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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 11, 1999
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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ATLAS AIR, INC.
(Exact name of registrant as specified in its charter)
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DELAWARE 4731 84-1207329
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
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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 NOTE OFFERING PRICE FEE
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9 3/8% Senior Notes due 2006........... $150,000,000 100.000% $150,000,000 $41,700.00
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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.
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THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY SECURITIES IN ANY
STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION -- DATED FEBRUARY 11, 1999
PROSPECTUS
ATLASAIR LOGO
ATLASAIR LOGO
OFFER TO EXCHANGE OUR 9 3/8% SENIOR NOTES DUE 2006,
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT,
FOR OUR 9 3/8% SENIOR NOTES DUE 2006, WHICH HAVE NOT BEEN REGISTERED
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TERMS OF THE EXCHANGE OFFER:
- Offer to exchange up to $150,000,000 aggregate principal amount of our
new 9 3/8% Senior Notes due 2006 (the "New Notes"), for a like principal
amount of our outstanding 9 3/8% Senior Notes due 2006 (the "Old Notes"
and collectively with the New Notes referred to as the "Notes").
- Expires 5:00 p.m., New York City time, on , 1999 unless
extended.
- Tenders of the Old Notes may be withdrawn any time prior to the
expiration of the Exchange Offer.
- We will accept for exchange any and all Old Notes validly tendered and
not withdrawn prior to the expiration of the Exchange Offer.
- Not subject to any condition, other than that the Exchange Offer not
violate applicable law or any applicable interpretation of the staff of
the Securities and Exchange Commission and certain other customary
conditions.
- We will not receive any proceeds from the Exchange Offer.
- The exchange of notes will not be a taxable exchange for U.S. federal
income tax purposes.
- The terms of the New Notes and the Old Notes are identical in all
material respects, except for certain transfer restrictions relating to
the Old Notes.
- The New Notes will evidence the same indebtedness as the Old Notes and
will be issued pursuant to, and entitled to the benefits of, the same
Indenture that governs the Old Notes.
THE NEW NOTES:
- Interest Payment: semi-annually in arrears on May 15 and November 15,
commencing on May 15, 1999.
- Redemption: The New Notes will be redeemable on or after November 15,
2002. Up to 35% of the New Notes will be redeemable prior to November 15,
2001, with the net proceeds of one or more Public Equity Offerings.
SEE "RISK FACTORS," WHICH BEGINS ON PAGE 11, FOR A DISCUSSION OF CERTAIN
FACTORS THAT SHOULD BE CONSIDERED BY HOLDERS PRIOR TO TENDERING THEIR OLD NOTES
IN THE EXCHANGE OFFER.
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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The date of this Prospectus is , 1999.
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TABLE OF CONTENTS
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PAGE
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Special Note Regarding Forward-Looking Information.......... ii
Summary..................................................... 1
Risk Factors................................................ 11
Capitalization.............................................. 17
Selected Financial and Operating Data....................... 18
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 20
Business.................................................... 32
Management.................................................. 40
Description of Certain Indebtedness......................... 43
The Exchange Offer.......................................... 46
Description of Notes........................................ 54
Certain United States Federal Income Tax Considerations..... 79
Plan of Distribution........................................ 81
Legal Matters............................................... 82
Experts..................................................... 82
Where You Can Find More Information......................... 83
Incorporation of Certain Documents by Reference............. 83
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THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL WE ACCEPT SURRENDERS FOR
EXCHANGE FROM, HOLDERS OF OLD NOTES IN ANY JURISDICTION IN WHICH THE EXCHANGE
OFFER OR THE ACCEPTANCE THEREOF WOULD NOT COMPLY WITH THE SECURITIES OR BLUE SKY
LAWS OF SUCH JURISDICTION.
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT OR THAT
WE HAVE REFERRED YOU TO. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
INFORMATION THAT IS DIFFERENT. NEITHER THE DELIVERY OF THIS PROSPECTUS OR THE
ACCOMPANYING LETTER OF TRANSMITTAL, NOR ANY EXCHANGE MADE PURSUANT TO THIS
PROSPECTUS SHALL UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT THE
INFORMATION CONTAINED IN THIS DOCUMENT IS CORRECT AS OF ANY DATE SUBSEQUENT TO
THE DATE HEREOF.
MARKET DATA USED THROUGHOUT THIS PROSPECTUS WERE OBTAINED FROM CONSULTANT'S
REPORTS AND INDUSTRY PUBLICATIONS. INDUSTRY PUBLICATIONS AND CONSULTANT'S
REPORTS GENERALLY STATE THAT THE INFORMATION CONTAINED THEREIN HAS BEEN OBTAINED
FROM SOURCES BELIEVED TO BE RELIABLE, BUT THAT THE ACCURACY AND COMPLETENESS OF
SUCH INFORMATION IS NOT GUARANTEED. WE HAVE NOT INDEPENDENTLY VERIFIED THIS
MARKET DATA.
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SPECIAL NOTE REGARDING FORWARD-LOOKING INFORMATION
Certain statements included or incorporated by reference in this Prospectus
constitute "forward looking statements" within the meaning of Section 27A of the
Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of
the Exchange Act. Such forward-looking statements involve known and unknown
risks, uncertainties and other factors which may cause our actual results,
levels of activity, performance or achievements or industry results, to be
materially different from any future results, levels of activity, performance or
achievements expressed or implied by such forward-looking statements. In
addition, forward-looking statements generally can be identified by the use of
forward-looking terminology such as "may", "will", "expect", "intend",
"estimate", "anticipate", "believe", or "continue" or the negative thereof or
variations thereon or similar terminology. Although we believe that the
expectations reflected in such forward-looking statements are reasonable, we can
give no assurance that such expectations will prove to have been correct.
Important factors that could cause actual results to differ materially from our
expectations are disclosed under "Risk Factors" and elsewhere in this
Prospectus.
To the extent that any of the statements contained herein relating to our
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 our workforce;
- dependence on key personnel; and
- regulatory matters.
As a result of the foregoing and other factors, no assurance can be given
as to our future results and achievements. Neither we nor any other person
assumes responsibility for the accuracy and completeness of these statements.
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SUMMARY
The following summary highlights selected information from this Prospectus
and may not contain all of the information that is important to you. This
Prospectus includes the terms of the notes we are offering, as well as
information regarding our business and detailed financial data. We encourage you
to read this Prospectus in its entirety. References in this Prospectus to "we,"
"us," "our," or the "Company" refer to Atlas Air, Inc and its subsidiaries. In
addition, references to "747-400 aircraft" in this Prospectus mean the Boeing
747-400F freighter aircraft. The term "you" refers to prospective investors in
the New Notes.
THE COMPANY
We are the world's largest air cargo outsourcer, with an all Boeing fleet
of 747 freighter aircraft that comply with Stage 3 FAA noise regulations. We
provide 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 we
supply aircraft, crew, maintenance and insurance (the "ACMI Contracts"). Our
customers currently include China Airlines Ltd., British Airways World Cargo,
Scandinavian Airlines System, The International Airline of the United Arab
Emirates, Thai Airways International Public Company Limited, Fast Air Carrier,
S.A., Lineas Aereas Suramericanas, S.A., Cargolux Airlines International, S.A.,
Linee Aeree Italiane S.p.A., Iberia Airlines of Spain, El Al Israel Airlines
Ltd. and Federal Express Corporation. We provide efficient, cost effective
service to our customers primarily as a result of our productive work force, the
outsourcing of a significant part of our regular maintenance work on a
long-term, fixed-cost contractual basis and the advantageous cost economies
realized in the operation of our fleet, comprised solely of Boeing 747 aircraft
which are configured for service in long-haul cargo operations.
Our fleet currently includes 23 Boeing 747-200 and 5 Boeing 747-400
freighter aircraft in service. We acquired the 747-400 aircraft in the second
half of 1998 pursuant to an agreement with the Boeing Company to purchase 10 new
747-400 freighter aircraft to be powered by engines acquired from General
Electric Company, with options to purchase up to 10 additional 747-400 aircraft
(the "Boeing Purchase Agreement"). The remaining five 747-400 aircraft are
scheduled to be delivered as follows: four in 1999 and one in 2000.
The advantages of the 747-400 aircraft as compared to the 747-200 aircraft
include:
- significantly longer range;
- greater payload capability;
- lower maintenance costs; and
- increased fuel efficiency.
We placed the first five 747-400 aircraft into service in 1998 and expect to
place the other 747-400 aircraft in service with both existing and prospective
customers whom we believe could benefit from the unique performance capabilities
of the 747-400 aircraft.
We believe that our leading market position and our continued opportunities
for growth are directly attributable to the following competitive strengths:
Long-Term Customer Contracts Which Provide Revenue Stability
Our ACMI Contracts, which accounted for approximately 94% of our total
operating revenues in 1998, generally allow our customers to guarantee monthly
minimum aircraft utilization levels at fixed hourly rates. These ACMI Contracts
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 us to supply aircraft, crew, maintenance and insurance, while our
customers bear all other operating expenses, including:
- fuel and fuel servicing;
- marketing costs associated with obtaining cargo;
- airport cargo handling;
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- landing fees;
- ground handling, aircraft push-back and de-icing services; and
- specific cargo and mail insurance.
Our customers are also responsible under these contracts for utilizing the cargo
capacity of each of the contracted aircraft. As a result, our ACMI Contracts
minimize the load factor, yield risk and fuel cost risk traditionally associated
with the air cargo business and provide a minimum annual revenue base and more
predictable profit margins. We also periodically engage in ad hoc charter or
scheduled air service depending on availability of aircraft for these uses.
Low Cost Structure
We have established ourself as a low cost, efficient and reliable provider
of air cargo transportation. This is primarily due to the outsourcing of many of
our required services, the advantageous economies of scale realized from the
operation of a standardized fleet of long-haul Boeing 747-200 aircraft, and our
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, we have advantageous, long-term contracts
on a fixed cost per flight hour basis with leading maintenance providers such as
GE and KLM Royal Dutch Airlines for a significant portion of our on-going
aircraft and engine maintenance requirements. As a result of these efficiencies,
our high service standards and increased airline industry pressure to reduce
costs, our airline customers have determined that outsourcing portions of their
air cargo business to us 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 have even greater operational capabilities than
the Boeing 747-200 aircraft and allow us to maintain our 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 10 747-400
freighter aircraft will make Atlas the largest operator of this aircraft type to
date and will enable us to achieve economies of scale from the standardization
in maintenance and crew training.
Expanding Business Base
We expect that 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, will provide us with
the opportunity to expand our air cargo outsourcing services. The primary
business focus of most of our 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.
Our 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
We have successfully increased our customer base from a single customer in
1992 to twelve customers in 1998. In addition, we have in the past operated
under short-term, seasonal ACMI Contracts with Kitty Hawk Air Cargo, Inc. and
anticipate providing short-term, seasonal service in the future. The growth in
the number of customers is a result of our ability to provide a cost-effective
service which has gained acceptance within the
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industry due to our successful market development efforts. The addition of the
747-400 aircraft provides us with the opportunity to increase our market share
by offering this product 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 gives us 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, we believe that current
industry trends are favorable to the continued growth of our 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 7.9% per year from 1987 to 1997.
The average annual percentage growth through 2017 is expected to average 6.4%,
with international air cargo market growth outpacing U.S. domestic growth. We
believe 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 establishment of the WTO;
- 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, we expect to benefit from
growth in the export-driven economies of the countries in the Pacific Rim, where
we have focused a significant amount of our flight operations. We have not
experienced any adverse impact on our business as a result of the recent
economic and political turmoil in Asia, although there can be no assurances that
there will not be any future impact. According to Boeing reports, eastbound and
westbound Trans-Pacific cargo volumes grew at average annual rates of 7.6% and
10.8%, respectively, between 1987 and 1997, and are projected to grow at average
annual rates of 7.7% and 6.0%, respectively, between 1997 and 2017. Similarly,
northbound and southbound air cargo volumes between North America and South
America increased at average annual rates of 8.7% and 10.2%, respectively,
between 1987 and 1997, and are projected to grow at average annual rates of 6.4%
and 6.8%, respectively, from 1997 to 2017. Additionally, eastbound and westbound
North Atlantic air cargo volumes increased at average annual rates of 6.8% and
6.9%, respectively, between 1987 and 1997 and are projected to grow at average
annual rates of 6.7% and 7.3%, respectively, from 1997 to 2017. We believe that,
as a U.S. certificated "flag" carrier, we are 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
we have concentrated a significant portion of our resources.
PRINCIPAL EXECUTIVE OFFICES
Our principal executive offices are located at 538 Commons Drive, Golden,
Colorado 80401. Our telephone number is (303) 526-5050.
THE EXCHANGE OFFER
Purpose and Effect......... The Company sold the Old Notes on November 18, 1998
to BT Alex. Brown Incorporated and Morgan Stanley &
Co. Incorporated (together, the "Initial
Purchaser"), who privately placed the Old Notes
with certain institutional investors. In connection
with this sale, we executed and delivered for the
benefit of the holders of the Old Notes a
registration rights agreement (the "Registration
Rights Agreement") providing
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for, among other things, the Exchange Offer. See
"The Exchange Offer -- Terms of the Exchange
Offer."
Terms of the Exchange
Offer...................... New Notes are being offered in exchange for a like
principal amount of Old Notes. Old Notes may be
exchanged only in integral multiples of $1,000. We
will issue the New Notes on or promptly after the
expiration of the Exchange Offer. See "Risk
Factors -- Consequences of Failure to Exchange."
Holders of the Old Notes do not have appraisal or
dissenters' rights in connection with the Exchange
Offer under the Delaware General Corporation Law,
the governing law of the state of incorporation of
the Company. See "The Exchange Offer -- Terms of
the Exchange Offer."
Minimum Condition.......... The Exchange Offer is not conditioned upon any
minimum aggregate principal amount of Old Notes
being tendered or accepted for exchange. See "The
Exchange Offer -- Certain Conditions to the
Exchange Offer."
Expiration Date............ 5:00 p.m., New York City time, on , 1999,
unless the Exchange Offer is extended, in which
case the term "Expiration Date" means the latest
date and time to which the Exchange Offer is
extended. See "The Exchange Offer -- Terms of the
Exchange Offer."
Conditions................. The Exchange Offer is subject to certain customary
conditions, which may be waived by us. We reserve
the right to terminate or amend the Exchange Offer
at any time prior to the Expiration Date upon the
occurrence of any such condition. The Exchange
Offer is also subject to the terms and provisions
of the Registration Rights Agreement. NO VOTE OF
OUR SECURITYHOLDERS IS REQUIRED TO EFFECT THE
EXCHANGE OFFER AND NO SUCH VOTE (OR PROXY THEREFOR)
IS BEING SOUGHT BY THIS PROSPECTUS. See "The
Exchange Offer -- Certain Conditions to the
Exchange Offer."
Procedures for tendering
Old Notes.................. If you wish to tender your Old Notes pursuant to
the Exchange Offer, you must complete, sign and
date the Letter of Transmittal, or a facsimile
thereof, in accordance with the instructions
contained in this Prospectus and in the Letter of
Transmittal. You must mail or otherwise deliver
such Letter of Transmittal, or such facsimile,
together with the Old Notes, or a Book-Entry
Confirmation (as defined), as the case may be, and
any other required documentation to the exchange
agent (the "Exchange Agent") at the address set
forth in this Prospectus. The method of delivery of
such documentation is at your election and risk. By
executing the Letter of Transmittal, you will
represent to us, among other things, that:
- the New Notes acquired pursuant to the Exchange
Offer by you and any beneficial owners of Old
Notes are being obtained in the ordinary course
of business of the person receiving such New
Notes;
- neither you nor such beneficial owner is
participating in, intends to participate in or
has an arrangement or understanding with any
person to participate in, the distribution of
such New Notes; and
- neither you nor such beneficial owner is an
"affiliate," as defined under Rule 405 of the
Securities Act, of the Company.
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Each broker-dealer that receives New Notes for its
own account in exchange for Old Notes, where such
Old Notes were acquired by such broker or dealer as
a result of market-making activities or other
trading activities (other than Old Notes acquired
directly from us), must acknowledge in the Letter
of Transmittal that it will deliver a prospectus in
connection with any resale of such New Notes. See
"The Exchange Offer -- Procedures for Tendering Old
Notes" and "Plan of Distribution."
Special Procedures for
Beneficial Owners.......... If you are a beneficial owner whose Old Notes are
registered in the name of a broker, dealer,
commercial bank, trust company or other nominee and
you wish to tender your Old Notes in the Exchange
Offer, you should contact such registered holder
promptly and instruct such registered holder to
tender on your behalf. If you wish to tender on
your own behalf, you must, prior to completing and
executing the Letter of Transmittal and delivering
your Old Notes, either make appropriate
arrangements to register ownership of the Old Notes
in your name or obtain a properly completed bond
power from the registered holder. The transfer of
registered ownership may take considerable time and
may not be able to be completed prior to the
Expiration Date. See "The Exchange
Offer -- Procedures for Tendering Old Notes."
Book-Entry Transfer........ Any financial institution that is a participant in
the Book-Entry Transfer Facility's (as defined)
system may make book-entry delivery of Old Notes by
causing the Book-Entry Transfer Facility to
transfer such Old Notes into the Exchange Agent's
account at the Book-Entry Transfer Facility in
accordance with such Book-Entry Transfer Facility's
procedures for transfer. See "The Exchange
Offer -- Procedures for Tendering Old Notes."
Withdrawal Rights.......... Tenders may be withdrawn at any time prior to 5:00
p.m. New York City time, on the Expiration Date.
See "The Exchange Offer -- Withdrawal of Tenders."
Acceptance of Old Notes and
Delivery of New Notes.... Upon satisfaction or waiver of all conditions of
the Exchange Offer, we will accept for exchange any
and all Old Notes which are properly tendered and
not withdrawn prior to 5:00 p.m., New York City
time, on the Expiration Date. The New Notes issued
pursuant to the Exchange Offer will be delivered
promptly following acceptance of the Old Notes by
us after the Expiration Date. See "The Exchange
Offer -- Acceptance of Old Notes for Exchange;
Delivery of New Notes."
Federal Income Tax
Consequences............. The exchange of Old Notes for New Notes by
tendering holders will not be a taxable exchange
for federal income tax purposes as a result of such
exchange. See "Certain United States Federal Income
Tax Considerations."
Regulatory Approvals....... We do not believe that the receipt of any material
federal or state regulatory approvals will be
necessary in connection with the Exchange Offer.
See "The Exchange Offer -- Regulatory Approvals."
Use of Proceeds............ We will not receive any proceeds from the exchange
pursuant to the Exchange Offer.
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Exchange Agent............. State Street Bank & Trust Company is serving as
Exchange Agent in connection with the Exchange
Offer. See "The Exchange Offer -- Exchange Agent."
Resales of the New Notes... The New Notes are being offered pursuant to this
Prospectus in order to satisfy certain obligations
contained in the Registration Rights Agreement.
Based on positions of the Commission and no action
or interpretive letters issued to third parties, we
believe that the New Notes issued pursuant to the
Exchange Offer may be offered for resale, resold
and otherwise transferred by you, without
compliance with the registration and prospectus
delivery provisions of the Securities Act, provided
that:
- you are acquiring the New Notes in the ordinary
course of your business;
- you are not participating, do not intend to
participate and have no arrangement or
understanding with any person to participate in
the distribution of such New Notes; and
- you are not an "affiliate" of our company.
If you acquire New Notes in the Exchange Offer for
the purpose of distributing or participating in a
distribution of New Notes, you cannot rely on the
position of the staff of the Commission set forth
in its non-action and interpretive letters and must
comply with the registration and prospectus
delivery requirements of the Securities Act in
connection with a secondary resale transaction,
unless an exemption from registration is otherwise
available. Each broker-dealer that receives New
Notes for its own account pursuant to the Exchange
Offer must acknowledge that:
(i) Old Notes tendered by it in the Exchange Offer
were acquired in the ordinary course of its
business as a result of market-making or other
trading activities; and
(ii) it will deliver a prospectus in connection
with any resale of New Notes received in the
Exchange Offer.
This Prospectus, as it may be amended or
supplemented from time to time, may be used by a
broker-dealer in connection with any resale of the
New Notes received in exchange for Old Notes where
such Old Notes were acquired by such broker-dealer
as a result of market-making or other trading
activities (other than Old Notes acquired directly
from us). We have agreed that, for a period of 180
days following the consummation of the Exchange
Offer, we will make this Prospectus available to
any broker-dealer for use in connection with any
such resale. See "The Exchange Offer -- Resales of
the New Notes" and "Plan of Distribution."
SUMMARY DESCRIPTION OF NEW NOTES
Securities Offered......... $150,000,000 aggregate principal amount of 9 3/8%
Senior Notes due 2006.
Issuer..................... Atlas Air, Inc.
Maturity Date.............. November 15, 2006.
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Interest Payment Dates..... Interest on the New Notes will accrue from the last
interest payment date on which interest was paid on
the Old Notes surrendered in exchange therefor or,
if no interest has been paid on the Old Notes, from
the date of original issuance of the Old Notes and
will be payable semi-annually on each May 15 and
November 15 of each year, commencing May 15, 1999.
Ranking.................... The New Notes will represent general unsecured
obligations of the Company and will rank senior to
all of our subordinated indebtedness and pari passu
in right of payment to all of our existing and
future unsecured senior indebtedness. The New Notes
will be effectively subordinated, however, to all
of our secured indebtedness and all existing and
future liabilities of our subsidiaries. As of
September 30, 1998, on a pro forma basis after
giving effect to the Offering and the application
of the proceeds therefrom, we would have had
approximately $678.6 million of indebtedness
outstanding (including approximately $202.6 million
of secured indebtedness) and our subsidiaries would
have had approximately $363.4 million of
liabilities outstanding.
Optional Redemption........ The New Notes will be redeemable, in whole or in
part, at our option on or after November 15, 2002,
at the redemption prices set forth in this
Prospectus, plus accrued interest to the date of
redemption. In addition, at any time on or prior to
November 15, 2001, we, at our option, may redeem up
to 35% of the aggregate principal amount of the
Notes originally issued with the net cash proceeds
of one or more Public Equity Offerings, at a
redemption price equal to 109.375% of the principal
amount of the Notes plus accrued interest to the
date of redemption; provided at least 65% of the
aggregate principal amount of the Notes originally
issued remains outstanding immediately after any
such redemption.
Change of Control.......... Upon a Change of Control (as defined), each holder
of the New Notes will have the right to require us
to repurchase such holder's New Notes at a price
equal to 101% of the principal amount thereof, plus
accrued and unpaid interest to the repurchase date.
There can be no assurance that, in the event of a
Change of Control, we will have, or be able to
obtain, sufficient funds to repurchase the New
Notes.
Certain Covenants.......... The Indenture governing the New Notes (the
"Indenture") contains certain limitations on our
ability and the ability of our 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
7
<PAGE> 12
- sell, assign, transfer, lease, convey or
otherwise dispose of all or substantially all of
our assets.
For additional information regarding the New Notes, see "Description of
Notes."
RISK FACTORS
See "Risk Factors" for a discussion of certain factors that should be
considered by holders prior to tendering their Old Notes in the Exchange Offer.
8
<PAGE> 13
SUMMARY FINANCIAL AND OPERATING DATA
The summary financial data presented below have been derived from our
consolidated financial statements. The data for the years ended December 31,
1997, 1996, 1995, 1994 and 1993 were derived from our audited consolidated
financial statements and related notes, and other financial information
incorporated herein. The data for the nine months ended September 30, 1998 and
1997 were derived from our unaudited consolidated financial statements, which,
in the opinion of management, include all adjustments (consisting only of normal
recurring adjustments) necessary for a fair presentation of the information set
forth herein. The results of operations for the interim periods presented are
not indicative of the results that may be expected for the full year. The
following information should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
our consolidated financial statements and notes thereto, which are incorporated
herein.
