<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 5, 1998
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------
FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
---------------------
ATLAS AIR, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 4731 84-1207329
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
538 COMMONS DRIVE
GOLDEN, COLORADO 80401
(303) 526-5050
(Address, including Zip Code, and Telephone Number, including Area Code, of
Registrant's Principal Executive Offices)
RICHARD H. SHUYLER
EXECUTIVE VICE PRESIDENT -- STRATEGIC PLANNING
AND TREASURER
ATLAS AIR, INC.
538 COMMONS DRIVE
GOLDEN, COLORADO 80401
(303) 526-5050
(Name, Address, including Zip Code, and Telephone Number, including
Area Code, of Agent for Service)
with a copy to:
STEPHEN A. GREENE, ESQ.
CAHILL GORDON & REINDEL
80 PINE STREET
NEW YORK, NEW YORK 10005
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
CALCULATION OF REGISTRATION FEE
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=====================================================================================================================
PROPOSED PROPOSED
MAXIMUM MAXIMUM AMOUNT OF
TITLE OF EACH CLASS AMOUNT TO OFFERING PRICE AGGREGATE REGISTRATION
OF SECURITIES TO BE REGISTERED BE REGISTERED PER CERTIFICATES OFFERING PRICE FEE
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
7.38% 1998-1A Pass Through Certificates...... $300,254,000 100% $300,254,000 $ 88,575
7.68% 1998-1B Pass Through Certificates...... 115,481,000 100 115,481,000 34,067
8.01% 1998-1C Pass Through Certificates...... 123,180,000 100 123,180,000 36,338
---------------- ---------------- ----------------
$538,915,000 $538,915,000 $158,980
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
================================================================================
<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION -- DATED MAY 5, 1998
PROSPECTUS
ATLAS AIR, INC.
OFFER TO EXCHANGE PASS THROUGH CERTIFICATES SERIES 1998-1,
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
FOR ANY AND ALL OUTSTANDING PASS THROUGH CERTIFICATES, SERIES 1998-1
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON , 1998, UNLESS EXTENDED.
Pass Through Certificates, Series 1998-1 (the "New Certificates"), which
have been registered under the Securities Act of 1933, as amended (the
"Securities Act"), pursuant to a Registration Statement of which this Prospectus
is a part, are hereby offered, upon the terms and subject to the conditions set
forth in this Prospectus and the accompanying letter of transmittal (the "Letter
of Transmittal" and, together with this Prospectus, the "Exchange Offer"), in
exchange for an equal principal amount of outstanding Pass Through Certificates,
Series 1998-1 (the "Old Certificates"), of which $538,915,000 aggregate
principal amount is outstanding as of the date hereof. The New Certificates and
the Old Certificates are collectively referred to herein as the "Certificates."
Any and all Old Certificates that are validly tendered and not withdrawn on
or prior to 5:00 P.M., New York City time, on the date the Exchange Offer
expires, which will be , 1998 (30 calendar days following the
commencement of the Exchange Offer) unless the Exchange Offer is extended (such
date, including as extended, the "Expiration Date") will be accepted for
exchange. Tenders of Old Certificates may be withdrawn at any time prior to 5:00
P.M., New York City time on the Expiration Date. The Exchange Offer is not
conditioned upon any minimum principal amount of Old Certificates being tendered
for exchange. However, the Exchange Offer is subject to certain customary
conditions which may be waived by Atlas Air, Inc. ("Atlas" or the "Company") and
to the terms of the Registration Rights Agreement (as defined herein). Old
Certificates may be tendered only in integral multiples of $1,000. See "The
Exchange Offer."
The New Certificates will be entitled to the benefits of the same
Pass-Through Trust Agreements (as defined herein) which govern the Old
Certificates and will govern the New Certificates. The form and terms of the New
Certificates are the same in all material respects as the form and terms of the
Old Certificates, except that the New Certificates do not contain terms with
respect to the interest rate step-up provisions and the New Certificates have
been registered under the Securities Act and therefore will not bear legends
restricting the transfer thereof. See "The Exchange Offer" and "Description of
New Certificates."
Each Certificate represents a fractional undivided interest in one of the
three Atlas Air 1998-1 Pass Through Trusts (the "Class A Trust", the "Class B
Trust" and the "Class C Trust", collectively, the "Trusts") formed pursuant to
three separate pass through trust agreements (the "Pass Through Trust
Agreements") between Atlas and Wilmington Trust Company (the "Trustee"), as
trustee under each Trust. Pursuant to an Intercreditor Agreement (as defined
herein), (i) the Certificates of the Class B Trust are subordinated in right of
payment to the Certificates of the Class A Trust, and (ii) the Certificates of
the Class C Trust are subordinated in right of payment to the Certificates of
the Class B Trust.
(continued on next page)
------------------------
FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY
PARTICIPANTS IN THE EXCHANGE OFFER, SEE "RISK FACTORS" BEGINNING ON PAGE 1 OF
THIS PROSPECTUS.
------------------------
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PASS THROUGH FINAL EXPECTED
CERTIFICATES PRINCIPAL AMOUNT INTEREST RATE DISTRIBUTION DATE
- ------------ ---------------- ------------- -----------------
<S> <C> <C> <C>
1998-1A $300,254,000 7.38% January 2, 2018
1998-1B 115,481,000 7.68 January 2, 2014
1998-1C 123,180,000 8.01 January 2, 2010
------------
$538,915,000
============
</TABLE>
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------
THE DATE OF THIS PROSPECTUS IS , 1998
<PAGE> 3
(continued from cover page)
The Trusts have been established for the purpose of acquiring equipment
notes (the "Equipment Notes") expected to be issued in connection with the
financing of all or a portion of the purchase price of five Boeing 747-400F
freighter aircraft (collectively, the "Aircraft"), which are currently scheduled
for delivery during the period July 1998 through December 1998, with the final
delivery for purposes of purchase by the Trusts no later than June 30, 1999 (or
later under certain circumstances) (the "Delivery Period"). See "Risk
Factors -- Risk Factors Relating to the Company and the Air Cargo
Industry -- Availability of 747-400 Aircraft Financing; Delivery Delays." The
Equipment Notes will be issued, at the Company's option, either (i) on a
non-recourse basis by the trustees of separate owner trusts (each, an "Owner
Trustee") in connection with separate leveraged lease transactions
(collectively, the "Leased Aircraft") or (ii) on a recourse basis by Atlas in
connection with separate secured loan transactions, in which case the applicable
Aircraft will be owned by Atlas (collectively, the "Owned Aircraft").
The cash proceeds of the offering of Old Certificates by each Trust were
paid to First Security Bank, N.A. ("First Security"), as escrow agent (the
"Escrow Agent"), under an Escrow and Paying Agent Agreement for the benefit of
the holders of Certificates issued by such Trust (each, an "Escrow Agreement").
The Escrow Agent has deposited such cash proceeds (each, a "Deposit") with ABN
AMRO Bank N.V., acting through its Chicago branch (the "Depositary"), in
accordance with the Deposit Agreement relating to such Trust (each, a "Deposit
Agreement"). Pursuant to each Deposit Agreement, the Depositary will pay for
distribution to the holders of Certificates issued by each Trust on each
semiannual distribution date an amount equal to interest accrued on such
Certificates during the applicable interest period at the rate per annum
applicable to such Certificates. Upon each delivery of an Aircraft, the Trustee
for the Class A Trust, the Class B Trust and the Class C Trust will cause to be
withdrawn from the Deposits relating to such Trust funds sufficient to purchase
the Equipment Note of the series applicable to such Trust issued with respect to
such Aircraft.
If an Aircraft is not delivered on the scheduled (or rescheduled) delivery
date, the portion of the Deposits relating to such Aircraft, together with
accrued interest thereon, shall be withdrawn and distributed to the
Certificateholders upon not less than 15 days' notice, unless, subject to
certain conditions, Atlas elects to extend such delivery date to a date not
later than June 30, 1999 (or later under certain circumstances). If any funds
remain as Deposits relating to any Trust at the end of the Delivery Period or,
if earlier, upon the acquisition by the Trusts of the Equipment Notes with
respect to all of the Aircraft (the "Delivery Period Termination Date"), such
funds will be withdrawn by the Escrow Agent for such Trust and distributed, with
accrued and unpaid interest thereon, to the Certificateholders (as defined
herein) of such Trust after at least 15 days' prior notice. If such remaining
Deposits with respect to all of the Trusts exceed $10 million (the "Par
Redemption Amount"), such distribution will include a premium payable by Atlas
equal to the Deposit Make-Whole Premium (as defined herein) with respect to the
remaining Deposits applicable to such Trust in excess of such Trust's
proportionate share of the Par Redemption Amount. Since the maximum principal
amount of Equipment Notes may not be issued with respect to an Aircraft and, in
any such case, the Equipment Notes to be acquired by the Class C Trust are more
likely not to be issued in the maximum principal amount as compared to the other
Equipment Notes, it is more likely that a distribution of unused Deposits will
be made with respect to the Certificates issued by the Class C Trust as compared
to the other Certificates. In addition, notwithstanding the Par Redemption
Amount limitation, if any Aircraft is not delivered by the manufacturer prior to
the Delivery Period Termination Date due to any reason not occasioned by Atlas'
fault or negligence and no Substitute Aircraft (as defined herein) is provided
in lieu of such Aircraft, no Deposit Make-Whole Premium will be paid with
respect to the unused Deposits to be distributed as a result of such failure to
deliver in an amount equal to the maximum principal amount of Equipment Notes
that could have been issued and acquired by such Trust with respect to such
Aircraft in accordance with the Mandatory Economic Terms (as defined herein) and
such unused Deposits shall not be included in the calculation of the Par
Redemption Amount.
The Equipment Notes in respect of each Aircraft will be issued in three
series (the "Series A Equipment Notes", the "Series B Equipment Notes" and the
"Series C Equipment Notes"). In addition, Atlas may elect to issue a fourth
series of Equipment Notes (the "Series D Equipment Notes") in connection with
the financing of Owned Aircraft. Series D Equipment Notes will not be purchased
by any of the Trusts and will be
ii
<PAGE> 4
funded from other sources. The Class A Trust, the Class B Trust and the Class C
Trust will purchase the series of Equipment Notes issued with respect to each
Aircraft that has an interest rate equal to the interest rate applicable to the
Certificates to be issued by such Trust. The maturity dates of the Equipment
Notes acquired by each Trust will occur on or before the final expected
distribution date applicable to the Certificates issued by such Trust. The
Equipment Notes issued with respect to each Aircraft will be secured by a
security interest in such Aircraft and, in the case of each Leased Aircraft, by
an assignment of the lease relating thereto, including the right to receive
rentals payable with respect to such Leased Aircraft by Atlas. Although neither
the Certificates nor the Equipment Notes issued with respect to the Leased
Aircraft will be direct obligations of, or guaranteed by, Atlas, the amounts
unconditionally payable by Atlas for lease of the Leased Aircraft will be
sufficient to pay in full when due all amounts required to be paid on the
Equipment Notes issued with respect to the Leased Aircraft. The Equipment Notes
issued with respect to the Owned Aircraft will be direct obligations of Atlas.
All of the Equipment Notes held in each Trust will accrue interest at the
applicable rate per annum for the Certificates issued by such Trust, payable on
January 2 and July 2 of each year (each, a "Regular Distribution Date"),
commencing on the first such date to occur after initial issuance thereof. The
Deposits relating to each Trust will accrue interest at the applicable rate per
annum for the Certificates issued by such Trust, payable on January 2 and July 2
of each year, commencing on July 2, 1998, until the Deposits have been fully
withdrawn. The scheduled payments of interest on the Equipment Notes and on the
Deposits with respect to each Trust, taken together, will be sufficient to pay
an amount equal to accrued interest on the outstanding Certificates issued by
such Trust at the rate per annum applicable thereto. Such interest will be
distributed to Certificateholders of such Trust on each such date, subject, in
the case of interest payments made pursuant to the Equipment Notes, to the
Intercreditor Agreement. See "Description of the Equipment Notes -- General" and
" -- Principal and Interest Payments."
Scheduled principal payments on the Equipment Notes held in each Trust will
be passed through to the Certificateholders of each such Trust on January 2 and
July 2 in certain years, commencing on January 2, 1999. Such payments will be
made, subject to certain adjustments, in accordance with the principal repayment
schedule set forth below under "Description of the New Certificates -- Pool
Factors," in each case subject to the Intercreditor Agreement.
On the earlier of (i) the first Business Day (as defined herein) after June
30, 1999 or, if later, the fifth Business Day after the Delivery Period
Termination Date and (ii) the fifth Business Day after the occurrence of a
Triggering Event (as defined herein) (such Business Day, the "Transfer Date"),
each of the Trusts established at the time of the original issuance of the
Certificates (the "Original Trusts") will transfer and assign all of its assets
and rights to a newly-created successor trust with substantially identical terms
(each, a "Successor Trust"). The institution acting as Trustee of each of the
Original Trusts (each, an "Original Trustee") will also act as Trustee of the
corresponding Successor Trust (each, a "New Trustee"), and each New Trustee will
assume the obligations of the related Original Trustee under each transaction
document to which such Original Trustee was a party. Upon the effectiveness of
such transfer, assignment and assumption, each of the Original Trusts will be
liquidated and each of the Certificates will represent the same percentage
interest in the Successor Trust as it represented in the Original Trust
immediately prior to such transfer, assignment and assumption. Unless the
context otherwise requires, all references in this Prospectus to the Trusts, the
Trustees, the Pass Through Trust Agreements and similar terms shall apply to the
Original Trusts until the effectiveness of such transfer, assignment and
assumption and, thereafter shall apply to the Successor Trusts.
Each Class of New Certificates will be represented by a single, permanent
global Certificate in fully registered form and will be deposited with the
Trustee as custodian for and registered in the name of a nominee of The
Depository Trust Company ("DTC"). Beneficial interests in the permanent global
Certificates will be shown on, and transfers thereof will be effected through,
records maintained by DTC and its participants.
Based on interpretations by the staff of the Securities and Exchange
Commission (the "Commission"), as set forth in no-action letters issued to third
parties, including Exxon Capital Holdings Corporation, SEC No-Action Letter
(available April 13, 1989) (the "Exxon Capital Letter"), Morgan Stanley & Co.
iii
<PAGE> 5
Incorporated, SEC No-Action Letter (available June 5, 1991) (the "Morgan Stanley
Letter") and Shearman & Sterling, SEC No-Action Letter (available July 2, 1993)
(the "Shearman & Sterling Letter") (collectively, the "Exchange Offer No-Action
Letters"), the Company believes that the New Certificates issued pursuant to the
Exchange Offer may be offered for resale, resold or otherwise transferred by
holders thereof (other than a broker-dealer who acquires such New Certificates
directly from the Trustee for resale pursuant to Rule 144A under the Securities
Act or any other available exemption under the Securities Act or any holder that
is an "affiliate" of the Company as defined under Rule 405 of the Securities
Act), without compliance with the registration and prospectus delivery
provisions of the Securities Act, provided that such New Certificates are
acquired in the ordinary course of such holders' business and such holders are
not engaged in, and do not intend to engage in, a distribution of such New
Certificates and have no arrangement with any person to participate in a
distribution of such New Certificates. By tendering the Old Certificates in
exchange for New Certificates, each holder, other than a broker-dealer, will
represent to the Company that: (i) it is not an affiliate of the Company (as
defined under Rule 405 of the Securities Act) nor a broker-dealer tendering Old
Certificates acquired directly from the Company for its own account; (ii) any
New Certificates to be received by it will be acquired in the ordinary course of
its business; and (iii) it is not engaged in, and does not intend to engage in,
a distribution of such New Certificates and has no arrangement or understanding
to participate in a distribution of the New Certificates. If a holder of Old
Certificates is engaged in or intends to engage in a distribution of the New
Certificates or has any arrangement or understanding with respect to the
distribution of the New Certificates to be acquired pursuant to the Exchange
Offer, such holder may not rely on the applicable interpretations of the staff
of the Commission and must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any secondary resale
transaction. Each broker-dealer that receives New Certificates for its own
account pursuant to the Exchange Offer (a "Participating Broker-Dealer") must
acknowledge that it will deliver a prospectus in connection with any resale of
such New Certificates. The Letter of Transmittal states that by so acknowledging
and by delivering a prospectus, a Participating Broker-Dealer will not be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act.
This Prospectus, as it may be amended or supplemented from time to time, may be
used by a Participating Broker-Dealer in connection with resales of New
Certificates received in exchange for Old Certificates where such Old
Certificates were acquired by such Participating Broker-Dealer as a result of
market-making activities or other trading activities.
The Company will not receive any proceeds from this offering. The Company
has agreed to pay the expenses of the Exchange Offer. No underwriter is being
utilized in connection with the Exchange Offer.
THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL THE COMPANY ACCEPT
SURRENDERS FOR EXCHANGE FROM, HOLDERS OF OLD CERTIFICATES IN ANY JURISDICTION IN
WHICH THE EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE
WITH THE SECURITIES AND BLUE SKY LAWS OF SUCH JURISDICTION.
Prior to this Exchange Offer, there has been no public market for the Old
Certificates or New Certificates. If such a market were to develop, the New
Certificates could trade at prices that may be higher or lower than their
principal amount. Neither Atlas nor any Trust has applied or intends to apply
for listing of the New Certificates on any national securities exchange or for
quotation of the New Certificates through the National Association of Securities
Dealers Automated Quotation System. One or more of Morgan Stanley & Co.
Incorporated, BT Alex. Brown Incorporated, Donaldson, Lufkin & Jenrette
Securities Corporation and Goldman, Sachs & Co. (collectively, the "Initial
Purchasers") have previously made a market in the Old Certificates and Atlas has
been advised that one or more of the Initial Purchasers presently intend to make
a market in the New Certificates, as permitted by applicable laws and
regulations, after consummation of the Exchange Offer. None of the Initial
Purchasers is obligated, however, to make a market in the Old Certificates or
the New Certificates and any such market making activity may be discontinued at
any time without notice at the sole discretion of each Initial Purchaser. There
can be no assurance as to the liquidity of the public market for the New
Certificates or that any active public market for the New Certificates will
develop or continue. If an active public market does not develop or continue,
the market prices and liquidity of the New Certificates may be adversely
affected. See "Risk Factors -- Absence of a Public Market for the New
Certificates."
iv
<PAGE> 6
FORWARD-LOOKING STATEMENTS
To the extent that any of the statements contained herein relating to the
Company's expectations, assumptions and other Company matters are
forward-looking, such statements are based on current expectations that involve
a number of uncertainties and risks that could cause actual results to differ
materially from those projected in the forward-looking statements, including,
but not limited to, risks associated with: worldwide business and economic
conditions; product demand and the rate of growth in the air cargo industry; the
impact of competitors and competitive aircraft and aircraft financing
availability; the ability to attract and retain new and existing customers;
normalized aircraft operating costs and reliability; management of growth; the
continued productivity of its workforce; dependence on key personnel; and
regulatory matters.
AVAILABLE INFORMATION FOR ATLAS
Atlas is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and in accordance
therewith files reports and other information with the Commission. Such reports
and other information concerning Atlas may be inspected and copied at the public
reference facilities maintained by the Commission at Judiciary Plaza, 450 Fifth
Street, N.W., Room 1228, Washington, D.C. 20549; Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661; and 7 World Trade Center,
13th Floor, New York, New York 10048. Copies of such material can be obtained
from the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. Such material may also be accessed
electronically by means of the Commission's Internet web site
(http://www.sec.gov), which contains reports, proxy and information statements
and other information regarding registrants that file electronically with the
Commission. In addition, Atlas' common stock is traded on the New York Stock
Exchange and reports, proxy statements and other information concerning Atlas
may be inspected and copied at the New York Stock Exchange, Inc., 20 Broad
Street, New York, New York 10005.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company's Annual Report on Form 10-K for the fiscal year ended December
31, 1997 is hereby incorporated in this Prospectus by reference.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Prospectus and prior to the
termination of the Exchange Offer contemplated hereby shall be deemed to be
incorporated by reference in this Prospectus and to be a part hereof from the
date of filing of such documents. Any statement contained in a document
incorporated by reference or deemed to be incorporated by reference herein shall
be deemed to be modified or superseded for all purposes of this Prospectus to
the extent that a statement contained herein or in any subsequently filed
document which also is incorporated or deemed to be incorporated by reference
herein modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
The Company undertakes to provide without charge to each person, including
any beneficial owner, to whom a copy of this Prospectus has been delivered, on
the written or oral request, a copy of any and all of the documents incorporated
in this Prospectus by reference, other than exhibits to such documents not
incorporated by reference therein. Requests for such copies should be directed
to Atlas Air, Inc., 538 Commons Drive, Golden, Colorado 80401 Attention: Chief
Financial Officer (telephone (303) 526-5050).
v
<PAGE> 7
TABLE OF CONTENTS
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PAGE
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Risk Factors................................................ 1
The Exchange Offer.......................................... 9
Selected Financial and Operating Data....................... 16
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 18
Business.................................................... 29
Management.................................................. 39
Description of the New Certificates......................... 41
Description of the Deposit Agreements....................... 53
Description of the Escrow Agreements........................ 55
Description of the Liquidity Facilities..................... 56
Description of the Intercreditor Agreement.................. 60
Description of the Aircraft and the Appraisals.............. 65
Description of the Equipment Notes.......................... 66
Legal Matters............................................... 81
Experts..................................................... 81
Index to Consolidated Financial Statements.................. F-1
</TABLE>
vi
<PAGE> 8
RISK FACTORS
Unless the context otherwise requires, references to the "Company" or
"Atlas" shall mean Atlas Air, Inc., a Delaware corporation, and its
subsidiaries. In addition, references made in this Prospectus to "747-400
aircraft" means the Boeing 747-400F freighter aircraft.
HOLDERS OF OLD CERTIFICATES SHOULD CAREFULLY REVIEW THE INFORMATION
CONTAINED ELSEWHERE IN THIS PROSPECTUS AND SHOULD PARTICULARLY CONSIDER THE
FOLLOWING MATTERS. THE RISK FACTORS SET FORTH BELOW (OTHER THAN "-- RISK FACTORS
RELATING TO THE CERTIFICATES -- CONSEQUENCES OF FAILURE TO EXCHANGE") ARE
GENERALLY APPLICABLE TO THE OLD CERTIFICATES AS WELL AS THE NEW CERTIFICATES.
RISK FACTORS RELATING TO THE COMPANY AND THE AIR CARGO INDUSTRY
Availability of 747-400 Aircraft Financing; Delivery Delays
On June 9, 1997, the Company entered into an agreement with The Boeing
Company ("Boeing") to purchase 10 new 747-400 freighter aircraft to be powered
by engines acquired from General Electric Company ("GE"), with options to
purchase up to 10 additional 747-400 aircraft (the "Boeing Purchase Agreement").
The aggregate value of the 10 747-400 aircraft, four installed engines per
aircraft and five spare engines, based on list prices, is approximately $1.7
billion. In February 1998, the Company completed an offering of $538.9 million
of enhanced equipment trust certificates that are the subject of this Exchange
Offer, the proceeds of which were deposited with the Escrow Agent to be used to
finance a portion of the acquisition cost of five of the 10 747-400 aircraft
scheduled to be delivered during the period July 1998 through December 1998.
While the Company currently anticipates that it will be able to obtain the
necessary financing on a timely basis to pay the total purchase price for the
remaining 747-400 aircraft to be acquired, there can be no assurance that the
Company will be able to obtain sufficient financing or, if such financing is
available, that it will be available on commercially reasonable terms. A recent
decision of the United States District Court for the District of Colorado (in
which state the Company's headquarters are located) raises questions concerning
the ability of lenders and lessors under certain types of aircraft equipment
financing arrangements to exercise special remedies under bankruptcy law against
a bankrupt air carrier, which decision if not reversed or modified could
increase the cost of the Company's future aircraft financing arrangements. If it
is unable to obtain sufficient financing, the Company could be required to
modify its expansion plans, incur higher than anticipated financing costs or
incur various penalty payments under the Boeing Purchase Agreement, which could
have a material adverse effect on the Company. Due to production problems at
Boeing, the Company believes that the 1998 delivery positions of the 747-400
aircraft as originally reflected in the Boeing Purchase Agreement may be delayed
up to 60 days. While Boeing has agreed to compensate the Company for delays in
delivery of the 747-400 aircraft pursuant to the Boeing Purchase Agreement, any
such delays could adversely impact the Company's ability to initiate service
with prospective customers in a timely fashion.
Competition
The market for air cargo services is highly competitive. A number of
airlines currently provide services for themselves and for others, similar to
the services offered by the Company, and new airlines may be formed that would
also compete with the Company. Such airlines may have substantially greater
financial resources than the Company. The Company believes that the most
important bases for competition in the air cargo business are the range, payload
and cubic capacities of the aircraft and the price, flexibility, quality and
reliability of the cargo transportation service. The Company provides reliable
airport-to-airport cargo transportation services throughout the world to major
international air carriers generally under three- to five-year fixed-rate U.S.
dollar denominated contracts which typically require that the Company supply
aircraft, crew, maintenance and insurance (the "ACMI Contracts"). The ability of
the Company to achieve its strategic plan depends upon its success in convincing
major international airlines that outsourcing some portion of their air cargo
business remains more cost-effective than undertaking cargo operations with
their own incremental capacity and resources and the ability of the Company to
obtain higher ACMI Contract rates in connection with the 747-400 aircraft
compared to those currently obtained in connection with existing 747-200
aircraft.
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Dependence on Significant Customers; Geographic Concentration
In 1997, China Airlines Ltd. ("China Airlines"), Fast Air Carrier, S.A.
("Fast Air") and Lufthansa Cargo AG ("Lufthansa") accounted for approximately
34%, 11% and 8%, respectively, of the Company's total operating revenues. The
Company believes that its relationships with its customers are mutually
satisfactory, as evidenced by the fact that in the last three years it has
renewed twelve ACMI Contracts with customers including China Airlines and KLM
Royal Dutch Airlines ("KLM"), and entered into nine new ACMI Contracts with its
existing customers. However, there can be no assurance that any of these
agreements will be renewed upon their expiration. The scheduled termination
dates for the current ACMI Contracts range from 1998 to 2002. See
"Business -- ACMI Contracts." The failure to renew any of these agreements, or
the renewal of any of these agreements on terms less favorable to the Company,
could have a material adverse effect on the Company. Additionally, the Company
has concentrated a significant percentage of its resources in routes between the
United States and Asia and the Pacific Rim and between Europe and Asia and the
Pacific Rim. Any economic decline or any military or political disturbance in
these areas of the world might prevent or interfere with the Company's ability
to provide service to its Asian and Pacific Rim destinations and could have a
material adverse effect on the Company. The Company has not experienced any
adverse impact on its business resulting from the current turmoil in the Asian
financial markets; however, there can be no assurance that continuation of the
turmoil in the Asian financial markets could not have an adverse impact on air
cargo market growth generally, which could adversely affect the Company's
ability to obtain new ACMI Contracts or to renew existing ACMI Contracts.
Operations Dependent upon Limited Fleet
The Boeing 747-200 aircraft in the existing fleet are typically dedicated
by the Company to the service of one or more ACMI Contracts. Although the
Company typically utilizes spare aircraft, in the event one or more of the
Company's aircraft were to be lost or out of service for an extended period of
time, the Company may have difficulty fulfilling its obligations under one or
more of its ACMI Contracts. While the Company believes that its insurance
coverage is sufficient to cover the replacement cost of an aircraft, there can
be no assurance that suitable replacement aircraft could be located or that, if
located, the Company could contract for the services of such an aircraft without
undertaking substantial costs therefor. While the Company carries aircraft hull
physical damage and third party liability insurance, any extended interruption
of the Company's operations due to the loss of an aircraft could have a material
adverse effect on the Company.
Utilization of Future Aircraft
The Company has not yet obtained an ACMI Contract to be serviced by the one
Boeing 747-200 aircraft owned but not yet fully modified from passenger to
freighter configuration or for the 747-400 aircraft scheduled to be delivered
commencing in July 1998. See "-- Availability of 747-400 Aircraft Financing;
Delivery Delays." Although the Company intends to have new ACMI Contracts in
place for the aircraft not yet converted from passenger to freighter
configuration by the time it is placed in service, to the extent arrangements
for such a contract have not been made at such time, the Company would seek
other revenue opportunities for such aircraft which it believes are generally
available, although there can be no assurance that such opportunities will be
available at such time. The failure to generate adequate revenue from new
aircraft pending the entering into of ACMI Contracts, or the failure to secure
ACMI Contracts for such aircraft as well as the aircraft currently in service in
the Company's fleet, could have a material adverse effect on the Company. See
"Business -- Aircraft."
Aging Aircraft
The Company's fleet currently consists of 18 Boeing 747-200 aircraft and
one passenger aircraft currently undergoing conversion to freighter
configuration, all of which were manufactured between 1974 and 1986.
Manufacturer Service Bulletins ("Service Bulletins") and the Federal Aviation
Administration's ("FAA") Airworthiness Directives ("Directives") issued under
its "Aging Aircraft" program cause Boeing 747-200 aircraft operators to be
subject to extensive aircraft examinations and require Boeing 747-200 aircraft
to undergo structural inspections and modifications to address problems of
corrosion and structural fatigue at specified times. For instance, in November
1994, Boeing issued Nacelle Strut Modification Service Bulletins
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which have been converted into Directives by the FAA. Eleven of the Company's
Boeing 747-200 aircraft will have to be brought into compliance with such
Directives within the next three years at an estimated aggregate cost of
approximately $5.5 million. Other Directives have been issued that require
inspections and minor modifications to Boeing 747-200 aircraft. It is possible
that additional Service Bulletins or Directives applicable to the types of
aircraft or engines included in the Company's fleet could be issued in the
future. The cost of compliance with Directives and of following Service
Bulletins cannot currently be estimated, but could be substantial.
Employee Relations
The Company believes it operates with lower incremental personnel costs
than many established international airlines and cargo carriers, principally due
to the flexibility and high productivity of its workforce, arising in part as a
result of the Company's emphasis on providing financial incentives to its
personnel that are focused on the Company's financial performance rather than on
base wages. The Company's employees are not currently subject to a collective
bargaining agreement; however, many airline industry employees are subject to
such agreements and the Company's employees have been solicited from time to
time by union representatives seeking to organize them, the most recent
solicitation having resulted in the Atlas pilots rejecting representation by the
Air Line Pilots Association ("ALPA") on January 27, 1998. There can be no
assurance that the Company's employees will not become subject to a collective
bargaining agreement and the extent to which, if any, such collective bargaining
agreement may adversely impact the Company's operations or cost structure.
Regulatory Matters
Under the Federal Aviation Act of 1958, as amended and recodified (the
"Aviation Act"), the Department of Transportation ("DOT") and the FAA exercise
regulatory authority over the Company. The Company has obtained the necessary
authority to conduct flight operations, including a Certificate of Public
Convenience and Necessity from the DOT and an Air Carrier Operating Certificate
from the FAA; however, the continuation of such authority is subject to
continued compliance by the Company with applicable statutes, rules and
regulations pertaining to the airline industry, including any new rules and
regulations that may be adopted in the future. All air carriers are subject to
the strict scrutiny and inspection by FAA officials and to the imposition of new
regulatory requirements that can negatively affect their operations. DOT and FAA
approval is required for each of the Company's long-term ACMI Contracts. In
addition, FAA approval is required for each of the Company's short-term seasonal
ACMI Contracts. In order to provide service to foreign points, the Company must
also obtain permission for such operations from the applicable foreign
governments and certain airport authorities. See "Business -- Governmental
Regulation." In addition, DOT regulates the transportation of hazardous
materials by air cargo carriers. Although customers are required to label
shipments that contain hazardous materials, customers may not inform the Company
when their cargo includes hazardous materials. Although the Company has never
had such an incident, the transportation of unmanifested hazardous materials
could result in fines, penalties, banning hazardous materials from Company
aircraft for a period of time, possible damage to the Company's aircraft or
other liability.
Control by Principal Stockholder
Michael A. Chowdry, the founder, Chief Executive Officer, President and
Chairman of the Board of Directors of the Company, beneficially owns
approximately 59.1% of the outstanding common stock of the Company. As a result,
Mr. Chowdry will be able to direct and control the policies of the Company,
including the election of directors, and mergers, sales of assets and other such
transactions.
Dependence upon Key Management Personnel
The Company believes that its success in acquiring ACMI Contracts and
managing its operations will depend substantially upon the continued services of
certain of the present executive officers of the Company. The loss of the
services of any of such persons could have a material adverse effect on the
Company. The Company has employment agreements with such officers, which are
generally terminable at any time by either party.
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Seasonality of Customers' Cargo Operations
The cargo operations of the Company's airline customers are seasonal in
nature, with peak activity traditionally in the second half of the year, and
with a significant decline occurring in the first quarter. As a result, the
Company's revenues typically decline in the first quarter of the year as its
minimum contractual aircraft utilization level temporarily decreases. The
Company's ACMI Contracts typically allow the Company's customers to cancel a
maximum of 5% of the guaranteed hours of aircraft utilization over the course of
a year. The Company's customers most often exercise such cancellation options
early in the first quarter of the year, when the demand for air cargo capacity
has been historically low or following the seasonal holiday peak in the latter
part of the fourth quarter. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
RISK FACTORS RELATING TO THE CERTIFICATES AND THE OFFERING
Consequences of Failure to Exchange
Holders of Old Certificates who do not exchange their Old Certificates for
New Certificates pursuant to the Exchange Offer will continue to be subject to
the restrictions on transfer of such Old Certificates as set forth in the legend
thereon as a consequence of the issuance of the Old Certificates pursuant to
exemptions from, or in transactions not subject to, the registration
requirements of the Securities Act and applicable state securities laws. In
general, the Old Certificates may not be offered or sold, unless registered
under the Securities Act, except pursuant to an exemption from, or in a
transaction not subject to, the Securities Act and applicable state securities
laws. The Company does not currently anticipate that it will register the Old
Certificates under the Securities Act. To the extent that Old Certificates are
tendered and accepted in the Exchange Offer, the trading market for untendered
and tendered but unaccepted Old Certificates could be adversely affected.
Appraisals and Realizable Value of Aircraft
Appraisals in respect of the Aircraft (without physical inspection thereof)
have been prepared by Aircraft Information Services, Inc. ("AISI"), Aviation
Solutions, Inc. ("AvS") and Morton Beyer & Agnew ("MBA", and together with AISI
and AvS referred to as the "Appraisers"). According to the appraisals of the
three firms, the Aircraft had an aggregate appraised value of $863,180,000,
$769,890,000 and $790,395,000, respectively, dated as of January 23, 1998,
December 5, 1997, and January 14, 1998, respectively. See "Description of the
Aircraft and the Appraisals." The appraised value of each Aircraft and,
accordingly, the initial aggregate Aircraft value as referred to herein, is
based upon the lesser of the average and median value of such Aircraft as
appraised by the Appraisers and projected as of the scheduled delivery month of
such Aircraft. Such aggregate appraised values also assume depreciation of
approximately 2% of the initial appraised value for Aircraft delivered more than
one year prior to the scheduled Delivery Period Termination Date (although no
assurance can be given as to the actual market value rate of depreciation, which
may differ from 2% during such period). Appraisals that are based on different
assumptions and methodologies may result in valuations that are materially
different from those contained in the appraisals of the Appraisers. However, an
appraisal is only an estimate of value and should not be relied upon as a
measure of realizable value; the proceeds realized upon a sale of any Aircraft
may be less than the appraised value thereof. The value of the Aircraft in the
event of the exercise of remedies under the applicable Indenture will depend on
market and economic conditions, the availability of buyers, the condition of the
Aircraft and other factors. Accordingly, there can be no assurance that the
proceeds realized upon any such exercise with respect to the Equipment Notes and
the Aircraft pursuant to the applicable Pass Through Trust Agreement and the
applicable Indenture would be sufficient to satisfy in full payments due on the
Certificates.
Priority of Distributions; Subordination
Certain provisions of the Intercreditor Agreement, which provides for the
subordination of the Class B Certificates to the Class A Certificates and the
subordination of the Class C Certificates to the Class B Certificates, and if
Class D Certificates have been issued, the subordination of the Class D
Certificates to the Class C Certificates, may result in the holders of the
subordinated Classes of Certificates receiving less than
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<PAGE> 12
the full amount due to them after the occurrence of a payment default under any
Equipment Note or a Triggering Event, even if all of the Equipment Notes
eventually are paid in full.
Pursuant to the Intercreditor Agreement to which the Trustees, the
Subordination Agent (as defined herein) and the Liquidity Providers (as defined
herein) are parties, on each Distribution Date, so long as no Triggering Event
shall have occurred, all payments in respect of Equipment Notes received by the
Subordination Agent will be distributed in the following order: (1) to the
Liquidity Providers to the extent required to pay certain Liquidity Obligations;
(2) to the Class A Trustee to the extent required to pay Expected Distributions
on the Class A Certificates; (3) to the Class B Trustee to the extent required
to pay Expected Distributions on the Class B Certificates; (4) to the Class C
Trustee to the extent required to pay Expected Distributions on the Class C
Certificates; (5) if Class D Certificates have been issued, to the Class D
Trustee to the extent required to pay "Expected Distributions" (to be defined in
a manner equivalent to the definition for other Classes of Certificates) on the
Class D Certificates; and (6) to the Subordination Agent and each Trustee for
the payment of certain fees and expenses.
Upon the occurrence of a Triggering Event and at all times thereafter, all
payments received by the Subordination Agent in respect of the Equipment Notes
and certain other payments will be distributed under the Intercreditor Agreement
in the following order: (1) to the Subordination Agent, each Trustee and certain
other parties in payment of the Administration Expenses and to the Liquidity
Providers in payment of the Liquidity Obligations; (2) to the Subordination
Agent, each Trustee and each Certificateholder for certain fees, taxes, charges
and other amounts payable to the Subordination Agent, any Trustee or any
Certificateholder, (3) to the Class A Trustee to the extent required to pay
Adjusted Expected Distributions on the Class A Certificates; (4) to the Class B
Trustee to the extent required to pay Adjusted Expected Distributions on the
Class B Certificates; (5) to the Class C Trustee to the extent required to pay
Adjusted Expected Distributions on the Class C Certificates; and (6) if Class D
Certificates have been issued, to the Class D Trustee to the extent required to
pay "Adjusted Expected Distributions" (to be defined in a manner equivalent to
the definition for other Classes of Certificates) on the Class D Certificates.
Accordingly, the priority of distributions after a payment default under
any Equipment Note or a Triggering Event will have the effect in certain
circumstances of requiring the distribution to more senior Classes of
Certificates of payments received in respect of one or more junior series of
Equipment Notes. If this should occur, the interest accruing on the remaining
Equipment Notes would in the aggregate be less than the interest accruing on the
remaining New Certificates because such New Certificates include a relatively
greater proportion of junior Classes with relatively higher interest rates. As a
result of this possible interest shortfall, the holders of one or more junior
Classes of New Certificates may not receive the full amount due to them after a
payment default under any Equipment Note even if all Equipment Notes are
eventually paid in full.
Payments in respect of the Deposits are not subject to the subordination
provisions of the Intercreditor Agreement.
Control over Collateral; Sale of Collateral
Pursuant to the Intercreditor Agreement, the Trustees and the Liquidity
Providers have agreed that, with respect to any Indenture at any given time, the
Loan Trustee (as defined herein) will be directed (a) in taking, or refraining
from taking, any action thereunder, by the holders of at least a majority of the
outstanding principal amount of the Equipment Notes issued thereunder as long as
no Indenture Default (as defined herein) has occurred and is continuing
thereunder and (b) subject to certain conditions, in exercising remedies under
such Indenture (including acceleration of such Equipment Notes or foreclosing
the lien on the Aircraft securing such Equipment Notes) insofar as an Indenture
Default has occurred and is continuing under such Indenture, by the Controlling
Party (as defined herein). See "Description of the New Certificates -- Indenture
Defaults and Certain Rights Upon an Indenture Default" for a description of the
rights of the Certificateholders of each Trust to direct the respective Trustee.
Notwithstanding the foregoing, at any time after 18 months from the earlier to
occur of (x) the date on which the entire available amount under any Liquidity
Facility (as defined herein) shall have been drawn (for any reason other than a
Downgrade Drawing (as defined herein) or a Non-Extension Drawing (as defined
herein)) and remain unreimbursed and (y) the date on which all Equipment Notes
shall have been accelerated, the Liquidity
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Providers with at least a majority of the unreimbursed Liquidity Obligations
will have the right to elect to become the Controlling Party with respect to
such Indenture. For purposes of giving effect to the foregoing, the Trustees
(other than the Controlling Party) shall irrevocably agree, and the
Certificateholders (other than the Certificateholders represented by the
Controlling Party) shall be deemed to agree by virtue of their purchase of
Certificates, to exercise their voting rights as directed by the Controlling
Party. For a description of certain limitations on the Controlling Party's
rights to exercise remedies, see "Description of the Equipment
Notes -- Remedies."
Upon the occurrence and during the continuation of any Indenture Default
under any Indenture, the Controlling Party may accelerate and, subject to the
provisions described in the last sentence of this paragraph, sell all (but not
less than all) of the Equipment Notes issued under such Indenture to any person.
The market for Equipment Notes at the time of the existence of any Indenture
Default may be very limited, and there can be no assurance as to the price at
which they could be sold. If the Controlling Party sells any such Equipment
Notes for less than their outstanding principal amount, certain
Certificateholders will receive a smaller amount of principal distributions than
anticipated and will not have any claim for the shortfall against Atlas, any
Owner Trustee (as defined herein), any Owner Participant (as defined herein) or
any Trustee. So long as any Certificates are outstanding, during nine months
after the earlier of (x) the acceleration of the Equipment Notes under any
Indenture and (y) the bankruptcy or insolvency of Atlas, without the consent of
each Trustee, (a) no Aircraft subject to the lien of such Indenture or such
Equipment Notes may be sold, if the net proceeds from such sale would be less
than the Minimum Sale Price (as defined herein) for such Aircraft or such
Equipment Notes, and (b) with respect to each Aircraft, the amount and payment
dates of rentals payable by Atlas under the Lease for such Aircraft may not be
adjusted, if, as a result of such adjustment, the discounted present value of
all such rentals would be less than 75% of the discounted present value of the
rentals payable by Atlas under such Lease before giving effect to such
adjustment, in each case, using the weighted average interest rate of the
Equipment Notes issued under such Indenture as the discount rate.
The Equipment Notes will not be cross-collateralized (except in certain
cases, if any, where the related Owner Participant and Atlas shall agree to
cross-collateralization) and, consequently, proceeds from the sale of an
Aircraft in excess of the amounts due on Equipment Notes related to such
Aircraft will not be available to cover losses, if any, on any other Equipment
Notes.
Owner Participant; Revisions to Agreements
Atlas plans to seek commitments of one or more companies to act as the
Owner Participant with respect to leveraged leases for the Aircraft. Atlas may
select one or more Owner Participants for some or all of the Aircraft or finance
such Aircraft as Owned Aircraft rather than Leased Aircraft. Such Owner
Participants may request revisions to the forms of the Participation Agreement
(as defined herein), the Lease and the Leased Aircraft Indenture (as defined
herein) that are contemplated by the Note Purchase Agreement (as defined
herein), so that the terms of such agreements applicable to any particular
Leased Aircraft may differ from the description of such agreements contained in
this Prospectus. However, under the Note Purchase Agreement, the terms of such
agreements are required to (i) contain the Mandatory Document Terms and (ii) not
vary the Mandatory Economic Terms. In addition, Atlas is obligated (i) to
certify to the Trustee that any such modifications do not materially and
adversely affect the Certificateholders and (ii) to obtain written confirmation
from each Rating Agency (as defined herein) that the use of versions of such
agreements modified in any material respect will not result in a withdrawal,
suspension or downgrading of the rating of any Class of Certificates. See
"Description of the New Certificates -- Obligation to Purchase Equipment Notes."
Each Owner Participant will have the right to sell, assign or otherwise
transfer its interests as Owner Participant in any of such leveraged leases,
subject to the terms and conditions of the relevant Participation Agreement and
related documents.
Ratings of the Certificates
It was a condition to the issuance of the Old Certificates that the Class A
Certificates be rated A3 by Moody's Investors Services, Inc. ("Moody's"), AA- by
Standard & Poor's Rating Services, a division of the McGraw-Hill Companies, Inc.
("Standard & Poor's"), and AA- by Fitch IBCA, Inc. ("Fitch") (each of
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<PAGE> 14
Moody's, Standard & Poor's and Fitch being referred to herein as a "Rating
Agency"), the Class B Certificates be rated Baa3 by Moody's, A- by Standard &
Poor's and A- by Fitch and the Class C Certificates be rated Ba3 by Moody's,
BBB- by Standard & Poor's and BBB- by Fitch. A rating is not a recommendation to
purchase, hold or sell Certificates, inasmuch as such rating does not address
market price or suitability for a particular investor. There is no assurance
that a rating will remain for any given period of time or that a rating will not
be lowered or withdrawn entirely by a Rating Agency if in its judgment
circumstances in the future (including the downgrading of Atlas, the Depositary
or a Liquidity Provider) so warrant. The rating of the Certificates is based
primarily on the default risk of the Equipment Notes and the Depositary, the
availability of the Liquidity Facility for the benefit of holders of the
Certificates, the collateral value provided by the Aircraft relating to the
Equipment Notes and the subordination in right of payment under the
Intercreditor Agreement of the Class B Certificates to the Class A Certificates
and of the Class C Certificates to the Class B Certificates. Standard & Poor's
has indicated that its rating applies to a unit consisting of Certificates
representing the property of a Trust (the "Trust Property") and escrow receipts
initially representing undivided interests in certain rights to $538,915,000 of
Deposits (the "Escrow Receipts"). Amounts deposited under the Escrow Agreements
are not property of Atlas and are not entitled to the benefits of Section 1110
of the U.S. Bankruptcy Code. Neither the Certificates nor the Escrow Receipts
may be separately assigned or transferred.
Atlas' ability to pay any premium due upon distribution of Deposits not
used to acquire Equipment Notes during the Delivery Period has not been rated by
either of the Rating Agencies.
Unused Deposits
The Trustees' obligations to purchase the Equipment Notes issued with
respect to each Aircraft are subject to satisfaction of certain conditions at
the time of delivery, as set forth in the Note Purchase Agreement. See
"Description of the New Certificates -- Obligation to Purchase Equipment Notes".
Since the Aircraft are scheduled for delivery from time to time during the
Delivery Period, no assurance can be given that all such conditions will be
satisfied at the time of delivery for each Aircraft. Moreover, since the
Aircraft will be newly manufactured, their delivery as scheduled is subject to
delays in the manufacturing process and to Boeing's right to postpone deliveries
under its agreement with Atlas. Boeing has recently announced that it is
experiencing delays in deliveries of Aircraft, and the current delivery schedule
for the Aircraft described in this Prospectus reflects adjustments made by
Boeing as a result of such delays. See "Description of the Aircraft and
Appraisals -- Deliveries of Aircraft." Atlas cannot predict whether further
adjustments in such schedule will be required. Depending on the circumstances of
the financing of each Aircraft, the maximum aggregate principal amount of
Equipment Notes may not be issued. In addition, Atlas' obligations under the
predelivery deposit facility are secured by Atlas' purchase agreement with
Boeing relating to the Aircraft. Accordingly, if Atlas should breach its
obligations secured thereby, the secured parties could exercise remedies and
prevent delivery of Aircraft to Atlas. If any funds remain as Deposits with
respect to any Trust at the Delivery Period Termination Date, they will be
withdrawn by the Escrow Agent for such Trust and distributed, with accrued and
unpaid interest thereon, to the Certificateholders of such Trust. In addition,
if such remaining Deposits with respect to all of the Trusts exceed the Par
Redemption Amount, such distribution will include a premium payable by Atlas
equal to the Deposit Make-Whole Premium with respect to the remaining Deposits
related to such Trust in excess of such Trust's proportionate share of the Par
Redemption Amount. Since the maximum principal amount of Equipment Notes may not
be issued with respect to an Aircraft and, in any such case, the Series C
Equipment Notes are more likely not to be issued in the maximum principal amount
as compared to the other Equipment Notes, it is more likely that a distribution
of unused Deposits will be made with respect to the Class C Certificates as
compared to the other Certificates. In addition, notwithstanding the Par
Redemption Amount limitation, if any Aircraft is not delivered by the
manufacturer prior to the Delivery Period Termination Date due to any reason not
occasioned by Atlas' fault or negligence and no Substitute Aircraft is provided
in lieu of such Aircraft, no Deposit Make-Whole Premium will be paid with
respect to the unused Deposits to be distributed as a result of such failure to
deliver in an amount equal to the maximum principal amount of Equipment Notes
that could have been issued and acquired by such Trust with respect to such
Aircraft in accordance with the Mandatory Economic
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Terms and such unused Deposits shall not be included in the calculation of the
Par Redemption Amount. See "Description of the Deposit Agreements -- Unused
Deposits; Prepayment of Deposits."
Absence of a Public Market for the Certificates
Prior to the Exchange Offer, there has been no public market for the
Certificates and neither Atlas nor any Trust has applied or intends to apply for
listing of the Certificates on any securities exchange or for quotation of the
Certificates on the National Association of Security Dealers Automated Quotation
System or otherwise. Atlas has been advised by the Initial Purchasers that each
of them have made a market in the Old Certificates and intends to make a market
in the New Certificates, as permitted by applicable laws and regulations, after
consummation of the Exchange Offer. None of the Initial Purchasers are
obligated, however, to make a market in the Old Certificates or the New
Certificates and any such market-making activity may be discontinued at any time
without notice at the sole discretion of each Initial Purchaser. There can be no
assurance as to the liquidity of the public market for the New Certificates or
that any active public market for the New Certificates will develop or continue.
If an active public market does not develop or continue, the market price and
liquidity of the New Certificates may be adversely affected.
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THE EXCHANGE OFFER
The summary herein of certain provisions of the Registration Rights
Agreement does not purport to be complete and reference is made to the
provisions of the Registration Rights Agreement, which has been filed as an
exhibit to the Registration Statement and a copy of which is available as set
forth under the heading "Available Information."
TERMS OF THE EXCHANGE OFFER
General
In connection with the issuance of the Old Certificates pursuant to a
purchase agreement dated as of January 26, 1998, between the Company and the
Initial Purchasers (the "Purchase Agreement"), the Initial Purchasers and their
respective assignees became entitled to the benefits of the Registration Rights
Agreement.
Under the Registration Rights Agreement, the Company is obligated to use
its best efforts (i) to file the Registration Statement of which this Prospectus
is a part for a registered exchange offer with respect to an issue of new
certificates identical in all material respects to the Old Certificates (except
that the New Certificates would not contain terms with respect to transfer
restrictions or interest rate increases) within 120 calendar days after February
9, 1998, the date the Old Certificates were issued (the "Issue Date") and (ii)
to cause the Registration Statement to become effective within 60 days after
filing of the Registration Statement. The Company will keep the Exchange Offer
open for a period of not less than 30 calendar days after the date notice of the
Exchange Offer is mailed to the holders of the Certificates. The Exchange Offer
being made hereby, if commenced and consummated within the time periods
described in this paragraph, will satisfy those requirements under the
Registration Rights Agreement.
Upon the terms and subject to the conditions set forth in this Prospectus
and in the Letter of Transmittal (which together constitute the Exchange Offer),
all Old Certificates validly tendered and not withdrawn prior to 5:00 p.m., New
York City time, on the Expiration Date will be accepted for exchange. New
Certificates of the same class will be issued in exchange for an equal principal
amount of outstanding Old Certificates accepted in the Exchange Offer. Old
Certificates may be tendered only in integral multiples of $1000. This
Prospectus, together with the Letter of Transmittal, is being sent to all
registered holders as of , 1998. The Exchange Offer is not
conditioned upon any minimum principal amount of Old Certificates being tendered
for exchange. However, the obligation to accept Old Certificates for exchange
pursuant to the Exchange Offer is subject to certain conditions as set forth
herein under "-- Conditions."
Old Certificates shall be deemed to have been accepted as validly tendered
when, as and if the Trustee has given oral or written notice thereof to the
Exchange Agent (as defined herein). The Exchange Agent will act as agent for the
tendering holders of Old Certificates for the purposes of receiving the New
Certificates and delivering New Certificates to such holders.
Based on interpretations by the staff of the Commission, as set forth in
no-action letters issued to third parties, including the Exchange Offer
No-Action Letters, the Company believes that the New Certificates issued
pursuant to the Exchange Offer may be offered for resale, resold or otherwise
transferred by holders thereof (other than a broker-dealer who acquires such New
Certificates directly from the Trustee for resale pursuant to Rule 144A under
the Securities Act or any other available exemption under the Securities Act or
any holder that is an "affiliate" of the Company as defined under Rule 405 of
the Securities Act), without compliance with the registration and prospectus
delivery provisions of the Securities Act, provided that such New Certificates
are acquired in the ordinary course of such holders' business and such holders
are not engaged in, and do not intend to engage in, a distribution of such New
Certificates and have no arrangement with any person to participate in a
distribution of such New Certificates. By tendering the Old Certificates in
exchange for New Certificates, each holder, other than a broker-dealer, will
represent to the Company that: (i) it is not an affiliate of the Company (as
defined under Rule 405 of the Securities Act) nor a broker-dealer tendering Old
Certificates acquired directly from the Company for its own account; (ii) any
New Certificates to be received by it will be acquired in the ordinary course of
its business; and (iii) it is not engaged in, and does not intend to engage in,
a distribution of such New Certificates and has no arrangement or understanding
to participate in a distribution of the New Certificates. If a holder of Old
Certificates is engaged in or intends
9
<PAGE> 17
to engage in a distribution of the New Certificates or has any arrangement or
understanding with respect to the distribution of the New Certificates to be
acquired pursuant to the Exchange Offer, such holder may not rely on the
applicable interpretations of the staff of the Commission and must comply with
the registration and prospectus delivery requirements of the Securities Act in
connection with any secondary resale transaction. Each Participating
Broker-Dealer that receives New Certificates for its own account pursuant to the
Exchange Offer must acknowledge that it will deliver a prospectus in connection
with any resale of such New Certificates. The Letter of Transmittal states that
by so acknowledging and by delivering a prospectus, a Participating
Broker-Dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a Participating Broker-Dealer in
connection with resales of New Certificates received in exchange for Old
Certificates where such Old Certificates were acquired by such Participating
Broker-Dealer as a result of market-making activities or other trading
activities.
In the event that any changes in law or the applicable interpretations of
the staff of the Commission do not permit Atlas to effect the Exchange Offer, if
the Registration Statement is not declared effective within 60 calendar days
after the filing thereof with the Commission under certain circumstances or the
Exchange Offer is not consummated within 30 days after the effectiveness of the
Registration Statement under certain other circumstances, at the request of a
holder not eligible to participate in the Exchange Offer or under certain other
circumstances described in the Registration Rights Agreement, Atlas will, in
lieu of effecting the registration of the New Certificates pursuant to the
Registration Statement and at no cost to the holders of Old Certificates, (a) as
promptly as practicable, file with the Commission a shelf registration statement
(the "Shelf Registration Statement") covering resales of the Old Certificates,
(b) use its best efforts to cause the Shelf Registration Statement to be
declared effective under the Securities Act by the 180th calendar day after the
Issue Date and (c) use its best efforts to keep effective the Shelf Registration
Statement for a period of two years after its effective date (or for such
shorter period as shall end when all of the Old Certificates covered by the
Shelf Registration Statement have been sold pursuant thereto or may be freely
sold pursuant to Rule 144 under the Securities Act).
In the event that neither the consummation of the Exchange Offer nor the
declaration by the Commission of the Shelf Registration Statement to be
effective (each a "Registration Event") occurs on or prior to the 180th calendar
day following the Issue Date, the interest rate per annum borne by the Equipment
Notes and passed through to holders of Old Certificates shall be increased by
0.50% effective from and including August 9, 1998, to but excluding the date on
which a Registration Event occurs. In the event that the Shelf Registration
Statement ceases to be effective at any time, during the period the Company is
required to keep such Shelf Registration Statement effective, for more than 60
days, whether or not consecutive, during any 12-month period, the interest rate
per annum borne by the Equipment Notes shall be increased by 0.50% from the 61st
day of the applicable 12-month period such Shelf Registration Statement ceases
to be effective until such time as the Shelf Registration Statement again
becomes effective.
Upon consummation of the Exchange Offer, subject to certain exceptions,
holders of Old Certificates who do not exchange their Old Certificates for New
Certificates in the Exchange Offer will no longer be entitled to registration
rights and will not be able to offer or sell their Old Certificates, unless such
Old Certificates are subsequently registered under the Securities Act (which,
subject to certain limited exceptions, the Company will have no obligation to
do), except pursuant to an exemption from, or in a transaction not subject to,
the Securities Act and applicable state securities laws. See "Risk
Factors -- Risk Factors Relating to the Certificates -- Consequences of Failure
to Exchange."
Expiration Date; Extensions; Amendments; Termination
The term "Expiration Date" shall mean , 1998 (30 calendar days
following the commencement of the Exchange Offer), unless the Company, in its
sole discretion, extends the Exchange Offer, in which case the term "Expiration
Date" shall mean the latest date to which the Exchange Offer is extended.
Notwithstanding any extension of the Exchange Offer, if the Exchange Offer is
not consummated by August 9, 1998, the interest rate borne by the Equipment
Notes and passed through to the Certificateholders is subject to increase. See
"-- General."
10
<PAGE> 18
In order to extend the Expiration Date, the Company will notify the
Exchange Agent of any extension by oral or written notice and will mail to the
record holders of Old Certificates an announcement thereof, each prior to 9:00
a.m., New York City time, on the next business day after the previously
scheduled Expiration Date. Such announcement may state that the Company is
extending the Exchange Offer for a specified period of time.
The Company reserves the right (i) to delay acceptance of any Old
Certificates, to extend the Exchange Offer or to terminate the Exchange Offer
and not permit acceptance of Old Certificates not previously accepted if any of
the conditions set forth herein under "-- Conditions" shall have occurred and
shall not have been waived by the Company, by giving oral or written notice of
such delay, extension or termination to the Exchange Agent, or (ii) to amend the
terms of the Exchange Offer in any manner deemed by it to be advantageous to the
holders of the Old Certificates. Any such delay in acceptance, extension,
termination or amendment will be followed as promptly as practicable by oral or
written notice thereof to the Exchange Agent. If the Exchange Offer is amended
in a manner determined by the Company to constitute a material change, the
Company will promptly disclose such amendment in a manner reasonably calculated
to inform the holders of the Old Certificates of such amendment.
Without limiting the manner in which the Company may choose to make public
announcement of any delay, extension, amendment or termination of the Exchange
Offer, the Company shall have no obligation to publish, advertise, or otherwise
communicate any such public announcement, other than by making a timely release
to an appropriate news agency.
INTEREST ON THE NEW CERTIFICATES
The New Certificates will accrue interest at the applicable per annum rate
for such Trust set forth on the cover page of this Prospectus, from the last
date on which interest was paid on the Old Certificates surrendered in exchange
therefor. Interest on the New Certificates is payable on January 2 and July 2 of
each year commencing upon the consummation of the Exchange Offer, subject to the
terms of the Intercreditor Agreement.
PROCEDURES FOR TENDERING
To tender in the Exchange Offer, a holder must complete, sign and date the
Letter of Transmittal, or a facsimile thereof, have the signatures thereon
guaranteed if required by the Letter of Transmittal and mail or otherwise
deliver such Letter of Transmittal or such facsimile, together with any other
required documents, to the Exchange Agent prior to 5:00 p.m., New York City
time, on the Expiration Date. In addition, either (i) certificates for such Old
Certificates must be received by the Exchange Agent along with the Letter of
Transmittal, (ii) a timely confirmation of a book-entry transfer (a "Book-Entry
Confirmation") of such Old Certificates, if such procedure is available, into
the Exchange Agent's account at The Depository Trust Company (the "Book-Entry
Transfer Facility") pursuant to the procedure for book-entry transfer described
below, must be received by the Exchange Agent prior to the Expiration Date or
(iii) the holder must comply with the guaranteed delivery procedures described
below. THE METHOD OF DELIVERY OF OLD CERTIFICATES, LETTERS OF TRANSMITTAL AND
ALL OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE HOLDERS. IF SUCH
DELIVERY IS BY MAIL, IT IS RECOMMENDED THAT REGISTERED MAIL, PROPERLY INSURED,
WITH RETURN RECEIPT REQUESTED, BE USED. IN ALL CASES, SUFFICIENT TIME SHOULD BE
ALLOWED TO ASSURE TIMELY DELIVERY. NO LETTERS OF TRANSMITTAL OR OLD CERTIFICATES
SHOULD BE SENT TO THE COMPANY. Delivery of all documents must be made to the
Exchange Agent at its address set forth below. Holders may also request their
respective brokers, dealers, commercial banks, trust companies or nominees to
effect such tender for such holders.
The tender by a holder of Old Certificates will constitute an agreement
between such holder and the Company in accordance with the terms and subject to
the conditions set forth herein and in the Letter of Transmittal.
11
<PAGE> 19
Only a holder of Old Certificates may tender such Old Certificates in the
Exchange Offer. The term "holder" with respect to the Exchange Offer means any
person in whose name Old Certificates are registered on the books of the Company
or any other person who has obtained a properly completed bond power from the
registered holder.
Any beneficial owner whose Old Certificates are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender should contact such registered holder promptly and instruct such
registered holder to tender on his behalf. If such beneficial owner wishes to
tender on his own behalf, such beneficial owner must, prior to completing and
executing the Letter of Transmittal and delivering his Old Certificates, either
make appropriate arrangements to register ownership of the Old Certificates in
such owners name or obtain a properly completed bond power from the registered
holder. The transfer of registered ownership may take considerable time.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed by any member firm of a registered national
securities exchange or of the National Association of Securities Dealers, Inc.,
a commercial bank or trust company having an office or correspondent in the
United States or an "eligible guarantor" institution within the meaning of Rule
17Ad-15 under the Exchange Act (each an "Eligible Institution") unless the Old
Certificates tendered pursuant thereto are tendered (i) by a registered holder
who has not completed the box entitled "Special Issuance Instructions" or
"Special Delivery Instructions" on the Letter of Transmittal or (ii) for the
account of an Eligible Institution.
If the Letter of Transmittal is signed by a person other than the
registered holder of any Old Certificates listed therein, such Old Certificates
must be endorsed or accompanied by bond powers and a proxy which authorizes such
person to tender the Old Certificates on behalf of the registered holder, in
each case as the name of the registered holder or holders appears on the Old
Certificates.
If the Letter of Transmittal or any Old Certificates or bond powers are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing, and unless waived by the
Company, evidence satisfactory to the Company of their authority to so act must
be submitted with the Letter of Transmittal.
All questions as to the validity, form, eligibility (including time of
receipt) and withdrawal of the tendered Old Certificates will be determined by
the Company in its sole discretion, which determination will be final and
binding. The Company reserves the absolute right to reject any and all Old
Certificates not properly tendered or any Old Certificates which, if accepted,
would, in the opinion of counsel for the Company, be unlawful. The Company also
reserves the absolute right to waive any irregularities or conditions of tender
as to particular Old Certificates. The Company's interpretation of the terms and
conditions of the Exchange Offer (including the instructions in the Letter of
Transmittal) will be final and binding on all parties. Unless waived, any
defects or irregularities in connection with tenders of Old Certificates must be
cured within such time as the Company shall determine. Neither the Company, the
Exchange Agent nor any other person shall be under any duty to give notification
of defects or irregularities with respect to tenders of Old Certificates, nor
shall any of them incur any liability for failure to give such notification.
Tenders of Old Certificates will not be deemed to have been made until such
irregularities have been cured or waived. Any Old Certificates received by the
Exchange Agent that are not properly tendered and as to which the defects or
irregularities have not been cured or waived will be returned without cost to
such holder by the Exchange Agent to the tendering holders of Old Certificates,
unless otherwise provided in the Letter of Transmittal, as soon as practicable
following the Expiration Date.
In, addition, the Company reserves the right in its sole discretion,
subject to the provisions of the Indenture, to (i) purchase or make offers for
any Old Certificates that remain outstanding subsequent to the Expiration Date
or, as set forth under "-- Conditions," to terminate the Exchange Offer in
accordance with the terms of the Registration Rights Agreement and (ii) to the
extent permitted by applicable law, purchase Old Certificates in the open
market, in privately negotiated transactions or otherwise. The terms of any such
purchases or offers could differ from the terms of the Exchange Offer.
12
<PAGE> 20
ACCEPTANCE OF OLD CERTIFICATES FOR EXCHANGE; DELIVERY OF NEW CERTIFICATES
Upon satisfaction or waiver of all of the conditions to the Exchange Offer,
all Old Certificates properly tendered will be accepted, promptly after the
Expiration Date, and the New Certificates will be issued promptly after
acceptance of the Old Certificates. See "-- Conditions" below. For purposes of
the Exchange Offer, Old Certificates shall be deemed to have been accepted
validly tendered for exchange when, as and if the Company has given oral or
written notice thereof to the Exchange Agent.
In all cases, issuance of New Certificates for Old Certificates that are
accepted for exchange pursuant to the Exchange Offer will be made only after
timely receipt by the Exchange Agent of certificates for such Old Certificates
or a timely Book-Entry Confirmation of such Old Certificates into the Exchange
Agent's account at the Book-Entry Transfer Facility, a properly completed and
duly executed Letter of Transmittal and all other required documents. If any
tendered Old Certificates are not accepted for any reason set forth in the terms
and conditions of the Exchange Offer or if Old Certificates are submitted for a
greater principal amount than the holder desires to exchange, such unaccepted or
nonexchanged Old Certificates will be returned without expense to the tendering
holder thereof (or, in the case of Old Certificates tendered by book-entry
transfer procedures described below, such nonexchanged Old Certificates will be
credited to an account maintained with such Book-Entry Transfer Facility) as
promptly as practicable after the expiration or termination of the Exchange
Offer.
BOOK-ENTRY TRANSFER
The Exchange Agent will make a request to establish an account with respect
to the Old Certificates at the Book-Entry Transfer Facility for purposes of the
Exchange Offer within two business days after the date of this Prospectus. Any
financial institution that is a participant in the Book-Entry Transfer
Facility's systems may make book-entry delivery of Old Certificates by causing
the Book-Entry Transfer Facility to transfer such Old Certificates into the
Exchange Agent's account at the Book-Entry Transfer Facility in accordance with
such Book-Entry Transfer Facility's procedures for transfer. However, although
delivery of Old Certificates may be effected through book-entry transfer at the
Book-Entry Transfer Facility, the Letter of Transmittal or facsimile thereof
with any required signature guarantees and any other required documents must, in
any case, be transmitted to and received by the Exchange Agent at one of the
addresses set forth below under "-- Exchange Agent" on or prior to the
Expiration Date or the guaranteed delivery procedures described below must be
complied with.
GUARANTEED DELIVERY PROCEDURES
If a registered holder of the Old Certificates desires to tender such Old
Certificates, and the Old Certificates are not immediately available, or time
will not permit such holder's Old Certificates or other required documents to
reach the Exchange Agent before the Expiration Date, or the procedures for book-
entry transfer cannot be completed on a timely basis, a tender may be effected
if (i) the tender is made through an Eligible Institution, (ii) prior to the
Expiration Date, the Exchange Agent receives from such Eligible Institution a
properly completed and duly executed Letter of Transmittal (or a facsimile
thereof) and Notice of Guaranteed Delivery, substantially in the form provided
by the Company (by facsimile transmission, mail or hand delivery), setting forth
the name and address of the holder of Old Certificates and the amount of Old
Certificates tendered, stating that the tender is being made thereby and
guaranteeing that within three New York Stock Exchange ("NYSE") trading days
after the date of execution of the Notice of Guaranteed Delivery, the
certificates for all physically tendered Old Certificates, in proper form for
transfer, or a Book-Entry Confirmation, as the case may be, and any other
documents required by the Letter of Transmittal will be deposited by the
Eligible Institution with the Exchange Agent and (iii) the certificates for all
physically tendered Old Certificates, in proper form for transfer, or a
Book-Entry Confirmation, as the case may be, and all other documents required by
the Letter of Transmittal are received by the Exchange Agent within three NYSE
trading days after the date of execution of the Notice of Guaranteed Delivery.
13
<PAGE> 21
WITHDRAWAL OF TENDERS
Tenders of Old Certificates may be withdrawn at any time prior to 5:00
p.m., New York City time on the Expiration Date.
For a withdrawal to be effective, a written notice of withdrawal must be
received by the Exchange Agent prior to 5:00 p.m., New York City time on the
Expiration Date at one of the addresses set forth below under "-- Exchange
Agent." Any such notice of withdrawal must specify the name of the person having
tendered the Old Certificates to be withdrawn, identify the Old Certificates to
be withdrawn (including the principal amount of such Old Certificates) and
(where certificates for Old Certificates have been transmitted) specify the name
in which such Old Certificates are registered, if different from that of the
withdrawing holder. If certificates for Old Certificates have been delivered or
otherwise identified to the Exchange Agent, then, prior to the release of such
certificates, the withdrawing holder must also submit the serial numbers of the
particular certificates to be withdrawn and a signed notice of withdrawal with
signatures guaranteed by an Eligible Institution unless such holder is an
Eligible Institution. If Old Certificates have been tendered pursuant to the
procedure for book-entry transfer described above, any notice of withdrawal must
specify the name and number of the account at the Book-Entry Transfer Facility
to be credited with the withdrawn Old Certificates and otherwise comply with the
procedures of such facility. All questions as to the validity, form and
eligibility (including time of receipt) of such notices will be determined by
the Company, whose determination shall be final and binding on all parties. Any
Old Certificates so withdrawn will be deemed not to have been validly tendered
for exchange for purposes of the Exchange Offer. Any Old Certificates which have
been tendered for exchange but which are not exchanged for any reason will be
returned to the holder thereof without cost to such holder (or, in the case of
Old Certificates tendered by book-entry transfer into the Exchange Agent's
account at the Book-Entry Transfer Facility pursuant to the book-entry transfer
procedures described above, such Old Certificates will be credited to an account
maintained with such Book-Entry Transfer Facility for the Old Certificates) as
soon as practicable after withdrawal, rejection of tender or termination of the
Exchange Offer. Properly withdrawn Old Certificates may be retendered by
following one of the procedures described under "-- Procedures for Tendering"
and "-- Book-Entry Transfer" above at any time on or prior to the Expiration
Date.
CONDITIONS
Notwithstanding any other term of the Exchange Offer, Old Certificates will
not be required to be accepted for exchange, nor will New Certificates be issued
in exchange for, any Old Certificates and the Company may terminate or amend the
Exchange Offer as provided herein before the acceptance of such Old
Certificates, if because of any change in law, or applicable interpretations
thereof by the Commission, the Company determines that it is not permitted to
effect the Exchange Offer, and the Company has no obligation to, and will not
knowingly, permit acceptance of tenders of Old Certificates from affiliates of
the Company (within the meaning of Rule 405 under the Securities Act) or from
any other holder or holders who are not eligible to participate in the Exchange
Offer under applicable law or interpretations thereof by the Commission, or if
the New Certificates to be received by such holder or holders of Old
Certificates in the Exchange Offer, upon receipt, will not be tradable by such
holder without restriction under the Securities Act and the Exchange Act and
without material restrictions under the "blue sky" or securities laws of
substantially all of the states of the United States.
14
<PAGE> 22
EXCHANGE AGENT
Wilmington Trust Company has been appointed as Exchange Agent for the
Exchange Offer. Questions and requests for assistance and requests for
additional copies of this Prospectus or of the Letter of Transmittal should be
directed to the Exchange Agent addressed as follows:
<TABLE>
<S> <C>
By Mail, Overnight Delivery: By Hand:
Wilmington Trust Company Wilmington Trust Company
1100 North Market Street 1105 North Market Street, 1st Floor
Wilmington, Delaware 19890-0001 Wilmington, Delaware 19890
Attention: Robert Hines Attention: Corporate Trust Operations
</TABLE>
Facsimile Transmission:
(302) 651-1079
Confirm by Telephone:
(302) 651-8816
Robert Hines
FEES AND EXPENSES
The expenses of soliciting tenders pursuant to the Exchange Offer will be
borne by the Company. The principal solicitation for tenders pursuant to the
Exchange Offer is being made by mail; however, additional solicitations may be
made by telegraph, telephone, telecopy or in person by officers and regular
employees of the Company.
The Company will not make any payments to brokers, dealers or other persons
soliciting acceptances of the Exchange Offer. The Company, however, will pay the
Exchange Agent reasonable and customary fees for its services and will reimburse
the Exchange Agent for its reasonable out-of-pocket expenses in connection
therewith. The Company may also pay brokerage houses and other custodians,
nominees and fiduciaries the reasonable out-of-pocket expenses incurred by them
in forwarding copies of the Prospectus and related documents to the beneficial
owners of the Old Certificates, and in handling or forwarding tenders for
exchange.
The expenses to be incurred in connection with the Exchange Offer will be
paid by the Company, including fees and expenses of the Exchange Agent and
Trustee and accounting, legal, printing and related fees and expenses.
The Company will pay all transfer taxes, if any, applicable to the exchange
of Old Certificates pursuant to the Exchange Offer. If, however, certificates
representing New Certificates or Old Certificates for principal amounts not
tendered or accepted for exchange are to be delivered to, or are to be
registered or issued in the name of, any person other than the registered holder
of the Old Certificates tendered, or if tendered Old Certificates are registered
in the name of any person other than the person signing the Letter of
Transmittal, or if a transfer tax is imposed for any reason other than the
exchange of Old Certificates pursuant to the Exchange Offer, then the amount of
any such transfer taxes (whether imposed on the registered holder or any other
persons) will be payable by the tendering holder. If satisfactory evidence of
payment of such taxes or exemption therefrom is not submitted with the Letter of
Transmittal, the amount of such transfer taxes will be billed directly to such
tendering holder.
15
<PAGE> 23
SELECTED FINANCIAL AND OPERATING DATA
The selected financial data presented below have been derived from the
consolidated financial statements of the Company. The data for the years ended
December 31, 1997, 1996 and 1995 were derived from the Company's audited
consolidated financial statements and related notes, and other financial
information included herein.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------
1993 1994 1995 1996 1997
--------- --------- --------- --------- ---------
(DOLLARS IN THOUSANDS, EXCEPT RATIOS AND OPERATING DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Total operating revenues................ $ 41,263 $102,979 $171,267 $315,659 $401,041
Operating expenses:
Flight crew salaries and benefits..... 4,243 8,887 14,584 25,020 30,153
Other flight-related expenses......... 7,844 9,270 12,361 27,404 28,784
Maintenance........................... 8,052 24,517 42,574 84,305 123,820
Aircraft and engine rentals........... 1,758 14,044 22,902 27,341 31,644
Fuel and ground handling.............. 4,575 9,747 5,027 10,554 10,816
Depreciation and amortization......... 5,647 7,451 14,793 25,515 42,945
Other................................. 8,698 15,169 16,352 27,457 49,777
Write-off of capital investment and
other.............................. -- -- -- -- 27,100
-------- -------- -------- -------- --------
Total operating expenses................ 40,817 89,085 128,593 227,596 345,039
-------- -------- -------- -------- --------
Operating income........................ 446 13,894 42,674 88,063 56,002
Other income (expense):
Interest income....................... 244 490 2,025 7,102 7,365
Interest expense...................... (10,101) (10,784) (18,460) (35,577) (52,834)
-------- -------- -------- -------- --------
Total other income (expense)............ (9,857) (10,294) (16,435) (28,475) (45,469)
-------- -------- -------- -------- --------
Income (loss) before income taxes....... (9,411) 3,600 26,239 59,588 10,533
Income tax benefit (expense)............ 1,388 (14) (8,408) (21,750) (3,844)
-------- -------- -------- -------- --------
Income (loss) before extraordinary
item.................................. (8,023) 3,586 17,831 37,838 6,689
Extraordinary item: Gain from
extinguishment of debt, net of
applicable taxes of
$9,622(1)............................. -- -- -- -- 16,740
-------- -------- -------- -------- --------
Net income (loss)....................... $ (8,023) $ 3,586 $ 17,831 $ 37,838 $ 23,429
======== ======== ======== ======== ========
OTHER DATA:
EBITDA(2)............................... $ 6,093 $ 21,345 $ 57,467 $113,578 $127,608
Ratio of EBITDA to interest
expense(2)............................ 0.60x 1.98x 3.11x 3.19x 2.42x
Ratio of earnings to fixed charges(3)... --(4) 1.21x 1.86x 2.11x 1.30x
OPERATING DATA:
Total block hours flown(5).............. 7,907 19,049 33,265 59,445 75,254
Revenue per block hour.................. $ 5,219 $ 5,406 $ 5,149 $ 5,310 $ 5,329
EBITDA per block hour(2)................ $ 771 $ 1,121 $ 1,728 $ 1,911 $ 1,696
Average aircraft operated(6)............ 2.1 5.2 7.7 14.7 19.5
Total aircraft (at end of period)....... 3 6 10 17 17
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------------------------
1993 1994 1995 1996 1997
-------- -------- -------- -------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash, cash equivalents and short-term
investments.......................... $ 6,198 $ 10,524 $ 96,990 $124,663 $ 152,969
Net property and equipment............. 114,255 131,237 319,751 584,270 1,063,210
Total assets........................... 125,005 162,731 447,323 773,707 1,297,415
Total debt............................. 130,690 163,615 351,261 484,429 776,075
Deferred aircraft obligations.......... -- -- -- -- 163,167
Stockholders' equity (deficit)......... (19,339) (15,753) 68,715 215,785 238,829
</TABLE>
16
<PAGE> 24
- ---------------
(1) In May 1997, the Company recognized an extraordinary gain, net of applicable
taxes of $9,622, as a result of the extinguishment of a portion of the
Company's debt.
(2) EBITDA represents income (loss) before income taxes, depreciation and
amortization, and total other income (expense), as adjusted to exclude the
"Write-off of capital investment and other" in the second quarter of 1997.
EBITDA is not a recognized measure of performance under GAAP and should not
be considered in isolation or as an alternative to, or more meaningful than,
operating income or operating cash flows prepared in accordance with GAAP as
an indicator of the Company's operating performance or liquidity. The
Company believes that EBITDA may provide additional information about the
Company's ability to meet its future requirements for debt service, capital
expenditures and working capital. When evaluating EBITDA, investors should
consider, among other factors, (i) increasing or decreasing trends in
EBITDA, (ii) whether EBITDA has remained at positive levels historically and
(iii) how EBITDA compares to levels of interest expense. Other companies may
define EBITDA differently, and as a result, such measures may not be
comparable to the Company's EBITDA.
(3) In calculating the ratio of earnings to fixed charges, earnings consist of
income (loss) prior to income tax benefit (expense), as adjusted to exclude
the "Write-off of capital investment and other" in the second quarter of
1997, and fixed charges (excluding capitalized interest for the period).
Fixed charges consist of interest expense (including amounts capitalized),
amortization of debt issuance costs and one-third of rental payments on
operating leases (such one-third portion having been deemed by the Company
to represent the interest portion of such payments).
(4) Earnings were insufficient to cover fixed charges by $9,411 for the year
ended December 31, 1993.
(5) Total block hours flown for an aircraft represents the elapsed time from the
moment the aircraft first moves at the point of origin to the time it comes
to rest at its destination.
(6) Average aircraft operated represents the total number of aircraft operated
during each day of a given period divided by the number of days in such
period.
17
<PAGE> 25
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The cargo operations of the Company's airline customers are seasonal in
nature, with peak activity occurring traditionally in the second half of the
year, and with a significant decline occurring in the first quarter. This
decline in cargo activity is largely due to the decrease in shipping that occurs
following the December and January holiday seasons associated with the
celebration of Christmas and the Chinese New Year. Certain of the Company's
customers have, in the past, elected to use that period of the year to exercise
their contractual options to cancel a limited number (generally not more than 5%
per year) of guaranteed hours with the Company, and are expected to continue to
do so in the future. As a result, the Company's revenues typically decline in
the first quarter of the year as its contractual aircraft utilization level
temporarily decreases. The Company seeks to schedule, to the extent possible,
its major aircraft maintenance activities during this period to take advantage
of any unutilized aircraft time.
The aircraft acquisitions, lease arrangements and modification schedule are
described in Note 6 of the Company's December 31, 1997 Consolidated Financial
Statements. The timing of when an aircraft enters the Company's fleet can affect
not only annual performance, but can make quarterly results vary, thereby
affecting the comparability of operations from period to period.
The tables below set forth selected financial and operating data for the
four quarters of the years ended December 31, 1997, 1996 and 1995 (dollars in
thousands).
<TABLE>
<CAPTION>
1997
---------------------------------------------------------
4TH 3RD 2ND 1ST
CUMULATIVE QUARTER QUARTER QUARTER QUARTER
---------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C>
Total operating revenues.............. $401,041 $120,893 $104,197 $ 93,902 $82,049
Operating expenses.................... 345,039 93,112 82,464 104,556 64,907
Operating income (loss)............... 56,002 27,781 21,733 (10,654) 17,142
Other (expense)....................... (45,469) (13,383) (11,930) (10,908) (9,248)
Net income............................ 23,429 9,143 6,225 3,048 5,013
Block hours........................... 75,254 22,333 19,937 17,541 15,443
Average aircraft operated............. 19.5 20.9 20.4 19.5 17.2
Operating margin (deficit)............ 14.0% 23.0% 20.9% (11.4)% 20.9%
</TABLE>
<TABLE>
<CAPTION>
1996
---------------------------------------------------------
4TH 3RD 2ND 1ST
CUMULATIVE QUARTER QUARTER QUARTER QUARTER
---------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C>
Total operating revenues.............. $315,659 $104,715 $ 79,681 $ 72,614 $58,649
Operating expenses.................... 227,596 74,775 59,635 49,947 43,239
Operating income...................... 88,063 29,940 20,046 22,667 15,410
Other (expense)....................... (28,475) (8,569) (7,207) (6,982) (5,717)
Net income............................ 37,838 13,397 8,201 10,037 6,203
Block hours........................... 59,445 18,803 15,444 14,073 11,125
Average aircraft operated............. 14.7 18.4 15.4 14.0 10.8
Operating margin...................... 27.9% 28.6% 25.2% 31.2% 26.3%
</TABLE>
<TABLE>
<CAPTION>
1995
---------------------------------------------------------
4TH 3RD 2ND 1ST
CUMULATIVE QUARTER QUARTER QUARTER QUARTER
---------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C>
Total operating revenues.............. $171,267 $ 56,142 $ 47,769 $ 38,418 $28,938
Operating expenses.................... 128,593 39,982 34,844 28,370 25,397
Operating income...................... 42,674 16,160 12,925 10,048 3,541
Other (expense)....................... (16,435) (4,014) (4,805) (4,287) (3,330)
Net income............................ 17,831 8,352 5,568 3,861 50
Block hours........................... 33,265 10,809 9,076 7,568 5,812
Average aircraft operated............. 7.7 9.4 8.2 6.9 6.1
Operating margin...................... 24.9% 28.8% 27.1% 26.2% 12.2%
</TABLE>
18
<PAGE> 26
1997 Compared to 1996
Operating Revenues and Results of Operations. Total operating revenues for
the year ended December 31, 1997 increased to $401.0 million compared to $315.7
million for 1996, an increase of approximately 27%. The average number of
aircraft in the Company's fleet during 1997 was 19.5 compared to 14.7 during
1996. Total block hours for 1997 were 75,254 compared to 59,445 for 1996, an
increase of approximately 27%, principally reflecting the increase in the size
of the Company's fleet. Revenue per block hour increased by approximately .4% to
$5,329 for 1997 compared to $5,310 for 1996. The Company's operating results
decreased from an $88.1 million operating profit in 1996 to a $56.0 million
operating profit in 1997, primarily due to the largely non-cash charge to
earnings of $27.1 million in the second quarter of 1997. The after-tax effect of
this second quarter charge was substantially offset by the after-tax effect of
the extraordinary gain on early extinguishment of debt in the same quarter of
1997. Net income of $37.8 million for 1996 declined to a net income of $23.4
million for 1997, primarily due to the increase in interest expense associated
with the increase in aircraft in service year over year and the higher
maintenance costs with respect to the aircraft sub-leased from Federal Express
Corporation ("FedEx").
Operating levels increased during the second quarter of 1997 as a result of
placing in service two additional aircraft upon completion of their respective
cargo modifications by Boeing, one in March 1997 and one in May 1997. In
addition, the Company placed in service the fifth FedEx aircraft in April 1997.
In August 1997 and at the end of September 1997, the Company took delivery of
the fifth and sixth Thai Aircraft (as defined herein), respectively, upon
completion by Boeing of its modification to cargo configuration. At the end of
1997, the Company removed from revenue service the five aircraft sub-leased from
FedEx in preparation for the return of these aircraft to FedEx in the first
quarter of 1998, as provided for in the sub-leases.
The Company's operating levels increased moderately during 1997 as a result
of these aircraft acquisitions. Block hours increased from 15,443 in the first
quarter of 1997 to 22,333 in the fourth quarter of 1997, reflecting the growth
in the average fleet size from 17.2 aircraft to 20.9 aircraft for the two
periods. Total operating revenue increased from $82.0 million in the first
quarter to $120.9 million in the fourth quarter, representing slightly higher
block hour rates for the fourth quarter compared to those of the first quarter
of 1997, primarily due to the seasonality of the business of the Company's
customers. The Company achieved $27.8 million operating income and $9.1 million
net income in the fourth quarter of 1997, compared to $17.1 million operating
income and $5.0 million net income in the first quarter of 1997.
In the second quarter of 1997, the Company recorded a largely non-cash
charge of $27.1 million to operating income. This charge included the write-off
of the Company's remaining balance sheet investment in the five aircraft
sub-leased from FedEx, as well as the establishment of certain reserves
associated with costs necessary to return the aircraft in the first quarter of
1998 and other non-recurring items. Excluding this charge, operating income was
$83.1 million for 1997 compared to $88.1 million for 1996, or a decrease of
approximately 6%. There were an average of 4.4 aircraft sub-leased from FedEx
operating in 1997 compared to an average of 1.7 aircraft sub-leased from FedEx
operating in 1996. Maintenance costs with respect to the FedEx aircraft were
substantially higher than for the rest of the Company's fleet. In addition, the
Company incurred $1.2 million of costs in the first quarter of 1997 related to
the return of two leased aircraft to their respective lessors. In the second
quarter of 1997, the realization of an after-tax extraordinary gain of $16.7
million, resulting from the receipt of a prepayment incentive credit associated
with the refinancing of approximately $228 million of indebtedness during the
second quarter, for the most part offset the $17.2 million after-tax impact of
the non-recurring charge discussed above.
Operating Expenses. The Company's principal operating expenses include
flight crew salaries and benefits; other flight-related expenses; maintenance;
aircraft and engine rentals; fuel costs and ground handling; depreciation and
amortization; and selling, general and administrative expenses.
Flight crew salaries and benefits include all such expenses for the
Company's pilot work force. Flight crew salaries and benefits increased to $30.2
million in 1997 compared to $25.0 million in 1996, due to increases in the
number of aircraft in the Company's fleet and aircraft block hours. While actual
expense increased by approximately 21% during 1997, on a block hour basis this
expense declined by approximately 5% to $401 per
19
<PAGE> 27
block hour for 1997 from $421 per block hour for 1996. This reduction was due to
increased efficiency in staffing levels and scheduling resulting from the
increased level of operations.
Other flight-related expenses include hull and liability insurance on the
Company's fleet of Boeing 747-200 aircraft, crew travel and meal expenses,
initial and recurring crew training costs and other expenses necessary to
conduct its flight operations.
Other flight-related expenses increased to $28.8 million in 1997 compared
to $27.4 million in 1996, or approximately 5%. The impact of the larger fleet
size for 1997 compared to the prior year was partially offset by a reduction in
the Company's aircraft hull and liability insurance rates based on its increased
size and favorable operating history. As a result of this and other operating
efficiencies, on a block hour basis, other flight-related expenses declined by
approximately 17% to $383 per block hour for 1997 compared to $461 per block
hour for 1996.
Maintenance expenses include all expenses related to the upkeep of the
aircraft, including maintenance, labor, parts, supplies and maintenance
reserves. The costs of C Checks (as defined), D Checks (as defined) and engine
overhauls not otherwise covered by maintenance reserves are capitalized as they
are incurred and amortized over the life of the maintenance event. In addition,
in January 1995 the Company contracted with KLM for a significant part of its
regular maintenance operations and support on a fixed cost per flight hour
basis. Effective October 1996, certain aircraft engines were accepted into the
GE engine maintenance program, also on a fixed cost per flight hour basis,
pursuant to a 10 year maintenance agreement.
Maintenance expense increased to $123.8 million in 1997 from $84.3 million
in 1996, or approximately 47%, partially due to the increase in the Company's
average fleet size and partially due to the higher maintenance costs with
respect to the aircraft sub-leased from FedEx. On a block hour basis,
maintenance expense increased year over year by approximately 16%, primarily due
to higher maintenance costs associated with the aircraft sub-leased from FedEx.
Aircraft and engine rentals include the cost of leasing aircraft and spare
engines, as well as the cost of short-term engine leases required to replace
engines removed from the Company's aircraft for either scheduled or unscheduled
maintenance and any related short-term replacement aircraft lease costs.
Aircraft and engine rentals were $31.6 million in 1997 compared to $27.3
million in 1996, or an increase of approximately 16%, of which approximately
$2.6 million was due to higher lease rates in 1997 compared to 1996 and $3.1
million was due to an additional .5 aircraft leased in 1997 over 1996. This
increase was partially offset by a $1.4 million decrease in engine rentals year
over year, due to additional spare engines purchased by the Company in 1997.
Because of the nature of the Company's ACMI Contracts with its airline
customers, under which the Company is responsible only for the ownership cost
and maintenance of the aircraft and for supplying aircraft crews and insurance,
the Company's airline customers bear all other operating expenses, including
fuel and fuel servicing; marketing costs associated with obtaining cargo;
airport cargo handling; landing fees; ground handling; aircraft push-back and
de-icing services; and specific cargo and mail insurance. As a result, the
Company incurs fuel and ground handling expenses only when it operates on its
own behalf, either in scheduled services, for ad hoc charters or for ferry
flights. Fuel expenses for the Company's non-ACMI contract services include both
the direct cost of aircraft fuel as well as the cost of delivering fuel into the
aircraft. Ground handling expenses for non-ACMI contract service include the
costs associated with servicing the Company's aircraft at the various airports
to which it operates as well as other direct flight related costs.
Fuel and ground handling costs increased to $10.8 million for 1997 compared
to $10.6 million for 1996, or an increase of approximately 3%. This was due to
higher fuel prices in 1997 compared to 1996, partially offset by the relative
decrease in scheduled service, charter and other non-ACMI block hours to 1,787
block hours in 1997 from 2,042 block hours in 1996.
Depreciation and amortization expense includes depreciation on aircraft,
spare parts and ground equipment, and the amortization of capitalized major
aircraft maintenance and engine overhauls.
20
<PAGE> 28
Depreciation and amortization expense increased to $42.9 million in 1997
from $25.5 million in 1996, or approximately 68%. This increase reflected an
increase of approximately 50% in owned aircraft, an approximate two-fold
increase in owned spare engines and an increase of approximately 100% in spare
parts for 1997 over 1996. In addition, Other Revenues include $1.5 million of
depreciation for 1997, associated with the net lease of two owned aircraft which
were in passenger configuration.
Other operating expenses include salaries, wages and benefits for all
employees other than pilots; accounting and legal expenses; supplies; travel and
meal expenses, excluding those of the aircraft crews; commissions; and other
miscellaneous operating costs.
Other operating expenses increased to $49.8 million in 1997 from $27.5
million in 1996, or approximately 81%, reflecting the increase in the Company's
operations. On a block hour basis, these expenses increased to $661 per block
hour in 1997 from $462 per block hour in 1996, or approximately 43%. This
increase in cost was due primarily to additional personnel and other resources
necessary to properly manage the Company's increased operations and to prepare
for the introduction of the 747-400 aircraft.
Other Income (Expense). Other income (expense) consists of interest income
and interest expense. Interest income for 1997 was $7.4 million compared to $7.1
million for 1996, due to achieving higher interest rates in 1997 compared to
1996 on a slightly lower short-term investment level in 1997 compared to 1996.
Interest expense increased to $52.8 million in 1997 from $35.6 million in 1996,
or approximately 49%, primarily resulting from an increase of approximately 50%
in financed flight equipment between these periods.
Income Taxes. Pursuant to the provisions of the Financial Accounting
Standard Board's (the "FASB") Statement of Financial Accounting Standards
("SFAS") No. 109 "Accounting for Income Taxes," the Company has recorded a tax
provision based on tax rates in effect during the period. Accordingly, the
Company accrued taxes at the rate of 36.5% during 1997 and 1996. Due to
significant capital costs, which are depreciated at an accelerated rate for tax
purposes, a majority of the Company's tax provision in these periods is
deferred.
1996 Compared to 1995
Operating Revenues and Results of Operations. Total operating revenues for
the year ended December 31, 1996 increased to $315.7 million compared to $171.3
million for 1995, an increase of approximately 84%. The average number of
aircraft in the Company's fleet during 1996 was 14.7, compared to 7.7 during
1995. Total block hours for 1996 were 59,445 compared to 33,265 for 1995, an
increase of approximately 79%. Revenue per block hour increased by 3% to $5,310
for 1996 compared to $5,149 for the year-earlier period reflecting a slight
increase in the level of charter and scheduled service hours. While charter and
scheduled service activity provides a higher revenue rate per block hour, costs
are also higher due to fuel and ground handling costs which the Company must
bear. The Company's operating results improved from a $42.7 million operating
profit for 1995 to an operating profit of $88.1 million for 1996, or
approximately 106%. Net income of $17.8 million for 1995 improved to a net
income of $37.8 million for 1996, or approximately 112%.
Operating levels increased during the first quarter of 1996 as a result of
placing in service four additional aircraft. In January 1996, the Company placed
in service one aircraft upon completion of its cargo modification by Hong Kong
Aircraft Engineering Company. Two additional aircraft were re-delivered to the
Company upon completion of their modification by Boeing in March 1996. Finally,
at the close of the first quarter, the Company took delivery of the first
aircraft sub-leased from FedEx. During the third quarter of 1996, the Company
placed in service the next three aircraft sub-leased from FedEx. At the end of
the third quarter the Company took delivery of a Boeing 747-200 passenger
aircraft acquired from Thai Airways International Public Company Limited ("Thai
Airways") upon completion by Boeing of its modification to cargo configuration.
In the fourth quarter of 1996, a second Boeing 747-200 passenger aircraft
acquired from Thai Airways was placed in service upon its delivery by Boeing
subsequent to modification to cargo configuration. At the end of 1996, two
leased aircraft were taken out of service for required maintenance prior to
re-delivery to the lessors.
21
<PAGE> 29
The Company's operating levels increased significantly during 1996 as a
result of these aircraft acquisitions. Block hours increased from 11,125 in the
first quarter of 1996 to 18,803 in the fourth quarter of 1996, relative to the
growth in average fleet size from 10.8 aircraft to 18.4 aircraft for the two
periods. Total operating revenue increased from $58.6 million in the first
quarter to $104.7 million in the fourth quarter, representing slightly higher
block hour rates for the fourth quarter compared to those of the first quarter
of 1996, primarily due to the seasonality of the business of the Company's
customers. The Company achieved $29.9 million operating income and $13.4 million
net income in the fourth quarter of 1996, compared to $15.4 million operating
income and $6.2 million net income in the first quarter of 1996.
The Company's operating levels increased substantially during 1995 also as
a result of aircraft acquisitions. Block hours rose from 5,812 hours in the
first quarter of 1995 to 10,809 in the fourth quarter, as the average number of
aircraft in the Company's fleet grew from 6.1 aircraft to 9.4 aircraft over the
corresponding period. Total operating revenue increased from $28.9 million in
the first quarter of 1995 to $56.1 million in the fourth quarter, with the
Company's operating income increasing from $3.5 million to $16.2 million and its
net income improving from $0.1 million to $8.4 million over that same period.
For the year 1995, total block hours were 33,265 and the average fleet size was
7.7 aircraft. Total operating revenue was $171.3 million, operating income was
$42.7 million and net income was $17.8 million.
Operating Expenses. Expenses for flight crew salaries and benefits
increased to $25.0 million in 1996 from $14.6 million in 1995, primarily as a
result of the increase in the Company's fleet of Boeing 747 aircraft from an
average of 7.7 aircraft in 1995 to 14.7 aircraft in 1996, while aircraft block
hours increased from 33,265 to 59,445, or 79%, over such period. On a block hour
basis, this expense declined to $421 per hour for 1996 from $438 per hour for
1995, or approximately 4%, due to increased staffing and scheduling efficiencies
associated with increased operations.
Other flight-related expenses rose to $27.4 million in 1996 from $12.4
million in 1995, or approximately 120%, primarily due to fleet expansion and
higher travel costs associated with operational difficulties related to the
aircraft sub-leased from FedEx. On a per block hour basis, other flight-related
expenses increased from $372 per block hour in 1995 to $461 per block hour in
1996, or approximately 24%.
Maintenance expense increased to $84.3 million in 1996 from $42.6 million
in 1995, or approximately 98%, due to the increase in average fleet size and
certain increased costs associated with introducing the aircraft sub-leased from
FedEx into the Company's fleet and higher ongoing maintenance costs. The
aircraft sub-leased from FedEx are not covered by the Company's maintenance
contracts with KLM and GE described above. On a block hour basis, maintenance
expense increased by 11%, primarily due to parts support requirements associated
with scheduled and unscheduled maintenance events, and due to the maintenance
costs for the aircraft sub-leased from FedEx discussed above.
Aircraft and engine rentals were $27.3 million in 1996 compared to $22.9
million in 1995, representing an increase of 19%. Lease costs in 1996 for the
aircraft sub-leased from FedEx represented $9.7 million of this increase, offset
by a $2.4 million decrease in sub-service rentals in 1996 compared to 1995. In
addition, the lease costs for one aircraft in 1995 exceeded the lease costs in
1996 by $1.6 million, due to the Company's purchase of the aircraft in the
second quarter of 1996. Engine rentals decreased by $1.8 million in 1996 to $1.8
million, due to the purchase of eight spare engines which reduced the Company's
need for leased engines.
Fuel and ground handling costs increased to $10.6 million in 1996 from $5.0
million in 1995, or approximately 110%. This increase was primarily due to an
increase in block hours for scheduled service, charters, ferry and other from
1,070 in 1995 to 2,042 in 1996, or approximately 91%. In addition, the airline
industry experienced a rise in fuel costs over the period.
Depreciation and amortization expense increased to $25.5 million in 1996
from $14.8 million in 1995, reflecting the increase in the number of owned
aircraft in the Company's fleet. On a per block hour basis, this expense
decreased from $445 per block hour in 1995 to $429 per block hour in 1996, or
approximately 4%. The proportion of owned aircraft to leased aircraft was
relatively the same for 1996 as it was for 1995.
Other operating expenses increased to $27.5 million in 1996 from $16.4
million in 1995, or approximately 68%. On a block hour basis, other operating
expenses decreased from $492 per block hour in 1995 to $462 per
22
<PAGE> 30
block hour in 1996, or approximately 6%, reflecting a lower rate of growth in
the Company's overhead as compared to its operational growth.
Other Income (Expense). Interest income increased to $7.1 million for 1996
from $2.0 million in 1995. This increase was primarily due to the investment of
$99.6 million of funds received from the secondary public offering ("SPO") in
May 1996, as well as funds retained from the Company's initial public offering
("IPO") in August 1995. Interest expense increased to $35.6 million in 1996 from
$18.5 million in 1995, resulting from the increase in financed flight equipment
between these periods.
Income Taxes. Pursuant to the provisions of SFAS No. 109, "Accounting for
Income Taxes," the Company has recorded a tax provision based on tax rates in
effect during the period. Accordingly, the Company accrued taxes at the rate of
36.5% in 1996 and 32.0% in 1995. Due to significant capital costs, which are
depreciated at an accelerated rate for tax purposes, a majority of the Company's
tax provision in 1996 and 1995 is deferred.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1997, the Company had cash and cash equivalents of
approximately $41.3 million, short-term investments of approximately $111.6
million and working capital of approximately $80.4 million. During 1997, cash
and cash equivalents increased approximately $31.5 million, principally
reflecting cash provided from operations of $87.7 million, proceeds from
equipment financings of $815.8 million and net proceeds from the sale and
purchase of short-term investments of $3.2 million, partially offset by the net
sale and purchase of investments in flight and other equipment of $364.0
million, principal reductions of indebtedness of $494.1 million, debt issuance
costs of $16.6 million and net treasury stock purchases of $0.4 million.
At December 31, 1996, the Company had cash and cash equivalents of
approximately $9.8 million, short-term investments of approximately $114.9
million and working capital of approximately $98.7 million. During 1996, cash
and cash equivalents decreased $87.2 million, principally reflecting investments
in flight and other equipment of $289.7 million, the net purchase of $114.9
million of short-term investments, debt issuance costs of $6.0 million,
principal reductions of indebtedness of $21.6 million and net treasury stock
purchases of $0.5 million, partially offset by cash provided from operations of
$84.4 million, proceeds from equipment financings of $154.8 million, net common
stock issuances of $106.3 million, including the $99.6 million received from the
SPO in the second quarter of 1996.
In January 1996, the Company entered into a contract with Langdon Asset
Management, Inc. for the purpose of acquiring six Boeing 747-200 passenger
aircraft (the "Thai Aircraft") and certain spare engines and spare parts from
Thai Airways. The Thai Aircraft were converted into freighter configuration by
Boeing. These aircraft were placed into service in the Company's operations over
the period from September 1996 to September 1997. The average cost of each of
the six aircraft, including conversion costs, approximated $45 million.
Financing for the first Thai Aircraft was provided by Finova Capital Corporation
and through the Aircraft Credit Facility (as defined herein) for the remaining
five Thai Aircraft. See Note 3 of the Company's Consolidated Financial
Statements dated December 31, 1997.
In May 1996, the Company entered into a $175 million revolving credit
facility (the "Aircraft Credit Facility") with Goldman Sachs Credit Partners
L.P. ("Goldman Sachs"), as Syndication Agent, and Bankers Trust Company
("BTCo"), as Administrative Agent. This revolving loan facility provides for the
acquisition and conversion of flight equipment. The Aircraft Credit Facility was
subsequently amended and restated in conjunction with certain refinancings. The
Aircraft Credit Facility provides for a $250 million revolving credit facility
as of September 5, 1997 with a two-year revolving period and a subsequent
three-year term loan period in the event that permanent financing has not been
obtained for any flight equipment financed under the facility. At the time of
each borrowing, the Company must select either a Base Rate Loan (prime rate,
plus 1.5% through May 8, 1998, thereafter plus 2.0%) or a Eurodollar Rate Loan
(Eurodollar rate, plus 2.5% through May 8, 1998, thereafter plus 3.0%). The
Eurodollar Rate Loan was selected by the Company for substantially all
borrowings in 1996 and 1997. The weighted average interest rate on borrowings
outstanding under the Aircraft Credit Facility was 8.38% at December 31, 1997.
Each borrowing is secured by a first
23
<PAGE> 31
priority security interest in the collateral flight equipment of that borrowing.
Certain tests must be met before each purchase of aircraft and related drawdown
on the facility. To date, the Company has met these tests. If in the future, the
Company cannot meet all the tests because of the difficult sequencing of
aircraft acquisition, aircraft conversion and customer contracts, the Company
believes that other financing sources would be available to the Company or that
it would acquire aircraft using its internal cash or seek a waiver of any
necessary conditions. As of December 31, 1997, the Company had $85.0 million
outstanding under the Aircraft Credit Facility. Covenants with respect to the
Aircraft Credit Facility require specific levels of insurance, as well as
contain requirements regarding possession, maintenance, and lease or transfer of
the flight equipment. Certain covenants applicable to the Company include, among
other restrictions, limitations on indebtedness, liens, investments, contingent
obligations, restricted junior payments, capital expenditures and leases. The
Company was in compliance with all of its covenants at December 31, 1997.
In March 1997, the Company refinanced one of its aircraft with Nationsbanc
Leasing Corporation ("Nationsbanc"). This aircraft was previously financed
through the Aircraft Credit Facility. As such, this refinancing increased the
availability of funds under the Aircraft Credit Facility by approximately $25
million. The Nationsbanc financing is a seven year term loan (extendible under
certain circumstances to ten years) which provides for a fixed interest rate of
9.16%. The loan is secured by a first priority security interest in this
aircraft.
In April 1997, the Company purchased the fifth and sixth aircraft from Thai
Airways. These aircraft were placed into service in the third quarter of 1997
subsequent to undergoing modification to cargo configuration by Boeing. These
aircraft were initially financed under the Aircraft Credit Facility and were
subsequently refinanced as part of the AFL II Term Loan Facility (as defined
herein).
In May 1997, the Company acquired from Citicorp Investor Lease, Inc.
("Citicorp") one 747-200 passenger aircraft for a purchase price of $25 million,
including two spare engines. In connection with the purchase of the aircraft
from Citicorp, the Company agreed to assume Citicorp's lessor interest in the
lease of such aircraft to Philippine Airlines ("PAL") for the remainder of the
lease term. This aircraft is financed under the Aircraft Credit Facility.
In May 1997, the Company formed a wholly-owned subsidiary, Atlas Freighter
Leasing, Inc. ("AFL"), for the purpose of entering into the $185 million AFL
Term Loan Facility (the "AFL Term Loan Facility") to refinance six Boeing
747-200 aircraft previously financed through Internationale Nederlanden Aviation
Lease B.V. ("ING Bank"). Concurrent with entering into the AFL Term Loan
Facility, the proceeds of the AFL Term Loan Facility were used to repay all
existing principal and interest due under the ING Bank debt. Interest is based
on the Eurodollar rate, plus 2.5% for the first three years and 3.0% thereafter,
and is payable quarterly. The interest rate on borrowings outstanding under the
AFL Term Loan Facility was 8.38% at December 31, 1997. Quarterly scheduled
principal payments of $2.5 million commenced in February 1998 and increase to
$5.7 million in August 1998 with a final payment of $50.0 million in May 2004.
The AFL Term Loan Facility is secured by a first priority interest in the six
subject aircraft and is restrictive with respect to limitations on indebtedness,
liens, investments, contingent obligations, restricted junior payments, capital
expenditures, amendments of material agreements, leases, transactions with
shareholders and affiliates and the conduct of business. AFL was in compliance
with all of its covenants as of December 31, 1997.
In June 1997, the Company entered into the Boeing Purchase Agreement to
purchase 10 new 747-400 freighter aircraft to be powered by GE engines. The
747-400 freighter aircraft are currently scheduled to be delivered as follows:
five in 1998, two in 1999 and three in 2000. Due to production problems at
Boeing, the Company believes that each of the 1998 delivery positions of the
747-400 aircraft may be delayed up to 60 days. While Boeing will compensate the
Company for defined delays in delivery of the 747-400 aircraft, any such delays
may adversely impact the Company's ability to initiate service with prospective
customers in a timely fashion. The Boeing Purchase Agreement also provides the
Company with options to purchase up to 10 additional 747-400 freighter aircraft
for delivery from 1999 through 2002. As a result of the Company being the
largest purchaser of 747-400 freighter aircraft to date, it was able to
negotiate from Boeing and GE a significant discount off the aggregate list price
of $1.7 billion for the 10 747-400 freighter aircraft, four installed engines
per aircraft and five spare engines. In addition, the Company also obtained
certain ancillary
24
<PAGE> 32
products and services at advantageous prices. The Boeing Purchase Agreement
requires that the Company pay pre-delivery deposits ("Pre-Delivery Deposits") to
Boeing prior to the delivery date of each 747-400 freighter aircraft in order to
secure delivery of the 747-400 freighter aircraft and to defray a portion of the
manufacturing costs. The Company expects the maximum total amount of
Pre-Delivery Deposits at any time outstanding will be approximately $155
million, approximately $105.1 million of which was paid as of December 31, 1997.
For the years 1998 and 1999, the Company expects to pay $67.6 million and $42.6
million, respectively, in accordance with the Pre-Delivery Deposits schedule. In
addition, the Boeing Purchase Agreement provides for a deferral of a portion of
the Pre-Delivery Deposits (Deferred Aircraft Obligations) for which the Company
accrues and pays interest quarterly at 6-month LIBOR, plus 2.00%. As of December
31, 1997, there was $163.2 million of Deferred Aircraft Obligations outstanding
and the combined interest rate was 7.97%.
In August 1997, the Company completed the offering of its unsecured 10 3/4%
Senior Notes due 2005 ("Senior Notes"). The proceeds from the offering of the
Senior Notes were used to, among other things, repay short-term indebtedness
incurred by the Company to make Pre-Delivery Deposits to Boeing for the purchase
of 10 new freighter aircraft and for additional Pre-Delivery Deposits as they
become due. Interest on the Senior Notes began to accrue from their date of
original issuance and is payable semi-annually in arrears on February 1 and
August 1 of each year, commencing February 1, 1998, at the rate of 10 3/4% per
annum. The Senior Notes are redeemable, in whole or in part, at the option of
the Company, on or after August 1, 2001, at established redemption prices, plus
accrued interest to the date of redemption. In addition, at any time on or prior
to August 1, 2000, the Company, at its option, may redeem up to 35% of the
aggregate principal amount of the Senior Notes originally issued with the net
cash proceeds of one or more public equity offerings, at a redemption price
equal to 110.75% of the principal amount thereof plus accrued interest to the
date of redemption; provided that at least 65% of the aggregate principal amount
of the Senior Notes originally issued remains outstanding immediately after any
such redemption. The Senior Notes are general unsecured obligations of the
Company which rank pari passu in right of payment to any existing and future
unsecured senior indebtedness of the Company. The Senior Notes are effectively
subordinated, however, to all secured indebtedness of the Company and to all
indebtedness of the Company's subsidiaries. Covenants with respect to the Senior
Notes contain certain limitations on the ability of the Company and its
subsidiaries to, among other things, incur additional indebtedness, pay
dividends or make certain other restricted payments, consummate certain asset
sales, enter into certain transactions with affiliates, incur liens, create
restrictions on the ability of a subsidiary to pay dividends or make certain
payments, sell or issue preferred stock of subsidiaries to third parties, merge
or consolidate with any other person or sell, assign, transfer, lease, convey or
otherwise dispose of all or substantially all of the assets of the Company. The
Company was in compliance with all of its covenants as of December 31, 1997.
