sv4
As filed with the Securities and Exchange
Commission on December 2, 2010
Registration
No. 333-
UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, DC 20549
Form S-4
REGISTRATION
STATEMENT
UNDER
THE SECURITIES ACT OF
1933
PHI, INC.
and the Registrant
Guarantors*
(Exact Name of Registrant as
Specified in Its Charter)
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Louisiana
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4522
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72-0395707
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(State or Other Jurisdiction
of
Incorporation or Organization)
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(Primary Standard Industrial
Classification Code Number)
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(I.R.S. Employer
Identification Number)
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2001 S.E. Evangeline Thruway
Lafayette, Louisiana 70508
(337) 235-2452
(Address, including zip code,
and telephone number, including area code, of registrants
principal executive offices)
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Michael J. McCann
Chief Financial Officer and Secretary
2001 S.E. Evangeline Thruway
Lafayette, Louisiana 70508
(337) 235-2452
(Name, address, including
zip code, and telephone number,
including area code, of agent for service)
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Copy to:
Dionne M. Rousseau
Jones, Walker, Waechter, Poitevent,
Carrère & Denègre, L.L.P.
8555 United Plaza, Suite 500
Baton Rouge, LA 70809
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Approximate date of commencement of proposed sale of
securities 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, please check
the following
box o
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. o
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. o
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See the definitions of
large accelerated filer, accelerated
filer and smaller reporting company in
Rule 12b-2
of the Exchange Act. (Check one):
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Large accelerated
filer o
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Accelerated
filer þ
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Non-accelerated
filer o
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Smaller reporting
company o
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(Do not check if a smaller reporting company)
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If applicable, place an X in the box to designate the
appropriate rule provision relied upon in conducting this
transaction:
Exchange Act Rule 13e-4(i) (Cross-Border Issuer Tender
Offer) o
Exchange Act Rule 14d-1(d) (Cross Border Third-Party Tender
Offer) o
CALCULATION
OF REGISTRATION FEE
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Proposed Maximum
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Proposed Maximum
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Amount of
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Title of Each Class of
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Amount to be
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Offering
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Aggregate
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Registration
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Securities to be Registered
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Registered(1)
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Price per Unit(1)
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Offering Price(1)
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Fee(1)
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8.625% Senior Notes due 2018
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$
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297,000,000
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100
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%
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$
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297,000,000
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$
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21,177
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Guarantees of 8.625% Senior Notes due 2018(2)
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(3
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(1)
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Estimated solely for the purpose of calculating the registration
fee pursuant to Rule 457(f) under the Securities Act of
1933.
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(2)
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Each of the subsidiaries of PHI, Inc. that is listed on the
Table of Additional Registrants on the following page has
guaranteed the notes being registered hereby.
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(3)
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No separate consideration will be received for the Guarantees
and, therefore, no additional registration fee is required.
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*
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Includes certain subsidiaries of
PHI, Inc. identified on the following page.
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The Registrants hereby amend this Registration Statement on
such date or dates as may be necessary to delay its effective
date until the Registrants 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 the Registration
Statement shall become effective on such date as the Commission,
acting pursuant to said Section 8(a), may determine.
TABLE OF
ADDITIONAL REGISTRANTS
Each of the following subsidiaries of PHI, Inc., and each other
subsidiary that is or becomes a guarantor of the securities
registered hereby, is hereby deemed to be a registrant.
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State or Other
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Primary Standard
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Jurisdiction of
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I.R.S. Employer
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Industrial
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Incorporation or
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Identification
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Classification Code
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Exact Name of Additional Registrant(1)
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Organization
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Number
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Number
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International Helicopter Transport, Inc.
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Louisiana
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72-0542540
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4522
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PHI Tech Services, Inc.
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Louisiana
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72-0835089
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4522
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Air Evac Services, Inc.
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Louisiana
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72-1404705
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4522
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PHI Air Medical, Inc.
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Louisiana
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72-1404703
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4522
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Petroleum Helicopters International, Inc.
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Louisiana
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72-1443677
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4522
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Helicopter Management, L.L.C.
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Louisiana
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03-0397562
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4522
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Helicopter Leasing, L.L.C.
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Louisiana
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03-0397710
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4522
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HELEX, L.L.C.
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Florida
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43-1991751
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4522
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Sky Leasing, L.L.C.
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Montana
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61-1462015
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4522
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Vertilease, L.L.C.
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Montana
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27-3776045
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4522
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Leasing Source, L.L.C.
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Montana
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27-3776123
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4522
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(1) |
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The address and telephone number for each Additional Registrant
is 2001 S.E. Evangeline Thruway, Lafayette, Louisiana 70508,
(337) 235-2452. |
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 these
securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not
permitted.
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SUBJECT TO COMPLETION, DATED
DECEMBER 2, 2010
PROSPECTUS
PHI, Inc.
Offer to Exchange
Up to $297,000,000 Registered
8.625% Senior Notes due 2018 for
Up to $297,000,000 Unregistered
8.625% Senior Notes due 2018
We are offering to exchange up to $297,000,000 aggregate
principal amount of 8.625% Senior Notes due 2018 that we
have registered under the Securities Act of 1933 (the
Registered Notes), for up to $297,000,000 aggregate
principal amount of 8.625% Senior Notes due 2018 initially
sold by us to UBS Securities, LLC on September 23, 2010 in
a private offering (the Unregistered Notes). In this
prospectus we refer to the Registered Notes and the Unregistered
Notes collectively as the notes.
The Exchange Offer
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We hereby offer to exchange all Unregistered Notes that are
validly tendered and not withdrawn for an equal principal amount
of Registered Notes.
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The exchange offer will expire at 5:00 p.m. New York City
time,
on , ,
unless extended.
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You may withdraw tenders of your Unregistered Notes at any time
before the exchange offer expires.
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The Registered Notes are substantially identical to the
Unregistered Notes, except that the transfer restrictions and
registration rights relating to the Unregistered Notes will not
apply to the Registered Notes.
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We believe that the exchange of Unregistered Notes will not be a
taxable event for federal income tax purposes, but you should
read Material U.S. federal income tax
considerations beginning on page for
more information.
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We will not receive any proceeds from the exchange offer.
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No public market currently exists for the Registered Notes. We
do not intend to apply for listing of the Registered Notes on
any securities exchange or to arrange for them to be quoted on
any quotation system.
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Interest on the Registered Notes will be paid at the rate of
8.625% per annum, semi-annually in cash in arrears on each April
15 and October 15, starting on April 15, 2011.
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Please see Risk factors beginning on page 15
for a discussion of factors you should consider in connection
with the exchange offer.
Each broker-dealer that receives Registered 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
Registered Notes. The letter of transmittal states that by so
acknowledging and by delivering a prospectus, a broker-dealer
will not be deemed to admit that it is an
underwriter within the meaning of the Securities
Act. This prospectus, as it may be amended or supplemented from
time to time, may be used by a broker-dealer in connection with
resales of Registered Notes received in exchange for
Unregistered Notes where such Unregistered Notes were acquired
by such broker-dealer as a result of market-making activities or
other trading activities. We have agreed that, for a period of
180 days after the date on which the registration statement
is declared effective, we will make this prospectus available to
any broker-dealer for use in connection with any such resale.
See Plan of distribution.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these
securities or passed upon the adequacy or accuracy of this
prospectus. Any representation to the contrary is a criminal
offense.
The date of this prospectus
is ,
2010.
TABLE OF
CONTENTS
TERMS
USED IN THIS PROSPECTUS
In this prospectus, PHI, the Company,
we, our and us refer to PHI,
Inc. and its subsidiaries, unless otherwise indicated.
MARKET,
RANKING AND INDUSTRY DATA
The data included in this prospectus regarding markets and
ranking, including the size of certain markets and our position
and the position of our competitors within these markets, are
based on our estimates formulated from our managements
knowledge of and experience in the markets in which we operate
and information obtained from our internal surveys, market
research, publicly available information and industry
publications. We believe these estimates to be accurate as of
the date of this prospectus. However, this information may prove
to be inaccurate because of the imprecise methods by which we
and others accumulated some of the data or because this
information cannot always be verified due to the limits on the
availability and reliability of raw data, the voluntary nature
of the data gathering process and other limitations and
uncertainties. As a result, you should be aware that market,
ranking and other industry data included in this prospectus, and
estimates and beliefs based on that data, may not be reliable.
About
this prospectus
This prospectus is part of a registration statement on
Form S-4
under the Securities Act of 1933, as amended (Securities
Act) that we filed with the Securities and Exchange
Commission (the SEC). In making your decision
whether to participate in the exchange offer, you should rely
only on the information contained in this prospectus and in the
accompanying letter of transmittal. We have not authorized any
person to provide you with different information. If anyone
provides you with different or inconsistent information, you
should not rely on it. You should not assume that the
information appearing in this prospectus is accurate as of any
date other than the date on the front cover of this prospectus.
Moreover, this prospectus does not contain all of the
information set forth in the registration statement and the
exhibits thereto. You may refer to the registration statement
and the exhibits thereto for more information. Statements made
in this prospectus regarding the contents of any contract or
document filed as an exhibit to the registration statement are
not necessarily complete and, in each instance, reference is
hereby made to the copy of such contract or document so filed.
Each such statement is qualified in its entirety by such
reference.
Available
information
We file annual, quarterly and current reports and other
information with the SEC. Our SEC filings are available to the
public over the Internet at the SECs website at
http://www.sec.gov.
You may also read and copy any document we file at the
SECs public reference room at 100 F. Street, N.E.,
Washington, D.C. 20549. Please call the SEC at
1-800-SEC-0330
for further information on the operation of its public reference
room. Both classes of our common stock are listed on The NASDAQ
Global Market. You may also inspect the information we file with
the SEC at the offices of The NASDAQ Stock Market, Reports
Section, 1735 K Street NW, Washington, D.C.
20006. The information we file with the SEC and other
information about us also is available on our website at
http://www.phihelico.com.
However, the information on our website is not a part of this
prospectus.
We are incorporating by reference the documents listed below and
any future filings made with the SEC under Sections 13(a),
13(c), 14 or 15(d) of the Securities Exchange Act of 1934
between the date of this prospectus and the closing of the
exchange offer, in each case other than information furnished to
the SEC under Item 2.02 or 7.01 of
Form 8-K
and which is not deemed filed under the Securities Exchange Act
of 1934, as amended, and is not incorporated in this prospectus:
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our Annual Report on
Form 10-K
for the year ended December 31, 2009;
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our Quarterly Reports on
Form 10-Q
for the quarters ended March 31, 2010, June 30, 2010
and September 30, 2010;
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our Current Reports on
Form 8-K
filed with the SEC on April 7, 2010, September 14,
2010, September 17, 2010 and September 23,
2010; and
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our definitive information statement on Schedule 14C
relating to our 2010 Annual Meeting of Stockholders.
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The information incorporated by reference is considered to be
part of this prospectus and information that we file later with
the SEC will automatically update and may supersede information
in this prospectus and information previously filed with the SEC.
Descriptions in this prospectus, including those contained in
the documents incorporated by reference, of contracts and other
documents are not necessarily complete and, in each instance,
reference is made to the copies of these contracts and documents
filed as exhibits to the documents incorporated by reference in
this prospectus.
This prospectus incorporates important business and financial
information about the company that is not included in or
delivered with this document. This information is available
without charge to security holders upon written or oral request.
You may review these filings, at no cost, over the Internet
ii
at our website at
http://www.phihelico.com,
or request a copy of these filings by writing or calling us as
follows:
Michael J. McCann
Chief Financial Officer
P.O. Box 90808
Lafayette, Louisiana 70509
(337) 235-2452
To obtain timely delivery of any of our filings, agreements or
other documents, you must make your request to us no later
than , ,
which is five business days prior to the expiration of the
exchange offer. In the event that we extend the exchange offer,
you must submit your request at least five business days before
the expiration date of the exchange offer, as extended. We may
extend the exchange offer in our sole discretion. We do not
currently intend to extend the expiration date. See The
exchange offer for more detailed information.
Cautionary
note regarding forward-looking statements
This prospectus contains forward-looking statements
within the meaning of Section 27A of the Securities Act of
1933 (the Securities Act) and Section 21E of
the Securities Exchange Act of 1934 (the Exchange
Act), both as amended. All statements other than
statements of historical fact are forward-looking
statements for purposes of federal and state securities
laws, including any projections of earnings, revenues or other
financial items; any statements of the plans, strategies and
objectives of management for future operations; any statements
concerning proposed new products, services or developments; any
statements regarding future economic conditions or performance;
any statements of belief; and any statements of assumptions
underlying any of the foregoing. When used herein, the words
anticipates, expects,
believes, goals, intends,
plans or projects and similar
expressions are intended to identify forward-looking statements.
Forward-looking statements are based on a number of assumptions
about future events and are subject to significant risks,
uncertainties and other factors that may cause our actual
results to differ materially from the expectations, beliefs and
estimates expressed or implied in those forward-looking
statements. Although we believe that the assumptions underlying
the forward-looking statements are reasonable, no assurance can
be given that these assumptions will prove correct or even
approximately correct. Factors that could cause our results to
differ materially from the expectations, beliefs and estimates
expressed or implied in the forward-looking statements include,
but are not limited to, the following:
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any reduction in demand for our services due to the Macondo
incident in the Gulf of Mexico and the regulatory response
thereto;
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any reduction in demand for our services due to volatility of
oil and gas prices and the level of exploration and production
activity in the Gulf of Mexico generally, which depends on
factors outside of our control such as (i) supply and
demand for oil and natural gas, (ii) actions of the
Organization of the Petroleum Exporting Countries
(OPEC) and other oil producing countries,
(iii) war, civil unrest or terrorist activities,
(iv) governmental regulation, and (v) availability and
price of alternative fuels;
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our dependence on a small number of large oil and gas industry
customers for a significant amount of our revenue and our
significant credit exposure within this industry;
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any failure to maintain our strong safety record, which would
significantly harm our ability to attract new customers and
maintain our existing customers;
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our ability to secure favorable customer contracts or otherwise
utilize newly purchased helicopters, and the effect of our new
helicopters on utilization of our existing fleet;
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the availability of capital or lease financing to acquire
aircraft;
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the availability and timely delivery of aircraft from our
suppliers;
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the availability of insurance and the fact that insurance does
not provide coverage for all potential losses, and coverage is
subject to deductibles, retentions, coverage limits and coverage
exceptions;
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weather conditions and seasonal factors such as reduced daylight
hours, tropical storms and hurricanes, specifically in the Gulf
of Mexico;
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unexpected variances in flight hours;
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early termination generally without any penalty of our fixed
term contracts by our customers or decrease without any penalty
in the number of aircraft covered under customer contracts,
which is generally permitted under contracts in our oil and gas
segment;
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increased governmental regulations, including but not limited to
regulations by the Federal Aviation Administration
(FAA) and Occupational Safety and Health
Administration (OSHA);
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competitiveness of the helicopter services business;
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the special risks of our air medical operations, including
collections risks and potential medical malpractice claims;
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political, economic and regulatory uncertainty and other risks
associated with our international operations;
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operating hazards;
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our ability to develop and implement successful business
strategies;
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our ability to attract and retain qualified personnel;
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the effect of new and proposed healthcare legislation;
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the effect on our operating costs of volatile fuel prices;
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the risk of work stoppages and other labor problems including
possible issues arising in relation to the current litigation
with the Office and Professional Employees International Union
(OPEIU), which represents our domestic pilots;
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general economic conditions and adverse market events;
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control over election of directors and substantial control over
other corporate decisions by our majority vote stockholder who
is also our Chairman of the Board and Chief Executive Officer,
which may, among other things, prevent a change in our
management or change in control of the company; and
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our substantial indebtedness and operating lease commitments,
which could adversely affect our financial condition and impair
our ability to operate our business.
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For a more detailed description of risks, see Risk
factors beginning on page 14 herein as well as those
described in Item 1A Risk Factors in our Annual
Report on
Form 10-K
for the year ended December 31, 2009 and our Quarterly
Reports on
Form 10-Q
for the periods ended March 31, 2010, June 30, 2010
and September 30, 2010, respectively, filed with the SEC,
which are incorporated in this prospectus by reference. All
forward-looking statements in this document are expressly
qualified in their entirety by the cautionary statements in this
paragraph and the Risk factors section herein and in
our reports filed with the SEC and incorporated herein by
reference. We undertake no obligation to update any
forward-looking statements, whether as a result of new
information, future events or otherwise, except as required by
law.
iv
Prospectus
Summary
This summary highlights selected information from this
prospectus, but may not contain all information that may be
important to you. We urge you to read this entire prospectus
carefully, including Risk factors and the
consolidated financial statements and other information included
or incorporated by reference herein.
PHI,
INC.
PHI, Inc., founded in 1949, is a leading provider of commercial
helicopter services. Our primary business is the safe and
reliable transportation of personnel and, to a lesser extent,
parts and equipment, to, from, and among offshore platforms for
customers engaged in the oil and gas exploration, development,
and production industry, principally in the Gulf of Mexico. We
also provide helicopter services to the oil and gas industry
internationally and to non-oil and gas customers and
U.S. governmental agencies, such as the National Science
Foundation. We also provide air medical transportation for
hospitals and emergency service agencies where we operate as an
independent provider of medical services. In addition, we
perform maintenance and repair services for existing customers,
primarily to those that own their own aircraft. As of
September 30, 2010, we owned or operated 251 aircraft, 159
of which were dedicated to our Oil and Gas segment, 87 of which
were dedicated to our Air Medical segment and five of which were
dedicated to other operations.
Oil
and Gas segment
We provide helicopter services to a broad base of major
integrated and independent oil and gas companies, primarily in
the Gulf of Mexico. Our key customers include Shell Oil Company
(Shell), BP America Production Company
(BP) and ConocoPhillips Company, with whom we have
worked for 30 or more years, and Exxonmobil Production Co. and
Eni Petroleum, with whom we have worked for more than
15 years. Our customers contract our services to transport
personnel from onshore bases to offshore drilling rigs,
platforms and other installations, to transport personnel during
medical or safety emergencies and to evacuate personnel during
the threat of hurricanes and other adverse weather conditions.
In 2009, approximately 65% of our total operating revenues was
generated by our Oil and Gas segment.
We generally classify our helicopters as small (up to six
passengers), medium (up to 12 passengers) or large (up to 19
passengers), each of which serves a different transportation
need of the offshore energy industry. Medium and large
helicopters, which can fly in a wider variety of operating
conditions, travel over longer distances and carry larger
payloads than small helicopters, are required for crew changes
on the large offshore production facilities and drilling rigs in
the deepwater region of the Gulf of Mexico.
In 2004, we made a strategic decision to focus more of our
business on these deepwater operations because we believed it
would provide a stable and profitable source of revenue.
Deepwater operations tend to have longer lead times and
consequently, activity levels are less susceptible to short term
volatility in commodity prices. The capital commitments are also
substantially larger than shallow water operations and our
client base is more heavily weighted to the major integrated and
larger independent oil and gas companies as a result. Finally,
the majority of our transportation activity services production
facilities, which adds stability to our business as these are
more permanent in nature.
Since we made the strategic decision to focus more of our
business on deepwater activities, we have substantially
increased our fleet of medium and large aircraft and reduced our
fleet of light aircraft. We have added 26 medium aircraft and 16
large aircraft over that time, while selling 60 light aircraft
and 25 older medium aircraft. As of October 31, 2010, of
the 159 aircraft dedicated to our Oil and Gas segment, 74 were
classified as medium or large.
We provide helicopter transportation services to some of the
largest producers in the Gulf of Mexico, including Shell and BP.
We recently entered in to a new contract to provide helicopter
transportation services for Shell Offshore Inc., a subsidiary of
Shell, and are in the process of acquiring 10 new medium
aircraft to fulfill our obligations under that contract. See
Recent developments New Shell contract.
Building on our substantial expertise and track record of
reliable and safe operations, we intend to selectively expand
into international markets that have attractive opportunities
for growth. We recently
1
executed an agreement to provide two aircraft to Noble Energy in
support of its operations in Israel and are involved in
discussions with TAM Empreendimentos e Participacoes S/A
regarding the formation of a joint venture that would provide
helicopter transportation services to the Brazilian oil and gas
offshore market.
Air
Medical segment
We provide air medical transportation services for hospitals and
emergency service agencies in 17 states using approximately
87 aircraft at 60 separate locations. Our Air Medical segment
operates primarily under the independent provider model and, to
a lesser extent, under the hospital-based model. Under the
independent provider model, we have no contracts and no fixed
revenue stream, and compete for transport referrals on a daily
basis with other operators in the area. Under the hospital-based
model, we contract directly with the hospitals to provide their
transportation services, with the contracts typically awarded on
a competitive bid basis. Our Air Medical operations are
headquartered in Phoenix, Arizona. We are paid directly by the
hospital in the hospital-based model and by either commercial
insurance companies, federal or state agencies such as Medicare
and Medicaid, or the patient in the independent provider model.
In 2009, approximately 33% of our total operating revenues was
generated by our Air Medical segment.
Technical
Services segment
The Technical Services segment provides helicopter repair and
overhaul services for flight operations customers that own their
aircraft. Costs associated with these services are primarily
labor, and customers are generally billed at a percentage above
cost. We also operate five aircraft for the National Science
Foundation in Antarctica under this segment. Approximately 2% of
our total operating revenues in 2009 was generated by our
Technical Services segment.
Our
fleet
The following table shows the aircraft we have in our fleet as
of October 31, 2010:
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Cruise
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Appr.
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Number
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Speed
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Range
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Manufacturer
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Type
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in Fleet
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Engine
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Passengers
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(mph)
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(miles)(2)
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Light Aircraft
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Bell
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206/407
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98
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Turbine
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4-6
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130-150
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300-420
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Eurocopter
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BK-117/BO-105
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6
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Twin Turbine
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4-6
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135
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255-270
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Eurocopter
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EC-135(1)
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36
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Twin Turbine
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7
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143
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382
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Eurocopter
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EC-145
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1
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Twin Turbine
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9
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143
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382
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Eurocopter
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AS350 B2/B3
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23
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Turbine
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5
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140
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337-385
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Medium Aircraft
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Bell
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212(1)/222(1)/230(1)/
412(1)/430(1)
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15
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Twin Turbine
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8-13
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115-160
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300-370
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Sikorsky
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S-76(1) A++, C+, C++
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46
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Twin Turbine
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12
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150
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400
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Transport Aircraft
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Sikorsky
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S-92A(1)
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16
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Twin Turbine
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19
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160
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495
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Total Helicopters
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241
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Fixed Wing
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Rockwell(3)
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Aero Commander
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2
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Turboprop
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6
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300-340
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1,200-1,600
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Lear Jet(4)
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31A(1)
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1
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Turbojet
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8
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527
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1,437
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Cessna(4)
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Conquest 441(1)
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2
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Turboprop
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6
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330
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1,200
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Cessna(3)
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U206(1)
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1
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Single/Piston
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6
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174
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900
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Beech(4)
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King Air(1)
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4
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Turboprop
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8
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300
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1,380
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Total Fixed Wing
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9
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Total Aircraft
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251
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2
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(1) |
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Equipped to fly under instrument flight rules
(IFR). All other types listed can only fly under
visual flight rules (VFR). |
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(2) |
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Based on maintaining a
30-minute
fuel reserve. |
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(3) |
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Aircraft used for corporate purposes. |
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(4) |
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Aircraft used in the Air Medical segment, along with 80 of
the rotary wing aircraft listed above. |
Of the 251 aircraft listed, we currently own 215 and lease 21.
The leased aircraft are medium and transport category aircraft
currently used in the Oil and Gas segment. Additionally, we
operate 15 aircraft owned by customers also included in the
table.
BUSINESS
STRATEGY
Our strategy is to grow our business while maximizing the
profitability and cash flow of our existing operations. To
achieve this objective, we intend to:
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leverage our long-term customer relationships with major
integrated energy companies and independent oil and gas
producers to grow our business in the deepwater Gulf of Mexico;
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protect our position in the Gulf of Mexico by maintaining our
reputation as one of the safest and most reliable providers of
helicopter transportation services;
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pursue opportunities to grow our Oil & Gas segment in
international markets, particularly in areas where the political
risk is low and we can partner with reputable, well positioned
parties;
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pursue opportunities to grow our Air Medical operations in the
hospital-based model, and selectively in the independent
provider model where we believe demographics indicate a
profitable patient transport volume; and
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pursue attractive strategic acquisition opportunities.
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COMPETITIVE
STRENGTHS
We attribute our strong competitive position to a number of
factors, including the following:
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Leading market position. We are a leading
provider of commercial helicopter services in the oil and gas
industry in the Gulf of Mexico, and our large operating scale
and fleet size allow flexibility in scheduling helicopter
services on a timely basis and over an extensive geographic area.
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Long-term customer relationships. We provide
helicopter services to some of the largest producers of oil and
gas in the Gulf of Mexico, including Shell and BP, two of the
largest oil and gas producers in the Gulf of Mexico, with whom
we have worked uninterrupted for more than 30 years. Our
long-term relationships with many of our larger customers may
present us with additional international opportunities where
these customers operate.
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Growing international presence. We recently
entered into an agreement to provide two aircraft to Noble
Energy in support of its operations in Israel and are involved
in discussions with TAM Empreendimentos e Participacoes S/A
regarding the formation of a joint venture company that would
provide helicopter transportation services to the expanding
Brazilian oil and gas offshore market. Petrobras, Brazils
leading oil and gas exploration company and one of the largest
offshore operators in the world, has announced an aggressive
offshore development plan, which should provide a high level of
demand for our services. We believe that partnering with a
local, well-respected company such as TAM Empreendimentos e
Participacoes S/A would provide us with a competitive advantage
in the Brazilian market. We currently operate one aircraft in
the Democratic Republic of Congo. We also operate five aircraft
in Antarctica for the National Science Foundation.
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Operational enhancements. Since 2001, we have
made operational enhancements to our business, including
substantial investments in new facilities, upgrades of our
computer systems and software, the
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3
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refurbishment of our fleet and the implementation of a
significant cost reduction program. In addition, we have sold
helicopters that were not profitable or that did not complement
our existing fleet, terminated or declined to renew lower margin
contracts and steadily increased our rates. As a result of these
changes, we are well positioned to expand our business and to
capitalize on opportunities in our industry.
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Large, modern, well-maintained fleet. We
believe that our existing fleet is among the most modern and
best maintained aircraft fleet operating in the Gulf of Mexico.
We believe our fleet is at least 50% larger than our next
largest competitor in the Gulf of Mexico. We target a complete,
full-scale refurbishment in our repair and maintenance facility
every five years for each of our Oil and Gas aircraft to
maintain our level of quality. As required by the FAA, we
routinely inspect our aircraft in accordance with manufacturer
specifications.
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Integrated operation and maintenance
functions. We believe that we are one of the
industry leaders in helicopter maintenance, repair and
refurbishment operations. We also believe that our repair and
refurbishment facility in Lafayette, Louisiana, which became
operational in 2001, is one of the premier facilities of its
kind in the world due to its size, scope of operations,
extensive inventory of parts and experienced technical and
maintenance personnel. We believe this facility allows us to
more efficiently and effectively service our fleet of aircraft,
resulting in less downtime and safer operations.
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Strong safety record; experienced and extensively trained
pilots. Safety is critical to us and to our
customers. Our pilots average nearly 7,000 hours of flight
time and 11 years of experience with PHI, and must have at
least 1,500 flight hours and a commercial pilot certificate with
instrument rating before we hire them. Once hired, our pilots
undergo rigorous additional training covering all aspects of
helicopter operation. As a result of this training and
experience, coupled with our detailed safety maintenance system
and comprehensive maintenance, we believe that we have one of
the best safety records in the industry. Based on data compiled
by the Helicopter Safety Advisory Conference, for the five-year
period through 2009, our Gulf of Mexico operations averaged 0.54
accidents for each 100,000 flight hours, approximately
two-thirds less than the average rate for our Gulf of Mexico
competitors (1.58 accidents per 100,000 flight hours). According
to the National Transportation Safety Board, for the ten-year
period through 2009, on a company-wide basis, our accident rate
was 1.66 accidents per 100,000 flight hours, compared to a
national average rate of 7.12 accidents per 100,000 flight hours.
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Significant barriers to entry to serve our larger
customers. We believe that there are significant
barriers to entry in our industry, particularly with respect to
operating aircraft for the major oil companies and the larger
independent oil companies. Our largest customers have employees
dedicated to setting extensive selection criteria for their
helicopter transport provider. These criteria are based on
safety and performance records, and very few companies have the
substantial infrastructure and track record to meet these
stringent requirements. Operators who are unable to meet these
rigorous quality standards on a long-term basis generally are
excluded from the bidding process. We work closely with our
customers to meet their specific requirements. In addition, our
primary targets for growth in the air medical industry are
currently served by a limited number of major competitors.
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|
Experienced management and operations team.
Members of our senior management and operations team have
significant experience in the oil and gas service industry and
in the commercial helicopter service industry. Al A. Gonsoulin,
our Chairman of the Board and Chief Executive Officer, has over
40 years of experience in the oil and gas service industry.
The nine members of our senior management team, excluding the
Air Medical segment, average approximately 15 years of
service with us and have an average of approximately
27 years of aviation experience. David Motzkin, the
director of our Air Medical operations, and his four regional
directors have an aggregate of approximately 75 years of
experience in the emergency medical services industry.
|
4
INDUSTRY
OVERVIEW
Gulf
of Mexico helicopter operations
Offshore oil and gas activities in the Gulf of Mexico require
daily movement of several thousand people plus parts and
equipment between onshore bases and remote offshore working
areas. These transports must occur in a safe, timely manner to
ensure smooth operations and avoid costly delays. Helicopters
are a primary means of offshore transportation, particularly for
crew changes, and typically are the only economical crew
transportation option for distances greater than 60 miles
from shore. The outermost portions of the continental shelf
region of the Gulf of Mexico (the Continental Shelf)
are located approximately 85 miles from our 17 onshore
bases in Louisiana, Texas and Alabama, and the deepwater areas
generally are located from 170 to 230 miles from these
bases, which allow us to efficiently service the primary
exploration and production areas of the Gulf of Mexico.
Crews working offshore typically work on a seven days on, seven
days off or a 14 days on, 14 days off basis, with crew
changes generally occurring midweek at regularly scheduled
times. The size of a crew working at any given time is
approximately 60 to 90 people for a jackup rig in the
Continental Shelf and 100 to 200 or more people for the
larger drilling rigs and production facilities involved in
deepwater drilling and production. Typically, there are two
crews working onsite at any given time, with one crew being
changed out each week. Because of the size of crew complements
offshore, multiple round trips or multiple helicopters are
required for each crew change operation.
Demand for helicopter services in the Gulf of Mexico is driven
by the number of production facilities (both manned and
unmanned) and drilling rigs. As of September 10, 2010,
there are approximately 3,400 active oil and gas platforms
and 109 contracted offshore drilling rigs in the Gulf of Mexico.
The majority of the 3,400 active oil and gas platforms are
located on the Continental Shelf of the Gulf of Mexico and must
be inspected and maintained on a regular basis by both operators
and regulatory officials to satisfy regulatory and operator
safety requirements. These ongoing inspection and maintenance
services provide a stable level of helicopter demand that
generally is less sensitive to short-term changes in commodity
prices. Light helicopters are the most efficient way to service
these maintenance and inspection visits and smaller crew changes.
The U.S. Gulf of Mexico, particularly its deepwater region,
is an increasingly important source of oil and natural gas
production, as it is one of the last known sources of large
deposits of oil and natural gas in the U.S. Currently,
according to the Bureau of Ocean Energy Management, Regulation,
and Enforcement, there are approximately 2,200 active leases in
water depths less than 200 meters, and approximately 4,400
active leases beyond that water depth, including approximately
3,500 active leases in water depths greater than
1,000 meters. According to Wood Mackenzie, an international
energy research firm, as of September 7, 2010, there are 48
deepwater fixed production platforms and floating production
facilities in service in the Gulf of Mexico, and an additional
11 deepwater platforms and facilities have been identified for
development in the Gulf of Mexico between 2010 and 2016.
Air
Medical operations
The civilian air medical industry began in the 1970s and has
grown steadily since that time. According to the Association of
Air Medical Services, the number of air transports has grown at
a 7% compound annual growth rate (CAGR) since 1990
and at an 11.5% CAGR since 2000, while the number of aircraft
has grown at a CAGR of 11% since 1990 and 18.3% since 2000.
Patient transports can be from one medical facility to another
or from an accident scene to a medical facility.
The entire air medical transportation market in the U.S. is
approximately $2.5 billion, of which about 50%, or
$1.2 billion, is controlled by hospitals. In recent years,
hospitals gradually have begun to exit this market, which is
expected to increase the portion of the market available to
independent operators over the next several years. As hospitals
exit the market, PHI has begun shifting its focus to the
hospital-based model by providing air medical services to those
hospitals that no longer desire to operate air medical operation
themselves, which we believe will increase the stability of our
revenue from the Air Medical segment. Under
5
this model, the hospital pays us a fixed monthly base rate and a
variable rate per flight hour. In contrast, under the
independent provider model, we provide not only the
transportation, but also the medical care, communications and
dispatch, and billing and collections. Our revenues under this
model are variable and consist of flight fees billed directly to
patients, their insurers or to governmental agencies such as
Medicare and Medicaid.
SAFETY
RECORD
Our customers consistently cite safety and reliability as a
critical factor in selecting a provider of air transportation
services. Since our inception in 1949, safety has been a top
priority and one of the cornerstones of our culture. In over
50 years of operations, we have logged more than
10.5 million flight hours, and during that time we have
developed and refined rigorous safety programs and practices
that we believe have given us one of the strongest safety
records in the commercial helicopter industry.
We believe that the key elements of our strong safety record are
awareness, extensive training, employee incentives and
comprehensive maintenance of our fleet. We strive to incorporate
best safety practices in every area of our operations. Our
company-wide safety program rewards employees who contribute to
our safety goals by working accident free, and we believe our
pilots and mechanics are among the most experienced and well
trained in the industry.
Based on data compiled by the Helicopter Safety Advisory
Conference, for the five-year period through 2009, our Gulf of
Mexico operations averaged 0.54 accidents for each 100,000
flight hours, approximately two-thirds less than the average
rate for our Gulf of Mexico competitors (1.58 accidents per
100,000 flight hours). According to the National Transportation
Safety Board, for the ten-year period through 2009, on a
company-wide basis, our accident rate was 1.66 accidents per
100,000 flight hours, compared to a national average rate of
7.12 accidents per 100,000 flight hours.
RECENT
DEVELOPMENTS
Financing
transactions
On September 23, 2010, we issued an aggregate principal
amount of $300 million of 8.625% Senior Notes due 2018
in private placements under the Securities Act, of which
$297 million was issued to UBS Securities LLC, as the
initial purchaser, in connection with transactions under
Rule 144A and Regulation S of the Securities Act (the
Unregistered Notes), and $3 million was issued
to two accredited investors pursuant to Regulation D of the
Securities Act (the Regulation D Notes). Net
proceeds of $295.5 million were used to repurchase
$189.5 million of our $200 million outstanding
7.125% Senior Notes due 2013 pursuant to a tender offer
that also settled on September 23, 2010, at a total cost of
$199.0 million, including the tender premium and accrued
and unpaid interest. On October 25, 2010, we redeemed the
remaining $10.5 million of 7.125% notes outstanding,
at a redemption price of 103.563% of their face amount plus
accrued and unpaid interest. After the repurchase and redemption
of all of our outstanding $200 million 7.125% Senior
Notes as described above, we had remaining net proceeds of
approximately $82.0 million. We intend to use these
proceeds for general corporate purposes, including the exercise
of purchase options for aircraft currently leased, and for the
purchase of aircraft required to perform our new contract with
Shell described below. Of the approximately $82.0 million
in net proceeds, on October 1, 2010, $25.3 million was
used for the purchase of aircraft off lease.
Options
to purchase leased aircraft
As of September 30, 2010, we had options to purchase
aircraft under lease becoming exercisable in 2010 through 2014
for the following aggregate purchase prices, respectively:
$25.3 million, $54.3 million, $51.0 million,
$38.8 million and $114.4 million. Subject to market
conditions, we intend to exercise these options as they become
exercisable, and intend to finance some of these acquisition
costs with the net proceeds of our Unregistered Notes. On
October 1, 2010, we exercised the options exercisable in
2010, acquiring two heavy aircraft for $25.3 million,
funded with the proceeds of the Unregistered Notes.
