As filed with the Securities and Exchange Commission on August 1, 2000
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
---------------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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AMTRAN, INC.
(Exact names of registrant as specified in its charter)
Indiana
(State or other jurisdiction of
incorporation or organization)
4522
(Primary Standard Industrial
Classification Code Number)
35-1617970
(I.R.S. Employer
Identification Number)
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
American Trans Air, 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 Eighth Avenue
New York, NY 10019
(212) 474-1000
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Approximate date of commencement of proposed sale of the securities to the
public: As soon as practicable after this Registration Statement becomes
effective.
If the only securities being registered on this form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box. o
If any of the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. |X|
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. o
If this form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. o
If delivery of this prospectus is expected to be made pursuant to Rule 434,
please check the following box. o
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
=========================================================================================================
Proposed
Maximum Proposed Amount of
Title of Each Class of Amount to be Offering Price Maximum Aggregate Registration
Securities to be Registered Registered Per Note Offering Price Fee
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
10 1/2% Senior Notes due 2004 $29,000,000 principal 100% 100% (1)
amount at maturity
=========================================================================================================
</TABLE>
(1) On February 4, 2000, the Issuer registered $75,000,000 principal amount at
maturity of the Senior Notes pursuant to a registration statement on Form
S-4 (No. 333-95371). The securities registered hereunder are being carried
forward from such registration statement. In connection with the
registration statement on Form S-4, an aggregate registration fee of
$19,800 was paid, $7,656 of which was attributable to the Senior Notes
registered hereunder. Accordingly, pursuant to Rule 429, no additional fee
need be paid because the previously paid fee of $7,656 is equal to the
registration fee of $7,656 attributable to the Senior Notes registered
hereunder.
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>
PROSPECTUS
$29,000,000
Principal Amount at Maturity
Amtran, Inc.
10 1/2% Senior Notes due 2004
---------------------------
This prospectus relates to the sale from time to time (the
"Offering") for the account of a certain holder (the "Selling
drrrSecurityholder") of 10 1/2% Senior Notes due 2004 (the "Notes") of Amtran,
Inc. ("Amtran" or the "Company") in an aggregate principal amount at
maturity of up to $29,000,000. The Notes were issued in a private placement
on December 21, 1999 (the "Private Placement"). Amtran will not receive any
of the proceeds from the sale of any of the Notes by the Selling
Securityholder.
On July 24, 1997, the Company issued $100,000,000 aggregate
principal amount of 10 1/2% Senior Notes due 2004 (the "Original Notes")
under an Indenture dated July 24, 1997 as supplemented by the first
Supplemental Indenture, dated December 21, 1999 (the "Indenture"). On
December 21, 1999 in the Private Placement, the Company issued $75,000,000
aggregate principal amount of 10 1/2% Senior Notes due 2004 (the "New
Notes") as additional debt securities of the Company under the Indenture.
Of those $75,000,000 aggregate principal amount of New Notes, up to
$29,000,000 aggregate principal amount of New Notes (the "Notes") are being
offered hereunder. The Notes, the New Notes and the Original Notes will be
treated as a single series under the Indenture and the Notes and the New
Notes will trade freely with all the Original Notes.
The Notes will be unconditionally guaranteed (the "Note
Guarantees") by American Trans Air, Inc., and each of the other
subsidiaries of the Company (the "Guarantors"). The Notes and the Note
Guarantees 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. The Notes will also be
effectively subordinated to all existing and future secured indebtedness of
the Company and the Guarantors to the extent of such security. The Notes
will mature on August 1, 2004. The Company will pay interest on the Notes
on February 1 and August 1.
The Company may redeem the Notes 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, until August 1, 2000, the Company may redeem up to 35% of the
aggregate principal amount of the Notes with the net proceeds of one or
more sales of common stock at 110.50% of their principal amount, plus
accrued interest. If the Company undergoes a change of control, it may be
required to offer to purchase the Notes from holders.
The prospectus includes additional information on the terms of
the Notes, including redemption and repurchase prices, covenants and events
of default.
Investing in the New Notes involves a high degree of risk. See
"Risk Factors" beginning on page 6.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
---------------------------
The Notes may be sold from time to time to purchasers directly by the
Selling Securityholder. Alternatively, the Selling Securityholder may from
time to time offer the Notes through underwriters, dealers or agents, on
terms to be determined at the time of the sale. To the extent required, the
specific Notes to be sold by the Selling Securityholder, the respective
purchase price and public offering price, the names of any such agent,
dealer or underwriter and any applicable commission or discount with
respect to a particular offer will be set forth in an accompanying
Prospectus Supplement. The aggregate proceeds to the Selling Securityholder
from the sale of the Notes will be the purchase price of the Notes sold
less the aggregate agents' or dealers' commissions and underwriters'
discounts, if any. See "Plan of Distribution."
The Selling Securityholder and any agents, dealers or
underwriters that participate with the Selling Securityholder in the
distribution of the Notes may be deemed to be "underwriters" within the
meaning of the Securities Act (as defined herein), and any commissions
received by them and any profit on the resale of the Securities purchased
by them may be deemed to be underwriting commissions or discounts under the
Securities Act.
The date of this prospectus is [ ], 2000.
<PAGE>
TABLE OF CONTENTS
Page
Where You Can Find More Information......................... 3
Incorporation of Certain Documents by Reference............. 3
Forward-Looking Statements.................................. 4
The Company................................................. 5
Use of Proceeds............................................. 6
Risk Factors................................................ 6
Description of the Notes.................................... 15
Book-Entry; Delivery and Form............................... 49
Certain U.S. Federal Income Tax Considerations.............. 50
Selling Securityholder...................................... 53
Plan of Distribution........................................ 53
Legal Matters............................................... 54
Experts..................................................... 54
Where to Find More Information.............................. 54
--
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
Amtran is subject to the informational requirements of the Securities
Exchange Act of 1934 and, therefore, must file periodic reports, proxy
statements and other information with the Commission. In addition, Amtran
has agreed to file with the Commission the annual reports and the
information, documents and other reports otherwise required by Section 13
of the Exchange Act. All such information is available to the public over
the Internet at the SEC's web site at http://www.sec.gov and may be
inspected and copied at the public reference facilities:
Public Reference Room New York Regional Office Chicago Regional Office
450 Fifth Street, N.W. 7 World Trade Center Citicorp Center
Judiciary Plaza Suite 1300 500 West Madison Street
Washington, D.C. 20549 New York, NY 10048 Suite 1400
Chicago, IL 60661-2511
Copies of these documents 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-3 filed by ATA 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. Reference is hereby made to the
registration statement and its exhibits and schedules for further
information with respect to ATA and the securities offered through this
registration statement. Statements contained in this prospectus 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.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The SEC allows us to "incorporate by reference" the information we
file with them into this prospectus, which means that:
o incorporated documents are considered part of this prospectus;
o we can disclose important business and financial information
about us, that is not included in or delivered with this
prospectus, to you by referring you to those other documents; and
o later information filed with the SEC will update and supersede
this information.
We incorporate by reference into this prospectus the documents listed
below, as amended and supplemented, and all documents filed by us with the
SEC under Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act
of 1934 after the date of this prospectus and prior to the termination of
the Offering:
o The Amtran, Inc. Annual Report on Form 10-K for the fiscal year
ended December 31, 1999;
o The Amtran, Inc. Quarterly Report on Form 10-Q for the period
ended March 31, 2000; and
o The Amtran, Inc. Definitive Proxy Statement, dated April 5, 2000.
You can obtain any of the filings incorporated by reference into
this document through us or from the SEC through the SEC's web site or at
the addresses listed above. Documents incorporated by reference into this
prospectus, except for any exhibits to those documents that are
<PAGE>
not expressly incorporated by reference into those documents, are available
from us without charge by requesting them in writing or by telephone at the
following address and telephone number:
American Trans Air, Inc.