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED DECEMBER 31, ENDED SEPTEMBER 30,
--------------------------------------------------------- -------------------
1993 1994 1995 1996 1997 1997 1998
--------- --------- --------- --------- --------- -------- --------
(DOLLARS IN THOUSANDS, EXCEPT RATIOS AND OPERATING DATA) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Total operating revenues.......... $ 41,263 $102,979 $171,267 $315,659 $401,041 $280,148 $276,773
Operating expenses:
Flight crew salaries and
benefits.......................... 4,243 8,887 14,584 25,020 30,153 21,437 24,110
Other flight-related expenses... 7,844 9,270 12,361 27,404 28,784 20,546 21,093
Maintenance....................... 8,052 24,517 42,574 84,305 123,820 88,470 65,385
Aircraft and engine rentals..... 1,758 14,044 22,902 27,341 31,644 23,279 6,163
Fuel and ground handling.......... 4,575 9,747 5,027 10,554 10,816 9,024 6,317
Depreciation and amortization..... 5,647 7,451 14,793 25,515 42,945 30,183 40,837
Other............................. 8,698 15,169 16,352 27,457 49,777 31,888 24,091
Write-off of capital investment
and other..................... -- -- -- -- 27,100 27,100 --
-------- -------- -------- -------- -------- -------- --------
Total operating expenses.......... 40,817 89,085 128,593 227,596 345,039 251,927 187,996
-------- -------- -------- -------- -------- -------- --------
Operating income.................. 446 13,894 42,674 88,063 56,002 28,221 88,777
Other income (expense):
Interest income................... 244 490 2,025 7,102 7,365 5,161 7,821
Interest expense................ (10,101) (10,784) (18,460) (35,577) (52,834) (37,246) (51,892)
-------- -------- -------- -------- -------- -------- --------
Total other income (expense)...... (9,857) (10,294) (16,435) (28,475) (45,469) (32,085) (44,071)
-------- -------- -------- -------- -------- -------- --------
Income (loss) before income
taxes............................. (9,411) 3,600 26,239 59,588 10,533 (3,864) 44,706
Income tax benefit (expense)...... 1,388 (14) (8,408) (21,750) (3,844) 1,411 (16,546)
-------- -------- -------- -------- -------- -------- --------
Income (loss) before extraordinary
item.............................. (8,023) 3,586 17,831 37,838 6,689 (2,453) 28,160
Extraordinary item: Gain from
extinguishment of debt, net of
applicable taxes of $9,622(1)... -- -- -- -- 16,740 16,740 --
-------- -------- -------- -------- -------- -------- --------
Net income (loss)................. $ (8,023) $ 3,586 $ 17,831 $ 37,838 $ 23,429 $ 14,287 $ 28,160
======== ======== ======== ======== ======== ======== ========
OTHER DATA:
EBITDA(2)......................... $ 6,093 $ 21,345 $ 57,467 $113,578 $127,608 $ 86,604 $129,761
Ratio of EBITDA to interest
expense(2)...................... 0.60x 1.98x 3.11x 3.19x 2.42x 2.33x 2.50x
Ratio of earnings to fixed
charges(3)...................... --(4) 1.21x 1.86x 2.11x 1.30x 1.29x 1.21x
Pro forma ratio of earnings to
fixed charges(5)................ N/A N/A N/A N/A 1.27x 1.25x 1.19x
</TABLE>
9
<PAGE> 14
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED DECEMBER 31, ENDED SEPTEMBER 30,
--------------------------------------------------------- -------------------
1993 1994 1995 1996 1997 1997 1998
--------- --------- --------- --------- --------- -------- --------
(DOLLARS IN THOUSANDS, EXCEPT RATIOS AND OPERATING DATA) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Total block hours flown(6)........ 7,907 19,049 33,265 59,445 75,254 52,921 51,142
Revenue per block hour............ $ 5,219 $ 5,406 $ 5,149 $ 5,310 $ 5,329 $ 5,294 $ 5,412
EBITDA per block hour(2).......... $ 771 $ 1,121 $ 1,728 $ 1,911 $ 1,696 $ 1,636 $ 2,537
Average aircraft operated(7)...... 2.1 5.2 7.7 14.7 19.5 19.1 18.2
Total aircraft (at end of
period)......................... 3 6 10 17 17 22 21
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30,
1998
-------------
<S> <C>
(IN
THOUSANDS)
<CAPTION>
(UNAUDITED)
<S> <C>
BALANCE SHEET DATA:
Cash, cash equivalents and short-term investments........... $ 253,351
Net property and equipment.................................. 1,310,781
Total assets................................................ 1,656,330
Total debt(8)............................................... 991,951
Deferred aircraft obligations............................... 269,206
Stockholders' equity........................................ 264,887
</TABLE>
- ---------------
(1) In May 1997, we recognized an extraordinary gain, net of applicable taxes of
$9,622, as a result of the extinguishment of a portion of our 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 our operating performance or liquidity. We believe that
EBITDA may provide additional information about our ability to meet our
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 our
EBITDA.
(3) In calculating the ratio of earnings to fixed charges, earnings consists 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 us 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) In calculating the pro forma ratio of earnings to fixed charges, the pro
forma redemption of our outstanding 12 1/4% Pass Through Certificates due
2002 and the offering of Old Notes are taken into account.
(6) 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.
(7) 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.
(8) The EETCs (as defined) issued in our recent EETC financing are not direct
obligations of, or guaranteed by, us and therefore are not included in our
consolidated financial statements. We entered into leveraged lease
transactions with respect to four of the five 747-400 aircraft delivered in
1998. We took ownership of one such aircraft and the corresponding EETCs
reverted to a direct obligation of the Company. See "Description of Certain
Indebtedness -- Enhanced Equipment Trust Certificates."
10
<PAGE> 15
RISK FACTORS
You should consider the following risk factors, as well as the other
information contained in this Prospectus, before making a decision to exchange
your Old Notes for New Notes in this Exchange Offer.
CONSEQUENCES OF FAILURE TO EXCHANGE
If you do not exchange your Old Notes for New Notes pursuant to the
Exchange Offer, you will continue to be subject to the restrictions on transfer
of such Old Notes, as set forth in the legend thereon, as a consequence of the
issuance of the Old Notes pursuant to exemptions from, or in transactions not
subject to, the registration requirements of the Securities Act and applicable
state securities laws. In general, the Old Notes may not be offered or sold,
unless registered under the Securities Act, except pursuant to an exemption
from, or in a transaction not subject to, the Securities Act and applicable
state securities laws. We do not currently anticipate that we will register the
Old Notes under the Securities Act. Based on interpretations by the staff of the
Commission set forth in no-action letters issued to third parties, we believe
that the New Notes issued to you pursuant to the Exchange Offer in exchange for
Old Notes may be offered for resale, resold or otherwise transferred by any
holder thereof (other than any such holder which is an "affiliate" of our
company within the meaning of Rule 405 under the Securities Act) without further
compliance with the registration and prospectus delivery provisions of the
Securities Act, provided that such New Notes are acquired in the ordinary course
of such holder's business and such holder is not participating, does not intend
to participate and has no arrangement or understanding with any person to
participate in the distribution of such New Notes. Each broker-dealer that
receives New Notes for its own account pursuant to the Exchange Offer must
acknowledge that it will deliver a prospectus in connection with any resale of
such New Notes. The Letter of Transmittal states that by so acknowledging and by
delivering a prospectus, a broker-dealer will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act. This Prospectus, as
it may be amended or supplemented from time to time, may be used by a
broker-dealer in connection with any resale of New Notes received in exchange
for Old Notes where such Old Notes were acquired by such broker-dealer as a
result of market-making activities or other trading activities (other than Old
Notes acquired directly from the Company). We have agreed that, for a period of
180 days following the consummation of the Exchange Offer, we will make this
Prospectus available to any broker-dealer for use in connection with any such
resale. However, your ability to resell the New Notes is subject to applicable
state securities laws. To the extent that Old Notes are tendered and accepted in
the Exchange Offer, the trading market, if any, for the Old Notes not so
tendered could be adversely affected. See "The Exchange Offer" and "Plan of
Distribution."
FAILURE TO COMPLY WITH EXCHANGE OFFER PROCEDURES
To participate in the Exchange Offer and avoid the restrictions on transfer
of the Old Notes, you must transmit a properly completed Letter of Transmittal,
including all other documents required by such Letter of Transmittal, to the
Exchange Agent at one of the addresses set forth below under "The Exchange
Offer -- Exchange Agent" on or prior to the Expiration Date. In addition,
either:
(i) certificates for such Old Notes must be received by the Exchange
Agent along with the Letter of Transmittal; or
(ii) a timely confirmation of a book-entry transfer of such Old Notes,
if such procedure is available, into the Exchange Agent's account at the
Book-Entry Transfer Facility pursuant to the procedure for book-entry
transfer described herein, must be received by the Exchange Agent prior to
the Expiration Date; or
(iii) the holder must comply with the guaranteed delivery procedures
described herein and in the Letter of Transmittal.
The method of delivery of the Old Notes and the Letter of Transmittal and all
other required documents to the Exchange Agent is at your election and risk. See
"The Exchange Offer."
11
<PAGE> 16
SUBSTANTIAL LEVERAGE; ABILITY TO SERVICE DEBT
We are highly leveraged. After giving pro forma effect to the offering of
the Old Notes and the application of the proceeds thereof, as of September 30,
1998, our total indebtedness outstanding would have been approximately $678.6
million and our subsidiaries would have had approximately $363.4 million of
liabilities outstanding.
Our high degree of leverage could have important consequences to holders of
the Notes, including the following:
- our ability to obtain additional financing for working capital, capital
expenditures, acquisitions or general corporate purposes may be
diminished in the future;
- a substantial portion of our cash flow from operations will be required
for the payment of principal and interest on our indebtedness, thereby
reducing the funds available to us for our operations and other purposes;
- we may be substantially more leveraged than some of our competitors,
which may place us at a competitive disadvantage;
- our substantial degree of leverage may hinder our ability to adjust
rapidly to changing market conditions and could make us more vulnerable
in the event of a downturn in our business or general economic
conditions; and
- substantially all of our other indebtedness will become due prior to the
time the principal payment on the Notes will become due.
Our ability to make scheduled payments of the principal of, or to pay
interest on, or to refinance, our indebtedness (including the Notes) and to make
scheduled payments under our lease obligations depends on our future
performance, which to a certain extent is subject to economic, financial,
competitive and other factors beyond our control. There can be no assurance,
however, that our business will continue to generate sufficient cash flow from
operations in the future to service our debt. If unable to do so, we may be
required to refinance all or a portion of our existing debt, including the
Notes, to sell assets or to obtain additional financing. There can be no
assurance that any such refinancing or that any such sale of assets or
additional financing would be possible on reasonably favorable terms.
AVAILABILITY OF 747-400 AIRCRAFT FINANCING; DELIVERY DELAYS
On June 9, 1997, we 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 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,
we completed an offering of $538.9 million of enhanced equipment trust
certificates (the "EETCs"), the proceeds of which were used to finance a portion
of the acquisition cost of the first five 747-400 aircraft which were delivered
during the period July 1998 through December 1998. While we currently anticipate
that we will be able to obtain the necessary financing on a timely basis to pay
the total purchase price for the remaining 747-400 freighter aircraft to be
acquired, there can be no assurance that we 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 (the state in which our 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 our future aircraft
financing arrangements. If we are unable to obtain sufficient financing, we
could be required to modify our 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, some of the 1998 delivery positions
of the 747-400 aircraft were delayed. We were compensated for these delays. In
addition, Boeing has agreed to compensate us for future delays, if any, in
deliveries of the 747-400 aircraft pursuant to the Boeing Purchase Agreement.
Any delays in
12
<PAGE> 17
future deliveries of the 747-400 aircraft could adversely impact our ability to
initiate service with existing and prospective customers in a timely fashion.
RESTRICTIONS IMPOSED BY TERMS OF THE COMPANY'S INDEBTEDNESS; EFFECTIVE
SUBORDINATION OF THE NOTES TO SECURED INDEBTEDNESS
The Indenture governing the Notes limits our ability to undertake certain
transactions. The Indenture restricts our ability to:
- incur additional indebtedness;
- incur liens, pay dividends or make other restricted payments;
- consummate asset sales;
- enter into certain transactions with affiliates;
- impose restrictions on the ability of a subsidiary to pay dividends or
make certain payments to us;
- merge or consolidate with any other person; or
- sell, assign, transfer, lease, convey or otherwise dispose of all or
substantially all of our assets.
In addition, certain of our other debt instruments contain other more
restrictive financial and operating covenants. See "Description of Certain
Indebtedness" and "Description of Notes -- Certain Covenants." Our ability to
meet such financial ratios and tests may be affected by events beyond our
control. There can be no assurance that we will meet such tests. A breach of any
of these covenants could result in a default under certain debt instruments
and/or the Indenture. Upon the occurrence of an event of default under the
various debt instruments, the lenders thereunder could elect to declare all
amounts outstanding thereunder, together with accrued interest, to be
immediately due and payable. If we are unable to repay those amounts, such
lenders could proceed against the collateral granted to them to secure that
indebtedness. If such lenders accelerate the payment of such indebtedness, there
can be no assurance that our assets would be sufficient to repay in full such
indebtedness and our other indebtedness, including the Notes.
The Notes are unsecured and thus will be effectively subordinated in right
of payment to any of our secured indebtedness to the extent of the value of any
assets securing such indebtedness. Substantially all of our existing
indebtedness, other than the 10 3/4% Senior Notes and the 9 1/4% Senior Notes
(each as defined), is secured by liens on substantially all of our fixed assets.
As of September 30, 1998, on a pro forma basis after giving effect to the
offering of the Old Notes and the application of the proceeds thereof, we would
have had approximately $202.6 million of secured indebtedness outstanding and
our subsidiaries would have had approximately $363.4 million of liabilities
outstanding, substantially all of which represented secured indebtedness and
accrued interest thereon. In bankruptcy, the holder of a security interest with
respect to any of our assets will be entitled to have the proceeds of such
assets applied to the payment of such holder's claim before the remaining
proceeds, if any, are applied to the claims of the holders of the Notes. In
addition to our outstanding indebtedness on the date of original issuance of the
Notes, the Indenture permits us and our Subsidiaries (as defined) to incur
additional secured indebtedness under certain circumstances. See "Description of
Notes -- Certain Covenants -- Limitation on Incurrence of Additional
Indebtedness."
COMPETITION
The market for air cargo services is highly competitive. A number of
airlines, including Lufthansa Cargo AG, currently provide services for
themselves and for others, similar to the services we offer and new airlines may
be formed that would also compete with us. Such airlines may have substantially
greater financial resources than we do. In addition, certain retail air freight
companies, such as Evergreen International and Kitty Hawk, compete with us on a
limited, indirect basis, generally outside of the ACMI Contract operating
structure. We believe that the most important elements 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. Our ability to achieve our strategic plan depends upon our 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 upon our ability to
13
<PAGE> 18
continue 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.
DEPENDENCE ON SIGNIFICANT CUSTOMERS; GEOGRAPHIC CONCENTRATION
In 1998, China Airlines, LAS and Fast Air accounted for approximately 33%,
10% and 9%, respectively, of our total operating revenues. We believe that our
relationships with our customers are mutually satisfactory, as evidenced by the
fact that we have renewed and, in certain cases, added a significant number of
ACMI Contracts with our existing customers. However, there can be no assurance
that any of our ACMI Contracts will be renewed upon their expiration. The
scheduled termination dates for the current ACMI Contracts range from 1999 to
2003. See "Business -- ACMI Contracts." The failure to renew any of our ACMI
Contracts, or the renewal of any of our ACMI Contracts on less favorable terms,
could have a material adverse effect on the Company. Additionally, we have
concentrated a significant percentage of our 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 our ability to provide
service to our Asian and Pacific Rim destinations and could have a material
adverse effect on the Company. We have not experienced any adverse impact on our
business as a result of the current economic and political turmoil in Asia;
however, there can be no assurance that continuation of the economic and
political turmoil in Asia will not have an adverse impact on air cargo market
growth generally, which could adversely affect our ability to obtain new ACMI
Contracts or to renew existing ACMI Contracts.
OPERATIONS DEPENDENT UPON LIMITED FLEET
Each of our aircraft is typically dedicated to the service of one or more
ACMI Contracts. Although we typically utilize spare aircraft, in the event one
or more of our aircraft were to be lost or out of service for an extended period
of time, we may have difficulty fulfilling our obligations under one or more of
our ACMI Contracts. While we believe that our 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, we could
contract for the services of such an aircraft without undertaking substantial
costs. While we carry aircraft hull physical damage and third party liability
insurance, any extended interruption of our operations due to the loss of an
aircraft could have a material adverse effect on the Company.
UTILIZATION OF FUTURE AIRCRAFT
We have not yet obtained long-term ACMI Contracts to be serviced by the
five 747-400 aircraft scheduled to be delivered in 1999 and 2000. See
"-- Availability of 747-400 Aircraft Financing; Delivery Delays." 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 our fleet, could have a material adverse
effect on the Company. See "Business -- Aircraft."
AGING AIRCRAFT
Our fleet currently includes 23 Boeing 747-200 aircraft in service, all of
which were manufactured between 1974 and 1986. Manufacturer Service Bulletins
and the Federal Aviation Administration's ("FAA") Airworthiness 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
which have been converted into Directives by the FAA. Nine of our Boeing 747-200
aircraft will have to be brought into compliance with such Directives by March
2000 at an estimated aggregate cost of approximately $4.5 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 our 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.
14
<PAGE> 19
EMPLOYEE RELATIONS
We believe we operate with lower incremental personnel costs than many
established international airlines and cargo carriers, principally due to the
flexibility and high productivity of our workforce, arising in part as a result
of our emphasis on providing financial incentives to our personnel that are
focused on our financial performance rather than on base wages. Our employees
are not currently subject to a collective bargaining agreement; however, many
airline industry employees are subject to such agreements and our employees have
been solicited from time to time by union representatives seeking to organize
them. The most recent solicitation having resulted in our pilots rejecting
representation by the Air Line Pilots Association ("ALPA") on January 27, 1998.
On February 2, 1999, we were notified by the National Mediation Board ("NMB")
that an application has been filed by the International Brotherhood of Teamsters
("IBT") and ALPA requesting authority to ballot Atlas' crew members to determine
if they wish to be represented by a third party. The filing of this application
requires the NMB to verify the authenticity of the union authorization cards
presented by both IBT and ALPA to determine if a representation election should
take place. There can be no assurance that our employees will not become subject
to a collective bargaining agreement and the extent to which, if any, such
collective bargaining agreement may adversely impact our operations or cost
structure.
REGULATORY MATTERS
Under the Federal Aviation Act of 1958, as amended and recodified at 49
U.S.C. Subtitle VII (the "Aviation Act"), the Department of Transportation
("DOT") and the FAA exercise regulatory authority over the Company. We have
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 our continued compliance 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. FAA
approval is required for each of our long-term ACMI Contracts and DOT approval
is required for each of our long-term ACMI Contracts with foreign air carriers.
In addition, FAA approval is required for each of our short-term seasonal ACMI
Contracts. In order to provide service to foreign points, we 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 us when their cargo includes
hazardous materials. Although we have never had such an incident, the
transportation of unmanifested hazardous materials could result in fines,
penalties, banning hazardous materials from our aircraft for a period of time,
possible damage to our aircraft or other liability. On December 3, 1998, the FAA
issued a Directive ordering Boeing 747 operators to change fuel pump procedures
immediately to prevent dry operation that could result in ignition of the center
fuel or horizontal stabilizer tanks. Compliance with this Directive may
adversely impact our customers' operating costs and schedules.
CONTROL BY PRINCIPAL STOCKHOLDER
As of December 31, 1998 Michael A. Chowdry, the founder, Chief Executive
Officer, President and Chairman of the Board of Directors of the Company,
beneficially owned approximately 59.2% of our outstanding common stock. As a
result, Mr. Chowdry is able to direct and control our policies, including the
election of directors, mergers, sales of assets and other such transactions.
DEPENDENCE UPON KEY MANAGEMENT PERSONNEL
We believe that our success in acquiring ACMI Contracts and managing our
operations will depend substantially upon the continued services of many of our
present executive officers. The loss of the services of any of such persons
could have a material adverse effect on the Company. We have employment
agreements with such officers, which are generally terminable at any time by
either party.
15
<PAGE> 20
SEASONALITY OF CUSTOMERS' CARGO OPERATIONS
The cargo operations of our 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, our revenues
typically decline in the first quarter of the year as our minimum contractual
aircraft utilization level temporarily decreases. Our ACMI Contracts typically
allow our customers to cancel a maximum of 5% of the guaranteed hours of
aircraft utilization over the course of a year. Our 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."
CHANGE OF CONTROL
Upon a Change of Control, we are required to offer to repurchase all
outstanding Notes at 101% of the principal amount thereof plus accrued interest
to the date of repurchase. The source of funds for any such repurchase would be
our available cash or cash generated from other sources. However, there can be
no assurance that sufficient funds would be available at the time of any Change
of Control to make any required repurchases of Notes tendered or, if applicable,
that restrictions in certain of our debt instruments would permit us to make
such required repurchases. See "Description of Certain Indebtedness," and
"Description of Notes -- Change of Control."
ABSENCE OF PUBLIC MARKET FOR THE NEW NOTES
There has previously been only a limited secondary market, and no public
market, for the Old Notes. The New Notes are a new issue of securities, have no
established trading market, and may not be widely distributed. We do not intend
to list the New Notes on any national securities exchange or to seek the
admission thereof to trading on any automated quotation system. No assurance can
be given that an active public or other market will develop for the New Notes or
as to the liquidity of or the trading market for the New Notes. If a trading
market does not develop or is not maintained, you may experience difficulty in
reselling the New Notes or may be unable to sell them at all. If a market for
the New Notes develops, any such market may be discontinued at any time. If a
public trading market develops for the New Notes, future trading prices of the
New Notes will depend on many factors, including, among other things:
- prevailing interest rates;
- our results of operations; and
- the market for similar securities.
Additionally, the price at which you will be able to sell such New Notes is not
assured and the New Notes could trade at a premium or discount to their purchase
price or face value. Depending on prevailing interest rates, the market for
similar securities and other factors, including our financial condition, the New
Notes may trade at a discount from their principal amount. We have been advised
by the Initial Purchaser that it intends to make a market for the New Notes;
however, the Initial Purchaser is not obligated to do so, and we do not
currently intend to list the New Notes on any securities exchange. Any
market-making may be discontinued at any time, and there is no assurance that an
active public market for the New Notes will develop or, that if such a market
develops, that it will continue. This Prospectus may be used by the Initial
Purchaser in connection with offers and sales of the New Notes it makes from
time to time in market-making transactions at negotiated prices relating to
prevailing market prices at the time of sale. The Initial Purchaser may act as
principal or agent in such transaction.
16
<PAGE> 21
CAPITALIZATION
The following table sets forth our capitalization at September 30, 1998 (i)
on an actual basis, and (ii) as adjusted for the offering of the Old Notes and
the application of the proceeds therefrom. The information below is unaudited
and should be read in conjunction with our consolidated financial statements,
including the notes thereto, incorporated herein.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1998
-------------------------
ACTUAL AS ADJUSTED
---------- -----------
(IN THOUSANDS)
<S> <C> <C>
Cash, cash equivalents and short-term investments........... $ 253,351 $ 290,351
========== ==========
Current portion of long-term debt........................... $ 56,261 $ 56,261
========== ==========
Long-term debt, net of current portion:
Aircraft Credit Facility............................... $ 113,204 $ 113,204
AFL Term Loan Facility................................. 151,700 151,700
AFL II Term Loan Facility.............................. 151,700 151,700
Equipment Notes(1)..................................... 100,000 --
Other secured aircraft indebtedness.................... 94,311 94,311
Senior Notes due 2005.................................. 150,000 150,000
Senior Notes due 2008.................................. 174,775 174,775
Senior Notes due 2006.................................. -- 150,000
---------- ----------
Total long-term debt, net of current
portion(2)(3)................................... 935,690 985,690
---------- ----------
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; 22,521,659 shares issued.................. 225 225
Additional paid-in capital............................. 177,448 177,448
Retained earnings...................................... 90,942 84,230
Treasury stock, at cost; 115,218 shares................ (3,728) (3,728)
---------- ----------
Total stockholders' equity........................ 264,887 258,175(4)
---------- ----------
Total capitalization......................... $1,200,577 $1,243,865
========== ==========
</TABLE>
- ---------------
(1) The Equipment Notes underlying the 12 1/4% Pass Through Certificates due
2002 were redeemed on January 19, 1999.
(2) The EETCs issued in our recent EETC financing are not direct obligations of,
or guaranteed by, us and therefore are not included in our consolidated
financial statements. We entered into leveraged lease transactions with
respect to four of the five 747-400 aircraft delivered in 1998. We took
ownership of one such aircraft and the corresponding EETCs reverted to a
direct obligation of the Company. See "Description of Certain
Indebtedness -- Enhanced Equipment Trust Certificates."
(3) Total long-term debt does not reflect other liabilities, which includes
deferred aircraft obligations.
(4) Reflects extraordinary loss of approximately $6.7 million relating to the
redemption of the 12 1/4% Pass Through Certificates due 2002. This loss
consists of an $8.0 million premium payment and the write-off of $2.6
million of unamortized loan fees associated with the original financing of
the 12 1/4% Pass Through Certificates due 2002, net of applicable taxes of
$3.9 million.
17
<PAGE> 22
SELECTED FINANCIAL AND OPERATING DATA
The selected financial data presented below have been derived from our
consolidated financial statements. The data for the years ended December 31,
1993, 1994, 1995, 1996 and 1997 were derived from our audited consolidated
financial statements and related notes, and other financial information
incorporated herein. The data for the nine months ended September 30, 1997 and
1998 were derived from our unaudited consolidated financial statements, which,
in the opinion of management, include all adjustments (consisting only of normal
recurring adjustments) necessary for a fair presentation of the information set
forth herein. The results of operations for the interim periods presented are
not indicative of the results that may be expected for the full year.