In September 1997, the Company formed another wholly-owned subsidiary,
Atlas Freighter Leasing II, Inc. ("AFL II") for the purpose of entering into the
$185 million AFL II Term Loan Facility (the "AFL II Term Loan Facility") to
refinance four of the aircraft previously financed under the Aircraft Credit
Facility, plus nine spare engines, in order to provide the Company with greater
financial flexibility in anticipation of the financing requirements for the
future acquisition of additional freighter aircraft. Interest is based on the
Eurodollar rate, plus 2.25%, less a pricing reduction, if any, in effect from
time to time, and is payable quarterly. The interest rate on borrowings
outstanding under the AFL II Term Loan Facility was 8.13% at December 31, 1997.
Quarterly scheduled principal payments of $2.5 million commenced in February
1998 and increase to $5.7 million in August 1998 with a final payment of $50.0
million in May 2004. The AFL II Term Loan Facility is secured by a first
priority interest in the four subject aircraft, plus nine spare engines, and is
restrictive with respect to limitations on indebtedness, liens, investments,
contingent obligations, restricted junior payments, capital expenditures,
amendments of material agreements, leases, transactions with shareholders and
affiliates and the conduct of business. AFL II was in compliance with all of its
covenants as of December 31, 1997.
In October 1997, Atlas Flightlease, Inc. ("AFI"), a wholly owned subsidiary
of the Company, secured a 2-year LIBOR based financing with Bankers Trust
Company for approximately 80% of the purchase price of a 1988 Canadair
Challenger passenger aircraft (the "Challenger"). AFI purchased the Challenger
from MAC
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Flightlease, Inc. ("MAC Flightlease"), an entity wholly-owned by the wife of the
Company's Chairman, President and CEO (see Note 7 to the Consolidated Financial
Statements), in the third quarter of 1997. In December 1997, AFI refinanced the
Challenger for approximately 100% of its purchase price with Nationsbanc under a
5-year loan which was guaranteed by the Company. Interest is based on the
Eurodollar rate, plus 2.35%, and is payable quarterly with concurrent scheduled
payments of principal. The interest rate on borrowings outstanding under the
Nationsbanc debt was 8.26% at December 31, 1997. The loan is secured by a first
priority security interest in the Challenger. Covenants with respect to this
financing require specific levels of insurance, as well as contain requirements
regarding use, maintenance, configuration, liens and disposition of the
Challenger, among other things. AFI was in compliance with all of its covenants
as of December 31, 1997.
In April 1998, the Company consummated the offering of $175 million of
unsecured 9 1/4% Senior Notes due 2008 (the "9 1/4% Senior Notes"). The proceeds
of the offering will be used to repay $80 million of the Aircraft Credit
Facility and for general corporate purposes, which may include the partial
funding of the redemption of the Company's outstanding 12 1/4% Pass Through
Certificates due 2002, which are subject to redemption at the option of the
Company on or after December 1, 1998. Interest on the 9 1/4% Senior Notes is
payable semi-annually on April 15 and October 15 of each year, commencing
October 15, 1998. The 9 1/4% Senior Notes are redeemable at the option of the
Company, in whole or in part, at any time on or after April 15, 2003, initially
at 104.625% of their principal amount, plus accrued interest, declining ratably
to 100% of their principal amount, plus accrued interest, on or after April 15,
2006. In addition, at any time prior to April 15, 2001, the Company may redeem
up to 35% of the aggregate principal amount of the 9 1/4% Senior Notes
originally issued with the net cash proceeds of one or more public equity
offerings at 109.25% of their principal amount, plus accrued interest; provided
that after any such redemption at least 65% of the aggregate principal amount of
9 1/4% Senior Notes remains outstanding. The 9 1/4% Senior Notes will be
unsubordinated indebtedness of the Company, ranking pari passu in right of
payment with all existing and future unsubordinated indebtedness of the Company
and senior in right of payment to all subordinated indebtedness of the Company.
The 9 1/4% Senior Notes will be effectively subordinated, however, to all
secured indebtedness of the Company and all existing and future liabilities of
the Company's subsidiaries. Covenants with respect to the 9 1/4% Senior Notes
contain certain limitations on the ability of the Company and its subsidiaries
to, among other things, incur additional indebtedness, pay dividends or make
certain other restricted payments, consummate certain asset sales, enter into
certain transactions with affiliates, incur liens, create restrictions on the
ability of a subsidiary to pay dividends or make certain payments, sell or issue
preferred stock of subsidiaries to third parties, merge or consolidate with any
other person or sell, assign, transfer, lease, convey or otherwise dispose of
all or substantially all of the assets of the Company.
Due to the contractual nature of the Company's business, the Company's
management does not consider its operations to be highly working
capital-intensive in nature. Because most of the non-ACMI costs normally
associated with operations are borne by and directly paid for by the Company's
customers, the Company does not incur significant costs in advance of the
receipt of corresponding revenues. Moreover, ACMI costs, which are the
responsibility of the Company, are generally incurred on a regular, periodic
basis ranging from flight hours to months. These costs are largely matched by
revenue receipts, as the Company's contracts require regular payments from its
customers, based upon current flight activity, generally every two to four
weeks. As a result, the Company has not in the past had a requirement for a
working capital facility. The Company is exploring the possibility of entering
into an unsecured line of credit for general working capital purposes.
Under the FAA's Directives issued under its Aging Aircraft program, the
Company is subject to extensive aircraft examinations and may be required to
undertake structural modifications to address the problem of corrosion and
structural fatigue. In November 1994, Boeing issued Nacelle Strut Modification
Service Bulletins which have been converted into Directives by the FAA. Eleven
of the Company's Boeing 747-200 aircraft will have to be brought into compliance
with such Directives within the next three years at an estimated cost of
approximately $5.5 million. As part of the FAA's overall aging aircraft program,
it has issued Directives requiring certain additional aircraft modifications to
be accomplished prior to the aircraft reaching 20,000 cycles. The average cycle
time for the 18 aircraft in service is approximately 12,000 cycles and the
average cycles operated per year is approximately 800 cycles. The Company
estimates that the modification
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<PAGE> 34
costs per aircraft will range between $2 million and $3 million. Between now and
the year 2000, only one aircraft is expected to reach the 20,000 cycle limit and
nine additional aircraft will require modification prior to 2009. The remaining
eight aircraft in service have already undergone such modifications. The one
aircraft undergoing modification to freighter configuration will receive the
Nacelle Strut Modification as part of the freighter conversion. Other Directives
have been issued that require inspections and minor modifications to Boeing
747-200 aircraft. It is possible that additional Directives applicable to the
types of aircraft or engines included in the Company's fleet could be issued in
the future, the cost of which could be substantial. Upon acquisition of an
aircraft, the Company determines whether or not the aircraft is in compliance
with Airworthiness Directives and tries to anticipate all future compliance
requirements. The necessary work to bring the aircraft into compliance is then
scheduled at the time of conversion of the aircraft to freighter configuration,
in order to minimize unscheduled maintenance events.
The Company has initiated a review of its internal information systems for
any Year 2000 transition problems through a company-wide effort, assisted by
Year 2000 experienced consultants, to address internal Year 2000 system issues,
and jointly with industry trade groups, to address issues related to key
business partners which are common to other air carriers. The Company has not
completed the development of the remediation approach for all affected areas. As
a result, the Company cannot estimate what the total cost will be to implement
remediation efforts for all critical operational systems. However, due to the
Company's relatively young systems, the Company's advanced client server and
data base architecture, and the Company's partial reliance on vendor
representations regarding Year 2000 compliant third-party systems, the Company
is confident that such remediation efforts will not be material. The Company
expects to complete the assessment and development stages of this plan by
mid-1998, at which time it expects to be able to make a reasonable cost
estimate. Implementation of all remediation efforts is scheduled to be completed
in early 1999.
The Company has started an ongoing program to review the status of key
supplier Year 2000 compliance efforts. While the Company believes it is taking
all appropriate steps to assure Year 2000 compliance, it is dependent on key
business partner compliance to some extent. The Year 2000 problem is pervasive
and complex, as virtually every computer operation will be affected in some way.
Consequently, no assurance can be given that Year 2000 compliance can be
achieved without costs that might affect future financial results or cause
reported financial information not to be necessarily indicative of future
operating results or future financial condition.
From time to time the Company engages in discussions with third parties
regarding possible acquisitions of aircraft that could expand the Company's
operations. The Company is in discussions with third parties for the possible
acquisition of additional aircraft for delivery in 1998 and beyond.
RECENTLY ISSUED ACCOUNTING STANDARDS
In February 1997, the FASB issued SFAS No. 128 "Earnings per Share,"
effective for financial statements for both interim and annual periods ending
after December 15, 1997. The purpose of SFAS No. 128 is to simplify the
computation of earnings per share ("EPS") and to make the U.S. standard for
computing EPS more compatible with the EPS standards of other countries and with
that of the International Accounting Standards Committee. SFAS No. 128 requires
the dual presentation of basic earnings per share ("basic EPS"), which replaces
primary earnings per share, and diluted earnings per share ("diluted EPS").
Basic EPS is computed by dividing income available to common stockholders by the
weighted-average number of common shares outstanding during the period. Diluted
EPS is computed similar to basic EPS except that the weighted-average number of
common shares outstanding during the period is adjusted for the incremental
shares attributed to outstanding options to purchase common stock.
In June 1997, the FASB issued SFAS No. 130 "Reporting Comprehensive
Income," which establishes standards for reporting and display of comprehensive
income and its components in a full set of general purpose financial statements.
The objective of SFAS No. 130 is to report a measure of all changes in equity of
an enterprise that result from transactions and other economic events of the
period other than transactions with owners. Comprehensive income includes net
income plus other comprehensive income (other revenues, expenses, gains, and
losses that under generally accepted accounting principles bypass net income).
The
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<PAGE> 35
Company does not expect other comprehensive income to be material. The effective
date for the application of SFAS No. 130 for both interim and annual periods is
for fiscal years beginning after December 15, 1997 with earlier application
permitted.
FORWARD-LOOKING STATEMENTS
To the extent that any of the statements contained herein relating to the
Company's expectations, assumptions and other Company matters are
forward-looking, they are made in reliance upon the safe harbor provisions of
the Private Securities Litigation Reform Act of 1995. Such statements are based
on current expectations that involve a number of uncertainties and risks that
could cause actual results to differ materially from those projected in the
forward-looking statements, including, but not limited to, risks associated
with: worldwide business and economic conditions; product demand and the rate of
growth in the air cargo industry; the impact of competitors and competitive
aircraft and aircraft financing availability; the ability to attract and retain
new and existing customers; normalized aircraft operating costs and reliability;
management of growth; the continued productivity of its workforce; dependence on
key personnel; and regulatory matters.
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BUSINESS
THE COMPANY
Atlas is the world's largest air cargo outsourcer, with an all Boeing fleet
of 747 freighter aircraft. The Company provides reliable airport-to-airport
cargo transportation services throughout the world to major international air
carriers generally under three- to five-year fixed-rate U.S. dollar denominated
contracts which typically require that the Company supply aircraft, crew,
maintenance and insurance. The Company's customers currently include China
Airlines, KLM, Lufthansa, British Airways World Cargo ("British Airways"),
Scandinavian Airlines System ("SAS"), The International Airline of the United
Arab Emirates ("Emirates"), Thai Airways, Fast Air, Lineas Aereas Suramericanas,
S.A. ("LAS") and Linee Aeree Italiane S.p.A. ("Alitalia"). The Company is able
to provide efficient, cost effective service to its customers primarily as a
result of its productive work force, the outsourcing of a significant part of
its regular maintenance work on a fixed-cost basis and the advantageous cost
economies realized in the operation of its fleet, comprised solely of Boeing 747
aircraft which are configured for service in long-haul cargo operations. For the
year ended December 31, 1997, the Company had total operating revenues and
EBITDA of approximately $401.0 million and $127.6 million, respectively.
The Company's fleet currently consists of 18 Boeing 747-200 freighter
aircraft in service and one 747-200 passenger aircraft undergoing conversion to
freighter configuration. The 747-200 passenger aircraft undergoing conversion to
freighter configuration is expected to be placed in service early in the third
quarter of 1998. On June 9, 1997, the Company entered into an agreement with
Boeing to purchase 10 new 747-400 freighter aircraft to be powered by engines
acquired from GE, with options to purchase up to 10 additional 747-400 aircraft.
The 747-400 aircraft has significantly longer range, greater payload capability,
lower maintenance costs and increased fuel efficiency compared to the Boeing
747-200 freighter aircraft. The Company expects to place the 747-400 aircraft in
service with both existing and prospective customers, who the Company believes
should be willing to pay higher ACMI Contract rates to achieve operating
benefits derived from the unique performance capabilities of the 747-400
aircraft.
The Company attributes its leading market position and continued
opportunities for growth to the following competitive strengths:
- Long-Term Customer Contracts Which Provide Revenue Stability. The
Company's ACMI Contracts with its customers, which accounted for 96% of
the Company's total operating revenues in 1997, generally provide for its
customers to guarantee monthly minimum aircraft utilization levels at
fixed hourly rates and are typically in force for periods of three to
five years, subject in certain limited cases to early termination
provisions. These ACMI Contracts typically require that the Company
supply aircraft, crew, maintenance and insurance and that its customers
bear all other operating expenses, including fuel and fuel servicing;
marketing costs associated with obtaining cargo; airport cargo handling;
landing fees; ground handling, aircraft push-back and de-icing services;
and specific cargo and mail insurance. The Company's customers are also
responsible under these contracts for utilizing the cargo capacity of
each of the contracted aircraft. The ACMI Contracts, therefore, minimize
for the Company the load factor, yield risk and fuel cost risk
traditionally associated with the air cargo business and provide the
Company with a minimum annual revenue base and more predictable profit
margins. The Company also periodically engages in ad hoc charter or
scheduled air service depending on availability of aircraft for these
uses. In addition, the Company differentiates itself from other air cargo
companies by not directly or indirectly competing with its customers by
offering its services to freight forwarders or shippers who do business
with the Company's customers.
- Low Cost Structure. The Company has established itself as a low cost,
efficient and reliable provider of air cargo transportation primarily due
to the outsourcing of many of its own required services, the advantageous
economies of scale realized from the operation of a standardized fleet of
long-haul Boeing 747-200 aircraft, and its productive work force. The
uniformity of the 747-200 aircraft fleet allows for standardization in
maintenance and crew training, resulting in substantial cost savings in
these areas. In particular, Atlas has advantageous, long-term contracts
on a fixed-cost per flight hour basis with leading maintenance providers
such as GE and KLM for a significant portion of its on-going
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aircraft and engine maintenance requirements. As a result of these
efficiencies, the Company's high service standards and increased airline
industry pressure to reduce costs, the Company's airline customers have
determined that outsourcing portions of their air cargo business to the
Company can be significantly less costly and offer greater operational
flexibility than expanding their cargo operations by purchasing
additional aircraft and adding other resources such as personnel and
systems. The new 747-400 aircraft are expected to have even greater
operational capabilities than the Boeing 747-200 aircraft and will allow
the Company to continue to maintain its low cost structure. The new
aircraft's higher level of operational reliability and warrantied
condition will result in lower maintenance costs during the early years
of operation, typically for at least five years. In addition, the
acquisition of the 10 747-400 freighter aircraft will make Atlas the
largest operator of this aircraft type to date and will enable the
Company to achieve economies of scale from the standardization in
maintenance and crew training.
- Expanding Business Base. The growth in demand for air cargo services,
combined with the lower rate of growth in passenger-airline cargo
capacity and the continuing pressure on the airline industry to reduce
operating costs, is expected to provide the Company with the opportunity
to expand its air cargo outsourcing services. The primary business focus
of most of the Company's customers is on the transportation of
passengers, not air cargo. Nevertheless, most passenger airlines have air
cargo customers that require quick and dependable air cargo service
between hubs serviced by these carriers. To the extent that airlines have
cargo capacity on their scheduled flights, which are generally scheduled
for the convenience of passengers rather than for the needs of air cargo
customers, air cargo service can be provided by them to meet such demand.
However, there is a growing trend in the passenger-airline business
toward replacing existing widebody passenger aircraft and combination
passenger/cargo aircraft with smaller, more efficient (for passenger
operations) twin-engine aircraft which have limited cargo space. The
Company's customers have therefore found that outsourcing to meet their
additional cargo transportation needs rather than allocating significant
resources and expanding their fleet of freighter aircraft to effectively
service their air cargo customers provides a cost-effective alternative
for them to maintain and expand that portion of their business.
- Increasing Cargo Market Share. The Company has successfully increased its
customer base from a single customer in 1992 to nine customers in 1998.
In addition, the Company has operated under short-term, seasonal ACMI
Contracts with FedEx, Kitty Hawk Air Cargo, Inc. ("Kitty Hawk") and
United Parcel Service ("UPS") and anticipates providing other short-term,
seasonal service. This increased market share is a result of the
Company's ability to provide a cost-effective service which has gained
acceptance within the industry due to the Company's successful market
development efforts. The addition of the 747-400 aircraft will provide
the Company with the opportunity to increase its market share to new and
existing customers who have a need for the greater payload, extended
range and operational reliability of the 747-400, but for whom the
purchase of a limited number of 747-400 freighter aircraft would not be
cost-effective. In addition, the 747-400 aircraft will give the Company a
competitive advantage with new customers who choose to utilize only new
or relatively new aircraft or are restricted by local regulations
limiting the operation of older aircraft.
- Dramatic Industry Growth. While the air cargo industry is highly
competitive, the Company believes that current industry trends are
favorable to the continued growth of its business. According to reports
prepared by Boeing, the world air cargo market is expected to more than
triple over the next 20 years. Such reports indicate that the world air
cargo market has grown at an average rate of 7.2% per year from 1986 to
1997. The average annual percentage growth through 2017 is expected to
average 6.5%, with international air cargo market growth outpacing U.S.
domestic growth. The Company believes this growth has been fueled, in
part, by economic growth, the relaxation of international trade barriers
(as indicated by the passage of the NAFTA and GATT treaties), reductions
in the price of shipping by air, manufacturers' search for low-cost labor
in developing countries, and the increasingly time-sensitive nature of
product-delivery schedules due to shorter product life-cycles and
"just-in-time" inventory management. In addition to growth in the global
air cargo market, the Company expects to benefit from growth in the
export-driven economies of the countries in the Pacific Rim, where the
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Company has focused a significant amount of its flight operations.
According to the Boeing reports, eastbound and westbound Trans-Pacific
cargo volumes grew at an average annual rate of 6.9% and 14.3%,
respectively, between 1986 and 1996, and are projected to grow at an
average annual rate of 8.0% and 8.1%, respectively, between 1996 and
2016. Similarly, northbound and southbound air cargo volumes between
North America and South America increased at an average annual rate of
9.4% and 8.8%, respectively, between 1986 and 1996, and are projected to
grow at an average annual rate of 6.5% and 6.7%, respectively, from 1996
to 2016. Additionally, eastbound and westbound North Atlantic air cargo
volumes increased at an average annual rate of 8.4% and 5.9%,
respectively, between 1986 and 1996 and are projected to grow at average
annual rates of 6.7% and 7.2%, respectively, from 1996 to 2016. The
Company believes that, as a U.S. certificated "flag" carrier, it is well
positioned to benefit from the progressive expansion of international
trade and the consequential growth in global air cargo markets,
particularly in Asia, South America and Europe, where the Company has
concentrated a significant portion of its resources. The Company has not
experienced any adverse impact on its business as a result of the recent
turmoil in the Asian financial markets, although there can be no
assurances that there will not be any future impact.
747-400 AIRCRAFT ACQUISITION
In June 1997, the Company entered into the Boeing Purchase Agreement to
purchase 10 new 747-400 freighter aircraft to be powered by GE engines. The
747-400 freighter aircraft are currently scheduled to be delivered as follows:
five in 1998, two in 1999 and three in 2000. Due to production problems at
Boeing, the Company believes that each of the 1998 delivery positions of the
747-400 aircraft may be delayed up to 60 days. While Boeing will compensate the
Company for defined delays in delivery of the 747-400 aircraft, any such delays
may adversely impact the Company's ability to initiate service with prospective
customers in a timely fashion. The Boeing Purchase Agreement also provides the
Company with options to purchase up to 10 additional 747-400 freighter aircraft
for delivery from 1999 through 2002. As a result of the Company being the
largest purchaser of 747-400 freighter aircraft to date, it was able to
negotiate from Boeing and GE a significant discount off the aggregate list price
of $1.7 billion for the 10 747-400 freighter aircraft, four installed engines
per aircraft and five spare engines. In addition, the Company also obtained
certain ancillary products and services at advantageous prices.
ACMI CONTRACTS
The Company's ACMI Contracts with its customers, which accounted for 96% of
the Company's operating revenues in 1997, typically provide for its customers to
guarantee monthly minimum aircraft utilization levels at fixed hourly rates and
are typically in force for periods of three to five years, subject in certain
limited cases to early termination provisions. These contracts typically require
that the Company supply aircraft, crew, maintenance and insurance and that its
customers bear all other operating expenses, including fuel and fuel servicing;
marketing costs associated with obtaining cargo; airport cargo handling; landing
fees; ground handling, aircraft push-back and de-icing services; and specific
cargo and mail insurance. These contracts, therefore, minimize for the Company
the load factor and yield risk traditionally associated with the air cargo
business. The ACMI Contracts typically require minimum air freight capacity to
be provided to its customers by the Company. All of the Company's revenues, and
virtually all of its costs, are in U.S. dollars, thus avoiding currency risks
normally associated with doing business primarily overseas.
The Company is currently operating under 16 ACMI Contracts: six with China
Airlines, two each with Fast Air and LAS and one each with British Airways,
Emirates, KLM, Lufthansa, SAS and Thai Airways. In most cases, one aircraft is
dedicated under each contract. In addition, the Company recently reached an
agreement with Alitalia for an ACMI Contract, which the Company expects to
commence in the second quarter of 1998. China Airlines, Fast Air and Lufthansa
accounted for approximately 34%, 11% and 8%, of the Company's total revenues,
respectively, for the year ended December 31, 1997. In addition, the Company has
also operated short-term, seasonal ACMI Contracts with FedEx, Kitty Hawk and UPS
and anticipates doing so in the future from time to time.
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Certain of the Company's ACMI Contracts allow the Company's customers to
cancel up to a maximum of approximately 5% of the guaranteed hours of aircraft
utilization over the course of a year. The Company's customers most often
exercise such cancellation options early in the first quarter or late in the
fourth quarter of the year, when the demand for air cargo capacity has been
historically lower. The Company has found that such cancellations provide a
timely opportunity for the scheduling of maintenance on its aircraft, to the
extent possible. See "-- Maintenance." The ACMI Contracts are typically in force
for periods of three to five years, subject in certain limited cases to early
termination provisions. The Company believes that its relationships with its
customers are mutually satisfactory, as evidenced by the fact that within the
last three years, it has renewed twelve ACMI Contracts and added nine ACMI
Contracts with its existing customers, although there can be no assurance that
future such contracts will not be canceled in accordance with their terms.
All of the ACMI Contracts provide that each of the Company's aircraft be
deemed to be at all times under the exclusive operating control, possession and
direction of the Company and that, in order to service the routes designated by
the contract, the Company obtain the authority from the governments having
jurisdiction over the route. See "-- Governmental Regulation." Additionally, if
the Company is required to use the customer's "call sign" in identifying itself
throughout its route, the customer must also have obtained underlying authority
from the governments having jurisdiction over the route. Therefore, the
Company's route structure is limited to areas in which it can gain access from
the appropriate governments.
OTHER FLIGHT OPERATIONS
To the extent the Company has available excess aircraft capacity at any
time, it will seek to obtain ad hoc charter service contracts, which the Company
believes are generally readily available. In addition, in the past the Company
has provided service to FedEx, Kitty Hawk and UPS pursuant to short-term,
seasonal ACMI Contracts during periods of excess aircraft capacity.
AIRCRAFT
The Company's utilization of Boeing 747 aircraft provides significant
marketing advantages because these aircraft, relative to most other cargo
aircraft that are commercially available, have higher maximum payload and cubic
capacities, and longer range. The uniformity of the Company's current Boeing
747-200 aircraft fleet allows for standardization in maintenance and crew
training, resulting in substantial cost savings in these areas. The new 747-400
aircraft are expected to have greater operational capabilities than the 747-200
aircraft and will allow the Company to continue to maintain its low cost
structure despite their higher acquisition cost. The new aircraft's limited
maintenance requirements will provide a higher level of operational reliability
with lower maintenance costs during the early years of operation, typically for
at least five years. In addition, the acquisition of the 10 747-400 freighter
aircraft will make Atlas the largest operator of this aircraft type to date and
will enable the Company to capitalize on economies of scale from the
standardization in maintenance and crew training.
In January 1998, the Company's leases for five Boeing 747-200 from FedEx
expired and the aircraft were returned. The Company expects to make up this loss
of capacity through the utilization of one 747-200 aircraft re-delivered to the
Company upon its conversion to freighter configuration at the end of April 1998,
one 747-200 aircraft in conversion and with the delivery of five 747-400
aircraft during the second half of 1998.
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The following table describes, as of April 30, 1998, the Company's existing
fleet, aircraft currently undergoing passenger to freighter modification and the
747-400 aircraft subject to the Boeing Purchase Agreement.
FLEET PROFILE
<TABLE>
<CAPTION>
NUMBER AIRCRAFT YEAR OF
OF AIRCRAFT TYPE OWNED/LEASED MANUFACTURE
----------- -------- ------------ -----------
<S> <C> <C> <C> <C>
Existing fleet:............................. 17 747-200 Owned(1) 1974-1986
1 747-200 Leased(2) 1976
Modification aircraft:...................... 1 747-200 Owned(3) 1979
747-400 aircraft on order:.................. 10 747-400 (4) 1998-2000
</TABLE>
- ---------------
(1) Two aircraft are powered by Pratt & Whitney ("P&W") engines and 15 are
powered by GE engines.
(2) The aircraft is leased from a third party under a lease expiring in March
2010 and is powered by GE engines.
(3) This passenger aircraft is powered by GE engines and is currently undergoing
conversion to freighter configuration by Boeing. The aircraft is expected to
be placed in service early in the third quarter of 1998.
(4) The Company has agreed to purchase 10 new Boeing 747-400 freighter aircraft,
with options to purchase an additional 10 aircraft. The first 10 aircraft
are scheduled to be delivered as follows: five in 1998, two in 1999 and
three in 2000. See "-- 747-400 Aircraft Acquisition." These aircraft will be
powered by GE engines. A portion of the financing for the first five
aircraft has been secured through the EETCs. In addition, the Company may
arrange for tax-oriented long-term leases on some or all of these aircraft.
The Company has been successful in obtaining new customers, or additional
arrangements with existing customers coincident with the delivery of aircraft
into the fleet, or soon thereafter. However, from time to time, the Company
accepts delivery of aircraft that have not been committed to a particular ACMI
Contract. These aircraft have been utilized temporarily as replacement aircraft
during scheduled and unscheduled maintenance of other aircraft, as well as for
ad hoc charter arrangements. Although the Company intends to have new ACMI
Contracts in place upon delivery of aircraft, including the 747-400 aircraft,
there can be no assurance that such arrangements will have been made.
From time to time, the Company engages in discussions with third parties
regarding possible acquisitions of aircraft that could expand the Company's
operations. The Company is in discussions with third parties for the possible
acquisition of additional aircraft for delivery in 1998 and beyond.
SALES AND MARKETING
From its offices in Colorado, New York and Miami, the Company services its
air cargo customers and solicits ACMI Contract business. The Company's efforts
to obtain new ACMI Contract business focus principally on international airlines
with established air cargo customers, high operating costs and hub and spoke
systems which gather cargo at a particular location and which have the need for
long-distance capacity to move such cargo to another distribution point. On
occasion, the Company may utilize independent cargo brokers to obtain new ACMI
Contracts. The Company markets its services by guaranteeing its customers a
reliable, low-cost dedicated aircraft with the capacity to ensure the efficient
linkage of such customers' distribution points without the customers having to
purchase and maintain additional aircraft, schedule additional flights and add
other resources. The Company expects to place the 747-400 aircraft in service
with both existing and prospective customers, which the Company believes should
be willing to pay higher ACMI Contract rates to achieve operating benefits
derived from the unique performance capabilities of the 747-400 aircraft such as
its longer range, greater payload and increased fuel efficiency.
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MAINTENANCE
Due to the average age of the Company's Boeing 747-200 fleet, it is likely
that the aircraft will require greater maintenance than newer aircraft such as
the 747-400 aircraft. See "-- Aircraft." Aircraft maintenance includes, among
other things, routine daily maintenance, maintenance every six weeks (an "A
Check"), significant maintenance work every 18 months (a "C Check") and major
maintenance events every five years or 25,000 flight hours, whichever comes
later if the aircraft is over the age of 18 years, or every six years or 25,000
flight hours, whichever comes later for aircraft under the age of 18 years, with
a maximum interval in either case of nine years (a "D Check"). The Company
attempts to schedule major maintenance on its aircraft in the first quarter of
the calendar year, when the demand for air cargo capacity has historically been
lower, taking advantage of cancellations of flights by the Company's customers
that generally occur most frequently during these periods.
Pursuant to a maintenance contract with KLM (the "Maintenance Contract") in
effect until January 2005, a significant part of the regular maintenance
(principally C Checks and engine overhauls, excluding D Checks) of certain of
the Company's aircraft and their GE engines is undertaken by KLM, primarily at
its maintenance base located at Schiphol International Airport in Amsterdam, The
Netherlands. KLM supplies engineering and diagnostic testing for each aircraft
and its components in compliance with the FAA and other applicable regulations.
The Maintenance Contract provides that KLM, subject to certain terms and
conditions, will perform repairs and maintenance of the Company's aircraft on
the same basis and order of priority as repairs to its own fleet. Such service
is provided to the Company at a cost, for which a large part is a fixed rate per
flight hour, subject to a 3.5% annual escalation factor for the first five
years. P&W engines are serviced elsewhere, each at a cost based upon the actual
time and material necessary for such service. Under the terms of the Maintenance
Contract, in the event that the Company wishes to maintain more than 12 of its
aircraft under such contract, the terms of the contract are subject to
adjustment by KLM. Twelve of the Company's aircraft are currently subject to the
Maintenance Contract.
In June 1996, the Company entered into a ten year engine maintenance
agreement with GE for the engine maintenance of up to 15 aircraft powered by
CF6-50E2 engines at a fixed rate per flight hour, subject to an annual formula
increase. The agreement commenced in the third quarter of 1996 with the
acceptance of engines associated with aircraft acquired in the third and fourth
quarter of 1996. Effective in the year 2000, the Company has an option to add
not less than 40 engines to the program.
During the initial operating period, the 747-400 aircraft's airframe will
be covered under manufacturer's warranties. As a result, the Company does not
expect to incur significant maintenance expense in connection with the 747-400
airframe during the warranty period. In addition, the 747-400 airframe limited
maintenance requirements will provide a higher operational reliability with
lower maintenance costs during the early years of operation, typically for at
least five years. The Company will incur expenses associated with routine daily
maintenance of both the airframe and the engines. In connection with the GE
engine purchase agreement, the Company has also entered into an agreement with
GE to provide ongoing maintenance on the 747-400 aircraft engines at a fixed
rate per flight hour, subject to an annual formula increase.
The Company believes that fixed-cost contracts provide the most efficient
means of ensuring the continued service of its aircraft fleet and the most
reliable way by which to predict its maintenance costs; however, the Company
believes it is more cost effective for routine line maintenance and A Checks to
be performed on a time and material basis due to the frequency of such
maintenance. The Company also has a contract with B.F. Goodrich Co. to perform
maintenance on its brakes and for the replacement of tires.
The Company has an agreement, subject to acceptable rates, terms and
conditions, with Alitalia to utilize, or find other parties to utilize, an
amount of Alitalia's maintenance services with an aggregate cost of $25 million
over a five-year period ending in June 2000.
GOVERNMENTAL REGULATION
Under the Aviation Act, the DOT and the FAA exercise regulatory authority
over the Company. The DOT's jurisdiction extends primarily to economic issues
related to the air transportation industry, including,
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among other things, air carrier certification and fitness, insurance, certain
leasing arrangements, the authorization of proposed scheduled and charter
operations, tariffs, consumer protection, unfair methods of competition, unjust
discrimination and deceptive practices. The FAA's regulatory authority relates
primarily to air safety, including aircraft certification and operations, crew
licensing/training and maintenance standards.
To provide air cargo transportation services under long-term contracts with
major international airlines, the Company relies primarily on its worldwide
charter authorities. The Company requires separate DOT and FAA approval for each
long-term ACMI Contract. In addition, FAA approval is required for each of the
Company's short-term, seasonal ACMI Contracts.
In order to engage in its air transportation business, the Company is
required to maintain a Certificate of Public Convenience and Necessity (a
"CPCN") from the DOT. Prior to issuing a CPCN, the DOT examines a company's
managerial competence, financial resources and plans and compliance disposition
in order to determine whether a carrier is fit, willing and able to engage in
the transportation services it has proposed to undertake, and whether a carrier
conforms with the Aviation Act requirement that the transportation services
proposed are consistent with the public convenience and necessity. Among other
things, a company holding a CPCN must qualify as a United States citizen, which
requires that it be organized under the laws of the United States or a State,
Territory or Possession thereof; that its Chief Executive Officer and at least
two-thirds of its Board of Directors and other managing officers be United
States citizens; that not more than 25% of its voting stock be owned or
controlled, directly or indirectly, by foreign nationals; and that it not
otherwise be subject to foreign control. The DOT may impose conditions or
restrictions on such a CPCN.
The DOT has issued the Company a CPCN to engage in interstate and overseas
air transportation of property and mail, and a CPCN to engage in foreign air
transportation of property and mail between the U.S. and Taiwan. Both CPCNs are
subject to standard terms, conditions and limitations. By virtue of holding
those CPCNs, the Company possesses worldwide charter authorities. It also holds
limited-term DOT exemption authority to engage in scheduled air transportation
of property and mail between certain points in the U.S. and Hong Kong.
International air services are generally governed by a network of bilateral
civil air transport agreements in which rights are exchanged between
governments, which then select and designate air carriers authorized to exercise
such rights. Insofar as scheduled service is involved, bilateral agreements may
prohibit services to certain countries. For countries in which service is
authorized, these bilateral agreements specify the city-pair markets that may be
served; may restrict the number of carriers that may be designated; may provide
for prior approval by one or both governments of the prices the carriers may
charge; may limit frequencies or the amount of capacity to be offered in the
market; and, in various other ways, may impose limitations on the operations of
air carriers. To obtain authority under a bilateral agreement, it is often
necessary to compete against other carriers in a DOT proceeding. At the
conclusion of the proceeding, the DOT awards all route authorizations. The
provisions of bilateral agreements pertaining to charter services vary
considerably from country to country. Some agreements limit the number of
charter flights that carriers of each country may operate. The Company is
subject to various international bilateral air services agreements between the
U.S. and the countries to which the Company provides service. The Company also
operates on behalf of foreign flag air carriers between various foreign points
without serving the U.S. These services are subject to the bilateral agreements
of the respective governments. Furthermore, these services require FAA approval
but not DOT approval. The Company must obtain permission from the applicable
foreign governments to provide service to foreign points.
The Company has obtained an operating certificate issued by the FAA
pursuant to Part 121 of the Federal Aviation Regulations. The FAA has
jurisdiction over the regulation of flight operations generally, including the
licensing of pilots and maintenance personnel; the establishment of minimum
standards for training and retraining; maintenance of technical standards for
flight, communications and ground equipment; security programs; and other
matters affecting air safety. In addition, the FAA mandates certain
recordkeeping procedures. The Company must obtain and maintain FAA certificates
of airworthiness for all of its aircraft. The Company's aircraft, flight
personnel and flight and emergency procedures are subject to periodic
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<PAGE> 43
inspections and tests by the FAA. All air carriers operating to, from or within
the United States are subject to the strict scrutiny of the FAA to ensure proper
compliance with FAA regulations.
The DOT and the FAA have authority under the Aviation Safety and Noise
Abatement Act of 1979, as amended and recodified, and under the Airport Noise
and Capacity Act of 1990, to monitor and regulate aircraft engine noise. All of
the Company's existing fleet of aircraft comply with Stage III Standards -- the
highest standard issued by the FAA.
Under the FAA's Directives issued under its Aging Aircraft program, the
Company is subject to extensive aircraft examinations and may be required to
undertake structural modifications to address the problem of corrosion and
structural fatigue. In November 1994, Boeing issued Nacelle Strut Modification
Service Bulletins which have been converted into Directives by the FAA. Eleven
of the Company's Boeing 747-200 aircraft will have to be brought into compliance
with such Directives within the next three years at an estimated cost of
approximately $5.5 million. As part of the FAA's overall Aging Aircraft program,
it has issued Directives requiring certain additional aircraft modifications to
be accomplished prior to the aircraft reaching 20,000 cycles. The average cycle
time for the 18 aircraft in service is approximately 12,000 cycles and the
average cycles operated per year is approximately 800 cycles. The Company
estimates that the modification costs per aircraft will range between $2 million
and $3 million. Between now and the year 2000, only one aircraft is expected to
reach the 20,000 cycle limit and nine additional aircraft will require
modification prior to the year 2009. The remaining eight aircraft have already
undergone such modifications. The one aircraft undergoing modification to
freighter configuration will receive the Nacelle Strut Modification as part of
the freighter conversion. Other Directives have been issued that require
inspections and minor modifications to Boeing 747-200 aircraft. It is possible
that additional Directives applicable to the types of aircraft or engines
included in the Company's fleet could be issued in the future, the cost of which
could be substantial.
The Company is also subject to the regulations of the Environmental
Protection Agency regarding air quality in the U.S. With respect to aircraft
that it operates, the Company meets the fuel venting requirements and smoke
emissions standards established by the Environmental Protection Agency.
COMPETITION
The market for air cargo services is highly competitive. A number of
airlines currently provide services for themselves and for others similar to the
services offered by the Company and new airlines may be formed that would also
compete with the Company. Such airlines may have substantially greater financial
resources than the Company. The Company believes that the most important factors
for competition in the air cargo business are the range, payload and cubic
capacities of the aircraft and the price, flexibility, quality and reliability
of service. The ability of the Company to achieve its strategic plan depends in
part upon its success in convincing major international airlines that
outsourcing some portion of their air cargo business remains more cost-
effective than undertaking cargo operations with their own incremental capacity
and resources and the ability of the Company to obtain higher ACMI Contract
rates in connection with the 747-400 aircraft compared to those currently
obtained in connection with existing Boeing 747-200 aircraft. The Company
believes that such higher rates will be obtainable as a result of the unique
operating benefits associated with the 747-400 aircraft. These operational
benefits include a longer range, greater payload capability and increased fuel
efficiency relative to the Boeing 747-200 aircraft.
FUEL
Although fuel costs are typically the largest operating expense for
airlines, the Company has limited exposure to the fluctuation of fuel costs and
disruptions in supply as a result of its ACMI Contracts, which require the
customers to provide fuel for the aircraft. However, an increase in fuel costs
could reduce the Company's cost advantages because of its older Boeing 747-200
aircraft fleet, which are not as fuel-efficient as newer cargo aircraft such as
the 747-400 aircraft. In addition, to the extent the Company operates scheduled
cargo or ad hoc charter services, or positions its aircraft, it is responsible
for fuel and other costs that are normally borne by the customers under the ACMI
Contracts. In 1997, approximately 2% of the Company's
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block hours represented scheduled cargo, ad hoc charter services or positioning
its aircraft for its own account. The Company may, at times, have excess
capacity in which case it may deploy such aircraft in scheduled cargo or ad hoc
charter services.
EMPLOYEES
As of March 1, 1998, the Company had 676 employees, 382 of whom were air
crew members. The Company expects to hire additional pilots in 1998 associated
with the delivery of additional aircraft, including the 747-400 aircraft. The
Company maintains a comprehensive training program for its pilots in compliance
with FAA requirements in which each pilot regularly attends update programs. The
Company believes that its current training program can be sufficiently modified
to provide training required for pilots for the 747-400 aircraft. In addition,
as part of the Boeing Purchase Agreement, to defray a portion of the costs,
Boeing will train a limited number of the Company's pilots and crew to be
assigned to the 747-400 aircraft. However, the Company may incur incremental
costs associated with ongoing training with regard to the 747-400 aircraft.
The Company believes that its employees' participation in the growth and
profitability of its business is essential to maintain its productivity and low
cost structure, and has therefore established programs for that purpose such as
a profit sharing plan, a stock purchase plan, and a Company percentage
contribution of the employee deferral contribution to a retirement plan
(Internal Revenue Code of 1986, as amended, Section 401(k) plan). Such programs
are designed to allow employees to share financially in the Company's success
and to augment base salary levels and retirement income. The Company considers
its relations with its employees to be good.
The Company's labor relations are covered under Title II of the Railway
Labor Act of 1926, as amended, and are subject to the jurisdiction of the
National Mediation Board. None of the Company's employees is subject to a
collective bargaining agreement; however, many airline industry employees are
subject to such agreements and the Company's employees have been and are
routinely solicited by union representatives seeking to organize them. In
January 1998, the Company's pilots rejected union representation by the ALPA.
INSURANCE
The Company is vulnerable to potential losses which may be incurred in the
event of an aircraft accident. Any such accident could involve not only repair
or replacement of a damaged aircraft and its consequent temporary or permanent
loss from service, but also potential claims involving injury to persons or
property. The Company is required by the DOT to carry liability insurance on
each of its aircraft, and each of the Company's aircraft leases and ACMI
Contracts also requires the Company to carry such insurance. While the Company
carries this insurance, any extended interruption of the Company's operations
due to the loss of an aircraft could have a material adverse effect on the
Company. The Company currently maintains public liability and property damage
insurance and aircraft hull and liability insurance for each of the aircraft in
the fleet in amounts consistent with industry standards. The Company maintains
baggage and cargo liability insurance if not provided by its customers under
ACMI Contracts. Although the Company believes that its insurance coverage is
adequate, there can be no assurance that the amount of such coverage will not be
changed upon renewal or that the Company will not be forced to bear substantial
losses from accidents. Substantial claims resulting from an accident could have
a material adverse effect on the Company's financial condition and could affect
the ability of the Company to obtain insurance in the future. The Company
believes that it has good relations with its insurance providers.
FACILITIES
The Company's principal executive offices are located in a 7,000 square
foot office building owned by the Company at 538 Commons Drive, Golden,
Colorado. The Company also rents 2,500 square feet of office space in an
adjacent building.
The Company presently occupies a 22,000 square foot facility located at
John F. Kennedy International Airport ("JFK"). This facility includes
administrative offices, maintenance work areas and hangar and parts storage
facilities, as well as flight dispatch operations. The Company occupies this
facility pursuant to a lease
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agreement with Japan Airlines ("JAL") for a five-year period with two five-year
renewal rights from JAL, which began on June 1, 1995, at a monthly rate of
approximately $55,000. The Company believes the JAL facility is adequate to
support the near term growth in operations that will result from the anticipated
acquisition of additional aircraft. In addition, the Company leases 7,750 square
feet of warehouse space at JFK for the storage of aircraft components, tires and
other aircraft related equipment at a monthly lease rate of $5,000. The initial
lease term expires at the end of August 1999 and provides for two one-year
renewal option periods beginning September 1, 1999.
Due to increased operations at Miami International Airport ("MIA"), the
Company entered into a month-to-month office lease and a month-to-month
warehouse lease with Dade County, Florida in March 1997 at a combined monthly
lease rate of approximately $6,000. The leased warehouse space is used to store
aviation equipment and aircraft components used to maintain aircraft operated by
the Company. In addition, the Company recently entered into a sublease and ramp
use agreement with American Airlines, Inc. for 145,000 square feet of hangar,
office and parking space at MIA commencing July 1, 1998 and terminating November
16, 1998. The monthly lease rate is approximately $105,000, subject to an annual
escalation factor.
LEGAL PROCEEDINGS
On February 24, 1997, the Company filed a complaint for declaratory
judgment in the Colorado District Court, Jefferson County against Israel
Aircraft Industries Ltd. ("IAI") for mechanical problems the Company experienced
with respect to an aircraft the Company sub-leased from IAI. The Company is
seeking approximately $4 million in damages against IAI to be offset by the
amount, if any, the Company owes IAI pursuant to the sub-lease. IAI had the case
removed to the U.S. District Court, District of Colorado on April 21, 1997 and
has filed counterclaims alleging damages of approximately $9 million based on
claims arising from the sub-lease. The Company intends to vigorously defend
against all of IAI's claims.
In March 1997, Air Support International, Inc. ("ASI") filed a complaint
against the Company in the U.S. District Court, Eastern District of New York
alleging actual and punitive damages of approximately $13.5 million arising from
the Company's refusal to pay commissions which ASI claims it is owed for
allegedly arranging certain ACMI Contracts. The Company intends to vigorously
defend against all of ASI's claims.
While the Company is from time to time involved in litigation in the
ordinary course of its business, there are no other material legal proceedings
pending against the Company or to which any of its property is subject.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information regarding the executive
officers and directors of the Company.
<TABLE>
<CAPTION>
NAME POSITION
---- --------
<S> <C>
Michael A. Chowdry..................... Chairman of the Board, Chief Executive Officer, President and
Director
Richard H. Shuyler..................... Executive Vice President -- Strategic Planning, Treasurer and
Director
James T. Matheny....................... Senior Vice President -- Operations
R. Terrence Rendleman.................. Senior Vice President -- Flight and Technical Operations
Stanley G. Wraight..................... Senior Vice President -- Marketing
Stephen C. Nevin....................... Vice President and Chief Financial Officer
Berl Bernhard.......................... Director
Lawrence W. Clarkson................... Director
David K.P. Li.......................... Director
David T. McLaughlin.................... Director
Brian Rowe............................. Director
</TABLE>
Michael A. Chowdry, 43, has been Chairman of the Board of Directors and
Chief Executive Officer of the Company since its inception in August 1992, and
served as President from July 1995 to May 1996 and September 1997 to the
present. He is also Chairman of the Board (since its inception in April 1985) of
Aeronautics Leasing, Inc., an affiliate of the Company ("ALI"). Prior to his
founding of ALI, he formed a Colorado-based certificated commuter air carrier in
1981, and was the principal stockholder of Skybus, Inc., the certificated air
carrier successor to Frontier Horizon Airlines, from 1984 to 1985. He has been
involved in the operation, acquisition, financing and disposition of aircraft
and aviation assets since 1978.
Richard H. Shuyler, 51, has been a member of the Company's Board of
Directors since March 1995 and was Senior Vice President -- Finance, Chief
Financial Officer and Treasurer of the Company from June 1994 to February 1998.
As of February 1998, Mr. Shuyler became Executive Vice President -- Strategic
Planning of the Company and also retained his position as Treasurer. From
January 1993 to June 1994, he was Senior Vice President -- Finance and Chief
Financial Officer at Trans World Airlines, Inc. ("TWA"). From 1975 to 1992, he
held various management and executive positions with Continental Airlines, Inc.,
and various of its affiliates and corporate predecessors, including Texas
International Airlines, Inc., Texas Air Corporation and New York Air, serving as
Senior Vice President -- Finance and Chief Financial Officer at those entities.
James T. Matheny, 58, has been Senior Vice President -- Operations of the
Company since December 1992. From 1991 to 1992, he was Director -- Quality
Assurance and subsequently, Vice President -- Maintenance and Engineering for
Eastern Airlines, Inc. From 1961 to 1991, he served in the United States Navy,
rising to Commanding Officer of an aircraft squadron, two air wings and an
aircraft carrier, and Operations Officer of the Seventh Fleet based in Japan.
R. Terrence Rendleman, 53, has been Senior Vice President -- Technical
Services and Flight Operations since January 1, 1997. From June 1993 to December
1996, he was Senior Vice President for Maintenance Operations at United
Airlines. Prior to that, he served as Senior Vice President -- Technical
Operations at Northwest Airlines from April 1985 to June 1993. From January 1983
to April 1985, he served as Vice President of Engineering and Maintenance at
Braniff Airlines, where he was a Boeing 727 pilot from 1979 to 1983.
Stephen C. Nevin, 48, has been Vice President and Chief Financial Officer
since February 16, 1998. From May 1994 to January 1998, he was Senior Vice
President of Finance and Chief Financial Officer at AirTran Holdings, Inc. From
December 1982 to April 1994, he served as a Vice President at McDonnell Douglas
Finance Corporation.
Stanley G. Wraight, 51, has been Senior Vice President -- Marketing since
May 1997. From 1995 to 1997, he led KLM's worldwide sales efforts. From 1965 to
1995, he was employed by KLM in various capacities, including Vice President of
KLM's sales, marketing and operations in Asia, Australia and the Middle East.
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<PAGE> 47
Berl Bernhard, 68, has been a member of the Washington based law firm of
Verner, Liipfert, Bernhard, McPherson and Hand since 1960 and has served as its
Chairman since 1982. He was nominated by President Kennedy and confirmed by the
Senate in 1961 to serve as Staff Director of the U.S. Commission on Civil
Rights. He was Special Advisor to Secretary of State Dean Rusk and Under
Secretary of State W. Averell Harriman (1963-65), and was Senior Advisor to
Secretary of State Edmund S. Muskie (1980-81). He also served as a Trustee of
Dartmouth College (1974-1984). He acted as special counsel to the Trustees of
Eastern Airlines and special counsel to the Chairman of Northwest Airlines, and
served as Trustee of the Federal City Council from 1988-1992. Mr. Bernhard
served as Chairman of the Aspen Institute from 1991-1996 as well as Chairman of
its Executive Committee. He was a director of Uniroyal Chemical Company, Inc.
and UNC Inc.
Lawrence W. Clarkson, 60, has been President of Boeing Enterprises since
February 1997, where he is responsible for establishing and directing new
commercial airplane-related business acquisitions, joint ventures and other
relationships outside of the traditional business scope of Boeing. Since April
1992 he has also been a Senior Vice President of Boeing. He previously held
various management and executive positions with Boeing which he joined in 1987.
Prior to that, for twenty years he held various management and executive
positions with Pratt & Whitney. He serves as Vice Chairman of the National
Bureau of Asian Research, Chairman of U.S.-Pacific Economic Cooperation Council
and Chairman of the National Center for APEC, and as a Director of the
U.S.-China Business Council, the National Association of Manufacturers and the
Atlantic Council. He also serves on the U.S.-Japan Joint High Level Advisory
Panel and is a member of the Council on Foreign Relations, the Pacific Council
on International Policy and the National Research Council -- Committee on Japan.
David K.P. Li, 58, has been a member of the Company's Board of Directors
since April 16, 1998. He has been Chairman of the Bank of East Asia, Limited
since 1997 and a director and the Chief Executive of the Bank of East Asia,
Limited since 1981. He is a director of Campbell Soup Company, CATIC Shenzhen
Holdings Limited, CBS Corporation, Chelsfield Plc., China Merchants China Direct
Investments Limited, China Overseas Land & Investment Limited, Dow Jones &
Company, Inc., Guangnan (Holdings) Limited, The Hong Kong and China Gas Company
Limited. The Hong Kong and Shanghai Hotels, Limited, Hong Kong Interbank
Clearing Limited, The Hong Kong Mortgage Corporation Limited, Hong Kong
Telecommunications Limited (Deputy Chairman), KTP Holdings Limited, New World
Infrastructure Limited, PowerGen Plc., San Miguel Brewery Hong Kong Limited,
Sime Darby Berhad and Sime Darby Hong Kong Limited, South China Morning Post
(Holdings) Limited and Vitasoy International Holdings Limited. Mr. Li serves on
the international advisory boards of Avon Products Inc., Bank Austria, Bank of
Montreal, Carlos P. Romulo Foundation for Peace and Development, Daimler-Benz
AG, Federal Reserve Bank of New York's International Capital Markets Advisory
Committee, Gulfstream Aerospace, IBM, Jardine Fleming Asian Property Company,
Lafarge, PowerGen and Rolls-Royce Plc.
David T. McLaughlin, 66, has been a member of the Company's Board of
Directors since September 1995. He has been President and Chief Executive
Officer of The Aspen Institute since his appointment in 1988, as well as
Chairman of its Board of Trustees since 1994. From 1972 to 1977 he served as
Chief Executive Officer of The Toro Company, and served as its Chairman from
1977 to 1981. From 1981 to 1987, he served as president of Dartmouth College. He
is currently a director of ARCO, Chase Manhattan Corporation, Westinghouse
Electric Corporation, CBS Inc., Standard Fusee Corporation, and PartnerRe, Inc.
and serves as a member of the Board of Trustees of the Asia Foundation Center
for Asian Pacific Affairs.
Brian Rowe, 66, has been a member of the Company's Board of Directors since
March 1995. He retired as Chairman of the General Electric Aircraft Engines
division of the General Electric Company in January 1995, a position he held
since September 1993, where he was in charge of world-wide sales of GE engines.
Prior to that, he held various management and executive positions with General
Electric, which he joined in 1957, including President of General Electric
Aircraft Engines (from 1979 to 1993), Vice President and General Manager of the
Aircraft Engineering Division (from 1976 to 1979), Vice President and General
Manager of the Airline Programs Division (from 1974 to 1976) and Vice President
and General Manager of the Commercial Engine Projects Division (from 1972 to
1974).
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DESCRIPTION OF THE NEW CERTIFICATES
The New Certificates will be issued pursuant to three separate Pass Through
Trust Agreements. The following summary describes all material terms of the New
Certificates and the Pass Through Trust Agreements. The summary does not purport
to be complete and is qualified in its entirety by reference to all of the
provisions of the New Certificates, the Pass Through Trust Agreements, the
Deposit Agreements, the Escrow Agreements, the Intercreditor Agreement and the
pass through trust agreements applicable to the Successor Trusts. Capitalized
terms used herein but not defined herein have the meanings ascribed to them in
the Pass Through Trust Agreements.
Except as otherwise indicated, the following summary relates to each of the
Trusts and the New Certificates issued by each Trust. The terms and conditions
governing each of the Trusts will be substantially the same, except as described
under " -- Subordination" below and except that the principal amount and
scheduled principal repayments of the Equipment Notes held by each Trust and the
interest rate and maturity date of the Equipment Notes held by each Trust will
differ.
GENERAL
The New Certificates of each Trust will be issued in fully registered form
only and will be subject to the provisions described below under
" -- Book-Entry; Delivery and Form". Each New Certificate will represent a
fractional undivided interest in the Trust created by the Pass Through Trust
Agreement pursuant to which such New Certificate is issued. The Trust Property
of each Trust will consist of (i) subject to the Intercreditor Agreement,
Equipment Notes acquired under the Note Purchase Agreement and issued at Atlas'
election in connection with the delivery of each Aircraft during the Delivery
Period either (a) on a nonrecourse basis by an Owner Trustee in each separate
leveraged lease transaction with respect to each Leased Aircraft to finance a
portion of the purchase price of such Leased Aircraft by the Owner Trustee or on
a recourse basis by a subsidiary of Atlas, in which case the applicable Leased
Aircraft will be leased to Atlas or (b) on a recourse basis by Atlas in
connection with each separate secured loan transaction with respect to each
Owned Aircraft to finance a portion of the purchase of such Owned Aircraft by
Atlas, (ii) the rights of such Trust to acquire Equipment Notes under the Note
Purchase Agreement, (iii) the rights of such Trust under the applicable Escrow
Agreement to request the Escrow Agent to withdraw from the Depositary funds
sufficient to enable such Trust to purchase Equipment Notes on the delivery of
each Aircraft during the Delivery Period, (iv) the rights of such Trust under
the Intercreditor Agreement (including all monies receivable in respect of such
rights), (v) all monies receivable under the Liquidity Facility for such Trust
and (vi) funds from time to time deposited with the Trustee in accounts relating
to such Trust. New Certificates will represent fractional undivided interests in
the related Trust and will be issued only in minimum denominations of $100,000
and integral multiples of $1,000 in excess thereof, except that one New
Certificate of each Trust may be issued in a different denomination.
On the Transfer Date, each of the Original Trusts will transfer and assign
all of its assets and rights to a substantially identical Successor Trust, and
the New Trustee will assume the obligations of the related Original Trustee
under each transaction document to which such Original Trustee was a party. Upon
the effectiveness of such transfer, assignment and assumption, each of the
Original Trusts will be liquidated and each of the New Certificates will
represent the same percentage interest in the Successor Trust as it represented
in the Original Trust immediately prior to such transfer, assignment and
assumption. Unless the context otherwise requires, all references in this
Prospectus to the Trusts, the Trustees, the Pass Through Trust Agreements and
similar terms shall be applicable to the Original Trusts until the effectiveness
of such transfer, assignment and assumption and thereafter shall be applicable
to the Successor Trusts. See
" -- Liquidation of Original Trusts."
The New Certificates represent interests in the respective Trusts, and all
payments and distributions thereon will be made only from the Trust Property of
the related Trust. The New Certificates do not represent an interest in or
obligation of Atlas, the Trustees, any of the Loan Trustees or Owner Trustees in
their individual capacities, any Owner Participant or any affiliate of any
thereof.
41
<PAGE> 49
Pursuant to the Escrow Agreement applicable to each Trust, the
Certificateholders of such Trust as holders of the Escrow Receipts affixed to
each New Certificate are entitled to certain rights with respect to the Deposits
relating to such Trust. Accordingly, any transfer of a New Certificate will have
the effect of transferring the corresponding rights with respect to the
Deposits, and rights with respect to the Deposits may not be separately
transferred by Certificateholders. Rights with respect to the Deposits and the
Escrow Agreement relating to a Trust, except for the right to request
withdrawals for the purchase of Equipment Notes, will not constitute Trust
Property of such Trust.
SUBORDINATION
Pursuant to the Intercreditor Agreement to which the Trustees, the
Subordination Agent and the Liquidity Providers are parties, on each
Distribution Date, so long as no Triggering Event shall have occurred (whether
or not continuing), all payments received by the Subordination Agent in respect
of Equipment Notes and certain other payments under the related Indenture will
be distributed under the Intercreditor Agreement in the following order: (1) to
the Liquidity Providers to the extent required to pay certain Liquidity
Obligations; (2) to the Class A Trustee to the extent required to pay Expected
Distributions on the Class A Certificates; (3) to the Class B Trustee to the
extent required to pay Expected Distributions on the Class B Certificates; (4)
to the Class C Trustee to the extent required to pay Expected Distributions on
the Class C Certificates; (5) if Class D Certificates have been issued, to the
Class D Trustee to the extent required to pay "Expected Distributions" (to be
defined in a manner equivalent to the definition for other Classes of
Certificates) on the Class D Certificates; and (6) to the Subordination Agent
and each Trustee for the payment of certain fees and expenses.
Upon the occurrence of a Triggering Event and at all times thereafter, all
payments received by the Subordination Agent in respect of the Equipment Notes
and certain other payments will be distributed under the Intercreditor Agreement
in the following order: (1) to the Subordination Agent, each Trustee and certain
other parties in payment of the Administration Expenses and to the Liquidity
Providers in payment of the Liquidity Obligations; (2) to the Subordination
Agent, each Trustee and each Certificateholder for certain fees, taxes, charges
and other amounts payable to the Subordination Agent, any Trustee or any
Certificateholder; (3) to the Class A Trustee to the extent required to pay
Adjusted Expected Distributions on the Class A Certificates; (4) to the Class B
Trustee to the extent required to pay Adjusted Expected Distributions on the
Class B Certificates; (5) to the Class C Trustee to the extent required to pay
Adjusted Expected Distributions on the Class C Certificates; and (6) if Class D
Certificates have been issued, to the Class D Trustee to the extent required to
pay "Adjusted Expected Distributions" (to be defined in a manner equivalent to
the definition for other Classes of Certificates) on the Class D Certificates.
For purposes of calculating Expected Distributions or Adjusted Expected
Distributions with respect to the New Certificates of any Trust, any premium
paid on the Equipment Notes held in such Trust that has not been distributed to
the Certificateholders of such Trust (other than such premium or a portion
thereof applied to the payment of interest on the New Certificates of such Trust
or the reduction of the Pool Balance (as defined herein) of such Trust) shall be
added to the amount of Expected Distributions or Adjusted Expected
Distributions.
The priority of distributions after a payment default under any Equipment
Note or a Triggering Event will have the effect in certain circumstances of
requiring the distribution to more senior Classes of Certificates of payments
received in respect of one or more junior series of Equipment Notes. If this
should occur, the interest accruing on the remaining Equipment Notes would in
the aggregate be less than the interest accruing on the remaining New
Certificates because such New Certificates include a relatively greater
proportion of junior Classes with relatively higher interest rates. As a result
of this possible interest shortfall, the holders of one or more junior Classes
of New Certificates may not receive the full amount due to them after a
Triggering Event even if all Equipment Notes are eventually paid in full.
Payments in respect of the Deposits relating to a Trust will not be subject
to the subordination provisions of the Intercreditor Agreement.
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<PAGE> 50
PAYMENTS AND DISTRIBUTIONS
Payments of interest on the Deposits with respect to each Trust and
payments of principal, premium (if any) and interest on the Equipment Notes or
with respect to other Trust Property held in each Trust will be distributed by
the Paying Agent (as defined herein) (in the case of the Deposits) or by the
Trustee (in the case of Trust Property of such Trust) to Certificateholders of
such Trust on the date receipt of such payment is confirmed, except in the case
of certain types of Special Payments.
The Deposits held with respect to each Trust and the Equipment Notes held
in each Trust will accrue interest at the applicable rate per annum for New
Certificates to be issued by such Trust set forth on the cover page of this
Prospectus, payable on January 2 and July 2 of each year, commencing on July 2,
1998 (or, in the case of Equipment Notes issued after such date, commencing with
the first such date to occur after initial issuance thereof). Such interest
payments will be distributed to Certificateholders of such Trust on each such
date until the final Distribution Date for such Trust, subject in the case of
payments on the Equipment Notes to the Intercreditor Agreement. Interest is
calculated on the basis of a 360-day year consisting of twelve 30-day months.
Payments of interest applicable to the New Certificates to be issued by each of
the Trusts will be supported by a separate Liquidity Facility to be provided by
the applicable Liquidity Provider for the benefit of the holders of such New
Certificates in an aggregate amount sufficient to pay interest thereon at the
Stated Interest Rate for such Trust on up to three successive Regular
Distribution Dates (without regard to any future payments of principal on such
New Certificates), except that the Liquidity Facility with respect to such Trust
will not cover interest payable by the Depositary on the Deposits relating to
such Trust. The Liquidity Facility for any Class of New Certificates does not
provide for drawings thereunder to pay for principal of or premium on the New
Certificates of such Class, any interest on the New Certificates of such Class
in excess of the applicable Stated Interest Rate, or, notwithstanding the
subordination provisions of the Intercreditor Agreement, principal of or
interest or premium on the New Certificates of any other Class. Therefore, only
the holders of the New Certificates to be issued by a particular Trust will be
entitled to receive and retain the proceeds of drawings under the Liquidity
Facility for such Trust. See "Description of the Liquidity Facilities."
Payments of principal of the Equipment Notes held in each Trust are
scheduled to be received by the Trustee on January 2 and July 2 in certain years
depending upon the terms of the Equipment Notes held in such Trust, commencing
on January 2, 1999. Scheduled payments of interest on the Deposits and of
interest or principal on the Equipment Notes are herein referred to as
"Scheduled Payments", and January 2 and July 2 of each year are herein referred
to as "Regular Distribution Dates". See "Description of the Equipment
Notes -- Principal and Interest Payments". The "Final Maturity Date" for the
Class A Certificates is July 2, 2019, for the Class B Certificates is July 2,
2015 and for the Class C Certificates is July 2, 2011.
The Paying Agent with respect to each Escrow Agreement will distribute on
each Regular Distribution Date to the Certificateholders of the Trust to which
such Escrow Agreement relates all Scheduled Payments received in respect of the
related Deposits, the receipt of which is confirmed by the Paying Agent on such
Regular Distribution Date. The Trustee of each Trust will distribute, subject to
the Intercreditor Agreement, on each Regular Distribution Date to the
Certificateholders of such Trust all Scheduled Payments received in respect of
Equipment Notes held on behalf of such Trust, the receipt of which is confirmed
by the Trustee on such Regular Distribution Date. Each Certificateholder of each
Trust will be entitled to receive a pro rata share of any distribution in
respect of Scheduled Payments of interest on the Deposits relating to such Trust
and, subject to the Intercreditor Agreement, of principal or interest on
Equipment Notes held on behalf of such Trust. Each such distribution of
Scheduled Payments will be made by the applicable Paying Agent or Trustee to the
Certificateholders of record of the relevant Trust on the Record Date (as
defined herein) applicable to such Scheduled Payment subject to certain
exceptions. If a Scheduled Payment is not received by the applicable Paying
Agent or Trustee on a Regular Distribution Date but is received within five days
thereafter, it will be distributed on the date received to such holders of
record. If it is received after such five-day period, it will be treated as a
Special Payment and distributed as described below.
Any payment in respect of, or any proceeds of, any Equipment Note or the
Trust Indenture Estate under (and as defined in) each Indenture other than a
Scheduled Payment (each, a "Special Payment") will be
43
<PAGE> 51
scheduled to be distributed on, in the case of an early redemption or a purchase
of any Equipment Note, the date of such early redemption or purchase (which
shall be a Business Day), and otherwise on the Business Day specified for
distribution of such Special Payment pursuant to a notice delivered by each
Trustee as soon as practicable after the Trustee has received funds for such
Special Payment (each a "Special Distribution Date"), subject to the
Intercreditor Agreement. If an Aircraft is not delivered on the scheduled (or
rescheduled) delivery date, the portion of the Deposits relating to such
Aircraft, together with accrued interest thereon, shall be withdrawn and
distributed to the Certificateholders upon not less than 15 days' notice,
unless, subject to certain conditions, Atlas elects to extend such delivery date
to a date not later than the Delivery Period Termination Date. Any unused
Deposits to be distributed after the Delivery Period Termination Date or the
occurrence of a Triggering Event, together with accrued and unpaid interest
thereon and any premium payable by Atlas (each, also a "Special Payment"), will
be distributed on a date 35 days after the Paying Agent has received notice of
the event requiring such distribution (also a "Special Distribution Date")
unless such date is within 10 days before or after a Regular Distribution Date,
in which case such Special Payment shall be made on such Regular Distribution
Date. Each Paying Agent, in the case of the Deposits, and each Trustee, in the
case of Trust Property or any premium payable by Atlas in connection with
certain distributions of unused Deposits, will mail a notice to the
Certificateholders of the applicable Trust stating the scheduled Special
Distribution Date, the related Record Date, the amount of the Special Payment
and the reason for the Special Payment. In the case of a redemption or purchase
of the Equipment Notes held in the related Trust or any distribution of unused
Deposits after the Delivery Period Termination Date or the occurrence of a
Triggering Event, such notice will be mailed not less than 15 days prior to the
date such Special Payment is scheduled to be distributed, and in the case of any
other Special Payment, such notice will be mailed as soon as practicable after
the Trustee has confirmed that it has received funds for such Special Payment.
Each distribution of a Special Payment, other than a final distribution, on a
Special Distribution Date for any Trust will be made by the Paying Agent or the
Trustee, as applicable, to the Certificateholders of record of such Trust on the
Record Date applicable to such Special Payment. See "-- Indenture Defaults and
Certain Rights Upon an Indenture Default" and "Description of the Equipment
Notes -- Redemption."
Each Pass Through Trust Agreement requires that the Trustee establish and
maintain, for the related Trust and for the benefit of the Certificateholders of
such Trust, one or more non-interest bearing accounts (the "Certificate
Account") for the deposit of payments representing Scheduled Payments received
by such Trustee. Each Pass Through Trust Agreement requires that the Trustee
establish and maintain, for the related Trust and for the benefit of the
Certificateholders of such Trust, one or more accounts (the "Special Payments
Account") for the deposit of payments representing Special Payments received by
such Trustee, which shall be non-interest bearing except in certain
circumstances where the Trustee may invest amounts in such account in certain
permitted investments. Pursuant to the terms of each Pass Through Trust
Agreement, the Trustee is required to deposit any Scheduled Payments relating to
the applicable Trust received by it in the Certificate Account of such Trust and
to deposit any Special Payments so received by it in the Special Payments
Account of such Trust. All amounts so deposited will be distributed by the
Trustee on a Regular Distribution Date or a Special Distribution Date, as
appropriate.
Each Escrow Agreement requires that the Paying Agent establish and
maintain, for the benefit of the Receiptholders (as defined herein), one or more
accounts (the "Paying Agent Account"), which shall be non-interest bearing.
Pursuant to the terms of the Escrow Agreement, the Paying Agent is required to
deposit interest on Deposits relating to such Trust and any unused Deposits
withdrawn by the Escrow Agent in the Paying Agent Account. All amounts so
deposited will be distributed by the Paying Agent on a Regular Distribution Date
or Special Distribution Date, as appropriate.
The final distribution for each Trust will be made only upon presentation
and surrender of the New Certificates for such Trust at the office or agency of
the Trustee specified in the notice given by the Trustee of such final
distribution. The Trustee will mail such notice of the final distribution to the
Certificateholders of such Trust, specifying the date set for such final
distribution and the amount of such distribution. See "-- Termination of the
Trusts" below. Distributions in respect of New Certificates issued in global
form will be made as described in "-- Book-Entry; Delivery and Form" below.
44
<PAGE> 52
If any Regular Distribution Date or Special Distribution Date is a
Saturday, Sunday or other day on which commercial banks are authorized or
required to close in New York, New York, Chicago, Illinois, Wilmington, Delaware
or Denver, Colorado (any other day being a "Business Day"), distributions
scheduled to be made on such Regular Distribution Date or Special Distribution
Date will be made on the next succeeding Business Day without additional
interest.
POOL FACTORS
The "Pool Balance" for each Trust or for the New Certificates issued by any
Trust indicates, as of any date, the original aggregate face amount of the New
Certificates of such Trust less the aggregate amount of all payments made in
respect of the New Certificates of such Trust or in respect of Deposits relating
to such Trust other than payments made in respect of interest or premium or
reimbursement of any costs and expenses in connection therewith. The Pool
Balance for each Trust or for the New Certificates issued by any Trust as of any
Regular Distribution Date or Special Distribution Date shall be computed after
giving effect to any special distribution with respect to unused Deposits,
payment of principal of the Equipment Notes or payment with respect to other
Trust Property held in such Trust and the distribution thereof to be made on
that date.
The "Pool Factor" for each Trust as of any Regular Distribution Date or
Special Distribution Date is the quotient (rounded to the seventh decimal place)
computed by dividing (i) the Pool Balance by (ii) the original aggregate face
amount of the New Certificates of such Trust. The Pool Factor for each Trust or
for the New Certificates issued by any Trust as of any Regular Distribution Date
or Special Distribution Date shall be computed after giving effect to any
special distribution with respect to unused Deposits, payment of principal of
the Equipment Notes or payment with respect to other Trust Property held in such
Trust and the distribution thereof to be made on that date. The Pool Factor for
each Trust will be 1.0000000 on the date of issuance of the New Certificates;
thereafter, the Pool Factor for each Trust will decline as described herein to
reflect reductions in the Pool Balance of such Trust. The amount of a
Certificateholder's pro rata share of the Pool Balance of a Trust can be
determined by multiplying the par value of the holder's New Certificate of such
Trust by the Pool Factor for such Trust as of the applicable Regular
Distribution Date or Special Distribution Date. Notice of the Pool Factor and
the Pool Balance for each Trust will be mailed to Certificateholders of such
Trust on each Regular Distribution Date and Special Distribution Date.
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<PAGE> 53
The following table sets forth an illustrative aggregate principal
amortization schedule for the Equipment Notes held in each Trust (the "Assumed
Amortization Schedule") and resulting Pool Factors with respect to such Trust.
The actual aggregate principal amortization schedule applicable to a Trust and
the resulting Pool Factors with respect to such Trust may differ from those set
forth below, since the amortization schedule for the Equipment Notes issued with
respect to an Aircraft may vary from such illustrative amortization schedule so
long as it complies with the Mandatory Economic Terms. In addition, the table
set forth below assumes that each Aircraft is delivered in the month scheduled
for its delivery (see "Description of the Aircraft and the Appraisals -- The
Appraisals" for the delivery schedule), that Equipment Notes in the maximum
principal amount in respect of all of the Aircraft are purchased by the Trusts
and that no early redemption or purchase, or default in the payment of
principal, in respect of any Equipment Notes occurs. Actual circumstances may
vary from these assumptions, which would result in differences in the aggregate
principal amortization schedule applicable to a Trust and in the resulting Pool
Factors.
<TABLE>
<CAPTION>
1998-1 A TRUST 1998-1 B TRUST 1998-C TRUST
EQUIPMENT EQUIPMENT EQUIPMENT
NOTES SCHEDULED 1998-1 A TRUST NOTES SCHEDULED 1998-1 B TRUST NOTES SCHEDULED
PAYMENTS OF EXPECTED PAYMENTS OF EXPECTED PAYMENTS OF
DATE PRINCIPAL POOL FACTOR PRINCIPAL POOL FACTOR PRINCIPAL
- -------------------------------- --------------- -------------- --------------- -------------- ---------------
<S> <C> <C> <C> <C> <C>
January 2, 1999 $ 2,397,500 0.9920151 $ 3,848,330 0.9666756 $ 9,840,000
July 2, 1999 1,202,214 0.9880111 462,390 0.9626716 1,857,739
January 2, 2000 4,802,928 0.9720149 924,780 0.9546635 8,946,554
July 2, 2000 1,202,214 0.9680109 462,390 0.9506595 1,929,568
January 2, 2001 4,802,928 0.9520147 924,780 0.9426514 9,654,226
July 2, 2001 1,202,214 0.9480107 462,390 0.9386474 1,977,429
January 2, 2002 4,802,928 0.9320145 924,780 0.9306393 10,368,798
July 2, 2002 1,202,214 0.9280105 462,390 0.9266353 2,013,610
January 2, 2003 3,600,714 0.9160183 1,225,560 0.9160226 10,351,430
July 2, 2003 2,404,428 0.9080103 924,780 0.9080146 2,042,816
January 2, 2004 3,600,714 0.8960181 1,384,890 0.8960222 10,981,357
July 2, 2004 2,404,428 0.8880101 924,780 0.8880141 2,067,365
January 2, 2005 3,600,714 0.8760178 4,658,111 0.8476775 8,545,109
July 2, 2005 2,404,428 0.8680099 924,780 0.8396695 2,088,574
January 2, 2006 3,600,714 0.8560176 10,807,954 0.7460787 4,557,132
July 2, 2006 2,404,428 0.8480097 1,061,139 0.7368898 2,107,268
January 2, 2007 3,600,714 0.8360174 11,521,480 0.6371204 5,340,120
July 2, 2007 2,404,428 0.8280095 1,314,296 0.6257393 2,123,996
January 2, 2008 3,600,714 0.8160172 12,161,923 0.5204239 6,353,247
July 2, 2008 2,404,428 0.8080092 1,592,973 0.5066297 2,139,143
January 2, 2009 3,600,714 0.7960170 9,774,504 0.4219880 7,440,749
July 2, 2009 2,404,428 0.7880090 1,896,919 0.4055618 2,152,993
January 2, 2010 3,600,714 0.7760168 4,479,836 0.3667689 8,300,777
July 2, 2010 2,404,428 0.7680088 2,225,904 0.3474939 0
January 2, 2011 9,843,155 0.7352261 5,385,566 0.3008579 0
July 2, 2011 3,716,432 0.7228484 2,579,723 0.2785190 0
January 2, 2012 22,558,848 0.6477159 7,766,713 0.2112637 0
July 2, 2012 4,125,102 0.6339772 2,958,186 0.1856474 0
January 2, 2013 26,190,164 0.5467505 7,473,591 0.1209304 0
July 2, 2013 4,546,731 0.5316075 3,361,120 0.0918250 0
January 2, 2014 27,026,626 0.4415950 10,604,042 0.0000000 0
July 2, 2014 4,980,851 0.4250062 0 0.0000000 0
January 2, 2015 30,758,116 0.3225659 0 0.0000000 0
July 2, 2015 5,427,034 0.3044911 0 0.0000000 0
January 2, 2016 29,278,052 0.2069801 0 0.0000000 0
July 2, 2016 5,884,893 0.1873804 0 0.0000000 0
January 2, 2017 13,015,118 0.1440334 0 0.0000000 0
July 2, 2017 6,354,074 0.1228711 0 0.0000000 0
January 2, 2018 36,892,528 0.0000000 0 0.0000000 0
<CAPTION>
1998-1 C TRUST
EXPECTED
DATE POOL FACTOR
- -------------------------------- --------------
<S> <C>
January 2, 1999 0.9201169
July 2, 1999 0.9050354
January 2, 2000 0.8324055
July 2, 2000 0.8167409
January 2, 2001 0.7383659
July 2, 2001 0.7223127
January 2, 2002 0.6381368
July 2, 2002 0.6217899
January 2, 2003 0.5377549
July 2, 2003 0.5211709
January 2, 2004 0.4320220
July 2, 2004 0.4152387
January 2, 2005 0.3458678
July 2, 2005 0.3289124
January 2, 2006 0.2919167
July 2, 2006 0.2748094
January 2, 2007 0.2314573
July 2, 2007 0.2142142
January 2, 2008 0.1626373
July 2, 2008 0.1452713
January 2, 2009 0.0848658
July 2, 2009 0.0673874
January 2, 2010 0.0000000
July 2, 2010 0.0000000
January 2, 2011 0.0000000
July 2, 2011 0.0000000
January 2, 2012 0.0000000
July 2, 2012 0.0000000
January 2, 2013 0.0000000
July 2, 2013 0.0000000
January 2, 2014 0.0000000
July 2, 2014 0.0000000
January 2, 2015 0.0000000
July 2, 2015 0.0000000
January 2, 2016 0.0000000
July 2, 2016 0.0000000
January 2, 2017 0.0000000
July 2, 2017 0.0000000
January 2, 2018 0.0000000
</TABLE>
The actual schedule of principal payments and the resulting schedule of
Pool Balances and Pool Factors may differ from that set forth above. In
addition, the Pool Factor and Pool Balance of each Trust will be recomputed if
there has been an early redemption, purchase, or default in the payment of
principal or interest in respect of one or more of the Equipment Notes held in a
Trust, as described in "-- Indenture Defaults and Certain Rights Upon an
Indenture Default"
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<PAGE> 54
and "Description of the Equipment Notes -- Redemption," or a special
distribution attributable to unused Deposits after the Delivery Period
Termination Date or the occurrence of a Triggering Event, as described in
"Description of the Deposit Agreements." In the event of (i) any such change in
the scheduled repayments or (ii) any such redemption, purchase, default or
special distribution, the Pool Factors and the Pool Balances of each Trust so
affected will be recomputed after giving effect thereto and notice thereof will
be mailed to the Certificateholders of such Trust promptly after any such change
in scheduled repayments or after the occurrence of any event described in clause
(ii), as the case may be.
REPORTS TO CERTIFICATEHOLDERS
On each Distribution Date, the applicable Paying Agent and Trustee will
include with each distribution by it of a Scheduled Payment or Special Payment
to Certificateholders of the related Trust a statement, giving effect to such
distribution to be made on such Distribution Date, setting forth the following
information (per $1,000 aggregate principal amount of New Certificate for such
Trust, as to (ii), (iii), (iv) and (v) below):
(i) the aggregate amount of such funds distributed on such
Distribution Date under the Pass Through Trust Agreement and the Escrow
Agreement, indicating the amount allocable to each source;
(ii) the amount of such distribution under the Pass Through Trust
Agreement allocable to principal and the amount allocable to premium
(including any premium paid by Atlas with respect to unused Deposits), if
any;
(iii) the amount of such distribution under the Pass Through Trust
Agreement allocable to interest;
(iv) the amount of such distribution under the Escrow Agreement
allocable to interest;
(v) the amount of such distribution under the Escrow Agreement
allocable to unused Deposits (if any); and
(vi) the Pool Balance and the Pool Factor for such Trust.
So long as the New Certificates are registered in the name of DTC or its
nominee, on the Record Date prior to each Distribution Date, the applicable
Trustee will request from DTC a securities position listing setting forth the
names of all DTC Participants (as defined herein) reflected on DTC's books as
holding interests in the New Certificates on such record date. On each
Distribution Date, the applicable Paying Agent and Trustee will mail to each
such DTC Participant the statement described above and will make available
additional copies as requested by such DTC Participant for forwarding to New
Certificateholders.
In addition, after the end of each calendar year, the applicable Trustee
and Paying Agent will furnish to each Certificateholder of each Trust at any
time during the preceding calendar year a report containing the sum of the
amounts determined pursuant to clauses (i), (ii), (iii), (iv) and (v) above with
respect to the Trust for such calendar year or, in the event such person was a
Certificateholder during only a portion of such calendar year, for the
applicable portion of such calendar year, and such other items as are readily
available to such Trustee and which a Certificateholder shall reasonably request
as necessary for the purpose of such Certificateholder's preparation of its U.S.
federal income tax returns. Such report and such other items shall be prepared
on the basis of information supplied to the applicable Trustee by the DTC
Participants and shall be delivered by such Trustee to such DTC Participants to
be available for forwarding by such DTC Participants to New Certificateholders
in the manner described above. At such time, if any, as the New Certificates are
issued in the form of definitive certificates, the applicable Paying Agent and
Trustee will prepare and deliver the information described above to each
Certificateholder of record of each Trust as the name and period of ownership of
such Certificateholder appears on the records of the registrar of the New
Certificates.
INDENTURE DEFAULTS AND CERTAIN RIGHTS UPON AN INDENTURE DEFAULT
An event of default under an Indenture (an "Indenture Default") will, with
respect to the Leased Aircraft Indentures, include an event of default under the
related Lease (a "Lease Event of Default"). See "Description of the Equipment
Notes -- Indenture Defaults, Notice and Waiver." Since the Equipment Notes
issued under an Indenture will be held in each Trust, a continuing Indenture
Default under such Indenture would affect the Equipment Notes held by each
Trust. There are no cross-default provisions in the Indentures or in the Leases
(unless otherwise agreed between an Owner Participant and Atlas). Consequently,
47
<PAGE> 55
events resulting in an Indenture Default under any particular Indenture may or
may not result in an Indenture Default under any other Indenture, and a Lease
Event of Default under any particular Lease may or may not constitute a Lease
Event of Default under any other Lease. If an Indenture Default occurs in fewer
than all of the Indentures, notwithstanding the treatment of Equipment Notes
issued under any Indenture under which an Indenture Default has occurred,
payments of principal and interest on the Equipment Notes issued pursuant to
Indentures with respect to which an Indenture Default has not occurred will
continue to be distributed to the holders of the New Certificates as originally
scheduled, subject to the Intercreditor Agreement. See "Description of the
Intercreditor Agreement -- Priority of Distributions."
With respect to each Leased Aircraft, the applicable Owner Trustee and
Owner Participant will, under the related Leased Aircraft Indenture, have the
right under certain circumstances to cure Indenture Defaults that result from
the occurrence of a Lease Event of Default under the related Lease. If the Owner
Trustee or the Owner Participant exercises any such cure right, the Indenture
Default will be deemed to have been cured.
In the event that the same institution acts as Trustee of multiple Trusts,
in the absence of instructions from the Certificateholders of any such Trust,
such Trustee could be faced with a potential conflict of interest upon an
Indenture Default. In such event, each Trustee has indicated that it would
resign as Trustee of one or all such Trusts, and a successor trustee would be
appointed in accordance with the terms of the applicable Pass Through Trust
Agreement. Wilmington Trust Company will be the initial Trustee under each
Trust.
Upon the occurrence and continuation of an Indenture Default, the
Controlling Party will direct the Indenture Trustee under such Indenture in the
exercise of remedies thereunder and may accelerate and sell all (but not less
than all) of the Equipment Notes issued under such Indenture to any person,
subject to certain limitations. See "Description of the Intercreditor
Agreement -- Intercreditor Rights -- Sale of Equipment Notes or Aircraft". The
proceeds of such sale will be distributed pursuant to the provisions of the
Intercreditor Agreement. Any such proceeds so distributed to any Trustee upon
any such sale shall be deposited in the applicable Special Payments Account and
shall be distributed to the Certificateholders of the applicable Trust on a
Special Distribution Date. The market for Equipment Notes at the time of the
existence of an Indenture Default may be very limited and there can be no
assurance as to the price at which they could be sold. If any such Equipment
Notes are sold for less than their outstanding principal amount, certain
Certificateholders will receive a smaller amount of principal distributions than
anticipated and will not have any claim for the shortfall against Atlas, any
Liquidity Provider, any Owner Trustee, any Owner Participant or any Trustee.
Any amount, other than Scheduled Payments received on a Regular
Distribution Date or within five days thereafter, distributed to the Trustee of
any Trust by the Subordination Agent on account of any Equipment Note or Trust
Indenture Estate (as defined in each Indenture) held in such Trust following an
Indenture Default will be deposited in the Special Payments Account for such
Trust and will be distributed to the Certificateholders of such Trust on a
Special Distribution Date. In addition, if, following an Indenture Default under
any Leased Aircraft Indenture, the applicable Owner Participant or Owner Trustee
or Atlas subsidiary exercises its option to redeem or purchase the outstanding
Equipment Notes issued under such Leased Aircraft Indenture, the price paid by
such Owner Participant or Owner Trustee or Atlas subsidiary for the Equipment
Notes issued under such Leased Aircraft Indenture and distributed to such Trust
by the Subordination Agent will be deposited in the Special Payments Account for
such Trust and will be distributed to the Certificateholders of such Trust on a
Special Distribution Date.
Any funds representing payments received with respect to any defaulted
Equipment Notes, or the proceeds from the sale of any Equipment Notes, held by
the Trustee in the Special Payments Account for such Trust will, to the extent
practicable, be invested and reinvested by such Trustee in certain permitted
investments pending the distribution of such funds on a Special Distribution
Date. Such permitted investments are defined as obligations of the United States
or agencies or instrumentalities thereof for the payment of which the full faith
and credit of the United States is pledged and which mature in not more than 60
days or such lesser time as is required for the distribution of any such funds
on a Special Distribution Date.
Each Pass Through Trust Agreement provides that the Trustee of the related
Trust will, within 90 days after the occurrence of any default known to the
Trustee, give to the Certificateholders of such Trust notice, transmitted by
mail, of all uncured or unwaived defaults with respect to such Trust known to
it, provided that, except in the case of default in a payment of principal,
premium, if any, or interest on any of the Equipment
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Notes held in such Trust, the applicable Trustee will be protected in
withholding such notice if it in good faith determines that the withholding of
such notice is in the interests of such Certificateholders. The term "default"
as used in this paragraph only with respect to any Trust means the occurrence of
an Indenture Default under any Indenture pursuant to which Equipment Notes held
by such Trust were issued, as described above, except that in determining
whether any such Indenture Default has occurred, any grace period or notice in
connection therewith will be disregarded.
Each Pass Through Trust Agreement contains a provision entitling the
Trustee of the related Trust, subject to the duty of such Trustee during a
default to act with the required standard of care, to be offered reasonable
security or indemnity by the holders of the New Certificates of such Trust
before proceeding to exercise any right or power under such Pass Through Trust
Agreement at the request of such Certificateholders.
Subject to certain qualifications set forth in each Pass Through Trust
Agreement and to the Intercreditor Agreement, the Certificateholders of each
Trust holding New Certificates evidencing fractional undivided interests
aggregating not less than a majority in interest in such Trust shall have the
right to direct the time, method and place of conducting any proceeding for any
remedy available to the Trustee with respect to such Trust or pursuant to the
terms of the Intercreditor Agreement, or exercising any trust or power conferred
on such Trustee under such Pass Through Trust Agreement or the Intercreditor
Agreement, including any right of such Trustee as Controlling Party under the
Intercreditor Agreement or as holder of the Equipment Notes.
In certain cases, the holders of the New Certificates of a Trust evidencing
fractional undivided interests aggregating not less than a majority in interest
of such Trust may on behalf of the holders of all the New Certificates of such
Trust waive any past Indenture Default under any Indenture pursuant to which
Equipment Notes held by such Trust were issued or, if the Trustee of such Trust
is the Controlling Party, may direct the Trustee to instruct the applicable Loan
Trustee to waive any past Indenture Default and its consequences and thereby
annul any direction given by such holders or Trustee to such Loan Trustee with
respect thereto, except (i) a default in the deposit of any Scheduled Payment or
Special Payment or in the distribution thereof, (ii) a default in payment of the
principal, premium, if any, or interest with respect to any of the Equipment
Notes and (iii) a default in respect of any covenant or provision of the Pass
Through Trust Agreement that cannot be modified or amended without the consent
of each Certificateholder of such Trust affected thereby. Each Indenture will
provide that, with certain exceptions, the holders of the majority in aggregate
unpaid principal amount of the Equipment Notes issued thereunder may on behalf
of all such holders waive any past default or Indenture Default thereunder.
Notwithstanding such provisions of the Indentures, pursuant to the Intercreditor
Agreement only the Controlling Party will be entitled to waive any such past
default or Indenture Default.
PURCHASE RIGHTS OF CERTIFICATEHOLDERS
Upon the occurrence and during the continuation of a Triggering Event, with
ten days' written notice to the Trustee and each Certificateholder of the same
Class, (i) the Class B Certificateholders will have the right to purchase all,
but not less than all, of the Class A Certificates, (ii) the Class C
Certificateholders will have the right to purchase all, but not less than all,
of the Class A Certificates and the Class B Certificates and (iii) if the Class
D Certificates are issued, the Class D Certificateholders shall have the right
to purchase all, but not less than all, of the Class A Certificates, the Class B
Certificates and the Class C Certificates, in each case at a purchase price
equal to the Pool Balance of the relevant Class or Classes of Certificates plus
accrued and unpaid interest thereon to the date of purchase without premium but
including any other amounts due to the Certificateholders of such Class or
Classes. In each case, if prior to the end of the ten-day period, any other
Certificateholder of the same Class notifies the purchasing Certificateholder
that the other Certificateholder wants to participate in such purchase, then
such other Certificateholder may join with the purchasing Certificateholder to
purchase the New Certificates pro rata based on the interest in the Trust held
by each Certificateholder.
PTC EVENT OF DEFAULT
A PTC Event of Default is defined under the Pass Through Trust Agreements
as the failure to pay: (i) the outstanding Pool Balance of the applicable Class
of New Certificates within 10 Business Days of the
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Final Maturity Date for such Class or (ii) interest due on such Class of New
Certificates within 10 Business Days of any Distribution Date (unless the
Subordination Agent shall have made Interest Drawings (as defined herein), or
withdrawals from the Cash Collateral Accounts (as defined herein) for such Class
of New Certificates, with respect thereto in an aggregate amount sufficient to
pay such interest and shall have distributed such amount to the Trustee entitled
thereto). Any failure to make expected principal distributions with respect to
any Class of New Certificates on any Regular Distribution Date (other than the
Final Maturity Date) will not constitute a PTC Event of Default with respect to
such New Certificates. A PTC Event of Default with respect to the most senior
outstanding Class of New Certificates resulting from an Indenture Default under
all Indentures will constitute a Triggering Event. See "Description of the
Intercreditor Agreement -- Priority of Distributions" for a discussion of the
consequences of the occurrence of a Triggering Event.
MERGER, CONSOLIDATION AND TRANSFER OF ASSETS
Atlas is prohibited from consolidating with or merging into any other
corporation or transferring substantially all of its assets as an entirety to
any other corporation unless (i) the surviving successor or transferee
corporation shall (a) be validly existing under the laws of the United States or
any state thereof, (b) be a "citizen of the United States" (as defined in Title
49 of the United States Code relating to aviation (the "Transportation Code"))
holding an air carrier operating certificate issued by the Secretary of
Transportation pursuant to Chapter 447 of Title 49, United States Code, if, and
so long as, such status is a condition of entitlement to the benefits of Section
1110 of the Bankruptcy Code, and (c) expressly assume all of the obligations of
Atlas contained in any Pass Through Trust Agreement, the Note Purchase
Agreement, the Owned Aircraft Indentures, the Participation Agreements and the
Leases, and any other operative documents; and (ii) Atlas shall have delivered a
certificate and an opinion or opinions of counsel indicating that such
transaction, in effect, complies with such conditions. In addition, after giving
effect to such transaction, no Lease Event of Default, in the case of a Leased
Aircraft, or Indenture Default, in the case of an Owned Aircraft, shall have
occurred and be continuing.
The Pass Through Trust Agreements and the Note Purchase Agreement do not,
and the Indentures, the Participation Agreements and the Leases will not contain
any covenants or provisions which may afford the applicable Trustee or
Certificateholders protection in the event of a highly leveraged transaction,
including transactions effected by management or affiliates, which may or may
not result in a change in control of Atlas.
MODIFICATIONS OF THE PASS THROUGH TRUST AGREEMENTS AND CERTAIN OTHER AGREEMENTS
Each Pass Through Trust Agreement contains provisions permitting, at the
request of the Company, the execution of amendments or supplements to such Pass
Through Trust Agreement or, if applicable, to the Deposit Agreements, the Escrow
Agreements, the Intercreditor Agreement, the Note Purchase Agreement or any
Liquidity Facility, without the consent of the holders of any of the New
Certificates of such Trust, (i) to evidence the succession of another
corporation to Atlas and the assumption by such corporation of Atlas'
obligations under such Pass Through Trust Agreement or the Note Purchase
Agreement, (ii) to add to the covenants of Atlas for the benefit of holders of
such New Certificates or to surrender any right or power conferred upon Atlas in
such Pass Through Trust Agreement, the Intercreditor Agreement, the Note
Purchase Agreement or any Liquidity Facility, (iii) to correct or supplement any
provision of such Pass Through Trust Agreement, the Deposit Agreements, the
Escrow Agreements, the Intercreditor Agreement, the Note Purchase Agreement or
any Liquidity Facility which may be defective or inconsistent with any other
provision in such Pass Through Trust Agreement, the Intercreditor Agreement, or
any Liquidity Facility, as applicable, or to cure any ambiguity or to modify any
other provision with respect to matters or questions arising under such Pass
Through Trust Agreement, the Deposit Agreements, the Escrow Agreements, the
Intercreditor Agreement, the Note Purchase Agreement or any Liquidity Facility,
provided that such action shall not materially adversely affect the interests of
the holders of such New Certificates; to correct any mistake in such Pass
Through Trust Agreement, the Intercreditor Agreement or any Liquidity Facility;
or, as provided in the Intercreditor Agreement, to give effect to or provide for
a Replacement Facility (as defined herein), (iv) to comply with any requirement
of the Commission, any applicable law, rules or regulations of any exchange or
quotation system on which the New Certificates are listed, or any regulatory
body, (v) to modify, eliminate or add to the provisions of such Pass Through
Trust Agreement, the Deposit Agreements,
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the Escrow Agreements, the Intercreditor Agreement, the Note Purchase Agreement
or any Liquidity Facility to such extent as shall be necessary to continue the
qualification of such Pass Through Trust Agreement (including any supplemental
agreement) under the Trust Indenture Act of 1939, as amended (the "Trust
Indenture Act"), or any similar federal statute enacted after the execution of
such Pass Through Trust Agreement, and to add to such Pass Through Trust
Agreement, the Deposit Agreements, the Escrow Agreements, the Intercreditor
Agreement, the Note Purchase Agreement or any Liquidity Facility such other
provisions as may be expressly permitted by the Trust Indenture Act, and (vi) to
evidence and provide for the acceptance of appointment under such Pass Through
Trust Agreement, the Deposit Agreements, the Escrow Agreements, the
Intercreditor Agreement, the Note Purchase Agreement or any Liquidity Facility
by a successor Trustee and to add to or change any of the provisions of such
Pass Through Trust Agreement, the Deposit Agreements, the Escrow Agreements, the
Intercreditor Agreement, the Note Purchase Agreement or any Liquidity Facility
as shall be necessary to provide for or facilitate the administration of the
Trusts by more than one Trustee, provided that in each case, such modification
or supplement does not adversely affect the status of the Trust as a grantor
trust under Subpart E, Part I of Subchapter J of Chapter 1 of Subtitle A of the
Code for U.S. federal income tax purposes.
Each Pass Through Trust Agreement also contains provisions permitting the
execution, with the consent of the holders of the New Certificates of the
related Trust evidencing fractional undivided interests aggregating not less
than a majority in interest of such Trust, and with the consent of the
applicable Owner Trustee (such consent not to be unreasonably withheld), of
amendments or supplements adding any provisions to or changing or eliminating
any of the provisions of such Pass Through Trust Agreement, the Deposit
Agreements, the Escrow Agreements, the Intercreditor Agreement, the Note
Purchase Agreement or any Liquidity Facility to the extent applicable to such
Certificateholders or of modifying the rights and obligations of such
Certificateholders under such Pass Through Trust Agreement, the Deposit
Agreements, the Escrow Agreements, the Intercreditor Agreement, the Note
Purchase Agreement or any Liquidity Facility, except that no such amendment or
supplement may, without the consent of the holder of each New Certificate so
affected thereby, (a) reduce in any manner the amount of, or delay the timing
of, any receipt by the Trustee (or, with respect to the Deposits, the
Receiptholders) of payments with respect to the Deposits, the Equipment Notes
held in such Trust or distributions in respect of any New Certificate related to
such Trust, or change the date or place of any payment in respect of any New
Certificate, or make distributions payable in coin or currency other than that
provided for in such New Certificates, or impair the right of any
Certificateholder of such Trust to institute suit for the enforcement of any
such payment when due, (b) permit the disposition of any Equipment Note held in
such Trust, except as provided in such Pass Through Trust Agreement, or
otherwise deprive such Certificateholder of the benefit of the ownership of the
applicable Equipment Notes, (c) alter the priority of distributions specified in
the Intercreditor Agreement in a manner materially adverse to such
Certificateholders, (d) reduce the percentage of the aggregate fractional
undivided interests of the Trust provided for in such Pass Through Trust
Agreement, the consent of the holders of which is required for any such
supplemental trust agreement or for any waiver provided for in such Pass Through
Trust Agreement, (e) modify any of the provisions relating to the rights of the
Certificateholders in respect of the waiver of events of default or receipt of
payment or (f) adversely affect the status of any Trust as a grantor trust under
Subpart E, Part I of Subchapter J of Chapter 1 of Subtitle A of the Code for
U.S. federal income tax purposes.
In the event that a Trustee, as holder (or beneficial owner through the
Subordination Agent) of any Equipment Note in trust for the benefit of the
Certificateholders of the relevant Trust or as Controlling Party under the
Intercreditor Agreement, receives (directly or indirectly through the
Subordination Agent) a request for a consent to any amendment, modification,
waiver or supplement under any Indenture, any Participation Agreement, any
Lease, any Equipment Note or any other related document, the Trustee shall
forthwith send a notice of such proposed amendment, modification, waiver or
supplement to each Certificateholder of the relevant Trust as of the date of
such notice. The Trustee shall request from the Certificateholders a direction
as to (a) whether or not to take or refrain from taking (or direct the
Subordination Agent to take or refrain from taking) any action which a holder of
such Equipment Note or the Controlling Party has the option to take, (b) whether
or not to give or execute (or direct the Subordination Agent to give or execute)
any waivers, consents, amendments, modifications or supplements as a holder of
such Equipment Note or as
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Controlling Party and (c) how to vote (or direct the Subordination Agent to
vote) any Equipment Note if a vote has been called for with respect thereto.
Provided such a request for Certificateholder direction shall have been made, in
directing any action or casting any vote or giving any consent as the holder of
any Equipment Note (or in directing the Subordination Agent in any of the
foregoing), (i) other than as Controlling Party, the Trustee shall vote for or
give consent to any such action with respect to such Equipment Note in the same
proportion as that of (x) the aggregate face amount of all Certificates actually
voted in favor of or for giving consent to such action by such direction of
Certificateholders to (y) the aggregate face amount of all outstanding New
Certificates of the relevant Trust and (ii) as the Controlling Party, the
Trustee shall vote as directed in such Certificateholder direction by the
Certificateholders evidencing fractional undivided interests aggregating not
less than a majority in interest in the relevant Trust. For purposes of the
immediately preceding sentence, a New Certificate shall have been "actually
voted" if the Certificateholder has delivered to the Trustee an instrument
evidencing such Certificateholder's consent to such direction prior to two
Business Days before the Trustee directs such action or casts such vote or gives
such consent. Notwithstanding the foregoing, but subject to certain rights of
the Certificateholders under the relevant Pass Through Trust Agreement and
subject to the Intercreditor Agreement, the Trustee may, in its own discretion
and at its own direction, consent and notify the relevant Loan Trustee of such
consent (or direct the Subordination Agent to consent and notify the relevant
Loan Trustee of such consent) to any amendment, modification, waiver or
supplement under the relevant Indenture, Participation Agreement or Lease, any
relevant Equipment Note or any other related document, if an Indenture Default
under any Indenture shall have occurred and be continuing, or if such amendment,
modification, waiver or supplement will not materially adversely affect the
interests of the Certificateholders.
POSSIBLE ISSUANCE OF CLASS D CERTIFICATES
Atlas may elect to issue Series D Equipment Notes in connection with the
financing of Owned Aircraft. Atlas may elect to fund the sale of the Series D
Equipment Notes through the sale of Class D Certificates. The Note Purchase
Agreement provides that Atlas' ability to issue any Series D Equipment Notes is
contingent upon its obtaining written confirmation from each Rating Agency that
the issuance of such Series D Equipment Notes will not result in a withdrawal or
downgrading of the rating of any Class of Certificates. If the Class D
Certificates are issued, the Trustee with respect to such Certificates will
become a party to the Intercreditor Agreement. See "Description of the
Intercreditor Agreement."
LIQUIDATION OF ORIGINAL TRUSTS
At the Transfer Date, each of the Original Trusts will transfer and assign
all of its assets and rights to a Successor Trust with substantially identical
terms, except that (i) the Successor Trusts will not have the right to purchase
new Equipment Notes and (ii) Delaware law will govern the Original Trusts and
New York law will govern the Successor Trusts. The Trustee of each of the
Original Trusts will also act as Trustee of the corresponding Successor Trust,
and each New Trustee will assume the obligations of the Original Trustee under
each transaction document to which such Original Trustee was a party. Upon the
effectiveness of such transfer, assignment and assumption, each of the Original
Trusts will be liquidated and each of the New Certificates will represent the
same percentage interest in the Successor Trust as it represented in the
Original Trust immediately prior to such transfer, assignment and assumption.
Unless the context otherwise requires, all references in this Prospectus to the
Trusts, the Trustees, the Pass Through Trust Agreements and similar terms shall
be applicable with respect to the Original Trusts until the effectiveness of
such transfer, assignment and assumption and thereafter shall be applicable with
respect to the Successor Trusts. If for any reason such transfer, assignment and
assumption cannot be effected to any Successor Trust, the related Original Trust
will continue in existence until it is effected. The Original Trusts may be
treated as partnerships for U.S. federal income tax purposes. The Successor
Trusts will, in the opinion of Tax Counsel, be treated as grantor trusts. See
"Certain U.S. Federal Income Tax Consequences."
TERMINATION OF THE TRUSTS
The obligations of Atlas and the applicable Trustee with respect to a Trust
will terminate upon the distribution to Certificateholders of such Trust of all
amounts required to be distributed to them pursuant to the applicable Pass
Through Trust Agreement and the disposition of all property held in such Trust.
The applicable Trustee will send to each Certificateholder of such Trust notice
of the termination of such Trust,
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the amount of the proposed final payment and the proposed date for the
distribution of such final payment for such Trust. The final distribution to any
Certificateholder of such Trust will be made only upon surrender of such
Certificateholder's New Certificates at the office or agency of the applicable
Trustee specified in such notice of termination.
THE TRUSTEES
The Trustee for each Trust is Wilmington Trust Company.
BOOK-ENTRY; DELIVERY AND FORM
The New Certificates of each Trust will be represented by a single,
permanent global Certificate, in definitive, fully registered form without
interest coupons (the "Global Certificates"), to be deposited with the Trustee
as custodian for DTC and registered in the name of Cede, as nominee of DTC.
DTC has advised Atlas as follows: DTC is a limited purpose trust company
organized under the laws of the State of New York, a "banking organization"
within the meaning of the New York Banking law, a member of the Federal Reserve
System, a "clearing corporation" within the meaning of the Uniform Commercial
Code and a "Clearing Agency" registered pursuant to the provision of Section 17A
of the Exchange Act. DTC was created to hold securities for DTC Participants and
facilitate the clearance and settlement of securities transactions between
participants through electronic book-entry changes in accounts of its
participants, thereby eliminating the need for physical movement of
certificates. DTC Participants include securities brokers and dealers, banks,
trust companies and clearing corporations and certain other organizations.
Indirect access to the DTC system is available to others such as banks, brokers,
dealers and trust companies that clear through or maintain a custodial
relationship with a DTC Participant, either directly or indirectly.
Upon the issuance of the Global Certificates, DTC or its custodian will
credit, on its internal system, the respective principal amount of the
individual beneficial interests represented by such Global Certificates to the
accounts of persons who have accounts with such depositary. Ownership of
beneficial interests Global Certificates is limited to persons who have accounts
with DTC ("DTC Participants") or persons who hold interests through
participants. Ownership of beneficial interests in the Global Certificates is
shown on, and the transfer of that ownership is effected only through, records
maintained by DTC or its nominee (with respect to interests of DTC Participants)
and the records of DTC Participants (with respect to interests of persons other
than DTC Participants). The laws of some states require that certain purchasers
of securities take physical delivery of such securities. Such limits and such
laws may limit the market for beneficial interests in the Global Certificates.
DESCRIPTION OF THE DEPOSIT AGREEMENTS
The following summary describes all material terms of the Deposit
Agreements. The summary does not purport to be complete and is qualified in its
entirety by reference to all of the provisions of the Deposit Agreements. The
provisions of the Deposit Agreements are substantially identical except as
otherwise indicated. Capitalized terms used herein but not defined herein have
the meanings ascribed to them in the Deposit Agreements.
GENERAL
Under the Escrow Agreements, the Escrow Agent with respect to each Trust
entered into a separate Deposit Agreement with the Depositary pursuant to which
the Depositary established separate accounts into which the proceeds of the
offering of the Old Certificates attributable to New Certificates of such Trust
were deposited on behalf of such Escrow Agent, from which the Escrow Agent, upon
request from the Trustee of such Trust, will make withdrawals and into which
such Trustee will make re-deposits during the Delivery Period. Pursuant to the
Deposit Agreement with respect to each Trust, on each Regular Distribution Date
the Depositary will pay to the Paying Agent on behalf of the applicable Escrow
Agent, for distribution to the Certificateholders of such Trust, an amount equal
to interest accrued on the New Certificates issued by such Trust during the
relevant interest period at the rate per annum applicable to such New
Certificates. The interest rates payable on the Deposits are subject to change
under certain circumstances to the same extent as the interest rates for the
Equipment Notes. Upon each delivery of an Aircraft during the Delivery Period,
the
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Trustee for each Trust will request the Escrow Agent relating to such Trust to
withdraw from the Deposits relating to such Trust funds sufficient to enable the
Trustee of such Trust to purchase the Equipment Note of the series applicable to
such Trust issued with respect to such Aircraft. Accrued but unpaid interest on
all such Deposits withdrawn will be paid on the next Regular Distribution Date.
Any portion of any Deposit withdrawn which is not used to purchase such
Equipment Note will be re-deposited by each Trustee into an account relating to
the applicable Trust. The Deposits relating to each Trust and interest paid
thereon will not be subject to the subordination provisions of the Intercreditor
Agreement and will not be available to pay any other amount in respect of the
New Certificates.
UNUSED DEPOSITS; PREPAYMENT OF DEPOSITS
The Trustees' obligations to purchase the Equipment Notes issued with
respect to each Aircraft are subject to satisfaction of certain conditions at
the time of delivery, as set forth in the Note Purchase Agreement. See
"Description of the New Certificates -- Obligation to Purchase Equipment Notes".
Since the Aircraft are scheduled for delivery from time to time during the
Delivery Period, no assurance can be given that all such conditions will be
satisfied at the time of delivery for each Aircraft. Moreover, since the
Aircraft will be newly manufactured, their delivery as scheduled is subject to
delays in the manufacturing process and to the Aircraft manufacturer's right to
postpone deliveries under its agreement with Atlas. See "Description of the
Aircraft and the Appraisals -- Deliveries of Aircraft." Depending on the
circumstances of the financing of each Aircraft, the maximum aggregate principal
amount of Equipment Notes may not be issued. If an Aircraft is not delivered on
the scheduled (or rescheduled) delivery date, the portion of the Deposits
relating to such Aircraft, together with accrued interest thereon, shall be
withdrawn and distributed to the Certificateholders upon not less than 15 days'
notice, unless, subject to certain conditions, Atlas elects to extend such
delivery date to a date not later than the Delivery Period Termination Date. If
any funds remain as Deposits with respect to any Trust at the Delivery Period
Termination Date, they will be withdrawn by the Escrow Agent and distributed,
with accrued and unpaid interest thereon to the Certificateholders of such Trust
after at least 15 days prior written notice. In addition, if such remaining
Deposits exceed the Par Redemption Amount with respect to all of the Trusts,
such distribution will include a premium payable by Atlas equal to the Deposit
Make-Whole Premium with respect to the remaining Deposits applicable to such
Trust in excess of such Trust's proportionate share of the Par Redemption
Amount. Since the maximum principal amount of Equipment Notes may not be issued
with respect to an Aircraft and, in any such case, the Series C Equipment Notes
are more likely not to be issued in the maximum principal amount as compared to
the other Equipment Notes, it is more likely that a distribution of unused
Deposits will be made with respect to the Class C Certificates as compared to
the other New Certificates. In addition, notwithstanding the Par Redemption
Amount limitation, if any Aircraft is not delivered by the manufacturer on or
prior to the Delivery Period Termination Date due to any reason not occasioned
by Atlas' fault or negligence and no Substitute Aircraft is provided in lieu of
such Aircraft, no Deposit Make-Whole Premium will be paid with respect to the
unused Deposits to be distributed as a result of such failure to deliver in an
amount equal to the maximum principal amount of Equipment Notes that could have
been issued and acquired by such Trust with respect to such Aircraft in
accordance with the Mandatory Economic Terms and such unused Deposits shall not
be included in the calculation of the Par Redemption Amount.