7337 West Washington Street
Indianapolis, Indiana 46231
Attention: Kenneth K. Wolff, Chief Financial Officer
Telephone: (317) 247-4000
If you request any incorporated documents from us, we will mail them
to you by first-class mail, or by another equally prompt means, within one
business day after we receive your request.
Unless the context requires otherwise, all references in this document
to "This Prospectus" include all documents incorporated by reference into
this prospectus.
FORWARD-LOOKING STATEMENTS
This prospectus includes and incorporates by reference forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995. These statements relate to analyses and other information which are based
on forecasts of future results and estimates of amounts not yet determinable.
These statements also relate to our future prospects, developments and business
strategies.
These forward-looking statements are identifiable by their use of terms and
phrases such as "anticipate," "believe," "could," "estimate," "expect,"
"intend," "may," "plan," "predict," "project," "will" and similar terms and
phrases, including references to assumptions. These statements are contained in
sections entitled "Summary," "Risk Factors" and other sections of this
prospectus and in the documents incorporated by reference in this prospectus.
Such forward-looking statements involve known and unknown risks,
uncertainties and other factors that may cause actual results to be
materially different. Such factors include, but are not limited to, the
following:
o economic conditions;
o labor costs;
o aviation fuel costs;
o competitive pressures on pricing;
o weather conditions;
o governmental legislation;
o consumer perceptions of our products;
o demand for air transportation in the markets in which we operate;
o other operational matters discussed in this offering memorandum; and
o other risks and uncertainties listed from time to time in reports we
periodically file with the SEC.
<PAGE>
We do not undertake to update our forward-looking statements to
reflect future events or circumstances.
Amtran is an Indiana corporation. Its executive offices are located at
7337 West Washington Street, Indianapolis, Indiana 46231, and the telephone
number is (317) 247-4000. Amtran's common stock is traded through the
facilities of the Nasdaq Stock Market under the symbol "AMTR."
"Amtran" refers to Amtran, Inc.; "ATA" refers to American Trans Air,
Inc. and "we" or "the Company" refers to Amtran, Inc. and its subsidiaries,
including ATA.
THE COMPANY
Amtran owns ATA, the eleventh largest passenger airline in the United
States (based on 1999 revenues) and a leading provider of airline services in
selected market segments. We are also the largest commercial passenger charter
airline in the United States and the largest charter provider of passenger
airline services to the U.S. military, in each case based on revenues. For the
year ended December 31, 1999, our revenues consisted of 55.7% scheduled service,
23.5% commercial charter service and 11.2% military charter service, with the
balance derived from related travel services.
We actively consider and enter into discussions regarding possible
business combinations with air carriers and others, and plan to continue to do
so. See "Risk Factors."
Scheduled Service
Amtran provides scheduled service through ATA to selected destinations
primarily from its gateways at Chicago-Midway and Indianapolis and also
provides transpacific services between the western United States and
Hawaii. In the second quarter of 1999, Amtran added scheduled service
between Chicago-Midway and Philadelphia. Amtran focuses on routes where it
believes it can be a leading provider of nonstop service and targets
leisure and value-oriented business travelers.
Commercial Charter Service
Amtran is the largest commercial passenger charter airline in the
United States and provides services throughout the world, primarily to U.S.
and European tour operators. Amtran seeks to maximize the profitability of
these operations by leveraging its leading market position, diverse
aircraft fleet and worldwide operating capability. Amtran believes its
commercial charter series are a predictable source of revenues and
operating profits in part because its commercial charter contracts require
tour operators to assume capacity, yield and fuel price risk, and also
because of Amtran's ability to re-deploy assets into favorable markets.
Amtran's commercial charter services are marketed through a network of
domestic sales offices along with a London office.
Military/Government Charter Service
Amtran has provided passenger airline services to the U.S. military
since 1983 and is currently the largest commercial airline provider of
these services. Amtran believes that because these operations are generally
less seasonal than leisure travel, they have tended to have a stabilizing
impact on Amtran's operating margins. The U.S. government awards one-year
contracts for its military charter business and pre-negotiates contract
prices for each type of aircraft that a carrier makes available. Amtran
believes that its fleet of aircraft is well suited to the needs of the
military.
Aircraft Deliveries
In January 2000, our commuter airline subsidiary, Chicago Express
Airlines, Inc. entered into an agreement to purchase nine SAAB 340B
aircraft, engines and spare parts for approximately $30 million. During the
first quarter of 2000, we took delivery of three of these aircraft and
completed the sale/leaseback of two of these aircraft. The remaining
aircraft will be placed into service throughout 2000. The current fleet of
Jetstream J31s will be returned to the lessor.
<PAGE>
USE OF PROCEEDS
We will receive no cash proceeds from the Offering of the Notes
pursuant to this Prospectus.
The net proceeds from the December 21, 1999 private placement were
approximately $73.0 million. These proceeds were used by the Company for
general corporate purposes, including to fund working capital requirements
and fleet acquisitions and improvements.
RISK FACTORS
You should carefully read this entire prospectus and the documents
incorporated by reference in this prospectus before investing in the Notes.
Among the factors that may adversely affect an investment in the Notes are
the following:
Risk Factors Relating to the Company
Our high proportion of debt compared to our equity capital may impair our
flexibility.
We have a higher proportion of debt compared to our equity capital
than some of our principal competitors. We need substantial cash resources
to meet scheduled debt and lease payments and to finance day-to-day
operations. As a result, we may be less able than some of our competitors
to withstand a prolonged recession in the airline industry or respond to
changing economic and competitive conditions. We may be restricted in our
ability to exploit new business opportunities. In addition, our ability to
obtain additional financing in the future for working capital, capital
expenditures, acquisitions or other purposes may be impaired.
As of March 31, 2000, we had:
o $125.2 million of cash, cash equivalents and short-term investments;
and
o $359.0 million of indebtedness outstanding (approximately $52.2 million
of which was secured).
We had interest expense of approximately $7.7 million for the three
months ended March 31, 2000 and $5.1 million for the three months ended
March 31, 1999. This resulted in an EBITDA to interest expense ratio of
approximately 10.7 times for the three months ended March 31, 1999 and 4.7
times for the year ended December 31, 1999. The ratio of EBITDAR to the sum
of interest (net of capitalized interest) plus aircraft rentals was 3.4 for
the three months ended March 31, 1999 and 2.2 for the three months ended
March 31, 2000.
Our ability to satisfy our obligations will be dependent upon our
future performance, which is subject to general economic conditions and to
financial, business and other factors, including factors beyond our
control. Our operating results and cash flow could be adversely affected by
many factors, including price competition, increases in fuel costs, a
downturn in general economic conditions and adverse regulatory changes.
We generally operate with a working capital deficit, and we will
require additional financing to meet our obligations.
Although we, like most other airlines, generally operate with a
working capital deficit, we have met our obligations as they have become
due. In order to meet short-term cash needs, ATA maintains bank credit
facilities. At March 31, 2000, our current assets were $238.7 million, and
our current liabilities were $264.2 million.
<PAGE>
In addition, we require significant levels of capital investment for
aircraft, engine and airframe maintenance and acquisition to maintain our
competitive position and to expand our operations. For the year ended
December 31, 2000, we expect that:
o capital expenditures for scheduled maintenance will total
approximately $111.6 million;
o capital expenditures for acquisitions of additional aircraft,
deposits on aircraft scheduled for future delivery and
construction of certain facilities at the Chicago-Midway Airport
will total approximately $108.4 million; and
o additional capital expenditures will total approximately $40.3 million.
We also may decide to refinance our long-term debt at or prior to its
maturity.
