consolidated Financial
Data,' and 'Experts' and to the use of our report dated February 7, 1997, in the
Registration Statement on Form S-4 and related Prospectus of Amtran, Inc. for
the registration of 10 1/2% Senior Notes.
ERNST & YOUNG LLP
Indianapolis, Indiana
September 23, 1997
<PAGE>
<PAGE>
FORM T-1
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
--------------------
STATEMENT OF ELIGIBILITY UNDER THE
TRUST INDENTURE ACT OF 1939
OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
--------------------
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF
A TRUSTEE PURSUANT TO SECTION 305(b)(2)
FIRST SECURITY BANK,
NATIONAL ASSOCIATION
(EXACT NAME OF TRUSTEE AS SPECIFIED IN ITS CHARTER)
NOT APPLICABLE 87-0131890
(JURISDICTION OF INCORPORATION (I.R.S. EMPLOYER
IF NOT A U.S. NATIONAL BANK) IDENTIFICATION NO.)
79 SOUTH MAIN STREET
SALT LAKE CITY, UTAH 84111
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
NOT APPLICABLE
(NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)
AMTRAN, INC.
(EXACT NAME OF OBLIGOR AS SPECIFIED IN ITS CHARTER)
INDIANA 35-1617970
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
7337 WEST WASHINGTON STREET
INDIANAPOLIS, INDIANA 46231
(ADDRESS OR PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
10 1/2 SENIOR EXCHANGE NOTES DUE 2004
(TITLE OF THE INDENTURE SECURITIES)
<PAGE>
<PAGE>
Item 1. General Information. Furnish the following information as to the
trustee:
(a) Name and address of each examining of supervising authority to
which it is subject.
Comptroller of the Currency, Washington, D.C. 20230; Federal Reserve
Bank of San Francisco, San Francisco, CA 94120; Federal Deposit
Insurance Corporation, Washington, D.C. 20429.
(b) Whether it is authorized to exercise corporate trust powers.
The Trustee is authorized to exercise corporate trust powers.
Item 2. Affiliations With The Obligor. If the obligor is an affiliate of the
trustee, describe each such affiliation.
Neither the obligor nor any underwriter for the obligor is an
affiliate of the Trustee.
Item 16. List of Exhibits. List below all exhibits filed as part of this
statement of eligibility and qualification.
Exhibit 1: copy of the articles of association as now in effect
Exhibit 2: certificate of authority to commence business including
a certificate of the Comptroller of the Currency
evidencing the change of the Trustee's name
Exhibit 3: copy of the authorization of the trustee to exercise
corporate trust powers
Exhibit 4: copy of the bylaws of the trustee
Exhibit 5: Not applicable
Exhibit 6: Not applicable
Exhibit 7: A copy of the latest report published pursuant to law or
its supervising or examining authority
Exhibit 8: Not applicable
Exhibit 9: Not applicable
<PAGE>
<PAGE>
Signature
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, First Security Bank, National Association, a national
banking association organized and existing under the laws of the United States,
has duly caused this statement of eligibility and qualification to be signed on
its behalf by the undersigned thereunder duly authorized, all in the City of
Salt Lake City, and State of Utah, on the 2nd day of October, 1997.
FIRST SECURITY BANK,
NATIONAL ASSOCIATION, Trustee
By: /s/ Greg A. Hawley
_____________________________________
Greg A. Hawley
Vice President
<PAGE>
<PAGE>
EXHIBIT 1
ARTICLES OF ASSOCIATION
OF
FIRST SECURITY BANK
NATIONAL ASSOCIATION
(As Amended)
FIRST. The title of this Association, which shall carry on the
business of banking under the laws of the United States, shall be "First
Security Bank, National Association."
SECOND. The place where the main banking house or office of this
Association shall be located shall be Ogden, County of Weber, State of Utah. Its
general business and its operations of discount and deposit shall also be
carried on in said city, and the branch or branches established or maintained by
it in accordance with the provisions of Section 36 of Title 12, United States
Code. The Board of Directors shall the power to change the location of the main
office of this Association (i) to any other authorized branch location within
the limits of Ogden, Utah, without the approval of the shareholders of this
Association and upon notice to the Comptroller of the Currency or, (ii) to any
other place within Ogden, Utah, or within thirty (30) miles of Ogden, Utah, with
the approval of the shareholders and the Comptroller of the Currency. The Board
of Directors shall have the power to change the location of any branch or
branches of this Association to any other location, without the approval of the
shareholders of this Association but subject to the approval of the Comptroller
of the Currency.
THIRD. The Board of Directors of the consolidated association
shall consist of not less than five (5) nor more than twenty-five (25) of its
shareholders.
FOURTH. There shall be an annual meeting of the shareholders the
purpose of which shall be the election of Directors and the transaction of
whatever other business may be brought before said meeting. It shall be held at
the main office of the Bank or other convenient place as the Board of Directors
may designate, on the third Monday of March of each year, but if no election is
held on that day, it may be held on any subsequent day according to such lawful
rules as may be prescribed by the Board of Directors. Nominations for election
to the Board of Directors may be made by the Board of Directors or by any
stockholder of any outstanding class of capital stock of the Bank entitled to
vote for election of directors. Nominations, other than those made by or on
behalf of the existing management of the Bank, shall be made in writing and
shall be delivered or mailed to the President of the Bank and to the Comptroller
of the Currency, Washington, D.C., not less than 14 days nor more than 50 days
prior to any meeting of stockholders called for the election of directors,
provided, however, that if less than 21 days notice of the meeting is given to
shareholders, such nomination shall be mailed or delivered to the President of
the Bank and to the Comptroller of the Currency not later than the close of
business on the seventh day following the day on which the notice of meeting was
mailed. Such notification shall contain the following information to the extent
known to the notifying shareholder: (a) the name and address of each proposed
nominee; (b) the principal occupation of each proposed nominee; (c) the total
number of shares of capital stock of the Bank that will be voted for each
proposed nominee; (d) the name and residence address of the notifying
shareholder; and (e) the number of shares of capital stock of the Bank owned by
the notifying shareholder. Nominations not made in accordance herewith may, in
his discretion, be disregarded by the Chairman of the meeting, and upon his
instructions, the voting inspectors may disregard all votes cast for each such
nominee.
<PAGE>
<PAGE>
FIFTH. The authorized amount of capital stock of this Association
shall be One Hundred Million Dollars ($100,000,000.00), divided into 4,000,000
shares of common stock of the par value of Twenty-five Dollars ($25.00) each;
provided, however, that said capital stock may be increased or decreased from
time to time, in accordance with the provision of the laws of the United States.
The shareholders of this Association shall not have any pre-emptive rights to
acquire unissued shares of this Association.
<PAGE>
<PAGE>
SIXTH. (1) The Board of Directors shall appoint one of its
members President of this Association. It may also appoint a Chairman of the
Board, and one or more Vice Chairman. The Board of Directors shall have the
power to appoint one or more Vice Presidents, at least one of whom shall also be
a member of the Board of Directors, and who shall be authorized, in the absence
of the President, to perform all acts and duties pertaining to the office of the
President; to appoint a Cashier and such other officers and employees as may be
required to transact the business of this Association; to fix the salaries to be
paid to such officers or employees and appoint others to take their place.
(2) The Board of Directors shall have the power to
define the duties of officers and employees of this Association and to require
adequate bonds from them for the faithful performance of their duties; to make
all By-Laws that may be lawful for the general regulation of the business of
this Association and the management of its affairs, and generally to do and
perform all acts that may be lawful for a Board of Directors to do and perform.
(3) Each person who was or is a party or is threatened
to be made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, administrative or investigative (other than an
action by or in the right of the Association) by reason of the fact that he
is or was a director, officer, employee or agent of the Association or is or was
serving at the request of the Association as a director, officer, employee,
fiduciary or agent of another corporation, partnership, joint venture, trust,
estate or other enterprise or was acting in furtherance of the Association's
business shall be indemnified against expenses (including attorney's fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by him in connection with such action, suit or proceeding if he acted in good
faith and in a manner he reasonably believed to be in or not opposed to the best
interests of the Association; provided, however, no indemnification shall be
given to a person adjudged guilty of, or liable for, willful misconduct, gross
neglect of duty, or criminal acts or where there is a final order assessing
civil money penalties or requiring affirmative action by such person in the form
of payments to the Association. The termination of any action, suit or
proceeding by judgment, order, settlement, or its equivalent, shall not of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the Association.