6
New
Shell contract
In 2010, we executed a new contract with Shell Offshore, Inc., a
subsidiary of Shell, to provide helicopter transportation
services in the Gulf of Mexico through mid-2016. The contract
covers 11 aircraft, and requires us to replace, between June
2011 and January 2013, the Sikorsky
S-76
aircraft we currently provide to Shell with 10 Agusta Westland
AW139s, a more costly aircraft which commands a higher
rate. We believe this contract reinforces our strong
relationship with Shell, who is one of our largest customers,
having contributed 15% of our consolidated revenues in 2009.
In connection with the new Shell contract, we have entered into
a contract to acquire 10 new Augusta Westland AW139 aircraft,
scheduled for delivery commencing in late 2010 and continuing
through late 2012. The AW139s have an aggregate acquisition cost
of approximately $127 million. We have traded in two
aircraft in exchange for a credit of approximately
$20.3 million towards these acquisition costs. We may
finance some of these acquisition costs with net proceeds from
the issuance of the Unregistered Notes and expect to finance the
balance through some combination of cash on hand or generated
from operations, operating leases and borrowings under our
revolving credit facility.
The
Macondo incident
In April 2010, the Deepwater Horizon rig, engaged in deepwater
drilling operations at BPs Macondo well in the Gulf of
Mexico, sank after a blowout, resulting in the discharge of
substantial amounts of oil until mid-July 2010, when the flow of
oil was stopped. On May 28, 2010, the Department of
Interior imposed a six-month moratorium on offshore deepwater
drilling operations, the enforcement of which was preliminarily
enjoined, and on July 12, 2010, the Department of Interior
imposed another similar moratorium set to expire
November 30, 2010. As a result, deepwater drilling
operations in the Gulf of Mexico were suspended. On
October 12, 2010, the Department of Interior lifted the
moratorium on deepwater drilling. In addition, as a result of
regulatory actions by the Department of Interior, there has been
a de facto moratorium on drilling in the shallow
waters of the Gulf of Mexico. It is not possible to estimate
whether or when drilling operations in the Gulf of Mexico will
return to normal activity levels, due to uncertainties
surrounding the timing of issuance of drilling permits by the
Department of Interior and new regulations related to drilling
operations. BP has incurred significant costs related to the
clean up of and damages caused by the oil spill and stopping the
flow of oil from the well. BP is one of our major customers and
accounted for approximately 14% of our total revenues in 2009.
As a result of these events, we have experienced increased
flight activity, although we expect that this increased activity
will decline when flight activity associated with the
clean-up
winds down. We estimate that the flight hours related to this
increased activity were approximately 2,800 hours and
1800 hours, or 7% and 5% of total flight hours (9% and 6%
of Oil and Gas segment flight hours) for the second and third
quarters of 2010, respectively. Offsetting these increased
flight hours are decreased flight hours resulting from the
suspension of deepwater drilling activities in the Gulf of
Mexico. We estimate that the adverse affect to our flight hours
related to deepwater drilling rigs that have already demobilized
are approximately 500 to 600 flight hours per month, or
approximately 5% of Oil and Gas segment flight hours per month.
Many of the deepwater drilling rigs we have been servicing are
still on location (although not drilling), and therefore we are
still conducting crew changes to those rigs. It is not possible
to estimate how long these rigs will remain in their current
status, but if these drilling rigs are demobilized or leave the
Gulf of Mexico, there will be a further adverse affect to our
flight activity. The majority of our transportation activity
services production facilities, which were not directly impacted
by the moratorium. This adds stability to our business as these
are more permanent in nature.
While the Macondo incident presents risks to our business, we
believe it also presents opportunities. Increased regulatory
requirements that may result from the incident could give a
competitive advantage to our customers, who tend to be larger
operators and we believe better able to absorb related increased
costs. We also believe that an increased focus on safety could
benefit our company, as we have a strong record of safe
operations. For a discussion of risks to our business from the
Macondo incident, see Risk factors.
7
Litigation
Information about Superior Offshore International
Inc. v. Bristow Group Inc., ERA Helicopters, LLC, Seacor
Holdings Inc., ERA Group Inc., ERA Aviation, Inc., and PHI,
Inc., is contained in our
Form 10-Q
for the quarter ended September 30, 2010. On
November 30, 2010, the court granted plaintiff leave to
amend the complaint, limited discovery to the new allegations,
and established a schedule for briefing dispositive motions in
February 2011.
PRINCIPAL
EXECUTIVE OFFICES
Our principal executive offices are located at 2001 SE
Evangeline Thruway, Lafayette, Louisiana 70508. Our telephone
number is
(337) 235-2452
and our internet website is www.phihelico.com. The information
contained on, or accessible through, our website is not part of
this prospectus.
SUMMARY
OF THE EXCHANGE OFFER
You are entitled to exchange in the exchange offer your
outstanding Unregistered Notes for Registered Notes with
substantially identical terms. The summary below describes the
principal terms of the Registered Notes. Certain of the terms
and conditions described below are subject to important
limitations and exceptions. You should read the discussion under
the heading Description of notes for further
information regarding the Registered Notes.
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The Initial Offering of Unregistered Notes |
|
We sold the Unregistered Notes on September 23, 2010 to UBS
Securities LLC (the Initial Purchaser). The Initial
Purchaser subsequently
resold the Unregistered Notes to
qualified institutional
buyers pursuant to Rule 144A under the
Securities Act and to
non-U.S. Persons within the meaning of Regulation S under the
Securities Act. |
|
The exchange |
|
We are offering to exchange the Registered Notes for your
Unregistered Notes. In order to be exchanged, an Unregistered
Note must be properly tendered and accepted. All Unregistered
Notes that are validly tendered and not validly withdrawn will
be exchanged. We will issue Registered Notes promptly after the
expiration of the exchange offer. |
|
Registration rights |
|
Under a registration rights agreement executed as part of the
offering of Unregistered Notes, we and the guarantors agreed to: |
|
|
|
file this registration statement to exchange the
Unregistered Notes for Registered Notes with substantially the
same terms;
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use reasonable best efforts to cause this
registration statement to become effective;
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use reasonable best efforts to consummate the
exchange offer within 365 days after the issue date; and
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use reasonable best efforts to file a shelf
registration statement for the resale of the Unregistered Notes
if we cannot effect an exchange offer within the time periods
listed above and in certain other circumstances.
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Resales |
|
Based on an interpretation by the staff of the SEC set forth in
no-action letters issued to third parties, we believe that the
Registered Notes issued pursuant to the exchange offer in
exchange for Unregistered Notes may be offered for resale,
resold and otherwise |
8
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transferred by you (unless you are our affiliate
within the meaning of Rule 405 of the Securities Act)
without compliance with the registration and prospectus delivery
provisions of the Securities Act, provided that you: |
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are acquiring the Registered Notes in the ordinary
course of business; and
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have not engaged in, do not intend to engage in, and
have no arrangement or understanding with any person or entity,
including any of our affiliates, to participate in, a
distribution of the Registered Notes.
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In addition, each participating broker-dealer that receives
Registered Notes for its own account pursuant to the exchange
offer in exchange for Unregistered Notes that were acquired as a
result of market-making or other trading activity must also
acknowledge that it will deliver a prospectus in connection with
any resale of the Registered Notes. For more information, see
Plan of distribution. |
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Any holder of Unregistered Notes, including any broker-dealer,
who |
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is our affiliate,
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does not acquire the Registered Notes in the
ordinary course of its business, or
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tenders in the exchange offer with the intention to
participate, or for the purpose of participating, in a
distribution of Registered Notes,
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cannot rely on the position of the staff of the Commission
expressed in Exxon Capital Holdings Corporation,
Morgan Stanley & Co., Incorporated or similar
no-action letters and, in the absence of an exemption, must
comply with the registration and prospectus delivery
requirements of the Securities Act in connection with the resale
of the Registered Notes. |
|
Expiration time |
|
The exchange offer will expire at 5:00 p.m., New York City
time,
on , ,
unless we extend the exchange offer in our sole discretion, in
which case the term expiration time means the latest
date and time to which the exchange offer is extended. We do not
currently intend to extend the expiration date. |
|
Conditions to the exchange offer |
|
The exchange offer is subject to customary conditions, some of
which we may waive. For more information, see The exchange
offer Conditions to the exchange offer. |
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Procedures for Tendering Unregistered Notes |
|
If you wish to tender your Unregistered Notes for exchange in
this exchange offer, you must transmit to the exchange agent on
or before the expiration date: |
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|
a computer-generated message transmitted by means
of the Automated Tender Offer Program System of DTC, or
ATOP, in which you acknowledge and agree to be bound
by the terms of the letter of transmittal and which, when
received by the exchange agent, forms a part of a confirmation
of book-entry
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9
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transfer. As part of the book-entry transfer, DTC will
facilitate the exchange of your Unregistered Notes and update
your account to reflect the issuance of the Registered Notes to
you. ATOP allows you to electronically transmit your acceptance
of the exchange offer to DTC instead of physically completing
and delivering a letter of transmittal to the exchange agent; and |
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|
a timely confirmation of book-entry transfer of
your Unregistered Notes into the account of the exchange agent
at DTC.
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By agreeing to be bound by the letter of transmittal, you will
represent to us that, among other things: |
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|
any Registered Notes that you receive will be
acquired in the ordinary course of your business;
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you have no arrangements or understandings with any
person or entity, including any of our affiliates, to
participate in the distribution of the Registered Notes;
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if you are a broker-dealer that will receive
Registered Notes for your own account in exchange for
Unregistered Notes that were acquired as a result of
market-making activities, that you will deliver a prospectus, as
required by law, in connection with any resale of the Registered
Notes; and
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you are not our affiliate as defined in
Rule 405 of the Securities Act, or, if you are an
affiliate, you will company with any applicable registration and
prospectus delivery requirements of the Securities Act.
|
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Special Procedures for Beneficial Owners |
|
If you are the beneficial owner of book-entry interests and your
name does not appear on a security position listing of DTC as
the holder of the book-entry interests or if you are a
beneficial owner of Unregistered Notes that are registered in
the name of a broker, dealer, commercial bank, trust company or
other nominee and you wish to tender the book-entry interest of
Unregistered Notes in the exchange offer, you should contact the
person in whose name your book-entry interests or Unregistered
Notes are registered promptly and instruct that person to tender
on your behalf. |
|
Withdrawal of tenders |
|
A tender of Unregistered Notes pursuant to this exchange offer
may be withdrawn at any time prior to the expiration date. Any
Unregistered Notes not accepted for exchange for any reason will
be returned without expense to the tendering holder promptly
after the expiration or termination of this exchange offer. |
|
Delivery of the Registered Notes |
|
The Registered Notes issued pursuant to this exchange offer will
be delivered to holders who tender Unregistered Notes promptly
following the expiration time. |
|
Consequences of failure to exchange |
|
All untendered Unregistered Notes will continue to be subject to
the restrictions on transfer provided for in the Unregistered
Notes and in the indenture. In general, the Unregistered 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. Other than |
10
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in connection with this exchange offer, we do not anticipate
that we will register the Unregistered Notes under the
Securities Act. |
|
Material U.S. federal income tax consequences |
|
We believe that the exchange of Unregistered Notes for
Registered Notes in the exchange offer should not be a taxable
event for U.S. federal income tax purposes. For more
information, see Material U.S. federal income tax
consequences. |
|
Use of proceeds |
|
We will not receive any cash proceeds from the issuance of the
Registered Notes. |
|
Exchange agent |
|
The Bank of New York Mellon Trust Company, N.A. is the
exchange agent for this exchange offer. The address and
telephone number of the exchange agent are set forth in the
section captioned The exchange offer Exchange
agent. |
SUMMARY
OF THE REGISTERED NOTES
|
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Issuer |
|
PHI, Inc. |
|
Notes offered |
|
$297,000,000 aggregate principal amount of 8.625% senior
notes due 2018. The terms of the Registered Notes are
substantially identical to the terms of the outstanding
Unregistered Notes, except that the transfer restrictions and
registration rights relating to the Unregistered Notes do not
apply to the Registered Notes. |
|
Maturity Date |
|
October 15, 2018. |
|
Interest |
|
8.625% per annum. |
|
Interest payment dates |
|
Interest on the notes will be payable semi-annually in arrears
in cash on each April 15 and October 15, commencing on
April 15, 2011. |
|
Guarantees |
|
The notes will be jointly and severally, fully and
unconditionally, guaranteed on a senior basis by all of our
existing and future U.S. restricted subsidiaries. |
|
Ranking |
|
The notes will be our unsecured, senior obligations. The notes
will rank senior to all of our future subordinated debt. The
subsidiary guarantees with respect to these notes will be
general, unsecured, senior obligations of the applicable
guarantor subsidiary and will rank equally in right of payment
with all of such guarantor subsidiarys existing and future
senior debt. However, the notes and the guarantees will be
effectively subordinated to (1) secured debt that we and
our guarantor subsidiaries incur to the extent of the value of
the assets securing such debt and (2) any debt and other
liabilities of our non-guarantor subsidiaries. As of
September 30, 2010, we had $18.3 million of senior
secured debt outstanding under our revolving credit facility,
excluding $5.5 million in letters of credit under our
revolving credit facility. As of such date, availability for
borrowings under the revolving credit facility was
$51.2 million. All borrowings under the revolving credit
facility are effectively senior to the notes to the extent of
the value of the assets securing such borrowings. As of
September 30, 2010, our non-guarantor subsidiaries had de
minims debt or other liabilities. |
11
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Optional redemption |
|
We may, at our option, redeem the notes, in whole or in part, at
any time on or after October 15, 2014 at the redemption
prices described in Description of notes
Optional redemption, plus accrued and unpaid interest to
the redemption date. |
|
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|
Prior to October 15, 2013, we may, at our option, redeem
notes with the net proceeds of sales of certain equity
securities at the redemption price described in
Description of notes Optional
redemption. We may make the redemption only if, after the
redemption, at least 65% of the aggregate principal amount of
the notes remain outstanding. |
|
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Prior to October 15, 2014, we may, at our option, redeem
the notes, in whole or in part, at a make-whole price described
in Description of notes Optional
redemption plus accrued and unpaid interest to the
redemption date. |
|
Change of control |
|
Upon certain Change of Control events (as defined in
the indenture), each holder of notes may require us to
repurchase all or a portion of its notes at a purchase price
equal to 101% of the principal amount thereof, plus accrued and
unpaid interest to the date of purchase. See Description
of notes Change of control. |
|
Certain covenants |
|
The indenture governing the notes contains covenants that, among
other things, will limit our ability and the ability of our
restricted subsidiaries to: |
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incur additional indebtedness and issue certain
capital stock;
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pay dividends on, redeem or repurchase capital stock;
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make investments;
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sell assets;
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engage in transactions with affiliates;
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enter into agreements that restrict dividends or
other payments from our restricted subsidiaries to us;
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enter into different lines of business;
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create unrestricted subsidiaries;
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enter into sale and leaseback transactions;
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create liens on our assets; and
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consolidate, merge or transfer all or substantially
all of our assets and the assets of our restricted subsidiaries
on a consolidated basis.
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These covenants are subject to important exceptions and
qualifications, which are described in Description of
notes. Many of the covenants will be suspended during any
period when the notes have an investment grade rating from the
rating agencies as described under Description of
notes Certain covenants. |
You should refer to the section Risk factors for
an explanation of some risks of participating in the exchange
offer.
12
Ratio of
earnings to fixed charges
Our ratio of earnings to fixed charges was as follows:
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Nine Months
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Ended
|
Years Ended December 31,
|
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September 30,
|
2005
|
|
2006
|
|
2007
|
|
2008
|
|
2009
|
|
2010
|
|
1.9x
|
|
1.0x
|
|
2.7x
|
|
2.4x
|
|
1.7x
|
|
1.6x
|
The term fixed charges means the sum of interest and
the estimated interest component of our rent expense. For this
calculation, fixed charges are added back to net earnings before
income taxes. Ratio of earnings to fixed charges does not
reflect the pro forma effect of the initial issuance of our
$300 million 8.625% Senior Notes due 2018 or the
redemption and repurchase of our $200 million
7.125% Senior Notes due 2013.
13
Selected
consolidated financial data
The following selected consolidated financial and other data
should be read in conjunction with our historical consolidated
financial statements and related notes and
Managements discussion and analysis of financial
condition and results of operations included elsewhere in
this prospectus.
The selected consolidated financial and other data as of and for
each of the years ended December 31, 2005 through 2009 have
been derived from our audited consolidated financial statements
and the selected consolidated financial and other data for the
nine months ended September 30, 2009 and 2010 is derived
from our unaudited condensed consolidated financial statements.
Historical results are not necessarily indicative of the results
to be expected in the future.
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
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|
|
Nine Months Ended
|
|
|
Years Ended December 31,
|
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September 30,
|
|
|
2005
|
|
2006
|
|
2007
|
|
2008
|
|
2009
|
|
2009
|
|
2010
|
|
|
(Dollars in thousands)
|
|
Income Statement Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating revenues
|
|
$
|
363,610
|
|
|
$
|
413,118
|
|
|
$
|
446,406
|
|
|
$
|
509,514
|
|
|
$
|
487,175
|
|
|
$
|
364,456
|
|
|
$
|
396,875
|
|
Gain on disposition of assets, net
|
|
|
1,173
|
|
|
|
1,910
|
|
|
|
34,953
|
|
|
|
4,468
|
|
|
|
111
|
|
|
|
172
|
|
|
|
221
|
|
Net earnings (loss)(1)(2)(3)
|
|
|
14,154
|
|
|
|
(667
|
)
|
|
|
28,218
|
|
|
|
23,515
|
|
|
|
12,968
|
|
|
|
12,694
|
|
|
|
8,642
|
|
Net earnings (loss) per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
1.76
|
|
|
|
(0.05
|
)
|
|
|
1.85
|
|
|
|
1.54
|
|
|
|
0.85
|
|
|
|
0.83
|
|
|
|
0.56
|
|
Diluted
|
|
|
1.76
|
|
|
|
(0.05
|
)
|
|
|
1.85
|
|
|
|
1.54
|
|
|
|
0.85
|
|
|
|
0.83
|
|
|
|
0.56
|
|
Weighted average shares outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
8,040
|
|
|
|
13,911
|
|
|
|
15,279
|
|
|
|
15,295
|
|
|
|
15,307
|
|
|
|
15,306
|
|
|
|
15,312
|
|
Diluted
|
|
|
8,063
|
|
|
|
13,911
|
|
|
|
15,288
|
|
|
|
15,301
|
|
|
|
15,307
|
|
|
|
15,306
|
|
|
|
15,312
|
|
Cash Flow Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
$
|
28,020
|
|
|
$
|
30,324
|
|
|
$
|
25,226
|
|
|
$
|
43,798
|
|
|
$
|
55,272
|
|
|
$
|
40,456
|
|
|
$
|
51,503
|
|
Net cash used in investing activities
|
|
|
(137,464
|
)
|
|
|
(178,928
|
)
|
|
|
(19,464
|
)
|
|
|
(47,292
|
)
|
|
|
(69,235
|
)
|
|
|
(45,083
|
)
|
|
|
(120,678
|
)
|
Net cash provided by (used in) financing activities
|
|
|
108,947
|
|
|
|
146,388
|
|
|
|
(5,157
|
)
|
|
|
3,228
|
|
|
|
15,305
|
|
|
|
7,350
|
|
|
|
98,217
|
|
Balance Sheet Data(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets
|
|
$
|
224,265
|
|
|
$
|
307,689
|
|
|
$
|
230,029
|
|
|
$
|
224,620
|
|
|
$
|
245,301
|
|
|
$
|
261,440
|
|
|
$
|
361,465
|
|
Working capital
|
|
|
162,527
|
|
|
|
245,099
|
|
|
|
176,633
|
|
|
|
173,978
|
|
|
|
207,024
|
|
|
|
209,194
|
|
|
|
299,425
|
|
Property and equipment, net
|
|
|
311,678
|
|
|
|
369,465
|
|
|
|
484,119
|
|
|
|
528,574
|
|
|
|
548,536
|
|
|
|
532,079
|
|
|
|
546,183
|
|
Total assets
|
|
|
549,209
|
|
|
|
700,970
|
|
|
|
741,296
|
|
|
|
777,182
|
|
|
|
805,506
|
|
|
|
807,252
|
|
|
|
945,291
|
|
Total long-term debt
|
|
|
203,300
|
|
|
|
205,500
|
|
|
|
200,000
|
|
|
|
203,000
|
|
|
|
218,305
|
|
|
|
210,350
|
|
|
|
318,287
|
|
Shareholders equity
|
|
|
239,051
|
|
|
|
400,125
|
|
|
|
428,669
|
|
|
|
452,396
|
|
|
|
465,448
|
|
|
|
465,172
|
|
|
|
474,083
|
|
|
|
|
(1) |
|
Net loss in 2006 includes an after tax charge of
$7.7 million related to the refinancing of our
93/8% Senior
Notes. |
|
(2) |
|
Net earnings in 2007 was impacted due to the pilots strike
that commenced September 20, 2006. |
|
(3) |
|
Net earnings in 2008 includes an after tax goodwill impairment
charge of $1.6 million related to our Air Medical segment. |
|
(4) |
|
At period end. |
14
Risk
factors
Before you decide to participate in the exchange offer, you
should carefully consider the risks described below as well as
those risks contained in Item 1A Risk Factors
in our Annual Report on
Form 10-K
for the year ended December 31, 2009 and Quarterly Reports
on
Form 10-Q
for the periods ended March 31, 2010, June 30, 2010
and September 30, 2010, respectively, which are
incorporated into this prospectus by reference, together with
all other information and data included or incorporated by
reference in this prospectus.
RISKS
RELATED TO THE EXCHANGE OFFER
Because
there is no public market for the notes, you may not be able to
resell your notes.
The Registered Notes will be registered under the Securities
Act, but will constitute a new issue of securities with no
established trading market, and there can be no assurance as to:
|
|
|
|
|
the liquidity of any trading market that may develop;
|
|
|
|
the ability of holders to sell their Registered Notes; or
|
|
|
|
the price at which the holders would be able to sell their
Registered Notes.
|
If a trading market were to develop, the Registered Notes might
trade at higher or lower prices than their principal amount or
purchase price, depending on many factors, including prevailing
interest rates, the market for similar securities and our
financial performance, as well as declines in the prices of
securities, or the financial performance or prospects of,
similar companies.
Any market-making activity with respect to the notes may be
discontinued at any time without notice. In addition, any
market-making activity will be subject to the limits imposed by
the Securities Act and the Exchange Act, and may be limited
during the exchange offer or the pendency of an applicable shelf
registration statement. There can be no assurance that an active
trading market will exist for the notes or that any trading
market that does develop will be liquid.
In addition, any Unregistered Note holder who tenders in the
exchange offer for the purpose of participating in a
distribution of the Registered Notes may be deemed to have
received restricted securities, and if so, will be required to
comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any resale
transaction. For a description of these requirements, see the
section Exchange Offer.
Your
notes will not be accepted for exchange if you fail to follow
the exchange offer procedures and, as a result, your notes will
continue to be subject to existing transfer restrictions and you
may not be able to sell your notes.
We will not accept your Unregistered Notes for exchange if you
do not follow the exchange offer procedures. We will issue
Registered Notes as part of this exchange offer only after a
timely tender of Unregistered Notes. If you do not tender your
Unregistered Notes by the expiration date of the exchange offer,
we will not accept your Unregistered Notes for exchange. If
there are defects or irregularities with respect to your tender
of Unregistered Notes, we will not accept such Unregistered
Notes for exchange. We are under no duty to give notification of
defects or irregularities with respect to the tenders of
Unregistered Notes for exchange.
If you
do not exchange your Unregistered Notes, your Unregistered Notes
will continue to be subject to the existing transfer
restrictions and you may not be able to sell your
notes.
We did not register the Unregistered Notes, nor do we intend to
do so following the exchange offer. Unregistered Notes that are
not tendered will therefore continue to be subject to the
existing transfer restrictions and may be transferred only in
limited circumstances under the securities laws. If you do not
exchange your Unregistered Notes, you will lose your right to
have such Unregistered Notes registered under the federal
securities laws. As a result, if you hold Unregistered Notes
after the exchange offer, you may not be able to sell your
Unregistered Notes.
15
The
reoffering and resale of the Unregistered Notes is subject to
significant legal restrictions.
The Unregistered Notes have not been registered under the
Securities Act or any state securities laws. As a result,
holders of Unregistered Notes may reoffer or resell Unregistered
Notes only if:
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there is an applicable exemption from the registration
requirements of the Securities Act and applicable state laws
that applies to the circumstances of the offer and sale, or
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we file a registration statement and it becomes effective.
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RISKS
RELATING TO THE NOTES
Our
substantial indebtedness and operating lease commitments could
adversely affect our financial condition and impair our ability
to operate our business.
We are a highly leveraged company and, as a result, have
significant debt service obligations. We also have significant
operating lease commitments and, as a result, have significant
rent expense. As of September 30, 2010, our total
indebtedness was $318.3 million, consisting of
$300 million of our 2018 notes and $18.3 million
borrowed under our revolving credit facility, which matures in
September 2012, excluding $5.5 million in letters of credit
issued under the revolving credit facility. As of
September 30, 2010, the amount available for borrowing
under the revolving credit facility was $51.2 million.
Borrowings under our revolving credit facility are secured by
accounts receivable and inventory and are effectively senior to
our 2018 notes to the extent of the value of the assets securing
such borrowings. As of September 30, 2010, our ratio of
total long-term indebtedness to shareholders equity was
.67 to 1.00.
As of September 30, 2010, we had approximately
$207.0 million in aggregate commitments under operating
leases, of which approximately $8.2 million is payable
through December 31, 2010, and a total of
$33.3 million is payable in 2011. The total lease
commitments include $190.7 million for aircraft and
$16.3 million for facility lease commitments, primarily for
our facilities in Lafayette, Louisiana.
Following this exchange, we could incur additional debt and
enter into additional operating leases, which could negatively
impact our financial condition, results of operations and
business prospects and prevent us from satisfying our
obligations under the notes.
The degree to which we are leveraged or may become leveraged in
the future could have important consequences to you, including:
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we will be required to dedicate a substantial portion of our
cash flow from operations to pay principal of, and interest on,
our indebtedness, and make lease payments on our operating
leases, thereby reducing funds available for operations, working
capital, capital expenditures, expansion, acquisitions or
general corporate or other purposes or to carry out other
aspects of our business plan;
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it may increase our vulnerability to a downturn in our business
that may result from the Macondo incident or for other reasons;
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it may increase our vulnerability to general adverse economic
and industry conditions and limit our ability to withstand
competitive pressures;
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we may be more highly leveraged than our competitors, which may
place us at a competitive disadvantage;
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our ability to obtain additional financing in the future may be
impaired;
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it may limit, along with the financial and other restrictive
covenants in our revolving credit facility and future
indebtedness, among other things, our ability to borrow
additional funds or dispose of assets;
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our flexibility in planning for, or reacting to, changes in our
business and industry may be limited; and
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it may make it more difficult for us to satisfy our obligations
with respect to the notes.
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The occurrence of any one of these events could have a material
adverse effect on our business, financial condition, results of
operations, business prospects and ability to satisfy our
obligations under the notes.
Our ability to meet our debt obligations, lease commitments and
other expenses will depend on our future performance, which will
be affected by financial, business, economic, regulatory and
other factors, many of which we are unable to control. For more
information on our indebtedness, please see Description of
other indebtedness.
In the
event of our bankruptcy or liquidation, holders of the notes
will be paid from any assets remaining after payments to any
holders of secured debt and debt and other liabilities of our
non-guarantor subsidiaries.
The notes and the guarantees are general unsecured senior
obligations of us and our subsidiary guarantors, effectively
junior to any of our existing or future secured debt to the
extent of the value of assets securing that debt. The notes and
the guarantees are effectively subordinated to the indebtedness
and other liabilities of our non-guarantor subsidiaries. If we
are declared bankrupt or insolvent, or are liquidated, holders
of our secured debt and any secured debt of our subsidiaries
will be entitled to be paid from our assets before any payment
may be made with respect to the notes. In addition, in that
circumstance, holders of debt and other creditors of our
non-guarantor subsidiaries would be entitled to be paid from the
assets of those subsidiaries before the proceeds of those assets
could be applied to pay the notes. If any of the foregoing
events occurs, we cannot assure you that we will have sufficient
assets to pay amounts due on our secured debt, the secured debt
of our subsidiary guarantors, the debt and other liabilities of
our non-guarantor subsidiaries, and the notes and other
liabilities of us and our subsidiaries. As a result, holders of
the notes may receive less, ratably, than holders of secured
debt of us or our subsidiary guarantors or the debt of our
non-guarantor subsidiaries in the event of bankruptcy or
liquidation.
We may
not be able to generate cash flow to meet our service
obligations.
Our ability to make payments on our indebtedness, including the
notes, to pay our obligations under our operating leases, and to
fund planned capital expenditures, including purchases of
aircraft under purchase options, will depend on our ability to
generate cash in the future. This is subject to conditions in
the oil and gas industry, particularly in the Gulf of Mexico,
and to general economic and financial conditions, the impact of
legislative and regulatory actions on how we conduct our
business and other factors, all of which are beyond our control.
We cannot assure you that our business will generate sufficient
cash flow from operations to service our outstanding
indebtedness or to pay our obligations under operating leases,
or that future borrowings or access to aircraft lease facilities
will be available to us in an amount sufficient to enable us to
pay our indebtedness or to fund our other capital needs, such as
purchases of aircraft under purchase options or upon expiration
of operating leases. If our business does not generate
sufficient cash flow from operations to service our outstanding
indebtedness or to pay our operating lease operations, we may
have to undertake alternative financing plans, such as:
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refinancing or restructuring our debt;
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selling assets;
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reducing or delaying acquisitions or capital investments; or
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seeking to raise additional capital.
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However, we cannot assure you that we would be able to implement
alternative financing plans, if necessary, on commercially
reasonable terms or at all, or that implementing any such
alternative financing plans would allow us to meet our debt
obligations and capital investment needs. Our inability to
generate sufficient cash flow to satisfy our debt and operating
lease obligations, including our obligations under the notes, or
to obtain alternative financings, could materially and adversely
affect our business, financial condition, results of operations
and prospects.
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Restrictions
in our debt agreements could limit our growth and our ability to
respond to changing conditions.
Our revolving credit facility contains and the indenture
governing the notes contain a number of significant covenants in
addition to covenants restricting the incurrence of additional
debt. These covenants limit our ability, among other things, to:
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pay cash dividends or distributions on our capital stock or
redeem or repurchase our capital stock;
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make certain investments;
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create certain liens on our assets to secure debt;
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consolidate, merge or enter into other business combination
transactions;
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issue and sell capital stock of our subsidiaries;
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incur additional indebtedness and issue certain capital stock;
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enter into different lines of business;
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enter into agreements that restrict dividends or other payments
from our subsidiaries to us;
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participate in activities through business entities that are not
subsidiaries;
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enter into sale and leaseback transactions;
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enter into certain transactions with affiliates; and
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transfer and sell assets.
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In addition, our revolving credit facility requires us to
maintain certain financial ratios and satisfy certain financial
condition tests and may require us to take action to reduce our
debt or take some other action to comply with them. These
restrictions could also limit our ability to obtain future
financings, make needed capital expenditures, withstand a future
downturn in our business or the economy in general, or otherwise
conduct necessary corporate activities. We may also be prevented
from taking advantage of business opportunities that arise
because of the limitations that the restrictive covenants under
our revolving credit facility and the indenture impose on us.
A breach of any of these covenants would result in a default
under the applicable debt agreement. A default, if not waived,
could result in acceleration of the debt outstanding under the
agreement and in a default with respect to, and acceleration of,
the debt outstanding under the other debt agreements. The
accelerated debt would become immediately due and payable. If
that should occur, we may not be able to pay all such debt or to
borrow sufficient funds to refinance it. Even if new financing
were then available, it may not be on terms that are acceptable
to us. See Description of other indebtedness and
Description of notes Events of default.
We may
not be able to repurchase the notes or repay debt under our
revolving credit facility upon a change of
control.
Upon the occurrence of a change of control, holders of the notes
may require us to offer to repurchase all or any part of their
notes. We may not have sufficient funds at the time of the
change of control to make the required repurchases, or
restrictions under our revolving credit facility may not allow
such repurchases. Additionally, an event constituting a
Change of Control (as defined in the indenture) will
likely be an event of default under our revolving credit
facility if we are required to offer to repurchase the notes but
are unable to do so, which default would, if it should occur,
permit the lenders to accelerate the debt outstanding under our
revolving credit facility and that, in turn, would cause an
event of default under the indenture.
The source of funds for any repurchase required as a result of
any change of control will be our available cash or cash
generated from operations or other sources, including
borrowings, sales of assets, sales of equity or funds provided
by a new controlling entity. We cannot assure you, however, that
sufficient funds would be
18
available at the time of any change of control to make any
required repurchases of the notes tendered and to repay debt
under our revolving credit facility. Furthermore, using
available cash to fund the potential consequences of a change of
control may impair our ability to obtain additional financing in
the future. Any of our future credit agreements or other
agreements relating to debt will most likely contain similar
restrictions and provisions.
Not
all of our subsidiaries guarantee the notes.
Our foreign subsidiaries do not guarantee the notes. Although
our non-guarantor subsidiaries generated no or de minimis
revenues and operating cash flow during the twelve-month
period ended December 31, 2009 and nine months ended
September 30, 2010, and these subsidiaries had de
minimis assets and liabilities and no indebtedness (other
than intercompany debt) as of September 30, 2010, these
non-guarantor subsidiaries may have revenues, operating cash
flow, assets, liabilities and indebtedness in the future, in
which case the claims of creditors of such non-guarantor
subsidiaries, including trade creditors and creditors holding
indebtedness, and claims of preferred stockholders (if any) of
such subsidiaries will generally have priority with respect to
the assets and earnings of such subsidiaries over the claims of
creditors of our company, including holders of the notes, even
if the obligations of the non-guarantor subsidiaries do not
constitute senior indebtedness.
The
subsidiary guarantees could be deemed fraudulent conveyances
under certain circumstances, and a court may subordinate or void
the subsidiary guarantees.
Under various fraudulent conveyance or fraudulent transfer laws,
a court could subordinate or void the subsidiary guarantees.
Generally, to the extent that a U.S. court were to find
that at the time one of our subsidiaries entered into a
subsidiary guarantee either:
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the subsidiary incurred the guarantee with the intent to hinder,
delay or defraud any present or future creditor, or contemplated
insolvency with a design to favor one or more creditors to the
exclusion of others; or
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the subsidiary did not receive fair consideration or reasonably
equivalent value for issuing the subsidiary guarantee and, at
the time it issued the subsidiary guarantee, the subsidiary
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was insolvent or became insolvent as a result of issuing the
subsidiary guarantee,
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was engaged or about to engage in a business or transaction for
which the remaining assets of the subsidiary constituted
unreasonably small capital, or
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intended to incur, or believed that it would incur, debts beyond
its ability to pay those debts as they matured, then the court
could void or subordinate the subsidiary guarantee in favor of
the subsidiarys other obligations.
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A legal challenge of a subsidiary guarantee on fraudulent
conveyance grounds may focus, among other things, on the
benefits, if any, the subsidiary realized as a result of our
issuing the notes. To the extent a subsidiary guarantee is
voided as a fraudulent conveyance or held unenforceable for any
other reason, the holders of the notes would not have any claim
against that subsidiary and would be creditors solely of us and
any other subsidiary guarantors whose guarantees are not held
unenforceable.
Your
ability to sell the notes may be limited by the absence of an
active trading market, and there is no assurance that an active
trading market will develop for the notes.
The notes are a new issue of securities for which there is no
established public market. We do not presently intend to apply
for listing of the notes on any securities exchange. The Initial
Purchaser has made a market in the Unregistered Notes, and may
make a market in the Registered Notes, if issued, as permitted
by applicable laws and regulations. However, the Initial
Purchaser is not obligated to make a market in the notes, and it
may discontinue its market-making activities at any time without
notice.
We cannot assure you that an active market for the notes will
develop or, if developed, that it will continue. Historically,
the market for non-investment grade debt has been subject to
disruptions that have
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caused substantial volatility in the prices of securities
similar to the notes. We cannot assure you that the market, if
any, for the notes will be free from similar disruptions or that
any such disruptions may not adversely affect the prices at
which you may sell your notes. In addition, subsequent to their
initial issuance, the notes may trade at a discount from their
initial offering price, depending upon prevailing interest
rates, the market for similar notes, our performance and other
factors.
RISKS
INHERENT IN OUR BUSINESS
The
failure to maintain our safety record would seriously harm our
ability to attract new customers and maintain our existing
customers.