We may seek to supplement our current sources of financing with other
sources of long-term financing, including obtaining vendor financing,
entering into sale-leaseback transactions and making public and private
debt offerings. We may also seek additional equity financing. We cannot
assure you that any such financing would be available on satisfactory
terms. If we are unable to obtain sufficient financing for capital
expenditures and to refinance maturing debt, our operations and ability to
pay debt service may be adversely affected.
Our earnings have been volatile.
For the year ended December 31, 1996, we had a net loss of $26.7
million. For the year ended December 31, 1997, we had net income of $1.6
million, for the year ended December 31, 1998, we had net income of $40.1
million and for the year ended December 31, 1999, we had net income of
$47.3 million. Although we recorded net income in 1997, 1998 and 1999, we
cannot assure you that this profitability will continue. Moreover, because
of the cyclicality of the airline industry, our results of operations may
continue to be volatile.
We may pursue strategic alternatives that result in a change of control and
increased leverage, and we may not be able to satisfy all of our obligations
upon the occurrence of a change of control.
We actively consider and enter into discussions regarding possible
business with air carriers and others, and plan to continue to do so. It is
possible that we will enter into a transaction that will result in a change
of control of Amtran. If we enter into such a transaction, it could result
in an increase in our indebtedness. In addition, upon a change of control
of Amtran, all borrowings outstanding under the bank credit facilities
maintained by ATA, which are guaranteed by Amtran, will become due, and in
the event a change of control is acompanied by a ratings downgrade, we will
be required to offer to purchase all amounts due under the 10 1/2% senior
notes due 2004 and the 9 5/8% senior notes due 2005 issued by Amtran at
101% of par plus accrued interest. We cannot assure you that we would be
able to satisfy all of our obligations under the bank credit facilities and
the notes in these circumstances. The failure to satisfy our obligations
would materially adversely affect our business, operations and financial
results as well as the market price of the Notes.
Our existing financing agreements and operating leases contain restrictive
covenants that may limit our flexibility and if we fail to comply with
these restrictions, our debt obligations could be accelerated and our
operating leases could be canceled.
Our existing debt financing agreements and our operating leases
relating to some of our aircraft contain restrictive covenants that impose
significant operating and financial restrictions on us. For example, the
bank credit facilities maintained by ATA and the indenture relating to our
10 1/2% senior notes due 2004 prohibit or restrict our ability to:
o incur additional indebtedness;
o create material liens on our assets;
<PAGE>
o sell assets or engage in mergers or consolidations;
o redeem or repurchase outstanding debt;
o make specified investments;
o pay cash dividends; and
o engage in other significant transactions.
The indenture relating to our 9 5/8% senior notes due 2005 contains similar
restrictions. In addition, our financing agreements and our operating
leases require us to maintain compliance with specified financial ratios
and other financial and operating tests.
These restrictions and requirements may limit our financial and
operating flexibility. In addition, if we fail to comply with these
restrictions or to satisfy these requirements, our obligations under our
debt and operating leases may be accelerated. We cannot assure you that we
would be able to satisfy all of these obligations upon acceleration. The
failure to satisfy these obligations would materially adversely affect our
business, operations and financial results as well as the market price of
the Notes.
Compliance with Department of Transportation regulations could reduce our
liquidity.
Under current Department of Transportation regulations regarding
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 in escrow by the tour operator or protected by
a surety bond satisfying certain prescribed standards. Currently, we
provide a third-party bond that is unlimited in amount to satisfy our
obligations under these regulations. Under the terms of our bonding
arrangements, the issuer of the bond has the right to terminate the bond at
any time on 30 days' notice. We provide a $1.5 million letter of credit to
secure our potential obligations to the issuer of the bond. If the bond
were to be materially limited or canceled, we, like all other U.S. charter
airlines, would be required to escrow funds to comply with the Department
of Transportation regulations. Compliance with these regulations would
reduce our liquidity and require us to fund higher levels of working
capital ranging up to $16.9 million based on 1998' s peak pre-paid bookings
and up to $32.4 million based on peak pre-paid bookings for 1999.
We may incur substantial losses in the event of an aircraft accident.
We may incur substantial losses in the event of an aircraft accident.
These losses may include the repair or replacement of a damaged aircraft,
and the consequent temporary or permanent loss of the aircraft from
service, as well as claims of injured passengers and other persons.
We are required by the Department of Transportation to carry liability
insurance on each of our aircraft. We currently maintain public liability
insurance in the amount of $1.5 billion. Although we believe our insurance
coverage is adequate, we cannot assure you that the amount of our insurance
coverage will not be changed or that we will not be forced to bear
substantial losses from accidents. Substantial claims resulting from an
accident could have a material adverse effect on our business, operations
and financial results and could seriously inhibit passenger acceptance of
our services.
Our customers may cancel or default on their contracts with us.
Customers who have contracted with us may cancel or default on their
contracts, and we may not be able to obtain other business to cover the
resulting loss in revenues. If customers with large contracts cancel or
default and we are not able to obtain other business, our financial
position could be materially adversely impacted.
<PAGE>
Our largest customer during each of the last three years was the U.S.
military, which accounted for approximately 11.2% of our total operating
revenues in 1996, 16.8% of our total operating revenues in 1997, 13.3% of
our total operating revenues in 1998 and 11.2% of operating revenues in
1999.
In 1999, our five largest non-military customers accounted for
approximately 12.5% of total operating revenues, and our ten largest
non-military customers accounted for approximately 14.7% of total operating
revenues. No single non-military customer accounted for more than 10% of
total operating revenues during this period.
Our airline business is significantly affected by seasonal factors, and our
results of operations for any one quarter are not necessarily indicative of
our annual results of operations.
Our airline businesses are significantly affected by seasonal factors.
Historically, we have experienced reduced demand during the fourth quarter
as demand for leisure airline services during this period is lower relative
to other times of the year. Our results of operations for any one quarter
are not necessarily indicative of our annual results of operations.
In 1998 and 1999, our results for the first three quarters were
significantly stronger than we have experienced in any comparable first
three quarters of any prior year. Also in 1998 and 1999, we experienced our
only profitable fourth quarters since becoming a public company in 1993. We
cannot assure you that the level of profitability achieved in 1998 and 1999
will be maintained in subsequent years.
Many of our employees are represented by unions, and a prolonged dispute with
our employees could have an adverse impact on our operations.
Our flight attendants are represented by the Association of Flight
Attendants, our cockpit crews are represented by the Air Line Pilots
Association and our dispatchers are represented by the Transport Workers
Union. A prolonged dispute with our employees who are represented by any of
these unions, or any sizable number of our employees, could have an adverse
impact on our operations.
Our current collective bargaining agreement with the Association of
Flight Attendants became subject to amendment, but did not expire, in
December 1998. During the first quarter of 2000, we completed renegotiation
of this contract, and the new contract was ratified. Our current collective
bargaining agreement with the Air Line Pilots Association will be subject
to amendment, but will not expire, in September 2000.
Our revenues could be adversely impacted by our relationship with travel agents
and tour operators.
Our revenues could be adversely impacted if travel agents and tour
operators elect to favor other airlines or to disfavor us. Our relationship
with travel agents and tour operators may be affected by:
o the size of override commissions offered by other airlines;
o changes in our arrangements with other distributors of airline
tickets; and
o the introduction of new methods of selling tickets.
In 1999, approximately 65% of our revenues were derived from tickets
sold by travel agents or tour operators, and, in 1998, approximately 68% of
our revenues were derived from tickets sold by travel agents or tour
operators. Although we will continue to strive to offer competitive
products to travel agencies and tour operators, we cannot assure you that
we will be able to maintain favorable relationships with these ticket
sellers.
<PAGE>
Risk Factors Relating to the Airline Industry
Because the airline industry is characterized by low gross profit margins and
high fixed costs, a minor shortfall from expected revenue could have a
significant impact on earnings.
The airline industry as a whole and scheduled service in particular
are 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 significant
impact on earnings.