(4) Each person who was or is a party or is threatened
to be made a party to any threatened, pending or completed action or suit
by or in the right of the Association (such action or suit being known as a
"derivative proceeding") to procure a judgment in its favor by reason of the
fact that he is or was a director, officer, employee or agent of the Association
or is or was serving at the request of the Association as a director, officer,
employee, fiduciary or agent of another corporation, partnership, joint venture,
trust, estate or other enterprise shall be indemnified against expenses
(including attorney's fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the Association; provided, however, that no indemnification
shall be given where there is a final order assessing civil money penalties or
requiring affirmative action by such person in the form of payments to the
Association; and provided further that no indemnification shall be made in
respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable for negligence or misconduct in the performance of his
duty to the Association, unless and only to the extent that the court in which
such action or suit was brought shall determine upon application that, despite
the
<PAGE>
<PAGE>
adjudication of liability but in view of all circumstances of the case, such
person is fairly and reasonably entitled to indemnity for such expenses which
such court shall deem proper.
(5) To the extent that a director, officer, employee
or agent of a corporation has been successful on the merits or otherwise
in defense of any action, suit or proceeding referred to in (3) or (4) of
this Article or in defense of any claim, issue or matter therein, he shall
be indemnified against expenses (including attorney's fees) actually and
reasonably incurred by him in connection therewith.
<PAGE>
<PAGE>
(6) Any indemnification under (3) or (4) of this
Article (unless ordered by a court) shall be made by the Association only as
authorized in the specific case upon a reasonable determination that
indemnification of the director, officer, employee or agent is proper in the
circumstances because he has met the applicable standard of conduct set forth in
(3) or (4) of this Article. Such determination shall be made (a) by the Board of
Directors by a majority vote of a quorum consisting of directors who were not
parties to such action, suit or proceeding, or (b) if such a quorum is not
obtainable, or, even if obtainable a quorum of disinterested directors so
directs, by independent legal counsel in written opinion, or (c) by the
stockholders.
(7) Expenses incurred in defending a civil or criminal
action, suit or proceeding may be paid by the Association in advance of the
final disposition of such action, suit or proceeding as authorized in the
manner provided in (6) of this Article (i) if the Board of Directors determines,
in writing, that (1) the director, officer, employee or agent has a substantial
likelihood or prevailing on the merits; (2) in the event the director, officer,
employee or agent does not prevail, he or she will have the financial capability
or reimburse the Association; and (3) payment of expenses by the Association
will not adversely affect its safety and soundness; and (ii) upon receipt of an
undertaking by or on behalf of the director, officer, employee or agent to repay
such amount unless it shall ultimately be determined that he is entitled to be
indemnified by the Association as authorized in this Article.
(8) The indemnification provided by this Article shall
not be deemed exclusive of any other rights to which those indemnified may
be entitled under any By-Law, agreement, vote of shareholders or disinterested
directors or otherwise, both as to action in his official capacity and as to
action in another capacity while holding such office and shall continue as to a
person who has ceased to be a director, officer, employee or agent and shall
inure to the benefit of the heirs, executors, successors in interest, and
administrators of such a person.
SEVENTH. This Association shall have succession from the date of
its organization certificate until such time as it be dissolved by the act of
its shareholders in accordance with the provisions of the banking laws of the
United States, or until its franchise becomes forfeited by reason of violation
of law, or until terminated by either a general or a special act of Congress, or
until its affairs be placed in the hands of a receiver and finally wound up by
him.
EIGHTH. The Board of Directors of this Association, or any three
or more shareholders owning, in the aggregate, not less than ten per centum of
the stock of this Association, may call a special meeting of shareholders at any
time: Provided, however, that unless otherwise provided by law, not less than
ten days prior to the date fixed for any such meeting, a notice of the time,
place and purpose of the meeting shall be given by first-class mail, postage
prepaid, to all shareholders of record of this Association. These Articles of
Association may be amended at any regular or special meeting of the Shareholders
by the affirmative vote of the shareholders owning at least a majority of the
stock of this Association, subject to the provisions of the banking laws of the
United States. The notice of any shareholders' meeting, at which an amendment to
the Articles of Association of this Association is to be considered shall be
given as hereinabove set forth.
<PAGE>
<PAGE>
EXHIBIT 2
CERTIFICATE
TREASURY DEPARTMENT )
Office of ) ss:
Comptroller of the Currency )
I, Thomas G. DeShazo, Deputy Comptroller of the Currency, do hereby certify
that:
Pursuant to Revised Statutes 324, et seq., as amended, 12 U.S.C. 1, et seq., the
Comptroller of the Currency charters and exercises regulatory and supervisory
authority over all national banking associations;
On December 9, 1881, The First National Bank of Ogden, Ogden, Utah was chartered
as a National Banking Association under the laws of the United States and under
Charter No. 2597;
The document hereto attached is a true and complete copy of the Comptroller
Certificate issued to The First National Bank of Ogden, Ogden, Utah, the
original of which certificate was issued by this Office on December 9, 1881;
On October 2, 1922, in connection with a consolidation of The First Bank of
Ogden, Ogden, Utah, and The Utah National Bank of Ogden, Ogden, Utah, the title
was charged to "The First & Utah National Bank of Ogden"; on January 18, 1923,
The First & Utah National Bank of Ogden changed its title to "First Utah
National Bank of Ogden"; on January 19, 1926, the title was changed to "First
National Bank of Ogden"; and on February 24, 1934, the title was changed to
"First Security Bank of Utah, National Association"; and
First Security Bank of Utah, National Association, Ogden, Utah, continues to
hold a valid certificate to do business as a National Banking Association.
IN TESTIMONY WHEREOF, I have hereunto
subscribed my name and caused the seal of
Office of the Comptroller of the Currency to
be affixed to these presents at the Treasury
Department, in the City of Washington and
District of Columbia, this fourth day of
April, A.D. 1972.
/s/ Thomas G. DeShazo
____________________________________________
Deputy Comptroller of the Currency
<PAGE>
<PAGE>
TREASURY DEPARTMENT
Comptroller of the Currency,
Washington, December 9th, 1881
WHEREAS, by satisfactory evidence presented to the undersigned it
has been made to appear that "The First National Bank of Ogden"
in Ogden City in the County of Weber, and Territory of Utah has
complied with all the provisions of the Revised Statutes of the
United States, required to be complied with before an association
shall be authorized to commence the business of Banking.
Now, therefore, I, John Jay Knox, Comptroller of the Currency, do
hereby certify that "The First National Bank of Ogden" in Ogden
City in the County of Weber, and Territory of Utah is authorized
to commence the business of Banking, as provided in Section
Fifty-one hundred and sixty-nine of the Revised Statutes of the
United States.
In testimony whereof, witness my hand and seal of
office this 9th day of December, 1881.
/s/ John Jay Knox
_____________________________________________
Comptroller of the Currency
<PAGE>
<PAGE>
EXHIBIT 3
FEDERAL RESERVE BOARD
WASHINGTON, D.C.
I, S.R. Carpenter, Assistant Secretary of the Federal Reserve Board, do
hereby certify that it appears from the records of the Federal Reserve
Board that:
(1) Pursuant to authority vested in the Federal Reserve Board by
an Act of Congress approved December 23, 1913, known as the Federal
Reserve Act, as amended, the Federal Reserve Board has heretofore
granted to the First National Bank of Ogden, Ogden, Utah, the right to
act when not in contravention of State or local law, as trustee,
executor, administrator, registrar of stocks and bonds, guardian of
estates, assignee, receiver, committee of estates of lunatics, or in any
other fiduciary capacity in which State banks, trust companies or other
corporations which come into competition with national banks are
permitted to act under the laws of the State of Utah;
(2) On February 24, 1934, the First National Bank of Ogden,
Ogden, Utah, changed its title to First Security Bank of Utah, National
Association, under the provisions of an Act of Congress approved May 1,
1886, whereby all of the rights, liabilities and powers of such national
bank under its old name devolved upon and inured to the bank under its
new name; and
(3) Pursuant to the permission heretofore granted by the Federal
Reserve Board to the First National Bank of Ogden, Ogden, Utah, as
aforesaid, and by virtue of the change in the title of such bank, the
First Security Bank of Utah, National Association has authority to act,
when not in contravention of State or local law, as trustee, executor,
administrator,
<PAGE>
<PAGE>
registrar of stocks and bonds, guardian of estates of lunatics, or in
any other fiduciary capacity in which State banks, trust companies or
other corporations which come into competition with national banks are
permitted to act under the laws of the State of Utah, subject to
regulations prescribed by the Federal Reserve Board.
IN WITNESS WHEREOF, I have hereunto subscribed my name and
caused the seal of the Federal Reserve Board to be affixed at the City
of Washington, in the District of Columbia, on the 1st day of March,
1934.
/s/ S.R. Carpenter
_____________________________________________
Assistant Secretary, Federal Reserve Board.
<PAGE>
<PAGE>
FEDERAL RESERVE BOARD
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
March 1, 1934.
First Security Bank of Utah, National Association,
Ogden, Utah.
Dear Sirs:
Reference is made to the change in the name of the First National Bank
of Ogden, Ogden, Utah, pursuant to the provisions of the Act of May 1, 1886, to
First Security Bank of Utah, National Association, and there is inclosed a
certificate issued by the Federal Reserve Board showing the trust powers
heretofore granted to the bank under its former name and that it is authorized
to exercise such powers under its new name.
