SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
Commission file number 0-21976
ATLANTIC COAST AIRLINES, INC.
(Exact name of registrant as specified in its charter)
Delaware 13-3621051
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
515-A Shaw Road, Dulles, Virginia 20166
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (703) 925-6000
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes X No
As of August 8, 1997, there were 7,108,267 shares of common stock, par
value $.02 per share, outstanding.
Part I. Financial Information
Item 1. Financial Statements
Atlantic Coast Airlines, Inc.
and Subsidiary
Consolidated Balance Sheets
<TABLE>
<S> <C> <C>
December 31, June 30, 1997
(In thousands except for share data and par 1996 (Unaudited)
values)
Assets
Current:
Cash and cash equivalents $ 21,470 $ 21,374
Accounts receivable, net 15,961 20,134
Due from financial institution - 48,250
Expendable parts and fuel inventory, 1,759 2,346
net
Prepaid expenses and other current 2,554 3,128
assets
Total current assets 41,744 95,232
Property and equipment, net of accumulated
depreciation and amortization 16,157 17,311
Preoperating costs, net of accumulated
amortization 225 365
Intangible assets, net of accumulated 2,882 2,746
amortization
Deferred tax asset 3,140 3,140
Debt issuance costs - 1,995
Aircraft deposits 570 15,330
Other assets 40 30
Total assets $ 64,758 $ 136,149
Liabilities and Stockholders' Equity
Current:
Accounts payable $ 3,770 $ 2,633
Notes Payable - 11,000
Line of credit with financial - 7
institution
Current portion of long-term debt 1,319 1,293
Current portion of capital lease 1,497 1,648
obligations
Accrued liabilities 17,376 22,121
Total current liabilities 23,962 38,702
Long-term debt, less current portion 2,407 51,788
Capital lease obligations, less current 3,266 3,180
portion
Deferred credits 486 1,123
Total liabilities 30,121 94,793
Stockholders' equity:
Preferred Stock, $.02 par value per share;
shares authorized 5,000,000; no shares
issued or outstanding in 1996 or 1997 - -
Common stock: $.02 par value per share;
shares authorized 17,000,000; shares
issued 8,498,910 in 1996 and 8,525,934 in 170 171
1997
Class A common stock: nonvoting; par value;
$.02 stated value per share; shares
authorized 6,000,000; no shares issued or - -
outstanding
Additional paid-in capital 37,689 37,820
Less: Common stock in treasury, at cost, (125) (125)
12,500 shares
Accumulated earnings (deficit) (3,097) 3,490
Total stockholders' equity 34,637 41,356
Total liabilities and $ 64,758 $ 136,149
stockholders' equity
</TABLE>
See accompanying notes to the consolidated financial statements.
Atlantic Coast Airlines, Inc.
and Subsidiary
Consolidated Statements of Operations
(Unaudited)
<TABLE>
Three months ended June 30,
<S> <C> <C>
(In thousands) 1996 1997
Revenues:
Passenger $49,565 $52,549
Other 800 671
Total revenues 50,365 53,220
Operating expenses:
Salaries and related costs 11,349 12,137
Aircraft fuel 4,209 4,202
Aircraft maintenance and materials 4,323 3,263
Aircraft rentals 7,392 7,808
Traffic commissions and related fees 7,713 8,690
Depreciation and amortization 648 767
Other 5,692 6,385
Restructuring charges (164) -
(reversals)
Total operating expenses 41,162 43,252
Operating income 9,203 9,968
Other income (expense):
Interest expense (306) (460)
Interest income 22 148
Other income (9) (9)
Total other expense (293) (321)
Income before income tax provision 8,910 9,647
Income tax provision 446 3,762
Net income $8,464 $5,885
Earnings per common and common equivalent
shares:
-primary $0.94 $0.65
-fully diluted $0.94 $0.65
Weighted average common and common
equivalent shares:
-primary 9,005 9,056
-fully diluted 9,005 9,078
See accompanying notes to the consolidated financial statements.
</TABLE>
Atlantic Coast Airlines, Inc.
and Subsidiary
Consolidated Statements of Operations
(Unaudited)
<TABLE>
Six months ended June 30,
<S> <C> <C>
(In thousands) 1996 1997
Revenues:
Passenger $86,696 $93,049
Other 1,526 1,285
Total revenues 88,222 94,334
Operating expenses:
Salaries and related costs 22,000 23,732
Aircraft fuel 7,903 8,527
Aircraft maintenance and materials 7,985 7,008
Aircraft rentals 14,459 15,110
Traffic commissions and related fees 13,765 15,038
Depreciation and amortization 1,289 1,487
Other 10,926 12,427
Restructuring charges (reversals) (426) -
Total operating expenses 77,901 83,329
Operating income 10,321 11,005
Other income (expense):
Interest expense (549) (650)
Interest income 46 293
Other expense (9) (13)
Total other expense (512) (370)
Income before income tax provision 9,809 10,635
Income tax provision 482 4,048
Net income $9,327 $6,587
Earnings per common and common equivalent
shares:
-primary $1.04 $0.73
-fully diluted $1.04 $0.73
Weighted average common and common
equivalent shares:
-primary 8,964 9,048
-fully diluted 8,968 9,072
See accompanying notes to the consolidated financial statements.
</TABLE>
Atlantic Coast Airlines, Inc.
and Subsidiary
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
Six months ended June 30,
(In thousands) 1996 1997
<S> <C> <C>
Cash flows from operating activities:
Net income $9,327 $6,587
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 1,292 1,487
Provision for uncollectible accounts 30 45
Amortization of finance costs 14 27
Amortization of deferred credits - (49)
Loss on disposal of fixed assets - 348
Changes in operating assets and liabilities:
Accounts receivable (5,194) (4,218)
Expendable parts and fuel inventory 255 (587)
Prepaid expenses and other current assets (826) (574)
Preoperating costs - (258)
Accounts payable 248 (1,137)
Accrued liabilities 870 4,745
Net cash provided by operating activities 6,016 6,416
Cash flows from investing activities:
Purchase of property and equipment (697) (1,946)
Proceeds from sales of fixed assets 16 -
(Increase) decrease in deposits 121 (3,750)
Net cash used in investing activities (560) (5,696)
Cash flows from financing activities:
Payments of long-term debt (668) (645)
Payments of capital lease obligations (506) (770)
Net increase in lines of credit 3,646 7
Due from financial institution - (48,250)
Increase in long term debt - 50,000
Increase in deferred credits 396 686
(Increase) decrease in intangible assets (107) (1,975)
Proceeds from exercise of stock options 288 131
1995 cumulative preferred dividends paid in (335) -
1996
Redemption of Series A cumulative convertible
preferred stock (3,825) -
Net cash used in financing activities (1,111) (816)
Net (decrease) increase in cash and cash 4,345 (96)
equivalents
Cash and cash equivalents, beginning of period 8,396 21,470
Cash and cash equivalents, end of period $12,741 $21,374
See accompanying notes to the consolidated financial statements.
</TABLE>
ATLANTIC COAST AIRLINES, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Information as of June 30, 1997, and for the three months ended June
30, 1997, is unaudited)
1. BASIS OF PRESENTATION
The consolidated financial statements included herein have been
prepared by Atlantic Coast Airlines, Inc. ("ACAI") and its subsidiary,
Atlantic Coast Airlines, (together, the "Company"), without audit,
pursuant to the rules and regulations of the Securities and Exchange
Commission. The information furnished in the consolidated financial
statements includes normal recurring adjustments and reflects all
adjustments which are, in the opinion of management, necessary for a
fair presentation of such consolidated financial statements. Results
of operations for the three and six month periods presented are not
necessarily indicative of the results to be expected for the year
ending December 31, 1997. Certain amounts as previously reported have
been reclassified to conform to the current year presentation. Certain
information and footnote disclosures normally included in the
condensed consolidated financial statements prepared in accordance
with generally accepted accounting principles have been condensed or
omitted pursuant to such rules and regulations, although the Company
believes that the disclosures are adequate to make the information
presented not misleading. These consolidated financial statements
should be read in conjunction with the consolidated financial
statements, and the notes thereto, included in the Company's Annual
Report on Form 10-K for the year ended December 31, 1996.
In June 1997, the Financial Accounting Standards Board issued two new
disclosure standards. Results of operations and financial position
will be unaffected by implementation of these new standards.
Statement of Financial Accounting Standards ("SFAS") 130, "Reporting
Comprehensive Income", establishes standards for the reporting and
displaying of comprehensive income, its components and accumulated
balances. Comprehensive income is defined to include all changes in
equity except those resulting from investments by owners and
distributions to owners. Among other disclosures, SFAS 130 requires
that all items that are required to be recognized under current
accounting standards as components of comprehensive income be reported
in a financial statement that is displayed with the same prominence as
other financial statements.
SFAS 131, "Disclosures about segments of a Business Enterprise",
establishes standards for the way that public enterprises report
information about operating segments in annual financial statements
and requires reporting of selected information about operating
segments in interim financial statements issued to the public. It also
establishes standards for disclosures regarding products and services,
geographic areas and major customers. SFAS 131 defines operating
segments as components of an enterprise about which separate financial
information is available that is evaluated regularly by the chief
operating decision maker in deciding how to allocate resources and in
assessing performance.
Both of these new standards are effective for financial statements for
periods beginning after December 15, 1997 and require comparative
information for earlier years to be restated. Due to the recent
issuance of these standards, management has been unable to fully
evaluate the impact, if any, they may have on future financial
statement disclosures.
Recently, the American Institute of Certified Public Accountants
issued a proposed statement of position on accounting for start-up
costs, including preoperating costs related to the introduction of new
fleet types by airlines. The proposed accounting guidelines would
require companies to expense start-up costs as incurred. If the
Financial Accounting Standards Board approves the proposed guidelines,
as expected, the guidelines will take effect in December 1997.
Presently, the Company intends to defer certain start-up costs related
to the introduction of the regional jets and to amortize such costs to
expense ratably over four years. The Company will expense preoperating
costs, beginning January 1, 1998, should the proposed guidelines
become effective as scheduled. Thus, if the proposed guidelines become
effective, the Company will expense its previously capitalized start-
up costs in the first quarter of 1998, and such costs will be expensed
rather than capitalized when incurred in the future.
2. PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<S> <C> <C>
December 31, June 30,
(In thousands) 1996 1997
Improvements to aircraft $2,350 $2,366
Flight equipment, primarily rotable parts 14,014 14,553
Maintenance and ground equipment 3,380 3,449
Computer hardware and software 1,464 1,796
Furniture and fixtures 296 417
Leasehold improvements 619 1,548
22,123 24,129
Less: Accumulated depreciation and
amortization 5,966 6,818
$16,157 $17,311
</TABLE>
3. ACCRUED LIABILITIES
Accrued liabilities consist of the following:
<TABLE>
<S> <C> <C>
December 31, June 30,
(In thousands) 1996 1997
Accrued payroll and employee benefits $4,929 $6,602
Accrued income taxes 103 4,115
Air traffic liability 2,703 1,461
Reservations and handling 2,454 2,344
Engine overhaul costs 3,311 3,125
Fuel 1,196 953
Other 2,680 3,521
$17,376 $22,121
</TABLE>
4. DEBT
Pursuant to a Purchase Agreement exercised on June 27, 1997, between
the Company and Alex. Brown & Sons, Incorporated and The Robinson-
Humphrey Company, Inc. as Initial Purchasers, on July 2, 1997, the
Company issued $50.0 million aggregate principal amount of 7.0%
Convertible Subordinated Notes due July 1, 2004 (the "Notes"), under
Rule 144A of the Securities Act of 1933, and received net proceeds of
approximately $48.3 million related to the sale of the Notes. On July
18, 1997 the Company issued an additional $7.5 million aggregate
principal amount of the Notes to cover over-allotments, and received
net proceeds of $7.3 million related to the exercise of the over-
allotment option.
The Notes are convertible into shares of Common Stock, par value $0.02
of the Company (the "Common Stock") by the holders at any time after
sixty days following the latest date of original issuance thereof and
prior to maturity, unless previously redeemed or repurchased, at a
conversion price of $18.00 per share, subject to certain adjustments.
Interest on the Notes is payable on April 1 and October 1 of each
year, commencing October 1, 1997. The Notes are not redeemable by the
Company until July 1, 2000. Thereafter, the Notes will be redeemable,
at any time, on at least 15 days notice at the option of the Company,
in whole or in part, at the redemption prices set forth in the
Indenture dated July 2, 1997, in each case, together with accrued
interest. The Notes are unsecured and subordinated in right of payment
in full to all existing and future Senior Indebtedness.
On April 1, 1997, the Company executed a short-term promissory note
for deposits related to the acquisition of Canadair Regional Jets
("CRJs") for $11.0 million at an 8% annual interest rate due July 15,
1997. The promissory note was paid in full on July 2, 1997 from the
proceeds of the Notes issued on June 27, 1997 as described above.
During July 1997 the Company retired $3.1 million of other high
interest rate debt from the proceeds of the Notes.
5. COMMITMENTS
In June 1997, the Industrial Development Authority of Loudoun County,
Virginia ("IDA") approved a $9.4 million tax exempt bond issue in
connection with the Company's proposed construction of a maintenance
facility at the Washington-Dulles International Airport ("Washington
Dulles"). These bonds were issued by the IDA under a variable interest
rate structure for a twenty-five year term and are collateralized by
the maintenance facility and a letter of credit issued by one of the
Company's financial institutions. The Company will be obligated to pay
rent for the facility and the underlying land leasehold, the proceeds
from which the IDA will make the required interest and sinking fund
payments.
6. INCOME TAXES
The Company's estimated effective tax rate for the second quarter of
1997 was 39.0% and is approximately equal to the statutory rate. The
Company estimates that the combined state and federal effective tax
rate will increase slightly during the third and fourth quarters of
1997 due to revisions in estimates and permanent differences between
taxable and book income.
7. EARNINGS PER COMMON SHARE
The computation of primary earnings per share is based on the weighted
average number of outstanding common shares during the period plus,
when their effect is dilutive, common stock equivalents consisting of
certain shares subject to stock options. On a fully diluted basis,
both earnings and shares outstanding are adjusted to assume the
conversion of the convertible securities.
On July 2, 1997 the Company repurchased 1.46 million shares of common
stock from British Aerospace. This will have the effect of reducing
the weighted average number of outstanding common shares for both
primary and fully diluted calculations. In addition, the fully diluted
weighted average number of outstanding shares will be increased to
reflect the assumed conversion of the convertible debt by
approximately 3.2 million shares.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations
Second Quarter Operating Results
<TABLE>
Increase
(Decrease)
<S> <C> <C> <C>
Three months ended June 30, 1996 1997 % Change
Revenue passengers carried 396,08 424,74 7.2%
9 0
Revenue passenger miles ("RPMs") 96,679 105,37 9.0%
(000's) 2
Available seat miles ("ASMs") (000's) 196,87 208,66 6.0%
0 3
Passenger load factor 49.1% 50.5% 1.4 pts
Break-even passenger load factor 1 40.2% 40.9% 0.7 pts
Revenue per ASM (cents) 25.6 25.5 (0.4%)
Yield (cents) 51.3 49.9 (2.7%)
Cost per ASM (cents) 2 21.0 20.7 (1.4%)
Average passenger fare $125.1 $123.7 (1.1%)
4 2
Average passenger trip length (miles) 244 248 1.6%
Revenue departures 35,235 36,051 2.3%
Revenue block hours 44,023 44,963 2.1%
Aircraft utilization (block hours) 9.7 9.4 (3.1%)
Average cost per gallon of fuel (cents) 80.1 77.3 (3.5%)
Aircraft in service (end of period) 57 60 5.3%
</TABLE>
Comparison of three months ended June 30, 1997, to three months ended
June 30, 1996.
Results of Operations
General
In the second quarter of 1997 the Company posted net income
of $5.9 million compared to net income of $8.5 million for the second
quarter of 1996. The Company's second quarter 1997 results reflect a
provision for income taxes which approximates statutory rates as
compared to the second quarter of 1996 which contained a significantly
smaller provision for income taxes due to the existence of a net
operating loss carryforward. In the three months ended June 30, 1997,
the Company earned pretax income of $9.6 million compared to $8.7
million excluding restructuring reversals, in the three months ended
June 30, 1996.
Operating Revenues
The Company's operating revenues increased 5.7% to $53.2
million in the second quarter of 1997 compared to $50.4 million in the
second quarter of 1996. The increase resulted from a 6.0% increase in
ASMs and an increase in load factor of 1.4 percentage points partially
offset by a 2.7% decrease in yield.
The reduction in yield per RPM is related in part to the
existence of the ticket tax in the second quarter of 1997 which was
not in effect during the second quarter of 1996. Revenue per ASM
remained essentially unchanged quarter over quarter. Total passengers
increased 7.2% in the second quarter of 1997 compared to the second
quarter of 1996.
Operating Expenses
The Company's operating expenses increased 4.7% in the
second quarter of 1997 compared to operating expenses before reversals
of restructuring charges for the second quarter of 1996 due primarily
to a 6.0% increase in ASMs. The increased capacity reflects the
addition of two British Aerospace Jetstream - 41 ("J-41") aircraft at
the end of the first quarter of 1997 and two additional J-41s during
the second quarter of 1997 net of one J-41 returned to the
manufacturer in December 1996 which had been loaned to the Company on
an interim basis. Operating expenses also increased due to additional
profit sharing expenses, passenger related costs (traffic commissions
and related fees) and increased aircraft rent. Cost per ASM before
reversals of restructuring charges decreased 1.4% to 20.7 cents during
the second quarter of 1997 compared to 21.0 cents in the second
quarter of 1996.
An unaudited summary of operating expenses as a percentage
of operating revenues and cost per ASM for the three months ended June
30, 1996, and 1997 is as follows:
<TABLE>
1996 1997
<S> <C> <C> <C> <C>
Percent Cost Percent Cost
of of
Operati per ASM Operatin per ASM
ng g
Revenue (cents) Revenue (cents)
s s
Salaries and related costs 22.5% 5.9 22.9% 5.8
Aircraft fuel 8.4% 2.1 7.9% 2.0
Aircraft maintenance and 8.6% 2.2 6.1% 1.5
materials
Aircraft rentals 14.7% 3.8 14.6% 3.7
Traffic commissions and related 15.3% 3.9 16.3% 4.2
fees
Depreciation and amortization 1.3% .3 1.4% .4
Other 11.3% 2.8 12.1% 3.1
Total (before restructuring
charge charge of reversals)
restructuring
reversals) 82.1% 21.0 81.3% 20.7
</TABLE>
ASMs increased 6.0% in the second quarter of 1997 compared
to the second quarter of 1996 as a result of a 2.1% increase in block
hours and the net addition of three J-41 aircraft. Cost per ASM
decreased on a quarter over quarter basis due primarily to the ASM
increase and reductions in aircraft maintenance and materials.
Salaries and related costs per ASM decreased slightly to 5.8
cents for the second quarter of 1997 compared to 5.9 cents for the
second quarter of 1996 despite a 31.8% increase in profit sharing,
additional flight crew hours, and contractual wage increases for
pilots and flight attendants effective March 1, 1997, and May 1, 1996
respectively. In absolute dollars, salaries and related costs
increased 6.9% from $11.3 million in the second quarter of 1996 to
$12.1 million in the second quarter of 1997.
The cost per ASM of aircraft fuel decreased to 2.0 cents in
the second quarter of 1997 compared to 2.1 cents in the second quarter
of 1996. The decrease in fuel cost per ASM resulted from a 3.5%
reduction in the average fuel cost per gallon and increased ASMs.
Aircraft fuel prices fluctuate with a variety of factors, including
the price of crude oil, and future increases or decreases cannot be
predicted with a high degree of certainty. There is no assurance that
future increases will not adversely affect the Company's operating
expenses. In absolute dollars, aircraft fuel expense was $4.2 million
in the second quarter of 1997 and was unchanged from the second
quarter of 1996.
The cost per ASM of aircraft maintenance and materials
decreased to 1.5 cents in the second quarter of 1997 compared to 2.2
cents in the second quarter of 1996. During the second quarter of 1997
the Company recognized credits of approximately $0.5 million for
manufacturer penalties related to engine overhauls and dispatch
reliability, and $0.4 million related to reimbursements for engine
spare parts, offset by increased maintenance related to the net
addition of three J-41 aircraft and the expiration of warranty
coverage for certain aircraft. In absolute dollars, aircraft
maintenance and materials expense decreased 32.5% from $4.3 million
in the second quarter of 1996 to $3.3 million in the second quarter of
1997.
The Company's maintenance accounting policy is a combination
of expensing events as incurred and accruals for maintenance events.
Maintenance accruals are estimated on a cost per flight hour or per
cycle basis for all aircraft, including those under warranty.
The cost per ASM of aircraft rentals decreased to 3.7 cents
compared to 3.8 cents for the second quarter of 1996 as a result of
the quarter over quarter increase in ASMs partially offset by
increased rent associated with the net addition of three J-41
aircraft. In absolute dollars, aircraft rentals increased 5.6% from
$7.4 million in the second quarter of 1996 to $7.8 million in the
second quarter of 1997.
The cost per ASM of traffic commissions and related fees
increased to 4.2 cents in the second quarter of 1997 compared to 3.9
cents in the second quarter of 1996 due to a 6.0% increase in
passenger revenue, a 7.2% increase in passengers, and contractual rate
increases in program fees paid to United Airlines, Inc. ("United"). In
absolute dollars, traffic commissions and related fees increased 12.7%
from $7.7 million in the second quarter of 1996 to $8.7 million in the
second quarter of 1997.
The cost per ASM of depreciation and amortization was 0.4
cents in the second quarter of 1997 compared to 0.3 cents in the
second quarter of 1996 despite the acquisition of rotable spare parts
associated with additional aircraft and ground equipment, improvements
to aircraft, facility leasehold improvements and other capital
expenditures since the second quarter of 1996. In absolute dollars,
depreciation and amortization increased 18.4% from $0.6 million in the
second quarter of 1996 to $0.8 million in the second quarter of 1997.
The cost per ASM of other operating expenses increased to
3.1 cents in the second quarter 1997 from 2.8 cents in the second
quarter of 1996 as a result of increased facilities rentals at
Washington-Dulles, and reversals of excess accruals for passenger
claims expense in the second quarter of 1996. In absolute dollars,
other operating expenses increased 12.2% from $5.7 million in the
second quarter of 1996 to $6.4 million in the second quarter of 1997.
As a result of the foregoing components, total cost per ASM
decreased to 20.7 cents in the second quarter of 1997 compared to 21.0
cents before reversals of restructuring charges in the second quarter
of 1996. The second quarter of 1996 included a reversal of excess
restructuring reserves of (0.1) cents per ASM. Total ASMs increased
6.0% and, in absolute dollars, total operating expenses increased 4.7%
from $41.3 million in the second quarter of 1996 to $43.3 million in
the second quarter of 1997.
The Company's combined effective tax rate for state and
federal taxes during the second quarter of 1997 was approximately 39%.
The Company estimates that the effective tax rate will increase
slightly in the third and fourth quarters due to revisions of
estimates and permanent differences between taxable and book income.
In the second quarter of 1997 the Company recorded net
income of $5.9 million compared to net income of $8.5 million for the
second quarter of 1996. The Company's second quarter of 1997 results
reflect a provision for income taxes that assumes an estimated
effective tax rate of approximately 39%, compared to an estimated
effective tax rate of 5% for the second quarter of 1996 due to the
existence of a net operating loss carryforward. In the second quarter
of 1997, the Company earned income before income tax provision of $9.6
million, compared to $8.9 million in the second quarter of 1996.
During the second quarter of 1997, the Company generated operating
income of $10.0 million compared to $9.2 million for the second
quarter of 1996. Results for the second quarter of 1996 include a
reversal of excess restructuring reserves of $0.2 million.
Six Months Operating Results
<TABLE>
Increase
(Decrease
)
<S> <C> <C> <C>
Six months ended June 30, 1996 1997 % Change
Revenue passengers 695,663 723,759 4.0%
Revenue passenger miles ("RPMs") 169,431 178,613 5.4%
(000's)
Available seat miles ("ASMs") 370,625 395,556 6.7%
(000's)
Passenger load factor 45.7% 45.2% (0.5 pts)
Break-even passenger load factor 40.5% 39.8% (0.7 pts)
Revenue per ASM (cents) 23.8 23.8 0.0%
Yield (cents) 51.2 52.1 1.8%
Cost per ASM (cents) 21.1 21.1 0.0%
Average passenger fare $124.62 $128.56 3.2%
Average passenger trip length 244 247 1.2%
(miles)
Revenue departures 66,769 69,187 3.6%
Revenue block hours 82,880 86,514 4.4%
Aircraft utilization (block hours) 9.7 9.4 (3.1%)
Average cost per gallon of fuel 78.9 81.0 2.7%
(cents)
Aircraft in service (end of period) 57 60 5.3%
</TABLE>
Comparison of six months ended June 30, 1997, to six months ended June
30, 1996.
Results of Operations
Operating Revenues
The Company's operating revenues increased 6.9% to $94.3
million in the first six months of 1997 compared to $88.2 million for
the first six months of 1996. The increase resulted from a 6.7%
increase in ASMs as well as a 1.8% increase in yield partially offset
by a decrease in load factor of 0.5 percentage points. The Company's
break-even load factor decreased from 40.5% to 39.8% year over year.
The increase in yield is related to an increase in average
fare of 3.2% from $124.62 in the first half of 1996 to $128.56 in the
first half of 1997, partially offset by the reinstatement of the 10.0%
ticket tax on March 7, 1997, which was not in effect during the first
half of 1996. Revenue per ASM remained essentially unchanged year over
year. Total passengers increased 4.0% in the first half of 1997
compared to the first half of 1996.
Operating Expenses
The Company's operating expenses increased 6.4% in the first
half of 1997 compared to operating expenses before reversals of
restructuring charges in the first half of 1996 due primarily to a
6.7% increase in ASMs. The increased capacity reflects the net
addition of three J-41s since the first half of 1996. Operating
expenses were also increased by additional profit sharing expenses,
passenger related costs (traffic commissions and related fees) and
increased aircraft rent. Cost per ASM before reversals of
restructuring charges was unchanged at 21.1 cents during the first six
months of 1996 and 1997.
An unaudited summary of operating expenses as a percentage
of operating revenues and cost per ASM for the six months ended June
30, 1996, and 1997 is as follows:
<TABLE>
1996 1997
<S> <C> <C> <C> <C>
Percent Cost Percent Cost
of of
Operati per ASM Operatin per ASM
ng g
Revenue (cents) Revenue (cents)
s s
Salaries and related costs 24.8% 6.0 25.2% 6.1
Aircraft fuel 9.0% 2.1 9.0% 2.1
Aircraft maintenance and 9.1% 2.2 7.4% 1.8
materials
Aircraft rentals 16.4% 3.9 16.0% 3.8
Traffic commissions and related 15.6% 3.7 15.9% 3.8
fees
Depreciation and amortization 1.5% .3 1.6% .4
Other 12.4% 2.9 13.2% 3.1
Total (before restructuring
charge
reversals) 88.8% 21.1 88.3% 21.1
</TABLE>
ASMs increased 6.7% in the first half of 1997 compared to
the first half of 1996 as a result of a 4.4% increase in block hours
and the net addition of three aircraft. Cost per ASM remained
unchanged at 21.1 cents during the first half of 1996 and 1997.
Salaries and related costs per ASM increased to 6.1 cents
for the first six months of 1997 compared to 6.0 cents for the first
six months of 1996. The increase resulted primarily from a 27.8%
increase in profit sharing, additional flight crew hours, and
contractual wage increases for pilots and flight attendants effective
March 1, 1997, and May 1, 1996 respectively. In absolute dollars,
salaries and related costs increased 7.9% from $22.0 million in the
first half of 1996 to $23.7 million in the first half of 1997.
The cost per ASM of aircraft fuel was unchanged at 2.1 cents
in the first six months of 1997 compared to the first six months of
1996 despite an increase in the average cost per gallon of fuel of
2.7% and a 4.4% increase in block hours. Aircraft fuel prices
fluctuate with a variety of factors including the price of crude oil,
and future increases or decreases cannot be predicted with a high
degree of certainty. There is no assurance that future increases will
not adversely affect the Company's operating expenses. In absolute
dollars, aircraft fuel expense increased 7.9% from $7.9 million in the
first half of 1996 to $8.5 million dollars in the first half of 1997.
The cost per ASM of aircraft maintenance and materials
decreased to 1.8 cents in the first six months of 1997 compared to 2.2
cents in the first six months of 1996. During the first half of 1997
the Company recognized credits of approximately $0.9 million for
manufacturer penalties related to engine overhauls and dispatch
reliability, and $0.4 million related to reimbursements for engine
spare parts, offset by increased maintenance related to the net
addition of three J-41 aircraft and the expiration of warranty
coverage for certain aircraft. In absolute dollars, aircraft
maintenance and materials expense decreased 12.2% from $8.0 million in
the first half of 1996 to $7.0 million in the first half of 1997.
The cost per ASM of aircraft rentals decreased to 3.8 cents
in the first six months of 1997 compared to 3.9 cents for the first
six months of 1996. The decrease occurred as a result of the increase
in ASMs partially offset by the increased rent associated with the net
addition of three J-41 aircraft. In absolute dollars, aircraft rentals
increased 4.5% from $14.5 million in the first half of 1996 to $15.1
million in the first half of 1997.
The cost per ASM of traffic commissions and related fees
increased to 3.8 cents in the first six months of 1997 compared to 3.7
cents in the first six months of 1996 due to a 7.3% increase in
passenger revenue, a 4.0% increase in passengers, and contractual rate
increases in program fees paid to United. In absolute dollars, traffic
commissions and related fees increased 9.2% from $13.8 million in the
first half of 1996 to $15.0 million in the first half of 1997.
The cost per ASM of depreciation and amortization was 0.4
cents in the first six months of 1997 compared to 0.3 cents in the
first six months of 1996 despite the acquisition of rotable spare
parts associated with additional aircraft and ground equipment,
improvements to aircraft, facility leasehold improvements and other
capital expenditures since the first half of 1996. In absolute
dollars, depreciation and amortization increased 15.4% from $1.3
million in the first half of 1996 to $1.5 million in the first half of
1997.
The cost per ASM of other operating expenses increased to
3.1 cents in the first six months of 1997 from 2.9 cents in the first
six months of 1996 due to increased facilities rentals at the
Washington-Dulles International Airport ("Washington-Dulles"), and
reversals of excess accruals for passenger claims expense in first
half of 1996. In absolute dollars, other operating expenses increased
13.7% from $10.9 million in the first half of 1996 to $12.4 million in
the first half of 1997.
As a result of the foregoing components, total cost per ASM
remained unchanged at 21.1 cents in the first six months of 1997
compared to 21.1 cents before reversals of restructuring charges in
the first six months of 1996. The first six months of 1996 included a
reversal of excess restructuring reserves of (0.1) cents per ASM.
Total ASMs increased 6.7% and, in absolute dollars, total operating
expenses increased 6.4% from $78.3 million in first half of 1996 to
$83.3 million in the second half of 1997.
In the first six months of 1997 the Company recorded net
income of $6.6 million compared to net income of $9.3 million for the
first six months of 1996. The Company's first half of 1997 results
reflect a provision for income taxes that assumes an estimated
effective tax rate of approximately 39%, compared to an estimated
effective tax rate of 5% for the first half of 1996 due to the
existence of a net operating loss carryforward. In the first half of
1997, the Company earned income before income tax provision of $10.6
million, compared to $9.8 million in the first half of 1996. During
the first half of 1997, the Company generated operating income of
$11.0 million compared to $10.3 million for the first half of 1996.
Results for the first half of 1996 include a reversal of excess
restructuring reserves of $0.4 million.
Outlook
This Outlook section and the Liquidity and Capital Resources
section below contain forward-looking statements. In addition,
statements that use words such as "expects", "intends", and
"anticipates" are forward-looking statements. The Company's actual
results may differ from the results discussed in forward-looking
statements. Factors that could cause the Company's future results to
differ materially from the expectations described herein include the
extent to which the Company's operation of Canadair Regional Jets,
Series 200 ER ("CRJ") is coordinated with the marketing and related
agreements between the Company and United (the "United Express
Agreements"), the costs of implementing CRJ service, the response of
the Company's competitors to the Company's business strategy, the
ability of the Company to obtain favorable financing terms for its
aircraft, market acceptance of the new CRJ service, routes and
schedules offered by the Company, the cost of fuel, the weather,
general economic conditions, satisfaction of regulatory requirements,
and the factors discussed below and in the Company's Annual Report on
Form 10-K for the year ended December 31, 1996.
A central element of the Company's business strategy is
expansion of its aircraft fleet. The Company has commitments to
acquire twelve 50-seat CRJs from July 1997 through 1998. The
introduction of these aircraft will expand the Company's business into
new markets. In general, introduction of new markets into the
Company's route system results, at least in the short-term, in
operating expenses that may not be matched by increases in operating
revenues.
In order to operate the CRJs under the "United Express"
name, the Company must obtain United's consent under the United
Express Agreements. The Company has sought United's consent, and is
awaiting United's response regarding incorporating the CRJs into its
existing United Express product. While the Company's fleet currently
operates only under the "United Express" name, the Company believes
that it will be able to operate CRJs successfully regardless of
whether such operation is under the United Express Agreements.
Nonetheless, the Company believes that its results of operations could
be substantially less favorable unless the CRJs are operated under the
United Express Agreements.
The Company will incur significant expenses in its fleet
expansion program, and must complete several training, operational,
and administrative requirements before commencing CRJ service. In
addition, the CRJs will significantly increase the Company's lease
obligations. The Company is exploring various third party lease
financing arrangements for these and other aircraft.
On March 11, 1994, the Aircraft Mechanics Fraternal
Association ("AMFA") was certified by the National Mediation Board
(the "NMB") as the collective bargaining representative elected by
mechanics and related employees of the Company. As of July 1, 1997,
AMFA represented 120 of the Company's employees. The Company and AMFA
have been attempting to negotiate an initial contract under federal
mediation since December 1994, but have failed to reach an agreement.
A tentative agreement was reached with AMFA in June 1997 but failed
ratification by the membership in July 1997. The NMB has indicated
that it favors continuing the negotiations, and the Company
anticipates participating in further negotiations. If at some point,
the NMB should decide that the parties are deadlocked, the NMB may
declare an impasse and a thirty day cooling off period. If an
agreement has not been reached at the conclusion of that period, AMFA
would have the authority to use self-help, including the right to
strike. The Company and AMFA are also engaged in litigation, which is
more fully described below. If that litigation were resolved in AMFA's
favor, AMFA would be in a position to use self-help, even if the NMB
does not declare an impasse.
The Company's contract with the Association of Flight
Attendants ("AFA") became amendable on April 30, 1997. Negotiations
regarding amendments to this contract have been scheduled to begin in
August 1997. The Company expects to continue operating under the terms
of the existing agreement until new terms are negotiated.
The Company is obligated to collect a U.S. transportation
excise tax of 10% of passenger ticket revenue through September 30,
1997. A revised formula for ticket tax collections for travel
commencing October 1, 1997 and thereafter was recently signed into
law. The new tax is comprised of a percentage of revenue plus a per
segment fee adjusted on an annual basis. For the period October 1,
1997, through September 30, 1998, the ticket tax will be equal to 9%
of passenger ticket revenue plus a $1 per flight segment fee. The
Company does not anticipate that this change will have either a
materially adverse or favorable impact on passenger revenues for the
next twelve months.
Liquidity and Capital Resources
The Company's working capital improved significantly during
the first half of 1997 compared to the first half of 1996. As of June
30, 1997, the Company had cash and cash equivalents of $21.4 million
and working capital of $56.5 million compared to $12.7 million and
$10.3 million respectively as of June 30, 1996. During the first half
of 1997, cash and cash equivalents decreased by $0.1 million,
reflecting net cash provided by operating activities of $6.4 million,
net cash used in investing activities of $5.7 million (related to
deposits for the CRJs and purchases of equipment) and net cash used in
financing activities of $0.9 million. As of June 30, 1997, working
capital included a $50.0 million receivable due from the underwriters
for the proceeds related to the sale of the 7.0% Convertible
Subordinated Notes due July 1, 2004 as discussed below. On July 2,
1997, the Company received net proceeds of approximately $48.3 million
related to this receivable. On July 18, 1997, the Company received an
additional $7.3 million in net proceeds from the exercise of the over-
allotment option related to this offering.
Other Financing
The Company has an asset-based lending agreement with a
financial institution that provides the Company with a line of credit
of up to $20.0 million. Borrowings under the line of credit can
provide the Company a source of working capital until proceeds from
ticket coupons are received. The line is collateralized by all of the
Company's receivables and general intangibles, and there were no
borrowings under the line during the first half of 1997. The Company's
access to this line has been reduced by $4.5 million under the terms
of the letter of credit issued in connection with the financing of the
maintenance facility at Washington-Dulles airport. Negotiations
regarding changes in covenants and reduction of collateral
requirements related to the line of credit agreement have been
scheduled to begin in August 1997.
In June 1997, the Industrial Development Authority of
Loudoun County, Virginia approved a $9.4 million tax exempt bond
issuance in connection with the Company's proposed construction of a
maintenance facility at the Washington-Dulles. These bonds were issued
under a variable interest rate structure for a twenty-five year term
including a requirement for a monthly sinking fund provision, and are
collateralized by the maintenance facility and a letter of credit
issued by one of the Company's financial institutions. The letter of
credit is collateralized by $4.5 million of the Company's line of
credit. The Company will be obligated to pay rent for the facility and
the underlying land leasehold, the proceeds from which the IDA will
make the required interest and sinking fund payments.
On July 2, 1997, the Company issued $50.0 million aggregate
principal amount of 7.0% Convertible Subordinated Notes due July 1,
2004 (the "Notes"), under Rule 144A of the Securities Act of 1933. On
July 2, the Company received net proceeds of approximately $48.3
million related to the sale of these Notes. In addition, the Company
granted the initial purchasers a thirty day option to purchase up to
an additional $7.5 million aggregate principal amount of the Notes
solely to cover over-allotments. On July 18, 1997, the Company
received net proceeds of $7.3 million related to the exercise of this
option.
The net proceeds of the offering have been and will be used
to support the introduction of the Company's regional jet fleet,
repurchase 1.46 million shares of the Company's common stock from
British Aerospace at a discount to the market price, and retire higher
interest rate debt, and for general corporate purposes.
The Notes are convertible into shares of Common Stock by the
holders, par value $0.02 of the Company (the "Common Stock"), at any
time after sixty days following the latest date of original issuance
thereof and prior to maturity, unless previously redeemed or
repurchased, at a conversion price of $18.00 per share, subject to
certain adjustments. Interest on the Notes is payable on April 1 and
October 1 of each year, commencing October 1, 1997. The Notes are not
redeemable by the Company until July 1, 2000. Thereafter, the Notes
will be redeemable, at any time, on at least 15 days notice at the
option of the Company, in whole or in part, at the redemption prices
set forth in the Indenture dated July 2, 1997, in each case, together
with accrued interest.
On April 1, 1997, the Company executed a short term
promissory note for deposits related to the acquisition of Canadair
Regional Jets ("CRJs") for $11.0 million at an 8% annual interest rate
due July 15, 1997. The promissory note was paid in full on July 2,
1997 from the net proceeds of the Notes as described above. The $15.0
million deposit is scheduled to be returned to the Company beginning
with the delivery of the seventh CRJ in early 1998 and ending with the
last CRJ scheduled for delivery in September 1998.
On July 2, 1997, the Company repurchased 1.46 million shares
of the Company's common stock from British Aerospace for approximately
$16.9 million from the net proceeds on the sale of the Notes as
described above. The stock was repurchased at a 22.5% discount from
the average of the closing bid prices during the period June 24
through June 30, 1997.
During July 1997, the Company retired $3.1 million of other
high interest rate debt from the proceeds of the Notes.
Aircraft
On January 8, 1997, the Company entered into an agreement
with Bombardier, Inc. to purchase twelve CRJs with options for thirty-
six additional aircraft. The delivery schedule provides for the
Company to take delivery of four aircraft in 1997 commencing in July,
with the remaining eight aircraft to be delivered during 1998. The
first two aircraft were delivered on July 11, and August 13, 1997
respectively.
On February 23, 1997, the Company entered into an agreement
with Aero International (Regional) (the "BA J-41 Agreement") under
which the Company agreed to acquire twelve new J-41s. The BA J-41
Agreement provided for delivery of twelve J-41 aircraft to the Company
beginning in March 1997 and continuing through mid-1999, and the
Company had accepted delivery of four of these aircraft as of May 15,
1997. On May 29, 1997, the J-41's manufacturer, British Aerospace,
announced that it will no longer manufacturer the J-41 as part of its
regular product line. Subsequently, the Company and British Aerospace
entered into a term sheet whereby the Company canceled its order for
the eight additional J-41s. Depending on the market for used J-41s and
the Company's need for additional turboprop aircraft, the Company may
consider selective acquisitions of used J-41s in the future.
In July 1997, the Company entered into agreements with ICX
Capital Corporation for the permanent financing of three of the four J-
41s delivered to the Company during 1997. ICX acquired these aircraft
from British Aerospace with debt provided by Sanwa Business Credit
Corporation, and entered into leveraged leases with the Company. The
term of the leases is 11.5 years.
Capital Equipment and Debt Service
Capital expenditures for the first six months of 1997 were
$2.8 million compared to $0.9 million for the same period of 1996.
Capital expenditures in the first six months of 1997 consisted
primarily of rotable spare parts, facility leasehold improvements,
furniture and fixtures, ground service equipment, computers, and other
office equipment. For the remainder of 1997 the Company anticipates
spending approximately $5.1 million for rotable spare parts related to
the CRJs and J-41 aircraft, ground service equipment, facilities,
computers, and software. Of this amount, approximately $3.0 million of
manufacturer credits will be applied to the purchase of CRJ spare
parts.
Debt service including capital leases as of June 30, 1997,
was $14.6 million compared to $1.8 million in the same period of 1996.
The increase is the result of an $11.0 million promissory note for
deposits on the acquisition of regional jets and $1.8 million in
additional spare parts and engine financing.