Our products and services face varying degrees of competition.
Competition for Scheduled Services. In scheduled service, we compete
against both the large U.S. scheduled service airlines and, from time to
time, against smaller regional or start-up airlines. Competition is
generally based on price, schedule, quality of service and convenience. All
of the major U.S. scheduled airlines are larger than we are, and most of
them have greater financial resources than we do. Where we seek to expand
our service by adding routes or frequency, competing airlines may respond
with intense price competition. In addition, when other airlines seek to
establish a presence over new routes, they may engage in significant price
discounting. Because of our size and financial resources relative to the
major airlines, we are less able to absorb losses from these activities
than many of our competitors.
Competition for Commercial Charter Services. In commercial charter
service, we compete against both the major U.S. scheduled airlines and
smaller U.S. charter airlines, including Sun Country and Miami Air. We also
compete against several European and Mexican charter and scheduled
airlines, some of which are larger than we are and have substantially
greater financial resources than we do.
The scheduled carriers compete for leisure travel customers with our
commercial charter operations in a variety of ways, including by:
o wholesaling discounted seats on scheduled flights to tour operators;
o promoting packaged tours to travel agents for sale to retail customers;
and
o selling discounted, excursion airfare-only products to the public.
As a result, all charter airlines, including ATA, generally compete for
customers against the lowest revenue-generating seats of the scheduled
airlines. During periods of dramatic fare cuts by other scheduled airlines,
we are forced to respond competitively to these deeply discounted prices.
We also compete directly against other charter airlines. In the United
States, these charter airlines are smaller in size than we are. In Europe,
several charter airlines are as large or larger than we are. Some of these
European charter airlines are affiliates of major scheduled airlines or
tour operators. As a result, in addition to their greater access to
financial resources, these charter airlines may have greater distribution
capabilities, including, in some cases, exclusive or preferential
relationships with affiliated tour operators.
Competition for Military and Other Government Charter Services. We
generally compete for military and other government charters with primarily
smaller U.S. passenger airlines. The allocation of U.S. military air
transportation contracts is based upon the number and type of aircraft a
carrier, alone or through a teaming arrangement, makes available for use to
the military. The formation of competing teaming arrangements that have
larger partners than those in which we participate, an increase by other
air carriers in their commitment of aircraft to the military or the
withdrawal of our current partners could adversely affect our U.S. military
charter business.
<PAGE>
Significant increases in the cost of aircraft fuel could adversely impact our
operating results.
Fuel costs are a significant portion of our operating costs,
comprising approximately 16.3% of our operating costs in 1998 and
approximately 16.6% of our operating costs in 1999. In 1999 our monthly
average fuel cost rose approximately 12.0% as compared to 1998, resulting
in an increase in fuel and oil expense of $18.0 million between years. In
the first quarter of 2000, fuel costs continued to adversely impact our
operating results. For the three months ended March 31, 2000, our monthly
average fuel cost rose approximately 76.9% as compared to the same period
in 1999, resulting in an increase in fuel and oil expense of approximately
$27.5 million between quarters. Increased fuel costs may also adversely
impact our operating results in future periods. Fuel costs may
significantly affect our scheduled service and our charter contracts that
do not contain fuel cost escalation provisions. In addition, substantial
increases in fuel costs and any resulting increase in air fares could cause
a reduction in leisure travel or the cancelation or renegotiation of
previously booked commitments from tour operators.
Fuel prices are affected by, among other factors, political and
economic influences that we cannot control. In the event of a fuel supply
shortage resulting from a disruption of oil imports or other events, higher
fuel prices or the curtailment of scheduled service could result.
We have worked to reduce some of the risks associated with a rise in
fuel costs. In 1998, approximately 45.0% of our total operating revenues
were derived from contracts that enable us to pass through increases in
fuel costs, including contracts with the U.S. military. In 1999,
approximately 41.1% of our total operating revenues were derived from these
types of contracts, and in the first three months of 2000, approximately
41.6% of our total operating revenues were derived from these types of
contracts. We are, however, exposed to increases in fuel costs that occur
within 14 days of flight time, to all increases associated with our
scheduled service (other than bulk seat sales) and to increases affecting
contracts that do not include fuel cost escalation provisions.
The profitability of our operations is influenced by economic conditions as
demand for leisure travel diminishes during economic downturns.
The profitability of our 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 our
competitive pricing position. The majority of our charter and scheduled
airline business, other than military, is leisure travel. Because leisure
travel is discretionary, we have 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, our performance during these periods has been significantly
better than that of the U.S. passenger airline industry as a whole.
The airline industry is heavily regulated, and changes in our governmental
authorizations or certificates, or changes in governmental regulations,
could adversely impact our business.
We are subject to a wide range of governmental regulation, including
regulation by the Department of Transportation and the Federal Aviation
Administration. A modification, suspension or revocation of any of our
Department of Transportation or Federal Aviation Administration authorizations
or certificates could adversely impact our business.
The Department of Transportation principally regulates economic matters
affecting air service, including:
o air carrier certification and fitness;
o insurance;
o leasing arrangements; allocation of route rights and authorization of
proposed scheduled and charter operations;
<PAGE>
o allocation of landing slots and departure slots;
o consumer protection; and
o competitive practices.
The Federal Aviation Administration primarily regulates flight operations,
especially matters affecting air safety, including airworthiness
requirements for each type of aircraft and pilot and crew certification.
Under the Airport Noise and Capacity Act of 1990 and related Federal
Aviation Administration regulations, our aircraft must comply with
specified Stage 3 noise restrictions. These regulations prohibit us from
operating any Stage 2 aircraft after December 31, 1999. We met the December
31, 1999 Stage 3 fleet requirements through Boeing 727-200 hushkit
modifications. We believe we are in compliance with all requirements
necessary to maintain in good standing our operating authority granted by
the Department of Transportation and our air carrier operating certificate
issued by the Federal Aviation Administration.
The Federal Aviation Administration has issued a series of
airworthiness directives under its aging aircraft program. These directives
are applicable to our Lockheed L-1011 and Boeing 727-200 aircraft. We do
not currently expect that the cost of compliance with these directives will
be material.
Changes in governmental regulation could also adversely impact our
business. In recent years, for example, the Federal Aviation Administration
has issued or proposed mandates relating to, among other things:
o collision avoidance systems;
o airborne windshear avoidance systems;
o noise abatement; and
o increased inspections and maintenance procedures.
We expect to incur expenses as we seek to comply with changes in
Federal Aviation Administration regulations, particularly those relating to
noise and aging aircrafts. The Federal Aviation Administration requires
each carrier to obtain an operating certificate and operations
specifications authorizing the carrier to fly to specific airports using
specified equipment. Several aspects of airline operations are subject to
regulation or oversight by federal agencies other than the Department of
Transportation and the Federal Aviation Administration. For example, the
United States Postal Service has jurisdiction over certain aspects of the
transportation of mail and related services that we provide through our
cargo affiliate. Labor relations in the air transportation industry are
generally regulated under the Railway Labor Act, which vests in the
National Mediation Board regulatory powers with respect to disputes between
airlines and labor unions arising under collective bargaining agreements.
We are also subject to the jurisdiction of the Federal Communications
Commission regarding the use of radio facilities. In addition, we are
subject to regulation on 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 our aircraft are in foreign countries, we must
comply with the requirements of similar authorities in those countries. We
are also subject to compliance with standards for aircraft exhaust
emissions promulgated by the Environmental Protection Agency and with
regulations adopted by various local authorities that operate the airports
we serve throughout our route network, including aircraft noise regulations
and curfews. The Commerce Department also regulates the export and
re-export of our U.S.-manufactured aircraft and equipment. While we intend
to maintain all appropriate government
<PAGE>
licenses and to comply with all appropriate standards, we cannot assure you
that we will be successful.