Very truly yours,
/s/ S.R. Carpenter
S.R. Carpenter,
Assistant Secretary.
Enclosure
<PAGE>
<PAGE>
[Logo]
================================================================================
Comptroller of the Currency
Administrator of National Banks
================================================================================
LICENSING UNIT (APPLICATIONS)
50 Fremont Street, Suite 3900
San Francisco, CA 94105
(415) 545-5900, FAX (415) 545-5925
June 20, 1996
Board of Directors
FIRST SECURITY BANK OF UTAH, N.A.
c/o First Security Corporation
Attn: Brad D. Hardy, EVP
Post Office Box 30006
Salt Lake City, Utah 84130
RE: MERGER - FIRST SECURITY BANK OF IDAHO, N.A., BOISE, IDAHO INTO FIRST
SECURITY BANK OF UTAH, N.A., OGDEN, UTAH, UNDER THE TITLE OF FIRST
SECURITY BANK, N.A., ODGEN, UTAH. CONTROL NO: 96-WE-02-010
Dear Members of the Board:
This letter is the OFFICIAL CERTIFICATION of the Comptroller of the Currency to
merge First Security Bank of Idaho, National Association, Boise, Idaho into
First Security Bank of Utah, National Association, Ogden, Utah, EFFECTIVE AS OF
JUNE 21, 1996. THE RESULTING BANK TITLE IS FIRST SECURITY BANK, NATIONAL
ASSOCIATION AND CHARTER NUMBER IS 2597.
This is also the official authorization given to First Security Bank, National
Association to operate the branches of the target institution and to operate the
main office of the target institution as a branch. Branches of a national bank
target are not listed since they are automatically carried over to the resulting
bank and retain their current OCC branch numbers.
Please be advised that the Charter Certificate for the merged bank, First
Security Bank of Idaho, National Association, MUST BE RETURNED TO THE WESTERN
DISTRICT OFFICE for cancellation.
Very truly yours,
/s/ Robert G. Tornborg
Robert G. Tornborg
Acting Director of Bank Supervision - Compliance and Analysis
<PAGE>
<PAGE>
EXHIBIT 4
BY-LAWS OF THE
FIRST SECURITY BANK,
NATIONAL ASSOCIATION
Organized under the National Banking laws of the United States.
MEETINGS
SECTION 1. Unless otherwise provided by the articles of association a notice of
each shareholder's meeting, setting forth clearly the time, place and purpose of
the meeting, shall be given, by mail, to each shareholder of record of this bank
at lease 10 days prior to the date of such meeting. Any failure to mail such
notice or any irregularity therein, shall not affect the validity of such
meeting or of any of the proceedings thereat.
SECTION 2. A record shall be made of the shareholders represented in person and
by proxy, after which the shareholders shall proceed to the transaction of any
business that may properly come before the meeting. A record of the
shareholder's meeting, giving the names of the shareholders present and the
number of shares of stock held by each, the names of the shareholders
represented by proxy and the number of shares held by each, and the names of the
proxies, shall be entered in the records of the meeting in the minute book of
the bank. This record shall show the names of the shareholders and the number of
shares voted for each resolution or voted for each candidate for director.
Proxies shall be secured for the annual meeting alone, shall be dated, and shall
be filed with the records of the meeting. No officer, director, employee, or
attorney for the bank may act as proxy.
The chairman or Secretary of the meeting shall notify the directors-elect of
their election and of the time at which they are required to meet at the banking
house for the purpose of organizing the new board. At the appointed time, which
as closely as possible shall follow their election, the directors-elect shall
convene and organize.
The president or cashier shall then forward to the office of the Comptroller of
the Currency a letter stating that a meeting of the shareholders was held in
accordance with these by-laws, stating the number of shares represented in
person and the number of shares represented by proxy, together with a list of
the directors elected and the report of the appointment and signatures of
officers.
OFFICERS
SECTION 3. Each officer and employee of this bank shall be responsible for all
such moneys, funds, valuables, and property of every kind as may be entrusted to
his care or otherwise come into his possession, and shall faithfully and
honestly discharge his duties and apply and account for all such moneys, funds,
valuables and other property that may come into his hands as such officer or
employee and pay over and deliver the same to the order of the Board of
Directors or to such person or persons as may be authorized to demand and
receive same.
Association By-Laws
<PAGE>
<PAGE>
SECTION 4. If the Board of Directors shall not require separate bonds, it shall
require a blanket bond in an amount deemed by it to be sufficient.
SECTION 5. The following is an impression of the seal adopted by the Board of
Directors of this bank: (Here in the original resolution was imprinted the
Association's seal).
SECTION 6. The various branches of this bank shall be open for business during
such hours as shall be customary in the vicinity, or as shall be fixed, as to
any branch, by the clearing house association of which such branch shall be a
member.
SECTION 7. The regular meeting of the board of directors shall be held on the
first Wednesday after the first Tuesday of each month. When any regular meeting
of the board of directors falls upon a holiday, the meeting shall be held on
such other day as the board may previously designate. Special meetings may be
called by the president, any vice-president, the secretary or the cashier, or at
the request of three or more directors.
MINUTE BOOK
SECTION 8. The organization papers of this bank, the returns of the elections,
the proceedings of all regular and special meetings of the directors and of the
shareholders, the by-laws and any amendments thereto, and reports of the
committees of directors shall be recorded in the minute book; and the minutes of
each meeting shall be signed by the chairman and attest by the secretary of the
meeting.
TRANSFERS OF STOCK
SECTION 9. The stock of this bank shall be assignable and transferable only on
the books of this bank, subject to the restrictions and provisions of the
national banking laws; and a transfer book shall be provided in which all
assignments and transfers of stock shall be made.
SECTION 10. Certificates of stock, signed by the president or vice-president,
and the secretary or the cashier or any assistant cashier, may be issued to
shareholders, and when stock is transferred the certificates thereof shall be
returned to the association, cancelled, preserved, and new certificates issued.
Certificates of stock shall state upon the face thereof that the stock is
transferable only upon the books of the association, and shall meet the
requirements of section 5139, United States Revised Statutes, as amended.
EXPENSES
SECTION 11. All the current expenses of the bank shall be paid by the cashier,
except that the current expenses of each branch shall be paid by the manager
thereof; and such officer shall, every six months, or more often if required,
make to the board a report thereof.
Association By-Laws
<PAGE>
<PAGE>
EXAMINATIONS
SECTION 12. There shall be appointed by the board of directors a committee of
three members, exclusive of the active officers of the bank, whose duty it shall
be to examine, at least once in each period of eighteen months, the affairs of
each branch as well as the head office of the association, count its cash, and
compare its assets and liabilities with the accounts of the general ledgers,
ascertain whether the accounts are correctly kept and that the condition of the
bank corresponds therewith, and whether the bank is in a sound and solvent
condition, and to recommend to the board such changes in the manner of doing
business, etc., as shall seem to be desirable, the result of which examination
shall be reported in writing to the board at the next regular meeting
thereafter, provided that the appointment of such committee and the examinations
by it may be dispensed with if the board shall cause such examination to be made
and reported to the board by accountants approved by it.
CHANGES IN BY-LAWS
SECTION 13. These by-laws may be changed or amended by the vote of a majority of
the directors at any regular or special meeting of the board, provided, however,
that the directors shall have been given 10 days notice of the intention to
change or offer an amended thereto.
REPEAL
SECTION 14. All by-laws heretofore adopted are repealed.
Association By-Laws
<PAGE>
<PAGE>
EXHIBIT 7
First Security Bank, N.A.
P.O. Box 30011
Salt Lake City, UT 84130
Transit Number: 12400001
Consolidated Report of Condition for Insured Commercial and
State-Chartered Savings Banks for March 31, 1997
All schedules are to be reported in thousands of dollars. Unless otherwise
indicated, report the amount outstanding as of the last business day of the
quarter.
Schedule RC- Balance Sheet
<TABLE>
<CAPTION>
C400
Dollar Amounts in Thousands
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
1. Cash and balances due from depository institutions (from Schedule RC-A): RCFD
----
a. Noninterest-bearing balances and currency and coin(1)________________________________0081 . . 655,052 1.a
b. Interest-bearing balances(2)_________________________________________________________0071 . . 67 1.b
2. Securities:
a. Held-to-maturity securities (from Schedule RC-B, column A)___________________________1754 . . 0 2.a
b. available-for-sale securities (from Schedule RC-B, column B)_________________________1773 . . 2,180,112 2.b
3. Federal funds sold and securities purchased under agreements to resell__________________1350 . . 66,173 3.
4. Loans and lease financing receivables:
RCFD
a. Loans and leases, net of unearned income ----
(from Schedule RC-C)____________________________________2122. . 7,516,685 . . . . . . 4.a
b. LESS: Allowance for loan and lease losses_______________3123. . 99,148 . . . . . . 4.b
c. LESS: Allocated transfer risk reserve___________________3128. . 0 . . . . . . 4.c
d. Loans and leases, net of unearned income,
allowance, and reserve (items 4.a minus 4.b and 4.c)_________________________________2125 . . 7,417,537 4.d
5. Trading assets (from Schedule RC-O)_____________________________________________________3545 . . 388,486 5.
6. Premises and fixed assets (including capitalized leases)________________________________2145 . . 174,816 6.
7. Other real estate owned (from Schedule RC-M)____________________________________________2150 . . 825 7.
8. Investments in unconsolidated subsidiaries and associated companies (from
Schedule RC-H)__________________________________________________________________________2130 . . 0 8.
