<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
(Mark One)
|X| ANNUAL REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1998
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______________ to ___________________
Commission file number 0-28428
-------
AirNet Systems, Inc.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Ohio 31-1458309
- --------------------------------------------------------------------------------
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
3939 International Gateway 43219
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 614-237-9777
------------
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
------------------- -----------------------------------------
Common Shares, $.01 par value New York Stock Exchange
(11,383,409 outstanding
at March 22, 1999)
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes |X| No|_|
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. |_|
The aggregate market value of voting stock held by non-affiliates of the
Registrant at March 22, 1999 was $55,316,000.
<PAGE>
Documents Incorporated by Reference:
(1) Portions of the Registrant's Annual Report to Shareholders for the
fiscal year ended December 31, 1998 are incorporated by reference
into Parts I and II of this Annual Report on Form 10-K.
(2) Portions of the Registrant's definitive Proxy Statement for its
Annual Meeting of Shareholders to be held on May 14, 1999, are
incorporated by reference into Part III of this Annual Report on
Form 10-K.
2
<PAGE>
PART I
ITEM 1 - BUSINESS
Overview of AirNet's business
AirNet Express(SM), the integrated national air transportation network of AirNet
Systems, Inc., operates between 100 cities in more than 40 states and delivers
over 18,000 time-critical shipments each working day. AirNet's check delivery
service, which generates approximately 82% of AirNet's revenues, is the leading
transporter of canceled checks and related information for the U.S. banking
industry, meeting more that 2,200 daily deadlines. AirNet's express service,
which generates approximately 17% of AirNet's revenues, provides specialized,
high priority delivery service for customers requiring late pick-ups and early
deliveries combined with prompt, on-line delivery information. AirNet's fixed
base operations, which account for approximately 1% of AirNet's revenues, also
offer retail aviation fuel sales and related ground services for customers in
Columbus, Ohio.
During 1998, AirNet acquired Mercury Business Services, Inc., an express
delivery management service located in Boston and specializing in providing
transportation services to the legal community, for 117,647 AirNet common shares
and $2.0 million cash. During 1998, AirNet also merged three subsidiaries, Data
Air Courier, Inc., Express Convenience Centers, Inc. and Pacific Air Charter,
Inc., into AirNet Systems, Inc.
AirNet currently operates a fleet of 119 aircraft (30 Learjets and 89 light twin
engine aircraft), which fly approximately 108,000 miles per operating night,
primarily Monday through Thursday. AirNet also provides ground pick-up and
delivery services throughout the nation seven days per week, using a fleet of
approximately 250 company-owned ground vehicles as well as a ground
transportation network of approximately 300 independent contractors. AirNet uses
its air and ground network to support its banking industry customers, as well as
its express delivery customers. AirNet also uses commercial airlines to provide
SameDay delivery service for some of its banking and small package customers.
Later pick-ups and earlier deliveries than those offered by other national
carriers are the differentiating characteristics of AirNet's time-critical
delivery network. AirNet has consistently achieved on-time performance levels
exceeding 97%. In order to maintain this performance, AirNet uses a number of
proprietary customer service and management information systems to track, sort,
dispatch and control the flow of checks and small packages throughout AirNet's
delivery system. Delivery times and selected shipment information are available
on-line and through the Internet.
Based on studies compiled by third parties, AirNet believes that the current
market for express deliveries (defined as SameDay and overnight shipments with
delivery by 8 am) is approximately $2.0 billion and is expected to grow to $3.5
billion by 2001. AirNet intends to target key industries within this growing
market, such the medical, legal and entertainment industries. AirNet believes
that its flexible and reliable air transportation network and its demonstrated
expertise in providing time-critical deliveries to the banking industry for over
25 years position AirNet to provide these additional services at premium prices.
AirNet Systems, Inc. was incorporated under the laws of the State of Ohio on
February 15, 1996. AirNet's principal executive offices are located at 3939
International Gateway, Columbus, Ohio 43219 and its telephone number is (614)
237-9777.
3
<PAGE>
Business strategy
The principal components of AirNet's operating and growth strategy are as
follows:
Grow AirNet's express delivery service. AirNet delivers packages on a SameDay /
SameNight basis for its express delivery customers, using its air transportation
system and the commercial airline system. AirNet believes that it offers a more
flexible pick-up and delivery schedule than those offered by other national and
regional carriers and appeals to customers with time-sensitive delivery
requirements. AirNet realigned its sales force in 1998 to better target the
larger, regional users of time-critical transportation and to provide industry
specialization in key areas, such as the medical and entertainment fields.
AirNet also believes its air and ground delivery network provides a solid
foundation from which to consolidate the operations of other high-quality ground
couriers and regional air freight operators in the business of addressing time
critical shipment needs. The fragmented nature of the air and ground package
delivery industry, outside of the major national carriers, provides such
opportunities.
Focus on unique aircraft type and route structure. AirNet's fast and reliable
fleet of aircraft is positioned around a highly efficient and flexible national
route structure designed to facilitate late pick-up and early delivery times,
minimize delays and simplify flight scheduling. AirNet's hub-and-spoke system,
with a primary hub in Columbus and several mini-hubs across the nation, allows
AirNet to match the varying load capacities of its aircraft with the shipment
weight and volume of each destination city and to consolidate shipments at its
hubs. The hubs are located primarily in less congested regional airports. These
locations, in conjunction with AirNet's off-peak departure and arrival times,
provide easy take-offs and landings, convenient loading and unloading, and fast
refueling and maintenance. Six strategically located maintenance bases help
minimize aircraft down time. AirNet's focus on Learjets and light twin engine
aircraft has also enabled it to develop an in-house expertise in purchasing,
flying, maintaining and operating its fleet.
Attract, retain and motivate the highest quality personnel available. As a
service organization, AirNet recognizes the importance of hiring, retaining and
motivating the highest quality personnel available who are focused on a set of
core values designed by AirNet to provide a working environment where
accountability, integrity, quality performance, open communication, team
management and responsibility are explicitly stated goals. AirNet provides its
associates with competitive compensation and benefits packages, including a
company-wide stock option program. AirNet believes that its compensation and
benefit package and corporate culture will give it a significant competitive
advantage in attracting and motivating its associates.
Ground operations
Shipments are typically picked-up by AirNet couriers and delivered to the
originating airport where shipments are loaded into aircraft by AirNet ground
crews. Upon arrival at the main hub in Columbus, Ohio, packages are off-loaded,
fine sorted by destination and reloaded onto the aircraft. During the thirty to
forty minute sort period, the aircraft is refueled by AirNet ground support
personnel. Fueling operations include trained fuelers and ground support
equipment, including six fuel trucks and approximately 86,500 gallons of fuel
storage capacity.
AirNet operates a fleet of approximately 250 ground transportation vehicles, all
of which it owns. AirNet uses a computerized system for monitoring vehicle
maintenance and conducts in-house training sessions throughout the year to
maximize safety. Vehicles range in size from passenger cars to full-size vans,
depending on the market being served. In addition, where appropriate, AirNet
uses approximately 300 independent contractors to further augment its ground
delivery network.
4
<PAGE>
Flight operations
AirNet's flight operations are headquartered in Columbus. AirNet hires licensed
pilots meeting specified experience requirements. All new pilots attend a
company-run, two-week training program. This flight school includes training on
AirNet's flight simulator prior to any actual flight time. Additionally, new
pilots typically apprentice as co-pilots in order to gain a familiarity with
AirNet's route system and the unique demands of night flying.
AirNet's central dispatch system ties together all components of the air
operation. Departure and arrival times are continuously updated, and weather
conditions throughout the nation are constantly monitored. AirNet dispatchers
remain in constant contact with pilots, outbased hub managers, fuelers,
maintenance and ground delivery personnel to ensure that no gaps exist in the
delivery process. AirNet also uses commercial airlines, primarily to transport
shipments during the day when its aircraft typically do not operate. Operations
personnel utilize FlightTrax, a computerized flight tracking system that allows
them to track the status of every commercial flight in the country and schedule
ground pick-up and delivery personnel appropriately.
Aircraft fleet
AirNet owns and operates a fleet of 119 aircraft. AirNet's fleet was comprised
of the following aircraft at December 31, 1998:
Maximum Maximum Maximum
Payload (1) Range (2) Speed (3)
Aircraft Type Number (lbs.) (n. miles) (knots)
- ------------- ------ ------ ---------- -------
Learjets, Model 35/35A 26 4,200 2,000 440
Learjets, Model 25 4 3,500 1,000 440
Piper Navajo Chieftain 18 1,500 800 175
Piper Aerostar 13 1,000 900 190
Beech Baron 42 1,000 700 180
Cessna 310 16 900 600 170
- ----------
(1) Maximum payload in pounds for a one-hour flight plus required fuel
reserves.
(2) Maximum range in nautical miles, assuming zero wind, full fuel and full
payload.
(3) Maximum speed in knots, assuming full payload.
The Learjet is among the most reliable, fastest and most fuel efficient small
jet aircraft available in the world. The Learjet 35 meets all Stage Three noise
requirements currently being implemented across the country. The Learjet 25 is a
smaller aircraft with slightly smaller payload and range capabilities. AirNet
intends to either equip these aircraft with approved hush kits, allowing them to
continue operations in most airports or phase-out the Learjet 25's from
scheduled operations and replace them with the more efficient Learjet 35 or
other Stage Three aircraft.
AirNet's Learjet fleet provides it with nationwide connectivity. Long lane
segments from all corners of the nation converge on AirNet's hub in Columbus, as
well as "mini-hubs" located in Atlanta, Chicago,
5
<PAGE>
Charlotte, Dallas, Denver, Des Moines, and New York. Smaller, light twin engine
aircraft provide service to the various "spoke" cities in AirNet's network,
which include virtually all of the nation's large metropolitan areas.
AirNet acquires and operates pre-owned aircraft, typically between 15 and 20
years old. These aircraft are reasonably priced and are relatively modern, as
they have undergone no significant design changes in the last 20 years. Further,
when appropriately maintained (AirNet performs its own major inspections and
overhauls on its aircraft fleet), these aircraft show little or no evidence of
erosion in performance.
Aircraft maintenance is also headquartered in Columbus. This facility operates
24 hours a day, 365 days a year. AirNet employs over 70 experienced aircraft and
avionics technicians in six separate locations across the country (Columbus,
Dallas, Denver, Hartford, Minneapolis and San Diego), performing all levels of
maintenance from 100-hour inspections on its light twin engine aircraft to
7,200-hour/12-year inspections on its fleet of Learjets. A seventh location was
added in New Orleans in the first quarter of 1999. AirNet has an in-house engine
shop where some of the piston engines can be overhauled on-site, thereby
reducing aircraft downtime and controlling costs. Avionics trouble-shooting and
repair, done internally by AirNet since 1989, provide for maximum efficiency and
minimum aircraft downtime for its entire fleet.
Delivery services
A typical shipment is picked up from the sending bank or an express customer by
an AirNet courier. Canceled check shipments are pre-sorted by bank personnel and
bundled as to final destination using AirNet-supplied, color-coded bags. Express
shipments are packaged in either AirNet-provided packaging or the customers'
packaging. The shipment is then transported to the local airport where it enters
AirNet's air transportation system and is scanned via bar code technology, which
reads information pertaining to the shipper, receiver, airbill number and
applicable deadline. This data is then downloaded into AirNet's ComCheck or
AirNet Connect computer systems, where it is available to AirNet's customer
service representatives ("CSRs").
Upon arrival at AirNet's Columbus hub or one of its mini-hubs, the shipment is
off-loaded, sorted by destination and reloaded onto company aircraft. At the
destination city, the shipment is off-loaded for the final time and delivered by
company courier to the receiver. When delivered, the shipment is once again
scanned and downloaded into AirNet's computer system. Delivery information for
all shipments is then available on-line to the customers and all CSRs. AirNet's
customer service department is available to handle any inquiries, discrepancies
or supply requests, as well as provide proof of delivery documentation, all of
which are value-added features of AirNet's service.