A favorable safety record is one of the primary factors a
customer reviews in selecting an aviation provider. If we fail
to maintain our safety and reliability record, our ability to
attract new customers and maintain our current customers will be
materially adversely affected.
Helicopter
operations involve risks that may not be covered by our
insurance or may increase the cost of our
insurance.
The operation of helicopters inherently involves a high degree
of risk. Hazards such as aircraft accidents, collisions, fire
and adverse weather are hazards that must be managed by
providers of helicopter services and may result in loss of life,
serious injury to employees and third parties, and losses of
equipment and revenues.
We maintain hull and liability insurance on our aircraft, which
insures us against physical loss of, or damage to, our aircraft
and against certain legal liabilities to others. In addition, we
carry war risk, expropriation, confiscation and nationalization
insurance for our aircraft involved in international operations.
In some instances, we are covered by indemnity agreements from
our customers in lieu of, or in addition to, our insurance. Our
aircraft are not insured for loss of use.
While we believe that our insurance and indemnification
arrangements provide reasonable protection for most foreseeable
losses, they do not cover all potential losses and are subject
to deductibles, retentions, coverage limits and coverage
exceptions such that severe casualty losses, or the
expropriation or confiscation of significant assets could
materially and adversely affect our financial condition or
results of operations. The occurrence of an event that is not
fully covered by insurance could have a material adverse impact
on our financial condition, results of operations, and cash
flows.
Our
operations are affected by adverse weather conditions and
seasonal factors.
We are subject to three types of weather-related or seasonal
factors:
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poor weather conditions that often prevail during winter but can
develop in any season;
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the tropical storm and hurricane season in the Gulf of
Mexico; and
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reduced daylight hours during the winter months.
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Poor visibility, high winds and heavy precipitation can affect
the operation of helicopters and significantly reduce our flight
hours. A significant portion of our operating revenue is
dependent on actual flight hours and a substantial portion of
our direct costs is fixed. Thus, prolonged periods of adverse
weather can materially and adversely affect our operating
revenues and net earnings.
In the Gulf of Mexico, the months of December, January and
February generally have more days of adverse weather conditions
than the other months of the year. Also, June through November
is tropical storm and hurricane season in the Gulf of Mexico,
with August and September typically being the most active
months. During tropical storms, we are unable to operate in the
area of the storm and can incur significant expense in moving
our aircraft to safer locations. In addition, as most of our
facilities are located along the Gulf of Mexico coast, tropical
storms and hurricanes may cause substantial damage to our
property, including helicopters that we are unable to relocate.
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Because the fall and winter months have fewer hours of daylight,
our flight hours are generally lower at those times, which
typically results in a reduction in operating revenues during
those months. Currently, only 88 of the 159 helicopters used in
our oil and gas operations are equipped to fly under IFR, which
enables these aircraft, when manned by IFR-rated pilots and
co-pilots, to operate when poor visibility or darkness prevents
flight by aircraft that can fly only under VFR. Not all of our
pilots are IFR rated.
Our
helicopters may not always be profitably deployed.
Management of our helicopter fleet exposes us to the risk that
our helicopters may not always be profitably deployed. Customers
often require a specific type of helicopter, which may be
different from those in our fleet. Our contract terms generally
are too short to recover our cost of purchasing a helicopter,
subjecting us to the risk that we will be unable to recoup our
investment in the helicopter. Helicopters we acquire may not be
covered by customer contracts when they are placed into service.
Once a new helicopter is delivered to us, we generally spend
between two and three months installing mission-specific
and/or
customer-specific equipment before we place it into service. As
a result, there can be a significant delay between the delivery
date for a new helicopter and the time that it is able to
generate revenues for us.
We may not be able to find alternative profitable uses for
helicopters no longer under contract. For example, in the third
quarter of 2010, we entered into a contract to purchase 10
medium aircraft related to requirements under a new contract
with a customer, which will replace aircraft being used with
respect to the current contract over a two-year period. See
Prospectus summary Recent
developments New Shell contract. As a result,
we must find alternative profitable uses for the helicopters
that will be released under the current contract. If we cannot
find an acceptably profitable use for a helicopter, or if a
helicopter no longer meets our strategic objectives, including
due to age, we may sell it. Prices in the used helicopter market
have been volatile over time, and we may incur gains or losses
from the sale of helicopters. Inability to profitably deploy
helicopters in our fleet may have a material adverse effect on
our financial condition, results of operation and cash flow.
Our
contracts generally can be terminated or downsized by our
customers without penalty.
Most of our fixed-term contracts contain provisions permitting
early termination by the customer, sometimes with as little as
30 days notice for any reason and generally without
penalty. In addition, many of our contracts permit our customers
to decrease the number of aircraft under contract with a
corresponding decrease in the fixed monthly payments without
penalty. As a result, undue reliance should not be placed on our
customer contracts or the terms of those contracts.
The
helicopter services business is highly
competitive.
All segments of our business are highly competitive. Many of our
contracts are awarded after competitive bidding, and the
competition for those contracts generally is intense. The
principal aspects of competition are safety, price, reliability,
availability and service.
We have two major competitors and several small competitors
operating in the Gulf of Mexico, and most of our customers and
potential customers could operate their own helicopter fleets if
they chose to do so.
Our Air Medical segment competes for business primarily under
the independent provider model and, to a lesser extent, under
the hospital-based model. Under the independent provider model,
we have no contracts and no fixed revenue stream, but must
compete for transport referrals on a daily basis with other
independent operators in the area. Under the hospital-based
model, we contract directly with the hospital to provide their
transportation services, with the contracts typically awarded on
a competitive bid basis. Under both models, we compete against
national and regional companies, and there is usually more than
one competitor in each local market. In addition, we compete
against hospitals that operate their own helicopters and, in
some cases, against ground ambulances as well.
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Our
air medical operations expose us to numerous special risks,
including collection risks and potential medical malpractice
claims.
Our air medical operations are highly competitive and expose us
to a number of risks that we do not encounter in our oil and gas
operations. For instance, the fees for our air medical services
generally are paid by individual patients, insurance companies,
or government agencies such as Medicare and Medicaid. As a
result, our profitability in this business depends not only on
our ability to generate an acceptable volume of patient
transports, but also on our ability to collect our transport
fees. We are not permitted to refuse service to patients based
on their inability to pay.
We employ paramedics, nurses, and other medical professionals
for these operations, which can give rise to medical malpractice
claims against us, which, if not fully covered by our medical
malpractice insurance, could materially adversely affect our
financial condition and results of operations.
Increased
governmental regulations could increase our costs or reduce our
ability to operate successfully.
Our operations are regulated by a number of federal and state
agencies. All of our flight operations are regulated by the FAA.
Aircraft accidents are subject to the jurisdiction of the
National Transportation Safety Board. Standards relating to
workplace health and safety are monitored by OSHA. We are also
subject to various federal and state healthcare-related laws and
regulations.
The FAA has jurisdiction over many aspects of our business,
including personnel, aircraft and ground facilities. We are
required to have an Air Taxi Certificate, granted by the FAA, to
transport personnel and property in our helicopters. This
certificate contains operating specifications that allow us to
conduct our present operations, but it is potentially subject to
amendment, suspension or revocation in accordance with
procedures set forth in the Federal Aviation Act. The FAA
conducts regular inspections regarding the safety, training and
general regulatory compliance of our U.S. aviation
operations. Additionally, the FAA requires us to file reports
confirming our continued compliance.
FAA regulations require that at least 75% of our voting
securities be owned or controlled by citizens of the
U.S. or one of its possessions, and that our president and
at least two-thirds of our directors be U.S. citizens. Our
Chief Executive Officer and all of our directors are
U.S. citizens, and our organizational documents provide for
the automatic reduction in voting power of each share of voting
common stock owned or controlled by a
non-U.S. citizen
if necessary to comply with these regulations.
We are subject to significant regulatory oversight by OSHA and
similar state agencies. We are also subject to the
Communications Act of 1934 because of our ownership and
operation of a radio communications flight-following network
throughout the Gulf of Mexico.
Numerous other federal statutes and rules regulate our offshore
operations and those of our customers, pursuant to which the
federal government has the ability to suspend, curtail or modify
certain or all offshore operations. A suspension or substantial
curtailment of offshore oil and gas operations for any prolonged
period would have an immediate and materially adverse effect on
us. A substantial modification of current offshore operations
could adversely affect the economics of such operations and
result in reduced demand for our services.
Our air medical operations are also subject to
healthcare-related laws and regulations, including those related
to Medicare and Medicaid compliance and the privacy and security
rules of the Health Insurance Portability and Accountability Act
of 1996, as amended.
Our
operations are subject to stringent and comprehensive
environmental laws and regulations that may expose us to
significant costs and liabilities.
Our operations are subject to stringent laws and regulations
relating to environmental protection. Inherent in our business
is the risk of incurring significant environmental costs and
liabilities due to our handling of petroleum products and
generated wastes, because of air emissions and wastewater
discharges related to our operations, and as a result of
historical operations and waste disposal practices.
Environmental laws and
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regulations generally require us to obtain permits such as air
emissions and wastewater permits before regulated activities
commence, require us to remain in compliance with the permits,
restrict the types, quantities and concentration of materials
that can be released into the environment in connection with
regulated activities, and impose substantial liabilities for
pollution resulting from operations. Failure to comply with
these laws and regulations or the terms or conditions of
required environmental permits may result in the assessment of
administrative, civil
and/or
criminal penalties, the imposition of remedial obligations or
corrective actions, and the issuance of injunctions limiting or
prohibiting some or all of our operations.
We currently own or lease, and have in the past owned or leased,
properties that have been used for many years by persons,
including us, for various aviation operational support and
maintenance activities. Petroleum products and wastes may have
been disposed or released on or under properties owned or leased
by us or on or under other locations where we have arranged for
such petroleum products or wastes to be taken for disposal or
recycling. In addition, many of these properties have been
operated by third parties whose treatment and disposal or
release of petroleum products or wastes was not under our
control. Because operating and maintaining helicopters causes us
to generate, handle and dispose of materials that may be
classified as hazardous substances, hazardous
wastes, or other types of regulated materials, we may
incur joint and several, strict liability under applicable
federal laws, including the federal Comprehensive Environmental
Response, Compensation, and Liability Act, also referred to as
the Superfund law and the federal Resource Conservation and
Recovery Act, as well as analogous state laws. Under such laws,
we could be required to remove or remediate previously disposed
wastes or property contamination, restore affected properties,
or undertake measures to prevent future contamination. In
addition, future spills or releases of regulated substances or
the discovery of currently unknown contamination could expose us
to material losses, expenditures and environmental liabilities,
including liabilities resulting from lawsuits brought by private
litigants or neighboring property owners or operators for
personal injury or property damage related to our operations or
the land on which our operations are conducted. We generally
cannot recover these costs from insurance.
Changes in environmental laws, regulations or enforcement
policies occur frequently, and any changes that result in more
stringent or costly pollution control equipment, waste handling,
storage, transport, disposal or cleanup requirements or other
unforeseen liabilities could require us to make significant
expenditures to attain and maintain compliance and may have a
material adverse effect on our results of operations,
competitive position or financial condition. For example, the
U.S. Congress has considered, and almost one-half of the
states have pursued regulatory initiatives designed to restrict
the emission of carbon dioxide, methane and other greenhouse
gases that may contribute to warming of the Earths
atmosphere and other climatic changes, primarily through the
planned development of greenhouse gas emission inventories
and/or
regional greenhouse cap and trade programs. Any adoption of laws
or regulations that limits emissions of greenhouse gases from
equipment or operations could result in increased costs to
reduce such emissions from our operations as well as those of
our customers, and could adversely affect demand for our
services.
New
and proposed health care legislation and regulation could have a
material impact on our business.
On March 23, 2010, the Patient Protection and Affordable
Care Act became law, enacting comprehensive health care reform
in the United States. Many provisions of the law that could
impact our business will not become effective until 2014 or
later, and require implementation through regulations that have
not yet been promulgated. Accordingly, we are currently
evaluating the new legislation and cannot predict with any
certainty what the potential impact of the new law will be on
our business. The legislation aims to expand health insurance
coverage to uninsured Americans, and, among other things,
expands Medicaid, requires U.S. citizens and legal
residents to have health insurance coverage or pay a tax
penalty, and assesses fees on employers who do not offer
qualifying coverage to employees. The legislation also has
provisions aimed at controlling health care costs. With respect
to our Air Medical operations, we may see a decrease in
reimbursement amounts from Medicaid, Medicare and commercial
insurance payors, but may also see an increase in payments from
individuals who were previously uninsured. Federal and state
governments may propose and adopt other health care initiatives
or changes to current laws and regulations, the impact of which
cannot be predicted.
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New
and proposed health care legislation and regulation could
increase the cost of providing medical benefits to employees,
which could have an adverse impact on our results of
operations.
Recently passed legislation, described above, and future
proposed legislation and regulation, could increase the cost of
providing medical insurance to our employees. The cost and other
effects, which may include the cost of compliance and cost of
insurance, cannot be determined with certainty. If our costs
increase and we are unable to pass the costs to our customers,
there may be a material adverse impact on our results of
operations.
Our
international operations are subject to political, economic and
regulatory uncertainty.
Our international operations represented approximately 1% of our
total operating revenues for the year ended December 31,
2009; however, we often consider international opportunities,
particularly in our Oil and Gas segment, and often in lesser
developed countries, and we are currently negotiating a joint
venture in Brazil. International operations, particularly in
lesser developed countries, are subject to a number of risks,
including:
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political, social and economic instability;
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terrorism, kidnapping and extortion;
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potential seizure or nationalization of assets;
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import-export quotas; and
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currency fluctuations or devaluation.
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Additionally, our competitiveness in international markets may
be adversely affected by government regulation, including
regulations requiring:
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the awarding of contracts to local contractors;
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the employment of local citizens; and
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the establishment of foreign subsidiaries with significant
ownership positions reserved by the foreign government for local
ownership.
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Our
failure to attract and retain qualified personnel could
adversely affect us.
Our ability to attract and retain qualified pilots, mechanics,
nurses, paramedics and other highly trained personnel will be an
important factor in determining our future success. Many of our
customers require pilots of aircraft that service them to have
inordinately high levels of flight experience. The market for
these experienced and highly trained personnel is extremely
competitive. Accordingly, we cannot assure that we will be
successful in our efforts to attract and retain such persons.
Some of our pilots and mechanics, and those of our competitors,
are members of the U.S. military reserves and could be
called to active duty. If significant numbers of such persons
are called to active duty, it would reduce the supply of such
workers, possibly curtailing our operations and likely
increasing our labor costs.
RISKS
SPECIFIC TO OUR COMPANY
The
Macondo incident could have a material adverse effect on our
business.
Our business is highly dependent on the offshore oil and gas
industry, with approximately 65% of our total 2009 operating
revenue attributable to helicopter support for offshore oil and
gas exploration and production companies, substantially all of
which was in the Gulf of Mexico. Of this revenue, approximately
65% was attributable to deepwater operations. Many of the
helicopters we have purchased recently are larger aircraft
intended to service deepwater activities, and the margins we
earn on these aircraft are generally higher than on smaller
aircraft. In addition, we derive a significant amount of our
revenue from a small number of major and independent oil and gas
companies.
24
In April 2010, the Deepwater Horizon rig, engaged in deepwater
drilling operations at BPs Macondo well in the Gulf of
Mexico, sank after a blowout, resulting in the discharge of
substantial amounts of oil until mid-July 2010, when the flow of
oil was stopped. On May 28, 2010, the Department of
Interior imposed a six-month moratorium on offshore deepwater
drilling operations, the enforcement of which was preliminarily
enjoined, and on July 12, 2010, the Department of Interior
imposed another similar moratorium set to expire
November 30, 2010. As a result, deepwater drilling
operations in the Gulf of Mexico were suspended. On
October 12, 2010, the Department of Interior lifted the
moratorium on deepwater drilling. In addition, as a result of
regulatory actions by the Department of Interior, there has been
a de facto moratorium on drilling in the shallow
waters of the Gulf of Mexico. It is not possible to estimate
whether or when drilling operations in the Gulf of Mexico will
return to normal activity levels, due to uncertainties
surrounding the timing of issuance of drilling permits by the
Department of Interior and new regulations related to drilling
operations. BP has incurred significant costs related to the
cleanup and damages caused by the oil spill and stopping the
flow of oil from the well. BP is one of our major customers and
accounted for approximately 14% of our total revenues in 2009.
As a result of these events, we have experienced increased
flight activity, although we expect that this increased activity
will decline when flight activity associated with the
clean-up
winds down. We estimate that the flight hours related to this
increased activity were approximately 2,800 hours and
1800 hours, or 7% and 5% of total flight hours (9% and 6%
of Oil and Gas segment flight hours) for the second and third
quarters of 2010, respectively. Offsetting these increased
flight hours are decreased flight hours resulting from the
suspension of deepwater drilling activities in the Gulf of
Mexico. We estimate that the adverse affect to our flight hours
related to deepwater drilling rigs that have already demobilized
are approximately 500 to 600 flight hours per month, or
approximately 5% of Oil and Gas segment flight hours per month.
Many of the deepwater drilling rigs we have been servicing are
still on location (although not drilling), and therefore we are
still conducting crew changes to those rigs. It is not possible
to estimate how long these rigs will remain in their current
status, but if these drilling rigs are demobilized or leave the
Gulf of Mexico, there will be a further adverse affect to our
flight activity. The majority of our transportation activity
services production facilities, which were not directly impacted
by the moratorium. This adds stability to our business as these
are more permanent in nature.
We believe the Macondo incident is likely to result in increased
costs for our exploration and production company customers
operating in the Gulf of Mexico. Increased costs may cause
customers to decrease their activity in the Gulf of Mexico, may
decrease demand for our services, and may increase pricing
pressure for our services. We cannot predict whether or to what
extent drilling activities will resume in the Gulf of Mexico.
Further, the potential for, or the ultimate enactment of, laws
and regulations that increase the costs of, or impose additional
restrictions on, drilling or operating in the Gulf of Mexico,
may cause customers and potential customers to substantially
limit activities in or even exit the Gulf of Mexico.
Accordingly, the Macondo incident could have a material adverse
effect on our business.
We are
highly dependent on the offshore oil and gas industry,
particularly in the Gulf of Mexico.
Approximately 65% of our 2009 operating revenue was attributable
to helicopter support for offshore oil and gas exploration and
production companies, substantially of which was in the Gulf of
Mexico. Our business is highly dependent on the level of
activity by oil and gas companies, particularly in the Gulf of
Mexico. The level of activity by our customers operating in the
Gulf of Mexico depends on factors that we cannot control, such
as:
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the extent to which increased government regulation or other
factors may impose increased costs, including as a result of the
Macondo incident, as discussed above;
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the supply of, and demand for, oil and natural gas and market
expectations regarding supply and demand;
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weather-related or other natural causes;
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actions of OPEC, and Middle Eastern and other oil producing
countries, to control prices or change production levels;
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general economic conditions in the United States and worldwide;
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war, civil unrest or terrorist activities; and
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the price and availability of alternative fuels.
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Any substantial or extended decline in the prices of oil and
natural gas could depress the level of helicopter activity in
support of exploration and production activity, and thus have a
material adverse effect on our business, results of operations
and financial condition.
Additionally, the Gulf of Mexico is generally considered to be a
mature area for oil and gas exploration, which may result in a
continuing decrease in activity over time. This could materially
adversely affect our business, results of operations and
financial condition. In addition, the concentrated nature of our
operations subjects us to the risk that a regional event could
cause a significant interruption in our operations or otherwise
have a material affect on our profitability.
Moreover, companies in the oil and gas exploration and
production industry continually seek to implement cost-savings
measures. As part of these measures, oil and gas companies have
attempted to improve operating efficiencies with respect to
helicopter support services. For example, certain oil and gas
companies have pooled helicopter services among operators,
reduced staffing levels by using technology to permit unmanned
production installations and decreased the frequency of
transportation of employees offshore by increasing the lengths
of shifts offshore. The continued implementation of such
measures could reduce demand for helicopter services and have a
material adverse effect on our business, results of operations
and our financial condition.
We
depend on a small number of large oil and gas industry customers
for a significant portion of our revenues, and our credit
exposure within this industry is significant.
We derive a significant amount of our revenue from a small
number of major and independent oil and gas companies. For the
year ended December 31, 2009, approximately 28% of our
operating revenues were attributable to our two largest
customers, Shell and BP, accounting for 15% and 14%,
respectively. The loss of one of our significant customers, if
not offset by revenues from new or other existing customers,
would have a material adverse effect on our business and
operations. In addition, this concentration of customers may
impact our overall credit risk in that these entities may be
similarly affected by changes in economic and other conditions.
Our
pilot workforce is represented by the OPEIU although the Company
and the Union do not have a current agreed upon collective
bargaining agreement and the Company, the Union and individual
pilots are engaged in litigation.
The Company is involved in Federal Court litigation in the
Western District of Louisiana and the Fifth Circuit Court of
Appeals with the OPEIU, the union which represents the
Companys domestic pilots. This litigation involves claims
of bad faith bargaining, compensation of striking pilots both at
the time of the strike and upon their return to work under both
the Railway Labor Act (RLA) and Louisiana state law,
and the terms of employment for the Companys pilots since
the strike ended including non-payment of retention bonuses.
After approximately two years of bargaining between the Company
and OPEIU for a second collective bargaining agreement,
including negotiations mediated by the National Mediation Board,
both parties entered a self-help period as defined by the
applicable labor law, the RLA. At that time the pilots commenced
a strike in September 2006 and immediately prior to that strike
the Company implemented its own terms and conditions of
employment for the pilots. The strike ended in November 2006 and
a court-approved return to work process began in January 2007
for those pilots who had not already returned to work or left
the Companys employment. This process was essentially
completed in April 2007. The Companys pilots continue to
work under the terms and conditions of employment determined by
the Company since the strike began. By Order dated July 9,
2010, the Court dismissed both the Companys and
OPEIUs claims that
26
the other had violated the RLA by bargaining in bad faith before
exercising self-help. By Order dated July 30, 2010, the
Court dismissed all claims that the Company violated the RLA in
the manner in which it returned pilots to work following the
strike. Also, the Court dismissed all but claims by 47 pilots
under Louisiana state law. On August 27, 2010, the OPEIU
and the individual pilot plaintiffs filed a notice of appeal
with the Fifth Circuit Court of Appeals. The parties may yet
proceed to trial on the claims of 47 pilots under Louisiana law
that the Company improperly deducted certain sums from their
final pre-strike paychecks. Such trial is scheduled for
November 29, 2010. On December 31, 2009, the OPEIU
filed another case against the Company in the Western District
of Louisiana in which the OPEIU asserts that its acceptance in
2009 of the terms and conditions of employment for the
Companys pilots initially implemented by the Company prior
to the strike has created a binding collective bargaining
agreement and that the Company has inappropriately made
unilateral revisions to those terms including failing to pay a
retention bonus. That case has been stayed by the Court pending
resolution of the other litigation between the parties.
Although
credit markets have improved following the credit crisis in late
2008 and 2009, there remains a risk that these markets may have
an adverse impact on our business and financial condition in
ways that we currently cannot predict.
The credit markets and related turmoil in the global financial
system may have an adverse impact on our business and our
financial condition. We cannot predict our ability to obtain
lease financing due to credit availability, and this could limit
our ability to fund our future growth and operations. While we
have been able to obtain proposals and lease financing, we
cannot predict future availability nor the effects on pricing
for lease financing.
General
economic conditions and recent market events may expose us to
new risks.
Recent events in the financial markets have contributed to
severe volatility in the securities markets, a severe liquidity
crisis in the global credit markets, and unprecedented
government intervention. In such an environment, significant
additional risks may exist for us. The recent instability in the
financial markets has led the U.S. government to take a
number of unprecedented actions designed to support certain
financial and other institutions and segments of the financial
market that have experienced extreme volatility, and in some
cases, a lack of liquidity. There can be no assurance that this
intervention will improve market conditions, that such
conditions will not continue to deteriorate, or that further
government intervention will or will not occur.
Our
Chairman of the Board and Chief Executive Officer is also our
principal stockholder and has voting control of the
Company.
Al A. Gonsoulin, our Chairman of the Board and Chief Executive
Officer, beneficially owns stock representing approximately 52%
of our total voting power. As a result, he exercises control
over the election of all of our directors and the outcome of all
matters requiring a stockholder vote. This ownership also may
delay or prevent a change in our management or a change in
control of us, even if such changes would benefit our other
stockholders and were supported by a majority of our
stockholders. Given his large equity ownership, his interest may
not align with those of holders of the notes.
Provisions
in our articles of incorporation and by-laws and Louisiana law
make it more difficult to effect a change in control of us,
which could discourage a takeover of our company and adversely
affect the price of our common stock.
Although an attempted takeover of our company is unlikely by
virtue of the ownership by our Chief Executive Officer of more
than 50% of the total voting power of our capital stock, there
are also provisions in our articles of incorporation and by-laws
that may make it more difficult for a third party to acquire
control of us, even if a change in control would result in the
purchase of our companys securities at a premium to the
market price or would otherwise be beneficial to you. For
example, our articles of incorporation authorize our board of
directors to issue preferred stock without stockholder approval.
If our board of directors elects to issue preferred stock, it
could be more difficult for a third party to acquire us.
27
In addition, provisions of our by-laws, such as giving the board
the exclusive right to fill all board vacancies, could make it
more difficult for a third party to acquire control of us. In
addition to the provisions contained in our articles of
incorporation and by-laws, the Louisiana Business Corporation
Law (LBCL), includes certain provisions applicable
to Louisiana corporations, such as us, which may be deemed to
have an anti-takeover effect. Such provisions give stockholders
the right to receive the fair value of their shares of stock
following a control transaction from a controlling person or
group and set forth requirements relating to certain business
combinations. Our descriptions of these provisions are only
abbreviated summaries of detailed and complex statutes. For a
complete understanding of the statutes, you should read them in
their entirety.
The LBCLs control share acquisition statute provides that
any person who acquires control shares will be able
to vote such shares only if the right to vote is approved by the
affirmative vote of at least a majority of both (i) all the
votes entitled to be cast by stockholders and (ii) all the
votes entitled to be cast by stockholders excluding
interested shares. The control share acquisition
statute permits the articles of incorporation or by-laws of a
company to exclude from the statutes application
acquisitions occurring after the adoption of the exclusion. Our
by-laws do contain such an exclusion; however, our board of
directors or stockholders, by an amendment to our by-laws, could
reverse this exclusion.
Use of
proceeds
This exchange offer is intended to satisfy our obligations under
the registration rights agreement. We will not receive any cash
proceeds from the issuance of the Registered Notes. In
consideration for issuing the Registered Notes contemplated in
this prospectus, we will receive Unregistered Notes in like
principal amount, the form and terms of which are the same as
the form and terms of the Registered Notes, except as otherwise
described in this prospectus. The Unregistered Notes surrendered
in exchange for the Registered Notes will be retired and
cancelled. Accordingly, the issuance of the Registered Notes
will not result in any increase in our indebtedness.
The
exchange offer
PURPOSE
AND EFFECT OF THE EXCHANGE OFFER
At the closing of the offering of the Unregistered Notes, we
entered into a registration rights agreement with the initial
purchaser, for the benefit of the holders, pursuant to which we
and our subsidiary guarantors (the Guarantors)
agreed, at our cost, to:
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file a registration statement (the exchange offer
registration statement) with the SEC with respect to a
registered exchange offer (the exchange offer) to
exchange the Unregistered Notes for Registered Notes guaranteed
by the Guarantors having terms identical in all material
respects to the Unregistered Notes (except that the Registered
Notes will not contain terms with respect to transfer
restrictions or Liquidated Damages (as defined below));
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use our reasonable best efforts to cause the exchange offer
registration statement to be declared effective under the
Securities Act; and
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use our reasonable best efforts to consummate the exchange offer
within 365 days after September 23, 2010 (the
Issue Date).
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After the effectiveness of the exchange offer registration
statement, we will offer the Registered Notes in exchange for
surrender of the Unregistered Notes. We will keep the registered
exchange offer open for not less than 30 days (or longer if
required by applicable law) after the date notice of the
exchange offer is given to the holders. For each Unregistered
Note surrendered to us pursuant to the exchange offer, the
holder of such note will receive a Registered Note having a
principal amount equal to that of the surrendered Unregistered
Note. Under existing SEC interpretations, the Registered Notes
and the related guarantees will be freely transferable by
holders other than affiliates of ours or any Guarantor after the
registered exchange offer without further registration under the
Securities Act.
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Each holder that wishes to exchange its Unregistered Notes for
Registered Notes will be required to represent that, among other
things:
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any Registered Notes to be received by it will be acquired in
the ordinary course of its business,
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it has no arrangement or understanding with any person to
participate in the distribution (within the meaning of the
Securities Act) of the Registered Notes in violation of the
provisions of the Securities Act,
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it is not an affiliate of ours or the Guarantors, as
defined in Rule 405 under the Securities Act, or if it is
an affiliate, it will comply with the registration and
prospectus delivery requirements of the Securities Act to the
extent applicable,
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if such holder is not a broker-dealer, it is not engaged in, and
does not intend to engage in, a distribution of Registered
Notes, and
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if such holder is a broker-dealer (a participating
broker-dealer) that will receive Registered Notes for its
own account in exchange for Unregistered Notes acquired as a
result of market-making or other trading activities, it will
deliver a prospectus in connection with any resale of such
Registered Notes.
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Under similar SEC interpretations, participating broker-dealers
may fulfill their prospectus delivery requirements with respect
to Registered Notes (other than a resale of an unsold allotment
from the original sale of the notes) with the prospectus
contained in the exchange offer registration statement. Under
the registration rights agreement, if requested by a
participating broker-dealer, we and the Guarantors are required
to use our reasonable best efforts to keep the exchange offer
registration statement continuously effective for a period of up
to 180 days after the date on which such statement is
declared effective, or such longer period if extended pursuant
to the registration rights agreement, to satisfy such prospectus
delivery requirements.
In the event that:
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any changes in law or the applicable interpretations of the
staff of the SEC do not permit us and the Guarantors to effect
such exchange offer,
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for any other reason the exchange offer is not consummated
within 365 days of the Issue Date,
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any holder is prohibited by law or the applicable
interpretations of the staff of the SEC from participating in
the exchange offer or does not receive Registered Notes on the
date of the exchange that may be sold without restriction under
state and federal securities laws (other than due solely to the
status of such holder as an affiliate of ours or any
Guarantor), or
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the initial purchaser so requests with respect to Unregistered
Notes that have, or that are reasonably likely to be determined
to have, the status of unsold allotments in an initial
distribution,
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then we and the Guarantors will, at our cost and subject to the
terms of the registration rights agreement, (a) use our
reasonable best efforts to, as promptly as practicable, file a
registration statement (the shelf registration
statement) covering resales of the Unregistered Notes or
the Registered Notes, as the case may be, from time to time,
(b) use our reasonable best efforts to cause the shelf
registration statement to be declared effective under the
Securities Act on or prior to the 365th day after the Issue
Date and (c) use our reasonable best efforts to keep the
shelf registration statement continuously effective under the
Securities Act for the period ending on the date which is one
year from the Issue Date or such shorter period ending when all
Unregistered Notes
and/or
Registered Notes covered by the shelf registration statement
have been sold in the manner set forth and as contemplated in
the shelf registration statement. We will, in the event a shelf
registration statement is filed, among other things, provide to
each holder for which such shelf registration statement was
filed copies of the prospectus which is a part of the shelf
registration statement, notify each such holder when the shelf
registration statement has become effective and take certain
other actions as are required to permit unrestricted resales of
the Unregistered Notes or the Registered Notes, as the case may
be. A holder selling Unregistered Notes or Registered Notes
pursuant to the shelf registration statement generally would be
required to be named as a selling security holder in the related
prospectus and to deliver a prospectus to purchasers, will be
subject to certain of the civil liability provisions under the
Securities Act in connection
29
with such sales and will be bound by the provisions of the
registration rights agreement which are applicable to such
holder (including certain indemnification obligations). In
addition, each holder of the Unregistered Notes or Registered
Notes to be registered under the shelf registration statement
will be required to deliver information to be used in connection
with the shelf registration statement within the time period set
forth in the registration rights agreement in order to have such
holders Unregistered Notes or Registered Notes included in
the shelf registration statement and to benefit from the
provisions regarding Liquidated Damages set forth in the
following paragraph.
If:
(i) the exchange offer is not consummated or a shelf
registration statement, if required, is not declared effective,
in each case, on or prior to the 365th day following the
Issue Date, or
(ii) the shelf registration statement is declared effective
but thereafter ceases to be effective or usable, except if the
shelf registration ceases to be effective or usable as
specifically permitted under the registration rights agreement,
(each such event referred to in clauses (i) and (ii) a
registration default), Liquidated Damages in the
form of additional cash interest (Liquidated
Damages) will accrue on the affected Unregistered Notes
and the affected Registered Notes, as applicable. The rate of
Liquidated Damages will be 0.25% per annum for the first
90-day
period immediately following the occurrence of a registration
default, increasing by an additional 0.25% per annum with
respect to each subsequent
90-day
period up to a maximum amount of additional interest of 1.00%
per annum, from and including the date on which any such
registration default shall occur to, but excluding, the earlier
of (1) the date on which all registration defaults have
been cured or (2) the date on which all the Unregistered
Notes and Registered Notes otherwise cease to be registrable
securities.
Notwithstanding the foregoing, (1) the amount of Liquidated
Damages payable shall not increase because more than one
registration default has occurred and is pending and (2) a
holder of Unregistered Notes or Registered Notes who is not
entitled to the benefits of the shelf registration statement
(i.e., such holder has not elected to include information) shall
not be entitled to Liquidated Damages with respect to a
registration default that pertains to the shelf registration
statement. Such amounts of Liquidated Damages are payable in
addition to any other interest payable from time to time with
respect to the Unregistered Notes and the Registered Notes in
cash on each interest payment date to the holders of record for
such interest payment date, commencing with the first such
interest payment date occurring after any such Liquidated
Damages commence to accrue.
Under certain circumstances we and our Guarantors may delay the
filing or the effectiveness of the exchange offer registration
statement or the shelf registration statement and shall not be
required to maintain the effectiveness thereof or amend or
supplement the exchange offer registration statement or the
shelf registration for a period of up to 90 days during any
12-month
period. Any delay period will not alter our obligations to pay
Liquidated Damages with respect to a registration default.
This summary of certain provisions of the registration rights
agreement does not purport to be complete and is subject to, and
is qualified in its entirety by reference to, all the provisions
of the registration rights agreement, a copy of which we will
provide upon receipt of a request delivered to our address set
forth elsewhere in this prospectus.
TERMS OF
THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this
prospectus and in the letter of transmittal, a copy of which is
attached to this prospectus as Annex A, we will accept any
and all Unregistered Notes validly tendered and not withdrawn
prior to the Expiration Date. We will issue $1,000 principal
amount of Registered Notes in exchange for each $1,000 principal
amount of Unregistered Notes accepted in the exchange offer.
Holders may tender some or all of their Unregistered Notes
pursuant to the exchange offer. However, Unregistered Notes may
be tendered only in integral multiples of $1,000 principal
amount.
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The form and terms of the Registered Notes are the same as the
form and terms of the Unregistered Notes, except that
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the Registered Notes will have been registered under the
Securities Act and will not bear legends restricting their
transfer pursuant to the Securities Act, and
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except as otherwise described above, holders of the Registered
Notes will not be entitled to the rights of holders of
Unregistered Notes under the registration rights agreement.
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The Registered Notes will evidence the same debt as the
Unregistered Notes which they replace, and will be issued under,
and be entitled to the benefits of, the indenture which governs
all of the notes.
Solely for reasons of administration and for no other purpose,
we have fixed the close of business
on ,
2010 as the record date for the exchange offer for purposes of
determining the persons to whom this prospectus and the letter
of transmittal will be mailed initially. Only a registered
holder of Unregistered Notes or such holders legal
representative or attorney-in-fact as reflected on the records
of the trustee under the indenture may participate in the
exchange offer. There will be no fixed record date for
determining registered holders of the Unregistered Notes
entitled to participate in the exchange offer.
Holders of the Unregistered Notes do not have any appraisal or
dissenters rights under Louisiana law or the indenture in
connection with the exchange offer. We intend to conduct the
exchange offer in accordance with the applicable requirements of
the Exchange Act and the rules and regulations of the SEC
thereunder.
We shall be deemed to have accepted validly tendered
Unregistered Notes when, as and if we have given oral or written
notice thereof to the exchange agent. The exchange agent will
act as agent for the tendering holders of the Unregistered Notes
for the purposes of receiving the Registered Notes. The
Registered Notes delivered pursuant to the exchange offer will
be issued on the earliest practicable date following our
acceptance for exchange of Unregistered Notes.