9. Customers' liability to this bank on acceptances outstanding____________________________2155 . . 803 9.
10. Intangible assets (from Schedule RC-M)__________________________________________________2143 . . 157,257 10.
11. Other assets (from Schedule RC-F)_______________________________________________________2160 . . 332,647 11.
12. Total assets (sum of items 1 through 11)________________________________________________2170 . . 11,373,780 12.
</TABLE>
- ---------------
(1) Includes cash items in process of collection and unposted debits.
(2) Includes time certificates of deposit not held for trading.
Association By-Laws
<PAGE>
<PAGE>
EXHIBIT 7
First Security Bank, N.A.
P.O. Box 30011
Salt Lake City, UT 84130
Transit Number: 12400001
Schedule RC - Continued
<TABLE>
<CAPTION>
Dollar Amounts in Thousands
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
LIABILITIES
RCON
13. Deposits: ----
a. in domestic offices (sum of totals of 2200. . 7,079,084 13.a
columns A and C from Schedule RC-E, part I)______________________________________
RCON
----
(1) Noninterest-bearing (1)________________ 6631 ... 1,582,595 . . . . . . . 13.a.1
(2) Interest-bearing_______________________ 6636 ... 5,496,489 . . . . . . . 13.a.2
RCFD
b. In foreign offices, Edge and Agreement subsidiaries, and IRFs from ----
Schedule RC-E, part II) _________________________________________________________2200 51,656 13.b
RCFN
----
(1) Noninterest-bearing ____________________ 6631 ... 0 . . . . . . . 13.b.1
(2) Interest-bearing ________________________6636 ... 51,656 . . . . . . . 13.b.2
RCFD
----
14. Federal funds purchased and securities sold under agreements to repurchase__________2800. . 1,987,674 14.
RCOM
----
15. a. Demand notes issued to the U.S. Treasury ________________________________________2840. . 20,244 15.a
RCFD
----
b. Trading Liabilities (from Schedule RC-B) ________________________________________3548. . 130 15.b
16. Other borrowed money (includes mortgage indebtedness and obligations under
capitalized Leases):
a. with a remaining maturity of one year or less ___________________________________2352. . 552,757 16.a
b. with a remaining maturity of more than one year__________________________________2333. . 353,202 16.b
17. Not applicable.
18. Bank's liability on acceptances executed and outstanding ___________________________2920. . 803 18.
19. Subordinated notes and debentures(2)________________________________________________3200. . 45,000 19.
20. Other Liabilities (from Schedule RC-G)______________________________________________2930. . 362,343 20.
21. Total Liabilities (sum of items 13 through 20)______________________________________2948. . 10,452,893 21.
22. Not applicable.
EQUITY CAPITAL
RCFD
----
23. Perpetual preferred stock and related surplus_______________________________________3838. . 0 23.
24. Common stock________________________________________________________________________3230. . 59,270 24.
25. Surplus (excludes all surplus related to preferred stock)___________________________3839. . 285,944 25.
26. a. Undivided profits and capital reserves___________________________________________3652. . 590,530 26.a
b. Net unrealized holding gains (losses) on available-for-sale securities___________8438. . (14,857) 26.b
27. Cumulative foreign currency translation adjustments ________________________________3284. . 0 27.
28. Total equity capital (sum of items 23 through 27)___________________________________3210. . 920,887 28.
29. Total Liabilities, limited-life preferred stock, and equity capital (sum of
items 21 and 28)____________________________________________________________________3300. . 11,373,780 29.
Memorandum
To be reported only with the March Report of Condition.
1. Indicate in the box at the right the number of the statement below that best RCFD Number
describes the most comprehensive level of auditing work performed for the bank by ---- ------
independent external auditors as of any date during 1996 ____________________________6724. . 2 M.1
1 = Independent audit of the bank conducted in accordance 4 = Directors' examination of the bank performed by other
with generally accepted auditing standards by a certified external auditors (may be required by state chartering
public accounting firm which submits a report on the bank. authority)
2 = Independent audit of the bank's parent holding company 5 = Review of the bank's financial statements by external
conducted in accordance with generally accepted auditing auditors
standards by a certified public accounting firm which 6 = Compilation of the bank's financial statements by
submits a report on the consolidated holding company (but external auditors
not on the bank separately) 7 = Other auditing procedures (excluding tax preparation work)
3 = Directors' examination of the bank conducted in accordance 8 = No external audit work
with generally accepted auditing standards by a certified
public accounting firm (may be required by state charter-
ing authority)
- -----------
(1) Includes total demand deposits and noninterest-bearing time and savings deposits.
(2) Includes limited-life preferred stock and related surplus.
</TABLE>
Association By-Laws
<PAGE>
<PAGE>
EXHIBIT 99.1
LETTER OF TRANSMITTAL
AMTRAN, INC.
OFFER FOR ALL OUTSTANDING
10 1/2% SENIOR NOTES DUE 2004
IN EXCHANGE FOR
10 1/2% SENIOR EXCHANGE NOTES DUE 2004
PURSUANT TO THE PROSPECTUS, DATED , 1997
THE EXCHANGE OFFER WILL EXPIRE AT MIDNIGHT, NEW YORK CITY TIME, ON , 1997,
UNLESS EXTENDED (THE "EXPIRATION DATE"). TENDERS MAY BE WITHDRAWN PRIOR TO
MIDNIGHT, NEW YORK CITY TIME, ON THE EXPIRATION DATE.
DELIVERY TO: FIRST SECURITY BANK, N.A., EXCHANGE AGENT
<TABLE>
<S> <C> <C>
By Mail or Overnight Courier By Hand Facsimile Transmission Number
First Security Bank, N.A. First Security Bank, N.A. (801) 246-5053
79 South Main Street Attention: Corporate Trust (FOR ELIGIBLE
Salt Lake City, UT 84111 Services INSTITUTIONS ONLY)
Attention: Corporate Trust In Care Of:
Services IBJ Schroder Bank & Trust Confirm by Telephone
Company
(IF BY MAIL, REGISTERED OR One State Street Plaza (801) 246-5822
CERTIFIED MAIL RECOMMENDED) New York, NY 10004
</TABLE>
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE, OR
TRANSMISSION OF INSTRUCTION VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE, WILL
NOT CONSTITUTE A VALID DELIVERY.
The undersigned acknowledges that he or she has received and reviewed the
Prospectus, dated , 1997 (the "Prospectus"), of Amtran, Inc., an Indiana
corporation (the "Company"), and this Letter of Transmittal (the "Letter"),
which together constitute the Company's offer (the "Exchange Offer") to exchange
an aggregate principal amount of up to $100,000,000 of its 10 1/2% Senior Notes
due 2004 (the "Exchange Notes") that have been registered under Securities Act
of 1933, as amended, for a like principal amount of its issued and outstanding
10 1/2% Senior Notes due 2004 (the "Outstanding Notes") with the holders
thereof.
For each Outstanding Note accepted for exchange, the holder of such
Outstanding Note will receive an Exchange Note having a principal amount equal
to that of the surrendered Outstanding Note. The Exchange Notes will bear
interest from July 24, 1997, payable semiannually on February 1 and August 1 of
each year commencing on February 1, 1998, at the rate of 10 1/2% per annum.
Holders of Outstanding Notes whose Outstanding Notes are accepted for exchange
will be deemed to have waived the right to receive any payment in respect of
interest on the Outstanding Notes accrued from July 24, 1997 until the date of
the issuance of the Exchange Notes. Consequently, holders who tender their
Outstanding Notes for Exchange Notes will receive the same interest payment on
February 1, 1998 (the first interest payment date with respect to the
Outstanding Notes and the Exchange Notes) that they would have received had they
not accepted the Exchange Offer.
This Letter is to be completed by a holder of Outstanding Notes either if
certificates are to be forwarded herewith or if a tender of certificates for
Outstanding Notes, if available, is to be made by book-entry transfer to the
account maintained by the Exchange Agent at The Depository Trust Company (the
"Book-Entry Transfer Facility") pursuant to the procedures set forth in "The
Exchange Offer--Book-Entry Transfer" section of the Prospectus. Holders of
Outstanding Notes whose certificates are not immediately available, or who are
unable to deliver their certificates or confirmation of the book-entry tender of
their Outstanding Notes into the Exchange Agent's account at the Book-Entry
Transfer Facility (the "Book-Entry Confirmation") and all other documents
required by this Letter to the Exchange Agent on or prior to the Expiration
Date, must tender their Outstanding Notes according to the guaranteed deliver
procedures set forth in "The Exchange Offer--Guaranteed Delivery Procedures"
section of the Prospectus. See Instruction 1. Delivery of documents to the
Book-Entry Transfer Facility does not constitute delivery to the Exchange Agent.