"Deposit Make-Whole Premium" means, with respect to the distribution of
unused Deposits to holders of any Class of Certificates, as of any date of
determination, an amount equal to the excess, if any, of (a) the present value
of the excess of (i) the scheduled payment of principal and interest to maturity
of the Equipment Notes, assuming the maximum principal amount thereof (the
"Maximum Amount") minus such Class of Certificates' proportionate share (in the
same proportion that the amount of unused Deposits with respect to such Class of
Certificates bears to the unused Deposits with respect to all Classes of
Certificates) of the Par Redemption Amount were issued, on each remaining
Regular Distribution Date for such Class under the Assumed Amortization Schedule
over (ii) the scheduled payment of principal and interest to maturity of the
Equipment Notes actually acquired by the Trustee for such Class on each such
Regular Distribution Date, such present value computed by discounting such
excess on a semiannual basis on each Regular Distribution Date (assuming a
360-day year of twelve 30-day months) using a discount rate equal to the
Treasury Yield plus 175 basis points in the case of the Class A Certificates,
205 basis points in the case of the Class B Certificates and 250 basis points in
the case of the Class C Certificates, over (b) the amount of such unused
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Deposits to be distributed to the holders of such New Certificates, minus such
Class of Certificates' proportionate share of the Par Redemption Amount, plus
accrued and unpaid interest on such net amount to but excluding the date of
determination from and including the preceding Regular Distribution Date (or if
such date of determination precedes the first Regular Distribution Date, the
date of issuance of the New Certificates).
DISTRIBUTION UPON OCCURRENCE OF TRIGGERING EVENT
If a Triggering Event shall occur prior to the Delivery Period Termination
Date, the Escrow Agent for each Trust will withdraw any funds then held as
Deposits with respect to such Trust and cause such funds, with accrued and
unpaid interest thereon but without any premium, to be distributed to the
Certificateholders of such Trust by the Paying Agent on behalf of the Escrow
Agent, after at least 15 days' prior written notice. Accordingly, if a
Triggering Event occurs prior to the Delivery Period Termination Date, the
Trusts will not acquire Equipment Notes issued with respect to Aircraft
delivered after the occurrence of such Triggering Event.
DEPOSITARY
ABN AMRO Bank N.V., acting through its Chicago branch, will act as
Depositary.
ABN AMRO Bank N.V. is a direct subsidiary of ABN AMRO Holding N.V., an
international multi-bank holding company. At December 31, 1996, ABN AMRO Holding
N.V. reported consolidated assets amounting to approximately $317 billion (based
on the exchange rate at March 31, 1997 of U.S. $1.00 to NLG 1.88). The
accounting principles applied in the preparation of the financial statements of
ABN AMRO Bank N.V. may not conform to U.S. generally accepted accounting
principles.
ABN AMRO Bank N.V. has long-term unsecured debt ratings of Aa1 from
Moody's, AA from S&P and AA+ from Fitch and short-term unsecured debt ratings of
P-1 from Moody's, A-1+ from S&P and F1+ from Fitch.
ABN AMRO Bank N.V.'s Chicago branch was initially licensed by the
Commissioner of Banks and Real Estate for the State of Illinois on October 1,
1973. The Chicago branch is an unincorporated branch of ABN AMRO Bank N.V. and
is not a separate subsidiary. The branch is located at 135 South LaSalle Street,
Chicago, Illinois 60674-9135.
DESCRIPTION OF THE ESCROW AGREEMENTS
The following summary describes all material terms of the Escrow
Agreements. The summary does not purport to be complete and is qualified in its
entirety by reference to all of the provisions of the Escrow Agreements. The
provisions of the Escrow Agreements are substantially identical except as
otherwise indicated. Capitalized terms used herein but not defined herein have
the meanings ascribed to them in the Escrow Agreements.
Each Escrow Agent, each Paying Agent, each Trustee and the Initial
Purchasers entered into a separate Escrow Agreement for the benefit of the
Certificateholders of each Trust as holders of the Escrow Receipts affixed
thereto (in such capacity, a "Receiptholder"). The cash proceeds of the offering
of the Old Certificates of each Trust were deposited on behalf of the Escrow
Agent (for the benefit of Receiptholders) with the Depositary as Deposits
relating to such Trust. The Escrow Agent of each Trust was given irrevocable
instructions (i) to permit the Trustee of such Trust to cause funds to be
withdrawn from such Deposits on or prior to the Delivery Period Termination Date
solely for the purpose of enabling such Trustee to purchase Equipment Notes on
and subject to the terms and conditions of the Note Purchase Agreement and (ii)
to direct the Depositary to pay interest on the Deposits accrued in accordance
with the Deposit Agreement to the Paying Agent for distribution to the
Receiptholders.
Each Escrow Agreement requires that the Paying Agent establish and
maintain, for the benefit of the related Receiptholders, one or more paying
agent account(s) (each, a "Paying Agent Account"), which shall be
non-interest-bearing. Pursuant to the terms of the Escrow Agreement, the Paying
Agent is required to deposit interest on Deposits relating to each Trust and any
unused Deposits withdrawn by the Escrow Agent in the Paying Agent Account. All
amounts so deposited will be distributed by the Paying Agent on a Regular
Distribution Date or Special Distribution Date, as appropriate.
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Upon receipt by the Depositary on behalf of the Escrow Agent of the cash
proceeds from the offering of the Old Certificates as described above, the
Escrow Agent issued one or more Escrow Receipts which will be affixed by the
relevant Trustee to each New Certificate. Each Escrow Receipt evidences a
fractional undivided interest in amounts from time to time deposited into the
Paying Agent Account and is limited in recourse to amounts deposited into such
Account. An Escrow Receipt may not be assigned or transferred except in
connection with the assignment or transfer of the New Certificate to which it is
affixed. Each Escrow Receipt will be registered by the Escrow Agent in the same
name and manner as the New Certificate to which it is affixed.
DESCRIPTION OF THE LIQUIDITY FACILITIES
The following summary describes all material terms of the Liquidity
Facilities and certain provisions of the Intercreditor Agreement relating to the
Liquidity Facilities. The summary does not purport to be complete and is
qualified in its entirety by reference to all of the provisions of the Liquidity
Facilities and the Intercreditor Agreement. The provisions of the Liquidity
Facilities are substantially identical except as otherwise indicated.
Capitalized terms used herein but not defined herein have the meanings ascribed
to them in the Revolving Credit Agreement in connection with the respective
Liquidity Facilities.
GENERAL
ABN AMRO Bank N.V., acting through its Chicago branch, entered into a
Liquidity Facility with the Subordination Agent with respect to the Class A
Trust and Morgan Stanley Capital Services, Inc. ("MSCS") entered into separate
Liquidity Facilities with the Subordination Agent with respect to the Class B
Trust and the Class C Trust (each, a "Liquidity Facility"). Pursuant to the
applicable Liquidity Facility, ABN AMRO Bank N.V. or MSCS, as the case may be,
will make one or more advances to the Subordination Agent to fund the payment of
interest on the New Certificates, subject to certain limitations. The Liquidity
Facility for each Trust is intended to enhance the likelihood of timely payment
by such Trust of the interest payable on the New Certificates of such Trust at
the Stated Interest Rate therefor. If interest payment defaults occur which
exceed the amount covered by or available under the applicable Liquidity
Facility for any Trust, the such Trust will bear their allocable share of the
deficiencies to the extent that there are no other sources of funds. Although
ABN AMRO Bank N.V., acting through its Chicago branch, is the Liquidity Provider
for the Class A Trust and MSCS is the Liquidity Provider for the Class B Trust
and the Class C Trust, each may be replaced by one or more other entities with
respect to such Trusts under certain circumstances. The obligations of MSCS
under its Liquidity Facilities will be fully and unconditionally guaranteed by
Morgan Stanley, Dean Witter, Discover & Co. ("MSDWD").
DRAWINGS
The initial aggregate amount available under the Liquidity Facilities for
the Class A Trust, the Class B Trust and the Class C Trust at January 2, 1999,
assuming that Equipment Notes in the maximum principal amount with respect to
all Aircraft are acquired by the Trusts and that all interest and principal due
on or prior to January 2, 1999, is paid, will be $35,490,023, $14,169,519, and
$15,723,927, respectively (each, an initial "Maximum Available Commitment").
Except as otherwise provided below, the Liquidity Facility for each Trust will
enable the Subordination Agent to make Interest Drawings thereunder promptly
after any Regular Distribution Date to fund the payment of interest then due and
payable on the New Certificates of such Trust at the Stated Interest Rate for
such Trust to the extent that the amount, if any, available to the Subordination
Agent on such Regular Distribution Date is not sufficient to pay such interest;
provided, however, that the maximum amount available to be drawn under a
Liquidity Facility with respect to any Trust on any Regular Distribution Date to
fund any shortfall of interest on Certificates of such Trust will not exceed the
then Maximum Available Commitment under such Liquidity Facility. The Liquidity
Facility for any Trust does not provide for drawings thereunder to pay for
principal of or premium on the Class of New Certificates of such Trust or any
interest on the Certificates of such Class in excess of the Stated Interest Rate
for such Class or more than three semiannual installments of interest thereon or
principal of or interest or premium on the New Certificates of any other Class.
In addition, the Liquidity Facility with respect to each Trust does not provide
for drawings thereunder to fund the payment of any amounts payable with respect
to the Deposits relating to such Trust.
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Each payment by the Liquidity Provider under each Liquidity Facility
reduces by the same amount the Maximum Available Commitment under such Liquidity
Facility, subject to reinstatement as hereinafter described. With respect to any
Interest Drawings under either Liquidity Facility for any Trust, upon payment to
the relevant Liquidity Provider in full for the amount of such Interest Drawings
plus interest thereon, the Maximum Available Commitment under such Liquidity
Facility in respect of interest on the New Certificates of such Trust will be
reinstated to an amount not to exceed the then Required Amount of such Liquidity
Facility; provided, however, that such Liquidity Facility will not be so
reinstated at any time if (i) a Liquidity Event of Default shall have occurred
and be continuing and (ii) less than 65% of the then aggregate outstanding
principal amount of all Equipment Notes are Performing Equipment Notes. With
respect to any other drawings under such Liquidity Facility, amounts available
to be drawn thereunder are not subject to reinstatement. The Required Amount of
the Liquidity Facility for any Trust will be automatically reduced from time to
time to an amount equal to the next three successive interest payments due on
the New Certificates of such Trust (without regard to expected future payment of
principal of such New Certificates) at the Stated Interest Rate for such Trust.
If at any time (i) the short-term unsecured debt rating of any Liquidity
Provider (or, in the case of MSCS, such rating of MSDWD) issued by any of the
Rating Agencies is lower than the Threshold Rating or (ii) the guaranty of
MSCS's obligations under the relevant Liquidity Facilities by MSDWD becomes
invalid or unenforceable, each Liquidity Facility provided by the relevant
Liquidity Provider may be replaced by a Replacement Facility. In the event that
such Liquidity Facility is not replaced with a Replacement Facility, in the case
of ABN AMRO Bank N.V., within 10 days, and in the case of MSCS, within 3 days,
after notice of the downgrading or such guaranty becoming invalid or
unenforceable, as applicable, and as otherwise provided in the Intercreditor
Agreement, the Subordination Agent will request the Downgrade Drawing in an
amount equal to the then Maximum Available Commitment thereunder and will hold
the proceeds thereof in the Cash Collateral Account for such Trust as cash
collateral to be used for the same purposes and under the same circumstances as
cash payments of Interest Drawings under such Liquidity Facility would be used.
A "Replacement Facility" for any Liquidity Facility will mean an
irrevocable liquidity facility (or liquidity facilities) in substantially the
form of the replaced Liquidity Facility, including reinstatement provisions, or
in such other form (which may include a letter of credit) as shall permit the
Rating Agencies to confirm in writing their respective ratings then in effect
for the New Certificates (before downgrading of such ratings, if any, as a
result of the downgrading of the applicable Liquidity Provider), in a face
amount (or in an aggregate face amount) equal to the amount of interest payable
on the Certificates of such Trust (at the Stated Interest Rate for such Trust,
and without regard to expected future principal payments) on the three Regular
Distribution Dates following the date of replacement of such Liquidity Facility
and issued by a person having unsecured short-term debt ratings issued by both
Rating Agencies which are equal to or higher than the Threshold Rating. The
provider of any Replacement Facility will have the same rights (including,
without limitation, priority distribution rights and rights as "Controlling
Party") under the Intercreditor Agreement as the replaced initial liquidity
provider.
"Threshold Rating" means the short-term unsecured debt rating of P-1 by
Moody's, A-1+ by Standard & Poor's and F1+ by Fitch, in the case of the Class A
Liquidity Provider, and the short-term unsecured debt rating of P-1 by Moody's,
A-1 by Standard & Poor's and F1 by Fitch, in the case of the Class B Liquidity
Provider and the Class C Liquidity Provider.
The Liquidity Facility for each Trust provides that the relevant Liquidity
Provider's obligations thereunder will expire on the earliest of (i) 364 days
after the Issuance Date (counting from, and including, the Issuance Date) in the
case of the Class A Trust or on the Final Maturity Date in the case of the Class
B Trust or the Class C Trust; (ii) the date on which the Subordination Agent
delivers to such Liquidity Provider a certification that all of the Certificates
of such Trust have been paid in full; (iii) the date on which the Subordination
Agent delivers to such Liquidity Provider a certification that a Replacement
Facility has been substituted for such Liquidity Facility; (iv) the fifth
Business Day following receipt by the Subordination Agent of a Termination
Notice from such Liquidity Provider (see "-- Liquidity Events of Default"); and
(v) the date on which no amount is or may (by reason of reinstatement) become
available for drawing under
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such Liquidity Facility. The Liquidity Facility for the Class A Trust provides
that the scheduled expiration date thereof may be extended for additional
364-day periods by mutual agreement.
The Intercreditor Agreement provides for the replacement of the Liquidity
Facility for any Trust if it is scheduled to expire earlier than 15 days after
the Final Maturity Date for the Certificates of such Trust) if such Liquidity
Facility is not extended at least 25 days prior to its then scheduled expiration
date. If such Liquidity Facility is not so extended or replaced by the 25th day
prior to its then scheduled expiration date, the Subordination Agent shall
request a Non-Extension Drawing in an amount equal to the then Maximum Available
Commitment thereunder and hold the proceeds thereof in the Cash Collateral
Account for such Trust as cash collateral to be used for the same purposes and
under the same circumstances, and subject to the same conditions, as cash
payments of Interest Drawings under such Liquidity Facility would be used.
Subject to certain limitations, Atlas may, at its option, arrange for a
Replacement Facility at any time to replace the Liquidity Facility for any Trust
(including without limitation any Replacement Facility described in the
following sentence). In addition, if any liquidity provider shall determine not
to extend any liquidity facility, then such liquidity provider may, at its
option, arrange for a Replacement Facility to replace such liquidity facility
during the period no earlier than 40 days and no later than 25 days prior to the
then scheduled expiration date of such liquidity facility. If any Replacement
Facility is provided at any time after a Downgrade Drawing or a Non-Extension
Drawing under any Liquidity Facility, the funds with respect to such liquidity
facility on deposit in the Cash Collateral Account for such Trust will be
returned to the liquidity provider being replaced.
The Intercreditor Agreement provides that, upon receipt by the
Subordination Agent of a Termination Notice with respect to any Liquidity
Facility from the applicable Liquidity Provider (given as described in
"-- Liquidity Events of Default"), the Subordination Agent shall request a final
drawing under such Liquidity Facility in an amount equal to the then Maximum
Available Commitment thereunder (a "Final Drawning") and will hold the proceeds
thereof in the Cash Collateral Account for the related Trust as cash collateral
to be used for the same purposes and under the same circumstances, and subject
to the same conditions, as cash payments of Interest Drawings under such
Liquidity Facility would be used.
Drawings under any Liquidity Facility will be made by delivery by the
Subordination Agent of a certificate in the form required by such Liquidity
Facility. Upon receipt of such a certificate, the relevant Liquidity Provider is
obligated to make payment of the drawing requested thereby in immediately
available funds. Upon payment by any Liquidity Provider of the amount specified
in any drawing under any Liquidity Facility, such Liquidity Provider will be
fully discharged of its obligations under such Liquidity Facility with respect
to such drawing and will not thereafter be obligated to make any further
payments under such Liquidity Facility in respect of such drawing to the
Subordination Agent or any other person.
REIMBURSEMENT OF DRAWINGS
Amounts drawn under any Liquidity Facility by reason of an Interest Drawing
or the Final Drawing will be immediately due and payable, together with interest
on the amount of such drawing, with respect to the period from the date of its
borrowing to (but excluding) the third business day following the applicable
Liquidity Provider's receipt of the notice of such Interest Drawing, at the Base
Rate plus 2.25% per annum, and thereafter, at LIBOR for the applicable Interest
Period plus 2.25% per annum in the case of the Class A Trust and 1.75% per annum
in the case of the Class B Trust or the Class C Trust, provided that, in the
case of a Final Drawing, the Subordination Agent may convert the Final Drawing
into a Drawing bearing interest at the Base Rate plus 2.25% per annum, in the
case of the Class A Trust, and 1.75% per annum, in the case of the Class B Trust
and the Class C Trust, on the last day of an Interest Period for such Drawing;
provided, further, that the Subordination Agent will be obligated to reimburse
such amounts only to the extent that the Subordination Agent has funds available
therefor.
"Base Rate" means a fluctuating interest rate per annum in effect from time
to time, which rate per annum shall at all times be equal to (a) the weighted
average of the rates on overnight Federal funds transactions with members of the
Federal Reserve System arranged by Federal funds brokers, as published for such
day (or, if such day is not a business day, for the next preceding business day)
by the Federal Reserve Bank of New York, or if such rate is not so published for
any day that is a business day, the average of the
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quotations for such day for such transactions received by the Liquidity Provider
from three Federal funds brokers of recognized standing selected by it, plus (b)
one-quarter of one percent ( 1/4 of 1%).
"LIBOR" means, with respect to any interest period, the average (rounded
upward, if necessary, to the next higher 1/16 of 1%) of the rates per annum at
which deposits in dollars are offered to major banks in the London interbank
market at approximately 11:00 A.M. (London time) two business days before the
first day of such interest period in an amount approximately equal to the
principal amount of the advance to which such interest period is to apply and
for a period of time comparable to such interest period.
The amount drawn under any Liquidity Facility for any Trust by reason of a
Downgrade Drawing or a Non-Extension Drawing will be treated as follows: (i)
such amount will be released on any Distribution Date to the relevant Liquidity
Provider to the extent that such amount exceeds the Required Amount; (ii) any
portion of such amount withdrawn from the Cash Collateral Account for such Trust
to fund payment of the interest on such Certificates will be treated in the same
way as Interest Drawings; and (iii) the balance of such amount will be invested
in Eligible Investments. A Downgrade Drawing under any of the Liquidity
Facilities (other than any portion thereof applied to the payment of interest on
the Certificates) will bear interest (x) subject to clause (y) below, at a rate
equal to LIBOR for the applicable Interest Period plus 0.675% per annum in the
case of the Class A Trust or 0.40% in the case of the Class B Trust or the Class
C Trust on the outstanding amount from time to time of such Downgrade Drawing,
and (z) from and after the date, if any, on which it is converted into a Final
Drawing as described below under "-- Liquidity Events of Default", at a rate
equal to LIBOR for the applicable Interest Period (or, as described in the third
preceding paragraph, the Base Rate) plus 2.25% per annum in the case of the
Class A Trust or 1.75% in the case of the Class B Trust or the Class C Trust per
annum; provided that the Subordination Agent will be obligated to pay such
amount only to the extent that the Subordination Agent has funds available
therefor. A Non-Extension Drawing under the Liquidity Facility for the Class A
Trust (other than any portion thereof applied to the payment of interest on the
Certificates) will bear interest (1) during the period from the date of its
borrowing to (but excluding) the date, if any, on which it is converted into a
Final Drawing as described below under "-- Liquidity Events of Default", at a
rate equal to LIBOR for the applicable interest period plus 0.475% per annum on
the outstanding amount from time to time of such Non-Extension Drawing, and (2)
thereafter, at a rate equal to LIBOR for the applicable interest period (or, as
described in the third preceding paragraph, the Base Rate) plus 2.25% per annum;
provided that the Subordination Agent will be obligated to pay such amount only
to the extent that the Subordination Agent has funds available therefor.
LIQUIDITY EVENTS OF DEFAULT
Events of Default under each Liquidity Facility (each, a "Liquidity Event
of Default") will consist of: (i) the acceleration of all the Equipment Notes
and (ii) certain bankruptcy or similar events involving Atlas.
If (i) any Liquidity Event of Default under any Liquidity Facility has
occurred and is continuing and (ii) less than 65% of the aggregate outstanding
principal amount of all Equipment Notes are Performing Equipment Notes, the
applicable Liquidity Provider may, in its discretion, give a notice of
termination of the related Liquidity Facility (a "Termination Notice") the
effect of which will be to cause (i) such Liquidity Facility to expire on the
fifth Business Day after the date on which such Termination Notice is received
by the Subordination Agent, (ii) the Subordination Agent to promptly request,
and the Liquidity Provider to make, a Final Drawing thereunder in an amount
equal to the then Maximum Available Commitment thereunder, (iii) any Drawing
remaining unreimbursed as of the date of termination to be automatically
converted into a Final Drawing under such Liquidity Facility, and (iv) all
amounts owing to such Liquidity Provider automatically to become accelerated.
Notwithstanding the foregoing, the Subordination Agent will be obligated to pay
amounts owing to the Liquidity Providers only to the extent of funds available
therefor after giving effect to the payments in accordance with the provisions
set forth under "Description of the Intercreditor Agreement -- Priority of
Distributions." Upon the circumstances described below under "Description of the
Intercreditor Agreement -- Intercreditor Rights," a Liquidity Provider may
become the Controlling Party with respect to the exercise of remedies under the
Indentures.
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LIQUIDITY PROVIDERS
The initial Liquidity Provider for the Class A Trust is ABN AMRO Bank N.V.,
acting through its Chicago branch. The initial Liquidity Provider for the Class
B Trust and the Class C Trust is MSCS. The obligations of MSCS under its
Liquidity Facilities are fully and unconditionally guaranteed by MSDWD.
For a description of ABN AMRO Bank N.V., see "Description of the Deposit
Agreements -- Depositary."
MSCS, a subsidiary of MSDWD, commenced operation in August 1985. MSCS was
established to conduct, primarily as principal, an interest rate, currency and
equity derivatives products business. MSCS also engages in a variety of other
related transactions.
MSDWD, the parent of MSCS and guarantor of its obligations under its
Liquidity Facilities, is a preeminent global financial services firm that
maintains leading market positions in each of its three primary
businesses -- securities, asset management and credit services. MSDWD is a
combination of Dean Witter, Discover & Co. ("Dean Witter Discover") and Morgan
Stanley Group Inc. ("Morgan Stanley") pursuant to a merger of equals that was
effected on May 31, 1997 in which Morgan Stanley was merged with and into Dean
Witter Discover.
Reports, proxy statements and other information filed by MSDWD with the
Securities and Exchange Commission pursuant to the informational requirements of
the Exchange Act can be inspected and copied at the public reference facilities
of the Securities and Exchange Commission at 450 Fifth Street, N.W. Washington,
D.C. 20549, and at the following regional offices of the Securities and Exchange
Commission: New York Regional Office, Suite 1300, 7 World Trade Center, New
York, New York 10048; Los Angeles Regional Office, 5670 Wilshire Boulevard, 11th
Floor, Los Angeles, California 90036; and Chicago Regional Office, Suite 1400,
500 West Madison Street, Chicago, Illinois 60661. Copies of such material can be
obtained from the Public Reference Section of the Securities and Exchange
Commission, 450 Fifth Street N.W. Washington, D.C. 20549, at prescribed rates.
DESCRIPTION OF THE INTERCREDITOR AGREEMENT
The following summary describes all material provisions of the
Intercreditor Agreement. The summary does not purport to be complete and is
qualified in its entirety by reference to all of the provisions of the
Intercreditor Agreement. Capitalized terms used herein but not defined herein
have the meanings ascribed to them in the Intercreditor Agreement.
INTERCREDITOR RIGHTS
Controlling Party
Pursuant to the Intercreditor Agreement, the Trustees and the Liquidity
Providers have agreed that, with respect to any Indenture at any given time, the
Loan Trustee will be directed (a) in taking, or refraining from taking, any
action thereunder or with respect to the Equipment Notes issued under such
Indenture, by the holders of at least a majority of the outstanding principal
amount of the Equipment Notes issued under such Indenture (provided that, for so
long as the Subordination Agent is the registered holder of the Equipment Notes,
the Subordination Agent will act with respect to this clause (a) in accordance
with the directions of the Trustees (in the case of each such Trustee, with
respect to the Equipment Notes issued under such Indenture and held as Trust
Property of such Trust) constituting, in the aggregate, directions with respect
to such principal amount of Equipment Notes), so long as no Indenture Default
(which, with respect to Leased Aircraft, has not been cured by the applicable
Owner Trustee or Owner Participant) shall have occurred and be continuing
thereunder, and (b) after the occurrence and during the continuance of an
Indenture Default under such Indenture which has not been cured by the
applicable Owner Trustee or Owner Participant, in taking, or refraining from
taking, any action thereunder or with respect to the Equipment Notes issued
under such Indenture, including exercising remedies thereunder or with respect
to such Equipment Notes (including acceleration of such Equipment Notes or
foreclosing the lien on the Aircraft securing such Equipment Notes), by the
Controlling Party, subject to the limitations described below.
"Controlling Party" with respect to any Indenture means: (x) the Class A
Trustee; (y) upon payment of Final Distributions to the holders of Class A
Certificates, the Class B Trustee; and (z) upon payment of Final
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Distributions to the holders of Class B Certificates, the Class C Trustee. See
"Description of the Certificates -- Indenture Defaults and Certain Rights Upon
an Indenture Default" for a description of the rights of the Certificateholders
of each Trust to direct the respective Trustees. Notwithstanding the foregoing,
at any time after 18 months from the earlier to occur of (x) the date on which
the entire available amount under any Liquidity Facility shall have been drawn
(for any reason other than a Downgrade Drawing or a Non-Extension Drawing) and
remain unreimbursed and (y) the date on which all Equipment Notes shall have
been accelerated, the Liquidity Providers with at least a majority of
unreimbursed Liquidity Obligations shall have the right to become the
Controlling Party with respect to any Indenture. For purposes of giving effect
to the foregoing, the Trustees (other than the Controlling Party) shall
irrevocably agree, and the Certificateholders (other than the Certificateholders
represented by the Controlling Party) will be deemed to agree by virtue of their
purchase of Certificates, that the Subordination Agent, as record holder of the
Equipment Notes, shall exercise its voting rights in respect of the Equipment
Notes as directed by the Controlling Party. For a description of certain
limitations on the Controlling Party's rights to exercise remedies, see
"Description of the Equipment Notes -- Remedies."
Sale of Equipment Notes or Aircraft
Upon the occurrence and during the continuation of any Indenture Default
under any Indenture, the Controlling Party may accelerate and, subject to the
provisions of the immediately following sentence, sell all (but not less than
all) of the Equipment Notes issued under such Indenture to any person. So long
as any Certificates are outstanding, during nine months after the earlier of (x)
the acceleration of the Equipment Notes under any Indenture and (y) the
bankruptcy or insolvency of Atlas, without the consent of each Trustee, (a) no
Aircraft subject to the lien of such Indenture or such Equipment Notes may be
sold, if the net proceeds from such sale would be less than the Minimum Sale
Price for such Aircraft or such Equipment Notes, and (b) with respect to any
Aircraft, the amount and payment dates of rentals payable by Atlas under the
Lease for such Aircraft may not be adjusted, if, as a result of such adjustment,
the discounted present value of all such rentals would be less than 75% of the
discounted present value of the rentals payable by Atlas under such Lease before
giving effect to such adjustment, in each case, using the weighted average
interest rate of the Equipment Notes outstanding under such Indenture as the
discount rate.
The Subordination Agent may from time to time during the continuance of an
Indenture Default (and before the occurrence of a Triggering Event) commission
LTV Appraisals with respect to an Aircraft at the request of the Controlling
Party.
PRIORITY OF DISTRIBUTIONS
So long as no Triggering Event shall have occurred, the payments in respect
of the Equipment Notes and certain other payments received on any Distribution
Date will be promptly distributed by the Subordination Agent on such
Distribution Date in the following order of priority:
(i) to the Liquidity Providers to the extent required to pay the
Liquidity Obligations (other than any interest accrued thereon or the
principal amount of any Drawing) (the "Liquidity Expenses");
(ii) to the Liquidity Providers to the extent required to pay interest
accrued on the Liquidity Obligations;
(iii) to the Liquidity Providers to the extent required to pay or
reimburse the Liquidity Providers for the Liquidity Obligations (other than
amounts payable pursuant to clauses (i) and (ii) above) and/or, if
applicable, to replenish each Cash Collateral Account up to the Required
Amount;
(iv) to the Class A Trustee to the extent required to pay Expected
Distributions on the Class A Certificates;
(v) to the Class B Trustee to the extent required to pay Expected
Distributions on the Class B Certificates;
(vi) to the Class C Trustee to the extent required to pay Expected
Distributions on the Class C Certificates;
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(vii) if Class D Certificates have been issued, to the Class D Trustee
to the extent required to pay "Expected Distributions" (to be defined in a
manner equivalent to the definition below for other Classes of
Certificates) on the Class D Certificates; and
(viii) to the Subordination Agent and each Trustee for the payment of
certain fees and expenses.
"Expected Distributions" means, with respect to the Certificates of any
Trust on any Current Distribution Date, the sum of (x) accrued and unpaid
interest on such Certificates (excluding interest, if any, payable with respect
to the Deposits relating to such Trust) and (y) the difference between (A) the
Pool Balance of such Certificates as of the immediately preceding Distribution
Date (or, if the Current Distribution Date is the first Distribution Date, the
original aggregate face amount of the Certificates of such Trust), and (B) the
Pool Balance of such Certificates as of the Current Distribution Date calculated
on the basis that (i) the principal of the Equipment Notes held in such Trust
has been paid when due (whether at stated maturity, upon redemption, prepayment,
purchase or acceleration or otherwise) and such payments have been distributed
to the holders of such Certificates and (ii) the principal of any Equipment
Notes formerly held in such Trust that have been sold pursuant to the
Intercreditor Agreement has been paid in full and such payments have been
distributed to the holders of such Certificates, but without giving effect to
any reduction in the Pool Balance as a result of any distribution attributable
to Deposits occurring after the immediately preceding Distribution Date (or, if
the Current Distribution Date is the first Distribution Date, occurring after
the initial issuance of the Certificates of such Trust). For purposes of
determining the priority of distributions on account of the redemption, purchase
or prepayment of all of the Equipment Notes issued pursuant to an Indenture,
clause (x) of the definition of Expected Distributions shall be deemed to read
as follows: "(x) accrued, due and unpaid interest on such Certificates
(excluding interest, if any, payable with respect to the Deposits relating to
such Trust) together with (without duplication) accrued and unpaid interest on a
portion of such Certificates equal to the outstanding principal amount of the
Equipment Notes being redeemed, purchased or prepaid (immediately prior to such
redemption, purchase or prepayment)".
Subject to the terms of the Intercreditor Agreement, upon the occurrence of
a Triggering Event and at all times thereafter, all funds received by the
Subordination Agent in respect of the Equipment Notes and certain other payments
will be promptly distributed by the Subordination Agent in the following order
of priority:
(i) to the Subordination Agent, any Trustee, any Certificateholder and
the Liquidity Providers to the extent required to pay certain out-of-pocket
costs and expenses actually incurred by the Subordination Agent or any
Trustee or to reimburse any Certificateholder or the Liquidity Providers in
respect of payments made to the Subordination Agent or any Trustee in
connection with the protection or realization of the value of the Equipment
Notes or any Trust Indenture Estate (collectively, the "Administration
Expenses");
(ii) to the Liquidity Providers to the extent required to pay the
Liquidity Expenses;
(iii) to the Liquidity Providers to the extent required to pay
interest accrued on the Liquidity Obligations;
(iv) to the Liquidity Providers to the extent required to pay the
outstanding amount of all Liquidity Obligations and/or, if applicable, with
respect to any particular Liquidity Facility, unless (x) less than 65% of
the aggregate outstanding principal amount of all Equipment Notes are
Performing Equipment Notes and a Liquidity Event of Default shall have
occurred and is continuing under such Liquidity Facility or (y) a Final
Drawing shall have occurred under such Liquidity Facility, to replenish the
Cash Collateral Account with respect to such Liquidity Facility up to the
Required Amount for the related Class of Certificates (less the amount of
any repayments of Interest Drawings under such Liquidity Facility while
sub-clause (x) of this clause (iv) is applicable);
(v) to the Subordination Agent, any Trustee or any Certificateholder
to the extent required to pay certain fees, taxes, charges and other
amounts payable;
(vi) to the Class A Trustee to the extent required to pay Adjusted
Expected Distributions on the Class A Certificates;
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<PAGE> 70
(vii) to the Class B Trustee to the extent acquired to pay Adjusted
Expected Distributions on the Class B Certificates;
(viii) to the Class C Trustee to the extent required to pay Adjusted
Expected Distributions on the Class C Certificates; and
(ix) if Class D Certificates have been issued, to the Class D Trustee
to the extent required to pay "Adjusted Expected Distributions" (to be
defined in a manner equivalent to the definition below for other Classes of
Certificates) on the Class D Certificates.
"Adjusted Expected Distributions" means, with respect to the Certificates
of any Trust on any Current Distribution Date, the sum of (1) accrued and unpaid
interest on such Certificates (excluding interest, if any, payable with respect
to the Deposits relating to such Trust) and (2) the greater of:
(A) the difference between (x) the Pool Balance of such Certificates
as of the immediately preceding Distribution Date (or, if the Current
Distribution Date is the first Distribution Date, the original aggregate
face amount of the Certificates of such Trust) and (y) the Pool Balance of
such Certificates as of the Current Distribution Date calculated on the
basis that (i) the principal of the Non-Performing Equipment Notes held in
such Trust has been paid in full and such payments have been distributed to
the holders of such Certificates, (ii) the principal of the Performing
Equipment Notes held in such Trust has been paid when due (but without
giving effect to any acceleration of Performing Equipment Notes) and such
payments have been distributed to the holders of such Certificates and
(iii) the principal of any Equipment Notes formerly held in such Trust that
have been sold pursuant to the Intercreditor Agreement has been paid in
full and such payments have been distributed to the holders of such
Certificates, but without giving effect to any reduction in the Pool
Balance as a result of any distribution attributable to Deposits occurring
after the immediately preceding Distribution Date (or, if the Current
Distribution Date is the first Distribution Date, occurring after the
initial issuance of the Certificates of such Trust), and
(B) the amount of the excess, if any, of (i) the Pool Balance of such
Class of Certificates as of the immediately preceding Distribution Date
(or, if the Current Distribution Date is the first Distribution Date, the
original aggregate face amount of the Certificates of such Trust), less the
amount of the Deposits for such Class of Certificates as of such preceding
Distribution Date (or, if the Current Distribution Date is the first
Distribution Date, the original aggregate amount of the Deposits for such
Class of Certificates) other than any portion of such Deposits thereafter
used to acquire Equipment Notes pursuant to the Note Purchase Agreement,
over (ii) the Aggregate LTV Collateral Amount for such Class of
Certificates for the Current Distribution Date; provided that, until the
date of the initial LTV Appraisals, clause (B) shall not apply.
For purposes of calculating Expected Distributions or Adjusted Expected
Distributions with respect to the Certificates of any Trust, any premium paid on
the Equipment Notes held in such Trust that has not been distributed to the
Certificateholders of such Trust (other than such premium or a portion thereof
applied to the payment of interest on the Certificates of such Trust or the
reduction of the Pool Balance of such Trust) shall be added to the amount of
Expected Distributions or Adjusted Expected Distributions.
"Aggregate LTV Collateral Amount" for any Class of Certificates for any
Distribution Date means (i) the sum of the applicable LTV Collateral Amounts for
each Aircraft, minus (ii) the Pool Balance for each Class of Certificates, if
any, senior to such Class, after giving effect to any distribution of principal
on such Distribution Date with respect to such senior Class or Classes.
"LTV Collateral Amount" of any Aircraft for any Class of Certificates
means, as of any Distribution Date, the lesser of (i) the LTV Ratio for such
Class of Certificates multiplied by the Appraised Current Market Value of such
Aircraft (or with respect to any such Aircraft which has suffered an Event of
Loss under and as defined in the relevant Lease, the amount of the insurance
proceeds paid to the related Loan Trustee in respect thereof to the extent then
held by such Loan Trustee (and/or on deposit in the Special Payments Account) or
payable to such Loan Trustee in respect thereof) and (ii) the outstanding
principal amount of the
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<PAGE> 71
Equipment Notes secured by such Aircraft after giving effect to any principal
payments of such Equipment Notes on or before such Distribution Date.
"LTV Ratio" means for the Class A Certificates 38.1%, for the Class B
Certificates 52.8% and for the Class C Certificates 68.4%.
"Appraised Current Market Value" of any Aircraft means the lower of the
average and the median of the most recent three LTV Appraisals of such Aircraft.
After a Triggering Event occurs and any Equipment Note becomes a Non-Performing
Equipment Note, the Subordination Agent shall obtain LTV Appraisals of the
Aircraft securing such Equipment Note as soon as practicable and additional LTV
Appraisals on or prior to each anniversary of the date of such initial LTV
Appraisals; provided that if the Controlling Party reasonably objects to the
appraised value of the Aircraft shown in such LTV Appraisals, the Controlling
Party shall have the right to obtain or cause to be obtained substitute LTV
Appraisals (including LTV Appraisals based upon physical inspection of such
Aircraft).
"LTV Appraisal" means a current fair market value appraisal (which may be a
"desk-top" appraisal) performed by any Appraiser or any other nationally
recognized appraiser on the basis of an arm's-length transaction between an
informed and willing purchaser under no compulsion to buy and an informed and
willing seller under no compulsion to sell and both having knowledge of all
relevant facts.
Interest Drawings under the Liquidity Facility and withdrawals from the
Cash Collateral Account, in each case in respect of interest on the Certificates
of any Trust, will be distributed to the Trustee for such Trust, notwithstanding
the priority of distributions set forth in the Intercreditor Agreement and
otherwise described herein. All amounts on deposit in the Cash Collateral
Account for any Trust that are in excess of the Required Amount, of the
applicable Liquidity Provider, will be paid to the applicable Liquidity
Provider.
VOTING OF EQUIPMENT NOTES
In the event that the Subordination Agent, as the registered holder of any
Equipment Note, receives a request for its consent to any amendment,
modification, consent or waiver under such Equipment Note or the related
Indenture (or, if applicable, the related Lease, the related Participation
Agreement or other related document), (i) if no Indenture Default shall have
occurred and be continuing with respect to such Indenture, the Subordination
Agent shall request instructions from the Trustee(s) and shall vote or consent
in accordance with the directions of such Trustee(s) and (ii) if any Indenture
Default shall have occurred and be continuing with respect to such Indenture,
the Subordination Agent will exercise its voting rights as directed by the
Controlling Party, subject to certain limitations, provided that no such
amendment, modification, consent or waiver shall, without the consent of each
Liquidity Provider, reduce the amount of rent, supplemental rent or stipulated
loss values payable by Atlas under any Lease or reduce the amount of principal
or interest payable by Atlas under any Equipment Note issued under any Owned
Aircraft Indenture.
ADDITION OF TRUSTEE FOR CLASS D CERTIFICATES
If the Class D Certificates are issued, the Class D Trustee will become a
party to the Intercreditor Agreement.
THE SUBORDINATION AGENT
Wilmington Trust Company is the Subordination Agent under the Intercreditor
Agreement (the "Subordination Agent). Atlas and its affiliates may from time to
time enter into banking and trustee relationships with the Subordination Agent
and its affiliates. The Subordination Agent's address is One Rodney Square, 1100
North Market Street, Wilmington, Delaware 19890-0001, Attention: Corporate Trust
Administration.
The Subordination Agent may resign at any time, in which event a successor
Subordination Agent will be appointed as provided in the Intercreditor
Agreement. The Controlling Party may remove the Subordination Agent for cause as
provided in the Intercreditor Agreement. In such circumstances, a successor
Subordination Agent will be appointed as provided in the Intercreditor
Agreement. Any resignation or removal of the Subordination Agent and appointment
of a successor Subordination Agent does not become effective until acceptance of
the appointment by the successor Subordination Agent.
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<PAGE> 72
DESCRIPTION OF THE AIRCRAFT AND THE APPRAISALS
THE AIRCRAFT
The Aircraft consist of five Boeing 747-400F aircraft, all of which will be
newly delivered by the manufacturer at the time that the Equipment Notes
relating thereto are issued. The Aircraft have been designed to be in compliance
with Stage 3 noise level standards. The Boeing 747-400F aircraft is a long-range
aircraft with payload capacity of approximately 150 tons. The engine type
expected to be utilized on the Aircraft is the General Electric Model
CF6-80C2B1F.
THE APPRAISALS
The table below sets forth the appraised values and certain additional
information regarding the Aircraft.
<TABLE>
<CAPTION>
AIRCRAFT MANUFACTURER'S APPRAISED VALUE
AIRCRAFT ENGINE TAIL SERIAL DELIVERY ------------------------------------------
TYPE TYPE NUMBER NUMBER DATE* AISI AVS MBA
- --------------- ----------- -------- -------------- ------------- ------------ ------------ ------------
<C> <S> <C> <C> <C> <C> <C> <C>
Boeing 747-400F CF6-80C2B1F N491MC 29252 July 1998 $171,540,000 $153,750,000 $157,260,000
Boeing 747-400F CF6-80C2B1F N492MC 29253 August 1998 171,960,000 153,750,000 157,575,000
Boeing 747-400F CF6-80C2B1F N493MC 29254 October 1998 172,810,000 154,130,000 158,205,000
Boeing 747-400F CF6-80C2B1F N494MC 29255 November 1998 173,230,000 154,130,000 158,520,000
Boeing 747-400F CF6-80C2B1F N495MC 29256 December 1998 173,640,000 154,130,000 158,835,000
------------ ------------ ------------
$863,180,000 $769,890,000 $790,395,000
============ ============ ============
</TABLE>
- ---------------
* Reflects current expected delivery dates. The actual delivery date for any
Aircraft may be subject to delay or acceleration. See "-- Deliveries of
Aircraft."
The appraised values set forth in the foregoing chart were determined by
the following three independent aircraft appraisal and consulting firms: AISI,
AvS and MBA. Each Appraiser was asked to provide its opinion as to the appraised
value of each Aircraft projected as of the scheduled delivery month of each such
Aircraft. As part of this process, all three Appraisers performed "desk-top"
appraisals without any physical inspection of the Aircraft. The appraisals are
based on various assumptions and methodologies, which vary among the appraisals.
An appraisal is only an estimate of value, is not indicative of the price
at which an aircraft may be purchased from the manufacturer and should not be
relied upon as a measure of realizable value; the proceeds realized upon a sale
of any Aircraft may be less than the appraised value thereof. The value of the
Aircraft in the event of the exercise of remedies under the applicable Indenture
will depend on market and economic conditions, the availability of buyers, the
condition of the Aircraft and other similar factors. Accordingly, there can be
no assurance that the proceeds realized upon any such exercise with respect to
the Equipment Notes and the Aircraft pursuant to the applicable Indenture would
equal the appraised value of such Aircraft or be sufficient to satisfy in full
payments due on the Equipment Notes issued thereunder or the Certificates.
DELIVERIES OF AIRCRAFT
The Aircraft are currently scheduled for delivery from July 1998 through
December 1998. See the table under "-- The Appraisals" for the scheduled month
of delivery of each Aircraft. Under the Boeing Purchase Agreement, delivery of
an Aircraft may be delayed due to "Excusable Delay," which is defined to
include, among other things, acts of God, war or armed hostilities, government
acts or priorities, strikes or labor troubles causing cessation, slowdown or
interruption of work, or any other cause beyond Boeing's control or not
occasioned by Boeing's fault or negligence. Boeing has announced that is has
experienced delays in deliveries of aircraft, and the delivery schedule
described above for the Aircraft reflects adjustments made by Boeing as a result
of such delays. Atlas cannot predict whether further adjustments in such
schedule will be required.
The Note Purchase Agreement provides that the Delivery Period will expire
on June 30, 1999, subject to extension, if a labor strike occurs at Boeing prior
to June 30, 1999 by the number of days that such strike continues in effect. If
delivery of any Aircraft is delayed by more than 30 days after the month
scheduled for delivery or beyond June 30, 1999, Atlas has the right to replace
such Aircraft with a Substitute Aircraft, subject to certain conditions. See
"-- Substitute Aircraft." If delivery of any Aircraft is delayed beyond the
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<PAGE> 73
Delivery Period Termination Date and Atlas does not exercise its right to
replace such Aircraft with a Substitute Aircraft, there will be unused Deposits
that will be distributed to Certificateholders together with accrued and unpaid
interest thereon from the immediately preceding Regular Distribution Date to the
date of such distribution and, if applicable, a premium. See "Description of the
Deposit Agreements -- Unused Deposits."
SUBSTITUTE AIRCRAFT
If the delivery date for any Aircraft is delayed (i) more than 30 days
after the month scheduled for delivery or (ii) beyond June 30, 1999, Atlas may
identify for delivery a substitute aircraft (each, a "Substitute Aircraft")
meeting the following conditions (x) a Substitute Aircraft must be a Boeing
747-400F aircraft manufactured after 1993 so long as such substitution does not
vary the Mandatory Economic Terms and (y) Atlas will be obligated to obtain
written confirmation from each Rating Agency that substituting such Substitute
Aircraft for the replaced Aircraft will not result in a withdrawal, suspension
or downgrading of the ratings of any of the Certificates.
DESCRIPTION OF THE EQUIPMENT NOTES
The following summary describes all material terms of the Equipment Notes.
The summaries make use of terms defined in and are qualified in their entirety
by reference to all of the provisions of the Equipment Notes, the Indentures,
the Leases, the Participation Agreements, the trust agreements under which the
Owner Trustees act on behalf of the Owner Participants (the "Trust Agreements")
and the Note Purchase Agreement. Except as otherwise indicated, the following
summaries relate to the Equipment Notes, the Indenture, the Lease, the
Participation Agreement and the Trust Agreement that may be applicable to each
Aircraft.
Under the Note Purchase Agreement, Atlas has the option of entering into a
leveraged lease financing or a debt financing with respect to each Aircraft. The
Note Purchase Agreement provides for the relevant parties to enter into either
(i) with respect to each Leased Aircraft, a Participation Agreement, a Lease and
a Leased Aircraft Indenture (among other documents) relating to the financing of
such Leased Aircraft and (ii) with respect to each Owned Aircraft, a
Participation Agreement and an Owned Aircraft Indenture relating to the
financing of such Owned Aircraft. The description of such agreements in this
Prospectus is based on the forms of such agreements annexed to the Note Purchase
Agreement.
Atlas plans to seek commitments from one or more companies to act as the
Owner Participant with respect to leveraged leases for certain of the Aircraft.
Atlas may select one or more Owner Participants for some or all of the Aircraft
or finance such Aircraft as Owned Aircraft rather than Leased Aircraft. Such
Owner Participants may request revisions to the forms of the Participation
Agreement, the Lease and the Indenture that are contemplated by the Note
Purchase Agreement, so that the terms of such agreements applicable to any
particular Aircraft may differ from the description of such agreements contained
in this Prospectus. There will not be any cross-default provisions in the
Indentures or in the Leases (unless otherwise required by an Owner Participant
with respect to Indentures and/or Leases affecting Aircraft owned by such Owner
Participant). However, under the Note Purchase Agreement, the terms of such
agreements are required to (i) contain the Mandatory Documents Terms and (ii)
not vary the Mandatory Economic Terms. In addition, Atlas will be obligated (i)
to certify to the Trustees that any such modifications do not materially and
adversely affect the Certificateholders and (ii) to obtain written confirmation
from each Rating Agency that the use of versions of such agreements modified in
any material respect would not result in a withdrawal, suspension or downgrading
of the ratings of any Class of Certificates. See "Description of the New
Certificates -- Obligation to Purchase Equipment Notes." Each Owner Participant
will be required to satisfy certain requirements, including having a minimum
combined capital and surplus or net worth.
GENERAL
The Equipment Notes will be issued in three series with respect to each
Aircraft, provided that Atlas may elect to issue a fourth series with respect to
Owned Aircraft. See "Description of the New Certificates -- Possible Issuance of
Class D Certificates." The Equipment Notes with respect to each Aircraft will be
issued under a separate Indenture between First Security, as Owner Trustee of a
trust for the benefit of the Owner
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<PAGE> 74
Participant who will be the beneficial owner of such Aircraft, and Wilmington
Trust Company, as Aircraft Trustee. The Indentures will not provide for
defeasance, or discharge upon deposit of cash or certain obligations of the
United States.
The related Owner Trustee will lease each Aircraft to Atlas pursuant to a
separate Lease between such Owner Trustee and Atlas with respect to such
Aircraft. Under each Lease, Atlas will be obligated to make or cause to be made
rental and other payments to the related Aircraft Trustee on behalf of the
related Owner Trustee, which rental and other payments will be at least
sufficient to pay in full when due all payments required to be made on the
Equipment Notes issued with respect to such Aircraft. The Equipment Notes issued
with respect to the Aircraft are not, however, direct obligations of, or
guaranteed by, Atlas. Atlas' rental obligations under each Lease will be general
obligations of Atlas.
SUBORDINATION
Series B Equipment Notes issued in respect of an Aircraft will be
subordinated in right of payment to Series A Equipment Notes issued in respect
of such Aircraft, Series C Equipment Notes issued in respect of such Aircraft
will be subordinated in right of payment to such Series B Equipment Notes and,
if Atlas elects to issue Series D Equipment Notes with respect to an Owned
Aircraft, they will be subordinated in right of payment to the Series C
Equipment Notes issued with respect to such Owned Aircraft. On each Equipment
Note payment date, (i) payments of interest and principal due on Series A
Equipment Notes issued in respect of an Aircraft will be made prior to payments
of interest and principal due on Series B Equipment Notes issued in respect of
such Aircraft; (ii) payments of interest and principal due on Series B Equipment
Notes issued in respect of an Aircraft will be made prior to payments of
interest and principal due on Series C Equipment Notes issued in respect of such
Aircraft; and (iii) if Atlas elects to issue Series D Equipment Notes with
respect to an Owned Aircraft, payments of interest and principal due on such
Series C Equipment \Notes will be made prior to payments of interest and
principal due on Series D Equipment Notes issued in respect of such Aircraft.
PRINCIPAL AND INTEREST PAYMENTS
Subject to the provisions of the Intercreditor Agreement, interest paid on
the Equipment Notes held in each Trust will be passed through to the
Certificateholders of such Trust on the dates and at the rate per annum set
forth in this Prospectus with respect to New Certificates issued by such Trust
until the final expected Regular Distribution Date for such Trust. Subject to
the provisions of the Intercreditor Agreement, principal paid on the Equipment
Notes held in each Trust will be passed through to the Certificateholders of
such Trust in scheduled amounts on the dates set forth herein until the final
expected Regular Distribution Date for such Trust.
Interest will be payable on the unpaid principal amount of each Equipment
Note at the rate applicable to such Equipment Note on January 2, and July 2 of
each year, commencing on the first such date to occur after initial issuance
thereof. Such interest will be computed on the basis of a 360-day year of twelve
30-day months.
Scheduled principal payments on the Equipment Notes will be made on January
2, and July 2 in certain years, commencing on January 2, 1999. See "Description
of the New Certificates -- Pool Factors" for a discussion of the scheduled
payments of principal of the Equipment Notes and possible revisions thereto.
If any date scheduled for a payment of principal, premium (if any) or
interest with respect to the Equipment Notes is not a Business Day, such payment
will be made on the next succeeding Business Day without any additional
interest.
REDEMPTION
If an Event of Loss occurs with respect to an Aircraft and such Aircraft is
not replaced by Atlas under the related Lease (in the case of a Leased Aircraft)
or under the related Owned Aircraft Indenture (in the case of an Owned
Aircraft), the Equipment Notes issued with respect to such Aircraft will be
redeemed, in whole, in each case at a price equal to the aggregate unpaid
principal amount thereof, together with accrued interest thereon to, but not
including, the date of redemption, but without premium, on a Special
Distribution Date.
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If Atlas exercises its right to terminate a Lease under Section 9 of such
Lease, the Equipment Notes relating to the applicable Leased Aircraft will be
redeemed, in whole, on a Special Distribution Date at a price equal to the
aggregate unpaid principal amount thereof, together with accrued interest
thereon to, but not including, the date of redemption, plus a Make-Whole
Premium. See "-- The Leases and Certain Provisions of the Owned Aircraft
Indentures -- Lease Termination."
All of the Equipment Notes issued with respect to a Leased Aircraft may be
redeemed prior to maturity as part of a refunding or refinancing thereof under
Section 11 of the applicable Participation Agreement, and all of the Equipment
Notes issued with respect to an Owned Aircraft may be redeemed prior to maturity
at any time at the option of Atlas, in each case at a price equal to the
aggregate unpaid principal thereof, together with accrued interest thereon to,
but not including, the date of redemption, plus a Make-Whole Premium. If notice
of such a redemption shall have been given in connection with a refinancing of
Equipment Notes with respect to a Leased Aircraft, such notice may be revoked
not later than three days prior to the proposed redemption date.
If, with respect to a Leased Aircraft, (x) one or more Lease Events of
Default shall have occurred and are continuing, (y) in the event of a bankruptcy
proceeding involving Atlas, (i) during the Section 1110 Period, the trustee in
such proceeding or Atlas does not assume or agree to perform its obligations
under the related Lease or (ii) at any time after assuming or agreeing to
perform such obligations, such trustee or Atlas ceases to perform such
obligations such that the stay period applicable under the U.S. Bankruptcy Code
comes to an end or (z) the Equipment Notes with respect to such Leased Aircraft
have been accelerated or the Leased Aircraft Trustee with respect to such
Equipment Notes takes action or notifies the applicable Owner Trustee that it
intends to take action to foreclose the lien of the related Leased Aircraft
Indenture or otherwise commence the exercise of any significant remedy under
such Indenture or the related Lease, then in each case all, but not less than
all, of the Equipment Notes issued with respect to such Leased Aircraft may be
purchased by the related Owner Trustee or Owner Participant on the applicable
purchase date at a price equal to the aggregate unpaid principal thereof,
together with accrued and unpaid interest thereon to, but not including, the
date of purchase, but without any premium (provided that a Make-Whole Premium
shall be payable pursuant to clause (x) when a Lease Event of Default shall have
occurred and is continuing for less than 180 days). Atlas as owner of the Owned
Aircraft has no comparable right under the Owned Aircraft Indentures to purchase
Equipment Notes under such circumstances.
"Make-Whole Premium" means, with respect to any Equipment Note, an amount
(as determined by an independent investment banker of national standing) equal
to the excess, if any, of (a) the present value of the remaining scheduled
payments of principal and interest to maturity of such Equipment Note computed
by discounting such payments on a semiannual basis on each payment date under
the applicable Indenture (assuming a 360-day year of twelve 30-day months) using
a discount rate equal to the Treasury Yield over (b) the outstanding principal
amount of such Equipment Note plus accrued interest to the date of
determination.
For purposes of determining the Make-Whole Premium and the Deposit
Make-Whole Premium, "Treasury Yield" means, at the date of determination with
respect to any Equipment Note, the interest rate (expressed as a semiannual
decimal and, in the case of United States Treasury bills, converted to a bond
equivalent yield) determined to be the per annum rate equal to the semiannual
yield to maturity for United States Treasury securities maturing on the Average
Life Date of such Equipment Note and trading in the public securities markets
either as determined by interpolation between the most recent weekly average
yield to maturity for two series of United States Treasury securities trading in
the public securities markets, (A) one maturing as close as possible to, but
earlier than, the Average Life Date of such Equipment Note and (B) the other
maturing as close as possible to, but later than, the Average Life Date of such
Equipment Note, in each case as published in the most recent H.15(519) or, if a
weekly average yield to maturity for United States Treasury securities maturing
on the Average Life Date of such Equipment Note is reported in the most recent
H.15(519), such weekly average yield to maturity as published in such H.15(519).
"H.15(519)" means the weekly statistical release designated as such, or any
successor publication, published by the Board of Governors of the Federal
Reserve System. The date of determination of a Make-Whole Premium shall be the
third Business Day prior to the applicable payment or redemption date and the
"most recent H.15(519)"
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means the H.15(519) published prior to the close of business on the third
Business Day prior to the applicable payment or redemption date.
"Average Life Date" for any Equipment Note shall be the date which follows
the time of determination by a period equal to the Remaining Weighted Average
Life of such Equipment Note. "Remaining Weighted Average Life" on a given date
with respect to any Equipment Note shall be the number of days equal to the
quotient obtained by dividing (a) the sum of each of the products obtained by
multiplying (i) the amount of each then remaining scheduled payment of principal
of such Equipment Note by (ii) the number of days from and including such
determination date to but excluding the date on which such payment of principal
is scheduled to be made, by (b) the then outstanding principal amount of such
Equipment Note.
SECURITY
The Equipment Notes issued with respect to each Leased Aircraft will be
secured by (i) an assignment by the related Owner Trustee to the related
Aircraft Trustee of such Owner Trustee's rights, except for certain limited
rights, under the Lease with respect to the related Aircraft, including the
right to receive payments of rent thereunder, (ii) a mortgage to such Leased
Aircraft Trustee of such Aircraft, subject to the rights of Atlas under such
Lease, and (iii) an assignment to such Leased Aircraft Trustee of certain of
such Owner Trustee's rights under the purchase agreement between Atlas and the
Leased Aircraft manufacturer. Unless and until an Indenture Default with respect
to a Leased Aircraft has occurred and is continuing, the Leased Aircraft Trustee
may not exercise the rights of the Owner Trustee under the related Lease, except
the Owner Trustee's right to receive payments of rent due thereunder. The
assignment by the Owner Trustee to the Leased Aircraft Trustee of its rights
under the related Lease will exclude certain rights of such Owner Trustee and
the related Owner Participant, including the rights of the Owner Trustee and the
Owner Participant with respect to indemnification by Atlas for certain matters,
insurance proceeds payable to such Owner Trustee in its individual capacity or
to such Owner Participant under public liability insurance maintained by Atlas
under such Lease or by such Owner Trustee or such Owner Participant, insurance
proceeds payable to such Owner Trustee in its individual capacity or to such
Owner Participant under certain casualty insurance maintained by such Owner
Trustee or such Owner Participant under such Lease and certain reimbursement
payments made by Atlas to such Owner Trustee. (Leased Aircraft Indenture,
Granting Clause) The Equipment Notes will not be cross-collateralized (except in
certain cases, if any, where the related Owner Participant and Atlas shall agree
to cross-collateralization), and, consequently, the Equipment Notes issued in
respect of any one Aircraft will not be secured by any of the other Aircraft or
replacement aircraft therefor (as described in "-- The Leases and Certain
Provisions of the Owned Aircraft Indentures -- Events of Loss") or the Leases
related thereto.
The Equipment Notes issued with respect to each Owned Aircraft will be
secured by (i) a mortgage to the Owned Aircraft Trustee of such Aircraft and
(ii) an assignment to the Owned Aircraft Trustee of certain of Atlas' rights
under its purchase agreement with the Aircraft manufacturer.
Funds, if any, held from time to time by the Loan Trustee with respect to
any Aircraft, including funds held as the result of an Event of Loss to such
Aircraft or, in the case of a Leased Aircraft, termination of the Lease, if any,
relating thereto, will be invested and reinvested by such Loan Trustee, at the
direction of the related Owner Trustee in the case of the Leased Aircraft or
Atlas in the case of the Owned Aircraft (except in the case of certain Indenture
Defaults), in investments described in the related Indenture.
LOAN TO VALUE RATIOS OF EQUIPMENT NOTES
The tables on the following page set forth illustrative loan to Aircraft
value ratios for the Equipment Notes issued in respect of Aircraft as of the
Regular Distribution Dates that occur after the scheduled date of original
issuance of such Equipment Notes, assuming that the Equipment Notes in the
maximum principal amount are issued in respect of each such Aircraft. These
examples were utilized by Atlas in preparing the Assumed Amortization Schedule,
although the amortization schedule for the Equipment Notes issued with respect
to an Aircraft may vary from such assumed schedule so long as it complies with
the Mandatory Economic Terms. Accordingly, the schedules set forth below may not
be applicable in the case of any particular Aircraft. See "Description of the
New Certificates -- Pool Factors." The LTV was obtained by dividing (i) the
outstanding balance (assuming no payment default) of such Equipment Notes
determined
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immediately after giving effect to the payments scheduled to be made on each
such Regular Distribution Date by (ii) the assumed value (the "Assumed Aircraft
Value") of the Aircraft securing such Equipment Notes.
The following table is based on the assumption that the value of each
Aircraft set forth opposite the initial Regular Distribution Date included in
each table depreciates by approximately 2% of the initial appraised value per
year until the fifteenth year after the year of delivery of such Aircraft, by
approximately 3% of the initial appraised value per year from the fifteenth year
until the twentieth year after the year of delivery of such Aircraft and by
approximately 4% of the initial appraised value per year thereafter. Other rates
or methods of depreciation would result in materially different loan to Aircraft
value ratios, and no assurance can be given (i) that the depreciation rates and
method assumed for the purposes of the tables are the ones most likely to occur
or (ii) as to the actual future value of any Aircraft. Thus the tables should
not be considered a forecast or prediction of expected or likely loan to
Aircraft value ratios, but simply a mathematical calculation based on one set of
assumptions.
<TABLE>
<CAPTION>
INDICATIVE LEASED AIRCRAFT(1) INDICATIVE OWNED AIRCRAFT(1)
------------------------------ ------------------------------
EQUIPMENT LOAN EQUIPMENT LOAN
NOTE ASSUMED TO NOTE ASSUMED TO
OUTSTANDING AIRCRAFT VALUE OUTSTANDING AIRCRAFT VALUE
DATE BALANCE VALUE RATIO BALANCE VALUE RATIO
---- ----------- -------- ----- ----------- -------- -----
(MILLIONS) (MILLIONS) (MILLIONS) (MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
February 9, 1998.......................... $107.62 $157.26 68.4% $107.89 $158.21 68.2%
January 2, 1999........................... 99.62 157.26 63.3 107.89 158.21 68.2
January 2, 2000........................... 96.02 154.11 62.3 104.37 155.04 67.3
January 2, 2001........................... 92.13 150.97 61.0 100.77 151.88 66.4
January 2, 2002........................... 87.92 147.82 59.5 97.13 148.71 65.3
January 2, 2003........................... 83.37 144.68 57.6 93.45 145.55 64.2
January 2, 2004........................... 78.45 141.53 55.4 89.74 142.38 63.0
January 2, 2005........................... 73.13 138.39 52.8 86.01 139.22 61.8
January 2, 2006........................... 67.39 135.24 49.8 82.26 136.06 60.5
January 2, 2007........................... 61.19 132.10 46.3 77.89 132.89 58.6
January 2, 2008........................... 54.50 128.95 42.3 73.25 129.73 56.5
January 2, 2009........................... 48.89 125.81 38.9 68.31 126.56 54.0
January 2, 2010........................... 46.96 122.66 38.3 60.90 123.40 49.4
January 2, 2011........................... 45.76 119.52 38.3 57.47 120.24 47.8
January 2, 2012........................... 37.95 116.37 32.6 51.18 117.07 43.7
January 2, 2013........................... 29.44 113.23 26.0 44.10 113.91 38.7
January 2, 2014........................... 20.28 110.08 18.4 33.30 110.74 30.1
January 2, 2015........................... 10.41 105.36 9.9 28.31 106.00 26.7
January 2, 2016........................... 1.80 100.65 1.8 22.89 101.25 22.6
January 2, 2017........................... 1.80 95.93 1.9 17.00 96.51 17.6
January 2, 2018........................... 0.00 91.21 NA 0.00 91.76 NA
</TABLE>
- ------------
(1) Indicative Leased Aircraft schedule assumes the Aircraft in the first
delivery position and the Indicative Owned Aircraft schedule assumes the
Aircraft in the third delivery position.
LIMITATION OF LIABILITY
The Equipment Notes issued with respect to each Leased Aircraft are not
direct obligations of, or guaranteed by, Atlas, any Owner Participant or the
Aircraft Trustees or the Owner Trustees in their individual capacities. None of
the Owner Trustees, the Owner Participants or the Leased Aircraft Trustees, or
any affiliates thereof, will be personally liable to any holder of an Equipment
Note or, in the case of the Owner Trustees and the Owner Participants, to the
Leased Aircraft Trustees for any amounts payable under the Equipment Notes or,
except as provided in each Leased Aircraft Indenture, for any liability under
such Leased Aircraft Indenture. All payments of principal of, premium, if any,
and interest on the Equipment Notes issued with respect to each Leased Aircraft
(other than payments made in connection with an optional redemption or purchase
of Equipment Notes issued with respect to each Leased Aircraft by the related
Owner Trustee or the related Owner Participant) will be made only from the
assets subject to the lien of the
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Indenture with respect to such Leased Aircraft or the income and Proceeds
received by the related Leased Aircraft Trustee therefrom (including rent
payable by Atlas under the Lease with respect to such Leased Aircraft).
The Equipment Notes issued with respect to the Owned Aircraft will be
direct obligations of Atlas.
Except as otherwise provided in the Indentures, each Owner Trustee and each
Loan Trustee, in its individual capacity, will not be answerable or accountable
under the Indentures or under the Equipment Notes under any circumstances
except, among other things, for its own willful misconduct or gross negligence.
None of the Owner Participants will have any duty or responsibility under any of
the Leased Aircraft Indentures or the Equipment Notes to the Leased Aircraft
Trustees or to any holder of any Equipment Note.
INDENTURE DEFAULTS, NOTICE AND WAIVER
Indenture Defaults under each Indenture will include: (a) in the case of a
Leased Aircraft Indenture, the occurrence of any Lease Event of Default under
the related Lease (other than the failure to make certain indemnity payments and
other payments to the related Owner Trustee or Owner Participant unless a notice
is given by such Owner Trustee that such failure shall constitute an Indenture
Default), (b) the failure by the related Owner Trustee (other than as a result
of a Lease Default or Lease Event of Default) in the case of a Leased Aircraft
Indenture, or Atlas, in the case of an Owned Aircraft Indenture, to pay any
interest or principal or premium, if any, or other amount when due, under such
Indenture or under any Equipment Note issued thereunder that continues for more
than 10 Business Days, in the case of principal, interest or Make-Whole Premium,
and, in all other cases, ten Business Days after the relevant Owner Trustee or
Owner Participant receives written demand from the related Loan Trustee or
holder of an Equipment Note, (c) the failure by the related Owner Participant or
the related Owner Trustee (in its individual capacity) to discharge certain
liens that continue after notice and specified cure periods, (d) any
representation or warranty made by the related Owner Trustee or Owner
Participant in such Indenture, the related Participation Agreement, or certain
related documents furnished to the Loan Trustee or any holder of an Equipment
Note pursuant thereto being false or incorrect in any material respect when made
that continues to be material and adverse to the interests of the Loan Trustee
or Note Holders and remains unremedied after notice and specified cure periods,
(e) failure by Atlas or the related Owner Trustee or Owner Participant to
perform or observe covenants or obligations for the benefit of the Loan Trustee
or holders of Equipment Notes under such Indenture or certain related documents
which continues after notice and specified cure periods and which is material
and adverse to the interests of the Loan Trustee or the Note Holders, (f) if at
any time when the related Aircraft is registered under the laws of the United
States, the registration of the related Aircraft ceasing to be effective as a
result of the Owner Participant (in the case of a Leased Aircraft) or Atlas (in
the case of an Owned Aircraft) not being a citizen of the United States, as
defined in the Transportation Code (subject to a cure period), (g) with respect
to the Owned Aircraft, the lapse or cancellation of insurance required under the
Owned Aircraft Indenture or (h) the occurrence of certain events of bankruptcy,
reorganization or insolvency of the related Owner Trustee or Owner Participant
(in the case of a Leased Aircraft) or Atlas (in the case of an Owned Aircraft).
There will not be cross-default provisions in the Indentures or in the Leases
(unless otherwise required by an Owner Participant with respect to Indentures
and/or Leases affecting Aircraft owned by such Owner Participant). Consequently,
events resulting in an Indenture Default under any particular Indenture may or
may not result in an Indenture Default occurring under any other Indenture, and
a Lease Event of Default under any particular Lease may or may not constitute a
Lease Event of Default under any other Lease.
The Loan Trustee will give the holders of the Equipment Notes and, if
applicable, the Owner Trustee and the Owner Participant prompt written notice of
any Indenture Default of which the Loan Trustee has actual knowledge and, in the
case of an indenture related to a Leased Aircraft, if the Indenture Default from
a Lease Event of Default, it will give the holders of the Equipment Notes, the
Owner Trustee and the Owner Participant not less than ten business days' prior
written notice of the date on or after which the Loan Trustee may commence the
exercise of any remedy described in "-- Remedies" below.
If Atlas fails to make any semiannual basic rental payment due under any
Lease, within a specified period after such failure the applicable Owner Trustee
may furnish to the Leased Aircraft Trustee the amount due on the Equipment Notes
issued with respect to the related Leased Aircraft, together with any interest
thereon on
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<PAGE> 79
account of the delayed payment thereof, in which event the Leased Aircraft
Trustee and the holders of outstanding Equipment Notes issued under such
Indenture may not exercise any remedies otherwise available under such Indenture
or such Lease as the result of such failure to make such rental payment, unless
such Owner Trustee has previously cured three or more immediately preceding
semiannual basic rental payment defaults or, in total, six or more previous
semiannual basic rental payment defaults (or, in the case of certain Owner
Participants, six or more immediately preceding semiannual basic rental payment
defaults or, in total, eight or more previous semiannual basic rental payment
defaults). The applicable Owner Trustee also may cure any other default by Atlas
in the performance of its obligations under any Lease that can be cured with the
payment of money.
In the case of a Leased Aircraft Indenture, if an Owner Trustee or Owner
Participant pays the amount due on the Equipment Notes to the Loan Trustee or
cures the Indenture Default, the Owner Trustee, or Owner Participant will be
subrogated to the rights of the Loan Trustee and the holders of the Equipment
Notes in respect of the rent which was overdue at the time of such payment as
well as interest payable by Atlas on account of such rent being overdue, and
thereafter the Owner Trustee or the Owner Participant, as the case may be, will
be entitled to receive such overdue rent and interest thereon upon receipt by
the Loan Trustee; provided, however, that (i) if the principal amount and
interest on the Equipment Notes is due and payable following an Indenture
Default, such subrogation will, until the principal amount of, interest on,
Make-Whole Premium, if any, and all other amounts due with respect to all
Equipment Notes has been paid in full, be subordinate to the rights of the Loan
Trustee and the holders of the Equipment Notes in respect of such payment of
overdue rent and interest and (ii) the Owner Trustee will not be entitled to
recover any such payment except pursuant to the foregoing right of subrogation,
by demand or suit for damages.
The holders of a majority in principal amount of the outstanding Equipment
Notes issued with respect to any Aircraft, by notice to the Loan Trustee, may on
behalf of all the holders waive any existing default and its consequences under
the Indenture with respect to such Aircraft, except a default in the payment of
the principal of, or premium or interest on any such Equipment Notes or a
default in respect of any covenant or provision of such Indenture that cannot be
modified or amended without the consent of each holder of Equipment Notes.
REMEDIES
If an Indenture Default occurs and is continuing under an Indenture, the
related Loan Trustee or the holders of a majority in principal amount of the
Equipment Notes outstanding under such Indenture may, subject to the applicable
Owner Participant's or Owner Trustee's right to cure, as discussed above,
declare the principal of all such Equipment Notes issued thereunder immediately
due and payable, together with all accrued but unpaid interest thereon, provided
that in the event of a reorganization proceeding involving Atlas instituted
under Chapter 11 of the U.S. Bankruptcy Code, if no other Lease Event of Default
and no other Indenture Default (other than the failure to pay the outstanding
amount of the Equipment Notes which by such declaration shall have become
payable) exists at any time after the consummation of such proceeding, such
declaration will be automatically rescinded without any further action on the
part of any holder of Equipment Notes. The holders of a majority in principal
amount of Equipment Notes outstanding under an Indenture may rescind any
declaration of acceleration of such Equipment Notes at any time before the
judgment or decree for the payment of the money so due shall be entered if (i)
there has been paid to the related Loan Trustee an amount sufficient to pay all
principal, interest, and premium, if any, on any such Equipment Notes, to the
extent such amounts have become due otherwise than by such declaration of
acceleration and (ii) all other Indenture Defaults and incipient Indenture
Defaults with respect to any covenant or provision of such Indenture have been
cured.
Each Indenture provides that if an Indenture Default under such Indenture
has occurred and is continuing, the related Loan Trustee may exercise certain
rights or remedies available to it under such Indenture or under applicable law,
including (if, in the case of a Leased Aircraft, the corresponding Lease has
been declared in default) one or more of the remedies under such Indenture or,
in the case of a Leased Aircraft, such Lease with respect to the Aircraft
subject to such Lease. If a Lease Event of Default shall have occurred and be
continuing under the corresponding Lease, the related Leased Aircraft Trustee's
right to
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<PAGE> 80
exercise remedies under a Leased Aircraft Indenture is subject, with certain
exceptions, to its having proceeded to exercise one or more of the dispossessory
remedies under the Lease with respect to such Leased Aircraft; provided that the
requirement to exercise one or more of such remedies under such Lease shall not
apply in circumstances where such exercise has been involuntarily stayed or
prohibited by applicable law or court order for a continuous period in excess of
60 days or such period as may be specified in Section 1110(a)(1)(A) of the U.S.
Bankruptcy Code, plus an additional period, if any, resulting from (i) the
trustee or debtor-in-possession in such proceeding agreeing to perform
obligations under such Lease with the approval of the applicable court and its
continuous performance of such Lease under Section 1110(a)(1) (A-B) of the U.S.
Bankruptcy Code or such Leased Aircraft Trustee's consent to an extension of
such period, (ii) such Leased Aircraft Trustee's failure to give any requisite
notice, or (iii) Atlas' assumption of such Lease with the approval of the
relevant court and its continuous performance of the Lease as so assumed. See
"-- The Leases and Certain Provisions of the Owned Aircraft
Indentures -- Remedies Exercisable upon Events of Default Under the Leases".
Such remedies may be exercised by the related Leased Aircraft Trustee to the
exclusion of the related Owner Trustee, subject to certain conditions specified
in such Indenture, and of Atlas, subject to the terms of such Lease. Any
Aircraft sold in the exercise of such remedies will be free and clear of any
rights of those parties, including the rights of Atlas under the Lease with
respect to such Aircraft; provided that no exercise of any remedies by the
related Leased Aircraft Trustee may affect the rights of Atlas under any Lease
unless a Lease Event of Default has occurred and is continuing. The Owned
Aircraft Indentures will not contain such limitations on the Owned Aircraft
Trustee's ability to exercise remedies upon an Indenture Default under an Owned
Aircraft Indenture.
If a bankruptcy proceeding involving Atlas under the U.S. Bankruptcy Code
occurs, all of the rights of the Owner Trustee as lessor under a particular
Lease will be exercised by the Owner Trustee in accordance with the terms
thereof unless (i) during the Section 1110 Period the trustee in such proceeding
or Atlas does not assume or agree to perform its obligations under such Lease,
(ii) at any time after assuming or agreeing to perform such obligations, such
trustee or Atlas ceases to perform such obligations or (iii) the related Loan
Trustee takes action, or notifies the Owner Trustee that such Loan Trustee
intends to take action, to foreclose the lien of the related Leased Aircraft
Indenture or otherwise commence the exercise of any significant remedy in
accordance with the Leased Aircraft Indenture. The Owner Trustee's exercise of
such rights shall be subject to certain limitations and, in no event, reduce the
amount or change the time of any payment in respect of the Equipment Notes or
adversely affect the validity or enforceability of the lien under the related
Leased Aircraft Indenture.
If the Equipment Notes issued in respect of one Aircraft are in default,
the Equipment Notes issued in respect of the other Aircraft may not be in
default, and, if not, no remedies will be exercisable under the applicable
Indentures with respect to such other Aircraft.
Section 1110 of the U.S. Bankruptcy Code provides in relevant part that the
right of lessors, conditional vendors and holders of security interests with
respect to "equipment" (as defined in Section 1110 of the U.S. Bankruptcy Code)
to take possession of such equipment in compliance with the provisions of a
lease, conditional sale contract or security agreement, as the case may be, is
not affected by (a) the automatic stay provision of the U.S. Bankruptcy Code,
which provision enjoins repossessions by creditors for the duration of the
reorganization period, (b) the provision of the U.S. Bankruptcy Code allowing
the trustee in reorganization to use property of the debtor during the
reorganization period, (c) Section 1129 of the U.S. Bankruptcy Code (which
governs the confirmation of plans of reorganization in Chapter 11 cases) and (d)
any power of the bankruptcy court to enjoin a repossession. Section 1110
provides in relevant part, however, that the right of a lessor, conditional
vendor or holder of a security interest to take possession of an aircraft in the
event of an event of default may not be exercised for 60 days following the date
of commencement of the reorganization proceedings (unless specifically permitted
by the bankruptcy court) and may not be exercised at all if, within such 60-day
period (or such longer period consented to by the lessor, conditional vendor or
holder of a security interest), the trustee in reorganization agrees to perform
the debtor's obligations that become due on or after such date and cures all
existing defaults (other than defaults resulting solely from the financial
condition, bankruptcy, insolvency or reorganization of the debtor). "Equipment"
is defined in Section 1110 of the U.S. Bankruptcy Code, in part, as an aircraft,
aircraft engine, propeller, appliance, or spare part (as defined in
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<PAGE> 81
Section 40102 of Title 49 of the U.S. Code) that is subject to a security
interest granted by, leased to, or conditionally sold to a debtor that is a
citizen of the United States (as defined in Section 40102 of Title 49 of the
U.S. Code) holding an air carrier operating certificate issued by the Secretary
of Transportation pursuant to chapter 447 of Title 49 of the U.S. Code for
aircraft capable of carrying 10 or more individuals or 6,000 pounds or more of
cargo.
It is a condition to the Trustee's obligation to purchase equipment Notes
with respect to each Aircraft that outside counsel to Atlas, Cahill Gordon &
Reindel, provide its opinion to the Trustees that (x) if such Aircraft is a
Leased Aircraft, the Owner Trustee, as lessor under the Lease for such Aircraft,
and the Leased Aircraft Trustee, as assignee upon foreclosure or other taking of
possession of the Owner Trustee's rights of such Owner Trustee's rights under
such Lease pursuant to the related Leased Aircraft Indenture, will be entitled
to the benefits of Section 1110 of the U.S. Bankruptcy Code with respect to the
airframe and engines comprising such Aircraft or (y) if such Aircraft is an
Owned Aircraft, the Owned Aircraft Trustee will be entitled to the benefits of
Section 1110 with respect to the airframe and engines comprising such Owned
Aircraft, in each case, assuming that Atlas is a "citizen of the United States"
as defined in Section 40102 of Title 49 of the U.S. Code holding an air carrier
operating certificate issued by the Secretary of Transportation pursuant to
chapter 447 of Title 49 of the U.S. Code for aircraft capable of carrying 10 or
more individuals or 6,000 pounds or more of cargo and assuming that the Aircraft
and Engines constitute "equipment" as defined in Section 1110 of the U.S.
Bankruptcy Code. For a description of certain limitations on the Loan Trustee's
exercise of rights contained in the Indenture, see "-- Indenture Defaults,
Notice and Waiver."
The opinion of Cahill Gordon & Reindel will not address the possible
replacement of an Aircraft after an Event of Loss in the future, the
consummation of which is conditioned upon the contemporaneous delivery of an
opinion of counsel to the effect that the related Loan Trustee will be entitled
to Section 1110 benefits with respect to such replacement unless there is a
change in law or court interpretation that results in Section 1110 not being
available. See "-- The Leases and Certain Provisions of the Owned Aircraft
Indentures -- Events of Loss." The opinion of Cahill Gordon & Reindel will also
not address the availability of Section 1110 with respect to any possible
sublessee of a Leased Aircraft subleased by Atlas or to any possible lessee of
an Owned Aircraft if it is leased by Atlas.
If an Indenture Default under any Indenture occurs and is continuing, any
sums held or received by the related Loan Trustee may be applied to reimburse
such Loan Trustee for any tax, expense or other loss incurred by it and to pay
any other amounts due to such Loan Trustee prior to any payments to holders of
the Equipment Notes issued under such Indenture.
In the event of bankruptcy, insolvency, receivership or like proceedings
involving an Owner Participant, it is possible that, notwithstanding that the
applicable Leased Aircraft is owned by the related Owner Trustee in trust, such
Leased Aircraft and the related Lease and Equipment Notes might become part of
such proceeding. In such event, payments under such Lease or on such Equipment
Notes might be interrupted and the ability of the related Leased Aircraft
Trustee to exercise its remedies under the related Leased Aircraft Indenture
might be restricted, although such Leased Aircraft Trustee would retain its
status as a secured creditor in respect of the related Lease and the related
Leased Aircraft.
MODIFICATION OF INDENTURES AND LEASES
Without the consent of holders of a majority in principal amount of the
Equipment Notes outstanding under any Indenture, the provisions of such
Indenture and any related Lease, Participation Agreement or Trust Agreement may
not be amended or modified, except to the extent indicated below.
Subject to certain limitations, certain provisions of any Leased Aircraft
Indenture, and of the Lease, the Participation Agreement, and the Trust
Agreement related thereto, may be amended or modified by the parties thereto
without the consent of any holders of the Equipment Notes outstanding under such
Indenture. In the case of each Lease, such provisions include, among others,
provisions relating to (i) the return to the related Owner Trustee of the
related Leased Aircraft at the end of the term of such Lease (except to the
extent that such amendment would affect the rights or exercise of remedies under
the Lease) and (ii) the renewal of such Lease and the option of Atlas at the end
of the term of such Lease to purchase the related Leased Aircraft so
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<PAGE> 82
long as the same would not adversely affect the Note Holders. In addition, any
Indenture may be amended without the consent of the holders of Equipment Notes
to, among other things, cure any defect or inconsistency in such Indenture or
the Equipment Notes issued thereunder, provided that such change does not
adversely affect the interests of any such holder.
Without the consent of each Liquidity Provider and the holder of each
Equipment Note outstanding under any Indenture affected thereby, no amendment or
modification of such Indenture may among other things (a) reduce the principal
amount of, or premium, if any, or interest payable on, any Equipment Notes
issued under such Indenture or change the date on which any principal, premium,
if any, or interest is due and payable, (b) permit the creation of any security
interest with respect to the property subject to the lien of such Indenture,
except as provided in such Indenture, or deprive any holder of an Equipment Note
issued under such Indenture of the benefit of the lien of such Indenture upon
the property subject thereto or (c) reduce the percentage in principal amount of
outstanding Equipment Notes issued under such Indenture necessary to modify or
amend any provision of such Indenture or to waive compliance therewith.
INDEMNIFICATION
Atlas will be required to indemnify each Loan Trustee, each Owner
Participant, each Owner Trustee, each Liquidity Provider, the Subordination
Agent, the Escrow Agent and each Trustee, but not the holders of Certificates,
for certain losses, claims and other matters. Atlas will be required under
certain circumstances to indemnify each Owner Participant against the loss of
depreciation deductions and certain other benefits allowable for certain income
tax purposes with respect to the related Leased Aircraft.
THE LEASES AND CERTAIN PROVISIONS OF THE OWNED AIRCRAFT INDENTURES
Each Leased Aircraft will be leased to Atlas by the relevant Owner Trustee
under the relevant lease agreement (each, a "Lease"). A prospective owner
participant for any Leased Aircraft may require revisions to the related Lease
so that the terms of such Lease may differ from the description of such Leases
set forth below.
Lease Term Rentals and Payments
Each Leased Aircraft will be leased separately by the relevant Owner
Trustee to Atlas for a term commencing on the date on which the Aircraft is
acquired by the Owner Trustee and expiring on a date not earlier than the latest
maturity date of the relevant Equipment Notes, unless terminated prior to the
originally scheduled expiration date as permitted by the applicable Lease. The
semiannual basic rent payment under each Lease is payable by Atlas on each
related Lease Payment Date (or, if such day is not a Business Day, on the next
Business Day), and will be assigned by the Owner Trustee under the corresponding
Leased Aircraft Indenture to provide the funds necessary to make scheduled
payments of principal and interest due from the Owner Trustee on the Equipment
Notes issued under such Indenture. In certain cases, the semiannual basic rent
payments under the Leases may be adjusted, but each Lease provides that under no
circumstances will rent payments by Atlas be less than the scheduled payments on
the related Equipment Notes. Any balance of each such semiannual basic rent
payment under each Lease, after payment of amounts due on the Equipment Notes
issued under the Indenture corresponding to such Lease, will be paid over to the
Owner Trustee.
"Lease Payment Date" means, with respect to each Lease, January 2 or July 2
during the term of such Lease.
Semiannual payments of interest on the Equipment Notes issued by Atlas
under an Owned Aircraft Indenture are payable January 2 and July 2 of each year,
commencing on the first such date after issuance thereof. Semiannual payments of
principal under the Equipment Notes issued by Atlas under an Owned Aircraft
Indenture are payable on January 2 and July 2 in certain years, commencing on
January 2, 1999.
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<PAGE> 83
Net Lease; Maintenance
Under the terms of each Lease, Atlas' obligations in respect of each Leased
Aircraft will be those of a lessee under a "net lease." Accordingly, Atlas is
obligated under each Lease, among other things and at its expense, to keep each
Aircraft duly registered and insured, to pay all costs of operating the Aircraft
and to maintain, service, repair and overhaul the Aircraft so as to keep it in
as good operating condition as when delivered to Atlas under the Lease, ordinary
wear and tear excepted, and in such condition as required to maintain the
airworthiness certificate for the Aircraft in good standing at all times. The
Owned Aircraft Indentures impose comparable maintenance, service and repair
obligations on Atlas with respect to the Owned Aircraft.
Possession, Sublease and Transfer
Each Aircraft may be operated by Atlas or, subject to certain restrictions,
by certain other persons. Normal interchange and pooling agreements customary in
the commercial airline industry with respect to any Engine are permitted.
Subleases, in the case of the Leased Aircraft, and leases, in the case of Owned
Aircraft, are also permitted to U.S. air carriers and foreign air carriers that
have their principal executive office in certain specified countries, subject to
a reasonably satisfactory legal opinion that, among other things, such country
would recognize (in the case of the Leased Aircraft) Owner Trustee's title to,
and the Loan Trustee's lien in respect of, the applicable Aircraft. In addition,
a sublessee may not be subject to insolvency or similar proceedings at the
commencement of such sublease or lease. Permitted foreign air carriers are not
limited to those based in a country that is a party to the Convention on the
International Recognition of Rights in Aircraft (Geneva 1948) (the
"Convention"). It is uncertain to what extent the relevant Loan Trustee's
security interest would be recognized if an Aircraft is registered or located in
a jurisdiction not a party to the Convention. Moreover, in the case of an
Indenture Default, the ability of the related Loan Trustee to realize upon its
security interest in an Aircraft could be adversely affected as a legal or
practical matter if such Aircraft were registered or located outside the United
States.
Registration
Atlas is required to keep each Aircraft duly registered under the
Transportation Code with the FAA, except (in the case of the Leased Aircraft) if
the relevant Owner Trustee or the relevant Owner Participant fails to meet the
applicable citizenship requirements, and to record each Lease (in the case of
the Leased Aircraft) and Indenture and certain other documents under the
Transportation Code. Such recordation of the Indenture and other documents with
respect to each Aircraft will give the relevant Loan Trustee a first-priority,
perfected security interest in such Aircraft whenever it is located in the
United States or any of its territories and possessions. The Convention provides
that such security interest will also be recognized, with certain limited
exceptions, in those jurisdictions that have ratified or adhere to the
Convention.
So long as no Lease Event of Default exists, Atlas has the right to
register the Leased Aircraft subject to such Lease in a country other than the
United States at its own expense in connection with a permitted sublease of the
Aircraft to a permitted foreign air carrier, subject to certain conditions set
forth in the related Participation Agreement. These conditions include a
requirement that the lien of the applicable Indenture continue as a first
priority security interest in the applicable Aircraft. The Owned Aircraft
Indentures contain comparable provisions with respect to the registration of the
Owned Aircraft in connection with a permitted lease of the Owned Aircraft.
Liens
Atlas is required to maintain each Aircraft free of any liens, other than
the rights of the relevant Loan Trustee, the holders of the related Equipment
Notes, Atlas and the Owner Participant and Owner Trustee arising under the
applicable Indenture, the Lease (in the case of the Leased Aircraft) or the
other operative documents related thereto, and other than certain limited liens
permitted under such documents, including but not limited to (i) liens for taxes
either not yet due or being contested in good faith by appropriate proceedings;
(ii) materialmen's, mechanics' and other similar liens arising in the ordinary
course of business and securing
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obligations that either are not yet delinquent for more than 60 days or are
being contested in good faith by appropriate proceedings; (iii) judgment liens
so long as such judgment is discharged or vacated within 60 days or the
execution of such judgment is stayed pending appeal or discharged, vacated or
reversed within 60 days after expiration of such stay; and (iv) any other lien
as to which Atlas has provided a bond or other security adequate in the
reasonable opinion of the Owner Trustee; provided that in the case of each of
the liens described in the foregoing clauses (i), (ii) and (iii), such liens and
proceedings do not involve any material risk of the sale, forfeiture or loss of
such Aircraft or the interest of any Participant therein or impair the lien of
the relevant Indenture.
Replacement of Parts, Alterations
Atlas is obligated to replace all parts at its expense that may from time
to time be incorporated or installed in or attached to any Aircraft and that may
become lost, damaged beyond repair, worn out, stolen, seized, confiscated or
rendered permanently unfit for use. Atlas or any permitted sublessee has the
right, at its own expense, to make such alterations, modifications and additions
with respect to each Aircraft as it deems desirable in the proper conduct of its
business and to remove parts which it deems to be obsolete or no longer suitable
or appropriate for use, so long as such alteration, modification, addition or
removal does not materially diminish the fair market value, utility or useful
life of the related Aircraft or Engine or invalidate the Aircraft's
airworthiness certificate.
Insurance
Atlas is required to maintain, at its expense (or at the expense of a
permitted lessee, in the case of the Owned Aircraft, or a permitted sublessee,
in the case of the Leased Aircraft), all-risk aircraft hull insurance covering
each Aircraft, at all times in an amount not less than the stipulated loss value
of such Aircraft (which will exceed the aggregate outstanding principal amount
of the Equipment Notes relating to such Aircraft, together with accrued interest
thereon). However, after giving effect to self-insurance permitted as described
below, the amount payable under such insurance may be less than such amounts
payable with respect to the Equipment Notes. In the event of a loss involving
insurance proceeds in excess of $7.5 million, to be adjusted for inflation, per
occurrence such proceeds up to the stipulated loss value of the relevant
Aircraft will be payable to the applicable Loan Trustee, for so long as the
relevant Indenture shall be in effect. In the event of a loss involving
insurance proceeds of up to $7.5 million, to be adjusted for inflation, per
occurrence such proceeds will be payable directly to Atlas so long as an
Indenture Event of Default does not exist with respect to the Owned Aircraft or
(in the case of the Leased Aircraft) the Owner Trustee has not notified the
insurance underwriters that a Lease Event of Default exists. So long as the loss
does not constitute an Event of Loss, insurance proceeds will be applied to
repair or replace the property.
In addition, Atlas is obligated to maintain comprehensive airline liability
insurance at its expense (or at the expense of a permitted lessee, in the case
of the Owned Aircraft, or a permitted sublessee, in the case of the Leased
Aircraft), including without limitation, passenger liability, baggage liability,
cargo and mail liability, hangarkeeper's liability and contractual liability
insurance with respect to each Aircraft. Such liability insurance must be
underwritten by insurers of nationally or internationally recognized
responsibility. The amount of such liability insurance coverage per occurrence
may not be less than the amount of comprehensive airline liability insurance
from time to time applicable to aircraft owned or leased and operated by Atlas
of the same type and operating on similar routes as such Aircraft.
Atlas is also required to maintain war-risk, hijacking or allied perils
insurance if it (or any permitted sublessee or lessee) operates any Aircraft,
Airframe or Engine in any area of recognized hostilities or if Atlas (or any
permitted sublessee or lessee) maintains such insurance with respect to other
aircraft operated on the same routes or areas on or in which the Aircraft is
operated.
Atlas may self-insure under a program applicable to all aircraft in its
fleet, but the amount of such self-insurance in the aggregate may not exceed 50%
of the largest replacement value of any single aircraft in Atlas' fleet or
1- 1/2% of the average aggregate insurable value (during the preceding policy
year) of all aircraft on which Atlas carries insurance, whichever is less,
unless an insurance broker of national standing shall certify
77
<PAGE> 85
that the standard among other major U.S. air cargo carriers is a higher level of
self-insurance, in which case Atlas may self-insure the Aircraft to such higher
level. In addition, Atlas may self-insure to the extent of any applicable
deductible per Aircraft that does not exceed industry standards for major U.S.
air cargo carriers.
In respect of each Aircraft, Atlas is required to name as additional
insured parties the relevant Loan Trustee and holders of the Equipment Notes and
(in the case of the Leased Aircraft) the relevant Owner Participant and Owner
Trustee, in its individual capacity and as owner of such Aircraft, and in some
cases certain other parties under all liability, hull and property and war risk,
hijacking and allied perils insurance policies required with respect to such
Aircraft. In addition, the insurance policies will be required to provide that,
in respect of the interests of such additional insured persons, the insurance
shall not be invalidated or impaired by any act or omission of Atlas, any
permitted sublessee or any other person.
Lease Termination
Unless a Lease Event of Default shall have occurred and is continuing,
Atlas may terminate any Lease on any Lease Payment Date occurring after the
fifth anniversary of the date on which such Lease commenced, if it makes a good
faith determination that the Leased Aircraft subject to such Lease is
economically obsolete or surplus to its requirement or if it is to be disposed
pursuant to a program of fleet renewal. Atlas is required to give notice of its
intention to exercise its right of termination described in this paragraph at
least 90 days prior to the proposed date of termination, which notice may be
withdrawn up to ten Business Days prior to such proposed date; provided that
Atlas may with respect to such Lease give only five such termination notices. In
such a situation, unless the Owner Trustee elects to retain title to such
Aircraft, Atlas is required to use commercially reasonable efforts to sell such
Aircraft as an agent for such Owner Trustee, and Owner Trustee will sell such
Aircraft on the date of termination to the highest cash bidder. If such sale
occurs, the Equipment Notes related thereto are required to be prepaid. If the
net proceeds to be received from such sale are less than the termination value
for such Aircraft (which is set forth in a schedule to each Lease), Atlas is
required to pay to the applicable Owner Trustee an amount equal to the excess,
if any, of the applicable termination value for such Aircraft over such net
proceeds. Upon payment of termination value for such Aircraft and an amount
equal to the Make-Whole Premium, if any payable on such date of payment,
together with certain additional amounts, the lien of the relevant Indenture
will be released, the relevant Lease will terminate, and the obligation of Atlas
thereafter to make scheduled rent payments under such Lease will cease.
The Owner Trustee has the option to retain title to the Leased Aircraft if
Atlas has given a notice of termination under the Lease. In such event, such
Owner Trustee will pay to the applicable Loan Trustee an amount sufficient to
prepay the outstanding Equipment Notes issued with respect to such Aircraft
(including the Make-Whole Premiums), in which case the lien of the relevant
Indenture will be released, the relevant Lease will terminate and the obligation
of Atlas thereafter to make scheduled rent payments under such Lease will cease.
Events of Loss
If an Event of Loss occurs with respect to the Airframe or the Airframe and
Engines of an Aircraft, Atlas must elect within 60 days after such occurrence
either to make payment with respect to such Event of Loss or to replace such
Airframe and any such Engines. Not later than the first Business Day following
the earliest of (i) the 180th day following the date of occurrence of such Event
of Loss, and (ii) the fourth Business Day following the receipt of the insurance
proceeds in respect of such Event of Loss, Atlas must either (a) pay to the
applicable Owner Trustee (in the case of the Leased Aircraft) or to the Owned
Aircraft Trustee (in the case of the Owned Aircraft) the stipulated loss value
of such Aircraft, together with certain additional amounts, but, in any case,
without any Make-Whole Premium or (b) unless any Lease Event of Default or
failure to pay basic rent under the relevant Lease (in the case of the Leased
Aircraft), an Indenture Event of Default or failure to pay principal or interest
under the Owned Aircraft Indenture (in the case of the Owned Aircraft) or
certain bankruptcy defaults shall have occurred and is continuing, substitute an
airframe (or airframe and one or more engines, as the case may be) for the
Airframe, or Airframe and Engine(s), that suffered such Event of Loss.
78
<PAGE> 86
If Atlas elects to replace an Airframe (or Airframe and one or more
Engines, as the case may be) that suffered such Event of Loss, it shall, in the
case of the Leased Aircraft, convey to the related Owner Trustee title to an
airframe (or airframe and one or more engines, as the case may be) or, in the
case of an Owned Aircraft, subject such an airframe (or airframe and one or more
engines) to the lien of the Owned Aircraft Indenture, and such replacement
airframe or airframe and engines must be the same model as the Airframe or
Airframe and Engines to be replaced or an improved model, with a value, utility
and remaining useful life (without regard to hours or cycles remaining until the
next regular maintenance check) at least equal to the Airframe or Airframe and
Engines to be replaced, assuming that such Airframe and such Engines had been
maintained in accordance with the related Lease or Owned Aircraft Indenture, as
the case may be. Atlas is also required to provide to the relevant Loan Trustee
and (in the case of a Leased Aircraft) the relevant Owner Trustee and Owner
Participant reasonably acceptable opinions of counsel to the effect, among other
things, that (i) certain specified documents have been duly filed under the
Transportation Code and (ii) such Owner Trustee and Leased Aircraft Trustee (as
assignee of lessor's rights and interests under the Lease), in the case of a
Leased Aircraft, or the Owned Aircraft Trustee, in the case of an Owned
Aircraft, will be entitled to receive the benefits of Section 1110 of the U.S.
Bankruptcy Code with respect to any such replacement airframe (unless, as a
result of a change in law or court interpretation, such benefits are not then
available).
If Atlas elects not to replace such Airframe, or Airframe and Engine(s),
then upon payment of the outstanding principal amount of the Equipment Notes
issued with respect to such Aircraft (in the case of an Owned Aircraft) or the
stipulated loss value for such Aircraft (in the case of a Leased Aircraft),
together with all additional amounts then due and unpaid with respect to such
Aircraft, which must be at least sufficient to pay in full as of the date of
payment thereof the aggregate unpaid principal amount under such Equipment Notes
together with accrued but unpaid interest thereon and all other amounts due and
owing in respect of such Equipment Notes (but without any Make-Whole Premium),
the lien of the Indenture and (in the case of a Leased Aircraft) the Lease
relating to such Aircraft shall terminate with respect to such Aircraft, the
obligation of Atlas thereafter to make the scheduled rent payments (in the case
of a Leased Aircraft) or interest and principal payments (in the case of an
Owned Aircraft) with respect thereto shall cease and the related Owner Trustee
shall transfer all of its right, title and interest in and to the related
Aircraft to Atlas. The stipulated loss value and other payments made under the
Leases or the Owned Aircraft Indenture, as the case may be, by Atlas shall be
deposited with the applicable Loan Trustee. Amounts in excess of the amounts due
and owing under the Equipment Notes issued with respect to such Aircraft will be
distributed by such Loan Trustee to the applicable Owner Trustee or to Atlas, as
the case may be.
If an Event of Loss occurs with respect to an Engine alone, Atlas will be
required to replace such Engine within 90 days after the occurrence of such
Event of Loss with another engine, free and clear of all liens (other than
certain permitted liens). Such replacement engine shall be the same make and
model as the Engine to be replaced, or an improved model, suitable for
installation and use on the Airframe, and having a value, utility and remaining
useful life (without regard to hours or cycles remaining until overhaul) at
least equal to the Engine to be replaced, assuming that such Engine had been
maintained in accordance with the relevant Lease immediately prior to the
occurrence of the Event of Loss.
An Event of Loss with respect to an Aircraft, Airframe or any Engine means
any of the following events with respect to such property: (i) the destruction
of such property, damage to such property beyond economic repair or rendition of
such property permanently unfit for normal use; (ii) the actual or constructive
total loss of such property or any damage to such property or requisition of
title or use of such property which results in an insurance settlement with
respect to such property on the basis of a total loss or a constructive or
compromised total loss; (iii) any theft, hijacking or disappearance of such
property for a period of 180 consecutive days or more; (iv) any seizure,
condemnation, confiscation, taking or requisition of title to such property by
any governmental entity or purported governmental entity (other than a U.S.
government entity or an entity of the country of registration of the relevant
Aircraft) for a period exceeding 180 consecutive days or, if earlier, at the end
of the term of such Lease (in the case of a Leased Aircraft) or the final
maturity of the Equipment Notes (in the case of an Owned Aircraft); (v) in the
case of any Leased Aircraft, any seizure, condemnation, confiscation, taking or
requisition of use of such property by any U.S. government entity (or
governmental entity of the country of registration of the relevant Aircraft)
that continues until the
79
<PAGE> 87
30th day after the last day of the term of the relevant Lease (unless the Owner
Trustee shall have elected not to treat such event as an Event of Loss); (vi) as
a result of any law, rule, regulation, order or other action by the FAA or any
governmental entity, the use of such property in the normal course of Atlas'
business of passenger air transportation is prohibited for 180 consecutive days,
unless Atlas, prior to the expiration of such 180-day period, shall have
undertaken and shall be diligently carrying forward steps which are necessary or
desirable to permit the normal use of such property by Atlas, but in any event
if such use shall have been prohibited for a period of two consecutive years,
provided that no Event of Loss shall be deemed to have occurred if such
prohibition has been applicable to Atlas' entire U.S. registered fleet of
similar property and Atlas, prior to the expiration of such two-year period,
shall have conformed at least one unit of such property in its fleet to the
requirements of any such law, rule, regulation, order or other action and
commenced regular commercial use of the same and shall be diligently carrying
forward, in a manner which does not discriminate against applicable property in
so conforming such property, steps which are necessary or desirable to permit
the normal use of such property by Atlas, but in any event if such use shall
have been prohibited for a period of three years or such use shall be prohibited
at the expiration of the term of the relevant Lease; or (vii) with respect to
any Engine, any divestiture of title to such Engine shall be treated as an Event
of Loss.
Renewal and Purchase Options
At the end of the term of each Lease after final maturity of the related
Equipment Notes and subject to certain conditions, Atlas will have the option to
renew such Lease for additional limited periods (each a "Renewal Term"). Each
Renewal Term shall be for not less than three months and not more than 2 years,
as determined by Atlas. Rent payments during the first Renewal Term shall equal
the lesser of fair market rental and a fixed rate rental as specified in the
Lease. Rent payments during subsequent Renewal Terms shall equal fair market
rental. Atlas will have the right (i) at the end of the term of each Lease, (ii)
at the end of each Renewal Term, (iii) on specified dates prior to the end of
the term of each Lease and (iv) upon certain tax events, to purchase the
Aircraft subject to each such Lease, in each case for an amount to be calculated
in accordance with the terms of such Lease. (Leases, Section 17) In connection
with any such purchase, Atlas shall have the option to assume the obligations of
the Owner Trustee to the Indenture Trustee and the holders under the Indenture
and under the Certificates, on the basis of full recourse to Atlas and
maintaining for the benefit of the holders the security interest in the Aircraft
created by the Indenture. In such case, the Leased Aircraft Indenture relating
to such Equipment Notes will be amended and restated to be substantially the
same as an Owned Aircraft Indenture. See "Certain U.S. Federal Income Tax
Consequences -- Taxation of Certificateholders Generally -- Trusts Classified as
Grantor Trusts" for a discussion of certain tax consequences of such purchase
and assumption.
Events of Default Under the Leases
Lease Events of Default under each Lease include among other things, (i)
failure by Atlas to make any payment of basic rent, stipulated loss value or
termination value under such Lease within ten Business Days after the same shall
have become due, or failure by Atlas to pay any other amount due under such
Lease or under any other related operative document within ten Business Days
from and after the date of any written notice from the Owner Trustee or Loan
Trustee of the failure to make such payment when due; (ii) failure by Atlas to
make any excluded payment (as defined) within ten Business Days after written
notice that such failure constitutes a Lease Event of Default is given by the
relevant Owner Participant to Atlas and the relevant Loan Trustee; (iii) failure
by Atlas to carry and maintain insurance on and in respect of the Aircraft,
Airframe and Engines, in accordance with the provisions of such Lease; (iv)
failure by Atlas to perform or observe any other covenant or agreement to be
performed or observed by it under such Lease or the related Participation
Agreement or any other related operative document (other than the related
tax-indemnity agreement between Atlas and the Owner Participant), and such
failure shall continue unremedied for a period of 30 days after written notice
of such failure by the applicable Owner Trustee or Loan Trustee unless such
failure is capable of being corrected and Atlas shall be diligently proceeding
to correct such failure, in which case there shall be no Lease Event of Default
unless and until such failure shall continue unremedied for a period of 180 days
after the receipt of such notice; (v) any representation or warranty made by
Atlas in such Lease or the related Participation Agreement or in any other
related operative document (other than in the
80
<PAGE> 88
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Public Accountants.................... F-2
Consolidated Balance Sheets as of December 31, 1997 and
December 31, 1996......................................... F-3
Consolidated Statements of Operations for the years ended
December 31, 1997, 1996 and 1995.......................... F-4
Consolidated Statements of Stockholders' Equity (Deficit)
for the years ended December 31, 1997, 1996 and 1995...... F-5
Consolidated Statements of Cash Flows for the years ended
December 31, 1997, 1996 and 1995.......................... F-6
Notes to Consolidated Financial Statements.................. F-7
</TABLE>
F-1
<PAGE> 89
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Atlas Air, Inc.:
We have audited the accompanying consolidated balance sheets of Atlas Air,
Inc. (a Delaware corporation) and subsidiaries as of December 31, 1997 and 1996,
and the related consolidated statements of operations, stockholders' equity
(deficit) and cash flows for each of the three years in the period ended
December 31, 1997. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Atlas Air, Inc. and subsidiaries as of December 31, 1997 and 1996, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1997, in conformity with generally
accepted accounting principles.
ARTHUR ANDERSEN LLP
Denver, Colorado
February 13, 1998.