Holders who tender Unregistered Notes in the exchange offer will
not be required to pay brokerage commissions or fees or, subject
to the instructions in the letter of transmittal, transfer taxes
with respect to the exchange of the Unregistered Notes pursuant
to the exchange offer. We will pay all charges and expenses,
other than certain applicable taxes, in connection with the
exchange offer. See Fees and expenses.
EXPIRATION
DATE; EXTENSIONS; AMENDMENTS
The term Expiration Date with respect to the
exchange offer, shall mean 5:00 p.m., New York City time,
on , unless
we, in our sole discretion, extend the exchange offer, in which
case the term Expiration Date shall mean the latest
date and time to which the exchange offer is extended. We do not
currently intend to extend the expiration date. The Registered
Notes issued pursuant to this exchange offer will be delivered
promptly following the expiration date to the holders who
validly tender their Unregistered Notes.
In order to extend the exchange offer, we will notify the
exchange agent of any extension by oral or written notice and
will make a public announcement thereof, each prior to
9:00 a.m., New York City time, on the next business day
after the previously scheduled Expiration Date of the exchange
offer.
We reserve the right, in our sole discretion,
(1) to delay accepting any Unregistered Notes,
(2) to extend the exchange offer,
(3) if any of the conditions set forth below under
Conditions to the exchange offer have
not been satisfied, to terminate the exchange offer, or
(4) to amend the terms of the exchange offer in any manner.
We may effect any such delay, extension or termination by giving
oral or written notice thereof to the exchange agent.
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Except as specified in the second paragraph under this heading,
any such delay in acceptance, extension, termination or
amendment will be followed as promptly as practicable by a
notice thereof. If the exchange offer is amended in a manner
determined by us to constitute a material change, we will
promptly disclose such amendment by means of a prospectus
supplement that will be distributed to the registered holders of
the Unregistered Notes. The exchange offer will then be extended
for a period of five to ten business days, as required by law,
depending upon the significance of the amendment and the manner
of disclosure to the registered holders, if the exchange offer
would otherwise expire during such five to ten business day
period.
PROCEDURES
FOR TENDERING UNREGISTERED NOTES
Tenders
of Unregistered Notes
The tender by a holder of Unregistered Notes pursuant to the
procedures set forth below will constitute the tendering
holders acceptance of the terms and conditions of the
exchange offer. Our acceptance for exchange of Unregistered
Notes tendered pursuant to the procedures described below will
constitute a binding agreement between such tendering holder and
us in accordance with the terms and subject to the conditions of
the exchange offer. Only holders are authorized to tender their
Unregistered Notes. The procedures by which Unregistered Notes
may be tendered by beneficial owners that are not holders will
depend upon the manner in which the Unregistered Notes are held.
DTC has authorized DTC participants that are beneficial owners
of Unregistered Notes through DTC to tender their Unregistered
Notes as if they were holders. To effect a tender, DTC
participants should transmit their acceptance to DTC through the
DTC Automated Tender Offer Program (ATOP), for which
the transaction will be eligible, and follow the procedures for
book-entry transfer, set forth below under
Book-Entry delivery procedures.
Tender
of Unregistered Notes held through a custodian
To tender effectively Unregistered Notes that are held of record
by a custodian bank, depository, broker, trust company or other
nominee, the beneficial owner thereof must instruct such holder
to tender the Unregistered Notes on the beneficial owners
behalf. A letter of instructions from the record owner to the
beneficial owner may be included in the materials provided along
with this prospectus which may be used by the beneficial owner
in this process to instruct the registered holder of such
owners Unregistered Notes to effect the tender.
Tender
of Unregistered Notes held through DTC
To tender effectively Unregistered Notes that are held through
DTC, DTC participants should either transmit their acceptance
through ATOP, for which the transaction will be eligible, and
DTC will then edit and verify the acceptance and send an
Agents Message to the exchange agent for its acceptance.
Delivery of tendering Unregistered Notes held through DTC must
be made to the exchange agent pursuant to the book-entry
delivery procedures set forth below.
Except as provided below, unless the Unregistered Notes being
tendered are deposited with the exchange agent on or prior to
the Expiration Date (accompanied by a properly completed and
duly executed letter of transmittal or a properly transmitted
Agents Message), we may, at our option, reject such
tender. Exchange of Registered Notes for Unregistered Notes will
be made only against deposit of the tendered Unregistered Notes
and delivery of all other required documents.
Book-entry
delivery procedures
The exchange agent will establish accounts with respect to the
Unregistered Notes at DTC for purposes of the exchange offer
within two business days after the date of this prospectus, and
any financial institution that is a participant in DTC may make
book-entry delivery of the Unregistered Notes by causing DTC to
transfer such Unregistered Notes into the exchange agents
account in accordance with DTCs procedures for such
transfer. However, although delivery of Unregistered Notes may
be effected through book-entry at DTC,
32
the letter of transmittal (or facsimile thereof), with any
required signature guarantees or an Agents Message in
connection with a book-entry transfer, and any other required
documents, must, in any case, be transmitted to and received by
the exchange agent at one or more of its addresses set forth in
this prospectus on or prior to the Expiration Date. Delivery of
documents to DTC does not constitute delivery to the exchange
agent. The confirmation of a book-entry transfer into the
exchange agents account at DTC as described above is
referred to herein as a Book-Entry Confirmation.
The term Agents Message means a message
transmitted by DTC to, and received by, the exchange agent and
forming a part of the Book-Entry Confirmation, which states that
DTC has received an express acknowledgment from each participant
in DTC tendering the Unregistered Notes and that such
participant has received the letter of transmittal and agrees to
be bound by the terms of the letter of transmittal and we may
enforce such agreement against such participant.
Notwithstanding any other provision hereof, delivery of
Registered Notes by the exchange agent for Unregistered Notes
tendered and accepted for exchange pursuant to the exchange
offer will, in all cases, be made only after timely receipt by
the exchange agent of such Unregistered Notes (or Book-Entry
Confirmation of the transfer of such Unregistered Notes into the
exchange agents account at DTC as described above), and
the letter of transmittal (or facsimile thereof) with respect to
such Unregistered Notes, properly completed and duly executed,
with any required signature guarantees and any other documents
required by the letter of transmittal, or a properly transmitted
Agents Message.
Determination
of validity
All questions as to the validity, form, eligibility (including
time of receipt), acceptance and withdrawal of tendered
Unregistered Notes will be determined by us in our sole
discretion, which determination will be final and binding. We
reserve the absolute right to reject any and all Unregistered
Notes not properly tendered or any Unregistered Notes our
acceptance of which, in the opinion of our counsel, would be
unlawful.
We also reserve the right to waive any defects, irregularities
or conditions of tender as to particular Unregistered Notes. The
interpretation of the terms and conditions of our exchange offer
(including the instructions in the letter of transmittal) by us
will be final and binding on all parties. Unless waived, any
defects or irregularities in connection with tenders of
Unregistered Notes must be cured within such time as we shall
determine.
Although we intend to notify holders of defects or
irregularities with respect to tenders of Unregistered Notes
through the exchange agent, neither we, the exchange agent nor
any other person is under any duty to give such notice, nor
shall they incur any liability for failure to give such
notification. Tenders of Unregistered Notes will not be deemed
to have been made until such defects or irregularities have been
cured or waived.
Any Unregistered Notes received by the exchange agent that are
not validly tendered and as to which the defects or
irregularities have not been cured or waived, or if Unregistered
Notes are submitted in a principal amount greater than the
principal amount of Unregistered Notes being tendered by such
tendering holder, such unaccepted or non-exchanged Unregistered
Notes will be credited to the appropriate account maintained by
the appropriate book-entry transfer facility.
By tendering, each registered holder will represent to us that,
among other things,
(a) the Registered Notes to be acquired by the holder and
any beneficial owner(s) of the Unregistered Notes in connection
with the exchange offer are being acquired by the holder and any
beneficial owner(s) in the ordinary course of business of the
holder and any beneficial owner(s),
(b) the holder and each beneficial owner are not
participating, do not intend to participate, and have no
arrangement or understanding with any person to participate, in
a distribution of the Registered Notes,
(c) the holder and each beneficial owner acknowledge and
agree that (x) any person participating in the exchange
offer for the purpose of distributing the Registered Notes must
comply with the registration and prospectus delivery
requirements of the Securities Act in connection with a
secondary resale transaction with respect to the Registered
Notes acquired by such person and cannot rely on the position
33
of the Staff of the SEC set forth in no-action letters that are
discussed herein under Resale of the
Registered Notes; Plan of distribution, and (y) any
broker-dealer that receives Registered Notes for its own account
in exchange for Unregistered Notes pursuant to the exchange
offer must delivery a prospectus in connection with any resale
of such Registered Notes, but by so acknowledging, the holder
shall not be deemed to admit that, by delivering a prospectus,
it is an underwriter within the meaning of the
Securities Act,
(d) neither the holder nor any beneficial owner is an
affiliate, as defined under Rule 405 of the
Securities Act, of ours, and
(e) the holder and each beneficial owner understands, that
a secondary resale transaction described in clause (c)
above should be covered by an effective registration statement
containing the selling securityholder information required by
Item 507 of
Regulation S-K
of the SEC.
Each broker-dealer that receives Registered Notes for its own
account in exchange for Unregistered Notes, where such
Unregistered 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 Registered Notes. See
Resale of the Registered Notes; Plan of
distribution.
WITHDRAWAL
OF TENDERS
Except as otherwise provided herein, tenders of Unregistered
Notes pursuant to the exchange offer may be withdrawn, unless
accepted for exchange as provided in the exchange offer, at any
time prior to the Expiration Date of the exchange offer.
Any notice of withdrawal must specify the name and number of the
account at the appropriate book-entry transfer facility to be
credited with such withdrawn Unregistered Notes and must
otherwise comply with such book-entry transfer facilitys
procedures.
If the Unregistered Notes to be withdrawn have been delivered or
otherwise identified to the exchange agent, a signed notice of
withdrawal meeting the requirements discussed above is effective
immediately upon written or facsimile notice of withdrawal even
if physical release is not yet effected. A withdrawal of
Unregistered Notes can only be accomplished in accordance with
these procedures.
All questions as to the validity, form and eligibility
(including time of receipt) of such notices will be determined
by us in our sole discretion, which determination shall be final
and binding on all parties. No withdrawal of Unregistered Notes
will be deemed to have been properly made until all defects or
irregularities have been cured or expressly waived. Neither we,
the exchange agent nor any other person will be under any duty
to give notification of any defects or irregularities in any
notice of withdrawal or revocation, nor shall we or they incur
any liability for failure to give any such notification. Any
Unregistered Notes so withdrawn will be deemed not to have been
validly tendered for purposes of the exchange offer and no
Registered Notes will be issued with respect thereto unless the
Unregistered Notes so withdrawn are retendered. Properly
withdrawn Unregistered Notes may be retendered in accordance
with the procedures described above under
Procedures for tendering Unregistered
Notes at any time prior to the Expiration Date of the
exchange offer.
Any Unregistered Notes which have been tendered but which are
not accepted for exchange due to the rejection of the tender due
to uncured defects or the prior termination of the exchange
offer, or which have been validly withdrawn, will be returned to
the appropriate account in accordance with the book-entry
transfer facilitys procedures.
CONDITIONS
TO THE EXCHANGE OFFER
The exchange offer shall not be subject to any conditions, other
than that
(1) the SEC has issued an order or orders declaring the
indenture governing the notes qualified under the
Trust Indenture Act of 1939,
34
(2) the exchange offer, or the making of any exchange by a
holder, does not violate applicable law or any applicable
interpretation of the staff of the SEC,
(3) no action or proceeding shall have been instituted or
threatened in any court or by or before any governmental agency
with respect to the exchange offer, which, in our judgment,
might impair our ability to proceed with the exchange offer,
(4) there shall not have been adopted or enacted any law,
statute, rule or regulation which, in our judgment, would
materially impair our ability to proceed with the exchange
offer, or
(5) there shall not have occurred any material change in
the financial markets in the United States or any outbreak of
hostilities or escalation thereof or other calamity or crisis
the effect of which on the financial markets of the United
States, in our judgment, would materially impair our ability to
proceed with the exchange offer.
If we determine in our sole discretion that any of the
conditions to the exchange offer are not satisfied, we may
(1) refuse to accept any Unregistered Notes and return all
tendered Unregistered Notes to the tendering holders,
(2) extend the exchange offer and retain all Unregistered
Notes tendered prior to the Expiration Date applicable to the
exchange offer, subject, however, to the rights of holders to
withdraw such Unregistered Notes (see
Withdrawal of tenders), or
(3) waive such unsatisfied conditions with respect to the
exchange offer and accept all validly tendered Unregistered
Notes which have not been withdrawn.
If such waiver constitutes a material change to the exchange
offer, we will promptly disclose such waiver by means of a
prospectus supplement that will be distributed to the registered
holders, and will extend the exchange offer for a period of five
to ten business days, depending upon the significance of the
waiver and the manner of disclosure to the registered holders,
if the exchange offer would otherwise expire during such five to
ten business day period.
CONSEQUENCES
OF FAILURE TO EXCHANGE
The Unregistered Notes that are not exchanged for Registered
Notes pursuant to the exchange offer will remain restricted
securities. Accordingly, the Unregistered Notes may be resold
only:
(1) to us upon redemption thereof or otherwise;
(2) so long as the Unregistered Notes are eligible for
resale pursuant to Rule 144A, to a person inside the United
States whom the seller reasonably believes is a qualified
institutional buyer within the meaning of Rule 144A under
the Securities Act in a transaction meeting the requirements of
Rule 144A;
(3) in an offshore transaction pursuant to
Regulation S under the Securities Act;
(4) pursuant to an exemption from registration in
accordance with Rule 144, if available, under the
Securities Act;
(5) in reliance on another exemption from the registration
requirements of the Securities Act; or
(6) pursuant to an effective registration statement under
the Securities Act, in each case in accordance with any
applicable securities laws of any state of the United States.
EXCHANGE
AGENT
The Bank of New York Mellon Trust Company, N.A., the
trustee under the indenture governing the notes, has been
appointed as exchange agent for the exchange offer. Questions
and requests for assistance, requests
35
for additional copies of this prospectus or of the letter of
transmittal and requests for Notices of Guaranteed Delivery and
other documents should be directed to the exchange agent
addressed as follows:
By Mail or Hand:
The Bank of New York Mellon Trust Company, N.A.
c/o The Bank of New York Mellon Corporation
Corporate Trust Operations Reorganization Unit
480 Washington
Blvd-27th
Floor
Jersey City, NJ 07310
Attention: Mrs. Carolle Montreuil
By Facsimile:
(212) 298-1915
Attention: Mrs. Carolle Montreuil
Confirm by Telephone:
(212) 815-5920
Attention: Mrs. Carolle Montreuil
FEES AND
EXPENSES
We will bear the expenses of soliciting tenders. The principal
solicitation is being made by mail; however, additional
solicitation may be made by telegraph, telecopy, telephone or in
person by officers and regular employees of PHI, Inc. and our
affiliates.
No dealer-manager has been retained in connection with the
exchange offer and no payments will be made to brokers, dealers
or others soliciting acceptance of the exchange offer. However,
reasonable and customary fees will be paid to the exchange agent
for its services and it will be reimbursed for its reasonable
out-of-pocket
expenses in connection therewith.
Our out of pocket expenses for the exchange offer will include
fees and expenses of the exchange agent and the trustee under
the indenture, accounting and legal fees and printing costs,
among others.
We will pay all transfer taxes, if any, applicable to the
exchange of the Unregistered Notes pursuant to the exchange
offer. If, however, a transfer tax is imposed for any reason
other than the exchange of the Unregistered Notes pursuant to
the exchange offer, then the amount of any such transfer taxes
(whether imposed on the registered holder or any other persons)
will be payable by the tendering holder. If satisfactory
evidence of payment of such taxes or exemption therefrom is not
submitted with the letter of transmittal, the amount of such
transfer taxes will be billed directly to such tendering holder.
ACCOUNTING
TREATMENT
The Registered Notes will be recorded at the carrying value of
the Unregistered Notes and no gain or loss for accounting
purposes will be recognized. The expenses of the exchange offer
will be amortized over the term of the Registered Notes.
RESALE OF
THE REGISTERED NOTES; PLAN OF DISTRIBUTION
Each broker-dealer that receives Registered Notes for its own
account pursuant to the exchange offer must acknowledge that it
will deliver a prospectus in connection with any resale of
Registered 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 Registered Notes received in
exchange for Unregistered Notes where such Unregistered Notes
were acquired as a result of market-making activities or other
trading activities. In addition,
until ,
2011 (90 days after the date of this prospectus), all
dealers effecting transactions in the Registered Notes, whether
or not participating in this distribution, may be required to
deliver a prospectus. This requirement is in addition to the
obligation of dealers to deliver a prospectus when acting as
underwriters and with respect to their unsold allotments or
subscriptions.
36
We will not receive any proceeds from any sale of Registered
Notes by broker-dealers. Registered 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
(1) in the
over-the-counter
market,
(2) in negotiated transactions,
(3) through the writing of options on the Registered Notes
or a combination of such methods of resale,
(4) at market prices prevailing at the time of resale,
(5) at prices related to such prevailing market
prices, or
(6) 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
or the purchasers of any such registered notes.
Any broker-dealer that resells registered 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 registered notes may be deemed to be an
underwriter within the meaning of the Securities Act
and any profit on any such resale of registered notes and any
commission on 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 a prospectus 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.
We agreed to permit the use of this prospectus by such
broker-dealers to satisfy this prospectus delivery requirement.
To the extent necessary to ensure that the prospectus is
available for sales of registered notes by broker-dealers, we
agreed to use our best efforts to keep the exchange offer
registration statement continuously effective, supplemented,
amended and current for a period of 180 days after the date
on which the registration statement is declared effective or
such shorter period as will terminate when all registered notes
covered by such registration statement have been sold. We will
provide sufficient copies of the latest version of this
prospectus to such broker-dealers no event later than one day
after such request at any time during this period.
Description
of other indebtedness
OUR
SENIOR SECURED REVOLVING CREDIT FACILITY
Our existing senior secured revolving credit facility permits
borrowings up to $75 million and contains a borrowing base
of 80% of eligible receivables and 50% of the value of parts. On
September 13, 2010, we entered into an amendment to the
revolving credit facility pursuant to which the term has been
extended for one year from September 1, 2011 to
September 1, 2012 and the minimum required consolidated net
worth covenant was increased to $450 million from
$425 million. We may prepay the revolving credit facility
at any time in whole or in part without premium or penalty.
As of September 30, 2010, we had $18.3 million in
borrowings, and $5.5 million in letters of credit
outstanding, under the facility. During the nine months ended
September 30, 2010 and 2009, and the year ended
December 31, 2009, the weighted average effective interest
rate on amounts borrowed under the facility was 4.25%, 3.36% and
3.58%, respectively.
Interest
rate and fees
The interest rate is the prime rate plus 100 basis points.
We are also obligated to pay a fee of 0.25% per annum on the
unused portion of the revolving credit facility. Letters of
credit bear interest at 0.125% per month, plus standard issuing
fees.
37
Covenants
The credit agreement includes financial covenants related to
working capital, funded debt to consolidated net worth, and
consolidated net worth and other covenants including
restrictions on additional debt, liens and a change of control.
Events
of default
Events of default under the revolving credit facility include,
among others, nonpayment of principal when due, nonpayment of
interest, fees or other amounts, a material inaccuracy of any of
the representations and warranties, failure to perform any
covenant, bankruptcy events, or a change of control, and a
default in any other material credit agreement or evidence of
indebtedness, including our 8.625% Senior Notes due 2018.
Security
and guarantees
All obligations under the revolving credit facility are secured
by a perfected first priority security interest in all of our
eligible receivables and parts. All obligations under the
revolving credit facility are guaranteed by certain of our
domestic subsidiaries.
Description
of notes
The Unregistered Notes and Regulation D Notes were issued
by the Company under an Indenture (the Indenture)
among itself, the Guarantors and Bank of New York Mellon
Trust Company, N.A. as trustee (the Trustee),
in private transactions that are not subject to the registration
requirements of the Securities Act. The terms of the notes
include those stated in the Indenture and those made part of the
Indenture by reference to the Trust Indenture Act of 1939,
as amended (the Trust Indenture Act).
Any Unregistered Notes that remain outstanding after completion
of the exchange offer, together with the Registered Notes issued
in the exchange offer, and the Regulation D Notes, will be
treated as a single class of securities under the indenture (the
Notes).
The following description is a summary of the material
provisions of the Indenture. It does not restate that agreement
in its entirety. We urge you to read the Indenture because it,
and not this description, defines your rights as holders of the
Notes.
You can find the definitions of certain terms used in this
description below under the heading Certain
Definitions. Certain defined terms used in this
description but not defined below under the heading
Certain Definitions have the meanings
assigned to them in the Indenture. In this description, the word
Issuer or Company refers only to PHI,
Inc. and not to any of its subsidiaries.
PRINCIPAL,
MATURITY AND INTEREST
The Notes will mature on October 15, 2018. The Notes bear
interest at the rate shown on the cover page of this prospectus,
payable on April 15 and October 15 of each year, commencing on
April 15, 2011, to holders of record at the close of
business on April 1 or October 1, as the case may be,
immediately preceding the relevant interest payment date.
Interest on the Notes is computed on the basis of a
360-day year
of twelve
30-day
months.
The Notes are issued in registered form, without coupons, and in
minimum denominations of $2,000 and integral multiples of $1,000
in excess thereof.
An aggregate principal amount of $300 million of the Notes
have been issued under the Indenture, and an aggregate principal
amount of Registered Notes up to $297.0 million may be
issued in exchange for up to $297.0 million of Unregistered
Notes in this exchange offer. The remaining $3 million of
the $300 million aggregate principal amount was issued to
certain accredited investors pursuant to Regulation D of
the Securities Act of 1933, as amended. The Issuer may issue
additional Notes in an unlimited aggregate principal amount
having identical terms and conditions to the Notes issued (the
Additional Notes), subject to
38
compliance with the covenant described under
Certain covenants Limitations on
additional indebtedness. Any Additional Notes will be part
of the same issue as the Notes already issued and will vote on
all matters as one class with the Notes being issued in this
offering. For purposes of this Description of notes,
except for the covenant described under
Certain Covenants Limitations on
additional indebtedness, references to the Notes include
Additional Notes, if any.
METHODS
OF RECEIVING PAYMENTS ON THE NOTES
If a holder has given wire transfer instructions to the Issuer
at least ten Business Days prior to the applicable payment date,
the Issuer will make all payments on such holders Notes by
wire transfer of immediately available funds to the account
specified in those instructions. Otherwise, payments on the
Notes will be made at the office or agency of the paying agent
(the Paying Agent) and registrar (the
Registrar) for the Notes within the City and State
of New York unless the Issuer elects to make interest payments
by check mailed to the holders at their addresses set forth in
the register of holders.
RANKING
The Notes are general unsecured obligations of the Issuer. The
Notes rank senior in right of payment to all future obligations
of the Issuer that are, by their terms, expressly subordinated
in right of payment to the Notes and pari passu in right of
payment with all existing and future obligations of the Issuer
that are not so subordinated. Each Note Guarantee (as defined
below) is a general, unsecured obligation of the Guarantor
thereof and ranks senior in right of payment to all future
obligations of such Guarantor that are, by their terms,
expressly subordinated in right of payment to such Note
Guarantee and pari passu in right of payment with all existing
and future obligations of such Guarantor that are not so
subordinated.
The Notes and each Note Guarantee are effectively subordinated
to secured Indebtedness of the Issuer and the applicable
Guarantor to the extent of the value of the assets securing such
Indebtedness. The Credit Agreement is secured by all of the
accounts receivable and inventory (and related assets) of the
Issuer and the Guarantors.
The Notes are also effectively subordinated to all existing and
future obligations, including Indebtedness, of any Subsidiaries
that are not Guarantors. Claims of creditors of these
Subsidiaries, including trade creditors, will generally have
priority as to the assets of these Subsidiaries over the claims
of the Issuer and the holders of the Issuers Indebtedness,
including the Notes.
As of September 30, 2010, the Issuer had $51.2 million
of undrawn borrowings available under the Credit Agreement.
Although the Indenture contains limitations on the amount of
additional secured Indebtedness that the Issuer and the
Restricted Subsidiaries may incur, under certain circumstances,
the amount of this Indebtedness could be substantial. See
Certain covenants Limitations on
additional indebtedness and Limitations
on liens.
NOTE GUARANTEES
The Issuers obligations under the Notes and the Indenture
are jointly and severally guaranteed (the Note
Guarantees) by all of our Subsidiaries (other than certain
Foreign Subsidiaries) and will also be guaranteed by our future
Restricted Subsidiaries (other than Foreign Subsidiaries).
Not all of our Subsidiaries guarantee the Notes. Unrestricted
Subsidiaries and Foreign Subsidiaries are not Guarantors. We
currently have no Unrestricted Subsidiaries. Our Foreign
Subsidiaries generated no or de minimis revenues and
operating cash flow during the twelve-month period ended
December 31, 2009 and nine months ended September 30,
2010, and had de minimis assets and liabilities and no
Indebtedness (other than Indebtedness to Issuer and Restricted
Subsidiaries) and no Preferred Stock outstanding as of
September 30, 2010. In the event of a bankruptcy,
liquidation or reorganization of any current or future
non-guarantor Subsidiaries, these non-guarantor Subsidiaries
will pay the holders of their debts and their trade creditors
before they will be able to distribute any of their assets to
us. See Risk factors Risks
relating to the notes Not all of our subsidiaries
guarantee the notes.
39
As of the date of the Indenture, all of our Subsidiaries were
Restricted Subsidiaries. Under the circumstances
described below under the subheading Certain
covenants Limitations on designation of unrestricted
subsidiaries, in the future the Issuer will be permitted
to designate some of its Subsidiaries as Unrestricted
Subsidiaries. The effect of designating a Subsidiary as an
Unrestricted Subsidiary will be:
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an Unrestricted Subsidiary will not be subject to many of the
restrictive covenants in the Indenture;
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a Subsidiary that has previously been a Guarantor and that is
designated an Unrestricted Subsidiary will be released from its
Note Guarantee; and
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the assets, income, cash flow and other financial results of an
Unrestricted Subsidiary will not be consolidated with those of
the Issuer for purposes of calculating compliance with the
restrictive covenants contained in the Indenture.
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The obligations of each Guarantor under its Note Guarantee are
limited to the maximum amount as will, after giving effect to
all other contingent and fixed liabilities of such Guarantor
(including, without limitation, any guarantees of Indebtedness
of the Issuer under the Credit Agreement permitted under
clause (1) of Certain
covenants Limitations on additional
indebtedness) and after giving effect to any collections
from or payments made by or on behalf of any other Guarantor in
respect of the obligations of such other Guarantor under its
Note Guarantee or pursuant to its contribution obligations under
the Indenture, result in the obligations of such Guarantor under
its Note Guarantee not constituting a fraudulent conveyance or
fraudulent transfer under applicable federal, state or foreign
law. Each Guarantor that makes a payment for distribution under
its Note Guarantee is entitled to a contribution from each other
Guarantor in a pro rata amount based on adjusted net assets of
each Guarantor.
In the event of a sale or other disposition of all or
substantially all of the assets of any Guarantor, by way of
merger, consolidation or otherwise, or a sale or other
disposition of all of the Equity Interests of any Guarantor then
held by the Issuer and the Restricted Subsidiaries, except in
any case to the Issuer or any Restricted Subsidiary, then that
Guarantor will be released and relieved of any obligations under
its Note Guarantee provided that such sale or other disposition
complies with the applicable provisions of the Indenture, to the
extent required thereby. See Certain
covenants Limitations on asset sales and
Limitation on mergers, consolidations,
etc. In addition, any Guarantor that is designated as an
Unrestricted Subsidiary or that otherwise ceases to be a
Guarantor, in each case in accordance with the provisions of the
Indenture, will be released from its Note Guarantee upon
effectiveness of such designation or when it first ceases to be
a Restricted Subsidiary, as the case may be.
OPTIONAL
REDEMPTION
Except as set forth below, the Notes may not be redeemed prior
to October 15, 2014. At any time on or after
October 15, 2014, the Issuer, at its option, may redeem the
Notes, in whole or in part, at the redemption prices (expressed
as percentages of principal amount) set forth below, together
with accrued and unpaid interest thereon, if any, 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), if redeemed during the
12-month
period beginning October 15 of the years indicated:
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Optional
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Year
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Redemption Price
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2014
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104.313
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%
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2015
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102.156
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%
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2016
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100.000
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%
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Notwithstanding the preceding paragraph, the Notes are
redeemable by the Issuer, at its option, at any time prior to
October 15, 2014, in whole or from time to time in part, at
a price equal to the greater of:
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100% of the principal amount of the Notes to be redeemed plus
accrued but unpaid interest thereon, if any, to the date of
redemption (subject to the right of holders of record on the
relevant record date to receive interest due on the relevant
interest payment date); and
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(a) the sum of the present values of the remaining
scheduled payments of principal and interest thereon from the
date of redemption to October 15, 2014 (except for
currently accrued but unpaid interest, if any, to the date of
redemption) (assuming the Notes are redeemed, and based on the
applicable redemption price, on that date) discounted to the
date of redemption, on a semiannual basis (assuming a
360-day year
consisting of twelve
30-day
months), at the Treasury Rate, plus 50 basis points, plus
(b) accrued but unpaid interest thereon, if any, to the
date of redemption (subject to the right of holders of record on
the relevant record date to receive interest due on the relevant
interest payment date).
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The actual redemption price, calculated as provided in this
description, will be calculated and certified to the Trustee and
the Issuer by the Independent Investment Banker. For purposes of
determining the optional redemption price pursuant to this
paragraph, the following definitions are applicable:
Comparable Treasury Issue means the United
States Treasury security or securities selected by the
Independent Investment Banker as having an actual or
interpolated maturity comparable to the remaining term of the
Notes to October 15, 2014 that would be utilized, at the
time of selection and in accordance with customary financial
practice, in pricing new issues of corporate debt securities of
a comparable maturity.
Comparable Treasury Price means, for any
redemption date, (1) the average of four Reference Treasury
Dealer Quotations for such redemption date, after excluding the
highest and lowest such Reference Treasury Dealer Quotations, or
(2) if the Independent Investment Banker obtains fewer than
four such Reference Treasury Dealer Quotations, the average of
all such quotations.
Independent Investment Banker means UBS
Securities LLC and any successor firm, or if such firm is
unwilling or unable to select the Comparable Treasury Issue, an
independent investment banking institution of national standing
appointed by the Trustee after consultation with the Issuer.
Reference Treasury Dealer means UBS
Securities LLC and its successors, plus three other dealers
selected by the Independent Investment Banker that are primary
U.S. government securities dealers in New York City;
provided, if any of UBS Securities LLC or any primary
U.S. government securities dealer selected by the
Independent Investment Banker shall cease to be a primary
U.S. government securities dealer, then such other primary
U.S. government securities dealers as may be substituted by
the Independent Investment Banker.
Reference Treasury Dealer Quotations means,
for each Reference Treasury Dealer and any redemption date, the
average, as determined by the Trustee, of the bid and asked
prices for the Comparable Treasury Issue (expressed in each case
as a percentage of its principal amount) at 3:30 p.m., New
York City time, on the third business day preceding such
redemption date, as quoted in writing to the Trustee by such
Reference Treasury Dealer.
Treasury Rate means, with respect to any
redemption date, (1) the yield, under the heading which
represents the average for the immediately preceding week,
appearing in the most recently published statistical release
designated H.15(519) or any successor publication
which is published weekly by the Board of Governors of the
Federal Reserve System and which establishes yields on actively
traded United States Treasury securities adjusted to
constant maturity under the caption Treasury Constant
Maturities, for the maturity corresponding to the
Comparable Treasury Issue (if no maturity is within three months
before or after the remaining term of the Notes to
October 15, 2014, yields for the two published maturities
most closely corresponding to the Comparable Treasury Issue
shall be determined and the Treasury Rate shall be interpolated
or extrapolated from such yields on a straight line basis,
rounding to the nearest month) or (2) if such release (or
any successor release) is not published during the week in which
the calculation date falls (or in the immediately preceding week
if the calculation date falls on any day prior to the usual
publication date for such release) or does not contain such
yields, the rate per year equal to the semi-annual equivalent
yield to maturity of the Comparable Treasury Issue, calculated
using a price for the Comparable Treasury Issue (expressed as a
percentage of its principal amount) equal to the Comparable
Treasury Price for such redemption date. The Treasury Rate shall
be calculated on the third Business Day preceding the redemption
date. Any weekly average yields
41
calculated by interpolation or extrapolation will be rounded to
the nearest 1/100th of 1%, with any figure of
1/200th of 1% or above being rounded upward.
Redemption
with proceeds from equity offerings
At any time prior to October 15, 2013, the Issuer may
redeem up to 35% of the aggregate principal amount of the Notes
with the net cash proceeds of one or more Qualified Equity
Offerings at a redemption price equal to 108.625% of the
principal amount of the Notes to be redeemed, plus accrued and
unpaid interest thereon, if any, to the date of redemption
(subject to the right of holders of record on the relevant
record date to receive interest due on the relevant interest
payment date); provided that (1) at least 65% of the
aggregate principal amount of Notes issued under the Indenture
remains outstanding immediately after the occurrence of such
redemption and (2) the redemption occurs within
90 days of the date of the closing of any such Qualified
Equity Offering.
SELECTION
AND NOTICE OF REDEMPTION
In the event that less than all of the Notes are to be redeemed
at any time pursuant to an optional redemption, selection of the
Notes for redemption will be made by the Trustee in compliance
with the requirements of the principal national securities
exchange, if any, on which the Notes are listed or, if the Notes
are not then listed on a national security exchange, on a pro
rata basis, by lot or by such method as the Trustee shall deem
fair and appropriate; provided, however, that no Notes of a
principal amount of $2,000 or less shall be redeemed in part. In
addition, if partial redemption is made pursuant to the
provisions described under Redemption with
proceeds from equity offerings, selection of the Notes or
portions thereof for redemption shall be made by the Trustee
only on a pro rata basis or on as nearly a pro rata basis as is
practicable (subject to the procedures of The Depository
Trust Company), unless that method is otherwise prohibited.
Notice of redemption will be mailed by first-class mail at least
30 but not more than 60 days before the date of redemption
to each holder of Notes to be redeemed at its registered address
except that a redemption notice may be given more than
60 days prior to a redemption date in connection with a
defeasance of the Notes or a satisfaction and discharge of the
Indenture. If any Note is to be redeemed in part only, the
notice of redemption that relates to that Note will state the
portion of the principal amount of the Note to be redeemed. A
new Note in a principal amount equal to the unredeemed portion
of the Note will be issued in the name of the holder of the Note
upon cancellation of the original Note. On and after the date of
redemption, interest will cease to accrue on Notes or portions
thereof called for redemption so long as the Issuer has
deposited with the Paying Agent for the Notes funds in
satisfaction of the redemption price (including accrued and
unpaid interest on the Notes to be redeemed) pursuant to the
Indenture.
CHANGE OF
CONTROL
Upon the occurrence of any Change of Control, each holder will
have the right to require that the Issuer purchase any or all of
that holders Notes for a cash price (the Change of
Control Purchase Price) equal to 101% of the principal
amount of the Notes to be purchased, plus accrued and unpaid
interest thereon, if any, to the date of purchase.
Within 30 days following any Change of Control, the Issuer
will mail, or caused to be mailed, to the holders a notice:
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describing the transaction or transactions that constitute the
Change of Control;
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offering to purchase, pursuant to the procedures required by the
Indenture and described in the notice (a Change of Control
Offer), on a date specified in the notice (which shall be
a Business Day not earlier than 30 days nor later than
60 days from the date the notice is mailed) and for the
Change of Control Purchase Price, all Notes properly tendered by
such holder pursuant to such Change of Control Offer; and
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describing the procedures that holders must follow to accept the
Change of Control Offer.
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The Change of Control Offer shall remain open for at least 20
Business Days or for such longer period as is required by law.
The Issuer will publicly announce the results of the Change of
Control Offer on or as soon as practicable after the date of
purchase.
If a Change of Control Offer is made, there can be no assurance
that the Issuer will have available funds sufficient to pay for
all or any of the Notes that might be delivered by holders
seeking to accept the Change of Control Offer. The Credit
Agreement contains, and future Indebtedness that we may incur
may also contain, prohibitions on the occurrence of certain
events that would constitute a Change of Control or require the
repurchase of such Indebtedness upon a Change of Control.