AirNet provides delivery service for three sets of banking deadlines and
customized express deadlines designed around customer needs. Basic deadlines,
which have a 9:30 p.m. - 10:00 p.m. hub time in Columbus, provide delivery
service between 12:01 a.m. and 2:00 a.m. to approximately the northeastern third
of the nation. Premium deadlines, which have an 11:00 p.m. - 11:30 p.m. hub time
in Columbus and Charlotte, provide delivery service at approximately 3:00 a.m.
to the eastern half of the nation. Finally, City deadlines, which have a 4:00
a.m. - 5:30 a.m. hub time in Columbus, provide delivery service at approximately
8:00 a.m. to all cities served by the network. AirNet prices these services
based on the tier of service and by the pound on a customer by customer basis.
AirNet's SameDay service provides canceled check delivery services to banking
customers meeting daytime banking deadlines and to other express customers
requiring next-flight-out timing. These shipments are typically picked up by
AirNet couriers and transported via commercial airlines to destination cities,
where AirNet couriers accept the packages and deliver them to the destinations.
6
<PAGE>
Customers
The highly specialized needs of AirNet's customer base combined with AirNet's
performance level over the years have resulted in a high level of customer
retention. This customer retention level, in turn, creates a level of stability
in AirNet's revenue base that allows for product development and continued
dedication of resources to providing the highest possible level of service to
customers. The U. S. banking industry, including commercial banks, savings banks
and Federal Reserve banks, represents AirNet's largest category of customers and
in 1998 accounted for approximately 82% of its revenues. This customer list
represents all 100 of the nation's largest bank holding companies. AirNet's
time-critical canceled check delivery service allows its banking customers to
offer competitive products and pricing. Express delivery customers, which
accounted for 17% of AirNet's 1998 revenues, include industrial and service
corporations, entertainment companies, medical companies, national integrated
carriers and consolidating freight forwarders. Although AirNet maintains a base
of express delivery customers who ship nightly and have a high level of
retention, it is also expanding its services to retail customers who tend to
ship less frequently. No single customer accounted for more than 10% of AirNet's
fiscal 1998 revenues.
Human resources
AirNet believes it has achieved a significant competitive advantage within its
industry through its major commitment to human resources. All levels of AirNet's
management strive to operate within the spirit of AirNet's core values, which
are: (i) Accountability, (ii) Honesty, Integrity, Trust and Respect, (iii)
Quality Performance, (iv) Open and Free Communication, (v) Team Management
Style, and (vi) Remember to Enjoy Life - It is a Gift!
All AirNet personnel are part of the company-wide drug-testing program.
Management believes this program, which goes beyond the requirements of AirNet's
regulators, helps to ensure the highest possible performance levels. The
management training and professional development seminars are periodically held
for, and attended by, all levels of company personnel. AirNet also aggressively
compensates for performance, with excellent performance recognized and rewarded
through incentive-based compensation.
Associates
The chart below summarizes AirNet's workforce at December 31, 1998, 1997 and
1996. AirNet's associates are not represented by any union or covered by any
collective bargaining agreement. AirNet has experienced no work stoppages and
believes that its relationship with associates is good.
As of December 31,
Department 1998 1997 1996
- ---------- ---- ---- ----
Management/Administration 249 206 134
Flight 164 179 149
Maintenance 73 73 68
Driver/Courier/Ramp/Sort 724 765 347
----- ----- -----
Total 1,210 1,223 698
7
<PAGE>
Competition
The air and ground courier industry is highly competitive. AirNet's primary
competitor in the transportation of cancelled checks is the Federal Reserve's
Interdistrict Transportation System ("ITS"). The actions of the Federal Reserve
are regulated by the Monetary Control Act, which requires the Federal Reserve to
price its services at actual cost plus a private sector adjustment factor.
AirNet believes that the purpose of the Monetary Control Act is to curtail the
possibility of predatory pricing by the Federal Reserve when it competes with
the private sector. No assurance beyond the remedies of law can be given that
the Federal Reserve will comply with the Monetary Control Act.
In the private sector, there are a large number of smaller, regional carriers
that transport canceled checks, none with a significant interstate market share.
The two largest private sector air couriers, Federal Express Corporation
("FedEx") and United Parcel Service ("UPS"), both carry canceled checks where
the deadlines being pursued fit into their existing system, but this has not
represented a significant market share of this industry market to date. AirNet
provides customized service for its customer base, often with later pick-ups and
earlier deliveries than the large, national couriers. Both FedEx and UPS utilize
AirNet's transportation network for certain situations where they require
customized service.
AirNet competes with commercial airlines and numerous other carriers in its
express delivery business. AirNet estimates its market share in this industry at
less than 1%. AirNet believes that this market represents a significant
expansion opportunity. AirNet is also expanding its presence in the SameDay
industry. AirNet believes that there are a large number of competitors in this
industry. To the extent AirNet elects to increase its presence in the SameDay
industry, it will compete against these companies. AirNet will emphasize its
information technology, competitive pricing and historically high on-time
performance levels to compete in this market.
Regulation
AirNet is regulated under Part 135 of the Federal Aviation Regulations by the
Federal Aviation Administration. In connection with the operation of its
vehicles and aircraft, AirNet is subject to regulation by the U. S. Department
of Transportation with respect to the handling of hazardous materials. AirNet
holds nationwide general commodities authority from the Interstate Commerce
Commission to operate as a common carrier on an interstate basis within the
contiguous 48 states. AirNet's delivery operations are subject to various state
and local regulations, and in many instances, require permits and licenses from
state authorities.
AirNet believes that it has all permits, approvals and licenses required to
conduct its operations and that it is in compliance with applicable regulatory
requirements relating to its operations. AirNet's failure to comply with the
applicable regulations could result in substantial fines or possible revocation
of one or more of AirNet's operating permits.
Environmental matters
AirNet believes that compliance with environmental matters has not had, and is
not expected to have, a material effect on operations. Although AirNet believes
that it is in compliance with all applicable noise level regulations and is
working proactively with various local governments to minimize noise issues,
future noise pollution regulations could require the replacement of several of
AirNet's aircraft.
8
<PAGE>
ITEM 2 - PROPERTIES
In October 1997, AirNet purchased its corporate and operational headquarters at
3939 International Gateway in Columbus, Ohio for $4.1 million from Mr. Mercer,
which represented fair market value as determined by an independent appraisal
performed by Kohr Royer Griffith, Inc. In addition, in March, 1998, AirNet
purchased a fuel farm, located on Port Authority of Columbus land, from Mr.
Mercer for $100,000. In conjunction with the purchases, AirNet assumed Mr.
Mercer's 25-year land lease with the Port Authority, which expires on December
31, 2009 and contains a 20 year renewal option. The complex has 80,000 square
feet, of which AirNet utilizes 70,000 square feet. The remainder is subleased to
unrelated third parties. AirNet's headquarters is currently used for operations,
aircraft maintenance, vehicle maintenance, general and administrative functions,
and training.
AirNet leases additional space at 4700 East Fifth Avenue, also located on
Columbus International Airport grounds. The space is used for administrative
support personnel. AirNet operates at approximately 50 additional locations
throughout the country. These locations, which are leased from unrelated third
parties, generally include office space and/or a section of the lessor's hangar
or ramp.
For additional information concerning AirNet's leases, see Note 7 to AirNet's
Consolidated Financial Statements on page 33 of AirNet's Annual Report to
Shareholders for the fiscal year ended December 31, 1998.
ITEM 3 - LEGAL PROCEEDINGS
On January 29, 1999, AirNet agreed to settle a lawsuit filed by Q International
Courier, Inc. and its shareholders (collectively, "Quick") in connection with
the termination of the agreement to acquire Quick. Quick had filed an action on
August 28, 1998 in the United States District Court for the Southern District of
New York (Case No. 98 CIV. 6129) alleging misappropriation of trade secrets and
confidential information and breach of the acquisition agreement between the
parties. Quick sought injunctive relief, monetary relief and punitive damages.
Air Net filed motions to dismiss all of the claims which were pending when the
parties settled the action. Under the terms of the settlement, neither AirNet
nor Quick admitted any wrongdoing or liability regarding the claims. AirNet
recorded a $3.2 million charge as of December 31, 1998 for settlement costs and
related litigation fees incurred.
There are no other pending legal proceedings involving AirNet other than routine
litigation incidental to its business. In the opinion of AirNet's management,
such proceedings should not, individually or in the aggregate, have a material
adverse effect on AirNet's results of operations or financial condition.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of 1998.
Executive officers of the registrant
The following table identifies the current executive officers of AirNet Systems,
Inc. as of March 22, 1999. The executive officers serve at the pleasure of the
Board of Directors.
9
<PAGE>
Name Age Positions
- ---- --- -------------------------------------------
Gerald G. Mercer 51 Chairman of the Board, President and
Chief Executive Officer
William R. Sumser 43 Acting Chief Financial Officer, Vice
President, Finance, Controller and Secretary
Donald D. Strench 42 Vice President, Corporate Development
Glenn M. Miller 52 Vice President, Operations
Guy S. King 46 Vice President, Express Sales
Kendall W. Wright 51 Vice President, Bank Sales
Jeffrey B. Harris 39 Vice President, Bank Sales
Gerald G. Mercer has served as Chairman of the Board, President and Chief
Executive Officer of AirNet since founding the company in 1974. He won Ohio's
"Entrepreneur of the Year" Award in 1996 and has been a member of the Young
Presidents' Organization since 1986. Mr. Mercer has been a guest speaker at
several major universities throughout the country.
William R. Sumser has served AirNet as the Acting Chief Financial Officer since
January 1, 1999, as the Vice President, Finance and Secretary since March 1996,
as Controller since 1988 and as Assistant Vice President from 1988 through March
1996.
Donald D. Strench has served AirNet as Vice President, Corporate Development
since April 1996. Prior to joining AirNet, Mr. Strench served in various
positions for American Airlines, Inc. between September 1986 and March 1996,
including Vice President, Corporate Development (American Eagle).
Glenn M. Miller has served as Vice President, Operations for AirNet since 1975.
Guy S. King has served as Vice President, Express Sales for AirNet since 1989.
Prior to 1989, Mr. King served AirNet in numerous functions dating back to 1976,
including dispatcher and pilot, before eventually founding AirNet's express
delivery division in 1984. Mr. King has served on the Board of Directors of the
Air Courier Conference of America since 1993.
Kendall W. Wright has served as Vice President, Bank Sales for AirNet since
1988.
Jeffrey B. Harris has served AirNet as Vice President, Bank Sales since October,
1997. Prior to joining AirNet in June 1996 as the West Coast Manager for Banking
Sales, Mr. Harris served as Vice President and Senior Transit Product Manager
for Mellon Bank from 1994 to 1996 and as Vice President for Nations Bank from
1992 to 1994.
PART II
ITEM 5 - MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The information called for in this Item 5 is incorporated herein by reference to
page 23 of AirNet's Annual Report to Shareholders for the fiscal year ended
December 31, 1998.
10
<PAGE>
ITEM 6 - SELECTED FINANCIAL DATA
The information called for in this Item 6 is incorporated herein by reference to
page 17 of AirNet's Annual Report to Shareholders for the fiscal year ended
December 31, 1998.
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION
The information called for in this Item 7 is incorporated herein by reference to
pages 18 through 23 of AirNet's Annual Report to Shareholders for the fiscal
year ended December 31, 1998.
ITEM 7A - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
No response required.
11
<PAGE>
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Consolidated Balance Sheets of AirNet and its subsidiaries as of December
31, 1998 and 1997, the related Consolidated Statements of Operations, of Cash
Flows and of Changes in Shareholders' Equity for each of the fiscal years ended
December 31, 1998 and 1997 and September 30, 1996 and the three months ended
December 31, 1996, the related Notes to the Consolidated Financial Statements
and the Report of Independent Auditors, appearing on pages 24 through 36 of
AirNet's Annual Report to Shareholders for the fiscal year ended December 31,
1998, are incorporated herein by reference. Quarterly financial data set forth
on page 21 of AirNet's Annual Report to Shareholders for the fiscal year ended
December 31, 1998, are also incorporated herein by reference.