F-2
<PAGE> 90
ATLAS AIR, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1997 1996
---------- --------
<S> <C> <C>
Current assets:
Cash and cash equivalents................................. $ 41,334 $ 9,793
Short-term investments.................................... 111,635 114,870
Accounts receivable and other, net........................ 55,702 49,603
---------- --------
Total current assets.............................. 208,671 174,266
Property and equipment:
Flight equipment.......................................... 1,154,562 638,630
Other..................................................... 7,607 3,933
---------- --------
1,162,169 642,563
Less accumulated depreciation............................. (98,959) (58,293)
---------- --------
Net property and equipment........................ 1,063,210 584,270
Other assets:
Debt issuance costs, net of accumulated amortization...... 21,705 12,382
Deposits.................................................. 3,829 2,789
---------- --------
25,534 15,171
---------- --------
Total assets...................................... $1,297,415 $773,707
========== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt......................... $ 40,049 $ 21,561
Accounts payable and accrued expenses..................... 88,105 47,763
Income tax payable........................................ 154 6,267
---------- --------
Total current liabilities......................... 128,308 75,591
Long-term debt, net of current portion...................... 736,026 462,868
Deferred aircraft obligations............................... 163,167 --
Deferred income tax payable................................. 31,085 19,463
Commitments and contingencies
Stockholders' equity:
Preferred Stock, $1 par value; 10,000,000 shares
authorized; no shares issued........................... -- --
Common Stock, $0.01 par value; 50,000,000 shares
authorized; 22,450,229 shares issued................... 225 225
Additional paid-in capital................................ 176,253 176,253
Retained earnings......................................... 62,803 39,543
Treasury Stock, at cost; 19,073 and 5,850 shares,
respectively........................................... (452) (236)
---------- --------
Total stockholders' equity........................ 238,829 215,785
---------- --------
Total liabilities and stockholders' equity........ $1,297,415 $773,707
========== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE> 91
ATLAS AIR, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Revenues:
Contract services........................................ $383,824 $296,289 $166,070
Scheduled services....................................... 7,171 6,005 1,335
Charters and other....................................... 10,046 13,365 3,862
-------- -------- --------
Total operating revenues......................... 401,041 315,659 171,267
Operating expenses:
Flight crew salaries and benefits........................ 30,153 25,020 14,584
Other flight-related expenses............................ 28,784 27,404 12,361
Maintenance.............................................. 123,820 84,305 42,574
Aircraft and engine rentals.............................. 31,644 27,341 22,902
Fuel and ground handling................................. 10,816 10,554 5,027
Depreciation and amortization............................ 42,945 25,515 14,793
Other.................................................... 49,777 27,457 16,352
Write-off of capital investment and other................ 27,100 -- --
-------- -------- --------
Total operating expenses......................... 345,039 227,596 128,593
-------- -------- --------
Operating income........................................... 56,002 88,063 42,674
Other income (expense):
Interest income.......................................... 7,365 7,102 2,025
Interest expense......................................... (52,834) (35,577) (18,460)
-------- -------- --------
(45,469) (28,475) (16,435)
-------- -------- --------
Income before income taxes................................. 10,533 59,588 26,239
Provision for income taxes................................. (3,844) (21,750) (8,408)
-------- -------- --------
Income before extraordinary item........................... 6,689 37,838 17,831
Extraordinary item:
Gain from extinguishment of debt, net of applicable taxes
of $9,622............................................. 16,740 -- --
-------- -------- --------
Net income....................................... $ 23,429 $ 37,838 $ 17,831
======== ======== ========
Basic earnings per share:
Income before extraordinary item......................... $ .30 $ 1.76 $ 1.06
Extraordinary item....................................... .74 -- --
-------- -------- --------
Net income............................................... $ 1.04 $ 1.76 $ 1.06
======== ======== ========
Weighted average common shares........................... 22,450 21,503 16,783
======== ======== ========
Diluted earnings per share:
Income before extraordinary item......................... $ .30 $ 1.75 $ 1.06
Extraordinary item....................................... .74 -- --
-------- -------- --------
Net income............................................... $ 1.04 $ 1.75 $ 1.06
======== ======== ========
Weighted average common shares........................... 22,536 21,682 16,852
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE> 92
ATLAS AIR, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(IN THOUSANDS)
<TABLE>
<CAPTION>
TOTAL
COMMON STOCK ADDITIONAL RETAINED STOCKHOLDERS'
--------------- PAID-IN EARNINGS TREASURY EQUITY
SHARES AMOUNT CAPITAL (DEFICIT) STOCK (DEFICIT)
------ ------ ---------- --------- -------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1994...................... 15,000 $150 $ -- $(15,903) $ -- $(15,753)
Issuance of Common Stock...................... 4,600 46 66,591 -- -- 66,637
Net income.................................... -- -- -- 17,831 -- 17,831
------ ---- -------- -------- ------- --------
Balance, December 31, 1995...................... 19,600 196 66,591 1,928 -- 68,715
Issuance of Common Stock...................... 2,300 23 99,625 -- -- 99,648
Exercise of stock options, including income
tax benefits of $3,412..................... 550 6 10,037 -- -- 10,043
Purchase of Treasury Stock.................... -- -- -- -- (933) (933)
Issuance of Treasury Stock.................... -- -- -- (223) 697 474
Net income.................................... -- -- -- 37,838 -- 37,838
------ ---- -------- -------- ------- --------
Balance, December 31, 1996...................... 22,450 225 176,253 39,543 (236) 215,785
Purchase of Treasury Stock.................... -- -- -- -- (1,051) (1,051)
Issuance of Treasury Stock.................... -- -- -- (169) 835 666
Net income.................................... -- -- -- 23,429 -- 23,429
------ ---- -------- -------- ------- --------
Balance, December 31, 1997...................... 22,450 $225 $176,253 $ 62,803 $ (452) $238,829
====== ==== ======== ======== ======= ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE> 93
ATLAS AIR, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------
1997 1996 1995
----------- --------- ---------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income............................................... $ 23,429 $ 37,838 $ 17,831
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization.......................... 44,506 25,156 14,793
Amortization of debt issuance costs.................... 3,620 2,278 546
Net gain on disposition of property and equipment...... (1,029) -- --
Write-off of capital investment and other.............. 27,100 -- --
Interest financed...................................... -- -- 1,258
Change in deferred income tax payable.................. 11,622 14,731 8,144
Extraordinary gain..................................... (26,363) -- --
Changes in operating assets and liabilities:
Accounts receivable and other....................... (16,052) (31,009) (10,751)
Deposits............................................ (1,040) 592 5,716
Accounts payable and accrued expenses............... 27,992 28,824 5,770
Income tax payable.................................. (6,113) 6,003 264
----------- --------- ---------
Net cash provided by operating activities...... 87,672 84,413 43,571
INVESTMENT ACTIVITIES:
Purchase of property and equipment....................... (367,787) (289,675) (190,807)
Proceeds from sale of property and equipment............. 3,750 -- --
Purchase of short-term investments....................... (2,505,530) (246,387) --
Maturity of short-term investments....................... 2,508,765 131,517 --
Advances of notes receivable............................. -- -- (550)
----------- --------- ---------
Net cash used in investing activities.......... (360,802) (404,545) (191,357)
FINANCING ACTIVITIES:
Issuance of Common Stock................................. -- 106,279 66,637
Purchase of Treasury Stock............................... (1,051) (933) --
Issuance of Treasury Stock............................... 666 474 --
Borrowings on notes payable.............................. 815,767 154,808 181,680
Principal payments on notes payable...................... (494,121) (21,640) (7,792)
Debt issuance costs...................................... (16,590) (6,053) (4,573)
Advances from affiliate, net............................. -- -- (1,700)
----------- --------- ---------
Net cash provided by financing activities ..... 304,671 232,935 234,252
----------- --------- ---------
Net increase (decrease) in cash................ 31,541 (87,197) 86,466
Cash and cash equivalents at beginning of period......... 9,793 96,990 10,524
----------- --------- ---------
Cash and cash equivalents at end of period............... $ 41,334 $ 9,793 $ 96,990
=========== ========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE> 94
ATLAS AIR, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
Atlas Air, Inc. (the "Company") provides airport to airport cargo services
throughout the world to major international airlines pursuant to contractual
arrangements with its customers in which the Company provides the aircraft,
crew, maintenance and insurance ("ACMI"), referred to as "contract services."
The Company also provides charter services and scheduled services on an ad hoc
basis. The principal markets served by the Company are Asia and the Pacific Rim
from the United States and Europe, and between South America and the United
States.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of
the Company and its wholly-owned subsidiaries. All material intercompany
balances and transactions have been eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Property and Equipment
Owned aircraft are stated at cost. Expenditures for major additions,
improvements, flight equipment modifications and certain overhaul and
maintenance costs are capitalized. A significant portion of scheduled and
unscheduled maintenance is contracted with two maintenance providers under
long-term agreements pursuant to which monthly reserve payments are made to the
providers based on flight-hours and such amounts are charged to expense
currently. Other maintenance and repairs are charged to expense as incurred,
except for significant engine overhaul maintenance which is capitalized and
charged to expense on a flight-hour basis and D checks which are capitalized and
amortized over the corresponding life. Owned aircraft are depreciated over their
estimated useful lives of 20 years, using the straight-line method and estimated
salvage values of 10% of cost. The cost and accumulated depreciation of property
and equipment disposed of are removed from the related accounts and any gain or
loss is reflected in the results of operations. Substantially all property and
equipment is specifically pledged as collateral for indebtedness of the Company.
Whenever events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable, management evaluates the recorded asset
balances, net of accumulated depreciation, for impairment based on the
undiscounted cash flows associated with the asset. Management believes that
there have been no events or changes in circumstances which would require review
of such recoverability.
Capitalized Interest
Interest attributable to funds used to finance the acquisition and
modification of aircraft is capitalized as an additional cost of the related
aircraft. Interest is capitalized at the Company's weighted average interest
rate on long-term debt, or where applicable, the interest rate related to
specific borrowings. Capitalization of interest ceases when the aircraft is
placed in service. Capitalized interest was $16,115,000, $5,347,000, and
$3,573,000 for the years ended December 31, 1997, 1996 and 1995, respectively.
F-7
<PAGE> 95
ATLAS AIR, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Deferred Costs
Costs associated with the issuance of debt are capitalized and amortized
over the life of the respective debt obligation, using the effective interest
method for amortization. In May 1997, $3,647,000 of unamortized deferred loan
costs was charged against the extraordinary gain recognized upon early
extinguishment of certain debt (see Note 3). Amortization of debt issuance costs
was $3,620,000, $2,278,000 and $546,000 for the years ended December 31, 1997,
1996 and 1995, respectively.
Cash Equivalents
All highly liquid investments with an original maturity of three months or
less are considered to be cash equivalents, except certain investments in debt
securities which are classified as short-term investments.
Short-Term Investments
All investments in debt securities, other than money market funds, with a
current maturity of less than one year, are considered to be short-term
investments (see Note 2).
Earnings per Share
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards ("SFAS") No. 128 "Earnings per Share,"
effective for financial statements for both interim and annual periods ending
after December 15, 1997. SFAS No. 128 requires the dual presentation of basic
earnings per share ("basic EPS"), which replaces primary earnings per share, and
diluted earnings per share ("diluted EPS"). Basic EPS is computed by dividing
income available to common stockholders by the weighted-average number of common
shares outstanding during the period. Diluted EPS is computed similar to basic
EPS except that the weighted-average number of common shares outstanding during
the period is adjusted for the incremental shares attributed to outstanding
options to purchase common stock. Options to acquire 405,000, 399,000 and
294,720 shares in 1997, 1996 and 1995, respectively, were not included in the
computation of diluted EPS because the option price was greater than the average
market price of the Company's common stock.
Income Taxes
The Company provides for income taxes using the asset and liability method
prescribed by SFAS No. 109, "Accounting for Income Taxes." Under this method
deferred income taxes are recognized for the tax consequences of temporary
differences by applying enacted statutory tax rates applicable to future years
to differences between the financial statement carrying amounts and the tax
bases of existing assets and liabilities. The effect on deferred taxes of a
change in tax laws or tax rates is recognized in income in the period that
includes the enactment date.
Fair Value of Financial Instruments
The Company's financial instruments consist of cash, certificates of
deposit, short-term investments, short-term trade receivables and payables,
long-term debt and deferred aircraft obligations. The carrying values of cash,
certificates of deposit, and short-term trade receivables and payables
approximate fair value. The fair value of long-term debt is estimated based on
current rates available for similar debt with similar maturities and security
(see Note 3). The fair value of deferred aircraft obligations is based upon the
fair value of the purchase contracts associated with the obligations.
F-8
<PAGE> 96
ATLAS AIR, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Hedges
The Company may from time to time enter into swaps to reduce exposure to
interest rate fluctuations in connection with certain debt. The cash flows of
the swaps mirror those of the underlying exposures. The premiums on the swaps,
as measured at inception, are amortized over their respective lives as
components of interest expense. Any gains or losses realized upon the early
termination of these swaps are deferred and recognized in income over the
remaining life of the underlying exposure.
Significant Customers and Concentration of Credit Risk
For the year ended December 31, 1997, China Airlines Ltd. ("China
Airlines"), Fast Air Carrier, S.A. ("Fast Air") and Lufthansa Cargo AG
("Lufthansa") accounted for approximately 34%, 11% and 8%, of the Company's
total revenues, respectively. For the year ended December 31, 1996, China
Airlines, KLM Royal Dutch Airlines ("KLM") and Lufthansa accounted for
approximately 34%, 12% and 11%, of the Company's total revenues, respectively.
For the year ended December 31, 1995, China Airlines, KLM and Varig Brazilian
Airlines ("Varig") accounted for approximately 60%, 19% and 11% of the Company's
total revenue, respectively. Accounts receivable from these principal customers
were $18,963,000 and $18,344,000 in the aggregate at December 31, 1997 and 1996,
respectively. The Company is in dispute with one of its customers with respect
to the validity of certain charges for materials and labor that the customer has
invoiced to the Company, and with respect to certain ACMI billings.
Reclassifications
Certain prior year amounts have been reclassified to conform to current
year presentation.
Supplemental Cash Flow Information
The aggregate interest payments made by the Company, net of amounts
capitalized, were $55,097,000, $30,744,000 and $15,563,000 for the years ended
December 31, 1997, 1996 and 1995, respectively. Prior to December 1995, the
required monthly payment under the ING Bank loan agreement was less than the
accrued interest, thus causing $1,258,000 of accrued interest in 1995 to be
financed by the lender as an increase in the principal balance (see Note 3).
The Company made federal and state income tax payments of approximately
$7,959,000, $750,000 and $399,000 in the years ended December 31, 1997, 1996 and
1995, respectively.
Reporting Comprehensive Income
In June 1997, the Financial Accounting Standards Board issued SFAS No. 130
"Reporting Comprehensive Income," which establishes standards for reporting and
display of comprehensive income and its components in a full set of general
purpose financial statements. The objective of SFAS No. 130 is to report a
measure of all changes in equity of an enterprise that result from transactions
and other economic events of the period other than transactions with owners.
Comprehensive income includes net income plus other comprehensive income (other
revenues, expenses, gains, and losses that under generally accepted accounting
principles bypass net income). The Company does not expect other comprehensive
income to be material. The effective date for the application of SFAS No. 130
for both interim and annual periods is for fiscal years beginning after December
15, 1997 with earlier application permitted.
2. SHORT-TERM INVESTMENTS
Proceeds from the secondary public offering of the Company's common stock
("SPO") in May 1996, plus additional funds, were invested in various
held-to-maturity securities, as defined in SFAS No. 115, "Accounting for Certain
Investments in Debt and Equity Securities," which requires investments in debt
F-9
<PAGE> 97
ATLAS AIR, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
securities to be classified as held-to-maturity and measured at amortized cost
only if the reporting enterprise has the positive intent and ability to hold
those securities to maturity. The following table sets forth the aggregate fair
value, gross unrealized holding gains, gross unrealized holding losses, and
amortized/accreted cost basis by major security type as of December 31, 1997 (in
thousands):
<TABLE>
<CAPTION>
AGGREGATE GROSS UNREALIZED GROSS UNREALIZED (AMORTIZATION)
SECURITY TYPE FAIR VALUE HOLDING GAINS HOLDING LOSSES ACCRETION
------------- ---------- ---------------- ---------------- --------------
<S> <C> <C> <C> <C>
Commercial Paper............... $ 56,466 $ -- $ 7 $(406)
U.S. Government Agencies....... 16,061 2 1 (138)
Corporate Notes................ 4,995 -- -- (3)
Market Auction Preferreds...... 23,800 -- -- --
Adjustable Rate Mortgages...... 10,000 -- -- --
-------- ---- ---- -----
Totals............... $111,322 $ 2 $ 8 $(547)
======== ==== ==== =====
</TABLE>
In addition, accrued interest on short-term investments at December 31, 1997 was
approximately $307,000. Interest earned on these investments and maturities of
these investments are reinvested in similar securities.
3. LONG-TERM DEBT
Long-term debt and current maturities are as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1997 1996
-------- --------
<S> <C> <C>
ING Bank Debt............................................... $ -- $225,112
Lufthansa Debt.............................................. -- 9,556
Equipment Notes............................................. 100,000 100,000
Finova Debt................................................. 30,048 32,503
Aircraft Acquisition Credit Facility........................ 85,000 113,469
Nationsbanc................................................. 23,056 --
AFL Term Loan Facility...................................... 185,000 --
AFL II Term Loan Facility................................... 185,000 --
Senior Notes................................................ 150,000 --
Nationsbanc -- AFI Debt..................................... 14,984 --
Other....................................................... 2,987 3,789
-------- --------
776,075 484,429
Current maturities.......................................... (40,049) (21,561)
-------- --------
Long-term debt, net......................................... $736,026 $462,868
======== ========
</TABLE>
ING Bank Debt
In December 1994, the Company renegotiated its loan agreement with ING
Bank. Pursuant to the new loan agreement, ING Bank agreed to provide up to $231
million of financing to the Company for the purpose of refinancing its existing
loan, financing additional aircraft and the associated costs of converting those
aircraft to freighter configuration, among other things. Subsequently, ING Bank
increased the size of its commitment under the new loan agreement to $232.9
million.
For all but $30,000,000 of the total indebtedness to ING Bank (which amount
was financed at a fixed interest rate of 11.53% through September 1995, at which
time the interest rate was converted to one-month LIBOR ("London Interbank
Offered Rate") plus 2.65%), the loan agreement accrued interest at one-month
LIBOR plus 2.65%. Certain debt covenants under the ING Bank debt precluded one
of the Company's
F-10
<PAGE> 98
ATLAS AIR, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
subsidiaries from declaring dividends, redeeming its own stock for value, or
returning any capital to its stockholders.
In May 1997, the Company used proceeds from the AFL Term Loan Facility (see
below) and approximately $7.6 million in cash to extinguish its ING Bank debt.
The Company recognized an extraordinary gain of $16.7 million (net of taxes of
$9.6 million) as a result of such extinguishment.
Lufthansa Debt
In the first quarter of 1995, the Company purchased two aircraft in
passenger configuration from Lufthansa, which financed approximately $12.5
million of the purchase price of each aircraft, for which the Company accrued
interest at an annual rate of 8.8%. In May 1997, the Company paid $6.3 million
to satisfy the remaining Lufthansa debt balance in conjunction with the
refinancing of these aircraft under the AFL Term Loan Facility (see below).
Equipment Notes
In November 1995, the Company sold $100 million of 12 1/4% Pass Through
Certificates. Each 12 1/4% Pass Through Certificate due 2002 (each a
"Certificate") represents a fractional undivided interest in the Atlas Air Pass
Through Trust (the "Trust") formed pursuant to a pass through trust agreement
between the Company and First Fidelity Bank, N.A., as trustee under the Trust.
The property of the Trust consists of 12 1/4% Senior Secured Notes due 2002 (the
"Equipment Notes") issued by the Company to finance, together with funds from
the Company, the acquisition and conversion cost of three Boeing 747 aircraft
(the "Collateral Aircraft") that were acquired by the Company in the fourth
quarter of 1995 and converted to freighter configuration in the first quarter of
1996. The Company issued the related Equipment Notes during the fourth quarter
of 1995 and the first quarter of 1996 at or prior to the time pre-delivery
deposits and final purchase price payments were required to be made with respect
to the Collateral Aircraft.
Interest on the Equipment Notes is passed through to the Certificateholders
on June 1 and December 1 of each year, at a rate per annum of 12 1/4%. The
Equipment Notes are redeemable at the option of the Company, in whole or in
part, at any time on or after December 1, 1998 at redemption prices ranging from
108% in 1998 to 100% in 2001 and thereafter, together with accrued and unpaid
interest, if any, to the date of redemption. The Company is required to provide
for the retirement of one-third of the aggregate principal amount of the
Equipment Notes on December 1 in each of 2000 and 2001 through the operation of
a sinking fund at a redemption price of 100% of the principal amount thereof,
together with accrued interest thereon to the redemption date.
Covenants with respect to the Collateral Aircraft require specific levels
of insurance, as well as contain requirements regarding possession, maintenance,
lease or transfer of the aircraft. Certain covenants applicable to the Company
include, among other restrictions, limitations on indebtedness, restricted
payments and restriction on certain asset sales. The Company was in compliance
with all of its covenants as of December 31, 1997.
Finova Debt
The Company obtained financing from Finova Capital Corporation for
approximately 80% of the total acquisition and conversion cost of the first of
six aircraft purchased from Thai Airways International Public Company Limited
(the "Thai Aircraft") (see below), or $32.8 million. The loan accrues interest
at 10.13% and matures on October 1, 2003. The loan is secured by a first
priority security interest in the first Thai Aircraft.
F-11
<PAGE> 99
ATLAS AIR, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Aircraft Acquisition Credit Facility
In May 1996, the Company entered into a $175 million revolving credit
facility (the "Aircraft Acquisition Credit Facility") with Goldman Sachs Credit
Partners L.P. ("Goldman Sachs"), as Syndication Agent, and Bankers Trust Company
("BTCo"), as Administrative Agent. This revolving loan facility provides for the
acquisition and conversion of flight equipment. The Aircraft Acquisition Credit
Facility was subsequently amended and restated in conjunction with certain
refinancings. The Third Amended and Restated Credit Facility provides for a $250
million revolving credit facility as of September 5, 1997 with a two-year
revolving period and a subsequent three-year term loan period in the event that
permanent financing has not been obtained for any flight equipment financed
under the facility. At the time of each borrowing, the Company must select
either a Base Rate Loan (prime rate, plus 1.5% through May 8, 1998, thereafter
plus 2.0%) or a Eurodollar Rate Loan (Eurodollar rate, plus 2.5% through May 8,
1998, thereafter plus 3.0%). The Eurodollar Rate Loan was selected by the
Company for substantially all borrowings in 1996 and 1997. The weighted average
interest rate on borrowings outstanding under the Aircraft Acquisition Credit
Facility was 8.38% at December 31, 1997. Each borrowing is secured by a first
priority security interest in the collateral flight equipment of that borrowing.
Certain tests must be met before each purchase of aircraft and related drawdown
on the facility. To date, the Company has met these tests. If in the future, the
Company cannot meet all the tests because of the difficult sequencing of
aircraft acquisition, aircraft conversion and customer contracts, the Company
believes that other financing sources would be available to the Company or that
it would acquire aircraft using its internal cash or seek a waiver of any
necessary conditions. As of December 31, 1997, the Company had $85.0 million
outstanding under the Aircraft Acquisition Credit Facility.
Covenants with respect to the Aircraft Acquisition Credit Facility require
specific levels of insurance, as well as contain requirements regarding
possession, maintenance, and lease or transfer of the flight equipment. Certain
covenants applicable to the Company include, among other restrictions,
limitations on indebtedness, liens, investments, contingent obligations,
restricted junior payments, capital expenditures and leases. The Company was in
compliance with all of its covenants at December 31, 1997.
Nationsbanc
In March 1997, the Company refinanced one of its aircraft with Nationsbanc
Leasing Corporation ("Nationsbanc"). This aircraft was previously financed
through the Aircraft Acquisition Credit Facility. As such, this refinancing
increased the availability of funds under the Aircraft Acquisition Credit
Facility by approximately $25 million. The Nationsbanc financing is a seven year
term loan (extendible under certain circumstances to ten years) which provides
for a fixed interest rate of 9.16%. The loan is secured by a first priority
security interest in this aircraft.
AFL Term Loan Facility
In May 1997, the Company formed a wholly-owned subsidiary, Atlas Freighter
Leasing, Inc. ("AFL"), for the purpose of entering into the $185 million AFL
Term Loan Facility (the "AFL Term Loan Facility") to refinance six Boeing
747-200 aircraft previously financed through the ING Bank debt (see above).
Concurrent with entering into the AFL Term Loan Facility, the proceeds of the
AFL Term Loan Facility were used to repay all existing principal and interest
due under the ING Bank debt. Interest is based on the Eurodollar rate, plus 2.5%
for the first three years and 3.0% thereafter, and is payable quarterly. The
interest rate on borrowings outstanding under the AFL Term Loan Facility was
8.38% at December 31, 1997. Quarterly scheduled principal payments of $2.5
million commenced in February 1998 and increase to $5.7 million in August 1998
with a final payment of $50.0 million in May 2004. The AFL Term Loan Facility is
secured by a first priority interest in the six subject aircraft and is
restrictive with respect to limitations on indebtedness, liens, investments,
contingent obligations, restricted junior payments, capital expenditures,
F-12
<PAGE> 100
ATLAS AIR, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
amendments of material agreements, leases, transactions with shareholders and
affiliates and the conduct of business. The Company was in compliance with all
of its covenants as of December 31, 1997.
AFL II Term Loan Facility
In September 1997, the Company formed another wholly-owned subsidiary,
Atlas Freighter Leasing II, Inc. ("AFL II") for the purpose of entering into the
$185 million AFL II Term Loan Facility (the "AFL II Term Loan Facility") to
refinance four of the aircraft previously financed under the Aircraft
Acquisition Credit Facility, plus nine spare engines, in order to provide the
Company with greater financial flexibility in anticipation of the financing
requirements for the future acquisition of additional aircraft. Interest is
based on the Eurodollar rate, plus 2.25%, less a pricing reduction, if any, in
effect from time to time and is payable quarterly. The interest rate on
borrowings outstanding under the AFL II Term Loan Facility was 8.13% at December
31, 1997. Quarterly scheduled principal payments of $2.5 million commenced in
February 1998 and increase to $5.7 million in August 1998 with a final payment
of $50.0 million in May 2004. The AFL II Term Loan Facility is secured by a
first priority interest in the four subject aircraft, plus nine spare engines,
and is restrictive with respect to limitations on indebtedness, liens,
investments, contingent obligations, restricted junior payments, capital
expenditures, amendments of material agreements, leases, transactions with
shareholders and affiliates and the conduct of business. The Company was in
compliance with all of its covenants as of December 31, 1997.
Senior Notes
In August 1997, the Company completed the offering of its unsecured 10 3/4%
Senior Notes due 2005 ("Senior Notes"). The proceeds from the offering of the
Senior Notes were used to, among other things, repay short-term indebtedness
incurred by the Company to make Pre-Delivery Deposits to The Boeing Company
("Boeing") for the purchase of 10 new freighter aircraft (see Note 6) and for
additional Pre-Delivery Deposits as they become due.
Interest on the Senior Notes began to accrue from their date of original
issuance and is payable semi-annually in arrears on February 1 and August 1 of
each year, at the rate of 10 3/4% per annum. The Senior Notes are redeemable, in
whole or in part, at the option of the Company, on or after August 1, 2001, at
105.375%, 102.688% and 100.000% for the years 2001, 2002 and 2003 and
thereafter, respectively, plus accrued interest to the date of redemption. In
addition, at any time on or prior to August 1, 2000, the Company, at its option,
may redeem up to 35% of the aggregate principal amount of the Senior Notes
originally issued with the net cash proceeds of one or more public equity
offerings, at a redemption price equal to 110.75% of the principal amount
thereof plus accrued interest to the date of redemption; provided that at least
65% of the aggregate principal amount of the Senior Notes originally issued
remains outstanding immediately after any such redemption.
The Senior Notes are general unsecured obligations of the Company which
rank pari passu in right of payment to any existing and future unsecured senior
indebtedness of the Company. The Senior Notes are effectively subordinated,
however, to all secured indebtedness of the Company and to all indebtedness of
the Company's subsidiaries.
Covenants with respect to the Senior Notes contain certain limitations on
the ability of the Company and its subsidiaries to, among other things, incur
additional indebtedness, pay dividends or make certain other restricted
payments, consummate certain asset sales, enter into certain transactions with
affiliates, incur liens, create restrictions on the ability of a subsidiary to
pay dividends or make certain payments, sell or issue preferred stock of
subsidiaries to third parties, merge or consolidate with any other person or
sell, assign, transfer, lease, convey or otherwise dispose of all or
substantially all of the assets of the Company. The Company was in compliance
with all of its covenants as of December 31, 1997.
F-13
<PAGE> 101
ATLAS AIR, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Nationsbanc - AFI Debt
In October 1997, Atlas Flightlease, Inc. ("AFI"), a wholly-owned subsidiary
of the Company, secured a 2-year LIBOR based financing with Bankers Trust
Company for approximately 80% of the purchase price of a 1988 Canadair
Challenger passenger aircraft (the "Challenger"). AFI purchased the Challenger
from MAC Flightlease, Inc. ("MAC Flightlease"), an entity wholly-owned by the
wife of the Company's Chairman, President and CEO (see Note 7), in the third
quarter of 1997. In December 1997, AFI refinanced the Challenger for
approximately 100% of its purchase price with Nationsbanc under a 5-year loan
which was guaranteed by the Company. Interest is based on the Eurodollar rate,
plus 2.35%, and is payable quarterly with concurrent scheduled payments of
principal. The interest rate on borrowings outstanding under the Nationsbanc
debt was 8.26% at December 31, 1997. The loan is secured by a first priority
security interest in the Challenger. Covenants with respect to this financing
require specific levels of insurance, as well as contain requirements regarding
use, maintenance, configuration, liens and disposition of the Challenger, among
other things. AFI was in compliance with all of its covenants as of December 31,
1997.
Hedges
In September 1997, the Company entered into an interest rate swap with BTCo
for the purpose of hedging its floating rate debt. The notional amount of the
interest rate swap is $210 million, decreasing over a term of eight years. The
Company pays a fixed interest rate of 5.72%, increasing .25% annually, and
receives a floating interest rate based on 3-month LIBOR, whereby the net
interest settles quarterly. The 3-month LIBOR rate for the quarterly interest
period which included December 31, 1997 was 5.88%.
Fair Value of Long-Term Debt
Based on current rates available for similar debt with similar maturities
and security, the fair values of the debt in the above table at December 31,
1997, are estimated to be their carrying values. The Equipment Notes and the
Senior Notes are publicly traded. Based on published trading prices at December
31, 1997, the fair values of the Equipment Notes and the Senior Notes are
estimated to be $111.3 million and $105.6 million, respectively.
Five Year Debt Maturities
At December 31, 1997 principal repayments on long-term debt for the next
five years were as follows (in thousands):
<TABLE>
<CAPTION>
1998 1999 2000 2001 2002 THEREAFTER
------- ------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Equipment Notes.......... $ -- $ -- $ 33,333 $ 33,333 $ 33,334 $ --
Finova Debt.............. 2,709 3,001 3,317 3,672 4,084 13,263
Aircraft Acquisition
Credit Facility........ -- 7,083 28,334 28,333 21,250 --
Nationsbanc.............. 2,865 3,139 3,439 3,768 4,128 5,718
AFL Term Loan Facility... 16,350 22,600 22,600 22,600 22,600 78,250
AFL II Term Loan
Facility............... 16,350 22,600 22,600 22,600 22,600 78,250
Senior Notes............. -- -- -- -- -- 150,000
Nationsbanc - AFI Debt... 719 789 1,396 1,516 1,643 8,921
Other.................... 1,056 553 452 488 181 258
------- ------- -------- -------- -------- --------
$40,049 $59,765 $115,471 $116,310 $109,820 $334,660
======= ======= ======== ======== ======== ========
</TABLE>
F-14
<PAGE> 102
ATLAS AIR, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
4. DEFERRED AIRCRAFT OBLIGATIONS
In June 1997, the Company entered into an agreement with Boeing to purchase
10 new 747-400 freighter aircraft (the "Boeing Purchase Agreement") (see Note
6). The Boeing Purchase Agreement requires the Company to pay "Pre-Delivery
Deposits" in order to secure delivery of the 747-400 freighter aircraft and to
defray a portion of the manufacturing costs. In addition, the Boeing Purchase
Agreement provides for a deferral of a portion of the Pre-Delivery Deposits
(Deferred Aircraft Obligations) for which the Company accrues and pays interest
quarterly at 6-month LIBOR, plus 2.00%. As of December 31, 1997, there was
$163.2 million of Deferred Aircraft Obligations outstanding and the combined
interest rate was 7.97%. The Company will settle its Deferred Aircraft
Obligations upon delivery of each of the 10 aircraft, which are scheduled for
delivery as follows: five in 1998, two in 1999 and three in 2000. Financing for
the first five aircraft has been secured through the EETCs (see Note 16). In
addition, the Company may arrange for tax-oriented long-term leases on some or
all of these aircraft.
5. INCOME TAXES
The Company had net operating loss carryforwards of approximately
$122,692,000 as of December 31, 1997 which expire between 2008 and 2017. The
Company has generated approximately $8,665,000 of alternative minimum tax credit
carryforwards which are available in subsequent years to reduce its regular tax
liability subject to statutory limitations. All tax years of the Company that
are statutorily open are subject to examination by the Internal Revenue Service
("IRS"), as well as state and local tax authorities. Currently, the fiscal year
ended March 31, 1994, the short year ended December 31, 1994 and the calendar
year ended December 31, 1995 are under examination by the IRS. The Company
believes that it has adequately provided for all income tax liabilities and that
final resolution of any IRS examination will not have a material effect on its
financial position or results of operations.
The provision for income taxes consisted of the following (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Current:
Federal............................................. $ 1,704 $ 6,625 $ 251
State and local..................................... 140 394 13
Deferred:
Federal............................................. 11,622 14,731 8,144
State and local..................................... -- -- --
------- ------- -------
Provision for income taxes....................... $13,466 $21,750 $ 8,408
======= ======= =======
</TABLE>
The provisions for income taxes were at rates different from the U.S.
federal statutory rate for the following reasons:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
Statutory federal income tax provision rate............. 35.00% 35.00% 35.00%
State and local income taxes, net of federal tax
benefit............................................... 1.04 .66 --
Nondeductible items..................................... 2.36 2.04 1.44
Reversal of prior year valuation allowance.............. -- -- (4.83)
Benefit of net operating loss........................... (1.90) (1.20) --
Other................................................... -- -- .43
------ ------ ------
Effective tax provision rate.......................... 36.50% 36.50% 32.04%
====== ====== ======
</TABLE>
F-15
<PAGE> 103
ATLAS AIR, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Deferred income taxes arise from temporary differences between the tax
basis of assets and liabilities and their reported amounts in the financial
statements. The net deferred income tax liability components are as follows (in
thousands):
<TABLE>
<CAPTION>
AT DECEMBER 31,
------------------
1997 1996
------- -------
<S> <C> <C>
Deferred tax liabilities:
Tax depreciation in excess of book depreciation........... $96,147 $57,127
Other..................................................... 1,372 1,564
------- -------
Total deferred tax liabilities.................... 97,519 58,691
Deferred tax assets:
Tax benefit of net operating loss carryforwards........... 44,218 20,804
Tax benefit of alternative minimum tax credits............ 8,665 7,020
Other..................................................... 13,551 11,404
------- -------
Total deferred tax assets......................... 66,434 39,228
------- -------
Net deferred tax liability........................ $31,085 $19,463
======= =======
</TABLE>
6. COMMITMENTS AND CONTINGENCIES
Aircraft
Minimum annual rental commitments under noncancelable aircraft operating
leases for years ending December 31, are approximately (in thousands):
<TABLE>
<S> <C>
1998 (one Boeing 747-200 aircraft).......................... $ 4,500
1999 (one Boeing 747-200 aircraft).......................... 4,500
2000 (one Boeing 747-200 aircraft).......................... 4,500
2001 (one Boeing 747-200 aircraft).......................... 4,500
2002 (one Boeing 747-200 aircraft).......................... 4,500
Thereafter (one Boeing 747-200 aircraft).................... 32,625
</TABLE>
The above commitments do not include the potential lease financing (if any)
of Boeing 747-400 freighter aircraft scheduled for delivery during 1998, 1999
and 2000. In addition to the above commitments, the Company leases engines under
short-term lease agreements on an as needed basis.
Aircraft and engine rentals, including short-term rentals, were
$31,644,000, $27,341,000 and $22,902,000 for the years ended December 31, 1997,
1996 and 1995, respectively.
Boeing Purchase Agreement
In June 1997, the Company entered into the Boeing Purchase Agreement to
purchase 10 new 747-400 freighter aircraft to be powered by GE engines. The
747-400 freighter aircraft are currently scheduled to be delivered as follows:
five in 1998, two in 1999 and three in 2000. Due to production problems at
Boeing, the Company believes that each of the 1998 delivery positions of the
747-400 aircraft may be delayed up to 60 days. While Boeing will compensate the
Company for defined delays in delivery of the 747-400 aircraft, any such delays
may adversely impact the Company's ability to initiate service with prospective
customers in a timely fashion. The Boeing Purchase Agreement also provides the
Company with options to purchase up to 10 additional 747-400 freighter aircraft
for delivery from 1999 through 2002. As a result of the Company being the
largest purchaser of 747-400 freighter aircraft to date, it was able to
negotiate from Boeing and GE a significant discount off the aggregate list price
of $1.7 billion for the 10 747-400 freighter aircraft, four installed engines
per aircraft and five spare engines. In addition, the Company also obtained
certain ancillary
F-16
<PAGE> 104
ATLAS AIR, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
products and services at advantageous prices. The Boeing Purchase Agreement
requires that the Company pay Pre-Delivery Deposits to Boeing prior to the
delivery date of each 747-400 freighter aircraft in order to secure delivery of
the 747-400 freighter aircraft and to defray a portion of the manufacturing
costs. The Company expects the maximum total amount of Pre-Delivery Deposits at
any time outstanding will be approximately $155 million, approximately $105.1
million of which was paid as of December 31, 1997. For the years 1998 and 1999,
the Company expects to pay $67.6 million and $42.6 million, respectively, in
accordance with the Pre-Delivery Deposits schedule. In addition, the Boeing
Purchase Agreement provides for a deferral of a portion of the Pre-Delivery
Deposits (Deferred Aircraft Obligations -- see Note 4) for which the Company
accrues and pays interest quarterly at 6-month LIBOR, plus 2.00%. As of December
31, 1997, there was $163.2 million of Deferred Aircraft Obligations outstanding
and the combined interest rate was 7.97%.
Cargo Modification
In December 1997, the Company supplemented its modification contract with
Boeing to provide for the cargo configuration of two aircraft (acquired in
December 1996 and May 1997) under lease to Philippines Airlines Limited ("PAL"),
which were utilized in passenger configuration by PAL during 1997 and in early
1998. The initial deposit for such modification is recorded in Flight Equipment
in the December 31, 1997 balance sheet. The remaining commitments to Boeing and
other vendors as of December 31, 1997 for both of these aircraft totaled
approximately $20.2 million. These commitments are expected to be paid during
the first three quarters of 1998.
Maintenance Agreements
In January 1995, the Company entered into a maintenance agreement with one
of its principal customers. This agreement includes a provision which requires
the Company to remit a fixed amount per flight hour each month to the customer,
subject to a 3.5% annual escalation factor for the first five years, for which
the customer will perform most regular maintenance on a substantial portion of
the aircraft in the Company's fleet. The agreement extends for a period of ten
years. Pursuant to its maintenance agreement, engines may be upgraded when
inducted into the maintenance pool in order to improve engine reliability and to
lower Company operating costs. When such costs are incurred and identified, they
are capitalized and amortized over the remaining life of each applicable engine.
As of December 31, 1997, the Company had paid the customer $7.5 million for such
costs. The Company expects to incur approximately an additional $2 million to $3
million for such upgrades over the term of the contract.
The Company has an agreement, subject to acceptable rates, terms and
conditions, with Linee Aeree Italiane S.p.A. ("Alitalia") to utilize, or find
other parties to utilize, an amount of Alitalia's maintenance services with an
aggregate cost of $25 million over a five-year period ending in June 2000.
In June 1996, the Company entered into a ten year engine maintenance
agreement with GE for the engine maintenance of up to 15 aircraft powered by
CF6-50E2 engines at a fixed rate per flight hour, subject to an annual formula
increase. The agreement commenced in the third quarter of 1996 with the
acceptance of engines associated with aircraft acquired in the third and fourth
quarters of 1996. Pursuant to its maintenance agreement and upon the first time
shop visit, the Company is invoiced for certain one-time charges, which the
Company capitalizes and amortizes over the lesser of the remaining life of the
asset or the remaining life of the maintenance agreement. As of December 31,
1997, the Company had been invoiced for and paid $4.9 million of such charges.
Effective in the year 2000, the Company will have an option to add not less than
40 engines to the program.
Office and Warehouse
In 1995, the Company entered into an operating lease for office space
expiring in the year 2000, with two five year renewal provisions. In addition,
the Company leases warehouse space for which the initial lease term
F-17
<PAGE> 105
ATLAS AIR, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
expires at the end of August 1999, and provides for two one-year renewal option
periods. Future minimum rental commitments by year are as follows for the years
ending December 31: 1998 -- $728,000; 1999 -- $708,000; 2000 -- $277,000. Rental
expense, including short-term rentals, was $905,000, $615,000 and $579,000 for
the years ended December 31, 1997, 1996 and 1995, respectively.
Employment Agreements
The Company has entered into employment agreements with certain key
employees. Such employment agreements provide for, among other things, base
annual salary, certain bonuses, the grant of options to purchase common stock of
the Company under the 1995 Stock Option Plan (see Note 14), and in certain
circumstances relocation and severance benefits.
FAA Airworthiness Directives
Under the FAA's Directives issued under its "Aging Aircraft" program, the
Company is subject to extensive aircraft examinations and may be required to
undertake structural modifications to address the problem of corrosion and
structural fatigue. In November 1994, Boeing issued Nacelle Strut Modification
Service Bulletins which have been converted into Directives by the FAA. Twelve
of the Company's Boeing 747-200 aircraft will have to be brought into compliance
with such Directives within the next three years at an estimated cost of
approximately $6.0 million. As part of the FAA's overall aging aircraft program,
it has issued Directives requiring certain additional aircraft modifications to
be accomplished prior to the aircraft reaching 20,000 cycles. The average cycle
time for the 17 aircraft in service is approximately 12,000 cycles and the
average cycles operated per year is approximately 800 cycles. The Company
estimates that the modification costs per aircraft will range between $2 million
and $3 million. Between now and the year 2000, only one aircraft is expected to
reach the 20,000 cycle limit and nine additional aircraft will require
modification prior to 2009. The remaining seven aircraft in service have already
undergone such modifications. The two aircraft undergoing modification to
freighter configuration will receive the Nacelle Strut Modification as part of
the freighter conversion. Other Directives have been issued that require
inspections and minor modifications to Boeing 747-200 aircraft. It is possible
that additional Directives applicable to the types of aircraft or engines
included in the Company's fleet could be issued in the future, the cost of which
could be substantial.
Upon acquisition of an aircraft, the Company determines whether or not the
aircraft is in compliance with Airworthiness Directives and tries to anticipate
all future compliance requirements. The necessary work to bring the aircraft
into compliance is then scheduled at the time of conversion of the aircraft to
freighter configuration, in order to minimize unscheduled maintenance events.
Legal Proceedings
On February 24, 1997, the Company filed a complaint for declaratory
judgment in the Colorado District Court, Jefferson County against Israel
Aircraft Industries Ltd. ("IAI") for mechanical problems the Company experienced
with respect to an aircraft the Company sub-leased from IAI. The Company is
seeking approximately $4 million in damages against IAI to be offset by the
amount, if any, the Company owes IAI pursuant to the sub-lease. IAI had the case
removed to the U.S. District Court, District of Colorado on April 21, 1997 and
has filed counterclaims alleging damages of approximately $9 million based on
claims arising from the sub-lease. The Company intends to vigorously defend
against all of IAI's claims.
In March 1997, Air Support International, Inc. ("ASI") filed a complaint
against the Company in the U.S. District Court, Eastern District of New York
alleging actual and punitive damages of approximately $13.5 million arising from
the Company's refusal to pay commissions which ASI claims it is owed for
allegedly arranging certain ACMI Contracts. The Company intends to vigorously
defend against all of ASI's claims.
F-18
<PAGE> 106
ATLAS AIR, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
While the Company is from time to time involved in litigation in the
ordinary course of its business, there are no other material legal proceedings
pending against the Company or to which any of its property is subject.
7. RELATED PARTY TRANSACTIONS
In June 1995, the Company extended a non-interest bearing loan to an
officer of the Company in the amount of $125,000 in connection with such
officer's relocation to Colorado, which the Company forgave in July 1995.
In August and September 1995, the Company extended demand loans to three
senior vice presidents of the Company in the aggregate amount of $550,000,
bearing interest at an annual rate of 7.50%. Two of the loans plus interest were
paid in full in April and May 1996, and the third loan plus interest was paid in
full in December 1997. A loan of up to $750,000, bearing interest at 5.87%, was
extended in June 1996 to one officer for the purpose of constructing a
residence. As of December 31, 1997, the outstanding balance of officer demand
loans was $735,000.
In November 1995, the Company began renting a Cessna Citation SP, on an as
needed basis, from MAC Flightlease for the purpose of corporate business travel.
MAC Flightlease is wholly-owned by the wife of the Company's Chairman, President
and CEO. The Company paid $265,000 in 1996 and $52,000 in 1995 for such travel,
at rates which are considered by the Company to be at fair market value.
In October 1997, AFI purchased from MAC Flightlease the Challenger for
corporate business travel. Initially, AFI secured a 2-year LIBOR based financing
with BTCo for approximately 80% of the purchase price of the Challenger. In
December 1997, AFI refinanced the Challenger for approximately 100% of its
purchase price with Nationsbanc under a 5-year LIBOR based loan which was
guaranteed by the Company. The Company paid $15.3 million for the Challenger,
which is considered by the Company to be at fair market value.
8. ACCOUNTS RECEIVABLE AND OTHER
The components of accounts receivable and other are as follows (in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1997 1996
------- -------
<S> <C> <C>
Accounts receivable-trade................................... $58,817 $41,687
Insurance and vendor claims................................. 2,250 5,952
Employee receivables........................................ 771 606
Prepaids and other.......................................... 3,139 1,979
Less: Allowance for doubtful accounts....................... (9,275) (621)
------- -------
$55,702 $49,603
======= =======
</TABLE>
F-19
<PAGE> 107
ATLAS AIR, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
9. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
The components of accounts payable and accrued expenses are as follows (in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1997 1996
------- -------
<S> <C> <C>
Accounts payable-trade...................................... $12,291 $15,745
Accrued salaries and wages.................................. 6,779 5,547
Accrued maintenance......................................... 19,012 11,621
Accrued interest............................................ 13,581 3,348
Loss reserves (see Note 10)................................. 18,550 --
Other accrued expenses...................................... 17,892 11,502
------- -------
$88,105 $47,763
======= =======
</TABLE>
10. WRITE-OFF OF CAPITAL INVESTMENT AND OTHER
In conjunction with the June 1997 agreement with Boeing to purchase 10 new
747-400 freighter aircraft, the Company reassessed the economic viability of
renewing on a longer-term basis its sub-leases with Federal Express Corporation
("FedEx") for five 747-200 freighter aircraft. Based on the results of this
assessment in the second quarter of 1997, the Company decided to schedule the
return of these aircraft in the first quarter of 1998. The Company wrote-off its
remaining investment in the five FedEx aircraft and established certain other
reserves.
The impact of the various largely non-recurring charges was $27.1 million,
or $17.2 million on an after-tax basis, which comprised write-offs of various
leasehold improvements associated with the Company's sub-leases with FedEx of
the five 747-200 aircraft and reserves for costs necessary to return the
aircraft upon the termination of the sub-leases. In addition, the Company
established reserves primarily related to certain customers and vendors for
out-of-period items for which the Company is currently in negotiations. In
addition, the reserves include estimates for litigation costs and other costs
not expected to re-occur.
11. SAVINGS AND RETIREMENT PLAN
The Company implemented a 401(k) Retirement Plan (the "Plan") in June 1994,
under which eligible employees may contribute up to 15% of their total pay. The
Plan covers substantially all employees. The Company did not make contributions
to the Plan in 1995. Effective May 1, 1996, the Plan was amended to provide for
Company contributions equal to 50% of the first 10% of contributions made by
employees, for which the Company incurred an expense of $1,255,000 and $559,000
for the years ended December 31, 1997 and 1996, respectively.
12. BUSINESS SEGMENTS
The Company operates in one business segment, which is to provide the
common carriage of freight over various worldwide routes.
The assets of the Company, principally flight equipment, support its entire
worldwide transportation system and are not readily identifiable by geographic
area. Property and equipment, other than flight equipment, located in foreign
locations is not significant.
Foreign sales accounted for 99%, 98% and 99% of total revenues for the
years ended December 31, 1997, 1996 and 1995, respectively. All foreign sales
were U.S. dollar denominated.
F-20
<PAGE> 108
ATLAS AIR, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
13. PREFERRED STOCK
The Board of Directors is authorized under the restated certificate of
incorporation to issue up to 10,000,000 shares of Preferred Stock in one or more
series and to fix the rights, preferences, privileges and restrictions thereof,
including dividend rights, dividend rates, conversion rights, voting rights,
terms of redemption, redemption prices, liquidation preferences and the number
of shares constituting any series or the designation of such series, without
further vote or action by the stockholders. The issuance of Preferred Stock may
have the effect of delaying, deferring or preventing a change in control of the
Company without further action by the stockholders. The issuance of Preferred
Stock with voting and conversion rights may adversely affect the voting power of
the holders of common stock, including the loss of voting control to others. At
present, the Company has no plans to issue any shares of Preferred Stock.
14. STOCK-BASED COMPENSATION PLANS
Employee Stock Purchase Plan
In 1995, the Company established an Employee Stock Purchase Plan (the
"Stock Purchase Plan"). Employees eligible to participate in the Stock Purchase
Plan are those who have completed at least one year of employment with the
Company, but excluding employees whose customary employment is not more than
five months in any calendar year or 20 hours or less per week. The Stock
Purchase Plan is administered by the Compensation Committee of the Board of
Directors of the Company which determines the terms and conditions under which
shares are offered and corresponding options granted under the Stock Purchase
Plan for any Purchase Period, as defined in the Stock Purchase Plan. Employees
may contribute up to 15% of their gross base compensation subject to certain
limitations. The price per share at which the common stock is purchased pursuant
to the Stock Purchase Plan is the lesser of 85% of the fair market value of the
common stock on the first or last day of the applicable Purchase Period. The
maximum number of shares of common stock which may be issued on the exercise of
options purchased under the Stock Purchase Plan is 1,000,000 shares. As of
December 31, 1997, 47,984 shares were issued at a weighted average cost of
$23.28 to 161 employees who have participated in the Stock Purchase Plan.
1995 Stock Option Plan
In 1995, the Company adopted the 1995 Stock Option Plan ("1995 Plan"),
whereby employees may be granted options, incentive stock options, share
appreciation rights, and restricted shares. The portion of the 1995 Plan
applicable to employees is administered by the Compensation Committee of the
Board of Directors of the Company which also establishes the terms of the
awards. The 1995 Plan also provides for certain automatic grants of nonqualified
stock options to non-employee directors which become exercisable on the date of
grant and expire on the tenth anniversary of the date of grant. Originally, an
aggregate of 1,800,000 shares were reserved for issuance in connection with
awards and director's options under the 1995 Plan. Following shareholder
approval, an additional 300,000 shares were reserved.
Director Stock Plan
In August 1996, the Company established the Director Stock Plan (the
"Director Plan"), which provides the Company's non-employee directors the option
to receive all or a portion of their quarterly remuneration in common stock
instead of cash. If a non-employee director elects at the commencement of any
quarter to receive his quarterly remuneration, or a portion thereof, in common
stock, the number of shares received is determined by dividing the average price
for the 30-day period immediately preceding the end of the quarter into the
amount of compensation earned for the quarter which the non-employee director
chooses not to receive in cash. The effective date of the Director Plan was
January 1, 1997. As of December 31, 1997, 861 shares were issued at a weighted
average cost of $27.62 to two directors who have participated in the Stock
Purchase Plan.
F-21
<PAGE> 109
ATLAS AIR, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Other
In July 1995, options to purchase 125,000 and 71,430 shares of the
Company's common stock were granted to an officer ("July 1995 Grant"), who
subsequently resigned from his position with the Company to accept a position
with an affiliate of the Company, at exercise prices of $10.00 per share and
$14.00 per share, respectively.
Statement of Financial Accounting Standards No. 123
SFAS No. 123, "Accounting for Stock-Based Compensation," defines a fair
value based method of accounting for employee stock options or similar equity
instruments. However, SFAS No. 123 allows the continued measurement of
compensation cost for such plans using the intrinsic value based method
prescribed by Accounting Principals Board ("APB") Opinion No. 25, "Accounting
for Stock Issued to Employees," provided that pro forma disclosures are made of
net income or loss and net income or loss per share, assuming the fair value
based method of SFAS No. 123 had been applied. The Company has elected to
account for its stock-based compensation plans under APB Opinion No. 25;
accordingly, for purposes of the pro forma disclosures presented below, the
Company has computed the fair value of all options granted during 1997, 1996 and
1995, using the Black-Scholes pricing model and the following weighted average
assumptions:
<TABLE>
<CAPTION>
ASSUMPTIONS -- 1995 PLAN 1997 1996 1995
------------------------ ------- -------- ----------
<S> <C> <C> <C>
Risk-free interest rates........................... 6.51% 6.31% 6.04%
Expected dividend yields........................... -- -- --
Expected lives..................................... 5 years 5 years 2.5 years
Expected volatility................................ 65.33% 73.44% 73.44%
</TABLE>
If the Company had accounted for its stock-based compensation plans in
accordance with SFAS No. 123, the Company's pro forma net income and pro forma
net income per common share would have been reported as follows:
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
<S> <C> <C> <C> <C>
Net income (in thousands):................. As Reported $23,429 $37,838 $17,831
Pro Forma 17,875 35,211 15,857
Net income per common share (basic EPS):... As Reported 1.04 1.76 1.06
Pro Forma .80 1.64 .94
Net income per common share (diluted
EPS):.................................... As Reported 1.04 1.75 1.06
Pro Forma .79 1.62 .94
</TABLE>
F-22
<PAGE> 110
ATLAS AIR, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
A summary of the status of the 1995 Plan and the July 1995 Grant at
December 31, 1997, 1996 and 1995 and changes during the years then ended is
presented in the table below:
<TABLE>
<CAPTION>
1997 1996 1995
------------------------- -------------------------- -------------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
SHARES EXERCISE PRICE SHARES EXERCISE PRICE SHARES EXERCISE PRICE
-------- -------------- --------- -------------- -------- --------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of
year..................... 635,962 $30.09 853,650 $12.99 -- --
Granted.................... 143,146 26.39 369,000 41.44 853,650 $12.99
Exercised.................. -- -- (550,229) 12.11 -- --
Forfeited.................. -- -- (36,459) 16.00 -- --
-------- --------- --------
Outstanding at end of
year..................... 779,108 29.41 635,962 30.09 853,650 12.99
======== ========= ========
Exercisable at end of
year..................... 401,762 22.71 166,273 14.21 561,930 10.54
Weighted average fair value
of options granted....... $ 15.68 $ 27.27 $ 5.02
</TABLE>
The following table summarizes information with regard to the options
outstanding at December 31, 1997:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------------------ ----------------------
WEIGHTED
AVERAGE WEIGHTED WEIGHTED
REMAINING AVERAGE AVERAGE
RANGE OF NUMBER CONTRACTUAL EXERCISE NUMBER EXERCISE
EXERCISE PRICES OUTSTANDING LIFE PRICE EXERCISABLE PRICE
- --------------- ----------- ----------- -------- ----------- --------
<S> <C> <C> <C> <C> <C> <C>
$10.00 -- $14.00................... 111,930 3.6 years.. $12.20 111,930 $12.20
16.00 -- 24.00................... 156,032 7.8 years.. 16.05 103,686 16.08
26.00 -- 38.25................... 192,146 6.5 years.. 29.49 117,146 27.11
41.75 -- 56.38................... 319,000 8.3 years.. 41.94 69,000 42.29
------- -------
10.00 -- 56.38................... 779,108 7.1 years.. 29.41 401,762 22.72
</TABLE>
15. PROFIT SHARING PLAN
Employees who have been employed by the Company for at least twelve months
as full-time employees are eligible to participate in the Company's Profit
Sharing Plan, which was adopted in 1994. The Profit Sharing Plan provides for
payments to eligible employees in semiannual distributions based on the
Company's pretax profits. The Company is obligated to make an annual profit
sharing contribution of ten percent of the Company's pretax profits, which is
defined as net income before taxes, but excluding (i) any income or loss related
to charges or credits for unusual or infrequently occurring items or related to
intangible assets, and (ii) extraordinary items. Annual profit sharing
contributions may be in the form of cash or common stock of the Company. For the
years 1997, 1998 and 1999, beginning with an employee's thirteenth month of
employment, an employee is entitled to receive a guaranteed profit sharing
payment of 10% of salary, except for captains, who receive a guarantee of 20%.
The expense for the Profit Sharing Plan for the years ended December 31, 1997,
1996 and 1995 was $4,004,000, $6,779,000 and $2,768,000, respectively.
16. SUBSEQUENT EVENTS (UNAUDITED)
In January and February 1998, pursuant to an early lease termination
agreement negotiated in November 1997, the Company delivered to Boeing for
modification to cargo configuration the aircraft acquired from Marine Midland in
December 1996 and the aircraft acquired from Citicorp in May 1997. These
aircraft are expected to be re-delivered to the Company in the second quarter
and early in the third quarter of
F-23
<PAGE> 111
ATLAS AIR, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
1998, respectively. The financing for the modification to cargo configuration is
secured under the Aircraft Credit Facility.
In February 1998, the Company completed an offering of $538.9 million of
pass-through certificates, also known as enhanced equipment trust certificates
(the "EETCs"). The EETCs are not direct obligations of, or guaranteed by, the
Company and therefore will not be included in the Company's consolidated
financial statements. The cash proceeds from the transaction were deposited with
an escrow agent and will be used to finance (through either leveraged leases or
secured debt financings) the debt portion of the acquisition cost of five of the
10 new 747-400 freighter aircraft from Boeing scheduled to be delivered to the
Company during the period July 1998 through December 1998. In connection
therewith, the Company intends to seek certain owner participants who will
commit lease equity financing to be used in leveraged leases of such aircraft.
If any funds remain as deposits with the escrow agent for such EETCs at the end
of the delivery period, such funds will be distributed back to the
certificateholders. Such distribution will include a make-whole premium payable
by the Company. In November and December 1997, the Company entered into three
Treasury Note hedges, approximating $300 million of principal, for the purpose
of minimizing the risk associated with the fluctuations in interest rates, which
are the basis for the pricing of the EETCs which were priced in January 1998.
The effect of the hedge resulted in a deferred cost of $6.3 million, which will
be amortized over the expected twenty-year life associated with this financing.
The Company is currently negotiating for the possibility of refinancing two
aircraft in the amount of approximately $86 million, currently financed under
the Aircraft Acquisition Credit Facility. There is no assurance that this
refinancing will be consummated.
17. SUPPLEMENTAL QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
INCOME
(LOSS) INCOME (LOSS) BEFORE
OPERATING INCOME (LOSS) BEFORE EXTRAORDINARY ITEM NET INCOME
INCOME BEFORE EXTRAORDINARY NET ----------------------- ---------
REVENUE (LOSS) INCOME TAXES ITEM INCOME BASIC EPS DILUTED EPS BASIC EPS
-------- --------- ------------- ------------- ------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1997
First Quarter............... $ 82,049 $ 17,141 $ 7,894 $ 5,013 $ 5,013 $ .22 $ .22 $.22
Second Quarter.............. 93,902 (10,654) (21,562) (13,692) 3,049 (.61) (.61) .14
Third Quarter............... 104,197 21,733 9,804 6,225 6,225 .28 .28 .28
Fourth Quarter.............. 120,893 27,781 14,397 9,142 9,142 .41 .41 .41
1996
First Quarter............... $ 58,649 $ 15,410 $ 9,693 $ 6,203 $ 6,203 $ .32 $ .31 $.32
Second Quarter.............. 72,614 22,667 15,685 10,037 10,037 .47 .46 .47
Third Quarter............... 79,681 20,046 12,839 8,201 8,201 .37 .36 .37
Fourth Quarter.............. 104,715 29,940 21,371 13,397 13,397 .60 .59 .60
<CAPTION>
NET INCOME
-----------
DILUTED EPS
-----------
<S> <C>
1997
First Quarter............... $.22
Second Quarter.............. .14
Third Quarter............... .28
Fourth Quarter.............. .41
1996
First Quarter............... $.31
Second Quarter.............. .46
Third Quarter............... .36
Fourth Quarter.............. .59
</TABLE>
F-24
<PAGE> 112
======================================================
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THE OFFER
CONTAINED HEREIN OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL
OR THE SOLICITATION OF AN OFFER TO BUY ANY SECURITY OTHER THAN THOSE TO WHICH IT
RELATES, NOR DOES IT CONSTITUTE AN OFFER TO SELL, OR THE SOLICITATION OF ANY
OFFER TO BUY, TO ANY PERSON IN ANY JURISDICTION IN WHICH SUCH OFFER OR
SOLICITATION IS NOT AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH OFFER OR
SOLICITATION IS NOT QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS UNLAWFUL
TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE
HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE HEREOF.
======================================================
======================================================
$538,915,000
[ATLASAIR LOGO]
OFFER TO EXCHANGE
PASS THROUGH CERTIFICATES
SERIES 1998-1,
WHICH HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, FOR ANY AND ALL OUTSTANDING
PASS THROUGH CERTIFICATES
SERIES 1998-1
--------------------
PROSPECTUS
--------------------
, 1998
======================================================
<PAGE> 113
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Delaware General Corporation Law and the Restated Certificate of
Incorporation of Atlas Air, Inc. (the "Charter") provide for indemnification of
directors and officers for liabilities and expenses incurred in defending
actions brought against them in such capacities. The Company's Charter provides
that the Company shall indemnify directors of the Company to the maximum extent
now or hereafter permitted by law, and officers, employees and agents of the
Company to the extent required by law and may, as authorized hereafter by the
Board of Directors, provide further indemnification to officers, employees and
agents of the Company to the maximum extent now or hereafter permitted by law.
The Company maintains directors' and officers' liability insurance covering
all directors and officers of the Company against claims arising out of the
performance of their duties.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
+2.1 -- Plan of Reorganization and Merger Agreement dated as of
July 12, 1995 by and between Holdings and the Company.
+3.2 -- Restated Certificate of Incorporation of the Company.
+3.3 -- Amended and Restated By-Laws of the Company.
#4.1 -- Form of Indenture between the Company and First Fidelity
Bank, N.A., as Trustee.
#4.2 -- Form of Second Indenture between the Company and First
Fidelity Bank, N.A., as Trustee.
#4.3 -- Form of Pass Through Trust Agreement between the Company
and First Fidelity Bank, N.A., as Trustee (with form of
Pass Through Certificate attached as exhibit thereto).
#4.4 -- Form of Pass Through Agreement between the Company and
First Fidelity Bank, N.A., as Trustee (with form of Pass
Through Certificate attached as exhibit thereto).
5.1 -- Opinion of Cahill Gordon & Reindel as to the legality of
the New Certificates.
+10.14 -- Boeing 747 Maintenance Agreement dated January 1, 1995,
between the Company and KLM Royal Dutch Airlines, as
amended.
+10.15 -- Atlas Air, Inc. 1995 Long Term Incentive and Stock Award
Plan.
+10.16 -- Atlas Air, Inc. Employee Stock Purchase Plan.
+10.17 -- Atlas Air, Inc. Profit Sharing Plan.
+10.18 -- Atlas Air, Inc. Retirement Plan.
#10.19 -- Employment Agreement between the Company and Michael A.
Chowdry.
#10.20 -- Employment Agreement between the Company and Richard H.
Shuyler.
#10.23 -- Employment Agreement between the Company and James T.
Matheny.
+10.26 -- Maintenance Agreement between the Company and Hong Kong
Aircraft Engineering Company Limited dated April 12,
1995, for the performance of certain maintenance events.
+10.30 -- Conditional Sales Agreement dated as of September 22,
1994 by and between Lufthansa and the Company relating to
B747-230 aircraft, registration D-ABYS.
+10.31 -- Conditional Sales Agreement dated as of September 22,
1994 by and between Lufthansa and the Company relating to
B747-230 aircraft, registration D-ABYL.
</TABLE>
II-1
<PAGE> 114
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
*10.36 -- Aircraft Purchase Agreement, dated as of January 19, 1996
between Langdon Asset Management, Inc. and the Company.
***10.52 -- Employment Agreement dated as of November 18, 1996
between the Company and R. Terrence Rendlerman.
***10.53 -- Secured Loan Agreement by and between the Company and
Finova Capital Corporation dated April 11, 1996.
***10.54 -- Second Amended and Restated Credit Agreement among the
Company and the Lenders listed therein, Goldman Sachs
Credit Partners L.P. (as syndication agent) and Bankers
Trust Company (as Administrative Agent) dated February
28, 1997.
***/****10.55 -- Engine Maintenance Agreement between the Company and
General Electric Company dated June 6, 1996.
**10.56 -- Employment Agreement dated as of May 1, 1997 between the
Company and Stanley G. Wraight.
**10.58 -- Third Amended and Restated Credit Agreement among the
Company, the Lenders listed therein, Goldman Sachs Credit
Partners L.P. (as Syndication Agent) and Bankers Trust
Company (as Administrative Agent) dated September 5,
1997.
**10.59 -- Credit Agreement among Atlas Freighter Leasing, Inc., the
Lenders listed therein and Bankers Trust Company, as
agent, dated May 29, 1997.
**10.60 -- Lease Agreement between Atlas Freighter Leasing, Inc., as
lessor, and the Company, as lessee, relating to B747-200
aircraft. U.S. Registration No. N516MC.
**10.61 -- Lease Agreement between Atlas Freighter Leasing, Inc., as
lessor, and the Company, as lessee, relating to B747-200
aircraft. U.S. Registration No. N508MC.
**10.62 -- Lease Agreement between Atlas Freighter Leasing, Inc., as
lessor, and the Company, as lessee, relating to B747-200
aircraft. U.S. Registration No. N507MC.
**10.63 -- Lease Agreement between Atlas Freighter Leasing, Inc., as
lessor, and the Company, as lessee, relating to B747-200
aircraft. U.S. Registration No. N509MC.
**10.64 -- Lease Agreement between Atlas Freighter Leasing, Inc., as
lessor, and the Company, as lessee, relating to B747-200
aircraft. U.S. Registration No. N808MC.
**10.65 -- Lease Agreement between Atlas Freighter Leasing, Inc., as
lessor, and the Company, as lessee, relating to B747-200
aircraft. U.S. Registration No. N505MC.
**10.66 -- Security Agreement and Chattel Mortgage between the
Company, Atlas Freighter Leasing, Inc. and Bankers Trust
Company, as agent, relating to B747-200 aircraft. U.S.
Registration No. N808MC.
**10.67 -- Security Agreement and Chattel Mortgage between the
Company, Atlas Freighter Leasing, Inc. and Bankers Trust
Company, as agent, relating to B747-200 aircraft. U.S.
Registration No. N507MC.
**10.68 -- Security Agreement and Chattel Mortgage between the
Company, Atlas Freighter Leasing, Inc. and Bankers Trust
Company, as agent, relating to B747-200 aircraft. U.S.
Registration No. N509MC.
**10.69 -- Security Agreement and Chattel Mortgage between the
Company, Atlas Freighter Leasing, Inc. and Bankers Trust
Company, as agent, relating to B747-200 aircraft. U.S.
Registration No. N505MC.
**10.70 -- Security Agreement and Chattel Mortgage between the
Company, Atlas Freighter Leasing, Inc. and Bankers Trust
Company, as agent, relating to B747-200 aircraft. U.S.
Registration No. N508MC.
**10.71 -- Security Agreement and Chattel Mortgage between the
Company, Atlas Freighter Leasing, Inc. and Bankers Trust
Company, as agent, relating to B747-200 aircraft. U.S.
Registration No. N516MC.
</TABLE>
II-2
<PAGE> 115
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
**10.72 -- Form of Indenture, dated August 13, 1997, between the
Company and State Street Bank and Trust Company, as
Trustee, relating to the 10 3/4% Senior Notes (with form
of Note attached as exhibit thereto)
**10.73 -- Purchase Agreement, dated August 8, 1997, between the
Company and BT Securities Corporation relating to the
10 3/4% Senior Notes.
**10.74 -- Registration Rights Agreement, dated August 13, 1997,
between the Company and BT Securities Corporation
relating to the 10 3/4% Senior Notes.
**10.75 -- Credit Agreement among Atlas Freighter Leasing II, Inc.,
the Lenders listed therein, Bankers Trust Company (as
Administrative Agent) and Goldman Sachs Credit Partners
L.P. (as Syndication Agent) dated September 5, 1997.
**10.76 -- Lease Agreement dated September 5, 1997 between Atlas
Freighter Leasing II, Inc., as lessor, and the Company,
as lessee, relating to B747-200 aircraft, U.S.
Registration No. N527MC and Spare Engine Nos. 517538,
517539 and 455167.
**10.77 -- Lease Agreement dated September 5, 1997 between Atlas
Freighter Leasing II, Inc., as lessor, and the Company,
as lessee, relating to B747-200 aircraft, U.S.
Registration No. N523MC and Spare Engine Nos. 530168 and
517530.
**10.78 -- Lease Agreement dated September 5, 1997 between Atlas
Freighter Leasing II, Inc., as lessor, and the Company,
as lessee, relating to B747-200 aircraft, U.S.
Registration No. N524MC and Spare Engine Nos. 517790 and
517602.
**10.79 -- Lease Agreement dated September 5, 1997 between Atlas
Freighter Leasing II, Inc., as lessor, and the Company,
as lessee, relating to B747-200 aircraft, U.S.
Registration No. N526MC and Spare Engine Nos. 517544 and
517547.
**10.80 -- Security Agreement and Chattel Mortgage dated September
5, 1997 between Atlas Freighter Leasing II, Inc., the
Company and Bankers Trust Company, as Agent, relating to
B747-200 aircraft, U.S. Registration No. N523MC and Spare
Engine Nos. 530168 and 517530.
*10.81 -- Security Agreement and Chattel Mortgage dated September
5, 1997 between Atlas Freighter Leasing II, Inc., the
Company and Bankers Trust Company, as Agent, relating to
B747-200 aircraft, U.S. Registration No. N524MC and Spare
Engine Nos. 517790 and 517602.
**10.82 -- Security Agreement and Chattel Mortgage dated September
5, 1997 between Atlas Freighter Leasing II, Inc., the
Company and Bankers Trust Company, as Agent, relating to
B747-200 aircraft, U.S. Registration No. N526MC and Spare
Engine Nos. 517544 and 517547.
**10.84 -- Security Agreement and Chattel Mortgage dated September
5, 1997 between Atlas Freighter Leasing II, Inc., the
Company and Bankers Trust Company, as Agent, relating to
B747-200 aircraft, U.S. Registration No. N527MC and Spare
Engine Nos. 517538, 517539 and 455167.
**10.85 -- First Amendment to Lease Agreement among Atlas Freighter
Leasing, Inc. and Bankers Trust Company, as agent, dated
September 5, 1997
**/****10.86 -- Purchase Agreement Number 2021 between The Boeing Company
and the Company dated June 6, 1997.
**10.87 -- Aircraft General Terms Agreement between The Boeing
Company and the Company dated June 6, 1997.
++10.88 -- Placement Agreement, dated January 26, 1998, among the
Company, Morgan Stanley & Co. Incorporated, BT Alex.
Brown Incorporated, Donaldson, Lufkin & Jenrette
Securities Corporation and Goldman, Sachs & Co. relating
to the Pass Through Certificates Series 1998-1.
</TABLE>
II-3
<PAGE> 116
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
++10.89 -- Registration Rights Agreement, dated February 9, 1998,
among the Company, Morgan Stanley & Co. Incorporated, BT
Alex. Brown Incorporated, Donaldson, Lufkin & Jenrette
Securities Corporation and Goldman, Sachs & Co. relating
to the Pass Through Certificates Series 1998-1.
++10.90 -- Pass Through Trust Agreement, dated as of February 9,
1998, between the Company and Wilmington Trust Company,
as Trustee, relating to the Atlas Air Pass Through Trust
1998-1A-0.
++10.91 -- Pass Through Trust Agreement, dated as of February 9,
1998, between the Company and Wilmington Trust Company,
as Trustee, relating to the Atlas Air Pass Through Trust
1998-1A-S.
++10.92 -- Pass Through Trust Agreement, dated as of February 9,
1998, between the Company and Wilmington Trust Company,
as Trustee, relating to the Atlas Air Pass Through Trust
1998-1B-0.
++10.93 -- Pass Through Trust Agreement, dated as of February 9,
1998, between the Company and Wilmington Trust Company,
as Trustee, relating to the Atlas Air Pass Through Trust
1998-1B-S.
++10.94 -- Pass Through Trust Agreement, dated as of February 9,
1998, between the Company and Wilmington Trust Company,
as Trustee, relating to the Atlas Air Pass Through Trust
1998-1C-0.
++10.95 -- Pass Through Trust Agreement, dated as of February 9,
1998, between the Company and Wilmington Trust Company,
as Trustee, relating to the Atlas Air Pass Through Trust
1998-1C-S.
++10.96 -- Deposit Agreement (Class A), dated as of February 9,
1998, between First Security Bank, National Association,
as Escrow Agent, and ABN AMRO Bank N.V., acting through
its Chicago Branch, as Depositary.
++10.97 -- Deposit Agreement (Class B), dated as of February 9,
1998, between First Security Bank, National Association,
as Escrow Agent, and ABN AMRO Bank N.V., acting through
its Chicago Branch, as Depositary.
++10.98 -- Deposit Agreement (Class C), dated as of February 9,
1998, between First Security Bank, National Association,
as Escrow Agent, and ABN AMRO Bank N.V., acting through
its Chicago Branch, as Depositary.
++10.99 -- Indemnity Agreement, dated as of February 9, 1998,
between ABN AMRO Bank N.V., acting through its Chicago
Branch, as Depositary, and the Company.
++10.100 -- Escrow and Paying Agent Agreement (Class A), dated as of
February 9, 1998, among First Security Bank, National
Association, as Escrow Agent, Morgan Stanley & Co.
Incorporated, BT Alex. Brown Incorporated, Donaldson,
Lufkin & Jenrette Securities Corporation and Goldman,
Sachs & Co., as Placement Agents, Wilmington Trust
Company, not in its individual capacity, but solely as
Pass Through Trustee, and Wilmington Trust Company, as
Paying Agent.
++10.101 -- Escrow and Paying Agent Agreement (Class B), dated as of
February 9, 1998, among First Security Bank, National
Association, as Escrow Agent, Morgan Stanley & Co.
Incorporated, BT Alex. Brown Incorporated, Donaldson,
Lufkin & Jenrette Securities Corporation and Goldman,
Sachs & Co., as Placement Agents, Wilmington Trust
Company, not in its individual capacity, but solely as
Pass Through Trustee, and Wilmington Trust Company, as
Paying Agent.
++10.102 -- Escrow and Paying Agent Agreement (Class C), dated as of
February 9, 1998, among First Security Bank, National
Association, as Escrow Agent, Morgan Stanley & Co.
Incorporated, BT Alex. Brown Incorporated, Donaldson,
Lufkin & Jenrette Securities Corporation and Goldman,
Sachs & Co., as Placement Agents, Wilmington Trust
Company, not in its individual capacity, but solely as
Pass Through Trustee, and Wilmington Trust Company, as
Paying Agent.
</TABLE>
II-4
<PAGE> 117
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
++10.103 -- Revolving Credit Agreement (1998-1A), dated as of
February 9, 1998, between Wilmington Trust Company, not
in its individual capacity but solely as Subordination
Agent, as Borrower, and ABN AMRO Bank N.V., acting
through its Chicago Branch as Liquidity Provider.
++10.104 -- Revolving Credit Agreement (1998-1B), dated as of
February 9, 1998, between Wilmington Trust Company, not
in its individual capacity but solely as Subordination
Agent, as Borrower, and Morgan Stanley Capital Services,
Inc., as Liquidity Provider.
++10.105 -- Revolving Credit Agreement (1998-1C), dated as of
February 9, 1998, between Wilmington Trust Company, not
in its individual capacity but solely as Subordination
Agent, as Borrower, and Morgan Stanley Capital Services,
Inc., as Liquidity Provider.
++10.106 -- Guarantee, dated as of February 9, 1998, from Morgan
Stanley, Dean Witter, Discover & Co. to Atlas Air, Inc.
Pass Through Trust 1998-B relating to Class B Liquidity
Facility.
++10.107 -- Guarantee, dated as of February 9, 1998, from Morgan
Stanley, Dean Witter, Discover & Co. to Atlas Air, Inc.
Pass Through Trust 1998-C relating to Class C Liquidity
Facility.
++10.108 -- Intercreditor Agreement, dated as of February 9, 1998,
among Wilmington Trust Company, not in its individual
capacity but solely as Trustee, ABN AMRO Bank N.V.,
acting through its Chicago Branch, as Class A Liquidity
Provider, Morgan Stanley Capital Services, Inc., as Class
B Liquidity Provider and Class C Liquidity Provider, and
Wilmington Trust Company.
++10.109 -- Note Purchase Agreement, dated as of February 9, 1998,
among the Company, Wilmington Trust Company and First
Security Bank, National Association.
++10.110 -- Employment Agreement dated as of February 16, 1998
between the Company and Stephen C. Nevin.
10.111 -- Form of Indenture, dated April 9, 1998, between the
Company and State Street Bank and Trust company, as
Trustee, relating to the 9 1/4% Senior Notes (with form
of Note attached as exhibit thereto).
10.112 -- Placement Agreement, dated April 7, 1998, among the
Company and Morgan Stanley & Co. Incorporated and BT
Alex. Brown Incorporated relating to the 9 1/4% Senior
Notes.
10.113 -- Registration Rights Agreement, dated April 9, 1998, among
the Company and Morgan Stanley & Co. Incorporated and BT
Alex. Brown Incorporated relating to the 9 1/4% Senior
Notes.
+16.1 -- Letter dated July 21, 1995 from Ernst & Young to the
Securities and Exchange Commission.
++21.1 -- Subsidiaries of the Registrant.
23.1 -- Consent of Independent Public Accountants.
23.2 -- Consent of Cahill Gordon & Reindel (included in Exhibit
5.1).
24.1 -- Powers of Attorney (set forth on the signature page of
the Registration Statement).
25.1 -- Statement of Eligibility of Trustee for the 1998-1A Pass
Through Certificates.
25.2 -- Statement of Eligibility of Trustee for the 1998-1B Pass
Through Certificates.
25.3 -- Statement of Eligibility of Trustee for the 1998-1C Pass
Through Certificates.
</TABLE>
- ---------------
++ Incorporated by reference to the exhibits to the Company's Annual Report
for 1997 on Form 10-K.
+ Incorporated by reference to the exhibits to the Company's Registration
Statement on Form S-1 (No. 33-90304).
++ Incorporated by reference to the exhibits to the Company's Registration
Statement on Form S-1 (No. 33-97892).
* Incorporated by reference to the exhibits to the Company's Registration
Statement on Form S-1 (No. 333-2810).
II-5
<PAGE> 118
** Incorporated by reference to the exhibits to the Company's Registration
Statement on Form S-4 (No. 333-36305).
*** Incorporated by reference to the exhibits to the Company's Annual Report
for 1996 on Form 10-K.
**** Portions of this document, for which the Company has been granted
confidential treatment, have been redacted and filed separately with the
Securities and Exchange Commission.
(b) Schedules.
All schedules are omitted as the required information is presented in
the Registrant's consolidated financial statements or related notes or such
schedules are not applicable.
ITEM 22. UNDERTAKINGS.
(1) The undersigned registrants hereby undertake as follows: that prior to
any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other items of the applicable form.
(2) The registrants undertake that every prospectus: (i) that is filed
pursuant to paragraph (1) immediately preceding, or (ii) that purports to meet
the requirements of Section 10(a)(3) of the Act and is used in connection with
an offering of securities subject to Rule 415, will be filed as a part of the
amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the Prospectus pursuant to
Item 4, 10(b), 11 or 13 of this form, within one business day of receipt of such
request, and to send the incorporated documents by first class mail or other
equally prompt means. This includes information contained in documents filed
subsequent to the effective date of the Registration Statement through the date
of responding to the request.
The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the Registration Statement when it became effective.
The undersigned registrants hereby undertake to file an application for the
purpose of determining the eligibility of the trustee to act under subsection
(a) of Section 310 of the Trust Indenture Act in accordance with the rules and
regulations prescribed by the SEC under Section 305(b)(2) of the Act.
II-6
<PAGE> 119
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, hereunto duly authorized in the City of Denver, State of Colorado
on the 5th day of May, 1998.
ATLAS AIR, INC.
By: /s/ RICHARD H. SHUYLER
----------------------------------
Name: Richard H. Shuyler
Title: Executive Vice
President -- Strategic
Planning, Treasurer and
Director
POWERS OF ATTORNEY
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated. Each person whose signature appears below
hereby constitutes Richard H. Shuyler and Stephen C. Nevin, and each of them
singly, such person's true and lawful attorneys, each with full power of
substitution to sign for such person and in such person's name and capacity
indicated below, any and all amendments to this Registration Statement,
including post-effective amendments thereto, and to file the same with the
Securities and Exchange Commission, hereby ratifying and confirming such
person's signature as it may be signed by said attorneys to any and all
amendments.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ MICHAEL A. CHOWDRY Chairman of the Board, Chief May 5, 1998
- ----------------------------------------------------- Executive Officer, President and
Michael A. Chowdry Director
/s/ RICHARD H. SHUYLER Executive Vice President -- May 5, 1998
- ----------------------------------------------------- Strategic Planning,
Richard H. Shuyler Treasurer and Director
/s/ STEPHEN C. NEVIN Chief Financial Officer and Vice May 5, 1998
- ----------------------------------------------------- President
Stephen C. Nevin
/s/ BERL BERNHARD Director May 5, 1998
- -----------------------------------------------------
Berl Bernhard
/s/ LAWRENCE W. CLARKSON Director May 5, 1998
- -----------------------------------------------------
Lawrence W. Clarkson
/s/ DAVID K.P. LI Director May 5, 1998
- -----------------------------------------------------
David K.P. Li
/s/ DAVID T. MCLAUGHLIN Director May 5, 1998
- -----------------------------------------------------
David T. McLaughlin
/s/ BRIAN ROWE Director May 5, 1998
- -----------------------------------------------------
Brian Rowe
</TABLE>
II-7
<PAGE> 120
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
------- ----------- ----
<C> <S> <C>
+2.1 -- Plan of Reorganization and Merger Agreement dated as of
July 12, 1995 by and between Holdings and the Company.
+3.2 -- Restated Certificate of Incorporation of the Company.
+3.3 -- Amended and Restated By-Laws of the Company.
#4.1 -- Form of Indenture between the Company and First Fidelity
Bank, N.A., as Trustee.
#4.2 -- Form of Second Indenture between the Company and First
Fidelity Bank, N.A., as Trustee.
#4.3 -- Form of Pass Through Trust Agreement between the Company
and First Fidelity Bank, N.A., as Trustee (with form of
Pass Through Certificate attached as exhibit thereto).
#4.4 -- Form of Pass Through Agreement between the Company and
First Fidelity Bank, N.A., as Trustee (with form of Pass
Through Certificate attached as exhibit thereto).
5.1 -- Opinion of Cahill Gordon & Reindel as to the legality of
the New Certificates.
+10.14 -- Boeing 747 Maintenance Agreement dated January 1, 1995,
between the Company and KLM Royal Dutch Airlines, as
amended.
+10.15 -- Atlas Air, Inc. 1995 Long Term Incentive and Stock Award
Plan.
+10.16 -- Atlas Air, Inc. Employee Stock Purchase Plan.
+10.17 -- Atlas Air, Inc. Profit Sharing Plan.
+10.18 -- Atlas Air, Inc. Retirement Plan.
#10.19 -- Employment Agreement between the Company and Michael A.
Chowdry.
#10.20 -- Employment Agreement between the Company and Richard H.
Shuyler.
#10.23 -- Employment Agreement between the Company and James T.
Matheny.
+10.26 -- Maintenance Agreement between the Company and Hong Kong
Aircraft Engineering Company Limited dated April 12,
1995, for the performance of certain maintenance events.
+10.30 -- Conditional Sales Agreement dated as of September 22,
1994 by and between Lufthansa and the Company relating to
B747-230 aircraft, registration D-ABYS.
+10.31 -- Conditional Sales Agreement dated as of September 22,
1994 by and between Lufthansa and the Company relating to
B747-230 aircraft, registration D-ABYL.
*10.36 -- Aircraft Purchase Agreement, dated as of January 19, 1996
between Langdon Asset Management, Inc. and the Company.
***10.52 -- Employment Agreement dated as of November 18, 1996
between the Company and R. Terrence Rendlerman.
***10.53 -- Secured Loan Agreement by and between the Company and
Finova Capital Corporation dated April 11, 1996.
</TABLE>
<PAGE> 121
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
------- ----------- ----
<C> <S> <C>
***10.54 -- Second Amended and Restated Credit Agreement among the
Company and the Lenders listed therein, Goldman Sachs
Credit Partners L.P. (as syndication agent) and Bankers
Trust Company (as Administrative Agent) dated February
28, 1997.
***/****10.55 -- Engine Maintenance Agreement between the Company and
General Electric Company dated June 6, 1996.
**10.56 -- Employment Agreement dated as of May 1, 1997 between the
Company and Stanley G. Wraight.
**10.58 -- Third Amended and Restated Credit Agreement among the
Company, the Lenders listed therein, Goldman Sachs Credit
Partners L.P. (as Syndication Agent) and Bankers Trust
Company (as Administrative Agent) dated September 5,
1997.
**10.59 -- Credit Agreement among Atlas Freighter Leasing, Inc., the
Lenders listed therein and Bankers Trust Company, as
agent, dated May 29, 1997.
**10.60 -- Lease Agreement between Atlas Freighter Leasing, Inc., as
lessor, and the Company, as lessee, relating to B747-200
aircraft. U.S. Registration No. N516MC.
**10.61 -- Lease Agreement between Atlas Freighter Leasing, Inc., as
lessor, and the Company, as lessee, relating to B747-200
aircraft. U.S. Registration No. N508MC.
**10.62 -- Lease Agreement between Atlas Freighter Leasing, Inc., as
lessor, and the Company, as lessee, relating to B747-200
aircraft. U.S. Registration No. N507MC.
**10.63 -- Lease Agreement between Atlas Freighter Leasing, Inc., as
lessor, and the Company, as lessee, relating to B747-200
aircraft. U.S. Registration No. N509MC.
**10.64 -- Lease Agreement between Atlas Freighter Leasing, Inc., as
lessor, and the Company, as lessee, relating to B747-200
aircraft. U.S. Registration No. N808MC.
**10.65 -- Lease Agreement between Atlas Freighter Leasing, Inc., as
lessor, and the Company, as lessee, relating to B747-200
aircraft. U.S. Registration No. N505MC.
**10.66 -- Security Agreement and Chattel Mortgage between the
Company, Atlas Freighter Leasing, Inc. and Bankers Trust
Company, as agent, relating to B747-200 aircraft. U.S.
Registration No. N808MC.
**10.67 -- Security Agreement and Chattel Mortgage between the
Company, Atlas Freighter Leasing, Inc. and Bankers Trust
Company, as agent, relating to B747-200 aircraft. U.S.
Registration No. N507MC.
**10.68 -- Security Agreement and Chattel Mortgage between the
Company, Atlas Freighter Leasing, Inc. and Bankers Trust
Company, as agent, relating to B747-200 aircraft. U.S.
Registration No. N509MC.
**10.69 -- Security Agreement and Chattel Mortgage between the
Company, Atlas Freighter Leasing, Inc. and Bankers Trust
Company, as agent, relating to B747-200 aircraft. U.S.
Registration No. N505MC.
**10.70 -- Security Agreement and Chattel Mortgage between the
Company, Atlas Freighter Leasing, Inc. and Bankers Trust
Company, as agent, relating to B747-200 aircraft. U.S.
Registration No. N508MC.
</TABLE>
<PAGE> 122
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
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<C> <S> <C>
**10.71 -- Security Agreement and Chattel Mortgage between the
Company, Atlas Freighter Leasing, Inc. and Bankers Trust
Company, as agent, relating to B747-200 aircraft. U.S.
Registration No. N516MC.
**10.72 -- Form of Indenture, dated August 13, 1997, between the
Company and State Street Bank and Trust Company, as
Trustee, relating to the 10 3/4% Senior Notes (with form
of Note attached as exhibit thereto)
**10.73 -- Purchase Agreement, dated August 8, 1997, between the
Company and BT Securities Corporation relating to the
10 3/4% Senior Notes.
**10.74 -- Registration Rights Agreement, dated August 13, 1997,
between the Company and BT Securities Corporation
relating to the 10 3/4% Senior Notes.
**10.75 -- Credit Agreement among Atlas Freighter Leasing II, Inc.,
the Lenders listed therein, Bankers Trust Company (as
Administrative Agent) and Goldman Sachs Credit Partners
L.P. (as Syndication Agent) dated September 5, 1997.
**10.76 -- Lease Agreement dated September 5, 1997 between Atlas
Freighter Leasing II, Inc., as lessor, and the Company,
as lessee, relating to B747-200 aircraft, U.S.
Registration No. N527MC and Spare Engine Nos. 517538,
517539 and 455167.
**10.77 -- Lease Agreement dated September 5, 1997 between Atlas
Freighter Leasing II, Inc., as lessor, and the Company,
as lessee, relating to B747-200 aircraft, U.S.
Registration No. N523MC and Spare Engine Nos. 530168 and
517530.
**10.78 -- Lease Agreement dated September 5, 1997 between Atlas
Freighter Leasing II, Inc., as lessor, and the Company,
as lessee, relating to B747-200 aircraft, U.S.
Registration No. N524MC and Spare Engine Nos. 517790 and
517602.
**10.79 -- Lease Agreement dated September 5, 1997 between Atlas
Freighter Leasing II, Inc., as lessor, and the Company,
as lessee, relating to B747-200 aircraft, U.S.
Registration No. N526MC and Spare Engine Nos. 517544 and
517547.
**10.80 -- Security Agreement and Chattel Mortgage dated September
5, 1997 between Atlas Freighter Leasing II, Inc., the
Company and Bankers Trust Company, as Agent, relating to
B747-200 aircraft, U.S. Registration No. N523MC and Spare
Engine Nos. 530168 and 517530.
*10.81 -- Security Agreement and Chattel Mortgage dated September
5, 1997 between Atlas Freighter Leasing II, Inc., the
Company and Bankers Trust Company, as Agent, relating to
B747-200 aircraft, U.S. Registration No. N524MC and Spare
Engine Nos. 517790 and 517602.
**10.82 -- Security Agreement and Chattel Mortgage dated September
5, 1997 between Atlas Freighter Leasing II, Inc., the
Company and Bankers Trust Company, as Agent, relating to
B747-200 aircraft, U.S. Registration No. N526MC and Spare
Engine Nos. 517544 and 517547.
**10.84 -- Security Agreement and Chattel Mortgage dated September
5, 1997 between Atlas Freighter Leasing II, Inc., the
Company and Bankers Trust Company, as Agent, relating to
B747-200 aircraft, U.S. Registration No. N527MC and Spare
Engine Nos. 517538, 517539 and 455167.
</TABLE>
<PAGE> 123
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
------- ----------- ----
<C> <S> <C>
**10.85 -- First Amendment to Lease Agreement among Atlas Freighter
Leasing, Inc. and Bankers Trust Company, as agent, dated
September 5, 1997
**/****10.86 -- Purchase Agreement Number 2021 between The Boeing Company
and the Company dated June 6, 1997.
**10.87 -- Aircraft General Terms Agreement between The Boeing
Company and the Company dated June 6, 1997.
++10.88 -- Placement Agreement, dated January 26, 1998, among the
Company, Morgan Stanley & Co. Incorporated, BT Alex.
Brown Incorporated, Donaldson, Lufkin & Jenrette
Securities Corporation and Goldman, Sachs & Co. relating
to the Pass Through Certificates Series 1998-1.
++10.89 -- Registration Rights Agreement, dated February 9, 1998,
among the Company, Morgan Stanley & Co. Incorporated, BT
Alex. Brown Incorporated, Donaldson, Lufkin & Jenrette
Securities Corporation and Goldman, Sachs & Co. relating
to the Pass Through Certificates Series 1998-1.
++10.90 -- Pass Through Trust Agreement, dated as of February 9,
1998, between the Company and Wilmington Trust Company,
as Trustee, relating to the Atlas Air Pass Through Trust
1998-1A-0.
++10.91 -- Pass Through Trust Agreement, dated as of February 9,
1998, between the Company and Wilmington Trust Company,
as Trustee, relating to the Atlas Air Pass Through Trust
1998-1A-S.
++10.92 -- Pass Through Trust Agreement, dated as of February 9,
1998, between the Company and Wilmington Trust Company,
as Trustee, relating to the Atlas Air Pass Through Trust
1998-1B-0.
++10.93 -- Pass Through Trust Agreement, dated as of February 9,
1998, between the Company and Wilmington Trust Company,
as Trustee, relating to the Atlas Air Pass Through Trust
1998-1B-S.
++10.94 -- Pass Through Trust Agreement, dated as of February 9,
1998, between the Company and Wilmington Trust Company,
as Trustee, relating to the Atlas Air Pass Through Trust
1998-1C-0.
++10.95 -- Pass Through Trust Agreement, dated as of February 9,
1998, between the Company and Wilmington Trust Company,
as Trustee, relating to the Atlas Air Pass Through Trust
1998-1C-S.
++10.96 -- Deposit Agreement (Class A), dated as of February 9,
1998, between First Security Bank, National Association,
as Escrow Agent, and ABN AMRO Bank N.V., acting through
its Chicago Branch, as Depositary.
++10.97 -- Deposit Agreement (Class B), dated as of February 9,
1998, between First Security Bank, National Association,
as Escrow Agent, and ABN AMRO Bank N.V., acting through
its Chicago Branch, as Depositary.
++10.98 -- Deposit Agreement (Class C), dated as of February 9,
1998, between First Security Bank, National Association,
as Escrow Agent, and ABN AMRO Bank N.V., acting through
its Chicago Branch, as Depositary.
++10.99 -- Indemnity Agreement, dated as of February 9, 1998,
between ABN AMRO Bank N.V., acting through its Chicago
Branch, as Depositary, and the Company.
</TABLE>
<PAGE> 124
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
------- ----------- ----
<C> <S> <C>
++10.100 -- Escrow and Paying Agent Agreement (Class A), dated as of
February 9, 1998, among First Security Bank, National
Association, as Escrow Agent, Morgan Stanley & Co.
Incorporated, BT Alex. Brown Incorporated, Donaldson,
Lufkin & Jenrette Securities Corporation and Goldman,
Sachs & Co., as Placement Agents, Wilmington Trust
Company, not in its individual capacity, but solely as
Pass Through Trustee, and Wilmington Trust Company, as
Paying Agent.
++10.101 -- Escrow and Paying Agent Agreement (Class B), dated as of
February 9, 1998, among First Security Bank, National
Association, as Escrow Agent, Morgan Stanley & Co.
Incorporated, BT Alex. Brown Incorporated, Donaldson,
Lufkin & Jenrette Securities Corporation and Goldman,
Sachs & Co., as Placement Agents, Wilmington Trust
Company, not in its individual capacity, but solely as
Pass Through Trustee, and Wilmington Trust Company, as
Paying Agent.
++10.102 -- Escrow and Paying Agent Agreement (Class C), dated as of
February 9, 1998, among First Security Bank, National
Association, as Escrow Agent, Morgan Stanley & Co.
Incorporated, BT Alex. Brown Incorporated, Donaldson,
Lufkin & Jenrette Securities Corporation and Goldman,
Sachs & Co., as Placement Agents, Wilmington Trust
Company, not in its individual capacity, but solely as
Pass Through Trustee, and Wilmington Trust Company, as
Paying Agent.
++10.103 -- Revolving Credit Agreement (1998-1A), dated as of
February 9, 1998, between Wilmington Trust Company, not
in its individual capacity but solely as Subordination
Agent, as Borrower, and ABN AMRO Bank N.V., acting
through its Chicago Branch as Liquidity Provider.
++10.104 -- Revolving Credit Agreement (1998-1B), dated as of
February 9, 1998, between Wilmington Trust Company, not
in its individual capacity but solely as Subordination
Agent, as Borrower, and Morgan Stanley Capital Services,
Inc., as Liquidity Provider.
++10.105 -- Revolving Credit Agreement (1998-1C), dated as of
February 9, 1998, between Wilmington Trust Company, not
in its individual capacity but solely as Subordination
Agent, as Borrower, and Morgan Stanley Capital Services,
Inc., as Liquidity Provider.
++10.106 -- Guarantee, dated as of February 9, 1998, from Morgan
Stanley, Dean Witter, Discover & Co. to Atlas Air, Inc.
Pass Through Trust 1998-B relating to Class B Liquidity
Facility.
++10.107 -- Guarantee, dated as of February 9, 1998, from Morgan
Stanley, Dean Witter, Discover & Co. to Atlas Air, Inc.
Pass Through Trust 1998-C relating to Class C Liquidity
Facility.
++10.108 -- Intercreditor Agreement, dated as of February 9, 1998,
among Wilmington Trust Company, not in its individual
capacity but solely as Trustee, ABN AMRO Bank N.V.,
acting through its Chicago Branch, as Class A Liquidity
Provider, Morgan Stanley Capital Services, Inc., as Class
B Liquidity Provider and Class C Liquidity Provider, and
Wilmington Trust Company.
++10.109 -- Note Purchase Agreement, dated as of February 9, 1998,
among the Company, Wilmington Trust Company and First
Security Bank, National Association.
</TABLE>
<PAGE> 125
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
------- ----------- ----
<C> <S> <C>
++10.110 -- Employment Agreement dated as of February 16, 1998
between the Company and Stephen C. Nevin.
10.111 -- Form of Indenture, dated April 9, 1998, between the
Company and State Street Bank and Trust company, as
Trustee, relating to the 9 1/4% Senior Notes (with form
of Note attached as exhibit thereto).
10.112 -- Placement Agreement, dated April 7, 1998, among the
Company and Morgan Stanley & Co. Incorporated and BT
Alex. Brown Incorporated relating to the 9 1/4% Senior
Notes.
10.113 -- Registration Rights Agreement, dated April 9, 1998, among
the Company and Morgan Stanley & Co. Incorporated and BT
Alex. Brown Incorporated relating to the 9 1/4% Senior
Notes.
+16.1 -- Letter dated July 21, 1995 from Ernst & Young to the
Securities and Exchange Commission.
++21.1 -- Subsidiaries of the Registrant.
23.1 -- Consent of Independent Public Accountants.
23.2 -- Consent of Cahill Gordon & Reindel (included in Exhibit
5.1).
24.1 -- Powers of Attorney (set forth on the signature page of
the Registration Statement).
25.1 -- Statement of Eligibility of Trustee for the 1998-1A Pass
Through Certificates.
25.2 -- Statement of Eligibility of Trustee for the 1998-1B Pass
Through Certificates.
25.3 -- Statement of Eligibility of Trustee for the 1998-1C Pass
Through Certificates.
</TABLE>
- ---------------
++ Incorporated by reference to the exhibits to the Company's Annual Report
for 1997 on Form 10-K.
+ Incorporated by reference to the exhibits to the Company's Registration
Statement on Form S-1 (No. 33-90304).
++ Incorporated by reference to the exhibits to the Company's Registration
Statement on Form S-1 (No. 33-97892).
* Incorporated by reference to the exhibits to the Company's Registration
Statement on Form S-1 (No. 333-2810).
** Incorporated by reference to the exhibits to the Company's Registration
Statement on Form S-4 (No. 333-36305).
*** Incorporated by reference to the exhibits to the Company's Annual Report
for 1996 on Form 10-K.
**** Portions of this document, for which the Company has been granted
confidential treatment, have been redacted and filed separately with the
Securities and Exchange Commission.
<PAGE> 1
EXHIBIT 5.1
[LETTERHEAD OF CAHILL GORDON & REINDEL]
May 4, 1998
Atlas Air, Inc.
538 Commons Drive
Golden, Colorado 80401
(212) 701-3000
Ladies and Gentlemen:
We have examined a copy of the Registration Statement on Form
S-4 (No. 333- ) (the "Registration Statement"), filed by Atlas Air, Inc. (the
"Company") with the Securities and Exchange Commission (the "Commission") on May
4, 1998 and relating to the registration pursuant to the provisions of the
Securities Act of 1933, as amended (the "Act"), of Pass Through Certificates,
Series 1998-1 in the principal amount of $538,915,000 (the "New Certificates").
The New Certificates, which upon the effectiveness of the Registration Statement
will be registered under the Act, will be issued in exchange for a like
principal amount of the outstanding Pass Through Certificates, Series 1998-1
(the "Old Certificates"), which are not registered under the Act. Each of the
New Certificates represents a fractional undivided interest in one of the three
Atlas Air 1998-1 Pass Through Trusts (the "Trusts") and will be issued pursuant
to three separate Pass Through Trust Agreements (collectively, the "Pass Through
Trust Agreements") dated as of February 9, 1998, between the Company and
Wilmington Trust Company. In rendering this opinion, we have reviewed such
documents and made such investigations as we have deemed appropriate.
Based on the foregoing, and subject to the further assumptions
and qualifications set forth below, it is our opinion that when the New
Certificates have been duly executed and authenticated in accordance with the
Pass Through Trust Agreements, and duly issued and delivered by the Trusts in
exchange for an equal principal amount of Old Certificates pursuant to the terms
of the Registration Rights Agreement filed as an ex-
<PAGE> 2
-2-
hibit to the Registration Statement, the New Certificates will be legal, valid,
binding and enforceable obligations of the applicable Trust, entitled to the
benefits of the applicable Pass Through Trust Agreement, subject to applicable
bankruptcy, insolvency and similar laws affecting creditors' rights generally
and to general principles of equity.
We are members of the bar of the State of New York and do not
purport to be experts in, or to express any opinion concerning, the laws of any
jurisdiction other than the law of the State of New York, the Delaware General
Corporation Law and the federal laws of the United States of America.
Neither this opinion nor any part hereof may be delivered to,
used or relied upon by any person other than you without our prior written
consent.
We hereby consent to the filing of this opinion with the
Commission as an exhibit to the Registration Statement and to the reference to
our firm under the caption "Legal Matters" in the Registration Statement and
related prospectus. Our consent to such reference does not constitute a consent
under Section 7 of the Securities Act, and in consenting to such reference we
have not certified any part of the Registration Statement and do not otherwise
come within the categories of persons who consent is required under said Section
7 or under the rules and regulations of the Commission thereunder.
Very truly yours,
/s/ CAHILL GORDON & REINDEL
----------------------------------------
Cahill Gordon & Reindel
<PAGE> 1
Exhibit 10.111
EXECUTION COPY
ATLAS AIR, INC.
as Issuer
and
STATE STREET BANK AND TRUST COMPANY
as Trustee
-----------------------------
INDENTURE
Dated as of April 9, 1998
-----------------------------
$175,000,000
9 1/4% SENIOR NOTES DUE 2008, SERIES A
9 1/4% SENIOR NOTES DUE 2008, SERIES B
<PAGE> 2
CROSS-REFERENCE TABLE
<TABLE>
<CAPTION>
TIA Indenture
Section Section
------- -------
<S> <C> <C>
310(a) (1)...........................................................................7.10
(a)(2)........................................................................7.10
(a)(3)........................................................................N.A.
(a)(4)........................................................................N.A.
(b)...........................................................................7.8; 7.10
(c)...........................................................................N.A.
311 (a) ..........................................................................7.11
(b)...........................................................................7.11
(c)...........................................................................N.A.
312 (a)...........................................................................2.5
(b)...........................................................................10.3
(c)...........................................................................10.3
313 (a)...........................................................................7.6
(b)(1)........................................................................N.A.
(b)(2)........................................................................7.6
(c)...........................................................................7.6
(d)...........................................................................7.6
314 (a)...........................................................................4.2; 4.10; 10.2
(b)...........................................................................N.A.
(c)(1)........................................................................10.4
(c)(2)........................................................................10.4
(c)(3)........................................................................N.A.
(d)...........................................................................N.A.
(e)...........................................................................10.5
(f)...........................................................................4.9
315 (a)...........................................................................7.1
(b)...........................................................................7.5; 10.2
(c)...........................................................................7.1
(d)...........................................................................7.1
(e)...........................................................................6.11
316 (a)(last sentence)............................................................10.6
(a)(1)(A).....................................................................6.5
(a)(1)(B).....................................................................6.4
(a)(2)........................................................................N.A.
(b)...........................................................................6.7
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C> <C>
317 (a)(1)........................................................................6.8
(a)(2)........................................................................6.9
(b)...........................................................................2.4
318 (a)...........................................................................12.1
</TABLE>
N.A. means Not Applicable
Note: This Cross-Reference Table shall not, for any purpose, be deemed to be
a part of the Indenture
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE I
Definitions and Incorporation by Reference
SECTION 1.1. Definitions...........................................................................1
SECTION 1.2. Other Definitions....................................................................18
SECTION 1.3. Incorporation by Reference of Trust Indenture Act....................................19
SECTION 1.4. Rules of Construction................................................................19
ARTICLE II
The Securities
SECTION 2.1. Form and Dating......................................................................20
SECTION 2.2. Execution and Authentication.........................................................21
SECTION 2.3. Registrar and Paying Agent...........................................................22
SECTION 2.4. Paying Agent to Hold Money in Trust..................................................22
SECTION 2.5. Securityholder Lists.................................................................23
SECTION 2.6. Transfer and Exchange................................................................23
SECTION 2.7. Replacement Securities...............................................................24
SECTION 2.8. Outstanding Securities...............................................................24
SECTION 2.9. Treasury Securities..................................................................24
SECTION 2.10. Temporary Securities................................................................25
SECTION 2.11. Cancellation........................................................................25
SECTION 2.12. Defaulted Interest..................................................................25
SECTION 2.13. CUSIP Number........................................................................25
SECTION 2.14. Deposit of Moneys...................................................................26
SECTION 2.15. Restrictive Legends.................................................................26
SECTION 2.16. Book-Entry Provisions for Global Security...........................................29
SECTION 2.17. Special Transfer Provisions.........................................................30
SECTION 2.18. Persons Deemed Owners...............................................................33
SECTION 2.19. Record Date.........................................................................33
ARTICLE III
Redemption
SECTION 3.1. Notices to Trustee...................................................................33
SECTION 3.2. Selection of Securities to be Redeemed...............................................33
</TABLE>
i
<PAGE> 5
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<CAPTION>
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SECTION 3.3. Notice of Redemption.................................................................34
SECTION 3.4. Effect of Notice of Redemption.......................................................35
SECTION 3.5. Deposit of Redemption Price..........................................................35
SECTION 3.6. Securities Redeemed in Part..........................................................35
ARTICLE IV
Covenants
SECTION 4.1. Payment of Securities................................................................35
SECTION 4.2. Reports..............................................................................36
SECTION 4.3. Limitation on Incurrence of Additional Indebtedness..................................36
SECTION 4.4. Limitation on Restricted Payments....................................................37
SECTION 4.5. Limitation on Issuances and Sales of Capital
Stock of Subsidiaries....................................................40
SECTION 4.6. Limitation on Transactions with Affiliates...........................................40
SECTION 4.7. Limitation on Liens..................................................................41
SECTION 4.8. Limitation on Asset Sales and Disposition of
Proceeds of Asset Sales..................................................41
SECTION 4.9. Change of Control....................................................................44
SECTION 4.10. Limitation on Guarantees of Indebtedness by Subsidiaries............................46
SECTION 4.11. Limitation on Dividend and Other Payment
Restrictions Affecting Subsidiaries......................................46
SECTION 4.12. Further Instruments and Acts........................................................47
SECTION 4.13. Use of Proceeds.....................................................................47
SECTION 4.14. Compliance Certificates.............................................................47
SECTION 4.15. Maintenance of Office or Agency.....................................................48
SECTION 4.16. Taxes...............................................................................48
SECTION 4.17. Stay, Extension and Usury Laws......................................................48
SECTION 4.18. Corporate Existence.................................................................48
ARTICLE V
Surviving Entity
SECTION 5.1. Limitations on Consolidations, Mergers and Sales of Assets...........................49
ARTICLE VI
Defaults and Remedies
SECTION 6.1. Events of Default....................................................................50
SECTION 6.2. Acceleration.........................................................................52
</TABLE>
ii
<PAGE> 6
<TABLE>
<CAPTION>
<S> <C> <C>
SECTION 6.3. Other Remedies.......................................................................53
SECTION 6.4. Waiver of Past Defaults..............................................................53
SECTION 6.5. Control by Majority..................................................................53
SECTION 6.6. Limitation on Suits..................................................................53
SECTION 6.7. Rights of Holders to Receive Payment.................................................54
SECTION 6.8. Collection Suit by Trustee...........................................................54
SECTION 6.9. Trustee May File Proofs of Claim.....................................................54
SECTION 6.10. Priorities..........................................................................54
SECTION 6.11. Undertaking for Costs...............................................................55
ARTICLE VII
Trustee
SECTION 7.1. Duties of Trustee....................................................................55
SECTION 7.2. Rights of Trustee....................................................................56
SECTION 7.3. Individual Rights of Trustee.........................................................57
SECTION 7.4. Trustee's Disclaimer.................................................................57
SECTION 7.5. Notice of Defaults...................................................................57
SECTION 7.6. Reports by Trustee to Holders........................................................58
SECTION 7.7. Compensation and Indemnity...........................................................58
SECTION 7.8. Replacement of Trustee...............................................................59
SECTION 7.9. Successor Trustee by Merger..........................................................60
SECTION 7.10. Eligibility; Disqualification.......................................................60
SECTION 7.11. Preferential Collection of Claims Against Company...................................60
ARTICLE VIII
Discharge of Indenture; Defeasance
SECTION 8.1. Discharge of Liability on Securities; Defeasance.....................................60
SECTION 8.2. Conditions to Defeasance.............................................................62
SECTION 8.3. Application of Trust Money...........................................................63
SECTION 8.4. Repayment to Company.................................................................63
SECTION 8.5. Indemnity for U.S. Government Obligations............................................64
SECTION 8.6. Reinstatement........................................................................64
ARTICLE IX
Amendments
SECTION 9.1. Without Consent of Holders...........................................................64
SECTION 9.2. With Consent of Holders..............................................................65
</TABLE>
iii
<PAGE> 7
<TABLE>
<CAPTION>
<S> <C> <C>
SECTION 9.3. Compliance with Trust Indenture Act..................................................67
SECTION 9.4. Revocation and Effect of Consents and Waivers........................................67
SECTION 9.5. Notation on or Exchange of Securities................................................67
SECTION 9.6. Trustee to Sign Amendments...........................................................68
ARTICLE X
Miscellaneous
SECTION 10.1. Trust Indenture Act Controls........................................................68
SECTION 10.2. Notices.............................................................................68
SECTION 10.3. Communication by Holders with Other Holders.........................................69
SECTION 10.4 Certificate and Opinion as to Conditions Precedent...................................69
SECTION 10.5 Statements Required in Certificate or Opinion........................................69
SECTION 10.6. When Securities Disregarded.........................................................70
SECTION 10.7. Rules by Trustee, Paying Agent and Registrar........................................70
SECTION 10.8. Legal Holidays......................................................................70
SECTION 10.9. Governing Law.......................................................................70
SECTION 10.10. No Recourse Against Others.........................................................70
SECTION 10.11. Successors.........................................................................71
SECTION 10.12. Multiple Originals.................................................................71
SECTION 10.13. Variable Provisions................................................................71
SECTION 10.14. Qualification of Indenture.........................................................71
SECTION 10.15. Table of Contents; Headings........................................................71
SECTION 10.16. Severability.......................................................................71
SECTION 10.17. No Adverse Interpretation of Other Agreements......................................71
Exhibit A - Form of Series A Security.................................................................A-1
Exhibit B - Form of Series B Security.................................................................B-1
Exhibit C - Form of Certificate to be Delivered in Connection with Transfers to Non-QIB
Accredited Investors......................................................................C-1
Exhibit D - Form of Certificate to be Delivered in Connection with Transfers
Pursuant to Regulation S..................................................................D-1
</TABLE>
- ------------------
Note: This Table of Contents shall not, for any purpose, be deemed to be part
of the Indenture.
iv
<PAGE> 8
INDENTURE dated as of April 9, 1998, between Atlas Air, Inc.,
a Delaware corporation (as further defined below, the "Company"), and State
Street Bank and Trust Company, a Massachusetts bank and trust company (the
"Trustee").