Moreover, the exercise by the holders of their right to require
us to repurchase the Notes could cause a default under such
Indebtedness, even if the Change of Control itself does not, due
to the financial effect of such repurchase on us. In addition,
we cannot assure you that in the event of a Change of Control
the Issuer will be able to obtain the consents necessary to
consummate a Change of Control Offer from the lenders under
agreements governing outstanding Indebtedness which may prohibit
the offer. Finally, our ability to pay cash to the holders of
Notes following the occurrence of a Change of Control may be
limited by our then existing financial resources. There can be
no assurance that sufficient funds will be available when
necessary to make any required repurchases.
The provisions described above that require us to make a Change
of Control Offer following a Change of Control will be
applicable regardless of whether any other provisions of the
Indenture are applicable.
The Issuers obligation to make a Change of Control Offer
will be satisfied if a third party makes the Change of Control
Offer in the manner and at the times and otherwise in compliance
in all material respects with the requirements applicable to a
Change of Control Offer made by the Issuer and purchases all
Notes properly tendered and not withdrawn under the Change of
Control Offer.
With respect to any disposition of assets, the phrase all
or substantially all as used in the Indenture (including
as set forth under Certain
covenants Limitations on mergers, consolidations,
etc. below) varies according to the facts and
circumstances of the subject transaction, has no clearly
established meaning under New York law (which governs the
Indenture) and is subject to judicial interpretation.
Accordingly, in certain circumstances there may be a degree of
uncertainty in ascertaining whether a particular transaction
would involve a disposition of all or substantially
all of the assets of the Issuer, and therefore it may be
unclear as to whether a Change of Control has occurred and
whether the holders have the right to require the Issuer to
purchase Notes.
The Issuer will comply with applicable tender offer rules,
including the requirements of
Rule 14e-1
under the Exchange Act and any other applicable laws and
regulations in connection with the purchase of Notes pursuant to
a Change of Control Offer. To the extent that the provisions of
any securities laws or regulations conflict with the
Change of Control provisions of the Indenture, the
Issuer shall comply with the applicable securities laws and
regulations and will not be deemed to have breached its
obligations under the Change of Control provisions
of the Indenture by virtue of this compliance.
CERTAIN
COVENANTS
The Indenture contains, among others, the covenants summarized
below. Following the first day (the Suspension Date)
that:
(1) the Notes have an Investment Grade Rating from both of
the Rating Agencies, and
(2) no Default has occurred and is continuing under the
Indenture, the Issuer and its Restricted Subsidiaries will not
be subject to the provisions of the Indenture summarized below
under:
(1) Limitations on additional
indebtedness,
(2) Limitations on layering indebtedness,
(3) Limitations on restricted payments,
43
(4) Limitations on dividend and other
restrictions affecting restricted subsidiaries,
(5) Limitations on transactions with
affiliates,
(6) Limitations on asset sales,
(7) subclause (a) of clause (1) and
clause (3) of Limitations on sale and
leaseback transactions,
(8) Limitations on the issuance or sale of
equity interests of restricted subsidiaries,
(9) clause (3) of the first paragraph under
Limitations on mergers, consolidations,
etc. and
(10) Conduct of business.
(collectively, the Suspended Covenants). If the
Issuer and its Restricted Subsidiaries are not subject to the
Suspended Covenants for any period of time as a result of the
preceding, and on any subsequent date (the Reversion
Date) one of the Rating Agencies withdraws its Investment
Grade Rating or downgrades the rating assigned to the Notes
below an Investment Grade Rating, then the Issuer and the
Restricted Subsidiaries will thereafter again be subject to the
Suspended Covenants with respect to future events. The period of
time between the Suspension Date and the Reversion Date is
referred to in this description as the Suspension
Period. Notwithstanding that the Suspended Covenants may
be reinstated, no Default will be deemed to have occurred as a
result of a failure to comply with the Suspended Covenants
during the Suspension Period.
On the Reversion Date, all Indebtedness incurred during the
Suspension Period will be classified to have been incurred
pursuant to the first paragraph of Limitations
on additional indebtedness or one of the clauses set forth
in the second paragraph of Limitations on
additional indebtedness (to the extent such Indebtedness
would be permitted to be incurred thereunder as of the Reversion
Date and after giving effect to Indebtedness incurred prior to
the Suspension Period and outstanding on the Reversion Date). To
the extent such Indebtedness would not be so permitted to be
incurred pursuant to either paragraph of
Limitations on additional indebtedness,
such Indebtedness will be deemed to have been outstanding on the
Issue Date, so that it is classified as permitted under
clause (3) of the second paragraph of
Limitations on additional indebtedness.
Calculations made after the Reversion Date of the amount
available to be made as Restricted Payments under
Limitations on restricted payments will
be made as though the covenant described under
Limitations on restricted payments had
been in effect since the Issue Date and throughout the
Suspension Period. Accordingly, Restricted Payments made during
the Suspension Period will reduce the amount of the Restricted
Payments Basket. For purposes of determining compliance with the
Limitations on asset sales covenant, on
the Reversion Date the Net Available Proceeds from all Asset
Sales not applied or invested in accordance with the covenant
will be deemed to be reset to zero.
Limitations
on additional indebtedness
The Issuer will not, and will not permit any Restricted
Subsidiary to, directly or indirectly, incur any Indebtedness;
provided that the Issuer or any Guarantor may incur additional
Indebtedness if, after giving effect thereto, the Consolidated
Interest Coverage Ratio, determined on a pro forma basis giving
effect to such incurrence and the application of the proceeds
thereof, would be at least 2.25 to 1.00 (the Coverage
Ratio Exception). Notwithstanding the above, each of the
following shall be permitted (the Permitted
Indebtedness):
(1) Indebtedness of the Issuer and any Guarantor under
Credit Facilities (including reimbursement obligations with
regard to letters of credit) incurred pursuant to this
clause (1) in an aggregate amount at any time outstanding
not to exceed the greater of (x) $85.0 million and
(y) 80% of the book value of the accounts receivable plus
50% of the book value of inventory of the Issuer and the
Restricted Subsidiaries, calculated on a consolidated basis and
in accordance with GAAP (giving pro forma effect to acquisitions
made in connection with the borrowing of any such Indebtedness);
(2) the Notes issued on the Issue Date and the Note
Guarantees;
44
(3) Indebtedness of the Issuer and the Restricted
Subsidiaries to the extent outstanding on the Issue Date (other
than Indebtedness referred to in clauses (1) and
(2) above, and after giving effect to the intended use of
proceeds of the Notes);
(4) Indebtedness under Hedging Obligations; provided that
such Hedging Obligations are incurred by the Issuer or any
Restricted Subsidiary in the ordinary course of business and not
for the purpose of speculation;
(5) Indebtedness of the Issuer owed to a Restricted
Subsidiary and Indebtedness of any Restricted Subsidiary owed to
the Issuer or any other Restricted Subsidiary; provided,
however, that upon any such Restricted Subsidiary ceasing to be
a Restricted Subsidiary or such Indebtedness being owed to any
Person other than the Issuer or a Restricted Subsidiary, the
Issuer or such Restricted Subsidiary, as applicable, shall be
deemed to have incurred Indebtedness not permitted by this
clause (5);
(6) Indebtedness in respect of bid, performance or surety
bonds issued for the account of the Issuer or any Restricted
Subsidiary in the ordinary course of business, including
guarantees or obligations of the Issuer or any Restricted
Subsidiary with respect to letters of credit supporting such
bid, performance or surety obligations (in each case other than
for an obligation for money borrowed);
(7) Purchase Money Indebtedness incurred by the Issuer or
any Restricted Subsidiary, and Refinancing Indebtedness thereof,
in an aggregate amount not to exceed at any time outstanding the
greater of (a) $50.0 million and (b) 20% of the
net book value of the aircraft owned by the Issuer and the
Restricted Subsidiaries;
(8) 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 five Business Days of incurrence;
(9) Indebtedness arising in connection with endorsement of
instruments for deposit in the ordinary course of business;
(10) Refinancing Indebtedness with respect to Indebtedness
incurred pursuant to the Coverage Ratio Exception or
clause (2) or (3) above or this clause (10);
(11) (a) Indebtedness of any Foreign Subsidiary (or
guarantees thereof by the Issuer or any Guarantor in respect
thereof) (Foreign Indebtedness) and
(b) guarantees of Indebtedness of a partnership or joint
venture (other than an Unrestricted Subsidiary) by the Issuer or
any Guarantor provided that such guarantee does not exceed the
proportion of such Indebtedness that is equal to the
Issuers or Guarantors proportionate equity ownership
of such partnership or joint venture, and provided that the
aggregate principal amount of Indebtedness at any time
outstanding incurred pursuant to the foregoing clauses (a)
and (b) does not exceed $15.0 million; and
(12) Indebtedness of the Issuer or any Restricted
Subsidiary in an aggregate amount not to exceed
$30.0 million at any time outstanding.
For purposes of determining compliance with this covenant, in
the event that an item of Indebtedness meets the criteria of
more than one of the categories of Permitted Indebtedness
described in clauses (1) through (12) above or is
entitled to be incurred pursuant to the Coverage Ratio
Exception, the Issuer shall, in its sole discretion, classify or
later reclassify such item of Indebtedness and may divide and
classify or later reclassify such Indebtedness in more than one
of the types of Indebtedness described, except that Indebtedness
incurred under the Credit Agreement and outstanding on the Issue
Date shall be deemed to have been incurred under clause (1)
above.
Limitations
on layering indebtedness
The Issuer will not, and will not permit any Guarantor to,
directly or indirectly, incur any Indebtedness that is or
purports to be by its terms (or by the terms of any agreement
governing such Indebtedness)
45
subordinated to any other Indebtedness of the Issuer or of such
Guarantor, as the case may be, unless such Indebtedness is also
by its terms (or by the terms of any agreement governing such
Indebtedness) made expressly subordinate to the Notes or the
Note Guarantee of such Guarantor, to the same extent and in the
same manner as such Indebtedness is subordinated to such other
Indebtedness of the Issuer or such Guarantor, as the case may be.
Limitations
on restricted payments
The Issuer will not, and will not permit any Restricted
Subsidiary to, directly or indirectly, make any Restricted
Payment if at the time of such Restricted Payment:
(1) a Default shall have occurred and be continuing or
shall occur as a consequence thereof;
(2) the Issuer cannot incur $1.00 of additional
Indebtedness pursuant to the Coverage Ratio Exception; or
(3) the amount of such Restricted Payment, when added to
the aggregate amount of all other Restricted Payments made after
the Issue Date (other than Restricted Payments made pursuant to
clause (2), (3), (4), (5), (6), (7) or (8) of the next
paragraph), exceeds the sum (the Restricted Payments
Basket) of (without duplication):
(a) 50% of Consolidated Net Income for the period (taken as
one accounting period) commencing on July 1, 2002 to and
including the last day of the fiscal quarter ended immediately
prior to the date of such calculation for which consolidated
financial statements are available (or, if such Consolidated Net
Income shall be a deficit, minus 100% of such aggregate
deficit), plus
(b) 100% of the aggregate net cash proceeds received by the
Issuer either (x) as contributions to the common equity of
the Issuer after the Issue Date or (y) from the issuance
and sale of Qualified Equity Interests after the Issue Date,
other than any such proceeds which are used to redeem Notes in
accordance with Optional
redemption Redemption with proceeds from equity
offerings, plus
(c) the aggregate amount by which Indebtedness incurred by
the Issuer or any Restricted Subsidiary subsequent to the Issue
Date is reduced on the Issuers balance sheet upon the
conversion or exchange (other than by a Subsidiary of the
Issuer) into Qualified Equity Interests (less the amount of any
cash, or the Fair Market Value of assets, distributed by the
Issuer or any Restricted Subsidiary upon such conversion or
exchange), plus
(d) in the case of the disposition or repayment of or
return on any Investment that was treated as a Restricted
Payment made after the Issue Date, an amount (to the extent not
included in the computation of Consolidated Net Income) equal to
the lesser of (i) the return of capital with respect to
such Investment and (ii) the amount of such Investment that
was treated as a Restricted Payment, in either case, less the
cost of the disposition of such Investment and net of taxes, plus
(e) upon a Redesignation of an Unrestricted Subsidiary as a
Restricted Subsidiary, the lesser of (i) the Fair Market
Value of the Issuers proportionate interest in such
Subsidiary immediately following such Redesignation, and
(ii) the aggregate amount of the Issuers Investments
in such Subsidiary to the extent such Investments reduced the
Restricted Payments Basket and were not previously repaid or
otherwise reduced.
The foregoing provisions will not prohibit:
(1) the payment by the Issuer or any Restricted Subsidiary
of any dividend within 60 days after the date of
declaration thereof, if on the date of declaration the payment
would have complied with the provisions of the Indenture;
(2) the redemption of any Equity Interests of the Issuer or
any Restricted Subsidiary in exchange for, or out of the
proceeds of the substantially concurrent issuance and sale of,
Qualified Equity Interests;
46
(3) the redemption of Subordinated Indebtedness of the
Issuer or any Restricted Subsidiary (a) in exchange for, or
out of the proceeds of the substantially concurrent issuance and
sale of, Qualified Equity Interests or (b) in exchange for,
or out of the proceeds of the substantially concurrent
incurrence of, Refinancing Indebtedness permitted to be incurred
under the Limitations on additional indebtedness
covenant and the other terms of the Indenture;
(4) the redemption of any Equity Interests of the Issuer or
any Restricted Subsidiary of the Issuer held by any of the
Issuers (or any of its Restricted Subsidiaries)
current or former directors or employees (or their transferees,
estates or beneficiaries under their estates) pursuant to any
director or employee equity subscription agreement or stock
option agreement; provided that the aggregate price paid for all
such redeemed Equity Interests may not exceed $2.5 million
in any twelve-month period (with unused amounts in any
12-month
period being permitted to be carried over into the next
12-month
period); provided, further, that the amounts in any
12-month
period may be increased by an amount not to exceed (A) the
cash proceeds received by the Issuer or any of its Restricted
Subsidiaries from the sale of Issuers Equity Interests
(other than Disqualified Equity Interests) to any such directors
or employees that occurs after the Issue Date to the extent such
proceeds have not otherwise been applied to the payment of
Restricted Payments plus (B) the cash proceeds of key man
life insurance policies received by the Issuer and its
Restricted Subsidiaries after the Issue Date;
(5) the redemption of Equity Interests of the Issuer or any
Restricted Subsidiary of the Issuer held by any of the
Issuers (or any of its Restricted Subsidiaries)
current or former directors or employees in connection with the
exercise or vesting of any equity compensation (including,
without limitation, stock options, restricted stock and phantom
stock) in order to satisfy the Issuers or such Restricted
Subsidiarys tax withholding obligation with respect to
such exercise or vesting;
(6) repurchases of Equity Interests deemed to occur upon
the exercise of stock options if the Equity Interests represent
a portion of the exercise price thereof;
(7) in the event of a Change of Control, the redemption of
Subordinated Indebtedness of the Issuer or any Guarantor, in
each case, at a redemption price not greater than 101% of the
principal amount (or, if such Subordinated Indebtedness were
issued with original issue discount, 101% of the accreted value)
of such Subordinated Indebtedness, plus any accrued and unpaid
interest thereon; provided, however, that prior to such
redemption, the Issuer (or a third party to the extent permitted
by the Indenture) has made a Change of Control Offer with
respect to the Notes as a result of such Change of Control and
has purchased all Notes validly tendered and not withdrawn in
connection with such Change of Control Offer; or
(8) in the event of an Asset Sale that requires the Issuer
to offer to repurchase Notes pursuant to the covenant described
under Limitations on asset sales,
redemption of Subordinated Indebtedness of the Issuer or any
Guarantor, in each case, at a redemption price not greater than
100% of the principal amount (or, if such Subordinated
Indebtedness were issued with original issue discount, 100% of
the accreted value) of such Subordinated Indebtedness, plus any
accrued and unpaid interest thereon; provided, however, that
(A) prior to such redemption, the Issuer has made a Net
Proceeds Offer with respect to the Notes pursuant to the
provisions of the covenant described under
Limitations on asset sales and has
purchased all Notes required to be purchased by it under such
covenant;
provided that (a) in the case of any Restricted Payment
pursuant to clause (3), (7) or (8) above, no Default
shall have occurred and be continuing or occur as a consequence
thereof and (b) no issuance and sale of Qualified Equity
Interests pursuant to clause (2) or (3) above shall
increase the Restricted Payments Basket.
Limitations
on dividend and other restrictions affecting restricted
subsidiaries
The Issuer will not, and will not permit any Restricted
Subsidiary to, directly or indirectly, create or otherwise cause
or permit to exist or become effective any consensual
encumbrance or consensual restriction on the ability of any
Restricted Subsidiary to:
(1) pay dividends or make any other distributions on or in
respect of its Equity Interests;
47
(2) make loans or advances or pay any Indebtedness or other
obligation owed to the Issuer or any other Restricted
Subsidiary; or
(3) transfer any of its assets to the Issuer or to any
Restricted Subsidiary that owns Equity Interests in such
Restricted Subsidiary (pro rata in accordance with such
ownership interest); except for:
(a) encumbrances or restrictions existing under or by
reason of applicable law;
(b) encumbrances or restrictions existing under the
Indenture, the Notes and the Note Guarantees;
(c) non-assignment provisions of any contract, license or
any lease entered into in the ordinary course of business;
(d) encumbrances or restrictions existing under agreements
existing on the date of the Indenture (including, without
limitation, the Credit Agreement) as in effect on that date;
(e) restrictions on the transfer of assets subject to any
Lien permitted under the Indenture imposed by the holder of such
Lien;
(f) any restriction with respect to a Restricted Subsidiary
(or any of its assets) imposed pursuant to an agreement entered
into for the direct or indirect sale or disposition of all or
substantially all the Equity Interests or assets of such
Restricted Subsidiary (or the assets that are subject to such
restriction) pending the closing of such sale or disposition;
(g) any instrument governing Acquired Indebtedness, which
encumbrance or restriction is not applicable to any Person, or
the assets of any Person, other than the Person or the assets of
the Person so acquired;
(h) any other agreement governing Indebtedness entered into
after the Issue Date that contains encumbrances and restrictions
taken as a whole that are not materially more restrictive with
respect to any Restricted Subsidiary than those in effect on the
Issue Date with respect to that Restricted Subsidiary pursuant
to agreements in effect on the Issue Date (including the
Indenture and the Credit Agreement);
(i) customary provisions in partnership agreements, limited
liability company organizational governance documents, joint
venture agreements and other similar agreements entered into in
the ordinary course of business that restrict the transfer of
ownership interests in such partnership, limited liability
company, joint venture or similar Person;
(j) Purchase Money Indebtedness incurred in compliance with
the covenant described under Limitations on
additional indebtedness that impose restrictions of the
nature described in clause (3) above on the assets acquired;
(k) encumbrances or restrictions applicable only to a
Foreign Subsidiary;
(l) any encumbrances or restrictions imposed by any
amendments or refinancings of the contracts, instruments or
obligations referred to in clauses (a) through
(k) above; provided that such amendments or refinancings
are, in the good faith judgment of the Issuers Board of
Directors, no more materially restrictive with respect to such
encumbrances and restrictions than those prior to such
amendments or refinancings; and
(m) restrictions on cash or other deposits or net worth
imposed by customers under contracts entered into in the
ordinary course of business.
Limitations
on transactions with affiliates
The Issuer will not, and will not permit any Restricted
Subsidiary to, directly or indirectly, in one transaction or a
series of related transactions, sell, lease, transfer or
otherwise dispose of any of its assets to,
48
or purchase any assets from, or enter into any contract,
agreement, understanding, loan, advance or guarantee with, or
for the benefit of, any Affiliate (an Affiliate
Transaction), unless:
(1) such Affiliate Transaction is on terms that are no less
favorable to the Issuer or the relevant Restricted Subsidiary
than those that would have been obtained in a comparable
transaction at such time on an arms-length basis by the
Issuer or that Restricted Subsidiary from a Person that is not
an Affiliate of the Issuer or that Restricted
Subsidiary; and
(2) the Issuer delivers to the Trustee:
(a) with respect to any Affiliate Transaction involving
aggregate value in excess of $5.0 million, an
Officers Certificate certifying that such Affiliate
Transaction complies with clause (1) above and a
Secretarys Certificate which sets forth and authenticates
a resolution that has been adopted by the Independent Directors
approving such Affiliate Transaction; and
(b) with respect to any Affiliate Transaction involving
aggregate value of $20.0 million or more, the certificate
described in the preceding clause (a) and a written opinion
as to the fairness of such Affiliate Transaction to the Issuer
or such Restricted Subsidiary from a financial point of view
issued by an Independent Financial Advisor.
The foregoing restrictions shall not apply to:
(1) transactions exclusively between or among (a) the
Issuer and one or more Restricted Subsidiaries or
(b) Restricted Subsidiaries; provided, in each case, that
no Affiliate of the Issuer (other than another Restricted
Subsidiary) owns Equity Interests of any such Restricted
Subsidiary;
(2) reasonable director, officer and employee compensation
(including bonuses) and other benefits (including retirement,
health, stock option and other benefit plans) and
indemnification arrangements;
(3) the entering into of a tax sharing agreement, or
payments pursuant thereto, between the Issuer
and/or one
or more Subsidiaries, on the one hand, and any other Person with
which the Issuer or such Subsidiaries are required or permitted
to file a consolidated tax return or with which the Issuer or
such Subsidiaries are part of a consolidated group for tax
purposes, on the other hand, which payments by the Issuer and
the Restricted Subsidiaries are not in excess of the tax
liabilities that would have been payable by them on a
stand-alone basis;
(4) loans and advances permitted by clause (3) of the
definition of Permitted Investments;
(5) Restricted Payments which are made in accordance with
the covenant described under Limitations on
restricted payments;
(6) any transaction with a Person (other than an
Unrestricted Subsidiary) that is an Affiliate of the Issuer
solely because the Issuer owns Equity Interests in such Person,
provided that no other Affiliate of the Issuer (other than a
Restricted Subsidiary) owns Equity Interests in such
Person; or
(7) any transaction with an Affiliate where the only
consideration paid by the Issuer or any Restricted Subsidiary is
Qualified Equity Interests.
Limitations
on liens
The Issuer shall not, and shall not permit any Restricted
Subsidiary to, directly or indirectly, create, incur, assume or
permit or suffer to exist any Lien of any nature whatsoever
against (other than Permitted Liens) any assets of the Issuer or
any Guarantor (including Equity Interests of a Restricted
Subsidiary), whether owned at the Issue Date or thereafter
acquired, or any proceeds therefrom, or assign or otherwise
convey any right to receive income or profits therefrom, unless
contemporaneously therewith:
(1) in the case of any Lien securing an obligation that
ranks pari passu with the Notes or a Note Guarantee, effective
provision is made to secure the Notes or such Note Guarantee, as
the case may be, at least equally and ratably with or prior to
such obligation with a Lien on the same collateral; and
49
(2) in the case of any Lien securing an obligation that is
subordinated in right of payment to the Notes or a Note
Guarantee, effective provision is made to secure the Notes or
such Note Guarantee, as the case may be, with a Lien on the same
collateral that is prior to the Lien securing such subordinated
obligation,
in each case, for so long as such obligation is secured by such
Lien.
Limitations
on asset sales
The Issuer will not, and will not permit any Restricted
Subsidiary to, directly or indirectly, consummate any Asset Sale
unless:
(1) the Issuer or such Restricted Subsidiary receives
consideration at the time of such Asset Sale at least equal to
the Fair Market Value of the assets included in such Asset
Sale; and
(2) at least 75% of the total consideration received in
such Asset Sale consists of cash or Cash Equivalents.
For purposes of clause (2), the following shall be deemed to be
cash:
(a) the amount (without duplication) of any Indebtedness or
other liabilities of the Issuer or any Restricted Subsidiary
(other than contingent liabilities and liabilities that are by
their terms subordinated to the Notes or any Note Guarantee)
that are satisfied or assumed by the transferee in such Asset
Sale pursuant to a customary novation agreement that releases
the Issuer or such Restricted Subsidiary from further liability;
(b) the amount of any obligations received from such
transferee that are within 90 days converted by the Issuer
or such Restricted Subsidiary to cash (to the extent of the cash
actually so received); and
(c) the Fair Market Value of any assets (other than
securities) received by the Issuer or any Restricted Subsidiary
to be used by it in a Permitted Business.
If at any time any non-cash consideration received by the Issuer
or any Restricted Subsidiary of the Issuer, as the case may be,
in connection with any Asset Sale is repaid or converted into or
sold or otherwise disposed of for cash (other than interest
received with respect to any such non-cash consideration), then
the date of such repayment, conversion or disposition shall be
deemed to constitute the date of an Asset Sale and the Net
Available Proceeds thereof shall be applied in accordance with
this covenant.
If the Issuer or any Restricted Subsidiary engages in an Asset
Sale, the Issuer or such Restricted Subsidiary shall, no later
than 365 days following the consummation thereof, apply all
or any of the Net Available Proceeds therefrom (or enter into a
definitive agreement for such application within such
365-day
period, provided that any resulting capital expenditure or
purchase is closed within 90 days after the end of such
365-day
period) to:
(1) repay or redeem any Indebtedness of the Company or a
Restricted Subsidiary, other than Subordinated Indebtedness,
Disqualified Equity Interests, intercompany Indebtedness, or
Indebtedness owed to an Affiliate of the Company; or
(2) invest all or any part of the Net Available Proceeds
thereof in the purchase of assets (other than securities) to be
used by the Issuer or any Restricted Subsidiary in a Permitted
Business, or Equity Interests of a Person that upon such
purchase will become a Restricted Subsidiary that directly or
indirectly, through one or more Subsidiaries that will become
Restricted Subsidiaries, owns assets to be used in a Permitted
Business.
Pending the final application of any such Net Available
Proceeds, the Issuer or a Restricted Subsidiary may temporarily
reduce revolving credit borrowings or otherwise invest such Net
Available Proceeds in any manner that is not prohibited by the
Indenture.
The amount of Net Available Proceeds not applied or invested as
provided in the second preceding paragraph will constitute
Excess Proceeds.
50
When the aggregate amount of Excess Proceeds equals or exceeds
$10.0 million, the Issuer shall make an offer to purchase
from all holders and, if applicable, redeem (or make an offer to
do so) any Pari Passu Indebtedness of the Issuer or any
Guarantor the provisions of which require the Issuer or such
Guarantor to redeem such Indebtedness with the proceeds from any
Asset Sales (or offer to do so), in an aggregate principal
amount of Notes and such Pari Passu Indebtedness equal to the
amount of such Excess Proceeds as follows:
(1) the Issuer will (a) make an offer to purchase (a
Net Proceeds Offer) to all holders in accordance
with the procedures set forth in the Indenture, and
(b) redeem (or make an offer to do so) any such Pari Passu
Indebtedness, pro rata in proportion to the respective principal
amounts of the Notes and such Pari Passu Indebtedness required
to be redeemed, the maximum principal amount of Notes and such
Pari Passu Indebtedness that may be redeemed out of the amount
(the Payment Amount) of such Excess Proceeds;
(2) the offer price for the Notes will be payable in cash
in an amount equal to 100% of the principal amount of the Notes
tendered pursuant to a Net Proceeds Offer, plus accrued and
unpaid interest thereon, if any, to the date such Net Proceeds
Offer is consummated (the Offered Price), in
accordance with the procedures set forth in the Indenture and
the redemption price for such Pari Passu Indebtedness (the
Pari Passu Indebtedness Price) shall be as set forth
in the related documentation governing such Indebtedness;
(3) if the aggregate Offered Price of Notes validly
tendered and not withdrawn by holders thereof exceeds the pro
rata portion of the Payment Amount allocable to the Notes, Notes
to be purchased will be selected on a pro rata basis; and
(4) upon completion of such Net Proceeds Offer in
accordance with the foregoing provisions, the amount of Excess
Proceeds with respect to which such Net Proceeds Offer was made
shall be deemed to be zero.
To the extent that the sum of the aggregate Offered Price of
Notes tendered pursuant to a Net Proceeds Offer and the
aggregate Pari Passu Indebtedness Price paid to the holders of
such Pari Passu Indebtedness is less than the Payment Amount
relating thereto (such shortfall constituting a Net
Proceeds Deficiency), the Issuer may use the Net Proceeds
Deficiency, or a portion thereof, for general corporate
purposes, subject to the provisions of the Indenture.
In the event of the transfer of substantially all (but not all)
of the assets of the Issuer and the Restricted Subsidiaries
(taken as a whole) to a Person in a transaction covered by and
effected in accordance with the covenant described under
Limitations on mergers, consolidations,
etc., the successor Person shall be deemed to have sold
for cash at Fair Market Value the assets of the Issuer and the
Restricted Subsidiaries not so transferred for purposes of this
covenant, and shall comply with the provisions of this covenant
with respect to such deemed sale as if it were an Asset Sale
(with such Fair Market Value being deemed to be Net Available
Proceeds for such purpose).
The Issuer will comply with applicable tender offer rules,
including the requirements of
Rule 14e-1
under the Exchange Act, and any other applicable laws and
regulations in connection with the purchase of Notes pursuant to
a Net Proceeds Offer. To the extent that the provisions of any
securities laws or regulations conflict with the
Limitations on asset sales provisions of the
Indenture, the Issuer shall comply with the applicable
securities laws and regulations and will not be deemed to have
breached its obligations under the Limitations on asset
sales provisions of the Indenture by virtue of this
compliance.
Limitations
on designation of unrestricted subsidiaries
The Issuer may designate any Subsidiary of the Issuer as an
Unrestricted Subsidiary under the Indenture (a
Designation) only if:
(1) no Default shall have occurred and be continuing at the
time of or after giving effect to such Designation; and
51
(2) the Issuer would be permitted to make, at the time of
such Designation, (a) a Permitted Investment or (b) an
Investment pursuant to the first paragraph of
Limitations on restricted payments
above, in either case, in an amount (the Designation
Amount) equal to the Fair Market Value of the
Issuers proportionate interest in such Subsidiary on such
date.
No Subsidiary shall be Designated as an Unrestricted
Subsidiary unless such Subsidiary:
(1) has no Indebtedness other than Non-Recourse Debt;
(2) is not party to any agreement, contract, arrangement or
understanding with the Issuer or any Restricted Subsidiary
unless the terms of the agreement, contract, arrangement or
understanding are reasonably similar or more favorable to the
Issuer or the Restricted Subsidiary as those that might be
obtained at the time from Persons who are not Affiliates;
(3) is a Person with respect to which neither the Issuer
nor any Restricted Subsidiary has any direct or indirect
obligation (a) to subscribe for additional Equity Interests
or (b) to maintain or preserve the Persons financial
condition or to cause the Person to achieve any specified levels
of operating results; and
(4) has not guaranteed or otherwise directly or indirectly
provided credit support for any Indebtedness of the Issuer or
any Restricted Subsidiary, except for any guarantee given solely
to support the pledge by the Issuer or any Restricted Subsidiary
of the Equity Interests of such Unrestricted Subsidiary, which
guarantee is not recourse to the Issuer or any Restricted
Subsidiary, and except to the extent the amount thereof
constitutes a Restricted Payment permitted pursuant to the
covenant described under Limitations on
restricted payments.
If, at any time, any Unrestricted Subsidiary fails to meet the
preceding requirements as an Unrestricted Subsidiary, it shall
thereafter cease to be an Unrestricted Subsidiary for purposes
of the Indenture and any Indebtedness of the Subsidiary and any
Liens on assets of such Subsidiary shall be deemed to be
incurred by a Restricted Subsidiary as of the date and, if the
Indebtedness is not permitted to be incurred under the covenant
described under Limitations on additional
indebtedness or the Lien is not permitted under the
covenant described under Limitations on
liens, the Issuer shall be in default of the applicable
covenant.
The Issuer may redesignate an Unrestricted Subsidiary as a
Restricted Subsidiary (a Redesignation) only if:
(1) no Default shall have occurred and be continuing at the
time of and after giving effect to such Redesignation; and
(2) all Liens, Indebtedness and Investments of such
Unrestricted Subsidiary outstanding immediately following such
Redesignation would, if incurred or made at such time, have been
permitted to be incurred or made for all purposes of the
Indenture.
All Designations and Redesignations must be evidenced by
resolutions of the Board of Directors of the Issuer, delivered
to the Trustee certifying compliance with the foregoing
provisions.
Limitations
on sale and leaseback transactions
The Issuer will not, and will not permit any Restricted
Subsidiary to, directly or indirectly, enter into any Sale and
Leaseback Transaction; provided that the Issuer or any
Restricted Subsidiary may enter into a Sale and Leaseback
Transaction if:
(1) the Issuer or such Restricted Subsidiary could have
(a) incurred the Attributable Indebtedness relating to such
Sale and Leaseback Transaction pursuant to the covenant
described under Limitations on additional
indebtedness and (b) incurred a Lien to secure such
Indebtedness without equally and ratably securing the Notes
pursuant to the covenant described under
Limitations on liens;
(2) the gross cash proceeds of such Sale and Leaseback
Transaction are at least equal to the Fair Market Value of the
asset that is the subject of such Sale and Leaseback
Transaction; and
52
(3) transfer of assets in such Sale and Leaseback
Transaction is permitted by, and the Issuer or the applicable
Restricted Subsidiary applies the proceeds of such transaction
in accordance with, the covenant described under
Limitations on asset sales.
Limitations
on the issuance or sale of equity interests of restricted
subsidiaries
The Issuer will not, and will not permit any Restricted
Subsidiary to, directly or indirectly, sell or issue any Equity
Interests of any Restricted Subsidiary except (1) to the
Issuer, a Restricted Subsidiary or the minority Equity Interest
holders of any Restricted Subsidiary, on a pro rata basis, at
Fair Market Value, or (2) to the extent such Equity
Interests represent directors qualifying shares or Equity
Interests required by applicable law to be held by a Person
other than the Issuer or a Wholly-Owned Restricted Subsidiary.
The sale of all the Equity Interests of any Restricted
Subsidiary is permitted by this covenant but is subject to the
covenant described under Limitations on asset
sales.
Limitations
on mergers, consolidations, etc.
The Issuer will not, directly or indirectly, in a single
transaction or a series of related transactions,
(a) consolidate or merge with or into (other than a merger
with a Wholly-Owned Restricted Subsidiary solely for the purpose
of changing the Issuers jurisdiction of incorporation to
another State of the United States), or sell, lease, transfer,
convey or otherwise dispose of all or substantially all of the
assets of the Issuer or the Issuer and the Restricted
Subsidiaries (taken as a whole) or (b) consummate a Plan of
Liquidation unless, in either case:
(1) either:
(a) the Issuer will be the surviving or continuing
Person; or
(b) the Person formed by or surviving such consolidation or
merger or to which such sale, lease, transfer, conveyance or
other disposition shall be made (or, in the case of a Plan of
Liquidation, any Person to which assets are transferred)
(collectively, the Successor) is an entity organized
and existing under the laws of any State of the United States of
America or the District of Columbia, and the Successor expressly
assumes, by supplemental indenture in form and substance
satisfactory to the Trustee, all of the obligations of the
Issuer under the Notes, the Indenture and the Registration
Rights Agreement;
(2) immediately prior to and immediately after giving
effect to such transaction and the assumption of the obligations
as set forth in clause (1)(b) above and the incurrence of any
Indebtedness to be incurred in connection therewith, no Default
shall have occurred and be continuing; and
(3) immediately after and giving effect to such transaction
and the assumption of the obligations set forth in clause (1)(b)
above and the incurrence of any Indebtedness to be incurred in
connection therewith, and the use of any net proceeds therefrom
on a pro forma basis, the Issuer or the Successor, as the case
may be, could incur $1.00 of additional Indebtedness pursuant to
the Coverage Ratio Exception.
For purposes of this covenant, any Indebtedness of the Successor
which was not Indebtedness of the Issuer immediately prior to
the transaction shall be deemed to have been incurred in
connection with such transaction.
Except in circumstances where its Guarantee may be released as
provided in the last paragraph under the caption
Note Guarantees, no Guarantor may
consolidate with or merge with or into (whether or not such
Guarantor is the surviving Person) another Person, other than
the Issuer or another Guarantor, unless:
(1) either:
(a) such Guarantor will be the surviving or continuing
Person; or
(b) the Person formed by or surviving any such
consolidation or merger assumes, by supplemental indenture in
form and substance satisfactory to the Trustee, all of the
obligations of
53
such Guarantor under the Note Guarantee of such Guarantor, the
Indenture and the Registration Rights Agreement; and
(2) immediately after giving effect to such transaction, no
Default shall have occurred and be continuing.