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED DECEMBER 31, ENDED SEPTEMBER 30,
---------------------------------------------------- -------------------
1993 1994 1995 1996 1997 1997 1998
-------- -------- -------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS, EXCEPT RATIOS AND OPERATING DATA)
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Total operating revenues..... $ 41,263 $102,979 $171,267 $315,659 $401,041 $280,148 $276,773
Operating expenses:
Flight crew salaries and
benefits................. 4,243 8,887 14,584 25,020 30,153 21,437 24,110
Other flight-related
expenses................. 7,844 9,270 12,361 27,404 28,784 20,546 21,093
Maintenance................ 8,052 24,517 42,574 84,305 123,820 88,470 65,385
Aircraft and engine
rentals.................. 1,758 14,044 22,902 27,341 31,644 23,279 6,163
Fuel and ground handling... 4,575 9,747 5,027 10,554 10,816 9,024 6,317
Depreciation and
amortization............. 5,647 7,451 14,793 25,515 42,945 30,183 40,837
Other...................... 8,698 15,169 16,352 27,457 49,777 31,888 24,091
Write-off of capital
investment and other..... -- -- -- -- 27,100 27,100 --
-------- -------- -------- -------- -------- -------- --------
Total operating expenses..... 40,817 89,085 128,593 227,596 345,039 251,927 187,996
-------- -------- -------- -------- -------- -------- --------
Operating income............. 446 13,894 42,674 88,063 56,002 28,221 88,777
Other income (expense):
Interest income............ 244 490 2,025 7,102 7,365 5,161 7,821
Interest expense........... (10,101) (10,784) (18,460) (35,577) (52,834) (37,246) (51,892)
-------- -------- -------- -------- -------- -------- --------
Total other income
(expense).................. (9,857) (10,294) (16,435) (28,475) (45,469) (32,085) (44,071)
-------- -------- -------- -------- -------- -------- --------
Income (loss) before income
taxes...................... (9,411) 3,600 26,239 59,588 10,533 (3,864) 44,706
Income tax benefit
(expense).................. 1,388 (14) (8,408) (21,750) (3,844) 1,411 (16,546)
-------- -------- -------- -------- -------- -------- --------
Income (loss) before
extraordinary item......... (8,023) 3,586 17,831 37,838 6,689 (2,453) 28,160
Extraordinary item: Gain from
extinguishment of debt, net
of applicable taxes of
$9,622(1).................. -- -- -- -- 16,740 16,740 --
-------- -------- -------- -------- -------- -------- --------
Net income (loss)............ $ (8,023) $ 3,586 $ 17,831 $ 37,838 $ 23,429 $ 14,287 $ 28,160
======== ======== ======== ======== ======== ======== ========
OTHER DATA:
EBITDA(2).................... $ 6,093 $ 21,345 $ 57,467 $113,578 $127,608 $ 86,604 $129,761
Ratio of EBITDA to interest
expense(2)................. 0.60x 1.98x 3.11x 3.19x 2.42x 2.33x 2.50x
Ratio of earnings to fixed
charges(3)................. --(4) 1.21x 1.86x 2.11x 1.30x 1.29x 1.21x
Pro forma ratio of earnings
to fixed charges(5)........ N/A N/A N/A N/A 1.27x 1.25x 1.19x
OPERATING DATA:
Total block hours flown(6)... 7,907 19,049 33,265 59,445 75,254 52,921 51,142
Revenue per block hour....... $ 5,219 $ 5,406 $ 5,149 $ 5,310 $ 5,329 $ 5,294 $ 5,412
EBITDA per block hour(2)..... $ 771 $ 1,121 $ 1,728 $ 1,911 $ 1,696 $ 1,636 $ 2,537
Average aircraft
operated(7)................ 2.1 5.2 7.7 14.7 19.5 19.1 18.2
Total aircraft (at end of
period).................... 3 6 10 17 17 22 21
</TABLE>
18
<PAGE> 23
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
------------------------------------------------------ -------------
1993 1994 1995 1996 1997 1998
-------- -------- -------- -------- ---------- -------------
(IN THOUSANDS)
(UNAUDITED)
<S> <C> <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 $ 253,351
Net property and equipment......... 114,255 131,237 319,751 584,270 1,063,210 1,310,781
Total assets....................... 125,005 162,731 447,323 773,707 1,297,415 1,656,330
Total debt(8)...................... 130,690 163,615 351,261 484,429 776,075 991,951
Other liabilities.................. -- -- -- -- 163,167 269,206
Stockholders' equity (deficit)..... (19,339) (15,753) 68,715 215,785 238,829 264,887
</TABLE>
- ---------------
(1) In May 1997, we recognized an extraordinary gain, net of applicable taxes of
$9,622, as a result of the extinguishment of a portion of our 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 our operating performance or liquidity. We believe that
EBITDA may provide additional information about our ability to meet our
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 our
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 us 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) In calculating the pro forma ratio of earnings to fixed charges, the pro
forma redemption of our outstanding 12 1/4% Pass Through Certificates due
2002 and the offering of Old Notes are taken into account.
(6) 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.
(7) 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.
(8) The EETCs issued in our recent EETC financing are not direct obligations of,
or guaranteed by, us and therefore are not included in our consolidated
financial statements. We entered into leveraged lease transactions with
respect to four of the five 747-400 aircraft delivered in 1998. We took
ownership of one such aircraft and the corresponding EETCs reverted to a
direct obligation of the Company. See "Description of Certain
Indebtedness -- Enhanced Equipment Trust Certificates."
19
<PAGE> 24
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The cargo operations of our 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 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
us, and are expected to continue to do so in the future. As a result, our
revenues typically decline in the first quarter of the year as our contractual
aircraft utilization level temporarily decreases. We seek to schedule, to the
extent possible, our 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 our December 31, 1997 Consolidated Financial Statements.
The timing of when an aircraft enters our fleet can affect not only annual
performance, but can make quarterly results vary, thereby affecting the
comparability of operations from period to period. In addition, the number of
aircraft utilized from period to period as spare or maintenance back-up aircraft
may also cause quarterly results to vary.
The tables below set forth selected financial and operating data for the
first, second and third quarters of 1998 and the four quarters of the years
ended December 31, 1997, 1996 and 1995 (dollars in thousands).
<TABLE>
<CAPTION>
1998
----------------------------------------------
3RD 2ND 1ST
CUMULATIVE QUARTER QUARTER QUARTER
---------- -------- -------- --------
<S> <C> <C> <C> <C>
Total operating revenues....................... $276,773 $109,189 $ 87,950 $ 79,634
Operating expenses............................. 187,996 73,473 56,432 58,091
Operating income............................... 88,777 35,716 31,518 21,543
Other income (expense)......................... (44,071) (15,478) (15,479) (13,114)
Net income..................................... 28,160 12,745 10,105 5,310
Block hours.................................... 51,142 18,926 16,828 15,388
Average aircraft operated...................... 18.2 19.9 17.7 17.0
Operating margin............................... 32.1% 32.7% 35.8% 27.1%
</TABLE>
<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 income (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 income (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>
20
<PAGE> 25
<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 income (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>
Three Months and Nine Months Ended September 30, 1998 Compared to Three Months
and Nine Months Ended September 30, 1997
Operating Revenues and Results of Operations. Total operating revenues for
the quarter ended September 30, 1998 increased to $109.2 million from $104.2
million for the same period in 1997, or approximately 5%. There was a decline in
the average number of aircraft in our fleet during the third quarter of 1998, to
19.9 aircraft compared to 20.4 during the same period in 1997, or a decrease of
approximately 2%. Total block hours for the third quarter of 1998 were 18,926
compared to 19,937 for the same period in 1997, a decrease of approximately 5%,
reflecting a slightly lower utilization per average aircraft period over period
as a result of a greater requirement for spare maintenance back-up aircraft, and
the reduction in average aircraft operated. Revenue per block hour increased by
approximately 10% to $5,769 for the third quarter of 1998 compared to $5,226 for
the third quarter of 1997. This was substantially due to: the increase in the
volume of charter operations period over period, due partially to the operation
of the first two 747-400 deliveries under non-scheduled service during the
period of their FAA-required proving runs prior to their entry into scheduled
service, for which the rate per block hour is higher due to additional operating
costs borne by us under such arrangements; the introduction into service of the
first two 747-400 freighter aircraft, which operate on a higher block hour rate
than the 747-200 freighter aircraft; and delayed delivery credits provided to us
with respect to the late delivery of the first and second 747-400 freighter
aircraft, pursuant to the Boeing Purchase Agreement. Charter operations are
performed on an ad hoc basis and are generally dependent upon excess
availability of our aircraft and customer demand.
Our operating results improved by 64% from a $21.7 million operating profit
for the third quarter of 1997 to an operating profit of $35.7 million for the
third quarter of 1998. Results of operations were favorably impacted by lower
maintenance costs due to the return upon lease termination at the beginning of
1998 of the five aircraft which we leased from FedEx (the "FedEx Aircraft"). The
FedEx Aircraft experienced significantly higher maintenance costs and were less
reliable compared to the other aircraft in our fleet. In addition, operating
results improved due to the increase in the percentage of owned aircraft
compared to leased aircraft in our fleet period over period. Net income of $6.2
million for the third quarter of 1997 increased by 105% to a net income of $12.7
million for the third quarter of 1998.
Total operating revenues for the nine months ended September 30, 1998
decreased to $276.8 million from $280.1 million for the same period in 1997, or
approximately 1%. There was a decline in the average number of aircraft in our
fleet during the first nine months of 1998, to 18.2 aircraft compared to 19.1
during the same period in 1997, a decrease of approximately 5%. Total block
hours for the first nine months of 1998 were 51,142 compared to 52,921 for the
same period in 1997, a decrease of approximately 3%, reflecting a slightly
higher utilization per average aircraft period over period. Revenue per block
hour increased by approximately 2% to $5,412 for the first nine months of 1998
compared to $5,294 for the same period in 1997. This was substantially due to
the increase in the volume of charter operations period over period, the
introduction of the 747-400 freighter aircraft and the delayed delivery credits,
as discussed above.
Our operating results improved by approximately 215% from a $28.2 million
operating profit for the first nine months of 1997 to an operating profit of
$88.8 million for the first nine months of 1998. Results of operations were
favorably impacted by lower maintenance costs and the increase in the percentage
of owned
21
<PAGE> 26
aircraft, as discussed above. Net income of $14.3 million for the first nine
months of 1997 increased by 97% to a net income of $28.2 million for the first
nine months of 1998. See "-- 1997 Compared to 1996."
Operating Expenses. Our 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 other expenses.
Flight crew salaries and benefits include all such expenses for our pilot
work force. Flight crew salaries and benefits increased to $9.7 million in the
third quarter of 1998 compared to $7.5 million in the same period of 1997, or
approximately 29%, due primarily to increased staffing associated with overall
operational requirements and the introduction of the 747-400 freighter aircraft
into our fleet in the second half of 1998. The expense increased approximately
12% from $21.4 million to $24.1 million during the first nine months of 1998
compared to the year-earlier period. Expense in both the third quarter of 1998
and the first nine months of 1998 was partially offset by a reduction in block
hours period over period. On a block hour basis, expense increased by
approximately 36% to $511 per hour for the third quarter of 1998 from $376 per
hour for the same period in 1997, and by approximately 16% to $471 per hour for
the first nine months of 1998 from $405 per hour for the year-earlier period.
Other flight-related expenses include hull and liability insurance on our
fleet of Boeing 747 aircraft, crew travel and meal expenses, initial and
recurrent crew training costs and other expenses necessary to conduct our flight
operations.
Other flight-related expenses increased to $9.1 million in the third
quarter of 1998 compared to $6.8 million for the same period of 1997, and to
$21.1 million for the first nine months of 1998 compared to $20.5 million for
the year-earlier period, or approximately 34% and 3%, respectively. These
increases were primarily due to the quarter over quarter increase in crew travel
costs associated with operational requirements and with the introduction of the
747-400 freighter aircraft into our fleet, partially offset by the decrease in
block hours. On a block hour basis, other flight-related expenses increased by
approximately 41% to $482 per hour for the third quarter of 1998 compared to
$342 per hour for the same period in 1997, and by approximately 6% to $412 per
hour for the first nine months of 1998 compared to $388 per hour for the same
period in 1997.
Maintenance expenses include all expenses related to the upkeep of the
aircraft, including maintenance, labor, parts, supplies and maintenance
reserves. The costs of C Check (as defined), D Check (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 we contracted with KLM for a significant part of our regular
maintenance operations and support on a fixed cost per flight hour basis.
Effective October 1996, certain additional 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. In the first half of 1998, we
entered into separate long-term contracts with Lufthansa Technik
Aktiengesellschaft for the airframe maintenance and with GE for the engine
maintenance of the 747-400 freighter aircraft, in conjunction with the
introduction of the 747-400 freighter aircraft into our fleet in the second half
of 1998.
Maintenance expense decreased to $23.9 million in the third quarter of 1998
from $33.5 million in the same period of 1997, and to $65.4 million in the nine
months ended September 30, 1998 from $88.5 million in the nine months ended
September 30, 1997, or approximately 29% and 26%, respectively. These decreases
were primarily due to the return of the FedEx Aircraft upon lease termination at
the beginning of the first quarter of 1998. On a block hour basis, maintenance
expense decreased by approximately 25% and 24%, respectively, primarily due to
higher maintenance costs associated with the FedEx Aircraft in the 1997 periods
compared to the other aircraft in our fleet.
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 our aircraft for either scheduled or unscheduled
maintenance and any related short-term replacement aircraft lease costs.
Aircraft and engine rentals were $4.0 million in the third quarter of 1998
compared to $7.8 million in the same period of 1997, and were $6.2 million in
the first nine months of 1998 compared to $23.3 million in the first nine months
of 1997, or a decrease of approximately 49% and 74%, respectively. The
reductions in quarter
22
<PAGE> 27
and nine months expense in 1998 were attributed to the reduction in leased
aircraft in the 1998 periods compared to the 1997 periods. The cost of engine
rentals in the 1998 and 1997 quarterly and nine month periods was insignificant,
due to the use of owned spare engines.
Because of the nature of our ACMI Contracts with our airline customers,
under which we are responsible for the ownership cost and maintenance of the
aircraft and for supplying aircraft crews and insurance, our airline customers
bear all other operating expenses. As a result, we incur fuel and ground
handling expenses only when we operate on our own behalf, either in scheduled
services, for ad hoc charters or for ferry flights. Fuel expenses for our
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 our
aircraft at the various airports to which we operate.
Fuel and ground handling costs increased by approximately 35% to $2.6
million for the third quarter of 1998 from $1.9 million for the third quarter of
1997, and decreased by approximately 30% to $6.3 million for the first nine
months of 1998 from $9.0 million for the first nine months of 1997. The increase
quarter over quarter was primarily due to the increased charter operations and
the nine month decrease was primarily due to a reduction in scheduled service
compared to the same period in 1997.
Depreciation and amortization expense includes depreciation on aircraft,
spare parts and ground equipment, and the amortization of capitalized major
aircraft maintenance and engine overhauls.
Depreciation and amortization expense increased to $15.6 million in the
third quarter of 1998 from $11.0 million in the same period of 1997, and to
$40.8 million in the first nine months of 1998 from $30.2 million in the
year-earlier period, or approximately 42% and 35%, respectively. These increases
reflect the additional owned aircraft, engines and spare parts for the third
quarter and nine months of 1998 over the same periods in 1997.
Other operating expenses include salaries, wages, benefits, travel and meal
expenses for non-crewmembers and other miscellaneous operating costs.
Other operating expenses decreased to $8.7 million in the third quarter of
1998 from $14.0 million in the same period of 1997, and to $24.1 million for the
first nine months of 1998 from $31.9 million for the same period of 1997, or
approximately 38% and 24%, respectively. The reduced expense in cost from the
prior year, quarter and nine month periods was due primarily to the
capitalization of start-up costs in the second and third quarters of 1998
associated with the introduction of the 747-400 aircraft and manufacturer
credits, partially offset by increased staffing and other resources associated
with the expansion of our operations.
Other Income (Expense). Other income (expense) consists of interest income
and interest expense. Interest income increased to $3.2 million in the third
quarter of 1998 from $1.7 million in the same period of 1997, and to $7.8
million for the first nine months of 1998 from $5.2 million for the first nine
months of 1997, primarily due to the investment of proceeds from our issuance of
the 9 1/4% Senior Notes (as defined) in April 1998 and the return of deposits
and proceeds from financing the delivery of the first two 747-400 freighter
aircraft in the third quarter of 1998. Interest expense increased to $18.7
million in the third quarter of 1998 from $13.6 million in the same period of
1997, and to $51.9 million in the first nine months of 1998 from $37.2 million
in the year-earlier period, or approximately 38% and 39%, respectively. These
increases resulted from the financing associated with the acquisition of
additional 747-200 aircraft, the cost of freighter conversions between these
periods and the issuance of $175 million of the 9 1/4% Senior Notes in April
1998.
Income Taxes. Pursuant to the provisions of Statement of Financial
Accounting Standards ("SFAS") No. 109 "Accounting for Income Taxes," we have
recorded a tax provision based on tax rates in effect during the period.
Accordingly, we accrued taxes at the rate of 37.0% during the third quarter and
first nine months of 1998 and 36.5% during the third quarter and first nine
months of 1997. Due to the amount of owned assets, which are depreciated at an
accelerated rate for tax purposes, a significant portion of our tax provision
for the 1998 and 1997 periods is deferred.
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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 our 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 our fleet.
Revenue per block hour increased by approximately .4% to $5,329 for 1997
compared to $5,310 for 1996. Our 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 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, we placed in service the fifth FedEx aircraft in April 1997. In August
1997 and at the end of September 1997, we took delivery of a fifth and sixth
aircraft from Thai Airways, respectively, upon completion by Boeing of its
modification to cargo configuration. At the end of 1997, we 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.
Our 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 our customers. We 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, we recorded a largely non-cash charge of
$27.1 million to operating income. This charge included the write-off of our
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 our fleet. In addition, we 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.
One of our customers has disputed a portion of approximately $8.9 million
of ACMI billings and non-ACMI billings associated with maintenance support. We
believe that we have established adequate reserves with respect to this dispute.
Operating Expenses. 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 our 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 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.
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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
our 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 expense increased to $123.8 million in 1997 from $84.3 million
in 1996, or approximately 47%, partially due to the increase in our 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 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 0.5 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 in 1997.
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 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 increased to $49.8 million in 1997 from $27.5
million in 1996, or approximately 81%, reflecting the increase in our
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 our increased operations and to prepare for the
introduction of the 747-400 aircraft.
Other Income (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 SFAS No. 109 "Accounting for
Income Taxes," we have recorded a tax provision based on tax rates in effect
during the period. Accordingly, we 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 our 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 our 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 we must bear. Our operating
results improved from a $42.7 million operating profit for 1995 to an
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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, we placed in
service one aircraft upon completion of its cargo modification by Hong Kong
Aircraft Engineering Company. Two additional aircraft were re-delivered to us
upon completion of their modification by Boeing in March 1996. Finally, at the
close of the first quarter, we took delivery of the first aircraft sub-leased
from FedEx. During the third quarter of 1996, we placed in service the next
three aircraft sub-leased from FedEx. At the end of the third quarter we took
delivery of a Boeing 747-200 passenger aircraft acquired from 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.
Our 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 our customers. We 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.
Our 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
our 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 our 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 our 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 our fleet and higher ongoing maintenance costs. The aircraft
sub-leased from FedEx are not covered by our 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 our purchase of the
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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 our 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 our 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 block hour in
1996, or approximately 6%, reflecting a lower rate of growth in our overhead as
compared to our 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 in May 1996,
as well as funds retained from our initial public offering 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," we have recorded a tax provision based on tax rates in effect
during the period. Accordingly, we 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 our tax provision in 1996 and
1995 is deferred.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1998, we had cash and cash equivalents of approximately
$153.4 million, short-term investments of approximately $100.0 million and
working capital of approximately $170.9 million. During the first nine months of
1998, cash and cash equivalents increased approximately $112.0 million,
principally reflecting cash provided by operations of $75.0 million, net
proceeds from debt issuance and lease financing of $361.1 million, net proceeds
from the maturity and purchase of short-term investments of $11.6 million and
proceeds from the exercise of stock options of $1.2 million, partially offset by
investments in flight and other equipment of $260.6 million, principal
reductions of indebtedness of $66.9 million, debt issuance costs of $6.1 million
and net treasury stock purchases of $3.3 million. Our overall borrowing level
increased to $992.0 million at September 30, 1998 from $776.1 million at
December 31, 1997.
In June 1997, we entered into the Boeing Purchase Agreement 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. We have arranged
leveraged lease financing for four of the 747-400 freighter aircraft that were
delivered in July, August, October and December 1998. See "Description of
Certain Indebtedness -- Enhanced Equipment Trust Certificates." The Boeing
Purchase Agreement requires that we 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. Based on the current expected firm aircraft delivery schedule, we expect
the maximum total amount of pre-delivery deposits at any time outstanding will
be approximately $162.3 million, which was paid as of June 30, 1998. There were
approximately $143.1 million of pre-delivery deposits outstanding at September
30, 1998 which were included in flight equipment. For the remainder of 1998 ,we
paid $16.7 million and we expect to pay an additional $11.8 million, in 1999 in
pre-delivery deposits in accordance with the firm order pre-delivery deposits
schedule. Upon each delivery, Boeing will refund to us the pre-delivery deposits
associated with the delivered 747-400 freighter aircraft. Boeing delivered and
we placed into service the first five of these aircraft in the second half of
1998 and Boeing refunded the pre-delivery deposits associated with these
aircraft. In addition, the Boeing
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Purchase Agreement provides for a deferral of a portion of the pre-delivery
deposits (deferred aircraft obligations) for which we accrue and pay interest
quarterly at 6-month LIBOR, plus 2.0%. As of September 30, 1998, there was
$235.6 million of deferred aircraft obligations included in other liabilities,
and the combined interest rate was approximately 7.8%.
In January and February 1998, pursuant to an early lease termination
agreement negotiated in November 1997 with Philippine Airlines, we delivered to
Boeing for modification to cargo configuration the aircraft acquired from Marine
Midland Bank in December 1996 and the aircraft acquired from Citicorp Investor
Lease, Inc. in May 1997. The first aircraft was re-delivered to us at the end of
April 1998 and the second aircraft was re-delivered to us in July 1998. The
financing for the modification to cargo configuration was provided under the
Aircraft Credit Facility (as defined), under which we borrowed a total of $3.3
million during the first quarter of 1998 with respect to these aircraft. In
April 1998 and July 1998, we borrowed an additional $13.8 million and $17.2
million, respectively, to pay for the final costs of conversion for these two
aircraft.
In February 1998, we completed an offering of $538.9 million of EETCs. The
EETCs are not direct obligations of, or guaranteed by, us and therefore are not
included in our consolidated financial statements. In November and December
1997, we 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 cash proceeds from the
EETCs have been used, to finance (through four leveraged leases and one secured
debt financing) the acquisition of the first five new 747-400 freighter aircraft
from Boeing which were delivered to us during the period July 1998 through
December 1998. There can be no assurance that we will be able to obtain
sufficient financing to fund the purchase of the remaining 747-400 freighter
aircraft, or if such financing is available, that it will be available on a
commercially reasonable basis. If we are unable to do so, we could be required
to modify our expansion plans or to incur higher than anticipated financing
costs, which could have a material adverse effect on the Company. We have
arranged for equity participation for four of our 747-400 freighter aircraft
deliveries. We have determined that these leveraged leases are operating leases
as defined under SFAS No. 13 "Accounting for Leases" and lease credits are being
amortized over the lives of the respective leases, with unamortized credits
included in other liabilities.
In March 1998, we entered into a 10-year agreement with GE to provide all
repair and overhaul work on the engines related to both the 10 firm and 10
option 747-400 freighter aircraft. This agreement is based on a fixed cost per
flight hour, similar to our engine agreement with GE for its 747-200 fleet.
In April 1998, we completed the offering of $175 million of unsecured
9 1/4% Senior Notes at 99.867% due 2008 (the "9 1/4% Senior Notes"). The
proceeds of the offering are being used for general corporate purposes. See
"Description of Certain Indebtedness -- 9 1/4% Senior Notes."
In April 1998, we entered into a sublease and ramp use agreement with
American Airlines, Inc. for 145,000 square feet of hangar, office and parking
space at Miami International Airport ("MIA") in support of our increased
operations. The lease is for a period in excess of four years and commenced July
1, 1998, at a monthly rate of approximately $105,000, subject to an annual
escalation factor. Additionally, in the third quarter of 1998, we leased an
additional 8,000 square feet at its existing facility located at John F. Kennedy
International Airport ("JFK") with a monthly rate increase to approximately
$88,000.
In May 1998, we agreed to purchase a Boeing Business Jet ("BBJ") from
Boeing for approximately $30 million. At the end of January 1999, we took
delivery of the BBJ from Boeing and immediately delivered the aircraft to a
third party for installation of the interior business configuration. This
aircraft will be used to transport our executives on business trips throughout
the world. We intend to sell our current corporate aircraft (currently owned by
one of our subsidiaries), upon delivery of the BBJ from the third party, and our
Chief Executive Officer has agreed to share in the acquisition costs and capital
improvement costs of the BBJ.
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In June 1998, we entered into an agreement with Lufthansa Technik pursuant
to which Lufthansa Technik will provide all required airframe maintenance for
our initial order of 10 747-400 freighter aircraft, plus any additional 747-400
freighter aircraft we purchase pursuant to our option in the Boeing Purchase
Agreement, on a fixed cost per flight hour basis for 10 years, with a provision
for us to terminate the agreement as of June 2003.
In July 1998, we secured permanent financing in the amount of $38.9 million
from Banc One Leasing Corporation for one of the aircraft originally financed
under the Aircraft Credit Facility. The new financing carries a term of 10 years
at an annual interest rate of approximately 7.5% with quarterly debt service
payments.
In July 1998, we purchased a 747-200 freighter aircraft from Air France
Partnairs Leasing N.V. for which we financed approximately $31.3 million through
the Aircraft Credit Facility.
In September 1998, the commitment for the Aircraft Credit Facility was
decreased from $250.0 million to $200.0 million in connection with a revision of
terms that are more favorable to us, including a decrease in the interest rate
from LIBOR plus 2.5% to LIBOR plus 2.0%.
In September 1998, we entered into an agreement to acquire three 747-200
freighter aircraft from Cargolux for scheduled deliveries in the fourth quarter
of 1998, of which the first delivery occurred in October 1998, the second
delivery occurred in November 1998 and the third delivery occurred in December
1998. Upon delivery, we immediately placed these aircraft into service. We
financed these aircraft through the Aircraft Credit Facility for approximately
$31.0 million, $34.1 million and $30.1 million, respectively.