Subsequent to June 30, 1997, the Company paid the $11.0
million promissory note and prepaid $3.1 million in existing notes and
capital leases. As a result, debt service will be reduced by $8.2
million for the next twelve month period.
The Company believes that, in the absence of unusual
circumstances, its cash flow from operations, the accounts receivable
credit facility, and other available equipment financing will be
sufficient to meet its working capital needs, capital expenditures,
and debt service requirements for the next twelve months.
Recent Accounting Pronouncements
In June 1997, the Financial Accounting Standards Board
issued two new disclosure standards. The Company's results of
operations and financial position will be unaffected by implementation
of these new standards.
Statement of Financial Accounting Standards (SFAS) 130,
"Reporting Comprehensive Income", establishes standards for the
reporting and displaying of comprehensive income, its components and
accumulated balances. Comprehensive income is defined to include all
changes in equity except those resulting from investments by owners
and distributions to owners. Among other disclosures, SFAS 130
requires that all items that are required to be recognized under
current accounting standards as components of comprehensive income be
reported in a financial statement that is displayed with the same
prominence as other financial statements.
SFAS 131, "Disclosures About Segments of a Business
Enterprise", establishes standards for the way that public enterprises
report information about operating segments in annual financial
statements and requires reporting of selected information about
operating segments in interim financial statements issued to the
public. It also establishes standards for disclosures regarding
products and services, geographic areas and major customers. SFAS 131
defines operating segments as components of an enterprise about which
separate financial information is available that is evaluated
regularly by the chief operating decision maker in deciding how to
allocate resources and in assessing performance.
Both of these new standards are effective for financial
statements for periods beginning after December 15, 1997 and require
comparative information for earlier years to be restated. Due to the
recent issuance of these standards, management has been unable to
fully evaluate the impact, if any, they may have on future financial
statement disclosures.
Recently, the American Institute of Certified Public
Accountants issued a proposed statement of position on accounting for
start-up costs, including preoperating costs related to the
introduction of new fleet types by airlines. The proposed accounting
guidelines would require companies to expense start-up costs as
incurred. If the Financial Accounting Standards Board approves the
proposed guidelines, as expected, the guidelines will take effect in
December 1997. Presently, the Company intends to defer certain start-
up costs related to the introduction of the regional jets and to
amortize such costs to expense ratably over four years. The Company
will expense preoperating costs, beginning January 1, 1998, should the
proposed guidelines become effective as scheduled. Thus, if the
proposed guidelines become effective, the Company will expense its
previously capitalized start-up costs in the first quarter of 1998,
and such costs will be expensed rather than capitalized when incurred
in the future.
ATLANTIC COAST AIRLINES, INC.
FISCAL QUARTER ENDED June 30, 1997
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings.
The Company is a party to routine litigation and FAA
proceedings incidental to its business, none of which is likely to
have a material effect on the Company's financial position.
The Company is a party to an action pending in the United
States District Court for the Southern District of Ohio, Peter J.
Ryerson, administrator of the estate of David Ryerson, v. Atlantic
Coast Airlines, Case No. C2-95-611. This action is more fully
described in the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1995. The Company believes that all claims
resulting from this litigation remain fully covered under the
Company's insurance policy. On March 10, 1997, the Court granted
Plaintiff's motion to the effect that liability would not be limited
to those damages available under the Warsaw Convention. As of August
12, 1997, the matter has not been set for trial.
The Company is also engaged in litigation with AMFA over
whether AMFA has a right to strike prior to the exhaustion of
mediation pursuant to the Railway Labor Act. This issue arose when the
Company imposed certain unilateral work rule changes during the period
between union certification and an initial collective bargaining
agreement. On December 14, 1995, the U.S. District Court for the
Southern District of New York declined to render a declaratory
judgment requested by AMFA and expressly stated that AMFA was
prohibited from striking at that time. In Aircraft Mechanics Fraternal
Association v. Atlantic Coast Airlines, 55 F.3d 90 (1995), the U.S.
Court of Appeals for the Second Circuit affirmed the District Court's
ruling. AMFA subsequently petitioned the U.S. Court of Appeals for
the Second Circuit to consider whether the Company's actions, although
legal, should allow AMFA to engage in self-help, including the right
to strike. The Second Circuit heard oral arguments on this matter in
January 1997 and, as of August 14, 1997, had not yet rendered its
decision.
The Company is also a party to an action pending in the
United States District Court for the Eastern District of Virginia,
Afzal v. Atlantic Coast Airlines, Civil Action No. 96-1537-A.
Plaintiff alleges that the Company violated Title VII of the Civil
Rights Act of 1964 in terminating his employment as a pilot. The
Company has filed a motion for Summary Judgment, which will be heard
by the Court on August 22, 1997. The case has been set for trial on
September 8, 1997. The Company believes that it has meritorious
defenses; however, there can be no assurance as to the outcome of the
case or that the Company will not incur any liability in connection
with the proceeding.
ITEM 2. Changes in Securities.
Pursuant to a Purchase Agreement exercised on June 27, 1997,
between the Company and Alex. Brown & Sons, Incorporated and The
Robinson-Humphrey Company, Inc. as Initial Purchasers, on July 2,
1997, the Company issued $50.0 million aggregate principal amount of
7.0% Convertible Subordinated Notes due July 1, 2004, under Rule 144A
of the Securities Act of 1933, and received net proceeds of
approximately $48.3 million related to the sale of the Notes. On July
18, 1997 the Company issued an additional $7.5 million aggregate
principal amount of the Notes to cover over-allotments, and received
net proceeds of $7.3 million related to the exercise of the over-
allotment option.
The Notes are convertible into shares of Common Stock, par
value $0.02 of the Company by the holders at any time after sixty days
following the latest date of original issuance thereof and prior to
maturity, unless previously redeemed or repurchased, at a conversion
price of $18.00 per share, subject to certain adjustments. The Notes
are not redeemable by the Company until July 1, 2000. Thereafter, the
Notes will be redeemable, at any time, on at least 15 days notice at
the option of the Company, in whole or in part, at the redemption
prices set forth in the Indenture dated July 2, 1997, in each case,
together with accrued interest. The Notes are unsecured and
subordinated in right of payment in full to all existing and future
Senior Indebtedness.
ITEM 3. Defaults Upon Senior Securities.
None to report.
ITEM 4. Submission of Matters to a Vote of Security Holders.
The annual meeting of shareholders of the Company was held
in Herndon, Virginia on June 3, 1997. Of the 8,508,000 shares of
common stock outstanding on the record date, 7,462,314 were present by
proxy. Those shares were voted on the matters before the meeting as
follows:
A. Election of Directors
For Withheld
C. Edward Acker 7,431,208 34,106
Kerry B. Skeen 7,428,298 34,016
Thomas J. Moore 7,428,489 33,825
Robert E. Buchanan 7,431,691 30,623
Joseph W. Elsbury 6,696,291 766,023
James J. Kerley 6,696,309 766,005
James C. Miller 7,431,562 30,752
John M. Sullivan 7,431,745 30,569
ITEM 5. Other Information.
None to report.
ITEM 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
4.17 Indenture dated as of July 2, 1997, between the
Company and First Union National Bank of Virginia.
4.18 Registration Rights Agreement dated as of July 2,
1997 by and among the Company , Alex. Brown & Sons
Incorporated and The Robinson-Humphrey Company, Inc.
27.1 Financial Data Schedule
(b) Reports on Form 8-K
None to report.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
ATLANTIC COAST AIRLINES, INC.
August 14, 1997 By: /S/ Paul H. Tate
Paul H. Tate
Senior Vice President and Chief
Financial Officer
August 14, 1997 By: /S/ Kerry B. Skeen
Kerry B. Skeen
President and Chief Executive
Officer
_______________________________
1 "Break-even passenger load factor" represents the percentage of ASMs
which must be flown by revenue passengers for the airline to break-
even after operating expenses excluding amounts related to
restructuring.
2 "Cost per ASM" represents total operating expenses excluding amounts
related to restructuring divided by ASMs.
ATLANTIC COAST AIRLINES, INC.
$50,000,000
7% Convertible Subordinated Notes due 2004
________________
INDENTURE
Dated as of July 2, 1997
________________
First Union National Bank of Virginia
Trustee
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS
Section 1.1.Definitions. 1
Section 1.2.Other Definitions. 6
Section 1.3.Rules of Construction. 7
ARTICLE II
THE NOTES
Section 2.1.Designation, Amount and Issue of Notes. 7
Section 2.2.Form of Notes. 7
Section 2.3.Date and Denomination of Notes; Payments of
Interest. 8
Section 2.4.Execution of Notes. 10
Section 2.5.Registrar, Paying Agent and Conversion Agent. 10
Section 2.6.Paying Agent to Hold Money in Trust. 11
Section 2.7.Noteholder Lists. 11
Section 2.8.Exchange and Registration of Transfer of Notes;
Restrictions on Transfer; Depositary. 11
Section 2.9.Mutilated, Destroyed, Lost or Stolen Notes. 20
Section 2.10. Treasury Notes. 21
Section 2.11. Temporary Notes. 21
Section 2.12. Cancellation. 22
Section 2.13. Deposit of Funds. 22
ARTICLE III
REDEMPTION OF NOTES
Section 3.1.Right to Redeem; Notice to Trustee. 22
Section 3.2.Selection of Notes to Be Redeemed. 23
Section 3.3.Notice of Redemption. 23
Section 3.4.Effect of Notice of Redemption. 24
Section 3.5.Deposit of Redemption Price. 24
Section 3.6.Notes Redeemed in Part. 24
Section 3.7.Conversion Arrangement on Call for Redemption. 24
ARTICLE IV
SUBORDINATION OF NOTES
Section 4.1.Notes Subordinated to Senior Indebtedness. 25
Section 4.2.Payments to Holders. 26
Section 4.3.Notes to Be Subrogated to Rights of Holders of
Senior Indebtedness. 28
Section 4.4.Obligations of the Company Unconditional. 29
Section 4.5.Notice to Trustee. 29
Section 4.6.Application by Trustee of Monies Deposited With
It.29
Section 4.7.Subordination Rights Not Impaired by Acts or
Omissions of Company or holders of Senior
Indebtedness. 30
Section 4.8.Trustee to Effectuate Subordination. 30
Section 4.9.Right of Trustee to Hold Senior Indebtedness. 30
Section 4.10. Article IV Not to Prevent Events of Default. 31
Section 4.11. No Fiduciary Duty Created to Holders of Senior
Indebtedness. 31
Section 4.12. Article Applicable to Paying Agent. 31
ARTICLE V
COVENANTS
Section 5.1.Payment of Notes. 31
Section 5.2.SEC Reports. 31
section 5.3.Maintenance of Office or Agency. 32
Section 5.4.Stay, Extension and Usury Laws. 32
Section 5.5.Liquidation. 33
Section 5.6.Compliance Certificates. 34
Section 5.7.Notice of Defaults. 34
Section 5.8.Payment of Taxes and Other Claims. 34
Section 5.9.Corporate Existence. 34
Section 5.10. Maintenance of Properties. 34
Section 5.11. Further Instruments and Acts. 35
ARTICLE VI
NOTEHOLDERS' LISTS AND REPORTS BY THE TRUSTEE
Section 6.1.Holders' Lists. 35
Section 6.2.Preservation and Disclosure of Lists. 35
Section 6.3.Reports by Trustee. 36
ARTICLE VII
REMEDIES OF THE TRUSTEE AND NOTEHOLDERS
ON AN EVENT OF DEFAULT
Section 7.1.Events of Default. 36
Section 7.2.Payment of Notes on Default; Suit Therefor. 38
Section 7.3.Application of Monies Collected by Trustee. 40
Section 7.4.Proceedings by Holders. 41
Section 7.5.Proceedings by Trustee. 41
Section 7.6.Remedies Cumulative and Continuing. 42
Section 7.7.Direction of Proceedings and Waiver of Defaults by
Majority of Holders. 42
Section 7.8.Notice of Defaults. 43
Section 7.9.Undertaking to Pay Costs. 43
ARTICLE VIII
CONCERNING THE TRUSTEE
Section 8.1.Duties and Responsibilities of Trustee. 43
Section 8.2.Reliance on Documents, Opinions, Etc. 44
Section 8.3.No Responsibility for Recitals, Etc. 46
Section 8.4.Trustee, Paying Agents, Conversion Agents or
Registrar May Own Notes. 46
Section 8.5.Monies to Be Held in Trust. 46
Section 8.6.Compensation and Expenses of Trustee. 46
Section 8.7.Officers' Certificate as Evidence. 47
Section 8.8.Conflicting Interests of Trustee. 47
Section 8.9.Eligibility of Trustee. 47
Section 8.10. Resignation or Removal of Trustee. 47
Section 8.11. Acceptance by Successor Trustee. 49
Section 8.12. Succession by Merger, Etc. 49
Section 8.13. Limitation on Rights of Trustee as Creditor. 50
ARTICLE IX
CONCERNING THE NOTEHOLDERS
Section 9.1.Action by Holders. 50
Section 9.2.Proof of Execution by Holders. 50
Section 9.3.Who are Deemed Absolute Owners. 51
Section 9.4.Company-Owned Notes Disregarded. 51
Section 9.5.Revocation of Consents; Future Holders Bound. 52
ARTICLE X
NOTEHOLDERS' MEETINGS
Section 10.1. Purpose of Meetings. 52
Section 10.2. Call of Meetings by Trustee. 52
Section 10.3. Call of Meetings by Company or Holders. 53
Section 10.4. Qualifications for Voting. 53
Section 10.5. Regulations. 53
Section 10.6. Voting. 54
Section 10.7. No Delay of Rights by Meeting. 54
ARTICLE XI
SUPPLEMENTAL INDENTURES
Section 11.1. Supplemental Indentures Without Consent of
Holders. 55
Section 11.2. Supplemental Indentures with Consent of
Holders. 56
Section 11.3. Effect of Supplemental Indenture. 57
Section 11.4. Notation on Notes. 57
Section 11.5. Evidence of Compliance of Supplemental
Indenture to Be
Furnished Trustee. 57
ARTICLE XII
CONSOLIDATION, MERGER, SALE, CONVEYANCE AND LEASE
Section 12.1. Company May Consolidate Etc. on Certain Terms.58
Section 12.2. Successor Corporation to Be Substituted. 58
Section 12.3. Opinion of Counsel to Be Given Trustee. 59
ARTICLE XIII
SATISFACTION AND DISCHARGE OF INDENTURE
Section 13.1. Discharge of Indenture. 59
Section 13.2. Deposited Monies to Be Held in Trust by
Trustee. 60
Section 13.3. Paying Agent to Repay Monies Held. 60
Section 13.4. Return of Unclaimed Monies. 60
Section 13.5. Reinstatement. 60
ARTICLE XIV
IMMUNITY OF INCORPORATORS, STOCKHOLDERS,
OFFICERS AND DIRECTORS
Section 14.1. Indenture and Notes Solely Corporate
Obligations. 61
ARTICLE XV
CONVERSION OF NOTES
Section 15.1. Right to Convert. 61
Section 15.2. Exercise of Conversion Privilege; Issuance of
Common Stock on Conversion; No Adjustment for
Interest or Dividends. 62
Section 15.3. Cash Payments in Lieu of Fractional Shares. 63
Section 15.4. Conversion Price. 64
Section 15.5. Adjustment of Conversion Price. 64
Section 15.6. Effect of Reclassification, Consolidation,
Merger or Sale. 72
Section 15.7. Taxes on Shares Issued. 73
Section 15.8. Reservation of Shares to Be Fully Paid;
Compliance with
Governmental Requirements; Listing of Common
Stock. 74
Section 15.9. Responsibility of Trustee. 74
Section 15.10. Notice to Holders Prior to Certain Actions. 75
ARTICLE XVI
REPURCHASE OF NOTES AT OPTION OF THE HOLDER
UPON CHANGE IN CONTROL
Section 16.1. Right to Require Repurchase. 76
Section 16.2. Notices; Method of Exercising Purchase Right,
Etc. 76
Section 16.3. Certain Definitions. 78
Section 16.4. Change in Control. 78
Section 16.5. Consolidation, Merger, Etc. 79
ARTICLE XVII
MISCELLANEOUS PROVISIONS
Section 17.1. Provisions Binding on Company's Successors. 80
Section 17.2. Official Acts by Successor Corporation. 80
Section 17.3. Addresses for Notices, Etc. 80
Section 17.4. Governing Law. 81
Section 17.5. Evidence of Compliance with Conditions
Precedent
Certificates to Trustee. 81
Section 17.6. Legal Holidays. 81
Section 17.7. Trust Indenture Act. 82
Section 17.8. No Security Interest Created. 82
Section 17.9. Benefits of Indenture. 82
Section 17.10. Table of Contents, Headings, Etc. 82
Section 17.11. Authenticating Agent. 82
Section 17.12. Execution in Counterparts. 83
INDENTURE dated as of July 2, 1997, between Atlantic Coast
Airlines, Inc., a Delaware corporation (hereinafter sometimes
called the "Company," as more fully set forth in Section 1.1),
and First Union National Bank of Virginia, a national banking
association, as trustee hereunder (hereinafter sometimes called
the "Trustee," as more fully set forth in Section 1.1).
W I T N E S S E T H:
WHEREAS, for its lawful corporate purposes, the Company has
duly authorized the issue of its 7% Convertible Subordinated
Notes due 2004 (hereinafter sometimes called the "Notes"), in an
aggregate principal amount not to exceed $50,000,000 ($57,500,000
if the overallotment option is exercised in full) and, to provide
the terms and conditions upon which the Notes are to be
authenticated, issued and delivered, the Company has duly
authorized the execution and delivery of this Indenture;
WHEREAS, the Notes, the certificate of authentication to be
borne by the Notes, a form of assignment, a form of option to
elect repurchase upon a Change in Control and a form of
conversion notice to be borne by the Notes are to be
substantially in the forms hereinafter provided for; and
WHEREAS, all acts and things necessary to make the Notes,
when executed by the Company and authenticated and delivered by
the Trustee or a duly authorized authenticating agent, as in this
Indenture provided, the valid, binding and legal obligations of
the Company, and to constitute these presents a valid agreement
according to its terms, have been done and performed, and the
execution of this Indenture and the issue hereunder of the Notes
have in all respects been duly authorized.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
That in order to declare the terms and conditions upon which
the Notes are, and are to be, authenticated, issued and
delivered, and in consideration of the premises and of the
purchase and acceptance of the Notes by the Holders thereof, the
Company covenants and agrees with the Trustee for the equal and
proportionate benefit of the respective Holders from time to time
of the Notes (except as otherwise provided below), as follows:
ARTICLE I
DEFINITIONS
Section 1.1. Definitions.
The terms defined in this Section 1.1 (except as herein
otherwise expressly provided or unless the context otherwise
requires) for all purposes of this Indenture and of any indenture
supplemental hereto shall have the respective meanings specified
in this Section 1.1. All other terms used in this Indenture that
are defined in the Trust Indenture Act or which are by reference
therein defined in the Securities Act (except as herein otherwise
expressly provided or unless the context otherwise requires)
shall have the meanings assigned to such terms in said Trust
Indenture Act and in said Securities Act as in force at the date
of the execution of this Indenture. The words "herein,"
"hereof," "hereunder," and words of similar import refer to this
Indenture as a whole and not to any particular Article, Section
or other Subdivision. The terms defined in this Article include
the plural as well as the singular.
"Affiliate" of any specified Person means any other Person
directly or indirectly controlling or controlled by or under
direct or indirect common control with such specified Person.
For the purposes of this definition, "control" when used with
respect to any specified Person means the power to direct the
management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract
or otherwise; and the terms "controlling" and "controlled" have
meanings correlative to the foregoing.
"Agent" means any Registrar, Paying Agent or Conversion
Agent or any successor thereto.
"Board of Directors" means either the Board of Directors of
the Company or any committee of such Board duly authorized to act
for it hereunder.
"Business Day" means any day other than (i) a Saturday or
Sunday or (ii) a day on which banking institutions in the City of
New York are authorized or required by law or executive order to
remain closed.
"Capitalized Lease Obligation" means indebtedness
represented by obligations under a lease that is required to be
capitalized for financial reporting purposes in accordance with
generally accepted accounting principles; the amount of such
indebtedness shall be the capitalized amount of such obligations
determined in accordance with such principles.
"Cash" or "cash" means such coin or currency of the United
States as at any time of payment is legal tender for the payment
of public and private debts.
"Commission" means the Securities and Exchange Commission,
as from time to time constituted, created under the Exchange Act,
or if at any time after the execution of this instrument such
Commission is not existing and performing the duties now assigned
to it under the Trust Indenture Act, then the body performing
such duties on such date.
"Common Stock" means the common stock, par value $0.02 per
share, of the Company.
"Company" means Atlantic Coast Airlines, Inc. until a
successor corporation shall have become such pursuant to the
applicable provisions of this Indenture, and thereafter "Company"
shall mean such successor corporation.
"Corporate Trust Office" means the principal offices of the
Trustee at which at any particular time its corporate trust
business shall be administered, which offices as of the date of
this Indenture are located at 901 East Cary Street, 2nd Floor,
Richmond, Virginia 23261-3279 and 1525 West W. T. Harris
Boulevard, Charlotte, North Carolina 28262.
"Custodian" means First Union National Bank of Virginia, as
custodian with respect to the Notes in global form, or any
successor entity thereto.
"Default" means any event which is, or after notice or
passage of time, or both, would be, an Event of Default.
"Depositary" means, with respect to the Notes issued or
issuable in whole or in part in global form, the Person
designated as Depositary by the Company pursuant to Section 2.8
with respect to such Notes (or any successor thereto).
"Designated Senior Indebtedness" means the Company's
Indebtedness outstanding from time to time under its revolving
credit facility and any particular Senior Indebtedness in which
the instrument creating or evidencing the same or the assumption
or guarantee thereof (or related agreements or documents to which
the Company is a party) expressly provides that such Senior
Indebtedness shall be "Designated Senior Indebtedness" for
purposes of the Indenture (provided that such instrument,
agreement or other document may place limitations and conditions
on the right of such Senior Indebtedness to exercise the rights
of Designated Senior Indebtedness).
"Event of Default" means any event specified in Section
7.1(a), (b), (c), (d), (e), (f) or (g).
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
"Holder" or "Noteholder" means a Person in whose name a Note
is registered on the Note Register.
"Indebtedness" means, with respect to any Person, and
without duplication, (a) the principal of and premium, if any,
and interest on, and fees, costs, enforcement expenses,
collateral protection expenses and other reimbursement or
indemnity obligations in respect to all indebtedness or
obligations of the Company to any Person, including but not
limited to banks and other lending institutions, for money
borrowed that is evidenced by a note, bond, loan agreement, or
similar instrument or agreement (including purchase money
obligations with original maturities in excess of one year and
noncontingent reimbursement obligations in respect of amounts
paid under letters of credit), (b) all reimbursement obligations
and other liabilities (contingent or otherwise) of such Person
with respect to letters of credit, bank guarantees or bankers'
acceptances, (c) all obligations and liabilities (contingent or
otherwise) in respect of Capitalized Lease Obligations on the
balance sheet of such Person, (d) all obligations of such Person
(contingent or otherwise) with respect to an interest rate or
other swap, cap or collar agreement or other similar instrument
or agreement or foreign currency hedge, exchange, purchase or
similar instrument or agreement, (e) all direct or indirect
guaranties or similar agreements by such Person in respect of,
and obligations or liabilities (contingent or otherwise) of such
Person to purchase or otherwise acquire or otherwise assure a
creditor against loss in respect of indebtedness, obligations or
liabilities of another Person of the kind described in clauses
(a) through (d), (f) any indebtedness or other obligations,
excluding any operating leases the Company is currently (or may
become) a party to, described in clauses (a) through (d) secured
by any mortgage, pledge, lien or other encumbrance existing on
property which is owned or held by such Person, regardless of
whether the indebtedness or other obligation secured thereby
shall have been assumed by such Person and (g) any and all
deferrals, renewals, extensions and refundings of, or amendments,
modifications or supplements to, any indebtedness, obligation or
liability of the kind described in clauses (a) through (f).
"Indenture" means this instrument as originally executed or,
if supplemented or amended as herein provided, as so supplemented
or amended.
"Initial Purchasers" means Alex. Brown & Sons Incorporated
and The Robinson-Humphrey Company, Inc.
"Institutional Accredited Investor" means an institutional
accredited investor within the meaning of Rule 501(a)(1), (2),
(3) or (7) of Regulation D under the Securities Act.
"Officer" means the Chairman of the Board, the President,
the Chief Financial Officer, the Controller, the Secretary, any
Assistant Secretary or any Vice President of the Company.
"Officer's Certificate" means a certificate signed by two
Officers, one of whom must be the Chairman of the Board, the
President, the Chief Financial Officer or a Vice President of the
Company.
"Opinion of Counsel" means a written opinion of counsel, who
may be counsel for the Company, and who shall be acceptable to
the Trustee.
"Person" means any individual, corporation, partnership,
joint venture, trust, association, joint stock company,
unincorporated organization or government or any agency or
political subdivision thereof.
"PORTAL Market" means the Private Offerings, Resales and
Trading through Automated Linkages Market operated by the
National Association of Securities Dealers, Inc. or any successor
thereto.
"Principal" or "principal" of a debt security, including the
Notes, means the principal of the security plus, when
appropriate, the premium, if any, on the security.
"QIB" shall mean a "qualified institutional buyer" as
defined in Rule 144A under the Securities Act.
"Redemption Date," when used with respect to any Note to be
redeemed, means the date fixed for such redemption by or pursuant
to this Indenture.
"Redemption Price," when used with respect to any Note to be
redeemed, means the price at which it is to be redeemed pursuant
to this Indenture.
"Registration Rights Agreement" means that certain
Registration Rights Agreement, dated as of July 2, 1997, between
the Company and the Initial Purchasers.
"Regulation D" means Regulation D promulgated under the
Securities Act (or any successor provision), as it may be amended
from time to time.
"Representative" means the indenture trustee or other
trustee, agent or representative for the holders of any Senior
Indebtedness.
"Senior Indebtedness" means the principal of, premium, if
any, interest (including all interest accruing subsequent to the
commencement of any bankruptcy or similar proceeding, whether or
not a claim for post-petition interest is allowable as a claim in
any such proceeding) and rent payable on or in connection with,
and all fees, costs, expenses and other amounts accrued or due on
or in connection with, Indebtedness of the Company, whether
outstanding on the date of this Indenture or thereafter created,
incurred, assumed, guaranteed or in effect guaranteed by the
Company (including all deferrals, renewals, extensions or
refundings of, or amendments, modifications or supplements to,
the foregoing), unless in the case of any particular Indebtedness
the instrument creating or evidencing the same or the assumption
or guarantee thereof expressly provides that such Indebtedness
shall not be senior in right of payment to the Notes or expressly
provides that such Indebtedness is "pari passu" with or "junior"
to the Notes. Notwithstanding the foregoing, the term Senior
Indebtedness shall not include any Indebtedness of the Company to
any Subsidiary of the Company.
"SEC" or "Commission" means the Securities and Exchange
Commission.
"Securities Act" means the Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder.
"Subsidiary" means with respect to any Person, (i) any
corporation, association or other business entity of which more
than 50% of the total voting power of shares of capital stock
entitled (without regard to the occurrence of any contingency) to
vote in the election of directors, managers or trustees thereof
is at the time owned or controlled, directly or indirectly, by
such person on one or more Subsidiaries of such person (or a
combination thereof) and (ii) any partnership (a) the sole
general partner or managing general partner of which is such
person or a Subsidiary of such person or (b) the only general
partners of which are such person or one or more Subsidiaries of
such Person (or any combination thereof).
"TIA" or "Trust Indenture Act" means the Trust Indenture Act
of 1939 (15 U.S.C. 77aaa-77666), as amended by the Trust
Indenture Reform Act of 1990, and as in effect on the date of
this Indenture, except as provided in Sections 11.3, 15.6 and
16.5, and except to the extent any amendment to the Trust
Indenture Act expressly provides for application of the Trust
Indenture Act as in effect on another date.
"Trading Day" or "trading day" means, with respect to any
security, each Monday, Tuesday, Wednesday, Thursday and Friday,
other than any day on which securities are not traded on the
exchange or market in which such security is traded.
"Trustee" means the party named as such in this Indenture
until a successor replaces it in accordance with the provisions
of this Indenture, and thereafter means the successor.
"Trust Officer" means any officer or corporate trust
officer or assistant corporate trust officer of the Trustee
assigned by the Trustee to administer its corporate trust
matters.
"U.S. Government Obligations" means direct noncallable
obligations of, or noncallable obligations guaranteed by, the
United States of America for the payment of which obligation or
guarantee the full faith and credit of the United States is
pledged.
"Vice President" when used with respect to the Company,
means any duly appointed vice president, whether or not
designated by a number or a word or words added before or after
the title "vice president."
Section 1.2. Other Definitions.
TERM DEFINED IN SECTION
"Change in Control" Section
16.4
"Closing Price" Section
15.5
"Conversion Agent" Section
2.5
"Conversion Price" Section
15.4
"Current Market Price" Section
15.5
"Defaulted Interest" Section
2.3
"Expiration Time" Section
15.5
"Note Registrar" Section
2.8
"Paying Agent" Section
2.5
"Payment Blockage Notice" Section
4.2
"Purchased Shares" Section
15.5
"Record Date" Section
15.5
"Registrar" Section
2.5
"Securities" Section
15.5
"Trigger Event" Section
15.5
Section 1.3. Rules of Construction.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the
meaning assigned to it in accordance with generally accepted
accounting principles in effect on the date hereof, and any other
reference in this Indenture to "generally accepted accounting
principles" refers to generally accepted accounting principles in
effect on the date hereof;
(3) words in the singular include the plural, and
words in the plural include the singular;
(4) provisions apply to successive events and
transactions; and
(5) "herein," "hereof" and other words of similar
import refer to this Indenture as a whole and not to any
particular Article, Section or other subdivision.
ARTICLE II
THE NOTES
Section 2.1. Designation, Amount and Issue of Notes.
The Notes shall be designated as "7% Convertible
Subordinated Notes due 2004." Notes to exceed the aggregate
principal amount of $50,000,000 (or $57,500,000 if the over-
allotment option set forth in Section 2(b) of the Purchase
Agreement, dated June 27, 1997, by and between the Company and
the Initial Purchasers is exercised in full) upon the execution
of this Indenture, or (except pursuant to Sections 2.8, 2.9, 15.2
and 16.1 hereof) from time to time thereafter, may be executed by
the Company and delivered to the Trustee for authentication, and
the Trustee shall thereupon authenticate and deliver said Notes
to or upon the written order of the Company, signed by its (a)
President, Senior Vice President or any Vice President (whether
or not designated by a number or numbers or word or words added
before or after the title "Vice President") and (b) Treasurer or
Assistant Treasurer or its Secretary or Assistant Secretary,
without any further action by the Company hereunder.
Section 2.2. Form of Notes.
The Notes and the Trustee's certificate of authentication to
be borne by such Notes shall be substantially in the form set
forth in Exhibit A, which is incorporated in and part of this
Indenture.
Any of the Notes may have such letters, numbers or other
marks of identification and such notations, legends and
endorsements as the Officers executing the same may approve
(execution thereof to be conclusive evidence of such approval)
and as are not inconsistent with the provisions of this
Indenture, or as may be required to comply with any law or with
any rule or regulation made pursuant thereto or with any rule or
regulation of any securities exchange or automated quotation
system on which the Notes may be listed, or to conform to usage.
Any Note in global form shall represent such of the
outstanding Notes as shall be specified therein and shall provide
that it shall represent the aggregate amount of outstanding Notes
from time to time endorsed thereon and that the aggregate amount
of outstanding Notes represented thereby may from time to time be
increased or reduced to reflect transfers or exchanges permitted
hereby. Any endorsement of a Note in global form to reflect the
amount of any increase or decrease in the amount of outstanding
Notes represented thereby shall be made by the Trustee or the
Custodian, at the direction of the Trustee, in such manner and
upon instructions given by the Holder of such Notes in accordance
with this Indenture. Payment of principal of and interest and
premium, if any, on any Note in global form shall be made to the
Holder of such Note.
The terms and provisions contained in the form of Note
attached as Exhibit A hereto shall constitute, and are hereby
expressly made, a part of this Indenture and, to the extent
applicable, the Company and the Trustee, by their execution and
delivery of this Indenture, expressly agree to such terms and
provisions and to be bound thereby.
Neither the Company nor the Trustee shall have any
responsibility for any defect in the CUSIP number that appears on
any Note, check, advice of payment or redemption notice, and any
such document may contain a statement to the effect that CUSIP
numbers have been assigned by an independent service for
convenience of reference and that neither the Company nor the
Trustee shall be liable for any inaccuracy in such numbers.
Section 2.3. Date and Denomination of Notes; Payments of
Interest.
The Notes shall be issuable in registered form without
coupons in denominations of $1,000 principal amount ($100,000 and
integral multiples of $1,000 in excess thereof, in the case of
Notes issued pursuant to Regulation D). Every Note shall be
dated July 2, 1997 and shall bear interest from the applicable
date in each case as specified on the face of the form of Note
attached as Exhibit A hereto. Interest on the Notes shall be
paid in arrears on each April 1 and October 1 commencing October
1, 1997. Interest on the Notes shall be computed on the basis of
a 360-day year comprised of twelve 30-day months.
The Person in whose name any Note is registered at the close
of business on any record date with respect to any interest
payment date (including any Note that is converted after the
record date and on or before the interest payment date) shall be
entitled to receive the interest payable on such interest payment
date notwithstanding the cancellation of such Note upon any
transfer, exchange or conversion subsequent to the record date
and on or prior to such interest payment date, provided, that in
the case of any Note, or portion thereof, called for redemption
on a Redemption Date or repurchased in connection with a Change
in Control on a repurchase date that is after a record date and
prior to (but excluding) the next succeeding interest payment
date, interest shall not be paid to the Person in whose name the
Note, or portion thereof, is registered on the close of business
on such record date and the Company shall have no obligation to
pay interest on such Note or such portion except to the extent
required to be paid upon redemption or repurchase of such Note or
portion thereof pursuant to Section 3.1 or 16.1 hereof. Interest
may, at the option of the Company, be paid by check mailed to the
address of such Person on the Note register provided that, with
respect to any Holder of Notes with an aggregate principal amount
equal to or in excess of $5,000,000 at the request of such Holder
in writing to the Company at least five (5) days prior to the
date set for payment of interest (who shall then furnish written
notice to such effect to the Trustee), interest on such Holder's
Notes shall be paid by wire transfer in immediately available
funds in accordance with the wire transfer instructions supplied
by such Holder to the Trustee and Paying Agent (if different from
the Trustee). The term "Interest Payment Date" shall mean April
1 and October 1 of each year commencing on October 1, 1997. The
term "record date" with respect to any interest payment date
shall mean the March 15 or September 15 preceding said April 1 or
October 1, respectively.
Any interest on any Note which is payable, but is not
punctually paid or duly provided for, on any said April 1 or
October 1 (herein called "Defaulted Interest") shall be paid by
the Company, at its election in each case, as provided in clause
(1) or (2) below.
(1) The Company may elect to make payment of any
Defaulted Interest to the Persons in whose names are registered
at the close of business on a special record date for the payment
of such Defaulted Interest, which shall be fixed in the following
manner. The Company shall notify the Trustee in writing of the
amount of Defaulted Interest to be paid on each Note and the date
of payment (which shall not be less than 25 days after the
receipt by the Trustee of such notice, unless the Trustee shall
consent to an earlier date), and at the same time the Company
shall deposit with the Trustee an amount of money equal to the
aggregate amount to be paid in respect of such Defaulted Interest
or shall make arrangements satisfactory to the Trustee for such
deposit prior to the date of the proposed payment, such money
when deposited to be held in trust for the benefit of the Persons
entitled to such Defaulted Interest as in this clause provided.
Thereupon the Trustee shall fix a special record date for the
payment of such Defaulted Interest which shall be not more than
15 days and not less than ten (10) days prior to the date of the
proposed payment and not less than ten (10) days after the
receipt by the Trustee of the notice of the proposed payment.
The Trustee shall promptly notify the Company of such special
record date and, in the name and at the expense of the Company,
shall cause notice of the proposed payment of such Defaulted
Interest and the special record date therefor to be mailed, first-
class postage prepaid, to each Noteholder at his address as it
appears in the Note register, not less than ten (10) days prior
to such special record date. Notice of the proposed payment of
such Defaulted Interest and the special record date therefor
having been so mailed, such Defaulted Interest shall be paid to
the Persons in whose names the Notes were registered at the close
of business on such special record date and shall no longer be
payable pursuant to the following clause (2).
(2) The Company may make payment of any Defaulted
Interest in any other lawful manner not inconsistent with the
requirements of any securities exchange or automated quotation
system on which the Notes may be listed or designated for
listing, and upon such notice as may be required by such exchange
or automated quotation system, if, after notice is given by the
Company to the Trustee of the proposed payment pursuant to this
clause, such manner of payment shall be deemed practicable by the
Trustee.
Section 2.4. Execution of Notes.
The Notes shall be signed in the name and on behalf of the
Company by the manual or facsimile signage of its President, any
Senior Vice President or any Vice President (whether or not
designated by a number or numbers or word or words added before
or after the title "Vice President") and attested by the manual
or facsimile signature of its Secretary or any of its Assistant
Secretaries (which may be printed, engraved or otherwise
reproduced thereon, by facsimile or otherwise). Only such Notes
as shall bear thereon a certificate of authentication
substantially in the form set forth on the form of Note attached
as Exhibit A hereto, manually executed by the Trustee (or an
authenticating agent appointed by the Trustee as provided by
Section 17.11), shall be entitled to the benefits of this
Indenture or be valid or obligatory for any purpose. Such
certificate by the Trustee (or such an authenticating agent) upon
any Note executed by the Company shall be conclusive evidence
that the Note so authenticated has been duly authenticated and
delivered hereunder and that the Holder is entitled to the
benefits of this Indenture.
In case any Officer who shall have signed any of the Notes
shall cease to be such Officer before the Notes so signed shall
have been authenticated and delivered by the Trustee, or disposed
of by the Company, such Notes nevertheless may be authenticated
and delivered or disposed of as though the Person who signed such
Notes had ceased to be such Officer and any Note may be signed on
behalf of the Company by such Persons as, at the actual date of
the execution of such Note, shall be the proper Officers,
although at the date of the execution of this Indenture any such
Person was not such an Officer.
Section 2.5. Registrar, Paying Agent and Conversion
Agent.
The Company shall maintain an office or agency where Notes
may be presented for registration of transfer or for exchange
(the "Registrar"), an office or agency where Notes may be
presented for payment (the "Paying Agent"), an office or agency
where Notes may be presented for conversion (the "Conversion
Agent") and an office or agency where notices and demands to or
upon the Company in respect of the Notes and this Indenture may
be served. The Registrar shall keep a register of the Notes and
of their transfer and exchange.
The Company shall enter into an appropriate agency agreement
with any Agent not a party to this Indenture. The agreement shall
implement the provisions of this Indenture that relate to such
Agent. The Company shall notify the Trustee of the name and
address of any Agent not a party to this Indenture. If the
Company fails to maintain a Registrar, Paying Agent, Conversion
Agent or agent for service of notices and demands, or fails to
give the foregoing notice, the Trustee shall act as such.
The Company initially appoints the Trustee as Registrar,
Paying Agent, Conversion Agent and agent for service of notices
and demands in connection with the Notes.
Section 2.6. Paying Agent to Hold Money in Trust.
On or prior to each due date of the principal of or interest
on any Securities, the Company shall deposit with the Paying
Agent a sum sufficient to pay such principal or interest so
becoming due. Subject to Sections 4.1, 4.2 and 4.3, the Paying
Agent shall hold in trust for the benefit of Holders or the
Trustee all money held by the Paying Agent for the payment of
principal of or interest on the Notes, and shall notify the
Trustee of any default by the Company (or any other obligor on
the Notes) in making any such payment. If the Company or an
Affiliate of the Company acts as Paying Agent, it shall, on or
before each due date of the principal of or interest on any
Notes, segregate the money and hold it as a separate trust fund.
The Company at any time may require a Paying Agent to pay all
money held by it to the Trustee and the Trustee may at any time
during the continuance of any default, upon written request to a
Paying Agent, require such Paying Agent to forthwith pay to the
Trustee all sums so held in trust by such Paying Agent. Upon
doing so, the Paying Agent (other than the Company) shall have no
further liability for the money.
Section 2.7. Noteholder Lists.
The Trustee shall preserve in as current a form as is
reasonably practicable the most recent list available to it of
the names and addresses of Holders. If the Trustee is not the
Registrar, the Company shall furnish to the Trustee on or before
each interest payment date and at such other times as the Trustee
may request in writing a list in such form and as of such date as
the Trustee may reasonably require of the names and addresses of
Holders, and the Company shall otherwise comply with TIA Section
312(a).
Section 2.8. Exchange and Registration of Transfer of
Notes; Restrictions on Transfer; Depositary.
(a) The Company shall cause to be kept at the Corporate
Trust Office a register (the register maintained in such office
and in any other office or agency of the Company designated
pursuant to Section 5.3 being herein sometimes collectively
referred to as the "Note register") in which, subject to such
reasonable regulations as it may prescribe, the Company shall
provide for the registration of Notes and of transfers of Notes.
The Note register shall be in written form or in any form capable
of being converted into written form within a reasonably prompt
period of time. The Trustee is hereby appointed "Note Registrar"
for the purpose of registering Notes and transfers of Notes as
herein provided. The Company may appoint one or more co-
Registrars in accordance with Section 5.3.
Upon surrender for registration of transfer of any
Note to the Note Registrar or any co-Registrar, and satisfaction
of the requirements for such transfer set forth in this Section
2.8, the Company shall execute, and the Trustee shall
authenticate and deliver, in the name of the designated
transferee or transferees, one or more new Notes of any
authorized denominations and of a like aggregate principal amount
and bearing such restrictive legends as may be required by this
Indenture.