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Board of directors
The Information called for in this Item 10 is incorporated herein by reference
to AirNet's definitive Proxy Statement relating to the Annual Meeting of
Shareholders to be held on May 14, 1999, under the captions "ELECTION OF
DIRECTORS" and "SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE". In
addition, information concerning AirNet's executive officers is included in the
portion of Part I of this Annual Report on Form 10-K entitled "Executive
officers of the registrant".
ITEM 11 - EXECUTIVE COMPENSATION
The information called for in this Item 11 is incorporate herein by reference to
AirNet's definitive Proxy Statement relating to the Annual Meeting of
Shareholders to be held on May 14, 1999, under the caption "ELECTION OF
DIRECTORS - Compensation of Directors", "EXECUTIVE COMPENSATION" and
"COMPENSATION COMMITTEE INTERNLOCKS AND INSIDER PARTICIPATION". Neither the
report on executive compensation nor the performance graph included in AirNet's
definitive Proxy Statement shall be deemed to be incorporated herein by
reference.
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information called for in this Item 12 is incorporated herein by reference
to AirNet's definitive Proxy Statement relating to the Annual Meeting of
Shareholders to be held on May 14, 1999, under the caption "BENEFICIAL OWNERSHIP
OF COMMON SHARES".
12
<PAGE>
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information called for in this Item 13 is incorporated herein by reference
to AirNet's definitive Proxy Statement relating to the Annual Meeting of
Shareholders to be held on May 14, 1999, under the caption "EXECUTIVE
COMPENSATION - Transaction with Management".
PART IV
ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) Documents filed as part of this report
1. For a list of all financial statements incorporated by reference in
this Annual Report on Form 10-K, see "Index to Financial Statements
and Financial Statement Schedules" at page 15.
2. Schedule II - Valuation and Qualifying Accounts. . . . . . page 16
Schedules not listed above have been omitted because they are not
required or the information required to be set forth therein is
included in the Consolidated Financial Statements or Notes thereto.
3. Exhibits
Exhibits filed with this Annual Report on Form 10-K are attached
hereto. For a list of such exhibits, see "Index to Exhibits"
beginning at page E-1. The following table provides certain
information concerning executive compensation plans and arrangements
required to be filed as exhibits to this Annual Report on Form 10-K.
13
<PAGE>
Executive Compensation Plans and Arrangements
<TABLE>
<CAPTION>
Exhibit No. Description Location
- ----------- ----------- --------
<S> <C> <C>
10.1 AirNet Systems, Inc. Amended and Restated 1996 Incorporated herein by reference to Exhibit 10 to
Incentive Stock Plan (reflects amendments through AirNet's September 30, 1998 Form 10-Q (File No.
November 9, 1998) 0-28428)
10.2 Confidential Agreement, dated August 6, 1998, Filed herewith
between AirNet Systems, Inc. and Donald D. Strench
10.3 Agreement, dated as of January 1, 1999, between Filed herewith
AirNet systems, Inc. and Eric P. Roy
</TABLE>
(b) Reports on Form 8-K:
No reports on Form 8-K were filed during the quarter ended December 31,
1998.
(c) Exhibits
See Item 14(a) (3) above.
(d) Financial Statement Schedules
The response to this portion of Item 14 is submitted as a separate section
of this Report. See Index to Financial Statements and Financial Data Schedule".
14
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this Report to be signed on its
behalf by the undersigned, thereunto duly authorized.
AIRNET SYSTEMS, INC.
Dated: March 30, 1999 By: /s/ Gerald G. Mercer
------------------------------------
Gerald G. Mercer, Chairman of the Board,
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Gerald G. Mercer Chairman of the Board, President, Chief March 30, 1999
- -------------------------------------- Executive Officer and Director (Principal
Gerald G. Mercer Executive Officer)
*William R. Sumser Acting Chief Financial Officer, Vice March 30, 1999
- -------------------------------------- President, Finance, Controller and Secretary
William R. Sumser
*Roger D. Blackwell Director March 30, 1999
- --------------------------------------
Roger D. Blackwell
*Tony C. Canonie, Jr. Director March 30, 1999
- --------------------------------------
Tony C. Canonie, Jr.
*Russell M. Gertmenian Director March 30, 1999
- --------------------------------------
Russell M. Gertmenian
*J. F. Keeler, Jr. Director March 30, 1999
- --------------------------------------
J. F. Keeler, Jr.
</TABLE>
*By /s/ Gerald G. Mercer
----------------------------------
Gerald G. Mercer
Attorney-in-Fact
15
<PAGE>
INDEX TO FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULES
<TABLE>
<CAPTION>
Pages(s) in Annual Report
Description of financial Statements (all of which are to Shareholders for the
Incorporated by reference in this Annual Report on fiscal year ended
Form 10-K for the fiscal year ended December 31, 1998) December 31, 1998
- ------------------------------------------------------ -----------------
<S> <C>
Report of Independent Auditors........................................................................ Page 24
Consolidated Balance Sheets as of December 31, 1998 and 1997.......................................... Page 25
Consolidated Statements of Operations for the years ended December 31, 1998
and 1997 and September 30, 1996 and the three months ended December 31, 1996 ......................... Page 26
Consolidated Statements of Cash Flows for the years ended December 31, 1998
and 1997 and September 30, 1996 and the three months ended December 31, 1996.......................... Page 27
Consolidated Statements of Changes in Shareholders' Equity for the years ended
December 31, 199 and 1997 and September 30, 1996 and the three months ended
December 31, 1996 .................................................................................... Page 28
Notes to Consolidated Financial Statements................................................ Pages 29 through 36
</TABLE>
16
<PAGE>
Schedule II - Valuation and Qualifying Accounts
AirNet Systems, Inc.
December 31, 1998
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
COL A COL B COL C COL D COL E
---------------------------
Additions
- ---------------------------------------------------------------------------------------------------------------------------
Balance at Charged to Charged to Balance at
Start of Costs and Other End of
Description Period Expenses Accounts Deductions Period
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Year end December 31, 1998:
Deducted from asset accounts;
Allowance for doubtful accounts $ 122,869 150,215 25,000 8,300 (1) $ 289,784
- ---------------------------------------------------------------------------------------------------------------------------
Year end December 31, 1997:
Deducted from asset accounts;
Allowance for doubtful accounts 23,149 83,656 16,064 0 (1) 122,869
- ---------------------------------------------------------------------------------------------------------------------------
Year end September 30, 1996:
Deducted from asset accounts;
Allowance for doubtful accounts 2,000 35,502 -- 23,332 (1) 14,170
- ---------------------------------------------------------------------------------------------------------------------------
Three months ended December 31, 1996:
Deducted from asset accounts;
Allowance for doubtful accounts 14,170 8,979 -- -- 23,149
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
17
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit No. Description Location
- ----------- ----------- --------
<S> <C> <C>
2.1 Leasehold Interest Purchase Agreement Incorporated herein by reference to
dated October 31, 1997 by and between Exhibit 2(a) to AirNet Systems, Inc.'s
Gerald G. Mercer and AirNet Systems, September 30, 1997 Form 10-Q. (File No.
Inc. 0-28428)
2.2 Assignment and Assumption of Leases Incorporated herein by reference to
dated October 31, 1997 by and between Exhibit 2(b) to AirNet Systems, Inc.'s
Gerald G. Mercer and AirNet Systems, September 30, 1997 Form 10-Q. (File No.
Inc. 0-28428)
2.3 Stock Purchase Agreement dated as of Filed herewith
August 10, 1998 among Peter G.
Salisbury, Andrew R. Cooke and AirNet
Systems, Inc.
2.4 Leasehold Interest Purchase Agreement Filed herewith
dated March 31, 1998 by and between JGM
Corp and AirNet Systems, Inc.
3.1 Amended Articles of AirNet Systems, Inc. Incorporated herein by reference to
Exhibit 2.1 to AirNet Systems, Inc.'s
Rregistration Statement on Form 8-A
(File No. 0-28428) filed on May 3, 1996
(the "Form 8-A")
3.2 Certificate of Amendment to the Amended Incorporated herein by reference to
Articles of AirNet Systems, Inc. as Exhibit 4(b) to AirNet Systems, Inc.'s
filed with the Ohio Secretary of State Registration Statement on Form S-8
on May 28, 1996 (Registration No. 333-08189) filed on
July 16, 1996 (the 1996 "Form S-8")
3.3 Amended Articles of AirNet Systems, Inc. Incorporated herein by reference to
(as amended through May 28, 1996) (for Exhibit 4.3 to AirNet Systems, Inc.'s
SEC reporting compliance purposes only - 1996 Form S-8
not filed with the Ohio Secretary of
State)
3.4 Code of Regulations of AirNet Systems, Incorporated herein by reference to
Inc. Exhibit 2.2 to AirNet Systems, Inc.'s
Form 8-A
4 Form of Loan Agreement dated as of Filed herewith
August 1, 1998, among AirNet Systems,
Inc., the Lenders Party thereto and NBD
Bank, as agent
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
10.1 AirNet Systems, Inc. Amended and Incorporated herein by reference to
Restated 1996 Incentive Stock Plan Exhibit 10 to the AirNet Systems, Inc.'s
(reflects amendments through November 9, September 30, 1998 Form 10-Q (File No.
1998) 0-28428).
10.2 Confidential Agreement, dated August 6, Filed herewith
1998, between AirNet Systems, Inc. and
Donald D. Strench
10.3 Agreement, dated as of January 1, 1999, Filed herewith
between AirNet Systems, Inc. and Eric P.
Roy
10.4 Indemnification Agreement dated as of Incorporated herein by reference to
May 15, 1996, among AirNet and Messrs. Exhibit 10.14 to AirNet's Amendment No.
Miller, Renusch, Roy, King, Rutter, 2 to Form S-1 Registration Statement
Sumser and Wright (Registration No. 333-3092) filed on May
24, 1996 ("Amendment No. 2")
10.5 Indemnification Agreement dated as of Incorporated herein by reference to
May 15, 1996 between Mr. Mercer and Exhibit 10.11 to AirNet's Amendment No. 2
AirNet Systems, Inc.
13 AirNet Systems, Inc. Annual Report to Incorporated herein by reference to the
Shareholders for the fiscal year ended financial statements portion of the
December 31, 1998 (not deemed filed, Annual Report on Form 10-K beginning at
except portions thereof which are page 17.
specifically incorporated by reference
into this Annual Report on Form 10-K)
21 Subsidiaries of AirNet Systems, Inc. Filed herewith
23 Consent of Ernst & Young LLP Filed herewith
24 Powers of Attorney Filed herewith
27 Financial Data Schedule Filed herewith
</TABLE>
<PAGE>
EXHIBIT 2.3
[EXECUTION COPY]
STOCK PURCHASE AGREEMENT
dated as of
August 10, 1998
among
PETER G. SALISBURY
ANDREW R. COOKE
(the "Stockholders")
AIRNET SYSTEMS, INC.