The Company has duly authorized the creation and issuance of
up to $175,000,000 aggregate principal amount of 9 1/4% Senior Notes due 2008
(the "Initial Securities") and $175,000,000 aggregate principal amount of 9 1/4%
Senior Notes due 2008 (the "Exchange Securities", and together with the Initial
Securities, the "Securities") and, to provide therefor, the Company has duly
authorized the execution and delivery of this Indenture. All things necessary to
make the Securities (as defined herein), when duly issued and executed by the
Company, and authenticated and delivered hereunder, the valid obligations of the
Company, and to make this Indenture a valid and binding agreement of the Company
have been done.
The Company and the Trustee agree as follows for the benefit
of each other and for the equal and ratable benefit of the Holders of the
Securities:
ARTICLE I
Definitions and Incorporation by Reference
SECTION 1.1. Definitions.
"ACMI Contracted Aircraft" means an aircraft acquired by the
Company or its Subsidiaries and dedicated to a new ACMI Contract entered into
within 60 days of the acquisition of such aircraft (which ACMI Contract shall
not represent a renewal or replacement of a prior ACMI Contract unless the
aircraft dedicated to such prior ACMI Contract was operated under an operating
lease and returned to the lessor) which is in effect on the date of calculation
and has a remaining term of three years or more on the date such aircraft was
dedicated to such ACMI Contract provided that in any calendar year two ACMI
contracts may have a term of not less than one year (subject to cancellation
terms, which may include the right to cancel on no less than six months notice).
Pro forma effect shall be given to the acquisition of an ACMI Contracted
Aircraft by adding to the appropriate components of the Consolidated Fixed
Charge Coverage Ratio (i) the net projected annualized revenues from the
operation of the ACMI Contracted Aircraft under such ACMI Contract for that
portion of the period for which the Consolidated Fixed Charge Coverage Ratio is
being calculated prior to the acquisition of such aircraft, assuming operation
for the minimum guaranteed number of block hours (less any block hours subject
to cancellation) at the minimum guaranteed rate under such ACMI Contract less
(ii) the projected annualized cash operating expenses from such operation for
the same period for which the related projected revenues are determined in
clause (i) above, provided that such projected cash operating expenses shall not
be less on a per block hour basis than the average historical per block hour
cash operating expenses of the Company for such aircraft model for the four full
fiscal quarters immediately preceding the date of calculation, and provided,
further, that if such aircraft is of a model not then currently operated by the
Company, such projected cash operating expenses shall include
<PAGE> 9
maintenance costs which shall not be less than the average for such aircraft
type disclosed on the most recently available DOT Forms 41 with respect to such
aircraft type or any summary of such data as reported in a nationally recognized
industry publication or as provided in a written estimate prepared by a
nationally recognized air transportation consulting group. For purposes of this
definition, "ACMI Contract" shall include contracts pursuant to which the
Company does not pay any crew costs, in which event pro forma effect shall be
given as described above but excluding from the projected annualized cash
operating expenses all crew costs. Cash operating expenses means for purposes of
this definition consolidated operating expenses, less consolidated depreciation
and amortization and consolidated rental expenses, to the extent included in
computing consolidated operating expenses.
"Acquired Indebtedness" means Indebtedness of a Person (a)
existing at the time such Person becomes a Subsidiary or (b) assumed in
connection with the acquisition of assets from such Person.
"AFL II" means a wholly owned Unrestricted Subsidiary formed
in August 1997 for the sole purpose of owning and leasing four 747-200 aircraft
and nine spare engines previously owned by the Company and financed by the
Company's existing revolving credit facility.
"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 other
Person that owns, directly or indirectly, 5% or more of such specified Person's
Capital Stock or any executive officer or director of any such specified Person
or other Persons or, with respect to any natural Person, any Person having a
relationship with such Person by blood, marriage or adoption not more remote
than first cousin. 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 co-registrar.
"Appraised Fair Market Value" means the Adjusted Current
Market Value. Current Market Value is the most likely trading price that, in the
opinion of an appraiser, may be generated from an aircraft under the market
conditions that are perceived to exist at the time in question. Current Market
Value assumes that the aircraft is valued for its highest, best use, that the
parties to the hypothetical transaction are willing, able, prudent and
knowledgeable, and under no unusual pressure for a prompt sale, and that the
transaction would be negotiated in an open and unrestricted market on an arm's
length basis, for cash or equivalent consideration, and given an adequate amount
of time for effective exposure to prospective buyers. Adjusted Current Market
Value, in the opinion of the appraiser, is the Current Market Value of the
aircraft adjusted for the actual technical status and maintenance condition of
the aircraft.
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<PAGE> 10
"Asset Sale" means any sale, issuance, conveyance, transfer,
lease or other disposition (including, without limitation, by way of merger,
consolidation or sale and leaseback transaction) (collectively, a "transfer"),
directly or indirectly, in one or a series of related transactions, of (i) any
Capital Stock of any Subsidiary; (ii) all or substantially all of the properties
and assets of the Company or its Subsidiaries; or (iii) any other properties or
assets of the Company or any Subsidiary, other than in the ordinary course of
business. For the purposes of this definition, the term "Asset Sale" shall not
include any transfer of properties or assets (A) that is governed by the
provisions of this Indenture, described in Section 5.1, (B) by the Company to
any Subsidiary, or by any Subsidiary of the Company or any Subsidiary and in
accordance with the terms of the Indenture, (C) of aircraft engines, components,
parts or spare parts pursuant to customary pooling, exchange or similar
agreements or, (D) asset swaps involving aircraft engines, components, parts or
spare parts (provided that the assets received by the Company or any Subsidiary
have a Fair Market Value at least equal to the asset transferred (provided that
with respect to any asset swap or series of related asset swaps involving assets
with a Fair Market Value exceeding $3 million, such determination shall be made
by the Board of Directors)), (E) constituting an Investment that is permitted
under the Indenture in an Unrestricted Subsidiary, joint venture or other Person
in which the Company or a Subsidiary retains an ownership interest, or (F)
having a Fair Market Value per transaction or series of related transactions of
less than $1,000,000.
"Atlas Freighter Leasing Transactions" means the transactions
in which Atlas Freighter Leasing, Inc. and AFL II, each a wholly-owned
Unrestricted Subsidiary of the Company, refinanced six 747-200 aircraft and four
747-200 aircraft all previously owned by the Company, respectively.
"Aviation Act" means the Federal Aviation Act of 1958, as
amended, and the applicable regulations thereunder.
"Bankruptcy Law" means Title 11, United States Code, as
amended, or any similar United States federal or state law relating to
bankruptcy, insolvency, receivership, winding-up, liquidation, reorganization or
relief of debtors or any amendment to, succession to or change in any such law.
"Board of Directors" means the Board of Directors of any
Person or any committee thereof duly authorized to act on behalf of such Board
of Directors.
"Board Resolution" means, with respect to any Person, a copy
of a resolution certified by the Secretary or an Assistant Secretary of such
Person to have been duly adopted by the Board of Directors of such Person and to
be in full force and effect on the date of such certification, and delivered to
the Trustee.
"Boeing Purchase Contract" means the agreement dated June 9,
1997 between Atlas Air, Inc. and The Boeing Company to purchase ten new 747-400
aircraft.
3
<PAGE> 11
"Business Day" means each day which is not a Legal Holiday.
"Capital Stock" of any Person means any and all shares,
interests, rights to purchase, warrants, options, participations, rights in or
other equivalents (however designated) of such Person's capital stock or other
equity participations, including partnership interests, whether general or
limited, in such Person, including any Preferred Stock, and any rights (other
than debt securities convertible into capital stock), warrants or options
exchangeable for or convertible into such capital stock, whether now outstanding
or issued after the date of this Indenture.
"Capitalized Lease Obligation" of any Person means any
obligation of such Person and its subsidiaries on a consolidated basis under a
lease of (or other agreement conveying the right to use) any property (whether
real, personal or mixed) that is required to be classified and accounted for as
a capital lease obligation under GAAP, and, for the purpose of the Indenture,
the amount of such obligation at any date shall be the capitalized amount
thereof at such date, determined in accordance with GAAP.
"Cash Equivalents" means (i) any evidence of Indebtedness with
a maturity of one year or less issued or directly and fully guaranteed or
insured by the United States of America or any agency or instrumentality thereof
(provided that the full faith and credit of the United States of America is
pledged in support thereof); (ii) certificates of deposit or acceptances and
money market deposits with a maturity of one year or less of any financial
institution that is a member of the Federal Reserve System, in each case having
combined capital and surplus and undivided profits of not less than
$500,000,000; (iii) commercial paper with a maturity of one year or less issued
by a corporation that is not an Affiliate of the Company and is organized under
the laws of any state of the United States or the District of Columbia and rated
at least A-1 by S&P or at least P-1 by Moody's and (iv) investment in money
market funds substantially all of whose assets are comprised of Cash Equivalents
described in clauses (i) through (iii).
"Cedel Bank" has the meaning set forth in Section 2.1.
"Change of Control" means the occurrence of any of the
following events: (a) any "person" or "group" (as such terms are used in
Sections 13(d) and 14(d) of the Exchange Act), other than Permitted Holders, is
or becomes the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the
Exchange Act, except that a Person shall be deemed to have "beneficial
ownership" of all securities that such Person has the right to acquire, whether
such right is exercisable immediately or only after the passage of time),
directly or indirectly, of more than 40% of the total outstanding Voting Stock
of the Company; (b) the Company consolidates with, or merges with or into,
another Person or conveys, transfers, leases or otherwise disposes of all or
substantially all of its assets to any Person, or any Person consolidates with,
or merges with or into, the Company, in any such event pursuant to a transaction
in which the outstanding Voting Stock of the Company is converted into or
exchanged for cash, securities or other property, other than any such
transaction where (i) the outstanding Voting Stock of the Company is not
converted or exchanged at all (except to the extent necessary to reflect a
change in the jurisdiction of
4
<PAGE> 12
incorporation of the Company) or is converted into or exchanged for (A) Voting
Stock (other than Redeemable Capital Stock) of the surviving or transferee
corporation or (B) cash, securities and other property (other than Capital Stock
of the Surviving Entity) in an amount that could be paid by the Company as a
Restricted Payment as described in Section 4.4 (or a combination of (A) and (B))
and (ii) immediately after such transaction, no "person" or "group" (as such
terms are used in Sections 13(d) and 14(d) of the Exchange Act), other than
Permitted Holders, is the "beneficial owner" (as defined in Rules 13d-3 and
13d-5 under the Exchange Act, except that a Person shall be deemed to have
"beneficial ownership" of all securities that such Person has the right to
acquire, whether such right is exercisable immediately or only after the passage
of time), directly or indirectly, of more than 40% of the total outstanding
Voting Stock of the surviving transferee corporation; (c) during any consecutive
two year period, individuals who at the beginning of such period constituted the
Board of Directors of the Company (together with any new directors whose
election to such Board of Directors, or whose nomination for election by the
stockholders of the Company was approved by a vote of 66 2/3% of the directors
then still in office who were either directors at the beginning of such period
or whose election or nomination for election was previously so approved) cease
for any reason to constitute a majority of the Board of Directors of the Company
then in office; or (d) the Company is liquidated or dissolved or adopts a plan
of liquidation or dissolution other than in a transaction which complies with
the provisions described in Section 5.1. For purposes of this definition, a
Permitted Holder shall be deemed to beneficially own Voting Stock that has been
pledged to a financial institution, unless the pledgee has the present right to
vote such Voting Stock in the election of directors or has exercised remedies
with respect to such Voting Stock.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" means Atlas Air, Inc., a Delaware corporation until
a successor replaces it and, thereafter, means the successor.
"Commission" or "SEC" means the U.S. Securities and Exchange
Commission or its successor.
"Consolidated Adjusted Net Income" means, for any period, the
consolidated net income (or loss) of the Company and all Subsidiaries for such
period as determined in accordance with GAAP, adjusted by excluding, without
duplication, (a) any net after-tax extraordinary gains or losses (less all fees
and expenses relating thereto), (b) any net after-tax gains or losses (less all
fees and expenses relating thereto) attributable to asset dispositions other
than in the ordinary course of business, (c) the portion of net income (or loss)
of any Person (other than the Company or a Subsidiary), including Unrestricted
Subsidiaries, in which the Company or any Subsidiary has an ownership interest,
except to the extent of the amount of dividends or other distributions actually
paid to the Company or any Subsidiary in cash during such period, (d) for
purposes of calculating Consolidated Adjusted Net Income in Section 4.4, the net
income (or loss) of any Person combined with the Company or any Subsidiary on a
"pooling of interests" basis attributable to any period prior to the date of
combination and (e) the net income of any Subsidiary, to the
5
<PAGE> 13
extent that the declaration or payment of dividends or similar distributions by
such Subsidiary is not at the date of determination permitted, directly or
indirectly, by operation of the terms of its charter or any agreement,
instrument, judgment, decree, order, statute, rule or governmental regulation
applicable to such Subsidiary or its stockholders.
"Consolidated Fixed Charge Coverage Ratio" of the Company
means, for any period, the ratio of (a) the sum of Consolidated Adjusted Net
Income, Consolidated Interest Expense, Consolidated Income Tax Expense and
Consolidated Non-Cash Charges deducted in computing Consolidated Adjusted Net
Income, in each case, for such period, of the Company and all Subsidiaries as
determined on a consolidated basis in accordance with GAAP to (b) such
Consolidated Interest Expense.
"Consolidated Income Tax Expense" means, for any period, the
provision for federal, state, local and foreign income taxes of the Company and
all Subsidiaries for such period as determined on a consolidated basis in
accordance with GAAP.
"Consolidated Interest Expense" of the Company means, for any
period, without duplication, the sum of (a) the interest expense of the Company
and its Subsidiaries for such period, including, without limitation, (i)
amortization of debt discount, (ii) the net cost of interest rate contracts
(including amortization of discounts), (iii) the interest portion of any
deferred payment obligation, (iv) amortization of debt costs and (v) accrued
interest and capitalized interest, plus (b) the interest component of
Capitalized Lease Obligations of the Company and its Subsidiaries during such
period, plus (c) cash dividends due (whether or not declared) on Redeemable
Capital Stock by the Company and any Subsidiary (to any Person other than the
Company and any wholly owned Subsidiary), in each case as determined on a
consolidated basis in accordance with GAAP; provided that (x) the Consolidated
Interest Expense attributable to interest on any Indebtedness computed on a pro
forma basis and (A) bearing a floating interest rate shall be computed as if the
rate in effect on the date of computation had been the applicable rate for the
entire period and (B) which was not outstanding during the period for which the
computation is being made but which bears, at the option of the Company, a fixed
or floating rate of interest, shall be computed by applying at the option of the
Company, either the fixed or floating rate, and (y) in making such computation,
the Consolidated Interest Expense attributable to interest on any Indebtedness
under a revolving credit facility computed on a pro forma basis shall be
computed based upon the average daily balance of such Indebtedness during the
applicable period. For purposes of clause (c) of the preceding sentence,
dividends shall be deemed to be an amount equal to the dividends due (whether or
not declared) divided by one minus the applicable actual combined federal,
state, provincial, local and foreign income tax rate of the Company and its
Subsidiaries (expressed as a decimal).
"Consolidated Non-Cash Charges" means, for any period, the
aggregate depreciation, amortization and other non-cash items of the Company and
any Subsidiary reducing Consolidated Adjusted Net Income for such period,
determined on a consolidated basis in
6
<PAGE> 14
accordance with GAAP (excluding any such non-cash charge which represents an
accrual of or reserve for cash charges for any future period).
"Corporate Trust Office of the Trustee" shall be at the
address of the Trustee specified in Section 10.2 or such other address as to
which the Trustee may give notice to the Company.
"Currency Agreements" means any spot or forward foreign
exchange agreements and currency swap, currency option or other similar
financial agreements or arrangements entered into by the Company or any of its
Subsidiaries in the ordinary course of business and designed to protect against
or manage exposure to fluctuations in foreign currency exchange rates.
"Default" means any event that is, or after notice or passage
of time or both would be, an Event of Default.
"Depositary" means The Depository Trust Company, its nominees
and their respective successors and assigns, or such other depository
institution hereinafter appointed by the Company.
"Disinterested Director" means, with respect to any
transaction or series of transactions in respect of which the Board of Directors
is required to deliver a resolution of the Board of Directors under the
Indenture, a member of the Board of Directors who does not have any material
direct or indirect financial interest in or with respect to such transaction or
series of transactions.
"Euroclear" has the meaning set forth in Section 2.1.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Exchange Securities" means the 9 1/4% Senior Notes due 2008,
Series B, to be issued in exchange for the Initial Securities pursuant to the
Registration Rights Agreement.
"Fair Market Value" means, with respect to any asset or
property, the sale value that would be obtained in an arm's-length transaction
between an informed and willing seller under no compulsion to sell and an
informed and willing buyer under no compulsion to buy.
"Generally Accepted Accounting Principles" or "GAAP" means
generally accepted accounting principles in the United States, consistently
applied, that are in effect on the date of this Indenture.
"guarantee" means, as applied to any obligation, (a) a
guarantee (other than by endorsement of negotiable instruments for collection in
the ordinary course of business), direct or indirect, in any manner, of any part
or all of such obligation and (b) an agreement, direct or
7
<PAGE> 15
indirect, contingent or otherwise, the practical effect of which is to assure in
any way the payment or performance (or payment of damages in the event of
non-performance) of all or any part of such obligation, including, without
limiting the foregoing, the payment of amounts drawn down by letters of credit.
"Guarantee" means any guarantee of the Securities by any
Subsidiary in accordance with the provisions of Section 4.10 hereof. When used
as a verb, "Guarantee" shall have a corresponding meaning.
"Holder" or "Securityholder" means the Person in whose name a
Security is registered on the Registrar's books.
"Indebtedness" means, with respect to any Person, without
duplication, (a) all liabilities of such Person for borrowed money (including
overdrafts) or for the deferred purchase price of property or services,
excluding any trade payables and other accrued current liabilities (including
outstanding disbursements owed to trade creditors) incurred in the ordinary
course of business (whether or not evidenced by a note), but including, without
limitation, all obligations, contingent or otherwise, of such Person in
connection with any letters of credit and acceptances issued under letter of
credit facilities, acceptance facilities or other similar facilities, (b) all
obligations of such Person evidenced by bonds, notes, debentures or other
similar instruments, (c) all indebtedness of such Person created or arising
under any conditional sale or other title retention agreement with respect to
property acquired by such Person (even if the rights and remedies of the seller
or lender under such agreement in the event of default are limited to
repossession or sale of such property), but excluding trade accounts payable
arising in the ordinary course of business, (d) all Capitalized Lease
Obligations of such Person, (e) all Indebtedness referred to in (but not
excluded from) the preceding clauses of other Persons and all dividends of other
Persons, the payment of which is secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be secured by)
any Lien upon or with respect to property (including, without limitation,
accounts and contract rights) owned by such Person, even though such Person has
not assumed or become liable for the payment of such Indebtedness (the amount of
such obligation being deemed to be the lesser of the value of such property or
asset or the amount of the obligation so secured), (f) all guarantees by such
Person of Indebtedness referred to in this definition of any other Person, (g)
all Redeemable Capital Stock of such Person valued at the greater of its
voluntary or involuntary maximum fixed repurchase price plus accrued and unpaid
dividends and (h) all obligations of such Person under or in respect of Interest
Rate Agreements or Currency Agreements. For purposes hereof, the "maximum fixed
repurchase price" of any Redeemable Capital Stock which does not have a fixed
repurchase price shall be calculated in accordance with the terms of such
Redeemable Capital Stock as if such Redeemable Capital Stock were purchased on
any date on which Indebtedness shall be required to be determined pursuant to
this Indenture, and if such price is based upon, or measured by, the Fair Market
Value of such Redeemable Capital Stock, such Fair Market Value shall be
determined in good faith by the board of directors of the issuer of such
Redeemable Capital Stock.
8
<PAGE> 16
"Indenture" means this Indenture as amended or supplemented
from time to time.
"Institutional Accredited Investor" means an institution that
is an "accredited investor" as that term is defined in Rule 501(a)(1), (2), (3)
or (7) under the Securities Act.
"Interest Payment Date" means the stated maturity of an
installment of interest on the Securities.
"Interest Rate Agreements" means any interest rate protection
agreements and other types of interest rate hedging agreements or arrangements
(including, without limitation, interest rate swaps, caps, floors, collars and
similar agreements) designed to protect against or manage exposure to
fluctuations in interest rates in respect of Indebtedness.
"Investment" means, with respect to any Person, any direct or
indirect advance, loss or other extension of credit or capital contribution to
(by means of any transfer of cash or other property to others or any payment for
property or services for the account or use of others), or any purchase,
acquisition or ownership by such Person of any Capital Stock, bonds, notes,
debentures or other securities or evidences of Indebtedness issued or owned by,
any other Person and all other items that would be classified as investments on
a balance sheet prepared in accordance with GAAP. In addition, the Fair Market
Value of the net assets of any Subsidiary at the time that such Subsidiary is
designated an Unrestricted Subsidiary shall be deemed to be an "Investment" made
by the Company in such Unrestricted Subsidiary at such time. "Investment" shall
exclude extensions of trade credit on commercially reasonable terms in
accordance with normal trade practices.
"Initial Securities" has the meaning set forth in the preamble
to this Indenture.
"Issue Date" means the date of original issuance of the
Securities.
"Legal Holiday" has the meaning ascribed in Section 10.8.
"Lien" means any mortgage, charge, pledge, lien (statutory or
otherwise), privilege, security interest, hypothecation, assignment for
security, claim, or preference or priority or other encumbrance upon or with
respect to any property of any kind, real or personal, movable or immovable, now
owned or hereafter acquired. A Person shall be deemed to own subject to a Lien
any property which such Person has acquired or holds subject to the interest of
a vendor or lessor under any conditional sale, agreement, capital lease or other
title retention agreement.
"Maturity" means, with respect to any Security, the date on
which any principal of such Security becomes due and payable as therein or
herein provided, whether at the Stated Maturity with respect to such principal,
by sinking fund payment or by declaration of acceleration, call for redemption
or purchase or otherwise.
"Maturity Date" means April 15, 2008.
9
<PAGE> 17
"Moody's" means Moody's Investors Service, Inc. and its
successors.
"Net Cash Proceeds" means (a) with respect to any Asset Sale,
the proceeds thereof in the form of cash or Cash Equivalents including payments
in respect of deferred payment obligations, but only when received in the form
of, or stock or other assets when disposed for, cash or Cash Equivalents (except
to the extent that such obligations are financed or sold with recourse to the
Company or any Subsidiary), net of (i) brokerage commissions and other fees and
expenses (including fees and expenses of legal counsel and investment banks)
related to such Asset Sale, (ii) provisions for all taxes payable as a result of
such Asset Sale, (iii) payments made to retire Indebtedness where payment of
such Indebtedness is secured by the assets or properties the subject of such
Asset Sale, (iv) amounts required to be paid to any Person (other than the
Company or any Subsidiary) owning a beneficial interest in the assets subject to
the Asset Sale and (v) appropriate amounts to be provided by the Company or any
Subsidiary, as the case may be, as a reserve required in accordance with GAAP
against any liabilities associated with such Asset Sale and retained by the
Company or any Subsidiary, as the case may be, after such Asset Sale, including,
without limitation, pension and other post-employment benefit liabilities,
liabilities related to environmental matters and liabilities under any
indemnification obligations associated with such Asset Sale, all as reflected in
an Officers' Certificate delivered to the Trustee and (b) with respect to any
issuance or sale of Capital Stock or options, warrants or rights to purchase
Capital Stock, or debt securities or Redeemable Capital Stock that have been
converted into or exchanged for Qualified Capital Stock, as referred to in
Section 4.4, the proceeds of such issuance or sale in the form of cash or Cash
Equivalents, including payments in respect of deferred payment obligations when
received in the form of, or stock or other assets when disposed for, cash or
Cash Equivalents (except to the extent that such obligations are financed or
sold with recourse to the Company or any Subsidiary of the Company), net of
attorney's fees, accountant's fees and brokerage, consultation, underwriting and
other fees and expenses actually incurred in connection with such issuance or
sale and net of taxes paid or payable as a result thereof.
"Offering Memorandum" means the Offering Memorandum dated
April 7, 1998 relating to the Securities;
"Officer" means the Chairman of the Board, the President, any
Senior Vice President, any Vice President, the Treasurer or the Secretary of,
the Company or any other officer designated by Board of Directors serving in a
similar capacity.
"Officers' Certificate" means a certificate signed by two
Officers.
"Opinion of Counsel" means a written opinion from legal
counsel who is reasonably acceptable to the Trustee and which complies, if
applicable, with Section 10.5. The counsel may be an employee of or counsel to
the Company.
"Paying Agent" has the meaning provided in Section 2.3.
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<PAGE> 18
"Permitted Holders" means Michael A. Chowdry, the Related
Parties and/or a trustee or other fiduciary holding Voting Stock under an
employee benefit plan of the Company.
"Permitted Indebtedness" means any of the following:
(a) Indebtedness of the Company in an aggregate principal
amount at any one time outstanding not to exceed $100 million provided
that such Indebtedness is incurred to finance the acquisition of
additional aircraft by the Company and is secured by Liens on such
aircraft;
(b) Indebtedness of the Company outstanding on the Issue Date;
(c) Indebtedness of the Company to any wholly owned
Subsidiary; provided that any Indebtedness of the Company owing to any
such Subsidiary is made pursuant to an intercompany note and is
subordinated in right of payment from and after such time as the
Securities shall become due and payable (whether at Stated Maturity,
upon acceleration or otherwise) to the payment and performance of the
Company's obligations under the Securities; provided further, that any
disposition, pledge or transfer of any such Indebtedness to a Person
(other than the Company or another wholly owned Subsidiary) shall be
deemed to be an incurrence of such Indebtedness by the Company not
permitted by this clause (c);
(d) Indebtedness of the Company under Currency Agreements and
Interest Rate Agreements entered into in the ordinary course of
business, provided that the notional amount of such obligations does
not exceed the amount of the related obligation on Indebtedness
outstanding or committed to be incurred on the date such Currency
Agreement or Interest Rate Agreements are entered into;
(e) any renewals, extensions, substitutions, refinancings or
replacements (each, for purposes of this clause, a "refinancing") by
the Company of any Indebtedness of the Company pursuant to clause (b)
of this definition, including any successive refinancings by the
Company, so long as (i) any such new Indebtedness shall be in a
principal amount that does not exceed the principal amount (or, if such
Indebtedness being refinanced provides for an amount less than the
principal amount thereof to be due and payable upon a declaration of
acceleration thereof, such lesser amount as of the date of
determination) so refinanced, plus the amount of any premium required
to be paid in connection with such refinancing pursuant to the terms of
the Indebtedness refinanced or the amount of any premium reasonably
determined by the Company as necessary to accomplish such refinancing,
plus the amount of expenses of the Company incurred in connection with
such refinancing, (ii) in the case of any refinancing of Subordinated
Indebtedness, such new Indebtedness is made subordinate to the
Securities at least to the same extent as the Indebtedness being
refinanced and (iii) such new Indebtedness has no scheduled principal
payments prior to the final Stated Maturity of the Securities;
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<PAGE> 19
(f) Indebtedness of the Company in addition to any amounts
listed in clauses (a) through (e) above in an aggregate principal
amount at any one time outstanding not to exceed $20 million less the
amount of Permitted Subsidiary Indebtedness then outstanding pursuant
to clause (f) of the definition thereof;
(g) Indebtedness under the Securities and this Indenture;
(h) Indebtedness arising from the honoring by a bank or other
financial institution of a check, draft or similar instrument
inadvertently (except in the case of daylight overdrafts) drawn against
insufficient funds in the ordinary course of business; provided,
however, that such Indebtedness is extinguished within two business
days of incurrence; and
(i) Indebtedness of the Company and its Subsidiaries incurred
in connection with the acquisition of ten new Boeing 747-400 aircraft
pursuant to the Boeing Purchase Contract provided that such
Indebtedness shall not exceed 80% of Appraised Fair Market Value of
such aircraft at the time of borrowing, neither individually nor in the
aggregate.
"Permitted Investments" means any of the following:
(a) Investments in Cash Equivalents;
(b) Investments in the Company or any wholly owned Subsidiary;
(c) Investments in Subsidiaries and Unrestricted Subsidiaries
in an amount not to exceed $20 million in aggregate which Subsidiaries
or Unrestricted Subsidiaries are in the business of the Company as
conducted on the Issue Date or, a business reasonably related thereto
or involved in outsourcing for the air cargo industry or the leasing of
aircraft to the Company;
(d) Investments by the Company or any Subsidiary in another
Person, if as a result of such Investment (i) such other Person becomes
a wholly owned Subsidiary or (ii) such other Person is merged or
consolidated with or into, or transfers or conveys all or substantially
all of its assets to, the Company or a wholly owned Subsidiary;
(e) Currency Agreements and Interest Rate Agreements;
(f) Loans and advances to employees and officers of the
Company and its Subsidiaries in the ordinary course of business not in
excess of $2.0 million at any one time outstanding;
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<PAGE> 20
(g) Investments in securities of trade creditors or customers
received pursuant to a plan of reorganization or similar arrangement
upon the bankruptcy or insolvency of such trade creditors or customers;
(h) Investments existing on the Issue Date; or
(i) Investments by the Company in AFL II.
"Permitted Liens" means the following types of Liens:
(a) Liens existing as of the date of this Indenture;
(b) Liens on any property or assets of a wholly owned
Subsidiary granted in favor of the Company or any other wholly owned
Subsidiary;
(c) Liens on property acquired after the date of this
Indenture that secures Indebtedness permitted to be incurred pursuant
to Section 4.3 and provided further that such Liens shall not extend to
any other property of the Company or its Subsidiaries;
(d) statutory Liens of landlords and carrier's,
warehouseman's, mechanics, supplier's, materialmen's, repairmen's or
other like Liens arising in the ordinary course of business and with
respect to amounts not yet delinquent or being contested in good faith
by appropriate proceeding, if a reserve or other appropriate provision,
if any, as shall be required in conformity with GAAP shall have been
made therefor;
(e) Liens for taxes, assessments, government charges or claims
that are being contested in good faith by appropriate proceedings
promptly instituted and diligently conducted and if a reserve or other
appropriate provision, if any, as shall be required in conformity with
GAAP shall have been made therefor;
(f) Liens incurred or deposits made to secure the performance
of tenders, bids, leases, statutory obligations, surety and appeal
bonds, government contracts, performance bonds and other obligations of
a like nature incurred in the ordinary course of business (other than
contracts for the payment of money);
(g) easements, rights-of-way, restrictions and other similar
charges or encumbrances not interfering in any material respect with
the business of the Company or any Subsidiary incurred in the ordinary
course of business;
(h) Liens arising by reason of any judgment, decree or order
of any court so long as such Lien is adequately bonded and any
appropriate legal proceedings that may have been duly initiated for the
review of such judgment, decree or order shall not have
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<PAGE> 21
been finally terminated or the period within which such proceedings may
be initiated shall not have expired; and
(i) any extension, renewal or replacement, in whole or in
part, of any Lien described in the foregoing clauses (a) through (i);
provided that any such extension, renewal or replacement shall be no
more restrictive in any material respect that the Lien so extended,
renewed or replaced and shall not extend to any additional property or
assets.
"Permitted Subsidiary Indebtedness" means any of the
following:
(a) Indebtedness of Subsidiaries outstanding on the Issue
Date;
(b) Indebtedness of any Subsidiary under Currency Agreements
and Interest Rate Agreements, provided that the notional principal
amount of such obligations does not exceed the amount of Indebtedness
outstanding or committed to be incurred on the date such Currency
Agreements or Interest Rate Agreements are entered into;
(c) Indebtedness of any wholly owned Subsidiary to any other
wholly owned Subsidiary or to the Company;
(d) any renewals, extensions, substitutions, refinancings or
replacements (each, for purposes of this clause, a "refinancing") by
any Subsidiary of any Indebtedness of such Subsidiary pursuant to
clause (a) of this definition, including any successive refinancings by
such Subsidiary, so long as any such new Indebtedness shall be in a
principal amount that does not exceed the principal amount (or, if such
Indebtedness being refinanced provides for an amount less than the
principal amount thereof to be due and payable upon a declaration of
acceleration thereof, such lesser amount as of the date of
determination) so refinanced plus the amount of any premium required to
be paid in connection with such refinancing pursuant to the terms of
the Indebtedness refinanced or the amount of any premium reasonably
determined by such Subsidiary as necessary to accomplish such
refinancing, plus the amount of expenses of such Subsidiary incurred in
connection with such refinancing;
(e) guarantees by Subsidiaries of Indebtedness of the Company
entered into in accordance with Section 4.10 and guarantees by
Subsidiaries of Permitted Subsidiary Indebtedness of wholly owned
Subsidiaries; and
(f) Indebtedness of Subsidiaries in addition to any amounts
listed in clauses (a) through (e) above in an aggregate principal
amount at any one time outstanding not to exceed $20 million, less the
amount of Permitted Indebtedness then outstanding pursuant to clause
(f) of the definition thereof.
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"Person" means any individual, corporation, limited liability
company, partnership, joint venture, association, joint-stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
"Physical Securities" has the meaning provided in Section 2.1.
"Preferred Stock" means, with respect to any Person, any and
all shares, interests, participations or other equivalents (however designated)
of such person's preferred or preference stock whether outstanding on the date
of this Indenture, or issued thereafter, and including, without limitation, all
classes and series of preferred or preference stock of such Person.
"Private Placement Legend" has the meaning provided in Section
2.15.
"Proceeds Purchase Date" has the meaning provided in Section
4.8.
"QIB" means any "qualified institutional buyer" (as defined
under the Securities Act).
"Qualified Capital Stock" of any Person means any and all
Capital Stock of such Person other than Redeemable Capital Stock.
"Record Date" means the record dates specified in the
Securities, whether or not a Legal Holiday.
"Redeemable Capital Stock" means any class or series of
Capital Stock that, either by its terms, by the terms of any security into which
it is convertible or exchangeable or by contract or otherwise is, or upon the
happening of an event or passage of time would be, required to be redeemed prior
to the final Stated Maturity of the Securities or is redeemable at the option of
the holder thereof at any time prior to such final Stated Maturity, or is
convertible into or exchangeable for debt securities at any time prior to such
final Stated Maturity.
"Redemption Date" when used with respect to any security,
means the date fixed for such redemption pursuant to this Indenture and the
Securities delivered pursuant to Section 3.3 as the date on which the Company
has elected to redeem all of the Securities pursuant to paragraph 7 of the
Securities after the occurrence of a Change of Control.
"Registrar" has the meaning provided for in Section 2.3.
"Registration Rights Agreement" means the Exchange and
Registration Rights Agreement, dated April 9, 1998, between the Company and
Placement Agents.
"Regulation S" means Regulation S under the Securities Act.
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<PAGE> 23
"Regulation S Global Note" has the meaning set forth in
Section 2.1.
"Related Parties" means (a) the spouse, children or other
descendants (by blood or adoption), stepchildren, siblings, and in-laws of
Michael A. Chowdry or the spouse of Michael A. Chowdry; (b) the heirs, legatees,
devisees, distributees, personal representatives, or the estate of Michael A.
Chowdry or of persons listed in the foregoing clause (a); (c) any trust
primarily for the benefit of Michael A. Chowdry or any of the persons or
entities listed in the foregoing clauses of this definition; (d) any trust,
corporation, limited or general partnership, limited liability company or
partnership or other entity of which Michael A. Chowdry and/or any of the other
persons or entities listed in the foregoing clauses of this definition are the
beneficial owners (as defined in Rules 13d-3 and 13d-5 under the Exchange Act,
except that a Person shall be deemed to have "beneficial ownership" of all
securities that such Person has the right to acquire, whether such right is
exercisable immediately or only after the passage of time) of a controlling
interest in the outstanding voting and equity securities or interests; (e) a
transferee pursuant to a decree of dissolution of marriage relating to Michael
A. Chowdry or a Person that has been immediately prior to the disposition a
Related Party under any clause of this definition; or (f) a transferee by
disposition in an involuntary manner without the consent of Michael A. Chowdry
or a Person that has been immediately prior to the disposition a Related Party
under any clause of this definition, including, but not limited to, disposition
under judicial orders.
"Responsible Officer" when used with respect to the Trustee,
means any officer within the corporate trust department of the Trustee (or any
successor group of the Trustee) with direct responsibility for the
administration of this Indenture and also means, with respect to a particular
corporate trust matter, any other officer to whom such matter is referred
because of his knowledge of and familiarity with the particular subject.
"Restricted Period" means 40 days after the later of
commencement of the offering of the Securities and the Issue Date.
"Restricted Security" has the meaning assigned to such term in
Rule 144(a)(3) under the Securities Act; provided, however, that the Trustee
shall be entitled to request and conclusively rely on an Opinion of Counsel with
respect to whether any Security constitutes a Restricted Security.
"Rule 144A Global Note" has the meaning set forth in Section
2.1.
"S&P" means Standard & Poor's Ratings Group, a division of
McGraw-Hill, Inc., and its successors.
"Securities" means the Initial Securities and the Exchange
Securities treated as a single class of securities, as amended or supplemented
from time to time in accordance with the terms hereof, that are issued pursuant
to this Indenture.
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<PAGE> 24
"Securities Act" means the Securities Act of 1933, as amended
and the rules and regulations of the Commission promulgated thereunder.
"Significant Subsidiary" means any Subsidiary of the Company
that, together with its Subsidiaries, (i) for the most recent fiscal year of the
Company, accounted for more than 10% of the consolidated revenues of the Company
and its Subsidiaries or (ii) as of the end of such fiscal year, was the owner of
more than 10% of the consolidated assets of the Company and its Subsidiaries,
all as set forth on the most recently available consolidated financial
statements of the Company for such fiscal year.
"Stated Maturity" means, when used with respect to the
Securities or any installment of interest thereon, the date specified in the
Security as the fixed date on which the principal of the Security or such
installment of interest is due and payable, and, when used with respect to any
other Indebtedness, means the date specified in the instrument governing such
Indebtedness as the fixed date on which the principal of such Indebtedness, or
any installment of interest thereon, is due and payable.
"Subordinated Indebtedness" means Indebtedness of the Company
that is expressly subordinated in right of payment to the Securities.
"Subsidiary" means any Person a majority of the equity
ownership or Voting Stock of which is at the time owned, directly or indirectly,
by the Company or by one or more other Subsidiaries or by the Company and one or
more other Subsidiaries. For purposes of this Indenture, the term Subsidiary
shall not include any Unrestricted Subsidiary, except in the definition of
Unrestricted Subsidiary.
"Surviving Entity" has the meaning provided in Section 5.1.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. Section
77aaa-77bbbb) as in effect on the date of this Indenture; provided, however,
that, in the event the Trust Indenture Act of 1939 is amended after such date,
"TIA" means, to the extent required by any such amendment, the Trust Indenture
Act of 1939 as so amended.
"Trustee" means the party named as such in the preamble to
this Indenture until a successor replaces it in accordance with the provisions
of Article VII of this Indenture and, thereafter, means the successor.
"Trust Officer" means any officer or assistant officer of the
Trustee assigned by the Trustee to administer its corporate trust matters.
"Unrestricted Subsidiary" means (a) any Subsidiary of the
Company that at the time of determination shall be an Unrestricted Subsidiary
(as designated by the Board of Directors of the Company, as provided below) and
(b) any Subsidiary of an Unrestricted Subsidiary and (c)
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<PAGE> 25
Atlas Freighter Leasing, Inc. and Atlas Freighter Leasing II, Inc. ("AFL II")
are Unrestricted Subsidiaries as of the Issue Date. The Board of Directors of
the Company may designate any Subsidiary (including any newly acquired or newly
formed Subsidiary) to be an Unrestricted Subsidiary so long as (i) neither the
Company nor any Subsidiary is directly or indirectly liable for any Indebtedness
of such Subsidiary, (ii) no default with respect to any Indebtedness of such
Subsidiary would permit (upon notice, lapse of time or otherwise) any holder of
any other Indebtedness of the Company or any Subsidiary to declare a default on
such other Indebtedness or cause the payment thereof to be accelerated or
payable prior to its stated maturity, (iii) any Investment in such Subsidiary
made as a result of designation of such Subsidiary an Unrestricted Subsidiary or
otherwise was permitted under paragraph (a), clause (iv) of Section 4.4, (iv)
neither the Company nor any Subsidiary has a contract, agreement, arrangement,
understanding or obligation of any kind, whether written or oral, with such
Subsidiary other than those that might be obtained at the time from Persons who
are not affiliates of the Company, and (v) neither the Company nor any
Subsidiary has any obligation (1) to subscribe for additional shares of Capital
Stock or other equity interests in such Subsidiary, or (2) to maintain or
preserve such Subsidiary's financial condition or to cause such Subsidiary to
achieve certain levels of operating results. Any such designation by the Board
of Directors of the Company shall be evidenced to the Trustee by filing a board
resolution with the Trustee giving effect to such designation. The Board of
Directors of the Company may designate any Unrestricted Subsidiary as a
Subsidiary if immediately after giving effect to such designation, there would
be no Default or Event of Default under this Indenture and the Company could
incur $1.00 of additional Indebtedness (other than Permitted Indebtedness)
pursuant to Section 4.3.
"U.S. Legal Tender" means 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.
"Voting Stock" means, with respect to any Person, any class or
classes of Capital Stock pursuant to which the holders thereof have the general
voting power under ordinary circumstances to elect at least a majority of the
board of directors, managers or trustees of such Person (irrespective of whether
or not, at the time, stock of any other class or classes shall have, or might
have, voting power by reason of the happening of any contingency).
SECTION 1.2. Other Definitions.
<TABLE>
<CAPTION>
Defined in
Term Section
- ---- -------
<S> <C>
"Agent Members" 2.16
"Change of Control Purchase Date" 4.9
"Change of Control Purchase Price" 4.9
"covenant defeasance" 8.1(b)
"Custodian" 6.1
"Event of Default" 6.1
</TABLE>
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<PAGE> 26
<TABLE>
<CAPTION>
<S> <C>
"Excess Proceeds" 4.8(b)
"Excess Proceeds Offer" 4.8(c)
"Global Notes" 2.1
"incur" 4.3(a)
"legal defeasance" 8.1(b)
"Offered Price" 4.8(c)
"Replacement Assets" 4.8(b)
"Restricted Payment" 4.4
"Rule 144A" 2.1
"Surviving Entity 5.1
</TABLE>
SECTION 1.3. Incorporation by Reference of Trust Indenture
Act. This Indenture is subject to the mandatory provisions of the TIA which are
incorporated by reference in and made a part of this Indenture. The following
TIA terms used in this Indenture have the following meanings:
"indenture securities" means the Securities.
"indenture security holder" means a Securityholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the
Trustee.
"obligor" on the indenture securities means the Company, and
any other obligor on the securities.
All other TIA terms used in this Indenture that are defined by
the TIA, defined by the TIA reference to another statute or defined under rules
promulgated by the Commission have the meanings assigned to them by such
definitions.
SECTION 1.4. 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 GAAP;
(3) "or" is not exclusive;
(4) "including" means including without limitation;
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(5) words in the singular include the plural and words in the
plural include the singular;
(6) references to Article and Section numbers refers to the
corresponding Articles and Sections of this Indenture unless otherwise
specified; and
(7) "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 Securities
SECTION 2.1. Form and Dating. The Initial Securities, and the
Trustee's certificate of authentication thereon shall be substantially in the
form of Exhibit A hereto. The Exchange Securities, and the Trustee's certificate
of authentication thereon shall be substantially in the form of Exhibit B
hereto. The Securities may have notations, legends or endorsements required by
law, stock exchange rule or Depository rule or usage. The Company and the
Trustee shall approve the form of the Securities and any notation, legend or
endorsement on them. Each Security shall be dated the date of its
authentication.
The terms and provisions contained in the forms of the
Securities annexed hereto as Exhibits A and B, 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.
Securities offered and sold in reliance on Rule 144A under the
Securities Act ("Rule 144A") shall be issued initially in the form of one or
more permanent global notes in registered form, in substantially the form set
forth in Exhibit A (the "Rule 144A Global Note"), deposited with the Trustee, as
custodian for the Depositary, duly executed by the Company and authenticated by
the Trustee as hereinafter provided. The aggregate principal amount of the Rule
144A Global Note may from time to time be increased or decreased by adjustments
made on the records of the Trustee, as custodian for the Depositary, as
hereinafter provided. Securities offered and sold in reliance on Regulation S
under the Securities Act shall be issued in the form of one or more permanent
global notes in registered form in substantially the form set forth in Exhibit A
with the legend set forth in Exhibit A-2 (the "Regulation S Global Note" and
together with the 144A Global Note, the "Global Notes"). The Regulation S Global
Note, which shall be deposited with the Trustee, as custodian for the
Depositary, and registered in the name of the Depositary or the nominee of the
Depositary for the accounts of designated agents holding on behalf of the
Euroclear System ("Euroclear") or Cedel Bank, S.A. ("Cedel Bank"). The aggregate
principal amount of the Regulation S Global Note may from time to time be
increased or decreased by adjustments made on the records of the Trustee, as
custodian for the Depositary, as hereinafter provided.
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<PAGE> 28
Securities issued in exchange for interests in the Rule 144A
Global Note pursuant to Section 2.17 may be issued in the form of permanent
certificated Securities in registered form in substantially the form set forth
in Exhibit A (the "Physical Securities").
Each of the Global Notes shall represent such amount of the
outstanding Securities as shall be specified therein and each shall provide that
it shall represent the aggregate amount of outstanding Securities from time to
time endorsed thereon and that the aggregate amount of outstanding Securities
represented thereby may from time to time be reduced or increased, as
appropriate, to reflect exchanges and redemptions. Any endorsement of a Global
Note to reflect the amount of any increase or decrease in the amount of
outstanding Securities represented thereby shall be made by the Trustee in
accordance with instructions given by the Holder thereof as required by Section
2.6 hereof.
The provisions of the "Operating Procedures of the Euroclear
System" and "Terms and Conditions Governing Use of Euroclear" and the
"Management Resolutions" and "Instructions to Participants" of Cedel Bank shall
be applicable to interests in the Regulation S Global Notes that are held by the
Agent Members through Euroclear or Cedel Bank.
SECTION 2.2. Execution and Authentication. (a) Two Officers of
the Company, or one Officer shall sign, and one Officer or an Assistant
Secretary (each of whom shall, in each case, have been duly authorized by all
requisite corporate actions) shall attest to, the Securities for the Company by
manual or facsimile signature. If an Officer whose signature is on a Security no
longer holds that office at the time the Security is authenticated, the Security
shall nevertheless be valid.
(b) A Security shall not be valid until authenticated by the
manual signature of the Trustee. The signature of the Trustee shall be
conclusive evidence that the Security has been authenticated under this
Indenture.
(c) The Trustee shall authenticate (i) Initial Securities for
original issue in the aggregate principal amount not to exceed $175,000,000, and
(ii) Exchange Securities from time to time for issue only in exchange for a like
principal amount of Initial Securities, in each case upon receipt of a written
order of the Company. Each such written order shall specify the amount of
Securities to be authenticated and the date on which the Securities are to be
authenticated, whether the Securities are to be Initial Securities or Exchange
Securities and whether the Securities are to be issued as Physical Securities or
Global Notes and such other information as the Trustee may reasonably request.
The aggregate principal amount of Securities outstanding at any time may not
exceed $175,000,000.
(d) The Trustee may appoint an authenticating agent acceptable
to the Company to authenticate Securities. Unless limited by the terms of such
appointment, an authenticating agent may authenticate Securities whenever the
Trustee may do so. Each reference
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<PAGE> 29
in this Indenture to authentication by the Trustee includes authentication by
such agent. An authenticating agent has the same rights as an Agent to deal with
the Company or an Affiliate.
(e) The Securities shall be issuable in fully registered form
only, without coupons, in denominations of $1,000 and any integral multiple
thereof.
SECTION 2.3. Registrar and Paying Agent. (a) The Company shall
maintain an office or agency (which shall be located in the Borough of Manhattan
in the City of New York, State of New York) where (i) Securities may be
presented for registration of transfer or for exchange ("Registrar"), (ii)
Securities may be presented for payment ("Paying Agent") and (iii) notices and
demands to or upon the Company in respect of the Securities and this Indenture
may be served. The Registrar shall keep a register of the Securities and of
their transfer and exchange. The Company may appoint one or more co-registrars
and one or more additional paying agents. The term "Paying Agent" includes any
additional paying agent. The Company may change any Paying Agent, Registrar or
co-registrar without prior notice to any Securityholder. The Company shall
notify the Trustee and the Trustee shall notify the Securityholders of the name
and address of any Agent not a party to this Indenture. If the Company fails to
appoint or maintain another entity as Registrar or Paying Agent, the Trustee
shall act as such. The Company may act as Paying Agent, Registrar or
co-registrar. The Company shall enter into an appropriate agency agreement with
any Agent not a party to this Indenture, which shall incorporate the provisions
of the TIA. 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 such Agent. If the Company fails to maintain a Registrar or
Paying Agent, or fails to give the foregoing notice, the Trustee shall act as
such, and shall be entitled to appropriate compensation in accordance with
Section 7.7.
(b) The Company initially appoints the Trustee as Registrar,
Paying Agent, authenticating agent and agent for service of notices and demands
in connection with the Securities. The Trustee's address for purposes of Section
2.3(a) is 61 Broadway, 15th Floor, New York, New York 10006.
(c) Any of the Registrar, the Paying Agent or any other agent
may resign upon 30 days' notice to the Company. The office of the Paying Agent
as Registrar for purposes of this Section 2.03 shall initially be at 61
Broadway, Concourse Level, New York, New York.
SECTION 2.4. Paying Agent to Hold Money in Trust. The Company
or any other obligor on the Securities shall require each Paying Agent other
than the Trustee to agree in writing that the Paying Agent shall hold in trust
for the benefit of the Securityholders or the Trustee all money held by the
Paying Agent for the payment of principal of, premium, if any, and interest on
the Securities, and shall notify the Trustee of any Default by the Company or
any other obligor on the Securities in making any such payment. While any such
Default continues, the Trustee may require a Paying Agent to pay all money held
by it to the Trustee. The Company or any other obligor on the Securities at any
time may require a Paying Agent to pay all money held by it to the Trustee. Upon
payment over to the Trustee, the Paying Agent (if other than the Company) shall
22
<PAGE> 30
have no further liability for the money delivered to the Trustee. If the Company
or any other obligor on the Securities acts as Paying Agent, it shall segregate
and hold in a separate trust fund for the benefit of the Securityholders all
money held by it as Paying Agent.
SECTION 2.5. Securityholder Lists. The Trustee shall preserve
in as current a form as is reasonably practicable the most recent list available
to it of the names and addresses of Securityholders and shall otherwise comply
with TIA Section 312(a). If the Trustee is not the Registrar, the Company or any
other obligor on the Securities shall furnish to the Trustee at least five
Business Days before each Interest Payment Date and at such other times as the
Trustee may request in writing a list in such form and as of such date as the
Trustee may reasonably require of the names and addresses of Securityholders,
including the aggregate principal amount of the Securities held by each thereof,
and the Company or any other obligor on the Securities shall otherwise comply
with TIA Section 312(a).
SECTION 2.6. Transfer and Exchange. (a) Subject to Sections
2.16 and 2.17 where Securities are presented to the Registrar or a co-registrar
with a request to register the transfer thereof or exchange them for an equal
principal amount of Securities of other denominations, the Registrar shall
register the transfer or make the exchange if its requirements for such
transactions are met; provided, that any Security presented or surrendered for
registration of transfer or exchange shall be duly endorsed or accompanied by a
written instruction of transfer in form satisfactory to the Registrar and the
Trustee duly executed by the Securityholder thereof or his attorney duly
authorized in writing. To permit registrations of transfer and exchanges, the
Company shall issue and the Trustee shall authenticate Securities at the
Registrar's request.
(b) The Company and the Registrar shall not be required (i) to
issue, to register the transfer of or to exchange Securities during a period
beginning at the opening of business on a Business Day 15 days before the day of
any selection of Securities for redemption pursuant to Article 3 and ending at
the close of business on the day of selection, (ii) to register the transfer of
or exchange any Security so selected for redemption in whole or in part, except
the unredeemed portion of any Security being redeemed in part or (iii) to
register the transfer or exchange of a Security between the Record Date and the
next succeeding Interest Payment Date.
(c) No service charge shall be made for any registration of a
transfer or exchange (except as otherwise expressly permitted herein), but the
Company may require payment by the Securityholder of a sum sufficient to cover
any transfer tax or similar governmental charge payable in connection therewith
(other than such transfer tax or similar governmental charge payable upon
exchanges pursuant to Section 2.10, 3.6 or 9.5).
(d) Any Holder of either of the Global Notes shall, by
acceptance of such Global Note, agree that transfers of beneficial interests in
such Global Note may be effected only through a book entry system maintained by
the Holder of such Global Note (or its agent), and that ownership of a
beneficial interest in the Global Note shall be required to be reflected in a
book entry.
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<PAGE> 31
SECTION 2.7. Replacement Securities. (a) If any mutilated Security is
surrendered to the Trustee, or the Company and the Trustee receives evidence to
its satisfaction of the destruction, loss or theft of any Security, the Company
shall issue and the Trustee, upon receipt by it of the written order of the
Company signed by two Officers of the Company, shall authenticate a replacement
Security if the Trustee's requirements for replacements of Securities are met.
If required by the Trustee or the Company, an indemnity bond must be supplied by
the Holder that is sufficient in the reasonable judgment of the Trustee and the
Company to protect the Company, the Trustee, any Agent or any authenticating
agent from any loss which any of them may suffer if a Security is replaced. The
Company and the Trustee may charge a Securityholder for reasonable out-of-pocket
expenses in replacing a Security, including fees and expenses of counsel.
(b) Every replacement Security is an additional obligation of the
Company and shall be entitled to the benefits of this Indenture.
SECTION 2.8. Outstanding Securities. (a) The Securities outstanding at
any time are all the Securities authenticated by the Trustee except for those
cancelled by the Company or by the Trustee, those delivered to the Trustee for
cancellation and those described in this Section as not outstanding.
(b) If a Security is replaced pursuant to Section 2.7, it ceases to be
outstanding unless and until the Trustee receives proof satisfactory to it that
the replaced Security is held by a bona fide purchaser.
(c) If the principal amount of any Security is considered paid under
Section 4.1, it ceases to be outstanding and interest on it ceases to accrue.
(d) Subject to Section 2.9, a Security does not cease to be outstanding
because the Company or an Affiliate of the Company holds the Security.
(e) If on a Redemption Date or the Maturity Date the Paying Agent holds
U.S. Legal Tender sufficient to pay all of the principal, premium, if any, and
interest due on the Securities payable on that date and is not prohibited from
paying such money to the Securityholders thereof pursuant to the terms of this
Indenture, then on and after that date such Securities cease to be outstanding
and interest on them ceases to accrue.
SECTION 2.9. Treasury Securities. In determining whether the Holders of
the required principal amount of Securities have concurred in any direction,
waiver or consent, Securities owned by the Company, or any of their respective
Affiliates shall be considered as though not outstanding, except that for
purposes of determining whether the Trustee shall be protected in relying on any
such direction, waiver or consent, only Securities which a Responsible Officer
knows to be so owned shall be so considered.
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SECTION 2.10. Temporary Securities. Until definitive Securities are
ready for delivery, the Company may prepare and the Trustee shall authenticate
temporary Securities. Temporary Securities shall be substantially in the form of
definitive Securities but may have variations that the Company and the Trustee
consider appropriate for temporary Securities. Without unreasonable delay, the
Company shall prepare and the Trustee, upon receipt of the written order of the
Company signed by two Officers of the Company, or one Officer shall sign, and
one Officer or an Assistant Secretary (each of whom shall, in each case, have
been duly authorized by all requisite corporate actions) shall authenticate,
pursuant to Section 2.02, definitive Securities in exchange for temporary
Securities. Until such exchange, temporary Securities shall be entitled to the
same rights, benefits and privileges under this Indenture as definitive
Securities.
SECTION 2.11. Cancellation. The Company at any time may deliver
Securities to the Trustee for cancellation. The Registrar and Paying Agent shall
forward to the Trustee any Securities surrendered to them for registration of
transfer, exchange or payment. The Trustee shall cancel all Securities, if not
already cancelled, surrendered for registration of transfer, exchange, payment,
replacement or cancellation and shall destroy cancelled Securities (subject to
the record retention requirement of the Exchange Act), and deliver certification
of their destruction to the Company, unless by a written order, signed by two
Officers of the Company, or one Officer shall sign, and one Officer or an
Assistant Secretary (each of whom shall, in each case, have been duly authorized
by all requisite corporate actions), the Company shall direct that cancelled
Securities be returned to it. Subject to Section 2.07 the Company may not issue
new Securities to replace Securities that it has redeemed or paid or that have
been delivered to the Trustee for cancellation.
SECTION 2.12. Defaulted Interest. If the Company defaults in a payment
of interest on the Securities, it shall pay the defaulted interest in any lawful
manner plus, to the extent lawful, interest payable on the defaulted interest,
to the Persons who are Securityholders on a subsequent special record date,
which date shall be at the earliest practicable date but in all events at least
five Business Days prior to the payment date, in each case at the rate provided
in the Securities and in Section 4.1. The Company shall, with the consent of the
Trustee, fix or cause to be fixed each such special record date and payment
date. At least 15 days before the special record date, the Company (or the
Trustee, in the name of and at the expense of the Company) shall mail to
Securityholders a notice that states the special record date, the related
payment date and the amount of such interest to be paid.
SECTION 2.13. CUSIP Number. The Company in issuing the Securities may
use a "CUSIP" number, and if so, the Trustee shall use the CUSIP number in
notices of redemption or exchange as a convenience to Securityholders; provided,
that no representation shall be deemed to be made by the Trustee as to the
correctness or accuracy of the CUSIP number printed in the notice or on the
Securities, and that reliance may be placed only on the other identification
numbers printed on the Securities. The Company shall promptly notify the Trustee
of any change in the CUSIP number.
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SECTION 2.14. Deposit of Moneys. Prior to 11:00 a.m. New York City time
on each Interest Payment Date and Maturity Date, the Company shall have
deposited with the Paying Agent in immediately available funds money 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 Securityholders on such Interest Payment Date or Maturity
Date, as the case may be.
SECTION 2.15. Restrictive Legends. Each Global Note and Physical
Security that constitutes a Restricted Security shall bear the following legend
(the "Private Placement Legend") on the face thereof until April 9, 2000 unless
otherwise agreed by the Company and the Securityholder thereof:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE
OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR
BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH 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) (AN "INSTITUTIONAL
ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING
THIS SECURITY IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION
S UNDER THE SECURITIES ACT, (2) AGREES THAT IT WILL NOT, WITHIN THE
TIME PERIOD REFERRED TO UNDER RULE 144(k) UNDER THE SECURITIES ACT AS
IN EFFECT ON THE DATE OF THE TRANSFER OF THIS SECURITY, RESELL OR
OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO THE ISSUER 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 (OR HAS FURNISHED ON
ITS BEHALF BY A U.S. BROKER-DEALER) TO THE TRUSTEE A SIGNED LETTER
CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE
RESTRICTIONS ON TRANSFER OF THIS SECURITY (THE FORM OF WHICH LETTER CAN
BE OBTAINED FROM
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THE TRUSTEE) AND IF SUCH TRANSFER IS IN RESPECT OF AN AGGREGATE
PRINCIPAL AMOUNT OF SECURITIES OF LESS THAN $100,000, AN OPINION OF
COUNSEL ACCEPTABLE TO THE ISSUER THAT SUCH TRANSFER IS IN COMPLIANCE
WITH THE SECURITIES ACT, (D) OUTSIDE THE UNITED STATES IN AN OFFSHORE
TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (E)
PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER
THE SECURITIES ACT (IF AVAILABLE) OR (F) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND (3) AGREES THAT IT
WILL GIVE TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE
SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY
TRANSFER OF THIS SECURITY WITHIN THE TIME PERIOD REFERRED TO ABOVE, THE
HOLDER MUST CHECK THE APPROPRIATE BOX SET FORTH ON THE REVERSE HEREOF
RELATING TO THE MANNER OF SUCH TRANSFER AND SUBMIT THIS CERTIFICATE TO
THE TRUSTEE. IF THE PROPOSED TRANSFEREE IS AN INSTITUTIONAL ACCREDITED
INVESTOR, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE
TRUSTEE AND THE ISSUER SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER
INFORMATION AS EITHER OF THEM MAY REASONABLY REQUIRE TO CONFIRM THAT
SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION"
"UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY
REGULATION S UNDER THE SECURITIES ACT.
Each Global Note shall also bear the following legend on the face
thereof:
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR SECURITIES IN
DEFINITIVE FORM, THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE
BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY, OR BY ANY SUCH
NOMINEE OF THE DEPOSITARY, OR BY THE DEPOSITARY OR NOMINEE OF
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SUCH SUCCESSOR DEPOSITARY OR ANY SUCH NOMINEE, TO A SUCCESSOR
DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY. TRANSFERS OF THIS
GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN
PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR THEREOF OR SUCH
SUCCESSOR'S NOMINEE, AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY
SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS
SET FORTH IN THE INDENTURE.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE
ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT,
AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR
SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC
(AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY
AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER,
PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN
INTEREST HEREIN.
The Regulation S Global Note shall bear the following legend on the
face thereof:
THIS SECURITY MAY NOT BE OFFERED OR SOLD TO A U.S. PERSON (AS SUCH TERM
IS DEFINED IN REGULATION S UNDER THE SECURITIES ACT) OR FOR THE ACCOUNT
OR BENEFIT OF A U.S. PERSON PRIOR TO THE EXPIRATION OF THE RESTRICTED
PERIOD (AS DEFINED IN THE INDENTURE), AND NO TRANSFER OR EXCHANGE OF
THIS SECURITY MAY BE MADE FOR AN INTEREST IN A PHYSICAL SECURITY UNTIL
AFTER THE LATER OF THE DATE OF EXPIRATION OF THE RESTRICTED PERIOD AND
THE DATE ON WHICH THE PROPER REQUIRED CERTIFICATION RELATING TO SUCH
INTEREST HAS BEEN PROVIDED IN ACCORDANCE WITH THE TERMS OF THE
INDENTURE, TO THE EFFECT THAT
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THE BENEFICIAL OWNER OR OWNERS OF SUCH INTEREST ARE NOT U.S. PERSONS.
SECTION 2.16. Book-Entry Provisions for Global Security. (a) Each
Global Note initially shall (i) be registered in the name of the Depositary or
the nominee of such Depositary, (ii) be delivered to the Trustee as custodian
for such Depositary and (iii) bear legends as set forth in Section 2.15.
Members of, or participants in, the Depositary ("Agent Members") shall
have no rights under this Indenture with respect to any Global Note held on
their behalf by the Depositary, or the Trustee as its custodian, or under the
Global Note, and the Depositary may be treated by the Company, the Trustee and
any agent of the Company or the Trustee as the absolute owner of the Global Note
for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall
prevent the Company, the Trustee or any agent of the Company or the Trustee from
giving effect to any written certification, proxy or other authorization
furnished by the Depositary or impair, as between the Depositary and its Agent
Members, the operation of customary practices governing the exercise of the
rights of a Holder of any Security.
(b) Transfers of a Global Note shall be limited to transfers in whole,
but not in part, to the Depositary, its successors or their respective nominees.
Interest of beneficial owners in a Global Note may be transferred or exchanged
for Physical Securities in accordance with the rules and procedures of the
Depositary, the provisions of Section 2.17 and the limitation set forth in
Section 2.1 with regard to the Regulation S Global Note. In addition, Physical
Securities shall be transferred to all beneficial owners in exchange for their
beneficial interests in a Global Note if (i) the Depositary notifies the Company
that it is unwilling or unable to continue as Depositary for the Global Note and
a successor depository is not appointed by the Company within 90 days of such
notice or (ii) an Event of Default has occurred and is continuing and the
Registrar has received a written request from the Depositary to issue Physical
Securities.
(c) In connection with any transfer or exchange of a portion of the
beneficial interest in the Global Notes to beneficial owners pursuant to
paragraph (b) above, the Registrar shall (if one or more Physical Securities are
to be issued) reflect on its books and records the date and a decrease in the
principal amount of the beneficial interest in the Global Note to be
transferred, and the Company shall execute, and the Trustee shall authenticate
and deliver, one or more Physical Securities of like tenor and amount.
(d) In connection with the transfer of an entire Global Note to
beneficial owners pursuant to paragraph (b) above, a Global Note shall be deemed
to be surrendered to the Trustee for cancellation, and the Company shall
execute, and the Trustee shall authenticate and deliver, to each beneficial
owner identified by the Depositary in exchange for its beneficial interest in
such Global Note, an equal aggregate principal amount of Physical Securities of
authorized denominations.
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(e) Any Physical Security constituting a Restricted Security delivered
in exchange for an interest in the Global Note pursuant to paragraph (b) or (c)
above shall, except as otherwise provided by paragraphs (a)(i)(x) and (c) of
Section 2.17, bear the legend regarding transfer restrictions applicable to the
Physical Securities set forth in Section 2.15.
(f) The Holder of a Global Note may grant proxies and otherwise
authorize any Person, including Agent Members and Persons that may hold
interests through Agent Members, to take any action which a Securityholder is
entitled to take under this Indenture or the Securities.
SECTION 2.17. Special Transfer Provisions.
(a) Transfers of Global Notes; Transfers to Non-QIB Institutional
Accredited Investors and Non-U.S. Persons. The following provisions shall apply
with respect to the registration of any proposed transfer of a Security
constituting of a Restricted Security to any Institutional Accredited Investor
which is not a QIB or to any Non-U.S. Person:
(i) the Registrar shall register the transfer of any Security
constituting a Restricted Security, whether or not such Security bears the
Private Placement Legend, if (x) the requested transfer is after April 9,
2000; provided, however, that neither the Company nor any Affiliate of the
Company has held any beneficial interest in such Security, or portion
thereof, at any time on or prior to April 9, 2000 or (y) (1) in the case of
a transfer to an Institutional Accredited Investor which is not a QIB
(excluding Non-U.S. Persons), the proposed transferee has delivered to the
Registrar a certificate substantially in the form of Exhibit C hereto or (2)
in the case of a transfer to a Non-U.S. Person, the proposed transferor has
delivered to the Registrar a certificate substantially in the form of
Exhibit D hereto; and
(ii) if the proposed transferor is an Agent Member holding a beneficial
interest in the Rule 144A Global Note, upon receipt by the Registrar of (x)
the certificate, if any, required by paragraph (i) above and (y)
instructions given in accordance with the Depositary's and the Registrar's
procedures, (a) the Registrar shall reflect on its books and records the
date and (if the transfer does not involve a transfer of outstanding
Physical Securities) a decrease in the principal amount of the Rule 144A
Global Note in an amount equal to the principal amount of the beneficial
interest in the Rule 144A Global Note to be transferred, and (b)(1) the
Company shall execute and the Trustee shall authenticate and deliver one or
more Physical Securities of like tenor and amount or (2) the Registrar shall
reflect on its books and records the date and (if the transfer does not
involve a transfer of outstanding Physical Securities) an increase in the
principal amount of the Regulation S Global Note in an amount equal to the
principal amount of the beneficial interest in the Rule 144A Global Note to
be transferred.
(iii) if the proposed transferor is an Agent Member holding a
beneficial interest in the Regulation S Global Note, upon receipt by the
Registrar of (x) the certificate, if any,
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required by paragraph (i) above and (y) instructions given in
accordance with the Depositary's and the Registrar's procedures, (a) the
Registrar shall reflect on its books and records the date and (if the
transfer does not involve a transfer of outstanding Physical Securities) a
decrease in the principal amount of the Regulation S Global Note in an
amount equal to the principal amount of the beneficial interest in the
Regulation S Global Note to be transferred, and (b)(1) the Company shall
execute and the Trustee shall authenticate and deliver one or more Physical
Securities of like tenor and amount or (2) the Registrar shall reflect on
its books and records the date and (if the transfer does not involve a
transfer of outstanding Physical Securities) an increase in the principal
amount of the Rule 144A Global Note in an amount equal to the principal
amount of the beneficial interest in the Rule 144A Global Note to be
transferred.
(b) Transfers to QIBs. The following provisions shall apply with
respect to the registration of any proposed transfer of a Security constituting
a Restricted Security to a QIB (excluding transfers to Non-U.S. Persons):
(i) the Registrar shall register the transfer if such transfer is being
made by a proposed transferor who has advised the Company and the Registrar
in writing, that the sale has been effected in compliance with the
provisions of Rule 144A to a transferee who has advised the Company and the
Registrar in writing, that it is purchasing the Security for its own account
or an account with respect to which it exercises sole investment discretion
and that any such account is a QIB within the meaning of Rule 144A, and it
is aware that the sale to it is being made in reliance on Rule 144A and
acknowledges that it has received such information regarding the Company as
it has requested pursuant to Rule 144A or has determined not to request such
information and that it is aware that the transferor is relying upon its
foregoing representations in order to claim the exemption from registration
provided by Rule 144A; and
(ii) if the proposed transferee is an Agent Member and the Securities
to be transferred consist of Physical Securities which after transfer are to
be evidenced by an interest in the Rule 144A Global Note, upon receipt by
the Registrar of instructions given in accordance with the Depositary's and
the Registrar's procedures, the Registrar shall reflect on its books and
records the date and an increase in the principal amount of the Rule 144A
Global Note in an amount equal to principal amount of the Physical
Securities to be transferred, and the Trustee shall cancel the Physical
Securities so transferred.
(c) Transfers to Non-U.S. Persons. The following provisions shall apply
with respect to the registration of any proposed transfer of a Security
constituting a Restricted Security to a Non-U.S. Persons:
(i) the Registrar shall register the transfer if such transfer is being
made by a proposed transferor who has advised the Company and the Registrar
in writing, that the sale has been effected in compliance with the
provisions of Regulation S to a transferee
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who has advised the Company and the Registrar in writing, that it is
purchasing the Security in compliance with Rule 904 under the Securities
Act, and it is aware that the sale to it is being made in reliance on
Regulation S and that it is aware that the transferor is relying upon its
foregoing representations in order to claim the exemption from registration
provided by Regulation S; and
(ii) if the proposed transferee is an Agent Member and the Securities
to be transferred consist of Physical Securities which after transfer are to
be evidenced by an interest in the Regulation S Global Note, upon receipt by
the Registrar of instructions given in accordance with the Depositary's and
the Registrar's procedures, the Registrar shall reflect on its books and
records the date and an increase in the principal amount of the Regulation S
Global Note in an amount equal to principal amount of the Physical
Securities to be transferred, and the Trustee shall cancel the Physical
Securities so transferred.
(d) Private Placement Legend. Upon the registration of the transfer,
exchange or replacement of Securities not bearing the Private Placement Legend,
the Registrar shall deliver Securities that do not bear the Private Placement
Legend. Upon the registration of the transfer, exchange or replacement of
Securities bearing the Private Placement Legend, the Registrar shall deliver
only Securities that bear the Private Placement Legend unless (i) the
circumstance contemplated by paragraph (a)(i)(x) of this Section 2.17 exists or
(ii) there is delivered to the Registrar an Opinion of Counsel reasonably
satisfactory to the Company and the Trustee to the effect that neither such
legend nor the related restrictions on transfer are required in order to
maintain compliance with the provisions of the Securities Act.
(e) General. By its acceptance of any Security bearing the Private
Placement Legend, each Holder of such a Security acknowledges the restrictions
on transfer of such Security set forth in this Indenture and in the Private
Placement Legend and agrees that it will transfer such Security only as provided
in this Indenture.
The Registrar shall retain for at least two years copies of all
letters, notices and other written communications received pursuant to Section
2.16 or this Section 2.17. The Company shall have the right to inspect and make
copies of all such letters, notices or other written communications at any
reasonable time upon the giving of reasonable written notice to the Registrar.
SECTION 2.18. Persons Deemed Owners. Prior to due presentment of a
Security for registration of transfer and subject to Section 2.12, the Company,
the Trustee, any Paying Agent, any Registrar and any co-registrar may deem and
treat the Person in whose name any Security shall be registered upon the
register of Securities kept by the Registrar as the absolute owner of such
Security (whether or not such Security shall be overdue and notwithstanding any
notation of the ownership or other writing thereon made by anyone other than the
Company, any Registrar or any co-registrar) for the purpose of receiving
payments of principal of or interest on
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such Security and for all other purposes; and none of the Company, the Trustee,
any Paying Agent, any Registrar or any co-registrar shall be affected by any
notice to the contrary.
SECTION 2.19. Record Date. The record date for purposes of determining
the identity of Securityholders entitled to vote or consent to any action by
vote or consent authorized or permitted under this Indenture shall be the later
of (i) 30 days prior to the first solicitation of such consent or (ii) the date
of the most recent list of Holders furnished to the Trustee, if applicable,
pursuant to Section 2.5.
ARTICLE III
Redemption
SECTION 3.1. Notices to Trustee. If the Company elects to redeem
Securities pursuant to paragraph 5 of the Securities, it shall notify the
Trustee in writing of the Redemption Date and the principal amount of Securities
to be redeemed.
The Company shall give each notice to the Trustee provided for in this
Section at least 45 days before the Redemption Date unless the Trustee consents
to a shorter period. Such notice shall be accompanied by an Officers'
Certificate from the Company to the effect that such redemption will comply with
the conditions herein.
SECTION 3.2. Selection of Securities to be Redeemed. If fewer than all
the Securities are to be redeemed, the Trustee shall select the Securities to be
redeemed in compliance with the requirements of the principal national
securities exchange, if any, on which such Securities are listed, or if such
Securities are not then listed on a national securities exchange, on a pro rata
basis, by lot or by such other method, if any, and that the Trustee in its sole
discretion considers fair and appropriate; provided, however, that if a partial
redemption is made with the proceeds of a Public Equity Offering, selection of
the Securities or portion thereof for redemption shall be made by the Trustee
only on a pro rata basis unless such method is otherwise prohibited. The Trustee
shall make the selection from outstanding Securities not previously called for
redemption. The Trustee may select for redemption portions of the principal of
Securities that have denominations larger than $1,000. Securities and portions
of them the Trustee selects shall be in amounts of $1,000 or a whole multiple of
$1,000. Provisions of this Indenture that apply to Securities called for
redemption also apply to portions of Securities called for redemption. The
Trustee shall notify the Company in writing promptly of the Securities or
portions of Securities to be redeemed.
SECTION 3.3. Notice of Redemption. At least 30 days but not more than
60 days before a date for redemption of Securities, the Company shall mail a
notice of redemption by first-class mail to each Holder of Securities to be
redeemed, at such Holder's registered address.
The notice shall identify the Securities to be redeemed and shall
state:
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(1) the Redemption Date;
(2) the Redemption Price and the amount of accrued interest, if any, to
be paid;
(3) the name and address of the Paying Agent;
(4) that Securities called for redemption must be surrendered to the
Paying Agent to collect the Redemption Price;
(5) if fewer than all the Securities are to be redeemed, the
identification of the particular Securities (or portion thereof) to be
redeemed, as well as the aggregate principal amount of Securities to be
redeemed and the aggregate principal amount of Securities to be outstanding
after such partial redemption;
(6) that, unless the Company defaults in making such redemption payment
or the Paying Agent is prohibited from making such payment pursuant to the
terms of this Indenture, interest on Securities (or portion thereof) called
for redemption ceases to accrue on and after the redemption date;
(7) the CUSIP number, if any, printed on the Securities being redeemed;
(8) if any Security is being redeemed in part, the portion of the
principal amount of such Security to be redeemed and that, after the
redemption date upon surrender of such Security, a new Security or
Securities in principal amount equal to the unredeemed portion shall be
issued; and
(8) the paragraph of the Securities and/or Section of this Indenture
pursuant to which the Securities called for redemption are being redeemed.
At the Company's request made in writing to the Trustee at least 45
days (unless a shorter period is acceptable to the Trustee) prior to the date
fixed for redemption, the Trustee shall give the notice of redemption in the
name and the expense of the Company to each Holder whose Securities are to be
redeemed at the last address for such Holder then shown on the registry books.
In such event, the Company shall provide the Trustee with the information
required by this Section.
SECTION 3.4. Effect of Notice of Redemption. Once notice of redemption
is mailed, Securities called for redemption become due and payable on the
redemption date and at the redemption price stated in the notice. Upon surrender
to the Paying Agent, such Securities shall be paid at the redemption price
stated in the notice, plus accrued interest to the redemption date; provided,
that if the redemption date is after a regular Record Date and on or prior to
the Interest Payment Date, the accrued interest shall be payable to the
Securityholder of the redeemed
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Securities registered on the relevant Record Date. Failure to give notice or any
defect in the notice to any Holder shall not affect the validity of the notice
to any other Holder.
SECTION 3.5. Deposit of Redemption Price. (a) Prior to 11:00 a.m., New
York City time, on the redemption date, the Company shall deposit with the
Trustee or with the Paying Agent money sufficient to pay the redemption price of
and accrued interest on all Securities to be redeemed on that date. The Trustee
or the Paying Agent shall promptly return to the Company any money deposited
with the Trustee or the Paying Agent by the Company in excess of the amounts
necessary to pay the redemption price of, and accrued interest on, all
Securities to be redeemed.
(b) Except as set forth in the last sentence of this paragraph, on and
after the redemption date, interest ceases to accrue on the Securities or the
portions of Securities called for redemption. If a Security is redeemed on or
after an interest Record Date but on or prior to the related Interest Payment
Date, then any accrued and unpaid interest shall be paid to the Person in whose
name such Security was registered at the close of business on such record date.
If any Security called for redemption shall not be so paid upon surrender for
redemption because of the failure of the Company to comply with the preceding
paragraph, interest shall be paid on the unpaid principal, from the redemption
date until such principal is paid and, to the extent lawful, on any interest not
paid on such unpaid principal, in each case at the rate provided in the
Securities and in Section 4.1.
SECTION 3.6. Securities Redeemed in Part. Upon surrender of a Security
that is redeemed in part, the Company shall execute and the Trustee shall
authenticate for and in the name of the Holder (at the Company's expense), a new
Security equal in a principal amount to the unredeemed portion of the Security
surrendered.
ARTICLE IV
Covenants
SECTION 4.1. Payment of Securities. The Company shall promptly pay the
principal of, premium, if any, and interest on the Securities on the dates and
in the manner provided in the Securities and in this Indenture. Principal,
premium, if any, and interest shall be considered paid on the date due if on
such date the Trustee or the Paying Agent holds in accordance with this
Indenture money sufficient to pay all principal and interest then due and the
Trustee or the Paying Agent, as the case may be, is not prohibited from paying
such money to the Securityholders on that date pursuant to the terms of this
Indenture. Interest will be computed on the basis of a 360 day year comprised of
twelve 30 day months.
The Company shall pay interest (including post-position interest in any
proceeding under any Bankruptcy Law) on overdue principal at the rate specified
therefor in the Securities, and it shall pay interest (including post-position
interest in any proceeding under any Bankruptcy
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Law) on overdue installments of interest (without regard to any applicable grace
period) at the same rate to the extent lawful.
SECTION 4.2. Reports. (a) The Company will file on a timely basis with
the Commission, to the extent such filings are accepted by the Commission and
whether or not the Company has a class of securities registered under the
Exchange Act, the annual reports, quarterly reports and other documents that the
Company would be required to file if it were subject to Section 13 or 15 of the
Exchange Act.
(b) The Company will also be required (a) to file with the Trustee, and
provide to each holder of Securities, without cost to such holder, copies of
such reports and documents within 15 days after the date on which the Company
files such reports and documents with the Commission or the date on which the
Company would be required to file such reports and documents if the Company were
so required, and (b) if the filing of such reports and documents with the
Commission is not accepted by the Commission or is prohibited under the Exchange
Act, to supply at the Company's cost copies of such reports and documents to any
prospective holder of Securities promptly upon written request. The Company will
also comply with the other provisions of TIA Section 314(a).
SECTION 4.3. Limitation on Incurrence of Additional Indebtedness. (a)
The Company will not create, issue, assume, guarantee or in any manner become
directly or indirectly liable for the payment of, or otherwise incur
(collectively, "incur"), any Indebtedness (including any Acquired Indebtedness)
other than Permitted Indebtedness unless, at the time of any such incurrence,
the Consolidated Fixed Charge Coverage Ratio would have been at least equal to
2.75 to 1.0 (after giving pro forma effect to (i) the incurrence of such
Indebtedness and (if applicable) the application of the net proceeds therefrom,
including to refinance other Indebtedness, as if such Indebtedness was incurred
and the application of such proceeds occurred on the first day of the period for
which the Consolidated Fixed Charge Coverage Ratio is calculated, (ii) the
incurrence, repayment or retirement of any other Indebtedness by the Company or
any Subsidiary since the first day of such period as if such Indebtedness was
incurred, repaid or retired at the beginning of such period (except that, in
making such computation, the amount of Indebtedness under any revolving credit
facility shall be computed based upon the average daily balance of such
Indebtedness during such period) and (iii) the acquisition (whether by purchase,
merger or otherwise) or disposition (whether by sale, merger or otherwise) of
any company, entity or business acquired or disposed of by the Company or any
Subsidiary or ACMI Contracted Aircraft acquired by the Company or any
Subsidiary, in any such case, since the first day of such period, as if such
acquisition or disposition of a company, entity or business, or such acquisition
of an ACMI Contracted Aircraft acquired by the Company or any Subsidiary, in any
such case, since the first day of such period, as if such acquisition or
disposition of a company, entity or business, or such acquisition of an ACMI
Contracted Aircraft occurred at the beginning of such period; provided, however,
that pro forma effect shall not be given to a number of ACMI Contracted Aircraft
exceeding five in any four fiscal quarters.
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(b) The Company will not permit any Subsidiary to incur any
Indebtedness (including any Acquired Indebtedness) other than Permitted
Subsidiary Indebtedness.
SECTION 4.4. Limitation on Restricted Payments. (a) The Company will
not, and will not permit any Subsidiary to, directly or indirectly:
(i) declare or pay any dividend on, or make any distribution to holders
of, any shares of the Capital Stock of the Company (other than dividends or
distributions payable solely in shares of its Qualified Capital Stock or in
options, warrants or other rights to acquire such shares of Qualified
Capital Stock);
(ii) purchase, redeem or otherwise acquire or retire for value,
directly or indirectly, any shares of Capital Stock of the Company or any
Subsidiary or any Affiliate of the Company, or any options, warrants or
other rights to acquire such shares of Capital Stock;
(iii) make any principal payment on, or repurchase, redeem, defease or
otherwise acquire or retire for value, prior to any scheduled principal
payment, sinking fund payment or maturity, any Subordinated Indebtedness; or
(iv) make any Investment (other than any Permitted Investment) in any
Person
(such payments or any other actions described in (but not excluded from) clauses
(i) through (iv) are collectively referred to as "Restricted Payments"), unless
at the time of, and immediately after giving effect on a pro forma basis to, the
proposed Restricted Payment (the amount of any such Restricted Payment, if other
than cash, as determined by the Board of Directors of the Company, whose
determination shall be conclusive and evidenced by a Board Resolution), (1) no
Default or Event of Default shall have occurred and be continuing, (2) the
Company could incur at least $1.00 of additional Indebtedness (other than
Permitted Indebtedness) in accordance with the provisions described in Section
4.3 and (3) the aggregate amount of all Restricted Payments declared or made
after the Issue Date shall not exceed the sum of:
(A) 50% of the aggregate cumulative Consolidated Adjusted Net Income of
the Company accrued on a cumulative basis during the period beginning on
July 1, 1997 and ending on the last day of the Company's last fiscal quarter
ending prior to the date of such proposed Restricted Payment (or, if such
aggregate cumulative Consolidated Adjusted Net Income shall be a loss, minus
100% of such amount), plus
(B) 100% of the aggregate Net Cash Proceeds received after the Issue
Date by the Company from the issuance or sale (other than to any Subsidiary)
of shares of Qualified Capital Stock of the Company or warrants, options or
rights to purchase such shares of Qualified Capital Stock of the Company,
plus
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(C) 100% of the aggregate Net Cash Proceeds received after the Issue
Date by the Company from the issuance or sale (other than to any Subsidiary)
of debt securities or Redeemable Capital Stock that have been converted into
or exchanged for Qualified Capital Stock of the Company to the extent such
securities were originally sold for cash, together with the aggregate Net
Cash Proceeds received by the Company at the time of such conversion or
exchange, plus
(D) to the extent not otherwise included in the Consolidated Adjusted
Net Income of the Company, an amount equal to the net reduction in
Investments (other than reductions in Permitted Investments) in any Person
resulting from payments in cash of interest on Indebtedness, dividends,
repayments of loans or advances, or other returns of capital, in each case
to the Company or a Subsidiary after the date of the Indenture from any such
Person not to exceed the amount of Investments (other than Permitted
Investments) in such Persons by the Company and its Subsidiaries, plus
(E) $10 million, plus
(F) without duplication, the sum of (1) the aggregate amount returned
in cash on or with respect to Investments (other than Permitted Investments)
made subsequent to the Issue Date whether through interest payments,
principal payments, dividends or other distributions or payments, (2) the
net cash proceeds received by the Company or any Subsidiary from the
disposition of all or any portion of such Investments (other than to a
Subsidiary of the Company) and (3) upon redesignation of an Unrestricted
Subsidiary as a Subsidiary, the fair market value of such Subsidiary;
provided, however, that with respect to all Investments made in any
Unrestricted Subsidiary or joint venture, the sum of clauses (1), (2) and
(3) above with respect to such Investment shall not exceed the aggregate
amount of all such Investments made subsequent to the Issue Date in such
Unrestricted Subsidiary or joint venture.
(b) Notwithstanding paragraph (a) above, the Company and any Subsidiary
may take the following actions so long as (with respect to clauses (ii), (iii),
(iv), (v), (vi) and (vii), below) no Default or Event of Default shall have
occurred and be continuing:
(i) the payment of any dividend within 60 days after the date of
declaration thereof, if at such date of declaration the payment of such
dividend would have complied with the provisions of paragraph (a) above and
such payment shall be deemed to have been paid on such date of declaration
for purposes of the calculation required by paragraph (a) above;
(ii) the purchase, redemption or other acquisition or retirement for
value of any shares of Capital Stock of the Company or any warrants, rights
or options to acquire shares of Capital Stock, in exchange for, or out of
the Net Cash Proceeds of a substantially
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concurrent issuance and sale (other than to a Subsidiary) of, shares of
Qualified Capital Stock of the Company;
(iii) the purchase, redemption, defeasance or other acquisition or
retirement for value of any Subordinated Indebtedness or Redeemable Capital
Stock in exchange for, or out of the Net Cash Proceeds of a substantially
concurrent issuance and sale (other than to a Subsidiary) of, shares of
Qualified Capital Stock of the Company;
(iv) the purchase, redemption, defeasance or other acquisition or
retirement for value of Subordinated Indebtedness of the Company in exchange
for, or out of the Net Cash Proceeds of a substantially concurrent
incurrence or sale (other than to a Subsidiary) of, new Subordinated
Indebtedness of the Company so long as (A) the principal amount of such new
Indebtedness does not exceed the principal amount (or, if such Subordinated
Indebtedness being refinanced provides for an amount less than the principal
amount thereof to be due and payable upon a declaration of acceleration
thereof, such lesser amount as of the date of determination) of the
Subordinated Indebtedness being so purchased, redeemed, defeased, acquired
or retired, (B) such new Subordinated Indebtedness is subordinated to the
Securities to the same extent as such Subordinated Indebtedness so
purchased, redeemed, defeased, acquired or retired and (C) such new
Subordinated Indebtedness does not have a scheduled principal payment
earlier than the final maturity of the Securities;
(v) the purchase, redemption or other acquisition or retirement for
value of shares of Capital Stock of the Company held by any future, present
or former employee or director of the Company or any Subsidiary issued
pursuant to any management equity or stock option plan of the Company;
provided that the aggregate consideration paid by the Company for such
shares so purchased, redeemed or otherwise acquired or retired for value
does not exceed $2.5 million in any fiscal year of the Company;
(vi) the making of any Investment (other than a Permitted Investment)
out of the Net Cash Proceeds of the substantially concurrent issuance and
sale (other than to a Subsidiary) of Qualified Capital Stock of the Company;
and
(vii) the making of Investments in an aggregate amount not to exceed
$50,000,000 in wholly-owned Unrestricted Subsidiaries to own and lease ACMI
Contracted Aircraft or other flight equipment utilized in the normal course
of business of the Company.
The actions described in clauses (i), (ii), (iii), (v) and (vi) of this
paragraph (b) shall be Restricted Payments that shall be permitted to be taken
in accordance with this paragraph (b) but shall reduce the amount that would
otherwise be available for Restricted Payments under clause (3) of paragraph (a)
and the actions described in clauses (iv) and (vii) of this paragraph (b) shall
be Restricted Payments that shall be permitted to be taken in accordance with
this paragraph and shall
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not reduce the amount that would otherwise be available for Restricted Payments
under clause (3) of paragraph (a) above.
(c) In computing Consolidated Adjusted Net Income of the Company under
paragraph (a) above, (1) the Company shall use audited financial statements for
the portions of the relevant period for which audited financial statements are
available on the date of determination and unaudited financial statements and
other current financial data based on the books and records of the Company for
the remaining portion of such period and (2) the Company shall be permitted to
rely in good faith on the financial statements and other financial data derived
from the books and records of the Company that are available on the date of
determination. If the Company makes a Restricted Payment which, at the time of
the making of such Restricted Payment would in the good faith determination of
the Company be permitted under the requirements of the Indenture, such
Restricted Payment shall be deemed to have been made in compliance with the
Indenture notwithstanding any subsequent adjustments made in good faith to the
Company's financial statements affecting Consolidated Adjusted Net Income of the
Company for any period.
SECTION 4.5. Limitation on Issuances and Sales of Capital Stock of
Subsidiaries. The Company (a) will not permit any Subsidiary to issue any
Capital Stock (other than to the Company or a Subsidiary) and (b) will not
permit any Person (other than the Company or a Subsidiary) to own any Capital
Stock of any Subsidiary; provided, however, that this covenant shall not
prohibit (i) the issuance and sale of all, but not less than all, of the issued
and outstanding Capital Stock of any Subsidiary owned by the Company or any
Subsidiary in compliance with the other provisions of the Indenture or (ii) the
ownership by directors of director's qualifying shares or the ownership by
foreign nationals of Capital Stock of any Subsidiary, to the extent mandated by
applicable law.
SECTION 4.6. Limitation on Transactions with Affiliates. The Company
will not, and will not permit any Subsidiary to, directly or indirectly, enter
into or suffer to exist any transaction or series of related transactions
(including, without limitation, the sale, purchase, exchange or lease of assets,
property or services) with, or for the benefit of, any Affiliate of the Company
or any Subsidiary unless (i) such transaction or series of related transactions
is between and among the Company and wholly owned Subsidiaries or (ii)(A) such
transaction or series of related transactions is on terms that are no less
favorable to the Company, or such Subsidiary, as the case may be, than those
that could have been obtained in an arm's-length transaction with unrelated
third parties; (B) the Company shall have delivered an officer's certificate to
the Trustee certifying that such transaction or series of related transactions
complies with clause (A); (C) if such transaction or series of related
transactions involves consideration of more than $3 million, the Board of
Directors (including a majority of the Disinterested Directors) has approved
such transaction or series of transactions or the Company has obtained a written
opinion from a nationally recognized investment banking firm to the effect set
forth in the preceding clause (A); and (D) if such transaction or series of
related transactions involves consideration of more than $10 million, the
Company has obtained a written opinion from a nationally recognized investment
banking firm to the effect set forth in the preceding clause (A). This covenant
will not apply to (i)
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the payment of reasonable and customary compensation and fees to, and
indemnification of, directors of the Company or any Subsidiary who are not
employees of the Company or any Subsidiary or (ii) reasonable and customary
salaries, bonuses and other compensation paid to employees of the Company or any
Subsidiary in accordance with past practice approved by the Compensation
Committee of the Company. Clauses (ii)(C) and (ii)(D) of Section 4.6 will not
apply to transactions pursuant to the Atlas Freighter Leasing Transactions.
SECTION 4.7. Limitation on Liens. The Company will not, and will not
permit any Subsidiary to, directly or indirectly, create, incur, assume or
suffer to exist any Lien of any kind (other then Permitted Liens) on or with
respect to any of its property or assets including any shares of stock or
indebtedness of any Subsidiary, whether owned at the date of the Indenture or
thereafter acquired, or any income, profits or proceeds therefrom, or assign or
otherwise convey any right to receive income thereon.
SECTION 4.8. Limitation on Asset Sales and Disposition of Proceeds of
Asset Sales. (a) The Company will not, and will not permit any Subsidiary to,
directly or indirectly engage in any Asset Sale involving assets unless (i) the
consideration received by the Company or such Subsidiary for such Asset Sale is
not less than the Fair Market Value of the assets sold (as determined by the
Board of Directors of the Company, whose determination shall be conclusive and
evidenced by a Board Resolution) and (ii) the consideration received by the
Company or the relevant Subsidiary in respect of such Asset Sale consists of at
least 75% cash or Cash Equivalents.
(b) If the Company or any Subsidiary engages in an Asset Sale, the
Company may use the Net Cash Proceeds thereof, within 12 months after such Asset
Sale, to (i) repay permanently any then outstanding senior Indebtedness of the
Company or Indebtedness of any Subsidiary, (ii) invest (or enter into a legally
binding agreement to invest) in properties and assets to replace the properties
and assets that were the subject of the Asset Sale or in properties and assets
that will be used in businesses of the Company or its Subsidiaries, as the case
may be, existing on the Issue Date or reasonably related thereto or involving
outsourcing for the air cargo industry ("Replacement Assets"), or (iii) a
combination of repayment and investment permitted by the foregoing clauses
(b)(i) and (b)(ii). If any such legally binding agreement to invest such Net
Cash Proceeds is terminated, then the Company may, within 90 days of such
termination or within 12 months of such Asset Sale, whichever is later, invest
such Net Cash Proceeds as provided in clauses (i), (ii) (without regard to the
parenthetical contained in such clause (ii)) or (iii) above. Pending the final
application of any such Net Cash Proceeds, the Company or such Subsidiary may
temporarily reduce Indebtedness under a revolving credit facility, if any, or
otherwise invest such Net Cash Proceeds in Cash Equivalents. The amount of such
Net Cash Proceeds not so used as set forth above in this paragraph (b)
constitutes "Excess Proceeds."
(c) When the aggregate amount of Excess Proceeds exceeds $10 million,
the Company shall, within 25 business days, make an offer to purchase (an
"Excess Proceeds Offer") from the holders of Securities, on a pro rata basis, in
accordance with the procedures set forth below, the maximum principal amount of
Securities that may be purchased with the Excess
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Proceeds. The offer price as to each Note shall be payable in cash in an amount
equal to 100% of the principal amount of such Note (as adjusted for any
prepayment of principal of the Securities), plus accrued interest, if any (the
"Offered Price"), to the date such Excess Proceeds Offer is consummated. To the
extent that the adjusted aggregate principal amount of Securities tendered
pursuant to an Excess Proceeds Offer is less than the Excess Proceeds, the
Company may use such deficiency for general corporate purposes. If the aggregate
principal amount of Securities validly tendered and not withdrawn by holders
thereof exceeds the Excess Proceeds, Securities to be purchased will be selected
on a pro rata basis. Upon completion of such offer to purchase, the amount of
Excess Proceeds shall be reset to zero.
(d) Notwithstanding the foregoing, the Company and its Subsidiaries
will be permitted to consummate an Asset Sale without complying with paragraphs
(a) and (b) above to the extent (i) at least 75% of the consideration for such
Asset Sale constitutes Replacement Assets and/or Cash Equivalents and (ii) such
Asset Sale is for Fair Market Value; provided, however, that any consideration
not constituting Replacement Assets received by the Company or any Subsidiary in
connection with any Asset Sale permitted to be consummated under this paragraph
shall constitute Net Cash Proceeds subject to the provisions of paragraphs (a)
and (b) above.
(e) If the Company becomes obligated to make an Excess Proceeds Offer
pursuant to clause (c) above, the Securities shall be purchased by the Company,
at the option of the holder thereof, in whole or in part in integral multiples
of $1,000, on a date that is not earlier than 30 days and not later than 60 days
from the date the notice is given to holders, or such later date as may be
necessary for the Company to comply with the requirements under the Exchange
Act, subject to proration in the event the amount Excess Proceeds is less than
the aggregate Offered Price of all Securities tendered.
(f) Any notice pursuant to 4.8 shall contain all instructions and
materials necessary to enable such Securityholders to tender Securities pursuant
to the Excess Proceeds Offer and shall state the following terms:
(1) that the Excess Proceeds Offer is being made pursuant to Section
4.8 of this Indenture and that all Securities tendered will be accepted for
payment; provided, however, that if the aggregate principal amount of
Securities tendered in an Excess Proceeds Offer exceeds the aggregate amount
of the Excess Proceeds Offer, the Company shall select the Securities to be
purchased on a pro rata basis (with such adjustments as may be deemed
appropriate by the Company so that only Notes in denominations of $1,000 or
multiples thereof shall be purchased);
(2) the purchase price (including the amount of accrued interest) and
the purchase date (which shall be 20 Business Days from the date of mailing
of notice of such Excess Proceeds Offer, or such longer period as required
by law) (the "Proceeds Purchase Date");
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(3) that any Securities not tendered will continue to accrue interest;
(4) that, unless the Company defaults in making payment therefor, any
Security accepted for payment pursuant to the Excess Proceeds Offer shall
cease to accrue interest after the Proceeds Purchase Date;
(5) that Securityholders electing to have a Security purchased pursuant
to an Excess Proceeds Offer will be required to surrender the Security, with
the form entitled "Option of Holder to Elect Purchase" on the reverse of the
Security completed, to the Paying Agent at the address specified in the
notice prior to the close of business on the third Business Day prior to the
Proceeds Purchase Date;
(6) that Securityholders will be entitled to withdraw their election if
the Paying Agent receives, not later than five Business Days prior to the
Proceeds Purchase Date, a telegram, telex, facsimile transmission or letter
setting forth the name of the Securityholder, the principal amount of the
Securities the Securityholder delivered for purchase and a statement that
such Securityholder is withdrawing his election to have such Security
purchased; and
(7) that Securityholders whose Securities are purchased only in part
will be issued new Securities in a principal amount equal to the unpurchased
portion of the Securities surrendered; provided that each Security purchased
and each new Security issued shall be in an original principal amount of
$1,000 or integral multiples thereof;
On or before the Proceeds Purchase Date, the Company shall (i) accept
for payment Securities or portions thereof tendered pursuant to the Excess
Proceeds Offer which are to be purchased in accordance with item (f)(1) above,
(ii) deposit with the Paying Agent U.S. Legal Tender sufficient to pay the
purchase price plus accrued interest, if any, of all Securities to be purchased
and (iii) deliver to the Trustee Securities so accepted together with an
Officers' Certificate stating the Securities or portions thereof being purchased
by the Company. The Paying Agent shall promptly mail to the Securityholders of
Securities so accepted payment in an amount equal to the purchase price plus
accrued interest, if any. For purposes of this Section 4.8, the Trustee shall
act as the Paying Agent.
Any amounts remaining after the purchase of the Securities pursuant to
an Excess Proceeds Offer shall be returned by the Trustee to the Company.
(g) The Company will comply with the applicable tender offer rules,
including Rule 14e-1 under the Exchange Act, in connection with an Excess
Proceeds Offer and shall not be deemed in violation of this covenant by reason
of any action required to be taken to effect such compliance. To the extent that
the provisions of any securities laws or regulations conflict with this Section
4.8, the Company shall comply with the applicable securities laws and
regulations and shall not be deemed to have breached its obligations under this
Section 4.8 by virtue thereof.
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SECTION 4.9. Change of Control. (a) If a Change of Control shall occur
at any time, then each holder of Securities shall have the right to require that
the Company purchase such holder's Securities, in whole or in part in integral
multiples of $1,000, at a purchase price (the "Change of Control Purchase
Price") in cash in an amount equal to 101% of the principal amount of such
Securities, plus accrued interest, if any, to the date of purchase (the "Change
of Control Purchase Date"), pursuant to the offer described in (b) below (the
"Change of Control Offer") and the other procedures set forth in this Indenture.
(b) Within 30 days following the date upon which a Change of Control
occurs, the Company shall notify the Trustee thereof and give written notice of
such Change of Control to each holder of Securities by first-class mail, postage
prepaid, at the address of such holder shown on the security register, which
notice shall govern the terms of the Change of Control Office; such notice shall
state:
(i) that the Change of Control Offer is being made pursuant to Section
4.9 of this Indenture and that all Securities validly tendered and not
withdrawn will be accepted for payment;
(ii) the purchase price and the purchase date, which shall be a
Business Day no earlier than 30 days nor later than 60 days from the date
such notice is mailed, or such later date as is necessary to comply with
requirements under the Exchange Act;
(iii) that any Securities not tendered will continue to accrue
interest;
(iv) that, unless the Company defaults in the payment of the purchase
price, any Securities accepted for payment pursuant to the Change of Control
Offer shall cease to accrue interest after the Change of Control Purchase
Date;
(v) that Securityholders electing to have a Security purchased pursuant
to a Change of Control Offer will be required to surrender the Security,
with the form entitled "Option of Securityholder to Elect Purchase" on the
reverse of the Security completed, to the Paying Agent and Registrar for the
Securities at the address specified in the notice prior to the close of
business on the third Business Day prior to the Change of Control Purchase
Date;
(vi) that Securityholders will be entitled to withdraw their election
if the Paying Agent receives, not later than the second Business Day prior
to the Change of Control Purchase Date, a telegram, telex, facsimile
transmission or letter setting forth the name of the Securityholder, the
principal amount of the Securities the Securityholder delivered for purchase
and a statement that such Securityholder is withdrawing his election to have
such Security purchased;
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(vii) that Securityholders whose Securities are purchased only in part
will be issued new Securities in a principal amount equal to the unpurchased
portion of the Securities surrendered; provided, however, that each Security
purchased and each new Security issued shall be in a principal amount of
$1,000 or integral multiples thereof; and
(viii) the circumstances and relevant facts regarding such Change of
Control.
(c) On or before the Change of Control Purchase Date, the Company shall
(i) accept for payment Securities or portions thereof tendered pursuant to the
Change of Control Offer, (ii) deposit with the Paying Agent U.S. Legal Tender
sufficient to pay the purchase price plus accrued interest, if any, of all
Securities so tendered and (iii) deliver to the Trustee Securities so accepted
together with an Officers, Certificate stating the Securities or portions
thereof being purchased by the Company. The Paying Agent shall promptly mail to
the Securityholders of Securities so accepted payment in an amount equal to the
purchase price plus accrued interest, if any, and the Trustee shall promptly
authenticate and mail to such Securityholders new Securities equal in principal
amount to any unpurchased portion of the Securities surrendered. Any Securities
not so accepted shall be promptly mailed by the Company to the Securityholder
thereof. For purposes of this Section 4.9, the Trustee shall act as the Paying
Agent.
Any amounts remaining after the purchase of Securities pursuant to a
Change of Control Offer shall be returned by the Trustee to the Company.
(d) The Company will comply with the applicable tender offer rules,
including Rule 14e-1 under the Exchange Act, in connection with a Change of
Control Offer and shall not be deemed in violation of this covenant by reason of
any action required to be taken to effect such compliance. To the extent that
the provisions of any securities laws or regulations conflict with the "Change
of Control" provisions of this Indenture, the Company shall comply with the
applicable securities laws and regulations and shall not be deemed to have
breached its obligations relating to such Change of Control Offer by virtue
thereof.
SECTION 4.10. Limitation on Guarantees of Indebtedness by Subsidiaries.
(a) The Company will not permit any Subsidiary, directly or indirectly, to
guarantee, assume or in any other manner become liable for the payment of any
Indebtedness of the Company or Indebtedness of any other Subsidiary unless
(i)(A) such Subsidiary simultaneously executes and delivers a supplemental
indenture to the Indenture providing for a Guarantee of payment of the
Securities by such Subsidiary and (B) with respect to any guarantee of
Subordinated Indebtedness by a Subsidiary, any such guarantee shall be
subordinated to such Subsidiary's Guarantee with respect to the Securities at
least to the same extent as such Subordinated Indebtedness is subordinated to
the Securities and (ii) such Subsidiary waives and will not in any manner
whatsoever claim or take the benefit or advantage of, any rights of
reimbursement, indemnity or subrogation or any other rights against the Company
or any other Subsidiary as a result of any payment by such Subsidiary under its
Guarantee.
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(b) Notwithstanding the foregoing, any Guarantee by a Subsidiary of the
Securities shall provide by its terms that it shall be automatically and
unconditionally released and discharged upon (i) any sale, exchange or transfer,
to any Person not an Affiliate of the Company, of all of the Capital Stock of a
Subsidiary owned by the Company or any Subsidiary in, or all or substantially
all the assets of, such Subsidiary (which sale, exchange or transfer is not
prohibited by the Indenture) or (ii) the release or discharge of the guarantee
which resulted in the creation of such Guarantee (and any other guarantees that
would have resulted in the creation of such a Guarantee), except a discharge or
release by or as a result of payment under such guarantee.
SECTION 4.11. Limitation on Dividend and Other Payment Restrictions
Affecting Subsidiaries. The Company will not, and will not permit any Subsidiary
to, directly or indirectly, create or otherwise cause or suffer to exist or
become effective any encumbrance or restriction of any kind on the ability of
any Subsidiary to (a) pay dividends, in cash or otherwise, or make any other
distributions on or in respect of its Capital Stock, (b) pay any Indebtedness
owed to the Company or any other Subsidiary, (c) make Investments in the Company
or any other Subsidiary, (d) transfer any of its properties or assets to the
Company or any other Subsidiary or (e) guarantee any Indebtedness of the Company
or any other Subsidiary, except for such encumbrances or restrictions existing
under or by reason of (i) any agreement in effect on the date of this Indenture,
(ii) this Indenture, (iii) applicable law, (iv) customary non-assignment
provisions, (x) of any lease governing a leasehold interest of the Company or
any Subsidiary or (y) of Indebtedness secured by a Lien that is permitted to be
incurred under the Indebtedness that relates to the property subject to such
Lien, (v) any agreement or other instrument of a Person acquired by the Company
or any Subsidiary in existence at the time of such acquisition (but not created
in contemplation thereof), which encumbrance or restriction is not applicable to
any Person, or the properties or assets of any Person, other than the Person, or
the property or assets of the Person, so acquired, (vi) any restriction with
respect to a Subsidiary of the Company imposed pursuant to an agreement relating
to the sale of all or substantially all of the Capital Stock or assets of such
Subsidiary (so long as such restriction, by its terms, terminates on the earlier
of the termination of such agreement or the consummation of such agreement), and
(vii) any restrictions existing under any agreement that refinances or replaces
any agreement containing restrictions permitted under clause (i), (ii), (iv) or
(v) or (vi), provided that the terms and conditions of such restriction are not
materially less favorable to the holder of the Securities than those under or
pursuant to the agreement refinanced or replaced.
SECTION 4.12. 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 purpose of this Indenture.
SECTION 4.13. Use of Proceeds. The Company shall use the net proceeds
from the sale of the Securities to consummate the transactions contemplated in
the section of the Offering Memorandum entitled "Use of Proceeds."
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SECTION 4.14. Compliance Certificates. (a) The Company shall deliver to
the Trustee, within 120 days after the end of each fiscal year, an Officers'
Certificate signed by its principal executive officer, principal financial
officer or principal accounting officer stating that a review of the activities
of the Company and its Subsidiaries during the preceding fiscal year has been
made under the supervision of the signing Officers with a view to determining
whether each has kept, observed, performed and fulfilled its obligations under
this Indenture, and further stating, as to each such Officer signing such
certificate, that to the best of his or her knowledge each has kept, observed,
performed and fulfilled each and every covenant contained in this Indenture and
is not in default in the performance or observance of any of the terms,
provisions and conditions of this Indenture (or, if a Default or Event of
Default shall have occurred, describing all such Defaults or Events of Default
of which he or she may have knowledge and what action each is taking or proposes
to take with respect thereto).
(b) So long as not contrary to the then current recommendations of the
American Institute of Certified Public Accountants, the year-end financial
statements delivered pursuant to Section 4.2 above shall be accompanied by a
written statement of the Company's independent public accountants (who shall be
a firm of established national reputation) that in making the examination
necessary for certification of such financial statements nothing has come to
their attention which would lead them to believe that the Company has violated
any provisions of Article 4 or 5 or that there exists a Default or Event of
Default under Article 6 of this Indenture insofar as they relate to accounting
matters or, if any such violation has occurred, specifying the nature and period
of existence thereof, it being understood that such accountants shall not be
liable directly or indirectly to any Person for any failure to obtain knowledge
of any such violation.
(c) The Company shall, so long as any of the Securities are
outstanding, deliver to the Trustee, within 5 days of any Officer becoming aware
of any Default or Event of Default, an Officers' Certificate specifying such
Default or Event of Default and what action the Company is taking or proposes to
take with respect thereto.
(d) The Company shall also comply with TIA Section 314(a)(4).
SECTION 4.15. Maintenance of Office or Agency. (a) The Company shall
maintain in the Borough of Manhattan, in the City of New York, an office or
agency (which may be an office of the Trustee or an affiliate of the Trustee,
Registrar or co-registrar) where Securities may be surrendered for registration
of transfer or exchange and where notices and demands to or upon the Company in
respect of the Securities and this Indenture may be served. The Company shall
give prior written notice to the Trustee of the location, and any change in the
location, of such office or agency. If at any time the Company shall fail to
maintain any such required office or agency or shall fail to furnish the Trustee
with the address thereof, such presentations, surrenders, notices and demands
may be made or served at the Corporate Trust Office of the Trustee.
(b) The Company may also from time to time designate one or more other
offices or agencies where the Securities may be presented or surrendered for any
or all such
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purposes and may from time to time rescind such designations; provided, however,
that no such designation or rescission shall in any manner relieve the Company
of its obligation to maintain an office or agency in the Borough of Manhattan,
in the City of New York for such purposes. The Company shall give prior written
notice to the Trustee of any such designation or rescission and of any change in
the location of any such other office or agency.
(c) The Company hereby designates the Trustee at 61 Broadway, 15th
Floor, New York, New York 10006 as one such office or agency of the Company in
accordance with Section 2.3.