The undersigned has completed the appropriate boxes below and signed this
Letter to indicate the action the undersigned desires to take with respect to
the Exchange Offer.
<PAGE>
<PAGE>
2
List below the Outstanding Notes to which this Letter relates. If the space
provided below is inadequate, the certificate numbers and principal amount of
Outstanding Notes should be listed on a separate signed schedule affixed hereto.
<TABLE>
<S> <C> <C> <C>
DESCRIPTION OF OUTSTANDING NOTES 1 2 3
AGGREGATE
PRINCIPAL
AMOUNT OF PRINCIPAL
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) CERTIFICATE OUTSTANDING AMOUNT
(PLEASE FILL IN, IF BLANK) NUMBER(S)* NOTE(S) TENDERED
TOTAL
</TABLE>
* Need not be completed if Outstanding Notes are being tendered by book-entry
transfer.
** Unless otherwise indicated in this column, a holder will be deemed to have
tendered ALL of the Outstanding Notes represented by the
Outstanding Notes indicated in column 2. See Instruction 2. Outstanding
Notes tendered hereby must be in denominations of principal amount of
US$1,000 and any integral multiple thereof. See Instruction 1.
|_| CHECK HERE IF TENDERED OUTSTANDING NOTES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER MADE TO AN ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE
BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution ______________________________________________
Account Number________________ Transaction Code Name____________________
|_| CHECK HERE IF TENDERED OUTSTANDING NOTES ARE BEING DELIVERED PURSUANT TO A
NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND
COMPLETE THE FOLLOWING:
Name(s) of Registered Holder(s)_____________________________________________
Window Ticket Number (if any)_______________________________________________
Date of Execution of Notice of Guaranteed Delivery__________________________
Date of Institution which guaranteed delivery_______________________________
IF DELIVERED BY BOOK-ENTRY TRANSFER, COMPLETE THE FOLLOWING::
Account Number____________________ Transaction Code Name________________
|_| CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO.
Name:___________________________________________________________________________
Address:________________________________________________________________________
________________________________________________________________________________
<PAGE>
<PAGE>
3
SPECIAL ISSUANCE INSTRUCTIONS
(SEE INSTRUCTIONS 3 AND 4)
To be completed ONLY if certificates for Outstanding Notes not exchanged and /or
Exchange Notes are to be issued in the name of and sent to someone other than
the person or persons whose signature(s) appear(s)on this Letter above, or if
Outstanding Notes delivered by book-entry transfer which are not accepted for
exchange are to be returned by credit to an account maintained at the Book-Entry
Transfer Facility other than the account indicated above.
Issue: Exchange Notes and/or Outstanding Notes to:
Name(s)________________________________________________________________________
(Please Type or Print)
________________________________________________________________________________
(Please Type or Print)
Address_________________________________________________________________________
(Zip Code)
(Complete Substitute Form W-9)
|_| Credit unexchanged Outstanding Notes delivered by Mail: book-entry
transfer to the Book-Entry Transfer Facility account set forth below.
________________________________________________________________________________
(Book-Entry Transfer Facility
Account Number, if applicable)
SPECIAL DELIVERY INSTRUCTIONS
(See Instructions 3 and 4)
To be completed ONLY if certificates for outstanding Notes not exchanged and/or
Exchange Notes are to be sent to someone other than the person or persons whose
signature(s) appear(s) on this letter above or to such person or persons at an
address other than shown in the box entitled "Description of Outstanding Notes"
on this Letter above.
Mail: Exchange Notes and/or Outstanding Notes to:
Name(s)________________________________________________________________________
(Please Type or Print)
________________________________________________________________________________
(Please Type or Print)
Address_________________________________________________________________________
________________________________________________________________________________
(Zip Code)
IMPORTANT: THIS LETTER OR A FACSIMILE HEREOF (TOGETHER WITH THE CERTIFICATES FOR
OUTSTANDING NOTES OR A BOOK-ENTRY CONFIRMATION AND ALL OTHER REQUIRED DOCUMENTS
OR THE NOTICE OF GUARANTEED DELIVERY) MUST BE RECEIVED BY THE EXCHANGE AGENT
PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE.
PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL
CAREFULLY BEFORE COMPLETING ANY BOX ABOVE.
<PAGE>
<PAGE>
4
PLEASE SIGN HERE
(TO BE COMPLETED BY ALL TENDERING HOLDERS)
(COMPLETE ACCOMPANYING SUBSTITUTE FORM W-9 ON REVERSE SIDE)
Dated:__________________________________________________________________, 1997
x____________________________________ _____________________________, 1997
x____________________________________ _____________________________, 1997
Signature(s) of Owner Date
Area Code and Telephone Number_____________________________________
If a holder is tendering any Outstanding Notes, this Letter must be signed
by the registered holder(s) as the name(s) appear(s) on the certificate(s) for
the Outstanding Notes or by any person(s) authorized to become registered
holder(s) by endorsements and documents transmitted herewith. If signature is by
a trustee, executor, administrator, guardian, officer or other person acting in
a fiduciary or representative capacity, please set forth full title. See
Instruction 3.
Name(s): _________________________________________________________________
(Please Type or Print)
Capacity:_________________________________________________________________
Address:__________________________________________________________________
(Including Zip Code)
SIGNATURE OF GUARANTEE
(If required by Instruction 3)
Signature(s) Guaranteed by
an Eligible Institution:________________________________________________________
(Authorized Signature)
________________________________________________________________________________
(Title)
________________________________________________________________________________
(Name and Firm)
Dated:_________________________________________________________________ , 1997
<PAGE>
<PAGE>
5
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the Exchange Offer, the
undersigned hereby tenders to the Company the aggregate principal amount of
Outstanding Notes indicated above. Subject to, and effective upon, the
acceptance for exchange of the Outstanding Notes tendered hereby, the
undersigned hereby sells, assigns and transfers to, or upon the order of, the
Company all rights, title and interest in and to such Outstanding Notes as are
being tendered hereby.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, sell, assign and transfer the Outstanding
Notes tendered hereby and that the Company will acquire good and unencumbered
title thereto, free and clear of all liens, restrictions, charges and
encumbrances and not subject to any adverse claim when the same are accepted by
the Company. The undersigned hereby further represents that any Exchange Notes
acquired in exchange for Outstanding Notes tendered hereby will have been
acquired in the ordinary course of business of the person receiving such
Exchange Notes, whether or not to such person is the undersigned, that neither
the holder of such Outstanding Notes nor any such other person has an
arrangement or understanding with any person to participate in the distribution
of such Exchange Notes and that neither the holder of such Outstanding Notes nor
any such other person is an "affiliate," as defined in Rule 405 under the
Securities Act of 1933, as amended (the "Securities Act"), of the Company.
The undersigned also acknowledges that this Exchange Offer is being made
in reliance on an interpretation by the staff of the Securities and Exchange
Commission (the "Commission") that the Exchange Notes issued in exchange for the
Outstanding Notes pursuant to the Exchange Offer may be offered for resale,
resold and otherwise transferred by holders thereof (other than any such holder
that is an "affiliate" of the Company within the meaning of Rule 405 under the
Securities Act), without compliance with the registration and prospectus
delivery provisions of the Securities Act, provided that such Exchange Notes are
acquired in the ordinary course of such holders' business and such holders have
no arrangements with any person to participate in the distribution of such
Exchange Notes. If the undersigned is not a broker-dealer, the undersigned
represents that it is not engaged in, and does not intend to engage in, a
distribution of Exchange Notes. If the undersigned is a broker-dealer that will
receive Exchange Notes for its own account in exchange for Outstanding Notes, it
represents that the Outstanding Notes to be exchanged for the Exchange Notes
were acquired by it as a result of market-making activities or other trading
activities and acknowledges that it will deliver a prospectus in connection with
any resale of such Exchange Notes; however, by so acknowledging and by
delivering a prospectus, the undersigned will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act.
The undersigned will, upon request, execute and deliver any additional
documents deemed by the Company to be necessary or desirable to complete the
sale, assignment and transfer of the Outstanding Notes tendered hereby. All
authority conferred or agreed to be conferred in this Letter and every
obligation of the undersigned hereunder shall be binding upon the successors,
assigns, heirs, executors, administrators, trustees in bankruptcy and legal
representatives of the undersigned and shall not be affected by, and shall
survive, the death or incapacity of the undersigned. This tender may be
withdrawn only in accordance with the procedures set forth in "The Exchange
Offer--Withdrawal Rights" section of the Prospectus.