("AirNet")
1
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I
PURCHASE AND SALE
SECTION 1.01. Purchase and Sale ..............................................1
1.02. Escrow Shares...................................................1
1.03. Closing.........................................................2
1.04. Post-Closing Adjustment.........................................3
ARTICLE II
REPRESENTATIONS AND WARRANTIES
OF THE STOCKHOLDERS
SECTION 2.01. Corporate Existence and Power...................................4
2.02. Organizational Documents........................................5
2.03. Governmental Authorization......................................5
2.04. Non-Contravention...............................................5
2.05. Capitalization..................................................5
2.06. Subsidiaries....................................................6
2.07. Financial Statements............................................6
2.08. Investment......................................................6
2.09. Absence of Certain Changes......................................7
2.10. No Undisclosed Liabilities......................................9
2.11. Litigation......................................................9
2.12. Taxes ..........................................................9
2.13. ERISA .........................................................10
2.14. Trademarks, Patents and Copyrights.............................12
2.15. Material Contracts.............................................13
2.16. Compliance with Laws...........................................14
2.17. Finders' Fees..................................................14
2.18. Other Information..............................................14
2.19. Environmental Compliance.......................................14
2.20. Intercompany Arrangements......................................15
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF AIRNET
SECTION 3.01. Corporate Existence and Power..................................16
3.02. Organizational Documents.......................................16
3.03. Corporate Authorization........................................16
3.04. Governmental Authorization.....................................16
i
<PAGE>
SECTION 3.05. Non-Contravention..............................................16
3.06. Capitalization.................................................17
3.07. SEC Filings; AirNet Disclosure Documents; Financial
Statements.....................................................17
3.08. Finders' Fees..................................................18
ARTICLE IV
COVENANTS OF THE STOCKHOLDERS
SECTION 4.01. Conduct of the Business of the Company.........................18
4.02. Access to Information; Confidentiality.........................20
4.03. Other Offers...................................................20
4.04. Notices of Certain Events......................................21
4.05. Stockholder Actions............................................21
ARTICLE V
COVENANTS OF AIRNET
SECTION 5.01. Access to Information; Confidentiality.........................22
5.02. Notices of Certain Events......................................22
5.03. Director and Officer Indemnification...........................23
5.04. Rule 144.......................................................23
ARTICLE VI
COVENANTS OF AIRNET,
THE COMPANY AND THE STOCKHOLDERS
SECTION 6.01. Reasonable Efforts.............................................23
6.02. Certain Filings................................................23
6.03. Public Announcements...........................................24
6.04. Tax Matters....................................................24
6.05. Tax Treatment..................................................25
6.06. Employee Benefits..............................................25
ARTICLE VII
CONDITIONS
SECTION 7.01. Conditions to the Obligations of Each Party....................26
7.02. Conditions to the Obligations of AirNet........................26
7.03. Conditions to the Obligations of the Stockholders..............27
ARTICLE VIII
TERMINATION
SECTION 8.01. Termination ...................................................29
8.02. Effect of Termination..........................................29
ii
<PAGE>
ARTICLE IX
SURVIVAL; INDEMNIFICATION
SECTION 9.01. Survival ......................................................30
9.02. Indemnification................................................30
9.03. Procedures.....................................................31
9.04. Exclusive Remedy...............................................31
9.05. Certain Limitations............................................31
ARTICLE X
MISCELLANEOUS
SECTION 10.01. Notices ......................................................32
10.02. Amendments; No Waivers........................................33
10.03. Expenses; Taxes...............................................33
10.04. Headings; Definition..........................................34
10.05. Severability..................................................34
10.06. Entire Agreement..............................................34
10.07. Successors and Assigns........................................34
10.08. Governing Law.................................................34
10.09. Consent to Jurisdiction.......................................34
10.10. Counterparts; Effectiveness...................................35
iii
<PAGE>
INDEX OF DEFINED TERMS
Page
----
401(k) Plan Participants......................................................23
A
Accounting Referee.............................................................4
Affiliate......................................................................5
AirNet.........................................................................1
AirNet 401(k) Plan............................................................23
AirNet Common Shares...........................................................1
AirNet Disclosure Documents...................................................16
AirNet Indemnitee.............................................................27
AirNet Material Adverse Effect................................................14
AirNet Preferred Shares.......................................................15
AirNet Representatives........................................................18
AirNet Securities.............................................................15
B
Balance Sheet..................................................................5
Balance Sheet Date.............................................................5
Benefit Arrangements..........................................................10
C
Cash Portion...................................................................1
CERCLA........................................................................13
Closing Balance Sheet..........................................................3
Closing Date...................................................................2
Common Stock...................................................................1
Company........................................................................1
Company 401(k) Plan...........................................................23
Company Acquisition Proposal..................................................18
Company Material Adverse Effect................................................4
Company Representatives.......................................................20
Company Securities.............................................................5
Cooke..........................................................................1
E
Employee Plans.................................................................9
ERISA..........................................................................9
ERISA Affiliate................................................................9
Escrow Account.................................................................1
Escrow Agent...................................................................1
iv
<PAGE>
Escrow Shares..................................................................1
Exchange Act..................................................................16
H
Hazardous Substance...........................................................13
I
Indemnified Party.............................................................28
Indemnifying Party............................................................28
Intellectual Property Rights..................................................11
L
Loss..........................................................................27
M
Multiemployer Plan.............................................................9
N
Net Worth......................................................................3
Net Worth Deficiency...........................................................3
P
PBGC...........................................................................9
Pension Plans..................................................................9
Purchase Price.................................................................1
R
Release.......................................................................13
Retirement Plans...............................................................9
S
Salisbury......................................................................1
Securities Act.................................................................5
Share Portion..................................................................1
Shares.........................................................................1
Stockholders...................................................................1
Straddle Periods..............................................................22
Subsidiary.................................................................5, 15
T
Tax Returns....................................................................8
Taxes..........................................................................8
v
<PAGE>
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT dated as of August 10, 1998, among PETER G.
SALISBURY ("Salisbury") and ANDREW R. COOKE ("Cooke" and, together with
Salisbury, the "Stockholders"), and AIRNET SYSTEMS, INC., an Ohio corporation
("AirNet").
WHEREAS, the Stockholders are the owners of 600 shares (the "Shares") of
common stock, $1.00 par value (the "Common Stock"), of Mercury Business
Services, Inc., a Massachusetts corporation (the "Company"), constituting 100%
of the issued and outstanding capital stock of the Company;
WHEREAS, AirNet desires to purchase the Shares from the Stockholders, and
the Stockholders desire to sell the Shares to AirNet, upon the terms and subject
to the conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth in this
Agreement, the parties hereto agree as follows:
ARTICLE I
PURCHASE AND SALE
SECTION 1.01. Purchase and Sale. Upon the terms and subject to the
conditions of this Agreement, the Stockholders agree to sell to AirNet, and
AirNet agrees to purchase from the Stockholders, the Shares at the Closing. The
aggregate purchase price for the Shares (as adjusted pursuant hereto, the
"Purchase Price") is (i) $2,000,000 (the "Cash Portion") and (ii) 117,647 common
shares, $.01 par value (the "AirNet Common Shares"), of AirNet (the "Share
Portion"). The allocation of the Purchase Price between the Stockholders shall
be determined according to the percentages set forth on Annex A attached hereto.
The Purchase Price, less the Escrow Shares, shall be delivered to the
Stockholders at the Closing upon delivery of the corresponding certificates
previously evidencing shares of capital stock of the Company.
SECTION 1.02. Escrow Shares. (a) Approximately ten percent (10%) of the
Purchase Price, in the form of 25,499 AirNet Common Shares, shall be set aside
to indemnify AirNet with respect to breaches of the Stockholder's
representations, warranties and covenants contained herein (the "Escrow
Shares"). The Escrow Shares shall be registered in the names of the Stockholders
and deposited in escrow pursuant to Section 1.02(b) hereof.
1
<PAGE>
(b) The parties agree that the Escrow Shares shall be deposited in an
account (the "Escrow Account") with Banc One Trust Company, NA, as escrow agent
(the "Escrow Agent"), to be held and administered in accordance with the terms
and conditions of an Escrow Agreement substantially in the form attached hereto
as Exhibit 1.02, against which Escrow Account AirNet shall be entitled to
recover any Losses which may be suffered by AirNet for which AirNet is entitled
to indemnity pursuant to Section 9.02.
SECTION 1.03. Closing. (a) Subject to the satisfaction or, to the extent
permitted hereunder, waiver of the conditions set forth in Article VII, the
consummation of the transactions contemplated hereby will take place on August
11, 1998 (the "Closing Date"), at the offices of Vorys, Sater, Seymour and Pease
LLP, 52 East Gay Street, Columbus, Ohio, unless another date or place is agreed
to in writing by the Stockholders and AirNet.
(b) At the Closing, the Stockholders shall deliver to AirNet the following
documents and instruments, each in form and substance reasonably satisfactory to
AirNet and its counsel and each dated the Closing Date:
(i) certificates representing 100% of the Shares duly endorsed or
accompanied by stock powers duly endorsed in blank, with any
required transfer stamps affixed thereto;
(ii) Employment Agreements, substantially in the form attached hereto as
Exhibit B-1 and B-2, duly executed by each of the Stockholders; and
(iii) such other documents, instruments and certificates as AirNet or its
counsel may reasonably request.
(c) At the Closing, or, in case of clauses (iii) and (iv) below, as soon
thereafter as reasonably practicable, AirNet shall deliver to the Stockholders:
(i) $1,750,000 in immediately available funds by wire transfer to the
account of Salisbury at a bank in Boston, Massachusetts, the account
number of which Salisbury shall provide by notice to AirNet no later
than two business days prior to the Closing Date;
(ii) $250,000 in immediately available funds by wire transfer to the
account of Cooke at a bank in Boston Massachusetts, the account
number of which Cooke
2
<PAGE>
shall provide by notice to AirNet no later than two business days
prior to the Closing Date;
(iii) a certificate for 80,629 AirNet Common Shares, registered in the
name of Salisbury;
(iv) a certificate for 11,519 AirNet Common Shares registered in the name
of Cooke; and
(v) Employment Agreements, substantially in the form attached hereto as
Exhibit B-1 and B-2, duly executed by AirNet.
(c) At the Closing, or as soon thereafter as reaonably practicable, AirNet
shall deliver to the Escrow Agent:
(i) a certificate for 22,312 Escrow Shares registered in the name of
Salisbury; and
(ii) a certificate for 3,187 Escrow Shares registered in the name of
Cooke.
SECTION 1.04. Post-Closing Adjustment. (a) In the event that the net worth
of the Company (defined as total assets minus total liabilities, excluding (i)
any liabilities relating to Massachusetts income Taxes imposed on the Company
for the period commencing on January 1, 1998 and ending on the Closing Date,
(ii) the effect of the distribution for 1998 federal and state income Taxes
payable by the Stockholders as detailed in Section 6.04 and (iii) a bonus of
$25,000 payable to Cooke by the Company) as of the Closing Date, as reflected on
the Closing Balance Sheet and finally determined pursuant to this Section 1.04
("Net Worth"), is less than $630,000 (the amount of such deficiency being
referred to herein as the "Net Worth Deficiency"), the Purchase Price shall be
reduced on a dollar for dollar basis, and the Stockholders shall be required to
immediately deliver to AirNet an amount in cash and AirNet Common Shares equal
to such Net Worth Deficiency. Such Net Worth Deficiency shall be allocated
between the Stockholders in the same percentage as the allocation of the
Purchase Price set forth on Annex A and shall be paid by each Stockholder in the
same proportion of cash and AirNet Common Shares as the Cash Portion and the
Share Portion comprise the Purchase Price, with the Share Portion thereof being
valued based upon a stock price of $17.00 per AirNet Common Share.
(b) As promptly as practicable, but not later than 30 days, after the
Closing Date unless otherwise agreed by the parties, AirNet will prepare an
unaudited balance sheet of the assets and liabilities of the Company as of the
Closing Date (the "Closing Balance Sheet") and shall deliver the Closing Balance
Sheet to the Stockholders. The
3
<PAGE>
Closing Balance Sheet shall fairly present in all material respects the
financial position of the Company as of the close of business on the Closing
Date in accordance with generally accepted accounting principles applied on a
consistent basis with the Balance Sheet and shall set forth AirNet's calculation
of the Company's Net Worth as of the Closing Date.