In November 1998, we completed the offering of $150 million of unsecured
9 3/8% Senior Notes due 2006 (i.e. the Old Notes). The proceeds of the offering
are being used for general corporate purposes, which includes the redemption of
the Company's outstanding 12 1/4% Pass Through Certificates due 2002. See
"Description of Certain Indentures -- 9 3/8% Senior Notes."
Due to the contractual nature of our business, our management does not
consider our 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 our customers, we do not incur significant costs in
advance of the receipt of corresponding revenues. Moreover, ACMI costs, which
are our responsibility, are generally incurred on a regular, periodic basis
ranging from flight hours to months. These costs are largely matched by revenue
receipts, as our contracts require regular payments from our customers, based
upon current flight activity, generally every two to four weeks. As a result, we
have not in the past had a requirement for a working capital facility.
Under the FAA's Directives issued under its "Aging Aircraft" program, we
are subject to extensive aircraft examinations and will be required to undertake
structural modifications to our fleet 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. Nine of
our Boeing 747-200 aircraft will have to be brought into compliance with such
Directives by March 2000 at an estimated total cost of approximately $4.5
million. As part of the FAA's overall aging aircraft program, it has issued
Directives requiring certain additional aircraft modifications to be
accomplished. We estimate that the modification costs per 747-200 aircraft will
range between $2 million and $3 million. Twelve aircraft in our 747-200 fleet
have already undergone the major portion of such modifications. The remaining
eleven 747-200 aircraft will require modification prior to the year 2009. Other
Directives have been issued that require inspections and minor modifications to
Boeing 747-200 aircraft. The newly manufactured 747-400 freighter aircraft were
delivered to us in compliance with all existing FAA Directives. On December 3,
1998, the FAA issued a Directive ordering Boeing 747 operators to change fuel
pump procedures immediately to prevent dry operation that could result in
ignition of the center fuel or horizontal stabilizer tanks. Compliance with this
Directive may adversely impact our customers' operating costs and schedules. It
is possible that additional Directives applicable to the types of aircraft or
engines included in our fleet could be issued in the future, the cost of which
could be substantial.
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We have performed a review of our internal information systems for Year
2000 ("Y2K") automation problems through a company-wide effort, assisted by Y2K
experienced consultants, to address internal Y2K system issues and, jointly with
industry trade groups, issues related to key business partners which are common
to other air carriers. As a result, we do not anticipate that Y2K compliance
will have a material financial impact. We have completed the first phase of this
project, which included an inventory of our computer network environment and an
assessment of the effort involved to bring our internal computer system
environment to full Y2K compliance. Due to our relatively young systems, our
advanced client server, development and data base architecture, and our partial
reliance on vendor representations regarding Y2K compliant third-party systems,
related remediation efforts are minimal and achievable. Third-party hardware and
software used by us are, for the most part, Y2K compliant; those that are not
compliant have broad customer bases and available software upgrades. A limited
number of systems remain to be reviewed for compliance, but are not of material
significance. Initial review of our 747-200 and 747-400 aircraft computer
systems indicate that most all of the systems are compliant, and those not
compliant are being addressed by Boeing sub-contractors. A limited number of
systems need further analysis.
We have begun an ongoing program to review the status of key
supplier/business partner Y2K compliance efforts. While we believe we are taking
all appropriate steps to assure our Y2K compliance, we are dependent on key
business partner compliance to some extent. We plan to have all
company-controllable systems Y2K tested and compliant by mid-1999, for which we
expect to incur between $100,000 to $200,000. We anticipate that third-party and
supplier/business partner systems will be fully addressed by mid-1999 in the
form of compliance remediation, plans for timely remediation, or contingency
plans. The Y2K problem is pervasive and complex, as virtually every global
computer operation will be affected in some way. Consequently, no assurance can
be given that all company-used third-party systems and suppliers/business
partners can achieve Y2K compliance.
From time to time we engage in discussions with third-parties regarding
possible acquisitions of aircraft that could expand our operations. We are
currently in discussions with third-parties for the possible acquisition of
additional aircraft for delivery in 1999 and beyond.
We believe that cash on hand and the cash flow generated from our
operations, combined with availability under the Aircraft Credit Facility and
the proceeds of the 9 1/4% Senior Notes, EETCs and the Notes, will be sufficient
to meet our normal ongoing liquidity needs for the next twelve months.
RECENTLY ISSUED ACCOUNTING STANDARDS
In March 1998, the Accounting Standards Executive Committee ("AcSEC") of
the American Institute of Certified Public Accountants ("AICPA") issued
Statement of Position ("SOP") 98-1 "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use." SOP 98-1 provides guidance on
accounting for the costs of computer software developed or obtained for internal
use. SOP 98-1 is effective for financial statements for fiscal years beginning
after December 15, 1998. We believe that the application of SOP 98-1 will not
have a material impact on our financial statements.
In April 1998, the AcSEC issued SOP 98-5 "Reporting on the Costs of
Start-up Activities." SOP 98-5 provides guidance on the financial reporting of
start-up costs and organization costs and requires such costs to be expensed as
incurred. Generally, initial application of SOP 98-5 should be reported as the
cumulative effect of a change in accounting principle. SOP 98-5 is effective for
financial statements for fiscal years beginning after December 15, 1998.
Presently, we are deferring certain start-up costs related to the introduction
of new Boeing 747-400 freighter aircraft into our fleet. We expect that the net
of tax effect of the application of SOP 98-5 in the first quarter of 1999 will
be in the range of $1 million to $2 million.
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133
"Accounting for Derivative Instruments and Hedging Activities." SFAS No. 133
establishes accounting and reporting standards requiring that every derivative
instrument (including certain derivative instruments embedded in other
contracts) be recorded in the balance sheet as either an asset or liability
measured at its fair value.
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<PAGE> 35
SFAS No. 133 requires that changes in the derivative's fair value be recognized
currently in earnings unless specific hedge accounting criteria are met. Special
accounting for qualifying hedges allows a derivative's gains and losses to
offset related results on the hedged item in the income statement, and requires
that a company must formally document, designate and assess the effectiveness of
transactions that receive hedge accounting. SFAS No. 133 is effective for years
beginning after June 15, 1999 and may be implemented as of the beginning of any
fiscal quarter after June 15, 1998. We have not yet quantified the impact, if
any, of adopting SFAS No. 133 on our financial statements and have not
determined the timing of or method of our adoption of SFAS No. 133. However,
SFAS No. 133 could increase volatility in earnings and other comprehensive
income.
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<PAGE> 36
BUSINESS
OVERVIEW
We are the world's largest air cargo outsourcer, with an all Boeing fleet
of 747 freighter aircraft that comply with Stage 3 FAA noise regulations. We
provide 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 we
supply aircraft, crew, maintenance and insurance. Our customers currently
include China Airlines, British Airways, SAS, Emirates, Thai Airways, Fast Air,
LAS, Cargolux, Alitalia, Iberia, El Al and FedEx. We provide efficient, cost
effective service to our customers primarily as a result of our productive work
force, the outsourcing of a significant part of our regular maintenance work on
a long-term, fixed-cost contractual basis and the advantageous cost economies
realized in the operation of our fleet, comprised solely of Boeing 747 aircraft
which are configured for service in long-haul cargo operations.
747-400 AIRCRAFT ACQUISITION
In June 1997, we entered into the Boeing Purchase Agreement to purchase 10
new 747-400 freighter aircraft to be powered by GE engines. We acquired and
placed into service five of the 747-400 aircraft in the second half of 1998. Due
to production problems at Boeing, some of the 1998 delivery positions of the
747-400 aircraft were delayed. We were compensated for these delays. In
addition, Boeing has agreed to compensate us for future delays, if any, in
deliveries of the 747-400 aircraft pursuant to the Boeing Purchase Agreement.
Any delays in future deliveries of the 747-400 aircraft could adversely impact
our ability to initiate service with existing and prospective customers in a
timely fashion. The Boeing Purchase Agreement also provides us with options to
purchase up to 10 additional 747-400 freighter aircraft for delivery from 2000
through 2002. As a result of our being the largest purchaser of 747-400
freighter aircraft to date, we were 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, we obtained certain ancillary products and services at
advantageous prices.
ACMI CONTRACTS
The Company's ACMI Contracts, which accounted for approximately 94% of our
total operating revenues in 1998, typically allow our 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
us to supply aircraft, crew, maintenance and insurance, while 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 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 our customers.
All of our revenues, and most of our costs, are in U.S. dollars, thus avoiding
currency risks normally associated with doing business primarily overseas.
At December 31, 1998, the Company operated under twenty-seven ACMI
Contracts with twelve customers. In most cases, one aircraft is dedicated under
each contract. China Airlines, LAS and Fast Air accounted for approximately 33%,
10% and 9% of the our total revenues, respectively, for the year ended December
31, 1998. In addition, we have also operated short-term, seasonal ACMI Contracts
with Kitty Hawk and anticipate doing so in the future.
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<PAGE> 37
Some of our ACMI Contracts allow our customers to cancel up to a maximum of
approximately 5% of the guaranteed hours of aircraft utilization over the course
of a year. Our 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. We have found that such
cancellations provide a timely opportunity for the scheduling of maintenance on
our aircraft, to the extent possible. See "-- Maintenance." We believe that our
relationships with our customers are mutually satisfactory, as evidenced by the
fact that we have renewed and, in certain cases, added a significant number of
ACMI Contracts with our existing customers, although there can be no assurance
that in the future such contracts will not be canceled in accordance with their
terms.
All of the ACMI Contracts provide that each of our aircraft be deemed to be
at all times under our exclusive operating control, possession and direction.
They also provide that, in order to service the routes designated by the
contract, we obtain the authority from the governments having jurisdiction over
the route. See "-- Governmental Regulation." Additionally, if we are required to
use the customer's "call sign" in identifying ourself throughout our route, the
customer must also have obtained underlying authority from the governments
having jurisdiction over the route. Therefore, our route structure is limited to
areas in which we can gain access from the appropriate governments.
OTHER FLIGHT OPERATIONS
To the extent we have available excess aircraft capacity at any time, we
will seek to obtain ad hoc charter service contracts, which we believe are
generally readily available. In addition, in the past we have provided service
to Kitty Hawk pursuant to short-term, seasonal ACMI Contracts during periods of
excess aircraft capacity.
AIRCRAFT
Our 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 our 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 have greater
operational capabilities than the 747-200 aircraft and will allow us to maintain
our 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 10 747-400
freighter aircraft will make Atlas the largest operator of this aircraft type to
date and will enable us to capitalize on economies of scale from the
standardization in maintenance and crew training.
The following table describes, as of January 15, 1999, our existing fleet
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:............................. 22 747-200 Owned(1) 1974-1986(2)
1 747-200 Leased(3) 1976
1 747-400 Owned 1998
4 747-400 Leased(4) 1998
747-400 aircraft on order:(5)............... 4 747-400 1999
1 747-400 2000
</TABLE>
- ---------------
(1) Two aircraft are powered by Pratt & Whitney engines and 20 are powered by GE
engines. See "-- Maintenance."
(2) The years of manufacture for these 22 aircraft are as follows: six aircraft
in 1979, four aircraft in 1980, two aircraft each in 1976, 1978 and 1981 and
one aircraft each in 1974, 1975, 1977, 1984, 1985 and 1986.
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(3) The aircraft is leased from a third party under a lease expiring in March
2010 and is powered by GE engines.
(4) These aircraft are leased from third parties under three leases expiring in
2019, and one lease expiring in 2020.
(5) We have agreed to purchase 10 new Boeing 747-400 freighter aircraft, with
options to purchase an additional 10 aircraft. The first five aircraft were
delivered in July, August, October and December 1998. The remaining five
aircraft are scheduled to be delivered as follows: four in 1999 and one 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 and lease equity.
We have been successful in obtaining new customers, or establishing
additional arrangements with existing customers, coincident with the delivery of
aircraft into the fleet or soon thereafter. However, from time to time, we
accept 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 we intend 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, we engage in discussions with third parties regarding
possible acquisitions of aircraft that could expand our operations. We are in
discussions with third parties for the possible acquisition of additional
aircraft for delivery in 1999 and beyond.
SALES AND MARKETING
From our offices in Colorado, New York and Miami, we service our air cargo
customers and solicit ACMI Contract business. Our 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, we may
utilize independent cargo brokers to obtain new ACMI Contracts. We market our
services by guaranteeing our 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. We
have placed the first five 747-400 aircraft into service and expect to place the
remaining 747-400 aircraft into service with both existing and prospective
customers whom we believe could benefit from the unique performance capabilities
of the 747-400 aircraft such as its longer range, greater payload and increased
fuel efficiency.
MAINTENANCE
Due to the average age of our 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"). We attempt to schedule
major maintenance on our 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 our customers that generally occur most
frequently during this period.
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
our 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 our aircraft on the same
basis and order of priority as repairs to its own fleet. Such service is
provided to us at a cost, for which a large part is a fixed rate per flight
hour, subject to a
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<PAGE> 39
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. We have entered into a contract with Boeing to re-engine two
aircraft in the Company's fleet from Pratt & Whitney engines to GE engines, in
order to improve the standardization of our fleet. We have contracted with a
third-party to acquire, among other things, the GE engines and parts required
for such re-engineing. In addition, we believe that the recent sale of Pratt &
Whitney engines coupled with the expected sale of the unused parts associated
with the acquisition of the GE engines will not result in any material financial
impact as a result of these re-engineing efforts. On a going forward basis, we
expect to incur lower maintenance costs related to these two aircraft compared
to the costs we have experienced to date. Under the terms of the Maintenance
Contract, in the event that we wish to maintain more than 12 of our aircraft
under such contract, the terms of the contract are subject to adjustment by KLM.
More than twelve of our aircraft are currently subject to the Maintenance
Contract.
In June 1996, we 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, we have 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, we do 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. We will incur expenses associated with routine daily
maintenance of both the airframe and the engines. In July 1998, we entered into
an agreement with Lufthansa Technik by which Lufthansa Technik will provide all
required maintenance for our initial order of ten 747-400 aircraft, plus any
additional 747-400 aircraft that we purchase pursuant to our option in the
Boeing Purchase Contract, on a fixed cost per flight hour basis for ten years,
with a provision for the Company to terminate the agreement as of June 2003. In
connection with the GE engine purchase agreement, we have also entered into two
agreements with GE to provide ongoing maintenance on the 747-400 aircraft
engines at a fixed cost per flight hour, subject to an annual formula increase.
We believe that fixed cost contracts provide the most efficient means of
ensuring the continued service of our aircraft fleet and the most reliable way
by which to predict our maintenance costs; however, we believe 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.
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, among other things:
- air carrier certification and fitness;
- insurance;
- certain leasing arrangements;
- the authorization of proposed schedule 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.
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<PAGE> 40
To provide air cargo transportation services under long-term contracts with
major international airlines, we rely primarily on our worldwide charter
authorities. FAA approval is required for each of our long-term ACMI Contracts
and DOT approval is required for each of our long-term ACMI Contracts with
foreign air carriers. In addition, FAA approval is required for each of our
short-term, seasonal ACMI Contracts.
In order to engage in the air transportation business, we are 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. The DOT also examines
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, we possess worldwide charter authorities. We also hold limited-term
DOT exemption authority to engage in scheduled air transportation of property
and mail between certain points in the U.S., on the one hand, and Hong Kong,
Colombia and The Netherlands, on the other hand.
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. These bilateral agreements may be open skies agreements which
contain no restrictions or limitations, or they may specify the city-pair
markets that may be served; restrict the number of carriers that may be
designated; provide for prior approval by one or both governments of the prices
the carriers may charge; limit frequencies or the amount of capacity to be
offered in the market; and, in various other ways, impose limitations on the
operations of air carriers. To obtain authority under a restrictive 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. We are
subject to various international bilateral air services agreements between the
U.S. and the countries to which we provide service. We also operate 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. We must obtain permission from the applicable foreign governments to
provide service to foreign points.
We have 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. We must obtain
and maintain FAA certificates of airworthiness for all of our aircraft. Our
aircraft, flight personnel and flight and emergency procedures are subject to
periodic inspections and tests by the FAA. All air carriers operating to, from
or
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<PAGE> 41
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
our existing fleet of aircraft comply with Stage 3 Standards -- the highest
standard issued by the FAA.
Under the FAA's Directives issued under its "Aging Aircraft" program, we
are subject to extensive aircraft examinations and will be required to undertake
structural modifications to our fleet 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. Nine of
our Boeing 747-200 aircraft will have to be brought into compliance with such
Directives by March 2000 at an estimated total cost of approximately $4.5
million. As part of the FAA's overall aging aircraft program, it has issued
Directives requiring certain additional aircraft modifications to be
accomplished. We estimate that the modification costs per aircraft will range
between $2 million and $3 million. Twelve aircraft in our fleet have already
undergone the major portion of such modifications. The remaining eleven aircraft
in service will require modification prior to the year 2009. Other Directives
have been issued that require inspections and minor modifications to Boeing
747-200 aircraft. The newly manufactured 747-400 freighter aircraft were
delivered in compliance with all existing FAA Directives. On December 3, 1998,
the FAA issued a Directive ordering Boeing 747 operators to change fuel pump
procedures immediately to prevent dry operation that could result in ignition of
the center fuel or horizontal stabilizer tanks. Compliance with this Directive
may adversely impact our customers' operating costs and schedules. It is
possible that additional Directives applicable to the types of aircraft or
engines included in our fleet could be issued in the future, the cost of which
could be substantial.
We are also subject to the regulations of the Environmental Protection
Agency regarding air quality in the U.S. The aircraft that we operate meet 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, including Lufthansa, currently provide services for themselves and for
others similar to the services offered by us, and new airlines may be formed
that would also compete with us. Such airlines may have substantially greater
financial resources than we do. In addition, certain retail air freight
companies, such as Evergreen International and Kitty Hawk, compete with us on a
limited, indirect basis, generally outside of the ACMI operating structure. We
believe that the most important elements 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.
Our ability to achieve our strategic plan depends in part upon our 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 upon our ability to
continue 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. We believe that such higher rates have been and will continue
to 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, we have limited exposure to the fluctuation of fuel costs and
disruptions in supply as a result of our ACMI Contracts, which require the
customers to provide fuel for the aircraft. However, an increase in fuel costs
could reduce our cost advantages because of our 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 we operate scheduled cargo or ad
hoc charter services, or position our aircraft, we are responsible for fuel and
other costs that are normally borne by the customers
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under the ACMI Contracts. In 1998, approximately 3% of our block hours
represented scheduled cargo, ad hoc charter services or positioning our aircraft
for our own account. We may, at times, have excess capacity in which case we may
deploy such aircraft in scheduled cargo or ad hoc charter services.
EMPLOYEES
As of December 31, 1998, we had 890 employees, 507 of whom were air crew
members. We have hired and expect to hire additional pilots in 1999 associated
with the delivery of additional aircraft, including the 747-400 aircraft. We
maintain a comprehensive training program for our pilots in compliance with FAA
requirements in which each pilot regularly attends update programs. We believe
that our current training program has been 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 has
trained and will train a limited number of our pilots and crew assigned to the
747-400 aircraft. However, we have incurred and will incur incremental costs
associated with ongoing training with regard to the 747-400 aircraft.
We believe that our employees' participation in the growth and
profitability of our business is essential to maintain our productivity and low
cost structure, and we have 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 our success and to
augment base salary levels and retirement income. We consider our relations with
our employees to be good.
Our labor relations are covered under Title II of the Railway Labor Act of
1926, as amended, and are subject to the jurisdiction of the NMB. None of our
employees is subject to a collective bargaining agreement; however, many airline
industry employees are subject to such agreements and our employees have been
and are routinely solicited by union representatives seeking to organize them.
In January 1998, our pilots rejected union representation by ALPA. On February
2, 1999, we were notified by the NMB that an application has been filed by the
IBT and ALPA requesting authority to ballot Atlas' crew members to determine if
they wish to be represented by a third party. The filing of this application
requires the NMB to verify the authenticity of the union authorization cards
presented by both IBT and ALPA to determine if a representation election should
take place.
INSURANCE
We may incur potential losses which could result 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.
We are required by the DOT to carry liability insurance on each of our aircraft,
and each of our aircraft leases and ACMI Contracts also require us to carry such
insurance. While we carry this insurance, any extended interruption of our
operations due to the loss of an aircraft could have a material adverse effect
on the Company. We currently maintain 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. We maintain baggage and
cargo liability insurance if not provided by our customers under ACMI Contracts.
Although we believe that our insurance coverage is adequate, there can be no
assurance that the amount of such coverage will not be changed upon renewal or
that we will not be forced to bear substantial losses from accidents.
Substantial claims resulting from an accident could have a material adverse
effect on our financial condition and could affect our ability to obtain
insurance in the future. We believe that we have good relations with our
insurance providers.
FACILITIES
Our principal executive offices are located in a 7,000 square foot office
building owned by the Company at 538 Commons Drive, Golden, Colorado. We also
rent 5,300 square feet of office space in two adjacent buildings.
We presently occupy a 22,000 square foot facility located at JFK. This
facility includes administrative offices, maintenance work areas and hangar and
parts storage facilities, as well as flight dispatch operations. We occupy this
facility pursuant to a lease 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
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$55,000. Additionally, in the third quarter of 1998, we leased an additional
8,000 square feet with a monthly rate increase to approximately $88,000. We
believe 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, we lease 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 MIA, we entered into a month-to-month office
lease and a month-to-month warehouse lease with Dade County, Florida in March
1997 that currently provide for a combined monthly lease rate of approximately
$19,000. The leased warehouse space is used to store aviation equipment and
aircraft components used to maintain aircraft operated by the Company. In the
third quarter of 1998, we 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 in support of our increased operations. The lease is for a period
in excess of four years and commenced July 1, 1998, at a monthly rate of
approximately $105,000, subject to an annual escalation factor.
LEGAL PROCEEDINGS
In March 1997, Air Support International, Inc. ("ASI") filed a complaint
against us in the U.S. District Court, Eastern District of New York alleging
actual and punitive damages of approximately $13.5 million arising from our
refusal to pay commissions which ASI claims it is owed for allegedly arranging
certain ACMI Contracts. We intend to vigorously defend against all of ASI's
claims.
While we are from time to time involved in litigation in the ordinary
course of our business, there are no other material legal proceedings pending
against us or to which any of our property is subject.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information regarding our executive
officers and directors.
<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
Thomas G. Scott........................ Senior Vice President and General Counsel
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, 44, has been the Chairman of the Board of Directors and
Chief Executive Officer since our 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 our Board of Directors since
March 1995 and was the Senior Vice President -- Finance, Chief Financial Officer
and Treasurer from June 1994 to February 1998. As of February 1998, Mr. Shuyler
became the Executive Vice President -- Strategic Planning 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, 59, has been the Senior Vice President -- Operations
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.
Stanley G. Wraight, 52, 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> 45
Thomas G. Scott, 49, has been Senior Vice President and General Counsel
since July 1998. Prior to his employment with us and since 1980, Mr. Scott was
employed with UPS where he served in a variety of positions, including Vice
President and Chief Legal Officer, with primary responsibility for managing the
airline legal department including aircraft acquisitions, airport projects and
international expansion. Mr. Scott received a B.S.A.S. from Youngstown State
University and a J.D. from the University of Cincinnati College of Law.
Stephen C. Nevin, 49, 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.
Berl Bernhard, 69, 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, was President of Boeing Enterprises from February
1997 until November 1998, where he was 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, 59, has been a member of our 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, 67, has been a member of our Board of Directors since
September 1995. Since 1998, Mr. McLaughlin has served as chairman and chief
executive officer of Orion Safety Products (formerly Standard Fusee
Corporation). From 1987 to 1988, Mr. McLaughlin was chairman of the Aspen
Institute and was appointed president and chief executive officer in 1988. Upon
his retirement from The Aspen Institute in 1997, he was named president
emeritus. From 1981 to 1987, Mr. McLaughlin served as President of Dartmouth
College. From 1970 to 1981, Mr. McLaughlin served in various management
positions at The
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<PAGE> 46
Toro Company, being named chairman and chief executive officer in 1977. Mr.
McLaughlin is Chairman of the Board of CBS Inc. and a director of Atlantic
Richfield Company and PartnerRe Ltd.
Brian Rowe, 67, has been a member of our 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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<PAGE> 47
DESCRIPTION OF CERTAIN INDEBTEDNESS
AIRCRAFT CREDIT FACILITY
In May 1996, we entered into a $175 million revolving credit facility (the
"Aircraft Credit Facility") with Goldman Sachs Credit Partners L.P., 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
was amended and restated in February 1997 and in September 1997 and further
amended in August 1998. The Aircraft Credit Facility, as amended, provides for a
$200 million revolving credit facility with a two-year revolving period and a
subsequent two-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, we must select either a Base Rate Loan (prime rate, plus
1.0% through September 30, 2000, thereafter plus 1.5%) or a Eurodollar Rate Loan
(Eurodollar rate, plus 2.0% through September 30, 2000, thereafter plus 2.5%).