SECTION 4.16. Taxes. The Company shall pay, prior to delinquency, all
material taxes, assessments, and governmental levies; provided, however, that
there shall not be required to be paid or discharged any such tax, assessment or
charge, the amount, applicability or validity of which is being contested in
good faith by appropriate proceedings and for which adequate provision has been
made or for which adequate reserves, to the extent required under GAAP, have
been taken.
SECTION 4.17. 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 claim or take the benefit or advantage
of, any stay, extension or usury law wherever enacted, now or at any time
hereafter in force, that may affect the covenants or the performance of this
Indenture (including, but not limited to, the payment of the principal of or
interest on the Securities); and the Company (to the extent that it may lawfully
do so) hereby expressly waive all benefit or advantage of any such law, and
covenant that they shall not, by resort to any such law, hinder, delay or impede
the execution of any power herein granted to the Trustee, but shall suffer and
permit the execution of every such power as though no such law has been enacted.
SECTION 4.18. Corporate Existence. Subject to Article V, the Company
shall do or cause to be done all things necessary to preserve and keep in full
force and effect its corporate existence, and the corporate existence of each
Subsidiary, in accordance with the respective organizational documents (as the
same may be amended from time to time) of each Subsidiary and the rights
(charter and statutory), licenses and franchises of the Company and its
Subsidiaries; provided, however, that the Company shall not be required to
preserve any such right, license or franchise, or the corporate, partnership or
other existence of any Subsidiary, if the Board of Directors of the Company
shall determine that the preservation thereof is no longer desirable in the
conduct of the business of the Company and its Subsidiaries, taken as a whole,
and that the loss thereof is not adverse in any material respect to the
Securityholders.
ARTICLE V
Surviving Entity
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SECTION 5.1. Limitations on Consolidations, Mergers and Sales of
Assets. (a) The Company will not in a single transaction or a series of related
transactions consolidate with or merge with or into any other Person or sell,
assign, convey, transfer, lease or otherwise dispose of all or substantially all
of its properties and assets as an entirety to any Person or Persons, and the
Company will not permit any Subsidiary to enter into any such transaction or
series of transactions if such transaction or series of transactions, in the
aggregate, would result in the sale, assignment, conveyance, transfer, lease or
other disposition of all or substantially all of the properties and assets of
the Company and its Subsidiaries on a consolidated basis to any Person or
Persons, unless:
(i) either (a) the Company shall be the surviving corporation or (b)
the Person (if other than the Company) formed by such consolidation or into
which the Company or such Subsidiary is merged or the Person which acquires
by sale, assignment, conveyance, transfer, lease or other disposition all or
substantially all of the properties and assets of the Company or such
Subsidiary, as the case may be (the "Surviving Entity"), (1) shall be a
corporation organized and validly existing under the laws of the United
States of America, any state thereof or the District of Columbia that is a
"certificated United States air carrier" under the Aviation Act and (2)
shall expressly assume, by indenture, supplemental to the Indenture,
executed and delivered to the Trustee, in form satisfactory to the Trustee,
the Company's obligation for the due and punctual payment of the principal
of (or premium, if any, on) and interest on the Securities and the
performance and observance of every covenant of this Indenture on the part
of the Company to be performed or observed;
(ii) immediately before and after giving effect to such transaction or
series of transactions on a pro forma basis and treating any obligation of
the Company or a Subsidiary in connection with or as a result of such
transaction as having been incurred at the time of such transaction, no
Default or Event of Default shall have occurred and be continuing;
(iii) immediately before and immediately after giving effect to such
transaction or series of transactions on a pro forma basis (on the
assumption that the transaction or series of transactions occurred on the
first day of the four-quarter period immediately prior to the consummation
of such transaction or series of transactions with the appropriate
adjustments with respect to the transaction or series of transactions being
included in such pro forma calculation), the Company (or the Surviving
Entity if the Company is not the continuing obligor under the Indenture)
could incur at least $1.00 of additional Indebtedness (other than Permitted
Indebtedness) under the provisions of Section 4.3;
(iv) if any of the property or assets of the Company or any of its
Subsidiaries would thereupon become subject to any Lien, the provisions of
Section 4.7 hereof are complied with; and
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(v) the Company or the Surviving Entity shall have delivered to the
Trustee, in form and substance reasonably satisfactory to the Trustee, an
officer's certificate and an opinion of counsel, each stating that such
consolidation, merger, conveyance, transfer or lease, and if a supplemental
indenture is required in connection with such transaction, such supplemental
indenture, comply with the terms of this Indenture and that all conditions
precedent therein provided for relating to such transaction have been
complied with.
(b) Upon any consolidation or merger, or any sale, assignment,
conveyance, transfer, lease or disposition of all or substantially all of the
properties and assets of the Company in accordance with the immediately
preceding paragraph in which the Company is not the continuing obligor under
this Indenture, the Surviving Entity shall succeed to, and be substituted for,
and may exercise every right and power of, the Company under this Indenture with
the same effect as if such successor had been named as the Company therein. When
a successor assumes all the obligations of its predecessor under this Indenture
or the Securities, the predecessor shall be released from those obligations;
provided that in the case of a transfer by lease, the predecessor shall not be
released from the payment of principal and interest on the Securities.
ARTICLE VI
Defaults and Remedies
SECTION 6.1. Events of Default. An "Event of Default" will occur under
this Indenture if:
(i) there shall be a default in the payment of any interest on the
Securities when it becomes due and payable, and continuance of such default
for a period of 30 days;
(ii) there shall be a default in the payment of the principal of (or
premium, if any, on) the Securities at their Maturity;
(iii) (A) there shall be a default in the performance, or breach, of
any covenant or agreement of the Company contained in this Indenture (other
than a default in the performance, or breach, of a covenant or agreement
which is specifically dealt with in the immediately preceding clauses (i) or
(ii), or in clauses (B), (C) and (D) of this clause (iii)) and continuance
of such default or breach for a period of 30 days after written notice shall
have been given to the Company by the Trustee or to the Company and the
Trustee by the holders of at least 25% in aggregate principal amount of the
Securities then outstanding; (B) there shall be a default in the
performance, or breach, of the provisions of Section 4.8; (C) there shall be
a default in the performance or breach of the provisions of Section 5.1
hereof; or (D) the Company shall have failed to make or consummate a Change
of Control Offer in accordance with the provisions of Section 4.9 hereof;
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(iv) (A) there shall have occurred one or more defaults in the payment
of principal of (or premium, if any, on) Indebtedness of the Company or any
Subsidiary aggregating $10 million or more, when the same becomes due and
payable at the stated maturity thereof, and such default or defaults shall
have continued after any applicable grace period and shall not have been
cured or waived or (B) Indebtedness of the Company or any Subsidiary
aggregating $10 million or more shall have been accelerated or otherwise
declared due and payable, or required to be prepaid or repurchased (other
than by regularly scheduled required prepayment), prior to the stated
maturity thereof;
(v) one or more final judgments or orders rendered against the Company
or any Subsidiary which require the payment of money, either individually or
in an aggregate amount, in excess of $10 million and either (A) an
enforcement proceeding shall have been commenced by any creditor upon such
judgment or order or (B) there shall have been a period of 30 days during
which a stay of enforcement of such judgment or order, by reason of a
pending appeal or otherwise, was not in effect; or
(vi) the Company or a Significant Subsidiary pursuant to or within the
meaning of any Bankruptcy Law:
(A) commences a voluntary case;
(B) consents to the entry of an order for relief against in an
involuntary case;
(C) consents to the appointment of a Custodian of it or for
any substantial part of its property;
(D) makes a general assignment for the benefit of its
creditors;
(E) consents to or acquiesces in the institution of a
bankruptcy or an insolvency proceeding against it; or
(F) takes any corporate action to authorize or effect any of
the foregoing;
or takes any comparable action under any foreign laws relating to
insolvency;
(vii) a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that:
(A) is for relief against the Company or any Significant
Subsidiary in an involuntary case;
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(B) appoints a Custodian of the Company or any Significant
Subsidiary or for any substantial part of the property of the Company
or any of its Significant Subsidiaries; or
(C) orders the winding up or liquidation of the Company or any
Significant Subsidiary;
or any similar relief is granted under any foreign laws and in each
case the order, decree or relief remains unstayed and in effect for 60 days;
The foregoing will constitute Events of Default whatever the reason for
any such Event of Default and whether it is voluntary or involuntary or is
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.
The term "Custodian" means any receiver, trustee, assignee, liquidator,
custodian or similar official under any Bankruptcy Law.
SECTION 6.2. Acceleration. If an Event of Default (other than an Event
of Default specified in Section 6.1(vi) or (vii)) occurs and is continuing, the
Trustee or the holders of at least 25% in principal amount of the outstanding
Securities by notice to the Company may declare the principal of and accrued and
unpaid interest, if any, on all the Securities to be due and payable. Upon such
declaration, such principal and accrued and unpaid interest shall be due and
payable immediately. If an Event of Default specified in Section 6.1(vi) or
(vii) occurs and is continuing, the principal of and accrued and unpaid interest
on all the Securities will become and be immediately due and payable without any
declaration or other act on the part of the Trustee or any holders. The Holders
of a majority in principal amount of the Securities by notice to the Trustee may
rescind an acceleration and its consequences if the rescission would not
conflict with any judgment or decree and if all existing Events of Default have
been cured or waived except nonpayment of principal or interest that has become
due solely because of acceleration. No such rescission shall affect any
subsequent Default or Event of Default or impair any right consequent thereto.
SECTION 6.3. Other Remedies. If an Event of Default occurs and is
continuing, the Trustee and the Securityholders may pursue any available remedy
to collect the payment of principal of or interest on the Securities or to
enforce the performance of any provision of the Securities or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any
of the Securities or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Securityholder in exercising any right or remedy
accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default.
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No remedy is exclusive of any other remedy. All available remedies are
cumulative to the extent permitted by law.
SECTION 6.4. Waiver of Past Defaults. The Holders of a majority in
principal amount of the outstanding Securities by notice to the Trustee may
waive an existing Default or Event of Default and its consequences except (i) a
Default or Event of Default in the payment of the principal of, premium, if any,
or interest on a Security or (ii) a Default or Event of Default in respect of a
provision that under Section 9.2 cannot be amended without the consent of each
Securityholder affected. When a Default or Event of Default is waived, it is
deemed cured, but no such waiver shall extend to any subsequent or other Default
or Event of Default or impair any consequent right.
SECTION 6.5. Control by Majority. Subject to Section 2.9, the Holders
of a majority in principal amount of the Securities may direct the time, method
and place of conducting any proceeding for any remedy available to the Trustee
or of exercising any trust or power conferred on the Trustee. However, the
Trustee may refuse to follow any direction that conflicts with law or this
Indenture or, subject to Section 7.1, that the Trustee determines is unduly
prejudicial to the rights of other Securityholders or would involve the Trustee
in personal liability; provided, however, that the Trustee may take any other
action deemed proper by the Trustee that is not inconsistent with such
direction. Prior to taking any action hereunder, the Trustee shall be entitled
to indemnification satisfactory to it in its sole discretion against all losses
and expenses caused by taking or not taking such action.
SECTION 6.6. Limitation on Suits. A Securityholder may not pursue any
remedy with respect to this Indenture or the Securities unless:
(1) the Holder gives to the Trustee written notice stating that an
Event of Default is continuing;
(2) the Holders of at least 25% in outstanding principal amount of the
Securities make a written request to the Trustee to pursue the remedy;
(3) such Holder or Holders offer to the Trustee reasonable security or
indemnity against any loss, liability or expense;
(4) the Trustee does not comply with the request within 60 days after
receipt of the request and the offer of security or indemnity; and
(5) the Holders of a majority in outstanding principal amount of the
Securities do not give the Trustee a direction that, in the opinion of the
Trustee, is inconsistent with the request during such 60-day period.
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A Securityholder may not use this Indenture to prejudice the rights of
another Securityholder or to obtain a preference or priority over another
Securityholder.
SECTION 6.7. Rights of Holders to Receive Payment. Notwithstanding any
other provision of this Indenture, the right of any Holder to receive payment of
principal of and interest on the Securities held by such Holder, on or after the
respective due dates expressed in the Securities, or to bring suit for the
enforcement of any such payment on or after such respective dates, shall not be
impaired or affected without the consent of such Holder.
SECTION 6.8. Collection Suit by Trustee. If an Event of Default
specified in Section 6.1(i) or (ii) or an acceleration pursuant to Section 6.2
occurs and is continuing, the Trustee may recover judgment in its own name and
as trustee of an express trust against the Company or any other obligor of the
Securities for the whole amount then due and owing (together with interest on
any unpaid interest to the extent lawful) and the amounts provided for in
Section 7.7.
SECTION 6.9. Trustee May File Proofs of Claim. The Trustee may file
such proofs of claim and other papers or documents as may be necessary or
advisable in order to have the claims of the Trustee and the Securityholders
allowed in any judicial proceedings relative to the Company, its Subsidiaries or
their respective creditors or properties and, unless prohibited by law or
applicable regulations, may vote on behalf of the Holders in any election of a
trustee in bankruptcy or other Person performing similar functions, and any
Custodian in any such judicial proceeding is hereby authorized by each Holder to
make 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 the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and its counsel, and any other amounts due
the Trustee under Section 7.7.
SECTION 6.10. Priorities. If the Trustee collects any money or property
pursuant to this Article VI, it shall pay out the money or property in the
following order:
FIRST: to the Trustee for amounts due under Section 7.7;
SECOND: if the Securityholders are forced to proceed against the
Company directly without the Trustee, to the Securityholders for their
collection costs;
THIRD: to Securityholders for amounts due and unpaid on the Securities
for principal and interest, ratably, without preference or priority of any
kind, according to the amounts due and payable on the Securities for
principal and interest, respectively; and
FOURTH: to the Company.
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The Trustee, upon prior notice to the Company, may fix a record date
and payment date for any payment to Securityholders pursuant to this Section
6.10. At least 15 days before such record date, the Company shall mail to each
Securityholder and the Trustee a notice that states the record date, the payment
date and amount to be paid.
SECTION 6.11. Undertaking for Costs. In any suit for the enforcement of
any right or remedy under this Indenture or in any suit against the Trustee for
any action taken or omitted by it as Trustee, a court in its discretion may
require the filing by any party litigant in the suit of an undertaking to pay
the costs of the suit, and the court in its discretion may assess reasonable
costs, including reasonable attorneys' fees, against any party litigant in the
suit, having due regard to the merits and good faith of the claims or defenses
made by the party litigant. This Section 6.11 does not apply to a suit by the
Trustee, a suit by a Holder pursuant to Section 6.7 or a suit by Holders of more
than 10% in outstanding principal amount of the Securities.
ARTICLE VII
Trustee
SECTION 7.1. Duties of Trustee. (a) If a Default or an Event of Default
has occurred and is continuing, the Trustee shall exercise the rights and powers
vested in it by this Indenture and use the same degree of care and skill in
their exercise as a prudent Person would exercise or use under the circumstances
in the conduct of such Person's own affairs.
(b) Except during the continuance of a Default or an Event of Default:
(1) the Trustee undertakes to perform such duties and only such duties
as are specifically set forth in this Indenture or the TIA and no implied
covenants or obligations shall be read into this Indenture against the
Trustee; and
(2) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions furnished to
the Trustee and conforming to the requirements of this Indenture. However,
the Trustee shall examine the certificates and opinions to determine whether
or not they conform to the requirements of this Indenture.
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act or its own wilful misconduct,
except that:
(1) this paragraph does not limit the effect of paragraph (b) of this
Section;
(2) the Trustee shall not be liable for any error of judgment made in
good faith by a Trust Officer unless it is proved that the Trustee was
negligent in ascertaining the pertinent facts; and
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(3) the Trustee shall not be liable with respect to any action it takes
or omits to take in good faith in accordance with a direction received by it
pursuant to Section 6.5.
(d) Every provision of this Indenture that in any way relates to the
Trustee is subject to paragraphs (a), (b) and (c) of this Section.
(e) The Trustee shall not be liable for interest on any money received
by it except as the Trustee may agree in writing with the Company.
(f) Money held in trust by the Trustee need not be segregated from
other funds except to the extent required by law.
(g) No provision of this Indenture shall require the Trustee to expend
or risk its own funds or otherwise incur financial liability in the performance
of any of its duties hereunder or in the exercise of any of its rights or
powers, if it shall have reasonable grounds to believe that repayment of such
funds or adequate indemnity against such risk or liability is not reasonably
assured to it.
(h) Every provision of this Indenture relating to the conduct or
affecting the liability of or affording protection to the Trustee shall be
subject to the provisions of this Section and to the provisions of the TIA.
SECTION 7.2. Rights of Trustee. Subject to TIA Section 315(a) through
(d):
(a) The Trustee may rely and shall be protected in acting or refraining
from acting on any document believed by it to be genuine and to have been
signed or presented by the proper person. The Trustee need not investigate
any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may require an
Officers' Certificate or an Opinion of Counsel which shall conform to
Section 12.5. The Trustee shall not be liable for any action it takes or
omits to take in good faith in reliance on the Officers' Certificate or
Opinion of Counsel.
(c) The Trustee may act through its attorneys and agents and shall not
be responsible for the misconduct or negligence of any agent appointed with
due care.
(d) The Trustee shall not be liable for any action it takes or omits to
take in good faith that it believes to be authorized or within its rights or
powers; provided, however, that the Trustee's conduct does not constitute
wilful misconduct or negligence.
(e) The Trustee may consult with counsel, and the advice or opinion of
counsel with respect to legal matters relating to this Indenture and the
Securities shall be full and
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complete authorization and protection from liability in respect to any
action taken, omitted or suffered by it hereunder in good faith and in
accordance with the advice or opinion of such counsel.
(f) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction
of any of the Securityholders, unless such Securityholders shall have
offered to the Trustee security or indemnity reasonably satisfactory to the
Trustee against the losses, expenses and liabilities that might be incurred
by it in compliance with such request or direction.
(g) The Trustee shall not be liable with respect to any action taken or
omitted to be taken by it good faith in accordance with the direction of the
Securityholders of a majority in aggregate principal amount of the
Securities at the time outstanding relating to the time, method and place of
conducting any proceeding for any remedy available to the Trustee or
involving the exercise of any right, duty, trust or power conferred upon the
Trustee under the TIA or this Indenture.
SECTION 7.3. Individual Rights of Trustee. The Trustee, in its
individual or any other capacity, may become the owner or pledgee of Securities
and may make loans to, accept deposits from, perform services for and otherwise
deal with the Company, or their Affiliates with the same rights it would have if
it were not Trustee. Any Paying Agent, Registrar, co-registrar or co-paying
agent may do the same with like rights. However, the Trustee must comply with
Sections 7.10 and 7.11.
SECTION 7.4. Trustee's Disclaimer. The Trustee shall not be responsible
for and makes no representation as to the validity or adequacy of this Indenture
or the Securities, it shall not be accountable for the Company's use of the
proceeds from the Securities, and it shall not be responsible for any statement
of the Company in this Indenture or in any document issued in connection with
the sale of the Securities or in the Securities other than the Trustee's
certificate of authentication.
SECTION 7.5. Notice of Defaults. If a Default or Event of Default
occurs and is continuing and if a Trust Officer has knowledge thereof, the
Trustee shall mail to each Securityholder in the manner and to the extent
provided in TIA Section 313(a) notice of the Default or Event of Default within
5 days after it occurs, unless such Default or Event of Default has been cured.
Except in the case of a Default or Event of Default in payment of principal,
premium, if any, or interest on any Security (including payments pursuant to the
optional redemption or required repurchase provisions of such Security, if any),
the Trustee may withhold the notice if and so long as its board of directors,
the executive committee of its board of directors or a committee of its Trust
Officers in good faith determines that withholding the notice is in the
interests of Securityholders.
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SECTION 7.6. Reports by Trustee to Holders. As promptly as practicable
and within 60 days after each May 15 beginning with the May 15 following the
date of this Indenture, and in any event prior to July 15 in each year, the
Trustee shall mail to each Securityholder, if required by TIA Section 313(a) a
brief report dated as of such May 15 that complies with TIA Section 313(a). The
Trustee also shall comply with TIA Section 313(b), (c) and (d).
A copy of each report at the time of its mailing to Securityholders
shall be filed with the Commission if required by law and each stock exchange
(if any) on which the Securities are listed. The Company agrees to notify
promptly the Trustee whenever the Securities become listed on any stock exchange
and of any delisting thereof.
SECTION 7.7. Compensation and Indemnity. The Company shall pay to the
Trustee from time to time reasonable compensation for its services. The
Trustee's compensation shall not be limited by any law on compensation of a
trustee of an express trust. The Company shall reimburse the Trustee upon
request for all reasonable out-of-pocket expenses and advances incurred or made
by it, including but not limited to costs of collection, costs of preparing and
reviewing reports, certificates and other documents, costs of preparation and
mailing of notices to Securityholders and reasonable costs of counsel retained
by the Trustee in connection with the delivery of an Opinion of Counsel or
otherwise, in addition to the compensation for its services. Such expenses shall
include the reasonable compensation and expenses, disbursements and advances of
the Trustee's agents, counsel, accountants and experts. The Company shall
indemnify the Trustee for, and hold it harmless against, any and all loss,
liability or expense (including reasonable attorneys' fees) incurred by it in
connection with the administration of this trust and the performance of its
duties hereunder and under the Securities, including the costs and expenses of
enforcing this Indenture and the Securities (including this Section 7.7) and of
defending itself against any claims or liabilities (whether asserted by any
Securityholder, the Company or otherwise) and of complying with any process
served upon it or any of its officers in connection with the exercise or
performance of any of its powers or duties under this Indenture. The Trustee
shall notify the Company promptly of any claim for which it may seek indemnity.
Failure by the Trustee to so notify the Company shall not relieve the Company of
its obligations hereunder. The Company shall defend the claim and the Trustee
may have separate counsel and the Company shall pay the fees and expenses of
such counsel. The Company need not reimburse any expense or indemnify against
any loss, liability or expense incurred by the Trustee through the Trustee's own
wilful misconduct, negligence or bad faith.
To secure the Company's payment obligations in this Section 7.7, the
Trustee shall have a lien prior to the Securities on all money or property held
or collected by the Trustee other than money or property held in trust to pay
principal of and interest on particular Securities. The Trustee's right to
receive payment of any amounts due under this Section 7.7 shall not be
subordinate to any other liability or indebtedness of the Company.
The Company's payment obligations pursuant to this Section shall
survive the discharge of this Indenture. When the Trustee incurs expenses after
the occurrence of a Default
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specified in Section 6.1(7) or (8) with respect to the Company, the expenses are
intended to constitute expenses of administration under any Bankruptcy Law.
SECTION 7.8. Replacement of Trustee. The Trustee may resign at any time
by so notifying the Company in writing at least 30 days in advance of such
resignation. The Holders of a majority in principal amount of the Securities may
remove the Trustee by so notifying the Trustee in writing and may appoint a
successor Trustee. The Company shall remove the Trustee if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged bankrupt or insolvent;
(3) a receiver or other public officer takes charge of the Trustee or
its property; or
(4) the Trustee otherwise becomes incapable of acting.
If the Trustee resigns or is removed by the Company or by the Holders
of a majority in principal amount of the Securities and such Holders do not
reasonably promptly appoint a successor Trustee, or if a vacancy exists in the
office of Trustee for any reason (the Trustee in such event being referred to
herein as the retiring Trustee), the Company shall promptly appoint a successor
Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. The successor Trustee shall mail a notice of its
succession to Securityholders. The retiring Trustee shall promptly transfer all
property held by it as Trustee to the successor Trustee, subject to the lien
provided for in Section 7.7.
A resignation or removal of the Trustee and appointment of a successor
Trustee shall become effective only upon the successor Trustee's acceptance of
appointment as provided in this Section 7.8.
If the Trustee fails to comply with Section 7.10, any Securityholder
may petition any court of competent jurisdiction for the removal of the Trustee
and the appointment of a successor Trustee.
Notwithstanding the replacement of the Trustee pursuant to this
Section, the Company's obligations under Section 7.7 shall continue for the
benefit of the retiring Trustee.
SECTION 7.9. Successor Trustee by Merger. If the Trustee consolidates
with, merges or converts into, or transfers all or substantially all its
corporate trust business or assets to,
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another corporation or banking association, the resulting, surviving or
transferee corporation without any further act shall be the successor Trustee.
In case at the time such successor or successors by merger, conversion
or consolidation to the Trustee shall succeed to the trusts created by this
Indenture, any of the Securities shall have been authenticated but not
delivered, any such successor to the Trustee may adopt the certificate of
authentication of any predecessor trustee, and deliver such Securities so
authenticated; and in case at that time any of the Securities shall not have
been authenticated, any successor to the Trustee may authenticate such
Securities either in the name of any predecessor hereunder or in the name of the
successor to the Trustee; and in all such cases such certificates shall have the
full force which it is anywhere in the Securities or in this Indenture provided
that the certificate of the Trustee shall have.
SECTION 7.10. Eligibility; Disqualification. The Indenture shall at all
times have a Trustee that satisfies the requirements of TIA Section 310(a). The
Trustee shall have a combined capital and surplus of at least $100 million as
set forth in its most recent published annual report of condition. The Trustee
shall comply with TIA Section 310(b); provided, however, that there shall be
excluded from the operation of TIA Section 310(b)(1) any indenture or indentures
under which other securities or certificates of interest or participation in
other securities of the Company are outstanding if the requirements for such
exclusion set forth in TIA Section 310(b)(1) are met.
SECTION 7.11. Preferential Collection of Claims Against Company. The
Trustee shall comply with TIA Section 311(a), excluding any creditor
relationship listed in TIA Section 311(b). A Trustee who has resigned or been
removed shall be subject to TIA Section 311(a) to the extent indicated.
ARTICLE VIII
Discharge of Indenture; Defeasance
SECTION 8.1. Discharge of Liability on Securities; Defeasance. (a) When
(i) the Company delivers to the Trustee all outstanding Securities (other than
Securities replaced pursuant to Section 2.7) for cancellation or (ii) all
outstanding Securities have become due and payable, whether at maturity or as a
result of the mailing of a notice of redemption pursuant to Article 3 hereof and
the Company irrevocably deposits with the Trustee funds sufficient to pay at
maturity or upon redemption all outstanding Securities (other than Securities
replaced pursuant to Section 2.7), including interest thereon to maturity or
such redemption date, and if in either case the Company pays all other sums
payable hereunder by the Company, then this Indenture shall, subject to Section
8.1(e) and Section 8.6, cease to be of further effect. The Trustee shall
acknowledge satisfaction and discharge of this Indenture on demand of the
Company (accompanied by an Officers' Certificate and an Opinion of Counsel
stating that all conditions precedent specified herein relating to the
satisfaction and discharge of this Indenture have been complied with) and at the
cost and expense of the Company.
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(b) Defeasance and Discharge. Upon the Company's exercise under Section
8.1(a) of the option applicable to this Section 8.1(b), the Company shall be
deemed to have paid and discharged the entire Indebtedness represented by the
outstanding Securities on the date the conditions set forth in Section 8.2 are
satisfied (hereinafter, "defeasance"). For this purpose, such defeasance means
that the Company shall be deemed to have paid and discharged the entire
indebtedness represented by the outstanding Securities, except for the following
which shall survive until otherwise terminated or discharged hereunder:
(i) the rights of holders of outstanding Securities to receive payments
in respect of the principal of (and premium, if any, on) and interest on
such Securities when such payments are due;
(ii) the Company's obligations to issue temporary Securities, register
the transfer or exchange of any Securities, replace mutilated, destroyed,
lost or stolen Securities, maintain an office or agency for payments in
respect of the Securities and segregate and hold such payments in trust;
(iii) the rights, powers, trusts, duties and immunities of the Trustee;
(iv) the defeasance provisions of this Article; and
(v) subject to compliance with this Article, the Company may exercise
its option under this Section 8.1(b) notwithstanding the prior exercise of
its options under Section 8.1(c) with respect to the Securities.
(c) Covenant Defeasance. Upon the Company's exercise under Section
8.1(a) of the option applicable to this Section 8.1(c), the Company shall be
released from its obligations with respect to any covenant contained in Sections
4.2(b), 4.3, 4.4, 4.5, 4.6, 4.7, 4.8, 4.9, 4.10, 4.11, 4.13 and 4.16 and
Sections 5.1(iii), 5.1(iv) and 5.1(v) with respect to the outstanding Securities
on and after the date the conditions set forth below are satisfied (hereinafter,
"covenant defeasance"), and the Securities shall thereafter be deemed not to be
"outstanding" for the purposes of any direction, waiver, consent or declaration
or act of Holders (and the consequences of any thereof) in connection with such
covenants, but shall continue to be deemed "outstanding" for all other purposes
hereunder. For these purposes, such covenant defeasance means that, with respect
to the outstanding Securities, the Company may omit to comply with and shall
have no liability in respect of any term, condition or limitation set forth in
any such covenant, whether directly or indirectly, by reason of any reference
elsewhere herein to any such covenant or by reason of any reference in any such
covenant to any other provision herein or in any other document and such
omission to comply shall not constitute a Default or an Event of Default under
Section 6.1, but, except as specified above, the remainder of this Indenture and
such Securities shall be unaffected thereby, and any omission to comply with
such obligations shall not constitute a Default or an Event of Default with
respect to the Securities.
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(d) Upon satisfaction of the conditions set forth herein and upon
request of the Company, the Trustee shall acknowledge in writing the discharge
of those obligations that the Company terminates.
(e) Notwithstanding the provisions of Sections 8.1(b) and (c), the
Company's obligations in Sections 2.3, 2.4, 2.5, 2.6, 2.7, 7.7, 8.1(e), 8.4, 8.5
and 8.6 shall survive until the Securities have been paid in full. Thereafter,
the Company's obligations in Sections 7.7, 8.4, 8.5 and 8.6 shall survive.
SECTION 8.2. Conditions to Defeasance. In order for the Company to
exercise its legal defeasance option or its covenant defeasance option:
(i) the Company must irrevocably deposit or cause to be deposited with
the Trustee, in trust, specifically pledged as security for, and dedicated
solely to, the benefit of the holders of the Securities, money in an amount,
or U.S. Government Obligations which through the scheduled payment of
principal and interest thereon will provide money in an amount, or a
combination thereof, sufficient, in the opinion of a nationally recognized
firm of independent public accountants, to pay and discharge the principal
of (and premium, if any, on) and interest on the outstanding Securities at
maturity (or upon redemption, if applicable) of such principal, premium or
installment of interest;
(ii) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit or, insofar as an event of bankruptcy
under Section 6.1(vi) or (vii) above is concerned, at any time during the
period ending on the 91st day after the date of such deposit;
(iii) such defeasance or covenant defeasance shall not result in a
breach or violation of, or constitute a default under this Indenture or any
material agreement or instrument to which the Company is a party or by which
it is bound;
(iv) in the case of defeasance, the Company shall have delivered to the
Trustee an Opinion of Counsel stating that the Company has received from, or
there has been published by, the Internal Revenue Service a ruling, or since
the date hereof, there has been a change in applicable federal income tax
law, in either case to the effect, and based thereon such opinion shall
confirm that, the holders of the outstanding Securities will not recognize
income, gain or loss for federal income tax purposes as a result of such
defeasance and will be subject to federal income tax on the same amounts, in
the same manner and at the same times as would have been the case if such
defeasance had not occurred;
(v) in the case of covenant defeasance, the Company shall have
delivered to the Trustee an Opinion of Counsel to the effect that the
holders of the Securities outstanding will not recognize income, gain or
loss for federal income tax purposes as a result of such covenant defeasance
and will be subject to federal income tax on the same amounts, in the
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same manner and at the same times as would have been the case if such
covenant defeasance had not occurred;
(vi) in the case of defeasance or covenant defeasance, the Company
shall have delivered to the Trustee an Opinion of Counsel in the United
States to the effect that after the 91st day following the deposit or after
the date such opinion is delivered, the trust funds will not be subject to
the effect of any applicable bankruptcy, insolvency, reorganization or
similar laws affecting creditors' rights generally;
(vii) the Company shall have delivered to the Trustee an Officers'
Certificate stating that the deposit was not made by the Company with the
intent of preferring the holders of the Securities over the other creditors
of the Company with the intent of hindering, delaying or defrauding
creditors of the Company; and
(viii) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent provided for relating to either the defeasance or the covenant
defeasance, as the case may be, have been complied with.
SECTION 8.3. Application of Trust Money. Subject to Section 8.6, the
Trustee or Paying Agent shall hold in trust money or U.S. Government Obligations
deposited with it pursuant to this Article VIII. It shall apply the deposited
money and the money from U.S. Government Obligations through the Paying Agent
and in accordance with this Indenture and the Securities to the payment of
principal of and interest on the Securities. Money and securities so held in
trust are not subject to Article X.
SECTION 8.4. Repayment to Company. Subject to Sections 7.7, 8.1 and
8.2, the Trustee and the Paying Agent shall promptly turn over to the Company
upon request set forth in an Officers' Certificate any excess money or
securities held by them upon payment of all the obligations under this Indenture
and thereupon shall be relieved from all liability with respect to such money.
Subject to any applicable abandoned property law, the Trustee and the
Paying Agent shall pay to the Company upon request any money held by them for
the payment of principal of or interest on the Securities that remains unclaimed
for two years; provided, however, that the Company shall have either caused
notice of such payment to be mailed to each Securityholder entitled thereto no
less than 30 days prior to such repayment or within such period shall have
published such notice in a financial newspaper of widespread circulation
published in the City of New York and, thereafter, Securityholders entitled to
the money must look to the Company for payment as general creditors and all
liability of the Trustee and such Paying Agent with respect to such money shall
cease.
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SECTION 8.5. Indemnity for U.S. Government Obligations. The Company
shall pay and shall indemnify the Trustee against any tax, fee or other charge
imposed on or assessed against deposited U.S. Government Obligations or the
principal and interest received on such U.S. Government Obligations.
SECTION 8.6. Reinstatement. If the Trustee or Paying Agent is unable to
apply any money or U.S. Government Obligations in accordance with this Article
VIII by reason of any legal proceeding or by reason of any order or judgment of
any court or governmental authority enjoining, restraining or otherwise
prohibiting such application, the obligations of the Company under this
Indenture and the Securities shall be revived and reinstated as though no
deposit had occurred pursuant to this Article VIII until such time as the
Trustee or Paying Agent is permitted to apply all such money or U.S. Government
Obligations in accordance with this Article VIII; provided, however, that, if
the Company has made any payment of interest on or principal of any Securities
because of the reinstatement of its obligations, the Company shall be subrogated
to the rights of the Holders of such Securities to receive such payment from the
money or U.S. Government Obligations held by the Trustee or Paying Agent.
ARTICLE IX
Amendments
SECTION 9.1. Without Consent of Holders. (a) The Company and the
Trustee may amend this Indenture or the Securities without notice to or consent
of any Securityholder:
(1) to cure any ambiguity, omission, defect or inconsistency; provided,
that such amendment or supplement does not, as evidenced by an Opinion of
Counsel delivered to the Trustee, adversely affect the rights of any
Securityholder in any material respect;
(2) to comply with Article V;
(3) to provide for uncertificated Securities in addition to or in place
of certificated Securities; provided, however, that the uncertificated
Securities are issued in registered form for purposes of Section 163(f) of
the Code or in a manner such that the uncertificated Securities are
described in Section 163(f)(2)(B) of the Code;
(4) to secure the Securities;
(5) to add to the covenants of the Company for the benefit of the
Holders or to surrender any right or power herein conferred upon the
Company;
(6) to comply with any requirements of the SEC in connection with
qualifying this Indenture under the TIA;
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(7) to make any change that does not adversely affect the rights of any
Securityholder;
(i) to surrender any right or power conferred upon the
Company;
(ii) to provide for a replacement Trustee under Section 7.8
hereof; or
(iii) to provide for the issuance of the Exchange Securities,
which will have terms substantially identical in all material respects
to the Initial Securities (except that the transfer restrictions
contained in the Initial Securities will be modified or eliminated, as
appropriate), and which will be treated, together with any outstanding
Initial Securities, as a single issue of securities;
provided that the Company has delivered to the Trustee an Opinion of Counsel
stating that any such amendment or supplement complies with the provisions of
this Section 9.1.
(b) Upon the request of the Company accompanied by a Board Resolution
of its Board of Directors authorizing the execution of any such supplemental
indenture, and upon receipt by the Trustee of the documents described in Section
9.6, the Trustee shall join with the Company in the execution of any
supplemental indenture authorized or permitted by the terms of this Indenture
and to make any further appropriate agreements and stipulations which may be
therein contained, but the Trustee shall not be obligated to enter into such
supplemental indenture which affects its own rights, duties or immunities under
this Indenture or otherwise.
(c) After an amendment under this Section becomes effective, the
Company shall mail to Securityholders a notice briefly describing such
amendment. However, the failure to give such notice to all Securityholders, or
any defect therein, shall not impair or affect the validity of an amendment
under this Section.
SECTION 9.2. With Consent of Holders. (a) The Company and the Trustee
may amend this Indenture or the Securities with the consent of the Holders of at
least a majority in outstanding principal amount of the Securities (including
consents obtained in connection with a tender offer or exchange offer for the
Securities) and any existing Default and its consequences (including, without
limitation, an acceleration of the Securities) or compliance with any provision
of this Indenture or the Securities may be waived with the consent of the
Holders of a majority in principal amount of the then outstanding Securities
(including consents obtained in connection with a tender offer or exchange offer
for the Securities). Furthermore, subject to Sections 6.4 and 6.7, the Holders
of a majority in aggregate principal amount of the Securities then outstanding
(including consents obtained in connection with a tender offer or exchange offer
for the Securities) may waive compliance in a particular instance by the Company
with any provision of this Indenture or the Securities. However, without the
consent of each Holder of a Security then outstanding, an amendment may not:
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(1) reduce the amount of Securities whose Holders must consent to an
amendment, supplement or waiver;
(2) reduce the rate of or extend the time for payment of interest on
any Security;
(3) reduce the principal of or extend the Stated Maturity of any
Security;
(4) reduce the premium payable upon the redemption or repurchase of any
Security or change the time at which any Security may or shall be redeemed
or repurchased in accordance with this Indenture;
(5) make any Security payable in money other than that stated in the
Security;
(6) modify or affect in any manner adverse to the Holders, the terms
and conditions of the obligation of the Company for the due and punctual
payment of the principal of or interest on Securities or to institute suit
for the enforcement of any payment on or with respect to the Securities;
(7) waive a Default or Event of Default in the payment of principal of,
premium, if any, or interest on, or redemption payment with respect to, any
Security (excluding any principal or interest due solely as a result of the
occurrence of a declaration of an Event of Default);
(8) make any change in Section 6.4 or 6.7 or the third sentence of this
Section;
(9) amend, change or modify in any material respect the obligation of
the Company to make and consummate a Change of Control Offer in the event of
a Change of Control or make and consummate an offer with respect to any
Asset Sale that has been consummated or modify any of the provisions or
definitions with respect thereto;
(10) modify or change any provision of the Indenture or the related
definitions affecting the ranking of the Securities in a manner which
adversely affects the Holders; or
(11) make any change in the amendment provisions which require each
holder's consent or in the waiver provisions.
(b) Upon the request of the Company accompanied by a Board Resolution
of its respective Board of Directors authorizing the execution of any such
supplemental indenture, and upon the filing with the Trustee of evidence
satisfactory to the Trustee of the consent of the Securityholders as aforesaid,
and upon receipt by the Trustee of the documents described in Section 9.6, the
Trustee shall join with the Company in the execution of such supplemental
indenture unless such supplemental indenture affects the Trustee's own rights,
duties or immunities
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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.
(c) It shall not be necessary for the consent of the Holders under this
Section to approve the particular form of any proposed amendment, but it shall
be sufficient if such consent approves the substance thereof.
(d) After an amendment under this Section becomes effective, the
Company shall mail to Securityholders a notice briefly describing such
amendment. The failure to give such notice to all Securityholders, or any defect
therein, shall not impair or affect the validity of an amendment under this
Section.
SECTION 9.3. Compliance with Trust Indenture Act. Every amendment to
this Indenture or the Securities shall comply with the TIA as then in effect.
SECTION 9.4. Revocation and Effect of Consents and Waivers. A consent
to an amendment or a waiver by a Holder of a Security shall bind the Holder and
every subsequent Holder of that Security or portion of the Security that
evidences the same debt as the consenting Holder's Security, even if notation of
the consent or waiver is not made on the Security. However, any such Holder or
subsequent Holder may revoke the consent or waiver as to such Holder's Security
or portion of the Security if the Trustee receives the notice of revocation
before the date the amendment or waiver becomes effective. After an amendment or
waiver becomes effective, it shall bind every Securityholder.
The Company may, but shall not be obligated to, fix a record date for
the purpose of determining the Securityholders entitled to give their consent or
take any other action described above or required or permitted to be taken
pursuant to this Indenture. If a record date is fixed, then notwithstanding the
immediately preceding paragraph, those Persons who were Securityholders at such
record date (or their duly designated proxies), and only those Persons, shall be
entitled to give such consent or to revoke any consent previously given or to
take any such action, whether or not such Persons continue to be Holders after
such record date. No such consent shall become valid or effective more than 120
days after such record date.
SECTION 9.5. Notation on or Exchange of Securities. If an amendment
changes the terms of a Security, the Trustee may require the Holder of the
Security to deliver it to the Trustee. The Trustee may place an appropriate
notation on the Security regarding the changed terms and return it to the
Holder. Alternatively, if the Company or the Trustee so determines, the Company
in exchange for the Security shall issue and the Trustee shall authenticate a
new Security that reflects the changed terms. Failure to make the appropriate
notation or to issue a new Security shall not affect the validity of such
amendment.
SECTION 9.6. Trustee to Sign Amendments. The Trustee shall sign any
amendment authorized pursuant to this Article IX if the amendment does not
adversely affect the
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rights, duties, liabilities or immunities of the Trustee. If it does, the
Trustee may, but need not sign it. In signing such amendment the Trustee shall
be entitled to receive indemnity reasonably satisfactory to it and to receive,
and (subject to Section 7.1) shall be fully protected in relying upon, an
Officers' Certificate and an Opinion of Counsel stating that such amendment is
authorized or permitted by this Indenture.
ARTICLE X
Miscellaneous
SECTION 10.1. Trust Indenture Act Controls. If any provision of this
Indenture limits, qualifies or conflicts with another provision which is
required to be included in this Indenture by the TIA, the provision required by
the TIA shall control. If any provision of this Indenture modifies or excludes
any provision of the TIA that may be so modified or excluded, the latter
provision shall be deemed to apply to this Indenture as so modified or excluded,
as the case may be.
SECTION 10.2. Notices. Any notice or communication shall be in writing
and delivered in person or mailed by first-class mail addressed as follows:
if to the Company:
Atlas Air, Inc
538 Commons Drive
Golden, Colorado 80401
Attention: Chief Financial Officer
if to the Trustee:
State Street Bank and Trust Company
Goodwin Square
225 Asylum Street
Hartford, Connecticut 06103
Attention: Corporate Trust Department
The Company or the Trustee by notice to the other may designate
additional or different addresses for subsequent notices or communications.
Any notice or communication mailed to a Securityholder shall be mailed
to the Securityholder at the Securityholder's address as it appears on the
registration books of the Registrar and shall be sufficiently given if so mailed
within the time prescribed.
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All notices and communications (other than those sent to
Securityholders) shall be deemed to have been duly given: at the time delivered
by hand, if personally delivered; five Business Days after being deposited in
the mail, postage prepaid, if mailed.
Any notice or communication to a Securityholder shall be mailed by
first class mail, postage prepaid, to its address shown on the register kept by
the Registrar. Any notice or communication shall also be so mailed to any Person
described in TIA Section 313(c), to the extent required by the TIA. Failure to
mail a notice or communication to a Securityholder or any defect in it shall not
affect its sufficiency with respect to other Securityholders.
If a notice or communication is mailed to any Person in the manner
provided above within the time prescribed, it is duly given, whether or not the
addressee receives it.
If the Company mails a notice or communication to Securityholders, it
shall mail a copy to the Trustee and each Agent at the same time.
SECTION 10.3. Communication by Holders with Other Holders.
Securityholders may communicate pursuant to TIA Section 312(b) with other
Securityholders with respect to their rights under this Indenture or the
Securities. The Company, the Trustee, the Registrar and anyone else shall have
the protection of TIA Section 312(c).
SECTION 10.4 Certificate and Opinion as to Conditions Precedent. Upon
any request or application by the Company to the Trustee to take or refrain from
taking any action under this Indenture, the Company shall furnish to the
Trustee:
(1) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth in
Section 10.5) stating that, in the opinion of the signers, all conditions
precedent, if any, provided for in this Indenture relating to the proposed
action have been complied with; and
(2) an Opinion of Counsel in form and substance reasonably satisfactory
to the Trustee (which shall include the statements set forth in Section
10.5) stating that, in the opinion of such counsel, all such conditions
precedent have been complied with.
SECTION 10.5 Statements Required in Certificate or Opinion. Each
certificate or opinion with respect to compliance with a covenant or condition
provided for in this Indenture shall include:
(1) a statement that the individual making such certificate or opinion
has read such covenant or condition;
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(2) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of such individual, 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
individual, such covenant or condition has been complied with and such other
opinions as the Trustee may reasonably request.
SECTION 10.6. When Securities Disregarded. In determining whether the
Holders of the required principal amount of Securities have concurred in any
direction, waiver or consent, Securities owned by the Company or by any Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with the Company shall be disregarded and deemed not to be
outstanding, except that, for the purpose of determining whether the Trustee
shall be protected in relying on any such direction, waiver or consent, only
Securities which the Trustee knows are so owned shall be so disregarded. Also,
subject to the foregoing, only Securities outstanding at the time shall be
considered in any such determination.
SECTION 10.7. Rules by Trustee, Paying Agent and Registrar. The Trustee
may make reasonable rules for action by or at a meeting of Securityholders. The
Registrar and the Paying Agent may make reasonable rules for their functions.
SECTION 10.8. Legal Holidays. A "Legal Holiday" is a Saturday, a Sunday
or a day on which banking institutions are not required to be open in the State
of New York, or the State in which the Corporate Trust Office is located. If a
payment date is a Legal Holiday, payment shall be made on the next succeeding
day that is not a Legal Holiday, and no interest shall accrue for the
intervening period. If a regular record date is a Legal Holiday, the record date
shall not be affected.
SECTION 10.9. Governing Law. This Indenture and the Securities shall be
governed by, and construed in accordance with, the laws of the State of New York
but without giving effect to applicable principles of conflicts of law to the
extent that the application of the laws of another jurisdiction would be
required thereby.
SECTION 10.10. No Recourse Against Others. A past, present or future
director, officer, employee or stockholder, as such, of the Company shall not
have any liability for any obligations of the Company under the Securities or
this Indenture or for any claim based on, in respect of or by reason of such
obligations or their creation. By accepting a Security, each Securityholder
shall waive and release all such liability. The waiver and release shall be part
of the consideration for the issue of the Securities.
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SECTION 10.11. Successors. All agreements of the Company in this
Indenture and the Securities shall bind their respective successors. All
agreements of the Trustee in this Indenture shall bind its successors.
SECTION 10.12. Multiple Originals. The parties may sign any number of
copies of this Indenture. Each signed copy shall be an original, but all of them
together represent the same agreement. One signed copy is enough to prove this
Indenture.
SECTION 10.13. Variable Provisions. The Company initially appoints the
Trustee as Paying Agent and Registrar and custodian with respect to any Global
Securities.
SECTION 10.14. Qualification of Indenture. The Company shall qualify
this Indenture under the TIA in accordance with the terms and conditions of the
Registration Rights Agreement and shall pay all reasonable costs and expenses
(including attorneys' fees for the Company, the Trustee and the Holders)
incurred in connection therewith, including, but not limited to, costs and
expenses of qualification of the Indenture and the Securities and printing this
Indenture and the Securities. The Trustee shall be entitled to receive from the
Company any such Officers' Certificates, Opinions of Counsel or other
documentation as it may reasonably request in connection with any such
qualification of this Indenture under the TIA.
SECTION 10.15. Table of Contents; Headings. The table of contents,
cross-reference sheet and headings of the Articles and Sections of this
Indenture have been inserted for convenience of reference only, are not intended
to be considered a part hereof and shall not modify or restrict any of the terms
or provisions hereof.
SECTION 10.16. Severability. In case any provision in this Indenture or
in the Securities shall be invalid, illegal or unenforceable, in any respect for
any reason, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby, it being
intended that all of the provisions hereof shall be enforceable to the fullest
extent permitted by law.
SECTION 10.17. No Adverse Interpretation of Other Agreements. This
Indenture may not be used to interpret another indenture, loan or debt agreement
of the Company or any of its Subsidiaries. Any such indenture, loan or debt
agreement may not be used to interpret this Indenture.
71
<PAGE> 79
IN WITNESS WHEREOF, the parties have caused this Indenture to be duly
executed as of the date first written above.
ATLAS AIR, INC.
By: /s/ Richard H. Shuyler
----------------------------------------
Name: Richard Shuyler
Title: Executive Vice President--
Strategic Planning and Treasurer
STATE STREET BANK AND TRUST
COMPANY, as Trustee
By: /s/ Steven Cimalore
----------------------------------------
Name: Steven Cimalore
Title: Vice President
<PAGE> 80
EXHIBIT A
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED
OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S.
PERSONS EXCEPT AS SET FORTH 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) (AN "INSTITUTIONAL ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND
IS ACQUIRING THIS SECURITY IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH
REGULATION S UNDER THE SECURITIES ACT, (2) AGREES THAT IT WILL NOT, WITHIN THE
TIME PERIOD REFERRED TO UNDER RULE 144(k) UNDER THE SECURITIES ACT AS IN EFFECT
ON THE DATE OF THE TRANSFER OF THIS SECURITY, RESELL OR OTHERWISE TRANSFER THIS
SECURITY EXCEPT (A) TO THE ISSUER 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 (OR HAS FURNISHED ON
ITS BEHALF BY A U.S. BROKER-DEALER) TO THE TRUSTEE A SIGNED LETTER CONTAINING
CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER
OF THIS SECURITY (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE) AND
IF SUCH TRANSFER IS IN RESPECT OF AN AGGREGATE PRINCIPAL AMOUNT OF SECURITIES OF
LESS THAN $100,000, AN OPINION OF COUNSEL ACCEPTABLE TO THE ISSUER THAT SUCH
TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT, (D) OUTSIDE THE UNITED STATES
IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT,
(E) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE
SECURITIES ACT (IF AVAILABLE) OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT AND (3) AGREES THAT IT WILL GIVE TO EACH
PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT
OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THIS SECURITY WITHIN THE TIME
PERIOD REFERRED TO ABOVE, THE HOLDER MUST CHECK THE APPROPRIATE BOX SET FORTH ON
THE REVERSE HEREOF RELATING TO THE MANNER OF SUCH TRANSFER AND SUBMIT THIS
CERTIFICATE TO THE TRUSTEE. IF THE PROPOSED TRANSFEREE IS AN INSTITUTIONAL
ACCREDITED INVESTOR, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE
TRUSTEE AND THE ISSUER SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION
AS EITHER OF THEM MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING
MADE PURSUANT TO AN EXEMPTION FROM, OR
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IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION" "UNITED STATES" AND "U.S.
PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES
ACT.
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR SECURITIES
IN DEFINITIVE FORM, THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY
THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY, OR BY ANY SUCH NOMINEE OF THE
DEPOSITARY, OR BY THE DEPOSITARY OR NOMINEE OF SUCH SUCCESSOR DEPOSITARY OR ANY
SUCH NOMINEE, TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR
DEPOSITARY. TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN
WHOLE, BUT NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR THEREOF OR
SUCH SUCCESSOR'S NOMINEE, AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY
SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH
IN THE INDENTURE.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER
OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS
IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT HEREON IS
MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
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<PAGE> 82
CUSIP No:_____
(Front of Security)
No. 1 $___________
ATLAS AIR, INC.
9 1/4% Senior Notes due 2008
ATLAS AIR, INC., a Delaware corporation, for value received,
promises to pay to Cede & Co., as nominee of the Depository Trust Company, or
its registered assigns, the principal sum of _________ AND /oo DOLLARS
($________) on April 15, 2008.
Interest Payment Dates: April 15, and October 15, commencing October
15, 1998.
Record Dates: April 1 and October 1 (whether or not a Business Day).
Additional provisions of this Security are set forth on the other
side of this Security.
Dated:
ATLAS AIR, INC.
By:_________________________________
Name:
Title:
By:_________________________________
Name:
Title:
(Trustee's Certificate of Authentication)
This is one of the Securities referred
to in the within-mentioned Indenture
STATE STREET BANK AND TRUST COMPANY, as Trustee
By:_________________________________
Authorized Officer
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<PAGE> 83
(Reverse of Security)
ATLAS AIR, INC.
9 1/4% SENIOR NOTE DUE 2008
Capitalized terms used herein have the meanings assigned to them in
the Indenture (as defined below) unless otherwise indicated.
1. Interest. Atlas Air, Inc., a Delaware corporation (the
"Company"), promises to pay interest on the principal amount of this Security at
the rate and in the manner specified below. The Company shall pay, in cash,
interest on the principal amount of this Security at the rate per annum of 9
1/4%. The Company will pay interest semiannually in arrears on April 15 and
October 15 of each year (each an "Interest Payment Date"), commencing October
15, 1998, or if any such day is not a Business Day on the next succeeding
Business Day. Interest will be computed on the basis of a 360-day year
consisting of twelve 30-day months. Interest shall accrue from the most recent
Interest Payment Date to which interest has been paid or, if no interest has
been paid, from the date of the original issuance of the Securities. To the
extent lawful, the Company shall pay interest on overdue principal at the rate
of 2% per annum in excess of the then applicable interest rate on the
Securities; it shall pay interest on overdue installments of interest (without
regard to any applicable grace periods) at the same rate to the extent lawful.
2. Method of Payment. The Company shall pay interest on the
Securities (except defaulted interest) to the Persons who are registered Holders
of Securities at the close of business on the Record Date immediately preceding
the Interest Payment Date, even if such Securities are cancelled after such
Record Date and on or before such Interest Payment Date. Securityholders must
surrender Securities to a Paying Agent to collect principal payments. The
Company shall pay principal, premium, if any, and interest in money of the
United States that at the time of payment is legal tender for payment of public
and private debts ("U.S. Legal Tender"). However, the Company may pay principal,
premium, if any, and interest by its check payable in such U.S. Legal Tender.
The Company may deliver any such interest payment to the Paying Agent or to a
Securityholder at the Securityholder's registered address.
3. Paying Agent and Registrar. Initially, the Trustee will act as
Paying Agent and Registrar. The Company may change any Paying Agent, Registrar
or co-registrar without prior notice to any Securityholder. The Company may act
in any such capacity.
4. Indenture. The Company issued the Securities under an Indenture,
dated as of April 9, 1998 (the "Indenture"), among the Company and the Trustee.
The terms of the Securities include those stated in the Indenture and those made
part of the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.
Code Sections 77aaa-77bbbb) (the "TIA") as in effect on the date the
Indenture is qualified. The Securities are subject to all such terms, and
Securityholders are referred to the Indenture and the TIA for a statement of
such terms. The terms
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<PAGE> 84
of the Indenture shall govern any inconsistencies between the Indenture and the
Securities. The Securities include the Initial Securities and the Exchange
Securities issued in exchange for the Initial Securities pursuant to the
Indenture. The Initial Securities and the Exchange Securities are treated as a
single class of securities under the Indenture. Capitalized terms herein are
used as defined in the Indenture unless otherwise defined herein. The terms of
the Securities include those stated in the Indenture and those made part of the
Indenture by reference to the TIA, as in effect on the date of the Indenture.
Notwithstanding anything to the contrary herein, the Securities are subject to
all such terms, and Securityholders of Securities are referred to the Indenture
and said Act for a statement of them. The Securities are unsecured senior
obligations of the Company limited to $175,000,000 in aggregate principal
amount.
5. (a) Optional Redemption. Except as set forth below, the
Securities will not be redeemable at the option of the Company prior to April
15, 2003. On and after such date, the Securities will be redeemable, at the
Company's option, in whole or in part, at any time upon not less than 30 nor
more than 60 days' prior notice mailed by first-class mail to each holder's
registered address, at the following redemption prices (expressed in percentages
of principal amount), if redeemed during the 12-month period commencing on April
15 of the years set forth below, plus accrued and unpaid interest to the
redemption date (subject to the right of holders of record on the relevant
record date to receive interest due on the relevant interest payment date):
<TABLE>
<CAPTION>
Year Redemption Price
- ---- ----------------
<S> <C>
2003..................................... 104.625%
2004..................................... 103.083%
2005..................................... 101.542%
2006 and thereafter...................... 100.000%
</TABLE>
(b) Optional Redemption upon Public Offerings. In addition, at any
time on or prior to April 15, 2001, the Company, at its option, may redeem up to
35% of the aggregate principal amount of the Securities originally issued with
the net cash proceeds of one or more Public Equity Offerings at a redemption
price equal to 109.25% of the principal amount thereof, plus accrued and unpaid
interest thereon, if any, to the date of redemption; provided, however, that
after any such redemption the aggregate principal amount of the Securities
outstanding must equal at least 65% of the aggregate principal amount of the
Securities originally issued. In order to effect the foregoing redemption with
the proceeds of any Public Equity Offering, the Company shall make such
redemption not more than 60 days after the consummation of any such Public
Equity Offering.
As used in the preceding paragraph, "Public Equity Offering" means
an underwritten primary public offering of Qualified Capital Stock of the
Company pursuant to a registration statement filed with the Commission in
accordance with the Securities Act.
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<PAGE> 85
6. Mandatory Redemption. The Securities are not subject to mandatory
redemption or sinking fund payments.
7. Repurchase at Option of Securityholder. Sections 4.8 and 4.9 of
the Indenture provide that, after certain Asset Sales (as defined in the
Indenture) and upon the occurrence of a Change of Control (as defined in the
Indenture), and subject to the further limitations contained therein, the
Company will make an offer to purchase certain amounts of the Securities in
accordance with procedures set forth in the Indenture.
8. Selection and Notice of Redemption. In the case of any partial
redemption, selection of the Securities for redemption will be made by the
Trustee in compliance with the requirements of the principal national securities
exchange, if any, on which such Securities are listed, or if such Securities are
not then listed on a national securities exchange, on a pro rata basis, by lot
or by such other method as the Trustee in its sole discretion shall deem to be
fair and appropriate; provided, however, that if a partial redemption is made
with the proceeds of a Public Equity Offering, selection of the Securities or
portion thereof for redemption shall be made by the Trustee only on a pro rata
basis, unless such method is otherwise prohibited. Securities may be redeemed in
part in multiples of $1,000 principal amount only. Notice of redemption will be
sent, by first class mail, postage prepaid, at least 30 but not more than 60
days (unless a shorter period is acceptable to the Trustee) prior to the date
fixed for redemption to each holder whose Securities are to be redeemed at the
last address for such holder then shown on the registry books. If any Security
is to be redeemed in part only, the notice of redemption that relates to such
Security shall state the portion of the principal amount thereof to be redeemed.
A new Security in principal amount equal to the unredeemed portion thereof will
be issued in the name of the holder thereof upon cancellation of the original
Security. On and after any redemption date, interest will cease to accrue on the
Securities or part thereof called for redemption as long as the Company has
deposited with the Paying Agent funds in satisfaction of the redemption price
pursuant to the Indenture.
9. Registration Rights. Pursuant to the Registration Rights
Agreement, and subject to certain terms and conditions stated therein, the
Company will be obligated to consummate an Exchange Offer pursuant to which the
Holders of the Initial Securities shall have the right to exchange this Security
for Exchange Securities, which have been registered under the Securities Act, in
like principal amount and having terms identical in all material respect to the
Initial Security. In certain circumstances, and subject to certain terms and
conditions, Holders of the Initial Securities shall have the right to receive
liquidated damages if the Company shall have failed to fulfill its obligations
under the Registration Rights Agreement.
10. Denominations, Transfer, Exchange. The Securities are in
registered form without coupons in denominations of $1,000 and integral
multiples of $1,000. The transfer of Securities may be registered and Securities
may be exchanged as provided in the Indenture. The Registrar and the Trustee may
require a Securityholder among other things, to furnish appropriate endorsements
and transfer documents and to pay any taxes and fees required by law or
permitted
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<PAGE> 86
by the Indenture. The Registrar need not exchange or register the transfer of
any Security or portion of a Security selected for redemption. Also, it need not
exchange or register the transfer of any Securities during a period beginning at
the opening of business on a Business Day 15 days before the day of any
selection of Securities to be redeemed and ending at the close of business on
the day of selection or during the period between a Record Date and the
corresponding Interest Payment Date.
11. Persons Deemed Owners. Prior to due presentment to the Trustee
for registration of the transfer of this Security, the Trustee, any Agent and
the Company may deem and treat the Person in whose name this Security is
registered as its absolute owner for the purpose of receiving payment of
principal of, premium, if any, and interest on this Security and for all other
purposes whatsoever, whether or not this Security is overdue, and neither the
Trustee, any Agent nor the Company shall be affected by notice to the contrary.
The registered Securityholder shall be treated as its owner for all purposes.
12. Amendments and Waivers. Subject to certain exceptions provided
in the Indenture, the Indenture or the Securities may be amended with the
written consent of the Holders of a majority in principal amount of the then
outstanding Securities, and any existing Default or Event of Default (except a
payment default) may be waived with the consent of the Holders of a majority in
principal amount of the then outstanding Securities. Without the consent of any
Securityholder, the Indenture or the Securities may be amended to, among other
things, cure any ambiguity, defect or inconsistency, to comply with the
requirements of the Commission in order to effect or maintain qualification of
the Indenture under the TIA or to make any change that does not adversely affect
in any material respect the rights of any Securityholder.
13. Defaults and Remedies. If an Event of Default occurs and is
continuing, the Trustee or the holders of at least 25% in principal amount of
the outstanding Securities by notice to the Company may declare the principal of
and accrued and unpaid interest, if any, on all the Securities to be due and
payable. Upon such a declaration, such principal and accrued and unpaid interest
shall be due and payable immediately, if an Event of Default relating to certain
events of bankruptcy, insolvency or reorganization of the Company occurs and is
continuing, the principal of and accrued and unpaid interest on all the
Securities will become and be immediately due and payable without any
declaration or other act on the part of the Trustee or any holders. Under
certain circumstances, the holders of a majority in principal amount of the
outstanding Securities may rescind any such acceleration with respect to the
Securities and its consequences.
14. Trustee Dealings with the Company. The Trustee under the
Indenture, in its individual or any other capacity, may make loans to, accept
deposits from, and perform services for the Company or any Affiliate of the
Company and may otherwise deal with the Company and their respective Affiliates
as if it were not Trustee.
15. Restrictive Covenants. The Indenture imposes certain limitations
on the ability of the Company and its Subsidiaries to, among other things, incur
additional Indebtedness,
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<PAGE> 87
pay dividends or make certain other restricted payments, consummate certain
asset sales, enter into certain transactions with affiliates, incur liens,
create restrictions on the ability of a subsidiary to pay dividends or make
certain payments, sell or issue preferred stock of subsidiaries to third
parties, merge or consolidate with any other person or sell, assign, transfer,
lease, convey or otherwise dispose of all or substantially all of the assets of
the Company. Such limitations are subject to a number of important
qualifications and exceptions provided for in the Indenture. The Company must
annually report to the Trustee on compliance with such limitations.
16. Authentication. This Security shall not be valid until
authenticated by the manual signature of the Trustee or an authenticating agent.
17. Defeasance. Subject to certain conditions provided for in the
Indenture, the Company at any time may terminate some or all of its obligations
under the Securities and the Indenture if the Company deposits with the Trustee
money or U.S. Government Obligations for the payment of principal, premium (if
any) and interest on the Securities to redemption or maturity, as the case may
be.
18. Governing Law. The Laws of the State of New York shall govern
this Security and the Indenture, without regard to principles of conflict of
laws.
19. Unclaimed Money. If money for the payment of principal or
interest remains unclaimed for two years, the Trustee and the Paying Agent will
pay the money back to the Company. After that, all liability of the Trustee and
such Paying Agent with respect to such money shall cease.
20. Successors. When a successor assumes, in accordance with the
Indenture, all the obligations of its predecessors under the Securities and the
Indenture, the predecessor will be released from those obligations.
21. No Recourse Against Others. No stockholder, director, officer,
employee or incorporator, as such, of the Company shall have any liability for
any obligation of the Company under the Securities or the Indenture or for any
claim based on, in respect of or by reason of, such obligations or their
creation. Each Securityholder by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for the issuance
of the Securities.
22. Abbreviations. Customary abbreviations may be used in the name
of a Securityholder or an assignee, such as: TEN COM (= tenants in common), TEN
ENT (= tenants by the entireties), JT TEN (= joint tenants with right of
survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (=
Uniform Gifts to Minors Act).
23. CUSIP Numbers. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company has caused
CUSIP numbers to be printed on the Securities and has directed the Trustee to
use CUSIP numbers in
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<PAGE> 88
notices of redemption as a convenience to Securityholders. No representation is
made as to the accuracy of such numbers either as printed on the Securities or
as contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
The Company will furnish to any Securityholder upon written request
and without charge a copy of the Indenture. Request may be made to:
Atlas Air, Inc.
538 Commons Drive
Golden, Colorado 80401
Attention: Chief Financial Officer
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<PAGE> 89
ASSIGNMENT FORM
To assign this Security, fill in the form below: (I) or (we) assign
and transfer this Security to
________________________________________________________________________________
________________________________________________________________________________
(Insert assignee's soc. sec. or tax I.D. no.)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Print or type assignee's name, address and zip code)
and irrevocably appoint ________________________________________________________
agent to transfer this Security on the books of the Company. The agent may
substitute another to act for him.
Date:___________________
Your Signature:_____________________________
(Sign exactly as your name appears on the
face of this Security)
Signature Guarantee:
________________________
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<PAGE> 90
OPTION OF SECURITYHOLDER TO ELECT PURCHASE
If you want to elect to have all or any part of this Security
purchased by the Company pursuant to Section 4.8 or Section 4.9 of the Indenture
check the appropriate box:
[ ] Section 4.8 [ ] Section 4.9
If you want to have only part of the Security purchased by the
Company pursuant to Section 4.8 or Section 4.9 of the Indenture, state the
amount you elect to have purchased:
$_______________________
Date:___________________
Your Signature:_____________________________
(Sign exactly as your name appears on the
face of this Security)
Signature Guarantee:
________________________
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<PAGE> 91
EXHIBIT B
THIS SECURITY MAY NOT BE OFFERED OR SOLD TO A U.S. PERSON (AS SUCH
TERM IS DEFINED IN REGULATION S UNDER THE SECURITIES ACT) OR FOR THE ACCOUNT OR
BENEFIT OF A U.S. PERSON PRIOR TO THE EXPIRATION OF THE RESTRICTED PERIOD (AS
DEFINED IN THE INDENTURE), AND NO TRANSFER OR EXCHANGE OF THIS SECURITY MAY BE
MADE FOR AN INTEREST IN A PHYSICAL SECURITY UNTIL AFTER THE LATER OF THE DATE OF
EXPIRATION OF THE RESTRICTED PERIOD AND THE DATE ON WHICH THE PROPER REQUIRED
CERTIFICATION RELATING TO SUCH INTEREST HAS BEEN PROVIDED IN ACCORDANCE WITH THE
TERMS OF THE INDENTURE, TO THE EFFECT THAT THE BENEFICIAL OWNER OR OWNERS OF
SUCH INTEREST ARE NOT U.S. PERSONS.
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR SECURITIES
IN DEFINITIVE FORM, THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY
THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY, OR BY ANY SUCH NOMINEE OF THE
DEPOSITARY, OR BY THE DEPOSITARY OR NOMINEE OF SUCH SUCCESSOR DEPOSITARY OR ANY
SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR
DEPOSITARY. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER
OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS
IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT HEREON IS
MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN
WHOLE, BUT NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR THEREOF OR
SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL
BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN
SECTION 2.17 OF THE INDENTURE.
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<PAGE> 92
CUSIP No:
(Front of Security)
No. 1 $___________
ATLAS AIR, INC.
9 1/4% Senior Notes due 2008
ATLAS AIR, INC., a Delaware corporation, for value received,
promises to pay to Cede & Co., as nominee of the Depository Trust Company, or
its registered assigns, the principal sum of _________ AND /oo DOLLARS
($________) on April 15, 2008.
Interest Payment Dates: April 15 and October 15, commencing October
15, 1998.
Record Dates: April 1 and October 1 (whether or not a Business Day).
Additional provisions of this Security are set forth on the other
side of this Security.
Dated:
ATLAS AIR, INC.
By:____________________________________
Name:
Title:
By:____________________________________
Name:
Title:
(Trustee's Certificate of Authentication)
This is one of the Securities referred
to in the within-mentioned Indenture
STATE STREET BANK AND TRUST COMPANY, as Trustee
By:____________________________________
Authorized Officer
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<PAGE> 93
(Reverse of Security)
ATLAS AIR, INC.
9 1/4% SENIOR NOTE DUE 2008
Capitalized terms used herein have the meanings assigned to them in
the Indenture (as defined below) unless otherwise indicated.
1. Interest. Atlas Air, Inc., a Delaware corporation (the
"Company"), promises to pay interest on the principal amount of this Security at
the rate and in the manner specified below. The Company shall pay, in cash,
interest on the principal amount of this Security at the rate per annum of
9 1/4%. The Company will pay interest semiannually in arrears on April 15 and
October 15 of each year (each an "Interest Payment Date"), commencing October
15, 1998, or if any such day is not a Business Day on the next succeeding
Business Day. Interest will be computed on the basis of a 360-day year
consisting of twelve 30-day months. Interest shall accrue from the most recent
Interest Payment Date to which interest has been paid or, if no interest has
been paid, from the date of the original issuance of the Securities. To the
extent lawful, the Company shall pay interest on overdue principal at the rate
of 2% per annum in excess of the then applicable interest rate on the
Securities; it shall pay interest on overdue installments of interest (without
regard to any applicable grace periods) at the same rate to the extent lawful.
2. Method of Payment. The Company shall pay interest on the
Securities (except defaulted interest) to the Persons who are registered Holders
of Securities at the close of business on the Record Date immediately preceding
the Interest Payment Date, even if such Securities are cancelled after such
Record Date and on or before such Interest Payment Date. Securityholders must
surrender Securities to a Paying Agent to collect principal payments. The
Company shall pay principal, premium, if any, and interest in money of the
United States that at the time of payment is legal tender for payment of public
and private debts ("U.S. Legal Tender"). However, the Company may pay principal,
premium, if any, and interest by its check payable in such U.S. Legal Tender.
The Company may deliver any such interest payment to the Paying Agent or to a
Securityholder at the Securityholder's registered address.
3. Paying Agent and Registrar. Initially, the Trustee will act as
Paying Agent and Registrar. The Company may change any Paying Agent, Registrar
or co-registrar without prior notice to any Securityholder. The Company may act
in any such capacity.
4. Indenture. The Company issued the Securities under an Indenture,
dated as of April 9, 1998 (the "Indenture"), among the Company and the Trustee.
The terms of the Securities include those stated in the Indenture and those made
part of the Indenture by reference to the TIA as in effect on the date the
Indenture is qualified. The Securities are subject to all such terms, and
Securityholders are referred to the Indenture and the TIA for a statement of
such terms. The terms of the Indenture shall govern any inconsistencies between
the Indenture and the
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Securities. The Securities include the Initial Securities and the Exchange
Securities issued in exchange for the Initial Securities pursuant to the
Indenture. The Initial Securities and the Exchange Securities are treated as a
single class of securities under the Indenture. Capitalized terms herein are
used as defined in the Indenture unless otherwise defined herein. The terms of
the Securities include those stated in the Indenture and those made part of the
Indenture by reference to the Trust Indenture Act of 1939 (15 U.S. Code
Sections 77aaa-77bbbb) (the "TIA"), as in effect on the date of the
Indenture. Notwithstanding anything to the contrary herein, the Securities are
subject to all such terms, and Securityholders of Securities are referred to the
Indenture and said Act for a statement of them. The Securities are unsecured
senior obligations of the Company limited to $175,000,000 in aggregate principal
amount.
5. (a) Optional Redemption. Except as set forth below, the
Securities will not be redeemable at the option of the Company prior to April
15, 2003. On and after such date, the Securities will be redeemable, at the
Company's option, in whole or in part, at any time upon not less than 30 nor
more than 60 days' prior notice mailed by first-class mail to each holder's
registered address, at the following redemption prices (expressed in percentages
of principal amount), if redeemed during the 12-month period commencing on April
15 of the years set forth below, plus accrued and unpaid interest to the
redemption date (subject to the right of holders of record on the relevant
record date to receive interest due on the relevant interest payment date):
<TABLE>
<CAPTION>
Year Redemption Price
- ---- ----------------
<S> <C>
2003..................................... 104.625%
2004..................................... 103.083%
2005..................................... 101.542%
2006 and thereafter...................... 100.000%
</TABLE>
(b) Optional Redemption Upon Public Offerings. In addition, at any
time on or prior to April 15, 2001, the Company, at its option, may redeem up to
35% of the aggregate principal amount of the Securities originally issued with
the net cash proceeds of one or more Public Equity Offerings at a redemption
price equal to 109.25% of the principal amount thereof, plus accrued and unpaid
interest thereon, if any, to the date of redemption; provided, however, that
after any such redemption the aggregate principal amount of the Securities
outstanding must equal at least 65% of the aggregate principal amount of the
Securities originally issued. In order to effect the foregoing redemption with
the proceeds of any Public Equity Offering, the Company shall make such
redemption not more than 60 days after the consummation of any such Public
Equity Offering.
As used in the preceding paragraph, "Public Equity Offering" means
an underwritten primary public offering of Qualified Capital Stock of the
Company pursuant to a registration statement filed with the Commission in
accordance with the Securities Act.
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<PAGE> 95
6. Mandatory Redemption. The Securities are not subject to mandatory
redemption or sinking fund payments.
7. Repurchase at Option of Securityholder. Sections 4.8 and 4.9 of
the Indenture provide that, after certain Asset Sales (as defined in the
Indenture) and upon the occurrence of a Change of Control (as defined in the
Indenture), and subject to the further limitations contained therein, the
Company will make an offer to purchase certain amounts of the Securities in
accordance with procedures set forth in the Indenture.
8. Selection and Notice of Redemption. In the case of any partial
redemption, selection of the Securities for redemption will be made by the
Trustee in compliance with the requirements of the principal national securities
exchange, if any, on which such Securities are listed, or if such Securities are
not then listed on a national securities exchange, on a pro rata basis, by lot
or by such other method as the Trustee in its sole discretion shall deem to be
fair and appropriate; provided, however, that if a partial redemption is made
with the proceeds of a Public Equity Offering, selection of the Securities or
portion thereof for redemption shall be made by the Trustee only on a pro rata
basis, unless such method is otherwise prohibited. Securities may be redeemed in
part in multiples of $1,000 principal amount only. Notice of redemption will be
sent, by first class mail, postage prepaid, at least 30 but not more than 60
days (unless a shorter period is acceptable to the Trustee) prior to the date
fixed for redemption to each holder whose Securities are to be redeemed at the
last address for such holder then shown on the registry books. If any Security
is to be redeemed in part only, the notice of redemption that relates to such
Security shall state the portion of the principal amount thereof to be redeemed.
A new Security in principal amount equal to the unredeemed portion thereof will
be issued in the name of the holder thereof upon cancellation of the original
Security. On and after any redemption date, interest will cease to accrue on the
Securities or part thereof called for redemption as long as the Company has
deposited with the Paying Agent funds in satisfaction of the redemption price
pursuant to the Indenture.
9. Denominations, Transfer, Exchange. The Securities are in
registered form without coupons in denominations of $1,000 and integral
multiples of $1,000. The transfer of Securities may be registered and Securities
may be exchanged as provided in the Indenture. The Registrar and the Trustee may
require a Securityholder among other things, to furnish appropriate endorsements
and transfer documents and to pay any taxes and fees required by law or
permitted by the Indenture. The Registrar need not exchange or register the
transfer of any Security or portion of a Security selected for redemption. Also,
it need not exchange or register the transfer of any Securities during a period
beginning at the opening of business on a Business Day 15 days before the day of
any selection of Securities to be redeemed and ending at the close of business
on the day of selection or during the period between a Record Date and the
corresponding Interest Payment Date.
10. Persons Deemed Owners. Prior to due presentment to the Trustee
for registration of the transfer of this Security, the Trustee, any Agent and
the Company may deem
B-5
<PAGE> 96
and treat the Person in whose name this Security is registered as its absolute
owner for the purpose of receiving payment of principal of, premium, if any, and
interest on this Security and for all other purposes whatsoever, whether or not
this Security is overdue, and neither the Trustee, any Agent nor the Company
shall be affected by notice to the contrary. The registered Securityholder shall
be treated as its owner for all purposes.
11. Amendments and Waivers. Subject to certain exceptions provided
in the Indenture, the Indenture or the Securities may be amended with the
written consent of the Holders of a majority in principal amount of the then
outstanding Securities, and any existing Default or Event of Default (except a
payment default) may be waived with the consent of the Holders of a majority in
principal amount of the then outstanding Securities. Without the consent of any
Securityholder, the Indenture or the Securities may be amended to, among other
things, cure any ambiguity, defect or inconsistency, to comply with the
requirements of the Commission in order to effect or maintain qualification of
the Indenture under the TIA or to make any change that does not adversely affect
in any material respect the rights of any Securityholder.
12. Defaults and Remedies. If an Event of Default occurs and is
continuing, the Trustee or the holders of at least 25% in principal amount of
the outstanding Securities by notice to the Company may declare the principal of
and accrued and unpaid interest, if any, on all the Securities to be due and
payable. Upon such a declaration, such principal and accrued and unpaid interest
shall be due and payable immediately, if an Event of Default relating to certain
events of bankruptcy, insolvency or reorganization of the Company occurs and is
continuing, the principal of and accrued and unpaid interest on all the
Securities will become and be immediately due and payable without any
declaration or other act on the part of the Trustee or any holders. Under
certain circumstances, the holders of a majority in principal amount of the
outstanding Securities may rescind any such acceleration with respect to the
Securities and its consequences.
13. Trustee Dealings with the Company. The Trustee under the
Indenture, in its individual or any other capacity, may make loans to, accept
deposits from, and perform services for the Company or any Affiliate of the
Company and may otherwise deal with the Company and their respective Affiliates
as if it were not Trustee.
14. Restrictive Covenants. The Indenture imposes certain limitations
on the ability of the Company and its Subsidiaries to, among other things, incur
additional Indebtedness, make payments in respect of its Capital Stock or
certain Indebtedness, pay dividends or make certain other restricted payments,
consummate certain asset sales, enter into certain transactions with affiliates,
incur liens, create restrictions on the ability of a subsidiary to pay dividends
or make certain payments, sell or issue preferred stock of subsidiaries to third
parties, merge or consolidate with any other person or sell, assign, transfer,
lease, convey or otherwise dispose of all or substantially all of the assets of
the Company. Such limitations are subject to a number of important
qualifications and exceptions provided for in the Indenture. The Company must
annually report to the Trustee on compliance with such limitations.
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<PAGE> 97
15. Authentication. This Security shall not be valid until
authenticated by the manual signature of the Trustee or an authenticating agent.
16. Defeasance. Subject to certain conditions provided for in the
Indenture, the Company at any time may terminate some or all of its obligations
under the Securities and the Indenture if the Company deposits with the Trustee
money or U.S. Government Obligations for the payment of principal, premium (if
any) and interest on the Securities to redemption or maturity, as the case may
be.
17. Governing Law. The Laws of the State of New York shall govern
this Security and the Indenture, without regard to principles of conflict of
laws.
18. Abbreviations. Customary abbreviations may be used in the name
of a Securityholder or an assignee, such as: TEN COM (= tenants in common), TEN
ENT (= tenants by the entireties), JT TEN (= joint tenants with right of
survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (=
Uniform Gifts to Minors Act).
19. Unclaimed Money. If money for the payment of principal or
interest remains unclaimed for two years, the Trustee and the Paying Agent will
pay the money back to the Company. After that, all liability of the Trustee and
such Paying Agent with respect to such money shall cease.
20. Successors. When a successor assumes, in accordance with the
Indenture, all the obligations of its predecessors under the Securities and the
Indenture, the predecessor will be released from those obligations.
21. No Recourse Against Others. No stockholder, director, officer,
employee or incorporator, as such, of the Company shall have any liability for
any obligation of the Company under the Securities or the Indenture or for any
claim based on, in respect of or by reason of, such obligations or their
creation. Each Holder of a Note by accepting a Security waives and releases all
such liability. The waiver and release are part of the consideration for the
issuance of the Securities.
22. CUSIP Numbers. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company has caused
CUSIP numbers to be printed on the Securities and has directed the Trustee to
use CUSIP numbers in notices of redemption as a convenience to Securityholders.
No representation is made as to the accuracy of such numbers either as printed
on the Securities or as contained in any notice of redemption and reliance may
be placed only on the other identification numbers placed thereon.
The Company will furnish to any Securityholder upon written request
and without charge a copy of the Indenture. Request may be made to:
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<PAGE> 98
Atlas Air, Inc.
538 Commons Drive
Golden, Colorado 80401
Attention: Chief Financial Officer
B-8
<PAGE> 99
ASSIGNMENT FORM
To assign this Security, fill in the form below: (I) or (we) assign
and transfer this Security to
________________________________________________________________________________
________________________________________________________________________________
(Insert assignee's soc. sec. or tax I.D. no.)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Print or type assignee's name, address and zip code)
and irrevocably appoint ________________________________________________________
agent to transfer this Security on the books of the Company. The agent may
substitute another to act for him.
Date:___________________
Your Signature:_____________________________
(Sign exactly as your name appears on the
face of this Security)
Signature Guarantee:
________________________
B-9
<PAGE> 100
OPTION OF SECURITYHOLDER TO ELECT PURCHASE
If you want to elect to have all or any part of this Security
purchased by the Company pursuant to Section 4.8 or Section 4.9 of the Indenture
check the appropriate box:
[ ] Section 4.8 [ ] Section 4.9
If you want to have only part of the Security purchased by the
Company pursuant to Section 4.8 or Section 4.9 of the Indenture, state the
amount you elect to have purchased:
$_______________________
Date:___________________
Your Signature:_____________________________
(Sign exactly as your name appears on the
face of this Security)
Signature Guarantee:
________________________
B-10
<PAGE> 101
EXHIBIT C
Form of Certificate to Be
Delivered in Connection with
Transfers to Non-QIB Accredited Investors
State Street Bank and Trust Company
Goodwin Square
225 Asylum Street
Hartford, Connecticut 06103
Attention: Corporate Trust Department
Re: Atlas Air, Inc.
9 1/4% Senior Notes due 2008
Ladies and Gentlemen:
In connection with our proposed purchase of 9 1/4% Senior Notes due
2008 (the "Securities") of Atlas Air, Inc. (the "Company"), we confirm that:
1. We have received a copy of the Offering Memorandum (the "Offering
Memorandum"), dated April 7, 1998 relating to the Securities and such other
information as we deem necessary in order to make our investment decision. We
acknowledge that we have read and agreed to the matters stated on pages (i) and
(ii) of the Offering Memorandum and in the section entitled "Transfer
Restrictions" of the Offering Memorandum including the restrictions on
duplication and circulation of the Offering Memorandum.
2. We understand that any subsequent transfer of the Securities is
subject to certain restrictions and conditions set forth in the Indenture
relating to the Securities (as described in the Offering Memorandum) and the
undersigned agrees to be bound by, and not to resell, pledge or otherwise
transfer the Securities except in compliance with, such restrictions and
conditions and the Securities Act of 1933, as amended (the "Securities Act").
3. We understand that the offer and sale of the Securities have not
been registered under the Securities Act, and that the Securities may not be
offered or sold except as permitted in the following sentence. We agree, on our
own behalf and on behalf of any accounts for which we are acting as hereinafter
stated, that if we should sell or otherwise transfer any Securities prior to the
date which is two years after the original issuance of the Securities, we will
do so only (i) to the Company or any of its subsidiaries, (ii) inside the United
States in accordance with Rule 144A under the Securities Act to a "qualified
institutional buyer" (as defined in Rule 144A under the Securities Act), (iii)
inside the United States to an institutional "accredited investor" (as defined
below) that, prior to such transfer, furnishes (or has furnished on its behalf
by
C-1
<PAGE> 102
a U.S. broker-dealer) to the Trustee (as defined in the Indenture relating to
the Securities), a signed letter containing certain representations and
agreements relating to the restrictions on transfer of the Securities, (iv)
outside the United States in accordance with Rule 904 of Regulation S under the
Securities Act, (v) pursuant to the exemption from registration provided by Rule
144 under the Securities Act (if available), or (vi) pursuant to an effective
registration statement under the Securities Act, and we further agree to provide
to any person purchasing any of the Securities from us a notice advising such
purchaser that resales of the Securities are restricted as stated herein.
4. We are not acquiring the Securities for or on behalf of, and will
not transfer the Securities to, any pension or welfare plan (as defined in
Section 3 of the Employee Retirement Income Security Act of 1974), except as
permitted in the section entitled "Transfer Restrictions" of the Offering
Memorandum.
5. We understand that, on any proposed resale of any Securities, we
will be required to furnish to the Trustee and the Company such certification,
legal opinions and other information as the Trustee and the Company may
reasonably require to confirm that the proposed sale complies with the foregoing
restrictions. We further understand that the Securities purchased by us will
bear a legend to the foregoing effect.
6. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and have
such knowledge and experience in financial and business matters as to be capable
of evaluating the merits and risks of our investment in the Securities, and we
and any accounts for which we are acting are each able to bear the economic risk
of our or their investment, as the case may be.
7. We are acquiring the Securities purchased by us for our account
or for one or more accounts (each of which is an institutional "accredited
investor") as to each of which we exercise sole investment discretion.
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceeding or official inquiry with respect
to the matters covered hereby.
Very truly yours,
By:__________________________________
Name:
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<PAGE> 103
EXHIBIT D
Form of Certificate to Be Delivered
in Connection with Transfers
Pursuant to Regulation S
_______________, _____
State Street Bank and Trust Company
Goodwin Square
225 Asylum Street
Hartford, Connecticut 06103
Attention: Corporate Trust Department
Re: Atlas Air, Inc.
(the "Company") 9 1/4% Senior
Notes due 2008 (the "Securities")
Ladies and Gentlemen:
In connection with our proposed sale of $____________ aggregate
principal amount of the Securities, we confirm that such sale has been effected
pursuant to and in accordance with Regulation S under the U.S. Securities Act of
1933, as amended (the "Securities Act"), and, accordingly, we represent that:
(1) the offer of the Securities was not made to a Person in the
United States;
(2) either (a) at the time the buy offer was originated, the
transferee was outside the United States or we and any person acting on
our behalf reasonably believed that the transferee was outside the United
States, or (b) the transaction was executed in, on or through the
facilities of a designated off-shore securities market and neither we nor
any person acting on our behalf knows that the transaction has been
pre-arranged with a buyer in the United States;
(3) no directed selling efforts have been made in the United States
in contravention of the requirements of Rule 903(b) or Rule 904(b) of
Regulation S, as applicable;
(4) the transaction is not part of a plan or scheme to evade the
registration requirements of the Securities Act; and
(5) we have advised the transferee of the transfer restrictions
applicable to the Securities.
D-1
<PAGE> 104
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceedings or official inquiry with
respect to the matters covered hereby. Terms used in this certificate have the
meanings set forth in Regulation S.
Very truly yours,
[Name of Transferor]
By:____________________________________
Authorized Signature
D-2
<PAGE> 1
EXHIBIT 10.112
EXECUTION COPY
$175,000,000
ATLAS AIR, INC.
9 1/4% SENIOR NOTES DUE 2008
PLACEMENT AGREEMENT
April 7, 1998
<PAGE> 2
April 7, 1998
Morgan Stanley & Co. Incorporated
BT Alex. Brown Incorporated
c/o Morgan Stanley & Co. Incorporated
1585 Broadway
New York, New York 10036
Dear Sirs and Mesdames:
ATLAS AIR, INC., a Delaware corporation (the "COMPANY"), proposes to
issue and sell to the several purchasers named in Schedule I hereto (the
"PLACEMENT AGENTS") $175,000,000 principal amount of its 9 1/4% Senior Notes due
2008 (the "SECURITIES") to BE issued pursuant to the provisions of an Indenture
to be dated as of April 9, 1998 (the "INDENTURE") between the Company and State
Street Bank and Trust Company, as Trustee (the "TRUSTEE").
The Securities will be offered without being registered under the
Securities Act of 1933, as amended (the "SECURITIES ACT"), to qualified
institutional buyers in compliance with the exemption from registration provided
by Rule 144A under the Securities Act, in offshore transactions in reliance on
Regulation S under the Securities Act ("REGULATION S") and to institutional
accredited investors (as defined in Rule 501(a)(1), (2), (3) or (7) under the
Securities Act) that deliver a letter in the form annexed to the Memorandum (as
defined below).
The Placement Agents and their direct and indirect transferees will
be entitled to the benefits of a Registration Rights Agreement dated the date
hereof between the Company and the Placement Agents (the "REGISTRATION RIGHTS
AGREEMENT").
In connection with the sale of the Securities, the Company will
prepare an offering memorandum (the "MEMORANDUM") including a description of the
terms of the Securities, the terms of the offering and a description of the
Company. As used herein, the term "Memorandum" shall include in each case the
documents incorporated by reference therein. The terms "SUPPLEMENT," "AMENDMENT"
and "AMEND" as used herein with respect to the Memorandum shall include all
documents deemed to be incorporated by reference in the Memorandum that are
filed subsequent to the date of such Memorandum with the Securities and Exchange
Commission (the "COMMISSION") pursuant to the Securities Exchange Act of 1934,
as amended (the "EXCHANGE ACT").
1. Representations and Warranties. (a) The Company represents and
warrants to, and agrees with, each Placement Agent that:
<PAGE> 3
2
(i) (A) Each document, if any, filed or to be filed pursuant to the
Exchange Act and incorporated by reference in the Memorandum complied or
will comply when so filed in all material respects with the Exchange Act
and the applicable rules and regulations of the Commission thereunder and
(B) the Memorandum, in the form used by the Placement Agents to confirm
sales and on the Closing Date (as defined in Section 4), will not contain
any untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading. The preceding
sentence does not apply to statements in or omissions from the Memorandum
based upon written information furnished to the Company by any Placement
Agent through Morgan Stanley & Co. Incorporated ("MORGAN STANLEY")
expressly for use therein. The Company hereby confirms that it has
authorized the use of the Memoranda in connection with the offer and
resale of the Securities by the Placement Agents.
(ii) The Company has been duly incorporated, is validly existing as
a corporation in good standing under the laws of the jurisdiction of its
incorporation, has the corporate power and authority to own its property
and to conduct its business as described in the Memorandum and to perform
its obligations under this Agreement, the Indenture, the Registration
Rights Agreement and the Securities; the Company is duly qualified to
transact business and is in good standing in each jurisdiction in which
the conduct of its business or its ownership or leasing of property
requires such qualification, except to the extent that the failure to be
so qualified or be in good standing would not have a material adverse
effect on the Company and its subsidiaries, taken as a whole (an "ATLAS
MATERIAL ADVERSE EFFECT").
(iii) The Company's only subsidiaries are Atlas One, Inc., Atlas
Freighter Leasing, Inc., Atlas Freighter Leasing II, Inc., Atlas Air
Services Limited, LHC Properties, Inc., Atlas Flightlease, Inc. and
Genessee Insurance Company, Ltd. (collectively, the "SUBSIDIARIES"). Each
Subsidiary is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation with
corporate power and authority under such laws to own, lease and operate
its properties and conduct its business; and each Subsidiary is duly
qualified to transact business as a foreign corporation and is in good
standing in each other jurisdiction in which it owns or leases property of
a nature, or transacts business of a type, that would make such
qualification necessary, except to the extent that the failure to so
qualify or be in good standing would not have an Atlas Material Adverse
Effect. All of the outstanding shares of capital stock of each Subsidiary
have been duly authorized and validly issued and are fully paid and
non-assessable and are owned by the Company free and clear of any pledge,
lien, security interest, charge, claim, equity or encumbrance of any kind.
<PAGE> 4
3
(iv) This Agreement has been duly authorized, executed and delivered
by the Company.
(v) The Securities have been duly authorized and, when executed and
authenticated in accordance with the provisions of the Indenture and
delivered to and paid for by the Placement Agents in accordance with the
terms of this Agreement, will be valid and binding obligations of the
Company, enforceable in accordance with their terms, subject to applicable
bankruptcy, insolvency or similar laws affecting creditors' rights
generally and general principles of equity, and will be entitled to the
benefits of the Indenture and the Registration Rights Agreement.
(vi) The Indenture has been duly authorized and, when executed and
delivered by the Company, will be a valid and binding agreement of the
Company, enforceable in accordance with its terms, subject to applicable
bankruptcy, insolvency or similar laws affecting creditors' rights
generally and general principles of equity.
(vii) The Registration Rights Agreement has been duly authorized,
executed and delivered by, and is a valid and binding agreement of, the
Company, enforceable in accordance with its terms, subject to applicable
bankruptcy, insolvency or similar laws affecting creditors' rights
generally and general principles of equity and except as rights to
indemnification and contribution under the Registration Rights Agreement
may be limited under applicable law.
(viii) The execution and delivery by the Company of this Agreement,
the Indenture, the Registration Rights Agreement and the Securities, the
consummation by the Company of the transactions contemplated in this
Agreement, the Indenture, the Registration Rights Agreement and the
Securities, and compliance by the Company with the terms of this
Agreement, the Indenture, the Registration Rights Agreement and the
Securities will not contravene (A) the certificate of incorporation or
by-laws of the Company, (B) any provision of applicable law or any
agreement or other instrument binding upon the Company or any of the
Subsidiaries, except for such contraventions as would not, singly or in
the aggregate, have an Atlas Material Adverse Effect, or (C) any judgment,
order or decree of any governmental body, agency or court having
jurisdiction over the Company or any Subsidiary, and no consent, approval,
authorization or order of, or qualification with, any governmental body or
agency is required for the valid authorization, execution, delivery and
performance by the Company of this Agreement, the Indenture, the
Registration Rights Agreement and the Securities, or the consummation by
the Company of the transactions contemplated by this Agreement, the
Indenture, the Registration Rights Agreement and the Securities, except
(x) such as may be required by the securities or Blue Sky laws of the
various states in connection with the offer and sale of the Securities and
(y) such as may be
<PAGE> 5
4
required under the Securities Act, the Trust Indenture Act or rules of the
National Association of Securities Dealers in connection with the
registration of the Securities under the Securities Act pursuant to the
Registration Rights Agreement.
(ix) The Company is a "CITIZEN OF THE UNITED STATES" (as defined in
Section 40102(a)(15) of Title 49 of the United States Code, as amended)
and is an air carrier operating under a certificate issued by the
Secretary of Transportation pursuant to Chapter 447 of Title 49, United
States Code, for aircraft capable of carrying 10 or more individuals or
6,000 pounds or more of cargo. There is in force with respect to the
Company an air carrier operating certificate issued pursuant to Part 121
of the regulations under the sections of Title 49, United States Code,
relating to aviation (the "FEDERAL AVIATION ACT"). All of the outstanding
shares of capital stock of the Company have been duly authorized and
validly issued and are fully paid and non-assessable
(x) There has not occurred any material adverse change, or any
development involving a prospective material adverse change, in the
condition, financial or otherwise, or in the earnings, business or
operations of the Company and the Subsidiaries, taken as a whole, from
that set forth in the Memorandum.
(xi) Except as accurately described in all material respects in the
Memorandum and except as would not have an Atlas Material Adverse Effect
and would not materially and adversely affect the ability of the Company
to perform its obligations under this Agreement, the Indenture, the
Registration Rights Agreement and the Securities, or to consummate the
transactions contemplated by the Memorandum, there are no legal or
governmental proceedings pending or, to the best knowledge of the Company,
threatened to which the Company or any of the Subsidiaries is or may be a
party or to which any of the properties of the Company or any of the
Subsidiaries is or may be subject.
(xii) Except as described in the Memorandum, the Company is not in
default in the performance or observance of any obligation, agreement,
covenant or condition contained in any contract, indenture, mortgage, loan
agreement, note, lease or other agreement or instrument to which it is a
party or by which it may be bound or to which any of its properties may be
subject, except for such defaults that would not have an Atlas Material
Adverse Effect.
(xiii) The Company and the Subsidiaries each has good and marketable
title to all properties and assets described in the Memorandum as owned by
it, free and clear of all liens, charges, encumbrances or restrictions,
except (A) as described in the Memorandum or (B) as would not have an
Atlas Material Adverse Effect.
<PAGE> 6
5
(xiv) Except as described in the Memorandum, no labor problem exists
with the Company's employees or with employees of any Subsidiary or, to
the best knowledge of the Company, is imminent that could reasonably be
expected to have an Atlas Material Adverse Effect, and the Company is not
aware of any existing or imminent labor disturbance by the employees of
any of its or any subsidiary's principal contractors or customers that
could reasonably be expected to have an Atlas Material Adverse Effect.
(xv) The Company and the Subsidiaries (A) are in compliance with any
and all applicable foreign, federal, state and local laws and regulations
relating to the protection of human health and safety, the environment or
hazardous or toxic substances or wastes, pollutants or contaminants
("ENVIRONMENTAL LAWS"), (B) have received all permits, licenses or other
approvals required of them under applicable Environmental Laws to conduct
their respective businesses and (C) are in compliance with all terms and
conditions of any such permit, license or approval, except where such
noncompliance with Environmental Laws, failure to receive required
permits, licenses or other approvals or failure to comply with the terms
and conditions of such permits, licenses or approvals would not, singly or
in the aggregate, have an Atlas Material Adverse Effect.
(xvi) Neither the Company nor any affiliate (as defined in Rule
501(b) of Regulation D under the Securities Act, an "AFFILIATE") of the
Company has directly, or through any agent, (A) sold, offered for sale,
solicited offers to buy or otherwise negotiated in respect of, any
security (as defined in the Securities Act) which is or will be integrated
with the sale of the Securities in a manner that would require the
registration under the Securities Act of the Securities or (B) engaged in
any form of general solicitation or general advertising in connection with
the offering of the Securities (as those terms are used in Regulation D
under the Securities Act) or in any manner involving a public offering
within the meaning of Section 4(2) of the Securities Act. The Company has
not entered and will not enter into any contractual arrangement with
respect to the distribution of the Securities, except for this Agreement.
(xvii) None of the Company, its Affiliates or any person acting on
its or their behalf (other than the Placement Agents, as to which the
Company makes no representation) has engaged in any directed selling
efforts (as that term is defined in Regulation S under the Securities Act
("REGULATION S")) with respect to the Securities and the Company and its
Affiliates and any person acting on its or their behalf (other than the
Placement Agents as to which the Company makes no representation) have
complied and will comply with the offering restrictions requirement of
Regulation S.
(xviii) The Company is subject to Section 13 or 15(d) of the
Securities
<PAGE> 7
6
Exchange Act of 1934, as amended (the "EXCHANGE ACT").
(xix) The Securities satisfy the eligibility requirements of Rule
144A(d)(3) under the Securities Act.
(xx) It is not necessary in connection with the offer, sale and
delivery of the Securities to the Placement Agents pursuant to this
Agreement to register the Securities under the Securities Act or to
qualify the Indenture under the Trust Indenture Act of 1939, as amended
(the "TRUST INDENTURE ACT").
(xxi) The Company is not, and after giving effect to the offering
and sale of the Securities and the application of the proceeds thereof as
described in the Memorandum, will not be an "investment company" as such
term is defined in the Investment Company Act of 1940, as amended.
(xxii) The Securities conform in all material respects to the
description thereof contained in the Memorandum under the heading
"Description of the Notes."
(xxiii) The accountants that examined and issued an auditors report
with respect to the consolidated financial statements of the Company and
its consolidated subsidiaries included or incorporated by reference in the
Memorandum are independent public accountants within the meaning of the
Securities Act and the regulations thereunder.
(xxiv) The consolidated financial statements included or
incorporated by reference in the Memorandum present fairly the
consolidated financial position of the Company and its consolidated
subsidiaries as of the dates indicated and the consolidated results of
operations and cash flows or changes in financial position of the Company
and its consolidated subsidiaries for the periods specified. Such
financial statements have been prepared in conformity with generally
accepted accounting principles applied on a consistent basis throughout
the periods involved. The financial statement schedules, if any, included
or incorporated by reference in the Memorandum present fairly the
information required to be stated therein.
(xxv) The Company and the Subsidiaries possess adequate
certificates, authorities and permits issued by appropriate governmental
agencies or bodies necessary to conduct, in all material respects, the
business now operated by them and have not received any notice of
proceedings relating to the revocation or modification of any such
certificate, authority or permit that would, individually or in the
aggregate, have an Atlas Material Adverse Effect.
<PAGE> 8
7
(xxvi) The statistical and market-related data included in the
Memorandum are based on or derived from sources which the Company and the
Subsidiaries believe to be reliable and accurate.
(xxvii) None of the Company, the Subsidiaries or any agent acting on
their behalf has taken or will take any action that might cause this
Agreement or the sale of the Securities to violate Regulation T, U or X of
the Board of Governors of the Federal Reserve System, in each case as in
effect, or as the same may hereafter be in effect, on the Closing Date.
(xxviii) Each of the Company and the Subsidiaries carries insurance
in such amounts and covering such risks as it deems reasonable for the
conduct of its business and the value of its properties.
(xxix) No holder of securities of the Company or any Subsidiary will
be entitled to have such securities registered under the registration
statements required to be filed by the Company pursuant to the
Registration Rights Agreement other than as expressly permitted thereby.
(xxx) Neither the Company nor any of its Subsidiaries nor, to the
Company's knowledge, any officer or director purporting to act on behalf
of the Company or any of its Subsidiaries has at any time: (A) violated or
is in violation of any provision of the Foreign Corrupt Practices Act of
1977 or (B) engaged in any transactions, maintained any bank account or
used any corporate funds except for transactions, bank accounts and funds
which have been and are reflected in the normally maintained books and
records of the Company and its Subsidiaries.
(b) The parties agree that any certificate signed by a duly
authorized officer of the Company and delivered to a Placement Agent, or to
counsel for the Placement Agents, on the Closing Date and in connection with
this Agreement or the offering of the Securities, shall be deemed a
representation and warranty by (and only by) the Company to the Placement Agents
as to the matters covered thereby.
The representations and warranties contained in this Agreement shall
be true and correct as of the date of this Agreement and as of the Closing Date.
2. Agreements to Sell and Purchase. The Company hereby agrees to
sell to the several Placement Agents, and each Placement Agent, upon the basis
of the representations and warranties herein contained, but subject to the
conditions hereinafter stated, agrees, severally and not jointly, to purchase
from the Company the respective principal amount of Securities set forth in
Schedule I hereto opposite its name at a purchase price of 96.867% of
<PAGE> 9
8
the principal amount thereof (the "PURCHASE PRICE") plus accrued interest, if
any, to the Closing Date.
The Company hereby agrees that, without the prior written consent of
Morgan Stanley on behalf of the Placement Agents, it will not, during the period
beginning on the date hereof and continuing to and including the Closing Date,
offer, sell, contract to sell or otherwise dispose of any debt of the Company or
warrants to purchase debt of the Company substantially similar to the
Securities, other than (i) the sale of the Securities under this Agreement and
(ii) commercial paper issued in the ordinary course of business.
3. Terms of Offering. You have advised the Company that the
Placement Agents will make an offering of the Securities purchased by the
Placement Agents hereunder on the terms to be set forth in the Memorandum, as
soon as practicable after this Agreement is entered into as in your judgment is
advisable.
4. Payment and Delivery. Payment for the Securities shall be made to
the Company in Federal or other funds immediately available in New York City
against delivery of such Securities for the respective accounts of the several
Placement Agents at a closing to be held at the offices of Shearman & Sterling,
599 Lexington Avenue, New York, New York, at 10:00 a.m., New York City time, on
April 9, 1998, or at such other time on the same or such other date, not later
than April 23, 1998, as shall be designated in writing by you. The time and date
of such payment are hereinafter referred to as the "CLOSING DATE."
Certificates for the Securities shall be in definitive form or
global form, as specified by you, and registered in such names and in such
denominations as you shall request in writing not later than one full business
day prior to the Closing Date. The certificates evidencing the Securities shall
be delivered to you on the Closing Date for the respective accounts of the
several Placement Agents, with any transfer taxes payable in connection with the
transfer of the Securities to the Placement Agents duly paid, against payment of
the Purchase Price therefor plus accrued interest, if any, to the date of
payment and delivery.
5. Conditions to the Placement Agents' Obligations. The several
obligations of the Placement Agents to purchase and pay for the Securities on
the Closing Date are subject to the following conditions:
(a) Subsequent to the execution and delivery of this Agreement and
prior to the Closing Date:
(i) there shall not have occurred any downgrading, nor shall
any notice have been given of any intended or potential downgrading
or of any review for a possible change that does not indicate the
direction of the possible
<PAGE> 10
9
change, in the rating accorded any of the Company's securities,
including the Securities, by any "nationally recognized statistical
rating organization," as such term is defined for purposes of Rule
436(g)(2) under the Securities Act; and
(ii) there shall not have occurred any change, or any
development involving a prospective change, in the condition,
financial or otherwise, or in the earnings, business or operations
of the Company and its subsidiaries, taken as a whole, from that set
forth in the Memorandum (exclusive of any amendments or supplements
thereto subsequent to the date of this Agreement) that, in your
judgment, is material and adverse and that makes it, in your
judgment, impracticable to market the Securities on the terms and in
the manner contemplated in the Memorandum.
(b) You shall have received on the Closing Date a certificate, dated
the Closing Date and signed by an executive officer of the Company, to the
effect set forth in clause (a)(i) above and to the effect that the
representations and warranties of the Company contained in this Agreement
are true and correct as of the Closing Date and that the Company has
complied with all of the agreements and satisfied all of the conditions on
its part to be performed or satisfied on or before the Closing Date.
The officer signing and delivering such certificate may rely upon
the best of his knowledge as to proceedings threatened.
(c) At the Closing Date, the Registration Rights Agreement, attached
as Exhibit A hereto, shall have been duly executed, delivered and be in
full force and effect.
(d) On the Closing Date, The Indenture shall have been duly executed
and delivered and be in full force and effect.
(e) On the Closing Date, you shall have received an opinion of
Cahill Gordon & Reindel, as counsel for the Company, dated the Closing
Date, to the effect set forth in Exhibit B hereto.
(f) On the Closing Date, you shall have received an opinion of David
Brictson, in-house legal counsel of the Company, dated the Closing Date,
to the effect set forth in Exhibit C hereto.
(g) On the Closing Date, you shall have received an opinion of
Shearman & Sterling, counsel for the Placement Agents, dated the Closing
Date, in form and substance satisfactory to you.
<PAGE> 11
10
(h) You shall have received on each of the date hereof and the
Closing Date a letter, dated the date hereof or the Closing Date, as
the case may be, in form and substance satisfactory to you, from the
Company's independent public accountants, containing statements and
information of the type ordinarily included in accountants' "comfort
letters" to underwriters with respect to the financial statements and
certain financial information contained in the Memorandum; provided,
that the letter delivered on the Closing Date shall use a "cut-off
date" not earlier than the date hereof.
(i) The Company shall have furnished to you and to counsel for
the Placement Agents, in form and substance satisfactory to you, such
other documents, certificates and opinions as such counsel may
reasonably request in order to pass upon the matters referred to in
Section 5(d) and in order to evidence the accuracy and completeness of
any of the representations, warranties or statements, the performance
of any covenant by the Company theretofore to be performed, or the
compliance with any of the conditions herein contained.
(j) On or before the Closing Date, the Company shall have
furnished the Placement Agents with such conformed copies of such
opinions, certificates, letters and documents as the Placement Agents
may reasonably request.
6. Covenants of the Company. In further consideration of the agreements
of the Placement Agents contained in this Agreement, the Company covenants with
each Placement Agent as follows:
(a) To furnish to each Placement Agent in New York City,
without charge, prior to 10:00 a.m., New York City time, on the
business day next succeeding the date of this Agreement and during the
period mentioned in Section 6(c), as many copies of the Memorandum, any
documents incorporated by reference therein and any supplements and
amendments thereto as such Placement Agent may reasonably request.
(b) Before amending or supplementing the Memorandum, to
furnish to you a copy of each such proposed amendment or supplement and
not to use any such proposed amendment or supplement to which you
reasonably object.
(c) If, during such period after the date hereof and prior to
the date on which all of the Securities shall have been sold by the
Placement Agents, any event shall occur or condition exist as a result
of which it is necessary to amend or supplement the Memorandum in order
to make the statements therein, in the light of the circumstances when
the Memorandum is delivered to a purchaser, not misleading, or if, in
the opinion of counsel for the Placement Agents, it is necessary to
amend or supplement the Memorandum to comply with applicable law,
forthwith to prepare and
<PAGE> 12
11
furnish, at its own expense, to the Placement Agents, either
amendments or supplements to the Memorandum so that the statements in
the Memorandum as so amended or supplemented will not, in the light of
the circumstances when the Memorandum is delivered to a purchaser, be
misleading or so that the Memorandum, as so amended or supplemented,
will comply with applicable law.
(d) To endeavor to qualify the Securities for offer and sale
under the securities or Blue Sky laws of such jurisdictions as you
shall reasonably request.