(c) In the event that the Stockholders disagree with the calculation of
Net Worth on the Closing Balance Sheet, the Stockholders may, within ten
business days after delivery of the Closing Balance Sheet, deliver a written
notice to AirNet disagreeing with such calculation and setting forth the
Stockholders calculation of the items and/or amounts set forth on the Closing
Balance Sheet. Any such notice of disagreement shall specify those items or
amounts as to which the Stockholders disagree, and the Stockholders shall be
deemed to have agreed with all other items and amounts contained in the Closing
Balance Sheet. During the ten business days following timely delivery of any
notice of disagreement, the parties shall use their best efforts to reach
agreement on the disputed items or amounts. If during such period the parties
are unable to reach agreement, they shall promptly thereafter cause a nationally
recognized accounting firm mutually selected by AirNet and the Stockholders (the
"Accounting Referee") to determine the disputed items or amounts (and only such
items or amounts). The Accounting Referee shall deliver to the parties, as
promptly as practicable, a report setting forth its calculation of the disputed
items or amounts and a calculation of Net Worth based thereon and on the
undisputed items and amounts. Such report and calculation of Net Worth shall be
final and binding upon the parties hereto. The cost of such review and report
shall be borne equally between the Stockholders, on the one hand, and AirNet, on
the other.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
OF THE STOCKHOLDERS
Each Stockholder, severally and not jointly, represents and warrants to
AirNet that:
SECTION 2.01. Corporate Existence and Power. The Company is a corporation
duly organized, validly existing and in good standing under the laws of The
Commonwealth of Massachusetts, and has all requisite corporate powers and all
governmental licenses, authorizations, consents and approvals required to own,
lease and operate its properties and to carry on its business as now conducted
by the Company. The Company is duly qualified or licensed to do business as a
foreign corporation, and is in good standing, in each jurisdiction where the
character of the property owned or leased by it or the nature of its activities
makes such qualification or licensing necessary, except where such failure would
not reasonably be expected to
4
<PAGE>
have a material adverse effect on the business, assets, results of operations or
condition (financial or otherwise) of the Company (a "Company Material Adverse
Effect").
SECTION 2.02. Organizational Documents. The Company has heretofore
delivered to AirNet true and complete copies of the Articles of Organization and
Bylaws of the Company, in each case as currently in effect. The Company is not
in violation of any provision of its Articles of Organization or Bylaws.
SECTION 2.03. Governmental Authorization. The execution, delivery and
performance by the Stockholders of this Agreement and the consummation of the
transactions contemplated by the Agreement by the Stockholders requires no
consent, approval, authorization or permit of, or filing with or notification to
any governmental or regulatory authority.
SECTION 2.04. Non-Contravention. The execution, delivery and performance
by the Stockholders of this Agreement and the consummation by the Stockholders
of the transactions contemplated hereby do not and will not (i) contravene or
conflict with the Articles of Organization or By-laws of the Company; (ii)
contravene or conflict with or constitute a violation of any provision of any
law, rule, regulation, judgment, injunction, order or decree binding upon or
applicable to the Company or any Stockholder; (iii) constitute a default under
or give rise to a right of termination, cancellation or acceleration of any
right or obligation of the Company or to a loss of any benefit to which the
Company is entitled under any provision of any agreement, contract or other
instrument binding upon the Company or any license, franchise, permit or other
similar authorization held by the Company; or (iv) result in the creation or
imposition of any Lien on any asset of the Company.
SECTION 2.05. Capitalization. The authorized capital stock of the Company
consists of 10,000 shares of common stock, $1.00 par value. As of the date
hereof there are, and as of the Closing Date there will be, 600 shares of common
stock outstanding and 400 shares of common stock held in treasury. All
outstanding shares of capital stock of the Company have been, and at the Closing
Date will be, duly authorized and validly issued and are, and at the Closing
Date will be, fully paid and nonassessable. Except as set forth in this Section,
there are, and at the Closing Date will be, outstanding: (i) no shares of
capital stock or other voting securities of the Company, (ii) no securities of
the Company convertible into or exchangeable for shares of capital stock or
voting securities of the Company, and (iii) no options or other rights to
acquire from the Company, and no obligation of the Company to issue, any capital
stock, voting securities or securities convertible into or exchangeable for
capital stock or voting securities of the Company (the items in clauses (i),
(ii) and (iii) being referred to collectively as the "Company Securities").
There are, and at the Closing Date will be, no outstanding obligations of the
Company, to repurchase, redeem or otherwise acquire any Company Securities or
make any material investment in any other Person.
5
<PAGE>
SECTION 2.06. Subsidiaries. The Company has no Subsidiaries and does not
own any capital stock of, any partnership or other ownership interest in, or any
other security issued by, any other corporation, organization, association or
entity. "Subsidiary" means, with respect to the Company, any corporation or
other entity of which securities or other ownership interests to elect a
majority of the board of directors or other other persons performing similar
functions are directly or indirectly owned by the Company. Except as set forth
in Schedule 2.06, the Company has, and at the Closing Date will have, no
Affiliates (other than any executive officer, director or stockholder of the
Company). For purposes of this Agreement, "Affiliate" shall have the meaning set
forth in Rule 405 of Regulation C under the Securities Act of 1933, as amended
(the "Securities Act").
SECTION 2.07. Financial Statements. The unaudited financial statements of
the Company as of December 31, 1997 and 1996 and for the two fiscal years ended
December 31, 1997, and the unaudited financial statements of the Company as of
May 31, 1998 and for the five months ended May 31, 1998 and 1997, which have
previously been provided to AirNet fairly present in all material respects, in
conformity with generally accepted accounting principles applied on a consistent
basis (except as may be indicated in the notes thereto), the financial position
of the Company as of the dates thereof and its results of operations and cash
flows for the periods then ended (subject to normal and recurring year-end
adjustments in the case of any unaudited interim financial statements which were
not, and are not expected, individually or in the aggregate, to be, material in
amount). For purposes of this Agreement, "Balance Sheet" means the balance sheet
of the Company as of December 31, 1997 and "Balance Sheet Date" means December
31, 1997.
2.08. Investment. (a) Each Stockholder is an "accredited investor" as such
term is defined in Section 501 of Regulation D under the Securities Act.
(b) Each Stockholder acknowledges that he has received copies of the
AirNet Disclosure Documents (as defined herein) and a brief description of the
AirNet Common Shares.
(c) Each Stockholder acknowledges that he has had ample opportunity to ask
questions of, and receive answers from, authorized officers of AirNet concerning
the AirNet Common Shares and AirNet.
(d) Neither Stockholder was offered any AirNet Common Shares pursuant to a
general solicitation or general advertising within the meaning of Rule 502(c) of
Regulation D under the Securities Act.
(e) Each Stockholder acknowledges that he will obtain any AirNet Common
Shares to which he may be entitled for investment purposes only, that he will
not take
6
<PAGE>
such AirNet Common Shares with a view to a distribution thereof and that he has
no present intention to distribute or resell such AirNet Common Shares.
(f) Each Stockholder acknowledges that he has no need for liquidity in the
AirNet Common Shares which he shall receive in connection with the transactions
contemplated hereby and understands that there are restrictions on the
subsequent resale or other transfer of such AirNet Common Shares.
(g) Each Stockholder acknowledges that certificates evidencing any of the
AirNet Common Shares delivered pursuant to this Agreement shall, until such time
as the same is no longer required under applicable requirements of the
Securities Act, and the rules and regulations thereunder, contain a legend,
substantially in the form set forth below, restricting transfer under the
Securities Act (in addition to any legend required under applicable state
securities laws):
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED. SUCH SHARES MAY NOT BE
SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT IN ACCORDANCE WITH
THE TERMS THEREOF AND UNLESS REGISTERED WITH THE SECURITIES EXCHANGE
COMMISSION OF THE UNITED STATES AND THE SECURITIES REGULATORY
AUTHORITIES OF CERTAIN STATES OR UNLESS AN EXEMPTION FROM SUCH
REGISTRATION IS AVAILABLE."
SECTION 2.09. Absence of Certain Changes. Since the Balance Sheet Date and
except as disclosed on Schedule 2.09 attached hereto, the Company has conducted
its business only in the ordinary course consistent with past practice and there
has not been:
(a) to the Knowledge of the Stockholders, any event or occurrence
which has had or reasonably could be expected to have a Company Material
Adverse Effect;
(b) any declaration, setting aside or payment of any dividend or
other distribution with respect to any shares of capital stock of any of
the Company, or any repurchase, redemption or other acquisition by the
Company of the Company of any outstanding shares of capital stock or other
securities of, or other ownership interests in, the Company;
(c) any amendment of any material term of any outstanding security
of the Company;
7
<PAGE>
(d) any incurrence, assumption or guarantee by the Company of any
indebtedness for borrowed money, other than in the ordinary course of
business in an aggregate amount not to exceed $10,000;
(e) any creation or assumption by the Company of any Lien on any
asset in excess of $10,000 other than in the ordinary course of business
consistent with past practices;
(f) any making of any loan, advance or capital contribution to or
investment in any Person other than loans, advances or capital
contributions to or investments in the Company made in the ordinary course
of business consistent with past practices;
(g) any transaction or commitment made, or any contract or agreement
entered into, by the Company relating to their respective assets or
business (including the acquisition or disposition of assets in excess of
$10,000) or any relinquishment by the Company of any contract or other
right, in either case, material to the Company, other than transactions
and commitments in the ordinary course of business consistent with past
practice and those contemplated by this Agreement;
(h) any change in any method of accounting or accounting practice by
the Company, except for any such change required by reason of a concurrent
change in generally accepted accounting principles;
(i) any (a) grant of any severance or termination pay to any
director, officer, employee or agent of the Company, (b) entering into of
any employment, deferred compensation or other similar agreement (or any
amendment to any such existing agreement) with any director, officer,
employee or agent of the Company, (c) increase in benefits payable under
any existing severance or termination pay policies or employment
agreements or (d) increase in compensation, bonus or other benefits
payable to directors, officers, employees or agents of the Company, other
than in the ordinary course of business consistent with past practice or,
in the case of employment agreements, as contemplated by Section 7.02(d);
or
(j) any labor dispute, other than routine individual grievances, or
any activity or proceeding by a labor union or representative thereof to
organize any employees of the Company, which employees were not subject to
a collective bargaining agreement at the Balance Sheet Date, or any
lockouts, strikes, slowdowns, work stoppages or threats thereof by or with
respect to such employees.
8
<PAGE>
SECTION 2.10. No Undisclosed Liabilities. Except as and to the extent set
forth on Schedule 2.10 attached hereto, the Company has no liability or
obligation of any nature (whether accrued, contingent, absolute, determined,
determinable or otherwise) and, to the Knowledge of the Stockholders, there is
no existing condition, situation or set of circumstances which could reasonably
be expected to result in such a liability, other than:
(a) liabilities specifically disclosed or provided for in the
Balance Sheet; and
(b) liabilities incurred in the ordinary course of business
consistent with past practice since the Balance Sheet Date.
SECTION 2.11. Litigation. Except as set forth on Schedule 2.11 attached
hereto, there is no claim, action, suit, investigation or proceeding pending
against or, to the knowledge of the Stockholders, threatened against the Company
or any of its properties before any court or arbitrator or any governmental
body, agency or official which, individually or in the aggregate, would
reasonably be likely to result in an uninsured liability in excess of $10,000 or
impair the ability of the Company to consummate the transactions contemplated by
this Agreement, nor, to the Knowledge of the Stockholders, is there any basis
therefor.
SECTION 2.12. Taxes. The Company has timely filed all material returns,
statements, reports and forms (the "Tax Returns") with respect to all federal,
state, local and foreign income, gross income, gross receipts, gains, premium,
sales, use, ad valorem, transfer, franchise, profits, withholding, payroll,
employment, excise, severance, stamp, occupation, license, lease, environmental,
customs, duties, property, windfall profits and all other taxes (including any
interest, penalties or additions to tax with respect thereto, individually, a
"Tax" and, collectively, "Taxes") required to be filed with the appropriate tax
authority through the date hereof, and shall timely file all such material Tax
Returns required to be filed on or before the Closing Date. To the Knowledge of
the Stockholders, such Tax Returns are and will be true, correct and complete in
all material respects. The Company has paid and discharged all material Taxes
due from it, other than such Taxes that are adequately reserved as shown on the
Balance Sheet. Neither the Internal Revenue Service nor any other taxing agency
or authority, domestic or foreign, has asserted, is now asserting or, to the
Knowledge of the Stockholders, is threatening to assert against the Company
deficiency or claim for additional Taxes in excess of $10,000. There are no
unexpired waivers by the Company of any statute of limitations with respect to
Taxes. The accruals and reserves for Taxes reflected in the Balance Sheet are
adequate for the periods covered. The Company has withheld or collected and paid
over to the appropriate governmental authorities or is properly holding for such
payment all material Taxes required by law to be withheld or collected. There
are no Liens for Taxes upon the assets of the Company or any of its
Subsidiaries, other than Liens for current Taxes not yet due and payable.