We selected the Eurodollar Rate Loan for substantially all borrowings in 1996,
1997 and the first nine months of 1998. The weighted average interest rate on
borrowings outstanding under the Aircraft Credit Facility was 7.6% at September
30, 1998. 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, we have
met these tests. If in the future, we cannot meet all the tests because of the
difficult sequencing of aircraft acquisition, aircraft conversion and customer
contracts, we believe that other financing sources would be available to us or
that we would acquire aircraft using our internal cash or seek a waiver of any
necessary conditions. As of September 30, 1998, we had $113.2 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 us include, among other restrictions:
- limitations on indebtedness;
- liens;
- investments;
- contingent obligations;
- restricted junior payments;
- capital expenditures; and
- leases.
We are in compliance with all such covenants as of December 31, 1998.
AFL TERM LOAN FACILITY
In May 1997, we formed a wholly owned subsidiary, Atlas Freighter Leasing,
Inc., for the purpose of entering into a $185 million term loan facility (the
"AFL Term Loan Facility") to refinance six Boeing 747-200 aircraft previously
financed through bank debt. 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 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 8.2% at September 30, 1998. Quarterly scheduled
principal payments of $2.5 million commenced in February 1998 and increased 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;
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<PAGE> 48
- capital expenditures;
- amendments of material agreements;
- leases;
- transactions with shareholders and affiliates; and
- the conduct of business.
We are in compliance with all such covenants as of December 31, 1998.
AFL II TERM LOAN FACILITY
In September 1997, we formed another wholly owned subsidiary, Atlas
Freighter Leasing II, Inc. for the purpose of entering into a $185 million 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 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 7.9% at September 30, 1998. Quarterly scheduled principal
payments of $2.5 million commenced in February 1998 and increased 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.
We are in compliance with all such covenants as of December 31, 1998.
10 3/4% SENIOR NOTES
In August 1997, we consummated the offering of $150 million of unsecured
10 3/4% Senior Notes due 2005 (the "10 3/4% Senior Notes"). The proceeds from
the offering of the 10 3/4% Senior Notes were used to, among other things, repay
short-term indebtedness incurred 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 10 3/4% 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 10 3/4% Senior
Notes are redeemable, in whole or in part, at our option, at any time, on or
after August 1, 2001, initially at 105.375% of their principal amount, plus
accrued interest, declining ratably to 100% of their principal amount, plus
accrued interest, on or after August 1, 2003. In addition, at any time on or
prior to August 1, 2000, we, at our option, may redeem up to 35% of the
aggregate principal amount of the 10 3/4% 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 10 3/4% Senior Notes originally issued remains outstanding
immediately after any such redemption.
The 10 3/4% Senior Notes are general unsecured obligations of the Company
which rank pari passu in right of payment to any of our existing and future
unsecured senior indebtedness. The 10 3/4% Senior Notes are effectively
subordinated, however, to all of our secured indebtedness and to all
indebtedness of our subsidiaries.
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<PAGE> 49
Covenants with respect to the 10 3/4% Senior Notes contain certain
limitations on our ability and our 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 our assets.
We are in compliance with all such covenants as of December 31, 1998.
9 1/4% SENIOR NOTES
In April 1998, we consummated the offering of $175 million of unsecured
9 1/4% Senior Notes at 99.867% due 2008. The proceeds of the offering of 9 1/4%
Senior Notes are being used for general corporate purposes.
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 our option, 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, we 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 represent unsubordinated indebtedness of the
Company, and rank pari passu in right of payment with all of our existing and
future unsubordinated indebtedness and senior in right of payment to all of our
subordinated indebtedness. The 9 1/4% Senior Notes are effectively subordinated,
however, to all of our secured indebtedness and all existing and future
liabilities of our subsidiaries.
Covenants with respect to the 9 1/4% Senior Notes contain certain
limitations on our ability and our 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 our assets.
We are in compliance with all such covenants as of December 31, 1998.
9 3/8% SENIOR NOTES
In November 1998, we consummated the offering of $150 million of unsecured
9 3/8% Senior Notes due 2006. The proceeds of the offering of 9 3/8% Senior
Notes are being used for general corporate purposes,which included the
redemption of the Equipment Notes.
Interest on the 9 3/8% Senior Notes is payable semi-annually on May 15 and
November 15 of each year, commencing May 15, 1999. The 9 3/8% Senior Notes are
redeemable at our option, in whole or in part, at any time on or after November
15, 2002, initially at 104.688% of their principal amount, plus accrued
interest, declining ratably to 100% of their principal amount, plus accrued
interest, on or after November 15, 2005. In
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<PAGE> 50
addition, at any time prior to November 15, 2001, we may redeem up to 35% of the
aggregate principal amount of the 9 3/8% Senior Notes originally issued with the
net cash proceeds of one or more public equity offerings at 109.375% of their
principal amount, plus accrued interest; provided that after any such redemption
at least 65% of the aggregate principal amount of the Notes originally issued
remains outstanding.
The 9 3/8% Senior Notes represent unsubordinated indebtedness of the
Company, and rank pari passu in right of payment with all of our existing and
future unsubordinated indebtedness and senior in right of payment to all of our
subordinated indebtedness. The 9 3/8% Senior Notes are effectively subordinated,
however, to all of our secured indebtedness and all existing and future
liabilities of our subsidiaries.
Covenants with respect to the 9 3/8% Senior Notes contain certain
limitations on our ability and our 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 our assets.
We are in compliance with all such covenants as of December 31, 1998.
ENHANCED EQUIPMENT TRUST CERTIFICATES
In February 1998, we completed an offering of $538.9 million of
pass-through certificates, also known as enhanced equipment trust certificates.
The EETCs are not direct obligations of, or guaranteed by, the Company and are
not included in our consolidated financial statements until such time that we
draw upon the proceeds to take delivery and ownership of an aircraft. The cash
proceeds from the transaction were used to finance (through four leveraged
leases and one secured debt financing) the first five new 747-400 freighter
aircraft from Boeing delivered to us during the period July 1998 through
December 1998. In connection with the secured debt financing, we took ownership
of the aircraft and executed equipment notes in the aggregate amount of
$107,889,000. In November and December 1997, we 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 EXCHANGE OFFER
PURPOSE AND EFFECT OF EXCHANGE OFFER
We sold the Old Notes on November 18, 1998 to the Initial Purchaser, who
placed the Old Notes with certain institutional investors. In connection
therewith, the Company and the Initial Purchaser entered into the Registration
Rights Agreement, pursuant to which we agreed, for the benefit of the holders of
the Old Notes, that we would, at our sole cost, (i) within 90 days following the
original issuance of the Old Notes, file with the Commission the Exchange Offer
Registration Statement (of which this Prospectus is a part) under the Securities
Act with respect to an issue of a series of new notes of the Company identical
in all material respects to the series of Old Notes and (ii) use our best
efforts to cause such Exchange Offer Registration Statement to become effective
under the Securities Act within 150 days following the original issuance of the
Old Notes. Upon the effectiveness of the Exchange Offer Registration Statement
(of which this Prospectus is a part), we will offer to the holders of the Old
Notes the opportunity to exchange their Old Notes for a like principal amount of
New Notes, to be issued without a restrictive legend and which may be reoffered
and resold by the holder without restrictions or limitations under the
Securities Act. The term "holder" with
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<PAGE> 51
respect to any Note means any person in whose name such Note is registered on
our books or any other person who has obtained a properly completed bond power
from the registered holder.
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this Prospectus
and in the accompanying Letter of Transmittal (which together constitute the
Exchange Offer), we will accept for exchange Old Notes that are properly
tendered on or prior to the Expiration Date and not withdrawn as permitted
below. As used herein, the term "Expiration Date" means 5:00 p.m., New York City
time, on , 1999; provided, however, that if we, in our sole
discretion, extend the period of time during which the Exchange Offer is open,
the term "Expiration Date" means the latest time and date to which the Exchange
Offer is extended.
As of the date of this Prospectus, $150,000,000 aggregate principal amount
of Old Notes is outstanding. This Prospectus, together with the Letter of
Transmittal, is first being sent on or about , 1999, to all holders
of Old Notes known to us. Our obligation to accept Old Notes for exchange
pursuant to the Exchange Offer is subject to certain customary conditions as set
forth below under "-- Certain Conditions to the Exchange Offer."
We expressly reserve the right, at any time and from time to time, to
extend the period of time during which the Exchange Offer is open, and thereby
to delay acceptance for exchange of any Old Notes, by giving oral or written
notice of such extension to the holders of the Old Notes as described below.
During any such extension, all Old Notes previously tendered will remain subject
to the Exchange Offer and may be accepted for exchange by us. Any Old Notes not
accepted for exchange for any reason will be returned without expense to the
tendering holders thereof as promptly as practicable after the expiration or
termination of the Exchange Offer.
Old Notes tendered in the Exchange Offer must be in denominations of $1,000
or any integral multiple thereof.
We expressly reserve the right to amend or terminate the Exchange Offer,
and not to accept for exchange any Old Notes not theretofore accepted for
exchange, upon the occurrence of any of the conditions to the Exchange Offer
specified below under "-- Certain Conditions to the Exchange Offer." We will
give oral or written notice of any extension, amendment, non-acceptance or
termination to the holders of the Old Notes as promptly as practicable, such
notice in the case of any extension to be issued by means of a press release or
other public announcement no later than 9:00 a.m., New York City time, on the
next business day after the previously scheduled Expiration Date.
PROCEDURES FOR TENDERING OLD NOTES
If you are a registered holder of Old Notes you may tender such Old Notes
in the Exchange Offer. If you tender Old Notes to the Company as set forth
below, our acceptance of such Old Notes will constitute a binding agreement
between you and the Company upon the terms and subject to the conditions set
forth in this Prospectus and in the accompanying Letter of Transmittal. Except
as set forth below, if you wish to tender Old Notes for exchange pursuant to the
Exchange Offer, you must transmit a properly completed and duly executed Letter
of Transmittal, including all other documents required by such Letter of
Transmittal, to State Street Bank & Trust Company (the "Exchange Agent") at one
of the addresses set forth below under "Exchange Agent" on or prior to the
Expiration Date. In addition, either (i) certificates for such Old Notes must be
received by the Exchange Agent along with the Letter of Transmittal, or (ii) a
timely confirmation of a book-entry transfer (a "Book-Entry Confirmation") of
such Old Notes, 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 NOTES, LETTERS OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS IS AT YOUR ELECTION AND RISK. IF YOU MAIL THESE
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<PAGE> 52
DOCUMENTS, WE RECOMMEND THAT YOU USE REGISTERED MAIL, PROPERLY INSURED, WITH
RETURN RECEIPT REQUESTED. ALWAYS ALLOW SUFFICIENT TIME TO ASSURE TIMELY
DELIVERY. DO NOT SEND LETTERS OF TRANSMITTAL OR OLD NOTES TO THE COMPANY. YOU
MAY REQUEST YOUR RESPECTIVE BROKERS, DEALERS, COMMERCIAL BANKS, TRUST COMPANIES
OR NOMINEES TO EFFECT THE ABOVE TRANSACTIONS FOR YOU.
If your Old Notes are registered in the name of a broker, dealer,
commercial bank, trust company, or other nominee and you wish to tender such Old
Notes in the Exchange Offer you should contact the registered holder promptly
and instruct such registered holder to tender on your behalf. If you wish to
tender on your own behalf, you must, prior to completing and executing the
Letter of Transmittal and delivering your Old Notes, either make appropriate
arrangements to register ownership of such Old Notes in your 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 described
below (see "-- Withdrawal of Tenders"), as the case may be, must be guaranteed
(see "-- Guaranteed Delivery Procedures") unless the Old Notes surrendered for
exchange pursuant thereto are tendered (i) by a registered holder of the Old
Notes 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 (as defined below). In the event that
signatures on a Letter of Transmittal or a notice of withdrawal, as the case may
be, are required to be guaranteed, such guaranties must be by a financial
institution (including most banks, savings and loan associations and brokerage
houses) that is a participant in the Securities Transfer Agents Medallion
Program, the New York Stock Exchange Medallion Program or the Stock Exchanges
Medallion Program (collectively, "Eligible Institutions"). If Old Notes are
registered in the name of a person other than a signer of the Letter of
Transmittal, the Old Notes surrendered for exchange must be endorsed by or be
accompanied by a written instrument or instruments of transfer or exchange in
satisfactory form as determined by us in our sole discretion, duly executed by
the registered holder exactly as the name or names of the registered holder or
holders appear on the Old Notes with the signature thereon guaranteed by an
Eligible Institution.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of Old Notes tendered for exchange will be determined by
us in our sole discretion, which determination shall be final and binding. We
reserve the absolute right to reject any and all tenders of any particular Old
Notes not properly tendered or not to accept any particular Old Notes not
properly tendered or the acceptance of which might, in our judgment or in the
judgment of our counsel, be unlawful. We also reserve the absolute right to
waive any defects or irregularities or conditions of the Exchange Offer as to
any particular Old Notes either before or after the Expiration Date (including
the right to waive the ineligibility of any holder who seeks to tender Old Notes
in the Exchange Offer). Our interpretation of the terms and conditions of the
Exchange Offer as to any particular Old Notes either before or after the
Expiration Date (including the Letter of Transmittal and the instructions
thereto) shall be final and binding on all parties. Unless waived, any defects
or irregularities in connection with tenders of Old Notes for exchange must be
cured within such reasonable period of time as we shall determine. None of the
Company, the Exchange Agent or any other person shall be under any duty to
notify of any defect or irregularity with respect to any tender of Old Notes for
exchange, nor shall any of them incur any liability for failure to notify.
If the Letter of Transmittal or any Old Notes or powers of attorney are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such person should so indicate when signing, and, unless waived,
satisfactory evidence of their authority to so act must be submitted with the
Letter of Transmittal.
By tendering Old Notes for exchange, you represent to us that, among other
things:
- the New Notes acquired pursuant to the Exchange Offer are being acquired
in the ordinary course of business of the person receiving such New
Notes, whether or not such person is the holder, and
- that neither the holder nor such other person has any arrangement or
understanding with any person to engage or participate in a distribution
of the New Notes.
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If any holder or any such other person is an "affiliate," as defined under Rule
405 of the Securities Act, of our company or is engaged in or intends to engage
in, or has an arrangement or understanding with any person to participate in, a
distribution of such New Notes to be acquired pursuant to the Exchange Offer,
such holder or any such other person (i) may not rely on the applicable
interpretation of the staff of the Commission and (ii) must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction. Each broker-dealer that receives New
Notes for its own account in exchange for Old Notes, where such Old Notes were
acquired by such broker-dealer as a result of market-making activities or other
trading activities, must acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. See "Plan of Distribution." The
Letter of Transmittal states that by so acknowledging and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
ACCEPTANCE OF OLD NOTES FOR EXCHANGE; DELIVERY OF NEW NOTES
Upon satisfaction or waiver of all of the conditions to the Exchange Offer,
we will accept, promptly after the Expiration Date, all Old Notes properly
tendered and will issue the New Notes promptly after acceptance of the Old
Notes. See "-- Certain Conditions to the Exchange Offer" below. For purposes of
the Exchange Offer, we will be deemed to have accepted properly tendered Old
Notes for exchange when, as and if we have given oral or written notice thereof
to the Exchange Agent.
For each Old Note accepted for exchange you will receive a New Note having
a principal amount equal to that of the surrendered Old Note. Accordingly,
registered holders of New Notes on the relevant record date for the first
interest payment date following the consummation of the Exchange Offer will
receive interest accruing from the most recent date to which interest has been
paid on the Old Notes or, if no interest has been paid, from November 18, 1998.
Old Notes accepted for exchange will cease to accrue interest from and after the
date of consummation of the Exchange Offer. Holders whose Old Notes are accepted
for exchange will not receive any payment in respect of accrued interest on such
Old Notes otherwise payable on any interest payment date for which the record
date occurs on or after consummation of the Exchange Offer. Old Notes not
tendered or not accepted for exchange will continue to accrue interest from and
after the date of consummation of the Exchange Offer.
In all cases, issuance of New Notes for Old Notes that are accepted for
exchange pursuant to the Exchange Offer will be made only after timely receipt
by the Exchange Agent of certificates for such Old Notes or a timely Book-Entry
Confirmation of such Old Notes into the Exchange Agent's account at the
Book-Entry Transfer Facility, a properly completed and duly executed Letter of
Transmittal and all other required documents. If any tendered Old Notes are not
accepted for any reason set forth in the terms and conditions of the Exchange
Offer or if Old Notes are submitted for a greater principal amount than the
holder desires to exchange, such unaccepted or non-exchanged Old Notes will be
returned without expense to the tendering holder thereof or, in the case of Old
Notes tendered by book-entry transfer into the Exchange Agent's account at the
Book-Entry Transfer Facility pursuant to the book-entry procedures described
below, and any financial institution that is a participant in the Book-Entry
Transfer Facility's systems may make book-entry delivery of Old Notes by causing
the Book-Entry Transfer Facility to transfer such Old Notes into the Exchange
Agent's account at the Book-Entry Transfer Facility in accordance with such
Book-Entry Transfer Facility's procedures for transfer. However, although
delivery of Old Notes may be effected through book-entry transfer at the
Book-Entry Transfer Facility, the Letter of Transmittal or a facsimile thereof,
with any required signature guarantees and any other required documents, must in
any case, be transmitted to and received by the Exchange Agent at 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 Notes desires to tender such Old Notes
and the Old Notes are not immediately available, or time will not permit such
holder's Old Notes or other required documents to reach the Exchange Agent
before the Expiration Date, or the procedure 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) on or
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<PAGE> 54
prior to 5:00 P.M., New York City time, on 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 telegram, telex,
facsimile transmission, mail or hand delivery), setting forth the name and
address of the holder of the Old Notes and the amount of Old Notes 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
Notes, 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 Notes, in paper 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 within three NYSE trading days after the date of execution of the
Notice of Guaranteed Delivery.
WITHDRAWAL OF TENDERS
Tenders of Old Notes 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 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 Notes to
be withdrawn, identify the Old Notes to be withdrawn (including the principal
amount of such Old Notes), and (where certificates for Old Notes have been
transmitted) specify the name in which such Old Notes are registered, if
different from that of the withdrawing holder. If certificates for Old Notes
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 in which case such guarantee will
not be required. If Old Notes 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 Notes 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 will be final and binding on all parties. Any Old Notes so
withdrawn will be deemed not to have been validly tendered for exchange for
purposes of the Exchange Offer. Any Old Notes 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 Notes
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 Notes will be credited to an account maintained with
such Book-Entry Transfer Facility for the Old Notes) as soon as practicable
after withdrawal, rejection of tender or termination of the Exchange Offer.
Properly withdrawn Old Notes may be retendered by following one of the
procedures described under "-- Procedures for Tendering Old Notes" above at any
time on or prior to the Expiration Date.
CERTAIN CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provisions of the Exchange Offer, and subject to
its obligations pursuant to the Registration Rights Agreement, we shall not be
required to accept for exchange, or to issue New Notes in exchange for, any Old
Notes, and may terminate or amend the Exchange Offer, if, at any time before the
acceptance of such New Notes for exchange, any of the following events shall
occur:
(a) any injunction, order or decree shall have been issued by any
court or any governmental agency that would prohibit, prevent or otherwise
materially impair our ability to proceed with the Exchange Offer;
(b) any change, or any development involving a prospective change, in
our business or financial affairs or any of our subsidiaries has occurred
which, in our sole judgment, might materially impair our ability to proceed
with the Exchange Offer or materially impair the contemplated benefits of
the Exchange Offer to the Company;
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<PAGE> 55
(c) any law, statute, rule or regulation is proposed, adopted or
enacted, which, in our sole judgment, might materially impair our ability
to proceed with the Exchange Offer or materially impair the contemplated
benefits of the Exchange Offer to the Company;
(d) any governmental approval has not been obtained, which approval we
shall, in our sole discretion, deem necessary for the consummation of the
Exchange Offer as contemplated hereby;
(e) the Exchange Offer will violate any applicable law or any
applicable interpretation of the staff of the Commission.
The foregoing conditions are for our sole benefit and may be asserted by us
in whole or in part at any time and from time to time in our sole discretion.
Our failure at any time to exercise any of the foregoing rights shall not be
deemed a waiver of any such right and such right shall be deemed an ongoing
right which may be asserted at any time and from time to time.
In addition, we will not accept for exchange any Old Notes tendered, and no
New Notes will be issued in exchange for any such Old Notes, if at such time any
stop order is threatened by the Commission or in effect with respect to the
Registration Statement of which this Prospectus is a part or the qualification
of the Indenture under the Trust Indenture Act of 1939, as amended.
The Exchange Offer is not conditioned on any minimum principal amount of
Old Notes being tendered for exchange.
EXCHANGE AGENT
The State Street Bank & Trust Company has been appointed as the Exchange
Agent for the Exchange Offer. All executed Letters of Transmittal should be
directed to the Exchange Agent at one of the addresses set forth below.
Questions and requests for assistance, requests for additional copies of this
Prospectus or of the Letter of Transmittal and requests or Notices of Guaranteed
Delivery should be directed to the Exchange Agent addressed as follows:
State Street Bank & Trust Company,
Exchange Agent
By Registered or Certified Mail:
State Street Bank and Trust Company
P.O. Box 778
Boston, Massachusetts 02102
Attention: Corporate Trust Department
Kellie Mullen
By Hand or Overnight Courier:
State Street Bank and Trust Company
Two International Place
Boston, Massachusetts 02110
Attention: Corporate Trust Department
Kellie Mullen
By Hand: in Boston
State Street Bank and Trust Company
Two International Plaza
Fourth Floor, Corporate Trust
Boston, Massachusetts 02110
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<PAGE> 56
By Hand or Overnight Courier
in New York (as Drop Agent)
State Street Bank and Trust Company, N.A.
61 Broadway
Fifteenth Floor, Corporate Trust Window
New York, New York 10006
Confirm by Telephone:
(617) 664-5587
DELIVERY OF THE LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH
ABOVE DOES NOT CONSTITUTE A VALID DELIVERY OF SUCH LETTER OF TRANSMITTAL.
RESALES OF THE NEW NOTES
Based on positions of the Commission set forth in Morgan Stanley & Co.
Incorporated (available June 5, 1991) and Exxon Capital Holdings Corporation
(available July 2, 1993) and K-III Communications Corporation (available May 14,
1993), and similar no-action letters issued to third parties, we believe that
the New Notes issued pursuant to the Exchange Offer to a holder in exchange for
Old Notes may be offered for resale, resold and otherwise transferred by any
holder thereof (other than such holder which is an "affiliate" of the Company
within the meaning of Rule 405 under the Securities Act) without compliance with
the registration and prospectus delivery provisions of the Securities Act,
provided that such New Notes are acquired in the ordinary course of such
holder's business and such holder is not participating, does not intend to
participate and has no arrangement or understanding with any person to
participate in the distribution of such New Notes. We have not requested or
obtained, and do not intend to seek, an interpretive letter from the staff of
the Commission with respect to this Exchange Offer, and neither we nor the
holders are entitled to rely on interpretive advice provided by the staff of the
Commission to other persons, which advice was based on the facts and conditions
represented in such letters. Although there can be no assurance that the staff
of the Commission would make a similar determination with respect to the
Exchange Offer, the Exchange Offer is being conducted in a manner intended to be
consistent with the facts and conditions represented in such letters. If any
holder acquires New Notes in the Exchange Offer for the purpose of distributing
or participating in a distribution of the New Notes, such holder cannot rely on
the position of the staff of the Commission set forth in the above no-action and
interpretive letters and must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with a secondary
resale transaction, unless an exemption from registration is otherwise
available.
Each broker-dealer that receives New Notes for its own account pursuant to
the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. This Prospectus, as it may be
amended or supplemented from time to time, may be used by a broker-dealer in
connection with resales of New Notes received in exchange for Old Notes where
such Old Notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities (other than Old Notes acquired directly
from the Company). We have agreed that, for a period of 180 days following the
consummation of the Exchange Offer, we will make this Prospectus available to
any broker-dealer for use in connection with any such resale. See "Plan of
Distribution." Under the Registration Rights Agreement, we are required to allow
such broker-dealers and other persons, if any, subject to similar prospectus
delivery requirements to use this Prospectus in connection with the resale of
such New Notes.
FEES AND EXPENSES
The expenses of soliciting tenders will be borne by us. The principal
solicitation is being made by mail; however, additional solicitation may be made
by telegraph, telephone or in person by our officers and regular employees and
our affiliates.
We have not retained any dealer-manager in connection with the Exchange
Offer and will not make any payments to brokers, dealers or others soliciting
acceptances of the Exchange Offer. However, we will pay the
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<PAGE> 57
Exchange Agent reasonable and customary fees for its services and will reimburse
it for its reasonable out-of-pocket expenses in connection therewith.
The cash expenses to be incurred in connection with the Exchange Offer will
be paid by us. Such expenses include fees and expenses of the Exchange Agent and
Trustee, accounting and legal fees and printing costs, among others.
We will pay all transfer taxes, if any, applicable to the exchange of Old
Notes pursuant to the Exchange Offer. If, however, certificates representing New
Notes or Old Notes for principal amounts not tendered or accepted for exchange
are to be delivered to, or are to be issued in the name of, any person other
than the registered holder of the Old Notes tendered, or if tendered Old Notes
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 Notes pursuant to the Exchange Offer, then the amount of any
such transfer taxes (whether imposed on the registered holder or any other
person) 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 must accompany the tender of Old
Notes.
ACCOUNTING TREATMENT
The New Notes will be recorded at the same carrying value as the Old Notes,
which is the principal amount as reflected in our accounting records on the date
of the exchange. Accordingly, we will recognize no gain or loss for accounting
purposes. The expenses of the Exchange Offer and the unamortized expenses
related to the issuance of the Old Notes will be amortized over the term of the
New Notes.