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 and must be remitted to the
applicable airport authority. Airport operators must obtain approval of the
Federal Aviation Administration before they may implement a passenger
facility charge. The $3.00 maximum on passenger facility charges must be
raised if Congress enacts an amendment to the legislation authorizing these
charges.
We are subject to biennial inspections by the Department of Defense as
a condition of retaining our eligibility to perform military charter
flights. The last such inspection was completed in September 1999. As a
result of our military business, we have been required from time to time to
meet operational standards beyond those normally required by the Department
of Transportation, the Federal Aviation Administration and other government
agencies.
At our aircraft line maintenance facilities, we use materials that are
regulated as hazardous under federal, state and local laws. We are required
to maintain programs to protect the safety of our employees who use these
materials and to manage and dispose of any waste generated by the use of
these materials in compliance with these laws. More generally, we are 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. We do not expect that the costs associated with
ongoing compliance with any of these regulations will have a material
impact upon our capital expenditures, earnings or competitive position.
Additional laws and regulations have been proposed from time to time that
could significantly increase the cost of airline operations by, for
instance, imposing additional requirements or restrictions on operations.
In addition, laws and regulations 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.
Based upon bilateral aviation agreements between the United States and
other nations, and, in the absence of such agreements, comity and
reciprocity principles, we, as a charter carrier, are generally not
restricted as to the frequency of our flights to and from most foreign
destinations. However, these agreements generally restrict us to the
carriage of passengers and cargo on flights which either originate in the
United States and terminate in a single foreign nation or which originate
in a single foreign nation and terminate in the United States. Proposals
for any additional charter service must generally be specifically approved
by the civil aeronautics authorities in the relevant countries. Approval of
these requests is typically based on considerations of comity and
reciprocity and cannot be guaranteed.
Risk Factors Relating to the Notes
Your Notes will be effectively subordinated to secured obligations of our
subsidiaries.
Claims of secured creditors of our subsidiaries have priority to the
extent of the security interests granted in the assets of those
subsidiaries over our claims and claims of the holders of our indebtedness,
including your Notes. ATA has a $100.0 million secured revolving credit
facility, which provides for a $100.0 million (including up to $50.0
million for stand-by letters of credit) revolving line of credit for
general working capital purposes, none of which was in use as of March 31,
2000. The revolving line secured $33.7 million in outstanding letters of
credit as of March 31, 2000. If we were to borrow under our bank credit
facility, amounts owed under the credit facility would be secured by a
first priority perfected security interest in certain aircraft and related
engines. Accordingly, the lenders under our bank credit facility would have
priority over your claims and claims of other holders of the Notes with
respect to, and to the extent of, the pledged assets. Thus, the Notes would
be effectively subordinated to such secured indebtedness, and to any other
secured indebtedness, of our subsidiaries.
<PAGE>
In addition the Notes will be effectively subordinated to the claims
of creditors of any of our subsidiaries that are not Guarantors. Claims of
creditors of our subsidiaries that are not Guarantors in respect of the
Notes will have priority with respect to the assets of such subsidiaries
over our claims and claims of the holders of our indebtedness including the
Notes.
We may be unable to purchase your Notes upon a change of control.
Upon the occurrence of a change of control, you may require us to
repurchase all or a portion of your 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, we may not have the
financial resources to repay the Notes, our credit facilities and any other
indebtedness that would become payable upon the occurrence of such change
of control. The "Repurchase of Notes upon a Change of Control" covenant
requiring us to repurchase the Notes will, unless consents are obtained,
require us to repay all indebtedness then outstanding in the event of a
change of control. There can be no assurance that we will have sufficient
funds available at the time of any change of control to make any debt
payment (including repurchase of Notes) required by this covenant. See
"Description of the Notes--Repurchase of Notes upon a Change of Control"
and "Description of the New Credit Facility."
The Notes and the Note Guarantees are subject to fraudulent transfer laws.
Under federal or state fraudulent transfer laws, if a court 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 we 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:
o were insolvent;
o were rendered insolvent by reason of such incurrence;
o were 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
o intended to incur, or believed or reasonably should have believed that
we would incur, debts beyond our ability to pay as such debts matured,
such court could avoid our obligations to you under the Notes, subordinate
our obligations to you to all other indebtedness or take other action
detrimental to you. In that event, there can be no assurance that any
repayment of principal and accrued interest on the Notes could ever be
recovered by you. 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 Notes--Guarantee."
There is no public market for the Notes.
We are obligated to register the Notes under the Securities Act and to
have the registration statement be declared effective by the Securities and
Exchange Commission (the "Commission") within 60 days after the date such
registration statement is filed. However, there can be no assurance that
such registration will occur in the required time period. The Commission
has broad discretion to determine whether any registration statement will
be declared effective and may delay or deny effectiveness of any such
registration statement filed by us for a variety of reasons. Failure to
have the registration statement declared effective could adversely affect
the liquidity and price of the Notes. See "Description of the Notes" and
"Transfer Restrictions."
<PAGE>
DESCRIPTION OF THE NOTES
The Notes were issued under the Indenture, dated as of July 24, 1997,
among the Company, as issuer, American Trans Air, Inc., Ambassadair Travel
Club, Inc., ATA Leisure Corp. (formerly ATA Vacations, Inc.), Amber Travel,
Inc., American Trans Air Training Corporation, American Trans Air ExecuJet,
Inc., Amber Air Freight Corporation, and Chicago Express Airlines, Inc., as
guarantors (collectively, the Guarantors), and First Security Bank, N.A.,
as trustee (the Trustee), as supplemented by the First Supplemental
Indenture dated as of December 21, 1999 among the Company, the Guarantors
and the Trustee (references in this Description of Notes to the "Indenture"
shall mean the Indenture as so supplemented). 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). A copy of the
Indenture and the Notes is 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." For purposes of this
summary, unless the context indicates otherwise, the term "Notes" means the
$29,000,000 aggregate principal amount 10 1/2% Senior Notes due 2004 being
registered hereunder.
General Aspects of the Notes
Amtran, Inc. currently has outstanding $100,000,000 principal amount
of Notes that was issued in 1997 under a previous registered statement. The
Notes offered by this prospectus are part of the same series of Notes that
were issued in 1997.
The Notes will be unsecured senior obligations of the Company, and
will mature on August 1, 2004. Each Note will initially bear interest at 10
1/2% per annum from the Closing Date, 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, 2000.
If we have not filed or caused a shelf registration statement with
respect to resales of the Notes to be declared effective within the time
period specified below, holders will be entitled to certain additional
interest. See "--Registration Rights for the Notes."
Principal of, premium, if any, and interest on the Notes will be
payable, and the Notes may be transferred, at the office or agency of the
Company in the Borough of Manhattan, The City of New York; provided that,
at our option, 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 we
may require payment of a sum sufficient to cover any transfer tax or other
similar governmental charge payable in connection therewith.
Subject to the covenants described below under "Covenants" and
applicable law, we may issue additional Notes under the Indenture. The
Notes and any additional Notes subsequently issued will be treated as a
single class for all purposes under the Indenture.
Optional Redemption
If 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,
we have the option to redeem the balance of the Notes, in whole or in part,
at any time or from time to time thereafter up to maturity. Holders must be
given between
<PAGE>
30 to 60 days' prior notice mailed by first class mail to each holder's
last address as it appears in the Security Register, and the Redemption
Price will be equal to the price specified in the 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).
The Notes will also be redeemable, at our option, in whole or in part,
at any time or from time to time, on or after August 1, 2002 up to
maturity. Holders must be given between 30 to 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:
Redemption
Year Price
---- -----------
2002........................................... 105.250%
2003........................................... 102.625%
In addition, at any time prior to August 1, 2000, we 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); so long as at least 65% of the 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. If the Notes are not listed on a national securities exchange,
the redemption will be made by lot or by such other method as the Trustee
in its sole discretion shall deem to be fair and appropriate; so long as 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 must state the portion of the principal amount of the Note to
be redeemed. A new Note in principal amount equal to the unredeemed portion
thereof will be issued in the name of the holder upon cancelation of the
original Note.