Notes may be exchanged for other Notes of any
authorized denominations and of a like aggregate principal
amount, upon surrender of the Notes to be exchanged at any such
office or agency maintained by the Company pursuant to Section
5.3. Whenever any Notes are so surrendered for exchange, the
Company shall execute, and the Trustee shall authenticate and
deliver, the Notes which the Noteholder making the exchange is
entitled to receive bearing registration numbers not
contemporaneously outstanding.
All Notes issued upon any registration of transfer
or exchange of Notes shall be the valid obligations of the
Company, evidencing the same debt, and entitled to the same
benefits under this Indenture, as the Notes surrendered upon such
registration of transfer or exchange.
All Notes presented or surrendered for
registration of transfer or for exchange, redemption, repurchase
or conversion shall (if so required by the Company or the Note
Registrar) be duly endorsed, or be accompanied by a written
instrument or instruments of transfer in form satisfactory to the
Company and the Trustee, and the Notes shall be duly executed by
the Noteholder thereof or his attorney duly authorized in
writing.
No service charge shall be made for any
registration of transfer or exchange of Notes, but the Company
may require payment of a sum sufficient to cover any tax,
assessment or other governmental charge that may be imposed in
connection with any registration of transfer or exchange of
Notes.
Neither the Company nor the Trustee nor any Note
Registrar nor any co-registrar shall be required to exchange or
register a transfer of (a) any Notes for a period of 15 days next
preceding any selection of Notes to be redeemed or (b) any Notes
or portions thereof called for redemption pursuant to Article III
or (c) any Notes or portions thereof surrendered for conversion
pursuant to Article XV.
(b) So long as the Notes are eligible for book-
entry settlement with the Depositary, unless otherwise required
by law, all Notes to be traded (i) on the PORTAL Market shall be
represented by a Note in global form (the "Rule 144A Global
Note") or (ii) to a Person who is not a U.S. Person (as defined
in Regulation S) who is acquiring the Note in an offshore
transaction (a "Foreign Person") in accordance with Regulation S
shall be represented by a Note in global form (the "Regulation S
Global Note") (the Rule 144 A Global Note and the Regulation S
Global Note collectively referred to in this Indenture as the
"Global Note"), the Rule 144A Global Note and the Regulation S
Global Note being registered in the name of the Depositary or the
nominee of the Depositary. The transfer and exchange of
beneficial interests in the Global Note, which does not involve
the issuance of a Note in certificated form, shall be effected
through the Depositary, in accordance with this Indenture
(including restrictions on transfer set forth herein) and the
procedures of the Depositary therefor.
At any time at the request of the beneficial
Holder of an interest in the Global Note to obtain a Note in
certificated form, such beneficial Holder shall be entitled to
obtain a Note in certificated form upon written request to the
Trustee and the Custodian in accordance with the standing
instructions and procedures existing between the Custodian and
Depositary for the issuance thereof. Upon receipt of any such
request, the Trustee, or the Custodian at the discretion of the
Trustee, will cause, in accordance with the standing,
instructions and procedures existing between the Depositary and
the Custodian, the aggregate principal amount of the Rule 144A
Global Note or Regulation S Global Note, as appropriate, to be
reduced by the principal amount of the Note in certified form
issued upon such request to such beneficial Holder and, following
such reduction, the Company will execute and the Trustee will
authenticate and deliver to such beneficial Holder (or its
nominee) a Note or Notes in certificated form in the appropriate
aggregate principal amount in the name of such beneficial Holder
(or its nominee) and bearing such restrictive legends as may be
required by this Indenture.
Any transfer of a beneficial interest in the
Global Note which cannot be effected through book-entry
settlement must be effected by the delivery to the transferee (or
its nominee) of a Note or Notes in certificated form registered
in the name of the transferee (or its nominee) on the books
maintained by the Note Registrar in accordance with the transfer
restrictions set forth herein. With respect to any such
transfer, the Trustee, or the Custodian at the direction of the
Trustee, will cause, in accordance with the standing instructions
and procedures existing between the Depositary and the Custodian,
the aggregate principal amount of the Rule 144A Global Note or
Regulation S Global Note to be reduced by the principal amount of
the respective beneficial interest in the Rule 144A Global Note
or Regulation S Global Note being transferred and, following such
reduction, the Company will execute and the Trustee will
authenticate and deliver to the transferee (or such transferee's
nominee, as the case may be), a Note or Notes in certificated
form in the appropriate aggregate principal amount in the name of
such transferee (or its nominee) bearing such restrictive legends
as may be registered by this Indenture.
(c) So long as the Notes are eligible for book-
entry settlement, or unless otherwise required by law, upon any
transfer of a Note in certificated form to a QIB in accordance
with Rule 144A or a Foreign Person in accordance with the
Regulation S, and upon receipt of the Note or Notes in
certificated form being so transferred, together with a
certification from the transferor that the transferee is a QIB or
a Foreign Person (or other evidence satisfactory to the Trustee),
the Trustee shall make, or direct the Custodian to make, an
endorsement on the Rule 144A Global Note or Regulation S Global
Note to reflect an increase in the aggregate principal amount of
the Notes represented by the Rule 144A Global Note or Regulation
S Global Note, and the Trustee shall cancel such Note or Notes in
certificated form and cause, or direct the Custodian to cause, in
accordance with the standing instructions and procedures existing
between the Depositary and the Custodian, the aggregate principal
amount of Notes represented by the Rule 144A Global Note or
Regulation S Global Note to be increased accordingly provided
that no Note in certificated form, or portion thereof, in respect
of which the Company or an Affiliate of the Company held any
beneficial interest shall be included in the Global Note until
such Note in certificated form is freely tradable in accordance
with Rule 144(k) provided further that the Trustee shall issue
Notes in certificated form upon any transfer of a beneficial
interest in the Global Note to the Company or an Affiliate of the
Company.
Any Global Note may be endorsed with or have
incorporated in the text thereof such legends or recitals or
changes not inconsistent with the provisions of this Indenture as
may be required by the Custodian, the Depositary or by the
National Association of Securities Dealers, Inc. in order for the
Notes to be tradable on the PORTAL Market or tradable on
Euroclear or Cedel or as may be required for the Notes to be
tradable on any other market developed for trading of securities
pursuant to Rule 144A or Regulation S under the Securities Act or
required to comply with any applicable law or any regulation
thereunder or with the rules and regulations of any securities
exchange or automated quotation system upon which the Notes may
be listed or traded or to conform with any usage with respect
thereto, or to indicate any special limitations or restrictions
to which any particular Notes are subject.
(d) Every Note that bears or is required under
this Section 2.8(d) to bear the legend set forth in this Section
2.8(d) (together with any Common Stock issued upon conversion of
the Notes and required to bear the legend set forth in Section
2.8(e), collectively, the "Restricted Notes") shall be subject to
the restrictions on transfer set forth in this Section 2.8(d)
(including those set forth in the legend set forth below) unless
such restrictions on transfer shall be waived by written consent
of the Company (with written notice to the Trustee), and the
Holder of each such Restricted Note, by such Noteholder's
acceptance thereof, agrees to be bound by all such restrictions
on transfer. As used in Section 2.8(d) and 2.8(e), the term
"transfer" encompasses any sale, pledge, transfer or other
disposition whatsoever of any Restricted Note.
Until two (2) years after the original issuance
date of any Note, any certificate evidencing such Note (and all
Notes issued in exchange therefor or substitution thereof, other
than Common Stock, if any, issued upon conversion thereof, which
shall bear the legend set forth in Section 2.8(e), if applicable)
shall bear a legend in substantially the following form, unless
otherwise agreed by the Company in writing, with written notice
thereof to the Trustee:
THE NOTE EVIDENCED HEREBY HAS NOT BEEN AND WILL
NOT BE REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT") OR ANY STATE SECURITIES LAWS, AND,
ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES
OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS, EXCEPT AS
SET FORTH BELOW.
BY ITS ACQUISITION HEREOF, THE HOLDER: (1)
REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS
DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS AN
INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE
501(a)(1), (2), (3) or (7) UNDER THE SECURITIES ACT)
("INSTITUTIONAL ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S.
PERSON AND IS ACQUIRING THE NOTE EVIDENCED HEREBY IN AN OFFSHORE
TRANSACTION; (2) AGREES THAT IT WILL NOT PRIOR TO THE DATE THAT
IS TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUANCE OF THE NOTE
EVIDENCED HEREBY AND THE LAST DATE ON WHICH ATLANTIC COAST
AIRLINES, INC. (THE "COMPANY") OR ANY "AFFILIATE" (AS DEFINED IN
RULE 144 UNDER THE SECURITIES ACT) OF THE COMPANY WAS THE OWNER
OF THE NOTE (THE "RESTRICTION TERMINATION DATE") RESELL OR
OTHERWISE TRANSFER THE NOTE EVIDENCED HEREBY OR THE COMMON STOCK
ISSUABLE UPON CONVERSION OF SUCH NOTE EXCEPT (A) TO THE COMPANY
OR ANY SUBSIDIARY THEREOF, (B) INSIDE THE UNITED STATES TO A
QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER
THE SECURITIES ACT, (C) INSIDE THE UNITED STATES TO AN
INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER,
FURNISHES TO FIRST UNION NATIONAL BANK OF VIRGINIA, AS TRUSTEE
(OR A SUCCESSOR TRUSTEE, AS APPLICABLE), A SIGNED LETTER
CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE
RESTRICTIONS ON TRANSFER OF THE NOTE EVIDENCED HEREBY (THE FORM
OF WHICH LETTER CAN BE OBTAINED FROM SUCH TRUSTEE OR A SUCCESSOR
TRUSTEE, AS APPLICABLE), (D) OUTSIDE THE UNITED STATES IN AN
OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE
SECURITIES ACT, (E) PURSUANT TO THE EXEMPTION FROM REGISTRATION
PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE), OR
(F) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED
EFFECTIVE UNDER THE SECURITIES ACT (AND WHICH CONTINUES TO BE
EFFECTIVE AT THE TIME OF SUCH TRANSFER); AND (3) AGREES THAT IT
WILL DELIVER TO EACH PERSON TO WHOM THE NOTE EVIDENCED HEREBY IS
TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND.
IN CONNECTION WITH ANY TRANSFER OF THE NOTE
EVIDENCED HEREBY BEFORE THE RESTRICTION TERMINATION DATE, THE
HOLDER MUST CHECK THE APPROPRIATE BOX SET FORTH ON THE REVERSE
HEREOF RELATING TO THE MANNER OF SUCH TRANSFER AND SUBMIT THIS
NOTE TO FIRST UNION NATIONAL BANK OF VIRGINIA, AS TRUSTEE (OR A
SUCCESSOR TRUSTEE, AS APPLICABLE). IF THE PROPOSED TRANSFER IS
PURSUANT TO CLAUSE (C), (D) OR (E) ABOVE, THE HOLDER MUST, PRIOR
TO SUCH TRANSFER, FURNISH TO FIRST UNION NATIONAL BANK OF
VIRGINIA, AS TRUSTEE (OR A SUCCESSOR TRUSTEE, AS APPLICABLE),
SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS IT
MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING
MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT
SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.
THIS LEGEND WILL BE REMOVED AFTER THE EXPIRATION
OF TWO YEARS FROM THE ORIGINAL ISSUANCE OF THE NOTE EVIDENCED
HEREBY. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION,"
"UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM
BY REGULATION S UNDER THE SECURITIES ACT.
Any Note (or security issued in exchange or
substitution therefor) as to which such restrictions on transfer
shall have expired in accordance with their terms or as to which
the conditions for removal of the foregoing legend set forth
therein have been satisfied may, upon surrender of such Note for
exchange to the Note Registrar in accordance with the provisions
of this Section 2.8, be exchanged for a new Note or Notes, of
like tenor and aggregate principal amount, which shall not bear
the restrictive legend required by this Section 2.8(d).
Notwithstanding any other provisions of this
Indenture (other than the provisions set forth in the second
paragraph of Section 2.8(b) and in this Section 2.8(d), a Global
Note may not be transferred as a whole or in part except by the
Depositary to a nominee of the Depositary or by a nominee of the
Depositary to the Depositary or another nominee of the Depositary
or by the Depositary or any such nominee to a successor
Depositary or a nominee of such successor Depositary.
The Depositary shall be a clearing agency
registered under the Exchange Act. The Company initially
appoints The Depository Trust Company to act as Depositary with
respect to the Global Notes. Initially, the Rule 144A Global
Note and the Regulation S Global Note shall be issued to the
Depositary, registered in the name of Cede & Co., as the nominee
of the Depositary, and deposited with the Custodian for Cede &
Co.
The Trustee is hereby authorized and requested to
execute and deliver a Letter of Representation to the Depositary
and, in connection with any successor nominee for the Depositary
or any successor Depositary, enter into comparable arrangements,
and shall have the same rights with respect to its actions
thereunder as it has with respect to its action under this
Indenture.
If at any time the Depositary for the Global Note
notifies the Company that it is unwilling or unable to continue
as Depositary for the Note, the Company may appoint a successor
Depositary with respect to such Note. If a successor Depositary
is not appointed by the Company within 90 days after the Company
receives such notice, the Company will execute, and the Trustee,
upon receipt of an Officers' Certificate for the authentication
and delivery of Notes, will authenticate and deliver, Notes in
certificated form, in an aggregate principal amount equal to the
principal amount of the Global Note, in exchange for the Global
Note.
If a Note in certificated form is issued in
exchange for any portion of a Global Note after the close of
business at the office or agency where such exchange occurs on
any record date and before the opening of business at such office
or agency on the next succeeding interest payment date, interest
will not be payable on such interest payment date in respect of
such Note, but will be payable on such interest payment date only
to the Person to whom interest in respect of such portion of such
Global Note is payable in accordance with the provisions of this
Indenture.
Notes in certificated form issued in exchange for
all or a part of a Global Note pursuant to this Section 2.8 shall
be registered in such names and in such authorized denominations
as the Depositary, pursuant to instruction from its direct or
indirect participants or otherwise, shall instruct the Trustee in
writing. Upon execution and authentication, the Trustee shall
deliver such Notes in certificated form to the Persons in whose
names such Notes in certificated form are so registered.
At such time as all interests in a Global Note
have been redeemed, repurchased, converted, canceled, exchanged
for Notes in certificated form, or transferred to a transferee
who receives Notes in certificated form, such Global Note shall,
upon receipt thereof, be canceled by the Trustee in accordance
with standing procedures and instructions existing between the
Depositary and the Custodian. At any time prior to such
cancellation, if any interest in a Global Note is exchanged for
Notes in certificated form, redeemed, converted, repurchased or
canceled, or transferred to a transferee who receives Notes in
certificated form therefor or any Note in certificated form is
exchanged or transferred for part of a Global Note, the principal
amount of such Global Note shall, in accordance with the standing
procedures and instructions existing between the Depositary and
the Custodian, be appropriately reduced or increased, as the case
may be, and an endorsement shall be made on such Global Note, by
the Trustee or the Custodian, at the direction of the Trustee, to
reflect such reduction or increase. In the event of any transfer
of any beneficial interest between the Rule 144A Global Note and
the Regulation S Global Note in accordance with the standing
procedures and instructions between the Depositary and the
Custodian and the transfer restrictions set forth herein, the
aggregate principal amount of each of the Rule 144A Global Note
and the Regulation S Global Note shall be appropriately increased
or decreased, as the case may be, and an endorsement shall be
made on each of the Rule 144A Global Note and the Regulation S
Global Note by the Trustee or the Custodian, at the direction of
the Trustee, to reflect such reduction or increase.
(e) Until two (2) years after the original
issuance date of any Note, any stock certificate representing
Common Stock issued upon conversion of such Note shall bear a
legend in substantially the following form, unless such Common
Stock has been transferred pursuant to a registration statement
that has been declared effective under the Securities Act (and
which continues to be effective at the time of such transfer) or
such Common Stock has been issued upon conversion of Notes that
have been transferred pursuant to a registration statement that
has been declared effective under the Securities Act, or unless
otherwise agreed by the Company in writing with written notice
thereof to the transfer agent:
THE COMMON STOCK EVIDENCED HEREBY HAS NOT BEEN
REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR ANY STATE SECURITIES LAWS, AND,
ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES
OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT AS
SET FORTH BELOW.
THE HOLDER HEREOF AGREES THAT PRIOR TO THE DATE
THAT IS TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUANCE OF THE
NOTE UPON THE CONVERSION OF WHICH THE COMMON STOCK EVIDENCED
HEREBY WAS ISSUED AND THE LAST DATE ON WHICH ATLANTIC COAST
AIRLINES, INC. (THE COMPANY") OR ANY "AFFILIATE" (AS DEFINED IN
RULE 144 UNDER THE SECURITIES ACT) OF THE COMPANY WAS THE OWNER
OF THE NOTE OR THE COMMON STOCK EVIDENCED HEREBY (THE
"RESTRICTION TERMINATION DATE"); (1) IT WILL NOT RESELL OR
OTHERWISE TRANSFER THE COMMON STOCK EVIDENCED HEREBY EXCEPT (A)
TO THE COMPANY, OR ANY SUBSIDIARY THEREOF, (B) INSIDE THE UNITED
STATES TO A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE
144A UNDER THE SECURITIES ACT) IN COMPLIANCE WITH RULE 144A, (C)
INSIDE THE UNITED STATES TO AN INSTITUTIONAL "ACCREDITED
INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) UNDER
THE SECURITIES ACT) THAT, PRIOR TO SUCH TRANSFER FURNISHES TO
CONTINENTAL STOCK TRANSFER AND TRUST COMPANY, AS TRANSFER AGENT
(OR A SUCCESSOR TRANSFER AGENT, AS APPLICABLE), A SIGNED LETTER
CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE
RESTRICTIONS ON TRANSFER OF THE COMMON STOCK EVIDENCED HEREBY
(THE FORM OF WHICH LETTER CAN BE OBTAINED FROM SUCH TRANSFER
AGENT OR A SUCCESSOR TRANSFER AGENT, AS APPLICABLE), (D) OUTSIDE
THE UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH
RULE 904 UNDER THE SECURITIES ACT, (E) PURSUANT TO THE EXEMPTION
FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT
(IF AVAILABLE), OR (F) PURSUANT TO A REGISTRATION STATEMENT WHICH
HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT (AND WHICH
CONTINUES TO BE EFFECTIVE AT THE TIME OF SUCH TRANSFER); (2)
PRIOR TO SUCH TRANSFER BEFORE THE RESTRICTION TERMINATION DATE
(OTHER THAN A TRANSFER PURSUANT TO CLAUSE 1(F) ABOVE), IT WILL
FURNISH CONTINENTAL STOCK TRANSFER AND TRUST COMPANY, AS TRANSFER
AGENT (OR A SUCCESSOR TRANSFER AGENT, AS APPLICABLE), SUCH
CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS IT MAY
REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE
PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT
TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND (3)
IT WILL DELIVER TO EACH PERSON TO WHOM THE COMMON STOCK EVIDENCED
HEREBY IS TRANSFERRED (OTHER THAN A TRANSFER PURSUANT TO CLAUSE
1(F) ABOVE) A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND.
THIS LEGEND WILL BE REMOVED UPON THE EARLIER OF
THE TRANSFER OF THE COMMON STOCK EVIDENCED HEREBY PURSUANT TO
CLAUSE 1(F) ABOVE OR UPON THE RESTRICTION TERMINATION DATE OR
UPON THE EARLIER SATISFACTION OF CONTINENTAL STOCK TRANSFER AND
TRUST COMPANY, AS TRANSFER AGENT (OR A SUCCESSOR TRANSFER AGENT,
AS APPLICABLE), THAT THE COMMON STOCK HAS BEEN OR IS BEING
OFFERED AND SOLD IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES
ACT.
AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION,"
"UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM
BY REGULATION S UNDER THE SECURITIES ACT.
Any such Common Stock as to which such
restrictions on transfer shall have expired in accordance with
their terms or as to which the conditions for removal of the
foregoing legend set forth therein have been satisfied may, upon
surrender of the certificates representing such shares of Common
Stock for exchange in accordance with the procedures of the
transfer agent for the Common Stock, be exchanged for a new
certificate or certificates for a like number of shares of Common
Stock, which shall not bear the restrictive legend required by
this Section 2.8(e).
(f)` Any certificate evidencing a Note that has
been transferred to an Affiliate of the Company within two (2)
years after the original issuance date of the Note, as evidenced
by a notation on the Assignment Form for such transfer or in the
representation letter delivered in respect thereof (substantially
in the form attached as an exhibit to the Offering Memorandum),
shall, until two (2) years after the last day on which the
Company or any Affiliate of the Company was an owner of such
Note, bear a legend in substantially the following form, unless
otherwise agreed by the Company (with written notice thereof to
the Trustee):
THE NOTE EVIDENCED HEREBY HAS NOT BEEN REGISTERED
UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR ANY STATE SECURITIES LAWS, AND,
ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES
OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT AS
SET FORTH IN THE FOLLOWING SENTENCE.
BY ACQUISITION HEREOF, THE HOLDER AGREES (1) THAT
IT WILL NOT RESELL OR OTHERWISE TRANSFER THE NOTE EVIDENCED
HEREBY OR THE COMMON STOCK ISSUABLE UPON CONVERSION OF SUCH NOTE
EXCEPT (A) TO ATLANTIC COAST AIRLINES, INC. OR ANY SUBSIDIARY
THEREOF, (B) IN A TRANSACTION REGISTERED UNDER THE SECURITIES ACT
OR (C) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY
RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE) AND (2) THAT IT
WILL DELIVER TO EACH PERSON TO WHOM THE NOTE EVIDENCED HEREBY IS
TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND.
THIS LEGEND SHALL BE REMOVED UPON THE TRANSFER OF THE NOTE
EVIDENCED HEREBY OR THE COMMON STOCK ISSUABLE UPON CONVERSION OF
SUCH NOTE PURSUANT TO THE IMMEDIATELY PRECEDING SENTENCE.
IF THE PROPOSED TRANSFER IS PURSUANT TO THE
EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE
SECURITIES ACT, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH
FIRST UNION NATIONAL BANK OF VIRGINIA, AS TRUSTEE (OR A SUCCESSOR
TRUSTEE, AS APPLICABLE), SUCH CERTIFICATIONS, LEGAL OPINIONS OR
OTHER INFORMATION AS THE COMPANY MAY REASONABLY REQUIRE TO
CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION
FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT.
AS USED HEREIN, THE TERMS "UNITED STATES" AND
"U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S
UNDER THE SECURITIES ACT.
Any stock certificate representing Common Stock
issued upon conversion of such Note shall also bear a legend in
substantially the form indicated above, unless otherwise agreed
by the Company (with written notice thereof to the Trustee).
Section 2.9. Mutilated, Destroyed, Lost or Stolen Notes.
In case any Note shall become mutilated or be destroyed,
lost or stolen, the Company in its discretion may execute and
upon its written request the Trustee or an authenticating agent
appointed by the Trustee shall authenticate and deliver, a new
Note, bearing a number not contemporaneously outstanding, in
exchange and substitution for the mutilated Note, or in lieu of
and in substitution for the Note so destroyed, lost or stolen.
In every case the applicant for a substituted Note shall furnish
to the Company, to the Trustee and, if applicable, to such
authenticating agent such security or indemnity as may be
required by them to save each of them harmless for any loss,
liability, cost or expense caused by or connected with such
substitution, and, in every case of destruction, loss or theft,
the applicant shall furnish to the Company, to the Trustee and,
if applicable, to such authenticating agent evidence to their
satisfaction of the destruction, loss or theft of such Note and
of the ownership thereof.
The Trustee or such authenticating agent may authenticate
any such substituted Note and deliver the same upon the receipt
of such security or indemnity as the Trustee, the Company and, if
applicable, such authenticating agent may require. Upon the
issuance of any substituted Note, the Company may require the
payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and
any other expenses connected therewith. In case any Note which
has matured or is about to mature or has been called for
redemption or is about to be converted into Common Stock shall
become mutilated or be destroyed, lost or stolen, the Company
may, instead of issuing a substitute Note, pay or authorize the
payment of or convert or authorize the conversion of the same
(without surrender thereof except in the case of a mutilated
Note), as the case may be, if the applicant for such payment or
conversion shall furnish to the Company, to the Trustee and, if
applicable, to such authenticating agent such security or
indemnity as may be required by them to save each of them
harmless for any loss, liability, cost or expense caused by or
connected with such substitution, and, in case of destruction,
loss or theft, evidence satisfactory to the Company, the Trustee
and, if applicable, any Paying Agent or Conversion Agent of the
destruction, loss or theft of such Note and of the ownership
thereof.
Every substitute Note issued pursuant to the provisions of
this Section 2.9 by virtue of the fact that any Note is
destroyed, lost or stolen shall constitute an additional
contractual obligation of the Company, whether or not the
destroyed, lost or stolen Note shall be found at any time, and
shall be entitled to all the benefits of (but shall be subject to
all the limitations set forth in) this Indenture equally and
proportionally with any and all other Notes duly issued
hereunder. To the extent permitted by law, all Notes shall be
held and owned upon the express condition that the foregoing
provisions are exclusive with respect to the respect to the
replacement or payment or conversion of mutilated, destroyed,
lost or stolen Notes and shall preclude any and all other rights
or remedies notwithstanding any law or statute existing or
hereafter enacted to the contrary with respect to the replacement
or payment or conversion of negotiable instruments or other
securities without their surrender.
Section 2.10. Treasury Notes.
In determining whether the Holders of the required principal
amount of Notes have concurred in any notice, direction, waiver
or consent, Notes owned by the Company or any other obligor on
the Notes or by any Affiliate of the Company or of such other
obligor on the Notes shall be disregarded, except that, for
purposes of determining whether the Trustee shall be protected in
relying on any such notice, direction, waiver or consent, only
Notes which the Trustee knows are so owned shall be so
disregarded. Notes so owned which have been pledged in good
faith shall not be disregarded if the pledgee establishes to the
satisfaction of the Trustee the pledgee's right so to act with
respect to the Notes and that the pledgee is not the Company or
any other obligor on the Notes or any Affiliate of the Company or
of such other obligor.
Section 2.11. Temporary Notes.
Until definitive Notes are ready for delivery, the Company
may prepare and execute, and, upon the order of the Company, the
Trustee shall authenticate and deliver temporary Notes.
Temporary Notes shall be substantially in the form of definitive
Notes but may have variation that the Company with the consent of
the Trustee considers appropriate for temporary Notes. Without
unreasonable delay, the Company shall prepare and the Trustee
shall authenticate and deliver definitive Notes in exchange for
temporary Notes.
Section 2.12. Cancellation.
All Notes surrendered for the purpose of payment,
redemption, repurchase, conversion, exchange or registration of
transfer, shall, if surrendered to the Company or any paying
agent or any Note registrar or any conversion agent, be
surrendered to the Trustee and promptly canceled by it, or, if
surrendered to the Trustee, shall be promptly canceled by it, and
no Notes shall be issued in lieu thereof except as expressly
permitted by any of the provisions of this Indenture provided
that any Note or portion thereof surrendered for repurchase shall
only be canceled at such time as such Note or portion thereof has
been repurchased pursuant to Article XVI hereof. The Trustee
shall destroy canceled Notes(unless the Company directs it to do
otherwise) and, after such destruction, shall, if requested by
the Company, deliver a certificate of such destruction to the
Company. If the Company shall acquire any of the Notes, such
acquisitions shall not operate as a redemption or satisfaction of
the indebtedness represented by such Notes unless and until the
same are delivered to the Trustee for cancellation.
Section 2.13. Deposit of Funds.
Prior to 10:00 a.m. New York City time on each Interest
Payment Date and the maturity date, the Company shall deposit
with the Paying Agent in immediately available funds sufficient
to make cash payments, if any, due on such Interest Payment Date
or maturity date, as the case may be, in a timely manner which
permits the Paying Agent to remit payment to the Holders on such
Interest Payment Date or maturity date, as the case may be.
ARTICLE III
REDEMPTION OF NOTES
Section 3.1. Right to Redeem; Notice to Trustee.
The Notes may not be redeemed otherwise than at the option
of the Holder as provided in Section 16.1 at the election of the
Company, as a whole or from time to time in part, at any time
after July 1, 2000, at the Redemption Prices specified in
paragraph nine of the form of Note (reverse side) attached hereto
as Exhibit A, together with accrued interest up to but not
including the Redemption Date.
If the Company elects to redeem Notes pursuant to this
Section 3.1 and paragraph eight of the Notes, it shall notify the
Trustee in writing at least 45 days prior to the Redemption Date
as fixed by the Company (unless a shorter notice shall be
satisfactory to the Trustee) of the Redemption Date and the
principal amount of Notes to be redeemed. If fewer than all of
the Notes are to be redeemed, the record date relating to such
redemption shall be selected by the Company and given to the
Trustee, which record date shall not be less than ten days after
the date of notice to the Trustee.
Section 3.2. Selection of Notes to Be Redeemed.
If less than all of the Notes are to be redeemed, the
Trustee shall, not more than 60 days prior to the Redemption
Date, select the Notes to be redeemed by lot or by a method the
Trustee considers fair and appropriate; provided, however, that
such method is not prohibited by any stock exchange or automated
quotations system on which the Notes are then listed or traded.
The Trustee shall make the selection from the Notes outstanding
and not previously called for redemption. The Trustee shall
select for redemption portions of the principal of Notes that
have denominations larger than $1,000. Provisions of this
Indenture that apply to Notes called for redemption also apply to
portions of Notes called for redemption.
Section 3.3. Notice of Redemption.
At least 15 days but not more than 60 days before a
Redemption Date, the Company shall mail or cause to be mailed a
notice of redemption by first-class mail to the Trustee and to
each Holder of Notes to be redeemed at such Holder's address as
it appears on the Note register.
The notice shall identify the Notes to be redeemed and shall
state:
(1) the Redemption Date;
(2) the Redemption Price;
(3) the then current Conversion Price;
(4) the name and address of the Paying Agent and the
Conversion Agent;
(5) that Notes called for redemption must be presented and
surrendered to the Paying Agent to collect the Redemption Price;
(6) that the Notes called for redemption may be converted
at any time before the close of business on the fifth Business
Day immediately preceding the Redemption Date;
(7) that Holders who wish to convert Notes must satisfy the
requirements in paragraph 11 of the Notes;
(8) that, unless the Company defaults in making the
redemption payment, the only remaining right of the Holder shall
be to receive payment of the Redemption Price upon presentation
and surrender to the Paying Agent of the Notes;
(9) if any Note is being redeemed in part, the portion of
the principal amount of such Note to be redeemed and that, after
the Redemption Date, upon presentation and surrender of such
Note, a new Note or Notes in principal amount equal to the
unredeemed portion thereof will be issued; and
(10) that interest on Notes called for redemption ceases to
accrue on and after the Redemption Date.
At the Company's request, the Trustee shall give the notice
of redemption in the Company's name and at the Company's expense.
Section 3.4. Effect of Notice of Redemption.
Once notice of redemption is mailed, Notes called for
redemption become due and payable on the Redemption Date and at
the Redemption Price stated in the notice, except for Notes that
are converted in accordance with the provisions of Section 15.1.
Upon presentation and surrender to the Paying Agent, Notes called
for redemption shall be paid at the Redemption Price, plus
accrued interest up to but not including the Redemption Date.
Section 3.5. Deposit of Redemption Price.
On or before 10:00 a.m. New York City time on any Redemption
Date, the Company shall deposit with the Paying Agent money
sufficient to pay the Redemption Price of and accrued interest on
all Notes to be redeemed on that date, other than Notes or
portions thereof called for redemption on that date which have
been delivered by the Company to the Trustee for cancellation or
have been converted. The Paying Agent shall promptly return to
the Company any money not required for that purpose because of
the conversion of Notes pursuant to Article XV or otherwise. If
such money is instead held by the Company or an Affiliate of the
Company in trust and is not required for such purpose, it shall
be discharged from the trust.
Section 3.6. Notes Redeemed in Part.
Upon presentation and surrender of a Note that is redeemed
in part, the Company shall execute and the Trustee shall
authenticate for and deliver to the Holder a new Note equal in
principal amount to the unredeemed portion of the Note
surrendered.
Notwithstanding the foregoing, the Trustee shall not pay the
Redemption Price of any Notes or mail any notice of redemption
during the continuance of a default in payment of interest on
the Notes or of any Event of Default of which a Trust Officer has
knowledge. If any Note called for redemption shall not be so
paid upon surrender thereof for redemption, the principal and
premium, if any, shall, until paid or duly provided for, bear
interest from the date fixed for redemption at the rate borne by
the Note and such Note shall remain convertible into Common Stock
until the principal and premium, if any, shall have been paid or
duly provided for.
Section 3.7. Conversion Arrangement on Call for
Redemption.
In connection with any redemption of Notes, the Company may
arrange for the purchase and conversion of any Notes by an
agreement with one or more investment bankers or other purchasers
to purchase such Notes by paying to the Trustee in trust for the
Holders, on or before the date fixed for redemption, an amount
not less than the applicable Redemption Price, together with
interest accrued to (but excluding) that date fixed for
redemption, of such Notes. Notwithstanding anything to the
contrary contained in this Article III, the obligation of the
Company to pay the Redemption Price of such Notes, together with
interest accrued to (but excluding) the date fixed for
redemption, shall be deemed to be satisfied and discharged to the
extent such amount is so paid by such purchasers. If such an
agreement is entered into (a copy of which shall be filed with
the Trustee prior to the date fixed for redemption), any Notes
not duly surrendered for conversion by the Holders thereof may,
at the option of the Company, be deemed, to the fullest extent
permitted by law, acquired by such purchasers from such Holders
and surrendered by such purchasers for conversions, all as of
immediately prior to the close of business on the date fixed for
redemption (and the right to convert any such Notes shall be
extended through such time), subject to payment of the above
amount as aforesaid. At the written direction of the Company,
the Trustee shall hold and dispose of any such amount paid to it
in the same manner as it would monies deposited with it by the
Company for the redemption of Notes. Without the Trustee's prior
written consent, no arrangement between the Company and such
purchasers for the purchase and conversion of any Notes shall
increase or otherwise affect any of the powers, duties,
responsibilities or obligations of the Trustee as set forth in
this Indenture, and the Company agrees to indemnify the Trustee
from, and hold it harmless against, any loss, liability or
expense arising out of or in connection with any such arrangement
for the purchase and conversion of any Notes between the Company
and such purchasers to which the Trustee has not consented in
writing, including the costs and expenses, including reasonable
legal fees, incurred by the Trustee in the defense of any claim
or liability arising out of or in connection with the exercise or
performance of any of its powers, duties, responsibilities or
obligations under this Indenture.
ARTICLE IV
SUBORDINATION OF NOTES
Section 4.1. Notes Subordinated to Senior Indebtedness.
The Company covenants and agrees, and each Holder of Notes
issued hereunder by his or her acceptance thereof likewise
covenants and agrees, that all Notes shall be issued subject to
the provisions of this Article IV; and each Person holding any
Note, whether upon original issue or upon transfer or assignment
thereof, accepts and agrees to be bound by such provisions.
The payment of the principal of and interest on all Notes
issued hereunder (including, without limitation, in connection
with any redemption of Notes) shall, to the extent and in the
manner hereinafter set forth, be subordinated and subject in
right of payment to the prior payment in full of all Senior
Indebtedness, whether outstanding at the date of this Indenture
or thereafter created, incurred, assumed or guaranteed.
Section 4.2. Payments to Holders.
No payment shall be made with respect to the principal of,
or premium, if any, or interest on the Notes (including, but not
limited to, the Redemption Price with respect to the Notes to be
called for redemption in accordance with Section 3.2 or submitted
for repurchase in accordance with Section 16.2, as the case, may
be, as provided in the Indenture), except payments and
distributions made by the Trustee as permitted by the first or
second paragraph of Section 4.5, if:
(a) a default in the payment of principal, premium,
interest, rent or other obligations due on any Senior
Indebtedness occurs and is continuing (or, in the case of Senior
Indebtedness for which there is a period of grace, in the event
of such a default that continues beyond the period of grace, if
any, specified in the instrument or lease evidencing such Senior
Indebtedness), unless and until such default shall have been
cured or waived or shall have ceased to exist, or
(b) a default, other than a payment default, on any
Designated Senior Indebtedness occurs and is continuing that then
permits holders of such Designated Senior Indebtedness to
accelerate its maturity and the Trustee receives a written notice
of the default (a "Payment Blockage Notice") from a
Representative or the Company.
If the Trustee receives any Payment Blockage Notice pursuant
to clause (b) above, no subsequent Payment Blockage Notice shall
be effective for purposes of this Section unless and until (A) at
least 365 days shall have elapsed since the initial effectiveness
of the immediately prior Payment Blockage Notice, and (B) all
scheduled payments of principal, premium, if any, and interest on
the Notes that have come due have been paid in full in cash. No
nonpayment default that existed or was continuing on the date of
delivery of any Payment Blockage Notice to the Trustee shall be,
or be made, the basis for a subsequent Payment Blockage Notice.
The Company, after providing written notice to the Trustee,
shall resume payments on and distributions in respect of the
Notes upon the earlier of:
(a) the date upon which the default is cured or waived or
ceases to exist, or
(b) in the case of a default referred to in clause (b)
above, 179 days pass after notice is received if the maturity of
such Designated Senior Indebtedness has not been accelerated;
unless this Article IV otherwise prohibits the payment or
distribution at the time of such payment or distribution.
Upon any payment by the Company, or distribution of assets
of the Company of any kind or character, whether in cash,
property or securities, to creditors upon any dissolution or
winding up or liquidation or reorganization of the Company,
whether voluntary or involuntary or in bankruptcy, insolvency,
receivership or other proceedings, all amounts due or to become
due upon all Senior Indebtedness shall first be paid in full in
cash or other payment satisfactory to the holders of such Senior
Indebtedness, or payment thereof in accordance with its terms
provided for in cash or other payment satisfactory to the holders
of such Senior Indebtedness, before any payment is made on
account of the principal of, premium, if any, or interest on the
Notes (except payments made pursuant to Article XIII from monies
deposited with the Trustee pursuant thereto prior to commencement
of proceedings for such dissolution, winding up, liquidation or
reorganization) and upon any such dissolution or winding up or
liquidation or reorganization of the Company or bankruptcy,
insolvency, receivership or other proceeding, any payment by the
Company, or distribution of assets of the Company of any kind or
character, whether in cash, property or securities, to which the
holders of the Notes or the Trustee would be entitled, except for
the provision of this Article IV, shall (except as aforesaid) be
paid by the Company or by any receiver, trustee in bankruptcy,
liquidating trustee, agent or other Person making such payment or
distribution, or by the holders of the Notes or by the Trustee
under this Indenture if received by them or it, directly to the
holders of Senior Indebtedness (pro rata to such holders on the
basis of the respective amounts of Senior Indebtedness held by
such holders, or as otherwise required by law or a court order)
or their representative or representatives, or to the trustee or
trustees under any indenture pursuant to which any instruments
evidencing any Senior Indebtedness may have been issued, as their
respective interests may appear, to the extent necessary to pay
all Senior Indebtedness in full, in cash or other payment
satisfactory to the holders of such Senior Indebtedness, after
giving effect to any concurrent payment or distribution to or for
the holders of Senior Indebtedness, before any payment or
distribution or provision therefor is made to the holders of the
Notes or to the Trustee.
For purposes of this Article IV, the words "cash, property
or securities" shall not be deemed to include shares of stock of
the Company as reorganized or readjusted, or securities of the
Company or any other corporation provided for by a plan of
reorganization or readjustment, the payment of which is
subordinated at least to the extent provided in this Article IV
with respect to the Notes to the payment of all Senior
Indebtedness which may at the time be outstanding provided that
(i) the Senior Indebtedness is assumed by the new corporation, if
any, resulting from any reorganization or readjustment, and (ii)
the rights of the holders of Senior Indebtedness (other than
leases which are not assumed by the Company or the new
corporation, as the case may be) are not, without the consent of
such holders, altered by such reorganization or readjustment.
The consolidation of the Company with, or the merger of the
Company into, another corporation or the liquidation or
dissolution of the Company following the conveyance or transfer
of its property as an entirety, or substantially as an entirety,
to another corporation upon the terms and conditions provided for
in Article XII shall not be deemed a dissolution, winding up,
liquidation or reorganization for the purposes of this Section
4.2 if such other corporation shall, as a part of such
consolidation, merger, conveyance or transfer, comply with the
conditions stated in Article XII.
In the event of the acceleration of the Notes because of an
Event of Default, no payment or distribution shall be made to the
Trustee or any holder of Notes in respect of the principal of,
premium, if any, or interest on the Notes (including, but not
limited to, the Redemption Price with respect to the Notes,
called for redemption in accordance with Section 3.2 or submitted
for repurchase in accordance with Section 16.2, as the case may
be, as provided in the Indenture), except payments and
distributions made by the Trustee as permitted by the first or
second paragraph of Section 4.5, until all Senior Indebtedness
has been paid in full in cash or other payment satisfactory to
the holders of Senior Indebtedness or such acceleration is
rescinded in accordance with the terms of this Indenture. If
payment of the Notes is accelerated because of an Event of
Default, the Company shall promptly notify holders of Senior
Indebtedness of the acceleration.
In the event that, notwithstanding the foregoing provisions,
any payment or distribution of assets of the Company of any kind
or character, whether in cash, property or securities (including,
without limitation, by way of setoff or otherwise), prohibited by
the foregoing, shall be received by the Trustee or the Holders
before all Senior Indebtedness is paid in full in cash or other
payment satisfactory to the holders of such Senior Indebtedness,
or provision is made for such payment thereof in accordance with
its terms in cash or other payment satisfactory to the holders of
such Senior Indebtedness, such payment or distribution shall be
held in trust for the benefit of and shall be paid over or
delivered to the holders of Senior Indebtedness or their
representative or representatives, or to the trustee or trustees
under any indenture pursuant to which any instruments evidencing
any Senior Indebtedness may have been issued, as their respective
interests may appear, as calculated by the Company, for
application to the payment of all Senior Indebtedness remaining
unpaid to the extent necessary to pay all Senior Indebtedness in
full in cash or other payment satisfactory to the holders of such
Senior Indebtedness, after giving effect to any concurrent
payment or distribution to or for the holders of such Senior
Indebtedness.