Unless otherwise indicated herein in the box entitled "Special Issuance
Instructions" below, please deliver the Exchange Notes (and, if applicable,
substitute certificates representing Outstanding Notes for any Outstanding Notes
not exchanged) in the name of the undersigned or, in the case of a book-entry
delivery of Outstanding Notes, please credit the account indicated above
maintained at the Book-Entry Transfer Facility. Similarly, unless otherwise
indicated under the box entitled "Special Delivery Instructions" below, please
send the Exchange Notes (and, if applicable, substitute certificates
representing Outstanding Notes for any Outstanding Notes not exchanged) to the
undersigned at the address shown above in the box entitled "Description of
Outstanding Notes."
THE UNDERSIGNED, BY COMPLETING THE BOX ENTITLED "DESCRIPTION OF
OUTSTANDING NOTES" ABOVE AND SIGNING THIS LETTER, WILL BE DEEMED TO HAVE
TENDERED THE OUTSTANDING NOTES AS SET FORTH IN SUCH BOX ABOVE.
<PAGE>
<PAGE>
1
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
TO EXCHANGE 10 1/2% SENIOR NOTES DUE 2004 WHICH HAVE
BEEN REGISTERED UNDER THE
SECURITIES ACT FOR ALL OUTSTANDING 10
1/2% SENIOR NOTES DUE 2004 OF
AMTRAN, INC.
1. DELIVERY OF THIS LETTER AND NOTES; GUARANTEED DELIVERY PROCEDURES.
This letter is to be completed by noteholders either if certificates are
to be forwarded herewith or if tenders are to be made pursuant to the procedures
for delivery by book-entry transfer set forth in "The Exchange Offer--Book-Entry
Transfer" section of the Prospectus. Certificates for all physically tendered
Outstanding Notes, or Book-Entry Confirmation, as the case may be, as well as a
properly completed and duly executed Letter (or manually signed facsimile
hereof) and any other documents required by this Letter, must be received by the
Exchange Agent at the address set forth herein or prior to the Expiration Date,
or the tendering holder must comply with the guaranteed delivery procedures set
forth below. Outstanding Notes tendered hereby must be in denominations of
principal amount of $1,000 and any integral multiple thereof.
Noteholders whose certificates for Outstanding Notes are not immediately
available or who cannot deliver their certificates and all other required
documents to the Exchange Agent on or prior to the Expiration Date, or who
cannot complete the procedure for book-entry transfer on a timely basis, may
tender their Outstanding Notes pursuant to the guaranteed delivery procedures
set forth in "The Exchange Offer--Guaranteed Delivery Procedures" section of the
Prospectus. Pursuant to such procedures, (i) such tender must be made through an
Eligible institution, (ii) prior to the Expiration Date, the Exchange Agent must
receive from such Eligible Institution a properly completed and duly executed
Letter (or a facsimile thereof) and Notice of Guaranteed Delivery, substantially
in the form provided by the Company (by telegram, telex, facsimile transmission,
mail or hand delivery), setting forth the name and address of the holder of
Outstanding Notes and the amount of Outstanding Notes tendered, stating that the
tender is being made thereby and guaranteeing that within five New York Stock
Exchange ("NYSE") trading days after the date of execution of the Notice of
Guaranteed Delivery, the certificates for all physically tendered Outstanding
Notes, or a Book-Entry Confirmation, and any other documents required by the
Letter will be deposited by the Eligible Institution with the Exchange Agent,
and (iii) the certificates for all physically tendered Outstanding Notes, in
proper form for transfer, or Book-Entry Confirmation, as the case may be, and
all other documents required by this Letter, are received by the Exchange Agent
within five NYSE trading days after the date of execution of the Notice of
Guaranteed Delivery.
The method of delivery of this Letter, the Outstanding Notes and all other
required documents is at the election and risk of the tendering holders, but the
delivery will be deemed made only when actually received or confirmed by the
Exchange Agent. If Outstanding Notes are sent by mail, it is suggested that the
mailing be made sufficiently in advance of the Expiration Date to permit
delivery to the Exchange Agent prior to 5:00 p.m., New York City time, on the
Expiration Date.
See "The Exchange Offer" section of the Prospectus.
2. PARTIAL TENDERS (NOT APPLICABLE TO NOTEHOLDERS WHO TENDER BY BOOK-ENTRY
TRANSFER).
If less than all of the Outstanding Notes evidenced by a submitted
certificate are to be tendered, the tendering holder(s) should fill in the
aggregate principal amount of Outstanding Notes to be tendered in the box above
entitled "Description of Outstanding Notes--Principal Amount Tendered." A
reissued certificate representing the balance of nontendered Outstanding Notes
will be sent to such tendering holder, unless otherwise provided in the
appropriate box on this Letter, promptly after the Expiration Date. ALL OF THE
OUTSTANDING NOTES DELIVERED TO THE EXCHANGE AGENT WILL BE DEEMED TO HAVE BEEN
TENDERED UNLESS OTHERWISE INDICATED.
3. SIGNATURES ON THIS LETTER; BOND POWERS AND ENDORSEMENTS; GUARANTEE OF
SIGNATURES.
If this Letter is signed by the registered holder of the Outstanding Notes
tendered hereby, the signature must correspond exactly with the name as written
on the face of the certificate without any change whatsoever.
If any tendered Outstanding Notes are owned of record by two or more joint
owners, all of such owners must sign this Letter.
If any tendered Outstanding Notes are registered in different names on
several certificates, it will be necessary to complete, sign and submit as many
separate copies of this Letter as there are different registrations of
certificates.
When this Letter is signed by the registered holder or holders of the
Outstanding Notes specified herein and tendered hereby, no endorsements of
certificates or separate bond powers are required. If, however, the Exchange
Notes are to be issued, or any untendered Outstanding Notes are to be reissued,
to a person other than the registered holder, then endorsements of any
certificates transmitted hereby or separate bond powers are required. Signatures
on such certificate(s) must be guaranteed by an Eligible Institution.
<PAGE>
<PAGE>
2
If this Letter is signed by a person other than the registered holder or
holders of any certificate(s) specified herein, such certificate(s) must be
endorsed or accompanied by appropriate bond powers, in either case signed
exactly as the name or names of the registered holder or holders appear(s) on
the certificate(s) and signatures on such certificate(s) must be guaranteed by
an Eligible Institution.
If this Letter or any certificates or bond powers are signed by trustees,
executors, administration, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, such
person should so indicate when signing, and, unless waived by the Company,
proper evidence satisfactory to the Company of their authority to so act must be
submitted.
ENDORSEMENTS ON CERTIFICATES FOR OUTSTANDING NOTES OR SIGNATURES ON BOND
POWERS REQUIRED BY THIS INSTRUCTION 3 MUST BE GUARANTEED BY A FIRM WHICH IS A
MEMBER OF A REGISTERED NATIONAL SECURITIES EXCHANGE OR A MEMBER OF THE NATIONAL
ASSOCIATION OF SECURITIES DEALERS, INC. OR BY A COMMERCIAL BANK OR TRUST COMPANY
HAVING AN OFFICER OR CORRESPONDENT IN THE UNITED STATES (AN "ELIGIBLE
INSTITUTION").
SIGNATURES ON THIS LETTER NEED NOT BE GUARANTEED BY AN ELIGIBLE
INSTITUTION, PROVIDED THE OUTSTANDING NOTES ARE TENDERED: (i) BY A REGISTERED
HOLDER OF OUTSTANDING NOTES (WHICH TERM, FOR PURPOSES OF THE EXCHANGE OFFER,
INCLUDES ANY PARTICIPANT IN THE BOOK-ENTRY TRANSFER FACILITY SYSTEM WHOSE NAME
APPEARS ON A SECURITY POSITION LISTING AS THE HOLDER OF SUCH OUTSTANDING NOTES)
WHO HAS NOT COMPLETED THE BOX ENTITLED "SPECIAL ISSUANCE INSTRUCTIONS" OR
"SPECIAL DELIVERY INSTRUCTIONS" ON THIS LETTER, OR (ii) FOR THE ACCOUNT OF AN
ELIGIBLE INSTITUTION.
4. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS.
Tendering holders of Outstanding Notes should indicate in the applicable
box the name and address to which Exchange Notes issued pursuant to the Exchange
Offer and/or substitute certificates evidencing Outstanding Notes not exchanged
are to be issued or sent, if different from the name or address of the person
signing this Letter. In the case of issuance in a different name, the employer
identification or social security number of the person named must also be
indicated. Noteholders tendering Outstanding Notes by book-entry transfer may
request that Outstanding Notes not exchanged be credited to such account
maintained at the Book-Entry Transfer Facility as such noteholder may designate
hereon. If no such instructions are given, such Outstanding Notes not exchanged
will be returned to the name or address of the person signing this Letter.