REGULATORY APPROVALS
We do not believe that the receipt of any material federal or state
regulatory approvals will be necessary in connection with the Exchange Offer.
TRANSFER TAXES
Holders who tender their Old Notes for exchange will not be obligated to
pay any transfer taxes in connection therewith, except that holders who instruct
us to register New Notes in the name of, or request that Old Notes not tendered
or not accepted in the Exchange Offer be returned to, a person other than the
registered tendering holder will be responsible for the payment of any
applicable transfer tax thereon.
OTHER
Participation in the Exchange Offer is voluntary and you should carefully
consider whether to accept the terms and conditions thereof. You are urged to
consult your financial and tax advisors in making your decisions on what action
to take with respect to the Exchange Offer.
As a result of the making of, and upon acceptance for exchange of all
validly tendered Old Notes pursuant to the terms of the Exchange Offer, we will
have fulfilled a covenant contained in the terms of the Old Notes and the
Registration Rights Agreement. If you do not tender your Old Notes in the
Exchange Offer you will continue to hold such Old Notes and will be entitled to
all the rights, and limitations applicable thereto, under the Indenture, except
for such rights under the Registration Rights Agreement (including rights to
receive Additional Interest) which by their terms terminate or cease to have
further effect as a result of the making and consummation of the Exchange Offer.
All untendered Old Notes will continue to be subject to the restrictions on
transfer set forth in the Indenture and we do not currently anticipate that we
will register the Old Notes under the Securities Act. To the extent that Old
Notes are tendered and accepted in the Exchange Offer, the trading market, if
any, for any remaining Old Notes could be adversely affected. See "Risk
Factors -- Consequences of Failure to Exchange."
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<PAGE> 58
DESCRIPTION OF NOTES
GENERAL
The Old Notes were, and the New Notes will be, issued under an Indenture,
to be dated as of November 18, 1998 (the "Indenture"), among the Company and
State Street Bank and Trust Company, as Trustee (the "Trustee"). The terms of
the New Notes are identical in all material respects to the Old Notes, except
that the New Notes have been registered under the Securities Act and, therefore,
will not bear legends restricting their transfer and will not contain certain
provisions providing for an increase in interest thereon under certain
circumstances described in the Registration Rights Agreement, the provisions of
which will terminate upon the consummation of the Exchange Offer. The following
summary of certain provisions of the Indenture and the Notes does not purport to
be complete and is subject to, and is qualified in its entirety by reference to,
all the provisions of the Indenture (including the definitions of certain terms
therein and those terms made a part thereof by the Trust Indenture Act of 1939,
as amended) and the Notes.
Principal of, premium, if any, and interest on the Notes will be payable,
and the Notes may be exchanged or transferred, at the office or agency of the
Company in the Borough of Manhattan, The City of New York (which initially shall
be the corporate trust office of the Trustee in New York, New York), except
that, at the option of the Company, payment of interest may be made by check
mailed to the address of the holders as such address appears in the Note
register. Initially, the Trustee will act as Paying Agent and Registrar for the
Notes. The Notes may be presented for registration of transfer and exchange at
the offices of the Registrar, which initially will be the Trustee's corporate
trust office. The Company may change any Paying Agent and Registrar without
prior notice to holders of the Notes.
The Notes will be issued only in fully registered form, without coupons, in
denominations of $1,000 and any integral multiple of $1,000. No service charge
will be made for any registration of transfer or exchange of Notes, but the
Company may require payment of a sum sufficient to cover any transfer tax or
other similar governmental charge payable in connection therewith.
PRINCIPAL, MATURITY AND INTEREST
The Notes will be unsecured, senior obligations of the Company, limited to
$150.0 million aggregate principal amount, and will mature on November 15, 2006.
Each Note will bear interest at the rate of 9 3/8% per annum from the date of
issuance, or from the most recent date to which interest has been paid or
provided for, and will be payable semiannually on May 15 and November 15 of each
year commencing on May 15, 1999 to holders of record at the close of business on
the May 1 or November 1 immediately preceding the interest payment date.
Interest will be computed on the basis of a 360-day year comprised of twelve
30-day months. The Notes will not be entitled to the benefit of any mandatory
sinking fund.
REDEMPTION
Optional Redemption. Except as set forth below, the Notes will not be
redeemable at the option of the Company prior to November 15, 2002. On and after
such date, the Notes 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 November 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>
REDEMPTION
YEAR PRICE
- ---- ----------
<S> <C>
2002....................................................... 104.688%
2003....................................................... 103.125%
2004....................................................... 101.563%
2005 and thereafter........................................ 100.000%
</TABLE>
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<PAGE> 59
Optional Redemption Upon Public Offerings. In addition, at any time on or
prior to November 15, 2001, the Company, at its option, may redeem up to 35% of
the aggregate principal amount of the Notes originally issued with the net cash
proceeds of one or more Public Equity Offerings at a redemption price equal to
109.375% 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 Notes outstanding must
equal at least 65% of the aggregate principal amount of the Notes 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.
SELECTION AND NOTICE OF REDEMPTION
In the case of any partial redemption, selection of the Notes for
redemption will be made by the Trustee in compliance with the requirements of
the principal national securities exchange, if any, on which such Notes are
listed, or if such Notes 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 Notes or portion thereof for redemption shall be made by the
Trustee only on a pro rata basis, unless such method is otherwise prohibited.
Notes 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 prior to the date fixed for redemption to
each holder whose Notes are to be redeemed at the last address for such holder
then shown on the registry books. If any Note is to be redeemed in part only,
the notice of redemption that relates to such Note shall state the portion of
the principal amount thereof to be redeemed. A new Note in principal amount
equal to the unredeemed portion thereof will be issued in the name of the holder
thereof upon cancellation of the original Note. On and after any redemption
date, interest will cease to accrue on the Notes 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.
RANKING
The Notes will be senior unsecured obligations of the Company and will rank
pari passu in right of payment with all other existing and future senior
obligations of the Company. The Notes, however, will be effectively subordinated
to secured senior obligations of the Company with respect to the assets securing
such obligations. The Notes also will be effectively subordinated to all
existing and future liabilities of the Company's subsidiaries. As of September
30, 1998, after giving pro forma effect to the Offering and the application of
the proceeds therefrom, the Company's total indebtedness outstanding would have
been approximately $678.6 million, of which approximately $202.6 million would
have been secured indebtedness, and the Company's subsidiaries would have had
liabilities of approximately $363.4 million. Subject to certain limitations, the
Company and its subsidiaries may incur additional indebtedness in the future.
CHANGE OF CONTROL
If a Change of Control shall occur at any time, then each holder of Notes
shall have the right to require that the Company purchase such holder's Notes,
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 Notes, plus accrued interest, if any, to the date of
purchase (the "Change of Control Purchase Date"), pursuant to the offer
described below (the "Change of Control Offer") and the other procedures set
forth in the Indenture.
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<PAGE> 60
Within 30 days following any Change of Control, the Company shall notify
the Trustee thereof and give written notice of such Change of Control to each
holder of Notes by first-class mail, postage prepaid, at the address of such
holder shown on the security register, stating, among other things:
(i) 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;
(ii) that any Notes not tendered will continue to accrue interest;
(iii) that, unless the Company defaults in the payment of the Change
of Control Price, any Notes accepted for payment pursuant to the Change of
Control Offer shall cease to accrue interest after the Change of Control
Purchase Date; and
(iv) certain other procedures that a holder of Notes must follow to
accept a Change of Control Offer or to withdraw such acceptance.
If a Change of Control Offer is made, there can be no assurance that the
Company will have available funds sufficient to pay the Change of Control
Purchase Price for all of the Notes that might be delivered by holders of the
Notes seeking to accept the Change of Control Offer. In the event the Company is
required to purchase outstanding Notes pursuant to a Change of Control Offer,
the Company may seek third party financing to the extent it does not have
available funds to meet its purchase obligations. However, there can be no
assurance that the Company would be able to obtain such financing. The failure
of the Company to make or consummate the Change of Control Offer or pay the
Change of Control Purchase Price when due would result in an Event of Default
and would give the Trustee and the holders of the Notes the rights described
under "-- Events of Default."
One of the events which constitutes a Change of Control under the Indenture
is the disposition of "all or substantially all" of the Company's assets. This
term has not been interpreted under New York law (which is the governing law of
the Indenture) to represent a specific quantitative test. As a consequence, in
the event holders of the Notes elect to require the Company to purchase the
Notes and the Company elects to contest such election, there can be no assurance
as to how a court interpreting New York law would interpret the phrase.
The existence of a holder's right to require the Company to purchase such
holder's Notes upon a Change of Control may deter a third party from acquiring
the Company in a transaction which constitutes a Change of Control.
The definition of "Change of Control" in the Indenture is limited in scope.
The provisions of the Indenture may not afford holders of Notes the right to
require the Company to purchase such Notes in the event of a highly leveraged
transaction or certain transactions with the Company's management or its
affiliates, including a reorganization, restructuring, merger or similar
transaction involving the Company (including, in certain circumstances, an
acquisition of the Company by management or its affiliates) that may adversely
affect holders of the Notes, if such transaction is not a transaction defined as
a Change of Control. See "-- Certain Definitions" for the definition of "Change
of Control." A transaction involving the Company's management or its affiliates,
or a transaction involving a recapitalization of the Company, would only result
in a Change of Control if it is the type of transaction specified by such
definition.
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.
CERTAIN COVENANTS
The Indenture will contain, among others, the following covenants:
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
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<PAGE> 61
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
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.
(b) The Company will not permit any Subsidiary to incur any Indebtedness
(including any Acquired Indebtedness) other than Permitted Subsidiary
Indebtedness.
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 under "-- Certain Covenants -- Limitation on
Incurrence of Additional Indebtedness" 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
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Capital Stock of the Company or warrants, options or rights to
purchase such shares of Qualified Capital Stock of the Company, plus
(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 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,
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defeased, acquired or retired, (B) such new Subordinated Indebtedness is
subordinated to the Notes 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 Notes;
(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 clause (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 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.
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.
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
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(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 (1) 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 (2)
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 this covenant will not apply to transactions pursuant to the Atlas
Freighter Leasing Transactions.
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 than 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.
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
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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 Notes, on a pro rata basis, in accordance
with the procedures set forth below, the maximum principal amount of Notes that
may be purchased with the Excess 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 Notes), 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
Notes 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 Notes validly tendered and not withdrawn by
holders thereof exceeds the Excess Proceeds, Notes 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 Notes 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 Notes tendered.
(f) 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.
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 Notes 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 Notes at least to the same extent as such
Subordinated Indebtedness is subordinated to the Notes; 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.
(b) Notwithstanding the foregoing, any Guarantee by a Subsidiary of the
Notes 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
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(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.
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 the Indenture;
(ii) the 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 Notes than those under or pursuant to the agreement refinanced or
replaced.
Limitations on Consolidations, Mergers and Sales of Assets. 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
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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
Notes and the performance and observance of every covenant of the
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 described under "--Certain
Covenants -- Limitation on Incurrence of Additional Indebtedness";
(iv) each Guarantor, if any, unless it is the other party to the
transactions described above, shall have by supplemental indenture
confirmed that its Guarantee shall apply to such Person's obligations under
the Indenture and the Notes;
(v) if any of the property or assets of the Company or any of its
Subsidiaries would thereupon become subject to any Lien, the provisions
described under "-- Certain Covenants -- Limitation on Liens" are complied
with; and
(vi) 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 the Indenture and that all
conditions precedent therein provided for relating to such transaction have
been complied with.
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 the Indenture, the
Surviving Entity shall succeed to, and be substituted for, and may exercise
every right and power of, the Company under the 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 the Indenture or the Notes,
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 Notes.
Reports. 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. The
Company will also be required (a) to file with the Trustee, and provide to each
holder of Notes, 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
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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 filing 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 Notes promptly upon
written request.
EVENTS OF DEFAULT
An Event of Default will occur under the Indenture if:
(i) there shall be a default in the payment of any interest on the
Notes 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 Notes 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 the 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 Notes then outstanding; (B) there shall be a
default in the performance, or breach, of the provisions of "-- Certain
Covenants -- Limitation on Asset Sales and Disposition of Proceeds of Asset
Sales"; (C) there shall be a default in the performance or breach of the
provisions of "-- Certain Covenants -- Limitations on Consolidation, Merger
and Sale of Assets"; or (D) the Company shall have failed to make or
consummate a Change of Control Offer in accordance with the provisions of
"-- Change of Control";
(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 occurrence of certain events of bankruptcy, insolvency or
reorganization with respect to the Company or any Significant Subsidiary.
If an Event of Default occurs and is continuing, the Trustee or the holders
of at least 25% in principal amount of the outstanding Notes by notice to the
Company may declare the principal of and accrued and unpaid interest, if any, on
all the Notes 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 Notes 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 Notes may rescind any such acceleration with respect to the Notes
and its consequences.
Subject to the provisions of the Indenture relating to the duties of the
Trustee, if an Event of Default occurs and is continuing, the Trustee will be
under no obligation to exercise any of the rights or powers under the Indenture
at the request or direction of any of the holders unless such holders have
offered to the Trustee
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reasonable indemnity or security against any loss, liability or expense. Except
to enforce the right to receive payment of principal, premium (if any) or
interest when due, no holder may pursue any remedy with respect to the Indenture
or the Notes unless:
(i) such holder has previously given the Trustee notice that an Event
of Default is continuing;
(ii) holders of at least 25% in principal amount of the outstanding
Notes have made a written request to the Trustee to pursue the remedy;
(iii) such holders have offered the Trustee reasonable security or
indemnity against any loss, liability or expense;
(iv) the Trustee has not complied with such request within 60 days
after the receipt of the request and the offer of security or indemnity;
and
(v) the holders of a majority in principal amount of the outstanding
Notes have not given the Trustee a direction that, in the opinion of the
Trustee, is inconsistent with such request within such 60-day period.
Subject to certain restrictions, the holders of a majority in principal amount
of the outstanding Notes are given the right to 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. The Trustee, however,
may refuse to follow any direction that conflicts with law or the Indenture or
that the Trustee determines is unduly prejudicial to the rights of any other
holder or that would involve the Trustee in personal liability. Prior to taking
any action under the Indenture, 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.
The Indenture provides that if a Default occurs and is continuing and is
known to the Trustee, the Trustee must mail to each holder notice of the Default
within 5 days after it occurs. Except in the case of a Default in the payment of
principal of, premium (if any) or interest on any Note, the Trustee may withhold
notice if and so long as a committee of its Trust officers in good faith
determines that withholding notice is in the interests of the Noteholders. In
addition, the Company is required to deliver to the Trustee, within 120 days
after the end of each fiscal year, a certificate indicating whether the signers
thereof know of any Default that occurred during the previous year. The Company
also is required to deliver to the Trustee, within 5 days after becoming aware
thereof, written notice of any events which would constitute certain Defaults,
their status and what action the Company is taking or proposes to take in
respect thereof.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
No director, officer, employee, or stockholder of the Company or any
Subsidiary, as such, shall have any liability for any obligations of the Company
or any Subsidiary under the Notes or the Indenture or for any claim based on, in
respect of, or by reason of, such obligations or their creation. Each Holder of
Notes by accepting a Note waives and releases all such liability. The waiver and
release are part of the consideration for issuance of the Notes.
DEFEASANCE OR COVENANT DEFEASANCE
The Company may, at its option by Board Resolution, at any time, terminate
the obligations of the Company with respect to the outstanding Notes
("defeasance"). Such defeasance means that the Company shall be deemed to have
paid and discharged the entire Indebtedness represented by the outstanding
Notes, except for:
(i) the rights of holders of outstanding Notes to receive payments in
respect of the principal of (and premium, if any, on) and interest on such
Notes when such payments are due;
(ii) the Company's obligations to issue temporary Notes, register the
transfer or exchange of any Notes, replace mutilated, destroyed, lost or
stolen Notes, maintain an office or agency for payments in respect of the
Notes and segregate and hold such payments in trust;
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(iii) the rights, powers, trusts, duties and immunities of the
Trustee; and
(iv) the defeasance provisions of the Indenture.
In addition, the Company may, at its option and at any time, elect to terminate
the obligations of the Company with respect to certain covenants set forth in
the Indenture ("covenant defeasance"), and any omission to comply with such
obligations shall not constitute a Default or an Event or Default with respect
to the Notes.
In order to exercise either defeasance or covenant defeasance:
(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 Notes, money in an amount, or
U.S. Government Obligations (as defined in the Indenture) 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 Notes 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 clause (vi) of "Events of Default" 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, the 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 Notes 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 Notes 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 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 Notes 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 defeasance or covenant
defeasance, as the case may be, have been complied with.
MODIFICATION OF INDENTURE
Subject to certain exceptions, the Indenture may be amended with the
consent of the holders of a majority in principal amount of the Notes then
outstanding and any past default or compliance with any
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provisions may be waived with the consent of the holders of a majority in
principal amount of the Notes then outstanding. However, without the consent of
each holder of an outstanding Note affected, no amendment may, among other
things:
(i) reduce the amount of Notes whose holders must consent to an
amendment;
(ii) reduce the stated rate of or extend the stated time for payment
of interest on any Note;
(iii) reduce the principal of or extend the Maturity of any Note;
(iv) reduce the premium payable upon the redemption or repurchase of
any Note or change the time at which any Note may be redeemed as described
under "-- Redemption -- Optional Redemption" above;
(v) make any Note payable in money other than that stated in the Note;
(vi) impair the right of any holder to receive payment of principal of
and interest on such holder's Notes on or after the due dates therefor or
to institute suit for the enforcement of any payment on or with respect to
such holder's Notes;
(vii) waive a default in the payment of the principal of or interest
on any Note;
(viii) make any change in the provisions of the Indenture relative to
waivers of past defaults;
(ix) 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;
(x) modify or change any provision of the Indenture or the related
definitions affecting the ranking of the Notes in a manner which adversely
affects the holders of the Notes; or
(xi) make any change in the amendment provisions which require each
holder's consent or in the waiver provisions.
Without the consent of any holder, the Company and the Trustee may amend
the Indenture to cure any ambiguity, omission, defect or inconsistency, to
provide for the assumption by a successor corporation, partnership, trust or
limited liability company of the obligations of the Company under the Indenture,
to provide for uncertificated Notes in addition to or in place of certificated
Notes (provided that the uncertificated Notes are issued in registered form for
purposes of Section 163(f) of the Code, or in a manner such that the
uncertificated Notes are described in Section 163(f)(2)(B) of the Code), to
secure the Notes, to add to the covenants of the Company for the benefit of the
holders or to surrender any right or power conferred upon the Company, to make
any change that does not adversely affect the rights of any holder or to comply
with any requirement of the Commission in connection with the qualification of
the Indenture under the Trust Indenture Act.
The consent of the holders is not necessary under the Indenture to approve
the particular form of any proposed amendment. It is sufficient if such consent
approves the substance of the proposed amendment.
After an amendment under the Indenture becomes effective, the Company is
required to mail to the holders a notice briefly describing such amendment.
However, the failure to give such notice to all the holders or any defect
therein, will not impair or affect the validity of the amendment.
CONCERNING THE TRUSTEE
State Street Bank and Trust Company is to be the Trustee under the
Indenture and has been appointed by the Company as Registrar and Paying Agent
with regard to the Notes. The Trustee is also the trustee under the indenture
for the Senior Notes and 9 1/4% Senior Notes.
The Indenture contains certain limitations on the rights of the Trustee,
should it become a creditor of the Company, to obtain payment of claims in
certain cases, or to realize on certain property received in respect of
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any such claim a security or otherwise. The Trustee will be permitted to engage
in other transactions; however, if it acquires any conflicting interest (as
defined) it must eliminate such conflict or resign.
The holders of a majority in aggregate principal amount of the then
outstanding Notes issued under the Indenture will have the right to direct the
time, method and place of conducting any proceeding for exercising any remedy
available to the Trustee. The Indenture provides that in case an Event of
Default shall occur (which shall not be cured) the Trustee will be required, in
the exercise of its power, to use the degree of care of a prudent man in the
conduct of his own affairs. Subject to such provisions, the Trustee will be
under no obligation to exercise any of its rights or powers under the Indenture
at the request of any of the holders of the Notes issued thereunder, unless they
shall have offered to the Trustee security and indemnity satisfactory to it.
GOVERNING LAW
The Indenture provides that it and the Notes will be governed by, and
construed in accordance with, the laws of the State of New York without giving
effect to applicable principles of conflicts of law to the extent that the
application of the law of another jurisdiction would be required thereby.
CERTAIN 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 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.
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"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.
"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.
"Asset Sale" means any sale, issuance, conveyance, transfer, lease or other
disposition (including, without limitation, by way or 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 the
Indenture, described under "-- Certain Covenants -- Limitations on
Consolidation, Merger and Sale of Assets," (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.
"Boeing Purchase Contract" means the agreement dated June 9, 1997 between
Atlas Air, Inc. and The Boeing Company to purchase 10 new 747-400 aircraft.
"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
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exchangeable for or convertible into such capital stock, whether now outstanding
or issued after the date of the 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).
"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 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 under "-- Certain
Covenants -- Limitation on Restricted Payments" (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
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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 under "-- Certain Covenants -- Limitations on
Consolidation, Merger and Sale of Assets."
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.
"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 under "-- Certain
Covenants -- Limitation on Restricted Payments," 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 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
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(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 accordance with GAAP (excluding any such non-cash
charge which represents an accrual of or reserve for cash charges for any future
period).
"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.
"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.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"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 the 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 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 Notes by any Subsidiary in
accordance with the provisions described under "-- Certain
Covenants -- Limitation on Guarantees of Indebtedness by Subsidiaries." When
used as a verb, "Guarantee" shall have a corresponding meaning.
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"Guarantor" means any Person that incurs a Guarantee.
"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 the 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.
"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, loan 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.
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"Issue Date" means the date of original issuance of the Notes.
"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 Note, the date on which any principal
of such Note becomes due and payable as therein or in the Indenture 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.
"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 under "-- Certain
Covenants -- Limitation on Restricted Payments," 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.
"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;
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(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 Notes 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 Notes; 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
Notes 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 Notes;
(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 Notes and the 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 10 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;
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(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;
(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 the 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 the Indenture that
secures Indebtedness permitted to be incurred under the covenant described
under "-- Certain Covenants -- Limitation on Incurrence of Additional
Indebtedness" 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 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 than the Lien so extended, renewed or replaced and shall
not extend to any additional property or assets.
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"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 the provisions described under "-- Certain
Covenants -- Limitation on Guarantees of Indebtedness by Subsidiaries" 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.
"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.
"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 the
Indenture, or issued thereafter, and including, without limitation, all classes
and series of preferred or preference stock of such Person.
"Qualified Capital Stock" of any Person means any and all Capital Stock of
such Person other than Redeemable Capital Stock.
"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 Notes 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.
"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
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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 of a Related Person
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 Person under any clause
of this definition, including, but not limited to, disposition under judicial
orders.
"S&P" means Standard & Poor's Ratings Group, a division of McGraw-Hill,
Inc., and its successors.
"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 Notes or any
installment of interest thereon, the date specified in the Note as the fixed
date on which the principal of the Note 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 Notes.
"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 the Indenture, the term Subsidiary shall not
include any Unrestricted Subsidiary, except in the definition of Unrestricted
Subsidiary.
"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) 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 "-- Certain
Covenants -- Limitation on Restricted Payments";
(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.
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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 the
Indenture and the Company could incur $1.00 of additional Indebtedness (other
than Permitted Indebtedness) pursuant to the provisions described under
"-- Certain Covenants -- Limitation on Incurrence of Additional Indebtedness".
"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).
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of certain United States federal income tax
consequences of (i) the exchange of Old Notes for New Notes and (ii) the
ownership and disposition of the New Notes. This summary is based upon laws,
regulations, rulings and decisions now in effect, all of which are subject to
change (including changes in effective dates) or possible differing
interpretations. It assumes that the Old Notes and New Notes are (or will be)
held as capital assets. It does not purport to deal with persons in special tax
situations, such as financial institutions, insurance companies, regulated
investment companies, dealers in securities or currencies, persons holding New
Notes as a hedge against currency risks or as a position in a "straddle" for tax
purposes, or persons whose functional currency is not the United States dollar.
It also does not deal with holders other than Holders participating in the
Exchange Offer (except where otherwise specifically noted). Persons considering
participation in the Exchange Offer should consult their own tax advisors
concerning the application of United States federal income tax laws to their
particular situations as well as any consequences of the exchange of Old Notes
for New Notes, and the ownership and disposition of the New Notes arising under
the laws of any other taxing jurisdiction.
As used herein, the term "U.S. Holder" means a beneficial owner of a New
Note that is for United States federal income tax purposes (i) a citizen or
resident of the United States, (ii) a corporation, partnership or other entity
created or organized in or under the laws of the United States or of any
political subdivision thereof, (iii) an estate that is described in Section
7701(a)(30)(D) of the Internal Revenue Code of 1986, as amended (the "Code"), or
a trust that is described in Section 7701(a)(30)(E) of the Code or (iv) any
other person whose income or gain in respect of a New Note is effectively
connected with the conduct of a United States trade or business. As used herein,
the term "non-U.S. Holder" means a beneficial owner of a New Note that is not a
U.S. Holder.