Nothing in this Section 4.2 shall apply to claims of, or
payments to, the Trustee under or pursuant to Section 8.6. This
Section 4.2 shall be subject to the further provisions of Section
4.5, and the right to rescind and annul acceleration of the
notice pursuant to Section 7.1
Section 4.3. Notes to Be Subrogated to Rights of Holders
of Senior Indebtedness.
Subject to the prior payment in full of all Senior
Indebtedness then due, the Holders shall be subrogated to the
rights of the holders of Senior Indebtedness to receive payments
or distributions of assets of the Company applicable to the
Senior Indebtedness until the principal of and interest on the
Notes shall be paid in full, and, for purposes of such
subrogation, no payments or distributions to the holders of
Senior Indebtedness of assets, whether in cash, property or
securities, distributable to the holders of Senior Indebtedness
under the provisions hereof to which the Holders would be
entitled except for the provisions of this Article IV, and no
payment pursuant to the provisions of this Article IV to the
holders of Senior Indebtedness by the Holders shall, as among the
Company, its creditors other than the holders of Senior
Indebtedness, and the Holders, be deemed to be a payment by the
Company to or on account of Senior Indebtedness, it being
understood that the provisions of this Article IV are, and are
intended, solely for the purpose of defining the relative rights
of the Holders, on the one hand, and the holders of Senior
Indebtedness, on the other hand.
Section 4.4. Obligations of the Company Unconditional.
Nothing contained in this Article IV or elsewhere in this
Indenture or in any Note is intended to or shall impair, as among
the Company, its creditors other than the holders of Senior
Indebtedness, and the Holders, the obligation of the Company,
which is absolute and unconditional, to pay to the Holders the
principal of and interest on the Notes, as the same shall become
due and payable in accordance with the terms of the Notes, or to
affect the relative rights of the Holders and other creditors of
the Company other than the holders of Senior Indebtedness, nor
shall anything herein or therein prevent the Trustee or any
Holder from exercising all remedies otherwise permitted by
applicable law upon the happening of an Event of Default under
this Indenture, subject to the provisions of Article VIII, and
the rights, if any, under this Article IV of the holders of
Senior Indebtedness in respect of assets, whether in cash,
property or securities, of the Company received upon the exercise
of any such remedy.
Section 4.5. Notice to Trustee.
The Company shall give prompt written notice to the Trustee
of any fact known to the Company which would prohibit the making
of any payment to or by the Trustee in respect of the Notes.
Notwithstanding the provisions of this Article IV or any other
provision of this Indenture, the Trustee shall not at any time be
charged with knowledge of the existence of any facts which would
prohibit the making of any payment to or by the Trustee, unless
and until the Trustee shall have received written notice thereof
from the Company or from the holder or holders of Senior
Indebtedness or from their Representative or Representatives;
and, prior to the receipt of any such written notice, the
Trustee, subject to the provisions of Sections 8.1 and 8.2, shall
be entitled to assume conclusively that such facts do not exist.
The Trustee shall be entitled to rely on the delivery to it
of a written notice by a Person representing himself or herself
to be a holder of Senior Indebtedness (or a Representative of
such holder) to establish that such notice has been given by a
holder of Senior Indebtedness or a Representative of any such
holder. In the event that the Trustee determines in good faith
that further evidence is required with respect to the right of
any Person as a holder of Senior Indebtedness to participate in
any payment or distribution pursuant to this Article IV, the
Trustee may request such Person to furnish evidence to the
reasonable satisfaction of the Trustee as to the amount of Senior
Indebtedness held by such Person, the extent of which such Person
is entitled to participate in such payment or distribution and
any other facts pertinent to the rights of each Person under this
Article IV, and, if such evidence is not furnished, the Trustee
may defer any payment to such Person pending judicial
determination as to the right of Person to receive such payment.
Section 4.6. Application by Trustee of Monies Deposited
With It.
Money or U.S. Government Obligations deposited with the
Trustee or any Paying Agent (whether or not in trust) for the
payment of the principal of or interest on any Notes shall be
subject to the provisions of Sections 4.1, 4.2, 4.3 and 4.4;
except that, if two (2) Business Days prior to the date on which
by the terms of this Indenture any such monies or U.S. Government
Obligations may become payable for any purpose (including,
without limitation, the payment of either the principal of or
interest on any Note) the Trustee shall not have received with
respect to such monies or U.S. Government Obligations the notice
provided for in Section 4.5, then the Trustee or any Paying Agent
shall have full power and authority to receive such monies and to
apply such monies to the purpose for which they were received,
and shall not be affected by any notice to the contrary which may
be received by it on or after such date. This Section 4.6 shall
be construed solely for the benefit of the Trustee and the Paying
Agent and shall not otherwise affect the rights that holders of
Senior Indebtedness may have to recover any such payments from
the Holders in accordance with the provisions of this Article IV.
Section 4.7. Subordination Rights Not Impaired by Acts
or Omissions of Company or holders of Senior
Indebtedness.
No right of any present or future holders of any Senior
Indebtedness to enforce subordination, as herein provided, shall
at any time in any way be prejudiced or impaired by any act or
failure to act on the part of the Company or by any act or
failure to act, in good faith, by any such holder, or by any
noncompliance by the Company with the terms, provisions and
covenants of this Indenture, regardless of any knowledge thereof
which any such holder may have or be otherwise charged with. The
holders of any Senior Indebtedness may extend, renew, modify or
amend the terms of such Senior Indebtedness or any security
therefor and release, sell or exchange such security and
otherwise deal freely with the Company, all without affecting the
liabilities and obligations of the parties to this Indenture or
the Holders. No provision in any supplemental indenture which
affects the superior position of the holders of the Senior
Indebtedness shall be effective against the holders of the Senior
Indebtedness unless the holders of such Senior Indebtedness
(required pursuant to the terms of such Senior Indebtedness to
give such consent) have consented thereto.
Section 4.8. Trustee to Effectuate Subordination.
Each Holder of a Note by his or her acceptance thereof
authorizes and directs the Trustee on his or her behalf to take
such action as may be necessary or appropriate to effectuate the
subordination provided in this Article IV and appoints the
Trustee his or her attorney-in-fact for any and all such
purposes.
Section 4.9. Right of Trustee to Hold Senior
Indebtedness.
The Trustee, in its individual capacity, shall be entitled
to all of the rights set forth in this Article IV in respect of
any Senior Indebtedness at any time held by it to the same extent
as any other holder of Senior Indebtedness, and nothing in this
Indenture shall be construed to deprive the Trustee of any of its
rights as such holder.
Section 4.10. Article IV Not to Prevent Events of
Default.
The failure to make a payment on account of the principal of
or interest on the Notes by reason of any provision in this
Article IV shall not be construed as preventing the occurrence of
an Event of Default under Section 7.1.
Section 4.11. No Fiduciary Duty Created to Holders of
Senior Indebtedness.
Notwithstanding any other provision in this Article IV, the
Trustee shall not be deemed to owe any fiduciary duty to the
holders of Senior Indebtedness by virtue of the provisions of
this Article IV.
Section 4.12. Article Applicable to Paying Agent.
In case at any time any Paying Agent other than the Trustee
shall have been appointed by the Company and be then acting
hereunder, the term "Trustee" as used in this Article IV shall in
such case (unless the context shall otherwise require) be
construed as extending to and including such Paying Agent within
its meaning as fully for all intents and purposes as if such
Paying Agent were named in this Article IV in addition to or in
place of the Trustee.
ARTICLE V
COVENANTS
Section 5.1. Payment of Notes.
The Company shall promptly make all payments in respect of
the Notes on the dates and in the manner provided in the Notes
and this Indenture. An installment of principal or interest shall
be considered paid on the date it is due if the Trustee or Paying
Agent (other than the Company or an Affiliate of the Company)
holds on that date money deposited by the Company or an Affiliate
thereof and sufficient to pay the installment. The Company shall
pay interest on overdue principal at the rate borne by the Notes
per annum; it shall pay interest on overdue installments of
interest at the same rate to the extent lawful.
Section 5.2. SEC Reports.
The Company shall file all reports and other information and
documents which it is required to file with the SEC pursuant to
Section 13 or 15(d) of the Exchange Act, and within 15 days after
it files them with the SEC, the Company shall file copies of all
such reports, information and other documents with the Trustee.
The Company will cause any quarterly and annual reports which it
mails to its shareholders to be mailed to the Holders.
During the period beginning on the latest date of the
original issuance of the Notes and ending on the date that is two
(2) years from such date, the Company covenants and agrees that
it shall, during any period in which it is not subject to Section
13 or 15(d) under the Exchange Act, make available to any Holder
or beneficial Holder of Notes or any Common Stock issued upon
conversion thereof which continue to be Restricted Securities in
connection with any sale thereof and any prospective purchaser of
Notes or such Common Stock from such Holder or beneficial Holder,
the information required pursuant to Rule 144A(d)(4) under the
Securities Act upon the request of any Holder or beneficial
Holder of such Notes or such Common Stock and it will take such
further action as any Holder or beneficial Holder of such Notes
or such Common Stock may reasonably request, all to the extent
required from time to time to enable such Holder or beneficial
Holder to sell its Notes or Common Stock without registration
under the Securities Act within the limitation of the exemption
provided by Rule 144A, as such Rule may be amended from time to
time. Upon the request of any Holder or any beneficial Holder of
the Notes or such Common Stock, the Company will deliver to such
Holder a written statement as to whether it has complied with
such requirements.
section 5.3. Maintenance of Office or Agency.
The Company will maintain in Richmond, Virginia, an office
or agency (which may be the Corporate Trust Office) where the
Notes may be surrendered for registration of transfer or exchange
or for presentation for payment or for conversion or redemption
and where notices and demands to or upon the Company in respect
of the Notes and this Indenture may be served. The Company will
give prompt written notice to the Trustee of the location, and
any change in the location, of such office or agency not
designated or appointed by the Trustee. If at any time the
Company shall fail to maintain any such required office or agency
or shall fail to furnish the Trustee with the address thereof,
such presentations, surrenders, notices and demands may be made
or served at the Corporate Trust Office or the office or agency
of the Trustee in Charlotte, North Carolina.
The Company may also from time to time designate one or more
other offices or agencies where the Notes may be presented or
surrendered for any or all such purposes and may from time to
time rescind such designations provided that no such designation
or rescission shall in any manner relieve the Company of its
obligation to maintain an office or agency in Richmond, Virginia,
for such purposes. The Company will give prompt written notice
to the holders of any such designation or rescission and of any
change in the location of any such other office or agency.
The Company hereby initially designates each of the
Corporate Trust Office of the Trustee and the office or agency of
the Trustee in Charlotte, North Carolina, as one such office or
agency of the Company for each of the aforesaid purposes.
Section 5.4. Stay, Extension and Usury Laws.
The Company covenants (to the extent that it may lawfully do
so) that it shall not at any time insist upon, plead, or in any
manner whatsoever claims or take the benefit or advantage of, any
stay, extension or usury law or other law which would prohibit or
forgive the Company from paying all or any portion of the
principal of, premium, if any, or interest on the Notes as
contemplated herein, wherever enacted, now or at any time
hereafter in force, or which may affect the covenants or the
performance of this Indenture, and the Company (to the extent it
may lawfully do so) hereby expressly waives all benefits or
advantage of any such law, and covenants that it will not, by
resort to any such law, hinder, delay or impede the execution of
any power herein granted to the Trustee, but will suffer and
permit the execution of every such power as though no such law
has been enacted.
Section 5.5. Liquidation.
Subject to the provisions of Article IV, so far as they may
be applicable hereto, the Board of Directors or the shareholders
of the Company may not adopt a plan of liquidation, which plan
provides for, contemplates or the effectuation of which is
preceded by (a) the sale, lease, conveyance or other disposition
of all or substantially all of the assets of the Company
otherwise than substantially as an entirety (any such sale,
lease, conveyance or other disposition substantially as an
entirety being governed by Article VII) and (b) the distribution
of all or substantially all of the proceeds of such sale, lease,
conveyance or other disposition and of the remaining assets of
the Company to the holders of the capital stock of the Company,
unless the Company shall in connection with the adoption of such
plan make provision for, or agree that prior to making any
liquidating distributions it will make provision for, the
satisfaction of the Company's obligations hereunder and under the
Notes as to the payment of the principal and interest thereof.
The Company shall be deemed to make provision for such payments
only if (1) the Company irrevocably deposits in trust with the
Trustee money or U.S. Government Obligations maturing as to
principal and interest in such amounts and at such times as are
sufficient, without consideration of any reinvestment of such
interest, to pay the principal of and interest on the Notes then
outstanding to maturity and to pay all other sums payable by it
hereunder or (2) there is an express assumption of the due and
punctual payment of the Company's obligations hereunder and under
the Notes and the performance and observance of all covenants and
conditions to be performed by the Company hereunder, by the
execution and delivery of a supplemental indenture in form
satisfactory to the Trustee by a Person who acquires, or will
acquire (otherwise than pursuant to a lease), all or
substantially all of the assets of the Company, and which Person
will have assets (immediately after the acquisition) and
aggregate earnings (for such Person's four full fiscal quarters
immediately preceding such acquisition) at least equal to the
assets of the Company (immediately preceding such acquisition)
and the aggregate earnings of the Company (for its four (4) full
fiscal quarters immediately preceding the acquisition),
respectively, and which is a corporation organized under the laws
of the United States, any State thereof or the District of
Columbia; provided, however, that the Company shall not make any
liquidating distribution until after the Company (x) has
certified to the Trustee with an Officers' Certificate at least
five (5) days prior to the making of any liquidating distribution
that it has complied with the provisions of this Section 5.5 and
(y) delivered to the Trustee an Opinion of Counsel that all
conditions precedent to such liquidation have been complied with.
Section 5.6. Compliance Certificates.
The Company shall deliver to the Trustee, within 90 days
after the end of each fiscal year of the Company, an Officers'
Certificate as to the signer's knowledge of the Company's
compliance with all conditions and covenants on its part
contained in this Indenture and stating whether or not the signer
knows of any default or Event of Default. If such signer knows of
such a default or Event of Default, the Officers' Certificate
shall describe the default or Event of Default and the efforts to
remedy the same. For the purposes of this Section 5.6, compliance
shall be determined without regard to any grace period or
requirement of notice provided pursuant to the terms of this
Indenture. The Officers' Certificate need not comply with Section
17.5 hereof.
Section 5.7. Notice of Defaults.
In the event (a) that Indebtedness of the Company in an
aggregate amount in excess of $5,000,000 is declared due and
payable before its maturity because of the occurrence of any
default under such Indebtedness, or (b) of the occurrence of any
event which, with the giving of notice or the passage of time, or
both, would entitle the holder or holders of such Indebtedness to
declare such Indebtedness due and payable before its maturity,
the Company will promptly give written notice to the Trustee of
such declaration.
Section 5.8. Payment of Taxes and Other Claims.
The Company will pay or discharge or cause to be paid or
discharged, before the same shall become delinquent, (a) all
material taxes, assessments and governmental charges levied or
imposed upon the Company, directly or by reason of its ownership
of any Subsidiary or upon the income, profits or property of the
Company and (b) all material lawful claims for labor, materials
and supplies, which, if unpaid, might by law become a lien upon
the property of the Company; provided, however, that the Company
shall not be required to pay or discharge or cause to be paid or
discharged any such tax, assessment, charge or claim whose
amount, applicability or validity is being contested in good
faith by appropriate proceedings and for which adequate provision
has been made.
Section 5.9. Corporate Existence.
Subject to Article XII, the Company will do or cause to be
done all things necessary to preserve and keep in full force and
effect its corporate existence and rights (charter and
statutory); provided, however, that the Company shall not be
required to preserve any right if the Board of Directors shall
determine in good faith that the preservation is no longer
desirable in the conduct of the Company's business and that the
loss thereof is not, and will not be, adverse in any material
respect to the Holders.
Section 5.10. Maintenance of Properties.
Subject to Section 5.5, the Company and its Subsidiaries
will cause all material properties (real and personal) owned,
leased or licensed in the conduct of their business to be
maintained and kept in good condition, repair and working order
and supplied with all necessary equipment and will cause to be
made all necessary repairs, renewals, replacements, betterments
and improvements thereof and thereto, all as in the reasonable
judgment of the Board of Directors may be necessary so that the
business carried on in connection therewith may be properly and
advantageously conducted at all times while any Notes are
outstanding, provided, however, that nothing in this Section 5.10
shall prevent the Company and its Subsidiaries from discontinuing
the maintenance of any such properties if, in the reasonable
judgment of the Board of Directors, such discontinuance is
desirable in the conduct of the Company's business and is not,
and will not be, adverse in any material respect to the Holders.
Section 5.11. Further Instruments and Acts.
Upon request of the Trustee, the Company will execute and
deliver such further instruments and do such further acts as may
be reasonably necessary or proper to carry out more effectively
the purposes of this Indenture.
ARTICLE VI
NOTEHOLDERS' LISTS AND REPORTS
BY THE TRUSTEE
Section 6.1. Holders' Lists.
The Company covenants and agrees that it will furnish or
cause to be furnished to the Trustee, semiannually, not more than
15 days after each March 15 and September 15 in each year
beginning with 1998, and at such other times as the Trustee may
request in writing, within 30 days after receipt by the Company
of any such request (or such lesser time as the Trustee may
reasonably request in order to enable it to timely provide any
notice to be provided by it hereunder), a list in such form as
the Trustee may reasonably require of the names and addresses of
the Holders of Notes as of a date not more than 15 days (or such
other date as the Trustee may reasonably request in order to so
provide any such notices) prior to the time such information is
furnished, except that no such list need be furnished so long as
the Trustee is acting as Note Registrar.
Section 6.2. Preservation and Disclosure of Lists.
(a) The Trustee shall preserve, in as current a form as is
reasonably practicable, all information as to the names and
addresses of the Holders of Notes contained in the most recent
list furnished to it as provided in Section 6.1 or maintained by
the Trustee in its capacity as Note Registrar, if so acting. The
Trustee may destroy any list furnished to it as provided in
Section 6.1 upon receipt of a new list so furnished.
(b) The rights of Holders to communicate with other Holders
of Notes with respect to their rights under this Indenture or
under the Notes, and the corresponding rights and duties of the
Trustee, shall be as provided by the Trust Indenture Act.
(c) Every Noteholder, by receiving and holding the same,
agrees with the Company and the Trustee that neither the Company
nor the Trustee nor any Agent of either of them shall be held
accountable by reason of any disclosure of information as to
names and addresses of Holders of Notes made pursuant to the
Trust Indenture Act.
Section 6.3. Reports by Trustee.
(a) Within 60 days after December 31 of each year
commencing with the year 1997, the Trustee shall transmit to
Holders of Notes such reports dated as of December 31 of the year
in which such reports are made concerning the Trustee and its
actions under this Indenture as may be required pursuant to the
Trust Indenture Act at the times and in the manner provided
pursuant thereto.
(b) A copy of such report shall, at the time of such
transmission to Holders of Notes, be filed by the Trustee with
each stock exchange or automated quotation system upon which the
Notes may be listed or traded with the Company. The Company will
notify the Trustee in writing within a reasonable time if the
Notes are listed on any stock exchange or automated quotation
system.
ARTICLE VII
REMEDIES OF THE TRUSTEE AND NOTEHOLDERS
ON AN EVENT OF DEFAULT
Section 7.1. Events of Default.
In case one or more of the following Events of Default
(whatever the reason for such Event of Default and whether it
shall be voluntary or involuntary or be effected by operation of
law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or
governmental body) shall have occurred and be continuing:
(a) default in the payment of any installment of interest
upon any of the Notes as and when the same shall become due and
payable, and continuance of such default for a period of 30 days,
whether or not such payment is permitted under Article IV hereof;
or
(b) default in the payment of the principal of or premium,
if any, on any of the Notes as and when the same shall become due
and payable either at maturity or in connection with any
redemption pursuant to Article III or repurchase pursuant to
Article XVI, by acceleration or otherwise, whether or not such
payment is permitted under Article IV hereof; or
(c) failure on the part of the Company duly to observe or
perform any other of the covenants or agreements on the part of
the Company in the Notes or in this Indenture (other than a
covenant or agreement a default in whose performance or whose
breach is elsewhere in this Section 7.1 specifically dealt with)
continued for a period of 60 days after the date on which written
notice of such failure, requiring the Company to remedy the same,
shall have been given to the Company by the Trustee, or to the
Company and a Trust Officer of the Trustee by the Holders of at
least 25% in aggregate principal amount of the Notes at the time
outstanding determined in accordance with Section 9.4; or
(d) failure on the part of the Company or any Subsidiary
with respect to its obligation to pay principal of or interest on
Indebtedness for borrowed money which default shall have resulted
in Indebtedness in an amount in excess of $5,000,000; or
(e) default by the Company with respect to any Indebtedness
for borrowed money of the Company, which default results in
acceleration of any such Indebtedness which is in an amount of in
excess of $5,000,000 without such Indebtedness having been
discharged, or such acceleration having been rescinded or
annulled within the applicable grace period; or
(f) the Company shall commence a voluntary case or other
proceeding seeking liquidation, reorganization or other relief
with respect to itself or its debts under any bankruptcy,
insolvency or other similar law now or hereafter in effect or
seeking the appointment of a trustee, receiver, liquidator,
custodian or other similar official of it or any substantial part
of its property, or shall consent to any such relief or to the
appointment of or taking possession by any such official in an
involuntary case or other proceeding commenced against it, or
shall make a general assignment for the benefit of creditors, or
shall fail generally to pay its debts as they become due; or
(g) an involuntary case or other proceeding shall be
commenced against the Company seeking liquidation, reorganization
or other relief with respect to it or its debts under any
bankruptcy, insolvency or other similar law now or hereafter in
effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or any
substantial part of its property, and such involuntary case or
other proceeding shall remain undismissed and unstayed for a
period of 60 consecutive days; or
(h) the entry by a court having jurisdiction in the
premises of a final judgment, decree or order against the Company
or any Subsidiary which shall require the payment by the Company
or any Subsidiary of an amount (to the extent not covered by
insurance) in excess of $5,000,000 and the continuance of any
such judgment, decree or order unstayed or unsatisfied and in
effect for a period of 60 consecutive days which is not being
contested in good faith by appropriate judicial proceedings;
then, and in each and every such case (other than an Event of
Default specified in Section 7.1(f) or (g)), unless the principal
of all of the Notes shall have already become due and payable,
either the Trustee or the Holders of not less than 25% in
aggregate principal amount of the Notes then outstanding
hereunder determined in accordance with Section 9.4, by notice in
writing to the Company (and to the Trustee if given by Holders),
may declare the principal of all the Notes and the interest
accrued thereon to be due and payable immediately, and upon any
such declaration the same shall become and shall be immediately
due and payable, anything in this Indenture or in the Notes
contained to the contrary notwithstanding. If an Event of
Default specified in Section 7.1(f) or (g) occurs, the principal
of all the Notes and the interest accrued thereon shall be
immediately and automatically due and payable without necessity
of further action. This provision, however, is subject to the
condition that if, at any time after the decree for the payment
of the monies due shall have been obtained or entered as
hereinafter provided, the Company shall pay or shall deposit with
the Trustee a sum sufficient to pay all matured installments of
interest upon all Notes and the principal of and premium, if any,
on any and all Notes which shall have become due otherwise than
by acceleration (with interest on overdue installments of
interest (to the extent that payment of such interest is
enforceable under applicable law) and on such principal and
premium, if any, at the rate borne by the Notes, to the date of
such payment or deposit) and amounts due to the Trustee pursuant
to Section 8.6, and if any and all defaults under this Indenture,
other than the nonpayment of principal of and premium, if any,
and accrued interest on Notes which shall have become due by
acceleration, shall have been cured or waived pursuant to Section
7.7, then and in every such case the Holders of a majority in
aggregate principal amount of the Notes then outstanding
determined in accordance with Section 9.4, by written notice to
the Company and to the Trustee, may waive all defaults or Events
of Default and rescind and annul such declaration and its
consequences, but no such waiver or rescission and annulment
shall extend to or shall affect any subsequent default or Event
of Default, or shall impair any right consequent thereon. The
Company shall notify a Trust Officer of the Trustee, promptly
upon becoming aware thereof, of any Event of Default.
In case the Trustee shall have proceeded to enforce any
right under this Indenture and such proceedings shall have been
discontinued or abandoned because of such waiver or rescission
and annulment or for any other reason or shall have been
determined adversely to the Trustee, then and in every such case
the Company, the Holders of Notes, and the Trustee shall be
restored respectively to their several positions and rights
hereunder and all rights, remedies and powers of the Company, the
Holders of Notes, and the Trustee shall continue as though no
such proceeding had been taken.
Section 7.2. Payment of Notes on Default; Suit Therefor.
The Company covenants that (a) in case default shall be made
in the payment of any installment of interest upon any of the
Notes as and when the same shall become due and payable, and such
default shall have continued for a period of 30 days, or (b) in
case default shall be made in the payment of the principal of or
premium, if any, on any of the Notes as and when the same shall
have become due and payable, whether at maturity of the Notes or
in connection with any redemption or repurchase, under this
Indenture, by declaration or otherwise, then, upon demand of the
Trustee, the Company will pay to the Trustee, for the benefit of
the Holders, the whole amount that then shall have become due and
payable on all such Notes for principal and premium, if any, or
interest, or both, as the case may be, with interest upon the
overdue principal and premium, if any, and (to the extent that
payment of such interest is enforceable under applicable law)
upon the overdue installments of interest at the rate borne by
the Notes and, in addition thereto, such further amount as shall
be sufficient to cover the costs and expenses of collection,
including reasonable compensation to the Trustee, its agents,
attorneys and counsel, and any expenses or liabilities incurred
by the Trustee hereunder. Until such demand by the Trustee, the
Company may pay the principal of and premium, if any, and
interest on the Notes to the Holders, whether or not the Notes
are overdue.
In case the Company shall fail forthwith to pay such amounts
upon such demand, the Trustee, in its own name and as Trustee of
an express trust, shall be entitled and empowered to institute
any actions or proceedings at law or in equity for the collection
of the sums so due and unpaid, and may prosecute any such action
or proceeding to judgment or final decree, and may enforce any
such judgment or final decree against the Company or any other
obligor on the Notes and collect in the manner provided by law
out of the property of the Company or any other obligor on the
Notes wherever situated the monies adjudged or decreed to be
payable.
In the case there shall be pending proceedings for the
bankruptcy or for the reorganization of the Company or any other
obligor on the Notes under Title 11 of the United States Code, or
any other applicable law, or in case a receiver, assignee or
trustee in bankruptcy or reorganization, liquidator, sequestrator
or similar official shall have been appointed for or taken
possession of the Company or such other obligor, the property of
the Company or such other obligor, or in the case of any other
judicial proceedings relative to the Company or such other
obligor upon the Notes, or to the creditors or property of the
Company or such other obligor, the Trustee, irrespective of
whether the principal of the Notes shall then be due and payable
as therein expressed or by declaration or otherwise and
irrespective of whether the Trustee shall have made any demand
pursuant to the provisions of this Section 7.2, shall be entitled
and empowered, by intervention in such proceedings or otherwise,
to file and prove a claim or claims for the whole amount of
principal, premium, if any, and interest owing and unpaid in
respect of the Notes, and, in case of any judicial proceedings,
to file such proofs of claim and other papers or documents as may
be necessary or advisable in order to have the claims of the
Trustee and of the Holders allowed in such judicial proceedings
relative to the Company or any other obligor on the Notes, its or
their creditors, or its or their property, and to collect and
receive any monies or other property payable or deliverable on
any such claims, and to distribute the same after the deduction
of any amounts due the Trustee under Section 8.6, and any
receiver, assignee or trustee in bankruptcy or reorganization,
liquidator, custodian or similar official is hereby authorized by
each of the Holders to make such payments to the Trustee, and, in
the event that the Trustee shall consent to the making of such
payments directly to the Holders, to pay to the Trustee any
amount due it for reasonable compensation, expenses, advances and
disbursements, including counsel fees incurred by it up to the
date of such distribution. To the extent that such payment of
reasonable compensation, expenses, advances and disbursements out
of the estate in any such proceedings shall be denied for any
reason, payment of the same shall be secured by a lien on, and
shall be paid out of, any and all distributions, dividends,
monies, securities and other property which the Holders may be
entitled to receive in such proceedings, whether in liquidation
or under any plan of reorganization or arrangement or otherwise.
All rights of action and of asserting claims under this
Indenture, or under any of the Notes, may be enforced by the
Trustee without the possession of any of the Notes, or the
production thereof at any trial or other proceeding relative
thereto, and any such suit or proceeding instituted by the
Trustee shall be brought in its own name as trustee of an express
trust, and any recovery of judgment shall, after provision for
the payment of the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and
counsel, be for the ratable benefit of the Holders.
In any proceedings brought by the Trustee (and in any
proceedings involving the interpretation of any provision of this
Indenture to which the Trustee shall be a party), the Trustee
shall be held to represent all the Holders, and it shall not be
necessary to make any Holders parties to any such proceedings.
Section 7.3. Application of Monies Collected by Trustee.
Any monies collected by the Trustee pursuant to this Article
VII shall be applied in the order following, at the date or dates
fixed by the Trustee for the distribution of such monies, upon
presentation of the several Notes, and stamping thereon the
payment, if only partially paid, and upon surrender thereof, if
fully paid:
First: to the payment of all amounts due the Trustee under
Section 8.6;
Second: subject to the provisions of Article IV, in case
the principal of the outstanding Notes shall not have become due
and be unpaid, to the payment of interest on the Notes in default
in the order of the maturity of the installments of such
interest, with interest (to the extent that such interest has
been collected by the Trustee) upon the overdue installments of
interest at the rate borne by the Notes, such payments to be made
ratably to the Persons entitled thereto;
Third: subject to the provisions of Article IV, in case the
principal of the outstanding Notes shall have become due, by
declaration or otherwise, and be unpaid, to the payment of the
whole amount then owing and unpaid upon the Notes for principal
and premium, if any, and interest, with interest on the overdue
principal and premium, if any, and (to the extent that such
interest has been collected by the Trustee) upon overdue payments
of interest at the rate borne by the Notes, and in case such
monies shall be insufficient to pay in full the whole amounts so
due and unpaid upon the Notes, then to the payment of such
principal and premium, if any, and interest without preference or
priority of principal and premium, if any, over interest, or of
interest over principal and premium, if any, or of any
installment of interest over any other installment of interest,
or of any Note over any other Note, ratably to the aggregate of
such principal and premium, if any, and accrued and unpaid
interest; and
Fourth: subject to the provisions of Article IV, to the
payment of the remainder, if any, to the Company or any other
Person lawfully entitled thereto.
Section 7.4. Proceedings by Holders.
No Holder shall have any right by virtue of or by availing
of any provision of this Indenture to institute any suit, action
or proceeding in equity or at law upon or under or with respect
to this Indenture, or for the appointment of a receiver, trustee,
liquidator, custodian or other similar official, or for any other
remedy hereunder, unless such Holder previously shall have given
to the Trustee written notice of an Event of Default and of the
continuance thereof, as hereinbefore provided, and unless also
the Holders of not less than 25% in aggregate principal amount of
the Notes then outstanding determined in accordance with Section
9.4 shall have made written request upon the Trustee to institute
such action, suit or proceedings in its own name as Trustee
hereunder and shall have offered to the Trustee such reasonable
indemnity as it may require against the costs, expenses and
liabilities to be incurred therein or thereby, and the Trustee
for 60 days after its receipt of such notice, request and offer
of indemnity, shall have neglected or refused to institute any
such action, suit or proceeding and no direction inconsistent
with such written request shall have been given to the Trustee
pursuant to Section 7.7, it being understood and intended, and
being expressly covenanted by the taker and Holder of every Note
with every other taker and Holder and the Trustee, that no one or
more Holders shall have any right in any manner whatever by
virtue of or by availing of any provision of this Indenture to
affect, disturb or prejudice the rights of any other Holder of
Notes, or to obtain or seek to obtain priority over or preference
to any other such Holder, or to enforce any right under this
Indenture, except in the manner herein provided and for the
equal, ratable and common benefit of all Holders (except as
otherwise provided herein). For the protection and enforcement
of this Section 7.4, each and every Noteholder and the Trustee
shall be entitled to such relief as can be given either at law or
in equity.
Notwithstanding any other provision of this Indenture and
any provision of any Note, the right of any Holder of any Note to
receive payment of the principal of and premium, if any, and
interest on such Note, on or after the respective due dates
therefor, or to institute suit for the enforcement of any such
payment on or after such respective dates against the Company
shall not be impaired or affected without the consent of such
Holder.
Anything in this Indenture or the Notes to the contrary
notwithstanding, the Holder of any Note, without the consent of
either the Trustee or the Holder of any other Note, in his own
behalf and for his own benefit, may enforce, and may institute
and maintain any proceeding suitable to enforce, his rights of
conversion as provided herein.
Section 7.5. Proceedings by Trustee.
In case of an Event of Default, the Trustee may in its
discretion proceed to protect and enforce the rights vested in it
by this Indenture by such appropriate judicial proceedings as the
Trustee shall deem most effectual to protect and enforce any of
such rights, either by suit in equity or by action at law or by
proceeding in bankruptcy or otherwise, whether for the specific
enforcement of any covenant or agreement contained in this
Indenture or in aid of the exercise of any power granted in this
Indenture, or to enforce any other legal or equitable right
vested in the Trustee by this Indenture or by law.
Section 7.6. Remedies Cumulative and Continuing.
Except as provided in the last paragraph of Section 2.9, all
powers and remedies given by this Article VII to the Trustee or
to the Holders shall, to the extent permitted by law, be deemed
cumulative and not exclusive of any thereof or of any other
powers and remedies available to the Trustee or the Holders, by
judicial proceedings or otherwise, to enforce the performance or
observance of the covenants and agreements contained in this
Indenture, and no delay or omission of the Trustee or of any
Holder of any of the Notes to exercise any right or power
accruing upon any default or Event of Default occurring and
continuing as aforesaid shall impair any such right or power, or
shall be construed to be a waiver of any such default or any
acquiescence therein and, subject to the provisions of Section
7.4, every power and remedy given by this Article VII or by law
to the Trustee or to the Holders may be exercised from time to
time, and as often as shall be deemed expedient, by the Trustee
or by the Holders.
Section 7.7. Direction of Proceedings and Waiver of
Defaults by Majority of Holders.
The Holders of a majority in aggregate principal amount of
the Notes at the time outstanding determined in accordance with
Section 9.4 shall have the right to direct the time, method and
place of conducting any proceeding for any remedy available to
the Trustee or exercising any trust or power conferred on the
Trustee, provided, however, that (a) such direction shall not be
in conflict with any rule of law or with this Indenture, and (b)
the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such direction. The
Holders of a majority in aggregate principal amount of the Notes
at the time outstanding determined in accordance with Section 9.4
may on behalf of the Holders of all of the Notes waive any past
default or Event of Default hereunder and its consequences except
(i) a default in the payment of interest or premium, if any, on,
or the principal of, the Notes, (ii) a failure by the Company to
convert any Notes into Common Stock, (iii) a default in the
payment of the Redemption Price pursuant to Article III or
repurchase price pursuant to Article XVI or (iv) a default in
respect of a covenant or provisions hereof which under Article XI
cannot be modified or amended without the consent of the Holders
of all Notes then outstanding. Upon any such waiver, the
Company, the Trustee and the Holders shall be restored to their
former positions and rights hereunder, but no such waiver shall
extend to any subsequent or other default or Event of Default or
impair any right consequent thereon. Whenever any default or
Event of Default hereunder shall have been waived as permitted by
this Section 7.7, said default or Event of Default shall for all
purposes of the Notes and this Indenture be deemed to have been
cured and to be not continuing, but no such waiver shall extend
to any subsequent or other default or Event of Default or impair
any right consequent thereon.
Section 7.8. Notice of Defaults.
The Trustee shall, within 90 days after a Trust Officer has
knowledge of the occurrence of a default, mail to all Holders, as
the names and addresses of such Holders appear upon the Note
register, notice of all defaults known to a Trust Officer, unless
such defaults shall have been cured or waived before the giving
of such notice and provided that, except in the case of default
in the payment of the principal of, or premium, if any, or
interest on any of the Notes, the Trustee shall be protected in
withholding such notice if and so long as a trust committee of
directors and/or officers of the Trustee in good faith determines
that the withholding of such notice is in the interest of the
Holders.
Section 7.9. Undertaking to Pay Costs.
All parties to this Indenture agree, and each Holder of any
Note by his acceptance thereof shall be deemed to have agreed,
that any court may, in its discretion, require, in any suit for
the enforcement of any right or remedy under this Indenture, or
in any suit against the Trustee for any action taken or omitted
by it as Trustee, the filing by any party litigant in such suit
of an undertaking to pay the costs of such suit and that such
court may in its discretion assess reasonable costs, including
reasonable attorneys' fees, against any party litigant in such
suit, having due regard to the merits and good faith of the
claims or defenses made by such party litigant, provided that the
provisions of this Section 7.9 (to the extent permitted by law)
shall not apply to any suit instituted by the Trustee, to any
suit instituted by any Noteholder, or group of Holders, holding
in the aggregate more than ten percent in principal amount of the
Notes at the time outstanding determined in accordance with
Section 9.4, or to any suit instituted by any Noteholder for the
enforcement of the payment of the principal of or premium, if
any, or interest on any Note on or after the due date therefor or
to any suit for the enforcement of the right to convert any Note
in accordance with the provisions of Article XV or to require the
Company to repurchase any Note in accordance with Article XVI.
ARTICLE VIII
CONCERNING THE TRUSTEE
Section 8.1. Duties and Responsibilities of Trustee.
The Trustee, prior to the occurrence of an Event of Default
and after the curing of all Events of Default which may have
occurred, undertakes to perform such duties and only such duties
as are specifically set forth in this Indenture. In case an
Event of Default has occurred (which has not been cured or
waived), the Trustee shall exercise such of the rights and powers
vested in it by this Indenture, and use the same degree of care
and skill in their exercise, as a prudent man would exercise or
use under the circumstances in the conduct of his own affairs.
No provision of this Indenture shall be construed to relieve
the Trustee from liability for its own negligent action, its own
negligent failure to act or its own willful misconduct, except
that:
(a) prior to the occurrence of an Event of Default and
after the curing or waiving of all Events of Default which may
have occurred:
(1) the duties and obligations of the Trustee shall be
determined solely by the express provisions of this Indenture and
the Trust Indenture Act, and the Trustee shall not be liable
except for the performance of such duties and obligations as are
specifically set forth in this Indenture and no implied covenants
or obligations shall be read into this Indenture or the Trust
Indenture Act against the Trustee; and
(2) in the absence of bad faith and willful misconduct on
the part of the Trustee, the Trustee may conclusively rely, as to
the truth of the statements and the correctness of the opinions
expressed therein, upon any certificates or opinions furnished to
the Trustee and conforming to the requirements of this Indenture
but, in the case of any such certificates or opinions which by
any provisions hereof are specifically required to be furnished
to the Trustee, the Trustee shall be under a duty to examine the
same to determine whether or not they conform to the requirements
of this Indenture;
(b) the Trustee shall not be liable for any error of
judgment made in good faith by a Trust Officer or Officers,
unless the Trustee was negligent in ascertaining the pertinent
facts;
(c) the Trustee shall not be liable with respect to any
action taken or omitted to be taken by it in good faith in
accordance with the direction of the Holders of not less than a
majority in principal amount of the Notes at the time outstanding
determined as provided in Section 9.4 relating to the time,
method and place of conducting any proceeding for any remedy
available to the Trustee, or exercising any trust or power
conferred upon the Trustee, under this Indenture; and
(d) whether or not therein provided, every provision of
this Indenture relating to the conduct or affecting the liability
of, or affording protection to, the Trustee as Trustee, Paying
Agent, Note Registrar, Custodian or Conversion Agent shall be
subject to the provisions of this Section.
None of the provisions contained in this Indenture shall
require the Trustee to expend or risk its own funds or otherwise
incur personal financial liability in the performance of any of
its duties or in the exercise of any of its rights or powers.
Section 8.2. Reliance on Documents, Opinions, Etc.
(a) the Trustee may rely and shall be protected in acting
upon any resolution, certificate, statement, instrument, opinion,
report, notice, request, consent, order, bond, note, coupon or
other paper or document believed by it in good faith to be
genuine and to have been signed or presented by the proper party
or parties;
(b) any request, direction, order or demand of the Company
mentioned herein shall be sufficiently evidence by an Officers'
Certificate (unless other evidence in respect thereof be herein
specifically prescribed) and any resolution of the Board of
Directors may be evidence to the Trustee by a copy thereof
certified by the Secretary or an Assistant Secretary of the
Company;
(c) the Trustee may consult with counsel, and any advice or
Opinion of Counsel shall be full and complete authorization and
protection in respect of any action taken or omitted by it
thereunder in good faith and in accordance with such advice or
Opinion of Counsel;
(d) the Trustee shall be under no obligation to exercise
any of the rights or powers vested in it by this Indenture at the
request, order or direction of any of the Holders pursuant to the
provisions of this Indenture, unless such Holders shall have
offered to the Trustee reasonable security or indemnity against
the costs, expenses and liabilities which may be incurred therein
or thereby;
(e) the Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolution,
certificate, statement, instrument, opinion, report, notice,
request, direction, consent, order, bond, Note or other paper or
document, but the Trustee, in its discretion, may make such
further inquiry or investigation into such facts or matters as it
may see fit, and, if the Trustee shall determine to make such
further inquiry or investigation, it shall be entitled to examine
the books, records and premises of the Company, personally or by
Agent or attorney, provided, however, that if the payments within
a reasonable time to the Trustee of the costs, expenses or
liabilities likely to be incurred by it in the making of such
investigation is, in the opinion of the Trustee, not reasonably
assured to the Trustee by the security afforded to it by the
terms of this Indenture, the Trustee may require reasonable
indemnity against such expenses or liability as a condition to so
proceeding and the reasonable expenses of every such examination
shall be paid by the Company or, if paid by the Trustee or any
predecessor Trustee, shall be repaid by the Company upon demand;
(f) the Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by
or through agents or attorneys and the Trustee shall not be
responsible for any misconduct or negligence on the part of any
Agent or attorney appointed by it with due care hereunder; and
(g) the Trustee shall not be deemed to have notice of an
Event of Default or of any event or conditions which, with the
giving of notice, the passage of time, or both, might constitute
an Event of Default unless (i) the Trustee has received written
notice thereof from the Company or any Noteholder or (ii) a Trust
Officer shall have actual knowledge thereof.