Sinking Fund
There will be no sinking fund payments for the Notes.
Registration Rights for the Notes
In the event that in the opinion of counsel for the Selling
Securityholder, a registration statement must be filed and a Prospectus
must be delivered by the Selling Securityholder in connection with any
offering of the Notes, the Company and the Guarantors shall, at their cost,
use their best efforts to cause to become effective a shelf registration
statement (the "Shelf Registration Statement") within 60 days after the
date such Shelf Registration Statement is filed with respect to resales of
the Notes and to keep such Shelf Registration Statement effective until the
expiration of the time period referred to in Rule 144(k) under the
Securities Act after the Closing Date, or such shorter period that will
terminate when all Notes covered by the Shelf Registration Statement have
been sold pursuant
<PAGE>
to the Shelf Registration Statement. The Company and the Guarantors shall,
in the event of such a shelf registration, provide to each holder copies of
the prospectus, notify each holder when the Shelf Registration Statement
for the Notes has become effective and take certain other actions as are
required to permit resales of the Notes.
A holder that sells its Notes pursuant to the Shelf Registration
Statement generally will be required to be named as a selling
securityholder 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 that are applicable to
such a holder (including certain indemnification obligations).
If we fail to comply with the above provisions or if the Shelf
Registration Statement fails to become effective, then additional interest
shall become payable in respect of the Notes as follows:
(1) if we are required to file a Shelf Registration Statement and such
Shelf Registration Statement is not filed on or prior to the date required
by the registration rights agreement, then commencing on the day after
either such required filing date, additional interest shall accrue on the
principal amount of the Notes at a rate of 0.50% per annum for the first 90
days immediately following each such filing date, such additional interest
rate increasing by an additional 0.50% per annum, at the beginning of each
subsequent 90-day period;
(2) if we are required to file a Shelf Registration Statement and such
Shelf Registration Statement is not declared effective by the Commission on
or prior to the 60th day following the date such Shelf Registration
Statement was filed, then, commencing on the day after either such required
effective date, additional interest shall accrue on the principal amount of
the Notes at a rate of 0.50% per annum for the first 90 days immediately
following such date, such additional interest rate increasing by an
additional 0.50% per annum at the beginning of each subsequent 90-day
period; or
(3) if applicable, the Shelf Registration Statement has been declared
effective and such Shelf Registration Statement ceases to be effective at
any time prior to the second anniversary of its effective date (other than
after such time as all Notes have been disposed of thereunder), then
additional interest shall accrue on the principal amount of the Notes at a
rate of 0.50% per annum for the first 90 days commencing on:
(x) the 31st day after such effective date, in the case of (A) above;
or
(y) the day such Shelf Registration Statement ceases to be effective,
in the case of (B) above, such additional interest rate increasing by an
additional 0.50% per annum at the beginning of each subsequent 90-day
period; provided, however, that the additional interest rate on the notes
may not exceed in the aggregate 2.0% per annum; provided, further, however,
that:
(a) upon the filing of a Shelf Registration Statement (in the
case of clause (1) above);
(b) upon the effectiveness of a Shelf Registration Statement (in
the case of clause (2) above); or
(c) upon the effectiveness of the Shelf Registration Statement
which had ceased to remain effective (in the case of clause (3)(B)
above), additional interest on the Notes as a result of such clause
(or the relevant subclause thereof), as the case may be, shall cease
to accrue.
<PAGE>
Guarantee
The Company's obligations under the Notes are fully and
unconditionally guaranteed on an unsecured, unsubordinated basis, jointly
and severally, by the Guarantors; so long as no Note Guarantee is
enforceable against any Guarantor in an amount in excess of the net worth
of such Guarantor at the time that determination of that net worth is,
under applicable law, relevant to the enforceability of such Note
Guarantee. The net worth will include any claim of the 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 will be automatically and unconditionally
released and discharged if any sale, 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, the Guarantor (which sale, exchange or transfer is not
prohibited by the Indenture).
Ranking
The indebtedness evidenced by the Notes and the Note Guarantees will
rank equally 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.
The Credit Agreement is secured by certain L-1011 and 727 aircraft and
related engines, including spares, and may be secured by other assets as
provided thereunder. See "Description of Other Indebtedness." 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
<PAGE>
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.
"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.
<PAGE>
"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.
"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.
<PAGE>
"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 were 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 nonrecurring 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'
<PAGE>
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 able 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 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
<PAGE>
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 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 oblige of such Indebtedness of the payment thereof or to protect
such oblige 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.
<PAGE>
"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 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
<PAGE>
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.
<PAGE>
"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 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 to 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 attorneys' 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" means the 10 1/2% Senior Notes due 2004 being sold hereunder.
"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;
<PAGE>
(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 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;
<PAGE>
(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, material men, 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;
<PAGE>
(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 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.
<PAGE>
"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 "N" (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 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
<PAGE>
(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 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
<PAGE>
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 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,
<PAGE>
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 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;
(i) 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;
(ii) 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
(iii) 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.
<PAGE>
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 other actions described in clauses (i) through (iv)
above being collectively payments or any "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
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
<PAGE>
(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
<PAGE>
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 (iii) 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
"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
<PAGE>
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.
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
<PAGE>
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 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
<PAGE>
(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;
<PAGE>
(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.
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.
<PAGE>
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 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.
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;
<PAGE>
(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, (1) 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 (2) 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
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.
<PAGE>
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.
<PAGE>
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 provides 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
<PAGE>
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 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
<PAGE>
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
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 term 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,
(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
<PAGE>
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
Notes will be represented by one or more permanent global Notes in
definitive, fully registered form without interest coupons (each a "Global
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 a Global Note will be limited to
persons who have accounts with DTC ("participants") or persons who hold
interests through participants. Ownership of beneficial interests in a
Global 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). Beneficial owners
may hold their interests in a Restricted Global Note directly through DTC
if they are participants in such system, or directly through organizations
which are participants in such system.
So long as DTC, or its nominee, is the registered owner or holder of a
Global Note, DTC or such nominee, as the case may be, will be considered
the sole owner or holder of the Notes represented by such Global Note for
all purposes under the Indenture and the Notes. No beneficial owner of an
interest in a Global 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, a Global 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 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 a Global
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 a Global Note, will credit
participants' accounts with payments in amounts proportionate to their
respective beneficial interests in the principal amount of such Global Note
as shown on the records of DTC or its nominee. The Company also expects
that payments by participants to owners of beneficial interests in such
Global 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.
<PAGE>
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 only at the direction of one or more
participants to whose account the DTC interests in a Global 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 applicable Global Note for Certificated Notes,
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 a Global 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 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 Notes and a successor depositary is not appointed by the
Company within 90 days, the Company will issue Certificated Notes.
CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS
The following is a general discussion of the principal U.S. federal
income tax consequences of the purchase, ownership and disposition of the
Notes to purchasers of the Notes who are U.S. Holders (as defined below)
and the principal U.S. federal income and estate tax consequences of the
purchase, ownership, exchange and disposition of the Notes to purchasers of
the Notes who are Foreign Holders (as defined below).
This discussion 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 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 U.S. 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 U.S. 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 in light of their personal
circumstances or to certain types of initial purchasers (such as certain
financial institutions, insurance companies, tax-exempt entities, dealers
in securities or persons who have hedged the risk of owning a Note).
<PAGE>
PROSPECTIVE HOLDERS OF THE NOTES ARE URGED TO CONSULT THEIR OWN TAX
ADVISORS AS TO THE PARTICULAR TAX CONSEQUENCES TO THEM OF THE 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.