For purposes of the foregoing, the disposition (by lease,
assignment, sale or otherwise, in a single transaction or series
of related transactions) of all or substantially all of the
assets of one or more Restricted Subsidiaries, the Equity
Interests of which constitute all or substantially all of the
assets of the Issuer, will be deemed to be the disposition of
all or substantially all of the assets of the Issuer.
Upon any consolidation or merger of the Issuer or a Guarantor,
or any disposition of all or substantially all of the assets of
the Issuer or the Issuer and the Restricted Subsidiaries (taken
as a whole) in accordance with the foregoing, in which the
Issuer or such Guarantor is not the continuing obligor under the
Notes or its Note Guarantee, the Person formed by such
consolidation or into which the Issuer or such Guarantor is
merged or to which the disposition is made will succeed to, and
be substituted for, and may exercise every right and power of,
the Issuer or such Guarantor under the Indenture, the Notes and
the Note Guarantees with the same effect as if such Person had
been named therein as the Issuer or such Guarantor and, except
in the case of a lease of all or substantially all of such
assets, the Issuer will be released from the obligation to pay
the principal of and interest on the Notes and all of the
Issuers other obligations and covenants under the Notes
and the Indenture. Such Guarantor will be released from its Note
Guarantee on the conditions described in the last paragraph
under Note guarantees.
Additional
Note guarantees
If, after the Issue Date, (a) the Issuer or any Restricted
Subsidiary shall acquire or create another Subsidiary (other
than in any case a Foreign Subsidiary or Subsidiary that has
been designated an Unrestricted Subsidiary) or (b) any
Unrestricted Subsidiary that is not a Foreign Subsidiary is
redesignated a Restricted Subsidiary, then, in each such case,
the Issuer shall cause such Restricted Subsidiary to:
(1) execute and deliver to the Trustee within 20 days
(a) a supplemental indenture in the form included in the
Indenture pursuant to which such Restricted Subsidiary shall
unconditionally guarantee all of the Issuers obligations
under the Notes and the Indenture and (b) a notation of
guarantee in respect of its Note Guarantee; and
(2) deliver to the Trustee one or more opinions of counsel
that such supplemental indenture (a) has been duly
authorized, executed and delivered by such Restricted Subsidiary
and (b) constitutes a valid and legally binding obligation
of such Restricted Subsidiary in accordance with its terms.
Conduct
of business
The Issuer will not, and will not permit any Restricted
Subsidiary to, engage in any business other than a Permitted
Business.
Reports
Whether or not required by the SEC, so long as any Notes are
outstanding, the Issuer will furnish (without exhibits) to the
holders of Notes, within the time periods specified in the
SECs rules and regulations:
(1) all quarterly and annual financial information that
would be required to be contained in a filing with the SEC on
Forms 10-Q
and 10-K if
the Issuer were required to file these Forms, including a
Managements Discussion and Analysis of Financial
Condition and Results of Operations and, with respect to
the annual information only, a report on the annual financial
statements by the Issuers certified independent
accountants; and
(2) all current reports that would be required to be filed
with the SEC on
Form 8-K
if the Issuer were required to file these reports.
54
In addition, whether or not required by the SEC, the Issuer will
file a copy of all of the information and reports referred to in
clauses (1) and (2) above with the SEC for public
availability within the time periods specified in the SECs
rules and regulations (unless the SEC will not accept the
filing) and make the information available to securities
analysts and prospective investors upon request. For so long as
any Notes remain outstanding, the Issuer will furnish to the
holders and to securities analysts and prospective investors,
upon their request, the information required to be delivered
pursuant to Rule 144A(d)(4) under the Securities Act.
EVENTS OF
DEFAULT
Each of the following is an Event of Default:
(1) failure by the Issuer to pay interest on any of the
Notes when it becomes due and payable and the continuance of any
such failure for 30 days;
(2) failure by the Issuer to pay the principal of or
premium, if any, on any of the Notes when it becomes due and
payable, whether at stated maturity, upon redemption, upon
acceleration or otherwise;
(3) failure by the Issuer to comply with any of its
agreements or covenants described above under
Certain covenants Limitations on
mergers, consolidations, etc. or in respect of its
obligations to make a Change of Control Offer as described above
under Change of control;
(4) failure by the Issuer to comply with any other
agreement or covenant in the Indenture and continuance of this
failure for 60 days after notice of the failure has been
given to the Issuer by the Trustee or by the Holders of at least
25% of the aggregate principal amount of the Notes then
outstanding;
(5) default under any mortgage, indenture or other
instrument or agreement under which there may be issued or by
which there may be secured or evidenced Indebtedness of the
Issuer or any Restricted Subsidiary, whether such Indebtedness
now exists or is incurred after the Issue Date, which default:
(a) is caused by a failure to pay when due principal on
such Indebtedness within the applicable express grace period,
(b) results in the acceleration of such Indebtedness prior
to its express final maturity or
(c) results in the commencement of judicial proceedings to
foreclose upon, or to exercise remedies under applicable law or
applicable security documents to take ownership of, the assets
securing such Indebtedness, and
in each case, the principal amount of such Indebtedness,
together with any other Indebtedness with respect to which an
event described in clause (a), (b) or (c) has occurred
and is continuing, aggregates $20.0 million or more;
(6) one or more judgments or orders that exceed
$20.0 million in the aggregate (net of amounts covered by
insurance or bonded) for the payment of money have been entered
by a court or courts of competent jurisdiction against the
Issuer or any Restricted Subsidiary and such judgment or
judgments have not been satisfied, stayed, annulled or rescinded
within 60 days of being entered;
(7) the Issuer or any 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 it
in an involuntary case,
(c) consents to the appointment of a Custodian of it or for
all or substantially all of its assets, or
(d) makes a general assignment for the benefit of its
creditors;
55
(8) a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that:
(a) is for relief against the Issuer or any Significant
Subsidiary as debtor in an involuntary case,
(b) appoints a Custodian of the Issuer or any Significant
Subsidiary or a Custodian for all or substantially all of the
assets of the Issuer or any Significant Subsidiary, or
(c) orders the liquidation of the Issuer or any Significant
Subsidiary,
and the order or decree remains unstayed and in effect for
60 days; or
(9) any Note Guarantee of any Significant Subsidiary ceases
to be in full force and effect (other than in accordance with
the terms of such Note Guarantee and the Indenture) or is
declared null and void and unenforceable or found to be invalid
or any Guarantor denies its liability under its Note Guarantee
(other than by reason of release of a Guarantor from its Note
Guarantee in accordance with the terms of the Indenture and the
Note Guarantee).
If an Event of Default (other than an Event of Default specified
in clause (7) or (8) above with respect to the
Issuer), shall have occurred and be continuing under the
Indenture, the Trustee, by written notice to the Issuer, or the
holders of at least 25% in aggregate principal amount of the
Notes then outstanding by written notice to the Issuer and the
Trustee, may declare all amounts owing under the Notes to be due
and payable immediately. Upon such declaration of acceleration,
the aggregate principal of, premium, if any, and accrued and
unpaid interest on the outstanding Notes shall immediately
become due and payable; provided, however, that after such
acceleration, but before a judgment or decree based on
acceleration, the holders of a majority in aggregate principal
amount of such outstanding Notes may, under certain
circumstances, rescind and annul such acceleration if all Events
of Default, other than the nonpayment of accelerated principal,
premium, if any, and interest, have been cured or waived as
provided in the Indenture. If an Event of Default specified in
clause (7) or (8) with respect to the Issuer occurs,
all outstanding Notes shall become due and payable without any
further action or notice.
The Trustee shall, within 30 days after the occurrence of
any Default with respect to the Notes, give the holders notice
of all uncured Defaults thereunder known to it; provided,
however, that, except in the case of an Event of Default in
payment with respect to the Notes or a Default in complying with
Certain covenants Limitations on
mergers, consolidations, etc., the Trustee shall be
protected in withholding such notice if and so long as a
committee of its trust officers in good faith determines that
the withholding of such notice is in the interest of the holders.
No holder will have any right to institute any proceeding with
respect to the Indenture or for any remedy thereunder, unless
the Trustee:
(1) has failed to act for a period of 60 days after
receiving written notice of a continuing Event of Default by
such holder and a request to act by holders of at least 25% in
aggregate principal amount of Notes outstanding;
(2) has been offered indemnity satisfactory to it in its
reasonable judgment; and
(3) has not received from the holders of a majority in
aggregate principal amount of the outstanding Notes a direction
inconsistent with such request within such
60-day
period. However, such limitations do not apply to a suit
instituted by a holder of any Note for enforcement of payment of
the principal of or interest on such Note on or after the due
date therefor (after giving effect to the grace period specified
in clause (1) of the first paragraph of this
Events of default section).
The Issuer is required to deliver to the Trustee annually a
statement regarding compliance with the Indenture and, upon any
Officer of the Issuer becoming aware of any Default, a statement
specifying such Default and what action the Issuer is taking or
proposes to take with respect thereto.
56
LEGAL
DEFEASANCE AND COVENANT DEFEASANCE
The Issuer may, at its option and at any time, elect to have its
obligations and the obligations of the Guarantors discharged
with respect to the outstanding Notes (Legal
Defeasance). Legal Defeasance means that the Issuer and
the Guarantors shall be deemed to have paid and discharged the
entire indebtedness represented by the Notes and the Note
Guarantees, and the Indenture shall cease to be of further
effect as to all outstanding Notes and Note Guarantees, except
as to
(1) rights of holders to receive payments in respect of the
principal of, premium, if any, on and interest on the Notes when
such payments are due from the trust funds referred to below,
(2) the Issuers obligations with respect to the Notes
concerning issuing temporary Notes, registration of Notes,
replacement of mutilated, destroyed, lost or stolen Notes, and
the maintenance of an office or agency for payment and money for
security payments held in trust,
(3) the rights, powers, trust, duties and immunities of the
Trustee, and the Issuers obligations in connection
therewith,
(4) the Issuers rights of optional
redemption, and
(5) the Legal Defeasance provisions of the Indenture.
In addition, the Issuer may, at its option and at any time,
elect to have its obligations and the obligations of the
Guarantors released with respect to most of the covenants under
the Indenture, except as described otherwise in the Indenture
(Covenant Defeasance), and thereafter any omission
to comply with such obligations shall not constitute a Default.
In the event Covenant Defeasance occurs, certain Events of
Default (not including non-payment and, solely for a period of
91 days following the deposit referred to in
clause (1) of the next paragraph, bankruptcy, receivership,
rehabilitation and insolvency events) will no longer apply.
Covenant Defeasance will not be effective until such bankruptcy,
receivership, rehabilitation and insolvency events no longer
apply. The Issuer may exercise its Legal Defeasance option
regardless of whether it previously exercised Covenant
Defeasance.
In order to exercise either Legal Defeasance or Covenant
Defeasance:
(1) the Issuer must irrevocably deposit with the Trustee,
in trust, for the benefit of the holders, U.S. legal
tender, U.S. Government Obligations or a combination
thereof, in such amounts as will be sufficient (without
reinvestment) in the opinion of a nationally recognized firm of
independent public accountants selected by the Issuer, to pay
the principal of, premium, if any, on and interest on the Notes
on the stated date for payment or on the redemption date of the
principal or installment of principal of or interest on the
Notes, and the holders must have a valid, perfected, exclusive
security interest in such trust,
(2) in the case of Legal Defeasance, the Issuer shall have
delivered to the Trustee an opinion of counsel in the United
States reasonably acceptable to the Trustee confirming that:
(a) the Issuer has received from, or there has been
published by the Internal Revenue Service, a ruling, or
(b) since the date of the Indenture, there has been a
change in the applicable U.S. federal income tax law,
in either case to the effect that, and based thereon this
opinion of counsel shall confirm that, the holders will not
recognize income, gain or loss for U.S. federal income tax
purposes as a result of the Legal Defeasance and will be subject
to U.S. federal income tax on the same amounts, in the same
manner and at the same times as would have been the case if such
Legal Defeasance had not occurred,
(3) in the case of Covenant Defeasance, the Issuer shall
have delivered to the Trustee an opinion of counsel in the
United States reasonably acceptable to the Trustee confirming
that the holders will not recognize income, gain or loss for
U.S. federal income tax purposes as a result of such
Covenant
57
Defeasance and will be subject to U.S. federal income tax
on the same amounts, in the same manner and at the same times as
would have been the case if the Covenant Defeasance had not
occurred,
(4) no Default shall have occurred and be continuing on the
date of such deposit (other than a Default resulting from the
borrowing of funds to be applied to such deposit and the grant
of any Lien securing such borrowing),
(5) the Legal Defeasance or Covenant Defeasance shall not
result in a breach or violation of, or constitute a default
under the Indenture or any other material agreement or
instrument to which the Issuer or any of its Subsidiaries is a
party or by which the Issuer or any of its Subsidiaries is bound,
(6) the Issuer shall have delivered to the Trustee an
Officers Certificate stating that the deposit was not made
by it with the intent of preferring the holders over any other
of its creditors or with the intent of defeating, hindering,
delaying or defrauding any other of its creditors or
others, and
(7) the Issuer shall have delivered to the Trustee an
Officers Certificate and an opinion of counsel, each
stating that the conditions provided for in, in the case of the
Officers Certificate, clauses (1) through
(6) and, in the case of the opinion of counsel, clauses (1)
(with respect to the validity and perfection of the security
interest), (2) and/or (3) and (5) of this
paragraph have been complied with.
If the funds deposited with the Trustee to effect Covenant
Defeasance are insufficient to pay the principal of, premium, if
any, and interest on the Notes when due, then the Issuers
obligations and the obligations of Guarantors under the
Indenture will be revived and no such defeasance will be deemed
to have occurred.
SATISFACTION
AND DISCHARGE
The Indenture will be discharged and will cease to be of further
effect (except as to rights of registration of transfer or
exchange of Notes which shall survive until all Notes have been
canceled) as to all outstanding Notes when either
(1) all the Notes that have been authenticated and
delivered (except lost, stolen or destroyed Notes which have
been replaced or paid and Notes for whose payment money has been
deposited in trust or segregated and held in trust by the Issuer
and thereafter repaid to the Issuer or discharged from this
trust) have been delivered to the Trustee for
cancellation, or
(2) (a) all Notes not delivered to the Trustee for
cancellation otherwise have become due and payable or will
become due and payable within one year by reason of the mailing
of a notice of redemption or otherwise, and the Issuer has
irrevocably deposited or caused to be deposited with the Trustee
funds in trust in an amount of money sufficient to pay and
discharge the entire Indebtedness (including all principal,
premium, if any, and accrued and unpaid interest) on the Notes
not theretofore delivered to the Trustee for cancellation,
(b) the Issuer has paid all sums payable by it under the
Indenture, and
(c) the Issuer has delivered irrevocable instructions to
the Trustee to apply the deposited money toward the payment of
the Notes at stated maturity or on the date of redemption, as
the case may be.
In addition, the Issuer must deliver an Officers
Certificate and an opinion of counsel stating that all
conditions precedent to satisfaction and discharge have been
complied with.
TRANSFER
AND EXCHANGE
A holder will be able to register the transfer of or Registered
Notes only in accordance with the provisions of the Indenture.
The Registrar may require a holder, among other things, to
furnish appropriate endorsements and transfer documents and to
pay any taxes and fees required by law or permitted by the
Indenture. Without the prior consent of the Issuer, the
Registrar is not required (1) to register the transfer of
or exchange any Note selected for redemption, (2) to
register the transfer of or exchange any Note for a period of
15 days before a selection of Notes to be redeemed or
(3) to register the transfer or exchange of a Note between
a record date and the next succeeding interest payment date.
58
The Notes will be issued in registered form and the registered
holder will be treated as the owner of such Note for all
purposes.
AMENDMENT,
SUPPLEMENT AND WAIVER
Subject to certain exceptions, the Indenture or the Notes may be
amended with the consent (which may include consents obtained in
connection with a tender offer or exchange offer for Notes) of
the holders of at least a majority in aggregate principal amount
of the Notes then outstanding, and any existing Default under,
or compliance with any provision of, the Indenture may be waived
(other than any continuing Default in the payment of the
principal of, premium, if any, on or interest on the Notes) with
the consent (which may include consents obtained in connection
with a tender offer or exchange offer for Notes) of the holders
of a majority in aggregate principal amount of the Notes then
outstanding; provided that:
(1) no such amendment may, without the consent of the
holders of two-thirds in aggregate principal amount of Notes
then outstanding, amend the obligations of the Issuer under the
heading Change of control or the related
definitions that could adversely affect the rights of any
holder; and
(2) without the consent of each holder affected, the
Issuer, the Guarantors and the Trustee may not:
(a) change the maturity of any Note;
(b) reduce the amount, extend the due date or otherwise
affect the terms of any scheduled payment of interest on or
principal of the Notes;
(c) reduce any premium payable upon optional redemption of
the Notes, change the date on which any Notes are subject to
redemption or otherwise alter the provisions with respect to the
redemption of the Notes;
(d) make any Note payable in money or currency other than
that stated in the Notes;
(e) modify or change any provision of the Indenture or the
related definitions to affect the ranking of the Notes or any
Note Guarantee in a manner that adversely affects the holders;
(f) reduce the percentage of holders necessary to consent
to an amendment or waiver to the Indenture or the Notes;
(g) impair the right of any holder of the Notes to receive
payment of principal of, premium, if any, and interest on such
holders Notes on or after the due dates therefor or to
institute suit for the enforcement of any payment on or with
respect to such holders Notes;
(h) release any Guarantor from any of its obligations under
its Note Guarantee or the Indenture, except as permitted by the
Indenture; or
(i) make any change in these amendment and waiver
provisions.
Notwithstanding the foregoing, the Issuer, the Guarantors and
the Trustee may amend the Indenture, the Note Guarantees or the
Notes without the consent of any holder: to cure any ambiguity,
defect or inconsistency; to provide for uncertificated Notes in
addition to or in place of certificated Notes; to provide for
the assumption of the Issuers or any Guarantors
obligations to the holders in the case of a merger or
acquisition; to add Guarantors or to release any Guarantor from
any of its obligations under its Note Guarantee or the Indenture
(to the extent permitted by the Indenture); to make any change
that does not materially adversely affect the legal rights of
any holder, provided that any change to conform the Indenture to
this prospectus will not be deemed to adversely affect such
legal rights; in the case of the Indenture, to comply with the
requirements of the SEC to qualify or maintain the qualification
of the Indenture under the Trust Indenture Act; to evidence
or provide for the acceptance of appointment under the Indenture
of a successor Trustee; to add any additional Events of Default;
or to secure the Notes
and/or the
Guarantees.
59
NO
PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND
STOCKHOLDERS
No director, officer, employee, incorporator or stockholder or
other Equity Interest holder, as such, of the Issuer or any
Guarantor will have any liability for any obligations of the
Issuer under the Notes or the Indenture or of any Guarantor
under its Note Guarantee or for any claim based on, in respect
of, or by reason of, such obligations or their creation. Each
holder by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration
for issuance of the Notes and the Note Guarantees. The waiver
may not be effective to waive liabilities under the federal
securities laws.
CONCERNING
THE TRUSTEE
The Bank of New York Mellon Trust Company, N.A. is the
Trustee under the Indenture and has been appointed by the Issuer
as Registrar and Paying Agent with regard to the Notes. The
Indenture contains certain limitations on the rights of the
Trustee, should it become a creditor of the Issuer, to obtain
payment of claims in certain cases, or to realize on certain
assets received in respect of any such claim as security or
otherwise. The Trustee will be permitted to engage in other
transactions; however, if it acquires any conflicting interest
(as defined in the Indenture) after a Default has occurred and
is continuing, it must eliminate such conflict within
90 days, apply to the SEC for permission to continue or
resign.
The holders of a majority in aggregate principal amount of the
then outstanding Notes will have the right to direct the time,
method and place of conducting any proceeding for exercising any
remedy available to the Trustee, subject to certain exceptions.
In case an Event of Default occurs and is not cured, the Trustee
will be required, in the exercise of its power, to use the
degree of care of a prudent person in similar circumstances 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
holder, unless such holder shall have offered to the Trustee
security or indemnity satisfactory to the Trustee.
GOVERNING
LAW
The Indenture, the Notes and the Note Guarantees are governed
by, and construed in accordance with, the laws of the State of
New York.
CERTAIN
DEFINITIONS
Set forth below is a summary of certain of the defined terms
used in the Indenture. Reference is made to the Indenture for
the full definition of all such terms.
Acquired Indebtedness means (1) with
respect to any Person that becomes a Restricted Subsidiary after
the Issue Date, Indebtedness of such Person and its Subsidiaries
existing at the time such Person becomes a Restricted Subsidiary
that was not incurred in connection with, or in contemplation
of, such Person becoming a Restricted Subsidiary and
(2) with respect to the Issuer or any Restricted
Subsidiary, any Indebtedness of a Person (other than the Issuer
or a Restricted Subsidiary) existing at the time such Person is
merged with or into the Issuer or a Restricted Subsidiary, or
Indebtedness expressly assumed by the Issuer or any Restricted
Subsidiary in connection with the acquisition of an asset or
assets from another Person, which Indebtedness was not, in any
case, incurred by such other Person in connection with, or in
contemplation of, such merger or acquisition.
Affiliate of any Person means any other
Person which directly or indirectly controls or is controlled
by, or is under direct or indirect common control with, the
referent Person. For purposes of the covenant described under
Certain covenants Limitations on
transactions with affiliates, Affiliates shall be deemed
to include, with respect to any Person, any other Person
(1) which beneficially owns or holds, directly or
indirectly, 10% or more of any class of the Voting Stock of the
referent Person, (2) of which 10% or more of the Voting
Stock is beneficially owned or held, directly or indirectly, by
the referent Person or (3) with respect to an individual,
any immediate family member of such Person. For purposes of this
definition, control of a Person shall mean 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.
60
amend means to amend, supplement, restate,
amend and restate or otherwise modify, and
amendment shall have a correlative meaning.
asset means any asset or property.
Asset Acquisition means
(1) an Investment by the Issuer or any Restricted
Subsidiary of the Issuer in any other Person if, as a result of
such Investment, such Person shall become a Restricted
Subsidiary of the Issuer, or shall be merged or consolidated
with or into the Issuer or any Restricted Subsidiary of the
Issuer,
(2) the acquisition by the Issuer or any Restricted
Subsidiary of the Issuer of all or substantially all of the
assets of any other Person or any division or line of business
of any other Person, or
(3) the acquisition by the Issuer or any Restricted
Subsidiary of an asset.
Asset Sale means any sale, issuance,
conveyance, transfer, lease, assignment or other disposition by
the Issuer or any Restricted Subsidiary to any Person other than
the Issuer or any Restricted Subsidiary (including by means of a
Sale and Leaseback Transaction or a merger or consolidation)
(collectively, for purposes of this definition, a
transfer), in one transaction or a series of related
transactions, of any assets of the Issuer or any of its
Restricted Subsidiaries other than in the ordinary course of
business. For purposes of this definition, the term Asset
Sale shall not include:
(1) transfers of cash or Cash Equivalents;
(2) transfers of assets (including Equity Interests) that
are governed by, and made in accordance with, the covenant
described under Certain covenants
Limitations on mergers, consolidations, etc.;
(3) Permitted Investments and Restricted Payments permitted
under the covenant described under Certain
covenants Limitations on restricted payments;
(4) the creation or realization of any Permitted Lien or a
disposition in connection with a Permitted Lien;
(5) transfers of damaged, worn-out or obsolete equipment or
other assets that, in the Issuers reasonable judgment, are
no longer used or useful in the business of the Issuer or its
Restricted Subsidiaries;
(6) any transfer or series of related transfers of assets
with a Fair Market Value not in excess of
$3.0 million; and
(7) any transfer of assets acquired substantially
contemporaneously with such transfer.
Attributable Indebtedness, when used with
respect to any Sale and Leaseback Transaction, means, as at the
time of determination, the present value of the total
obligations of the lessee for rental payments during the
remaining term of the lease included in any such Sale and
Leaseback Transaction. Such present value shall be calculated
using a discount rate equal to the rate of interest implicit in
such transaction determined in accordance with GAAP; provided,
however, that if such Sale and Leaseback Transaction results in
a Capitalized Lease Obligation, the amount of Indebtedness
represented thereby will be determined in accordance with the
definition of Capitalized Lease Obligation.
Bankruptcy Law means Title 11 of the
United States Code, as amended, or any similar federal, state or
foreign law for the relief of debtors.
Board of Directors means, with respect to any
Person, the board of directors or comparable governing body of
such Person.
Business Day means a day other than a
Saturday, Sunday or other day on which banking institutions in
New York are authorized or required by law to close.
61
Capitalized Lease means a lease required to
be capitalized for financial reporting purposes in accordance
with GAAP.
Capitalized Lease Obligations of any Person
means the obligations of such Person to pay rent or other
amounts under a Capitalized Lease, and the amount of such
obligation shall be the capitalized amount thereof determined in
accordance with GAAP, and the maturity thereof shall be the date
of the last payment of rent or any other amount due under such
lease prior to the first date upon which such lease may be
prepaid by the lessee without payment of a penalty.
Cash Equivalents means:
(1) marketable obligations with a maturity of not more than
one year from the date of acquisition and 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);
(2) demand and time deposits and certificates of deposit or
acceptances with a maturity of 365 days or less of any
financial institution that is a member of the Federal Reserve
System having combined capital and surplus and undivided profits
of not less than $500 million and is assigned at least a
B rating by Thomson Financial BankWatch;
(3) commercial paper maturing no more than 270 days
from the date of creation thereof issued by a Person that is not
the Issuer or an Affiliate of the Issuer, and is organized under
the laws of any State of the United States of America or the
District of Columbia and rated at least
A-1 by
S&P or at least
P-1 by
Moodys;
(4) repurchase obligations with a term of not more than ten
days for underlying securities of the types described in
clause (1) above entered into with any commercial bank
meeting the specifications of clause (2) above;
(5) investments in money market or other mutual funds
substantially all of whose assets comprise securities of the
types described in clauses (1) through (4) above;
(6) overnight bank deposits and bankers acceptances
at any commercial bank meeting the qualifications specified in
clause (2) above; and
(7) deposits available for withdrawal on demand with any
commercial bank not meeting the qualifications specified in
clause (2) above but which is organized under the laws of
(a) any country that is a member of the Organization for
Economic Cooperation and Development (OECD) and has
total assets in excess of $500.0 million or (b) any
other country in which the Issuer or any Restricted Subsidiary
maintains an office or is engaged in a Permitted Business,
provided that, in either case (A) all such deposits are
required to be made in such accounts in the ordinary course of
business, (B) such deposits do not at any one time exceed
$5.0 million in the aggregate and (C) no funds so
deposited remain on deposit in such bank for more than
30 days.
Change of Control means the occurrence of any
of the following events:
(1) any person or group (as such
terms are used in Sections 13(d) and 14(d) of the Exchange
Act), other than one or more Permitted holders, is or becomes
the beneficial owner (as defined in
Rules 13d-3
and 13d-5
under the Exchange Act), directly or indirectly, of Voting Stock
representing more than 50% of the voting power of the total
outstanding Voting Stock of the Issuer; provided, however, that
such event shall not be deemed to be a Change of Control so long
as the Permitted holders own Voting Stock representing in the
aggregate a greater percentage of the total voting power of the
Voting Stock of the Issuer than such other person or group;
(2) during any period of two consecutive years, individuals
who at the beginning of such period constituted the Board of
Directors (together with any new directors whose election to
such Board of Directors or whose nomination for election by the
stockholders of the Issuer was approved by a vote of the
majority of the directors of the Issuer then still in office who
were either directors at the beginning of
62
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 Issuer;
(3) (a) all or substantially all of the assets of the
Issuer and the Restricted Subsidiaries on a consolidated basis
are sold or otherwise transferred to any Person other than a
Wholly-Owned Restricted Subsidiary or one or more Permitted
holders or (b) the Issuer consolidates or merges with or
into another Person or any Person consolidates or merges with or
into the Issuer, in either case under this clause (3), in one
transaction or a series of related transactions in which
immediately after the consummation thereof Persons owning Voting
Stock representing in the aggregate a majority of the total
voting power of the Voting Stock of the Issuer immediately prior
to such consummation do not own Voting Stock representing a
majority of the total voting power of the Voting Stock of the
Issuer or the surviving or transferee Person; or
(4) the Issuer shall adopt a plan of liquidation or
dissolution or any such plan shall be approved by the
stockholders of the Issuer.
Consolidated Amortization Expense for any
period means the amortization expense of the Issuer and the
Restricted Subsidiaries for such period, determined on a
consolidated basis in accordance with GAAP.
Consolidated Cash Flow for any period means,
without duplication, the sum of the amounts for such period of
(1) Consolidated Net Income, plus
(2) in each case only to the extent (and in the same
proportion) deducted in determining Consolidated Net Income,
(a) Consolidated Income Tax Expense,
(b) Consolidated Amortization Expense (but only to the
extent not included in Consolidated Interest Expense),
(c) Consolidated Depreciation Expense,
(d) Consolidated Interest Expense, and
(e) all other non-cash items reducing Consolidated Net
Income (excluding any non-cash charge that results in an accrual
of a reserve for cash charges in any future period) for such
period, in each case determined on a consolidated basis in
accordance with GAAP, minus
(3) the aggregate amount of all non-cash items, determined
on a consolidated basis, to the extent such items increased
Consolidated Net Income for such period,
provided that there shall be excluded from Consolidated Cash
Flow (to the extent otherwise included therein) any positive
Consolidated Cash Flow derived from any Restricted Subsidiary
during such period to the extent that the declaration or payment
of dividends or similar distributions by such Restricted
Subsidiary of that Consolidated Cash Flow is not permitted
directly or indirectly by any means, by operation of the terms
of its charter or any agreement, instrument, judgment, decree,
order, statute, rule or governmental regulation applicable to
that Subsidiary during such period.
Consolidated Depreciation Expense for any
period means the depreciation expense of the Issuer and the
Restricted Subsidiaries for such period, determined on a
consolidated basis in accordance with GAAP.
Consolidated Income Tax Expense for any
period means the provision for taxes of the Issuer and the
Restricted Subsidiaries for such period, determined on a
consolidated basis in accordance with GAAP.
Consolidated Interest Coverage Ratio means
the ratio of Consolidated Cash Flow during the most recent four
consecutive full fiscal quarters for which financial statements
are available (the Four-Quarter Period) ending on or
prior to the date of the transaction giving rise to the need to
calculate the Consolidated Interest Coverage Ratio (the
Transaction Date) to Consolidated Interest Expense
for the Four-Quarter Period.
63
For purposes of this definition, Consolidated Cash Flow and
Consolidated Interest Expense shall be calculated after giving
effect on a pro forma basis for the period of such calculation
to:
(1) the incurrence of any Indebtedness or the issuance of
any Disqualified Equity Interests of the Issuer or any Preferred
Stock of any Restricted Subsidiary (and the application of the
proceeds therefrom) and any repayment of other Indebtedness or
redemption of other Preferred Stock (and the application of the
proceeds therefrom) (other than the incurrence or repayment of
Indebtedness in the ordinary course of business for working
capital purposes pursuant to any revolving credit arrangement)
occurring during the Four-Quarter Period or at any time
subsequent to the last day of the Four-Quarter Period and on or
prior to the Transaction Date, as if such incurrence, repayment,
issuance or redemption, as the case may be, (and the application
of the proceeds thereof) occurred on the first day of the
Four-Quarter Period; and
(2) any Asset Sale or other disposition or Asset
Acquisition (including, without limitation, any Asset
Acquisition giving rise to the need to make such calculation as
a result of the Issuer or any Restricted Subsidiary (including
any Person who becomes a Restricted Subsidiary as a result of
such Asset Acquisition) incurring Acquired Indebtedness and also
including any Consolidated Cash Flow (including any pro forma
expense and cost reductions calculated on a basis consistent
with
Regulation S-X
under the Exchange Act) associated with any such Asset
Acquisition) occurring during the Four-Quarter Period or at any
time subsequent to the last day of the Four-Quarter Period and
on or prior to the Transaction Date, as if such Asset Sale or
Asset Acquisition or other disposition (including the incurrence
of, or assumption or liability for, any such Indebtedness or
Acquired Indebtedness) occurred on the first day of the
Four-Quarter Period.
If the Issuer or any Restricted Subsidiary directly or
indirectly guarantees Indebtedness of a third Person, the
preceding sentence shall give effect to the incurrence of such
guaranteed Indebtedness as if the Issuer or such Restricted
Subsidiary had directly incurred or otherwise assumed such
guaranteed Indebtedness.
In calculating Consolidated Interest Expense for purposes of
determining the denominator (but not the numerator) of this
Consolidated Interest Coverage Ratio:
(1) interest on outstanding Indebtedness determined on a
fluctuating basis as of the Transaction Date and which will
continue to be so determined thereafter shall be deemed to have
accrued at a fixed rate per annum equal to the average of
(a) the rate of interest on this Indebtedness in effect on
the Transaction Date after giving effect to any Hedging
Obligations then in effect and (b) the average of what the
applicable rates were (or would have been) as of the last day of
each of the six months immediately preceding the Transaction
Date;
(2) if interest on any Indebtedness actually incurred on
the Transaction Date may optionally be determined at an interest
rate based upon a factor of a prime or similar rate, a
eurocurrency interbank offered rate or other rates, then the
interest rate deemed to have been in effect during the
Four-Quarter Period will be the average of (a) the rate of
interest on this Indebtedness in effect on the Transaction Date
after giving effect to any Hedging Obligations then in effect
and (b) the average of what the applicable rates would have
been as of the last day of each of the six months immediately
preceding the Transaction Date; and
(3) any Person that is or will become a Restricted
Subsidiary on the Transaction Date will be deemed to be a
Restricted Subsidiary at all times during the Four-Quarter
Period and any Person that is not, and will not become, a
Restricted Subsidiary on the Transaction Date will be deemed not
to have been a Restricted Subsidiary at any time during such
Four-Quarter Period.
Consolidated Interest Expense for any period
means the sum, without duplication, of the total interest
expense of the Issuer and the Restricted Subsidiaries for such
period, determined on a consolidated basis in accordance with
GAAP and including without duplication,
(1) interest components of all payments associated with
Capitalized Lease Obligations and imputed interest with respect
to Attributable Indebtedness,
64
(2) commissions, discounts and other fees and charges owed
with respect to letters of credit securing financial
obligations, bankers acceptance financing and receivables
financings,
(3) the net payments associated with interest rate Hedging
Obligations,
(4) amortization of debt issuance costs, debt discount or
premium (provided that any amortization of bond premium will be
credited to reduce Consolidated Interest Expense unless,
pursuant to GAAP, such amortization of bond premium has
otherwise reduced Consolidated Interest Expense) and other
financing fees and expenses,
(5) the interest component of any deferred payment
obligations,
(6) all other non-cash interest expense,
(7) capitalized interest,
(8) the product of (a) all dividend payments on any
series of Disqualified Equity Interests of the Issuer or any
Preferred Stock of any Restricted Subsidiary (other than any
such Disqualified Equity Interests or any Preferred Stock held
by the Issuer or a Wholly-Owned Restricted Subsidiary),
multiplied by (b) a fraction, the numerator of which is one
and the denominator of which is one minus the then current
combined federal, state and local statutory tax rate of the
Issuer and the Restricted Subsidiaries, expressed as a decimal,
(9) all interest payable with respect to discontinued
operations, and
(10) all interest on any Indebtedness of any other Person
guaranteed by the Issuer or any Restricted Subsidiary.