5. TAX IDENTIFICATION NUMBER.
U.S. Federal income tax law generally requires that a tendering holder
whose Outstanding Notes are accepted for exchange must provide the Company (as
payor) with such holder's correct Taxpayer Identification Number ("TIN") on
Substitute Form W-9 below, which in the case of a tendering holder who is an
individual, is his or her social security number. If the Company is not provided
with the current TIN or an adequate basis for an exemption, such tendering
holder may be subject to a $50 penalty imposed by the Internal Revenue Service.
In addition, delivery to such tendering holder of Exchange Notes may be subject
to backup withholding in an amount equal to 31% of all reportable payments made
after the exchange. If withholding results in an overpayment of taxes, a refund
may be obtained.
Exempt holders of Outstanding Notes (including, among others, all
corporations and certain foreign individuals) are not subject to these backup
withholding and reporting requirements. See the enclosed Guidelines if
Certification of Taxpayer Identification Number on Substitute Form W-9 (the "W-9
Guidelines") for additional instructions.
To prevent backup withholding, each tendering holder of Outstanding Notes
must provide its correct TIN by completing the Substitute Form W-9 set forth
below, certifying that the TIN provided is correct (or that such holder is
awaiting a TIN) and that (i) the holder is exempt from backup withholding, or
(ii) the holder has not been notified by the Internal Revenue Service that such
holder is subject to backup withholding as a result of a failure to report all
interest or dividends or (iii) the Internal Revenue Service has notified the
holder that such holder is no longer subject to backup withholding. If the
tendering holder of Outstanding Notes is a nonresident alien or foreign entity
not subject to backup withholding, such holder must give the Company a completed
Form W-8, Certificate of Foreign Status. These forms may be obtained from the
Exchange Agent. If the Outstanding Notes are in more than one name or are not in
the name of the actual owner, such holder should consult the W-9 Guidelines for
information on which TIN to report. If such holder does not have a TIN, such
holder should consult the W-9 Guidelines for information on which TIN to report.
If such holder does not have a TIN, such holder should consult the W-9
Guidelines for instructions on applying for a TIN, check the box in Part 2 of
the Substitute Form W-9 and write "applied for" in lieu of its TIN. Note:
Checking this box and writing "applied for" on the form means that such holder
has already applied for a TIN or that such holder intends to apply for one in
the near future. If such holder does not provide its TIN to the Company within
60 days, backup withholding will begin and continue until such holder furnishes
its TIN to the Company.
<PAGE>
<PAGE>
3
6. TRANSFER TAXES.
The Company will pay all transfer taxes, if any, applicable to the
transfer of Outstanding Notes to it or its order pursuant to the Exchange Offer.
If however, Exchange Notes and/or substitute Outstanding Notes not exchanged are
to be delivered to, or are to be registered or issued in the name of, any person
other than the registered holder of the Outstanding Notes tendered hereby, or if
tendered Outstanding Notes are registered in the name of any person other than
the person signing this Letter, or if a transfer tax is imposed for any reason
other than the transfer of Outstanding Notes to the Company or its order
pursuant to the Exchange Offer, the amount of any such transfer taxes (whether
imposed on the registered holder or any other persons) will be payable by the
tendering holder. If satisfactory evidence of payment of such taxes or exemption
therefrom is not submitted herewith, the amount of such transfer taxes will be
billed directly to such tendering holder.
EXCEPT AS PROVIDED IN THIS INSTRUCTION 6, IT WILL NOT BE NECESSARY FOR
TRANSFER TAX STAMPS TO BE AFFIXED TO THE OUTSTANDING NOTES SPECIFIED IN THIS
LETTER.
7. WAIVER OF CONDITIONS.
The Company reserves the absolute right to waive satisfaction of any or
all conditions enumerated in the Prospectus.
8. NO CONDITIONAL TENDERS.
No alternative, conditional, irregular or contingent tenders will be
accepted. All tendering holders of Outstanding Notes, by execution of this
Letter, shall waive any right to receive notice of the acceptance of their
Outstanding Notes for exchange.
9. MUTILATED, LOST, STOLEN OR DESTROYED OUTSTANDING NOTES.
Any holder whose Outstanding Notes have been mutilated, lost, stolen or
destroyed should contact the Exchange Agent at the address indicated above for
further instructions.
10. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES.
Questions relating to the procedure for tendering, as well as requests for
additional copies of the Prospectus and this Letter, may be directed to the
Exchange Agent, at the address and telephone number indicated above.
<PAGE>
<PAGE>
TO BE COMPLETED BY ALL TENDERING HOLDERS
(SEE INSTRUCTION 5)
PAYOR'S NAME: [ ]
<TABLE>
<S> <C> <C>
SUBSTITUTE PART 1--PLEASE PROVIDE YOUR TIN TIN:___________________________
FORM W-9 IN THE BOX AT RIGHT AND SOCIAL SECURITY NUMBER OR
DEPARTMENT OF THE TREASURY CERTIFY BY SIGNING AND DATING EMPLOYER IDENTIFICATION NUMBER
INTERNAL REVENUE SERVICE BELOW
PAYOR'S REQUEST FOR PART 2--TIN APPLIED FOR |_|
TAXPAYER
IDENTIFICATION NUMBER
("TIN") AND
CERTIFICATION
CERTIFICATION: UNDER THE PENALTIES OF PERJURY, I CERTIFY
THAT:
(1) the number shown on this form is my
correct Taxpayer Identification Number
(or I am waiting for a number to be
issued to me).
(2) I am not subject to backup withholding
either because: (a) I am exempt from
backup withholding, or (b) I have not
been notified by the Internal Revenue
Service (the "IRS") that I am subject
to backup withholding as a result of a
failure to report all interest or
dividends, or (c) the IRS has notified
me that I am no longer subject to
backup withholding, and
(3) any other information provided on this form is true and correct.
SIGNATURE_______________________________ DATE_________________
</TABLE>
You must cross out item (2) of the above certification if you have been notified
by the IRS that you are subject to backup withholding because of underreporting
of interest or dividends on your tax return and you have not been notified by
the IRS that you are no longer subject to backup withholding.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX
IN PART 2 OF SUBSTITUTE FORM W-9
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number has
not been issued to me, and either (a) I have mailed or delivered an application
to receive a taxpayer identification number to the appropriate Internal Revenue
Service Center or Social Security Administration Office or (b) I intend to mail
or deliver an application in the near future. I understand that if I do not
provide a taxpayer identification number by the time of the exchange, 31 percent
of all reportable payments made to me thereafter will be withheld until I
provide a number.
______________________________________ ______________________________________
SIGNATURE DATE
<PAGE>
<PAGE>
EXHIBIT 99.2
NOTICE OF GUARANTEED DELIVERY FOR
AMTRAN, INC.
This form or one substantially equivalent hereto must be used to accept the
Exchange Offer of Amtran, Inc. (the "Company") made pursuant to the Prospectus,
dated , 1997 (the "Prospectus"), if certificates for
Outstanding Notes of the Company are not immediately available or if the
procedure for book-entry transfer cannot be completed on a timely basis or time
will not permit all required documents to reach the Company prior to midnight,
New York City time, on the Expiration Date of the Exchange Offer. Such form may
be delivered or transmitted by telegram, telex, facsimile transmission, mail or
hand delivery to First Security Bank, N.A. (the "Exchange Agent") as set forth
below. In addition, in order to utilize the guaranteed delivery procedure to
tender Outstanding Notes pursuant to the Exchange Offer, a completed, signed and
dated Letter of Transmittal (or facsimile thereof) must also be received by the
Exchange Agent prior to midnight, New York City time, on the Expiration Date.
Capitalized terms not defined herein are defined in the Prospectus.
Delivery To: First Security Bank, N.A., Exchange Agent
<TABLE>
<CAPTION>
By Mail or Overnight Courier By Hand Facsimile Transmission Number
<S> <C> <C>
First Security Bank, N.A. First Security Bank, N.A. (801) 246-5053
79 South Main Street Attention: Corporate Trust (FOR ELIGIBLE
Salt Lake City, UT 84111 Services INSTITUTIONS ONLY)
Attention: Corporate Trust In Care Of:
Services IBJ Schroder Bank & Trust Confirm by Telephone
Company
(IF BY MAIL, REGISTERED OR One State Street Plaza (801) 246-5822
CERTIFIED MAIL RECOMMENDED) New York, NY 10004
</TABLE>
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE, OR
TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE, WILL
NOT CONSTITUTE A VALID DELIVERY.
Ladies and Gentlemen:
Upon the terms and conditions set forth in the Prospectus and the
accompanying Letter of Transmittal, the undersigned hereby tenders to the
Company the principal amount of Outstanding Notes set forth below, pursuant to
the guaranteed delivery procedure described in "The Exchange Offer--Guaranteed
Delivery Procedures" section of the Prospectus.
Principal Amount of Outstanding Notes Tendered*
$_____________________________________
Certificate Nos. (if available):
If Outstanding Notes will be
______________________________________ delivered by book-entry transfer to
Total Principal Amount Represented by The Depository Trust Company provide
Outstanding Notes Certificate(s): account number.