9
<PAGE>
The Company is, and at all times since June 1, 1987 has been, an S corporation
and/or a qualified subchapter S subsidiary within the meaning of Section
1361(a)(1) of the Code (or the corresponding provisions of preceding law) and is
not subject to the tax imposed on certain built-in gains under Section 1374 of
the Code.
SECTION 2.13. ERISA. (a) Schedule 2.13(a) includes a list identifying each
"employee benefit plan," as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974 ("ERISA"), which (i) is subject to any provision of
ERISA and (ii) is maintained, administered or contributed to by the Company or
any ERISA Affiliate and covers any employee or former employee of the Company or
any of its ERISA Affiliates or under which the Company or any of its ERISA
Affiliates has any liability. Copies of such plans (and, if applicable, related
trust agreements) and all amendments thereto and written interpretations thereof
have been furnished to AirNet together with (x) the three most recent annual
reports (Form 5500 including, if applicable, Schedule B thereto) prepared in
connection with any such plan and (y) the most recent actuarial valuation report
prepared in connection with any such plan. Such plans are referred to
collectively herein as the "Employee Plans". For purposes of this Section,
"ERISA Affiliate" of any Person means any other Person which, together with such
Person, would be treated as a single employer under Section 414 of the Code. The
only Employee Plans which individually or collectively would constitute an
"employee pension benefit plan" as defined in Section 3(2) of ERISA (the
"Pension Plans") are identified as such in the list referred to above. The
Company has provided AirNet with complete age, salary, service and related data
as of December 31, 1997 for employees and former employees of the Company and
any ERISA Affiliate covered under the Pension Plans.
(b) Except as otherwise identified in Schedule 2.13(b), no Employee Plan
constitutes a "multiemployer plan", as defined in Section 3(37) of ERISA (a
"Multiemployer Plan"), and no Employee Plan is maintained in connection with any
trust described in Section 501(c)(9) of the Code. The only Employee Plans that
are subject to Title IV of ERISA (the "Retirement Plans") are identified in the
list of such Plans heretofore provided to AirNet by the Company. As of the
Balance Sheet Date, the fair market value of the assets of each Retirement Plan
(excluding for these purposes any accrued but unpaid contributions) exceeded the
present value of all benefits accrued under such Retirement Plan determined on a
termination basis using the assumptions established by the Pension Benefit
Guaranty Corporation (the "PBGC") as in effect on such date. No "accumulated
funding deficiency," as defined in Section 412 of the Code, has been incurred
with respect to any Pension Plan, whether or not waived. No "reportable event,"
within the meaning of Section 4043 of ERISA, has occurred with respect to any
Retirement Plan for which reportable event the 30-day notice requirement to the
PBGC has not been waived, and no event described in Section 4041, 4042, 4062 or
4063 of ERISA has occurred in connection with any Retirement Plan, other than a
"reportable event." No condition exists and no event has occurred that would
constitute grounds for termination of any Retirement Plan or, with
10
<PAGE>
respect to any Retirement Plan which is a Multiemployer Plan, presents a
material risk of a complete or partial withdrawal under Title IV of ERISA and
the Company and any of its ERISA Affiliates have not incurred any liability in
excess of $25,000 under Title IV of ERISA arising in connection with the
termination of, or complete or partial withdrawal from, any plan covered or
previously covered by Title IV of ERISA. If a "complete withdrawal" by the
Company and all of its ERISA Affiliates were to occur as of the Closing Date
with respect to all Retirement Plans which are Multiemployer Plans, the Company
and any such ERISA Affiliate would not incur any withdrawal liability in excess
of $25,000 under Title IV of ERISA. To the Stockholders' Knowledge, nothing done
or omitted to be done and no transaction or holding of any asset under or in
connection with any Employee Plan has or will make the Company or any officer or
director of the Company subject to any liability under Title I of ERISA or
liable for any tax pursuant to Section 4975 of the Code in excess of $10,000.
(c) Each Employee Plan which is intended to be qualified under Section
401(a) of the Code is so qualified and has been so qualified during the period
from its adoption to date, and each trust forming a part thereof is exempt from
tax pursuant to Section 501(a) of the Code. The Company has furnished to AirNet
copies of the most recent Internal Revenue Service determination letters with
respect to each such Plan. Each Employee Plan has been maintained in substantial
compliance with its terms and with the requirements prescribed by any and all
statutes, orders, rules and regulations, including but not limited to ERISA and
the Code, which are applicable to such Plan. Without limiting the generality of
the preceding sentence, each Employee Plan which is a "group health plan," as
defined in Section 5000(b)(1) of the Code, has been administered in compliance
with the provisions of Section 4980B of the Code and Part 6 of Title I of ERISA.
(d) There is no contract, agreement, plan or arrangement covering any
employee or former employee of the Company or any ERISA Affiliate that,
individually or collectively, could give rise to the payment of any amount that
would not be deductible pursuant to the terms of Sections 162(a)(1) of the Code.
(e) Schedule 2.13(e) sets forth a list of each employment, severance or
other similar contract, arrangement or policy and each plan or arrangement
(written or oral) providing for insurance coverage (including any self-insured
arrangements), workers' compensation, disability benefits, supplemental
unemployment benefits, vacation benefits, retirement benefits or for deferred
compensation, profit-sharing, bonuses, stock options, stock appreciation or
other forms of incentive compensation or post-retirement insurance, compensation
or benefits which (i) is not an Employee Plan, (ii) is entered into, maintained
or contributed to, as the case may be, by the Company or any of its ERISA
Affiliates and (iii) covers any employee or former employee of the Company or
any of its ERISA Affiliates. Such contracts, plans and arrangements as are
described above, copies or descriptions of all of which have been furnished
previously to AirNet are referred to collectively herein as the "Benefit
Arrangements." Each Benefit
11
<PAGE>
Arrangement has been maintained in substantial compliance with its terms and
with the requirements prescribed by any and all statutes, orders, rules and
regulations that are applicable to such Benefit Arrangement.
(f) The excess of the present value of the projected liability in respect
of post-retirement health and medical benefits for retired employees of the
Company and its Affiliates, determined using assumptions that are reasonable in
the aggregate, over the fair market value of any fund, reserve or other assets
segregated for the purpose of satisfying such liability (including for such
purposes any fund established pursuant to Section 401(h) of the Code) does not
in the aggregate exceed $10,000. No condition exists that would prevent the
Company or any of its Affiliates from amending or terminating any Employee Plan
or Benefit Arrangement providing health or medical benefits, including
post-retirement health and medical benefits, in respect of any active employee
or former employee of the Company.
(g) Except as set forth in Schedule 2.13(g), the Company is not a party to
or subject to any union contract or any employment contract or arrangement
providing for annual future compensation of $30,000 or more with any officer,
consultant, director or employee. There are no labor unions voluntarily
recognized or certified to represent any bargaining unit of employees at the
Company. No work stoppage, labor strike or slowdown against the Company is
pending or, to the Stockholders' Knowledge, threatened. The Company is not
involved in or, to the Stockholders' Knowledge, threatened with any labor
dispute or grievance. To the Knowledge of the Stockholders, there is no
organizing effort or representation question at issue with respect to any
employee of the Company.
SECTION 2.14. Trademarks, Patents and Copyrights. (a) Schedule 2.14(a)
sets forth a true and complete list of (i) all patents, patent rights,
trademarks, trademark rights, trade names, copyrights, service marks, trade
secrets, applications for trademarks and for service marks, know-how and other
proprietary rights and information used or held for use in connection with the
business of the Company as currently conducted or as heretofore conducted by the
Company (collectively, "Intellectual Property Rights") and (ii) all licenses,
commitments and other agreements to which the Company is a party providing for
the license of any Intellectual Property Rights to or from any other Person.
(b) Except as set forth on Schedule 2.14(b), the Company owns or possesses
adequate licenses or other rights to use all of the Intellectual Property
Rights; there are no Intellectual Property Rights necessary for use in
connection with the business of the Company as currently conducted or as
heretofore conducted by the Company which are not owned or possessed by the
Company; and the Company is not aware of any assertion or claim challenging the
validity of any of the Intellectual Property Rights; and the conduct of the
business of the Company as currently conducted or as heretofore conducted by the
Company, to the Knowledge of the Stockholders, does not conflict in
12
<PAGE>
any material way with any patent, patent right, license, trademark, trademark
right, trade name, trade name right, service mark or copyright of any third
party. To the Knowledge of the Stockholders, there are no material infringements
of any proprietary rights owned by or licensed by or to the Company.
SECTION 2.15. Material Contracts. (a) Except for agreements, contracts,
plans, leases, arrangements or commitments (in each case, oral or written) set
forth on Schedule 2.15(a), the Company is not a party to or subject to:
(a) any lease providing for annual rental payments of $10,000 or
more;
(b) any contract for the purchase of materials, supplies, goods,
services, equipment or other assets providing for annual payments by the
Company of $10,000 or more;
(c) any sales, distribution or other similar agreement providing for
the sale by the Company of materials, supplies, goods, services, equipment
or other assets that provides for annual payments to the Company of
$10,000 or more;
(d) any partnership, joint venture or other similar contract
arrangement or agreement;
(e) any contract relating to indebtedness for borrowed money or the
deferred purchase price of property (whether incurred, assumed, guaranteed
or secured by any asset), except contracts relating to indebtedness
incurred in the ordinary course of business in an amount not exceeding
$10,000;
(f) any license agreement, franchise agreement or agreement in
respect of similar rights granted to or held by the Company;
(g) any agency, dealer, sales representative or other similar
agreement;
(h) any contract or other document that substantially limits the
ability of the Company to compete in any line of business or with any
Person or in any area or which would so restrict the Company after the
Closing Date; or
(i) any other contract or commitment not made in the ordinary course
of business that involves annual expenditures by, or revenues to, to the
Company in excess of $10,000.
13
<PAGE>
(b) Each agreement, contract, lease, arrangement and commitment disclosed
on Schedule 2.15(a) or required to be disclosed pursuant to this Section is a
valid and binding agreement of the Company and is in full force and effect, and
neither the Company nor, to the Knowledge of the Stockholders, any other party
thereto is in default in any material respect under the terms of any such
agreement, contract, plan, lease arrangement or commitment.
SECTION 2.16. Compliance with Laws. The Company is not in material
violation of, and has not violated in any material respect, any applicable
provisions of any material laws, rules, statutes, ordinances or regulations.
SECTION 2.17. Finders' Fees. No investment banker, broker, finder or other
intermediary has been retained by, or authorized to act on behalf of, any
Stockholder or the Company and entitled to any fee or commission in connection
with the transactions contemplated by this Agreement.
SECTION 2.18. Other Information. The statements contained in the documents
and certificates furnished or to be furnished by the Company or the Stockholders
pursuant to this Agreement and in connection with the transactions contemplated
by this Agreement, when considered in their entirety, do not contain any untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements contained therein not misleading. The financial
projections relating to the Company furnished to AirNet constituted the
Company's best estimate, at the time prepared, of the information purported to
be shown therein, and the Stockholders are not aware of any fact or information
that would lead it to believe that such earnings projections are incorrect or
misleading in any material respect.
SECTION 2.19. Environmental Compliance. Except as set forth on Schedule
2.19:
(a) No written notice, notification, demand, request for information,
citation, summons, complaint or order has been issued or filed, no penalty has
been assessed and no investigation or review is pending, or to the Knowledge of
the Stockholders, threatened by any governmental or other entity, (i) with
respect to any alleged material violation of any law, ordinance, rule,
regulation or order of any governmental entity in connection with the conduct of
the business of the Company and relating to a Hazardous Substance (as
hereinafter defined) or (ii) with respect to any alleged failure to have any
permit, certificate, license, approval, registration or authorization required
in connection with the conduct of the business of the Company relating to a
Hazardous Substance or (iii) with respect to any generation, treatment, storage,
recycling, transportation, disposal or release (including a release as defined
in 42 USC ss. 9601) ("Release") of any toxic, caustic or otherwise hazardous
substance, including
14
<PAGE>
petroleum, its derivatives, by-products and other hydrocarbons ("Hazardous
Substance") used in connection with the business of the Company.