Section 8.3. No Responsibility for Recitals, Etc.
The recitals contained herein and in the Notes (except in
the Trustee's certificate of authentication) shall be taken as
the statements of the Company, and the Trustee assumes no
responsibility for the correctness of the same. The Trustee
makes no representations as to the validity or sufficiency of
this Indenture or of the Notes. The Trustee shall not be
accountable for the use or application by the Company of any
Notes or the proceeds of any Notes authenticated and delivered by
the Trustee in conformity with the provisions of this Indenture.
Section 8.4. Trustee, Paying Agents, Conversion Agents
or Registrar May Own Notes.
The Trustee, any Paying Agent, any Conversion Agent or Note
Registrar, in its individual or any other capacity, may become
the owner or pledgee of Notes with the same rights it would have
if it were not Trustee, Paying Agent, Conversion Agent or Note
Registrar.
Section 8.5. Monies to Be Held in Trust.
Subject to the provisions of Section 13.4, all monies
received by the Trustee shall, until used or applied as herein
provided, be held in trust for the purposes for which they were
received. Money held by the Trustee in trust thereunder need not
be segregated from other funds except to the extent required by
law. The Trustee shall be under no liability for interest on any
money received by it hereunder except as may be agreed from time
to time by the Company and the Trustee.
Section 8.6. Compensation and Expenses of Trustee.
The Company covenants and agrees to pay to the Trustee from
time to time, and the Trustee shall be entitled to, reasonable
compensation for all services rendered by it hereunder in any
capacity (which shall not be limited by any provision of law in
regard to the compensation of a Trustee of an express trust), and
the Company will pay or reimburse the Trustee upon its request
for all reasonable expenses, disbursements and advances
reasonably incurred or made by the Trustee in accordance with any
of the provisions of this Indenture (including the reasonable
compensation and the expenses and disbursements of its counsel
and of all Persons not regularly in its employ), except any such
expense, disbursement or advance as may arise from the Trustee's
negligence, willful misconduct, recklessness or bad faith. The
Company also covenants to indemnify the Trustee in any capacity
under this Indenture and its agents and any authenticating agent
for, and to hold them harmless against, any loss, liability or
expense incurred without negligence, willful misconduct,
recklessness, or bad faith on the part of the Trustee or such
Agent or authenticating agent, as the case may be, and arising
out of or in connection with the acceptance or administration of
this trust or in any other capacity hereunder, including the
costs and expenses of defending themselves against any claim of
liability in the premises. All indemnifications and releases
from liability granted hereunder to the Trustee shall extend to
its Officers, directors, employees, agents, successors and
assigns. The obligations of the Company under this Section 8.6
to compensate or indemnify the Trustee and to pay or reimburse
the Trustee for expenses, disbursements and advances shall be
secured by a lien prior to that of the Notes upon all property
and funds held or collected by the Trustee as such, except funds
held in trust for the benefit of the Holders of particular Notes.
The obligation of the Company under this Section 8.6 shall
survive the satisfaction and discharge of this Indenture.
When the Trustee and its agents and any authenticating agent
incur expenses or render services after an Event of Default
specified in Section 7.1(f) or (g) occurs, the expenses and the
compensation for the services are intended to constitute expenses
of administration under any bankruptcy, insolvency or similar
laws.
Section 8.7. Officers' Certificate as Evidence.
Except as otherwise provided in Section 8.1, wherever in the
administration of the provisions of this Indenture, the Trustee
shall deem it necessary or desirable that a matter be proved or
established prior to taking or omitting any action hereunder,
such matter (unless other evidence in respect thereof be herein
specifically prescribed) may, in the absence of negligence,
willful misconduct, recklessness, or bad faith on the part of the
Trustee, be deemed to be conclusively proved and established by
an Officers' Certificate delivered to the Trustee.
Section 8.8. Conflicting Interests of Trustee.
If the Trustee has or shall acquire a conflicting interest
within the meaning of the Trust Indenture Act, the Trustee shall
either eliminate such interest or resign, to the extent and in
the manner provided by, and subject to the provisions of, the
Trust Indenture Act and this Indenture.
Section 8.9. Eligibility of Trustee.
There shall at all times be a Trustee hereunder which shall
be a Person that is eligible pursuant to the Trust Indenture Act
to act as such and which shall have (or, in the case of a
corporation included in a bank holding company system, the
related bank holding company shall have) a combined capital and
surplus of at least $50,000,000. If such Person publishes
reports of condition at least annually, pursuant to law or to the
requirements of any supervising or examining authority, then for
the purposes of this Section 8.9, the combined capital and
surplus of such Person shall be deemed to be its combined capital
and surplus as set forth in its most recent report of condition
so published. If at any time the Trustee shall cease to be
eligible in accordance with the provisions of this Section 8.9,
it shall resign immediately in the manner and with the effect
hereinafter specified in this Article VIII.
Section 8.10. Resignation or Removal of Trustee.
(a) The Trustee may at any time resign by giving
written notice of such resignation to the Company and to the
Holders of Notes. Upon receiving such notice of resignation, the
Company shall promptly appoint a successor Trustee by written
instrument, in duplicate, executed by order of the Board of
Directors, one copy of which instrument shall be delivered to the
resigning Trustee and one copy to the successor Trustee. If no
successor Trustee shall have been so appointed and have accepted
appointment within 60 days after the mailing of such notice of
resignation to the Holders, the resigning Trustee may petition
any court of competent jurisdiction for the appointment of a
successor Trustee, or any Noteholder who has been a bona fide
Holder of a Note or Notes for at least six months may, subject to
the provisions of Section 7.9, on behalf of himself and all
others similarly situated, petition any such court for the
appointment of a successor Trustee. Such court may thereupon,
after such notice, if any, as it may deem proper and prescribe,
appoint a successor Trustee.
(b) In case at any time any of the following shall
occur:
(1) the Trustee shall fail to comply with Section
8.8 after written request therefor by the Company or by any
Noteholder who has been a bona fide Holder of a Note or Notes for
at least six (6) months; or
(2) the Trustee shall cease to be eligible in
accordance with the provisions of Section 8.9 and shall fail to
resign after written request therefor by the Company or by any
such Noteholder; or
(3) the Trustee shall become incapable of acting,
or shall be adjudged a bankrupt or insolvent, or a receiver of
the Trustee or of its property shall be appointed, or any public
officer shall take charge or control of the Trustee or of its
property or affairs for the purpose of rehabilitation,
conservation or liquidation;
then, in any such case, the Company may remove the
Trustee and appoint a successor Trustee by written instrument, in
duplicate, executed by order of the Board of Directors, one copy
of which instrument shall be delivered to the Trustee so removed
and one copy to the successor Trustee, or, subject to the
provisions of Section 7.9, any Noteholder who has been a bona
fide Holder of a Note or Notes for at least six (6) months may,
on behalf of himself and all others similarly situated, petition
any court of competent jurisdiction for the removal of the
Trustee and the appointment of a successor Trustee. Such court
may thereupon, after such notice, if any, as it may deem proper
and prescribe, remove the Trustee and appoint a successor
Trustee.
(c) The Holders of a majority in aggregate principal
amount of the Notes at the time outstanding may at any time
remove the Trustee and nominate a successor Trustee which shall
be deemed appointed as successor Trustee unless within ten (10)
days after notice to the Company of such nomination, the Company
objects thereto, in which case the Trustee so removed or any
Noteholder, upon the terms and conditions and otherwise as in
Section 8.10(a) provided, may petition any court of competent
jurisdiction for an appointment of a successor Trustee.
(d) Any resignation or removal of the Trustee and
appointment of a successor Trustee pursuant to any of the
provisions of this Section 8.10 shall become effective upon
acceptance of appointment by the successor Trustee as provided in
Section 8.11.
Section 8.11. Acceptance by Successor Trustee.
Any successor Trustee appointed as provided in Section 8.10
shall execute, acknowledge and deliver to the Company and to its
predecessor Trustee an instrument accepting such appointment
hereunder, and thereupon the resignation or removal of the
predecessor Trustee shall become effective and such successor
Trustee, without any further act, deed or conveyance, shall
become vested with all the rights, powers, duties and obligations
of its predecessor hereunder, with like effect as if originally
named as Trustee herein but, nevertheless, on the written request
of the Company or of its successor Trustee, the Trustee ceasing
to act shall, upon payment of any amounts then due it pursuant to
the provisions of Section 8.6, execute and deliver an instrument
transferring to such successor Trustee all the rights and powers
of the Trustee so ceasing to act. Upon request of any such
successor Trustee, the Company shall execute any and all
instruments in writing for more fully and certainly vesting in
and confirming to such successor Trustee all such rights and
powers. Any Trustee ceasing to act shall, nevertheless, retain a
lien upon all property and funds held or collected by such
Trustee as such, except for funds held in trust for the benefit
of Holders of particular Notes, to secure any amounts then due it
pursuant to the provisions of Section 8.6.
No successor Trustee shall accept appointment as provided in
this Section 8.11 unless at the time of such acceptance, such
successor Trustee shall be qualified under the provisions of
Section 8.8 and be eligible under the provisions of Section 8.9.
Upon acceptance of appointment by a successor Trustee as
provided in this Section 8.11, the Company (or the former
Trustee, at the written direction of the Company) shall mail or
cause to be mailed notice of the succession of such Trustee
hereunder the Holders of Notes at their addresses as they shall
appear on the Note register. If the Company fails to mail such
notice within ten (10) days after acceptance of appointment by
the successor Trustee, the successor Trustee shall cause such
notice to be mailed at the expense of the Company.
Section 8.12. Succession by Merger, Etc.
Any corporation into which the Trustee may be merged or
converted or with which it may be consolidated, or any
corporation resulting from any merger, conversion or
consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all of the
corporate trust business of the Trustee (including any trust
created by this Indenture), shall be the successor to the Trustee
hereunder without the execution or filing of any paper or any
further act on the part of any of the parties hereto, provided
that in the case of any corporation succeeding to all or
substantially all of the corporate trust business of the Trustee,
such corporation shall be qualified under the provisions of
Section 8.8 and eligible under the provisions of Section 8.9.
In case at the time such successor to the Trustee shall
succeed to the trusts created by this Indenture, any of the Notes
shall have been authenticated but not delivered, any such
successor to the Trustee may adopt the certificate of
authentication of any predecessor Trustee or authenticating agent
appointed by such predecessor Trustee, and deliver such Notes so
authenticated and in case at that time any of the Notes shall not
have been authenticated, any successor to the Trustee or an
authenticating agent appointed by such successor Trustee may
authenticate such Notes either in the name of any predecessor
Trustee hereunder or in the name of the successor Trustee and in
all such cases such certificates shall have the full force which
it is anywhere in the Notes or in this Indenture provided that
the certificate of the Trustee shall have provided, however, that
the right to adopt the certificate of authentication of any
predecessor Trustee shall apply only to its successor or
successors by merger, conversion or consolidation.
Section 8.13. Limitation on Rights of Trustee as
Creditor.
If and when the Trustee shall be or become a creditor of the
Company (or any other obligor upon the Notes), the Trustee shall
be subject to the provisions of the Trust Indenture Act regarding
the collection of the claims against the Company (or any such
other obligor).
ARTICLE IX
CONCERNING THE NOTEHOLDERS
Section 9.1. Action by Holders.
When in this Indenture it is provided that the Holders of a
specified percentage in aggregate principal amount of the Notes
may take any action (including the making of any demand or
request, the giving of any notice, consent or waiver or the
taking of any other action), the fact that at the time of taking
any such action, the Holders of such specified percentage have
joined therein may be evidenced (a) by any instrument or any
number of instruments of similar tenor executed by Holders in
Person or by Agent or proxy appointed in writing, or (b) by the
record of the Holders of Notes voting in favor thereof at any
meeting of Holders duly called and held in accordance with the
provisions of Article X, or (c) by a combination of such
instrument or instruments and any such record of such a meeting
of Holders. Whenever the Company or the Trustee solicits the
taking of any action by the Holders, the Company or the Trustee
may fix in advance of such solicitation, a date as the record
date for determining Holders entitled to take such action. The
record date shall be not more than 15 days prior to the date of
commencement of solicitation of such action.
Section 9.2. Proof of Execution by Holders.
Subject to the provisions of Sections 8.1, 8.2 and 10.5,
proof of the execution of any instrument by a Noteholder or his
Agent or proxy shall be sufficient if made in accordance with
such reasonable rules and regulations as may be prescribed by the
Trustee or in such manner as shall be satisfactory to the
Trustee. The holding of Notes shall be provided by the registry
of such Notes or by a certificate of the Note Registrar.
The record of any Holders' meeting shall be proved in the
manner provided in Section 10.6.
Section 9.3. Who are Deemed Absolute Owners.
The Company, any other obligor on the Notes, the Trustee,
any authenticating agent, any Paying Agent, any Conversion Agent
and any Note Registrar may deem the Person in whose name such
Note shall be registered upon the Note register to be, and may
treat him as, the absolute owner of such Note (whether or not
such Note shall be overdue and notwithstanding any notation of
ownership or other writing thereon) for the purpose of receiving
payment of or on account of the principal of, premium, if any,
and interest on such Note, for conversion of such Note and for
all other purposes and neither the Company nor any authenticating
agent nor any Note Registrar shall be affected by any notice to
the contrary. All such payments so made to any Holder for the
time being, or upon his order, shall be valid, and, to the extent
of the sum or sums so paid, effectual to satisfy and discharge
the liability for monies payable upon such Note.
Section 9.4. Company-Owned Notes Disregarded.
In determining whether the Holders of the requisite
aggregate principal amount of Notes have concurred in any
direction, consent, waiver or other action under this Indenture,
Notes which are owned by the Company or any other obligor on the
Notes or by any Person directly or indirectly controlling or
controlled by or under direct or indirect common control with the
Company or any other obligor on the Notes shall be disregarded
and deemed not to be outstanding for the purpose of any such
determination, provided that for the purposes of determining
whether the Trustee shall be protected in relying on any such
direction, consent, waiver or other action, only Notes which a
Trust Officer knows are so owned shall be so disregarded. Notes
so owned which have been pledged in good faith may be regarded as
outstanding for the purpose of this Section 9.4 if the pledgee
shall establish to the satisfaction of the Trustee the pledgee's
right to vote such Notes and that the pledgee is not the Company,
any other obligor on the Notes or a Person directly or indirectly
controlling or controlled by or under direct or indirect common
control with the Company of any such other obligor. In the case
of a dispute as to such right, any decision by the Trustee taken
upon the advice of counsel shall be full protection to the
Trustee. Upon request of the Trustee, the Company shall furnish
to the Trustee promptly an Officers' Certificate listing and
identifying all Notes, if any, known by the Company to be owned
or held by or for the account of any of the above-described
Persons and, subject to Section 8.1, the Trustee shall be
entitled to accept such Officers' Certificate as conclusive
evidence of the facts therein set forth and of the fact that all
Notes not listed therein are outstanding for the purpose of any
such determination.
Section 9.5. Revocation of Consents; Future Holders
Bound.
At any time prior to (but not after) the evidencing to the
Trustee, as provided in Section 9.1, of the taking of any action
by the Holders of the percentage in aggregate principal amount of
the Notes specified in this Indenture in connection with such
action, any Holder of a Note which is shown by the evidence to be
included in the Notes the Holders of which have consented to such
action may, by filing written notice with the Trustee at its
Corporate Trust Office and upon proof of holding as provided in
Section 9.2, revoke such action so far as it concerns such Note.
Except as aforesaid, any such action taken by the Holder of any
Note shall be conclusive and binding upon such Holder and upon
all future Holders and owners of such Note and of any Notes
issued in exchange or substitution therefor, irrespective of
whether any notation in regard thereto is made upon such Note or
any Note issued in exchange or substitution therefor.
ARTICLE X
NOTEHOLDERS' MEETINGS
Section 10.1. Purpose of Meetings.
A meeting of Holders may be called at any time and from time
to time pursuant to the provisions of this Article X for any of
the following purposes:
(a) to give any notice to the Company or to the
Trustee or to give any directions to the Trustee permitted under
this Indenture, or to consent to the waiving of any default or
Event of Default hereunder and its consequences, or to take any
other action authorized to be taken by Holders pursuant to any of
the provisions of Article VII;
(b) to remove the Trustee and nominate a successor
Trustee pursuant to the provisions of Article VIII;
(c) to consent to the execution of an indenture or
indentures supplemental hereto pursuant to the provisions of
Section 11.2; or
(d) to take any other action authorized to be taken
by or on behalf of the Holders of any specified aggregate
principal amount of the Notes under any other provision of this
Indenture or under applicable law.
Section 10.2. Call of Meetings by Trustee.
The Trustee may at any time call a meeting of Holders to
take any action specified in Section 10.1, to be held at such
time and at such place at a location within ten (10) miles of the
Corporate Trust Office or in New York, New York, as the Trustee
shall determine. Notice of every meeting of the Holders, setting
forth the time and the place of such meeting and in general terms
the action proposed to be taken at such meeting and the
establishment of any record date pursuant to Section 9.1, shall
be mailed to Holders of Notes at their addresses as they shall
appear on the Note register. Such notice shall also be mailed to
the Company. Such notices shall be mailed not less than 20 nor
more than 90 days prior to the date fixed for the meeting.
Any meeting of Holders shall be valid without notice if the
Holders of all Notes then outstanding are present in Person or by
proxy or if notice is waived before or after the meeting by the
Holders of all Notes outstanding, and if the Company and the
Trustee are either present by duly authorized representatives or
have, before or after the meeting, waived notice.
Section 10.3. Call of Meetings by Company or Holders.
In case at any time the Company, pursuant to a resolution of
its Board of Directors, or the Holders of at least ten percent in
aggregate principal amount of the Notes then outstanding, shall
have requested the Trustee to call a meeting of Holders, by
written request setting forth in reasonable detail the action
proposed to be taken at the meeting, and the Trustee shall not
have mailed the notice of such meeting within 20 days after
receipt of such request, then the Company or such Holders may
determine the time and the place at any location within 10 miles
of the Corporate Trust Office or New York, New York for such
meeting and may call such meeting to take any action authorized
in Section 10.1, by mailing notice thereof as provided in Section
10.2.
Section 10.4. Qualifications for Voting.
To be entitled to vote at any meeting of Holders a Person
shall (a) be a Holder of one or more Notes on the record date
pertaining to such meeting or (b) be a Person appointed by an
instrument in writing as proxy by a Holder of one or more Notes.
The only Persons who shall be entitled to be present or to speak
at any meeting of Holders shall be the Persons entitled to vote
at such meeting and their counsel and any representatives of the
Trustee and its counsel and any representatives of the Company
and its counsel.
Section 10.5. Regulations.
Notwithstanding any other provisions of this Indenture, the
Trustee may make such reasonable regulations as it may deem
advisable for any meeting of Holders, in regard to proof of the
holding of Notes and of the appointment of proxies, and in regard
to the appointment and duties of inspectors of votes, the
submission and examination of proxies, certificates and other
evidence of the right to vote, and such other matters concerning
the conduct of the meeting as it shall think fit.
The Trustee shall, by an instrument in writing, appoint a
temporary chairman of the meeting, unless the meeting shall have
been called by the Company or by Holders as provided in Section
10.3, in which case the Company or the Holders calling the
meeting, as the case may be, shall in like manner appoint a
temporary chairman. A permanent chairman and a permanent
secretary of the meeting shall be elected by vote of the Holders
of a majority in principal amount of the Notes represented at the
meeting and entitled to vote at the meeting.
Subject to the provisions of Section 9.4, at any meeting
each Noteholder or proxy Holder shall be entitled to one vote for
each $1,000 principal amount of Notes then outstanding and held
or represented by him, provided, however, that no vote shall be
cast or counted at any meeting in respect of any Note challenged
as not outstanding and ruled by the chairman of the meeting to be
not outstanding. The chairman of the meeting shall have no right
to vote other than by virtue of Notes held by him or instruments
in writing as aforesaid duly designating him as the proxy vote on
behalf of other Holders. Any meeting of Holders duly called
pursuant to the provisions of Section 10.2 or 10.3 may be
adjourned from time to time by the Holders of a majority of the
aggregate principal amount of Notes represented at the meeting,
whether or not constituting a quorum, and the meeting may be held
as so adjourned without further notice.
Section 10.6. Voting.
The vote upon any resolution submitted to any meeting of
Holders shall be by written ballot on which shall be subscribed
the signatures of the Holders of Notes or of their representative
by proxy and the principal amount of the Notes held or
represented by them. The permanent chairman of the meeting shall
appoint two inspectors of votes who shall count all votes cast at
the meting for or against any resolution and who shall make and
file with the secretary of the meeting their verified written
reports in duplicate of all votes cast at the meeting. A record
in duplicate of the proceedings of each meeting of Holders shall
be prepared by the secretary of the meeting and there shall be
attached to said record the original reports of the inspectors of
votes on any vote by ballot taken thereat and affidavits by one
or more Persons having knowledge of the facts setting forth a
copy of the notice of the meeting and showing that said notice
was mailed as provided in Section 10.2. The record shall show
the principal amount of the Notes voting in favor of or against
any resolution. The record shall be signed and verified by the
affidavits of the permanent chairman and secretary of the meeting
and one of the duplicates shall be delivered to the Company and
the other to the Trustee to be preserved by the Trustee, the
latter to have attached thereto the ballots voted at the meeting.
Any record so signed and verified shall be conclusive
evidence of the matters therein stated.
Section 10.7. No Delay of Rights by Meeting.
Nothing in this Article X shall be deemed or construed to
authorize or permit, by reason of any call of a meeting of
Holders or any rights expressly or impliedly conferred hereunder
to make such call, any hindrance or delay in the exercise of any
right or rights conferred upon or reserved to the Trustee or to
the Holders under any of the provisions of this Indenture or of
the Notes.
ARTICLE XI
SUPPLEMENTAL INDENTURES
Section 11.1. Supplemental Indentures Without Consent of
Holders.
The Company, when authorized by resolutions of the Board of
Directors, and the Trustee may from time to time and at any time
enter into an indenture or indentures supplemental hereto for one
or more of the following purposes:
(a) to make provisions with respect to the conversion
rights of the Holders of Notes pursuant to the requirements of
Section 15.6 or the repurchase obligations of the Company
pursuant to the requirements of Section 16.5;
(b) subject to Article IV, to convey, transfer,
assign, mortgage or pledge to the Trustee as security for the
Notes, any property or assets;
(c) to evidence the succession of another corporation
to the Company, or successive successions, and the assumption by
the successor corporation of the covenants, agreements and
obligations of the Company pursuant to Article XII;
(d) to add to the covenants of the Company such
further covenants, restrictions or conditions as the Board of
Directors and the Trustee shall consider to be for the benefit of
the Holders of Notes, and to make the occurrence, or the
occurrence and continuance, of a default in any such additional
covenants, restrictions or conditions a default or an Event of
Default permitting the enforcement of all or any of the several
remedies provided in this Indenture as herein set forth provided,
however, that in respect of any such additional covenant,
restriction or conditions such supplemental indenture may provide
for a particular period of grace after default (which period may
be shorter or longer than that allowed in the case of other
defaults) or may provide for an immediate enforcement upon such
default or may limit the remedies available to the Trustee upon
such default;
(e) to provide for the issuance under this Indenture
of Notes in coupon form (including Notes registrable as to
principal only) and to provide for exchangeability of such Notes
with the Notes issued hereunder in fully registered form and to
make all appropriate changes for such purpose;
(f) to cure any ambiguity or to correct or supplement
any provision contained herein or in any supplemental indenture
which may be defective or inconsistent with any other provisions
contained herein or in any supplemental indenture, or to make
such other provisions in regard to matters or questions arising
under this Indenture which shall not materially adversely affect
the interests of the Holders;
(g) to evidence and provide for the acceptance of
appointment hereunder by a successor Trustee with respect to the
Notes; or
(h) to modify, eliminate or add to the provisions of
this Indenture to such extent as shall be necessary to effect the
qualification of this Indenture under the Trust Indenture Act, or
under any similar federal statue hereafter enacted.
The Trustee is hereby authorized to join with the Company in
the execution of any such supplemental indenture, to make any
further appropriate agreements and stipulations which may be
therein contained and to accept the conveyance, transfer and
assignment of any property thereunder, but the Trustee shall not
be obligated to, but may in its discretion, enter into any
supplemental indenture which affects the Trustee's own rights,
duties or immunities under this Indenture or otherwise.
Any supplemental indenture authorized by the provisions of
this Section 11.1 may be executed by the Company and the Trustee
without the consent of the Holders of any of the Notes at the
time outstanding, notwithstanding any of the provisions of
Section 11.2.
Section 11.2. Supplemental Indentures with Consent of
Holders.
With the consent (evidenced as provided in Article IX) of
the Holders of not less than a majority in aggregate principal
amount of the Notes at the time outstanding determined in
accordance with Section 9.4, the Company, when authorized by the
resolutions of the Board of Directors, and the Trustee may from
time to time and at any time enter into an indenture or
indentures supplemental hereto for the purpose of adding any
provisions to or changing in any manner or eliminating any of the
provisions of this Indenture or any supplemental indenture or of
modifying in any manner the rights of the Holders, provided,
however, that no such supplemental indenture shall (i) extend the
fixed maturity of any Note, or reduce the rate or extend the time
of payment of interest thereon, or reduce the principal amount
thereof or premium, if any, thereon, or reduce any amount payable
on redemption thereof, or impair the right of any Noteholder to
institute suit for the payment thereof, or make the principal
thereof or interest or premium, if any, thereon payable in any
coin or currency other than that provided in the Notes, or modify
the provisions of this Indenture with respect to the
subordination of the Notes in a manner adverse to the Holders in
any material respect, or change the obligation of the Company to
repurchase any Note upon the occurrence of a Change in Control in
a manner adverse to the Holder of Notes, or impair the right to
convert the Notes into Common Stock in any material respect,
without the consent of the Holder of each Note so affected, or
(ii) reduce the aforesaid percentage of Notes, the Holders of
which are required to consent to any such supplemental
indentures, without the consent of the Holders of all Notes then
outstanding.
Upon the request of the Company, accompanied by a copy of
the resolutions of the Board of Directors certified by its
Secretary or an Assistant Secretary authorizing the execution of
any such supplemental indentures, and upon the filing with the
Trustee of evidence of the consent of Holders as aforesaid the
Trustee shall join with the Company in the execution of such
supplemental indentures unless such supplemental indenture
affects the Trustee's own rights, duties or immunities under this
Indenture or otherwise, in which case the Trustee may in its
discretion, but shall not be obligated to, enter into such
supplemental indenture.
It shall not be necessary for the consent of the Holders
under this Section 11.2 to approve the particular form of any
proposed supplemental indenture, but it shall be sufficient if
such consent shall approve the substance thereof.
Section 11.3. Effect of Supplemental Indenture.
Any supplemental indenture executed pursuant to the
provisions of this Article XI shall comply with the Trust
Indenture Act, as then in effect, provided that this Section 11.3
shall not require such supplemental indenture or the Trustee to
be qualified under the Trust Indenture Act prior to the time such
qualification is in fact required under the terms of the Trust
Indenture Act or the Indenture has been qualified under the Trust
Indenture Act, nor shall it constitute any admission or
acknowledgment by any party to such supplemental indenture that
any such qualification is required prior to the time such
qualification is in fact required under the terms of the Trust
Indenture Act or the Indenture has been qualified under the Trust
Indenture Act. Upon the execution of any supplemental indenture
pursuant to the provisions of this Article XI, this Indenture
shall be and be deemed to be modified and amended in accordance
therewith and the respective rights, limitation of rights,
obligations, duties and immunities under this Indenture of the
Trustee, the Company and the Holders of Notes shall thereafter be
determined, exercised and enforced hereunder subject in all
respects to such modifications and amendments and all the terms
and conditions of any such supplemental indenture shall be and be
deemed to be part of the terms and conditions of this Indenture
for any and all purposes.
Section 11.4. Notation on Notes.
Notes authenticated and delivered after the execution of any
supplemental indenture pursuant to the provisions of this Article
XI may bear a notation in form approved by the Trustee as to any
matter provided for in such supplemental indenture. If the
Company or the Trustee shall so determine, new Notes so modified
as to conform, in the opinion of the Trustee and the Board of
Directors, to any modification of this Indenture contained in any
such supplemental indenture may, at the Company's expense, be
prepared and executed by the Company, authenticated by the
Trustee (or an authenticating agent duly appointed by the Trustee
pursuant to Section 17.11) and delivered in exchange for the
Notes then outstanding, upon surrender of such Notes then
outstanding.
Section 11.5. Evidence of Compliance of Supplemental
Indenture to Be Furnished Trustee.
The Trustee, subject to the provisions of Sections 8.1 and
8.2, may require an Officers' Certificate and an Opinion of
Counsel as conclusive evidence that any supplemental indenture
executed pursuant hereto complies with the requirements of this
Article XI.
ARTICLE XII
CONSOLIDATION, MERGER, SALE, CONVEYANCE AND LEASE
Section 12.1. Company May Consolidate Etc. on Certain
Terms.
Subject to the provisions of Sections 12.2 and 16.1, nothing
contained in this Indenture or in any of the Notes shall prevent
any consolidation or merger of the Company with or into any other
corporation or corporations (whether or not affiliated with the
Company), or successive consolidations or mergers in which the
Company or its successor or successors shall be a party or
parties, or shall prevent any sale, conveyance or lease (or
successive sales, conveyances or leases) of the property of the
Company, substantially as an entirety, to any other corporation
(whether or not affiliated with the Company), authorized to
acquire and operate the same and which, in each case, shall be
organized under the laws of the United States of America, any
state thereof or the District of Columbia, provided, that upon
any such consolidation, merger, sale, conveyance or lease, if the
Company is not the surviving entity, the due and punctual payment
of the principal of and premium, if any, and interest on all of
the Notes, according to their tenor, and the due and punctual
performance and observance of all of the covenants and conditions
of this Indenture to be performed by the Company, shall be
expressly assumed, by supplemental indenture satisfactory in form
to the Trustee, executed and delivered to the Trustee by the
corporation (if other than the Company) formed by such
consolidation, or into which the Company shall have been merged,
or by the corporation which shall have acquired or leased such
property, and such supplemental indenture shall provide for the
applicable conversion rights set forth in Section 15.6.
Section 12.2. Successor Corporation to Be Substituted.
In case of any such consolidation, merger, sale, conveyance
or lease referenced in Section 12.1 and upon the assumption by
any successor corporation, by supplemental indenture required by
Section 12.1, executed and delivered to the Trustee and
satisfactory in form to the Trustee, of the due and punctual
payment of the principal of and premium, if any, and interest on
all of the Notes and the due and punctual performance of all of
the covenants and conditions of this Indenture to be performed by
Company, such successor corporation shall succeed to and be
substituted for the Company, with the same effect as if it had
been named herein as such. Such successor corporation thereupon
may cause to be signed and may issue either in its own name or in
the name of Atlantic Coast Airlines, Inc. any or all of the Notes
issuable hereunder which theretofore shall not have been signed
by the Company and delivered to the Trustee and, upon the order
of such successor corporation instead of the Company and subject
to all the terms, conditions and limitations in this Indenture
prescribed, the Trustee shall authenticate and shall deliver, or
cause to be authenticated and delivered, any Notes which
previously shall have been signed and delivered by the Officers
of the Company to the Trustee for authentication, and any Notes
which such successor corporation thereafter shall cause to be
signed and delivered to the Trustee for that purpose. All the
Notes so issued shall in all respects have the same legal rank
and benefit under this Indenture as the Notes theretofore or
thereafter issued in accordance with the terms of this Indenture
as though all of such Notes had been issued at the date of the
execution hereof. In the event of any such consolidation,
merger, sale or conveyance (but not in the event of any such
lease), the Person named as the "Company" in the first paragraph
of this Indenture or any successor which shall thereafter have
become such in the manner prescribed in this Article XII shall be
released from its liabilities as obligor and maker of the Notes
and from its obligations under this Indenture.
In case of any such consolidation, merger, sale, conveyance
or lease, such changes in phraseology and form (but not in
substance) may be made in the Notes thereafter to be issued as
may be appropriate.
Section 12.3. Opinion of Counsel to Be Given Trustee.
The Trustee, subject to Sections 8.1 and 8.2, shall receive
an Officers' Certificate and an Opinion of Counsel as conclusive
evidence that any such consolidation, merger, sale, conveyance or
lease and any such assumption complies with the provisions of
this Article XII.
ARTICLE XIII
SATISFACTION AND DISCHARGE OF INDENTURE
Section 13.1. Discharge of Indenture.
When (a) the Company shall deliver to the Trustee for
cancellation all Notes theretofore authenticated (other than any
Notes which have been destroyed, lost or stolen and in lieu of or
in substitution for which other Notes shall have been
authenticated and delivered) and not therefore canceled, or (b)
all the Notes not theretofore canceled or delivered to the
Trustee for cancellation shall have become due and payable, or
are by their terms to become due and payable within one year or
are to be canceled for redemption within one year under
arrangements satisfactory to the Trustee for the giving of notice
of redemption, and the Company shall deposit with the Trustee, in
trust, monies sufficient to pay at maturity or upon redemption of
all of the Notes (other than any Notes which shall have been
mutilated, destroyed, lost or stolen and in lieu of or in
substitution for which other Notes shall have been authenticated
and delivered) not theretofore canceled or delivered to the
Trustee for cancellation, including principal and premium, if
any, and interest due or to become due to such date of maturity
or Redemption Date, as the case may be, and if in either case the
Company shall also pay or cause to be paid all other sums payable
hereunder by the Company, then this Indenture shall cease to be
of further effect (except as to (i) remaining rights of
registration of transfer, substitution and exchange and
conversion of Notes, (ii) rights hereunder of Holders to receive
payments of principal of and premium, if any, and interest on,
the Notes and the other rights, duties and obligations of
Holders, as beneficiaries hereof with respect to the amounts, if
any, so deposited with the Trustee and (iii) the rights,
obligations and immunities of the Trustee hereunder), and the
Trustee, on demand of the Company accompanied by an Officers'
Certificate and an Opinion of Counsel as required by Section 17.5
and at the cost and use of the Company, shall execute proper
instruments acknowledging satisfaction of and discharging this
Indenture the Company, however, hereby agreeing to reimburse the
Trustee for any costs or expenses thereafter reasonably and
properly incurred by the Trustee and to compensate the Trustee
for any services thereafter reasonably and properly rendered by
the Trustee in connection with this Indenture or the Notes.
Section 13.2. Deposited Monies to Be Held in Trust by
Trustee.
Subject to Section 13.4, all monies deposited with the
Trustee pursuant to Section 13.1 and not in violation of Article
IV shall be held in trust for the sole benefit of the Holders and
not to be subject to the subordination provisions of Article IV,
and such monies hall be applied by the Trustee to the payment,
either directly or through any Paying Agent (including the
Company if acting as its own Paying Agent), to the Holders of the
particular Notes for the payment or redemption of which such
monies have been deposited with the Trustee, of all sums due and
to become due thereon for principal and interest and premium, if
any.
Section 13.3. Paying Agent to Repay Monies Held.
Upon the satisfaction and discharge of this Indenture, all
monies then held by any Paying Agent for the Notes (other than
the Trustee) shall, upon written request of the Company, be
repaid to the Company or paid to the Trustee, and thereupon such
Paying Agent shall be released from all further liability with
respect to such monies.
Section 13.4. Return of Unclaimed Monies.
Subject to the requirement of applicable law, any monies
deposited with or paid to the Trustee for payment of the
principal of, premium, if any, or interest on Notes and not
applied but remaining unclaimed by the Holders of Notes for two
years after the date upon which the principal of, premium, if
any, or interest on such Notes, as the case may be, shall have
become due and payable, shall be repaid to the Company by the
Trustee on demand and all liability of the Trustee shall
thereupon cease with respect to such monies, and the Holder of
any of the Notes shall thereafter look only to the Company for
any payment which such Holder may be entitled to collect except
if an applicable abandoned property law does not so permit.
Section 13.5. Reinstatement.
If the Trustee or the Paying Agent is unable to apply any
money in accordance with Section 13.2 by reason of any order or
judgment of any court of governmental authority enjoining,
restraining or otherwise prohibiting such application, the
Company's obligations under this Indenture and the Notes shall be
revived and reinstated as though no deposit had occurred pursuant
to Section 13.1 until such time as the Trustee or the Paying
Agent is permitted to apply all such money in accordance with
Section 13.2, provided, however, that if the Company makes any
payment of interest or premium, if any, on or principal of any
Note following the reinstatement of its obligations, the Company
shall be subrogated to the rights of the Holders of such Notes to
receive such payment from the money held by the Trustee or Paying
Agent.
ARTICLE XIV
IMMUNITY OF INCORPORATORS, STOCKHOLDERS,
OFFICERS AND DIRECTORS
Section 14.1. Indenture and Notes Solely Corporate
Obligations.
No recourse for the payment of the principal of or premium,
if any, or interest on any Note, or for any claim based thereon
or otherwise in respect thereof, and no recourse under or upon
any obligation, covenant or agreement of the Company in this
Indenture or in any supplemental indenture or in any Note, or
because of the creation of any Indebtedness represented thereby,
shall be had against any incorporator, stockholder, employee,
agent, Officer, or director or subsidiary, as such, past, present
or future, of the Company or of any successor corporation, either
directly or through the Company or any successor corporation,
whether by virtue of any constitution, statute or rule of law, or
by the enforcement of any assessment or penalty or otherwise it
being expressly understood that all such liability is hereby
expressly waived and released as a condition of, and as a
consideration for, the execution of this Indenture and the issue
of the Notes.
ARTICLE XV
CONVERSION OF NOTES
Section 15.1. Right to Convert.
Subject to and upon compliance with the provisions of this
Indenture, the Holder of any Note shall have the right, at his
option, at any time on or after 60 days following the latest date
of original issuance of the Notes and prior to the close of
business on July 1, 2004 (except that, with respect to any Note
or portion of a Note which shall be called for redemption, such
right shall terminate, except as provided in Section 15.2 or
Section 3.4, at the close of business on the fifth Business Day
preceding the date fixed for redemption of such Note or portion
of a Note, unless the Company shall default in payment due upon
redemption thereof) to convert the principal amount of any such
Note, or any portion of such principal amount which is $1,000 or
an integral multiple thereof, into that number of fully paid and
non-assessable shares of Common Stock (as such shares shall then
be constituted) obtained by dividing the principal amount of the
Note or portion thereof surrendered for conversion by the
Conversion Price in effect at such time, by surrender of the Note
so to be converted in whole or in part in the manner provided,
together with any required funds, in Section 15.2. A Holder of
Notes is not entitled to any rights of a Holder of Common Stock
until such Holder has converted his Notes to Common Stock, and
only to the extent such Notes are deemed to have been converted
to Common Stock under this Article XV.
Section 15.2. Exercise of Conversion Privilege; Issuance
of Common Stock on Conversion; No Adjustment for
Interest or Dividends.
In order to exercise the conversion privilege with respect
to any Note in certificated form, the Holder of any such Note to
be converted in whole or in part shall surrender such Note, duly
endorsed, at an office or agency maintained by the Company
pursuant to Section 5.2, accompanied by the funds, if any,
required by the penultimate paragraph of this Section 15.2, and
shall give written notice of conversion in the form provided on
the Notes (or such other notice which is acceptable to the
Company) to such office or agency that the Holder elects to
convert such Note or the portion thereof specified in said
notice. Such notice shall also state the name or names (with
address or addresses) in which the certificate or certificates
for shares of Common Stock which shall be issuable on such
conversion shall be issued, and shall be accompanied by transfer
taxes, if required pursuant to Section 15.7. Each such Note
surrendered for conversion shall, unless the shares issuable on
conversion are to be issued in the same name as the registration
of such Note, be duly endorsed by, or be accompanied by
instruments of transfer in form satisfactory to the Company duly
executed by, the Holder or his duly authorized attorney.
In order to exercise the conversion privilege with respect
to any interest in a Note in global form, the beneficial Holder
must complete the appropriate instruction form for conversion
pursuant to the Depositary's book-entry conversion program,
deliver by book-entry delivery an interest in such Note in global
form, furnish appropriate endorsements and transfer documents if
required by the Company or the Trustee or Conversion Agent, and
pay the funds, if any, required by this Section 15.2 and any
transfer taxes if required pursuant to Section 15.7.
As promptly as practicable after satisfaction of the
requirements for conversion set forth above, subject to
compliance with any restrictions on transfer if shares issuable
on conversion are to be issued in a name other than that of the
Noteholder (as if such transfer were a transfer of the Note or
Notes (or portion thereof) so converted), the Company shall issue
and shall deliver to such Holder at the office or agency
maintained by the Company for such purpose pursuant to Section
5.2, a certificate or certificates for the number of full shares
of Common Stock issuable upon the conversion of such Note or
portion thereof in accordance with the provisions of this Article
and a check or cash in respect of any fractional interest in
respect of a share of Common Stock arising upon such conversion,
as provided in Section 15.3. In case any Note of a denomination
greater than $1,000 shall be surrendered for partial conversion,
and subject to Section 2.3, the Company shall execute and the
Trustee shall authenticate and deliver to the Holder of the Note
so surrendered, without charge to him, a new Note or Notes in
authorized denominations in an aggregate principal amount equal
to the unconverted portion of the surrendered Note.