Consolidated Net Income for any period means
the net income (or loss) of the Issuer and the Restricted
Subsidiaries for such period determined on a consolidated basis
in accordance with GAAP; provided that there shall be excluded
from such net income (to the extent otherwise included therein),
without duplication:
(1) the net income (or loss) of any Person (other than a
Restricted Subsidiary) in which any Person other than the Issuer
and the Restricted Subsidiaries has an ownership interest,
except to the extent that cash in an amount equal to any such
income has actually been received by the Issuer or any of its
Restricted Subsidiaries during such period;
(2) except to the extent includible in the consolidated net
income of the Issuer pursuant to the foregoing clause (1), for
purposes of the Restricted Payments Basket only, the net income
(or loss) of any Person that accrued prior to the date that
(a) such Person becomes a Restricted Subsidiary or is
merged into or consolidated with the Issuer or any Restricted
Subsidiary or (b) the assets of such Person are acquired by
the Issuer or any Restricted Subsidiary;
(3) the net income of any Restricted Subsidiary during such
period to the extent that the declaration or payment of
dividends or similar distributions by such Restricted Subsidiary
of that income is not permitted, directly or indirectly by any
means, by operation of the terms of its charter or any
agreement, instrument, judgment, decree, order, statute, rule or
governmental regulation applicable to that Restricted Subsidiary
during such period, except that the Issuers equity in a
net loss of any such Restricted Subsidiary for such period shall
be included in determining Consolidated Net Income;
(4) for the purposes of calculating the Restricted Payments
Basket only, in the case of a successor to the Issuer by
consolidation, merger or transfer of its assets, any income (or
loss) of the successor prior to such merger, consolidation or
transfer of assets;
(5) other than for purposes of calculating the Restricted
Payments Basket, any gain (or loss), together with any related
provisions for taxes on any such gain (or the tax effect of any
such loss), realized during such period by the Issuer or any
Restricted Subsidiary upon (a) the acquisition of any
securities, or the extinguishment of any Indebtedness, of the
Issuer or any Restricted Subsidiary or (b) any Asset Sale
by the Issuer or any Restricted Subsidiary; and
65
(6) other than for purposes of calculating the Restricted
Payments Basket, any extraordinary gain (or extraordinary loss),
together with any related provision for taxes on any such
extraordinary gain (or the tax effect of any such extraordinary
loss), realized by the Issuer or any Restricted Subsidiary
during such period.
In addition, any return of capital with respect to an Investment
that increased the Restricted Payments Basket pursuant to clause
(3)(d) of the first paragraph under Certain
covenants Limitations on restricted payments
or decreased the amount of Investments outstanding pursuant to
clause (13) or (15) of the definition of
Permitted Investments shall be excluded from
Consolidated Net Income for purposes of calculating the
Restricted Payments Basket.
Consolidated Net Tangible Assets means, as of
any date of determination, the total assets, less goodwill and
other intangibles (other than patents, trademarks, copyrights,
licenses and other intellectual property), shown on the balance
sheet of the Issuer and the Restricted Subsidiaries for the most
recently ended fiscal quarter for which financial statements are
available, determined on a consolidated basis in accordance with
GAAP.
Coverage Ratio Exception has the meaning set
forth in the proviso in the first paragraph of the covenant
described under Certain covenants
Limitations on additional indebtedness.
Credit Agreement means the Amended and
Restated Loan Agreement dated as of March 31, 2008, as
amended, among the Issuer, the Guarantors named therein, and
Whitney National Bank, including any notes, guarantees,
collateral and security documents, instruments and agreements
executed in connection therewith (other than Hedging Obligations
related to the Indebtedness incurred thereunder), and in each
case as amended or refinanced from time to time, including any
agreement extending the maturity of, refinancing or otherwise
restructuring (including increasing the amount of borrowings or
other Indebtedness outstanding or available to be borrowed
thereunder) all or any portion of the Indebtedness under such
agreement, and any successor or replacement agreement or
agreements with the same or any other agents, creditor, lender
or group of creditors or lenders.
Credit Facilities means one or more debt
facilities, loan agreements, indentures or other agreements or
instruments (which may be outstanding at the same time and
including, without limitation, the Credit Agreement) providing
for revolving credit loans, term loans, letters of credit or
debt securities and, in each case, as such agreements or
instruments may be amended, amended and restated, supplemented,
modified, refinanced, replaced or otherwise restructured, in
whole or in part from time to time (including increasing the
amount of available borrowings thereunder or adding Subsidiaries
of the Issuer as additional borrowers or guarantors thereunder)
with respect to all or any portion of the Indebtedness under
such agreement or instruments or any successor or replacement
agreement or instruments and whether by the same or any other
agent, lender, group of lenders or investors.
Custodian means any receiver, trustee,
assignee, liquidator or similar official under any Bankruptcy
Law.
Default means (1) any Event of Default
or (2) any event, act or condition that, after notice or
the passage of time or both, would be an Event of Default.
Designation has the meaning given to this
term in the covenant described under Certain
covenants Limitations on designation of unrestricted
subsidiaries.
Designation Amount has the meaning given to
this term in the covenant described under
Certain covenants Limitations on
designation of unrestricted subsidiaries.
Disqualified Equity Interests of any Person
means any Equity Interests of such Person that, by their terms,
or by the terms of any related agreement or of any security into
which they are convertible, puttable or exchangeable, are, or
upon the happening of any event or the passage of time would be,
required to be redeemed by such Person, whether or not at the
option of the holder thereof, or mature or are mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise,
in whole or in part, on or prior to the date which is
91 days after the final maturity date of the Notes;
provided, however, that any class of Equity
66
Interests of such Person that, by its terms, authorizes such
Person to satisfy in full its obligations upon maturity or
redemption (pursuant to a sinking fund or otherwise) thereof or
otherwise by the delivery of Equity Interests that are not
Disqualified Equity Interests, and that are not convertible,
puttable or exchangeable for Disqualified Equity Interests or
Indebtedness, will not be deemed to be Disqualified Equity
Interests so long as such Person satisfies its obligations with
respect thereto solely by the delivery of Equity Interests that
are not Disqualified Equity Interests; provided, further,
however, that any Equity Interests that would not constitute
Disqualified Equity Interests but for provisions thereof giving
holders thereof (or the holders of any security into or for
which such Equity Interests are convertible, exchangeable or
exercisable) the right to require the Issuer to redeem such
Equity Interests upon the occurrence of a change in control
occurring prior to the final maturity date of the Notes shall
not constitute Disqualified Equity Interests if the change in
control provisions applicable to such Equity Interests are no
more favorable to such holders than the provisions described
under Change of Control and such Equity
Interests specifically provide that the Issuer will not redeem
any such Equity Interests pursuant to such provisions prior to
the Issuers purchase of the Notes as required pursuant to
the provisions described under Change of
Control.
Equity Interests of any Person means
(1) any and all shares or other equity interests (including
common stock, preferred stock, limited liability company
interests and partnership interests) in such Person and
(2) all rights to purchase, warrants or options (whether or
not currently exercisable), participations or other equivalents
of or interests in (however designated) such shares or other
interests in such Person, other than debt securities convertible
into capital stock.
Exchange Act means the U.S. Securities
Exchange Act of 1934, as amended.
Fair Market Value means, with respect to any
asset or Investment, the price (after taking into account any
liabilities relating to such asset or Investment) that would be
negotiated in an arms-length transaction for cash between
a willing seller and a willing and able buyer, neither of which
is under any compulsion to complete the transaction, as such
price is determined in good faith by an officer of the Issuer,
if such price is less than $5.0 million, or the Board of
Directors of the Issuer or a duly authorized committee thereof,
if larger, as evidenced by a resolution of such Board or
committee.
Foreign Subsidiary means any Restricted
Subsidiary of the Issuer which (i) is not organized under
the laws of (x) the United States or any state thereof or
(y) the District of Columbia and (ii) conducts
substantially all of its business operations outside the United
States of America.
GAAP means generally accepted accounting
principles set forth in the opinions and pronouncements of the
Accounting Principles Board of the American Institute of
Certified Public Accountants and statements and pronouncements
of the Financial Accounting Standards Board or in such other
statements by such other entity as may be approved by a
significant segment of the accounting profession of the United
States, as in effect on the Issue Date.
guarantee means a direct or indirect
guarantee (other than by endorsement of negotiable instruments
in the ordinary course of business) by any Person of any
Indebtedness of any other Person and includes any obligation,
direct or indirect, contingent or otherwise, of such Person:
(1) to purchase or pay (or advance or supply funds for the
purchase or payment of) Indebtedness of such other Person
(whether arising by virtue of partnership arrangements, or by
agreements to keep-well, to purchase assets, goods, securities
or services, to
take-or-pay,
or to maintain financial statement conditions or otherwise); or
(2) entered into for purposes of assuring in any other
manner the obligee of such Indebtedness of the payment thereof
or to protect such obligee against loss in respect thereof (in
whole or in part); guarantee, when used as a verb,
and guaranteed have correlative meanings.
Guarantors means each Restricted Subsidiary
of the Issuer on the Issue Date (other than Foreign
Subsidiaries), and each other Person that is required to become
a Guarantor by the terms of the Indenture after the Issue Date,
in each case, until such Person is released from its Note
Guarantee.
Hedging Obligations of any Person means the
obligations of such Person pursuant to (1) any interest
rate swap agreement, interest rate cap agreement, interest rate
collar agreement or other similar agreement or arrangement
designed to protect such Person against fluctuations in interest
rates, (2) agreements or
67
arrangements designed to protect such Person against
fluctuations in foreign currency exchange rates in the conduct
of its operations, or (3) any forward contract, commodity
swap agreement, commodity option agreement or other similar
agreement or arrangement designed to protect such Person against
fluctuations in commodity prices.
holder means any registered holder, from time
to time, of the Notes.
incur means, with respect to any Indebtedness
or Obligation, incur, create, issue, assume, guarantee or
otherwise become directly or, indirectly liable, contingently or
otherwise, with respect to such Indebtedness or Obligation;
provided that (1) the Indebtedness of a Person existing at
the time such Person became a Restricted Subsidiary shall be
deemed to have been incurred by such Restricted Subsidiary at
such time and (2) neither the accrual of interest nor the
accretion of original issue discount shall be deemed to be an
incurrence of Indebtedness.
Indebtedness of any Person at any date means,
without duplication:
(1) all liabilities, contingent or otherwise, of such
Person for borrowed money (whether or not the recourse of the
lender is to the whole of the assets of such Person or only to a
portion thereof);
(2) all obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments excluding trade
payables and accrued expenses incurred by such Person in the
ordinary course of business that are not more than 90 days
overdue;
(3) all obligations of such Person in respect of letters of
credit or other similar instruments (or reimbursement
obligations with respect thereto);
(4) all obligations of such Person to pay the deferred and
unpaid purchase price of property or services, except trade
payables and accrued expenses incurred by such Person in the
ordinary course of business;
(5) the maximum fixed redemption price of all Disqualified
Equity Interests of such Person;
(6) all Capitalized Lease Obligations of such Person;
(7) all Indebtedness of others secured by a Lien on any
asset of such Person, whether or not such Indebtedness is
assumed by such Person, provided that Indebtedness of the Issuer
or its Subsidiaries that is secured by a lien shall only be
counted once in the calculation of the amount of Indebtedness of
the Issuer and its Subsidiaries on a consolidated basis;
(8) all Indebtedness of others guaranteed by such Person to
the extent of such guarantee; provided that Indebtedness of the
Issuer or its Subsidiaries that is guaranteed by the Issuer or
the Issuers Subsidiaries shall only be counted once in the
calculation of the amount of Indebtedness of the Issuer and its
Subsidiaries on a consolidated basis;
(9) all Attributable Indebtedness;
(10) to the extent not otherwise included in this
definition, Hedging Obligations of such Person; and
(11) all obligations of such Person under conditional sale
or other title retention agreements relating to assets purchased
by such Person.
For purposes of calculating the amount of any non-interest
bearing or other discount security, such Indebtedness shall be
deemed to be the principal amount thereof that would be shown on
the balance sheet of the issuer thereof dated such date prepared
in accordance with GAAP, but such security shall be deemed to
have been incurred only on the date of the original issuance
thereof. The amount of Indebtedness of any Person at any date
shall be the outstanding balance at such date of all
unconditional obligations as described above, the maximum
liability of such Person for any such contingent obligations at
such date and, in the case of clause (7), the lesser of
(a) the Fair Market Value of any asset subject to a Lien
securing the Indebtedness of others on the date that the Lien
attaches and (b) the amount of the Indebtedness secured.
For purposes of clause (5), the maximum fixed redemption
or repurchase price of any Disqualified Equity Interests
that do
68
not have a fixed redemption price shall be calculated in
accordance with the terms of such Disqualified Equity Interests
as if such Disqualified Equity Interests were redeemed on any
date on which an amount of Indebtedness outstanding shall be
required to be determined pursuant to the Indenture.
In addition, Indebtedness of any Person shall
include Indebtedness described in the preceding paragraph that
would not appear as a liability on the balance sheet of such
Person if:
(1) such Indebtedness is the obligation of a partnership or
joint venture that is not a Restricted Subsidiary of such Person
(a Joint Venture);
(2) such Person or a Restricted Subsidiary of such Person
is a general partner of the Joint Venture (a General
Partner); and
(3) there is recourse, by contract or operation of law,
with respect to the payment of such Indebtedness to property or
assets of such Person or a Restricted Subsidiary of such Person;
and then such Indebtedness shall be included in an amount not to
exceed:
(a) the lesser of (i) the net assets of the General
Partner and (ii) the amount of such Indebtedness to the
extent that there is recourse, by contract or operation of law,
to the property or assets of such Person or a Restricted
Subsidiary of such Person; or
(b) if less than the amount determined pursuant to
clause (a) immediately above, the actual amount of such
Indebtedness that is recourse to such Person or a Restricted
Subsidiary of such Person, if the Indebtedness is evidenced by a
writing and is for a determinable amount.
Independent Director means a director of the
Issuer who:
(1) is independent with respect to the transaction at issue;
(2) does not have any material financial interest in the
Issuer or any of its Affiliates (other than as a result of
holding securities of the Issuer); and
(3) has not and whose Affiliates or affiliated firm has
not, at any time during the twelve months prior to the taking of
any action hereunder, directly or indirectly, received, or
entered into any understanding or agreement to receive, any
compensation, payment or other benefit, of any type or form,
from the Issuer or any of its Affiliates, other than customary
directors fees for serving on the Board of Directors of
the Issuer or any Affiliate and reimbursement of
out-of-pocket
expenses for attendance at the Issuers or Affiliates
board and board committee meetings.
Independent Financial Advisor means an
accounting, appraisal or investment banking firm of nationally
recognized standing that is, in the reasonable judgment of the
Issuers Board of Directors, qualified to perform the task
for which it has been engaged and disinterested and independent
with respect to the Issuer and its Affiliates.
interest means, with respect to the Notes,
interest and Liquidated Damages, if any, on the Notes.
Investment Grade Rating means a rating equal
to or higher than Baa3 (or the equivalent) by Moodys and
BBB (or the equivalent) by S&P, or an
equivalent rating by any other Rating Agency.
Investments of any Person means:
(1) all direct or indirect investments by such Person in
any other Person in the form of loans, advances or capital
contributions or other credit extensions constituting
Indebtedness of such other Person, and any guarantee of
Indebtedness of any other Person;
(2) all purchases (or other acquisitions for consideration)
by such Person of Indebtedness, Equity Interests or other
securities of any other Person;
(3) all other items that would be classified as investments
on a balance sheet of such Person prepared in accordance with
GAAP; and
(4) the Designation of any Subsidiary as an Unrestricted
Subsidiary.
69
Except as otherwise expressly specified in this definition, the
amount of any Investment (other than an Investment made in cash)
shall be the Fair Market Value thereof on the date such
Investment is made. The amount of Investment pursuant to
clause (4) shall be the Designation Amount determined in
accordance with the covenant described under
Certain Covenants Limitations on
designation of unrestricted subsidiaries. If the Issuer or
any Subsidiary sells or otherwise disposes of any Equity
Interests of any direct or indirect Subsidiary such that, after
giving effect to any such sale or disposition, such Person is no
longer a Subsidiary, the Issuer shall be deemed to have made an
Investment on the date of any such sale or other disposition
equal to the Fair Market Value of the Equity Interests of and
all other Investments in such Subsidiary not sold or disposed
of. The acquisition by the Issuer or any Restricted Subsidiary
of a Person that becomes a Restricted Subsidiary and that holds
an Investment in a third Person shall be deemed to be an
Investment by the Issuer or such Restricted Subsidiary in the
third Person in an amount equal to the Fair Market Value of the
Investment held by the acquired Person in the third Person.
Notwithstanding the foregoing, purchases or other redemptions of
Equity Interests of the Issuer shall be deemed not to be
Investments.
Issue Date means September 23, 2010, the
first date on which the Notes were originally issued.
Lien means, with respect to any asset, any
mortgage, deed of trust, lien (statutory or other), pledge,
lease, easement, restriction, covenant, charge, security
interest or other encumbrance of any kind or nature in respect
of such asset, whether or not filed, recorded or otherwise
perfected under applicable law, including any conditional sale
or other title retention agreement, and any lease in the nature
thereof, any option or other agreement to sell granted as credit
support for any Indebtedness and any filing of any financing
statement under the Uniform Commercial Code (or equivalent
statutes) of any jurisdiction (other than cautionary filings in
respect of operating leases).
Liquidated Damages has the meaning set forth
in the Registration Rights Agreement.
Moodys means Moodys Investors
Service, Inc. and its successors.
Net Available Proceeds means, with respect to
any Asset Sale, the proceeds thereof in the form of cash or Cash
Equivalents, net of
(1) brokerage commissions and other fees and expenses
(including fees and expenses of legal counsel, accountants and
investment banks) of such Asset Sale;
(2) provisions for taxes payable as a result of such Asset
Sale (after taking into account any available tax credits or
deductions and any tax sharing arrangements);
(3) amounts required to be paid to any Person (other than
the Issuer or any Restricted Subsidiary) owning a beneficial
interest in the assets subject to the Asset Sale or having a
Lien thereon or in order to obtain a necessary consent to such
Asset Sale;
(4) payments of unassumed liabilities (including
Indebtedness) relating to the assets sold at the time of, or
within 30 days after the date of, such Asset Sale;
(5) appropriate amounts to be provided by the Issuer or any
Restricted 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 Issuer or any Restricted
Subsidiary, as the case may be, after such Asset Sale, including
pensions and other postemployment 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; provided, however, that any amounts
remaining after adjustments, revaluations or liquidations of
such reserves shall constitute Net Available Proceeds; and
(6) amounts required to be held in escrow to secure payment
of indemnity or other obligations, until such amounts are
released.
Non-Recourse Debt means Indebtedness of an
Unrestricted Subsidiary:
(1) as to which neither the Issuer nor any Restricted
Subsidiary (a) provides credit support of any kind
(including any undertaking, agreement or instrument that would
constitute Indebtedness), (b) is
70
directly or indirectly liable as a guarantor or otherwise, or
(c) constitutes the lender, except in any case to the
extent it would be permitted to make an Investment in such
Unrestricted Subsidiary pursuant to the first paragraph of the
covenant described under Limitations on
restricted payments;
(2) no default with respect to which (including any rights
that the holders thereof may have to take enforcement action
against an Unrestricted Subsidiary) would permit upon notice,
lapse of time or both any holder of any other Indebtedness
(other than the Notes) of the Issuer or any Restricted
Subsidiary to declare a default on the other Indebtedness or
cause the payment thereof to be accelerated or payable prior to
its stated maturity; and
(3) as to which the lenders have been notified in writing
that they will not have any recourse to the Equity Interests or
other assets of the Issuer or any Restricted Subsidiary.
Obligation means any principal, interest,
penalties, fees, indemnification, reimbursements, costs,
expenses, damages and other liabilities payable under the
documentation governing any Indebtedness.
Officer means any of the following of the
Issuer: the Chairman of the Board of Directors, the Chief
Executive Officer, the Chief Financial Officer, the President,
any Vice President, the Treasurer or the Secretary.
Officers Certificate means a
certificate signed by two Officers.
Pari Passu Indebtedness means any
Indebtedness of the Issuer or any Guarantor that ranks pari
passu as to payment with the Notes or the Note Guarantees, as
applicable.
Permitted Business means (i) commercial
helicopter services of all types worldwide, including helicopter
transportation services to the oil and gas industry and the
health care industry and helicopter maintenance and repair
services, providing air medical transportation for hospitals and
for emergency service agencies (operating as an independent
provider of medical services), and including related fixed-wing
aircraft and charter services and (ii) businesses that are
reasonably related thereto or reasonable extensions thereof.
Permitted Holder means (i) Al Gonsoulin
and his spouse and lineal descendants, their respective estates
or legal representatives, (ii) trusts created for the
benefit of such Persons and (iii) entities 80% or more of
the Voting Stock of which is directly or indirectly owned by any
of the preceding Persons.
Permitted Indebtedness has the meaning set
forth in the second paragraph of the covenant described under
Certain covenants Limitations on
additional indebtedness.
Permitted Investment means:
(1) Investments by the Issuer or any Restricted Subsidiary
in (a) any Restricted Subsidiary or (b) in any Person
that is or will become immediately after such Investment a
Restricted Subsidiary or that will merge or consolidate into the
Issuer or a Restricted Subsidiary;
(2) Investments in the Issuer by any Restricted Subsidiary;
(3) loans and advances to directors, employees and officers
of the Issuer and the Restricted Subsidiaries for bona fide
business purposes and to purchase Equity Interests of the Issuer
not in excess of $3.0 million at any one time outstanding;
(4) Hedging Obligations incurred in compliance with
clause (4) of the second paragraph under the covenant
described under Certain covenants
Limitations on additional indebtedness;
(5) Cash Equivalents;
(6) receivables owing to the Issuer or any Restricted
Subsidiary if created or acquired in the ordinary course of
business and payable or dischargeable in accordance with
customary trade terms; provided, however, that such trade terms
may include such concessionary trade terms as the Issuer or any
such Restricted Subsidiary deems reasonable under the
circumstances;
71
(7) Investments received in compromise or resolution of
(A) obligations of trade creditors or customers that were
incurred in the ordinary course of business of the Issuer or any
of its Restricted Subsidiaries, including pursuant to any plan
of reorganization or similar arrangement upon the bankruptcy or
insolvency of any trade creditor or customer; or
(B) litigation, arbitration or other disputes with Persons
who are not Affiliates;
(8) Investments made by the Issuer or any Restricted
Subsidiary as a result of consideration received in connection
with an Asset Sale made in compliance with the covenant
described under Certain covenants
Limitations on asset sales;
(9) Investments in prepaid expenses, negotiable instruments
held for collection or deposit and lease, utility and
workers compensation, performance and similar deposits
entered into in the ordinary course of business;
(10) Investments made by the Issuer or a Restricted
Subsidiary for consideration consisting only of Qualified Equity
Interests of the Issuer;
(11) stock, obligations or securities received in
settlement of debts created in the ordinary course of business
and owing to the Issuer or any Restricted Subsidiary or in
satisfaction of judgments;
(12) Investments of a Restricted Subsidiary acquired after
the Issue Date or of any Person merged into the Issuer or merged
into or consolidated or amalgamated with a Restricted Subsidiary
in accordance with the covenant described under
Certain covenants Limitations on
mergers, consolidations, etc. to the extent that such
Investments were not made in contemplation of or in connection
with such acquisition, merger, consolidation or amalgamation and
were in existence on the date of such acquisition, merger,
consolidation or amalgamation;
(13) Investments in international joint ventures in an
aggregate amount not to exceed $25.0 million at any one
time outstanding (with each Investment being valued as of the
date made and without regard to subsequent changes in value);
(14) Investments in existence on the Issue Date and any
amendments, renewals or replacements thereof that do not exceed
the amount of such Investment; and
(15) other Investments in an aggregate amount not to exceed
$15.0 million at any one time outstanding (with each
Investment being valued as of the date made and without regard
to subsequent changes in value).
The amount of Investments outstanding at any time pursuant to
clause (13) or (15) above shall be deemed to be
reduced:
(a) upon the disposition or repayment of or return on any
Investment made pursuant to clause (13) or (15) above,
by an amount equal to the return of capital with respect to such
Investment to the Issuer or any Restricted Subsidiary (to the
extent not included in the computation of Consolidated Net
Income), less the cost of the disposition of such Investment and
net of taxes; and
(b) upon a Redesignation of an Unrestricted Subsidiary as a
Restricted Subsidiary, by an amount equal to the lesser of
(x) the Fair Market Value of the Issuers
proportionate interest in such Subsidiary immediately following
such Redesignation, and (y) the aggregate amount of
Investments in such Subsidiary that increased (and did not
previously decrease) the amount of Investments outstanding
pursuant to clause (13) or (15) above.
Permitted Liens means the following types of
Liens:
(1) Liens for taxes, assessments or governmental charges or
claims either (a) not delinquent or (b) contested in
good faith by appropriate proceedings and as to which the Issuer
or the Restricted Subsidiaries shall have set aside on their
books such reserves as may be required pursuant to GAAP;
(2) statutory or contractual Liens of landlords, carriers,
warehousemen, mechanics, suppliers, materialmen, repairmen and
other Liens incurred in the ordinary course of business for sums
not yet
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delinquent or being contested in good faith, if such reserve or
other appropriate provision, if any, as shall be required by
GAAP shall have been made in respect thereof;
(3) Liens incurred or deposits made in the ordinary course
of business in connection with workers compensation,
unemployment insurance and other types of social security, or to
secure the performance of tenders, statutory obligations, surety
and appeal bonds, bids, leases, government contracts,
performance and
return-of-money
bonds and other similar obligations (exclusive of obligations
for the payment of borrowed money);
(4) Liens upon specific items of inventory or other goods
and proceeds of any Person securing such Persons
obligations in respect of bankers acceptances issued or
created for the account of such Person to facilitate the
purchase, shipment or storage of such inventory or other goods;
(5) judgment Liens not giving rise to a Default so long as
such Liens are adequately bonded and any appropriate legal
proceedings which may have been duly initiated for the review of
such judgment have not been finally terminated or the period
within which the proceedings may be initiated has not expired;
(6) easements,
rights-of-way,
zoning restrictions and other similar charges, restrictions or
encumbrances in respect of real property or immaterial
imperfections of title which do not, in the aggregate, impair in
any material respect the ordinary conduct of the business of the
Issuer and the Restricted Subsidiaries taken as a whole;
(7) Liens securing reimbursement obligations with respect
to commercial letters of credit which encumber documents and
other assets relating to such letters of credit and products and
proceeds thereof;
(8) Liens encumbering deposits made to secure obligations
arising from statutory, regulatory, contractual or warranty
requirements of the Issuer or any Restricted Subsidiary,
including rights of offset and setoff;
(9) bankers Liens, rights of setoff and other similar
Liens existing solely with respect to cash and Cash Equivalents
on deposit in one or more of accounts maintained by the Issuer
or any Restricted Subsidiary, in each case granted in the
ordinary course of business in favor of the bank or banks with
which such accounts are maintained, securing amounts owing to
such bank or banks with respect to cash management and operating
account arrangements, including those involving pooled accounts
and netting arrangements; provided that in no case shall any
such Liens secure (either directly or indirectly) the repayment
of any Indebtedness;
(10) leases or subleases granted to others that do not
materially interfere with the ordinary course of business of the
Issuer or any Restricted Subsidiary;
(11) Liens arising from filing Uniform Commercial Code
financing statements regarding leases;
(12) Liens securing all of the Notes and Liens securing any
Note Guarantee;
(13) Liens existing on the Issue Date securing Indebtedness
outstanding on the Issue Date;
(14) Liens in favor of the Issuer or a Guarantor;
(15) Liens securing Indebtedness incurred under a Credit
Facility pursuant to clause (1) of the definition of
Permitted Indebtedness;
(16) Liens securing Purchase Money Indebtedness;
(17) Liens securing Acquired Indebtedness permitted to be
incurred under the Indenture; provided that the Liens do not
extend to assets not subject to such Lien at the time of
acquisition (other than improvements and accessions thereto and
replacements or proceeds thereof);
(18) Liens on assets of a Person existing at the time such
Person is acquired or merged with or into or consolidated with
the Issuer or any such Restricted Subsidiary (and not created in
anticipation or contemplation thereof);
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(19) Liens securing Indebtedness of the Issuer and the
Restricted Subsidiaries in an aggregate principal amount that,
together with Indebtedness secured by Liens incurred pursuant to
clause (15) of this definition, does not exceed 15% of
Consolidated Net Tangible Assets;
(20) Liens to secure Refinancing Indebtedness of
Indebtedness secured by Liens referred to in the foregoing
clauses (13), (16), (17), and (18); provided that in each case
such Liens do not extend to any additional assets (other than
improvements or accessions thereto and replacements or proceeds
thereof);
(21) Liens to secure Attributable Indebtedness
and/or that
are permitted to be incurred pursuant to the covenant described
under Limitations on sale and leaseback
transactions; provided that any such Lien shall not extend
to or cover any assets of the Issuer or any Restricted
Subsidiary other than the assets which are the subject of the
Sale and Leaseback Transaction in which the Attributable
Indebtedness is incurred;
(22) Liens on assets of a Foreign Subsidiary securing
Foreign Indebtedness in aggregate amount at any time outstanding
not to exceed $15.0 million;
(23) Liens on Equity Interests owned by Issuer or any
Restricted Subsidiary in an Unrestricted Subsidiary or a Person
that is not a Subsidiary to secure Indebtedness or other
obligations of the Unrestricted Subsidiary or Person that issued
the Equity Interests; and
(24) Liens incurred by the Issuer or any Restricted
Subsidiary with respect to Indebtedness that does not in
aggregate principal amount outstanding at any time exceed the
greater of $25.0 million or 5% of Consolidated Net Tangible
Assets determined as of the date of the incurrence after giving
pro forma effect to such incurrence and the application of
proceeds therefrom.
Person means any individual, corporation,
partnership, limited liability company, joint venture,
incorporated or unincorporated association, joint-stock company,
trust, unincorporated organization or government or other agency
or political subdivision thereof or other entity of any kind.
Plan of Liquidation with respect to any
Person, means a plan that provides for, contemplates or the
effectuation of which is preceded or accompanied by (whether or
not substantially contemporaneously, in phases or otherwise):
(1) the sale, lease, conveyance or other disposition of all
or substantially all of the assets of such Person otherwise than
as an entirety or substantially as an entirety; and (2) the
distribution of all or substantially all of the proceeds of such
sale, lease, conveyance or other disposition and all or
substantially all of the remaining assets of such Person to
holders of Equity Interests of such Person.
Preferred Stock means, with respect to any
Person, any and all preferred or preference stock or other
equity interests (however designated) of such Person whether now
outstanding or issued after the Issue Date.
Purchase Money Indebtedness means
Indebtedness, including Capitalized Lease Obligations, of the
Issuer or any Restricted Subsidiary incurred for the purpose of
financing all or any part of the purchase price of property,
plant or equipment used in the business of the Issuer or any
Restricted Subsidiary or the cost of installation, construction
or improvement thereof; provided, however, that (1) the
amount of such Indebtedness shall not exceed such purchase price
or cost, (2) such Indebtedness shall not be secured by any
asset other than the specified asset being financed or other
assets securing Purchase Money Indebtedness of the same lender,
or in the case of real property, fixtures or helicopters,
additions and improvements thereto, the real property to which
such asset is attached and the proceeds thereof and
(3) such Indebtedness shall be incurred within
180 days after such acquisition of such asset by the Issuer
or such Restricted Subsidiary or such installation, construction
or improvement.
Qualified Equity Interests means Equity
Interests of the Issuer other than Disqualified Equity
Interests; provided that such Equity Interests shall not be
deemed Qualified Equity Interests to the extent sold or owed to
a Subsidiary of the Issuer or financed, directly or indirectly,
using funds (1) borrowed from the Issuer or any Subsidiary
of the Issuer until and to the extent such borrowing is repaid
or (2) contributed, extended, guaranteed or advanced by the
Issuer or any Subsidiary of the Issuer (including, without
limitation, in respect of any employee stock ownership or
benefit plan).
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Qualified Equity Offering means the issuance
and sale of Qualified Equity Interests of the Issuer to Persons
other than any Permitted Holder or any other Person who is,
prior to such issuance and sale, an Affiliate of the Issuer.
Rating Agency means each of S&P and
Moodys or if S&P or Moodys or both shall not
make a rating on the Notes publicly available, a nationally
recognized statistical rating agency or agencies, as the case
may be, selected by the Issuer (as certified to the Trustee by
an Officers Certificate) which shall be substituted for
S&P or Moodys or both, as the case may be.
redeem means to redeem, repurchase, purchase,
defease, retire, discharge or otherwise acquire or retire for
value; and redemption shall have a correlative
meaning; provided that this definition shall not apply for
purposes of Optional redemption or
Redemption with proceeds from equity
offerings.
Redesignation has the meaning given to such
term in the covenant described under Certain
covenants Limitations on designation of unrestricted
subsidiaries.
refinance means to refinance, repay, prepay,
replace, renew or refund.
Refinancing Indebtedness means Indebtedness
of the Issuer or a Restricted Subsidiary issued in exchange for,
or the proceeds from the issuance and sale or disbursement of
which are used substantially concurrently to redeem or refinance
in whole or in part, any Indebtedness of the Issuer or any
Restricted Subsidiary (the Refinanced Indebtedness)
in a principal amount not in excess of the principal amount (or
accreted value, if applicable) of the Refinanced Indebtedness so
redeemed or refinanced and accrued interest thereon (or, if such
Refinancing Indebtedness refinances Indebtedness under a
revolving credit facility or other agreement providing a
commitment for subsequent borrowings, with a maximum commitment
not to exceed the maximum commitment under such revolving credit
facility or other agreement) (plus the amount of necessary fees
and expenses incurred in connection therewith and any premiums
paid on the Indebtedness so refinanced or refunded); provided
that:
(1) the Refinancing Indebtedness is the obligation of the
Issuer or same Restricted Subsidiary as that of the Refinanced
Indebtedness;
(2) if the Refinanced Indebtedness was subordinated to or
pari passu with the Notes or the Note Guarantees, as the case
may be, then such Refinancing Indebtedness, by its terms, is
expressly pari passu with (in the case of Refinanced
Indebtedness that was pari passu with) or subordinate in right
of payment to (in the case of Refinanced Indebtedness that was
subordinated to) the Notes or the Note Guarantees, as the case
may be, at least to the same extent as the Refinanced
Indebtedness;
(3) the Refinancing Indebtedness is scheduled to mature
either (a) no earlier than the Refinanced Indebtedness
being redeemed or refinanced or (b) after the maturity date
of the Notes; and
(4) the portion, if any, of the Refinancing Indebtedness
that is scheduled to mature on or prior to the maturity date of
the Notes has a Weighted Average Life to Maturity at the time
such Refinancing Indebtedness is incurred that is equal to or
greater than the Weighted Average Life to Maturity of the
portion of the Refinanced Indebtedness being repaid that is
scheduled to mature on or prior to the maturity date of the
Notes.
Restricted Payment means any of the following:
(1) the declaration or payment of any dividend or any other
distribution on Equity Interests of the Issuer or any Restricted
Subsidiary or any payment made to the direct or indirect holders
(in their capacities as such) of Equity Interests of the Issuer
or any Restricted Subsidiary, including, without limitation, any
payment in connection with any merger or consolidation involving
the Issuer but excluding (a) dividends or distributions
payable solely in Qualified Equity Interests and (b) in the
case of Restricted Subsidiaries, dividends or distributions
payable to the Issuer or to a Restricted Subsidiary and pro rata
dividends or distributions payable to minority holders of Equity
Interests of any Restricted Subsidiary;
(2) the redemption of any Equity Interests of the Issuer or
any Restricted Subsidiary or any direct or indirect parent of
the Issuer, including, without limitation, any payment in
connection with any merger or
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consolidation involving the Issuer but excluding any such Equity
Interests held by the Issuer or any Restricted Subsidiary;
(3) any Investment other than a Permitted
Investment; or
(4) any redemption prior to the scheduled maturity or prior
to any scheduled repayment of principal or sinking fund payment,
as the case may be, in respect of Subordinated Indebtedness.
Restricted Payments Basket has the meaning
given to such term in the first paragraph of the covenant
described under Certain covenants
Limitations on restricted payments.
Restricted Subsidiary means any Subsidiary of
the Issuer other than an Unrestricted Subsidiary.
S&P means Standard &
Poors Ratings Services, a division of The McGraw-Hill
Companies, Inc., and its successors.
Sale and Leaseback Transactions means with
respect to any Person an arrangement with any bank, insurance
company or other lender or investor or to which such lender or
investor is a party, providing for the leasing by such Person of
any asset of such Person which has been or is being sold or
transferred by such Person to such lender or investor or to any
Person to whom funds have been or are to be advanced by such
lender or investor on the security of such asset.
SEC means the U.S. Securities and
Exchange Commission.
Secretarys Certificate means a
certificate signed by the Secretary or an Assistant Secretary of
the Issuer.
Securities Act means the U.S. Securities
Act of 1933, as amended.
Significant Subsidiary means (1) any
Restricted Subsidiary that would be a significant
subsidiary as defined in Article 1, Rule 102 of
Regulation S-X
promulgated pursuant to the Securities Act as such Regulation is
in effect on the Issue Date and (2) any Restricted
Subsidiary that, when aggregated with all other Restricted
Subsidiaries that are not otherwise Significant Subsidiaries and
as to which any event described in clause (7) or
(8) under Events of Default has
occurred and is continuing, would constitute a Significant
Subsidiary under clause (1) of this definition.