FEDERAL INCOME TAX CONSEQUENCES OF TENDERING OLD NOTES FOR NEW NOTES
Exchange Offer. The exchange of Old Notes for New Notes pursuant to the
Exchange Offer should not be treated as an exchange or other taxable event for
United States federal income tax purposes because under Treasury regulations,
the New Notes should not be considered to differ materially in kind or extent
from the Old Notes. Rather, the New Notes received by a holder should be treated
as a continuation of the Old Notes in the hands of such holder. As a result,
there should be no United States federal income tax consequences to holders who
exchange Old Notes for New Notes pursuant to the Exchange Offer and any such
holder should have the same tax basis and holding period in the New Notes as it
had in the Old Notes immediately before the exchange.
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FEDERAL INCOME TAX CONSEQUENCES OF OWNING NEW NOTES
U.S. Holders
Payment of Interest. The Old Notes were not issued with original issue
discount. As a result, payments of interest on a New Note generally will be
taxable to a U.S. Holder as ordinary interest income at the time such payments
are accrued or are received, in accordance with the U.S. Holder's regular method
of tax accounting.
Market Discount. A Note will be considered to bear "market discount" if the
U.S. Holder's tax basis for the Note is less than the principal amount of the
Note by more than a de minimis amount.
Under the market discount rules, a U.S. Holder will be required to treat
any partial principal payment on, or any gain realized on the sale, exchange,
retirement or other disposition of, a Note as ordinary income to the extent of
the lesser of (i) the amount of such payment or realized gain or (ii) the market
discount which has not previously been included in income and is treated as
having accrued on such New Note at the time of such payment or disposition.
Market discount will be considered to accrue on a straight-line basis during the
period from the date of acquisition to the maturity date of the Note, unless the
U.S. Holder elects to accrue market discount on the basis of semiannual
compounding.
A U.S. Holder may be required to defer the deduction of all or a portion of
the interest paid or accrued on any indebtedness incurred or maintained to
purchase or carry a New Note with market discount until the maturity of the New
Note or certain earlier dispositions. A U.S. Holder may elect to include market
discount in income currently as it accrues, in which case the rules described
above regarding the treatment as ordinary income of gain upon the disposition of
the Note and upon the receipt of certain cash payments and regarding the
deferral of interest deductions will not apply. Persons considering making this
election should consult their tax advisors.
Premium. If a U.S. Holder's initial tax basis in any Note is greater than
the principal amount of the Note, the Note will be considered to have
"amortizable bond premium" equal in amount to such excess. A U.S. Holder may
elect to amortize such premium using a constant yield method over the remaining
term of the New Note and may offset interest otherwise required to be included
in respect of the New Note during any taxable year by the amortized amount of
such excess for the taxable year. Any election to amortize bond premium applies
to all taxable debt instruments acquired by the U.S. Holder on or after the
first day of the first taxable year to which such election applies and may be
revoked only with the consent of the IRS.
Disposition of a Note. Except as discussed above, upon the sale, exchange
or retirement of a New Note, a U.S. Holder generally will recognize taxable gain
or loss equal to the difference between the amount realized on the sale,
exchange or retirement (other than amounts representing accrued and unpaid
interest) and such U.S. Holder's adjusted tax basis in the New Note. A U.S.
Holder's adjusted tax basis in a New Note generally will equal such U.S.
Holder's initial investment in the Note increased by any accrued market discount
that the U.S. Holder has included in income and decreased by the amount of any
amortizable bond premium taken with respect to such Note. Such gain or loss
generally will be capital gain or loss and will, in the case of individuals, be
long-term capital gain or loss subject to a maximum rate of 20% if the Note has
been held for more than 18 months at the time of such disposition. An individual
will be taxed on his or her net capital gain at a rate of 28% for property held
for 18 months or less but more than one year. Special rates (and generally lower
maximum rates) apply to individuals in lower tax brackets.
Non-U.S. Holders
A non-U.S. Holder will not be subject to United States federal income taxes
on payments of principal, premium (if any) or interest (including original issue
discount, if any) on a New Note, unless such non-U.S. Holder is a direct or
indirect 10% or greater shareholder of the Company or a controlled foreign
corporation related to the Company. To qualify for the exemption from taxation,
the last United States payor in the chain of payment prior to payment to a
non-U.S. Holder (the "Withholding Agent") must have received in the year in
which a payment of interest or principal occurs, or in either of the two
preceding calendar years, a statement that (i) is signed by the beneficial owner
of the New Note under penalties of perjury, (ii) certifies that such owner is
not a U.S. Holder and (iii) provides the name and address of the beneficial
owner. The statement
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may be made on an IRS Form W-8 or a substantially similar form, and the
beneficial owner must inform the Withholding Agent of any change in the
information on the statement within 30 days of such change. If a New Note is
held through a securities clearing organization or certain other financial
institutions, the organization or institution may provide a signed statement to
the Withholding Agent. However, in such case, the signed statement must be
accompanied by a copy of the IRS Form W-8 or the substitute form provided by the
beneficial owner to the organization or institution. Proposed Treasury
Regulations have been issued which, if adopted, could affect these withholding
rules and other U.S. federal tax rules applicable to non-U.S. Holders, and
non-U.S. Holders should therefore consult their tax advisors with respect to the
effect of such proposed Treasury Regulations.
Generally, a non-U.S. Holder will not be subject to federal income taxes on
any amount which constitutes capital gain upon retirement or disposition of a
New Note, provided the gain is not effectively connected with the conduct of a
trade or business in the United States by the non-U.S. Holder. Certain other
exceptions may be applicable, and a non-U.S. Holder should consult its tax
advisor in this regard.
The New Notes will not be includible in the estate of a non-U.S. Holder
unless the individual is a direct or indirect 10% or greater shareholder of the
Company or, at the time of such individual's death, payments in respect of the
New Notes would have been effectively connected with the conduct by such
individual of a trade or business in the United States.
Backup Withholding; Information Reporting
Backup withholding of United States federal income tax at a rate of 31% may
apply to payments made in respect of the New Notes to registered owners who are
not "exempt recipients" and who fail to provide certain identifying information
(such as the registered owner's taxpayer identification number) in the required
manner. Generally, individuals are not exempt recipients, whereas corporations
and certain other entities generally are exempt recipients. Payments made in
respect of the New Notes to a U.S. Holder must be reported to the IRS, unless
the U.S. Holder is an exempt recipient or establishes an exemption. Compliance
with the identification procedures described in the preceding section would
establish an exemption from backup withholding for those non-U.S. Holders who
are not exempt recipients.
In addition, upon the sale of a New Note to (or through) a broker, the
broker must withhold 31% of the entire purchase price, unless either (i) the
broker determines that the seller is a corporation or other exempt recipient or
(ii) the seller provides, in the required manner, certain identifying
information and, in the case of a non-U.S. Holder, certifies that such seller is
a non-U.S. Holder (and certain other conditions are met). Such a sale must also
be reported by the broker to the IRS, unless either (a) the broker determines
that the seller is an exempt recipient or (b) the seller certifies its non-U.S.
status (and certain other conditions are met). Certification of the registered
owner's non-U.S. status would be made normally on an IRS Form W-8 under
penalties of perjury, although in certain cases it may be possible to submit
other documentary evidence.
Any amounts withheld under the backup withholding rules from a payment to a
beneficial owner would be allowed as a refund or a credit against such
beneficial owner's United States federal income tax provided the required
information is furnished to the IRS.
PLAN OF DISTRIBUTION
Each broker-dealer that receives New Notes for its own account pursuant to
the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. This Prospectus, as it may be
amended or supplemented from time to time, may be used by a broker-dealer in
connection with resales of New Notes received in exchange for Old Notes where
such Old Notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities. We have agreed that, starting on the
Expiration Date and ending on the close of business on the 180th day following
the Expiration Date, it will make this Prospectus, as amended or supplemented,
available to any broker-dealer for use in connection with any such resale.
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<PAGE> 86
We will not receive any proceeds from any sale of New Notes by
broker-dealers. New Notes received by broker-dealers for their own account
pursuant to the Exchange Offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions through
the writing of options on the New Notes or a combination of such methods of
resale, at market prices prevailing at the time of resale, at prices related to
such prevailing market prices or at negotiated prices. Any such resale may be
made directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
broker-dealer and/or the purchasers of any such New Notes. Any broker-dealer
that resells New Notes that were received by it for its own account pursuant to
the Exchange Offer and any broker or dealer that participates in a distribution
of such New Notes may be deemed to be an "underwriter" within the meaning of the
Act and any profit of any such resale of New Notes and any commissions or
concessions received by any such persons may be deemed to be underwriting
compensation under the Securities Act. The Letter of Transmittal states that, by
acknowledging that it will deliver and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. By acceptance of the Exchange Offer, each
broker-dealer that receives New Notes pursuant to the Exchange Offer hereby
agrees to notify us prior to using this Prospectus in connection with the sale
or transfer of New Notes, and acknowledges and agrees that, upon receipt of
notice from us of the happening of any event which makes any statement in this
Prospectus untrue in any material respect or which requires the making of any
changes in this Prospectus in order to make the statements herein not misleading
(which notice we agree to deliver promptly to such broker-dealer), such
broker-dealer will suspend use of this Prospectus until we have amended or
supplemented the Prospectus to correct such misstatement or omission and have
furnished copies of the amended or supplemented prospectus to such
broker-dealer.
For a period of 180 days after the Expiration Date, we will promptly send
additional copies of this Prospectus and any amendment or supplement to this
Prospectus to any broker-dealer that requests such documents in the Letter of
Transmittal. We have agreed to pay all expenses incident to the Exchange Offer
(including the expenses of any one special counsel for the holders of the Notes)
other than commissions or concessions of any brokers or dealers and will
indemnify the holders of the Notes participating in the Exchange Offer
(including any broker-dealers) against certain liabilities, including
liabilities under the Securities Act.
LEGAL MATTERS
Certain legal matters in connection with the New Notes offered hereby will
be passed upon for the Company by Cahill Gordon & Reindel (a partnership
including a professional corporation), New York, New York.
EXPERTS
The audited consolidated financial statements incorporated by reference in
this Prospectus and elsewhere in the Registration Statement have been audited by
Arthur Andersen LLP, independent public accountants, as indicated in their
report with respect thereto, and are incorporated herein in reliance upon the
authority of said firm as experts in giving said report.
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<PAGE> 87
WHERE YOU CAN FIND MORE INFORMATION
We filed with the Commission a registration statement on Form S-4 (herein,
together with all amendments and exhibits, referred to as the "Registration
Statement") under the Securities Act with respect to the New Notes offered
hereby. This Prospectus, which forms a part of the Registration Statement, does
not contain all of the information set forth in the Registration Statement and
the exhibits and schedules thereto, certain parts of which are omitted in
accordance with the rules and regulations of the Commission. For more
information about the Company and the New Notes offered by this Prospectus,
reference is made to the Registration Statement and its exhibits and schedules.
Any statements made in this Prospectus concerning the provisions of certain
documents may be incomplete and, in each instance, reference is made to the copy
of such document filed as an exhibit to the Registration Statement otherwise
filed with the Commission.
We file annual, quarterly and special reports, proxy statements and other
information with the Securities and Exchange Commission (the" Commission"). The
Registration Statement, its exhibits and such reports, proxy statements and
other information can be inspected and copied at the public reference facilities
maintained by the Commission at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the following Regional Offices of the Commission:
New York Regional Office, Seven World Trade Center, 13th Floor, New York, New
York 10048; and Chicago Regional Office, Citicorp Center, 500 West Madison
Street, 14th Floor, Chicago, Illinois 60601. Copies of such material can be
obtained from the Public Reference Section of the Commission, Judiciary Plaza,
450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates. The
Commission also maintains an Internet Web Site at http://www.sec.gov that
contains reports and other information. Our common stock is traded on the New
York Stock Exchange under the symbol "CGO" and reports, proxy statements and
other information concerning the Company can be inspected at the New York Stock
Exchange, 20 Broad Street, New York, New York 10005.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
Our Annual Report on Form 10-K for the fiscal year ended December 31, 1997,
our Quarterly Reports on Form 10-Q for the quarters ended March 31, 1998, June
30, 1998, and September 30, 1998, each of which has been filed with the
Commission, are hereby incorporated in this Prospectus by reference.
All documents we file pursuant to Section 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934, as amended, 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.
We undertake 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).
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<PAGE> 88
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
, 1999
[ATLASAIR LOGO]
[ATLASAIR LOGO]
$150,000,000
9 3/8% SENIOR NOTES DUE 2006
--------------------
PROSPECTUS
--------------------
- --------------------------------------------------------------------------------
We have not authorized any dealer, salesperson or other person to give you
written information other than this Prospectus or to make representations as to
matters not stated in this Prospectus. You must not rely on unauthorized
information. This Prospectus is not an offer to sell these securities or our
solicitation of your offer to buy the securities in any jurisdiction where that
would not be permitted or legal. Neither the delivery of this Prospectus nor any
sales made hereunder after the date of this Prospectus shall create an
implication that the information contained herein or the affairs of the Company
have not changed since the date hereof.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 89
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>
+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 -- Opinion of Cahill Gordon & Reindel as to the legality of
the New Notes.
+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.
***10.52 -- 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.
***/****10.55 -- 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.
</TABLE>
II-1
<PAGE> 90
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
**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.
**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)
**10.75 -- 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.
</TABLE>
II-2
<PAGE> 91
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
*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.
++10.90 -- 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.
</TABLE>
II-3
<PAGE> 92
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
++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.
++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).
****/*****10.114 -- Engine Maintenance Agreement between the Company and GE
Engine Services, Inc.
****/*****10.115 -- Engine Maintenance Agreement between the Company and GE
Engine Services, Inc.
****/*****10.116 -- General Terms Agreement between the Company and General
Electric Company dated June 6, 1997.
10.117 -- Form of Indenture, dated November 18, 1998, between the
Company and State Street Bank and Trust Company, as
Trustee, relating to the 9 3/8% Senior Notes (with form
of Note attached as exhibit thereto).
++21.1 -- Subsidiaries of the Registrant.
23.1 -- Consent of Independent Public Accountants.
23.2 -- Consent of Cahill Gordon & Reindel (included in Exhibit
5).
</TABLE>
II-4
<PAGE> 93
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
24.1 -- Powers of Attorney (set forth on the signature page of
the Registration Statement).
25 -- Statement of Eligibility of Trustee for the 9 3/8% Senior
Notes.
</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-4 (No. 333-51819).
* 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.
***** Incorporated by reference to the exhibits to the Company's Registration
Statement on Form S-4 (No. 333-56391).
(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.
II-5
<PAGE> 94
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> 95
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 11th day of February, 1999.
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, and 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 February 11, 1999
- ----------------------------------------------------- Executive Officer,
Michael A. Chowdry President and Director
/s/ RICHARD H. SHUYLER Executive Vice President -- February 11, 1999
- ----------------------------------------------------- Strategic Planning,
Richard H. Shuyler Treasurer and Director
/s/ STEPHEN C. NEVIN Vice President and Chief February 11, 1999
- ----------------------------------------------------- Financial Officer
Stephen C. Nevin
/s/ BERL BERNHARD Director February 11, 1999
- -----------------------------------------------------
Berl Bernhard
/s/ LAWRENCE W. CLARKSON Director February 11, 1999
- -----------------------------------------------------
Lawrence W. Clarkson
/s/ DAVID K.P. LI Director February 11, 1999
- -----------------------------------------------------
David K.P. Li
/s/ DAVID T. MCLAUGHLIN Director February 11, 1999
- -----------------------------------------------------
David T. McLaughlin
/s/ BRIAN ROWE Director February 11, 1999
- -----------------------------------------------------
Brian Rowe
</TABLE>
II-7
<PAGE> 96
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
+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 -- Opinion of Cahill Gordon & Reindel as to the legality of
the New Notes.
+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.
***10.52 -- 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.
***/****10.55 -- 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.
</TABLE>
<PAGE> 97
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
**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.
**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)
**10.75 -- 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.
</TABLE>
<PAGE> 98
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
**10.87 -- Aircraft General Terms Agreement between The Boeing
Company and the Company dated June 6, 1997.
++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.
++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.
</TABLE>
<PAGE> 99
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
++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).
****/*****10.114 -- Engine Maintenance Agreement between the Company and GE
Engine Services, Inc.
****/*****10.115 -- Engine Maintenance Agreement between the Company and GE
Engine Services, Inc.
****/*****10.116 -- General Terms Agreement between the Company and General
Electric Company dated June 6, 1997.
10.117 -- Form of Indenture, dated November 18, 1998, between the
Company and State Street Bank and Trust Company, as
Trustee, relating to the 9 3/8% Senior Notes (with form
of Note attached as exhibit thereto).
++21.1 -- Subsidiaries of the Registrant.
23.1 -- Consent of Independent Public Accountants.
23.2 -- Consent of Cahill Gordon & Reindel (included in Exhibit
5).
24.1 -- Powers of Attorney (set forth on the signature page of
the Registration Statement).
25 -- Statement of Eligibility of Trustee for the 9 3/8% Senior
Notes.
</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-4 (No. 333-51819).
* 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.
<PAGE> 1
EXHIBIT 5
February 11, 1999
(212) 701-3000
Atlas Air, Inc.
538 Commons Drive
Golden, Colorado 80401
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
February 11, 1999 and relating to the registration pursuant to the provisions
of the Securities Act of 1933, as amended (the "Act"), of up to $150,000,000
principal amount of 9 3/8% Notes due 2006 (the "New Notes"). The New Notes,
which upon effectiveness of the Registration Statement will be registered under
the Act, will be issued in exchange for a like principal amount of the
Company's outstanding 9 3/8% Notes due 2006 (the "Old Notes"), which are not
registered under the Act. The New Notes will be issued pursuant to an Indenture
(the "Indenture") dated as of November 18, 1998, between the Company and State
Street Bank & 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 qualifications stated herein,
we are of the opinion that:
<PAGE> 2
-2-
The New Notes have been duly authorized for issuance and, when duly
executed, authenticated, registered, issued and delivered in exchange for Old
Notes of like principal amount, in accordance with the terms of the Indenture
and as contemplated by the Registration Statement, will constitute valid and
binding obligations of the Company, enforceable against the Company in
accordance with their terms and entitled to the benefits of the Indenture,
subject to applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance and similar laws affecting creditors' rights and remedies
generally and subject to general principals 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 whose consent is required under said Section 7
or under the rules and regulations of the Commission thereunder.
Very truly yours,
/s/ CAHILL GORDON & REINDEL
<PAGE> 1
Exhibit 10.117
================================================================================
ATLAS AIR, INC.
as Issuer
and
STATE STREET BANK AND TRUST COMPANY
as Trustee
---------------------------
INDENTURE
Dated as of November 18, 1998
---------------------------
$150,000,000
9 3/8% SENIOR NOTES DUE 2006, SERIES A
9 3/8% SENIOR NOTES DUE 2006, SERIES B
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I
Definitions and Incorporation by Reference...................................................... 1
SECTION 1.1. Definitions........................................................................ 1
SECTION 1.2. Other Definitions.................................................................. 17
SECTION 1.3. Incorporation by Reference of Trust Indenture Act.................................. 17
SECTION 1.4. Rules of Construction.............................................................. 18
ARTICLE II
The Securities.................................................................................. 18
SECTION 2.1. Form and Dating.................................................................... 18
SECTION 2.2. Execution and Authentication....................................................... 20
SECTION 2.3. Registrar and Paying Agent......................................................... 20
SECTION 2.4. Paying Agent to Hold Money in Trust................................................ 21
SECTION 2.5. Securityholder Lists............................................................... 21
SECTION 2.6. Transfer and Exchange.............................................................. 22
SECTION 2.7. Replacement Securities............................................................. 22
SECTION 2.8. Outstanding Securities............................................................. 23
SECTION 2.9. Treasury Securities................................................................ 23
SECTION 2.10. Temporary Securities.............................................................. 23
SECTION 2.11. Cancellation...................................................................... 23
SECTION 2.12. Defaulted Interest................................................................ 24
SECTION 2.13. CUSIP Number...................................................................... 24
SECTION 2.14. Deposit of Moneys................................................................. 24
SECTION 2.15. Restrictive Legends............................................................... 24
SECTION 2.16. Book-Entry Provisions for Global Security......................................... 26
SECTION 2.17. Special Transfer Provisions....................................................... 28
SECTION 2.18. Persons Deemed Owners............................................................. 30
SECTION 2.19. Record Date....................................................................... 30
ARTICLE III
Redemption...................................................................................... 30
SECTION 3.1. Notices to Trustee................................................................. 30
SECTION 3.2. Selection of Securities to be Redeemed............................................. 31
SECTION 3.3. Notice of Redemption............................................................... 31
SECTION 3.4. Effect of Notice of Redemption..................................................... 32
</TABLE>
(i)
<PAGE> 3
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 3.5. Deposit of Redemption Price........................................................ 32
SECTION 3.6. Securities Redeemed in Part........................................................ 33
SECTION 3.7. Optional Redemption................................................................ 33
SECTION 3.8. Mandatory Redemption............................................................... 33
SECTION 3.9. Offer to Purchase by Application of Excess Proceeds................................ 33
ARTICLE IV
Covenants....................................................................................... 35
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................................................................ 40
SECTION 4.8. Limitation on Asset Sales and Disposition of Proceeds of Asset Sales............... 41
SECTION 4.9. Change of Control.................................................................. 42
SECTION 4.10. Limitation on Guarantees of Indebtedness by Subsidiaries.......................... 43
SECTION 4.11. Limitation on Dividend and Other Payment Restrictions Affecting Subsidiaries...... 44
SECTION 4.12. Further Instruments and Acts...................................................... 45
SECTION 4.13. Use of Proceeds................................................................... 45
SECTION 4.14. Compliance Certificates........................................................... 45
SECTION 4.15. Maintenance of Office or Agency................................................... 45
SECTION 4.16. Taxes............................................................................. 46
SECTION 4.17. Stay, Extension and Usury Laws.................................................... 46
SECTION 4.18. Corporate Existence............................................................... 46
ARTICLE V
Surviving Entity................................................................................ 47
SECTION 5.1. Limitations on Consolidations, Mergers and Sales of Assets......................... 47
ARTICLE VI
Defaults and Remedies........................................................................... 48
SECTION 6.1. Events of Default.................................................................. 48
SECTION 6.2. Acceleration....................................................................... 50
SECTION 6.3. Other Remedies..................................................................... 50
SECTION 6.4. Waiver of Past Defaults............................................................ 50
SECTION 6.5. Control by Majority................................................................ 51
SECTION 6.6. Limitation on Suits................................................................ 51
</TABLE>
(ii)
<PAGE> 4
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 6.7. Rights of Holders to Receive Payment............................................... 51
SECTION 6.8. Collection Suit by Trustee......................................................... 51
SECTION 6.9. Trustee May File Proofs of Claim................................................... 52
SECTION 6.10. Priorities........................................................................ 52
SECTION 6.11. Undertaking for Costs............................................................. 52
ARTICLE VII
Trustee......................................................................................... 52
SECTION 7.1. Duties of Trustee.................................................................. 52
SECTION 7.2. Rights of Trustee.................................................................. 53
SECTION 7.3. Individual Rights of Trustee....................................................... 54
SECTION 7.4. Trustee's Disclaimer............................................................... 54
SECTION 7.5. Notice of Defaults................................................................. 55
SECTION 7.6. Reports by Trustee to Holders...................................................... 55
SECTION 7.7. Compensation and Indemnity......................................................... 55
SECTION 7.8. Replacement of Trustee............................................................. 56
SECTION 7.9. Successor Trustee by Merger........................................................ 57
SECTION 7.10. Eligibility; Disqualification..................................................... 57
SECTION 7.11. Preferential Collection of Claims Against Company................................. 57
ARTICLE VIII
Discharge of Indenture; Defeasance............................................................. 57
SECTION 8.1. Discharge of Liability on Securities; Defeasance.................................. 57
SECTION 8.2. Conditions to Defeasance.......................................................... 59
SECTION 8.3. Application of Trust Money........................................................ 60
SECTION 8.4. Repayment to Company.............................................................. 60
SECTION 8.5. Indemnity for U.S. Government Obligations......................................... 60
SECTION 8.6. Reinstatement..................................................................... 61
ARTICLE IX
Amendments..................................................................................... 61
SECTION 9.1. Without Consent of Holders........................................................ 61
SECTION 9.2. With Consent of Holders........................................................... 62
SECTION 9.3. Compliance with Trust Indenture Act............................................... 64
SECTION 9.4. Revocation and Effect of Consents and Waivers..................................... 64
SECTION 9.5. Notation on or Exchange of Securities............................................. 64
SECTION 9.6. Trustee to Sign Amendments........................................................ 64
</TABLE>
(iii)
<PAGE> 5
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE X
Miscellaneous................................................................................... 64
SECTION 10.1. Trust Indenture Act Controls...................................................... 64
SECTION 10.2. Notices........................................................................... 65
SECTION 10.3. Communication by Holders with Other Holders....................................... 65
SECTION 10.4. Certificate and Opinion as to Conditions Precedent................................ 66
SECTION 10.5. Statements Required in Certificate or Opinion..................................... 66
SECTION 10.6. When Securities Disregarded....................................................... 66
SECTION 10.7. Rules by Trustee, Paying Agent and Registrar...................................... 66
SECTION 10.8. Legal Holidays.................................................................... 67
SECTION 10.9. Governing Law..................................................................... 67
SECTION 10.10. No Recourse Against Others....................................................... 67
SECTION 10.11. Successors....................................................................... 67
SECTION 10.12. Multiple Originals............................................................... 67
SECTION 10.13. Variable Provisions.............................................................. 67
SECTION 10.14. Qualification of Indenture....................................................... 67
SECTION 10.15. Table of Contents; Headings...................................................... 67
SECTION 10.16. Severability..................................................................... 67
SECTION 10.17. No Adverse Interpretation of Other Agreements.................................... 68
Exhibit A - Form of Series A Security.......................................................... A-1
EXHIBIT A-2 Regulation S Global Note Legend.................................................... A-2
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>
SCHEDULE A Exchanges of Portions
- --------------
Note: This Table of Contents shall not, for any purpose, be deemed to be part of
the Indenture.