(e) Whether or not the transactions contemplated in this
Agreement are consummated or this Agreement is terminated, to pay or
cause to be paid all expenses incident to the performance of its
obligations under this Agreement, including: (i) the fees,
disbursements and expenses of the Company's counsel and the Company's
accountants in connection with the issuance and sale of the Securities
and all other fees or expenses in connection with the preparation of
the Memorandum and all amendments and supplements thereto, including
all printing costs associated therewith, and the delivering of copies
thereof to the Placement Agents, in the quantities herein above
specified, (ii) all costs and expenses related to the transfer and
delivery of the Securities to the Placement Agents, including any
transfer or other taxes payable thereon, (iii) the cost of printing or
producing any Blue Sky or legal investment memorandum in connection
with the offer and sale of the Securities under state securities laws
and all expenses in connection with the qualification of the Securities
for offer and sale under state securities laws as provided in Section
6(d) hereof, including filing fees and the reasonable fees and
disbursements of counsel for the Placement Agents in connection with
such qualification and in connection with the Blue Sky or legal
investment memorandum, (iv) any fees charged by rating agencies for the
rating of the Securities, (v) the fees and expenses, if any, incurred
in connection with the admission of the Securities for trading in
PORTAL or any appropriate market system, (vi) the costs and charges of
the Trustee (including the reasonable fees and disbursements of counsel
to the Trustee) and any transfer agent, registrar or depositary, (vii)
the cost of the preparation, issuance and delivery of the Securities,
(viii) the costs and expenses of the Company relating to investor
presentations on any "road show" undertaken in connection with the
marketing of the offering of the Securities, including, without
limitation, expenses associated with the production of road show slides
and graphics, fees and expenses of any consultants engaged in
connection with the road show presentations with the prior approval of
the Company, travel and lodging expenses of the representatives and
officers of the Company and any such consultants, and the cost of any
aircraft chartered in connection with the road show, and (ix) all other
costs and expenses incident to the performance of the obligations of
the Company hereunder for which provision is not otherwise made in this
Section. It is understood, however, that except as provided in this
Section, Section 8, and the last paragraph of
<PAGE> 13
12
Section 10, the Placement Agents will pay all of their costs and
expenses, including fees and disbursements of their counsel, transfer
taxes payable on resale of any of the Securities by them and any
advertising expenses connected with any offers they may make.
(f) Neither the Company nor any Affiliate will sell, offer for
sale or solicit offers to buy or otherwise negotiate in respect of any
security (as defined in the Securities Act) which could be integrated
with the sale of the Securities in a manner which would require the
registration under the Securities Act of the Securities.
(g) Not to solicit any offer to buy or offer or sell the
Securities by means of any form of general solicitation or general
advertising (as those terms are used in Regulation D under the
Securities Act) or in any manner involving a public offering within the
meaning of Section 4(2) of the Securities Act.
(h) While any of the Securities remain "restricted securities"
within the meaning of the Securities Act, to make available, upon
request, to any seller of the Securities the information specified in
Rule 144A(d)(4) under the Securities Act, unless the Company is then
subject to Section 13 or 15(d) of the Exchange Act.
(i) If requested by you, to use its best efforts to permit the
Securities to be designated PORTAL securities in accordance with the
rules and regulations adopted by the National Association of Securities
Dealers, Inc. relating to trading in the PORTAL Market.
(j) None of the Company, its Affiliates or any person acting
on its or their behalf (other than the Placement Agents, as to whom the
Company makes no covenant, as to whom the Company makes no covenant
will engage in any directed selling efforts (as that term is defined in
Regulation S) with respect to the Securities, and the Company and its
Affiliates and each person acting on its or their behalf (other than
the Placement Agents, as to whom the Company makes no covenant) will
comply with the offering restrictions requirement of Regulation S.
(k) During the period of two years after the Closing Date, the
Company will not, and will not permit any of its affiliates (as defined
in Rule 144 under the Securities Act) to, resell any of the Securities
which constitute "restricted securities" under Rule 144 that have been
reacquired by any of them.
(l) For a period of three years after the Closing Date, to
make available to the Placement Agents, copies of all annual reports,
quarterly reports and current reports filed by the Company with the
Commission on Forms 10-K, 10-Q and 8-K, or such
<PAGE> 14
13
other similar forms as may be designated by the Commission, and such
other \ documents, reports and information as shall be furnished by the
Company to the holders of Securities or to its security holders
generally; provided that at such time the Company has securities
registered under Section 12(b) or 12(g) of the Exchange Act.
(m) During the period of two years after the Closing Date,
upon request, to furnish to the Placement Agents and any holder of
Securities a copy of the restrictions on transfer applicable to the
Offered Certificates.
(n) During the period of two years after the Closing Date, not
to be or become an open-end investment company, unit investment trust
or face-amount certificate company that is or is required to be
registered under Section 8 of the Investment Company Act, or a
closed-end investment company required to be registered, but not
registered, under the Investment Company Act.
(o) In connection with the offering, until the Placement
Agents shall have notified the Company of the completion of the resale
of the Securities, neither the Company nor any of its Affiliates has
bid for or purchased or will bid for or purchase, either alone or with
one or more other persons, for any account in which it or any of its
affiliates has a beneficial interest any Securities; and neither it nor
any of its affiliates will make bids or purchases for the purpose of
creating actual, or apparent, active trading in, or of raising the
price of, the Securities.
(p) The Company will apply the net proceeds from the sale of
the Notes as set forth under "Use of Proceeds" in the Memorandum.
7. Offering of Securities; Restrictions on Transfer. (a) Each
Placement Agent, severally and not jointly, represents and warrants
that such Placement Agent is a qualified institutional buyer as defined
in Rule 144A under the Securities Act (a "QIB"). Each Placement Agent,
severally and not jointly, agrees with the Company that (i) it will not
solicit offers for, or offer or sell, such Securities by any form of
general solicitation or general advertising (as those terms are used in
Regulation D under the Securities Act) or in any manner involving a
public offering within the meaning of Section 4(2) of the Securities
Act and (ii) it will solicit offers for such Securities only from, and
will offer such Securities only to, persons that it reasonably believes
to be (A) in the case of offers inside the United States, (x) QIBs or
(y) other institutional accredited investors (as defined in Rule
501(a)(1), (2), (3) or (7) under the Securities Act ("INSTITUTIONAL
ACCREDITED INVESTORS") that, prior to their purchase of the Securities,
deliver to such Placement Agent a letter containing the representations
and agreements set forth in Appendix A to the Memorandum and (B) in the
case of offers outside the United States, to persons other than U.S.
persons ("FOREIGN PURCHASERS,"
<PAGE> 15
14
which term shall include dealers or other professional fiduciaries in
the United States acting on a discretionary basis for foreign
beneficial owners (other than an estate or trust)) in reliance upon
Regulation S under the Securities Act that, in each case, in purchasing
such Securities are deemed to have represented and agreed as provided
in the Memorandum under the caption "Transfer Restrictions."
(b) Each Placement Agent, severally and not jointly, represents,
warrants, and agrees with respect to offers and sales outside the United States
that:
(i) such Placement Agent understands that no action has been
or will be taken in any jurisdiction by the Company that would permit a
public offering of the Securities, or possession or distribution of the
Memorandum or any other offering or publicity material relating to the
Securities, in any country or jurisdiction where action for that
purpose is required;
(ii) such Placement Agent will comply with all applicable laws
and regulations in each jurisdiction in which it acquires, offers,
sells or delivers Securities or has in its possession or distributes
the Memorandum or any such other material, in all cases at its own
expense;
(iii) the Securities have not been registered under the
Securities Act and may not be offered or sold within the United States
or to, or for the account or benefit of, U.S. persons except in
accordance with Rule 144A or Regulation S under the Securities Act or
pursuant to another exemption from the registration requirements of the
Securities Act;
(iv) such Placement Agent has offered the Securities and will
offer and sell the Securities (A) as part of their distribution at any
time and (B) otherwise until 40 days after the later of the
commencement of the offering and the Closing Date, only in accordance
with Rule 903 of Regulation S or as otherwise permitted in Section
7(a); accordingly, neither such Placement Agent, its Affiliates nor any
persons acting on its or their behalf have engaged or will engage in
any directed selling efforts (within the meaning of Regulation S) with
respect to the Securities, and any such Placement Agent, its Affiliates
and any such persons have complied and will comply with the offering
restrictions requirement of Regulation S;
(v) such Placement Agent has (A) not offered or sold and,
prior to the date six months after the Closing Date, will not offer or
sell any Securities to persons in the United Kingdom except to persons
whose ordinary activities involve them in acquiring, holding, managing
or disposing of investments (as principal or agent) for the purposes of
their businesses or otherwise in circumstances which have not resulted
and will not
<PAGE> 16
15
result in an offer to the public in the United Kingdom within the
meaning of the Public Offers of Securities Regulations 1995; (B)
complied and will comply with all applicable provisions of the
Financial Services Act 1986 with respect to anything done by it in
relation to the Securities in, from or otherwise involving the United
Kingdom, and (C) only issued or passed on and will only issue or pass
on in the United Kingdom any document received by it in connection with
the issue of the Securities to a person who is of a kind described in
Article 11(3) of the Financial Services Act 1986 (Investment
Advertisements) (Exemptions) Order 1996 or is a person to whom such
document may otherwise lawfully be issued or passed on;
(vi) such Placement Agent understands that the Securities have
not been and will not be registered under the Securities and Exchange
Law of Japan, and represents that it has not offered or sold, and
agrees not to offer or sell, directly or indirectly, any Securities in
Japan or for the account of any resident thereof except pursuant to any
exemption from the registration requirements of the Securities and
Exchange Law of Japan and otherwise in compliance with applicable
provisions of Japanese law; and
(vii) such Placement Agent agrees that, at or prior to
confirmation of sales of the Securities, it will have sent to each
distributor, dealer or person receiving a selling concession, fee or
other remuneration that purchases Securities from it during the
restricted period a confirmation or notice to substantially the
following effect:
"The Securities covered hereby have not been registered under
the U.S. Securities Act of 1933 (the "Securities Act") and may not be
offered and sold within the United States or to, or for the account or
benefit of, U.S. persons (i) as part of their distribution at any time
or (ii) otherwise until 40 days after the later of the commencement of
the offering and the closing date, except in either case in accordance
with Regulation S (or Rule 144A if available) under the Securities Act.
Terms used above have the meaning given to them by Regulation S."
Terms used in this Section 7(b) have the meanings given to them by Regulation S.
8. Indemnity and Contribution. (a) The Company agrees to
indemnify and hold harmless each Placement Agent and each person, if any, who
controls any Placement Agent within the meaning of either Section 15 of the
Securities Act or Section 20 of the Exchange Act, or is under common control
with, or is controlled by, such Placement Agent, from and against any and all
losses, claims, damages and liabilities (including, without limitation, any
legal or other expenses reasonably incurred in connection with defending or
investigating any such action or claim) caused by any untrue statement or
alleged untrue statement of a material fact contained in the Memorandum (as
amended or supplemented if the Company shall have furnished any amendments or
supplements thereto), by any
<PAGE> 17
16
omission or alleged omission to state therein a material fact necessary to make
the statements therein in the light of the circumstances under which they were
made not misleading, except insofar as such losses, claims, damages or
liabilities are caused by any such untrue statement or omission or alleged
untrue statement or omission based upon information relating to any Placement
Agent furnished to the Company in writing by such Placement Agent through Morgan
Stanley & Co. Incorporated expressly for use therein.
(b) Each Placement Agent agrees, severally and not jointly, to
indemnify and hold harmless the Company, its directors, its officers 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 to the same extent as
the foregoing indemnity from the Company to such Placement Agent, but only with
reference to information relating to such Placement Agent furnished to the
Company in writing by such Placement Agent through Morgan Stanley & Co.
Incorporated expressly for use in the Memorandum or any amendments or
supplements thereto.
(c) In case any proceeding (including any governmental investigation)
shall be instituted involving any person in respect of which indemnity may be
sought pursuant to Section 8(a) or 8(b), such person (the "INDEMNIFIED PARTY")
shall promptly notify the person against whom such indemnity may be sought (the
"INDEMNIFYING PARTY") in writing and the indemnifying party, upon request of the
indemnified party, shall retain counsel reasonably satisfactory to the
indemnified party to represent the indemnified party and any others the
indemnifying party may designate in such proceeding and shall pay the fees and
disbursements of such counsel related to such proceeding. In any such
proceeding, any indemnified party shall have the right to retain its own
counsel, but the fees and expenses of such counsel shall be at the expense of
such indemnified party unless (i) the indemnifying party and the indemnified
party shall have mutually agreed to the retention of such counsel or (ii) the
named parties to any such proceeding (including any impleaded parties) include
both the indemnifying party and the indemnified party and representation of both
parties by the same counsel would be inappropriate due to actual or potential
differing interests between them. It is understood that the indemnifying party
shall not, in respect of the legal expenses of 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 such indemnified parties and that all such fees
and expenses shall be reimbursed as they are incurred. Such firm shall be
designated in writing by Morgan Stanley & Co. Incorporated, in the case of
parties indemnified pursuant to Section 8(a), and by the Company, in the case of
parties indemnified pursuant to Section 8(b). 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
<PAGE> 18
17
party shall have requested an indemnifying party to reimburse the indemnified
party for fees and expenses of counsel as contemplated by the second and third
sentences of this paragraph, the indemnifying party agrees that it shall be
liable for any settlement of any proceeding effected without its written consent
if (i) such settlement is entered into more than 60 days after receipt by such
indemnifying party of the aforesaid request and (ii) such indemnifying party
shall not have reimbursed the indemnified party in accordance with such request
prior to the date of such settlement. No indemnifying party shall, without the
prior written consent of the indemnified party, effect any settlement of any
pending or threatened proceeding in respect of which any indemnified party is or
could have been a party and indemnity could have been sought hereunder by such
indemnified party, unless such settlement includes an unconditional release of
such indemnified party from all liability on claims that are the subject matter
of such proceeding.
(d) To the extent the indemnification provided for in Section 8(a) or
8(b) is unavailable to an indemnified party or insufficient in respect of any
losses, claims, damages or liabilities referred to therein, then each
indemnifying party under such paragraph, in lieu of indemnifying such
indemnified party thereunder, shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages or
liabilities (i) in such proportion as is appropriate to reflect the relative
benefits received by the Company on the one hand and the Placement Agents on the
other hand from the offering of the Securities or (ii) if the allocation
provided by clause 8(d)(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 8(d)(i) above but also the relative fault of the Company on the one
hand and of the Placement Agents on the other hand in connection with the
statements or omissions that resulted in such losses, claims, damages or
liabilities, as well as any other relevant equitable considerations. The
relative benefits received by the Company on the one hand and the Placement
Agents on the other hand in connection with the offering of the Securities shall
be deemed to be in the same respective proportions as the net proceeds from the
offering of the Securities (before deducting expenses) received by the Company
and the total discounts and commissions received by the Placement Agents in
respect thereof, bear to the aggregate offering price of the Securities. The
relative fault of the Company on the one hand and of the Placement Agents on the
other hand shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the Company
or by the Placement Agents and the parties' relative intent, knowledge, access
to information and opportunity to correct or prevent such statement or omission.
The Placement Agents' respective obligations to contribute pursuant to this
Section 8 are several in proportion to the respective principal amount of
Securities they have purchased hereunder, and not joint.
(e) The Company and the Placement Agents agree that it would not be
just or equitable if contribution pursuant to this Section 8 were determined by
pro rata allocation
<PAGE> 19
18
(even if the Placement Agents were treated as one entity for such purpose) or by
any other method of allocation that does not take account of the equitable
considerations referred to in Section 8(d). The amount paid or payable by an
indemnified party as a result of the losses, claims, damages and liabilities
referred to in Section 8(d) shall be deemed to include, subject to the
limitations set forth above, any legal or other expenses reasonably incurred by
such indemnified party in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this Section 8, no Placement
Agent shall be required to contribute any amount in excess of the amount by
which the total price at which the Securities resold by it in the initial
placement of such Securities were offered to investors exceeds the amount of any
damages that such Placement Agent has otherwise been required to pay by reason
of such untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. The remedies provided
for in this Section 8 are not exclusive and shall not limit any rights or
remedies which may otherwise be available to any indemnified party at law or in
equity.
(f) The indemnity and contribution provisions contained in this Section
8 and the representations, warranties and other statements of the Company
contained in this Agreement shall remain operative and in full force and effect
regardless of (i) any termination of this Agreement, (ii) any investigation made
by or on behalf of any Placement Agent or any person controlling any Placement
Agent or by or on behalf of the Company, its officers or directors or any person
controlling the Company and (iii) acceptance of and payment for any of the
Securities.
9. Termination. This Agreement shall be subject to termination
by notice given by you to the Company, if (a) after the execution and delivery
of this Agreement and prior to the Closing Date (i) trading generally shall have
been suspended or materially limited on or by, as the case may be, any of the
New York Stock Exchange, the American Stock Exchange, the National Association
of Securities Dealers, Inc., the Chicago Board of Options Exchange, the Chicago
Mercantile Exchange or the Chicago Board of Trade, (ii) trading of any
securities of the Company shall have been suspended on any exchange or in any
over-the-counter market, (iii) a general moratorium on commercial banking
activities in New York shall have been declared by either Federal or New York
State authorities or (iv) there shall have occurred any outbreak or escalation
of hostilities or any change in financial markets or any calamity or crisis
that, in your judgment, is material and adverse and (b) in the case of any of
the events specified in clauses 9(a)(i) through 9(a)(iv), such event, singly or
together with any other such event, makes it, in your judgment, impracticable to
market the Securities on the terms and in the manner contemplated in the
Memorandum.
10. Effectiveness. This Agreement shall become effective upon
the
<PAGE> 20
19
execution and delivery hereof by the parties hereto.
If this Agreement shall be terminated by the Placement Agents,
or any of them, because of any failure or refusal on the part of the Company to
comply with the terms or to fulfill any of the conditions of this Agreement, or
if for any reason the Company shall be unable to perform its obligations under
this Agreement, the Company will reimburse the Placement Agents or such
Placement Agents as have so terminated this Agreement with respect to
themselves, severally, for all out-of-pocket expenses (including the fees and
disbursements of their counsel) reasonably incurred by such Placement Agents in
connection with this Agreement or the offering contemplated hereunder.
11. Notices. All notices and other communications under this
Agreement shall be in writing and mailed, delivered or sent by facsimile
transmission to: if sent to the Placement Agents, Morgan Stanley & Co.
Incorporated, 1585 Broadway, New York, New York 10036, attention: High Yield New
Issues Group, facsimile number (212) 761-0587 and if sent to the Company, to
Atlas Air, Inc., 538 Commons Drive, Golden, Colorado 80401, attention: Chief
Financial Officer, facsimile number (303) 526-5051.
12. Counterparts. This Agreement may be signed in any number
of counterparts, each of which shall be an original, with the same effect as if
the signatures thereto and hereto were upon the same instrument.
13. Headings. The headings of the sections of this Agreement
have been inserted for convenience of reference only and shall not be deemed a
part of this Agreement.
<PAGE> 21
20
14. Applicable Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York.
Very truly yours,
ATLAS AIR, INC.
By: /s/ Richard Shuyler
---------------------------
Name: Richard Shuyler
Title: Executive Vice President --
Strategic Planning and
Treasurer
Accepted as of the date hereof
MORGAN STANLEY & CO. INCORPORATED
BT ALEX. BROWN INCORPORATED
By: Morgan Stanley & Co. Incorporated
By: /s/ Helen Meates
----------------------------------
Name: Helen Meates
Title: Vice President
<PAGE> 22
SCHEDULE I
<TABLE>
<CAPTION>
Principal Amount of
PLACEMENT AGENT Securities to be Purchased
<S> <C>
Morgan Stanley & Co. Incorporated....................... $87,500,000
BT Alex. Brown Incorporated............................. 87,500,000
Total:.................................................. $175,000,000
</TABLE>
<PAGE> 23
EXHIBIT A
FORM OF REGISTRATION RIGHTS AGREEMENT
<PAGE> 24
EXHIBIT B
FORM OF OPINION OF CAHILL GORDON & REINDEL,
COUNSEL TO THE COMPANY
<PAGE> 25
EXHIBIT C
FORM OF OPINION OF DAVID BRICTSON, IN-HOUSE LEGAL COUNSEL
TO THE COMPANY
<PAGE> 1
EXHIBIT 10.113
ATLAS AIR, INC.
9 1/4% Senior Notes Due 2008
REGISTRATION RIGHTS AGREEMENT
Dated: April 9, 1998
<PAGE> 2
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made
and entered into April 9, 1998, among ATLAS AIR, INC., a Delaware corporation
(the "Company"), MORGAN STANLEY & CO. INCORPORATED ("Morgan Stanley") and BT
ALEX. BROWN INCORPORATED (collectively, the "Placement Agents").
This Agreement is made pursuant to the Placement Agreement
dated April 7, 1998, between the Company and the Placement Agents (the
"Placement Agreement"), which provides for the sale to the Placement Agents of
$175,000,000 aggregate principal amount of 9 1/4% Senior Notes Due 2008 (the
"Securities") of the Company. In order to induce the Placement Agents to enter
into the Placement Agreement, the Company has agreed to provide to the Placement
Agents and their direct and indirect transferees the registration rights set
forth in this Agreement. The execution of this Agreement is a condition to the
closing under the Placement Agreement.
The Securities will be issued pursuant to an Indenture to be
dated as of April 9, 1998 (the "Indenture") between the Company and State Street
Bank and Trust Company, as trustee (the "Trustee").
In consideration of the foregoing, the parties hereto agree as
follows:
1. Definitions.
As used in this Agreement, the following capitalized defined
terms shall have the following meanings:
"1933 Act" shall mean the Securities Act of 1933, as amended
from time to time.
"1934 Act" shall mean the Securities Exchange Act of 1934, as
amended from time to time.
"Agreement" shall have the meaning set forth in the preamble.
"Closing Date" shall mean the Closing Date as defined in the
Placement Agreement.
"Company" shall have the meaning set forth in the preamble and
shall also include the Company's successors.
<PAGE> 3
2
"Exchange Dates" shall have the meaning set forth in Section
2(a)(ii) of this Agreement.
"Exchange Offer" shall mean the exchange offer by the Company
of Exchange Securities for Registrable Securities pursuant to Section
2(a) hereof.
"Exchange Offer Registration" shall mean a registration under
the 1933 Act effected pursuant to Section 2(a) hereof.
"Exchange Offer Registration Statement" shall mean an exchange
offer registration statement on Form S-4 (or, if applicable, on another
appropriate form) and all amendments and supplements to such
registration statement, in each case including the Prospectus contained
therein, all exhibits thereto and all material incorporated by
reference therein.
"Exchange Securities" shall mean securities issued by the
Company under the Indenture containing terms identical to the
Securities (except that (i) interest thereon shall accrue from the last
date on which interest was paid on the Securities or, if no such
interest has been paid, from April 9, 1998, and (ii) the Exchange
Securities will not contain restrictions on transfer), to be offered to
Holders of the Securities in exchange for such Securities pursuant to
the Exchange Offer.
"Holder" shall mean each Placement Agent, for so long as it
owns any Registrable Securities, and each of its successors, assigns
and direct and indirect transferees who become registered owners of
Registrable Securities under the Indenture; provided that for purposes
of Sections 4 and 5 of this Agreement, the term "Holder" shall include
Participating Broker-Dealers (as defined in Section 4(a)).
"Indenture" shall have the meaning set forth in the third
paragraph of this Agreement.
"Majority Holders" shall mean, together, the Holders of a
majority in aggregate principal amount of the of Registrable Securities
then outstanding; provided that whenever the consent or approval of
Holders of a specified percentage of Registrable Securities is required
hereunder, Registrable Securities held by the Company or any of its
affiliates (as such term is defined in Rule 405 under the 1933 Act)
(other than the Placement Agents or subsequent holders of Registrable
Securities if such subsequent holders are deemed to be such affiliates
solely by reason of their holding of such Registrable Securities) shall
not be counted in determining whether such consent or approval was
given by the Holders of such required percentage or amount.
<PAGE> 4
3
"Morgan Stanley" shall have the meaning set forth in the
preamble.
"Person" shall mean an individual, partnership, corporation,
trust or unincorporated organization, or a government or agency or
political subdivision thereof.
"Placement Agents" shall have the meaning set forth in the
preamble.
"Placement Agreement" shall have the meaning set forth in the
second paragraph of this Agreement.
"Prospectus" shall mean the prospectus included in a
Registration Statement, including any preliminary prospectus, and any
such prospectus as amended or supplemented by any prospectus
supplement, including a prospectus supplement with respect to the terms
of the offering of any portion of the Registrable Securities covered by
a Shelf Registration Statement, and by all other amendments and
supplements to such prospectus, and in each case including all material
incorporated by reference therein.
"Registration Expenses" shall mean any and all expenses
incident to performance of or compliance by the Company with this
Agreement, including without limitation: (i) all SEC, stock exchange or
National Association of Securities Dealers, Inc. registration and
filing fees, (ii) all fees and expenses incurred in connection with
compliance with state securities or blue sky laws (including reasonable
fees and disbursements of counsel for any underwriters or Holders in
connection with blue sky qualification of any of the Exchange
Securities or Registrable Securities), (iii) all expenses in connection
with the printing and distributing of any Registration Statement, any
Prospectus and any amendments or supplements thereto, (iv) all rating
agency fees, (v) all fees and disbursements relating to the
qualification of the Indenture under applicable securities laws, (vi)
the fees and disbursements of the Trustee and its counsel, (vii) the
fees and disbursements of counsel for the Company and, in the case of a
Shelf Registration Statement, the fees and disbursements of one counsel
for the Holders (which counsel shall be selected by the Majority
Holders and which counsel may also be counsel for the Placement Agents)
and (viii) the fees and disbursements of the independent public
accountants of the Company, including the expenses of any special
audits or "cold comfort" letters required by or incident to such
performance and compliance, but excluding fees and expenses of counsel
to the underwriters (other than fees and expenses set forth in clause
(ii) above) or the Holders and underwriting discounts and commissions
and transfer taxes, if any, relating to the sale or disposition of
Registrable Securities by a Holder.
<PAGE> 5
4
"Registrable Securities" shall mean the Securities; provided,
however, that the Securities shall cease to be Registrable Securities
upon the earlier to occur of (i) the consummation of the Exchange
Offer, (ii) a Registration Statement with respect to such Securities
shall have been declared effective under the 1933 Act and such
Securities shall have been disposed of pursuant to such Registration
Statement, (iii) such Securities shall have been sold to the public
pursuant to Rule 144(k) (or any similar provision then in force, but
not Rule 144A) under the 1933 Act or (iv) such Securities shall have
ceased to be outstanding.
"Registration Statement" shall mean any registration statement
of the Company that covers any of the Exchange Securities or
Registrable Securities pursuant to the provisions of this Agreement and
all amendments and supplements to any such Registration Statement,
including post-effective amendments, in each case including the
Prospectus contained therein, all exhibits thereto and all material
incorporated by reference therein.
"SEC" shall mean the Securities and Exchange Commission.
"Securities" shall have the meaning set forth in the second
paragraph of this Agreement.
"Shelf Registration" shall mean a registration effected
pursuant to Section 2(b) hereof.
"Shelf Registration Statement" shall mean a "shelf"
registration statement of the Company pursuant to the provisions of
Section 2(b) of this Agreement which covers all of the Registrable
Securities (but no other securities unless approved by the Holders
whose Registrable Securities are covered by such Shelf Registration
Statement) on an appropriate form under Rule 415 under the 1933 Act, or
any similar rule that may be adopted by the SEC, and all amendments and
supplements to such registration statement, including post-effective
amendments, in each case including the Prospectus contained therein,
all exhibits thereto and all material incorporated by reference
therein.
"TIA" shall have the meaning set forth in Section 3(l) of this
Agreement.
"Trustee" shall have the meaning set forth in the third
paragraph of this Agreement and shall also include the Trustee's
successors.
<PAGE> 6
5
"Underwritten Registration" or "Underwritten Offering" shall
mean a registration in which Registrable Securities are sold to an
Underwriter (as hereinafter defined) for reoffering to the public.
2. Registration Under the 1933 Act. (a) To the extent not
prohibited by any applicable law or applicable interpretation of the Staff of
the SEC, the Company shall use its best efforts (i) to cause to be filed within
60 days after the Closing Date an Exchange Offer Registration Statement covering
the offer to the Holders to exchange all of the Registrable Securities for
Exchange Securities, (ii) to cause the Exchange Offer Registration Statement to
be declared effective by the SEC within 150 days of the Closing Date, and (iii)
to have such Registration Statement remain effective until the closing of the
Exchange Offer. The Company shall commence the Exchange Offer promptly after the
Exchange Offer Registration Statement has been declared effective by the SEC and
use its best efforts to have the Exchange Offer consummated not later than 180
days after the Closing Date. The Company shall, or shall cause the Trustee to,
commence the Exchange Offer by mailing the related exchange offer Prospectus and
accompanying documents to each Holder stating, in addition to such other
disclosures as are required by applicable law:
(i) that the Exchange Offer is being made pursuant to this
Registration Rights Agreement and that all Registrable Securities
validly tendered will be accepted for exchange;
(ii) the dates of acceptance for exchange (which shall be each
business day during a period of at least 30 days from the date such
notice is mailed (or longer if required by applicable law)) (the
"Exchange Dates");
(iii) that any Registrable Security not tendered will remain
outstanding and continue to accrue interest, but will not retain any
rights under this Registration Rights Agreement;
(iv) that Holders electing to have a Registrable Security
exchanged pursuant to the Exchange Offer will be required to surrender
such Registrable Security, together with the enclosed letters of
transmittal, to the institution and at the address (located in the
Borough of Manhattan, The City of New York) specified in the notice
prior to the close of business on the last Exchange Date; and
(v) that Holders will be entitled to withdraw their election,
not later than the close of business on the last Exchange Date, by
sending to the institution and at the address (located in the Borough
of Manhattan, The City of New York) specified in the notice, a
telegram, telex, facsimile transmission or letter setting forth the
name of such Holder, the principal amount of Registrable Securities
delivered for exchange, and a
<PAGE> 7
6
statement that such Holder is withdrawing his election to have such Securities
exchanged.
As soon as practicable after the last Exchange Date, the
Company shall or shall cause the Trustee to:
(i) accept for exchange Registrable Securities or portions
thereof tendered and not validly withdrawn pursuant to the Exchange
Offer; and
(ii) deliver, or cause to be delivered, to the Trustee for
cancellation all Registrable Securities or portions thereof so accepted
for exchange by the Company, and issue, and cause the Trustee to
promptly authenticate and mail to each Holder, Exchange Securities
equal in principal amount to the principal amount of the Registrable
Securities surrendered by such Holder;
The Company shall use its best efforts to complete the Exchange Offer as
provided above and shall comply with the applicable requirements of the 1933
Act, the 1934 Act and other applicable laws, rules and regulations in connection
with the Exchange Offer. The Exchange Offer shall not be subject to any
conditions, other than that the Exchange Offer does not violate applicable law
or any applicable interpretation of the Staff of the SEC. The Company shall
inform the Placement Agents of the names and addresses of the Holders to whom
the Exchange Offer is made, and the Placement Agents shall have the right,
subject to applicable law, to contact such Holders and otherwise facilitate the
tender of Registrable Securities in the Exchange Offer.
(b) In the event that (i) the Company determines that the
Exchange Offer Registration provided for in Section 2(a) above is not available
or may not be consummated as soon as practicable after the last Exchange Date
because it would violate applicable law or the applicable interpretations of the
Staff of the SEC, (ii) any holder of a Security notifies the Company on or prior
to the 45th day following the Closing Date that (A) due to a change in law or
policy it is not entitled to participate in the Exchange Offer, (B) due to a
change in law or policy it may not resell Exchange Securities acquired by it in
the Exchange Offer to the public without delivering a prospectus and the
Prospectus contained in the Exchange Offer Registration Statement is not
appropriate or available for such resales by such holder or (C) it owns
Securities (including any Placement Agent that holds Securities as part of an
unsold allotment from the original offering of the Securities) acquired directly
from the Company or an Affiliate of the Company, (iii) the holders of not less
than a majority in aggregate principal amount of the Securities reasonably
determine that the interests of the holders would be materially adversely
affected by consummation of the Exchange Offer, (iv) the Exchange Offer is not
for any other reason consummated within 180 days of the Closing Date or (v) the
Exchange Offer has been completed and in the opinion of counsel for the
Placement Agents a
<PAGE> 8
7
Registration Statement must be filed and a Prospectus must be delivered by the
Placement Agents in connection with any offering or sale of Registrable
Securities, the Company shall use its best efforts to cause to be filed as soon
as practicable after such determination, date or notice of such opinion of
counsel is given to the Company, as the case may be, a Shelf Registration
Statement providing for the sale by the Holders of all of the Registrable
Securities, and to have such Shelf Registration Statement declared effective by
the SEC. The Company agrees to use its best efforts to keep the Shelf
Registration Statement continuously effective until the second anniversary of
the Closing Date or such shorter period that will terminate when all of the
Registrable Securities covered by the Shelf Registration Statement have been
sold pursuant to the Shelf Registration Statement. The Company further agrees to
supplement or amend the Shelf Registration Statement, if required by the rules,
regulations or instructions applicable to the registration form used by the
Company for such Shelf Registration Statement or by the 1933 Act or by any other
rules and regulations thereunder for shelf registration or if reasonably
requested by a Holder with respect to information relating to such Holder, and
to use its best efforts to cause any such amendment to become effective and such
Shelf Registration Statement to become usable as soon as thereafter practicable.
The Company agrees to furnish to the Holders of Registrable Securities copies of
any such supplement or amendment promptly after its being used or filed with the
SEC.
(c) The Company shall pay all Registration Expenses in
connection with the registration pursuant to Section 2(a) or Section 2(b). Each
Holder shall pay all underwriting discounts and commissions and transfer taxes,
if any, relating to the sale or disposition of such Holder's Registrable
Securities pursuant to the Shelf Registration Statement.
(d) An Exchange Offer Registration Statement pursuant to
Section 2(a) hereof or a Shelf Registration Statement pursuant to Section 2(b)
hereof will not be deemed to have become effective unless it has been declared
effective by the SEC; provided, however, that if, after it has been declared
effective, the offering of Registrable Securities pursuant to a Shelf
Registration Statement is interfered with by any stop order, injunction or other
order or requirement of the SEC or any other governmental agency or court, such
Shelf Registration Statement will be deemed not to have become effective during
the period of such interference until the offering of Registrable Securities
pursuant to such Registration Statement may legally resume. In the event that
neither the consummation of the Exchange Offer nor the declaration by the
Commission of a Shelf Registration to be effective (each a "Registration Event")
occurs, then the interest rate on the Securities (the "Additional Interest")
will increase as follows:
(i) if the Exchange Offer Registration Statement or Shelf
Registration Statement is not filed within 60 days following the
Closing Date, Additional Interest shall accrue on the Securities over
and above the stated interest at a rate of 0.50% per annum for the
first 90 days, commencing on the 61st day after the Closing Date, such
<PAGE> 9
8
additional Interest rate increasing by an additional 0.50% per annum at
the beginning of each subsequent 90-day period;
(ii) if the Exchange Offer Registration Statement or Shelf
Registration Statement is not declared effective within 150 days
following the Closing Date, then, commencing on the 151st day after the
Closing Date, Additional Interest shall accrue on the Securities over
and above the stated interest at a rate of 0.50% per annum for the
first 90 days immediately following the 90th day after the Closing
Date, such Additional Interest rate increasing by an additional 0.50%
per annum at the beginning of each subsequent 90-day period; or
(iii) if (A) the Company has not exchanged all Securities
validly tendered in accordance with the terms of the Exchange Offer on
or prior to 180 days after the Closing Date or (B) the Exchange Offer
Registration Statement ceases to be effective at any time prior to the
time that the Exchange Offer is consummated or (C) if applicable, the
Shelf Registration Statement has been declared effective and such Shelf
Registration Statement ceases to be effective at any time prior to the
second anniversary of the Closing Date (unless all the Securities have
been sold thereunder), then Additional Interest shall accrue on the
Securities over and above the stated interest at a rate of 0.50% per
annum for the first 90 days commencing on (x) the 181st day after the
Closing Date with respect to the Securities validly tendered and not
exchanged by the Company, in the case of (A) above, or (y) the day the
Exchange Offer Registration Statement ceases to be effective or usable
for its intended purpose in the case of (B) above, or (z) the day such
Shelf Registration Statement ceases to be effective in the case of (C)
above, such Additional Interest rate increasing by an additional 0.50%
per annum at the beginning of each subsequent 90-day period;
provided, however, that the Additional Interest rate on the Securities may not
exceed in the aggregate 1.0% per annum; and provided, further, that (1) upon the
filing of the Exchange Offer Registration Statement or Shelf Registration
Statement (in the case of clause (i) above), (2) upon the effectiveness of the
Exchange Offer Registration or Shelf Registration Statement (in the case of
clause (ii) above), or (3) upon the exchange of Exchange Securities for all
Securities tendered (in the case of clause (iii)(A) above), or upon the
effectiveness of the Exchange Registration Statement which had ceased to remain
effective (in the case of clause (iii)(B) above), or upon the effectiveness of
the Shelf Registration Statement which had ceased to remain effective (in the
case of clause (iii)(C) above), Additional Interest on the Securities as a
result of such clause (or the relevant subclause thereof, as the case may be)
shall cease to accrue and the interest rate shall revert to the original rate.
(e) The Company shall notify the Trustee and paying agent
under the Indenture (or the trustee and paying agent under such other indenture
under which any
<PAGE> 10
9
Transfer Restricted Notes are issued) within one Business Day upon the happening
of each and every Registration Event. The Company shall pay the Additional
Interest due on the Securities by depositing with the paying agent (which shall
not be the Company for these purposes) for the Securities, in trust, for the
benefit of the holders thereof, prior to 11:00 A.M. on the next interest payment
date specified by the Indenture (or such other indentures), sums sufficient to
pay the Additional Interest then due. The Additional Interest due shall be
payable on each interest payment date specified by the Indenture (or such other
indenture) to the record holders entitled to receive the interest payment to be
made on such date. Each obligation to pay Additional Interest shall be deemed to
accrue from, and including, the applicable Registration Event. The amount of
Additional Interest will be determined by multiplying the applicable Additional
Interest rate by the principal amount of the affected Transfer Restricted Notes
of such holders, multiplied by a fraction, the numerator of which is the number
of days such Additional Interest rate was applicable during such period
(determined on the basis of a 360-day year comprised of twelve 30-day months
and, in the case of a partial month, the actual number of days elapsed), and the
denominator of which is 360.
(f) Without limiting the remedies available to the Placement
Agents and the Holders, the Company acknowledges that any failure by the Company
to comply with its obligations under Section 2(a) and Section 2(b) hereof may
result in material irreparable injury to the Placement Agents or the Holders for
which there is no adequate remedy at law, that it will not be possible to
measure damages for such injuries precisely and that, in the event of any such
failure, each Placement Agent or any Holder may obtain such relief as may be
required to specifically enforce the Company's obligations under Section 2(a)
and Section 2(b) hereof.
3. Registration Procedures. In connection with the obligations
of the Company with respect to the Registration Statements pursuant to Section
2(a) and Section 2(b) hereof, the Company shall as expeditiously as possible:
(a) prepare and file with the SEC a Registration Statement on
the appropriate form under the 1933 Act, which form (x) shall be
selected by the Company and (y) shall, in the case of a Shelf
Registration, be available for the sale of the Registrable Securities
by the selling Holders thereof and (z) shall comply as to form in all
material respects with the requirements of the applicable form and
include all financial statements required by the SEC to be filed
therewith, and use its best efforts to cause such Registration
Statement to become effective and remain effective in accordance with
Section 2 hereof;
(b) prepare and file with the SEC such amendments and
post-effective amendments to each Registration Statement as may be
necessary to (x) keep such Registration Statement effective for the
applicable period under this Registration Rights
<PAGE> 11
10
Agreement, and (y) cause each Prospectus to be supplemented by any
required prospectus supplement and, as so supplemented, to be filed
pursuant to Rule 424 under the 1933 Act and (z) keep each Prospectus
current during the period described under Section 4(3) and Rule 174
under the 1933 Act that is applicable to transactions by brokers or
dealers with respect to the Registrable Securities or Exchange
Securities;
(c) in the case of a Shelf Registration, furnish to each
Holder of Registrable Securities, to counsel for the Placement Agents,
to counsel for the Holders and to each Underwriter of an Underwritten
Offering of Registrable Securities, if any, and each such Underwriter's
Counsel, without charge, as many copies of each Prospectus, including
each preliminary Prospectus, and any amendment or supplement thereto
and such other documents as such Holder or Underwriter may reasonably
request, in order to facilitate the public sale or other disposition of
the Registrable Securities; and the Company consents to the use of such
Prospectus and any amendment or supplement thereto in accordance with
applicable law by each of the selling Holders of Registrable Securities
and any such Underwriters in connection with the offering and sale of
the Registrable Securities covered by and in the manner described in
such Prospectus or any amendment or supplement thereto in accordance
with applicable law;
(d) use its best efforts to register or qualify the
Registrable Securities under all applicable state securities or "blue
sky" laws of such jurisdictions as any Holder of Registrable Securities
covered by a Registration Statement shall reasonably request in writing
by the time the applicable Registration Statement is declared effective
by the SEC, to cooperate with such Holders in connection with any
filings required to be made with the National Association of Securities
Dealers, Inc. and do any and all other acts and things which may be
reasonably necessary or advisable to enable such Holder to consummate
the disposition in each such jurisdiction of such Registrable
Securities owned by such Holder; provided, however, that the Company
shall not be required to (i) qualify as a foreign corporation or as a
dealer in securities in any jurisdiction where it would not otherwise
be required to qualify but for this Section 3(d), (ii) file any general
consent to service of process or (iii) subject itself to taxation in
any such jurisdiction if it is not so subject;
(e) in the case of a Shelf Registration, notify each Holder of
Registrable Securities, counsel for the Holders and counsel for the
Placement Agents promptly and, if requested by any such Holder or
counsel, confirm such advice in writing, (i) when a Registration
Statement has become effective and when any post-effective amendment
thereto have been filed and become effective, (ii) of any request by
the SEC or any state securities authority for amendments and
supplements to a Registration Statement and Prospectus or for
additional information after the Registration Statement has become
effective, (iii) of the issuance by the SEC or any state securities
authority of
<PAGE> 12
11
any stop order suspending the effectiveness of a Registration Statement
or the initiation of any proceedings for that purpose, (iv) if, between
the effective date of a Registration Statement and the closing of any
sale of Registrable Securities covered thereby, the representations and
warranties of the Company contained in any underwriting agreement,
securities sales agreement or other similar agreement, if any, relating
to such offering cease to be true and correct in all material respects
or if the Company receives any notification with respect to the
suspension of the qualification of the Registrable Securities for sale
in any jurisdiction or the initiation of any proceeding for such
purpose, (v) of the happening of any event during the period a Shelf
Registration Statement is effective which makes any statement made in
such Registration Statement or the related Prospectus untrue in any
material respect or which requires the making of any changes in such
Registration Statement or Prospectus in order to make the statements
therein not misleading, and (vi) of any determination by the Company
that a post-effective amendment to a Registration Statement would be
appropriate;
(f) make every reasonable effort to obtain the withdrawal of
any order suspending the effectiveness of a Registration Statement at
the earliest possible moment and provide immediate notice to each
Holder of the withdrawal of any such order;
(g) in the case of a Shelf Registration, furnish to each
Holder of Registrable Securities, without charge, at least one
conformed copy of each Registration Statement and any post-effective
amendment thereto (without documents incorporated therein by reference
or exhibits thereto, unless requested);
(h) in the case of a Shelf Registration, cooperate with the
selling Holders of Registrable Securities to facilitate the timely
preparation and delivery of Securities representing Registrable
Securities to be sold and not bearing any restrictive legends and
enable such Registrable Securities to be in such denominations
(consistent with the provisions of the Indenture) and registered in
such names as the selling Holders may reasonably request at least two
business days prior to the closing of any sale of Registrable
Securities;
(i) in the case of a Shelf Registration, upon the occurrence
of any event contemplated by Section 3(e)(v) hereof, use its best
efforts to prepare and file with the SEC a supplement or post-effective
amendment to a Registration Statement or the related Prospectus or any
document incorporated therein by reference or file any other required
document so that, as thereafter delivered to the purchasers of the
Registrable Securities, such Prospectus will not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements therein, in light of the circumstances under
which they were made, not misleading; the Company agrees to notify the
Holders to suspend use of the Prospectus as promptly as practicable
after the
<PAGE> 13
12
occurrence of such an event, and the Holders hereby agree to suspend
use of the Prospectus until the Company has amended or supplemented the
Prospectus to correct such misstatement or omission;
(j) a reasonable time prior to the filing of any Registration
Statement, any Prospectus, any amendment to a Registration Statement or
amendment or supplement to a Prospectus or any document which is to be
incorporated by reference into a Registration Statement or a Prospectus
after initial filing of a Registration Statement, provide copies of
such document to the Placement Agents and their counsel (and, in the
case of a Shelf Registration Statement, the Holders and their counsel)
and make such of the representatives of the Company as shall be
reasonably requested by the Placement Agents or their counsel (and, in
the case of a Shelf Registration Statement, the Holders or their
counsel) available for discussion of such document, and shall not at
any time file or make any amendment to the Registration Statement, any
Prospectus or any amendment of or supplement to a Registration
Statement or a Prospectus or any document which is to be incorporated
by reference into a Registration Statement or a Prospectus, of which
the Placement Agents and their counsel (and, in the case of a Shelf
Registration Statement, the Holders and their counsel) shall not have
previously been advised and furnished a copy or to which the Placement
Agents or their counsel (and, in the case of a Registration Statement,
the Holders or their counsel) shall object;
(k) obtain a CUSIP number for all Exchange Securities or
Registrable Securities, as the case may be, not later than the
effective date of a Registration Statement;
(l) cause the Indenture to be qualified under the Trust
Indenture Act of 1939, as amended (the "TIA") in connection with the
registration of the Exchange Securities or Registrable Securities, as
the case may be, cooperate with the Trustee and the Holders to effect
such changes to the Indenture as may be required for the Indenture to
be so qualified in accordance with the terms of the TIA and execute,
and use its best efforts to cause the Trustee to execute, all documents
as may be required to effect such changes, and all other forms and
documents required to be filed with the SEC to enable the Indenture to
be so qualified in a timely manner;
(m) in the case of a Shelf Registration, make available for
inspection by a representative of the Holders of the Registrable
Securities, any Underwriter participating in any disposition pursuant
to such Shelf Registration Statement, and attorneys and accountants
designated by the Holders, at reasonable times and in a reasonable
manner, all financial and other records, pertinent documents and
properties of the Company, and cause the respective officers, directors
and employees of the
<PAGE> 14
13
Company to supply all information reasonably requested by any such
representative, Underwriter, attorney or accountant in connection with
a Shelf Registration Statement;
(n) in the case of a Shelf Registration, use its best efforts
to cause all Registrable Securities to be listed on any securities
exchange or any automated quotation system on which similar securities
issued by the Company are then listed if requested by the Majority
Holders, to the extent such Registrable Securities satisfy applicable
listing requirements;
(o) use its best efforts to cause the Exchange Securities or
Registrable Securities, as the case may be, to be rated by two
nationally recognized statistical rating organizations (as such term is
defined in Rule 436(g)(2) under the 1933 Act);
(p) if reasonably requested by any Holder of Registrable
Securities covered by a Registration Statement, (i) promptly
incorporate in a Prospectus supplement or post-effective amendment such
information with respect to such Holder as such Holder reasonably
requests to be included therein and (ii) make all required filings of
such Prospectus supplement or such post-effective amendment as soon as
the Company has received satisfactory notification of the matters to be
incorporated in such filing; and
(q) in the case of a Shelf Registration, enter into such
customary agreements and take all such other actions in connection
therewith (including those requested by the Holders of a majority of
the class of Registrable Securities being sold) in order to expedite or
facilitate the disposition of such Registrable Securities including,
but not limited to, an Underwritten Offering and in such connection,
(i) to the extent possible, make such representations and warranties to
the Holders and any Underwriters of such Registrable Securities with
respect to the business of the Company and 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) obtain opinions of counsel to the Company (which
counsel and opinions, in form, scope and substance, shall be reasonably
satisfactory to the Holders and such Underwriters and their respective
counsel) addressed to each selling Holder and Underwriter of
Registrable Securities, covering the matters customarily covered in
opinions requested in underwritten offerings, (iii) obtain "cold
comfort" letters from the independent certified public accountants of
the Company (and, if necessary, any other certified public accountant
of any subsidiary of the Company, or of any business 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 selling Holder and Underwriter of Registrable Securities, such
letters to be in customary form and covering matters of the
<PAGE> 15
14
type customarily covered in "cold comfort" letters in connection with
underwritten offerings, and (iv) deliver such documents and Securities
as may be reasonably requested by the Holders of a majority in
principal amount of the Registrable Securities being sold or the
Underwriters, and which are customarily delivered in underwritten
offerings, to evidence the continued validity of the representations
and warranties of the Company made pursuant to clause (i) above and to
evidence compliance with any customary conditions contained in an
underwriting agreement.
In the case of a Shelf Registration Statement, the Company may
require each Holder of Registrable Securities to furnish to the Company such
information regarding the Holder and the proposed distribution by such Holder of
such Registrable Securities as the Company may from time to time reasonably
request in writing.
In the case of a Shelf Registration Statement, each Holder
agrees that, upon receipt of any notice from the Company of the happening of any
event of the kind described in Section 3(e)(v) hereof, such Holder will
forthwith discontinue disposition of Registrable Securities pursuant to a Shelf
Registration Statement until such Holder's receipt of the copies of the
supplemented or amended Prospectus contemplated by Section 3(i) hereof, and, if
so directed by the Company, such Holder will deliver to the Company (at the
Company's expense) all copies in its possession, other than permanent file
copies then in such Holder's possession, of the Prospectus covering such
Registrable Securities current at the time of receipt of such notice. If the
Company shall give any such notice to suspend the disposition of Registrable
Securities pursuant to a Registration Statement, the Company shall extend the
period during which the Registration Statement shall be maintained effective
pursuant to this Registration Rights Agreement by the number of days during the
period from and including the date of the giving of such notice to and including
the date when the Holders shall have received copies of the supplemented or
amended Prospectus necessary to resume such dispositions. The Company may give
any such notice only twice during any 365 day period and any such suspensions
may not exceed 30 days for each suspension and there may not be more than two
suspensions in effect during any 365 day period.
The Holders of Registrable Securities covered by a Shelf
Registration Statement who desire to do so may sell such Registrable Securities
in an Underwritten Offering. In any such Underwritten Offering, the investment
banker or investment bankers and manager or managers (the "Underwriters") that
will administer the offering will be selected by the Majority Holders of the
Registrable Securities included in such offering.
4. Participation of Broker-Dealers in Exchange Offer. (a) The
Staff of the SEC has taken the position that any broker-dealer that receives
Exchange Securities for its own account in the Exchange Offer in exchange for
Securities that were acquired by such broker-dealer as a result of market making
or other trading activities (a "Participating
<PAGE> 16
15
Broker-Dealer") may be deemed to be an "underwriter" within the meaning of the
1933 Act and must deliver a prospectus meeting the requirements of the 1933 Act
in connection with any resale of such Exchange Securities.
The Company understands that it is the Staff's position that
if the Prospectus contained in the Exchange Offer Registration Statement
includes a plan of distribution containing a statement to the above effect and
the means by which Participating Broker-Dealers may resell the Exchange
Securities, without naming the Participating Broker-Dealers or specifying the
amount of Exchange Securities owned by them, such Prospectus may be delivered by
Participating Broker-Dealers to satisfy their prospectus delivery obligation
under the 1933 Act in connection with resales of Exchange Securities for their
own accounts, so long as the Prospectus otherwise meets the requirements of the
1933 Act.
(b) In light of Section 4(a) above, notwithstanding the other
provisions of this Registration Rights Agreement, the Company agrees that the
provisions of this Registration Rights Agreement as they relate to a Shelf
Registration shall also apply to an Exchange Offer Registration to the extent,
and with such reasonable modifications thereto as may be reasonably requested by
the Placement Agents or by one or more Participating Broker-Dealers, in each
case as provided in clause (ii) below, in order to expedite or facilitate the
disposition of any Exchange Securities by Participating Broker-Dealers
consistent with the positions of the Staff recited in Section 4(a) above;
provided that:
(i) the Company shall not be required to amend or supplement
the Prospectus contained in the Exchange Offer Registration Statement,
as would otherwise be contemplated by Section 3(i), for a period
exceeding 180 days after the last Exchange Date (as such period may be
extended pursuant to the penultimate paragraph of Section 3 of this
Agreement) and Participating Broker-Dealers shall not be authorized by
the Company to deliver and shall not deliver such Prospectus after such
period in connection with the resales contemplated by this Section 4;
and
(ii) the application of the Shelf Registration procedures set
forth in Section 3 of this Registration Rights Agreement to an Exchange
Offer Registration, to the extent not required by the positions of the
Staff of the SEC or the 1933 Act and the rules and regulations
thereunder, will be in conformity with the reasonable request to the
Company by the Placement Agents or with the reasonable request in
writing to the Company by one or more broker-dealers who certify to the
Placement Agents and the Company in writing that they anticipate that
they will be Participating Broker-Dealers; provided that in connection
with such application of the Shelf Registration procedures set forth in
Section 3 to an Exchange Offer Registration, the Company shall be
obligated (x) to deal only with one entity representing the
Participating Broker-Dealers, which shall be Morgan Stanley unless it
elects not to act as such representative, (y) to pay the fees and
expenses of only one counsel representing the Participating
Broker-Dealers,
<PAGE> 17
16
which shall be counsel to the Placement Agents unless such counsel elects not to
so act, and (z) to cause to be delivered only one, if any, "cold comfort" letter
with respect to the Prospectus in the form existing on the last Exchange Date
and with respect to each subsequent amendment or supplement, if any, effected
during the period specified in clause (i) above.
(c) The Placement Agents shall have no liability to the
Company or any Holder with respect to any request that it may make pursuant to
Section 4(b) above.
5. Indemnification and Contribution. (a) The Company agrees to
indemnify and hold harmless each Placement Agent, each Holder and each person,
if any, who controls any Placement Agent or any Holder within the meaning of
either Section 15 of the 1933 Act or Section 20 of the 1934 Act, or is under
common control with, or is controlled by, any Placement Agent or any Holder,
from and against all losses, claims, damages and liabilities (including, without
limitation, any legal or other expenses reasonably incurred by any Placement
Agent, any Holder or any such controlling or affiliated person in connection
with defending or investigating any such action or claim) caused by any untrue
statement or alleged untrue statement of a material fact contained in any
Registration Statement (or any amendment thereto) pursuant to which Exchange
Securities or Registrable Securities were registered under the 1933 Act,
including all documents incorporated therein by reference, or caused by any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, or
caused by any untrue statement or alleged untrue statement of a material fact
contained in any Prospectus (as amended or supplemented if the Company shall
have furnished any amendments or supplements thereto), or caused by any omission
or alleged omission to state therein a material fact necessary to make the
statements therein in light of the circumstances under which they were made not
misleading, except insofar as such losses, claims, damages or liabilities are
caused by any such untrue statement or omission or alleged untrue statement or
omission based upon information relating to the Placement Agents or any Holder
furnished to the Company in writing through Morgan Stanley or any selling Holder
expressly for use therein. In connection with any Underwritten Offering
permitted by Section 3, the Company will also indemnify the Underwriters, if
any, selling brokers, dealers and similar securities industry professionals
participating in the distribution, their officers and directors and each Person
who controls such Persons (within the meaning of the 1933 Act and the 1934 Act)
to the same extent as provided above with respect to the indemnification of the
Holders, if requested in connection with any Registration Statement.
(b) Each Holder agrees, severally and not jointly, to
indemnify and hold harmless the Company, each Placement Agent, the other selling
Holders and each of their
<PAGE> 18
17
respective directors, officers who sign the Registration Statement and each
Person, if any, who controls the Company, any Placement Agent or any other
selling Holder within the meaning of either Section 15 of the 1933 Act or
Section 20 of the 1934 Act to the same extent as the foregoing indemnity from
the Company to the Placement Agents and the Holders, but only with reference to
information relating to such Holder furnished to the Company in writing by such
Holder expressly for use in any Registration Statement (or any amendment
thereto) or any Prospectus (or any amendment or supplement thereto).
(c) In case any proceeding (including any governmental
investigation) shall be instituted involving any person in respect of which
indemnity may be sought pursuant to either of paragraph (a) or paragraph (b)
above, such person (the "indemnified party") shall promptly notify the person
against whom such indemnity may be sought (the "indemnifying party") in writing
and the indemnifying party, upon request of the indemnified party, shall retain
counsel reasonably satisfactory to the indemnified party to represent the
indemnified party and any others the indemnifying party may designate in such
proceeding and shall pay the fees and disbursements of such counsel related to
such proceeding. In any such proceeding, any indemnified party shall have the
right to retain its own counsel, but the fees and expenses of such counsel shall
be at the expense of such indemnified party unless (i) the indemnifying party
and the indemnified party shall have mutually agreed to the retention of such
counsel or (ii) the named parties to any such proceeding (including any
impleaded parties) include both the indemnifying party and the indemnified party
and representation of both parties by the same counsel would be inappropriate
due to actual or potential differing interests between them. It is understood
that the indemnifying party shall not, in connection with any proceeding or
related proceedings in the same jurisdiction, be liable for (a) the fees and
expenses of more than one separate firm (in addition to any local counsel) for
the Placement Agents and all persons, if any, who control any Placement Agent
within the meaning of either Section 15 of the 1933 Act or Section 20 of the
1934 Act, (b) the fees and expenses of more than one separate firm (in addition
to any local counsel) for the Company, its directors, its officers who sign the
Registration Statement and each person, if any, who controls the Company within
the meaning of either such Section and (c) the fees and expenses of more than
one separate firm (in addition to any local counsel) for all Holders and all
persons, if any, who control any Holders within the meaning of either such
Section, and that all such fees and expenses shall be reimbursed as they are
incurred. In such case involving the Placement Agents and persons who control
any Placement Agent, such firm shall be designated in writing by the Placement
Agents. In such case involving the Holders and such persons who control Holders,
such firm shall be designated in writing by the Majority Holders. In all other
cases, such firm shall be designated by the Company. 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
<PAGE> 19
18
party shall have requested an indemnifying party to reimburse the indemnified
party for fees and expenses of counsel as contemplated by the second and third
sentences of this paragraph, the indemnifying party agrees that it shall be
liable for any settlement of any proceeding effected without its written consent
if (i) such settlement is entered into more than 60 days after receipt by such
indemnifying party of the aforesaid request and (ii) such indemnifying party
shall not have reimbursed the indemnified party for such fees and expenses of
counsel in accordance with such request prior to the date of such settlement. No
indemnifying party shall, without the prior written consent of the indemnified
party, effect any settlement of any pending or threatened proceeding in respect
of which such indemnified party is or could have been a party and indemnity
could have been sought hereunder by such indemnified party, unless such
settlement includes an unconditional release of such indemnified party from all
liability on claims that are the subject matter of such proceeding.
(d) If the indemnification provided for in paragraph (a) or
paragraph (b) of this Section 4 is unavailable to an indemnified party or
insufficient in respect of any losses, claims, damages or liabilities, then each
indemnifying party under such paragraph, in lieu of indemnifying such
indemnified party thereunder, shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages or
liabilities in such proportion as is appropriate to reflect the relative fault
of the indemnifying party or parties on the one hand and of the indemnified
party or parties on the other hand in connection with the statements or
omissions that resulted in such losses, claims, damages or liabilities, as well
as any other relevant equitable considerations. The relative fault of the
Company and the Holders shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company or the Holders and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The Holders' respective obligations to contribute
pursuant to this Section 5(d) are several in proportion to the respective number
of Registrable Securities of such Holder that were registered pursuant to a
Registration Statement.
(e) The Company and each Holder agree that it would not be
just or equitable if contribution pursuant to this Section 5 were determined by
pro rata allocation or by any other method of allocation that does not take
account of the equitable considerations referred to in paragraph (d) above. The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages and liabilities referred to in paragraph (d) above shall be
deemed to include, subject to the limitations set forth above, any legal or
other expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Section 5, no Holder shall be required to indemnify or
contribute any amount in excess of the amount by which the total price at which
Registrable Securities were sold by such Holder exceeds the amount of any
damages that such Holder has otherwise been required to pay by reason of such
untrue or
<PAGE> 20
19
alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933
Act) shall be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation. The remedies provided for in this Section 5
are not exclusive and shall not limit any rights or remedies which may otherwise
be available to any indemnified party at law or in equity.
The indemnity and contribution provisions contained in this
Section 5 shall remain operative and in full force and effect regardless of (i)
any termination of this Agreement, (ii) any investigation made by or on behalf
of the Placement Agents, any Holder or any person controlling any Placement
Agent or any Holder, or by or on behalf of the Company, its officers or
directors or any person controlling the Company, (iii) acceptance of any of the
Exchange Securities and (iv) any sale of Registrable Securities pursuant to a
Shelf Registration Statement.
6. Miscellaneous. (a) No Inconsistent Agreements. The Company
has not entered into, and on or after the date of this Registration Rights
Agreement will not enter into, any agreement which is inconsistent with the
rights granted to the Holders of Registrable Securities in this Registration
Rights Agreement or otherwise conflicts with the provisions hereof. The rights
granted to the Holders hereunder do not in any way conflict with and are not
inconsistent with the rights granted to the holders of the Company's other
issued and outstanding securities under any such agreements.
(b) Amendments and Waivers. The provisions of this
Registration Rights 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 at least a majority in aggregate principal amount
of the outstanding Registrable Securities affected by such amendment,
modification, supplement, waiver or consent; provided, however, that no
amendment, modification, supplement, waiver or consents to any departure from
the provisions of Section 5 hereof shall be effective as against any Holder of
Registrable Securities unless consented to in writing by such Holder.
(c) Notices. All notices and other communications provided for
or permitted hereunder shall be made in writing by hand-delivery, registered
first-class mail, telex, telecopier, or any courier guaranteeing overnight
delivery (i) if to a Holder, at the most current address given by such Holder to
the Company by means of a notice given in accordance with the provisions of this
Section 6(c), which address initially is, with respect to the Placement Agents,
the address set forth in the Placement Agreement, and (ii) if to the Company,
initially at the Company's address set forth in the Placement Agreement and
thereafter at such other address, notice of which is given in accordance with
the provisions of this Section 6(c).
<PAGE> 21
20
All such notices and communications shall be deemed to have
been duly given: at the time delivered by hand, if personally delivered; five
business days after being deposited in the mail, postage prepaid, if mailed;
when answered back, if telexed; when receipt is acknowledged, if telecopied; and
on the next business day if timely delivered to an air courier guaranteeing
overnight delivery.
Copies of all such notices, demands, or other communications
shall be concurrently delivered by the person giving the same to the Trustee, at
the address specified in the Indenture.
(d) Successors and Assigns. This Registration Rights Agreement
shall inure to the benefit of and be binding upon the successors, assigns and
transferees of each of the parties, including, without limitation and without
the need for an express assignment, subsequent Holders; provided that nothing
herein shall be deemed to permit any assignment, transfer or other disposition
of Registrable Securities in violation of the terms of the Placement Agreement
or the Indenture. If any transferee of any Holder shall acquire Registrable
Securities, in any manner, whether by operation of law or otherwise, such
Registrable Securities shall be held subject to all of the terms of this
Registration Rights Agreement, and by taking and holding such Registrable
Securities, such Person shall be conclusively deemed to have agreed to be bound
by and to perform all of the terms and provisions of this Registration Rights
Agreement and such Person shall be entitled to receive the benefits hereof. The
Placement Agents (in their capacity as Placement Agents) shall have no liability
or obligation to the Company with respect to any failure by any other Holder to
comply with, or any breach by any other Holder of, any of the obligations of
such other Holder under this Registration Rights Agreement.
(e) Purchases and Sales of Securities. The Company shall not,
and shall use its best efforts to cause its affiliates (as defined in Rule 405
under the 1933 Act), not to purchase and then resell or otherwise transfer any
Securities.
(f) Third Party Beneficiary. The Holders shall be third party
beneficiaries to the agreements made hereunder and shall have the right to
enforce such agreements directly to the extent they deem such enforcement
necessary or advisable to protect their rights hereunder.
(g) Counterparts. This Registration Rights Agreement may be
executed in any number of counterparts and by the parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same agreement.
<PAGE> 22
21
(h) Headings. The headings in this Registration Rights
Agreement are for convenience of reference only and shall not limit or otherwise
affect the meaning hereof.
(i) Governing Law. This Registration Rights Agreement shall be
governed by and construed in accordance with the internal laws of the State of
New York.
(j) Severability. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstance, is
held invalid, illegal or unenforceable, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions contained herein shall not be affected or impaired thereby.
(k) Trustee. The Trustee shall take such action as may be
reasonably requested by the Company in connection with the Company satisfying
its obligations arising under this Agreement.
<PAGE> 23
IN WITNESS WHEREOF, the parties have executed this
Registration Rights Agreement as of the date first written above.
ATLAS AIR, INC.
By: /s/ Richard H, Shuyler
-----------------------------------------
Name: Richard H. Shuyler
Title: Executive Vice President -
Strategic Planning and
Treasurer
Confirmed and accepted as of the date first above written:
MORGAN STANLEY & CO. INCORPORATED
BT ALEX. BROWN INCORPORATED
By: MORGAN STANLEY & CO. INCORPORATED
By: /s/ Helen Meates
--------------------------------------
Name: Helen Meates
Title: Vice President
<PAGE> 1
Exhibit 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
included in this registration statement and to the incorporation by reference
in this registration statement of our report dated February 15, 1998 included
in Atlas Air, Inc.'s Form 10-K for the year ended December 31, 1997 and to all
references to our Firm included in this registration statement.
ARTHUR ANDERSEN LLP
Denver, Colorado
May 4, 1998
<PAGE> 1
Exhibit 25.1
Registration No.
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939
OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) ___
WILMINGTON TRUST COMPANY
(Exact name of trustee as specified in its charter)
Delaware 51-0055023
(State of incorporation) (I.R.S. employer identification no.)
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890
(Address of principal executive offices)
Cynthia L. Corliss
Vice President and Trust Counsel
Wilmington Trust Company
Rodney Square North
Wilmington, Delaware 19890
(302) 651-8516
(Name, address and telephone number of agent for service)
ATLAS AIR, INC.
(Exact name of obligor as specified in its charter)
Delaware 84-1207329
(State of incorporation) (I.R.S. employer identification no.)
538 Commons Drive
Golden, Colorado 80401
(Address of principal executive offices) (Zip Code)
Pass Through Certificates, Series 1998-1A
(Title of the indenture securities)
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ITEM 1. GENERAL INFORMATION.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority
to which it is subject.
Federal Deposit Insurance Co. State Bank Commissioner
Five Penn Center Dover, Delaware
Suite #2901
Philadelphia, PA
(b) Whether it is authorized to exercise corporate trust powers.
The trustee is authorized to exercise corporate trust powers.
ITEM 2. AFFILIATIONS WITH THE OBLIGOR.
If the obligor is an affiliate of the trustee, describe each
affiliation:
Based upon an examination of the books and records of the
trustee and upon information furnished by the obligor, the obligor
is not an affiliate of the trustee.
ITEM 3. LIST OF EXHIBITS.
List below all exhibits filed as part of this Statement of
Eligibility and Qualification.
A. Copy of the Charter of Wilmington Trust Company, which
includes the certificate of authority of Wilmington Trust
Company to commence business and the authorization of
Wilmington Trust Company to exercise corporate trust powers.
B. Copy of By-Laws of Wilmington Trust Company.
C. Consent of Wilmington Trust Company required by Section
321(b) of Trust Indenture Act.
D. Copy of most recent Report of Condition of Wilmington Trust
Company.
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, Wilmington Trust Company, a corporation organized and
existing under the laws of Delaware, has duly caused this Statement of
Eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in the City of Wilmington and State of Delaware on the 29th day
of April, 1998.
WILMINGTON TRUST COMPANY
[SEAL]
Attest: /s/ Patricia A. Evans By: /s/ Emmett R. Harmon
----------------------------- ----------------------
Assistant Secretary Name: Emmett R. Harmon
Title: Vice President
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EXHIBIT A
AMENDED CHARTER
WILMINGTON TRUST COMPANY
WILMINGTON, DELAWARE
AS EXISTING ON MAY 9, 1987
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AMENDED CHARTER
OR
ACT OF INCORPORATION
OF
WILMINGTON TRUST COMPANY
WILMINGTON TRUST COMPANY, originally incorporated by an Act of the
General Assembly of the State of Delaware, entitled "An Act to Incorporate the
Delaware Guarantee and Trust Company", approved March 2, A.D. 1901, and the
name of which company was changed to "WILMINGTON TRUST COMPANY" by an amendment
filed in the Office of the Secretary of State on March 18, A.D. 1903, and the
Charter or Act of Incorporation of which company has been from time to time
amended and changed by merger agreements pursuant to the corporation law for
state banks and trust companies of the State of Delaware, does hereby alter and
amend its Charter or Act of Incorporation so that the same as so altered and
amended shall in its entirety read as follows:
FIRST: - The name of this corporation is WILMINGTON TRUST COMPANY.
SECOND: - The location of its principal office in the State of
Delaware is at Rodney Square North, in the City of Wilmington,
County of New Castle; the name of its resident agent is WILMINGTON
TRUST COMPANY whose address is Rodney Square North, in said City.
In addition to such principal office, the said corporation maintains
and operates branch offices in the City of Newark, New Castle
County, Delaware, the Town of Newport, New Castle County, Delaware,
at Claymont, New Castle County, Delaware, at Greenville, New Castle
County Delaware, and at Milford Cross Roads, New Castle County,
Delaware, and shall be empowered to open, maintain and operate
branch offices at Ninth and Shipley Streets, 418 Delaware Avenue,
2120 Market Street, and 3605 Market Street, all in the City of
Wilmington, New Castle County, Delaware, and such other branch
offices or places of business as may be authorized from time to time
by the agency or agencies of the government of the State of Delaware
empowered to confer such authority.
THIRD: - (a) The nature of the business and the objects and purposes
proposed to be transacted, promoted or carried on by this
Corporation are to do any or all of the things herein mentioned as
fully and to the same extent as natural persons might or could do
and in any part of the world, viz.:
(1) To sue and be sued, complain and defend in any Court of
law or equity and to make and use a common seal, and alter
the seal at pleasure, to hold, purchase, convey, mortgage or
otherwise deal in real and personal estate and property, and
to appoint such officers and agents as the business of the
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Corporation shall require, to make by-laws not inconsistent
with the Constitution or laws of the United States or of this
State, to discount bills, notes or other evidences of debt,
to receive deposits of money, or securities for money, to buy
gold and silver bullion and foreign coins, to buy and sell
bills of exchange, and generally to use, exercise and enjoy
all the powers, rights, privileges and franchises incident to
a corporation which are proper or necessary for the
transaction of the business of the Corporation hereby
created.
(2) To insure titles to real and personal property, or any
estate or interests therein, and to guarantee the holder of
such property, real or personal, against any claim or claims,
adverse to his interest therein, and to prepare and give
certificates of title for any lands or premises in the State
of Delaware, or elsewhere.
(3) To act as factor, agent, broker or attorney in the
receipt, collection, custody, investment and management of
funds, and the purchase, sale, management and disposal of
property of all descriptions, and to prepare and execute all
papers which may be necessary or proper in such business.
(4) To prepare and draw agreements, contracts, deeds,
leases, conveyances, mortgages, bonds and legal papers of
every description, and to carry on the business of
conveyancing in all its branches.
(5) To receive upon deposit for safekeeping money, jewelry,
plate, deeds, bonds and any and all other personal property
of every sort and kind, from executors, administrators,
guardians, public officers, courts, receivers, assignees,
trustees, and from all fiduciaries, and from all other
persons and individuals, and from all corporations whether
state, municipal, corporate or private, and to rent boxes,
safes, vaults and other receptacles for such property.
(6) To act as agent or otherwise for the purpose of
registering, issuing, certificating, countersigning,
transferring or underwriting the stock, bonds or other
obligations of any corporation, association, state or
municipality, and may receive and manage any sinking fund
therefor on such terms as may be agreed upon between the two
parties, and in like manner may act as Treasurer of any
corporation or municipality.
(7) To act as Trustee under any deed of trust, mortgage,
bond or other instrument issued by any state, municipality,
body politic, corporation, association or person, either
alone or in conjunction with any other person or persons,
corporation or corporations.
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(8) To guarantee the validity, performance or effect of any
contract or agreement, and the fidelity of persons holding
places of responsibility or trust; to become surety for any
person, or persons, for the faithful performance of any
trust, office, duty, contract or agreement, either by itself
or in conjunction with any other person, or persons,
corporation, or corporations, or in like manner become surety
upon any bond, recognizance, obligation, judgment, suit,
order, or decree to be entered in any court of record within
the State of Delaware or elsewhere, or which may now or
hereafter be required by any law, judge, officer or court in
the State of Delaware or elsewhere.
(9) To act by any and every method of appointment as
trustee, trustee in bankruptcy, receiver, assignee, assignee
in bankruptcy, executor, administrator, guardian, bailee, or
in any other trust capacity in the receiving, holding,
managing, and disposing of any and all estates and property,
real, personal or mixed, and to be appointed as such trustee,
trustee in bankruptcy, receiver, assignee, assignee in
bankruptcy, executor, administrator, guardian or bailee by
any persons, corporations, court, officer, or authority, in
the State of Delaware or elsewhere; and whenever this
Corporation is so appointed by any person, corporation,
court, officer or authority such trustee, trustee in
bankruptcy, receiver, assignee, assignee in bankruptcy,
executor, administrator, guardian, bailee, or in any other
trust capacity, it shall not be required to give bond with
surety, but its capital stock shall be taken and held as
security for the performance of the duties devolving upon it
by such appointment.
(10) And for its care, management and trouble, and the
exercise of any of its powers hereby given, or for the
performance of any of the duties which it may undertake or be
called upon to perform, or for the assumption of any
responsibility the said Corporation may be entitled to
receive a proper compensation.
(11) To purchase, receive, hold and own bonds, mortgages,
debentures, shares of capital stock, and other securities,
obligations, contracts and evidences of indebtedness, of any
private, public or municipal corporation within and without
the State of Delaware, or of the Government of the United
States, or of any state, territory, colony, or possession
thereof, or of any foreign government or country; to receive,
collect, receipt for, and dispose of interest, dividends and
income upon and from any of the bonds, mortgages, debentures,
notes, shares of capital stock, securities, obligations,
contracts, evidences of indebtedness and other property held
and owned by it, and to exercise in respect of all such
bonds, mortgages, debentures, notes, shares of capital stock,
securities, obligations, contracts, evidences of indebtedness
and other property, any and all the rights, powers and
privileges of individual
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owners thereof, including the right to vote thereon; to
invest and deal in and with any of the moneys of the
Corporation upon such securities and in such manner as it may
think fit and proper, and from time to time to vary or
realize such investments; to issue bonds and secure the same
by pledges or deeds of trust or mortgages of or upon the
whole or any part of the property held or owned by the
Corporation, and to sell and pledge such bonds, as and when
the Board of Directors shall determine, and in the promotion
of its said corporate business of investment and to the
extent authorized by law, to lease, purchase, hold, sell,
assign, transfer, pledge, mortgage and convey real and
personal property of any name and nature and any estate or
interest therein.
(b) In furtherance of, and not in limitation, of the powers
conferred by the laws of the State of Delaware, it is hereby
expressly provided that the said Corporation shall also have the
following powers:
(1) To do any or all of the things herein set forth, to the
same extent as natural persons might or could do, and in any
part of the world.
(2) To acquire the good will, rights, property and
franchises and to undertake the whole or any part of the
assets and liabilities of any person, firm, association or
corporation, and to pay for the same in cash, stock of this
Corporation, bonds or otherwise; to hold or in any manner to
dispose of the whole or any part of the property so
purchased; to conduct in any lawful manner the whole or any
part of any business so acquired, and to exercise all the
powers necessary or convenient in and about the conduct and
management of such business.
(3) To take, hold, own, deal in, mortgage or otherwise lien,
and to lease, sell, exchange, transfer, or in any manner
whatever dispose of property, real, personal or mixed,
wherever situated.
(4) To enter into, make, perform and carry out contracts of
every kind with any person, firm, association or corporation,
and, without limit as to amount, to draw, make, accept,
endorse, discount, execute and issue promissory notes,
drafts, bills of exchange, warrants, bonds, debentures, and
other negotiable or transferable instruments.
(5) To have one or more offices, to carry on all or any of
its operations and businesses, without restriction to the
same extent as natural persons might or could do, to purchase
or otherwise acquire, to hold, own, to mortgage, sell, convey
or otherwise dispose of, real and personal property, of every
class and description, in any State, District, Territory or
Colony of the United States, and in any foreign country or
place.
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(6) It is the intention that the objects, purposes and
powers specified and clauses contained in this paragraph
shall (except where otherwise expressed in said paragraph) be
nowise limited or restricted by reference to or inference
from the terms of any other clause of this or any other
paragraph in this charter, but that the objects, purposes and
powers specified in each of the clauses of this paragraph
shall be regarded as independent objects, purposes and
powers.
FOURTH: - (a) The total number of shares of all classes of stock
which the Corporation shall have authority to issue is forty-one
million (41,000,000) shares, consisting of:
(1) One million (1,000,000) shares of Preferred stock, par
value $10.00 per share (hereinafter referred to as "Preferred
Stock"); and
(2) Forty million (40,000,000) shares of Common Stock, par
value $1.00 per share (hereinafter referred to as "Common
Stock").
(b) Shares of Preferred Stock may be issued from time to time in
one or more series as may from time to time be determined by the
Board of Directors each of said series to be distinctly designated.
All shares of any one series of Preferred Stock shall be alike in
every particular, except that there may be different dates from
which dividends, if any, thereon shall be cumulative, if made
cumulative. The voting powers and the preferences and relative,
participating, optional and other special rights of each such
series, and the qualifications, limitations or restrictions thereof,
if any, may differ from those of any and all other series at any
time outstanding; and, subject to the provisions of subparagraph 1
of Paragraph (c) of this Article FOURTH, the Board of Directors of
the Corporation is hereby expressly granted authority to fix by
resolution or resolutions adopted prior to the issuance of any
shares of a particular series of Preferred Stock, the voting powers
and the designations, preferences and relative, optional and other
special rights, and the qualifications, limitations and restrictions
of such series, including, but without limiting the generality of
the foregoing, the following:
(1) The distinctive designation of, and the number of shares
of Preferred Stock which shall constitute such series, which
number may be increased (except where otherwise provided by
the Board of Directors) or decreased (but not below the
number of shares thereof then outstanding) from time to time
by like action of the Board of Directors;
(2) The rate and times at which, and the terms and
conditions on which, dividends, if any, on Preferred Stock of
such series shall be paid, the extent of the preference or
relation, if any, of such dividends to the dividends payable
on any other class or classes, or series of the same or other
class of stock and whether such dividends shall be cumulative
or non-cumulative;
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(3) The right, if any, of the holders of Preferred Stock of
such series to convert the same into or exchange the same
for, shares of any other class or classes or of any series of
the same or any other class or classes of stock of the
Corporation and the terms and conditions of such conversion
or exchange;
(4) Whether or not Preferred Stock of such series shall be
subject to redemption, and the redemption price or prices and
the time or times at which, and the terms and conditions on
which, Preferred Stock of such series may be redeemed.
(5) The rights, if any, of the holders of Preferred Stock of
such series upon the voluntary or involuntary liquidation,
merger, consolidation, distribution or sale of assets,
dissolution or winding-up, of the Corporation.
(6) The terms of the sinking fund or redemption or purchase
account, if any, to be provided for the Preferred Stock of
such series; and
(7) The voting powers, if any, of the holders of such series
of Preferred Stock which may, without limiting the generality
of the foregoing include the right, voting as a series or by
itself or together with other series of Preferred Stock or
all series of Preferred Stock as a class, to elect one or
more directors of the Corporation if there shall have been a
default in the payment of dividends on any one or more series
of Preferred Stock or under such circumstances and on such
conditions as the Board of Directors may determine.
(c) (1) After the requirements with respect to preferential
dividends on the Preferred Stock (fixed in accordance with the
provisions of section (b) of this Article FOURTH), if any, shall
have been met and after the Corporation shall have complied with all
the requirements, if any, with respect to the setting aside of sums
as sinking funds or redemption or purchase accounts (fixed in
accordance with the provisions of section (b) of this Article
FOURTH), and subject further to any conditions which may be fixed in
accordance with the provisions of section (b) of this Article
FOURTH, then and not otherwise the holders of Common Stock shall be
entitled to receive such dividends as may be declared from time to
time by the Board of Directors.
(2) After distribution in full of the preferential amount,
if any, (fixed in accordance with the provisions of section
(b) of this Article FOURTH), to be distributed to the holders
of Preferred Stock in the event of voluntary or involuntary
liquidation, distribution or sale of assets, dissolution or
winding-up, of the Corporation, the holders of the Common
Stock shall be entitled to
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receive all of the remaining assets of the Corporation,
tangible and intangible, of whatever kind available for
distribution to stockholders ratably in proportion to the
number of shares of Common Stock held by them respectively.
(3) Except as may otherwise be required by law or by the
provisions of such resolution or resolutions as may be
adopted by the Board of Directors pursuant to section (b) of
this Article FOURTH, each holder of Common Stock shall have
one vote in respect of each share of Common Stock held on all
matters voted upon by the stockholders.
(d) No holder of any of the shares of any class or series of stock
or of options, warrants or other rights to purchase shares of any
class or series of stock or of other securities of the Corporation
shall have any preemptive right to purchase or subscribe for any
unissued stock of any class or series or any additional shares of
any class or series to be issued by reason of any increase of the
authorized capital stock of the Corporation of any class or series,
or bonds, certificates of indebtedness, debentures or other
securities convertible into or exchangeable for stock of the
Corporation of any class or series, or carrying any right to
purchase stock of any class or series, but any such unissued stock,
additional authorized issue of shares of any class or series of
stock or securities convertible into or exchangeable for stock, or
carrying any right to purchase stock, may be issued and disposed of
pursuant to resolution of the Board of Directors to such persons,
firms, corporations or associations, whether such holders or others,
and upon such terms as may be deemed advisable by the Board of
Directors in the exercise of its sole discretion.
(e) The relative powers, preferences and rights of each series of
Preferred Stock in relation to the relative powers, preferences and
rights of each other series of Preferred Stock shall, in each case,
be as fixed from time to time by the Board of Directors in the
resolution or resolutions adopted pursuant to authority granted in
section (b) of this Article FOURTH and the consent, by class or
series vote or otherwise, of the holders of such of the series of
Preferred Stock as are from time to time outstanding shall not be
required for the issuance by the Board of Directors of any other
series of Preferred Stock whether or not the powers, preferences and
rights of such other series shall be fixed by the Board of Directors
as senior to, or on a parity with, the powers, preferences and
rights of such outstanding series, or any of them; provided,
however, that the Board of Directors may provide in the resolution
or resolutions as to any series of Preferred Stock adopted pursuant
to section (b) of this Article FOURTH that the consent of the
holders of a majority (or such greater proportion as shall be
therein fixed) of the outstanding shares of such series voting
thereon shall be required for the issuance of any or all other
series of Preferred Stock.
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(f) Subject to the provisions of section (e), shares of any series
of Preferred Stock may be issued from time to time as the Board of
Directors of the Corporation shall determine and on such terms and
for such consideration as shall be fixed by the Board of Directors.
(g) Shares of Common Stock may be issued from time to time as the
Board of Directors of the Corporation shall determine and on such
terms and for such consideration as shall be fixed by the Board of
Directors.
(h) The authorized amount of shares of Common Stock and of
Preferred Stock may, without a class or series vote, be increased or
decreased from time to time by the affirmative vote of the holders
of a majority of the stock of the Corporation entitled to vote
thereon.
FIFTH: - (a) The business and affairs of the Corporation shall be
conducted and managed by a Board of Directors. The number of
directors constituting the entire Board shall be not less than five
nor more than twenty-five as fixed from time to time by vote of a
majority of the whole Board, provided, however, that the number of
directors shall not be reduced so as to shorten the term of any
director at the time in office, and provided further, that the
number of directors constituting the whole Board shall be
twenty-four until otherwise fixed by a majority of the whole Board.
(b) The Board of Directors shall be divided into three classes, as
nearly equal in number as the then total number of directors
constituting the whole Board permits, with the term of office of one
class expiring each year. At the annual meeting of stockholders in
1982, directors of the first class shall be elected to hold office
for a term expiring at the next succeeding annual meeting, directors
of the second class shall be elected to hold office for a term
expiring at the second succeeding annual meeting and directors of
the third class shall be elected to hold office for a term expiring
at the third succeeding annual meeting. Any vacancies in the Board
of Directors for any reason, and any newly created directorships
resulting from any increase in the directors, may be filled by the
Board of Directors, acting by a majority of the directors then in
office, although less than a quorum, and any directors so chosen
shall hold office until the next annual election of directors. At
such election, the stockholders shall elect a successor to such
director to hold office until the next election of the class for
which such director shall have been chosen and until his successor
shall be elected and qualified. No decrease in the number of
directors shall shorten the term of any incumbent director.
(c) Notwithstanding any other provisions of this Charter or Act of
Incorporation or the By-Laws of the Corporation (and notwithstanding
the fact that some lesser percentage may be specified by law, this
Charter or Act of Incorporation or the By-Laws of the Corporation),
any director or the entire Board of Directors of the
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Corporation may be removed at any time without cause, but only by
the affirmative vote of the holders of two-thirds or more of the
outstanding shares of capital stock of the Corporation entitled to
vote generally in the election of directors (considered for this
purpose as one class) cast at a meeting of the stockholders called
for that purpose.
(d) Nominations for the election of directors may be made by the
Board of Directors or by any stockholder entitled to vote for the
election of directors. Such nominations shall be made by notice in
writing, delivered or mailed by first class United States mail,
postage prepaid, to the Secretary of the Corporation not less than
14 days nor more than 50 days prior to any meeting of the
stockholders called for the election of directors; provided,
however, that if less than 21 days' notice of the meeting is given
to stockholders, such written notice shall be delivered or mailed,
as prescribed, to the Secretary of the Corporation not later than
the close of the seventh day following the day on which notice of
the meeting was mailed to stockholders. Notice of nominations which
are proposed by the Board of Directors shall be given by the
Chairman on behalf of the Board.
(e) Each notice under subsection (d) shall set forth (i) the name,
age, business address and, if known, residence address of each
nominee proposed in such notice, (ii) the principal occupation or
employment of such nominee and (iii) the number of shares of stock
of the Corporation which are beneficially owned by each such
nominee.
(f) The Chairman of the meeting may, if the facts warrant,
determine and declare to the meeting that a nomination was not made
in accordance with the foregoing procedure, and if he should so
determine, he shall so declare to the meeting and the defective
nomination shall be disregarded.
(g) No action required to be taken or which may be taken at any
annual or special meeting of stockholders of the Corporation may be
taken without a meeting, and the power of stockholders to consent in
writing, without a meeting, to the taking of any action is
specifically denied.
SIXTH: - The Directors shall choose such officers, agent and
servants as may be provided in the By-Laws as they may from time to
time find necessary or proper.
SEVENTH: - The Corporation hereby created is hereby given the same
powers, rights and privileges as may be conferred upon corporations
organized under the Act entitled "An Act Providing a General
Corporation Law", approved March 10, 1899, as from time to time
amended.
EIGHTH: - This Act shall be deemed and taken to be a private Act.
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NINTH: - This Corporation is to have perpetual existence.
TENTH: - The Board of Directors, by resolution passed by a majority
of the whole Board, may designate any of their number to constitute
an Executive Committee, which Committee, to the extent provided in
said resolution, or in the By-Laws of the Company, shall have and
may exercise all of the powers of the Board of Directors in the
management of the business and affairs of the Corporation, and shall
have power to authorize the seal of the Corporation to be affixed to
all papers which may require it.
ELEVENTH: - The private property of the stockholders shall not be
liable for the payment of corporate debts to any extent whatever.
TWELFTH: - The Corporation may transact business in any part of the
world.
THIRTEENTH: - The Board of Directors of the Corporation is expressly
authorized to make, alter or repeal the By-Laws of the Corporation
by a vote of the majority of the entire Board. The stockholders may
make, alter or repeal any By-Law whether or not adopted by them,
provided however, that any such additional By-Laws, alterations or
repeal may be adopted only by the affirmative vote of the holders of
two-thirds or more of the outstanding shares of capital stock of the
Corporation entitled to vote generally in the election of directors
(considered for this purpose as one class).
FOURTEENTH: - Meetings of the Directors may be held outside of the
State of Delaware at such places as may be from time to time
designated by the Board, and the Directors may keep the books of the
Company outside of the State of Delaware at such places as may be
from time to time designated by them.
FIFTEENTH: - (a) In addition to any affirmative vote required by
law, and except as otherwise expressly provided in sections (b) and
(c) of this Article FIFTEENTH:
(A) any merger or consolidation of the Corporation or any
Subsidiary (as hereinafter defined) with or into (i) any
Interested Stockholder (as hereinafter defined) or (ii) any
other corporation (whether or not itself an Interested
Stockholder), which, after such merger or consolidation,
would be an Affiliate (as hereinafter defined) of an
Interested Stockholder, or
(B) any sale, lease, exchange, mortgage, pledge, transfer or
other disposition (in one transaction or a series of related
transactions) to or with any Interested Stockholder or any
Affiliate of any Interested Stockholder of any assets of the
Corporation or any Subsidiary having an aggregate fair market
value of $1,000,000 or more, or
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(C) the issuance or transfer by the Corporation or any
Subsidiary (in one transaction or a series of related
transactions) of any securities of the Corporation or any
Subsidiary to any Interested Stockholder or any Affiliate of
any Interested Stockholder in exchange for cash, securities
or other property (or a combination thereof) having an
aggregate fair market value of $1,000,000 or more, or
(D) the adoption of any plan or proposal for the liquidation
or dissolution of the Corporation, or
(E) any reclassification of securities (including any
reverse stock split), or recapitalization of the Corporation,
or any merger or consolidation of the Corporation with any of
its Subsidiaries or any similar transaction (whether or not
with or into or otherwise involving an Interested
Stockholder) which has the effect, directly or indirectly, of
increasing the proportionate share of the outstanding shares
of any class of equity or convertible securities of the
Corporation or any Subsidiary which is directly or indirectly
owned by any Interested Stockholder, or any Affiliate of any
Interested Stockholder,
shall require the affirmative vote of the holders of at least two-thirds of
the outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors, considered for the purpose of this
Article FIFTEENTH as one class ("Voting Shares"). Such affirmative vote shall
be required notwithstanding the fact that no vote may be required, or that some
lesser percentage may be specified, by law or in any agreement with any
national securities exchange or otherwise.
(2) The term "business combination" as used in this
Article FIFTEENTH shall mean any transaction which is
referred to any one or more of clauses (A) through (E) of
paragraph 1 of the section (a).
(b) The provisions of section (a) of this Article FIFTEENTH
shall not be applicable to any particular business
combination and such business combination shall require only
such affirmative vote as is required by law and any other
provisions of the Charter or Act of Incorporation of By-Laws
if such business combination has been approved by a majority
of the whole Board.
(c) For the purposes of this Article FIFTEENTH:
(1) A "person" shall mean any individual firm, corporation or other
entity.
(2) "Interested Stockholder" shall mean, in respect of any business
combination, any person (other than the Corporation or any
Subsidiary) who or which as of the record date for the determination
of stockholders entitled to notice of and to vote on
11
<PAGE> 15
such business combination, or immediately prior to the consummation
of any such transaction:
(A) is the beneficial owner, directly or indirectly, of more
than 10% of the Voting Shares, or
(B) is an Affiliate of the Corporation and at any time
within two years prior thereto was the beneficial owner,
directly or indirectly, of not less than 10% of the then
outstanding voting Shares, or
(C) is an assignee of or has otherwise succeeded in any
share of capital stock of the Corporation which were at any
time within two years prior thereto beneficially owned by any
Interested Stockholder, and such assignment or succession
shall have occurred in the course of a transaction or series
of transactions not involving a public offering within the
meaning of the Securities Act of 1933.
(3) A person shall be the "beneficial owner" of any Voting Shares:
(A) which such person or any of its Affiliates and
Associates (as hereafter defined) beneficially own, directly
or indirectly, or
(B) which such person or any of its Affiliates or Associates
has (i) the right to acquire (whether such right is
exercisable immediately or only after the passage of time),
pursuant to any agreement, arrangement or understanding or
upon the exercise of conversion rights, exchange rights,
warrants or options, or otherwise, or (ii) the right to vote
pursuant to any agreement, arrangement or understanding, or
(C) which are beneficially owned, directly or indirectly, by
any other person with which such first mentioned person or
any of its Affiliates or Associates has any agreement,
arrangement or understanding for the purpose of acquiring,
holding, voting or disposing of any shares of capital stock
of the Corporation.
(4) The outstanding Voting Shares shall include shares deemed owned
through application of paragraph (3) above but shall not include any
other Voting Shares which may be issuable pursuant to any agreement,
or upon exercise of conversion rights, warrants or options or
otherwise.
(5) "Affiliate" and "Associate" shall have the respective meanings
given those terms in Rule 12b-2 of the General Rules and Regulations
under the Securities Exchange Act of 1934, as in effect on December
31, 1981.
12
<PAGE> 16
(6) "Subsidiary" shall mean any corporation of which a majority of
any class of equity security (as defined in Rule 3a11-1 of the
General Rules and Regulations under the Securities Exchange Act of
1934, as in effect in December 31, 1981) is owned, directly or
indirectly, by the Corporation; provided, however, that for the
purposes of the definition of Investment Stockholder set forth in
paragraph (2) of this section (c), the term "Subsidiary" shall mean
only a corporation of which a majority of each class of equity
security is owned, directly or indirectly, by the Corporation.
(d) majority of the directors shall have the power and duty
to determine for the purposes of this Article FIFTEENTH on
the basis of information known to them, (1) the number of
Voting Shares beneficially owned by any person (2) whether a
person is an Affiliate or Associate of another, (3) whether a
person has an agreement, arrangement or understanding with
another as to the matters referred to in paragraph (3) of
section (c), or (4) whether the assets subject to any
business combination or the consideration received for the
issuance or transfer of securities by the Corporation, or any
Subsidiary has an aggregate fair market value of $1,000,000
or more.
(e) Nothing contained in this Article FIFTEENTH shall be
construed to relieve any Interested Stockholder from any
fiduciary obligation imposed by law.
SIXTEENTH: Notwithstanding any other provision of this Charter or
Act of Incorporation or the By-Laws of the Corporation (and in
addition to any other vote that may be required by law, this Charter
or Act of Incorporation by the By-Laws), the affirmative vote of the
holders of at least two-thirds of the outstanding shares of the
capital stock of the Corporation entitled to vote generally in the
election of directors (considered for this purpose as one class)
shall be required to amend, alter or repeal any provision of
Articles FIFTH, THIRTEENTH, FIFTEENTH or SIXTEENTH of this Charter
or Act of Incorporation.
SEVENTEENTH: (a) a Director of this Corporation shall not be liable
to the Corporation or its stockholders for monetary damages for
breach of fiduciary duty as a Director, except to the extent such
exemption from liability or limitation thereof is not permitted
under the Delaware General Corporation Laws as the same exists or
may hereafter be amended.
(b) Any repeal or modification of the foregoing paragraph
shall not adversely affect any right or protection of a
Director of the Corporation existing hereunder with respect
to any act or omission occurring prior to the time of such
repeal or modification."
13
<PAGE> 17
EXHIBIT B
BY-LAWS
WILMINGTON TRUST COMPANY
WILMINGTON, DELAWARE
AS EXISTING ON JANUARY 16, 1997
<PAGE> 18
BY-LAWS OF WILMINGTON TRUST COMPANY
ARTICLE I
STOCKHOLDERS' MEETINGS
Section 1. The Annual Meeting of Stockholders shall be held on the
third Thursday in April each year at the principal office at the Company or at
such other date, time, or place as may be designated by resolution by the Board
of Directors.
Section 2. Special meetings of all stockholders may be called at
any time by the Board of Directors, the Chairman of the Board or the President.
Section 3. Notice of all meetings of the stockholders shall be
given by mailing to each stockholder at least ten (10) days before said
meeting, at his last known address, a written or printed notice fixing the time
and place of such meeting.
Section 4. A majority in the amount of the capital stock of the
Company issued and outstanding on the record date, as herein determined, shall
constitute a quorum at all meetings of stockholders for the transaction of any
business, but the holders of a small number of shares may adjourn, from time to
time, without further notice, until a quorum is secured. At each annual or
special meeting of stockholders, each stockholder shall be entitled to one
vote, either in person or by proxy, for each shares of stock registered in the
stockholder's name on the books of the Company on the record date for any such
meeting as determined herein.
ARTICLE II
DIRECTORS
Section 1. The number and classification of the Board of Directors
shall be as set forth in the Charter of the Bank.
Section 2. No person who has attained the age of seventy-two (72)
years shall be nominated for election to the Board of Directors of the Company,
provided, however, that this limitation shall not apply to any person who was
serving as director of the Company on September 16, 1971.
Section 3. The class of Directors so elected shall hold office for
three years or until their successors are elected and qualified.
Section 4. The affairs and business of the Company shall be managed
and conducted by the Board of Directors.
Section 5. The Board of Directors shall meet at the principal
office of the Company or elsewhere in its discretion at such times to be
determined by a majority of its members, or at the call of the Chairman of the
Board of Directors or the President.
<PAGE> 19
Section 6. Special meetings of the Board of Directors may be called
at any time by the Chairman of the Board of Directors or by the President, and
shall be called upon the written request of a majority of the directors.
Section 7. A majority of the directors elected and qualified shall
be necessary to constitute a quorum for the transaction of business at any
meeting of the Board of Directors.
Section 8. Written notice shall be sent by mail to each director of
any special meeting of the Board of Directors, and of any change in the time or
place of any regular meeting, stating the time and place of such meeting, which
shall be mailed not less than two days before the time of holding such meeting.
Section 9. In the event of the death, resignation, removal,
inability to act, or disqualification of any director, the Board of Directors,
although less than a quorum, shall have the right to elect the successor who
shall hold office for the remainder of the full term of the class of directors
in which the vacancy occurred, and until such director's successor shall have
been duly elected and qualified.
Section 10. The Board of Directors at its first meeting after its
election by the stockholders shall appoint an Executive Committee, a Trust
Committee, an Audit Committee and a Compensation Committee, and shall elect
from its own members a Chairman of the Board of Directors and a President who
may be the same person. The Board of Directors shall also elect at such
meeting a Secretary and a Treasurer, who may be the same person, may appoint at
any time such other committees and elect or appoint such other officers as it
may deem advisable. The Board of Directors may also elect at such meeting one
or more Associate Directors.
Section 11. The Board of Directors may at any time remove, with or
without cause, any member of any Committee appointed by it or any associate
director or officer elected by it and may appoint or elect his successor.
Section 12. The Board of Directors may designate an officer to be
in charge of such of the departments or division of the Company as it may deem
advisable.
ARTICLE III
COMMITTEES
Section 1. Executive Committee
(A) The Executive Committee shall be composed of not
more than nine members who shall be selected by the Board of Directors from its
own members and who shall hold office during the pleasure of the Board.
2
<PAGE> 20
(B) The Executive Committee shall have all the powers
of the Board of Directors when it is not in session to transact all business
for and in behalf of the Company that may be brought before it.
(C) The Executive Committee shall meet at the principal
office of the Company or elsewhere in its discretion at such times to be
determined by a majority of its members, or at the call of the Chairman of the
Executive Committee or at the call of the Chairman of the Board of Directors.
The majority of its members shall be necessary to constitute a quorum for the
transaction of business. Special meetings of the Executive Committee may be
held at any time when a quorum is present.
(D) Minutes of each meeting of the Executive Committee
shall be kept and submitted to the Board of Directors at its next meeting.
(E) The Executive Committee shall advise and
superintend all investments that may be made of the funds of the Company, and
shall direct the disposal of the same, in accordance with such rules and
regulations as the Board of Directors from time to time make.
(F) In the event of a state of disaster of sufficient
severity to prevent the conduct and management of the affairs and business of
the Company by its directors and officers as contemplated by these By-Laws any
two available members of the Executive Committee as constituted immediately
prior to such disaster shall constitute a quorum of that Committee for the full
conduct and management of the affairs and business of the Company in accordance
with the provisions of Article III of these By-Laws; and if less than three
members of the Trust Committee is constituted immediately prior to such
disaster shall be available for the transaction of its business, such Executive
Committee shall also be empowered to exercise all of the powers reserved to the
Trust Committee under Article III Section 2 hereof. In the event of the
unavailability, at such time, of a minimum of two members of such Executive
Committee, any three available directors shall constitute the Executive
Committee for the full conduct and management of the affairs and business of
the Company in accordance with the foregoing provisions of this Section. This
By-Law shall be subject to implementation by Resolutions of the Board of
Directors presently existing or hereafter passed from time to time for that
purpose, and any provisions of these By-Laws (other than this Section) and any
resolutions which are contrary to the provisions of this Section or to the
provisions of any such implementary Resolutions shall be suspended during such
a disaster period until it shall be determined by any interim Executive
Committee acting under this section that it shall be to the advantage of the
Company to resume the conduct and management of its affairs and business under
all of the other provisions of these By-Laws.
3
<PAGE> 21
Section 2. Trust Committee
(A) The Trust Committee shall be composed of not more
than thirteen members who shall be selected by the Board of Directors, a
majority of whom shall be members of the Board of Directors and who shall hold
office during the pleasure of the Board.
(B) The Trust Committee shall have general supervision
over the Trust Department and the investment of trust funds, in all matters,
however, being subject to the approval of the Board of Directors.
(C) The Trust Committee shall meet at the principal
office of the Company or elsewhere in its discretion at such times to be
determined by a majority of its members or at the call of its chairman. A
majority of its members shall be necessary to constitute a quorum for the
transaction of business.
(D) Minutes of each meeting of the Trust Committee
shall be kept and promptly submitted to the Board of Directors.
(E) The Trust Committee shall have the power to appoint
Committees and/or designate officers or employees of the Company to whom
supervision over the investment of trust funds may be delegated when the Trust
Committee is not in session.
Section 3. Audit Committee
(A) The Audit Committee shall be composed of five
members who shall be selected by the Board of Directors from its own members,
none of whom shall be an officer of the Company, and shall hold office at the
pleasure of the Board.
(B) The Audit Committee shall have general supervision
over the Audit Division in all matters however subject to the approval of the
Board of Directors; it shall consider all matters brought to its attention by
the officer in charge of the Audit Division, review all reports of examination
of the Company made by any governmental agency or such independent auditor
employed for that purpose, and make such recommendations to the Board of
Directors with respect thereto or with respect to any other matters pertaining
to auditing the Company as it shall deem desirable.
(C) The Audit Committee shall meet whenever and
wherever the majority of its members shall deem it to be proper for the
transaction of its business, and a majority of its Committee shall constitute a
quorum.
Section 4. Compensation Committee
(A) The Compensation Committee shall be composed of not
more than
4
<PAGE> 22
five (5) members who shall be selected by the Board of Directors from its own
members who are not officers of the Company and who shall hold office during
the pleasure of the Board.
(B) The Compensation Committee shall in general advise
upon all matters of policy concerning the Company brought to its attention by
the management and from time to time review the management of the Company,
major organizational matters, including salaries and employee benefits and
specifically shall administer the Executive Incentive Compensation Plan.
(C) Meetings of the Compensation Committee may be
called at any time by the Chairman of the Compensation Committee, the Chairman
of the Board of Directors, or the President of the Company.
Section 5. Associate Directors
(A) Any person who has served as a director may be
elected by the Board of Directors as an associate director, to serve during the
pleasure of the Board.
(B) An associate director shall be entitled to attend
all directors meetings and participate in the discussion of all matters brought
to the Board, with the exception that he would have no right to vote. An
associate director will be eligible for appointment to Committees of the
Company, with the exception of the Executive Committee, Audit Committee and
Compensation Committee, which must be comprised solely of active directors.
Section 6. Absence or Disqualification of Any Member of a Committee
(A) In the absence or disqualification of any member of
any Committee created under Article III of the By-Laws of this Company, the
member or members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously appoint
another member of the Board of Directors to act at the meeting in the place of
any such absence or disqualified member.
ARTICLE IV
OFFICERS
Section 1. The Chairman of the Board of Directors shall preside at
all meetings of the Board and shall have such further authority and powers and
shall perform such duties as the Board of Directors may from time to time
confer and direct. He shall also exercise such powers and perform such duties
as may from time to time be agreed upon between himself and the President of
the Company.
Section 2. The Vice Chairman of the Board. The Vice Chairman of
the Board of
5
<PAGE> 23
Directors shall preside at all meetings of the Board of Directors at which the
Chairman of the Board shall not be present and shall have such further
authority and powers and shall perform such duties as the Board of Directors or
the Chairman of the Board may from time to time confer and direct.
Section 3. The President shall have the powers and duties
pertaining to the office of the President conferred or imposed upon him by
statute or assigned to him by the Board of Directors in the absence of the
Chairman of the Board the President shall have the powers and duties of the
Chairman of the Board.
Section 4. The Chairman of the Board of Directors or the President
as designated by the Board of Directors, shall carry into effect all legal
directions of the Executive Committee and of the Board of Directors, and shall
at all times exercise general supervision over the interest, affairs and
operations of the Company and perform all duties incident to his office.
Section 5. There may be one or more Vice Presidents, however
denominated by the Board of Directors, who may at any time perform all the
duties of the Chairman of the Board of Directors and/or the President and such
other powers and duties as may from time to time be assigned to them by the
Board of Directors, the Executive Committee, the Chairman of the Board or the
President and by the officer in charge of the department or division to which
they are assigned.
Section 6. The Secretary shall attend to the giving of notice of
meetings of the stockholders and the Board of Directors, as well as the
Committees thereof, to the keeping of accurate minutes of all such meetings and
to recording the same in the minute books of the Company. In addition to the
other notice requirements of these By-Laws and as may be practicable under the
circumstances, all such notices shall be in writing and mailed well in advance
of the scheduled date of any other meeting. He shall have custody of the
corporate seal and shall affix the same to any documents requiring such
corporate seal and to attest the same.
Section 7. The Treasurer shall have general supervision over all
assets and liabilities of the Company. He shall be custodian of and
responsible for all monies, funds and valuables of the Company and for the
keeping of proper records of the evidence of property or indebtedness and of
all the transactions of the Company. He shall have general supervision of the
expenditures of the Company and shall report to the Board of Directors at each
regular meeting of the condition of the Company, and perform such other duties
as may be assigned to him from time to time by the Board of Directors of the
Executive Committee.
Section 8. There may be a Controller who shall exercise general
supervision over the internal operations of the Company, including accounting,
and shall render to the Board of Directors at appropriate times a report
relating to the general condition and internal operations of the Company.
6
<PAGE> 24
There may be one or more subordinate accounting or controller
officers however denominated, who may perform the duties of the Controller and
such duties as may be prescribed by the Controller.
Section 9. The officer designated by the Board of Directors to be
in charge of the Audit Division of the Company with such title as the Board of
Directors shall prescribe, shall report to and be directly responsible only to
the Board of Directors.
There shall be an Auditor and there may be one or more Audit
Officers, however denominated, who may perform all the duties of the Auditor
and such duties as may be prescribed by the officer in charge of the Audit
Division.
Section 10. There may be one or more officers, subordinate in rank
to all Vice Presidents with such functional titles as shall be determined from
time to time by the Board of Directors, who shall ex officio hold the office
Assistant Secretary of this Company and who may perform such duties as may be
prescribed by the officer in charge of the department or division to whom they
are assigned.
Section 11. The powers and duties of all other officers of the
Company shall be those usually pertaining to their respective offices, subject
to the direction of the Board of Directors, the Executive Committee, Chairman
of the Board of Directors or the President and the officer in charge of the
department or division to which they are assigned.
ARTICLE V
STOCK AND STOCK CERTIFICATES
Section 1. Shares of stock shall be transferrable on the books of
the Company and a transfer book shall be kept in which all transfers of stock
shall be recorded.
Section 2. Certificate of stock shall bear the signature of the
President or any Vice President, however denominated by the Board of Directors
and countersigned by the Secretary or Treasurer or an Assistant Secretary, and
the seal of the corporation shall be engraved thereon. Each certificate shall
recite that the stock represented thereby is transferrable only upon the books
of the Company by the holder thereof or his attorney, upon surrender of the
certificate properly endorsed. Any certificate of stock surrendered to the
Company shall be cancelled at the time of transfer, and before a new
certificate or certificates shall be issued in lieu thereof. Duplicate
certificates of stock shall be issued only upon giving such security as may be
satisfactory to the Board of Directors or the Executive Committee.
Section 3. The Board of Directors of the Company is authorized to
fix in advance a record date for the determination of the stockholders entitled
to notice of, and to vote at, any meeting of stockholders and any adjournment
thereof, or entitled to receive payment of
7
<PAGE> 25
any dividend, or to any allotment or rights, or to exercise any rights in
respect of any change, conversion or exchange of capital stock, or in
connection with obtaining the consent of stockholders for any purpose, which
record date shall not be more than 60 nor less than 10 days proceeding the date
of any meeting of stockholders or the date for the payment of any dividend, or
the date for the allotment of rights, or the date when any change or conversion
or exchange of capital stock shall go into effect, or a date in connection with
obtaining such consent.
ARTICLE VI
SEAL
Section 1. The corporate seal of the Company shall be in the
following form:
Between two concentric circles the words
"Wilmington Trust Company" within the inner
circle the words "Wilmington, Delaware."
ARTICLE VII
FISCAL YEAR
Section 1. The fiscal year of the Company shall be the calendar
year.
ARTICLE VIII
EXECUTION OF INSTRUMENTS OF THE COMPANY
Section 1. The Chairman of the Board, the President or any Vice
President, however denominated by the Board of Directors, shall have full power
and authority to enter into, make, sign, execute, acknowledge and/or deliver
and the Secretary or any Assistant Secretary shall have full power and
authority to attest and affix the corporate seal of the Company to any and all
deeds, conveyances, assignments, releases, contracts, agreements, bonds, notes,
mortgages and all other instruments incident to the business of this Company or
in acting as executor, administrator, guardian, trustee, agent or in any other
fiduciary or representative capacity by any and every method of appointment or
by whatever person, corporation, court officer or authority in the State of
Delaware, or elsewhere, without any specific authority, ratification, approval
or confirmation by the Board of Directors or the Executive Committee, and any
and all such instruments shall have the same force and validity as though
expressly authorized by the Board of Directors and/or the Executive Committee.