Subordinated Indebtedness means Indebtedness
of the Issuer or any Guarantor that is subordinated in right of
payment to the Notes or the Note Guarantees, respectively.
Subsidiary means, with respect to any Person:
(1) any corporation, limited liability company, association
or other business entity of which more than 50% of the total
voting power of the Voting Stock is at the time owned or
controlled, directly or indirectly, by such Person or one or
more of the other Subsidiaries of that Person (or a combination
thereof); and
(2) any partnership (a) the sole general partner or
the managing general partner of which is such Person or a
Subsidiary of such Person or (b) the only general partners
of which are such Person or of one or more Subsidiaries of such
Person (or any combination thereof). Unless otherwise specified,
Subsidiary refers to a Subsidiary of the Issuer.
Trust Indenture Act means the
Trust Indenture Act of 1939, as amended.
Unrestricted Subsidiary means (1) any
Subsidiary that at the time of determination shall be designated
an Unrestricted Subsidiary by the Board of Directors of the
Issuer in accordance with the covenant described under
Certain covenants Limitations on
designation of unrestricted subsidiaries and (2) any
Subsidiary of an Unrestricted Subsidiary.
U.S. Government Obligations means direct
non-callable obligations of, or obligations guaranteed by, the
United States of America for the payment of which guarantee or
obligations the full faith and credit of the United States is
pledged.
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Voting Stock with respect to any Person,
means securities of any class of Equity Interests of such Person
entitling the holders thereof (whether at all times or only so
long as no senior class of stock or other relevant Equity
Interest has voting power by reason of any contingency) to vote
in the election of members of the Board of Directors of such
Person.
Weighted Average Life to Maturity when
applied to any Indebtedness at any date, means the number of
years obtained by dividing (1) the sum of the products
obtained by multiplying (a) the amount of each then
remaining installment, sinking fund, serial maturity or other
required payment of principal, including payment at final
maturity, in respect thereof by (b) the number of years
(calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment by (2) the then
outstanding principal amount of such Indebtedness.
Wholly-Owned Restricted Subsidiary means a
Restricted Subsidiary of which 100% of the Equity Interests
(except for directors qualifying shares or certain
minority interests owned by other Persons solely due to local
law requirements that there be more than one stockholder, but
which interest is not in excess of what is required for such
purpose) are owned directly by the Issuer or through one or more
Wholly-Owned Restricted Subsidiaries.
BOOK-ENTRY,
DELIVERY AND FORM OF SECURITIES
Except as provided below, the Registered Notes will be
represented by one or more global notes (the Global
Notes) in definitive form. The Global Notes will be
deposited with, or on behalf of, DTC and registered in the name
of Cede & Co., as nominee of DTC (such nominee being
referred to herein as the Global Note Holder). DTC
will maintain the Notes through its book-entry facilities. The
Unregistered Notes, to the extent validly tendered and accepted,
will be exchanged through book-entry electronic transfer for the
applicable Global Note. DTC will maintain the Registered Notes
in minimum denominations of $2,000 and integral multiples of
$1,000 in excess thereof through its book-entry facilities.
DTC has advised the Issuer as follows:
DTC is a limited-purpose trust company that was created to hold
securities for its participating organizations, including
Euroclear and Clearstream (collectively, the
Participants or the Depositarys
Participants), and to facilitate the clearance and
settlement of transactions in these securities between
Participants through electronic book-entry changes in accounts
of its Participants. The Depositarys Participants include
securities brokers and dealers (including the initial
purchaser), banks and trust companies, clearing corporations and
certain other organizations. Access to DTCs system is also
available to other entities such as banks, brokers, dealers and
trust companies (collectively, the Indirect
Participants or the Depositarys Indirect
Participants) that clear through or maintain a custodial
relationship with a Participant, either directly or indirectly.
Persons who are not Participants may beneficially own securities
held by or on behalf of DTC only through the Depositarys
Participants or the Depositarys Indirect Participants.
Pursuant to procedures established by DTC, ownership of the
Registered Notes will be shown on, and the transfer of ownership
thereof will be effected only through, records maintained by DTC
(with respect to the interests of the Depositarys
Participants) and the records of the Depositarys
Participants (with respect to the interests of the
Depositarys Indirect Participants).
The laws of some states require that certain persons take
physical delivery in definitive form of securities that they
own. Consequently, the ability to transfer the Notes will be
limited to such extent.
So long as the Global Note Holder is the registered owner of any
Registered Notes, the Global Note Holder will be considered the
sole holder of outstanding Registered Notes represented by such
Global Registered Notes under the Indenture. Except as provided
below, beneficial owners of Registered Notes will not be
entitled to have Registered Notes registered in their names and
will not be considered the owners or holders thereof under the
Indenture for any purpose, including with respect to the giving
of any directions, instructions, or approvals to the Trustee
thereunder. None of the Issuer, the Guarantors or the Trustee
will have any responsibility or liability for any aspect of the
records relating to or payments made on account of
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Registered Notes by DTC, or for maintaining, supervising or
reviewing any records of DTC relating to such Registered Notes.
Payments in respect of the principal of, premium, if any, and
interest on any Registered Notes registered in the name of a
Global Note Holder on the applicable record date will be payable
by the Trustee to or at the direction of such Global Note Holder
in its capacity as the registered holder under the Indenture.
Under the terms of the Indenture, the Issuer, the Guarantors and
the Trustee may treat the Persons in whose names any Registered
Notes, including the Global Notes, are registered as the owners
thereof for the purpose of receiving such payments and for any
and all other purposes whatsoever. Consequently, neither the
Issuer, the Guarantors nor the Trustee has or will have any
responsibility or liability for the payment of such amounts to
beneficial owners of Registered Notes (including principal,
premium, if any, and interest). The Issuer believes, however,
that it is currently the policy of DTC to immediately credit the
accounts of the relevant Participants with such payments, in
amounts proportionate to their respective beneficial interests
in the relevant security as shown on the records of DTC.
Payments by the Depositarys Participants and the
Depositarys Indirect Participants to the beneficial owners
of Registered Notes will be governed by standing instructions
and customary practice and will be the responsibility of the
Depositarys Participants or the Depositarys Indirect
Participants.
If (1) the Depositary notifies the Issuer in writing that
DTC is no longer willing or able to act as a depositary and the
Issuer is unable to locate a qualified successor within
90 days or (2) there has occurred and is continuing a
Default and DTC notifies the Trustee of its decision to exchange
the Global Note for Registered Notes in definitive form under
the Indenture, then, upon surrender by the relevant Global Note
Holder of its Global Note, Registered Notes in such form will be
issued to each Person that such Global Note Holder and DTC
identify as being the beneficial owner of the related Notes.
Upon any such issuance, the Trustee is required to register such
Registered Notes in the name of and cause the same to be
delivered to, such person or persons (or the nominee of any
thereof). Such Registered Notes would be issued in fully
registered form and would be subject to the legal requirements
described in this prospectus.
Neither the Issuer nor the Trustee will be liable for any delay
by the Global Note Holder or DTC in identifying the beneficial
owners of Registered Notes and the Issuer and the Trustee may
conclusively rely on, and will be protected in relying on,
instructions from the Global Note Holder or DTC for all purposes.
Material
U.S. federal income tax consequences
The following describes the material U.S. federal income
tax consequences of the ownership and disposition of the notes
by holders who purchase notes at their original issuance for a
price equal to the issue price of the notes and who hold the
notes as capital assets (generally, property held for
investment). This discussion is not a complete discussion of all
the potential tax consequences that may be relevant to you. This
discussion is based upon the Internal Revenue Code of 1986, as
amended (the Code), its legislative history,
existing and proposed regulations thereunder, published rulings
and court decisions, all as in effect on the date of this
document, and all of which are subject to change, possibly on a
retroactive basis, or are subject to different interpretations.
The tax treatment of holders of the notes may vary depending
upon their particular situations. Certain holders, including
insurance companies, tax exempt organizations, financial
institutions, investors in pass-through entities, certain
U.S. expatriates, taxpayers subject to the alternative
minimum tax, broker-dealers and persons holding the notes as
part of a straddle, hedge or
conversion transaction, may be subject to special
rules not discussed below. This discussion does not address any
estate, gift, foreign, state or local tax considerations.
We urge you to consult your own tax advisors regarding the
particular U.S. federal income tax consequences to you of
holding and disposing of notes, any tax consequences that may
arise under the laws of any relevant foreign, state, local, or
other taxing jurisdiction or under any applicable tax treaty, as
well as possible effects of changes in federal or other tax
laws.
In certain circumstances (see Description of
notes Optional redemption and
Change of control, we may elect or be
obligated to pay amounts on the notes that are in excess of
stated interest or principal on
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the notes. We do not intend to treat the possibility of paying
such additional amounts as causing the notes to be treated as
contingent payment debt instruments. However,
additional income will be recognized if any such additional
payment is made. It is possible that the IRS may take a
different position, in which case a holder might be required to
accrue interest income at a higher rate than the stated interest
rate and to treat as ordinary interest income any gain realized
on the taxable disposition of the note. The remainder of this
discussion assumes that the notes will not be treated as
contingent payment debt instruments. Investors should consult
their own tax advisors regarding the possible application of the
contingent payment debt instrument rules to the notes.
U.S.
HOLDERS
The following is a summary of the material U.S. federal
income tax consequences that will apply to you if you are a
U.S. holder of the notes. For purposes of this discussion,
you are a U.S. holder if you are a beneficial
owner of notes and you are:
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an individual citizen or resident alien of the United States;
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a corporation or other entity subject to tax as a corporation
for U.S. federal income tax purposes, created or organized
in or under the laws of the United States or of any state
thereof or the District of Columbia;
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an estate whose income is subject to U.S. federal income
taxation regardless of its source; or
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a trust if a U.S. court is able to exercise primary
supervision over the administration of the trust and one or more
United States persons have the authority to control all
substantial decisions of the trust or a trust that has a valid
election in effect under applicable regulations to be treated as
a United States person.
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If a partnership or other entity treated as a partnership for
U.S. federal income tax purposes holds the notes, the tax
treatment of a partner will generally depend on the status of
the partner and on the activities of the partnership. Partners
of partnerships holding notes should consult their tax advisors.
Stated
interest on the notes
Stated interest on the notes generally will be taxable to you as
ordinary income at the time it is received or accrued in
accordance with your regular method of accounting for United
States federal income tax purposes.
Sale,
taxable exchange, redemption, retirement or other taxable
disposition of the notes
Upon a sale, taxable exchange, redemption, retirement or other
taxable disposition of a note, you generally will recognize gain
or loss equal to the difference between the amount received upon
such disposition (less any amount attributable to accrued
interest which will be taxable as ordinary income, if not
previously included in gross income) and your adjusted tax basis
in the note at that time. Your adjusted tax basis in the note
will generally equal the amount you paid for the note. Such gain
or loss generally will be capital gain or loss, and will be
long-term capital gain or loss if, at the time of the
disposition, the note has been held for more than one year.
Under current law, long-term capital gains of certain
non-corporate holders are generally taxed at lower rates than
items of ordinary income. The deductibility of capital losses is
subject to limitations.
Backup
withholding and information reporting
In general, information reporting and backup withholding will
apply to payments of interest on the notes and to the proceeds
from the sale, redemption, retirement or other disposition of a
note paid to you if you fail to provide the withholding agent
with a correct taxpayer identification number, certified under
penalties of perjury, as well as certain other information.
Backup withholding is not an additional tax. If backup
withholding applies to you, you may use the amounts withheld as
a refund or credit against your U.S. federal
79
income tax liability, as long as you timely provide certain
information to the Internal Revenue Service, which we refer to
as the IRS.
New
legislation
For taxable years beginning after December 31, 2012, newly
enacted legislation is scheduled to impose a 3.8% tax on the
net investment income of certain United States
citizens and resident aliens, and on the undistributed net
investment income of certain estates and trusts. Among
other items, net investment income would generally
include gross income from interest and net gain from the sale,
redemption, exchange, retirement or other taxable disposition of
a note, less certain deductions.
NON-U.S.
HOLDERS
The following is a summary of the material U.S. federal
income tax consequences that will apply to you if you are a
non-U.S. holder
of the notes. You are a
non-U.S. holder
for purposes of this discussion if you are a beneficial owner of
notes that is an individual, corporation, estate or trust that
is not a U.S. holder.
Stated
interest on the notes
Stated interest that we pay to you that is not effectively
connected with your conduct of a U.S. trade or business
will not be subject to U.S. federal income tax and
U.S. federal withholding tax will not be required on that
payment if you:
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do not actually or constructively own 10% or more of the
combined voting power of all classes of our stock;
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are not a controlled foreign corporation with respect to which
we are a related person;
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are not a bank receiving interest on a loan entered into in the
ordinary course of business within the meaning of the
Code; and
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you certify to us, our payment agent, or the person who would
otherwise be required to withhold U.S. federal income tax,
on IRS
Form W-8BEN
or applicable substitute form, under penalties of perjury, that
you are not a United States person and provide your name and
address.
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If you do not satisfy the preceding requirements, your interest
on a note that is not effectively connected with a
U.S. trade or business would generally be subject to
U.S. withholding tax at a flat rate of 30% unless that rate
is reduced or eliminated pursuant to an applicable tax treaty
(provided certain certification requirements are met).
Sale,
taxable exchange, redemption, retirement or other taxable
disposition of the notes
You generally will not be subject to U.S. federal income
tax with respect to gain recognized on a sale, taxable exchange,
redemption, retirement or other taxable disposition of a note
unless:
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the gain is effectively connected with your conduct of a trade
or business within the United States, and, if an applicable
income tax treaty applies, is attributable to a permanent
establishment or fixed base you maintain in the United
States; or
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you are an individual who is present in the United States for
183 or more days in the taxable year of the disposition and
certain other requirements are met.
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If you are a
non-U.S. holder
described in the first bullet point above, you generally will be
subject to tax as described below (See
Non-U.S. holders
Income or gain effectively connected with a U.S. trade or
business). If you are a
non-U.S. holder
described in the second bullet point above, you generally will
be subject to a flat 30% United States federal income tax on the
gain derived from the sale, redemption, exchange, retirement or
other disposition, which may be offset by certain United States
source capital losses.
80
Income
or gain effectively connected with a U.S. trade or
business
If you are engaged in trade or business in the United States,
and if interest on a note or gain on the sale, taxable exchange,
redemption, retirement or other taxable disposition of a note is
effectively connected with the conduct of that trade or business
(and, if an applicable income tax treaty so requires, is
attributable to a permanent establishment or fixed base
maintained by you in the United States), you will be subject to
regular U.S. federal income tax on the interest or gain in
the same manner as if you were a United States person but will
be exempt from U.S. withholding tax if you provide to us,
our payment agent or the person who would otherwise be required
to withhold U.S. federal income tax, a properly completed
and executed IRS
Form W-8ECI
or applicable substitute form. In addition to regular
U.S. federal income tax, if you are a corporation, you may
be subject to a U.S. branch profits tax at a 30% rate or
such lower rate as may be available under an applicable income
tax treaty.
Information
reporting and backup withholding
Backup withholding and information reporting generally will not
apply to payments to you of interest on the notes by us or our
paying agent to you if you certify as to your
non-U.S. status
under penalties of perjury or otherwise establish an exemption,
provided that neither we nor our paying agent has actual
knowledge or reason to know that you are a United States person
or that the conditions of any other exemptions are not in fact
satisfied. However, payments of interest on the notes are
required to be reported on IRS
Form 1042-S
even if the payments are not otherwise subject to information
reporting.
The payments of the proceeds of the disposition of notes to or
through the U.S. office of a U.S. or foreign broker
will be subject to information reporting and backup withholding
unless you provide the certification described above under
Non-U.S. holders
Stated interest on the notes or otherwise establish an
exemption. The proceeds of a disposition of notes effected
outside the United States to or through a foreign office of a
broker generally will not be subject to backup withholding or
information reporting. However, if that broker is a United
States person, a controlled foreign corporation for
U.S. tax purposes, a foreign person 50% or more of whose
gross income from all sources for certain periods is effectively
connected with a trade or business in the United States, or a
foreign partnership that is engaged in the conduct of a trade or
business in the United States or that has one or more partners
that are U.S. persons who in the aggregate hold more than
50% of the income or capital interests in the partnership,
information reporting requirements will apply unless that broker
has documentary evidence in its files of your
non-U.S. status
and has no actual knowledge or reason to know to the contrary or
unless you otherwise establish an exemption.
You are urged to consult your tax advisors regarding the
application of information reporting and backup withholding to
your particular situation, the availability of an exemption
therefrom, and the procedure for obtaining such an exemption, if
available. Any amounts withheld from a payment to you under the
backup withholding rules will be allowed as a credit against
your U.S. federal income tax liability, if any, and may
entitle you to a refund, provided you timely furnish the
required information to the IRS.
TREASURY
CIRCULAR 230 DISCLOSURE
The preceding discussion of material U.S. federal income
tax considerations and any other discussion in this prospectus
of the tax consequences or tax risks of an investment in the
notes is not intended or written to be used, and cannot be used,
by any person for the purpose of avoiding tax penalties that may
be imposed on the person. This discussion was written to support
the marketing of the transaction(s) or matter(s) addressed
herein, and the taxpayer should seek advice based on the
taxpayers particular circumstances from an independent tax
advisor. No limitation has been imposed by legal counsel on
disclosure of the tax treatment or tax structure of the
transaction.
Plan of
distribution
Each broker-dealer that receives Registered 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
Registered Notes. This
81
prospectus, as it may be amended or supplemented from time to
time, may be used by a broker-dealer in connection with resales
of Registered Notes received in exchange for Unregistered Notes
only where such Unregistered Notes were acquired as a result of
market-making activities or other trading activities. We have
agreed that, for a period of 180 days from the date on
which the registration statement is declared effective, we will
make this prospectus, as amended or supplemented, available to
any broker-dealer for use in connection with any such resale. In
addition, all dealers effecting transactions in the Registered
Notes may be required to deliver a prospectus.
We will not receive any proceeds from any sale of Registered
Notes by broker-dealers. Registered 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 Registered Notes or a combination of such methods
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 or the purchasers of any Registered Notes.
Any broker-dealer that resells Registered 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 Registered Notes may be deemed to be an
underwriter within the meaning of the Securities Act
and any profit on any such resale of Registered 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. The letter of transmittal also states that any holder
participating in this exchange offer will have no arrangements
or understanding with any person to participate with the
distribution of the Unregistered Notes or the Registered Notes
within the meaning of the Securities Act.
For a period of 180 days from the date on which the
registration statement is declared effective, 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, other than
commissions or concessions of any broker-dealers and will
indemnify the holders of the Registered Notes, including any
broker-dealers, against certain liabilities, including
liabilities under the Securities Act.
Legal
matters
The validity of the registered notes and the related guarantees
offered hereby (other than by Guarantors organized under Montana
law) will be passed upon for us by Jones, Walker, Waechter,
Poitevent, Carrère & Denègre, L.L.P. and the
validity of the guarantees of Guarantors organized under Montana
law are being passed upon by Crowley Fleck PLLP, as set forth in
their respective opinions filed as exhibits to this registration
statement.
Experts
The consolidated financial statements, and the related financial
statement schedule, incorporated in this Prospectus by reference
from the Companys Annual Report on
Form 10-K
for the year ended December 31, 2009 and the effectiveness
of PHI Inc.s internal control over financial reporting
have been audited by Deloitte & Touche LLP, an
independent registered public accounting firm, as stated in
their reports, which are incorporated herein by reference. Such
consolidated financial statements and financial statement
schedule have been so incorporated in reliance upon the reports
of such firm given upon their authority as experts in accounting
and auditing.
82
Part II
Information not required in prospectus
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ITEM 20.
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INDEMNIFICATION
OF DIRECTORS AND OFFICERS.
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The Louisiana Business Corporation Law (the LBCL),
Section 83, gives Louisiana corporations broad powers to
indemnify their present and former directors and officers and
those of affiliated corporations against expenses incurred in
the defense of any lawsuit to which they are made parties by
reason of being or having been such directors or officers;
subject to specific conditions and exclusions, gives a director
or officer who successfully defends an action the right to be so
indemnified; and authorizes Louisiana corporations to buy
directors and officers liability insurance. Such
indemnification is not exclusive of any other rights to which
those indemnified may be entitled under any by-laws, agreement,
authorization of shareholders or otherwise.
Our Articles of Incorporation confirm the authority of the Board
of Directors to (i) adopt by-laws or resolutions providing
for indemnification of directors, officers and other persons to
the fullest extent permitted by law, (ii) enter into
contracts with directors and officers providing for
indemnification to the fullest extent permitted by law, and
(iii) exercise our powers to procure directors and
officers liability insurance. The Articles of
Incorporation also provide that any amendment or repeal of any
by-law or resolution relating to indemnification would not
adversely affect any persons entitlement to
indemnification whose claim results from conduct occurring prior
to the date of such amendment or repeal.
Our by-laws expressly provide for the indemnification of
directors, officers and employees to the fullest extent
permitted by law against any costs incurred by any such person
in connection with any threatened, pending or completed claim,
action, suit or proceeding against such person or as to which
such person is involved solely as a witness or person required
to give evidence, because he or she is our director, officer or
employee.
We have entered into indemnification contracts with our
directors that provide for the elimination, to the fullest
extent permitted by law, of any directors liability to us
or our shareholders for monetary damages for breach of his or
her fiduciary duty as a director and will provide the
contracting director with certain procedural and substantive
rights to indemnification. Such indemnification rights apply to
acts or omissions of directors, whether such acts or omissions
occurred before or after the effective date of the contract.
In addition, we maintain a directors and officers
insurance policy, which is designed, among other things, to
reimburse us for any payments made by us pursuant to our
indemnification obligations.
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ITEM 21.
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EXHIBITS AND
FINANCIAL STATEMENTS AND SCHEDULES.
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(a) Exhibits
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Exhibit
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Number
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Description of Exhibit
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4
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.1
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Indenture dated as of September 23, 2010 by and among PHI,
Inc., the subsidiary guarantors and The Bank of New York Mellon
Trust Company, N.A., as trustee (incorporated by reference
to Exhibit 4.1 to PHIs Report on
Form 8-K
filed September 23, 2010).
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4
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.2
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Form of 8.625% Senior Note (incorporated by reference to
Exhibit 4.2 to PHIs Report on
Form 8-K
filed September 23, 2010).
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4
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.3
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Amended and Restated Loan Agreement dated as of March 31,
2008 by and among PHI, Inc., Air Evac Services, Inc., PHI Tech
Services, Inc. (formerly Evangeline Airmotive, Inc.) and
International Helicopter Transport, Inc. and Whitney National
Bank (incorporated by reference to Exhibit 4.1 to
PHIs Report on
Form 10-Q
for the quarterly period ended March 31, 2008, filed
May 8, 2008).
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4
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.4
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First Amendment dated as of August 5, 2009 to Amended and
Restated Loan Agreement dated as of March 31, 2008 by and
among PHI, Inc., Air Evac Services, Inc., PHI Tech Services,
Inc. (formerly Evangeline Airmotive, Inc.), and International
Helicopter Transport, Inc. and Whitney National Bank
(incorporated by reference to Exhibit 4.2 to PHIs
Report on
Form 10-Q
filed on August 10, 2009).
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II-1
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Exhibit
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Number
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Description of Exhibit
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4
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.5
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Second Amendment dated September 13, 2010 to Amended and
Restated Loan Agreement dated March 31, 2008 by and among
PHI, Inc., Air Evac Services, Inc., PHI Tech Services, Inc. and
International Helicopter Transport, Inc., and Whitney National
Bank (incorporated by reference to Exhibit 4.3 to
PHIs Report on
Form 10-Q
for the quarter ended September 30, 2010).
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5
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.1*
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Opinion of Jones, Walker, Waechter, Poitevent,
Carrère & Denègre, L.L.P as to the legality
of the securities being offered.
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5
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.2*
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Opinion of Crowley Fleck PLLP as to the legality of the
securities being offered (Montana law).
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12
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.1*
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Calculation of Ratio of Earnings to Fixed Charges.
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21
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.1*
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Subsidiaries of PHI, Inc.
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23
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.1*
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Consent of Jones, Walker, Waechter, Poitevent,
Carrère & Denègre, L.L.P (included in its
opinion filed as Exhibit 5.1 hereto).
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23
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.2*
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Consent of Crowley Fleck PLLP (included in its opinion filed as
Exhibit 5.2 hereto).
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23
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.3*
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Consent of Deloitte & Touche LLP
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24
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.1*
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Power of attorney (included on signature pages).
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25
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.1*
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Form T-1
Statement of Eligibility under the Trust Indenture Act of
1939 of The Bank of New York Mellon Trust Company, N.A.
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99
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.1*
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Form of Letter of Transmittal.
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99
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.2*
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Form of Letter to Brokers.
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99
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.3*
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Form of Letter to Clients.
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(b) The information required by this item is incorporated
by reference to Item 15
Form 10-K
for the period ended December 31, 2010.
The undersigned registrants hereby undertake:
(a) (1) To file, during any period in which offers or
sales are being made, a post-effective amendment to this
registration statement:
(A) To include any prospectus required by
Section 10(a)(3) of the Securities Act;
(B) To reflect in the prospectus any facts or events
arising after the effective date of the registration statement
(or the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental change
in the information set forth in the registration statement.
Notwithstanding the foregoing, any increase or decrease in
volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered)
and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if,
in the aggregate, the changes in volume and price represent no
more than a 20 percent change in the maximum aggregate
offering price set forth in the Calculation of
Registration Fee table in the registration
statement; and
(C) To include any material information with respect to the
plan of distribution not previously disclosed in the
registration statement or any material change to such
information in the registration statement.
II-2
(2) That, for the purpose of determining any liability
under the Securities Act, each such post-effective amendment
shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a
post-effective amendment any of the securities being registered
which remain unsold at the termination of the offering.
(4) That, for purposes of determining liability under the
Securities Act to any purchaser, each prospectus filed pursuant
to Rule 424(b) as part of the registration statement
relating to an offering, other than registration statements
relying on Rule 430B or other than prospectuses filed in
reliance on Rule 430A, shall be deemed to be part of and
included in the registration statement as of the date it is
first used after effectiveness. Provided, however, that no
statement made in a registration statement or prospectus that is
part of the registration statement or made in a document
incorporated or deemed incorporated by reference into the
registration statement or prospectus that is part of the
registration statement will, as to a purchaser with a time of
contract of sale prior to such first use, supersede or modify
any statement that was made in the registration statement or
prospectus that was part of the registration statement or made
in any such document immediately prior to such date of first use.
(5) That, for the purpose of determining liability of the
registrant under the Securities Act to any purchaser in the
initial distribution of the securities:
The undersigned registrants undertake that in a primary offering
of securities of the undersigned registrants pursuant to this
registration statement, regardless of the underwriting method
used to sell the securities to the purchaser, if the securities
are offered or sold to such purchaser by means of any of the
following communications, the undersigned registrant will be a
seller to the purchaser and will be considered to offer or sell
such securities to such purchaser:
(i) Any preliminary prospectus or prospectus of the
undersigned registrant relating to the offering required to be
filed pursuant to Rule 424;
(ii) Any free writing prospectus relating to the offering
prepared by or on behalf of the undersigned registrant or used
or referred to by the undersigned registrant;
(iii) The portion of any other free writing prospectus
relating to the offering containing material information about
the undersigned registrant or its securities provided by or on
behalf of the undersigned registrant; and
(iv) Any other communication that is an offer in the
offering made by the undersigned registrant to the purchaser.
(b) The undersigned registrants hereby undertake that, for
purposes of determining any liability under the Securities Act,
each filing of PHIs annual report pursuant to
section 13(a) or section 15(d) of the Exchange Act
(and where applicable, each filing of an employee benefit
plans annual report pursuant to section 15(d) of the
Exchange Act) that is incorporated by reference in the
registration statement 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
an initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising
under the Securities Act may be permitted to directors, officers
and controlling persons of the registrants pursuant to the
foregoing provisions, or otherwise, the registrants have 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
registrants 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
II-3
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.
(d) The undersigned registrants hereby undertake to respond
to requests for information that is incorporated by reference
into the prospectus pursuant to Items 4, 10(b), 11, or 13
of this Form, within one business day of receipt of such
request, and to send the incorporated 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.
(e) The undersigned registrants hereby undertake to supply
by means of a post-effective amendment all information
concerning a transaction, and the company being acquired
involved therein, that was not the subject of and included in
the registration statement when it became effective.
II-4
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this registration statement to be
signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Lafayette, State of Louisiana, on
November 29, 2010.
PHI, Inc.
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By:
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/s/ Michael
J. McCann
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Michael J. McCann
Chief Financial Officer and Secretary
Power of
attorney
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Al A. Gonsoulin and
Michael J. McCann and each of them, either of whom may act
without joinder of the other, his true and lawful
attorneys-in-fact and agents, with full power of substitution
and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any or all amendments to this
Registration Statement (including post-effective amendments), to
sign any registration statement filed pursuant to
Rule 462(b) of the Securities Act of 1933, and to file the
same, with all exhibits thereto and other documents in
connection therewith, with the Securities and Exchange
Commission, granting unto such attorneys-in-fact and agents, and
each of them, full power and authority to do and perform each
and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as
he might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents, and each of them, or
the substitute or substitutes of either of them, may lawfully do
or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed below by the following
persons in the capacities and on the dates indicated.
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Signature
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Title
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Date
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/s/ Al
A. Gonsoulin
Al
A. Gonsoulin
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Chairman of the Board,
Chief Executive Officer and Director
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November 29, 2010
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/s/ Lance
F. Bospflug
Lance
F. Bospflug
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Director
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November 29, 2010
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/s/ Arthur
J. Breault, Jr.
Arthur
J. Breault, Jr.
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Director
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November 29, 2010
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/s/ Thomas
H. Murphy
Thomas
H. Murphy
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Director
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November 29, 2010
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/s/ Richard
H. Matzke
Richard
H. Matzke
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Director
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November 29, 2010
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/s/ C.
Russell Luigs
C.
Russell Luigs
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Director
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November 29, 2010
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/s/ Michael
J. McCann
Michael
J. McCann
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Chief Financial Officer and Secretary (Principal Financial and
Accounting Officer)
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November 29, 2010
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S-1
Pursuant to the requirements of the Securities Act of 1933, the
registrants have duly caused this registration statement to be
signed on their behalf by the undersigned, thereunto duly
authorized, in the City of Lafayette, State of Louisiana, on
November 29, 2010.
INTERNATIONAL HELICOPTER TRANSPORT, INC.
PHI TECH SERVICES, INC.
AIR EVAC SERVICES, INC.
PHI AIR MEDICAL, INC.
PETROLEUM HELICOPTERS INTERNATIONAL, INC.
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By:
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/s/ Michael
J. McCann
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Michael J. McCann
Vice President
Power of
attorney
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Al A. Gonsoulin and
Michael J. McCann, and each of them, either of whom may act
without joinder of the other, its true and lawful
attorneys-in-fact and agents, with full power of substitution
and resubstitution, for it and in its name, place and stead, in
any and all capacities, to sign any or all amendments to this
Registration Statement (including post-effective amendments), to
sign any registration statement filed pursuant to
Rule 462(b) of the Securities Act of 1933, and to file the
same, with all exhibits thereto and other documents in
connection therewith, with the Securities and Exchange
Commission, granting unto such attorneys-in-fact and agents, and
each of them, full power and authority to do and perform each
and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as
he might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents, and each of them, or
the substitute or substitutes of either of them, may lawfully do
or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed below by the following
persons in the capacities and on the dates indicated.
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Signature
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Title
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Date
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/s/ Al
A. Gonsoulin
Al
A. Gonsoulin
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Chief Executive Officer and Director
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November 29, 2010
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/s/ Richard
A. Rovinelli
Richard
A. Rovinelli
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Director
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November 29, 2010
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/s/ Michael
J. McCann
Michael
J. McCann
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Vice President and Director
(Principal Financial and Accounting Officer)
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November 29, 2010
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S-2
Pursuant to the requirements of the Securities Act of 1933, the
registrants have duly caused this registration statement to be
signed on their behalf by the undersigned, thereunto duly
authorized, in the City of Lafayette, State of Louisiana, on
November 29, 2010.
HELICOPTER MANAGEMENT, L.L.C.
HELICOPTER LEASING, L.L.C.
HELEX, L.L.C.
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By:
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/s/ Michael
J. McCann
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Michael J. McCann
Vice President
Power of
attorney
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Al A. Gonsoulin and
Michael J. McCann and each of them, either of whom may act
without joinder of the other, his true and lawful
attorneys-in-fact and agents, with full power of substitution
and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any or all amendments to this
Registration Statement (including post-effective amendments), to
sign any registration statement filed pursuant to
Rule 462(b) of the Securities Act of 1933, and to file the
same, with all exhibits thereto and other documents in
connection therewith, with the Securities and Exchange
Commission, granting unto such attorneys-in-fact and agents, and
each of them, full power and authority to do and perform each
and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as
he might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents, and each of them, or
the substitute or substitutes of either of them, may lawfully do
or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed below by the following
persons in the capacities and on the dates indicated.
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Signature
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Title
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Date
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/s/ Al
A. Gonsoulin
Al
A. Gonsoulin
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Chairman of the Board,
Chief Executive Officer and
Director of Managing Member
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November 29, 2010
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/s/ Lance
F. Bospflug
Lance
F. Bospflug
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Director of Managing Member
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November 29, 2010
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/s/ Arthur
J. Breault, Jr.
Arthur
J. Breault, Jr.
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Director of Managing Member
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November 29, 2010
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/s/ Thomas
H. Murphy
Thomas
H. Murphy
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Director of Managing Member
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November 29, 2010
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/s/ Richard
H. Matzke
Richard
H. Matzke
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Director of Managing Member
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November 29, 2010
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/s/ C.
Russell Luigs
C.
Russell Luigs
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Director of Managing Member
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November 29, 2010
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/s/ Michael
J. McCann
Michael
J. McCann
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Chief Financial Officer and Secretary of Managing Member
(Principal Financial and Accounting Officer)
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November 29, 2010
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S-3
Pursuant to the requirements of the Securities Act of 1933, the
registrants have duly caused this registration statement to be
signed on their behalf by the undersigned, thereunto duly
authorized, in the City of Lafayette, State of Louisiana, on
November 29, 2010.
SKY LEASING, L.L.C.
VERTILEASE, L.L.C.
LEASING SOURCE, L.L.C.
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By:
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/s/ Michael
J. McCann
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Michael J. McCann
Vice President
Power of
attorney
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Al A. Gonsoulin and
Michael J. McCann and each of them, either of whom may act
without joinder of the other, his true and lawful
attorneys-in-fact and agents, with full power of substitution
and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any or all amendments to this
Registration Statement (including post-effective amendments), to
sign any registration statement filed pursuant to
Rule 462(b) of the Securities Act of 1933, and to file the
same, with all exhibits thereto and other documents in
connection therewith, with the Securities and Exchange
Commission, granting unto such attorneys-in-fact and agents, and
each of them, full power and authority to do and perform each
and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as
he might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents, and each of them, or
the substitute or substitutes of either of them, may lawfully do
or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed below by the following
persons in the capacities and on the dates indicated.
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Signature
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Title
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Date
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/s/ Gary
Weber
Gary
Weber
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Manager
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November 29, 2010
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S-4
EXHIBIT INDEX
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Exhibit
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Number
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Description of Exhibit
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5
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.1
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Opinion of Jones, Walker, Waechter, Poitevent,
Carrère & Denègre L.L.P. as to the legality
of the securities being offered.
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5
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.2
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Opinion of Crowley Fleck PLLP as to the legality of the
securities being offered (Montana law).
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12
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.1
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Calculation of Ratio of Earnings to Fixed Charges.
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21
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.1
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Subsidiaries of PHI, Inc.
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23
|
.1
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Consent of Jones, Walker, Waechter, Poitevent,
Carrère & Denègre L.L.P. (included in its
opinion filed as Exhibit 5.1 hereto).
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23
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.2
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Consent of Crowley Fleck PLLP (included in its opinion filed as
Exhibit 5.2 hereto).
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23
|
.3
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Consent of Deloitte & Touche LLP
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24
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.1
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Power of attorney (included on signature pages).
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25
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.1
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Form T-1
Statement of Eligibility under the Trust Indenture Act of
1939 of The Bank of New York Mellon Trust Company, N.A.
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99
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.1
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Form of Letter of Transmittal.
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99
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.2
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Form of Letter to Brokers.
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99
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.3
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Form of Letter to Clients.
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