(b)(i) The Company has not, other than as a generator, handled any
Hazardous Substance, on any property now or previously owned or leased by the
Company; (ii) no asbestos is present at any property now or previously owned or
leased by the Company; (iii) there are no underground storage tanks currently in
use or, to the Knowledge of the Company, abandoned by the Company, at any
property now or previously owned or leased by the Company which have been used
to store or have contained a Hazardous Substance, (iv) there has been no Release
of a Hazardous Substance with respect to which the Company may reasonably be
required to perform investigation or remediation, other than routine spills and
leaks which are addressed in the ordinary course of business, at, on or under
any property now or previously owned or leased by the Company and (v) no
Hazardous Substance is present in a reportable or threshold planning quantity,
where such a quantity has been established by statute, ordinance, rule,
regulation or order, at, on or under any property now or previously owned by the
Company.
(c) To the Knowledge of the Stockholders, the Company has not transported
or arranged for the transportation (directly or indirectly) of any Hazardous
Substance to any location which is listed or proposed for listing on the
nationwide priorities list established under the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended ("CERCLA") or on
any similar state list.
(d) To the Knowledge of the Stockholders, no oral or written notification
of a Release of a Hazardous Substance has been filed by or on behalf of the
Company, and no property now or previously owned or leased by the Company is
listed, or to the Knowledge of the Stockholders, proposed for listing, on the
National Priorities List promulgated pursuant to CERCLA.
(e) There are no environmental Liens on any asset of the Company and no
government actions have been taken or are in process which could subject any of
such assets to such Liens.
(f) Except as set forth on Schedule 2.19(f), there have been no material
environmental investigations, studies, audits, tests, reviews or other analyses
conducted by or which are in the possession of the Company in relation to any
property or facility now or previously owned or leased by the Company.
SECTION 2.20. Intercompany Arrangements. Except as set forth on Schedule
2.20, the Company does not own any note, bond, debenture or other indebtedness,
or is otherwise a creditor, of a Stockholder or any Affiliate of the Company.
Since the Balance Sheet Date there has not been any payment by the Company or
any Subsidiary to any Stockholder or any Affiliate of the Company, charge by any
Stockholder or any of Affiliate of the Company to the Company
15
<PAGE>
or other transaction between the Company and any Stockholder or any Affiliate of
the Company, except in any such case in the ordinary course of business of the
Company consistent with past practice and in an aggregate amount not in excess
of $10,000.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF AIRNET
AirNet represents and warrants to the Stockholders that:
SECTION 3.01. Corporate Existence and Power. AirNet is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Ohio, and has all requisite corporate powers and all material governmental
licenses, authorizations, consents and approvals required to own, lease and
operate its properties and to carry on its business as now conducted. AirNet is
duly qualified or licensed to do business as a foreign corporation, and is in
good standing, in each jurisdiction where the character of the property owned or
leased by it or the nature of its activities makes such qualification or
licensing necessary.
SECTION 3.02. Organizational Documents. AirNet has heretofore delivered to
the Company true and complete copies of the articles of incorporation and code
of regulations of AirNet, as currently in effect. AirNet is not in violation of
any provision of its articles of incorporation or code of regulations.
SECTION 3.03. Corporate Authorization. The execution, delivery and
performance by AirNet of this Agreement and the consummation by AirNet of the
transactions contemplated hereby are within the corporate powers of AirNet and
have been duly authorized, including, but not limited to, for purposes of
Chapter 1704 of Ohio Law, by all necessary corporate action. This Agreement
constitutes a valid and binding agreement of AirNet.
SECTION 3.04. Governmental Authorization. The execution, delivery and
performance by AirNet of this Agreement and the consummation by AirNet of the
transactions contemplated by the Agreement require no consent, approval,
authorization or permit of, or filing with or notification to any governmental
or regulatory authority.
SECTION 3.05. Non-Contravention. The execution, delivery and performance
by AirNet of this Agreement and the consummation by AirNet of the transactions
contemplated hereby do not and will not (i) contravene or conflict with the
articles of incorporation or code of regulations of AirNet; (ii) contravene or
conflict with or constitute a violation of any provision of law, rule,
regulation, judgment, injunction, order or decree binding upon AirNet or any
Subsidiary of AirNet; (iii) constitute a default under
16
<PAGE>
or give rise to any right of termination, cancellation or acceleration of any
right or obligation of AirNet or any Subsidiary of AirNet or to a loss of any
benefit to which AirNet or any Subsidiary of AirNet is entitled under any
agreement, contract or other instrument binding upon AirNet or any Subsidiary of
AirNet; or (iv) result in the creation or imposition of any Lien on any asset of
AirNet or any Subsidiary of AirNet. "Subsidiary," with respect to AirNet, means
any corporation or other entity of which securities or other ownership interests
having ordinary voting power to elect a majority of the board of directors or
other persons performing similar functions are directly or indirectly owned by
AirNet.
SECTION 3.06. Capitalization. (a) As of the date hereof, the authorized
capital stock of AirNet consists of 40,000,000 AirNet Common Shares and
10,000,000 preferred shares, $.01 par value (the "AirNet Preferred Shares"). As
of December 31, 1997, there were outstanding 12,489,830 AirNet Common Shares,
employee stock options to purchase an aggregate of 651,095 AirNet Common Shares
(of which options to purchase an aggregate of 587,145 shares were exercisable)
and no AirNet Preferred Shares outstanding. All of the outstanding AirNet Common
Shares have been duly authorized and validly issued and are fully paid and
nonassessable. Except as set forth in this Section and except for changes since
December 31, 1997, resulting from the exercise of employee stock options
outstanding on such date, there are outstanding: (i) no shares of capital stock
or other voting securities of AirNet and (ii) no securities of AirNet
convertible into or exchangeable for shares of capital stock or voting
securities of AirNet, no options or other rights to acquire from AirNet, and no
obligation of AirNet to issue, any capital stock, voting securities or
securities convertible into or exchangeable for capital stock or voting
securities of AirNet (the items in clauses (i) and (ii) being referred to
collectively as the "AirNet Securities"). There are no outstanding obligations
of AirNet or any of its Subsidiaries to repurchase, redeem or otherwise acquire
any AirNet Securities.
(b) The Share Portion of the Purchase Price, when issued in accordance
with this Agreement, will be duly authorized, validly issued, fully paid and
non-assessable.
SECTION 3.07. SEC Filings; AirNet Disclosure Documents; Financial
Statements. (a) AirNet has filed all forms, reports and documents required to be
filed by it with the SEC since May 31, 1996, and has heretofore made available
to the Company and the Stockholders, in the form filed with the SEC (excluding
any exhibits thereto, unless otherwise specifically requested by the Company or
the Stockholders), (i) its Annual Report on Form 10-K for the fiscal year ended
September 30, 1996; (ii) its Quarterly Reports on Form 10-Q for the fiscal
quarters ended December 31, 1996, March 31, June 30 and September 30, 1997 and
March 31, 1998; (iii) all proxy statements relating to meetings of AirNet's
shareholders (whether annual or special) held since May 31, 1996; and (iv) all
other reports, statements, schedules and registration statements filed with the
SEC since May 31, 1996 (the forms, reports and other documents referred to in
clauses (i) through (iv), being referred to herein,
17
<PAGE>
collectively, as the "AirNet Disclosure Documents"). The AirNet Disclosure
Documents and any other forms, reports or other documents filed by AirNet with
the SEC after the date of this Agreement but prior to the Closing Date, (x) were
prepared, or will be prepared, in accordance with the Securities Act or the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), as the case
may be, and complied, or will comply, in all material respects with the rules
and regulations thereunder and (y) did not at the time they were filed, or will
not at the time they are filed, with the SEC contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading.
(b) Each of the consolidated financial statements (including any notes
thereto) contained in the Annual Report on Form 10-K for the fiscal year ended
December 31, 1997, was prepared in accordance with generally accepted accounting
principles and fairly presents, in all material respects, the consolidated
financial position, results of operations and cash flows of AirNet and its
consolidated Subsidiaries as at the respective dates thereof and for the
respective periods indicated therein.
SECTION 3.08. Finders' Fees. No investment banker, broker, finder or other
intermediary has been retained by, or authorized to act on behalf of, AirNet and
entitled to any fee or commission in connection with the transactions
contemplated by this Agreement.
ARTICLE IV
COVENANTS OF THE STOCKHOLDERS
Each of the Stockholders, severally and not jointly, agrees that:
SECTION 4.01. Conduct of the Business of the Company. From the date hereof
until the Closing Date unless AirNet shall otherwise have consented in writing,
the Company shall conduct its business in the ordinary course consistent with
past practice and shall use their reasonable efforts to preserve intact their
business organizations and relationships with third parties and to keep
available the services of their present officers and employees. Without limiting
the generality of the foregoing, from the date hereof until the Closing Date,
except as contemplated or required by this Agreement or set forth on Schedule
4.01, the Company shall not, directly or indirectly, do, or propose or agree to
do, any of the following without the prior written consent of AirNet, which
shall not be unreasonably delayed or withheld:
(a) adopt or propose any change in its Articles of Organization or
By-laws;
18
<PAGE>
(b) merge or consolidate with any other Person or acquire a material
amount of assets of any other Person;
(c) lease, license or otherwise dispose of any assets or property in
excess of $10,000 except (i) pursuant to existing contracts or commitments
or (ii) in the ordinary course consistent with past practice in an
aggregate;
(d) declare, set aside, make or pay any dividend or other
distribution, payable in cash, stock, property or otherwise, with respect
to any of their capital stock;
(e) reclassify, combine, split, subdivide or redeem, purchase or
otherwise acquire, directly or indirectly, any of their capital stock;
(f) increase the compensation payable or to become payable to the
Company's executive officers, directors or employees, except for increases
in the ordinary course of business consistent with past practice, or grant
any severance or termination pay to, or enter into any employment or
severance agreement with any director or executive officer, or establish,
adopt, enter into or amend in any material respect or take action to
accelerate any rights or benefits under any collective bargaining, bonus,
profit sharing, thrift, compensation, stock option, restricted stock,
pension, retirement, deferred compensation, employment, termination,
severance or other plan, agreement, trust, fund, policy or arrangement for
the benefit of any director, executive officer or employee;
(g) create or assume any Lien on any asset having a value in excess
of $10,000 other than in the ordinary course consistent with past
practices;
(h) issue, deliver or sell, or authorize or propose to issue,
deliver or sell, any Company Securities or any securities convertible into
or exchangeable for, or any rights, warrants or options to acquire, any
Company Securities;
(i) incur or assume any indebtedness in excess of $10,000 from any
third party for borrowed money or guarantee any such indebtedness;
(j) make any loans, advances or capital contributions to, or
investments in, any other Person except for (i) loans or advances to
employees in the ordinary course of business consistent with past practice
19
<PAGE>
and in an aggregate amount not to exceed $10,000 or (ii) investments in
securities consistent with past practices;
(k) authorize, recommend, propose or announce an intention to adopt
a plan of complete or partial liquidation or dissolution of the Company,
or any plan of division or share exchange involving the Company;
(l) change any method of accounting or any accounting principle or
practice used by the Company, except for any such change required by
reason of a change in generally accepted accounting principles or
Regulation S-X;
(m) agree or commit to do any of the foregoing; or
(n) take or agree or commit to take any action that would make any
representation and warranty of the Company hereunder inaccurate in any
material respect at, or as of any time prior to, the Closing Date.
SECTION 4.02. Access to Information; Confidentiality. (a) From the date
hereof until the Closing Date, the Company shall afford AirNet, its officers,
directors, employees, counsel, financial advisors, auditors and other authorized
representatives (the "AirNet Representatives") reasonable access to the offices,
properties, books and records of the Company, will furnish to AirNet and the
AirNet Representatives such financial and operating data and other information
as such Persons may reasonably request and will instruct the Company's
employees, counsel and financial advisors to cooperate with AirNet in its
investigation of the business of the Company; provided that no investigation
pursuant to this Section shall affect any representation or warranty given by
the Stockholders to AirNet hereunder.