Each conversion shall be deemed to have been effected as to
any such Note (or portion thereof) on the date on which the
requirements set forth above in this Section 15.2 have been
satisfied as to such Note (or portion thereof), and the Person in
whose name any certificate or certificates for shares of Common
Stock shall be issuable upon such conversion shall be deemed to
have become on said date the Holder of record of the shares
represented thereby, provided, however, that any such surrender
on any date when the stock transfer books of the Company shall be
closed shall constitute the Person in whose name the certificates
are to be issued as the record Holder thereof for all purposes on
the next succeeding day on which such stock transfer books are
open, but such conversion shall be at the Conversion Price in
effect on the date upon which such Note shall be surrendered.
Any Note or portion thereof surrendered for conversion
during the period from the close of business on the record date
for any interest payment date to the close of business on the
Business Day next preceding the following interest payment date
shall (unless such Note or portion thereof being converted shall
have been called for redemption during the period from the close
of business on such record date to the close of business on the
Business Day next preceding the following interest payment date)
be accompanied by payment, in New York Clearing House funds or
other funds acceptable to the Company, of an amount equal to the
interest payable on such interest payment date on the principal
amount being converted provided, however, that no such payment
need be made if there shall exist at the time of conversion a
default in the payment of interest on the Notes. In the event a
Note or portion thereof is called for redemption on or after July
1, 2000 and before October 1, 2000 and the Holder elects to
convert such Note after it has been called for redemption, the
Holder will be entitled to receive interest on such Note for the
period from April 1, 2000 through July 1, 2000. Except as
provided above in this Section 15.2, no adjustment shall be made
for interest accrued on any Note converted or for dividends on
any shares issued upon the conversion of such Note as provided in
this Article.
Upon the conversion of an interest in a Note in global form,
the Trustee, or the Custodian at the direction of the Trustee,
shall make a notation on such Note in global form as to the
reduction in the principal amount represented thereby as a result
of such conversion.
Section 15.3. Cash Payments in Lieu of Fractional Shares.
No fractional shares of Common Stock or scrip representing
fractional shares shall be issued upon conversion of Notes. If
more than one Note shall be surrendered for conversion at one
time by the same Holder, the number of full shares which shall be
issuable upon conversion shall be computed on the basis of the
aggregate principal amount of the Notes (or specified portions
thereof to the extent permitted hereby) so surrendered. If any
fractional share of stock would be issuable upon the conversion
of any Note or Notes, the Company shall make an adjustment and
payment therefor in cash at the current market value thereof to
the Holder of Notes. The current market value of a share of
Common Stock shall be the Closing Price on the first Trading Day
immediately preceding the day on which the Notes (or specified
portions thereof) are deemed to have been converted.
Section 15.4. Conversion Price.
The conversion price shall be as specified in the form of
Note (herein called the "Conversion Price") attached as Exhibit A
hereto, subject to adjustment as provided in this Article XV.
Section 15.5. Adjustment of Conversion Price.
The Conversion Price shall be adjusted from time to time by
the Company as follows:
(a) In case the Company shall hereafter pay a dividend or
make a distribution to all Holders of the outstanding Common
Stock in shares of Common Stock, the Conversion Price in effect
at the opening of business on the date following the date fixed
for the determination of stockholders entitled to receive such
dividend or other distribution shall be reduced by multiplying
such Conversion Price by a fraction of which the numerator shall
be the number of shares of Common Stock outstanding at the close
of business on the date fixed for such determination and the
denominator shall be the sum of such number of shares and the
total number of shares constituting such dividend or other
distribution, such reduction to become effective immediately
after the opening of business on the day following the date fixed
for such determination. The Company will not pay any dividend or
make any distribution on shares of Common Stock held in the
treasury of the Company. If any dividend or distribution of the
type described in this Section 15.5(a) is declared but not so
paid or made, the Conversion Price shall again be adjusted to the
Conversion Price which would then be in effect if such dividend
or distribution had not been declared.
(b) In case the Company shall issue rights or warrants to
all Holders of its outstanding shares of Common Stock entitling
them (for a period expiring within 45 days after the date fixed
for determination of stockholders entitled to receive such rights
or warrants) to subscribe for or purchase shares of Common Stock
at a price per share less than the Current Market Price (as
defined below) on the date fixed for determination of
stockholders entitled to receive such rights or warrants, the
Conversion Price shall be adjusted so that the same shall equal
the price determined by multiplying the Conversion Price in
effect immediately prior to the date fixed for determination of
stockholders entitled to receive such rights or warrants by a
fraction of which the numerator shall be the number of shares of
Common Stock outstanding at the close of business on the date
fixed for determination of stockholders entitled to receive such
rights and warrants plus the number of shares which the aggregate
offering price of the total number of shares so offered would
purchase at such Current Market Price, and of which the
denominator shall be the number of shares of Common Stock
outstanding on the date fixed for determination of stockholders
entitled to receive such rights and warrants plus the total
number of additional shares of Common Stock offered for
subscription or purchase. Such adjustment shall be successively
made whenever any such rights and warrants are issued, and shall
become effective immediately after the opening of business on the
day following the date fixed for determination of stockholders
entitled to receive such rights or warrants. To the extent that
shares of Common Stock are not delivered after the expiration of
such rights or warrants, the Conversion Price shall be readjusted
to the Conversion Price which would then be in effect had the
adjustments made upon the issuance of such rights or warrants
been made on the basis of delivery of only the number of shares
of Common Stock actually delivered. In the event that such
rights or warrants are not so issued, the Conversion Price shall
again be adjusted to be the Conversion Price which would then be
in effect if such date fixed for the determination of
stockholders entitled to receive such rights or warrants had not
been fixed. In determining whether any rights or warrants
entitle the Holders to subscribe for or purchase shares of Common
Stock at less than such Current Market Price, and in determining
the aggregate offering price of such shares of Common Stock,
there shall be taken into account any consideration received by
the Company for such rights or warrants, the value of such
consideration, if other than cash, to be determined by the Board
of Directors.
(c) In case outstanding shares of Common Stock shall be
subdivided into a greater number of shares of Common Stock, the
Conversion Price in effect at the opening of business on the day
following the day upon which such subdivision becomes effective
shall be proportionately reduced, and conversely, in case
outstanding shares of Common Stock shall be combined into a
smaller number of shares of Common Stock, the Conversion Price in
effect at the opening of business on the day following the day
upon which such combination becomes effective shall be
proportionately increased, such reduction or increase, as the
case may be, to become effective immediately after the opening of
business on the day following the day upon which such subdivision
or combination becomes effective.
(d) In case the Company shall, by dividend or otherwise,
distribute to all Holders of its Common Stock shares of any class
of capital stock of the Company (other than any dividends or
distributions to which Section 15.5(a) applies) or evidences of
its Indebtedness or assets (including securities, but excluding
any rights or warrants referred to in Section 15.5(b), and
excluding any dividend or distribution paid exclusively in cash
(any of the foregoing hereinafter in this Section 15.5(d) called
the "Securities")), then, in each such case (unless the Company
elects to reserve such Securities for distribution to the Holders
upon the conversion of the Notes so that any such Holder
converting Notes will receive upon such conversion, in addition
to the shares of Common Stock to which such Holder is entitled,
the amount and kind of such Securities which such Holder would
have received if such Holder had converted its Notes into Common
Stock immediately prior to the Record Date (as defined in Section
15.5(h) for such distribution of the Securities)), the Conversion
Price shall be reduced so that the same shall be equal to the
price determined by multiplying the Conversion Price in effect on
the Record Date (as defined below) with respect to such
distribution by a fraction of which the numerator shall be the
Current Market Price per share of the Common Stock on such Record
Date less the fair market value (as determined by the Board of
Directors, whose determination shall be conclusive, and described
in a resolution of the Board of Directors) on the Record Date of
the portion of the Securities so distributed applicable to one
share of Common Stock and the denominator shall be the Current
Market Price per share of the Common Stock, such reduction to
become effective immediately prior to the opening of business on
the day following such Record Date provided, however, that in the
event the then fair market value (as so determined) of the
portion of the Securities so distributed applicable to one share
of Common Stock is equal to or greater than the Current Market
Price of the Common Stock on the Record Date, in lieu of the
foregoing adjustment, adequate provision shall be made so that
each Noteholder shall have the right to receive upon conversion
the amount of Securities such Holder would have received had such
Holder converted each Note on the Record Date. In the event that
such dividend or distribution is not so paid or made, the
Conversion Price shall again be adjusted to be the Conversion
Price which would then be in effect if such dividend or
distribution had not been declared. If the Board of Directors
determines the fair market value of any distribution for purposes
of this Section 15.5(d) by reference to the actual or when issued
trading market for any securities, it must in doing so consider
the prices in such market over the same period used in computing
the Current Market Price of the Common Stock.
In the event the Company implements a stockholder rights
plan, such rights plan shall provide that upon conversion of the
Notes the Holders will receive, in addition to the Common Stock
issuable upon such conversion, the rights issued under such
rights plan (notwithstanding the occurrence of an event causing
such rights to separate from the Common Stock at or prior to the
time of conversion).
Rights or warrants distributed by the Company to all Holders
of Common Stock entitling the Holders thereof to subscribe for or
purchase shares of the Company's capital stock (either initially
or under certain circumstances), which rights or warrants, until
the occurrence of a specified event or events ("Trigger Event"):
(i) are deemed to be transferred with such shares of Common Stock
(ii) are not exercisable and (iii) are also issued in respect of
future issuances of Common Stock, shall be deemed not to have
been distributed for purposes of this Section 15.5 (and no
adjustment to the Conversion Price under this Section 15.5 will
be required) until the occurrence of the earliest Trigger Event,
whereupon such rights and warrants shall be deemed to have been
distributed and an appropriate adjustment (if any is required) to
the Conversion Price shall be made under this Section 15.5(d).
If any such right or warrant, including any such existing rights
or warrants distributed prior to the date of this Indenture, are
subject to events, upon the occurrence of which such rights or
warrants become exercisable to purchase different securities,
evidences of Indebtedness or other assets, then the date of the
occurrence of any and each such event shall be deemed to be the
date of distribution and record date with respect to new rights
or warrants with such rights (and a termination or expiration of
the existing rights or warrants without exercise by any of the
Holders thereof). In addition, in the event of any distribution
(or deemed distribution) of rights or warrants, or any Trigger
Event or other event (of the type described in the preceding
sentence) with respect thereto that was counted for purposes of
calculating a distribution amount for which an adjustment to the
Conversion Price under this Section 15.5 was made, (1) in the
case of any such rights or warrants which shall all have been
redeemed or repurchased without exercise by any Holders thereof,
the Conversion Price shall be readjusted upon such final
redemption or repurchase to give effect to such distribution or
Trigger Event, as the case may be, as though it were a cash
distribution, equal to the per share redemption or repurchase
price received by a Holder or Holders of Common Stock with
respect to such rights or warrants (assuming such Holder had
retained such rights or warrants), made to all Holders of Common
Stock as of the date of such redemption or repurchase, and (2) in
the case of such rights or warrants which shall have expired or
been terminated without exercise by any Holders thereof, the
Conversion Price shall be readjusted as if such rights and
warrants had not been issued.
For purposes of this Section 15.5(d) and Sections 15.5(a)
and (b), any dividend or distribution to which this Section
15.5(d) is applicable that also includes shares of Common Stock,
or rights or warrants to subscribe for or purchase shares of
Common Stock (or both), shall be deemed instead to be (1) a
dividend or distribution of the evidences of Indebtedness, assets
or shares of capital stock other than such shares of Common Stock
or rights or warrants (and any further Conversion Price reduction
required by this Section 15.5(d) with respect to such dividend or
distribution shall then be made) immediately followed by (2) a
dividend or distribution of such shares of Common Stock or such
rights or warrants (and any further Conversion Price reduction
required by Sections 15.5(a) and (b) with respect to such
dividend or distribution shall then be made), except (A) the
Record Date of such dividend or distribution shall be substituted
as "the date fixed for the determination of stockholders entitled
to receive such dividend or other distribution" and "the date
fixed for such determination" within the meaning of Sections
15.5(a) and (b), and (B) any shares of Common Stock included in
such dividend or distribution shall not be deemed "outstanding at
the close of business on the date fixed for such determination"
within the meaning of Section 15.5(a).
(e) In case the Company shall, by dividend or otherwise,
distribute to all Holders of its Common Stock cash (excluding any
cash that is distributed upon a merger or consolidation to which
Section 15.6 applies or as part of a distribution referred to in
Section 15.5(d)) in an aggregate amount that, combined together
with (1) the aggregate amount of any other such distributions to
all holders of its Common Stock made exclusively in cash within
the 12 months preceding the date of payment of such distribution,
and in respect of which no adjustment pursuant to this Section
15.5(e) has been made, and (2) the aggregate of any cash plus the
fair market value (as determined by the Board of Directors, whose
determination shall be conclusive and described in a resolution
of the Board of Directors) of consideration payable in respect of
any tender offer by the Company for all or any portion of the
Common Stock concluded within the 12 months preceding the date of
payment of such distribution, and in respect of which no
adjustment pursuant to Section 15.5(f) has been made, exceeds 10%
of the product of the Current Market Price (determined as
provided in Section 15.5(h)) on the Record Date with respect to
such distribution times the number of shares of Common Stock
outstanding on such date, then, and in each such case,
immediately after the close of business on such date, the
Conversion Price shall be reduced so that the same shall equal
the price determined by multiplying the Conversion Price in
effect immediately prior to the close of business on such Record
Date by a fraction (i) the numerator of which shall be equal to
the Current Market Price on the Record Date less an amount equal
to the quotient of (x) the excess of such combined amount over
such 10% and (y) the number of shares of Common Stock outstanding
on the Record Date and (ii) the denominator of which shall be
equal to the Current Market Price on such Record Date provided,
however, that, if the portion of the cash so distributed
applicable to one share of Common Stock is equal to or greater
than the Current Market Price of the Common Stock on the Record
Date, in lieu of the foregoing adjustment, adequate provision
shall be made so that each Noteholder shall have the right to
receive upon conversion the amount of cash such Holder would have
received had such Holder converted such Note immediately prior to
such Record Date. If such dividend or distribution is not so
paid or made, the Conversion Price shall again be adjusted to be
the Conversion Price which would then be in effect if such
dividend or distribution had not been declared.
(f) In case a tender offer made by the Company or any of
its subsidiaries for all or any portion of the Common Stock
expires and such tender offer (as amended upon the expiration
thereof) requires the payment to stockholders (based on the
acceptance (up to any maximum specified in the terms of the
tender offer) of Purchased Shares (as defined below)) of an
aggregate consideration having a fair market value (as determined
by the Board of Directors, whose determination shall be
conclusive and described in a resolution of the Board of
Directors) that, combined together with (1) the aggregate of the
cash plus the fair market value (as determined by the Board of
Directors, whose determination shall be conclusive and described
in a resolution of the Board of Directors), as of the expiration
of such tender offer, of consideration payable in respect of any
other tender offers, by the Company or any of its subsidiaries
for all or any portion of the Common Stock expiring within the 12
months preceding the expiration of such tender offer and in
respect of which no adjustment pursuant to this Section 15.5(f)
has been made and (2) the aggregate amount of any distributions
to all Holders of the Common Stock made exclusively in cash
within 12 months preceding the expiration of such tender offer
and in respect of which no adjustment pursuant to Section 15.5(e)
has been made, exceeds 10% of the product of the Current Market
Price (determined as provided in Section 15.5(h)) as of the last
time (the "Expiration Time") tenders could have been made
pursuant to such tender offer (as it may be amended) times the
number of shares of Common Stock outstanding (including any
tendered shares) at the Expiration Time, then, and in each such
case, immediately prior to the opening of business on the day
after the date of the Expiration Time, the Conversion Price shall
be adjusted so that the same shall equal the price determined by
multiplying the Conversion Price in effect immediately prior to
the close of business on the date of the Expiration Time by a
fraction of which the numerator shall be the number of shares of
Common Stock outstanding (including any tendered shares) at the
Expiration Time multiplied by the Current Market Price of the
Common Stock on the Trading Day next succeeding the Expiration
Time and the denominator shall be the sum of (x) the fair market
value (determined as aforesaid) of the aggregate consideration
payable to stockholders based on the acceptance (up to any
maximum specified in the terms of the tender offer) of all shares
validly tendered and not withdrawn as of the Expiration Time (the
shares deemed so accepted, up to any such maximum, being referred
to as the "Purchased Shares") and (y) the product of the number
of shares of Common Stock outstanding (less any Purchased Shares)
at the Expiration Time and the Current Market Price of the Common
Stock on the Trading Day next succeeding the Expiration Time,
such reduction (if any) to become effective immediately prior to
the opening of business on the day following the Expiration Time.
If the Company is obligated to purchase shares pursuant to any
such tender offer, but the Company is permanently prevented by
applicable law from effecting any such purchases or all such
purchases are rescinded, the Conversion Price shall again be
adjusted to be the Conversion Price which would then be in effect
if such tender offer had not been made. If the application of
this Section 15.5(f) to any tender offer would result in an
increase in the Conversion Price, no adjustment shall be made for
such tender offer under this Section 15.5(f).
(g) In case of a tender or exchange offer made by a Person
other than the Company or any subsidiary of the Company for an
amount which increases the offeror's ownership of Common Stock to
more than 25% of the Common Stock outstanding and shall involve
the payment by such Person of consideration per share of Common
Stock having a fair market value (as determined by the Board of
Directors, whose determination shall be conclusive, and described
in a resolution of the Board of Directors) at the Expiration Time
that exceeds the Current Market Price of the Common Stock on the
Trading Day next succeeding the Expiration Time, and in which, as
of the Expiration Time the Board of Directors is not recommending
rejection of the offer, the Conversion Price shall be reduced so
that the same shall equal the price determined by multiplying the
Conversion Price in effect immediately prior to the Expiration
Time by a fraction of which the numerator shall be the number of
shares of Common Stock outstanding (including any tendered or
exchanged shares) on the Expiration Time multiplied by the
current Market Price of the Common Stock on the Trading Day next
succeeding the Expiration Time and the denominator shall be the
sum of (X) the fair market value (determined as aforesaid) of the
aggregate consideration payable to stockholders based on the
acceptance (up to any maximum specified in the terms of the
tender or exchange offer) of all shares validly tendered or
exchanged and not withdrawn as of the Expiration Time (the shares
deemed so accepted, up to any such maximum, being referred to as
the "Purchased Shares") and (y) the product of the number of
shares of Common Stock outstanding (less any Purchased Shares) on
the Expiration Time and the Current Market Price of the Common
Stock on the Trading Day next succeeding the Expiration Time,
such reduction to become effective as of immediately prior to the
opening of business on the day following the Expiration Time. In
the event that such Person is obligated to purchase shares
pursuant to any such tender or exchange offer, but such Person is
permanently prevented by applicable law from effecting any such
purchases or all such purchases are rescinded, the Conversion
Price shall again be adjusted to be the Conversion Price which
would then be in effect if such tender or exchange offer had not
been made. Notwithstanding the foregoing, the adjustment
described in this Section 15.5(g) shall not be made if, as of the
Expiration Time, the offering documents with respect to such
offer disclose a plan or intention to cause the Company to engage
in any transaction described in Article XII.
(h) For purposes of this Section 15.5, the following terms
shall have the meaning indicated:
(1) "Closing Price" with respect to any securities on any
day shall mean the closing sale price regular way on such day or,
in case no such sale takes place on such day, the average of the
reported closing bid and asked prices, regular way, in each case
on the New York Stock Exchange, or, if such security is not
listed or admitted to trading on such Exchange, on the principal
national security exchange or quotation system on which such
security is quoted or listed or admitted to trading, or, if not
quoted or listed or admitted to trading on any national
securities exchange or quotation system, the average of the
closing bid and asked prices of such security on the over-the-
counter market on the day in question as reported by the National
Quotation Bureau Incorporated, or a similar generally accepted
reporting service, or if not so available, in such manner as
furnished by any New York Stock Exchange member firm selected
from time to time by the Board of Directors for that purpose, or
a price determined in good faith by the Board of Directors or, to
the extent permitted by applicable law, a duly authorized
committee thereof, whose determination shall be conclusive.
(2) "Current Market Price" shall mean the average of the
daily Closing Prices per share of Common Stock for the ten
consecutive Trading Days immediately prior to the date in
question provided, however, that (1) if the "ex" date (as
hereinafter defined) for any event (other than the issuance or
distribution requiring such computation) that requires an
adjustment to the Conversion Price pursuant to Section 15.5(a),
(b), (c), (d), (e), (f) or (g) occurs during such ten consecutive
Trading Days, the Closing Price for each Trading Day prior to the
"ex" date for such other event shall be adjusted by multiplying
such Closing Price by the same fraction by which the Conversion
Price is so required to be adjusted as a result of such other
event, (2) if the "ex" date for any event (other than the
issuance or distribution requiring such computation) that
requires an adjustment to the Conversion Price pursuant to
Section 15.5(a), (b), (c), (d), (e), (f) or (g) occurs on or
after the "ex" date for the issuance or distribution requiring
such computation and prior to the day in question, the Closing
Price for each Trading Day on and after the "ex" date for such
other event shall be adjusted by multiplying such Closing Price
by the reciprocal of the fraction by which the Conversion Price
is so required to be adjusted as a result of such other event,
and (3) if the "ex" date for the issuance or distribution
requiring such computation is prior to the day in question, after
taking into account any adjustment required pursuant to clause
(1) or (2) of this proviso, the Closing Price for each Trading
Day on or after such "ex" date shall be adjusted by adding
thereto the amount of any cash and the fair market value (as
determined by the Board of Directors or, to the extent permitted
by applicable law, a duly authorized committee thereof in a
manner consistent with any determination of such value for
purposes of Section 15.5(d), (f) or (g), whose determination
shall be conclusive and described in a resolution of the Board of
Directors or such duly authorized committee thereof, as the case
may be) of the evidences of Indebtedness, shares of capital stock
or assets being distributed applicable to one share of Common
Stock as of the close of business on the day before such "ex"
date. For purposes of any computation under Section 15.5(f) or
(g), the Current Market Price of the Common Stock on any date
shall be deemed to be the average of the daily Closing Prices per
share of Common Stock for such day and the next two succeeding
Trading Days provided, however, that if the "ex" date for any
event (other than the tender or exchange offer requiring such
computation) that requires an adjustment to the Conversion Price
pursuant to Section 15.5(a), (b), (c), (d), (e), (f) or (g)
occurs on or after the Expiration Time for the tender or exchange
offer requiring such computation and prior to the day in
question, the Closing Price for each Trading Day on and after the
"ex" date for such other event shall be adjusted by multiplying
such Closing Price by the reciprocal of the fraction by which the
Conversion Price is so required to be adjusted as a result of
such other event. For purposes of this paragraph, the term "ex"
date, (1) when used with respect to any issuance or distribution,
means the first date on which the Common Stock trades regular way
on the relevant exchange or in the relevant market from which the
Closing Price was obtained without the right to receive such
issuance or distribution, (2) when used with respect to any
subdivision or combination of shares of Common Stock, means the
first date on which the Common Stock trades regular way on such
exchange or in such market after the time at which such
subdivision or combination becomes effective, and (3) when used
with respect to any tender or exchange offer means the first date
on which the Common Stock trades regular way on such exchange or
in such market after the Expiration Time of such offer.
(3) "fair market value" shall mean the amount which a
willing buyer would pay a willing seller in an arm's length
transaction.
(4) "Record Date" shall mean, with respect to any dividend,
distribution or other transaction or event in which the Holders
of Common Stock have the right to receive any cash, securities or
other property or in which the Common Stock (or other applicable
security) is exchanged for or converted into any combination of
cash, securities or other property, the date fixed for
determination of shareholders entitled to receive such cash,
securities or other property (whether such date is fixed by the
Board of Directors or by statute, contract or otherwise).
(5) "Trading Day" shall mean (x) if the applicable security
is listed or admitted for trading on the New York Stock Exchange,
the Nasdaq Stock Market (National Market) or another national
security exchange, a day on which the New York Stock Exchange,
the Nasdaq Stock Market (National Market) or another national
security exchange is open for business or (y) if the applicable
security is quoted on the Nasdaq National Market, a day on which
trades may be made thereon or (z) if the applicable security is
not so listed, admitted for trading or quoted, any day other than
a Saturday or Sunday or a day on which banking institutions in
the State of New York are authorized or obligated by law or
executive order to close.
(i) The Company may make such reductions in the Conversion
Price, in addition to those required by Sections 15.5(a), (b),
(c), (d), (e), (f) and (g), as the Board of Directors considers
to be advisable to avoid or diminish any income tax to Holders of
Common Stock or rights to purchase Common Stock resulting from
any dividend or distribution of stock (or rights to acquire
stock) or from any event treated as such for income tax purposes.
To the extent permitted by applicable law, the Company from
time to time may reduce the Conversion Price by any amount for
any period of time if the period is at least 20 days, the
reduction is irrevocable during the period and the Board of
Directors shall have made a determination that such reduction
would be in the best interests of the Company, which
determination shall be conclusive. Whenever the Conversion Price
is reduced pursuant to the preceding sentence, the Company shall
mail to Holders of record of the Notes a notice of the reduction
at lease 15 days prior to the date the reduced Conversion Price
takes effect, and such notice shall state the reduced Conversion
Price and the period during which it will be in effect.
(j) No adjustment in the Conversion Price shall be required
unless such adjustment would require an increase or decrease of
at least 1.00% in such price provided, however, that any
adjustments which by reason of this Section 15.5(j) are not
required to be made shall be carried forward and taken into
account in any subsequent adjustment. All calculations under
this Article XV shall be made by the Company and shall be made to
the nearest cent or to the nearest one hundredth of a share, as
the case may be.
(k) Whenever the Conversion Price is adjusted as herein
provided, the Company shall promptly file with the Trustee and
any Conversion Agent other than the Trustee an Officers'
Certificate setting forth the Conversion Price after such
adjustment and setting forth a brief statement of the facts
requiring such adjustment. Promptly after delivery of such
certificate, the Company shall prepare a notice of such
adjustment of the Conversion Price setting forth the adjusted
Conversion Price and the date on which each adjustment becomes
effective and shall mail notice of such adjustment of the
Conversion Price to the Holder of each Note at his last address
appearing on the Note register provided for in Section 2.5 of
this Indenture, within 20 days after execution thereof. Failure
to deliver such notice shall not affect the legality or validity
of any such adjustment.
(l) In any case in which this Section 15.5 provides that an
adjustment shall become effective immediately after a record date
for an event, the Company may defer until the occurrence of such
event (i) issuing to the Holder of any Note converted after such
record date and before the occurrence of such event the
additional shares of Common Stock issuable upon such conversion
by reason of the adjustment required by such event over and above
such conversion by reason of the adjustment required by such
event and above the Common Stock issuable upon such conversion
before giving effect to such adjustment and (ii) paying to such
Holder any amount in cash in lieu of any fraction pursuant to
Section 15.5.
(m) For purposes of this Section 15.5, the number of shares
of Common Stock at any time outstanding shall not include shares
held in the treasury of the Company but shall include shares
issuable in respect of scrip certificates issued in lieu of
fractions of shares of Common Stock. The Company will not pay
any dividend or make any distribution on shares of Common Stock
held in the treasury of the Company.
Section 15.6. Effect of Reclassification, Consolidation,
Merger or Sale.
If any of the following events occur, namely (i) any
reclassification or change of the outstanding shares of Common
Stock (other than a subdivision or combination to which Section
15.5(c) applies), (ii) any consolidation, merger or combination
of the Company with another corporation as a result of which
Holders of Common Stock shall be entitled to receive stock,
securities or other property or assets (including cash) with
respect to or in exchange for such Common Stock, or (iii) any
sale or conveyance of the properties and assets of the Company
as, or substantially as, an entirety to any other corporation as
a result of which Holders of Common Stock shall be entitled to
receive stock, securities or other property or assets (including
cash) with respect to or in exchange for such Common Stock, then
the Company or the successor or purchasing corporation, as the
case may be, shall execute with the Trustee a supplemental
indenture (which shall comply with the Trust Indenture Act as in
force at the date of execution of such supplemental indenture)
providing that such Notes shall be convertible into the kind and
amount of shares of stock and other securities or property or
assets (including cash) receivable upon such reclassification,
change, consolidation, merger, combination, sale or conveyance by
a Holder of a number of shares of Common Stock issuable upon
conversion of such Notes (assuming, for such purposes, a
sufficient number of authorized shares of Common Stock available
to convert all such Notes) immediately prior to such
reclassification, change, consolidation, merger, combination,
sale or conveyance assuming such Holder of Common Stock did not
exercise his rights of election, if any, as to the kind or amount
of shares of stock and other securities or property or assets
(including cash) receivable upon such reclassification, change,
consolidation, merger, combination, sale or conveyance (provided
that, if the kind or amount of shares of stock and other
securities or property or assets (including cash) receivable upon
such reclassification, change, consolidation, merger,
combination, sale or conveyance is not the same for each share of
Common Stock in respect of which such rights of election shall
not have been exercised ("nonelecting share"), then for the
purposes of this Section 15.6 the kind and amount of shares of
stock and other securities or property or assets (including cash)
receivable upon such reclassification, change, consolidation,
merger, combination, sale or conveyance for each non-electing
share shall be deemed to be the kind and amount so receivable per
share by a plurality of the non-electing shares. Such
supplemental indenture shall provide for adjustments which shall
be as nearly equivalent as may be practicable to the adjustments
provided for in this Article.
The Company shall cause notice of the execution of such
supplemental indenture to be mailed to each Holder of Notes, at
his address appearing on the Note register provided for in
Section 2.5 of this Indenture, within 20 days after execution
thereof. Failure to deliver such notice shall not affect the
legality or validity of such supplemental indenture.
The above provisions of this Section shall similarly apply
to successive reclassifications, changes, consolidations,
mergers, combinations, sales and conveyances.
If this Section 15.6 applies to any event or occurrence,
Section 15.5 shall not apply.
Section 15.7. Taxes on Shares Issued.
The issue of stock certificates on conversions of Notes
shall be made without charge to the converting Noteholder for any
tax in respect of the issue thereof. The Company shall not,
however, be required to pay any tax which may be payable in
respect of any transfer involved in the issue and delivery of
stock in any name other than that of the Holder of any Note
converted, and the Company shall not be required to issue or
deliver any such stock certificate unless and until the Person or
Persons requesting the issue thereof shall have paid to the
Company the amount of such tax or shall have established to the
satisfaction of the Company that such tax has been paid.
Section 15.8. Reservation of Shares to Be Fully Paid;
Compliance with Governmental Requirements;
Listing of Common Stock.
The Company shall reserve, free from preemptive rights, out
of its authorized but unissued shares or shares held in treasury,
sufficient shares of Common Stock to provide for the conversion
of the Notes from time to time as such Notes are presented for
conversion.
Before taking any action which would cause an adjustment
reducing the Conversion Price below the then par value, if any,
of the shares of Common Stock issuable upon conversion of the
Notes, the Company will take all corporate action which may, in
the opinion of its counsel, be necessary in order that the
Company may validly and legally issue shares of such Common Stock
at such adjusted Conversion Price.
The Company covenants that all shares of Common Stock which
may be issued upon conversion of Notes will upon issue be fully
paid and non-assessable by the Company and free from all taxes,
liens and charges with respect to the issue thereof.
The Company covenants that if any shares of Common Stock to
be provided for the purpose of conversion of Notes hereunder
require registration with or approval of any governmental
authority under any federal or state law before such shares may
be validly issued upon conversion, the Company will in good faith
and as expeditiously as possible endeavor to secure such
registration or approval, as the case may be.
The Company further covenants that if at any time the Common
Stock shall be listed on the New York Stock Exchange, the Nasdaq
Stock Market (National Market), or any other national securities
exchange the Company will, if permitted by the rules of such
exchange, list and keep listed so long as the Common Stock shall
be so listed on such exchange, all Common Stock issuable upon
conversion of the Notes.
Section 15.9. Responsibility of Trustee.
The Trustee and any other Conversion Agent shall not at any
time be under any duty or responsibility to any Holder of Notes
to either calculate the Conversion Price or determine whether any
facts exist which may require any adjustment of the Conversion
Price, or with respect to the nature or extent or calculation of
any such adjustment when made, or with respect to the method
employed, or herein or in any supplemental indenture provided to
be employed, in making the same. The Trustee and any other
Conversion Agent shall not be accountable with respect to the
validity or value (or the kind or amount) of any shares of Common
Stock, or of any securities or property, which may at any time be
issued or delivered upon the conversion of any Note and the
Trustee and any other Conversion Agent make no representations
with respect thereto. Subject to the provisions of Section 8.1,
neither the Trustee nor any Conversion Agent shall be responsible
for any failure of the Company to issue, transfer or deliver any
shares of Common Stock or stock certificates or other securities
or property or cash upon the surrender of any Note for the
purpose of conversion or to comply with any of the duties,
responsibilities or covenants of the Company contained in this
Article. Without limiting the generality of the foregoing,
neither the Trustee nor any Conversion Agent shall be under any
responsibility to determine the correctness of any provisions
contained in any supplemental indenture entered into pursuant to
Section 15.6 relating either to the kind or amount of shares of
stock or securities or property (including cash) receivable by
Holders upon the conversion of their Notes after any event
referred to in such Section 15.6 or to any adjustment to be made
with respect thereto, but, subject to the provisions of Section
8.1, may accept as conclusive evidence of the correctness of any
such provisions, and shall be protected in relying upon, the
Officers' Certificate (which the Company shall be obligated to
file with the Trustee prior to the execution of any such
supplemental indenture) with respect thereto.
Section 15.10. Notice to Holders Prior to Certain Actions.
In case:
(a) the Company shall declare a dividend (or any other
distribution) on its Common Stock that would require an
adjustment in the Conversion Price pursuant to Section 15.5; or
(b) the Company shall authorize the granting to all or
substantially all the Holders of its Common Stock of rights or
warrants to subscribe for or purchase any share of any class or
any other rights or warrants; or
(c) of any reclassification or reorganization of the Common
Stock of the Company (other than a subdivision or combination of
its outstanding Common Stock, or a change in par value, or from
par value to no par value, or from no par value to par value), or
of any consolidation or merger to which the Company is a party
and for which approval of any shareholders of the Company is
required, or of the sale or transfer of all or substantially all
of the assets of the Company; or
(d) of the voluntary or involuntary dissolution,
liquidation or winding-up of the Company,
the Company shall cause to be filed with the Trustee and to be
mailed to each Holder of Notes at his address appearing on the
Note register provided for in Section 2.5 of this Indenture, as
promptly as possible but in any event at least 15 days prior to
the applicable date hereinafter specified, a notice stating (x)
the date on which a record is to be taken for the purpose of such
dividend, distribution or rights or warrants, or, if a record is
not to be taken, the date as of which the holders of Common Stock
of record to be entitled to such dividend, distribution, or
rights or warrants are to be determined, or (y) the date on which
such reclassification, consolidation, merger, sale, transfer,
dissolution, liquidation or winding-up is expected to become
effective or occur, and the date as of which it is expected that
Holders of Common Stock of record shall be entitled to exchange
their Common Stock for securities or other property deliver-able
upon such reclassification, consolidation, merger, sale,
transfer, dissolution, liquidation or winding-up. Failure to
give such notice, or any defect therein, shall not affect the
legality or validity of such dividend, distribution,
reclassification, consolidation, merger, sale, transfer,
dissolution, liquidation or winding-up.
ARTICLE XVI
REPURCHASE OF NOTES AT OPTION OF THE HOLDER
UPON CHANGE IN CONTROL
Section 16.1. Right to Require Repurchase.
In the event that a Change in Control (as hereinafter
defined) shall occur, then each Holder shall have the right, at
the Holder's option, to require the Company to repurchase, and
upon the exercise of such right the Company shall repurchase, all
of such Holder's Notes, or any portion of the principal amount
thereof that is an integral multiple of $1,000 (provided that no
single Note may be repurchased in part unless the portion of the
principal amount of such Note to be outstanding after such
repurchase is equal to $1,000 or an integral multiple of $1,000),
on the date (the "Repurchase Date") that is 30 days after the
date of the Company Notice (as defined in Section 16.2) for cash
at a purchase price equal to 100% of the principal amount (the
"Repurchase Price") plus interest accrued and unpaid to, but
excluding, the Repurchase Date. If the Repurchase Date is
between a record date for an interest payment date and such
interest payment date, then the interest payable on such interest
payment date shall be paid to the Holder of Record on the Note on
such interest payment date. Whenever in this Indenture there is
a reference, in any context, to the principal of any Note as of
any time, such reference shall be deemed to include reference to
the Repurchase Price payable in respect of such Note to the
extent that such Repurchase Price is, was or would be so payable
at such time, and express mention of the Repurchase Price in any
provision of this Indenture shall not be construed as excluding
the Repurchase Price in those provisions of this Indenture when
such express mention is not made.
Section 16.2. Notices; Method of Exercising Purchase
Right, Etc.
(a) Unless the Company shall have theretofore called for
redemption all of the outstanding Notes pursuant to Article III,
on or before the 15th day after the occurrence of a Change in
Control, the Company or, at the written request of the Company on
or before the tenth (10th) day after receipt of such request, the
Trustee, shall give to all Holders of Notes notice (the "Company
Notice") of the occurrence of the Change in Control and of the
repurchase right set forth herein arising as a result thereof.
The Company shall also deliver a copy of such notice of a
repurchase right to the Trustee.
Each notice of a repurchase right shall state:
(1) the Repurchase Date,
(2) the date by which the repurchase right must exercised,
(3) the Repurchase Price,
(4) a description of the procedure which a Holder must
follow to exercise a repurchase right,
(5) that on the Repurchase Date the Repurchase Price will
become due and payable upon each such Note designated by the
Holder to be repurchased, and that interest thereon shall cease
to accrue on and after said date,
(6) the Conversion Price, the date on which the right to
convert the Notes to be repurchased will terminate and the places
where such Notes may be surrendered for conversion, and
(7) the place or places where such Notes are to be
surrendered for payment of the Repurchase Price and accrued
interest, if any.
No failure of the Company to give the foregoing notices or
defect therein shall limit any Holder's right to exercise a
repurchase right or affect the validity of the proceedings for
the repurchase of Notes.
If any of the foregoing provisions or other provisions of
this Article are inconsistent with applicable law, such law shall
govern.
(b) To exercise a repurchase right, a Holder shall deliver
to the Trustee or any Paying Agent on or before the 30th day
after the date of the Company Notice (i) written notice of the
Holder's exercise of such right, which notice shall set forth the
name of the Holder, the principal amount of the Notes to be
repurchased (and, if any Note is to be repurchased in part, the
serial number thereof, the portion of the principal amount
thereof to be repurchased and the name of the Person in which the
portion thereof to remain outstanding after such repurchase is to
be registered) and a statement that an election to exercise the
repurchase right is being made thereby, and (ii) the Notes with
respect to which the repurchase right is being exercised.
(c) In the event a repurchase right shall be exercised in
accordance with the terms hereof, the Company shall pay or cause
to be paid to the Trustee or the Paying Agent the Repurchase
Price in cash, for payment to the Holder on the Repurchase Date,
together with accrued and unpaid interest to, but excluding, the
Repurchase Date payable with respect to the Notes as to which the
repurchase right has been exercised.
(d) If any Note (or portion thereof) surrendered for
repurchase shall not be so paid on the Repurchase Date, the
principal amount of such Note (or portion thereof, as the case
may be) shall, until paid, bear interest from the Repurchase Date
at the rate of 7% per annum, and each Note shall remain
convertible into Common Stock until the principal of such Note
(or portion thereof, as the case may be) shall have been paid or
duly provided for.
(e) Any Note which is to be repurchased only in part shall
be surrendered to the Trustee (with, if the Company or the
Trustee so requires, due endorsement by, or a written instrument
of transfer in form satisfactory to the Company and the Trustee
duly executed by, the Holder thereof or his attorney duly
authorized in writing), and the Company shall execute, and the
Trustee shall authenticate and deliver to the Holder of such Note
without service charge, a new Note or Notes, containing identical
terms and conditions, each in an authorized denomination in
aggregate principal amount equal to and in exchange for the
portion of the principal of the Note so surrendered that was not
repurchased.
(f) Any Holder that has delivered to the Trustee its
written notice exercising its right to require the Company to
repurchase its Notes upon a Change in Control shall have the
right to withdraw such notice at any time prior to the close of
business on the Repurchase Date by delivery of a written notice
of withdrawal to the Trustee prior to the close of business on
such date. A Note in respect of which a Holder is exercising its
option to require repurchase upon a Change in Control may be
converted into Common Stock in accordance with Article XV only if
such Holder withdraws its notice in accordance with the preceding
sentence.
Section 16.3. Certain Definitions.
For purposes of this Article XVI,
(a) the term "beneficial owner" shall be determined in
accordance with Rule 13d-3 promulgated by the Commission pursuant
to the Exchange Act; and
(b) the term "Person" shall include any syndicate or group
which would be deemed to be a "Person" under Section 13(d)(3) of
the Exchange Act.
Section 16.4. Change in Control.