U.S. Federal Income Taxation of U.S. Holders
As used herein, the term "U.S. Holder" means a holder of a Note that
is, for U.S. federal income tax purposes, (a) a citizen or resident of the
U.S., (b) a corporation, partnership or other entity created or organized
in or under the laws of the U.S. or any political subdivision thereof, (c)
an estate the income of which is subject to U.S. federal income taxation
regardless of source, or (d) a trust subject to the primary supervision of
a court within the U.S. and the control of a U.S. fiduciary, as described
in the Code.
If a partnership holds a Note, the tax treatment of a partner will
generally depend upon the status of the partner and upon the activities of
the partnership. If you are a partner of a partnership holding a Note, we
suggest that you consult your tax advisor.
Payment of Interest on Notes. Interest paid or payable on a Note will
be taxable to a U.S. 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 U.S. federal income tax purposes.
Sale, Exchange or Retirement of the Notes. Upon the sale, redemption,
retirement at maturity or other disposition of a Note, a U.S. 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 U.S. Holder's adjusted tax basis in the Note. A
U.S. Holder's adjusted tax basis in a Note generally will equal the cost of
the Note to such U.S. Holder, less any principal payments received by such
U.S. 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 U.S. Holder's holding period for the Note is
more than one year.
Market Discount. If you purchase a note for an amount that is less
than the principal amount, the difference between the principal amount of
the notes and your purchase price will be "market discount". Unless you
elect to include the market discount in income as it accrues, any gain on
the sale or redemption of a note will be ordinary income to the extent of
the market discount that has accrued at that time, and you may be required
to defer interest deductions on any indebtedness attributable to the notes.
Generally, market discount will be treated as accruing ratably over the
term of the notes or, if you elect, under a constant yield method.
Amortizable Bond Premium. If you purchase a note for an amount in
excess of the principal amount, you will be considered to have purchased
the note at a "premium". You generally may elect to amortize the premium
over the remaining term of the note on a constant yield method as an offset
to interest when includible in income under your regular accounting method.
If you do not elect to amortize bond premium, that premium will decrease
the gain or increase the loss you would otherwise recognize on disposition
of the note. Your election to amortize premium on a constant yield method
will also apply to all debt obligations held or subsequently acquired by
you on or after the first day of the first taxable year to which the
election applies. You may not revoke the election without the consent of
the IRS.
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
<PAGE>
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 31% of such payment if a U.S. 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 U.S. 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 U.S. Holder will be allowed as a
credit against such U.S. Holder's U.S. federal income tax and may entitle
the Holder to a refund, provided that the required information is furnished
to the Internal Revenue Service ("IRS").
U.S. Federal Income Taxation of Foreign Holders
As used herein, the term "Foreign Holder" means a Holder of a Note
that is, for U.S. federal income tax purposes, (a) a nonresident alien
individual, (b) a corporation organized or created under non-U.S. law, (c)
an estate that is not taxable in the U.S. on its worldwide income, or (d) a
trust that is either not subject to primary supervision over its
administration by a U.S. court or not subject to the control of a U.S.
person with respect to substantial trust decisions.
Payment of Interest on Notes. In general, payments of interest
received by a Foreign Holder will not be subject to U.S. withholding tax if
(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)(I) the beneficial owner of the Note, under penalties of perjury,
provides the Company or its agents with such beneficial owner's name and
address and certifies on IRS Form W-8 (or a suitable substitute form) that
it is not a U.S. Holder or (II) a securities clearing organization, bank or
other financial institution that holds customers' securities in the
ordinary course of its trade or business (a "financial institution") holds
the Note and provides a statement to the Company or its agent under
penalties of 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 U.S.
withholding tax and the Foreign Holder or such Foreign Holder's agent
provides a properly executed IRS Form 1001 (or a suitable substitute)
claiming the exemption. Payments of interest not exempt from U.S. 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. A Foreign Holder generally
will not be subject to U.S. federal income tax (and generally no tax will
be withheld) with respect to gain realized on the sale, redemption,
retirement at maturity or other disposition of a Note unless (a) the
Foreign Holder is an individual who is present in the U.S. 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 place of
business" in the U.S. or (b) the Foreign Holder is subject to tax pursuant
to the provisions of U.S. federal income tax law applicable to certain
expatriates.
We suggest that you consult your tax advisor about the specific
methods for satisfying these requirements. These procedures will change on
January 1, 2001. In addition, a claim for exemption will not be valid if
the person receiving the applicable form has actual knowledge that the
statements on the form are false.
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 "--U.S. 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 U.S. Holder.
If any payments of principal and interest are
<PAGE>
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 U.S. person, that derives 50% or more of its
gross income for certain periods from the conduct of a trade or business in
the U.S., or that is a "controlled foreign corporation" (generally, a
foreign corporation controlled by certain U.S. 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 U.S.
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 the Holder is a Foreign Holder or otherwise establishes an
exemption.
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 U.S. 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.
SELLING SECURITYHOLDER
Deutsche Bank Securities Inc. (the "Selling Securityholder") has
reported to the Issuer beneficial ownership of the $29,000,000 aggregate
principal amount at maturity of Notes registered hereunder. The Notes
offered by this Prospectus may be offered from time to time by the Selling
Securityholder.
In the ordinary course of their business, the Selling Securityholder
and certain of its affiliates have in the past and may in the future engage
in investment banking or other transactions of a financial nature with the
Company, including the provision of certain advisory services and the
making of loans to the Company and its affiliates, for which they have
received and may receive customary compensation. Otherwise, the Selling
Securityholder has not held any position, office or other material
relationship with the Company within the past three years other than as a
result of the ownership of the Notes and as set forth in the next
succeeding paragraph.
The Selling Securityholder acted as Initial Purchaser in the Private
Placement. In the Private Placement, the Initial Purchaser purchased all
outstanding Notes ($75,000,000 aggregate principal amount at maturity) from
the Issuer and resold approximately $46,000,000 aggregate principal amount
at maturity thereof to qualified institutional buyers and accredited
investors. The Selling Securityholder is hereby offering all the
$29,000,000 aggregate principal amount at maturity of Notes that are
beneficially owned by them.
PLAN OF DISTRIBUTION
Neither the Issuer nor the Guarantors will receive any proceeds from
the sale of the Notes offered hereby. The Notes may be sold from time to
time to purchasers directly by the Selling Securityholder. Alternatively,
the Selling Securityholder may from time to time offer the Notes through
underwriters, dealers or agents, who may receive compensation in the form
of underwriting discounts, concessions or commissions from the Selling
Securityholder and/or the purchasers of the Notes for whom it may act as an
agent. The Selling Securityholder and any such underwriters, dealers or
agents that participate in the distribution of Notes may be deemed to be
underwriters, and any profit on the sale of Notes by them and any
discounts, commissions or concessions received by any such underwriters,
dealers or agents might be deemed to be underwriting discounts and
commissions under the Securities Act. At any time a particular offer of
Notes is made, if required, a Prospectus Supplement will be distributed
which will set forth the aggregate amount at maturity of the Notes being
offered and the terms of the offering, including the name or names of any
underwriters, dealers or agents, any discounts, commissions and other items
constituting dealers.
<PAGE>
Such Prospectus Supplement and, if necessary, a post-effective amendment to
the Registration Statement of which this Prospectus is a part will be filed
with the Commission to reflect the disclosure of additional information
with respect to the distribution of the Notes.
The Notes may be sold from time to time in one or more transactions at
a fixed offering price, which may be changed, or at varying prices
determined at the time of sale or at negotiated prices. Such prices will be
determined by the Selling Securityholder or by agreement between the
Selling Securityholder and underwriters or dealers who may receive fees or
commissions in connection therewith.