8
<PAGE> 26
ARTICLE IX
COMPENSATION OF DIRECTORS AND MEMBERS OF COMMITTEES
Section 1. Directors and associate directors of the Company, other
than salaried officers of the Company, shall be paid such reasonable honoraria
or fees for attending meetings of the Board of Directors as the Board of
Directors may from time to time determine. Directors and associate directors
who serve as members of committees, other than salaried employees of the
Company, shall be paid such reasonable honoraria or fees for services as
members of committees as the Board of Directors shall from time to time
determine and directors and associate directors may be employed by the Company
for such special services as the Board of Directors may from time to time
determine and shall be paid for such special services so performed reasonable
compensation as may be determined by the Board of Directors.
ARTICLE X
INDEMNIFICATION
Section 1. (A) The Corporation shall indemnify and hold harmless,
to the fullest extent permitted by applicable law as it presently exists or may
hereafter be amended, any person who was or is made or is threatened to be made
a party or is otherwise involved in any action, suit or proceeding, whether
civil, criminal, administrative or investigative (a "proceeding") by reason of
the fact that he, or a person for whom he is the legal representative, is or
was a director, officer, employee or agent of the Corporation or is or was
serving at the request of the Corporation as a director, officer, employee,
fiduciary or agent of another corporation or of a partnership, joint venture,
trust, enterprise or non-profit entity, including service with respect to
employee benefit plans, against all liability and loss suffered and expenses
reasonably incurred by such person. The Corporation shall indemnify a person
in connection with a proceeding initiated by such person only if the proceeding
was authorized by the Board of Directors of the Corporation.
(B) The Corporation shall pay the expenses incurred in
defending any proceeding in advance of its final disposition, provided,
however, that the payment of expenses incurred by a Director officer in his
capacity as a Director or officer in advance of the final disposition of the
proceeding shall be made only upon receipt of an undertaking by the Director or
officer to repay all amounts advanced if it should be ultimately determined
that the Director or officer is not entitled to be indemnified under this
Article or otherwise.
(C) If a claim for indemnification or payment of
expenses, under this Article X is not paid in full within ninety days after a
written claim therefor has been received by the Corporation the claimant may
file suit to recover the unpaid amount of such claim and, if successful in
whole or in part, shall be entitled to be paid the expense of prosecuting such
claim. In any such action the Corporation shall have the burden of proving
that the claimant was not entitled to the requested indemnification of payment
of expenses under applicable law.
9
<PAGE> 27
(D) The rights conferred on any person by this Article
X shall not be exclusive of any other rights which such person may have or
hereafter acquire under any statute, provision of the Charter or Act of
Incorporation, these By-Laws, agreement, vote of stockholders or disinterested
Directors or otherwise.
(E) Any repeal or modification of the foregoing
provisions of this Article X shall not adversely affect any right or protection
hereunder of any person in respect of any act or omission occurring prior to
the time of such repeal or modification.
ARTICLE XI
AMENDMENTS TO THE BY-LAWS
Section 1. These By-Laws may be altered, amended or repealed, in
whole or in part, and any new By-Law or By-Laws adopted at any regular or
special meeting of the Board of Directors by a vote of the majority of all the
members of the Board of Directors then in office.
10
<PAGE> 28
EXHIBIT C
SECTION 321(b) CONSENT
Pursuant to Section 321(b) of the Trust Indenture Act of 1939, as
amended, Wilmington Trust Company hereby consents that reports of examinations
by Federal, State, Territorial or District authorities may be furnished by such
authorities to the Securities and Exchange Commission upon requests therefor.
WILMINGTON TRUST COMPANY
Dated: April 29, 1998 By: /s/ Emmett R. Harmon
------------------------
Name: Emmett R. Harmon
Title: Vice President
<PAGE> 29
EXHIBIT D
NOTICE
This form is intended to assist state nonmember banks and savings
banks with state publication requirements. It has not been approved
by any state banking authorities. Refer to your appropriate state
banking authorities for your state publication requirements.
R E P O R T O F C O N D I T I O N
Consolidating domestic subsidiaries of the
WILMINGTON TRUST COMPANY of WILMINGTON
- ----------------------------------------------- --------------
Name of Bank City
in the State of DELAWARE , at the close of business on December 31, 1997.
------------
<TABLE>
<CAPTION>
ASSETS
Thousands of dollars
<S> <C>
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coins . . . . . . . . . . . . . . . . . . . . . . 236,646
Interest-bearing balances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0
Held-to-maturity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 331,880
Available-for-sale securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,258,661
Federal funds sold and securities purchased under agreements to resell . . . . . . . . . . . . . . . . . . 91,500
Loans and lease financing receivables:
Loans and leases, net of unearned income. . . . . . . 3,822,320
LESS: Allowance for loan and lease losses. . . . . . 59,373
LESS: Allocated transfer risk reserve. . . . . . . . 0
Loans and leases, net of unearned income, allowance, and reserve . . . . . . . . . . . . . . . 3,762,947
Assets held in trading accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0
Premises and fixed assets (including capitalized leases) . . . . . . . . . . . . . . . . . . . . . . . . . 129,740
Other real estate owned . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,106
Investments in unconsolidated subsidiaries and associated companies . . . . . . . . . . . . . . . . . . . . 22
Customers' liability to this bank on acceptances outstanding . . . . . . . . . . . . . . . . . . . . . . . 0
Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,905
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100,799
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,919,206
</TABLE>
CONTINUED ON NEXT PAGE
<PAGE> 30
<TABLE>
<S> <C>
LIABILITIES
Deposits:
In domestic offices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,034,633
Noninterest-bearing . . . . . . . . 839,928
Interest-bearing. . . . . . . . . . 3,194,705
Federal funds purchased and Securities sold under agreements to repurchase . . . . . . . . . . . . . . . . 575,827
Demand notes issued to the U.S. Treasury . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61,290
Trading liabilities (from Schedule RC-D) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0
Other borrowed money: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ///////
With original maturity of one year or less . . . . . . . . . . . . . . . . . . . . . . . . . . 673,000
With original maturity of more than one year . . . . . . . . . . . . . . . . . . . . . . . . . 43,000
Bank's liability on acceptances executed and outstanding . . . . . . . . . . . . . . . . . . . . . . . . . 0
Subordinated notes and debentures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0
Other liabilities (from Schedule RC-G) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76,458
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,464,208
EQUITY CAPITAL
Perpetual preferred stock and related surplus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0
Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 500
Surplus (exclude all surplus related to preferred stock) . . . . . . . . . . . . . . . . . . . . . . . . . 62,118
Undivided profits and capital reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 385,018
Net unrealized holding gains (losses) on available-for-sale securities . . . . . . . . . . . . . . . . . . 7,362
Total equity capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 454,998
Total liabilities, limited-life preferred stock, and equity capital . . . . . . . . . . . . . . . . . . . . 5,919,206
</TABLE>
2
<PAGE> 1
Exhibit 25.2
Registration No.
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939
OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) ___
WILMINGTON TRUST COMPANY
(Exact name of trustee as specified in its charter)
Delaware 51-0055023
(State of incorporation) (I.R.S. employer identification no.)
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890
(Address of principal executive offices)
Cynthia L. Corliss
Vice President and Trust Counsel
Wilmington Trust Company
Rodney Square North
Wilmington, Delaware 19890
(302) 651-8516
(Name, address and telephone number of agent for service)
ATLAS AIR, INC.
(Exact name of obligor as specified in its charter)
Delaware 84-1207329
(State of incorporation) (I.R.S. employer identification no.)
538 Commons Drive
Golden, Colorado 80401
(Address of principal executive offices) (Zip Code)
Pass Through Certificates, Series 1998-1B
(Title of the indenture securities)
================================================================================
<PAGE> 2
ITEM 1. GENERAL INFORMATION.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority
to which it is subject.
Federal Deposit Insurance Co. State Bank Commissioner
Five Penn Center Dover, Delaware
Suite #2901
Philadelphia, PA
(b) Whether it is authorized to exercise corporate trust powers.
The trustee is authorized to exercise corporate trust powers.
ITEM 2. AFFILIATIONS WITH THE OBLIGOR.
If the obligor is an affiliate of the trustee, describe each
affiliation:
Based upon an examination of the books and records of the
trustee and upon information furnished by the obligor, the obligor
is not an affiliate of the trustee.
ITEM 3. LIST OF EXHIBITS.
List below all exhibits filed as part of this Statement of
Eligibility and Qualification.
A. Copy of the Charter of Wilmington Trust Company, which
includes the certificate of authority of Wilmington Trust
Company to commence business and the authorization of
Wilmington Trust Company to exercise corporate trust powers.
B. Copy of By-Laws of Wilmington Trust Company.
C. Consent of Wilmington Trust Company required by Section
321(b) of Trust Indenture Act.
D. Copy of most recent Report of Condition of Wilmington Trust
Company.
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, Wilmington Trust Company, a corporation organized and
existing under the laws of Delaware, has duly caused this Statement of
Eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in the City of Wilmington and State of Delaware on the 29th day
of April, 1998.
WILMINGTON TRUST COMPANY
[SEAL]
Attest: /s/ Patricia A. Evans By: /s/ Emmett R. Harmon
----------------------------- ----------------------
Assistant Secretary Name: Emmett R. Harmon
Title: Vice President
2
<PAGE> 3
EXHIBIT A
AMENDED CHARTER
WILMINGTON TRUST COMPANY
WILMINGTON, DELAWARE
AS EXISTING ON MAY 9, 1987
<PAGE> 4
AMENDED CHARTER
OR
ACT OF INCORPORATION
OF
WILMINGTON TRUST COMPANY
WILMINGTON TRUST COMPANY, originally incorporated by an Act of the
General Assembly of the State of Delaware, entitled "An Act to Incorporate the
Delaware Guarantee and Trust Company", approved March 2, A.D. 1901, and the
name of which company was changed to "WILMINGTON TRUST COMPANY" by an amendment
filed in the Office of the Secretary of State on March 18, A.D. 1903, and the
Charter or Act of Incorporation of which company has been from time to time
amended and changed by merger agreements pursuant to the corporation law for
state banks and trust companies of the State of Delaware, does hereby alter and
amend its Charter or Act of Incorporation so that the same as so altered and
amended shall in its entirety read as follows:
FIRST: - The name of this corporation is WILMINGTON TRUST COMPANY.
SECOND: - The location of its principal office in the State of
Delaware is at Rodney Square North, in the City of Wilmington,
County of New Castle; the name of its resident agent is WILMINGTON
TRUST COMPANY whose address is Rodney Square North, in said City.
In addition to such principal office, the said corporation maintains
and operates branch offices in the City of Newark, New Castle
County, Delaware, the Town of Newport, New Castle County, Delaware,
at Claymont, New Castle County, Delaware, at Greenville, New Castle
County Delaware, and at Milford Cross Roads, New Castle County,
Delaware, and shall be empowered to open, maintain and operate
branch offices at Ninth and Shipley Streets, 418 Delaware Avenue,
2120 Market Street, and 3605 Market Street, all in the City of
Wilmington, New Castle County, Delaware, and such other branch
offices or places of business as may be authorized from time to time
by the agency or agencies of the government of the State of Delaware
empowered to confer such authority.
THIRD: - (a) The nature of the business and the objects and purposes
proposed to be transacted, promoted or carried on by this
Corporation are to do any or all of the things herein mentioned as
fully and to the same extent as natural persons might or could do
and in any part of the world, viz.:
(1) To sue and be sued, complain and defend in any Court of
law or equity and to make and use a common seal, and alter
the seal at pleasure, to hold, purchase, convey, mortgage or
otherwise deal in real and personal estate and property, and
to appoint such officers and agents as the business of the
<PAGE> 5
Corporation shall require, to make by-laws not inconsistent
with the Constitution or laws of the United States or of this
State, to discount bills, notes or other evidences of debt,
to receive deposits of money, or securities for money, to buy
gold and silver bullion and foreign coins, to buy and sell
bills of exchange, and generally to use, exercise and enjoy
all the powers, rights, privileges and franchises incident to
a corporation which are proper or necessary for the
transaction of the business of the Corporation hereby
created.
(2) To insure titles to real and personal property, or any
estate or interests therein, and to guarantee the holder of
such property, real or personal, against any claim or claims,
adverse to his interest therein, and to prepare and give
certificates of title for any lands or premises in the State
of Delaware, or elsewhere.
(3) To act as factor, agent, broker or attorney in the
receipt, collection, custody, investment and management of
funds, and the purchase, sale, management and disposal of
property of all descriptions, and to prepare and execute all
papers which may be necessary or proper in such business.
(4) To prepare and draw agreements, contracts, deeds,
leases, conveyances, mortgages, bonds and legal papers of
every description, and to carry on the business of
conveyancing in all its branches.
(5) To receive upon deposit for safekeeping money, jewelry,
plate, deeds, bonds and any and all other personal property
of every sort and kind, from executors, administrators,
guardians, public officers, courts, receivers, assignees,
trustees, and from all fiduciaries, and from all other
persons and individuals, and from all corporations whether
state, municipal, corporate or private, and to rent boxes,
safes, vaults and other receptacles for such property.
(6) To act as agent or otherwise for the purpose of
registering, issuing, certificating, countersigning,
transferring or underwriting the stock, bonds or other
obligations of any corporation, association, state or
municipality, and may receive and manage any sinking fund
therefor on such terms as may be agreed upon between the two
parties, and in like manner may act as Treasurer of any
corporation or municipality.
(7) To act as Trustee under any deed of trust, mortgage,
bond or other instrument issued by any state, municipality,
body politic, corporation, association or person, either
alone or in conjunction with any other person or persons,
corporation or corporations.
2
<PAGE> 6
(8) To guarantee the validity, performance or effect of any
contract or agreement, and the fidelity of persons holding
places of responsibility or trust; to become surety for any
person, or persons, for the faithful performance of any
trust, office, duty, contract or agreement, either by itself
or in conjunction with any other person, or persons,
corporation, or corporations, or in like manner become surety
upon any bond, recognizance, obligation, judgment, suit,
order, or decree to be entered in any court of record within
the State of Delaware or elsewhere, or which may now or
hereafter be required by any law, judge, officer or court in
the State of Delaware or elsewhere.
(9) To act by any and every method of appointment as
trustee, trustee in bankruptcy, receiver, assignee, assignee
in bankruptcy, executor, administrator, guardian, bailee, or
in any other trust capacity in the receiving, holding,
managing, and disposing of any and all estates and property,
real, personal or mixed, and to be appointed as such trustee,
trustee in bankruptcy, receiver, assignee, assignee in
bankruptcy, executor, administrator, guardian or bailee by
any persons, corporations, court, officer, or authority, in
the State of Delaware or elsewhere; and whenever this
Corporation is so appointed by any person, corporation,
court, officer or authority such trustee, trustee in
bankruptcy, receiver, assignee, assignee in bankruptcy,
executor, administrator, guardian, bailee, or in any other
trust capacity, it shall not be required to give bond with
surety, but its capital stock shall be taken and held as
security for the performance of the duties devolving upon it
by such appointment.
(10) And for its care, management and trouble, and the
exercise of any of its powers hereby given, or for the
performance of any of the duties which it may undertake or be
called upon to perform, or for the assumption of any
responsibility the said Corporation may be entitled to
receive a proper compensation.
(11) To purchase, receive, hold and own bonds, mortgages,
debentures, shares of capital stock, and other securities,
obligations, contracts and evidences of indebtedness, of any
private, public or municipal corporation within and without
the State of Delaware, or of the Government of the United
States, or of any state, territory, colony, or possession
thereof, or of any foreign government or country; to receive,
collect, receipt for, and dispose of interest, dividends and
income upon and from any of the bonds, mortgages, debentures,
notes, shares of capital stock, securities, obligations,
contracts, evidences of indebtedness and other property held
and owned by it, and to exercise in respect of all such
bonds, mortgages, debentures, notes, shares of capital stock,
securities, obligations, contracts, evidences of indebtedness
and other property, any and all the rights, powers and
privileges of individual
3
<PAGE> 7
owners thereof, including the right to vote thereon; to
invest and deal in and with any of the moneys of the
Corporation upon such securities and in such manner as it may
think fit and proper, and from time to time to vary or
realize such investments; to issue bonds and secure the same
by pledges or deeds of trust or mortgages of or upon the
whole or any part of the property held or owned by the
Corporation, and to sell and pledge such bonds, as and when
the Board of Directors shall determine, and in the promotion
of its said corporate business of investment and to the
extent authorized by law, to lease, purchase, hold, sell,
assign, transfer, pledge, mortgage and convey real and
personal property of any name and nature and any estate or
interest therein.
(b) In furtherance of, and not in limitation, of the powers
conferred by the laws of the State of Delaware, it is hereby
expressly provided that the said Corporation shall also have the
following powers:
(1) To do any or all of the things herein set forth, to the
same extent as natural persons might or could do, and in any
part of the world.
(2) To acquire the good will, rights, property and
franchises and to undertake the whole or any part of the
assets and liabilities of any person, firm, association or
corporation, and to pay for the same in cash, stock of this
Corporation, bonds or otherwise; to hold or in any manner to
dispose of the whole or any part of the property so
purchased; to conduct in any lawful manner the whole or any
part of any business so acquired, and to exercise all the
powers necessary or convenient in and about the conduct and
management of such business.
(3) To take, hold, own, deal in, mortgage or otherwise lien,
and to lease, sell, exchange, transfer, or in any manner
whatever dispose of property, real, personal or mixed,
wherever situated.
(4) To enter into, make, perform and carry out contracts of
every kind with any person, firm, association or corporation,
and, without limit as to amount, to draw, make, accept,
endorse, discount, execute and issue promissory notes,
drafts, bills of exchange, warrants, bonds, debentures, and
other negotiable or transferable instruments.
(5) To have one or more offices, to carry on all or any of
its operations and businesses, without restriction to the
same extent as natural persons might or could do, to purchase
or otherwise acquire, to hold, own, to mortgage, sell, convey
or otherwise dispose of, real and personal property, of every
class and description, in any State, District, Territory or
Colony of the United States, and in any foreign country or
place.
4
<PAGE> 8
(6) It is the intention that the objects, purposes and
powers specified and clauses contained in this paragraph
shall (except where otherwise expressed in said paragraph) be
nowise limited or restricted by reference to or inference
from the terms of any other clause of this or any other
paragraph in this charter, but that the objects, purposes and
powers specified in each of the clauses of this paragraph
shall be regarded as independent objects, purposes and
powers.
FOURTH: - (a) The total number of shares of all classes of stock
which the Corporation shall have authority to issue is forty-one
million (41,000,000) shares, consisting of:
(1) One million (1,000,000) shares of Preferred stock, par
value $10.00 per share (hereinafter referred to as "Preferred
Stock"); and
(2) Forty million (40,000,000) shares of Common Stock, par
value $1.00 per share (hereinafter referred to as "Common
Stock").
(b) Shares of Preferred Stock may be issued from time to time in
one or more series as may from time to time be determined by the
Board of Directors each of said series to be distinctly designated.
All shares of any one series of Preferred Stock shall be alike in
every particular, except that there may be different dates from
which dividends, if any, thereon shall be cumulative, if made
cumulative. The voting powers and the preferences and relative,
participating, optional and other special rights of each such
series, and the qualifications, limitations or restrictions thereof,
if any, may differ from those of any and all other series at any
time outstanding; and, subject to the provisions of subparagraph 1
of Paragraph (c) of this Article FOURTH, the Board of Directors of
the Corporation is hereby expressly granted authority to fix by
resolution or resolutions adopted prior to the issuance of any
shares of a particular series of Preferred Stock, the voting powers
and the designations, preferences and relative, optional and other
special rights, and the qualifications, limitations and restrictions
of such series, including, but without limiting the generality of
the foregoing, the following:
(1) The distinctive designation of, and the number of shares
of Preferred Stock which shall constitute such series, which
number may be increased (except where otherwise provided by
the Board of Directors) or decreased (but not below the
number of shares thereof then outstanding) from time to time
by like action of the Board of Directors;
(2) The rate and times at which, and the terms and
conditions on which, dividends, if any, on Preferred Stock of
such series shall be paid, the extent of the preference or
relation, if any, of such dividends to the dividends payable
on any other class or classes, or series of the same or other
class of stock and whether such dividends shall be cumulative
or non-cumulative;
5
<PAGE> 9
(3) The right, if any, of the holders of Preferred Stock of
such series to convert the same into or exchange the same
for, shares of any other class or classes or of any series of
the same or any other class or classes of stock of the
Corporation and the terms and conditions of such conversion
or exchange;
(4) Whether or not Preferred Stock of such series shall be
subject to redemption, and the redemption price or prices and
the time or times at which, and the terms and conditions on
which, Preferred Stock of such series may be redeemed.
(5) The rights, if any, of the holders of Preferred Stock of
such series upon the voluntary or involuntary liquidation,
merger, consolidation, distribution or sale of assets,
dissolution or winding-up, of the Corporation.
(6) The terms of the sinking fund or redemption or purchase
account, if any, to be provided for the Preferred Stock of
such series; and
(7) The voting powers, if any, of the holders of such series
of Preferred Stock which may, without limiting the generality
of the foregoing include the right, voting as a series or by
itself or together with other series of Preferred Stock or
all series of Preferred Stock as a class, to elect one or
more directors of the Corporation if there shall have been a
default in the payment of dividends on any one or more series
of Preferred Stock or under such circumstances and on such
conditions as the Board of Directors may determine.
(c) (1) After the requirements with respect to preferential
dividends on the Preferred Stock (fixed in accordance with the
provisions of section (b) of this Article FOURTH), if any, shall
have been met and after the Corporation shall have complied with all
the requirements, if any, with respect to the setting aside of sums
as sinking funds or redemption or purchase accounts (fixed in
accordance with the provisions of section (b) of this Article
FOURTH), and subject further to any conditions which may be fixed in
accordance with the provisions of section (b) of this Article
FOURTH, then and not otherwise the holders of Common Stock shall be
entitled to receive such dividends as may be declared from time to
time by the Board of Directors.
(2) After distribution in full of the preferential amount,
if any, (fixed in accordance with the provisions of section
(b) of this Article FOURTH), to be distributed to the holders
of Preferred Stock in the event of voluntary or involuntary
liquidation, distribution or sale of assets, dissolution or
winding-up, of the Corporation, the holders of the Common
Stock shall be entitled to
6
<PAGE> 10
receive all of the remaining assets of the Corporation,
tangible and intangible, of whatever kind available for
distribution to stockholders ratably in proportion to the
number of shares of Common Stock held by them respectively.
(3) Except as may otherwise be required by law or by the
provisions of such resolution or resolutions as may be
adopted by the Board of Directors pursuant to section (b) of
this Article FOURTH, each holder of Common Stock shall have
one vote in respect of each share of Common Stock held on all
matters voted upon by the stockholders.
(d) No holder of any of the shares of any class or series of stock
or of options, warrants or other rights to purchase shares of any
class or series of stock or of other securities of the Corporation
shall have any preemptive right to purchase or subscribe for any
unissued stock of any class or series or any additional shares of
any class or series to be issued by reason of any increase of the
authorized capital stock of the Corporation of any class or series,
or bonds, certificates of indebtedness, debentures or other
securities convertible into or exchangeable for stock of the
Corporation of any class or series, or carrying any right to
purchase stock of any class or series, but any such unissued stock,
additional authorized issue of shares of any class or series of
stock or securities convertible into or exchangeable for stock, or
carrying any right to purchase stock, may be issued and disposed of
pursuant to resolution of the Board of Directors to such persons,
firms, corporations or associations, whether such holders or others,
and upon such terms as may be deemed advisable by the Board of
Directors in the exercise of its sole discretion.
(e) The relative powers, preferences and rights of each series of
Preferred Stock in relation to the relative powers, preferences and
rights of each other series of Preferred Stock shall, in each case,
be as fixed from time to time by the Board of Directors in the
resolution or resolutions adopted pursuant to authority granted in
section (b) of this Article FOURTH and the consent, by class or
series vote or otherwise, of the holders of such of the series of
Preferred Stock as are from time to time outstanding shall not be
required for the issuance by the Board of Directors of any other
series of Preferred Stock whether or not the powers, preferences and
rights of such other series shall be fixed by the Board of Directors
as senior to, or on a parity with, the powers, preferences and
rights of such outstanding series, or any of them; provided,
however, that the Board of Directors may provide in the resolution
or resolutions as to any series of Preferred Stock adopted pursuant
to section (b) of this Article FOURTH that the consent of the
holders of a majority (or such greater proportion as shall be
therein fixed) of the outstanding shares of such series voting
thereon shall be required for the issuance of any or all other
series of Preferred Stock.
7
<PAGE> 11
(f) Subject to the provisions of section (e), shares of any series
of Preferred Stock may be issued from time to time as the Board of
Directors of the Corporation shall determine and on such terms and
for such consideration as shall be fixed by the Board of Directors.
(g) Shares of Common Stock may be issued from time to time as the
Board of Directors of the Corporation shall determine and on such
terms and for such consideration as shall be fixed by the Board of
Directors.
(h) The authorized amount of shares of Common Stock and of
Preferred Stock may, without a class or series vote, be increased or
decreased from time to time by the affirmative vote of the holders
of a majority of the stock of the Corporation entitled to vote
thereon.
FIFTH: - (a) The business and affairs of the Corporation shall be
conducted and managed by a Board of Directors. The number of
directors constituting the entire Board shall be not less than five
nor more than twenty-five as fixed from time to time by vote of a
majority of the whole Board, provided, however, that the number of
directors shall not be reduced so as to shorten the term of any
director at the time in office, and provided further, that the
number of directors constituting the whole Board shall be
twenty-four until otherwise fixed by a majority of the whole Board.
(b) The Board of Directors shall be divided into three classes, as
nearly equal in number as the then total number of directors
constituting the whole Board permits, with the term of office of one
class expiring each year. At the annual meeting of stockholders in
1982, directors of the first class shall be elected to hold office
for a term expiring at the next succeeding annual meeting, directors
of the second class shall be elected to hold office for a term
expiring at the second succeeding annual meeting and directors of
the third class shall be elected to hold office for a term expiring
at the third succeeding annual meeting. Any vacancies in the Board
of Directors for any reason, and any newly created directorships
resulting from any increase in the directors, may be filled by the
Board of Directors, acting by a majority of the directors then in
office, although less than a quorum, and any directors so chosen
shall hold office until the next annual election of directors. At
such election, the stockholders shall elect a successor to such
director to hold office until the next election of the class for
which such director shall have been chosen and until his successor
shall be elected and qualified. No decrease in the number of
directors shall shorten the term of any incumbent director.
(c) Notwithstanding any other provisions of this Charter or Act of
Incorporation or the By-Laws of the Corporation (and notwithstanding
the fact that some lesser percentage may be specified by law, this
Charter or Act of Incorporation or the By-Laws of the Corporation),
any director or the entire Board of Directors of the
8
<PAGE> 12
Corporation may be removed at any time without cause, but only by
the affirmative vote of the holders of two- thirds or more of the
outstanding shares of capital stock of the Corporation entitled to
vote generally in the election of directors (considered for this
purpose as one class) cast at a meeting of the stockholders called
for that purpose.
(d) Nominations for the election of directors may be made by the
Board of Directors or by any stockholder entitled to vote for the
election of directors. Such nominations shall be made by notice in
writing, delivered or mailed by first class United States mail,
postage prepaid, to the Secretary of the Corporation not less than
14 days nor more than 50 days prior to any meeting of the
stockholders called for the election of directors; provided,
however, that if less than 21 days' notice of the meeting is given
to stockholders, such written notice shall be delivered or mailed,
as prescribed, to the Secretary of the Corporation not later than
the close of the seventh day following the day on which notice of
the meeting was mailed to stockholders. Notice of nominations which
are proposed by the Board of Directors shall be given by the
Chairman on behalf of the Board.
(e) Each notice under subsection (d) shall set forth (i) the name,
age, business address and, if known, residence address of each
nominee proposed in such notice, (ii) the principal occupation or
employment of such nominee and (iii) the number of shares of stock
of the Corporation which are beneficially owned by each such
nominee.
(f) The Chairman of the meeting may, if the facts warrant,
determine and declare to the meeting that a nomination was not made
in accordance with the foregoing procedure, and if he should so
determine, he shall so declare to the meeting and the defective
nomination shall be disregarded.
(g) No action required to be taken or which may be taken at any
annual or special meeting of stockholders of the Corporation may be
taken without a meeting, and the power of stockholders to consent in
writing, without a meeting, to the taking of any action is
specifically denied.
SIXTH: - The Directors shall choose such officers, agent and
servants as may be provided in the By-Laws as they may from time to
time find necessary or proper.
SEVENTH: - The Corporation hereby created is hereby given the same
powers, rights and privileges as may be conferred upon corporations
organized under the Act entitled "An Act Providing a General
Corporation Law", approved March 10, 1899, as from time to time
amended.
EIGHTH: - This Act shall be deemed and taken to be a private Act.
9
<PAGE> 13
NINTH: - This Corporation is to have perpetual existence.
TENTH: - The Board of Directors, by resolution passed by a majority
of the whole Board, may designate any of their number to constitute
an Executive Committee, which Committee, to the extent provided in
said resolution, or in the By-Laws of the Company, shall have and
may exercise all of the powers of the Board of Directors in the
management of the business and affairs of the Corporation, and shall
have power to authorize the seal of the Corporation to be affixed to
all papers which may require it.
ELEVENTH: - The private property of the stockholders shall not be
liable for the payment of corporate debts to any extent whatever.
TWELFTH: - The Corporation may transact business in any part of the
world.
THIRTEENTH: - The Board of Directors of the Corporation is expressly
authorized to make, alter or repeal the By-Laws of the Corporation
by a vote of the majority of the entire Board. The stockholders may
make, alter or repeal any By-Law whether or not adopted by them,
provided however, that any such additional By-Laws, alterations or
repeal may be adopted only by the affirmative vote of the holders of
two-thirds or more of the outstanding shares of capital stock of the
Corporation entitled to vote generally in the election of directors
(considered for this purpose as one class).
FOURTEENTH: - Meetings of the Directors may be held outside
of the State of Delaware at such places as may be from time to time
designated by the Board, and the Directors may keep the books of the
Company outside of the State of Delaware at such places as may be
from time to time designated by them.
FIFTEENTH: - (a) In addition to any affirmative vote required by
law, and except as otherwise expressly provided in sections (b) and
(c) of this Article FIFTEENTH:
(A) any merger or consolidation of the Corporation or any
Subsidiary (as hereinafter defined) with or into (i) any
Interested Stockholder (as hereinafter defined) or (ii) any
other corporation (whether or not itself an Interested
Stockholder), which, after such merger or consolidation,
would be an Affiliate (as hereinafter defined) of an
Interested Stockholder, or
(B) any sale, lease, exchange, mortgage, pledge, transfer or
other disposition (in one transaction or a series of related
transactions) to or with any Interested Stockholder or any
Affiliate of any Interested Stockholder of any assets of the
Corporation or any Subsidiary having an aggregate fair market
value of $1,000,000 or more, or
10
<PAGE> 14
(C) the issuance or transfer by the Corporation or any
Subsidiary (in one transaction or a series of related
transactions) of any securities of the Corporation or any
Subsidiary to any Interested Stockholder or any Affiliate of
any Interested Stockholder in exchange for cash, securities
or other property (or a combination thereof) having an
aggregate fair market value of $1,000,000 or more, or
(D) the adoption of any plan or proposal for the liquidation
or dissolution of the Corporation, or
(E) any reclassification of securities (including any
reverse stock split), or recapitalization of the Corporation,
or any merger or consolidation of the Corporation with any of
its Subsidiaries or any similar transaction (whether or not
with or into or otherwise involving an Interested
Stockholder) which has the effect, directly or indirectly, of
increasing the proportionate share of the outstanding shares
of any class of equity or convertible securities of the
Corporation or any Subsidiary which is directly or indirectly
owned by any Interested Stockholder, or any Affiliate of any
Interested Stockholder,
shall require the affirmative vote of the holders of at least two-thirds of
the outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors, considered for the purpose of this
Article FIFTEENTH as one class ("Voting Shares"). Such affirmative vote shall
be required notwithstanding the fact that no vote may be required, or that some
lesser percentage may be specified, by law or in any agreement with any
national securities exchange or otherwise.
(2) The term "business combination" as used in this
Article FIFTEENTH shall mean any transaction which is
referred to any one or more of clauses (A) through (E) of
paragraph 1 of the section (a).
(b) The provisions of section (a) of this Article FIFTEENTH
shall not be applicable to any particular business
combination and such business combination shall require only
such affirmative vote as is required by law and any other
provisions of the Charter or Act of Incorporation of By-Laws
if such business combination has been approved by a majority
of the whole Board.
(c) For the purposes of this Article FIFTEENTH:
(1) A "person" shall mean any individual firm, corporation or other
entity.
(2) "Interested Stockholder" shall mean, in respect of any business
combination, any person (other than the Corporation or any
Subsidiary) who or which as of the record date for the determination
of stockholders entitled to notice of and to vote on
11
<PAGE> 15
such business combination, or immediately prior to the consummation
of any such transaction:
(A) is the beneficial owner, directly or indirectly, of more
than 10% of the Voting Shares, or
(B) is an Affiliate of the Corporation and at any time
within two years prior thereto was the beneficial owner,
directly or indirectly, of not less than 10% of the then
outstanding voting Shares, or
(C) is an assignee of or has otherwise succeeded in any
share of capital stock of the Corporation which were at any
time within two years prior thereto beneficially owned by any
Interested Stockholder, and such assignment or succession
shall have occurred in the course of a transaction or series
of transactions not involving a public offering within the
meaning of the Securities Act of 1933.
(3) A person shall be the "beneficial owner" of any Voting Shares:
(A) which such person or any of its Affiliates and
Associates (as hereafter defined) beneficially own, directly
or indirectly, or
(B) which such person or any of its Affiliates or Associates
has (i) the right to acquire (whether such right is
exercisable immediately or only after the passage of time),
pursuant to any agreement, arrangement or understanding or
upon the exercise of conversion rights, exchange rights,
warrants or options, or otherwise, or (ii) the right to vote
pursuant to any agreement, arrangement or understanding, or
(C) which are beneficially owned, directly or indirectly, by
any other person with which such first mentioned person or
any of its Affiliates or Associates has any agreement,
arrangement or understanding for the purpose of acquiring,
holding, voting or disposing of any shares of capital stock
of the Corporation.
(4) The outstanding Voting Shares shall include shares deemed owned
through application of paragraph (3) above but shall not include any
other Voting Shares which may be issuable pursuant to any agreement,
or upon exercise of conversion rights, warrants or options or
otherwise.
(5) "Affiliate" and "Associate" shall have the respective meanings
given those terms in Rule 12b-2 of the General Rules and Regulations
under the Securities Exchange Act of 1934, as in effect on December
31, 1981.
12
<PAGE> 16
(6) "Subsidiary" shall mean any corporation of which a majority of
any class of equity security (as defined in Rule 3a11-1 of the
General Rules and Regulations under the Securities Exchange Act of
1934, as in effect in December 31, 1981) is owned, directly or
indirectly, by the Corporation; provided, however, that for the
purposes of the definition of Investment Stockholder set forth in
paragraph (2) of this section (c), the term "Subsidiary" shall mean
only a corporation of which a majority of each class of equity
security is owned, directly or indirectly, by the Corporation.
(d) majority of the directors shall have the power and duty
to determine for the purposes of this Article FIFTEENTH on
the basis of information known to them, (1) the number of
Voting Shares beneficially owned by any person (2) whether a
person is an Affiliate or Associate of another, (3) whether a
person has an agreement, arrangement or understanding with
another as to the matters referred to in paragraph (3) of
section (c), or (4) whether the assets subject to any
business combination or the consideration received for the
issuance or transfer of securities by the Corporation, or any
Subsidiary has an aggregate fair market value of $1,000,000
or more.
(e) Nothing contained in this Article FIFTEENTH shall be
construed to relieve any Interested Stockholder from any
fiduciary obligation imposed by law.
SIXTEENTH: Notwithstanding any other provision of this Charter or
Act of Incorporation or the By-Laws of the Corporation (and in
addition to any other vote that may be required by law, this Charter
or Act of Incorporation by the By-Laws), the affirmative vote of the
holders of at least two-thirds of the outstanding shares of the
capital stock of the Corporation entitled to vote generally in the
election of directors (considered for this purpose as one class)
shall be required to amend, alter or repeal any provision of
Articles FIFTH, THIRTEENTH, FIFTEENTH or SIXTEENTH of this Charter
or Act of Incorporation.
SEVENTEENTH: (a) a Director of this Corporation shall not be liable
to the Corporation or its stockholders for monetary damages for
breach of fiduciary duty as a Director, except to the extent such
exemption from liability or limitation thereof is not permitted
under the Delaware General Corporation Laws as the same exists or
may hereafter be amended.
(b) Any repeal or modification of the foregoing paragraph
shall not adversely affect any right or protection of a
Director of the Corporation existing hereunder with respect
to any act or omission occurring prior to the time of such
repeal or modification."
13
<PAGE> 17
EXHIBIT B
BY-LAWS
WILMINGTON TRUST COMPANY
WILMINGTON, DELAWARE
AS EXISTING ON JANUARY 16, 1997
<PAGE> 18
BY-LAWS OF WILMINGTON TRUST COMPANY
ARTICLE I
STOCKHOLDERS' MEETINGS
Section 1. The Annual Meeting of Stockholders shall be held on the
third Thursday in April each year at the principal office at the Company or at
such other date, time, or place as may be designated by resolution by the Board
of Directors.
Section 2. Special meetings of all stockholders may be called at
any time by the Board of Directors, the Chairman of the Board or the President.
Section 3. Notice of all meetings of the stockholders shall be
given by mailing to each stockholder at least ten (10) days before said
meeting, at his last known address, a written or printed notice fixing the time
and place of such meeting.
Section 4. A majority in the amount of the capital stock of the
Company issued and outstanding on the record date, as herein determined, shall
constitute a quorum at all meetings of stockholders for the transaction of any
business, but the holders of a small number of shares may adjourn, from time to
time, without further notice, until a quorum is secured. At each annual or
special meeting of stockholders, each stockholder shall be entitled to one
vote, either in person or by proxy, for each shares of stock registered in the
stockholder's name on the books of the Company on the record date for any such
meeting as determined herein.
ARTICLE II
DIRECTORS
Section 1. The number and classification of the Board of Directors
shall be as set forth in the Charter of the Bank.
Section 2. No person who has attained the age of seventy-two (72)
years shall be nominated for election to the Board of Directors of the Company,
provided, however, that this limitation shall not apply to any person who was
serving as director of the Company on September 16, 1971.
Section 3. The class of Directors so elected shall hold office for
three years or until their successors are elected and qualified.
Section 4. The affairs and business of the Company shall be managed
and conducted by the Board of Directors.
Section 5. The Board of Directors shall meet at the principal
office of the Company or elsewhere in its discretion at such times to be
determined by a majority of its members, or at the call of the Chairman of the
Board of Directors or the President.
<PAGE> 19
Section 6. Special meetings of the Board of Directors may be called
at any time by the Chairman of the Board of Directors or by the President, and
shall be called upon the written request of a majority of the directors.
Section 7. A majority of the directors elected and qualified shall
be necessary to constitute a quorum for the transaction of business at any
meeting of the Board of Directors.
Section 8. Written notice shall be sent by mail to each director of
any special meeting of the Board of Directors, and of any change in the time or
place of any regular meeting, stating the time and place of such meeting, which
shall be mailed not less than two days before the time of holding such meeting.
Section 9. In the event of the death, resignation, removal,
inability to act, or disqualification of any director, the Board of Directors,
although less than a quorum, shall have the right to elect the successor who
shall hold office for the remainder of the full term of the class of directors
in which the vacancy occurred, and until such director's successor shall have
been duly elected and qualified.
Section 10. The Board of Directors at its first meeting after its
election by the stockholders shall appoint an Executive Committee, a Trust
Committee, an Audit Committee and a Compensation Committee, and shall elect
from its own members a Chairman of the Board of Directors and a President who
may be the same person. The Board of Directors shall also elect at such
meeting a Secretary and a Treasurer, who may be the same person, may appoint at
any time such other committees and elect or appoint such other officers as it
may deem advisable. The Board of Directors may also elect at such meeting one
or more Associate Directors.
Section 11. The Board of Directors may at any time remove, with or
without cause, any member of any Committee appointed by it or any associate
director or officer elected by it and may appoint or elect his successor.
Section 12. The Board of Directors may designate an officer to be
in charge of such of the departments or division of the Company as it may deem
advisable.
ARTICLE III
COMMITTEES
Section 1. Executive Committee
(A) The Executive Committee shall be composed of not
more than nine members who shall be selected by the Board of Directors from its
own members and who shall hold office during the pleasure of the Board.
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<PAGE> 20
(B) The Executive Committee shall have all the powers
of the Board of Directors when it is not in session to transact all business
for and in behalf of the Company that may be brought before it.
(C) The Executive Committee shall meet at the principal
office of the Company or elsewhere in its discretion at such times to be
determined by a majority of its members, or at the call of the Chairman of the
Executive Committee or at the call of the Chairman of the Board of Directors.
The majority of its members shall be necessary to constitute a quorum for the
transaction of business. Special meetings of the Executive Committee may be
held at any time when a quorum is present.
(D) Minutes of each meeting of the Executive Committee
shall be kept and submitted to the Board of Directors at its next meeting.
(E) The Executive Committee shall advise and
superintend all investments that may be made of the funds of the Company, and
shall direct the disposal of the same, in accordance with such rules and
regulations as the Board of Directors from time to time make.
(F) In the event of a state of disaster of sufficient
severity to prevent the conduct and management of the affairs and business of
the Company by its directors and officers as contemplated by these By-Laws any
two available members of the Executive Committee as constituted immediately
prior to such disaster shall constitute a quorum of that Committee for the full
conduct and management of the affairs and business of the Company in accordance
with the provisions of Article III of these By-Laws; and if less than three
members of the Trust Committee is constituted immediately prior to such
disaster shall be available for the transaction of its business, such Executive
Committee shall also be empowered to exercise all of the powers reserved to the
Trust Committee under Article III Section 2 hereof. In the event of the
unavailability, at such time, of a minimum of two members of such Executive
Committee, any three available directors shall constitute the Executive
Committee for the full conduct and management of the affairs and business of
the Company in accordance with the foregoing provisions of this Section. This
By-Law shall be subject to implementation by Resolutions of the Board of
Directors presently existing or hereafter passed from time to time for that
purpose, and any provisions of these By-Laws (other than this Section) and any
resolutions which are contrary to the provisions of this Section or to the
provisions of any such implementary Resolutions shall be suspended during such
a disaster period until it shall be determined by any interim Executive
Committee acting under this section that it shall be to the advantage of the
Company to resume the conduct and management of its affairs and business under
all of the other provisions of these By-Laws.
3
<PAGE> 21
Section 2. Trust Committee
(A) The Trust Committee shall be composed of not more
than thirteen members who shall be selected by the Board of Directors, a
majority of whom shall be members of the Board of Directors and who shall hold
office during the pleasure of the Board.
(B) The Trust Committee shall have general supervision
over the Trust Department and the investment of trust funds, in all matters,
however, being subject to the approval of the Board of Directors.
(C) The Trust Committee shall meet at the principal
office of the Company or elsewhere in its discretion at such times to be
determined by a majority of its members or at the call of its chairman. A
majority of its members shall be necessary to constitute a quorum for the
transaction of business.
(D) Minutes of each meeting of the Trust Committee
shall be kept and promptly submitted to the Board of Directors.
(E) The Trust Committee shall have the power to appoint
Committees and/or designate officers or employees of the Company to whom
supervision over the investment of trust funds may be delegated when the Trust
Committee is not in session.
Section 3. Audit Committee
(A) The Audit Committee shall be composed of five
members who shall be selected by the Board of Directors from its own members,
none of whom shall be an officer of the Company, and shall hold office at the
pleasure of the Board.
(B) The Audit Committee shall have general supervision
over the Audit Division in all matters however subject to the approval of the
Board of Directors; it shall consider all matters brought to its attention by
the officer in charge of the Audit Division, review all reports of examination
of the Company made by any governmental agency or such independent auditor
employed for that purpose, and make such recommendations to the Board of
Directors with respect thereto or with respect to any other matters pertaining
to auditing the Company as it shall deem desirable.
(C) The Audit Committee shall meet whenever and
wherever the majority of its members shall deem it to be proper for the
transaction of its business, and a majority of its Committee shall constitute a
quorum.
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<PAGE> 22
Section 4. Compensation Committee
(A) The Compensation Committee shall be composed of not
more than five (5) members who shall be selected by the Board of Directors from
its own members who are not officers of the Company and who shall hold office
during the pleasure of the Board.
(B) The Compensation Committee shall in general advise
upon all matters of policy concerning the Company brought to its attention by
the management and from time to time review the management of the Company,
major organizational matters, including salaries and employee benefits and
specifically shall administer the Executive Incentive Compensation Plan.
(C) Meetings of the Compensation Committee may be
called at any time by the Chairman of the Compensation Committee, the Chairman
of the Board of Directors, or the President of the Company.
Section 5. Associate Directors
(A) Any person who has served as a director may be
elected by the Board of Directors as an associate director, to serve during the
pleasure of the Board.
(B) An associate director shall be entitled to attend
all directors meetings and participate in the discussion of all matters brought
to the Board, with the exception that he would have no right to vote. An
associate director will be eligible for appointment to Committees of the
Company, with the exception of the Executive Committee, Audit Committee and
Compensation Committee, which must be comprised solely of active directors.
Section 6. Absence or Disqualification of Any Member of a Committee
(A) In the absence or disqualification of any member of
any Committee created under Article III of the By-Laws of this Company, the
member or members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously appoint
another member of the Board of Directors to act at the meeting in the place of
any such absence or disqualified member.
ARTICLE IV
OFFICERS
Section 1. The Chairman of the Board of Directors shall preside at
all meetings of the Board and shall have such further authority and powers and
shall perform such duties as the Board of Directors may from time to time
confer and direct. He shall also exercise such powers and perform such duties
as may from time to time be agreed upon between himself and the President of
the Company.
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<PAGE> 23
Section 2. The Vice Chairman of the Board. The Vice Chairman of
the Board of Directors shall preside at all meetings of the Board of Directors
at which the Chairman of the Board shall not be present and shall have such
further authority and powers and shall perform such duties as the Board of
Directors or the Chairman of the Board may from time to time confer and direct.
Section 3. The President shall have the powers and duties
pertaining to the office of the President conferred or imposed upon him by
statute or assigned to him by the Board of Directors in the absence of the
Chairman of the Board the President shall have the powers and duties of the
Chairman of the Board.
Section 4. The Chairman of the Board of Directors or the President
as designated by the Board of Directors, shall carry into effect all legal
directions of the Executive Committee and of the Board of Directors, and shall
at all times exercise general supervision over the interest, affairs and
operations of the Company and perform all duties incident to his office.
Section 5. There may be one or more Vice Presidents, however
denominated by the Board of Directors, who may at any time perform all the
duties of the Chairman of the Board of Directors and/or the President and such
other powers and duties as may from time to time be assigned to them by the
Board of Directors, the Executive Committee, the Chairman of the Board or the
President and by the officer in charge of the department or division to which
they are assigned.
Section 6. The Secretary shall attend to the giving of notice of
meetings of the stockholders and the Board of Directors, as well as the
Committees thereof, to the keeping of accurate minutes of all such meetings and
to recording the same in the minute books of the Company. In addition to the
other notice requirements of these By-Laws and as may be practicable under the
circumstances, all such notices shall be in writing and mailed well in advance
of the scheduled date of any other meeting. He shall have custody of the
corporate seal and shall affix the same to any documents requiring such
corporate seal and to attest the same.
Section 7. The Treasurer shall have general supervision over all
assets and liabilities of the Company. He shall be custodian of and
responsible for all monies, funds and valuables of the Company and for the
keeping of proper records of the evidence of property or indebtedness and of
all the transactions of the Company. He shall have general supervision of the
expenditures of the Company and shall report to the Board of Directors at each
regular meeting of the condition of the Company, and perform such other duties
as may be assigned to him from time to time by the Board of Directors of the
Executive Committee.
Section 8. There may be a Controller who shall exercise general
supervision over the internal operations of the Company, including accounting,
and shall render to the Board of Directors at appropriate times a report
relating to the general condition and internal operations of the Company.
6
<PAGE> 24
There may be one or more subordinate accounting or controller
officers however denominated, who may perform the duties of the Controller and
such duties as may be prescribed by the Controller.
Section 9. The officer designated by the Board of Directors to be
in charge of the Audit Division of the Company with such title as the Board of
Directors shall prescribe, shall report to and be directly responsible only to
the Board of Directors.
There shall be an Auditor and there may be one or more Audit
Officers, however denominated, who may perform all the duties of the Auditor
and such duties as may be prescribed by the officer in charge of the Audit
Division.
Section 10. There may be one or more officers, subordinate in rank
to all Vice Presidents with such functional titles as shall be determined from
time to time by the Board of Directors, who shall ex officio hold the office
Assistant Secretary of this Company and who may perform such duties as may be
prescribed by the officer in charge of the department or division to whom they
are assigned.
Section 11. The powers and duties of all other officers of the
Company shall be those usually pertaining to their respective offices, subject
to the direction of the Board of Directors, the Executive Committee, Chairman
of the Board of Directors or the President and the officer in charge of the
department or division to which they are assigned.
ARTICLE V
STOCK AND STOCK CERTIFICATES
Section 1. Shares of stock shall be transferrable on the books of
the Company and a transfer book shall be kept in which all transfers of stock
shall be recorded.
Section 2. Certificate of stock shall bear the signature of the
President or any Vice President, however denominated by the Board of Directors
and countersigned by the Secretary or Treasurer or an Assistant Secretary, and
the seal of the corporation shall be engraved thereon. Each certificate shall
recite that the stock represented thereby is transferrable only upon the books
of the Company by the holder thereof or his attorney, upon surrender of the
certificate properly endorsed. Any certificate of stock surrendered to the
Company shall be cancelled at the time of transfer, and before a new
certificate or certificates shall be issued in lieu thereof. Duplicate
certificates of stock shall be issued only upon giving such security as may be
satisfactory to the Board of Directors or the Executive Committee.
Section 3. The Board of Directors of the Company is authorized to
fix in advance a record date for the determination of the stockholders entitled
to notice of, and to vote at, any meeting of stockholders and any adjournment
thereof, or entitled to receive payment of
7
<PAGE> 25
any dividend, or to any allotment or rights, or to exercise any rights in
respect of any change, conversion or exchange of capital stock, or in
connection with obtaining the consent of stockholders for any purpose, which
record date shall not be more than 60 nor less than 10 days proceeding the date
of any meeting of stockholders or the date for the payment of any dividend, or
the date for the allotment of rights, or the date when any change or conversion
or exchange of capital stock shall go into effect, or a date in connection with
obtaining such consent.
ARTICLE VI
SEAL
Section 1. The corporate seal of the Company shall be in the
following form:
Between two concentric circles the words
"Wilmington Trust Company" within the inner
circle the words "Wilmington, Delaware."
ARTICLE VII
FISCAL YEAR
Section 1. The fiscal year of the Company shall be the calendar
year.
ARTICLE VIII
EXECUTION OF INSTRUMENTS OF THE COMPANY
Section 1. The Chairman of the Board, the President or any Vice
President, however denominated by the Board of Directors, shall have full power
and authority to enter into, make, sign, execute, acknowledge and/or deliver
and the Secretary or any Assistant Secretary shall have full power and
authority to attest and affix the corporate seal of the Company to any and all
deeds, conveyances, assignments, releases, contracts, agreements, bonds, notes,
mortgages and all other instruments incident to the business of this Company or
in acting as executor, administrator, guardian, trustee, agent or in any other
fiduciary or representative capacity by any and every method of appointment or
by whatever person, corporation, court officer or authority in the State of
Delaware, or elsewhere, without any specific authority, ratification, approval
or confirmation by the Board of Directors or the Executive Committee, and any
and all such instruments shall have the same force and validity as though
expressly authorized by the Board of Directors and/or the Executive Committee.
8
<PAGE> 26
ARTICLE IX
COMPENSATION OF DIRECTORS AND MEMBERS OF COMMITTEES
Section 1. Directors and associate directors of the Company, other
than salaried officers of the Company, shall be paid such reasonable honoraria
or fees for attending meetings of the Board of Directors as the Board of
Directors may from time to time determine. Directors and associate directors
who serve as members of committees, other than salaried employees of the
Company, shall be paid such reasonable honoraria or fees for services as
members of committees as the Board of Directors shall from time to time
determine and directors and associate directors may be employed by the Company
for such special services as the Board of Directors may from time to time
determine and shall be paid for such special services so performed reasonable
compensation as may be determined by the Board of Directors.
ARTICLE X
INDEMNIFICATION
Section 1. (A) The Corporation shall indemnify and hold harmless,
to the fullest extent permitted by applicable law as it presently exists or may
hereafter be amended, any person who was or is made or is threatened to be made
a party or is otherwise involved in any action, suit or proceeding, whether
civil, criminal, administrative or investigative (a "proceeding") by reason of
the fact that he, or a person for whom he is the legal representative, is or
was a director, officer, employee or agent of the Corporation or is or was
serving at the request of the Corporation as a director, officer, employee,
fiduciary or agent of another corporation or of a partnership, joint venture,
trust, enterprise or non-profit entity, including service with respect to
employee benefit plans, against all liability and loss suffered and expenses
reasonably incurred by such person. The Corporation shall indemnify a person
in connection with a proceeding initiated by such person only if the proceeding
was authorized by the Board of Directors of the Corporation.
(B) The Corporation shall pay the expenses incurred in
defending any proceeding in advance of its final disposition, provided,
however, that the payment of expenses incurred by a Director officer in his
capacity as a Director or officer in advance of the final disposition of the
proceeding shall be made only upon receipt of an undertaking by the Director or
officer to repay all amounts advanced if it should be ultimately determined
that the Director or officer is not entitled to be indemnified under this
Article or otherwise.
(C) If a claim for indemnification or payment of
expenses, under this Article X is not paid in full within ninety days after a
written claim therefor has been received by the Corporation the claimant may
file suit to recover the unpaid amount of such claim and, if successful in
whole or in part, shall be entitled to be paid the expense of prosecuting such
claim. In any such action the Corporation shall have the burden of proving
that the claimant was not entitled to the requested indemnification of payment
of expenses under applicable law.
9
<PAGE> 27
(D) The rights conferred on any person by this Article
X shall not be exclusive of any other rights which such person may have or
hereafter acquire under any statute, provision of the Charter or Act of
Incorporation, these By-Laws, agreement, vote of stockholders or disinterested
Directors or otherwise.
(E) Any repeal or modification of the foregoing
provisions of this Article X shall not adversely affect any right or protection
hereunder of any person in respect of any act or omission occurring prior to
the time of such repeal or modification.
ARTICLE XI
AMENDMENTS TO THE BY-LAWS
Section 1. These By-Laws may be altered, amended or repealed, in
whole or in part, and any new By-Law or By- Laws adopted at any regular or
special meeting of the Board of Directors by a vote of the majority of all the
members of the Board of Directors then in office.
10
<PAGE> 28
EXHIBIT C
SECTION 321(b) CONSENT
Pursuant to Section 321(b) of the Trust Indenture Act of 1939, as
amended, Wilmington Trust Company hereby consents that reports of examinations
by Federal, State, Territorial or District authorities may be furnished by such
authorities to the Securities and Exchange Commission upon requests therefor.
WILMINGTON TRUST COMPANY
Dated: April 29, 1998 By: /s/ Emmett R. Harmon
------------------------
Name: Emmett R. Harmon
Title: Vice President
<PAGE> 29
EXHIBIT D
NOTICE
This form is intended to assist state nonmember banks and savings banks with
state publication requirements. It has not been approved by any state banking
authorities. Refer to your appropriate state banking authorities for your
state publication requirements.
R E P O R T O F C O N D I T I O N
Consolidating domestic subsidiaries of the
WILMINGTON TRUST COMPANY of WILMINGTON
- ---------------------------------------------------------- ------------------
Name of Bank City
in the State of DELAWARE , at the close of business on December 31, 1997.
-----------
<TABLE>
<CAPTION>
ASSETS
Thousands of dollars
<S> <C>
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coins . . . . . . . . . . . . . . . . . . . . . . 236,646
Interest-bearing balances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0
Held-to-maturity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 331,880
Available-for-sale securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,258,661
Federal funds sold and securities purchased under agreements to resell . . . . . . . . . . . . . . . . . . 91,500
Loans and lease financing receivables:
Loans and leases, net of unearned income. . . . . . . 3,822,320
LESS: Allowance for loan and lease losses. . . . . . 59,373
LESS: Allocated transfer risk reserve. . . . . . . . 0
Loans and leases, net of unearned income, allowance, and reserve . . . . . . . . . . . . . . . 3,762,947
Assets held in trading accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0
Premises and fixed assets (including capitalized leases) . . . . . . . . . . . . . . . . . . . . . . . . . 129,740
Other real estate owned . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,106
Investments in unconsolidated subsidiaries and associated companies . . . . . . . . . . . . . . . . . . . . 22
Customers' liability to this bank on acceptances outstanding . . . . . . . . . . . . . . . . . . . . . . . 0
Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,905
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100,799
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,919,206
</TABLE>
CONTINUED ON NEXT PAGE
<PAGE> 30
<TABLE>
<S> <C>
LIABILITIES
Deposits:
In domestic offices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,034,633
Noninterest-bearing . . . . . . . . 839,928
Interest-bearing. . . . . . . . . . 3,194,705
Federal funds purchased and Securities sold under agreements to repurchase . . . . . . . . . . . . . . . . 575,827
Demand notes issued to the U.S. Treasury . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61,290
Trading liabilities (from Schedule RC-D) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0
Other borrowed money: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ///////
With original maturity of one year or less . . . . . . . . . . . . . . . . . . . . . . . . . . 673,000
With original maturity of more than one year . . . . . . . . . . . . . . . . . . . . . . . . . 43,000
Bank's liability on acceptances executed and outstanding . . . . . . . . . . . . . . . . . . . . . . . . . 0
Subordinated notes and debentures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0
Other liabilities (from Schedule RC-G) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76,458
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,464,208
EQUITY CAPITAL
Perpetual preferred stock and related surplus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0
Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 500
Surplus (exclude all surplus related to preferred stock) . . . . . . . . . . . . . . . . . . . . . . . . . 62,118
Undivided profits and capital reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 385,018
Net unrealized holding gains (losses) on available-for-sale securities . . . . . . . . . . . . . . . . . . 7,362
Total equity capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 454,998
Total liabilities, limited-life preferred stock, and equity capital . . . . . . . . . . . . . . . . . . . . 5,919,206
</TABLE>
2
<PAGE> 1
Exhibit 25.3
Registration No.
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939
OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) ___
WILMINGTON TRUST COMPANY
(Exact name of trustee as specified in its charter)
Delaware 51-0055023
(State of incorporation) (I.R.S. employer identification no.)
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890
(Address of principal executive offices)
Cynthia L. Corliss
Vice President and Trust Counsel
Wilmington Trust Company
Rodney Square North
Wilmington, Delaware 19890
(302) 651-8516
(Name, address and telephone number of agent for service)
ATLAS AIR, INC.
(Exact name of obligor as specified in its charter)
Delaware 84-1207329
(State of incorporation) (I.R.S. employer identification no.)
538 Commons Drive
Golden, Colorado 80401
(Address of principal executive offices) (Zip Code)
Pass Through Certificates, Series 1998-1C
(Title of the indenture securities)
================================================================================
<PAGE> 2
ITEM 1. GENERAL INFORMATION.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority
to which it is subject.
Federal Deposit Insurance Co. State Bank Commissioner
Five Penn Center Dover, Delaware
Suite #2901
Philadelphia, PA
(b) Whether it is authorized to exercise corporate trust powers.
The trustee is authorized to exercise corporate trust powers.
ITEM 2. AFFILIATIONS WITH THE OBLIGOR.
If the obligor is an affiliate of the trustee, describe each
affiliation:
Based upon an examination of the books and records of the
trustee and upon information furnished by the obligor, the obligor
is not an affiliate of the trustee.
ITEM 3. LIST OF EXHIBITS.
List below all exhibits filed as part of this Statement of
Eligibility and Qualification.
A. Copy of the Charter of Wilmington Trust Company, which
includes the certificate of authority of Wilmington Trust
Company to commence business and the authorization of
Wilmington Trust Company to exercise corporate trust powers.
B. Copy of By-Laws of Wilmington Trust Company.
C. Consent of Wilmington Trust Company required by Section
321(b) of Trust Indenture Act.
D. Copy of most recent Report of Condition of Wilmington Trust
Company.
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, Wilmington Trust Company, a corporation organized and
existing under the laws of Delaware, has duly caused this Statement of
Eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in the City of Wilmington and State of Delaware on the 29th day
of April, 1998.
WILMINGTON TRUST COMPANY
[SEAL]
Attest: /s/ Patricia A. Evans By: /s/ Emmett R. Harmon
----------------------------- ----------------------
Assistant Secretary Name: Emmett R. Harmon
Title: Vice President
2
<PAGE> 3
EXHIBIT A
AMENDED CHARTER
WILMINGTON TRUST COMPANY
WILMINGTON, DELAWARE
AS EXISTING ON MAY 9, 1987
<PAGE> 4
AMENDED CHARTER
OR
ACT OF INCORPORATION
OF
WILMINGTON TRUST COMPANY
WILMINGTON TRUST COMPANY, originally incorporated by an Act of the
General Assembly of the State of Delaware, entitled "An Act to Incorporate the
Delaware Guarantee and Trust Company", approved March 2, A.D. 1901, and the
name of which company was changed to "WILMINGTON TRUST COMPANY" by an amendment
filed in the Office of the Secretary of State on March 18, A.D. 1903, and the
Charter or Act of Incorporation of which company has been from time to time
amended and changed by merger agreements pursuant to the corporation law for
state banks and trust companies of the State of Delaware, does hereby alter and
amend its Charter or Act of Incorporation so that the same as so altered and
amended shall in its entirety read as follows:
FIRST: - The name of this corporation is WILMINGTON TRUST COMPANY.
SECOND: - The location of its principal office in the State of
Delaware is at Rodney Square North, in the City of Wilmington,
County of New Castle; the name of its resident agent is WILMINGTON
TRUST COMPANY whose address is Rodney Square North, in said City.
In addition to such principal office, the said corporation maintains
and operates branch offices in the City of Newark, New Castle
County, Delaware, the Town of Newport, New Castle County, Delaware,
at Claymont, New Castle County, Delaware, at Greenville, New Castle
County Delaware, and at Milford Cross Roads, New Castle County,
Delaware, and shall be empowered to open, maintain and operate
branch offices at Ninth and Shipley Streets, 418 Delaware Avenue,
2120 Market Street, and 3605 Market Street, all in the City of
Wilmington, New Castle County, Delaware, and such other branch
offices or places of business as may be authorized from time to time
by the agency or agencies of the government of the State of Delaware
empowered to confer such authority.
THIRD: - (a) The nature of the business and the objects and purposes
proposed to be transacted, promoted or carried on by this
Corporation are to do any or all of the things herein mentioned as
fully and to the same extent as natural persons might or could do
and in any part of the world, viz.:
(1) To sue and be sued, complain and defend in any Court of
law or equity and to make and use a common seal, and alter
the seal at pleasure, to hold, purchase, convey, mortgage or
otherwise deal in real and personal estate and property, and
to appoint such officers and agents as the business of the
<PAGE> 5
Corporation shall require, to make by-laws not inconsistent
with the Constitution or laws of the United States or of this
State, to discount bills, notes or other evidences of debt,
to receive deposits of money, or securities for money, to buy
gold and silver bullion and foreign coins, to buy and sell
bills of exchange, and generally to use, exercise and enjoy
all the powers, rights, privileges and franchises incident to
a corporation which are proper or necessary for the
transaction of the business of the Corporation hereby
created.
(2) To insure titles to real and personal property, or any
estate or interests therein, and to guarantee the holder of
such property, real or personal, against any claim or claims,
adverse to his interest therein, and to prepare and give
certificates of title for any lands or premises in the State
of Delaware, or elsewhere.
(3) To act as factor, agent, broker or attorney in the
receipt, collection, custody, investment and management of
funds, and the purchase, sale, management and disposal of
property of all descriptions, and to prepare and execute all
papers which may be necessary or proper in such business.
(4) To prepare and draw agreements, contracts, deeds,
leases, conveyances, mortgages, bonds and legal papers of
every description, and to carry on the business of
conveyancing in all its branches.
(5) To receive upon deposit for safekeeping money, jewelry,
plate, deeds, bonds and any and all other personal property
of every sort and kind, from executors, administrators,
guardians, public officers, courts, receivers, assignees,
trustees, and from all fiduciaries, and from all other
persons and individuals, and from all corporations whether
state, municipal, corporate or private, and to rent boxes,
safes, vaults and other receptacles for such property.
(6) To act as agent or otherwise for the purpose of
registering, issuing, certificating, countersigning,
transferring or underwriting the stock, bonds or other
obligations of any corporation, association, state or
municipality, and may receive and manage any sinking fund
therefor on such terms as may be agreed upon between the two
parties, and in like manner may act as Treasurer of any
corporation or municipality.
(7) To act as Trustee under any deed of trust, mortgage,
bond or other instrument issued by any state, municipality,
body politic, corporation, association or person, either
alone or in conjunction with any other person or persons,
corporation or corporations.
2
<PAGE> 6
(8) To guarantee the validity, performance or effect of any
contract or agreement, and the fidelity of persons holding
places of responsibility or trust; to become surety for any
person, or persons, for the faithful performance of any
trust, office, duty, contract or agreement, either by itself
or in conjunction with any other person, or persons,
corporation, or corporations, or in like manner become surety
upon any bond, recognizance, obligation, judgment, suit,
order, or decree to be entered in any court of record within
the State of Delaware or elsewhere, or which may now or
hereafter be required by any law, judge, officer or court in
the State of Delaware or elsewhere.
(9) To act by any and every method of appointment as
trustee, trustee in bankruptcy, receiver, assignee, assignee
in bankruptcy, executor, administrator, guardian, bailee, or
in any other trust capacity in the receiving, holding,
managing, and disposing of any and all estates and property,
real, personal or mixed, and to be appointed as such trustee,
trustee in bankruptcy, receiver, assignee, assignee in
bankruptcy, executor, administrator, guardian or bailee by
any persons, corporations, court, officer, or authority, in
the State of Delaware or elsewhere; and whenever this
Corporation is so appointed by any person, corporation,
court, officer or authority such trustee, trustee in
bankruptcy, receiver, assignee, assignee in bankruptcy,
executor, administrator, guardian, bailee, or in any other
trust capacity, it shall not be required to give bond with
surety, but its capital stock shall be taken and held as
security for the performance of the duties devolving upon it
by such appointment.
(10) And for its care, management and trouble, and the
exercise of any of its powers hereby given, or for the
performance of any of the duties which it may undertake or be
called upon to perform, or for the assumption of any
responsibility the said Corporation may be entitled to
receive a proper compensation.
(11) To purchase, receive, hold and own bonds, mortgages,
debentures, shares of capital stock, and other securities,
obligations, contracts and evidences of indebtedness, of any
private, public or municipal corporation within and without
the State of Delaware, or of the Government of the United
States, or of any state, territory, colony, or possession
thereof, or of any foreign government or country; to receive,
collect, receipt for, and dispose of interest, dividends and
income upon and from any of the bonds, mortgages, debentures,
notes, shares of capital stock, securities, obligations,
contracts, evidences of indebtedness and other property held
and owned by it, and to exercise in respect of all such
bonds, mortgages, debentures, notes, shares of capital stock,
securities, obligations, contracts, evidences of indebtedness
and other property, any and all the rights, powers and
privileges of individual
3
<PAGE> 7
owners thereof, including the right to vote thereon; to
invest and deal in and with any of the moneys of the
Corporation upon such securities and in such manner as it may
think fit and proper, and from time to time to vary or
realize such investments; to issue bonds and secure the same
by pledges or deeds of trust or mortgages of or upon the
whole or any part of the property held or owned by the
Corporation, and to sell and pledge such bonds, as and when
the Board of Directors shall determine, and in the promotion
of its said corporate business of investment and to the
extent authorized by law, to lease, purchase, hold, sell,
assign, transfer, pledge, mortgage and convey real and
personal property of any name and nature and any estate or
interest therein.
(b) In furtherance of, and not in limitation, of the powers
conferred by the laws of the State of Delaware, it is hereby
expressly provided that the said Corporation shall also have the
following powers:
(1) To do any or all of the things herein set forth, to the
same extent as natural persons might or could do, and in any
part of the world.
(2) To acquire the good will, rights, property and
franchises and to undertake the whole or any part of the
assets and liabilities of any person, firm, association or
corporation, and to pay for the same in cash, stock of this
Corporation, bonds or otherwise; to hold or in any manner to
dispose of the whole or any part of the property so
purchased; to conduct in any lawful manner the whole or any
part of any business so acquired, and to exercise all the
powers necessary or convenient in and about the conduct and
management of such business.
(3) To take, hold, own, deal in, mortgage or otherwise lien,
and to lease, sell, exchange, transfer, or in any manner
whatever dispose of property, real, personal or mixed,
wherever situated.
(4) To enter into, make, perform and carry out contracts of
every kind with any person, firm, association or corporation,
and, without limit as to amount, to draw, make, accept,
endorse, discount, execute and issue promissory notes,
drafts, bills of exchange, warrants, bonds, debentures, and
other negotiable or transferable instruments.
(5) To have one or more offices, to carry on all or any of
its operations and businesses, without restriction to the
same extent as natural persons might or could do, to purchase
or otherwise acquire, to hold, own, to mortgage, sell, convey
or otherwise dispose of, real and personal property, of every
class and description, in any State, District, Territory or
Colony of the United States, and in any foreign country or
place.
4
<PAGE> 8
(6) It is the intention that the objects, purposes and
powers specified and clauses contained in this paragraph
shall (except where otherwise expressed in said paragraph) be
nowise limited or restricted by reference to or inference
from the terms of any other clause of this or any other
paragraph in this charter, but that the objects, purposes and
powers specified in each of the clauses of this paragraph
shall be regarded as independent objects, purposes and
powers.
FOURTH: - (a) The total number of shares of all classes of stock
which the Corporation shall have authority to issue is forty-one
million (41,000,000) shares, consisting of:
(1) One million (1,000,000) shares of Preferred stock, par
value $10.00 per share (hereinafter referred to as "Preferred
Stock"); and
(2) Forty million (40,000,000) shares of Common Stock, par
value $1.00 per share (hereinafter referred to as "Common
Stock").
(b) Shares of Preferred Stock may be issued from time to time in
one or more series as may from time to time be determined by the
Board of Directors each of said series to be distinctly designated.
All shares of any one series of Preferred Stock shall be alike in
every particular, except that there may be different dates from
which dividends, if any, thereon shall be cumulative, if made
cumulative. The voting powers and the preferences and relative,
participating, optional and other special rights of each such
series, and the qualifications, limitations or restrictions thereof,
if any, may differ from those of any and all other series at any
time outstanding; and, subject to the provisions of subparagraph 1
of Paragraph (c) of this Article FOURTH, the Board of Directors of
the Corporation is hereby expressly granted authority to fix by
resolution or resolutions adopted prior to the issuance of any
shares of a particular series of Preferred Stock, the voting powers
and the designations, preferences and relative, optional and other
special rights, and the qualifications, limitations and restrictions
of such series, including, but without limiting the generality of
the foregoing, the following:
(1) The distinctive designation of, and the number of shares
of Preferred Stock which shall constitute such series, which
number may be increased (except where otherwise provided by
the Board of Directors) or decreased (but not below the
number of shares thereof then outstanding) from time to time
by like action of the Board of Directors;
(2) The rate and times at which, and the terms and
conditions on which, dividends, if any, on Preferred Stock of
such series shall be paid, the extent of the preference or
relation, if any, of such dividends to the dividends payable
on any other class or classes, or series of the same or other
class of stock and whether such dividends shall be cumulative
or non-cumulative;
5
<PAGE> 9
(3) The right, if any, of the holders of Preferred Stock of
such series to convert the same into or exchange the same
for, shares of any other class or classes or of any series of
the same or any other class or classes of stock of the
Corporation and the terms and conditions of such conversion
or exchange;
(4) Whether or not Preferred Stock of such series shall be
subject to redemption, and the redemption price or prices and
the time or times at which, and the terms and conditions on
which, Preferred Stock of such series may be redeemed.
(5) The rights, if any, of the holders of Preferred Stock of
such series upon the voluntary or involuntary liquidation,
merger, consolidation, distribution or sale of assets,
dissolution or winding-up, of the Corporation.
(6) The terms of the sinking fund or redemption or purchase
account, if any, to be provided for the Preferred Stock of
such series; and
(7) The voting powers, if any, of the holders of such series
of Preferred Stock which may, without limiting the generality
of the foregoing include the right, voting as a series or by
itself or together with other series of Preferred Stock or
all series of Preferred Stock as a class, to elect one or
more directors of the Corporation if there shall have been a
default in the payment of dividends on any one or more series
of Preferred Stock or under such circumstances and on such
conditions as the Board of Directors may determine.
(c) (1) After the requirements with respect to preferential
dividends on the Preferred Stock (fixed in accordance with the
provisions of section (b) of this Article FOURTH), if any, shall
have been met and after the Corporation shall have complied with all
the requirements, if any, with respect to the setting aside of sums
as sinking funds or redemption or purchase accounts (fixed in
accordance with the provisions of section (b) of this Article
FOURTH), and subject further to any conditions which may be fixed in
accordance with the provisions of section (b) of this Article
FOURTH, then and not otherwise the holders of Common Stock shall be
entitled to receive such dividends as may be declared from time to
time by the Board of Directors.
(2) After distribution in full of the preferential amount,
if any, (fixed in accordance with the provisions of section
(b) of this Article FOURTH), to be distributed to the holders
of Preferred Stock in the event of voluntary or involuntary
liquidation, distribution or sale of assets, dissolution or
winding-up, of the Corporation, the holders of the Common
Stock shall be entitled to
6
<PAGE> 10
receive all of the remaining assets of the Corporation,
tangible and intangible, of whatever kind available for
distribution to stockholders ratably in proportion to the
number of shares of Common Stock held by them respectively.
(3) Except as may otherwise be required by law or by the
provisions of such resolution or resolutions as may be
adopted by the Board of Directors pursuant to section (b) of
this Article FOURTH, each holder of Common Stock shall have
one vote in respect of each share of Common Stock held on all
matters voted upon by the stockholders.
(d) No holder of any of the shares of any class or series of stock
or of options, warrants or other rights to purchase shares of any
class or series of stock or of other securities of the Corporation
shall have any preemptive right to purchase or subscribe for any
unissued stock of any class or series or any additional shares of
any class or series to be issued by reason of any increase of the
authorized capital stock of the Corporation of any class or series,
or bonds, certificates of indebtedness, debentures or other
securities convertible into or exchangeable for stock of the
Corporation of any class or series, or carrying any right to
purchase stock of any class or series, but any such unissued stock,
additional authorized issue of shares of any class or series of
stock or securities convertible into or exchangeable for stock, or
carrying any right to purchase stock, may be issued and disposed of
pursuant to resolution of the Board of Directors to such persons,
firms, corporations or associations, whether such holders or others,
and upon such terms as may be deemed advisable by the Board of
Directors in the exercise of its sole discretion.
(e) The relative powers, preferences and rights of each series of
Preferred Stock in relation to the relative powers, preferences and
rights of each other series of Preferred Stock shall, in each case,
be as fixed from time to time by the Board of Directors in the
resolution or resolutions adopted pursuant to authority granted in
section (b) of this Article FOURTH and the consent, by class or
series vote or otherwise, of the holders of such of the series of
Preferred Stock as are from time to time outstanding shall not be
required for the issuance by the Board of Directors of any other
series of Preferred Stock whether or not the powers, preferences and
rights of such other series shall be fixed by the Board of Directors
as senior to, or on a parity with, the powers, preferences and
rights of such outstanding series, or any of them; provided,
however, that the Board of Directors may provide in the resolution
or resolutions as to any series of Preferred Stock adopted pursuant
to section (b) of this Article FOURTH that the consent of the
holders of a majority (or such greater proportion as shall be
therein fixed) of the outstanding shares of such series voting
thereon shall be required for the issuance of any or all other
series of Preferred Stock.
7
<PAGE> 11
(f) Subject to the provisions of section (e), shares of any series
of Preferred Stock may be issued from time to time as the Board of
Directors of the Corporation shall determine and on such terms and
for such consideration as shall be fixed by the Board of Directors.
(g) Shares of Common Stock may be issued from time to time as the
Board of Directors of the Corporation shall determine and on such
terms and for such consideration as shall be fixed by the Board of
Directors.
(h) The authorized amount of shares of Common Stock and of
Preferred Stock may, without a class or series vote, be increased or
decreased from time to time by the affirmative vote of the holders
of a majority of the stock of the Corporation entitled to vote
thereon.
FIFTH: - (a) The business and affairs of the Corporation shall be
conducted and managed by a Board of Directors. The number of
directors constituting the entire Board shall be not less than five
nor more than twenty-five as fixed from time to time by vote of a
majority of the whole Board, provided, however, that the number of
directors shall not be reduced so as to shorten the term of any
director at the time in office, and provided further, that the
number of directors constituting the whole Board shall be
twenty-four until otherwise fixed by a majority of the whole Board.
(b) The Board of Directors shall be divided into three classes, as
nearly equal in number as the then total number of directors
constituting the whole Board permits, with the term of office of one
class expiring each year. At the annual meeting of stockholders in
1982, directors of the first class shall be elected to hold office
for a term expiring at the next succeeding annual meeting, directors
of the second class shall be elected to hold office for a term
expiring at the second succeeding annual meeting and directors of
the third class shall be elected to hold office for a term expiring
at the third succeeding annual meeting. Any vacancies in the Board
of Directors for any reason, and any newly created directorships
resulting from any increase in the directors, may be filled by the
Board of Directors, acting by a majority of the directors then in
office, although less than a quorum, and any directors so chosen
shall hold office until the next annual election of directors. At
such election, the stockholders shall elect a successor to such
director to hold office until the next election of the class for
which such director shall have been chosen and until his successor
shall be elected and qualified. No decrease in the number of
directors shall shorten the term of any incumbent director.
(c) Notwithstanding any other provisions of this Charter or Act of
Incorporation or the By-Laws of the Corporation (and notwithstanding
the fact that some lesser percentage may be specified by law, this
Charter or Act of Incorporation or the By-Laws of the Corporation),
any director or the entire Board of Directors of the
8
<PAGE> 12
Corporation may be removed at any time without cause, but only by
the affirmative vote of the holders of two- thirds or more of the
outstanding shares of capital stock of the Corporation entitled to
vote generally in the election of directors (considered for this
purpose as one class) cast at a meeting of the stockholders called
for that purpose.
(d) Nominations for the election of directors may be made by the
Board of Directors or by any stockholder entitled to vote for the
election of directors. Such nominations shall be made by notice in
writing, delivered or mailed by first class United States mail,
postage prepaid, to the Secretary of the Corporation not less than
14 days nor more than 50 days prior to any meeting of the
stockholders called for the election of directors; provided,
however, that if less than 21 days' notice of the meeting is given
to stockholders, such written notice shall be delivered or mailed,
as prescribed, to the Secretary of the Corporation not later than
the close of the seventh day following the day on which notice of
the meeting was mailed to stockholders. Notice of nominations which
are proposed by the Board of Directors shall be given by the
Chairman on behalf of the Board.
(e) Each notice under subsection (d) shall set forth (i) the name,
age, business address and, if known, residence address of each
nominee proposed in such notice, (ii) the principal occupation or
employment of such nominee and (iii) the number of shares of stock
of the Corporation which are beneficially owned by each such
nominee.
(f) The Chairman of the meeting may, if the facts warrant,
determine and declare to the meeting that a nomination was not made
in accordance with the foregoing procedure, and if he should so
determine, he shall so declare to the meeting and the defective
nomination shall be disregarded.
(g) No action required to be taken or which may be taken at any
annual or special meeting of stockholders of the Corporation may be
taken without a meeting, and the power of stockholders to consent in
writing, without a meeting, to the taking of any action is
specifically denied.
SIXTH: - The Directors shall choose such officers, agent and
servants as may be provided in the By-Laws as they may from time to
time find necessary or proper.
SEVENTH: - The Corporation hereby created is hereby given the same
powers, rights and privileges as may be conferred upon corporations
organized under the Act entitled "An Act Providing a General
Corporation Law", approved March 10, 1899, as from time to time
amended.
EIGHTH: - This Act shall be deemed and taken to be a private Act.
9
<PAGE> 13
NINTH: - This Corporation is to have perpetual existence.
TENTH: - The Board of Directors, by resolution passed by a majority
of the whole Board, may designate any of their number to constitute
an Executive Committee, which Committee, to the extent provided in
said resolution, or in the By-Laws of the Company, shall have and
may exercise all of the powers of the Board of Directors in the
management of the business and affairs of the Corporation, and shall
have power to authorize the seal of the Corporation to be affixed to
all papers which may require it.
ELEVENTH: - The private property of the stockholders shall not be
liable for the payment of corporate debts to any extent whatever.
TWELFTH: - The Corporation may transact business in any part of the
world.
THIRTEENTH: - The Board of Directors of the Corporation is expressly
authorized to make, alter or repeal the By-Laws of the Corporation
by a vote of the majority of the entire Board. The stockholders may
make, alter or repeal any By-Law whether or not adopted by them,
provided however, that any such additional By-Laws, alterations or
repeal may be adopted only by the affirmative vote of the holders of
two-thirds or more of the outstanding shares of capital stock of the
Corporation entitled to vote generally in the election of directors
(considered for this purpose as one class).
FOURTEENTH: - Meetings of the Directors may be held outside
of the State of Delaware at such places as may be from time to time
designated by the Board, and the Directors may keep the books of the
Company outside of the State of Delaware at such places as may be
from time to time designated by them.
FIFTEENTH: - (a) In addition to any affirmative vote required by
law, and except as otherwise expressly provided in sections (b) and
(c) of this Article FIFTEENTH:
(A) any merger or consolidation of the Corporation or any
Subsidiary (as hereinafter defined) with or into (i) any
Interested Stockholder (as hereinafter defined) or (ii) any
other corporation (whether or not itself an Interested
Stockholder), which, after such merger or consolidation,
would be an Affiliate (as hereinafter defined) of an
Interested Stockholder, or
(B) any sale, lease, exchange, mortgage, pledge, transfer or
other disposition (in one transaction or a series of related
transactions) to or with any Interested Stockholder or any
Affiliate of any Interested Stockholder of any assets of the
Corporation or any Subsidiary having an aggregate fair market
value of $1,000,000 or more, or
10
<PAGE> 14
(C) the issuance or transfer by the Corporation or any
Subsidiary (in one transaction or a series of related
transactions) of any securities of the Corporation or any
Subsidiary to any Interested Stockholder or any Affiliate of
any Interested Stockholder in exchange for cash, securities
or other property (or a combination thereof) having an
aggregate fair market value of $1,000,000 or more, or
(D) the adoption of any plan or proposal for the liquidation
or dissolution of the Corporation, or
(E) any reclassification of securities (including any
reverse stock split), or recapitalization of the Corporation,
or any merger or consolidation of the Corporation with any of
its Subsidiaries or any similar transaction (whether or not
with or into or otherwise involving an Interested
Stockholder) which has the effect, directly or indirectly, of
increasing the proportionate share of the outstanding shares
of any class of equity or convertible securities of the
Corporation or any Subsidiary which is directly or indirectly
owned by any Interested Stockholder, or any Affiliate of any
Interested Stockholder,
shall require the affirmative vote of the holders of at least two-thirds of
the outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors, considered for the purpose of this
Article FIFTEENTH as one class ("Voting Shares"). Such affirmative vote shall
be required notwithstanding the fact that no vote may be required, or that some
lesser percentage may be specified, by law or in any agreement with any
national securities exchange or otherwise.
(2) The term "business combination" as used in this
Article FIFTEENTH shall mean any transaction which is
referred to any one or more of clauses (A) through (E) of
paragraph 1 of the section (a).
(b) The provisions of section (a) of this Article FIFTEENTH
shall not be applicable to any particular business
combination and such business combination shall require only
such affirmative vote as is required by law and any other
provisions of the Charter or Act of Incorporation of By-Laws
if such business combination has been approved by a majority
of the whole Board.
(c) For the purposes of this Article FIFTEENTH:
(1) A "person" shall mean any individual firm, corporation or other
entity.
(2) "Interested Stockholder" shall mean, in respect of any business
combination, any person (other than the Corporation or any
Subsidiary) who or which as of the record date for the determination
of stockholders entitled to notice of and to vote on
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<PAGE> 15
such business combination, or immediately prior to the consummation
of any such transaction:
(A) is the beneficial owner, directly or indirectly, of more
than 10% of the Voting Shares, or
(B) is an Affiliate of the Corporation and at any time
within two years prior thereto was the beneficial owner,
directly or indirectly, of not less than 10% of the then
outstanding voting Shares, or
(C) is an assignee of or has otherwise succeeded in any
share of capital stock of the Corporation which were at any
time within two years prior thereto beneficially owned by any
Interested Stockholder, and such assignment or succession
shall have occurred in the course of a transaction or series
of transactions not involving a public offering within the
meaning of the Securities Act of 1933.
(3) A person shall be the "beneficial owner" of any Voting Shares:
(A) which such person or any of its Affiliates and
Associates (as hereafter defined) beneficially own, directly
or indirectly, or
(B) which such person or any of its Affiliates or Associates
has (i) the right to acquire (whether such right is
exercisable immediately or only after the passage of time),
pursuant to any agreement, arrangement or understanding or
upon the exercise of conversion rights, exchange rights,
warrants or options, or otherwise, or (ii) the right to vote
pursuant to any agreement, arrangement or understanding, or
(C) which are beneficially owned, directly or indirectly, by
any other person with which such first mentioned person or
any of its Affiliates or Associates has any agreement,
arrangement or understanding for the purpose of acquiring,
holding, voting or disposing of any shares of capital stock
of the Corporation.
(4) The outstanding Voting Shares shall include shares deemed owned
through application of paragraph (3) above but shall not include any
other Voting Shares which may be issuable pursuant to any agreement,
or upon exercise of conversion rights, warrants or options or
otherwise.
(5) "Affiliate" and "Associate" shall have the respective meanings
given those terms in Rule 12b-2 of the General Rules and Regulations
under the Securities Exchange Act of 1934, as in effect on December
31, 1981.
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<PAGE> 16
(6) "Subsidiary" shall mean any corporation of which a majority of
any class of equity security (as defined in Rule 3a11-1 of the
General Rules and Regulations under the Securities Exchange Act of
1934, as in effect in December 31, 1981) is owned, directly or
indirectly, by the Corporation; provided, however, that for the
purposes of the definition of Investment Stockholder set forth in
paragraph (2) of this section (c), the term "Subsidiary" shall mean
only a corporation of which a majority of each class of equity
security is owned, directly or indirectly, by the Corporation.
(d) majority of the directors shall have the power and duty
to determine for the purposes of this Article FIFTEENTH on
the basis of information known to them, (1) the number of
Voting Shares beneficially owned by any person (2) whether a
person is an Affiliate or Associate of another, (3) whether a
person has an agreement, arrangement or understanding with
another as to the matters referred to in paragraph (3) of
section (c), or (4) whether the assets subject to any
business combination or the consideration received for the
issuance or transfer of securities by the Corporation, or any
Subsidiary has an aggregate fair market value of $1,000,000
or more.
(e) Nothing contained in this Article FIFTEENTH shall be
construed to relieve any Interested Stockholder from any
fiduciary obligation imposed by law.
SIXTEENTH: Notwithstanding any other provision of this Charter or
Act of Incorporation or the By-Laws of the Corporation (and in
addition to any other vote that may be required by law, this Charter
or Act of Incorporation by the By-Laws), the affirmative vote of the
holders of at least two-thirds of the outstanding shares of the
capital stock of the Corporation entitled to vote generally in the
election of directors (considered for this purpose as one class)
shall be required to amend, alter or repeal any provision of
Articles FIFTH, THIRTEENTH, FIFTEENTH or SIXTEENTH of this Charter
or Act of Incorporation.
SEVENTEENTH: (a) a Director of this Corporation shall not be liable
to the Corporation or its stockholders for monetary damages for
breach of fiduciary duty as a Director, except to the extent such
exemption from liability or limitation thereof is not permitted
under the Delaware General Corporation Laws as the same exists or
may hereafter be amended.
(b) Any repeal or modification of the foregoing paragraph
shall not adversely affect any right or protection of a
Director of the Corporation existing hereunder with respect
to any act or omission occurring prior to the time of such
repeal or modification."
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<PAGE> 17
EXHIBIT B
BY-LAWS
WILMINGTON TRUST COMPANY
WILMINGTON, DELAWARE
AS EXISTING ON JANUARY 16, 1997
<PAGE> 18
BY-LAWS OF WILMINGTON TRUST COMPANY
ARTICLE I
STOCKHOLDERS' MEETINGS
Section 1. The Annual Meeting of Stockholders shall be held on the
third Thursday in April each year at the principal office at the Company or at
such other date, time, or place as may be designated by resolution by the Board
of Directors.
Section 2. Special meetings of all stockholders may be called at
any time by the Board of Directors, the Chairman of the Board or the President.
Section 3. Notice of all meetings of the stockholders shall be
given by mailing to each stockholder at least ten (10) days before said
meeting, at his last known address, a written or printed notice fixing the time
and place of such meeting.
Section 4. A majority in the amount of the capital stock of the
Company issued and outstanding on the record date, as herein determined, shall
constitute a quorum at all meetings of stockholders for the transaction of any
business, but the holders of a small number of shares may adjourn, from time to
time, without further notice, until a quorum is secured. At each annual or
special meeting of stockholders, each stockholder shall be entitled to one
vote, either in person or by proxy, for each shares of stock registered in the
stockholder's name on the books of the Company on the record date for any such
meeting as determined herein.
ARTICLE II
DIRECTORS
Section 1. The number and classification of the Board of Directors
shall be as set forth in the Charter of the Bank.
Section 2. No person who has attained the age of seventy-two (72)
years shall be nominated for election to the Board of Directors of the Company,
provided, however, that this limitation shall not apply to any person who was
serving as director of the Company on September 16, 1971.
Section 3. The class of Directors so elected shall hold office for
three years or until their successors are elected and qualified.
Section 4. The affairs and business of the Company shall be managed
and conducted by the Board of Directors.
Section 5. The Board of Directors shall meet at the principal
office of the Company or elsewhere in its discretion at such times to be
determined by a majority of its
<PAGE> 19
members, or at the call of the Chairman of the Board of Directors or the
President.
Section 6. Special meetings of the Board of Directors may be called
at any time by the Chairman of the Board of Directors or by the President, and
shall be called upon the written request of a majority of the directors.
Section 7. A majority of the directors elected and qualified shall
be necessary to constitute a quorum for the transaction of business at any
meeting of the Board of Directors.
Section 8. Written notice shall be sent by mail to each director of
any special meeting of the Board of Directors, and of any change in the time or
place of any regular meeting, stating the time and place of such meeting, which
shall be mailed not less than two days before the time of holding such meeting.
Section 9. In the event of the death, resignation, removal,
inability to act, or disqualification of any director, the Board of Directors,
although less than a quorum, shall have the right to elect the successor who
shall hold office for the remainder of the full term of the class of directors
in which the vacancy occurred, and until such director's successor shall have
been duly elected and qualified.
Section 10. The Board of Directors at its first meeting after its
election by the stockholders shall appoint an Executive Committee, a Trust
Committee, an Audit Committee and a Compensation Committee, and shall elect
from its own members a Chairman of the Board of Directors and a President who
may be the same person. The Board of Directors shall also elect at such
meeting a Secretary and a Treasurer, who may be the same person, may appoint at
any time such other committees and elect or appoint such other officers as it
may deem advisable. The Board of Directors may also elect at such meeting one
or more Associate Directors.
Section 11. The Board of Directors may at any time remove, with or
without cause, any member of any Committee appointed by it or any associate
director or officer elected by it and may appoint or elect his successor.
Section 12. The Board of Directors may designate an officer to be
in charge of such of the departments or division of the Company as it may deem
advisable.
ARTICLE III
COMMITTEES
Section 1. Executive Committee
(A) The Executive Committee shall be composed of not
more than nine members who shall be selected by the Board of Directors from its
own members and who shall hold office during the pleasure of the Board.
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<PAGE> 20
(B) The Executive Committee shall have all the powers
of the Board of Directors when it is not in session to transact all business
for and in behalf of the Company that may be brought before it.
(C) The Executive Committee shall meet at the principal
office of the Company or elsewhere in its discretion at such times to be
determined by a majority of its members, or at the call of the Chairman of the
Executive Committee or at the call of the Chairman of the Board of Directors.
The majority of its members shall be necessary to constitute a quorum for the
transaction of business. Special meetings of the Executive Committee may be
held at any time when a quorum is present.
(D) Minutes of each meeting of the Executive Committee
shall be kept and submitted to the Board of Directors at its next meeting.
(E) The Executive Committee shall advise and
superintend all investments that may be made of the funds of the Company, and
shall direct the disposal of the same, in accordance with such rules and
regulations as the Board of Directors from time to time make.
(F) In the event of a state of disaster of sufficient
severity to prevent the conduct and management of the affairs and business of
the Company by its directors and officers as contemplated by these By-Laws any
two available members of the Executive Committee as constituted immediately
prior to such disaster shall constitute a quorum of that Committee for the full
conduct and management of the affairs and business of the Company in accordance
with the provisions of Article III of these By-Laws; and if less than three
members of the Trust Committee is constituted immediately prior to such
disaster shall be available for the transaction of its business, such Executive
Committee shall also be empowered to exercise all of the powers reserved to the
Trust Committee under Article III Section 2 hereof. In the event of the
unavailability, at such time, of a minimum of two members of such Executive
Committee, any three available directors shall constitute the Executive
Committee for the full conduct and management of the affairs and business of
the Company in accordance with the foregoing provisions of this Section. This
By-Law shall be subject to implementation by Resolutions of the Board of
Directors presently existing or hereafter passed from time to time for that
purpose, and any provisions of these By-Laws (other than this Section) and any
resolutions which are contrary to the provisions of this Section or to the
provisions of any such implementary Resolutions shall be suspended during such
a disaster period until it shall be determined by any interim Executive
Committee acting under this section that it shall be to the advantage of the
Company to resume the conduct and management of its affairs and business under
all of the other provisions of these By-Laws.
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Section 2. Trust Committee
(A) The Trust Committee shall be composed of not more
than thirteen members who shall be selected by the Board of Directors, a
majority of whom shall be members of the Board of Directors and who shall hold
office during the pleasure of the Board.
(B) The Trust Committee shall have general supervision
over the Trust Department and the investment of trust funds, in all matters,
however, being subject to the approval of the Board of Directors.
(C) The Trust Committee shall meet at the principal
office of the Company or elsewhere in its discretion at such times to be
determined by a majority of its members or at the call of its chairman. A
majority of its members shall be necessary to constitute a quorum for the
transaction of business.
(D) Minutes of each meeting of the Trust Committee
shall be kept and promptly submitted to the Board of Directors.
(E) The Trust Committee shall have the power to appoint
Committees and/or designate officers or employees of the Company to whom
supervision over the investment of trust funds may be delegated when the Trust
Committee is not in session.
Section 3. Audit Committee
(A) The Audit Committee shall be composed of five
members who shall be selected by the Board of Directors from its own members,
none of whom shall be an officer of the Company, and shall hold office at the
pleasure of the Board.
(B) The Audit Committee shall have general supervision
over the Audit Division in all matters however subject to the approval of the
Board of Directors; it shall consider all matters brought to its attention by
the officer in charge of the Audit Division, review all reports of examination
of the Company made by any governmental agency or such independent auditor
employed for that purpose, and make such recommendations to the Board of
Directors with respect thereto or with respect to any other matters pertaining
to auditing the Company as it shall deem desirable.
(C) The Audit Committee shall meet whenever and
wherever the majority of its members shall deem it to be proper for the
transaction of its business, and a majority of its Committee shall constitute a
quorum.
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<PAGE> 22
Section 4. Compensation Committee
(A) The Compensation Committee shall be composed of not
more than five (5) members who shall be selected by the Board of Directors from
its own members who are not officers of the Company and who shall hold office
during the pleasure of the Board.
(B) The Compensation Committee shall in general advise
upon all matters of policy concerning the Company brought to its attention by
the management and from time to time review the management of the Company,
major organizational matters, including salaries and employee benefits and
specifically shall administer the Executive Incentive Compensation Plan.
(C) Meetings of the Compensation Committee may be
called at any time by the Chairman of the Compensation Committee, the Chairman
of the Board of Directors, or the President of the Company.
Section 5. Associate Directors
(A) Any person who has served as a director may be
elected by the Board of Directors as an associate director, to serve during the
pleasure of the Board.
(B) An associate director shall be entitled to attend
all directors meetings and participate in the discussion of all matters brought
to the Board, with the exception that he would have no right to vote. An
associate director will be eligible for appointment to Committees of the
Company, with the exception of the Executive Committee, Audit Committee and
Compensation Committee, which must be comprised solely of active directors.
Section 6. Absence or Disqualification of Any Member of a Committee
(A) In the absence or disqualification of any member of
any Committee created under Article III of the By-Laws of this Company, the
member or members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously appoint
another member of the Board of Directors to act at the meeting in the place of
any such absence or disqualified member.
ARTICLE IV
OFFICERS
Section 1. The Chairman of the Board of Directors shall preside at
all meetings of the Board and shall have such further authority and powers and
shall perform such duties as the Board of Directors may from time to time
confer and direct. He shall also exercise such powers and perform such duties
as may from time to time be agreed upon between himself and the President of
the Company.
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<PAGE> 23
Section 2. The Vice Chairman of the Board. The Vice Chairman of
the Board of Directors shall preside at all meetings of the Board of Directors
at which the Chairman of the Board shall not be present and shall have such
further authority and powers and shall perform such duties as the Board of
Directors or the Chairman of the Board may from time to time confer and direct.
Section 3. The President shall have the powers and duties
pertaining to the office of the President conferred or imposed upon him by
statute or assigned to him by the Board of Directors in the absence of the
Chairman of the Board the President shall have the powers and duties of the
Chairman of the Board.
Section 4. The Chairman of the Board of Directors or the President
as designated by the Board of Directors, shall carry into effect all legal
directions of the Executive Committee and of the Board of Directors, and shall
at all times exercise general supervision over the interest, affairs and
operations of the Company and perform all duties incident to his office.
Section 5. There may be one or more Vice Presidents, however
denominated by the Board of Directors, who may at any time perform all the
duties of the Chairman of the Board of Directors and/or the President and such
other powers and duties as may from time to time be assigned to them by the
Board of Directors, the Executive Committee, the Chairman of the Board or the
President and by the officer in charge of the department or division to which
they are assigned.
Section 6. The Secretary shall attend to the giving of notice of
meetings of the stockholders and the Board of Directors, as well as the
Committees thereof, to the keeping of accurate minutes of all such meetings and
to recording the same in the minute books of the Company. In addition to the
other notice requirements of these By-Laws and as may be practicable under the
circumstances, all such notices shall be in writing and mailed well in advance
of the scheduled date of any other meeting. He shall have custody of the
corporate seal and shall affix the same to any documents requiring such
corporate seal and to attest the same.
Section 7. The Treasurer shall have general supervision over all
assets and liabilities of the Company. He shall be custodian of and
responsible for all monies, funds and valuables of the Company and for the
keeping of proper records of the evidence of property or indebtedness and of
all the transactions of the Company. He shall have general supervision of the
expenditures of the Company and shall report to the Board of Directors at each
regular meeting of the condition of the Company, and perform such other duties
as may be assigned to him from time to time by the Board of Directors of the
Executive Committee.
Section 8. There may be a Controller who shall exercise general
supervision over the internal operations of the Company, including accounting,
and shall render to the Board of Directors at appropriate times a report
relating to the general condition and internal operations of the Company.
6
<PAGE> 24
There may be one or more subordinate accounting or controller
officers however denominated, who may perform the duties of the Controller and
such duties as may be prescribed by the Controller.
Section 9. The officer designated by the Board of Directors to be
in charge of the Audit Division of the Company with such title as the Board of
Directors shall prescribe, shall report to and be directly responsible only to
the Board of Directors.
There shall be an Auditor and there may be one or more Audit
Officers, however denominated, who may perform all the duties of the Auditor
and such duties as may be prescribed by the officer in charge of the Audit
Division.
Section 10. There may be one or more officers, subordinate in rank
to all Vice Presidents with such functional titles as shall be determined from
time to time by the Board of Directors, who shall ex officio hold the office
Assistant Secretary of this Company and who may perform such duties as may be
prescribed by the officer in charge of the department or division to whom they
are assigned.
Section 11. The powers and duties of all other officers of the
Company shall be those usually pertaining to their respective offices, subject
to the direction of the Board of Directors, the Executive Committee, Chairman
of the Board of Directors or the President and the officer in charge of the
department or division to which they are assigned.
ARTICLE V
STOCK AND STOCK CERTIFICATES
Section 1. Shares of stock shall be transferrable on the books of
the Company and a transfer book shall be kept in which all transfers of stock
shall be recorded.
Section 2. Certificate of stock shall bear the signature of the
President or any Vice President, however denominated by the Board of Directors
and countersigned by the Secretary or Treasurer or an Assistant Secretary, and
the seal of the corporation shall be engraved thereon. Each certificate shall
recite that the stock represented thereby is transferrable only upon the books
of the Company by the holder thereof or his attorney, upon surrender of the
certificate properly endorsed. Any certificate of stock surrendered to the
Company shall be cancelled at the time of transfer, and before a new
certificate or certificates shall be issued in lieu thereof. Duplicate
certificates of stock shall be issued only upon giving such security as may be
satisfactory to the Board of Directors or the Executive Committee.
Section 3. The Board of Directors of the Company is authorized to
fix in advance a record date for the determination of the stockholders entitled
to notice of, and to vote at, any meeting of stockholders and any adjournment
thereof, or entitled to receive payment of
7
<PAGE> 25
any dividend, or to any allotment or rights, or to exercise any rights in
respect of any change, conversion or exchange of capital stock, or in
connection with obtaining the consent of stockholders for any purpose, which
record date shall not be more than 60 nor less than 10 days proceeding the date
of any meeting of stockholders or the date for the payment of any dividend, or
the date for the allotment of rights, or the date when any change or conversion
or exchange of capital stock shall go into effect, or a date in connection with
obtaining such consent.
ARTICLE VI
SEAL
Section 1. The corporate seal of the Company shall be in the
following form:
Between two concentric circles the words
"Wilmington Trust Company" within the inner
circle the words "Wilmington, Delaware."
ARTICLE VII
FISCAL YEAR
Section 1. The fiscal year of the Company shall be the calendar
year.
ARTICLE VIII
EXECUTION OF INSTRUMENTS OF THE COMPANY
Section 1. The Chairman of the Board, the President or any Vice
President, however denominated by the Board of Directors, shall have full power
and authority to enter into, make, sign, execute, acknowledge and/or deliver
and the Secretary or any Assistant Secretary shall have full power and
authority to attest and affix the corporate seal of the Company to any and all
deeds, conveyances, assignments, releases, contracts, agreements, bonds, notes,
mortgages and all other instruments incident to the business of this Company or
in acting as executor, administrator, guardian, trustee, agent or in any other
fiduciary or representative capacity by any and every method of appointment or
by whatever person, corporation, court officer or authority in the State of
Delaware, or elsewhere, without any specific authority, ratification, approval
or confirmation by the Board of Directors or the Executive Committee, and any
and all such instruments shall have the same force and validity as though
expressly authorized by the Board of Directors and/or the Executive Committee.
8
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ARTICLE IX
COMPENSATION OF DIRECTORS AND MEMBERS OF COMMITTEES
Section 1. Directors and associate directors of the Company, other
than salaried officers of the Company, shall be paid such reasonable honoraria
or fees for attending meetings of the Board of Directors as the Board of
Directors may from time to time determine. Directors and associate directors
who serve as members of committees, other than salaried employees of the
Company, shall be paid such reasonable honoraria or fees for services as
members of committees as the Board of Directors shall from time to time
determine and directors and associate directors may be employed by the Company
for such special services as the Board of Directors may from time to time
determine and shall be paid for such special services so performed reasonable
compensation as may be determined by the Board of Directors.
ARTICLE X
INDEMNIFICATION
Section 1. (A) The Corporation shall indemnify and hold harmless,
to the fullest extent permitted by applicable law as it presently exists or may
hereafter be amended, any person who was or is made or is threatened to be made
a party or is otherwise involved in any action, suit or proceeding, whether
civil, criminal, administrative or investigative (a "proceeding") by reason of
the fact that he, or a person for whom he is the legal representative, is or
was a director, officer, employee or agent of the Corporation or is or was
serving at the request of the Corporation as a director, officer, employee,
fiduciary or agent of another corporation or of a partnership, joint venture,
trust, enterprise or non-profit entity, including service with respect to
employee benefit plans, against all liability and loss suffered and expenses
reasonably incurred by such person. The Corporation shall indemnify a person
in connection with a proceeding initiated by such person only if the proceeding
was authorized by the Board of Directors of the Corporation.
(B) The Corporation shall pay the expenses incurred in
defending any proceeding in advance of its final disposition, provided,
however, that the payment of expenses incurred by a Director officer in his
capacity as a Director or officer in advance of the final disposition of the
proceeding shall be made only upon receipt of an undertaking by the Director or
officer to repay all amounts advanced if it should be ultimately determined
that the Director or officer is not entitled to be indemnified under this
Article or otherwise.
(C) If a claim for indemnification or payment of
expenses, under this Article X is not paid in full within ninety days after a
written claim therefor has been received by the Corporation the claimant may
file suit to recover the unpaid amount of such claim and, if successful in
whole or in part, shall be entitled to be paid the expense of prosecuting such
claim. In any such action the Corporation shall have the burden of proving
that the claimant was not entitled to the requested indemnification of payment
of expenses under applicable law.
9
<PAGE> 27
(D) The rights conferred on any person by this Article
X shall not be exclusive of any other rights which such person may have or
hereafter acquire under any statute, provision of the Charter or Act of
Incorporation, these By-Laws, agreement, vote of stockholders or disinterested
Directors or otherwise.
(E) Any repeal or modification of the foregoing
provisions of this Article X shall not adversely affect any right or protection
hereunder of any person in respect of any act or omission occurring prior to
the time of such repeal or modification.
ARTICLE XI
AMENDMENTS TO THE BY-LAWS
Section 1. These By-Laws may be altered, amended or repealed, in
whole or in part, and any new By-Law or By-Laws adopted at any regular or
special meeting of the Board of Directors by a vote of the majority of all the
members of the Board of Directors then in office.
10
<PAGE> 28
EXHIBIT C
SECTION 321(b) CONSENT
Pursuant to Section 321(b) of the Trust Indenture Act of 1939, as
amended, Wilmington Trust Company hereby consents that reports of examinations
by Federal, State, Territorial or District authorities may be furnished by such
authorities to the Securities and Exchange Commission upon requests therefor.
WILMINGTON TRUST COMPANY
Dated: April 29, 1998 By: /s/ Emmett R. Harmon
----------------------
Name: Emmett R. Harmon
Title: Vice President
<PAGE> 29
EXHIBIT D
NOTICE
This form is intended to assist state nonmember banks and savings banks with
state publication requirements. It has not been approved by any state banking
authorities. Refer to your appropriate state banking authorities for your
state publication requirements.
R E P O R T O F C O N D I T I O N
Consolidating domestic subsidiaries of the
WILMINGTON TRUST COMPANY of WILMINGTON
- ---------------------------------------------------------- ------------------
Name of Bank City
in the State of DELAWARE , at the close of business on December 31, 1997.
------------
<TABLE>
<CAPTION>
ASSETS
Thousands of dollars
<S> <C>
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coins . . . . . . . . . . . . . . . . . . . . . 236,646
Interest-bearing balances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0
Held-to-maturity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 331,880
Available-for-sale securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,258,661
Federal funds sold and securities purchased under agreements to resell . . . . . . . . . . . . . . . . . 91,500
Loans and lease financing receivables:
Loans and leases, net of unearned income. . . . . . . 3,822,320
LESS: Allowance for loan and lease losses. . . . . . 59,373
LESS: Allocated transfer risk reserve. . . . . . . . 0
Loans and leases, net of unearned income, allowance, and reserve . . . . . . . . . . . . . . 3,762,947
Assets held in trading accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0
Premises and fixed assets (including capitalized leases) . . . . . . . . . . . . . . . . . . . . . . . . 129,740
Other real estate owned . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,106
Investments in unconsolidated subsidiaries and associated companies . . . . . . . . . . . . . . . . . . . 22
Customers' liability to this bank on acceptances outstanding . . . . . . . . . . . . . . . . . . . . . . 0
Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,905
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100,799
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,919,206
</TABLE>
CONTINUED ON NEXT PAGE
<PAGE> 30
<TABLE>
<S> <C>
LIABILITIES
Deposits:
In domestic offices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,034,633
Noninterest-bearing . . . . . . . . 839,928
Interest-bearing. . . . . . . . . . 3,194,705
Federal funds purchased and Securities sold under agreements to repurchase . . . . . . . . . . . . . . . 575,827
Demand notes issued to the U.S. Treasury . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61,290
Trading liabilities (from Schedule RC-D) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0
Other borrowed money: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ///////
With original maturity of one year or less . . . . . . . . . . . . . . . . . . . . . . . . . 673,000
With original maturity of more than one year . . . . . . . . . . . . . . . . . . . . . . . . 43,000
Bank's liability on acceptances executed and outstanding . . . . . . . . . . . . . . . . . . . . . . . . 0
Subordinated notes and debentures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0
Other liabilities (from Schedule RC-G) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76,458
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,464,208
EQUITY CAPITAL
Perpetual preferred stock and related surplus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0
Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 500
Surplus (exclude all surplus related to preferred stock) . . . . . . . . . . . . . . . . . . . . . . . . 62,118
Undivided profits and capital reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 385,018
Net unrealized holding gains (losses) on available-for-sale securities . . . . . . . . . . . . . . . . . 7,362
Total equity capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 454,998
Total liabilities, limited-life preferred stock, and equity capital . . . . . . . . . . . . . . . . . . . 5,919,206
</TABLE>
2