$_____________________________________ Account Number________________________
- --------
* Must be in denominations of principal amount of $1,000 and any integral
multiple thereof.
<PAGE>
<PAGE>
EXHIBIT 99.3
AMTRAN, INC.
OFFER FOR ALL OUTSTANDING
10 1/2% SENIOR NOTES DUE 2004
IN EXCHANGE FOR
10 1/2% SENIOR EXCHANGE NOTES DUE 2004
TO: BROKERS, DEALERS, COMMERCIAL BANKS,
TRUST COMPANIES AND OTHER NOMINEES:
Amtran, Inc. (the "Company") is offering, upon and subject to the terms and
conditions set forth in the Prospectus, dated , 1997 (the "Prospectus"),
and the enclosed Letter of Transmittal (the "Letter of Transmittal"), to
exchange (the "Exchange Offer") its 10 1/2% Senior Notes due 2004 that have been
Registered under the Securities Act, for its outstanding 10 1/2% Senior Notes
Due 2004 (the "Outstanding Notes"). The Exchange Offer is being made in order
to satisfy certain obligations of the Company contained in the Registration
Rights Agreement dated July 24, 1997, by and among the Company and the other
signatories thereto.
We are requesting that you contact your clients for whom you hold
Outstanding Notes regarding the Exchange Offer. For your information and for
forwarding to your clients for whom you hold Outstanding Notes registered in
your name or in the name of your nominee, or who hold Outstanding Notes
registered in their own names, we are enclosing the following documents:
1. Prospectus dated , 1997;
2. The Letter of Transmittal for your use and for the information of your
clients;
3. A Notice of Guaranteed Delivery to be used to accept the Exchange Offer
if certificates for Outstanding Notes are not immediately available or time will
not permit all required documents to reach the Exchange Agent prior to the
Expiration Date (as defined below) or if the procedure for book-entry transfer
cannot be completed on a timely basis;
4. A form of letter which may be sent to your clients for whose accounts
you hold Outstanding Notes registered in your name or the name of your nominee,
with space provided for obtaining such clients' instructions with regard to the
Exchange Offer;
5. Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9; and
6. Return envelopes addressed to First Security Bank, N.A., the Exchange
Agent for the Outstanding Notes.
YOUR PROMPT ACTION IS REQUESTED, THE EXCHANGE OFFER WILL EXPIRE AT
MIDNIGHT., NEW YORK CITY TIME, ON, , 1997 UNLESS EXTENDED
BY THE COMPANY (THE "EXPIRATION DATE"). OUTSTANDING NOTES TENDERED PURSUANT TO
THE EXCHANGE OFFER MAY BE WITHDRAWN AT ANY TIME BEFORE THE EXPIRATION DATE.
To participate in the Exchange Offer, a duly executed and properly
completed Letter of Transmittal (or facsimile thereof), with any required
signature guarantees and any other required documents, should be sent to the
Exchange Agent and certificates representing the Outstanding Notes should be
delivered to the Exchange Agent, all in accordance with the instructions set
forth in the Letter of Transmittal and the Prospectus.
If holders of Outstanding Notes wish to tender, but it is impracticable for
them to forward their certificates for Outstanding Notes prior to the expiration
of the Exchange Offer or to comply with the book-entry transfer procedures on a
timely basis, a tender may be effected by following the guaranteed delivery
procedures described in the Prospectus under "The Exchange Offer--Guaranteed
Delivery Procedures".
The Company will, upon request, reimburse brokers, dealers, commercial
banks and trust companies for reasonable and necessary costs and expenses
incurred by them in forwarding the Prospectus and the related documents for the
beneficial owners of Outstanding Notes held by them as nominee or in a fiduciary
capacity. The Company will pay or cause to be paid all stock transfer taxes
applicable to the exchange of Outstanding Notes pursuant to the Exchange Offer,
except as set forth in Instruction 6 of the Letter of Transmittal.
<PAGE>
<PAGE>
2
Any inquiries you may have with respect to the Exchange Offer, or requests
for additional copies of the enclosed materials, should be directed to First
Security Bank, N.A., the Exchange Agent for the Outstanding Notes, at its
address and telephone number set forth on the front of the Letter of Transmittal
Very truly yours,
AMTRAN, INC.
NOTHING HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR ANY
PERSON AS AN AGENT OF THE COMPANY OR THE EXCHANGE AGENT, OR AUTHORIZE YOU OR ANY
OTHER PERSON TO USE ANY DOCUMENT OR MAKE ANY STATEMENTS ON BEHALF OF EITHER OF
THEM WITH RESPECT TO THE EXCHANGE OFFER, EXCEPT FOR STATEMENTS EXPRESSLY MADE IN
THE PROSPECTUS OR THE LETTER OF TRANSMITTAL.
Enclosures
<PAGE>
<PAGE>
EXHIBIT 99.4
AMTRAN, INC.
OFFER FOR ALL OUTSTANDING
10 1/2% SENIOR NOTES DUE 2004
IN EXCHANGE FOR
10 1/2% SENIOR EXCHANGE NOTES DUE 2004
TO OUR CLIENTS:
Enclosed for your consideration is a Prospectus, dated ,
1997 (the "Prospectus"), and the related Letter of Transmittal (the "Letter of
Transmittal"), relating to the Offer (the "Exchange Offer") of Amtran, Inc. (the
"Company") to exchange its 10 1/2% Senior Notes Due 2004 that have been
Registered under the Securities Act (the "Exchange Notes") for its outstanding
10 1/2% Senior Notes Due 2004 (the "Outstanding Notes"), upon the terms and
subject to the conditions described in the Prospectus and the Letter of
Transmittal. The Exchange Offer is being made in order to satisfy certain
obligations of the Company contained in the Registration Rights Agreement dated
July 24, 1997, by and among the Company and the other signatories thereto.
This material is being forwarded to you as the beneficial owner of the
Outstanding Notes carried by us in your account but not registered in your name.
A TENDER OF SUCH OUTSTANDING NOTES MAY ONLY BE MADE BY US AS THE HOLDER OF
RECORD AND PURSUANT TO YOUR INSTRUCTIONS.
Accordingly, we request instructions as to whether you wish us to tender on
your behalf the Outstanding Notes held by us for your account, pursuant to the
terms and conditions set forth in the enclosed Prospectus and Letter of
Transmittal.
Your instructions should be forwarded to us as promptly as possible in
order to permit us to tender the Outstanding Notes on your behalf in accordance
with the provisions of the Exchange Offer. The Exchange Offer will expire at
midnight, New York City time, on , 1997, unless extended by the
Company. Any Outstanding Notes tendered pursuant to the Exchange Offer may be
withdrawn at any time before the Expiration Date.
Your attention is directed to the following:
1. The Exchange Offer is for any and all Outstanding Notes.
2. The Exchange Offer is subject to certain conditions set forth in the
Prospectus in the section captioned "The Exchange Offer--Certain Conditions to
the Exchange Offer".
3. Any transfer taxes incident to the transfer of Outstanding Notes from
the holder to the Company will be paid by the Company, except as otherwise
provided in the Instructions in the Letter of Transmittal.
4. The Exchange Offer expires at midnight, New York City time, on ,
1997, unless extended by the Company.
If you wish to have us tender your Outstanding Notes, please so instruct us
by completing, executing and returning to us the instruction form on the back of
this letter. THE LETTER OF TRANSMITTAL IS FURNISHED TO YOU FOR INFORMATION ONLY
AND MAY NOT BE USED DIRECTLY BY YOU TO TENDER OUTSTANDING NOTES.
<PAGE>
<PAGE>
INSTRUCTIONS WITH RESPECT TO
THE EXCHANGE OFFER
The undersigned acknowledge(s) receipt of your letter and the enclosed
material referred to therein relating to the Exchange Offer made by Amtran, Inc.
with respect to its Outstanding Notes.
This will instruct you to tender the Outstanding Notes held by you for the
account of the undersigned, upon and subject to the terms and conditions set
forth in the Prospectus and the related Letter of Transmittal.
Please tender the Outstanding Notes held by you for my account as indicated
below:
AGGREGATE PRINCIPAL AMOUNT OF
OUTSTANDING NOTES
10 1/2% Senior Notes Due 2004........... _____________________________________
[ ] Please do not tender any Outstanding
Notes held by you for my account.
Dated:____________________________. 1997 _____________________________________
_____________________________________
Signature(s)
_____________________________________
_____________________________________
_____________________________________
Please print name(s) here
_____________________________________
_____________________________________
Address(es)
_____________________________________
_____________________________________
Area Code and Telephone Number
_____________________________________
Tax Identification or
Social Security No(s).
None of the Outstanding Notes held by us for your account will be tendered
unless we receive written instructions from you to do so. Unless a specific
contrary instruction is given in the space provided, your signature(s) hereon
shall constitute an instruction to us to tender all the Outstanding Notes held
by us for your account.
<PAGE>