The Selling Securityholder acted as the Initial Purchaser in
connection with the Private Placement for which it received a customary
underwriting discount.
Pursuant to a Registration Rights Agreement entered into by the Issuer
and the Selling Securityholder on December 21, 1999 (the "Registration
Rights Agreement"), the Issuer agreed to pay substantially all of the
expenses incident to the registration and offering of the Notes other than
underwriting discounts and commissions and transfer taxes, if any, relating
to the sale or disposition of the Notes by the Selling Securityholder.
Pursuant to the Registration Rights Agreement, the Selling Securityholder
and any underwriter they may utilize will be indemnified by the Issuer
against certain civil liabilities under the Securities Act.
LEGAL MATTERS
Certain legal matters in connection with the Offering are being passed
upon for the Company by Cravath, Swaine & Moore, New York, New York.
Cravath, Swaine & Moore will rely as to matters of Indiana law upon the
opinion of Brian T. Hunt, General Counsel of the Company. The validity of
the issuance of the Notes offered hereby will also be passed upon by Brian
Hunt. William P. Rogers, Jr., a partner at Cravath, Swaine & Moore, is a
director of the Company, and beneficially owns 5,000 shares of common stock
of the Company and options to purchase 4,000 shares of such common stock.
EXPERTS
The consolidated financial statements of Amtran, Inc. and subsidiaries
incorporated by reference in Amtran, Inc.'s Annual Report (Form 10-K) for
the year ended December 31, 1999 have been audited by Ernst & Young LLP,
independent auditors, as set forth in their report thereon included therein
and incorporated herein by reference in reliance upon such report given on
the authority of such firm as experts in accounting and auditing.
WHERE TO FIND MORE INFORMATION
The Company is subject to the informational requirements of the
Exchange Act and in accordance therewith files reports, proxy statements
and other information with the Commission. Such reports, proxy statements
and other information filed by the Company with the Commission can be
inspected and copied at the public reference facilities maintained by the
Commission and Judiciary Plaza, 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549, and at the Commission's regional offices at
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661 and at 7 World Trade Center, Suite 1300, New York, New York
10048. The Commission maintains a World Wide Web site on the Internet at
http://www.sec.gov that contains reports, proxy and information statements
and other information regarding registrants, including the Company, that
file electronically with the Commission. Copies of such material can also
be obtained at prescribed rates upon request from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549.
<PAGE>
Part II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The following is a reasonable itemized statement of all expenses in
connection with the issuance and distribution of the securities to be
registered, other than underwriting discounts and commissions and transfer
taxes. No portion of these expenses is to be borne by the Selling
Securityholder.
Registration Fee.................................... $ 0*
Legal Fees and Expenses............................. $ 50,000
Accounting Fees and Expenses........................ $ 7,500
Blue Sky Fees and Expenses.......................... $ 0
Miscellaneous....................................... $ 0
Total.......................................... $ 57,500
=========================
* On February 4, 2000, the Issuer registered $75,000,000 principal
amount at maturity of the Senior Notes pursuant to a registration
statement on Form S-4 (No. 333-95371). The securities registered
hereunder are being carried forward from such registration statement.
In connection with the registration statement on Form S-4, an
aggregate registration fee of $19,800 was paid, $7,656 of which was
attributable to the Senior Notes registered hereunder. Accordingly,
pursuant to Rule 429, no additional fee need be paid because the
previsouly paid fee of $7,556 is equal to the registration fee of
$7,656 attributable to the Senior Notes registered hereunder.
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).
<PAGE>
Item 21. Exhibits.
Exhibit
Number Description
-------- -----------
*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, and First Supplemental
Indenture, dated as of December 21, 1999, between the Company,
the Guarantors and First Security Bank, N.A., as trustee.
**4.2-- Form of 10 1/2% Senior Note due 2004 (included in Exhibit 4.1.)
**4.3-- Purchase Agreement, dated December 16, 1999, between the
Company, the Guarantors and Deutsche Bank Securities Inc.
**4.4-- Registration Rights Agreement, dated December 21, 1999, between
the Company, the Guarantors and Deutsche Bank Securities 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 Leisure Corp. (formerly ATA
Vacations, Inc.), Amber Travel, Inc., American Trans Air
Training Corporation, American Trans Air ExecuJet, Inc., Amber
Air Freight Corporation, Chicago Express Airlines, Inc. 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-- Power of Attorney (included on page II - 4).
25.1-- Statement of Eligibility under the Trust Indenture Act of 1939,
as amended, of First Security Bank, N.A. on Form T-1.
----------
* Previously filed as an exhibit to the Company's Registration
Statement on Form S-1 (File No. 33-59630), and incorporated herein
by reference.
** Previously filed as an exhibit to the Company's Registration
Statement on Form S-4 with the Commission on February 4, 2000 (File
No. 333-95371), and incorporated herein by reference.
<PAGE>
Item 22. Undertakings.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration:
(i) To include any prospectus required by Section 10(a)(3)
of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in
the registration statement. Notwithstanding the foregoing any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which is registered) and any
deviation from the low or high and of the estimated maximum offering range
may be reflected in the form of a prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate offering price set forth in
the "Calculation of Registration Fee" table in the effective registration
statement.
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in the registration
statement or any material change to such information in the registration
statement;
provided, however, that paragraphs (a) and (i) above do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Commission by the registrant pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in the
registration statement.
(2) That, for the purpose of determining any liability under
the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned registrant hereby undertakes 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 is 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.
(c) 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.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this Registration Statement on Form S-3 to be
signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Indianapolis, State of Indiana, on the 1st day of August, 2000.
AMTRAN, INC.
By /s/ J. George Mikelsons
--------------------------------
J. George Mikelsons
Chairman of the Board of Directors
POWER OF ATTORNEY
The undersigned directors and officers of Amtran, Inc. do hereby
constitute and appoint John P. Tague and Kenneth K. Wolff, and each of them
with full power of substitution, our true and lawful attorneys-in-fact and
agents to do any and all acts and things in our name and behalf in our
capacities as directors and officers, and to execute any and all
instruments for us and in our names in the capacities indicated below which
such person may deem necessary or advisable to enable Amtran, Inc. to
comply with the Securities Act of 1933, as amended (the "Securities Act"),
and any rules, regulations and requirements of the Securities and Exchange
Commission, in connection with this Registration Statement, including
specifically, but not limited to, power and authority to sign for us, or
any of us, in the capacities indicated below and any and all amendments
(including pre- effective and post-effective amendments or any other
registration statement filed pursuant to the provisions of Rule 462(b)
under the Securities Act) hereto; and we do hereby ratify and confirm all
that such person or persons shall 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.
Signatures Titles Dates
---------- ------ -----
/s/ J. George Mikelsons
--------------------------- Chairman of the Board of Directors August 1, 2000
(J. George Mikelsons)
/s/ John P. Tague
--------------------------- President and Chief Executive August 1, 2000
(John P. Tague) Officer and Director (Principal
Executive Officer)
/s/ James W. Hlavacek
--------------------------- Executive Vice President and Chief August 1, 2000
(James W. Hlavacek) Operating Officer and Director
/s/ Kenneth K. Wolff
--------------------------- Executive Vice President and Chief August 1, 2000
(Kenneth K. Wolff) Financial Officer and Director
(Principal Financial and
Accounting Officer)
/s/ Robert A. Abel
--------------------------- Director August 1, 2000
(Robert A. Abel)
<PAGE>
/s/ William P. Rogers, Jr.
--------------------------- Director August 1, 2000
(William P. Rogers, Jr.)
/s/ Andrejs P. Stipnieks
-------------------------- Director August 1, 2000
(Andrejs P. Stipnieks)
<PAGE>
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Amtran, Inc.
$29,000,000
10 1/2% Senior Notes due 2004
----------
PROSPECTUS
----------
[ ], 2000
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