A "Change in Control" shall be deemed to have occurred at
such time after the original issuance of the Notes as:
(a) any Person, other than the Company, any subsidiary of
the Company or any entity Controlled (as defined below) by the
foregoing, or any employee benefit plan of the Company or any
such subsidiary, is or becomes the beneficial owner, directly or
indirectly, through a purchase or other acquisition transaction
or series of transactions (other than a merger or consolidation
involving the Company), of shares of capital stock of the Company
entitling such Person to exercise in excess of 50% of the total
voting power of all shares of capital stock of the Company
entitled to vote generally in the election of directors;
(b) there occurs any consolidation of the Company with, or
merger of the Company into, any other Person, any merger of
another Person into the Company, or any sale or transfer of the
assets of the Company as, or substantially as, an entirety to
another Person (other than (i) any such transaction pursuant to
which the Holders of the Common Stock immediately prior to such
transaction have, directly or indirectly, shares of capital stock
of the continuing or surviving corporation immediately after such
transaction which entitle such Holders to exercise in excess of
50% of the total voting power of all shares of capital stock of
the continuing or surviving corporation entitled to vote
generally in the election of directors and (ii) any merger (1)
which does not result in any reclassification, conversion,
exchange or cancellation of outstanding shares of Common Stock or
(2) which is effected solely to change the jurisdiction of
incorporation of the Company and results in a reclassification,
conversion or exchange of outstanding shares of Common Stock
solely into shares of Common Stock and separate series of Common
Stock carrying substantially the same relative rights as the
Common Stock); or
(c) a change in the Board of Directors of the Company in
which the individuals who constituted the Board of Directors of
the Company at the beginning of the one-year period immediately
preceding such change (together with any other director whose
election by the Board of Directors of the Company or whose
nomination for election by the stockholders of the Company was
approved by a vote of at least a majority of the directors then
in office either who were directors at the beginning of such
period or whose election or nomination for election was
previously so approved) cease for any reason to constitute a
majority of the directors then in office; provided, however, that
a Change in Control shall not be deemed to have occurred if
either (a) the Closing Price per share of the Common Stock for
any ten (10) Trading Days within the period of 20 consecutive
Trading Days ending immediately before the Change in Control
shall equal or exceed 105% of the Conversion Price in effect on
each such Trading Day, or (b) (i) at least 90% of the
consideration (excluding cash payments for fractional shares) in
the transaction or transactions constituting the Change in
Control consists of shares of Common Stock with full voting
rights traded on a national securities exchange or quoted on the
Nasdaq National Market (or which will be so traded or quoted when
issued or exchanged in connection with such Change in Control)
(such securities being referred to as "Publicly Traded
Securities") and as a result of such transaction or transactions
such Notes become convertible solely into such Publicly Traded
Securities and (ii) the consideration in the transaction or
transactions constituting the Change of Control consists of cash,
Publicly Traded Securities or a combination of cash and Publicly
Traded Securities with an aggregate fair market value (which, in
the case of Publicly Traded Securities, shall be equal to the
average Closing Price of such Publicly Traded Securities during
the ten (10) consecutive Trading Days, commencing with the sixth
Trading Day, following consummation of the transaction or
transactions constituting the Change in Control) is at least 105%
of the Conversion Price in effect on the date immediately
preceding the date of consummation of such Change in Control.
The term "Controlled" shall mean ownership or control of more
than 50% of the voting power of such entity.
Section 16.5. Consolidation, Merger, Etc.
In the case of any reclassification, change, consolidation,
merger, combination, sale or conveyance to which Section 15.6
applies, in which the Common Stock of the Company is changed or
exchanged as a result into the right to receive shares of stock
and other securities or property or assets (including cash) which
includes shares of Common Stock of the Company or Common Stock of
another Person that are, or upon issuance will be, traded on a
United States national securities exchange or approved for
trading on an established automated over-the-counter trading
market in the United States and such shares constitute at the
time such change or exchange becomes effective in excess of 50%
of the aggregate fair market value of such shares of stock and
other securities, property and assets (including cash) (as
determined by the Company, which determination shall be
conclusive and binding), then the Person formed by such
consolidation or resulting from such merger or combination or
which acquires the properties or assets (including cash) of the
Company, as the case may be, shall execute and deliver to the
Trustee a supplemental indenture (which shall comply with the
trust Indenture Act as in force at the date of execution of such
supplemental indenture) modifying the provisions of this
Indenture relating to the right of Holders to cause the Company
to repurchase the Notes following a Change in Control, including
without limitation the applicable provisions of this Article XVI
and the definitions of the Common Stock and Change in Control, as
appropriate, and such other related definitions set forth herein
as determined in good faith by the Company (which determination
shall be conclusive and binding), to make such provisions apply
to the Common Stock and the issuer thereof if different from the
Company and Common Stock of the Company (in lieu of the Company
and the Common Stock of the Company).
ARTICLE XVII
MISCELLANEOUS PROVISIONS
Section 17.1. Provisions Binding on Company's Successors.
All the covenants, stipulations, promises and agreements by
the Company contained in this Indenture shall bind its successors
and assigns whether so expressed or not.
Section 17.2. Official Acts by Successor Corporation.
Any act or proceeding by any provision of this Indenture
authorized or required to be done or performed by any board,
committee or Officer of the Company shall and may be done and
performed with like force and effect by the like board, committee
or Officer of any corporation that shall at the time be the
lawful sole successor of the Company.
Section 17.3. Addresses for Notices, Etc.
Any notice or demand which by any provision of this
Indenture is required or permitted to be given or served by the
Trustee or by the Holders of Notes on the Company shall be deemed
to have been sufficiently given or made, for all purposes, if
given or served by being deposited postage prepaid by registered
or certified mail in a post office letter box addressed (until
another address is filed by the Company with the Trustee) to
Atlantic Coast Airlines, Inc., 515-A Shaw Road, Dulles, Virginia
20166. Any notice, direction, request or demand hereunder to or
upon the Trustee shall be deemed to have been sufficiently given
or made, for all purposes, if given or served by being deposited
postage prepaid by registered or certified mail in a post office
letter box addressed to the Corporate Trust Office, which office
is, at the date as of which this Indenture is dated, located at
901 East Cary Street, 2nd Floor, Richmond, Virginia 23261-3279,
Attention: Corporate Trust Department.
The Trustee, by notice to the Company, may designate
additional or different addresses for subsequent notices or
communications.
Any notice or communication mailed to a Noteholder shall be
mailed to him by first class mail, postage prepaid, at his
address as it appears on the Note register and shall be
sufficiently given to him if so mailed within the time
prescribed.
Failure to mail a notice or communication to a Noteholder or
any defect in it shall not affect its sufficiency with respect to
other Holders. If a notice or communication is mailed in the
manner provided above, it is duly given, whether or not the
addressee receives it.
Section 17.4. Governing Law.
This Indenture and each Note shall be deemed to be a
contract made under the laws of the Commonwealth of Virginia, and
for all purposes shall be construed in accordance with the laws
of the Commonwealth of Virginia.
Section 17.5. Evidence of Compliance with Conditions
Precedent Certificates to Trustee.
Upon any application or demand by the Company to the Trustee
to take any action under any of the provisions of this Indenture,
the Company shall furnish to the Trustee an Officers' Certificate
stating that all conditions precedent, if any, provided for in
this Indenture relating to the proposed action have been complied
with, and an Opinion of Counsel stating that, in the opinion of
such counsel, all such conditions precedent have been complied
with.
Each certificate or opinion provided for in this Indenture
and delivered to the Trustee with respect to compliance with a
condition or covenant provided for in this Indenture shall
include (1) a statement that the Person making such certificate
or opinion has read such covenant or condition (2) a brief
statement as to the nature and scope of the examination or
investigation upon which the statement or opinion contained in
such certificate or opinion is based (3) a statement that, in the
opinion of such Person, he has made such examination or
investigation as is necessary to enable him to express an
informed opinion as to whether or not such covenant or condition
has been complied with and (4) a statement as to whether or not,
in the opinion of such Person, such condition or covenant has
been complied with.
Section 17.6. Legal Holidays.
In any case where the date of maturity of interest on or
principal of the Notes or the date fixed for redemption or
repurchase of any Note will not be a Business Day, then payment
of such interest on or principal of the Notes need not be made on
such date, but may be made on the next succeeding Business Day
with the same force and effect as if made on the date of maturity
or the date fixed for redemption or repurchase, and no interest
shall accrue for the period from and after such date.
Section 17.7. Trust Indenture Act.
This Indenture is hereby made subject to, and shall be
governed by, the provisions of the Trust Indenture Act required
to be part of and to govern indentures qualified under the Trust
Indenture Act provided, however, that, unless otherwise required
by law, notwithstanding the foregoing, this Indenture and the
Notes issued hereunder shall not be subject to the provisions of
subsections (a)(1), (a)(2), and (a)(3) of Section 314 of the
Trust Indenture Act as now in effect or as hereafter amended or
modified provided, further, that this Section 17.7 shall not
require this Indenture or the Trustee to be qualified under the
Trust Indenture Act prior to the time such qualification is in
fact required under the terms of the Trust Indenture Act, nor
shall it constitute any admission or acknowledgment by any party
to such supplemental indenture that any such qualification is
required prior to the time such qualification is in fact required
under the terms of the Trust Indenture Act. If any provision
hereof limits, qualifies or conflicts with another provision
hereof which is required to be included in an indenture qualified
under the Trust Indenture Act, such required provision shall
control.
Section 17.8. No Security Interest Created.
Nothing in this Indenture or in the Notes, expressed or
implied, shall be construed to constitute a security interest
under the Uniform Commercial Code or similar legislation, as now
or hereafter enacted and in effect, in any jurisdiction where
property of the Company or its subsidiaries is located.
Section 17.9. Benefits of Indenture.
Nothing in this Indenture or in the Notes, expressed or
implied, shall give to any Person, other than the parties hereto,
any Paying Agent, any authenticating agent, any Custodian, any
Conversion Agent, any Note Registrar and their successors
hereunder, the Holders of Notes and the Holders of Senior
Indebtedness, any benefit or any legal or equitable right, remedy
or claim under this Indenture.
Section 17.10. Table of Contents, Headings, Etc.
The table of contents and the titles and headings of the
articles and sections of this Indenture have been inserted for
convenience of reference only, are not to be considered a part
hereof, and shall in no way modify or restrict any of the terms
or provisions hereof.
Section 17.11. Authenticating Agent.
The Trustee may appoint an authenticating agent which shall
be authorized to act on its behalf and subject to its direction
in the authentication and delivery of Notes in connection with
the original issuance thereof and transfers and exchanges of
Notes hereunder, including under Sections 2.4, 2.5, 2.6, 2.7,
3.3, 15.2 and 16.2, as fully to all intents and purposes as
though the authenticating agent had been expressly authorized by
this Indenture and those Sections to authenticate and deliver
Notes. For all purposes of this Indenture, the authentication
and delivery of Notes by the authenticating agent shall be deemed
to be authentication and delivery of such Notes "by the Trustee"
and a certificate of authentication executed on behalf of the
Trustee by an authenticating agent shall be deemed to satisfy any
requirement hereunder or in the Notes for the Trustee's
certificate of authentication. Such authenticating agent shall
at all times be a Person eligible to serve as Trustee hereunder
pursuant to Section 8.9.
Any corporation into which any authenticating agent may be
merged or converted or with which it may be consolidated, or any
corporation resulting from any merger, consolidation or
conversion to which any authenticating agent shall be a party, or
any corporation succeeding to the corporate trust business of any
authenticating agent, shall be the successor of the
authenticating agent hereunder, if such successor corporation is
otherwise eligible under this Section 17.11, without the
execution or filing of any paper or any further act on the part
of the parties hereto or the authenticating agent or such
successor corporation.
Any authenticating agent may at any time resign by giving
written notice of resignation to the Trustee and to the Company.
The Trustee may at any time terminate the agency of any
authenticating agent by giving written notice of termination to
such authenticating agent and to the Company. Upon receiving
such a notice of resignation or upon such a termination, or in
case at any time any authenticating agent shall cease to be
eligible under this Section, the Trustee shall either promptly
appoint a successor authenticating agent or itself assume the
duties and obligations of the former authenticating agent under
this Indenture, and upon such appointment of a successor
authenticating agent, if made, shall give written notice of such
appointment of a successor authenticating agent to the Company
and shall mail notice of such appointment of a successor
authenticating agent to all Holders of Notes as the names and
addresses of such Holders appear on the Note register.
The Trustee agrees to pay to the authenticating agent from
time to time reasonable compensation for its services (to the
extent pre-approved by the Company in writing), and the Trustee
shall be entitled to be reimbursed for such pre-approved
payments, subject to Section 8.6.
The provisions of Sections 8.2, 8.3, 8.4, 9.3 and this
Section 17.11 shall be applicable to any authenticating agent.
Section 17.12. Execution in Counterparts.
This Indenture may be executed in any number of
counterparts, each of which shall be an original, but such
countervails shall together constitute but one and the same
instrument.
First Union National Bank of Virginia hereby accepts the
trusts in this Indenture declared and provided, upon the terms
and conditions hereinabove set forth.
IN WITNESS WHEREOF, the parties hereto have caused this
Indenture to be duly signed, all as of the date first written
above.
Attest: atlantic coast airlines, inc.
____________________________ By:
___________________________________
Title: Kerry B. Skeen
President and Chief Executive
Officer
Attest: first union national bank of
virginia,
as Trustee
____________________________ By:
___________________________________
Title: Name:
Title:
EXHIBIT A
[For Global Note only:]
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (55 WATER STREET,
NEW YORK, NEW YORK) (THE "DEPOSITARY," WHICH TERM INCLUDES ANY
SUCCESSOR DEPOSITARY FOR THE CERTIFICATES) TO THE COMPANY OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN
SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITARY AND ANY PAYMENT HEREIN IS MADE TO CEDE & CO. (OR
TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITARY), ANY TRANSFER, PLEDGE, OR OTHER
USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL
SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.
[For all Notes:]
THE NOTE EVIDENCED HEREBY HAS NOT BEEN AND WILL NOT BE
REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT") OR ANY STATE SECURITIES LAWS, AND, ACCORDINGLY,
MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR
THE ACCOUNT OR BENEFIT OF, U.S. PERSONS, EXCEPT AS SET FORTH
BELOW.
BY ITS ACQUISITION HEREOF, THE HOLDER: (1) REPRESENTS THAT
(A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE
144A UNDER THE SECURITIES ACT) OR (B) IT IS AN INSTITUTIONAL
"ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2), (3) or
(7) UNDER THE SECURITIES ACT) ("INSTITUTIONAL ACCREDITED
INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING THE
NOTE EVIDENCED HEREBY IN AN OFFSHORE TRANSACTION; (2) AGREES THAT
IT WILL NOT PRIOR TO THE DATE THAT IS TWO YEARS AFTER THE LATER
OF THE ORIGINAL ISSUANCE OF THE NOTE EVIDENCED HEREBY AND THE
LAST DATE ON WHICH ATLANTIC COAST AIRLINES, INC. (THE "COMPANY")
OR ANY "AFFILIATE" (AS DEFINED IN RULE 144 UNDER THE SECURITIES
ACT) OF THE COMPANY WAS THE OWNER OF THE NOTE (THE "RESTRICTION
TERMINATION DATE") RESELL OR OTHERWISE TRANSFER THE NOTE
EVIDENCED HEREBY OR THE COMMON STOCK ISSUABLE UPON CONVERSION OF
SUCH NOTE EXCEPT (A) TO THE COMPANY OR ANY SUBSIDIARY THEREOF,
(B) INSIDE THE UNITED STATES TO A QUALIFIED INSTITUTIONAL BUYER
IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C) INSIDE
THE UNITED STATES TO AN INSTITUTIONAL ACCREDITED INVESTOR THAT,
PRIOR TO SUCH TRANSFER, FURNISHES TO FIRST UNION NATIONAL BANK OF
VIRGINIA, AS TRUSTEE (OR A SUCCESSOR TRUSTEE, AS APPLICABLE), A
SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS
RELATING TO THE RESTRICTIONS ON TRANSFER OF THE NOTE EVIDENCED
HEREBY (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM SUCH
TRUSTEE OR A SUCCESSOR TRUSTEE, AS APPLICABLE), (D) OUTSIDE THE
UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE
904 UNDER THE SECURITIES ACT, (E) PURSUANT TO THE EXEMPTION FROM
REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF
AVAILABLE), OR (F) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS
BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT (AND WHICH
CONTINUES TO BE EFFECTIVE AT THE TIME OF SUCH TRANSFER); AND (3)
AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THE NOTE
EVIDENCED HEREBY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE
EFFECT OF THIS LEGEND.
IN CONNECTION WITH ANY TRANSFER OF THE NOTE EVIDENCED HEREBY
BEFORE THE RESTRICTION TERMINATION DATE, THE HOLDER MUST CHECK
THE APPROPRIATE BOX SET FORTH ON THE REVERSE HEREOF RELATING TO
THE MANNER OF SUCH TRANSFER AND SUBMIT THIS NOTE TO FIRST UNION
NATIONAL BANK OF VIRGINIA, AS TRUSTEE (OR A SUCCESSOR TRUSTEE, AS
APPLICABLE). IF THE PROPOSED TRANSFER IS PURSUANT TO CLAUSE (C),
(D) OR (E) ABOVE, THE HOLDER MUST, PRIOR TO SUCH TRANSFER,
FURNISH TO FIRST UNION NATIONAL BANK OF VIRGINIA, AS TRUSTEE (OR
A SUCCESSOR TRUSTEE, AS APPLICABLE), SUCH CERTIFICATIONS, LEGAL
OPINIONS OR OTHER INFORMATION AS IT MAY REASONABLY REQUIRE TO
CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION
FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT.
THIS LEGEND WILL BE REMOVED AFTER THE EXPIRATION OF TWO
YEARS FROM THE ORIGINAL ISSUANCE OF THE NOTE EVIDENCED HEREBY.
AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES"
AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S
UNDER THE SECURITIES ACT.
ATLANTIC COAST AIRLINES, INC.
7% CONVERTIBLE SUBORDINATED NOTE DUE 2004
No. _______ CUSIP [_____]
Atlantic Coast Airlines, Inc., a corporation duly organized
and validly existing under the laws of the State of Delaware
(herein called the "Company"), which term includes any successor
corporation under the indenture referred to on the reverse
hereof, for value received hereby promises to pay to
_____________ [for global Note, insert: CEDE & CO.] or registered
assigns, the principal sum of [___________ ($____________)] [for
Global Note only (as increased or decreased from time to time in
accordance with the procedures of DTC)] on July 1, 2004, at the
office or agency of the Company maintained for that purpose in
Richmond, Virginia, or, at the option of the Holder of this Note,
at the Corporate Trust Office, in such coin or currency of the
United States of America as at the time of payment shall be legal
tender for the payment of public and private debts, and to pay
interest, semi-annually on April 1 and October 1 of each year,
commencing October 1, 1997, on said principal sum at said office
or agency, in like coin or currency, at the rate per annum of 7%,
from the date of this Note. The interest payable on this Note
pursuant to the Indenture on any April 1 or October 1 will be
paid to the person in whose name this Note (or one or more
predecessor Notes is registered at the close of business on the
record date, which shall be the March 15 or September 15 (whether
or not a Business Day) next preceding such April 1 or October 1,
as provided in the Indenture provided that any such interest not
punctually paid or duly provided for shall be payable as provided
in the Indenture. Interest may, at the option of the Company, be
paid by check mailed to the registered address of such person
provided that with respect to any Holder with an aggregate
principal amount equal to or in excess of $5,000,000 interest may
be paid by wire transfer as more fully specified in the
Indenture.
Reference is made to the further provisions of this Note set
forth on the reverse hereof, including, without limitation,
provisions subordinating the payment of principal of and premium,
if any, and interest on the Notes to the prior payment in fully
of all Senior Indebtedness, as defined in the Indenture, and
provisions giving the Holder of this Note the right to convert
this Note into Common Stock of the Company on the terms and
subject to the limitations referred to on the reverse hereof and
as more fully specified in the Indenture. Such further
provisions shall for all purposes have the same effect as though
fully set forth at this place.
This Note shall be deemed to be a contract made under the
laws of the Commonwealth of Virginia, and for all purposes shall
be construed in accordance with and governed by the laws of said
Commonwealth.
This Note shall not be valid or become obligatory for any
purpose until the certificate of authentication hereon shall have
been manually signed by the Trustee or a duly authorized
authenticating agent under the Indenture.
IN WITNESS WHEREOF, the Company has caused this Note to be
duly executed under its corporate seal.
DATED:
Attest: atlantic coast airlines, inc.
____________________________ By:
___________________________________
Title: Kerry B. Skeen
President and Chief Executive
Officer
[SEAL]
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes described in the within-named Indenture.
FIRST UNION NATIONAL BANK OF VIRGINIA, as Trustee
By:
Name:
Title:
[FORM OF REVERSE OF NOTE]
ATLANTIC COAST AIRLINES, INC.
7% CONVERTIBLE SUBORDINATED NOTE DUE 2004
1. This Note is one of a duly authorized issue of Notes of
the Company, designated as its 7% Convertible Subordinated Notes
due 2004 (herein called the "Notes"), limited to aggregate
principal amount of $57,000,000 ($57,500,000 if the over-
allotment option is exercised in full) issued or to be issued
under and pursuant to an indenture dated as of July 2, 1997
(herein called the "Indenture"), between the Company and First
Union National Bank of Virginia, as trustee (herein called the
"Trustee"), to which Indenture and all indentures supplemental
thereto reference is hereby made for a description of the rights,
limitations of rights, obligations, duties and immunities
thereunder of the Trustee, the Company and the Holders.
2. In case an Event of Default, as defined in the
Indenture, shall have occurred and be continuing, the principal
of and accrued interest on all Notes may be declared, and upon
said declaration shall become, due and payable, in the manner,
with the effect and subject to the conditions provided in the
Indenture.
3. The Indenture contains provisions permitting the
Company and the Trustee, with the consent of the Holders of not
less than a majority in aggregate principal amount of the Notes
as the time outstanding, evidenced as in the Indenture provided,
to execute supplemental indentures adding any provisions to or
changing in any manner or eliminating any of the provisions of
the Indenture or of any supplemental indenture or modifying in
any manner the rights of the Holders provided, however, that no
such supplemental indenture shall (i) extend the fixed maturity
of any Note, or reduce the rate or extend the time of payment of
interest thereon, or reduce the principal amount thereof or
premium, if any, thereon, or reduce any amount payable on
redemption thereof, or impair the right of any Noteholder to
institute suit for the payment thereof, or make the principal
thereof or interest or premium, if any, thereon payable in any
coin or currency other than that provided in the Note, or modify
the provisions of the Indenture with respect to the subordination
of the Notes in a manner adverse to the Holders in any material
respect, or change the obligation of the Company to repurchase
any Note upon the occurrence of a Change in Control in a manner
adverse to the Holder of the Notes, or impair the right to
convert the Notes into Common Stock in any material respect,
without the consent of the Holder of each Note so affected or
(ii) reduce the aforesaid percentage of Notes, the Holders of
which are required to consent to any such supplemental indenture,
without the consent of the Holders of all Notes then outstanding.
It is also provided in the Indenture that the Holders of a
majority in aggregate principal amount of the Notes at the time
outstanding may on behalf of the Holders of all of the Notes
waive any past default or Event of Default under the Indenture
and its consequences except (i) a default in the payment of
interest or any premium, if any, on, or the principal of, the
Notes, (ii) a failure by the Company to convert any Notes into
Common Stock, (iii) a default in the payment of the Redemption
Price pursuant to Article III or repurchase price pursuant to
Article XVI or (iv) a default in respect of a covenant or
provisions which under Article XI cannot be modified or amended
without the consent of the Holders of all Notes then outstanding.
Any such consent or waiver by the Holder of this Note (unless
revoked as provided in the Indenture) shall be conclusive and
binding upon such Holder and upon all future Holders and owners
of this Note and any Notes which may be issued in exchange or
substitute hereof, irrespective of whether or not any notation
thereof is made upon this Note or such other Notes.
4. The indebtedness evidenced by the Notes is, to the
extent and in the manner provided in the Indenture, expressly
subordinate and subject in right of payment to the prior payment
in full of all Senior Indebtedness of the Company, as defined in
the Indenture, whether outstanding at the date of the Indenture
or thereafter incurred, and this Note is issued subject to the
provisions of the Indenture with respect to such subordination.
Each Holder of this Note by accepting the same, agrees to and
shall be bound by such provisions and authorizes the Trustee on
his behalf to take such action as may be necessary or appropriate
to effectuate the subordination so provided and appoints the
Trustee his attorney-in-fact for such purpose.
5. No reference herein to the Indenture and no provision
of this Note or of the Indenture shall alter or impair the
obligation of the Company, which is absolute and unconditional,
to pay the principal of and any premium and interest on this Note
at the place, at the respective times, at the rate and in the
coin or currency herein prescribed.
6. Interest on the Notes shall be computed on the basis of
a 360-day year comprised of twelve 30-day months.
7. The Notes are issuable in registered form without
coupons in minimum denominations of $1,000 ($100,000 in the case
of Notes issued pursuant to Regulation D) and any integral
multiple of $1,000. At the office or agency of the Company
referred to on the face hereof, and in the manner and subject to
the limitations provided in the Indenture, without payment of any
service charge but with payment of a sum sufficient to cover any
tax or other governmental charge that may be imposed in
connection with any registration or exchange of Notes, Notes may
be exchanged for a like aggregate principal amount of Notes of
other authorized denominations.
8. The Notes will not be redeemable at the option of the
Company prior to July 1, 2000. At any time after July 1, 2000,
and prior to maturity, the Notes may be redeemed at the option of
the Company from time to time, as a whole or in part, upon
mailing a notice of such redemption not less than 15 nor more
than 60 days before the date fixed for redemption to the Holders
of Notes at their registered addresses, all as provided in the
Indenture, at the following optional Redemption Prices (expressed
as percentages of the principal amount), together in each case
with accrued interest to, but excluding, the date fixed for
redemption.
9. If redeemed during the 12-month period beginning July
1:
Year Percentage
2000 104%
2001 103%
2002 102%
2003 101%
and 100% at July 1, 2004 provided that if the date fixed for
redemption is on April 1 or October 1, then the interest payable
on such date shall be paid to the Holder of record of the Note on
the next preceding March 15 or September 15, respectively.
10. The Notes are not subject to redemption through the
operation of any sinking fund.
11. Subject to the provisions of the Indenture, the Holder
hereof has the right, at its option, at any time after 60 days
following the latest date of original issuance of the Notes and
prior to the close of business on the maturity date, subject to
prior redemption or repurchase, or, as to all or any portion
hereof called for redemption, prior to the close of business on
the fifth Business day preceding the date fixed for redemption
(unless the Company shall default in payment due upon redemption
thereof), to convert the principal hereof or any portion of such
principal which is $1,000 or an integral multiple thereof, into
that number of shares of the Company's Common Stock, said shares
shall be constituted at the date of conversion, obtained by
dividing the principal amount of this Note or portion thereof to
be converted by the Conversion Price of $18.00 or such Conversion
Price is adjusted from time to time as provided in the Indenture,
upon surrender of this Note, together with a conversion notice as
provided in the Indenture, to the Company at the office or agency
of the Company maintained for that purpose in Richmond, Virginia,
or at the option of such Holder, the Corporate Trust Office, and,
unless the shares issuable on conversion are to be issued in the
same name as this Note, duly endorsed by, or accompanied by
instruments of transfer in form satisfactory to the Company duly
executed by, the Holder or by his duly authorized attorney. No
adjustment in respect of interest or dividends will be made upon
any conversion provided, however, that if this Note shall be
surrendered for conversion during the period from the close of
business on any record date for the payment of interest to the
close of business on the Business Day preceding the interest
payment date, this Note (unless it or the portion being converted
shall have been called for redemption during the period from the
close of business on any record date for the payment of interest
to the close of business on the Business Day preceding the
interest payment date) must be accompanied by an amount, in New
York Clearing house finds or other funds acceptable to the
Company, equal to the interest payable on such interest payment
date on the principal amount being converted, provided further
however, that in the event this Note or a portion thereof is
called for redemption on or after July 1, 2000 and before October
1, 2000 and the Holder elects to convert such Note, the Holder
will be entitled to receive interest on such Note for the period
from April 1, 2000 through July 1, 2000 (provided however, that
no such payment need be made if there shall exist at the time of
conversion a default in the payment of interest on the Notes.) No
fractional shares will be issued upon any conversion, but an
adjustment in cash will be made, as provided in the Indenture, in
respect of any fraction of a share which would otherwise be
issuable upon the surrender of any Note or Notes for conversion.
12. Any Notes called for redemption, unless surrendered for
conversion on or before the close of business on the date fixed
for redemption, may be deemed to be purchased from the Holder of
such Notes at an amount equal to the applicable Redemption Price,
together with accrued interest to the date fixed for redemption,
by one or more investment bankers or other purchasers who may
agree with the Company to purchase such Notes from the Holders
thereof and convert them into Common Stock of the Company and to
make payment for such Notes as aforesaid to the Trustee in trust
for such Holders.
13. Upon due presentment for registration of transfer of
this Note at the office or agency of the Company in Richmond,
Virginia, or at the option of the Holder of this Note, at the
Corporate Trust Office, a new Note or Notes of authorized
denominations for an equal aggregate principal amount will be
issued to the transferee in exchange thereof, subject to the
limitations provided in the Indenture, without charge except for
any tax or other governmental charge imposed in connection
therewith.
14. The Company, the Trustee, any authenticating agency,
any paying agent, any conversion agent and any Note Registrar may
deem and treat the registered Holder hereof as the absolute owner
of this Note (whether or Note this Note shall be overdue and
notwithstanding any notation of ownership or other writing
hereon), for the purpose of receiving payment hereof, or on
account hereof, for the conversion hereof and for all other
purposes, and neither the Company nor the Trustee nor any other
authenticating agent nor any paying agent nor any other
conversion agent nor any Note Registrar shall be affected by any
notice to the contrary. All payments made to or upon the order
of such registered Holder shall, to the extent of the sum or sums
paid, satisfy and discharge liability for monies payable on this
Note.
15. No recourse for the payment of the principal or any
premium or interest on this Note, or for any claim based hereon
or otherwise in respect hereof, and no recourse under or upon any
obligation, covenant or agreement of the Company in the Indenture
or any indenture supplemental thereto or in any Note, or because
of the creation of any indebtedness represented thereby, shall be
had against any incorporation, stockholder, employee, agent,
officer or director or subsidiary, as such, past, present or
future, of the Company or of any successor corporation, either
directly or through the Company or any successor corporation,
whether by virtue of any constitution, statute or rule of law or
by the enforcement of any assessment or penalty or otherwise, all
such liability being, by the acceptance hereof and as part of the
consideration of the issue hereof, expressly waived and released.
16. Terms used in this Note and defined in the Indenture
are used herein as therein defined.
ABBREVIATIONS
The following abbreviations, when used in the inscription of
the face of this Note, shall be construed as though they were
written out in full according to applicable laws or regulations:
TEN COM- TEN ENT-as tenants in UNIF GIFT MIN ACT
common ___Custodian_
___
as tenants by the (Cust)
entireties (Minor)
JT TEN- as joint under Uniform Gifts to
tenants with Minors Act
right to
survivorship
and not as ___________________________
tenants in (State)
common
Additional abbreviations may also be used
though not in the above list.
CONVERSION NOTICE
To: ATLANTIC COAST AIRLINES, INC.
The undersigned registered owner of this Note hereby
irrevocably exercises the option to convert this Note, or the
portion hereof (which is $1,000 or an integral multiple thereof)
below designated, into shares of Common Stock of Atlantic Coast
Airlines, Inc. in accordance with the terms of the Indenture
referred to in this Note, and directs that the shares issuable
and deliverable upon such conversion, together with any check in
payment for fractional shares and any Notes representing any
unconverted principal amount hereof, be issued and delivered to
the registered Holder hereof unless a different name has been
indicated below. If shares or any portion of this Note not
converted are to be issued in the name of a Person other than the
undersigned, the undersigned will check the appropriate box below
and pay all transfer taxes payable with respect thereto. Any
amount required to be paid to the undersigned on account of
interest accompanies this Note.
Dated: ______________________
___________________________________
_______
___________________________________
_______
Signature(s)
Signature(s) must be guaranteed by
an eligible Guarantor Institution
(banks, stock brokers, savings and
loan associations and credit
unions) with membership in an
approved signature guarantee
medallion program pursuant to
Securities and Exchange Commission
Rule 17Ad-15 if shares of Common
Stock are to be issued, or Notes to
be delivered, other than to and in
the name of the registered Holder.
___________________________________
_______
Signature Guarantee
Fill in for registration
of shares of Common Stock
if to be issued, and
Notes it to be delivered,
other than to and in the
name of the registered
Holder:
_________________________
(Name)
_________________________
(Street Address)
_________________________
(City, State and Zip
Code)
Please print name and
address
Principal amount to be converted
(if less than all): $___________
___________________________________
_______
Social Security or Other Taxpayer
Identification Number
ASSIGNMENT
For value received ___________________ hereby sell(s), assign(s)
and transfer(s) unto
_________________________________________________________________
_____________
(Please insert name, social security or other Taxpayer
Identification Number of assignee)
the within Note, and hereby irrevocably constitutes and appoints
_________________________________________________________________
_____________
attorney to transfer the said Note on the Books of the Company,
with power of substitution in the premises.
In connection with any transfer of the within Note within
two years of the date of original issuance of such Note, the
undersigned confirms that such Note is being transferred:
To Atlantic Coast Airlines, Inc. or a subsidiary
thereof; or
Pursuant to and in compliance with Rule 144A under the
Securities Act of 1933, as amended; or
To an Institutional Accredited Investor pursuant to and
in compliance with the Securities Act of 1933, as
amended; or
Pursuant to and in compliance with Regulation S under
the Securities Act of 1933, as amended; or
Pursuant to and in compliance with Rule 144 under the
Securities Act of 1933, as amended;
and unless the box below is checked, the undersigned confirms
that such Note is not being transferred to an "affiliate" of the
Company as defined in Rule 144 under the Securities Act of 1933,
as amended (an "Affiliate").
The transferee is an Affiliate of the Company.
Dated: ______________________
___________________________________
_______
___________________________________
_______
Signature(s)
Signature(s) must be guaranteed by
an eligible Guarantor Institution
(banks, stock brokers, savings and
loan associations and credit
unions) with membership in an
approved signature guarantee
medallion program pursuant to
Securities and Exchange Commission
Rule 17Ad-15 if shares of Common
Stock are to be issued, or Notes to
be delivered, other than to and in
the name of the registered Holder.
___________________________________
_______
Signature Guarantee
OPTION TO ELECT REPURCHASE
UPON A CHANGE IN CONTROL
To: ATLANTIC COAST AIRLINES, INC.
The undersigned registered owner of this Note hereby
irrevocably acknowledges receipt of a notice from Atlantic Coast
Airlines, Inc. (the Company") as to the occurrence of a Change in
Control with respect to the Company and requests and instructs
the Company to repay the entire principal amount of this Note, or
the portion thereof (which is $1,000 or an integral multiple
thereof) below designated, in accordance with the terms of the
Indenture referred to in this Note at the repurchase price,
together with accrued interest to, but excluding, such date, to
the registered Holder hereof.
Dated: ______________________
___________________________________
_______
___________________________________
_______
Signature(s)
NOTICE: The above signatures of
the Holder(s) hereof must
correspond with the name as written
upon the face of the Note in every
particular without alteration,
enlargement or any change whatever.
Principal amount to be repurchased
(if less than all):
$_______________
___________________________________
_______
Social Security or Other Taxpayer
Identification Number
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (the "Agreement") is
made and entered into as of July 2, 1997, by and among
Atlantic Coast Airlines, Inc., a Delaware corporation (the
"Company"), Alex. Brown & Sons Incorporated and The Robinson
Humphrey Company, Inc. (collectively, the "Initial
Purchasers") pursuant to the Purchase Agreement dated as of
June 27, 1997 (the "Purchase Agreement"), between the
Company and the Initial Purchasers. In order to induce the
Initial Purchasers to enter into the Purchase Agreement, the
Company has agreed to provide the registration rights set
forth in this Agreement. The execution of this Agreement is
a condition to the closing under the Purchase Agreement.
The Company agrees with the Initial Purchasers, (i) for
their benefit as Initial Purchasers and (ii) for the benefit
of the holders from time to time of the Notes (including the
Initial Purchasers) and the holders from time to time of the
Common Stock issued upon conversion of the Notes (each of
the foregoing a "Holder" and together the "Holders"), as
follows:
1. Definitions. Capitalized terms used herein
without definition shall have their respective meanings set
forth in the Purchase Agreement. As used in this Agreement,
the following terms shall have the following meanings:
Affiliate: "Affiliate" means, with respect to any
specified person, (i) any other person directly or
indirectly controlling or controlled by, or under direct or
indirect common control with, such specified person or (ii)
any officer or director of such other person. For purposes
of this definition, the term "control" (including the terms
"controlling," "controlled by" and "under common control
with") of a person means the possession direct or indirect,
of the power (whether or not exercised) to direct or cause
the direction of the management and policies of a person,
whether through the ownership of voting securities, by
contract, or otherwise.
Business Day: Each Monday, Tuesday, Wednesday,
Thursday and Friday that is not a day on which banking
institutions in the City of New York are authorized or
obligated by law or executive order to close.
Common Stock: The shares of common stock, $.02 par
value, of the Company and any other shares of common stock
as may constitute "Common Stock" for purposes of the
Indenture, in each case, as issuable or issued upon
conversion of the Notes.
Damages Accrual Period: See Section 2(d) hereof.
Damages Payment Date: Each of the semi-annual interest
payment dates provided in the Indenture, whether or not
Liquidated Damages are payable on such date.
Effectiveness Period: The period commencing with the
date hereof and ending on the earlier of the date that is
two years after the latest date of original issuance of the
Notes and the date that all Registrable Securities have
ceased to be Registrable Securities.
Effectiveness Target Date: See Section 2(a) hereof.
Event. See Section 2(d) hereof.
Event Date: See Section 2(d) hereof.
Exchange Act: The Securities Exchange Act of 1934,
as amended, and the rules and regulations of
the
SEC promulgated thereunder.
Filing Date: See Section 2(a) hereof.
Holder: See the second paragraph of this Agreement.
Indenture: The Indenture, dated as of July 2,
1997, between the Company and First Union National
Bank of Virginia, as trustee, pursuant to which the
Notes are being issued, as amended or supplemented
from time to time in accordance with the terms
thereof.
Initial Purchasers: See the first paragraph of
this Agreement.
Initial Shelf Registration: See Section 2(a) hereof.
Liquidated Damages: See Section 2(d) hereof.
Losses: See Section 5 hereof.
Majority of Registrable Securities: A majority of
the then outstanding aggregate principal amount of
Registrable Securities.
For purposes of this calculation, Registrable
Securities which have been converted into shares of
Common Stock shall be deemed to bear the principal
amount at which such Registrable Securities were
converted.
Managing Underwriters: The investment banking firm
or firms that shall manage or co-manage an
Underwritten Offering.
Notes: The 7% Convertible Subordinated Notes due
2004 of the Company being issued and sold pursuant
to the Purchase Agreement and the Indenture.
Prospectus: The prospectus included in
any Registration Statement (including, without
limitation, a prospectus that discloses information
previously omitted from a prospectus filed as part of
an effective registration statement in reliance upon
Rule 430A promulgated under the Securities Act), as
amended or supplemented by any amendment or
prospectus supplement, including post-effective
amendments, and all material incorporated by reference
or deemed to be incorporated by reference in such
Prospectus.
Purchase Agreement: See the first paragraph of
this Agreement.
Record Holder: (i) with respect to any Damages
Payment Date relating to the Notes, each Person who is
a registered holder of such Notes on the record date
with respect to the interest payment date under the
Indenture on which such Damages Payment Date shall
occur and (ii) with respect to any Damages Payment
Date relating to the Common Stock, each Person who is a
registered holder of such Common Stock 15 days prior
to such Damages Payment Date.
Registrable Securities: Each Note and each share
of
Common Stock into which the Notes are convertible
or converted upon original issuance thereof, and at all
times subsequent thereto, and any Common Stock issued
with respect thereto upon any stock dividend, split or
similar event, until, in the case of any such Note
or share of Common Stock, (i) it is effectively
registered under the Securities Act and disposed of
in accordance with the Registration Statement
covering it, (ii) it is salable by the holder
thereof pursuant to Rule 144(k) or (iii) it is sold to
the public pursuant to Rule 144, and, as a result of
the event or circumstance described in any of the
foregoing clauses (i) through (iii), the legends with
respect to transfer restrictions required under the
Indenture (other than any such legends required solely
as the consequences or the fact that the Registrable
Securities are owned by, or were previously owned
by, the Company or an Affiliate of the Company) are
removed or removable in accordance with the terms of
the Indenture.
Registration Expenses: See Section 5 hereof.
Registration Statement: Any registration statement
of the Company which covers any of the Registrable
Securities pursuant to the provisions of this Agreement,
including the Prospectus, amendments and supplements
to such registration statement, including post-
effective amendments,
all
exhibits, and all material incorporated by reference
or deemed to be incorporated by reference in such
registration statement.
Rule 144: Rule 144 under the Securities Act, as
such Rule may be amended from time to time, or any
similar rule or regulations hereafter adopted by the
SEC.
Rule 144A: Rule 144A under the Securities Act, as
such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the
SEC.
SEC: The Securities and Exchange Commission.
Securities Act: The Securities Act of 1933,
as amended, and the rules and regulations promulgated
by the SEC thereunder.
Selling Holder: A Holder offering to sell
Registrable Securities.
Shelf Registration: See Section 2(a) hereof.
Special Counsel: Piper & Marbury L.L.P., or such
other successor counsel as shall be specified by the
Holders of a majority of the Registrable
Securities, the fees and
expenses of which will be paid by the Company pursuant
to Section 5 hereof.
Subsequent Shelf Registration: See Section
2(b) hereof.
Suspension Period: See Section 2(c).
TIA: The Trust Indenture Act of 1939, as amended.
Trustee: The Trustee under the Indenture.
Underwritten Registration or Underwritten Offering:
A registration in which the Registrable Securities are
sold by
Holders thereof to an underwriter for reoffering to
the public.
2. Shelf Registration.
(a) The Company shall prepare and file with
the SEC, as soon as practicable but in any event on or
prior to the date 90 days following the latest date
of original issuance of the Notes (the "Filing
Date"), a Registration Statement for an offering to be
made on a continuous basis pursuant to Rule 415 of
the Securities Act (a "Shelf Registration")
registering the resale from time to time by Holders
thereof of all of the Registrable Securities (the
"Initial Shelf Registration"). The Initial
Shelf Registration shall be on an appropriate SEC
Registration Statement form permitting registration of
such Registrable Securities for resale by such
Holders in the manner or manners designated by them
(including, without limitation, one or more
Underwritten Offerings). The Company shall use its best
efforts to cause the Initial Shelf Registration to be
declared effective under the Securities Act as soon as
practicable but in any event on or prior to the date
120 days following the Filing Date (the "Effectiveness
Target Date"), and shall use its best efforts to keep
the Initial Shelf Registration continuously
effective under the Securities Act, subject to the
provisions of Section 2(c), until the earlier of the
expiration of the Effectiveness Period or the date
a Subsequent Shelf Registration (as defined below)
covering all of the Registrable Securities has been
declared effective under the Securities Act. Subject
to the right of the Company to have the Initial
Shelf Registration not be effective, or not to be
updated, amended or supplemented, for periods of time
set forth in Section 2(c), the Company further agrees
to use its best efforts to prevent the happening of
any event that would cause the Initial Shelf
Registration to contain a material misstatement or
omission or to be not effective and usable for resale
of the Registrable Securities during the Effective
Period.