(iv)
<PAGE> 6
CROSS-REFERENCE TABLE
---------------------
TIA Indenture
Section Section
- ------- -------
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
317(a)(1)...................................................... 6.8
(a)(2).................................................... 6.9
(b)....................................................... 2.4
318(a)......................................................... 10.1
N.A. means Not Applicable
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Note: This Cross-Reference Table shall not, for any purpose, be deemed to be a
part of the Indenture
<PAGE> 7
INDENTURE dated as of November 18, 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 $150,000,000 aggregate principal amount of 9 3/8% Senior Notes due 2006
(the "Initial Securities") and $150,000,000 aggregate principal amount of 9 3/8%
Senior Notes due 2006 (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 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
<PAGE> 8
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.
"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
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<PAGE> 9
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.
"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.
-3-
<PAGE> 10
"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 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
-4-
<PAGE> 11
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 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.
-5-
<PAGE> 12
"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 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.
-6-
<PAGE> 13
"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 3/8% Senior Notes due 2006,
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 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
-7-
<PAGE> 14
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.
"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.
-8-
<PAGE> 15
"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 November 15, 2006.
"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.
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<PAGE> 16
"Offering Memorandum" means the Offering Memorandum dated
November 13, 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.
"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
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<PAGE> 17
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;
(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;
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<PAGE> 18
(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;
(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
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<PAGE> 19
have been duly initiated for the review of such judgment, decree or
order shall not have 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.
"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.
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<PAGE> 20
"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 November 18, 1998, between the Company and
Placement Agents.
"Regulation S" means Regulation S under the Securities Act.
"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
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<PAGE> 21
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.
"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
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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) 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 con-
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<PAGE> 23
dition 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.
Defined in
Term Section
- ---- -------
"AI Global Note".............................................. 2.1
"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
"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
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.
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<PAGE> 24
"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;
(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,
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<PAGE> 25
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, or the
records of DTC or its nominee, as the case may be, as hereinafter provided (or
by the issue of a further Rule 144A Global Note), in connection with a
corresponding decrease or increase in the aggregate principal amount of the
Regulation S Global Note or the AI Global Note or in consequence of the issue of
Exchange Securities or additional Rule 144A Global Notes, 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"). 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, or the records of DTC or its nominee, as the case
may be, as hereinafter provided (or by the issue of a further Regulation S
Global Note), in connection with a corresponding decrease or increase in the
aggregate principal amount of the Rule 144A Global Note or the AI Global Note or
in consequence of the issue of Exchange Securities or additional Regulation S
Notes, as hereinafter provided. Securities offered and sold to Accredited
Investors 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
"AI Global Note" and together with the Regulation S Global Note and the Rule
144A Global Note, the "Global Notes"), deposited with the Trustee, as custodian
for the Depositary, duly executed by the Company and authenticated by the
Trustee as hereinafter provided. The aggregate principal amount of the AI 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, or the records of DTC
or its nominee, as the case may be, as hereinafter provided (or by the issue of
a further AI Global Note), in connection with a corresponding decrease or
increase in the aggregate principal amount of the Rule 144A Global Note or the
Regulation S Global Note or in consequence of the issue of Exchange Securities
or additional AI Global Notes, as hereinafter provided.
Securities issued in exchange for interests in the Rule 144A
Global Note, the Regulation S Global Note or the AI Global Note pursuant to
Section 2.16 and 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
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<PAGE> 26
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 $150,000,000, 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 $150,000,000.
(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 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)
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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
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
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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.
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.
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(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.
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 2.2, 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,
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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 2.7 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.
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
November 18, 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
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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 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.
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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 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 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.
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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.
(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.
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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
November 18, 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 November 18,
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 or the AI Global Note,
as the case may be, 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, 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 or the AI Global Note, as
the case may be, in an amount equal to the principal amount of the
beneficial interest in the Rule 144A Global Note or AI Global Note, as
the case may be, to be transferred.
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(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 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.
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(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 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.
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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, postage prepaid, 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:
(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;
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(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
(9) 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 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.
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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.
SECTION 3.7 Optional Redemption. (a) Except as provided in
Section 3.7(b), the Securities will not be redeemable at the option of the
Company prior to November 15, 2002. On and after such date, the Securities will
be redeemable, at the Company's option, in whole or in part upon not less than
30 nor more than 60 days' notice, at the following redemption prices (expressed
in percentages of principal amount), plus accrued and unpaid interest, if any,
thereon to the Redemption Date, if redeemed during the twelve-month period
beginning on November 15 of the years indicated below (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>
Redemption
Period Price
- ------ ----------
<S> <C>
2002................................................................ 104.688%
2003................................................................ 103.125%
2004................................................................ 101.563%
2005 and thereafter................................................. 100.000%
</TABLE>
(b) Notwithstanding the foregoing, on or prior to November 15,
2001, the Company may redeem up to 35% of the aggregate principal amount of
Securities originally issued under this Indenture at a redemption price of 109
3/8% of the principal amount thereof, plus accrued and unpaid interest, if any,
thereon to the Redemption Date, with the net cash proceeds of one or more
offerings of Equity Interests (other than Disqualified Stock) of the Company;
provided that (i) at least 65% of the aggregate principal amount of Securities
originally issued under this Indenture remains outstanding immediately after the
occurrence of such redemption (excluding Securities held by the Company and its
Subsidiaries) and (ii) each such redemption shall occur within 60 days of the
date of the closing of each such offering.
SECTION 3.8 Mandatory Redemption. Except as set forth in
Section 3.9 and Section 4.9 the Company is not required to make mandatory
redemption or sinking fund payments with respect to the Securities.
SECTION 3.9 Offer to Purchase by Application of Excess
Proceeds. In the event that, pursuant to Section 4.8 hereof, the Company shall
be required to commence an offer to all Holders to purchase securities, notice
of such offer shall contain all instructions and materials necessary to enable
such Securityholders to tender Securities pursuant to the Excess Proceeds Offer
and shall follow the procedures specified below:
The Excess Proceeds Offer shall remain open for a period of 20
Business Days following its commencement and no longer, except to the extent
that a longer period is required by applicable law (the "Offer Period"). No
later than five Business Days after the termination of
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the Offer Period (the "Proceeds Purchase Date"), the Company shall purchase the
principal amount of Securities required to be purchased pursuant to Section 4.8
hereof (the "Offer Amount") or, if less than the Offer Amount has been tendered,
all Securities tendered in response to the Excess Proceeds Offer. Payment for
any Securities so purchased shall be made in the same manner as interest
payments are made.
If the Proceeds Purchase Date is on or after an interest
Record Date and on or before the related Interest Payment Date, any accrued and
unpaid interest, if any, shall be paid to the Person in whose name Security is
registered at the close of business on such Record Date, and no additional
interest, if any, shall be payable to Holders who tender Securities pursuant to
the Excess Proceeds Offer.
Upon the commencement of an Excess Proceeds Offer, the Company
shall send, by first class mail, a notice to the Trustee and each of the
Holders, with a copy to the Trustee. The notice shall contain all instructions
and materials necessary to enable such Holders to tender Securities pursuant to
the Excess Proceeds Offer. The Excess Proceeds Offer shall be made to all
Holders. The notice, which shall govern the terms of the Excess Proceeds Offer,
shall state:
(1) that the Excess Proceeds Offer is being made pursuant to
this Section 3.9 and 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);
(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
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<PAGE> 41
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 the Proceeds Purchase Date for any Excess Proceeds Offer,
the Company shall (i) accept for payment the maximum principal amount of
Securities tendered pursuant to such Excess Proceeds Offer that can be purchased
out of Excess Proceeds from such Asset Sales, (ii) deposit with the Paying Agent
the aggregate purchase price of all Securities accepted for payment and any
accrued and unpaid interest, on such Securities as of the Proceeds Purchase
Date, and (iii) deliver or cause to be delivered to the Trustee all Securities
tendered pursuant to the Excess Proceeds Offer. If less than all Securities
tendered pursuant to any Excess Proceeds Offer are accepted for payment by the
Company for any reason, selection of the Securities to be purchased by the
Trustee shall be in compliance with the requirements of the principal national
securities exchange, if any, on which the Securities are listed as certified to
the Trustee by the Company or, if the Securities are not so listed, by lot or by
such method as the Trustee shall deem fair and appropriate; provided that
Securities accepted for payment in part shall only be purchased in integral
multiples of $1,000. The Paying Agent shall promptly mail to each Holder of
Securities accepted for payment an amount equal to the purchase price for such
Securities plus any accrued and unpaid interest and the Trustee shall promptly
authenticate and mail to such Holder of Securities accepted for payment in part
a new Security equal in principal amount to any unpurchased portion of the
Securities, and any Security not accepted for payment in whole or in part shall
be promptly returned to the Holder of such Security. On and after a Proceeds
Purchase Date, interest shall cease to accrue on the Securities accepted for
payment. The Company shall announce the results of the Offer to holders of the
Securities on or as soon as practicable after the Proceeds Purchase Date.
Any amounts remaining after the purchase of the Securities
pursuant to an Excess Proceeds Offer shall be returned by the Trustee to the
Company.
Other than as specifically provided in this Section 3.9, any
purchase pursuant to this Section 3.9 shall be made pursuant to the provisions
of Sections 3.1 through 3.6 hereof.
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
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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 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,
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<PAGE> 43
however, that pro forma effect shall not be given to a number of ACMI Contracted
Aircraft exceeding five in any four fiscal quarters.
(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
(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
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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
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;
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(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 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 require-
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<PAGE> 46
ments 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) 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 this 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 than 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.
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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 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 para-
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graph 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) 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.
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 Offer;
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;
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(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;
(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
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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.
(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.
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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."
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
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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 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.
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ARTICLE V
Surviving Entity
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;
(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
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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;
(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;
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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 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.
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.
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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.
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.
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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.
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
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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
(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):
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(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 10.5. 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 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
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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.
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
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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 willful 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 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.
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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, 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
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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.
(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
docu-
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ment 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.
(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
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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 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.
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
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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;
(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
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(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:
(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;
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(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 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.
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<PAGE> 70
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 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
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<PAGE> 71
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.
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
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<PAGE> 72
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;
(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.
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<PAGE> 73
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.
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,
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<PAGE> 74
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.
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<PAGE> 75
IN WITNESS WHEREOF, the parties have caused this Indenture to
be duly executed as of the date first written above.
ATLAS AIR, INC.
By:
--------------------------------
Name:
Title:
STATE STREET BANK AND TRUST COMPANY,
as Trustee
By:
--------------------------------
Name:
Title:
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<PAGE> 76
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 IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT. AS USED HEREIN, THE TERMS "OFFSHORE
<PAGE> 77
Exhibit A
Page 2
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.
<PAGE> 78
Exhibit A
Page 3
CUSIP No:_____
(Front of Security)
No.___ $___________
ATLAS AIR, INC.
9 3/8% Senior Notes due 2006
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 $____________ on November 15, 2006.
Interest Payment Dates: May 15, and November 15, commencing
May 15, 1999.
Record Dates: __________ and __________ (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
<PAGE> 79
Exhibit A
Page 4
(Reverse of Security)
ATLAS AIR, INC.
9 3/8% SENIOR NOTE DUE 2006
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
3/8%. The Company will pay interest semiannually in arrears on May 15 and
November 15 of each year (each an "Interest Payment Date"), commencing May 15,
1999, 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 November 18, 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 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
<PAGE> 80
Exhibit A
Page 5
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
$150,000,000 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 November
15, 2002. 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
November 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>
Redemption
Year Price
---- -----
<S> <C> <C>
2002.............................................................. 104.688%
2003.............................................................. 103.125%
2004.............................................................. 101.563%
2005 and thereafter............................................... 100.000%
</TABLE>
(b) Optional Redemption upon Public Offerings. In addition, at
any time on or prior to November 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 3/8% 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.
6. Mandatory Redemption. The Securities are not subject to
mandatory redemption or sinking fund payments.
<PAGE> 81
Exhibit A
Page 6
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 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
<PAGE> 82
Exhibit A
Page 7
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, 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
<PAGE> 83
Exhibit A
Page 8
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 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.
<PAGE> 84
Exhibit A
Page 9
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
<PAGE> 85
Exhibit A
Page 10
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:
- -------------------------------
(Signatures must be guaranteed by an "eligible
guarantor institution" meeting the requirements of
the Registrar, which requirements will include
membership participation in the Securities
Transfer Agents Medallion Program ("STAMP") or
such other "signature guarantee program" as may be
determined by the Registrar in addition to, or in
substitution for, STAMP, all in accordance with
the Securities Exchange Act of 1934, as amended.)
<PAGE> 86
Exhibit A
Page 11
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:
- --------------------------
(Signatures must be guaranteed by an
"eligible guarantor institution" meeting
the requirements of the Registrar, which
requirements will include membership
participation in the Securities Transfer
Agents Medallion Program ("STAMP") or
such other "signature guarantee program"
as may be determined by the Registrar in
addition to, or in substitution for,
STAMP, all in accordance with the
Securities Exchange Act of 1934, as
amended.)
<PAGE> 87
EXHIBIT A-2
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 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.
<PAGE> 88
Exhibit A-2
Page 2
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.
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.
<PAGE> 89
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.
<PAGE> 90
Exhibit B
Page 2
CUSIP No:
(Front of Security)
No. ___ $___________
ATLAS AIR, INC.
9 3/8% Senior Notes due 2006
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 $_____________ on November 15,
2006.
Interest Payment Dates: May 15 and November 15, commencing May
15, 1999.
Record Dates: __________ and __________ (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
<PAGE> 91
Exhibit B
Page 3
(Reverse of Security)
ATLAS AIR, INC.
9 3/8% SENIOR NOTE DUE 2006
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
3/8%. The Company will pay interest semiannually in arrears on May 15 and
November 15 of each year (each an "Interest Payment Date"), commencing May 15,
1999, 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 November 18, 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 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
<PAGE> 92
Exhibit B
Page 4
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 $150,000,000 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 November
15, 2002. 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
November 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>
Redemption
Year Price
---- -----
<S> <C> <C>
2002.............................................................. 104.688%
2003.............................................................. 103.125%
2004.............................................................. 101.563%
2005 and thereafter............................................... 100.000%
</TABLE>
(b) Optional Redemption Upon Public Offerings. In addition, at
any time on or prior to November 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 3/8% 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.
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
<PAGE> 93
Exhibit B
Page 5
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 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
<PAGE> 94
Exhibit B
Page 6
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.
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.
<PAGE> 95
Exhibit B
Page 7
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:
Atlas Air, Inc.
538 Commons Drive
Golden, Colorado 80401
Attention: Chief Financial Officer
<PAGE> 96
Exhibit B
Page 8
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:
- --------------------------
(Signatures must be guaranteed by an
"eligible guarantor institution" meeting
the requirements of the Registrar, which
requirements will include membership
participation in the Securities Transfer
Agents Medallion Program ("STAMP") or
such other "signature guarantee program"
as may be determined by the Registrar in
addition to, or in substitution for,
STAMP, all in accordance with the
Securities Exchange Act of 1934, as
amended.)
<PAGE> 97
Exhibit B
Page 9
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:
- --------------------------
(Signatures must be guaranteed by an
"eligible guarantor institution" meeting
the requirements of the Registrar, which
requirements will include membership
participation in the Securities Transfer
Agents Medallion Program ("STAMP") or
such other "signature guarantee program"
as may be determined by the Registrar in
addition to, or in substitution for,
STAMP, all in accordance with the
Securities Exchange Act of 1934, as
amended.)
<PAGE> 98
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 3/8% Senior Notes due 2006
Ladies and Gentlemen:
In connection with our proposed purchase of 9 3/8% Senior
Notes due 2006 (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 November 13, 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 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
<PAGE> 99
Exhibit C
Page 2
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:
<PAGE> 100
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 3/8% Senior Notes due 2006 (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.
<PAGE> 101
Exhibit D
Page 2
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
<PAGE> 102
SCHEDULE A
Exchanges of portions of this Global Security for definitive
Securities and of definitive Securities for portions of this Global Security:
<TABLE>
<CAPTION>
Amount of Amount of increase Principal Amount of
decrease in in Principal Amount this Global Security Signature of
Principal Amount of of the Global following such authorized officer
Date of Transaction the Global Security Security decrease (or increase) of Trustee
------------------- ------------------- -------- ---------------------- ------------------
<S> <C> <C> <C> <C>
------- ------------- ------------ -------------- -------------
------- ------------- ------------ -------------- -------------
------- ------------- ------------ -------------- -------------
------- ------------- ------------ -------------- -------------
------- ------------- ------------ -------------- -------------
------- ------------- ------------ -------------- -------------
------- ------------- ------------ -------------- -------------
------- ------------- ------------ -------------- -------------
------- ------------- ------------ -------------- -------------
------- ------------- ------------ -------------- -------------
</TABLE>
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this Registration Statement on Form S-4 of our reports dated
February 13, 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
February 11, 1999
Denver, Colorado
<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE
TRUST INDENTURE ACT OF l939 OF A CORPORATION
DESIGNATED TO ACT AS TRUSTEE
|_| CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO SECTION 305(B)(2)
STATE STREET BANK AND TRUST COMPANY
(Exact name of trustee as specified in its charter)
Massachusetts 04-1867445
(State of incorporation if (I.R.S. Employer
not a national bank Identification No.)
225 Franklin Street, Boston, Massachusetts 02110
(Address of principal executive offices) (Zip Code)
John R. Towers, Executive Vice President and General Counsel,
225 Franklin Street, Boston, Massachusetts 02110
(617) 654-3253
(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 or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
538 Commons Drive, Golden, Colorado 80401
(Address of principal executive offices) (Zip Code)
9 3/8% Senior Notes due 2006
(Title of the indenture securities)
<PAGE> 2
Item l. 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:
Department of Banking and Insurance of
The Commonwealth of Massachusetts
100 Cambridge Street
Boston, Massachusetts
Board of Governors of the Federal Reserve System
Washington, D.C.
Federal Deposit Insurance Corporation
Washington, D.C.
(b) Whether it is authorized to exercise corporate trust powers:
The trustee is so authorized.
Item 2. Affiliations with obligor. If the obligor is an affiliate of the
trustee, describe each such affiliation.
None with respect to the trustee or its parent, State Street
Corporation.
Item l6. List of exhibits. List below all exhibits filed as a part of
this statement of eligibility and qualification.
l. A copy of the Articles of Association of the trustee
as now in effect.
A copy of the Articles of Association of the trustee, as
now in effect, is on file with the Securities and Exchange
Commission as Exhibit 1 to Amendment No. 1 to the
Statement of Eligibility and Qualification of Trustee
(Form T-1) filed with Registration Statement of Morse
Shoe, Inc. (File No. 22-17940) and is incorporated herein
by reference thereto.
2. A copy of the Certificate of Authority of the trustee
to do Business.
A copy of a Statement from the Commissioner of Banks of
Massachusetts that no certificate of authority for the
trustee to commence business was necessary or issued is on
file with the Securities
-2-
<PAGE> 3
and Exchange Commission as Exhibit 2 to Amendment No.
1 to the Statement of Eligibility and Qualification
of Trustee (Form T-1) filed with Registration
Statement of Morse Shoe, Inc. (File No. 22-17940) and
is incorporated herein by reference thereto.
3. A copy of the Certification of Fiduciary Powers of
the Trustee.
A copy of the authorization of the trustee to
exercise corporate trust powers is on file with the
Securities and Exchange Commission as Exhibit 3 to
Amendment No. 1 to the Statement of Eligibility and
Qualification of Trustee (Form T-1) filed with
Registration Statement of Morse Shoe, Inc. (File No.
22-17940) and is incorporated herein by reference
thereto.
4. A copy of the By-laws of the trustee as now in
effect.
A copy of the By-Laws of the trustee, as now in
effect, is on file with the Securities and Exchange
Commission as Exhibit 4 to the Statement of
Eligibility and Qualification of Trustee (Form T-1)
filed with Registration Statement of Eastern Edison
Company (File No. 33-37823) and is incorporated
herein by reference thereto.
5. A consent of the trustee required by Section 32l(b)
of the Act is annexed hereto as Exhibit 5 and made a
part hereof.
6. A copy of the latest Consolidated Reports of
Condition of the trustee, published pursuant to law
or the requirements of its supervising or examining
authority.
A copy of the latest report of condition of the
trustee published pursuant to law or the requirements
of its supervising or examining authority is annexed
hereto as Exhibit 6 and made a part hereof.
-3-
<PAGE> 4
NOTES
Inasmuch as this Form T-l is filed prior to the ascertainment
by the trustee of all facts on which to base its answer to Item 2, the answer to
said Item is based upon incomplete information. Said Item may, however, be
considered correct unless amended by an amendment to this Form T-l.
-4-
<PAGE> 5
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of
l939, the trustee, State Street Bank and Trust Company, a Massachusetts trust
company, has duly caused this statement of eligibility and qualification to be
signed on its behalf by the undersigned, thereunto duly authorized, all in the
City of Hartford, and State of Connecticut, on the 14th day of January, 1999.
STATE STREET BANK AND TRUST
COMPANY,
Trustee
By /s/ Steven Cimalore
Name: Steven Cimalore
Title: Vice President
-5-
<PAGE> 6
EXHIBIT 5
CONSENT OF THE TRUSTEE
REQUIRED BY SECTION 321(b)
OF THE TRUST INDENTURE ACT OF 1939
The undersigned, as Trustee under an Indenture entered into between
Atlas Air, Inc. and State Street Bank and Trust Company, Trustee, does hereby
consent that, pursuant to Section 321(b) of the Trust Indenture Act of 1939,
reports of examinations with respect to the undersigned by Federal, State,
Territorial or District authorities may be furnished by such authorities to the
Securities and Exchange Commission upon request therefor.
STATE STREET BANK AND TRUST
COMPANY,
Trustee
By /s/ Steven Cimalore
Name: Steven Cimalore
Title: Vice President
Dated: January 14, 1999
<PAGE> 7
EXHIBIT 6
Consolidated Report of Condition of State Street Bank and Trust Company,
Massachusetts and foreign and domestic subsidiaries, a state banking institution
organized and operating under the banking laws of this commonwealth and a member
of the Federal Reserve System, at the close of business September 30, 1998,
published in accordance with a call made by the Federal Reserve Bank of this
District pursuant to the provisions of the Federal Reserve Act and in accordance
with a call made by the Commissioner of Banks under General Laws, Chapter 172,
Section 22(a).
<TABLE>
<CAPTION>
Thousands of
ASSETS Dollars
Cash and balances due from depository institutions:
<S> <C> <C>
Noninterest-bearing balances and currency and coin ................... 2,008,956
Interest-bearing balances ............................................ 12,286,877
Securities .................................................................... 9,654,241
Federal funds sold and securities purchased
under agreements to resell in domestic offices
of the bank and its Edge subsidiary .................................. 10,922,779
Loans and lease financing receivables:
Loans and leases, net of unearned income ....... 7,457,235
Allowance for loan and lease losses ............ 82,851
Allocated transfer risk reserve ................ 0
Loans and leases, net of unearned income and allowances .............. 7,374,384
Assets held in trading accounts ............................................... 1,898,804
Premises and fixed assets ..................................................... 513,372
Other real estate owned ....................................................... 100
Investments in unconsolidated subsidiaries .................................... 484
Customers' liability to this bank on acceptances outstanding .................. 48,563
Intangible assets ............................................................. 220,613
Other assets .................................................................. 1,333,210
-----------
Total assets .................................................................. 46,262,383
===========
LIABILITIES
Deposits:
In domestic offices .................................................. 9,557,938
Noninterest-bearing ................... 7,158,356
Interest-bearing ...................... 2,339,582
In foreign offices and Edge subsidiary ............................... 18,451,054
Noninterest-bearing ................... 429,797
Interest-bearing ...................... 18,021,257
Federal funds purchased and securities sold under
agreements to repurchase in domestic offices of
the bank and of its Edge subsidiary .................................. 12,023,438
Demand notes issued to the U.S. Treasury ...................................... 451,424
Trading liabilities .................................................. 1,582,933
Other borrowed money .......................................................... 323,782
Subordinated notes and debentures ............................................. 0
Bank's liability on acceptances executed and outstanding ...................... 48,563
Other liabilities ............................................................. 1,226,129
-----------
Total liabilities ............................................................. 43,665,261
-----------
EQUITY CAPITAL
Perpetual preferred stock and related surplus ................................. 0
Common stock .................................................................. 29,931
Surplus ....................................................................... 462,782
Undivided profits and capital reserves/Net unrealized holding gains (losses) .. 2,080,148
Net unrealized holding gains (losses) on available-for-sale securities 27,376
Cumulative foreign currency translation adjustments ........................... (3,115)
Total equity capital .......................................................... 2,597,122
-----------
Total liabilities and equity capital .......................................... 46,262,383
===========
</TABLE>
I, Rex S. Schuette, Senior Vice President and Comptroller of the above named
bank do hereby declare that this Report of Condition has been prepared in
conformance with the instructions issued by the Board of Governors of the
Federal Reserve System and is true to the best of my knowledge and belief.
Rex S. Schuette
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
David A. Spina
Marshall N. Carter
Truman S. Casner