(b) If the Initial Shelf Registration or
any
subsequent Shelf Registration ceases to be effective for
any reason as a result of the issuance of a stop order
by the SEC at any time during the Effectiveness Period,
the Company shall use its best efforts to obtain the
prompt withdrawal of any order suspending the
effectiveness thereof, and in any event shall within
30 days of such cessation of effectiveness amend
the Shelf Registration in a manner reasonably
expected to obtain the withdrawal of the order
suspending the effectiveness thereof, or file an
additional Shelf Registration covering all of
the Registrable Securities (a "Subsequent Shelf
Registration"). If a Subsequent Shelf Registration
is filed, the Company shall use its best efforts
to cause the Subsequent Shelf Registration to be
declared effective as soon as practicable after such
filing and to keep such Registration Statement
continuously effective until the end of the
Effectiveness Period.
(c) In the event (A) of the happening of
any
event of the kind described in Section 3(c)(ii),
3(c)(iii), 3(c)(iv), 3(c)(v) or 3(c)(vi) hereof or (B)
that, in the good faith judgment of the Company, it
is advisable to suspend the use of the Prospectus for
a discrete period of time due to pending material
corporate developments or similar material events
that have not yet been publicly
disclosed and as to which the Company believes
public disclosure will be prejudicial to the Company,
the Company shall deliver a certificate in writing,
signed by an authorized executive officer of the
Company, to the Special Counsel, the
Initial Purchasers and the
Managing
Underwriters, if any, to the effect of the foregoing
and thereafter the use of the Prospectus shall be
suspended, and the Company, subject to the terms of
this Section 2(c), shall
thereafter not be required to maintain the
effectiveness or update the Shelf Registration. The
Company will use its best efforts to ensure that the
use of the Prospectus may be resumed as soon as
practicable, in the case of suspension under Section
2(c)(A), and, in the case of a pending development or
event referred to in Section 2(c)(B) hereof, as soon
as, in the good faith-judgment of the Company, public
disclosure of such material corporate development or
similar material event would not have a material
adverse effect on the Company. Notwithstanding the
foregoing, the Company shall not under any circumstances
be entitled to exercise its right under this Section
2(c) to suspend the use of the Prospectus (whether as
a result of events referred to in Section 2(c)(A)
hereof or as a result of the pending development or
event referred to in Section 2(c)(B) hereof) more than
one (1) time in any three (3) month period, and
the periods in which the use of the Prospectus is
suspended shall not exceed 15 days in any three-month
period (a "Suspension Period").
(d) The parties hereto agree that the
Holders of Registrable Securities will suffer damages,
and that it would not be feasible to ascertain the
extent of such damages with precision, if (i)
the
Initial Shelf Registration has not been filed on or
prior to the Filing Date, (ii) the Initial Shelf
Registration has not been declared effective by the
Effectiveness Target Date, (iii) prior to the end of
the Effectiveness Period, the SEC shall have issued a
stop order suspending the effectiveness of the Shelf
Registration or proceedings have been initiated with
respect to the Shelf Registration under Section 8(d) or
8(e) of the Securities Act, (iv) the aggregate number
of days in any one Suspension Period exceeds the
period permitted pursuant to Section 2(c) hereof or
(v) the number of Suspension Periods exceeds the
number permitted pursuant to Section 2(c) hereof (each
of the events of a type described in any of the
foregoing clauses (i) through (v) are individually
referred to herein as an "Event," and the Filing
Date in the case of clause (i), the Effectiveness
Target Date in the case of clause (ii), the date on
which the effectiveness of the
Shelf Registration has been suspended or
proceedings with respect to the Shelf Registration
under Section 8(d) or 8(e) of the Securities Act have
been commenced in the case of clause (iii), the date
on
which the duration of a Suspension Period exceeds the
period permitted by Section 2(c) hereof in the case of
clause (iv), and the date of the commencement of
a Suspension Period that causes the limit on the
number of Suspension Periods under Section 2(c) hereof
to be exceeded in the case of clause (v), being
referred to herein as an "Event Date").
Notwithstanding the foregoing, the parties hereto
agree that an Event shall be deemed not to have
occurred to the extent the parties mutually agree that
the direct, proximate cause of said Event was the act or
failure to act of one or more Holders, the Initial
Purchasers or the Managing Underwriters. Events shall
be deemed to continue until the date of the termination
of such Event, which shall be the following dates with
respect to the respective types of Events: the date
the Initial Registration Statement is filed in the
case of an Event of the type described in clause (i),
the date the Initial Shelf Registration is declared
effective in the case of clause (ii), the date that all
stop orders suspending effectiveness of the Shelf
Registration have been removed and the proceedings
initiated with respect to the Shelf Registration under
Section 8(d) or 8(e) or the Securities Act have
terminated, as the case may be, in the case of Events
of the types described in clause (iii), termination of
the Suspension Period which caused the aggregate number
of days in any one Suspension Period to exceed the
number permitted by Section 2(c) to be exceeded in the
case of Events of the types described in clause (iv),
and termination of the Suspension Periods, the
commencement of which caused the number of Suspension
Periods permitted by Section 2(d) to be exceeded in the
case of Events of the type described in clause (v).
Accordingly, upon the occurrence of any Event and
until such time as there are no Events which have
occurred and are continuing (a "'Damages Accrual
Period"), commencing on the Event Date on which such
Damages Accrual Period began, the Company agrees to
pay, as liquidated damages, and not as a penalty, an
additional amount (the "Liquidated Damages"): (i) to
each holder of Notes that are Registrable Securities,
accruing at a rate equal to one-half of one percent
per annum (50 basis points) on the aggregate principal
amount of Notes that are Registrable Securities held
by such Holder and (ii) to each holder of shares of
Common Stock that are Registrable Securities, accruing
at a rate equal to one-half of one percent per annum
(50 basis points) calculated on an amount equal to
the product of (x) the then-applicable Conversion
Price (as defined in the Indenture), times (y) the
number of shares of Common Stock that are Registrable
Securities held by such holder. Notwithstanding
the
foregoing, no Liquidated Damages shall accrue as to
any Registrable Securities from and after the earlier of
(x) the date such securities are no longer Registrable
Securities, and (y) the expiration of the
Effectiveness Period. The
rate of accrual of the Liquidated Damages with respect
to any period shall not exceed the rate provided for
in this paragraph notwithstanding the occurrence
of multiple concurrent Events.
The Company shall pay the Liquidated Damages due on
any Notes or Common Stock by depositing with the
Trustee under the Indenture, in trust, for the benefit
of the
holders of Notes or Common Stock, as the case may be,
entitled thereto, at least one Business Day prior to
the applicable Damages Payment Date, sums sufficient
to pay the Liquidated Damages accrued or accruing since
the last preceding Damages Payment Date through such
Damages Payment Date. The Liquidated Damages shall
be paid by the Company to the Record Holders on each
Damages Payment Date by wire transfer of immediately
available funds to the account specified by them or
by mailing checks to their registered addresses as they
appear in the Note register (as defined in the
Indenture), in the case of the Notes, and in the
register of the Company for the Common Stock, in the
case of the Common Stock, if no such accounts have
been specified on or before the Damage Payment Date;
provided, however, that any Liquidated Damages accrued
with respect to any Note or portion thereof called for
redemption on a redemption date, or repurchased in
connection with a Change in Control (as defined in
the Indenture) on a repurchase date, or converted into
Common Stock on a conversion date prior to the
Damages Payment
Date, shall, in any such event, be paid instead to
the holder who submitted such Note or portion
thereof for redemption, repurchase or conversion on
the applicable redemption date, repurchase date or
conversion date, as the case may be, on such date
(or promptly following the conversion date, in the
case of conversion of a Note). If a holder of a Note
submits a Note for conversion during the period
between a record date for the payment of Liquidated
Damages and the related Damages Payment Date,
Liquidated Damages for the period from the conversion
date through the next succeeding Damages Payment Date
shall accrue and be payable to the holder of Common
Stock received on conversion on the next succeeding
Damages Payment Date, notwithstanding that such holder
was not a Record Holder with respect to such Damages
Payment Date. The Trustee shall be entitled, on
behalf of the Holders of Notes and Common Stock to seek
any available remedy for the enforcement of this
Agreement, including for the payment of such
Liquidated Damages. Nothing shall preclude a Holder of
Registrable Securities from pursuing or obtaining
specific performance or other equitable relief with
respect to this Agreement.
All of the Company's obligations set forth in
this Section 2(d) which are outstanding with
respect to any Registrable Securities at the time such
security ceases to be a Registrable Security shall
survive until such time as all such obligations with
respect to such security have been satisfied in full
(notwithstanding termination of the
Agreement pursuant to Section 7(o)).
The parties hereto agree that the Liquidated
Damages provided for in this Section 2(d) constitute
a reasonable estimate of the damages that may be
incurred by holders of Registrable Securities (other
than the Initial Purchasers) by reason of the
failure of the Shelf Registration to be filed or
declared effective or unavailable (absolutely or as a
practical matter) for effecting resales of
Registrable Securities, as the case may be, in
accordance with the provisions hereof.
3. Registration Procedures. In connection with
the
Company's registration obligations under Section 2
hereof, the Company shall effect such registrations to
permit the sale of the Registrable Securities in
accordance with the intended method or methods of
disposition thereof, and pursuant thereto the
Company shall as expeditiously as possible:
(a) Prepare and file with the SEC a
Registration Statement or Registration Statements on any
appropriate form under the Securities Act available
for the sale of the Registrable Securities by the
Holders thereof in accordance with the intended method
or methods of distribution thereof and shall include all
required financial statements, and use its best
efforts to cause each such Registration Statement to
become effective and remain effective as provided
herein; provided, that before filing, any
such
Registration Statement or Prospectus or any amendments
or supplements thereto the Company shall furnish
within a reasonable time period to each Selling Holder
(if requested by such Selling Holder), the Initial
Purchasers, the Special Counsel and the Managing
Underwriters of such offering, if any, copies of all
such documents proposed to be filed, which documents
will be subject to the review of each Selling Holder
(if requested by such Selling Holder), the Initial
Purchasers, the Special Counsel and such Managing
Underwriters, and the Company shall not file any such
Registration Statement or
amendment thereto or any Prospectus or any
supplement thereto to which
the Holders of a majority of the
Registrable Securities covered by such
Registration
Statement, the Initial Purchasers or the Special
Counsel shall reasonably object in writing within five
Business Days after the receipt thereof. In addition,
the Company shall use its best efforts to reflect
in each such document referenced in this paragraph
so filed with the SEC such comments as the Initial
Purchasers, Special Counsel and the Managing
Underwriters, if any, may propose.
(b) Subject to Section 2(c), prepare and
file with the SEC such amendments and post-effective
amendments to each Registration Statement as may be
necessary to keep such Registration Statement
continuously effective for the applicable period
specified in Section 2; cause the related Prospectus
to be supplemented by any required Prospectus
supplement, and as so supplemented to be filed pursuant
to Rule 424 (or any similar provisions then in force)
under the Securities Act and comply with the
provisions of the Securities Act with respect to
the disposition of all securities covered by such
Registration Statement during the applicable period in
accordance with the intended methods or disposition
by the sellers thereof set forth in such
Registration Statement as so amended or such Prospectus
as
so supplemented. The Company shall ensure that (i)
any Shelf Registration and any amendment thereto
and any
Prospectus forming a part thereof and any amendment
or
supplement thereto complies in all material respects
with the Act and the rules and regulations thereunder,
(ii) any Shelf Registration and any amendment thereto
does not, when it becomes
effective, contain an untrue statement of a
material fact or omit to state a material fact required
to
be stated therein or necessary to make the
statements therein, in light of the circumstances under
which they were made, not misleading and (iii) any
Prospectus forming part of any Shelf Registration,
and any amendment or supplement to such Prospectus,
does not include an untrue statement or a material fact
or omit to state a material fact necessary in order to
make the statements therein, in the light of the
circumstances under which they were made, not
misleading.
(c) Notify the Holders, the Initial
Purchasers, the Special Counsel and the Managing
Underwriters, if any, promptly, and (if requested by
any such person) confirm such notice in writing, (i)
when a Prospectus, any Prospectus supplement,
a Registration Statement or a post-effective
amendment to a Registration Statement has been filed
with the SEC, and, with respect to a Registration
Statement or
any post-effective amendment, when the same has
become effective; (ii) of any request by the SEC or
any other federal or state
governmental authority for amendments or
supplements to a Registration Statement or
related
Prospectus or for additional information, (iii) of
the issuance by the SEC or any other federal or
state
governmental authority of any stop order suspending
the effectiveness of a Registration Statement or the
initiation or threatening of any proceedings for that
purpose, (iv) of the receipt by the Company of any
notification with respect to the suspension of the
qualification or exemption from qualification of any
of the Registrable Securities for sale in any
jurisdiction or the initiation or threatening of any
proceedings
for such purpose, (v) of the existence of any
fact or happening of any event which makes any statement
of
a material fact in such Registration Statement or
related
Prospectus or any document incorporated or deemed to
be incorporated therein by reference untrue or which
would require the making of any changes in the
Registration Statement or Prospectus in order that, in
the case of the Registration Statement, it will not
contain any untrue statement of a material fact or
omit to state any material fact required to be stated
therein or necessary to make the statements therein not
misleading, and that in the case of the Prospectus, it
will not contain any untrue statement of a material
fact or omit to state any material fact required to be
stated therein or necessary to make the statements
therein, in the light of the circumstances under which
they were made, not misleading, and (vi) of the
Company's determination that a post-effective
amendment to a Registration Statement would be
appropriate.
(d) Use its best efforts to obtain the
withdrawal of any order suspending the effectiveness of
a Registration Statement, or the lifting of any
suspension of the
qualification (or exemption from qualification) of any
of the Registrable Securities for sale in any
jurisdiction, at the earliest possible moment.
(e) If requested by the Initial Purchasers or
the Managing Underwriters, if any, or the Holders of a
Majority of the Registrable Securities being sold,
(i) promptly incorporate in a Prospectus supplement
or post-effective amendment to Registration Statement
such information as the Initial
Purchaser, the Special Counsel, the
Managing
Underwriters, if any, or such Holders and the Company
agree should be included therein, and (ii) make all
required filings of such Prospectus supplement or such
post-effective amendment as soon as practicable after
the Company has received notification of the
matters proposed to
be
incorporated in such Prospectus supplement or post
effective amendment.
(f) Furnish to each Selling Holder (if
requested by such Selling Holder), the Special
Counsel, the Initial Purchasers, and each Managing
Underwriter, if any, without charge, at least one
conformed copy of the Registration Statement or
Statements and any amendment thereto, including
financial statements but excluding schedules, all
documents incorporated or deemed to be incorporated
therein
by
reference and all exhibits.
(g) Deliver to each Selling Holder, the
Special Counsel,
the Initial Purchasers and each
Managing
Underwriter, if any, in connection with any offering
of Registrable Securities, without charge, as many
copies of the Prospectus or Prospectuses relating to
such Registrable Securities (including each preliminary
prospectus) and any amendment or supplement
thereto as such persons
may reasonably request; and the Company hereby consents
to the use of such Prospectus or each amendment or
supplement thereto by each of the Selling Holders
of Registrable Securities and the Underwriters, if any,
in connection with any offering and sale of the
Registrable Securities covered by such Prospectus or any
amendment or supplement thereto.
(h) Prior to any public offering of
Registrable Securities, to register or qualify or
cooperate with the Selling Holders, the Managing
Underwriters, if any, and the Special Counsel in
connection with the registration or qualification
(or exemption from such registration
or
qualification) of such Registrable Securities for offer
and
sale under the securities or Blue Sky laws of
such
jurisdictions within the United States as any Selling
Holder or Managing Underwriter reasonably requests in
writing, keep each such
registration or qualification (or exemption
therefrom) effective during the period such
Registration Statement is required to be kept effective
and do any and all other acts or things necessary or
advisable to enable the disposition in such
jurisdictions of the Registrable Securities covered by
the applicable Registration Statement, provided, that
the Company will not be required to (i) qualify
generally to do business in any jurisdiction where it
is not then so qualified (ii) take any action that would
subject it to general service of process in suits or
to taxation in any such jurisdiction where it is not
then so subject.
(i) Cause the Registrable Securities covered
by the applicable Registration Statement to be
registered with or approved by such other governmental
agencies in addition to the SEC or authorities within
the United States as may be necessary to enable the
Selling Holder or Holders thereof or the Managing
Underwriters, if any, to consummate the disposition
of such Registrable Securities.
(j) During the Effectiveness Period (subject
to the provisions of Section 2(c)), immediately
upon the existence of any fact or the occurrence of any
event as a result of which a Registration Statement
shall contain any untrue statement of a material fact
or omit to state any material fact required to be
stated therein or necessary to make the statements
therein, in light of the circumstances under which they
were made, not misleading, or a Prospectus shall
contain any untrue statement of a material fact or
omit to state any material fact required to be
stated therein or necessary to make the statements
therein, in the light of the circumstances under which
they were made, not misleading, promptly prepare and
file a posteffective amendment to each Registration
Statement or a supplement to the related Prospectus or
any document incorporated therein by reference or file
any other required document (such as a Current Report
on Form 8K) that would be incorporated by reference
into the Registration Statement so that the
Registration Statement shall not contain any
untrue statement or a material fact or omit to state any
material fact required to be stated therein or necessary
to make the statements therein not misleading, in
light of the
circumstances under which they were made, and so that
the Prospectus will not contain any untrue
statement of a material fact or omit to state any
material fact or omit to state any material fact
required to be stated therein or necessary to make the
statements therein, in the light of the
circumstances under which they were made,
not misleading, as thereafter delivered to the
purchasers of the Registrable Securities being sold
thereunder, and in the case
of a posteffective amendment to a Registration
Statement use its best efforts to cause it to
become effective as soon as practicable.
(k) Enter into such agreements (including, in
the event of an Underwritten Offering, an underwriting
agreement in form, scope and substance as is customary
in Underwritten Offerings) and take all such other
actions in connection therewith (including, in the
event of an the Underwritten Offering, those
reasonably requested
by the Managing
Underwriters, if any, or the Holders of a Majority of
the Registrable Securities being sold) in order to
expedite or
facilitate the disposition of such Registrable
Securities and in such connection, whether or not
an underwriting agreement is entered into, and if the
registration is
an underwritten registration, (i) make such
representations and warranties to the Holders of such
Registrable Securities and the underwriters with respect
to the business of the Company and its subsidiaries, the
Registration Statement, Prospectus and documents
incorporated by reference or deemed incorporated
by reference, if any, in each case, in form, substance
and scope as are customarily made by issuers
to underwriters in underwritten offerings and confirm
the same if and when requested; (ii) use its
reasonable efforts to
obtain opinions of counsel to the Company and
updates thereof (which counsel and opinions (in form,
scope and substance) shall be reasonably satisfactory
to the Managing Underwriters, if any, Special Counsel
and the Holders of a majority of the Registrable
Securities being sold) addressed to each of the
underwriters covering the matters customarily covered in
opinions requested in underwritten offerings and such
other matters as may be reasonably requested by such
Special Counsel and Managing Underwriters; (iii) use
its reasonable efforts to obtain "cold comfort"
letters and updates thereof from the independent
certified public accountants of the Company (and, if
necessary, any other certified public accountants of
any subsidiary of the Company or any business
acquired or to be acquired by the Company for which
financial statements and financial data are, or are
required to be, included in the Registration
Statement), addressed to each of the Managing
Underwriters, if any, such letters to be in customary
form and covering matters of the type customarily
covered in "cold comfort" letters in connection with
Underwritten Offerings, and (iv) deliver such documents
and certificates as may be reasonably requested by the
Holders of a majority of the Registrable Securities
being sold, the Special Counsel and the Managing
Underwriters, if any, to evidence the continued validity
of the representations and warranties of the Company
and its subsidiaries made pursuant to clause (i)
above and to
evidence compliance with any customary conditions
contained in the underwriting agreement or other
agreement entered into by the Company. The above
shall be done at each closing under such
underwriting or similar agreement as and to the extent
required thereunder.
(1) Make available for inspection by
a
representative of the Holders of Registrable
Securities being sold, any Managing Underwriter
participating in any disposition of Registrable
Securities, if any, and any attorney or accountant
retained by such Selling Holders
or underwriter, financial and other records,
pertinent
corporate documents and properties of the Company and
its subsidiaries, and cause the executive officers,
directors and employees of the Company and its
subsidiaries to supply all information reasonably
requested by any such
representative, Managing Underwriter, attorney or
accountant in connection with such disposition;
provided, however, that any information that is
reasonable and in good faith designated by the
Company in writing as confidential at the time of
delivery of such information shall be
kept confidential by such persons, unless (i) disclosure
of such information is required by court or
administrative order or
is necessary to respond to inquiries of
regulatory authorities, (ii) disclosure of such
information is required by law (including any
disclosure requirements pursuant
to federal securities laws in connection with the filing
of any Registration Statement or the use of any
prospectus referred
to in this Agreement), (iii) such information
becomes generally available to the public other than as
a result of disclosure
or failure to safeguard by any such person or
(iv) such information becomes available to any such
person from a source other than the Company and such
source is not bound by a confidentiality agreement.
(m) Comply with all applicable rules
and
regulations of the SEC in all material respects and
make generally
available to its securityholders earnings
statements (which need not be audited) satisfying
the
provisions of Section 11(a) of the Securities Act and
Rule 158 thereunder (or any similar rule promulgated
under the Securities Act) no later than 45 days after
the end of any 12-month period (or 90 days after the
end of any 12-month period if
such period is a fiscal year) (i) commencing at
the end of any fiscal quarter in which
Registrable
Securities are sold to underwriters in firm commitment
or
best efforts underwritten offering and (ii) if not sold
to underwriters in such an offering, commencing on the
first day of the first fiscal quarter of the Company
commencing after the effective date of a Registration
Statement, which statements shall cover said 12-month
periods.
(n) Cooperate with the Selling Holders
of Registrable Securities, the Initial Purchasers, the
Special Counsel and the Managing Underwriters, if any,
to facilitate the timely preparation and delivery
of
certificates representing Registrable Securities to
be sold and not bearing any restrictive legends; and
enable such Registrable Securities
to be in such denominations and registered in
such names as the Holders may request.
(o) Not later than the effectiveness date of
any Registration Statement hereunder, provide a CUSIP
number for the Registrable Securities registered
under such Registration Statement, and provide the
Trustee under the Indenture and the transfer agent
for the Common Stock with printed certificates for the
Registrable Securities which are in a form eligible
for deposit with The Depository Trust Company.
(p) Cause all shares of Common Stock covered
by the Registration Statement to be listed on, each
securities exchange or quotation system on which the
Company's Common Stock is then listed or quoted no
later than the date the Registration Statement is
declared effective, and,
in
connection therewith, to the extent applicable, to make
such findings under the Exchange Act (e.g., the
filing of a Registration Statement on Form 8-A) and to
have such filings declared effective thereunder.
(q) Cooperate and assist in any filing
required to be made with the National Association
of Securities Dealers, Inc.
(r) Cause the Indenture to be qualified under
the TIA, and,
in connection therewith, cooperate with the
Trustee and the Holders, the Initial Purchasers, the
Special Counsel and the Managing Underwriters, if any,
to effect such changes to the Indenture as may be
required for such Indenture to be so qualified in
accordance with the terms of the TIA; and execute and
use its best efforts to cause the Trustee to execute
all documents as may be required to effect such
changes and all other forms and documents required
to be filed with the SEC to enable such Indenture
to be so qualified in a timely manner.
The Company may require each Holder of securities
to be sold pursuant to any Registration Statement to
furnish to the Company such information regarding the
Holder and the distribution of such securities as the
Company may from time to time
reasonably require for inclusion in
such
Registration Statement. Any Holder who fails to
provide such information shall not be entitled to
use the
Prospectus.
4. Registration Expenses. All fees and
expenses
incident to the Company's obligations under this
Agreement shall be
borne by the Company whether or not any of the
Registration Statements become effective. Such fees
and expenses
shall include, without limitation,
(i) all
registration and filing fees (including, without
limitation, fees and
expenses with respect to filings required to be
made with the National Association of Securities
Dealers, Inc.),
(ii) printing expenses (including, without
limitation, expenses of printing
certificates for
Registrable Securities in a form eligible for
deposit with The Depository Trust Company and of
printing Prospectuses if the printing of
Prospectuses is
requested by the Special Counsel, the Initial
Purchasers, the Managing Underwriters or the holders
of a Majority of the Registrable Securities included in
any Registration Statement), (iii) reasonable fees and
disbursements of counsel for the Company and the
Special Counsel in connection with the Shelf
Registration (provided that the Company shall not be
liable for the fees and expenses of more than one
separate firm for all parties (other than the Company)
participating in any transaction hereunder),
and (iv) fees and disbursements of
all independent certified public accountants referred
to in Section 3(k)(iii) hereof (including the
expenses of any special audit and "cold comfort"
letters required by or incident to such
performance). In addition, the Company shall pay the
fees and expenses incurred in connection with the
listing or quotation of the securities to be registered
on any securities exchange or quotations system on
which similar securities issued by the Company are then
listed and the fees and expenses of any
person, including special
experts, retained by the Company.
5. Indemnification.
(a) Indemnification by the Company. The
Company shall indemnify and hold harmless each
Holder, the
directors, officers, employees and agents of each
such Holder and each person, if any, who controls any
such Holder (within the meaning of either Section 15 of
the Securities Act or Section 20 of the Exchange Act)
from and against all losses, liabilities, damages and
expenses (including without limitation, any legal or
other expenses reasonably incurred in connection with
defending or investigating any such action or claim)
(collectively, "Losses"), arising out of or based upon
any untrue statement or alleged untrue statement of a
material fact contained in any Registration Statement or
Prospectus or in any amendment or supplement thereto, or
arising out of or based upon any omission or
alleged omission to state therein a material fact
required to be stated therein or necessary to make the
statements therein not misleading, in light of the
circumstances under which they were made, except
insofar as such Losses arise out of or are based upon
the information relating to any Holder furnished
to the Company in writing by any Holder expressly
for use therein. The Company shall also indemnify
each underwriter, their officers and directors, and
each person who controls such person (within the
meaning of Section 15
of the Securities Act or Section 20 of the Exchange Act
to
the same extent and with the same limitations as
provided above with respect to the indemnification of
the Holders or
Registrable Securities.
(b) Indemnification by Holder of
Registrable Securities. Each Holder, agrees severally
and not jointly to indemnify and hold harmless the
Company, its directors, its officers who sign a
Registration Statement and each person, if any, who
controls the Company (within the meaning of either
Section 15 of the Securities Act or Section 20 of the
Exchange Act), from and against all losses arising out
of or based upon any untrue statement of a material
fact contained in any Registration Statement,
Prospectus or
arising out of or based upon any omission of a material
fact required to be stated therein or necessary to
make the statements therein not misleading, in
light of the
circumstances under which they were made, to the extent,
but only to the extent, that such untrue statement or
omission is contained in any information relating to
such Holder so
furnished in writing by such Holder to the Company
expressly for use in such Registration Statement or
Prospectus. In no event shall the liability of
any Selling Holder
of
Registrable Securities hereunder be greater in amount
than the dollar amount of the proceeds received by
such Holder upon the sale of the Registrable Securities
giving rise to
such indemnification obligation.
(c) Conduct of Indemnification Proceedings.
In
case any proceeding (including any
governmental
investigation) shall be instituted involving any person
in
respect of which indemnity may be sought pursuant to
either of the two preceding paragraphs, such
person (the
"indemnified party") shall promptly notify the
person against whom such indemnity may be sought (the
"indemnifying party") in writing, but failure so to
notify an indemnifying party shall not relieve such
indemnifying party from any liability hereunder to
the extent it is not materially prejudiced as a
result thereof. The indemnifying party, upon request
of the indemnified party, shall retain counsel
satisfactory to the indemnified party to represent
the indemnified party and any others the indemnifying
party may designate in such proceeding and shall pay
the fees and disbursements of such counsel related
to such proceeding. In any such proceeding, any
indemnified party shall have the right to retain its
own counsel, but the fees and expenses of such counsel
shall be at the expense of such indemnified party
unless (i) the indemnifying party and the indemnified
party shall have mutually agreed to the retention to
such counsel (ii) the named parties to any such
proceeding (including any impleaded parties) include
both
the
indemnifying party and the indemnified party
and
representation of both parties by the same counsel would
be
inappropriate due to actual or potential differing
interests between them, or (iii) the indemnifying party
shall not have employed counsel satisfactory to the
indemnified party
to
represent the indemnified party within a reasonable
time after notice of commencement of the action.
It is
understood that the indemnifying party shall not, in
respect of the legal expenses or any indemnified party
in connection with any proceeding or related
proceedings in the same jurisdiction, be liable for
the fees and expenses of more than one separate firm
(in addition to any local counsel)
for all indemnified parties under Section 5(a) or
5(b)
hereof who are parties to such proceeding or
proceedings, and that all such fees and expenses shall
be reimbursed as
they are incurred. The indemnifying party shall not
be
liable for any settlement of any proceeding effected
without its written consent, but if settled with such
consent or if
there be a final judgment for the plaintiff,
the
indemnifying party agrees to indemnify the indemnified
party from and against any loss or liability by reason
of such
settlement or judgment. Notwithstanding the
foregoing
sentence, if at any time an indemnified party shall
have requested an indemnifying party to reimburse the
indemnified party for fees and expenses of counsel as
contemplated by
the second and third sentences of this paragraph,
such indemnifying party agrees that it shall be liable
for any
settlements of any proceeding effected without its
written
consent if (i) such settlement is entered into more than
45
days after receipt by such indemnifying party of
the
aforesaid request and (ii) such indemnifying party shall
not have reimbursed the indemnified party in
accordance with such request prior to the date of
such settlement. No
indemnifying party shall, without the Prior written
consent
of the indemnified party, effect any settlement of
any
pending or threatened proceeding in respect of which
any indemnified party is or could have been a
party and indemnity could have
been sought hereunder by
such indemnified party, unless such settlement
includes an
unconditional release of such indemnified party from
all liability on claims that are the subject matter
of such
proceeding.
(d) Contribution. If the
indemnification provided for in this Section 5 is
unavailable to an
indemnified party under Section 5(a) or 5(b) hereof
in
respect of any Losses or is insufficient to hold
such indemnified party
harmless, then each applicable
indemnifying party, in lieu of indemnifying such
indemnified party, shall contribute to the amount paid
or payable by
such indemnified party as a result of such Losses, (i)
in
such proportion as is appropriate to reflect the
relative
benefits received by the indemnifying party or parties
on
the one hand and the indemnified party or parties an
the
other hand or (ii) if the allocation provided by clause
(i) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but
also the relative fault of the indemnifying party or
parties on the one hand and of the indemnified party
or parties on the other
hand in
connection with the statements or omissions that
resulted in such Losses, as well as any other
relevant equitable considerations. Benefits received by
the Company shall be
deemed to be equal to the total net proceeds
from the initial placement of the Notes pursuant
to the Purchase
Agreement. Benefits received by the Initial
Purchasers
shall be deemed to be equal to the total purchase
discounts and commissions received by them pursuant
to the Purchase
Agreement and benefits received by any other Holders
shall be deemed to be equal to the value of
receiving Notes registered under the Securities
Act. Benefits received by
any underwriter shall be deemed to be equal to the
total underwriting discounts and commissions, as set
forth on the cover page of the Prospectus forming
a part of the
Registration Statement which resulted in such Losses.
The
relative fault of the Holders on the one hand and
the
Company on the other hand shall be determined by
reference to, among other things, whether the untrue or
alleged untrue
statement of a material fact or the omission or
alleged omission to state a material fact relates to
information supplied by the Holders or by the Company
and the parties' relative intent, knowledge, access
to information and
opportunity to correct or prevent such statement
or
omission. The Holders' respective obligations to
contribute pursuant to this paragraph are several in
proportion to the respective number of Registrable
Securities they have sold pursuant to a Registration
Statement, and not joint.
The parties hereto agree that it would not be just
and equitable if contribution pursuant to this Section
5(d) were determined by pro rata allocation or by any
other method or allocation that does not take into
account the
equitable
considerations referred to in the immediately
preceding
paragraph. The amount paid or payable by an
indemnified party as a result of the Losses
referred to in the immediately preceding paragraph
shall be deemed to include, subject to the limitations
set forth above, any legal
or
other expenses reasonably incurred by such indemnified
party in connection with investigating or defending
any such
action or claim. Notwithstanding this Section 5(d),
an
indemnifying party that is a Selling Holder of
Registrable Securities shall not be required to
contribute any amount in excess of the amount by which
the total price at which the Registrable Securities sold
by such indemnifying party and distributed to the
public were offered to the public exceeds the amount of
any damages which such indemnifying party has otherwise
been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged
omission.
No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act)
shall be
entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.
The indemnity, contribution and expense
reimbursement obligations of the Company hereunder shall
be in addition to any liability the Company may
otherwise have hereunder, under the Purchase Agreement
or otherwise.
The indemnity and contribution provisions contained
in this Section 5 shall remain operative and in full
force and effect regardless of (i) any termination of
this Agreement, (ii) any investigation made by or on
behalf of any Holder or any person controlling any
Holder, or the Company, its officers or directors or
any person controlling the Company and (iii) the sale
of any Registrable Securities by any Holder.
6. Information Requirements.
(a) The Company shall file the reports
required to be filed by it under the Securities Act and
the Exchange Act, and if at any time the Company is not
required to file such reports, it will, upon the
request of any Holder of Registrable Securities,
make publicly available other information so long as
necessary to permit sales pursuant to Rule 144 and
Rule 144A under the Securities Act. The
Company further covenants that it will cooperate with
any
Holder of Registrable Securities and take such
further reasonable action as any Holder of Registrable
Securities may reasonably request (including,
without limitation, making such reasonable
representations as any such Holder may reasonably
request), all to the extent required from time to
enable such Holder to sell Registrable Securities
without registration under the Securities Act within
the
limitation of the exemptions provided by Rule 144 and
Rule 144A under the Securities Act. Notwithstanding
the
foregoing, nothing in this Section 6 shall be deemed
to require the Company to register any of its securities
under any section of the Exchange Act.
(b) The Company shall file the reports
required to be filed by it under the Exchange Act and
shall comply with all other requirements set forth in
the instructions to the appropriate SEC Registration
Statement form permitting registration of the
Registrable Securities for resale by the Holders thereof
in the manner or manners designated by them.
7. Miscellaneous.
(a) Remedies. In the event of a breach by
the Company of its obligations under this Agreement, each
Holder of Registrable Securities, in addition to being
entitled to exercise all rights granted by law,
including recovery of damages, will be entitled to
specific performance of its rights under this
Agreement. The Company agrees that monetary damages
would not be adequate compensation for any loss
incurred by reason or a breach by it of any of the
provisions of this Agreement and hereby further agrees
that, in the event of any action for specific
performance in respect of such breach, it shall waive
the defense that a remedy at law would be adequate.
(b) No Conflicting Agreements. The Company
has not entered, as of the date hereof and shall not,
on or after the date of this Agreement, enter into any
agreement with respect to its securities which
conflicts with the rights granted to the Holders of
Registrable Securities in this Agreement. The Company
represents and warrants that the rights granted to the
Holders of Registrable Securities hereunder do not in any
way conflict with the rights granted to the holders of
the Company's securities under any other agreements.
(c) Amendments and Waivers. The provisions
of this Agreement, including the provisions of this
sentence, may not be amended, modified or supplemented,
and waivers or consents to departures from the provisions
hereof may not be given, unless the Company has obtained
the written consent of Holders of a Majority of the then
outstanding Registrable Securities. Notwithstanding the
foregoing, a waiver or consent to depart from the
provisions hereof with respect to a matter that relates
exclusively to the rights of holders of Registrable
Securities whose securities are being sold pursuant to
a Registration Statement and that does not directly
or indirectly affect the rights of other Holders of
Registrable Securities may be given by Holders of at
least a majority of the Registrable Securities being
sold by such Holders; provided, that the provisions of
this sentence may not
be amended, modified, or supplemented except
in
accordance with the provisions of the immediately
preceding sentence.
(d) Notices. All notices and
other communications provided for or permitted hereunder
shall be made in writing and shall be deemed given (i)
when made, if made by hand delivery, (ii) upon
confirmation, if made by telecopier or (iii) one
business day after being deposited with a reputable
nextday courier, postage prepaid, to the parties as
follows:
(x) if to a holder of
Registrable Securities, at the most current address given
by such holder to the Company in accordance with the
provisions of Section 7(e):
(y) if to the Company, to:
Atlantic Coast Airlines, Inc.
515-A Shaw Road
Dulles, Virginia 20166
Attention: Kerry B.
Skeen Telecopy No.:
(703) 9256294
with a copy to:
Gibson, Dunn & Crutcher
LLP 1050 Connecticut
Avenue, N.W. Washington,
D.C. 20036 Attention:
Ronald O. Mueller
Telecopy No.: (202) 467-
0539
and
(z) if to the Special Counsel
to:
Piper & Marbury L.L.P.
36 South Charles Street Baltimore,
Maryland 21201 Attention: Stephen
A. Riddick Telecopy No.: (410) 576-
1763
or to such other address as such person may have
furnished to the other persons identified in this
Section 7(d) in writing in accordance herewith.
Copies of all notices, demands or other
communications shall be concurrently delivered by the
Person given the same to the Trustee under the
Indenture at the address specified in the Indenture.
(e) Owner of Registrable Securities. The
Company will maintain, or will cause its registrar
and transfer agent to maintain, a register with
respect to the
Registrable Securities in which all transfers of
Registrable Securities of which the Company has
received notice will be recorded. The Company may
deem and treat the person in whose name
Registrable Securities are registered in such
register of the Company as the owner thereof for
all purposes, including, without limitation, the
giving of notices under this Agreement.
(f) Approval of Holders. Whenever the
consent or approval of Holders of a specified
percentage of Registrable Securities is required
hereunder, Registrable Securities held by the
Company or its affiliates (as such term is defined
in Rule 405 under the Securities Act) (other than the
Initial Purchasers or subsequent holders of Registrable
Securities if such subsequent holders are deemed to be
such affiliates solely by reason of their holdings
of such Registrable Securities) shall not be counted
in determining whether such consent or approval was
given by the Holders of such required percentage.
(g) Successors and Assigns. Any person
who purchases any Registrable Securities from an
Initial Purchaser shall be deemed, for purposes of this
Agreement to
be an assignee of such Initial Purchaser. The
Agreement shall inure to the benefit of and be
binding upon the successors
and assigns of each of the parties and shall
inure to the benefit of and be binding upon each
holder
of any Registrable Securities.
(h) Counterparts. This Agreement may be
executed in any number of counterparts and by the
parties hereto in separate counterparts, each of which
when so executed shall be deemed
to be original and all of which taken together
shall constitute one and the same agreement.
(i) Headings. The headings in this
Agreement are for convenience of reference only and
shall not limit or otherwise affect the meaning
hereof.
(j) Governing Law. THIS AGREEMENT
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE COMMONWEALTH OF VIRGINIA, AS APPLIED TO
CONTRACTS MADE AND PERFORMED WITHIN THE COMMONWEALTH
OF VIRGINIA WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF
LAWS.
(k) Severability. If any term,
provision, covenant or restriction of this Agreement
is held to be invalid, illegal, void or
unenforceable, the remainder of the terms,
provisions, covenants and restrictions set forth herein
shall remain in full force and effect, and shall in no
way be affected, impaired or invalidated thereby, and
the parties hereto shall use their best efforts to
find and employ an alternative means to achieve
the same or substantially the
same result as that contemplated by such term,
provision, covenant or restriction. It is
hereby stipulated
and declared to be the intention of the parties
that they would have executed the remaining
terms, provisions, covenants and restrictions without
including any of such which may be hereafter declared
invalid, illegal, void or unenforceable.
(l) Entire Agreement. This Agreement is
intended by the parties as a final expression of their
agreement and is intended to be a complete and
exclusive statement of the agreement and understanding
of the parties hereto in respect of the subject matter
contained herein. Except as provided in the Purchase
Agreement and the Indenture, there are no
restrictions, promises, warranties or undertakings,
other than those set forth or referred to herein, with
respect to the registration rights granted by the
Company with respect to the securities sold pursuant
to the Purchase Agreement and the Indenture. This
Agreement supersedes all prior agreements and
understandings among the parties with respect to such
subject matter.
(m) Attorneys' Fees. In any action or
proceeding brought to enforce any provision of this
Agreement, or where any provision hereof is validly
asserted as a defense, the prevailing
party, as determined by the court, shall be
entitled to recover reasonable attorneys' fees in
addition to any other available remedy.
(n) Further Assurances. Each of the
parties hereto shall use all reasonable efforts to
take,
or cause to be taken, all appropriate action, do or
cause to be done all things reasonably necessary,
proper or advisable under applicable
law, and execute and deliver such documents and
other papers, as may be required to carry out the provisions
of this Agreement and the other documents contemplated
hereby and consummate the make effective the transactions
contemplated hereby.
(o) Termination. This Agreement and the
obligations of the parties hereunder shall terminate upon
the end of the Effectiveness Period, except for any
liabilities or obligations under Sections 2(d), 4 or 5
hereof, each of which shall remain in effect in accordance
with their terms.
IN WITNESS WHEREOF, the parties have executed
this Registration Rights Agreement as of the date first
written above.
ATLANTIC COAST AIRLINES,
INC.
By:_____________________
____ Name: Kerry B.
Skeen Title:President
and
Chief Executive
Officer
Accepted as of the date first above written:
ALEX. BROWN & SONS INCORPORATED
THE ROBINSON-HUMPHREY COMPANY, INC.
By: Alex. Brown & Sons Incorporated
By:______________________________________
Authorized Signatory
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