(b) All information obtained by AirNet pursuant to this Section shall be
kept confidential in accordance with the confidentiality agreements dated as of
April 30, 1997, and executed May 14, 1997, between AirNet and the Company.
SECTION 4.03. Other Offers. From the date hereof until the later of the
termination of this Agreement and the Closing Date, none of the Company, any
Affiliate of the Company, the Stockholders or any officer, director, employee or
other agent of the Company will, directly or indirectly, (i) take any action to
solicit, initiate or encourage any inquiries or the making or implementation of
any proposal or offer with respect to a merger, acquisition, consolidation or
similar transaction involving, or any purchase of all or any significant portion
of the assets or any equity securities of, the Company (a "Company Acquisition
Proposal"), other than the transactions contemplated by this Agreement, or (ii)
engage in negotiations with, or disclose any nonpublic information relating to
the Company or afford access to the properties, books or records of the
20
<PAGE>
Company to, any Person that the Company believes may be considering making, or
has made, a Company Acquisition Proposal. The Stockholders will promptly notify
AirNet upon receipt of any Company Acquisition Proposal or any indication that
any Person is considering making a Company Acquisition Proposal or any request
for nonpublic information relating to the Company or for access to the
properties, books or records of the Company by any Person that may be
considering making, or has made, a Company Acquisition Proposal and will keep
AirNet fully informed of the status and details of any such Company Acquisition
Proposal, indication or request.
SECTION 4.04. Notices of Certain Events. The Stockholders shall promptly
notify AirNet of:
(a) any notice or other communication from any Person alleging that
the consent of such Person is or may be required in connection with the
transactions contemplated by this Agreement;
(b) any notice or other communication from any governmental or
regulatory agency or authority in connection with the transactions
contemplated by this Agreement;
(c) the occurrence, or non-occurrence, of any event the occurrence,
or non-occurrence, of which would be reasonably likely to cause (x) any
representation or warranty contained in this Agreement to be untrue or
inaccurate in any material respect or (y) any covenant, condition or
agreement contained in this Agreement not to be complied with or satisfied
in all material respects; and
(d) any failure of the Company or any Stockholder to comply with or
satisfy any covenant, condition or agreement to be complied with or
satisfied by them hereunder;
provided, however, that the delivery of any notice pursuant to this Section
shall not limit or otherwise affect the remedies available hereunder to AirNet.
SECTION 4.05. Stockholder Actions. (a) Each Stockholder hereby waives any
and all rights now or hereafter available to such Stockholder under the law of
The Commonwealth of Massachusetts to demand appraisal with respect to any shares
of capital stock of the Company in connection with this Agreement or the
transactions contemplated by this Agreement.
(b) Following the Closing Date, each Stockholder agrees not to make any
sale, transfer or other disposition of any AirNet Common Shares unless (i) such
sale, transfer or other disposition has been registered under the Securities
Act, (ii) such sale, transfer or other disposition is made in conformity with
the provisions of Rule 144 under the Securities Act (as such rule may be amended
from time to time), or (iii) in the opinion of counsel in form and
21
<PAGE>
substance reasonably satisfactory to AirNet, or under a "no-action" letter
obtained by such Stockholder from the staff of the SEC, such sale, transfer or
other disposition will not violate or is otherwise exempt from registration
under the Securities Act.
ARTICLE V
COVENANTS OF AIRNET
AirNet agrees that:
SECTION 5.01. Access to Information; Confidentiality. (a) From the date
hereof until the Closing Date, AirNet shall afford the Company, its officers,
directors, employees, counsel, financial advisors, auditors and other authorized
representatives (the "Company Representatives") reasonable access to the
offices, properties, books and records of AirNet and its Subsidiaries, will
furnish to the Company and the Company Representatives such financial and
operating data and other information as such Persons may reasonably request and
will instruct AirNet's and its Subsidiaries' employees, counsel and financial
advisors to cooperate with the Company in its investigation of the business of
AirNet and its Subsidiaries; provided that no investigation pursuant to this
Section shall affect any representation or warranty given by AirNet to the
Company and the Stockholders hereunder.
(b) All information obtained by the Company pursuant to this Section shall
be kept confidential in accordance with the confidentiality agreements dated as
of April 30, 1997, and executed May 14, 1997, between AirNet and the Company.
SECTION 5.02. Notices of Certain Events. AirNet shall promptly notify the
Company of:
(a) any notice or other communication from any Person alleging that
the consent of such Person is or may be required in connection with the
transactions contemplated by this Agreement;
(b) any notice or other communication from any governmental or
regulatory agency or authority in connection with the transactions
contemplated by this Agreement;
(c) the occurrence, or non-occurrence, of any event the occurrence,
or non-occurrence, of which would be likely to cause (x) any
representation or warranty contained in this Agreement to be untrue or
inaccurate in any material respect or (y) any covenant, condition or
agreement contained in this Agreement not to be complied with or satisfied
in all material respects; and
22
<PAGE>
(d) any failure of AirNet or any Subsidiary of AirNet to comply with
or satisfy any covenant, condition or agreement to be complied with or
satisfied by it hereunder;
provided, however, that the delivery of any notice pursuant to this Section
shall not limit or otherwise affect the remedies available hereunder to the
Company.
SECTION 5.03. Director and Officer Indemnification. From and after the
Closing Date, AirNet will cause the Company to indemnify and hold harmless the
present and former officers and directors of the Company in respect of acts or
omissions occurring prior to the Closing Date to the extent provided under the
Company's Articles of Organization and By-laws, as in effect on the date hereof;
provided, that such indemnification shall be subject to any limitation imposed
from time to time under applicable law, and, provided, further, that such
indemnification shall not apply to claims made by or on behalf of any
stockholder or former stockholder of the Company.
SECTION 5.04. Rule 144. With a view to making available to the
Stockholders the benefits of Rule 144 promulgated under the Securities Act, and
any other similar rules and regulations of the SEC which may at any time permit
the Stockholders to sell or distribute without registration the AirNet Common
Shares received as the Share Portion of the Purchase Price hereunder, AirNet
agrees to use its reasonable efforts to file with the SEC in a timely manner all
reports and other documents required to be filed by it under the Exchange Act.
ARTICLE VI
COVENANTS OF AIRNET AND THE STOCKHOLDERS
The parties hereto agree that:
SECTION 6.01. Reasonable Efforts. Subject to the terms and conditions of
this Agreement, each party will use its reasonable efforts to take, or cause to
be taken, all actions and to do, or cause to be done, all things necessary,
proper or advisable under applicable laws and regulations to consummate the
transactions contemplated by this Agreement as promptly as possible.
SECTION 6.02. Certain Filings. The Stockholders and AirNet shall cooperate
with one another (a) in determining whether any action by or in respect of, or
filing with, any governmental body, agency or official, or authority is
required, or any actions, consents, approvals or waivers are required to be
obtained from parties to any contracts, in connection with the consummation of
the transactions contemplated by this Agreement and (b) in seeking any such
actions, consents, approvals or waivers or making any such filings and seeking
to timely obtain any such actions, consents, approvals or waivers.
23
<PAGE>
SECTION 6.03. Public Announcements. AirNet and the Stockholders will
consult with each other before issuing any press release or otherwise making any
public statement with respect to this Agreement or any transaction contemplated
herein and, except as may be required by applicable law, the rules and
regulations of the SEC or any listing agreement with any national securities
exchange, AirNet will not issue any such press release or make any such public
statement prior to such consultation, and neither the Stockholders nor the
Company will issue any such press release or make any such public statement
without the prior written consent of AirNet, which shall not be unreasonably
withheld or delayed.
SECTION 6.04. Tax Matters. (a) The Stockholders shall be solely
responsible for preparing all Tax Returns with respect to the income, business,
assets, operations, activities, status or other matters of the Company for all
taxable periods ending at or before the Closing Date other than the Tax Return
with respect to Massachusetts income Tax imposed on the Company for the period
commencing on January 1, 1998 and ending on the Closing Date, which Tax Return
shall be prepared by AirNet. The Stockholders shall submit a copy of such Tax
Returns to AirNet for its review and approval (which shall not be unreasonably
withheld or delayed) at least 15 days prior to their due date. Upon such
approval, AirNet and the Stockholders shall cause such Tax Returns to be filed
on a timely basis. The Stockholders shall be solely responsible for and shall
pay on a timely basis all Taxes due thereon, except with respect to any
Massachusetts income Tax imposed (including, for the avoidance of doubt,
Massachusetts income Taxes imposed on the Company as a result of the Election)
on the Company for the period commencing on January 1, 1998 and ending on the
Closing Date.
(b) AirNet shall be solely responsible for preparing and filing on a
timely basis all Tax Returns with respect to the income, business, assets,
operations, activities, status or other matters of the Company or any of its
Subsidiaries for all taxable periods beginning after the Closing Date. AirNet
shall be solely responsible for and shall pay on a timely basis all Taxes due
thereon.
(c) The Stockholders and AirNet shall jointly prepare all Tax Returns with
respect to the income, business, assets, operations, activities, status or other
matters of the Company for all taxable periods beginning before and ending after
the Closing Date ("Straddle Periods"). The Stockholders and AirNet shall
allocate any liability for Taxes relating to Straddle Periods on the basis of an
interim closing of the books as of the Closing Date. The parties agree that the
Company shall distribute to each Stockholder an amount representing such
Stockholder's aggregate liability for Taxes attributable to the Taxable income
of the Company for the period commencing January 1, 1998 and ending at the
Closing Date, less estimated tax payments already paid to such Stockholder for
such period. The Stockholders and AirNet shall jointly prepare such calculation,
and the amount with respect to each Stockholder shall be distributed by the
Company to such Stockholder within 10 days after the calculation thereof. The
parties
24
<PAGE>
further agree that such distributions shall be final and binding on the parties
and no further cash distributions may be paid by the Company with respect to, or
in satisfaction of, either Stockholder's liability for Taxes attributable to the
taxable income of the Company for any period.
(d) The Stockholders and AirNet agree to furnish to each other, upon
written request, as promptly as practicable, such information and reasonable
assistance relating to the Company as is necessary for the filing of any Tax
Return required to be filed after the Closing Date. The Stockholders and AirNet
also agree to cooperate with each other in the conduct of any audit or other
proceeding involving one or more of the Company or any successor corporation. In
any such case, each party shall use its reasonable efforts to cause its
financial advisors, auditors and other authorized representatives to cooperate
therewith.
SECTION 6.05. Tax Treatment. The parties agree that AirNet and the
Stockholders will file the election provided for by Section 338(h)(10) of the
Code and any comparable election under applicable state or local law
(collectively and separately, the "Election") with respect to the acquisition of
the Shares pursuant to this Agreement. In connection with the Election, as soon
as reasonably practicable, but in any event within 30 days after Closing Date,
AirNet and the Stockholders shall act together in good faith to agree upon the
proper allocations with respect to the Company's assets in accordance with the
Code and the Treasury Regulations promulgated thereunder (the "Allocations").
Each of AirNet and the Stockholders agree to file the Tax Returns described in
Section 6.04 in accordance with the Allocations and to file the Election with
the Internal Revenue Service no later than December 31, 1998. Each Stockholder
shall, upon written request from AirNet, execute and deliver to AirNet such
documents as AirNet shall reasonably request to properly complete the forms
relating to the Election. Upon the filing of the Election, AirNet agrees to
reimburse each Stockholder (in the same proportions as set forth on Annex A) for
any additional Taxes incurred by such Stockholder beyond Taxes at then existing
capital gains rates that each such Stockholder would have incurred had the
Election not been made. The amount of such reimbursement shall be grossed up by
dividing such amount by 0.75.
SECTION 6.06. Employee Benefits. (a) With respect to each of the Employee
Plans and Benefit Arrangements of the Company, AirNet agrees that, as of and
following the Closing Date, AirNet shall provide, or shall cause the Company to
provide, employees of the Company, with the same or substantially similar
employee benefit plans and programs, including but not limited to employee
benefit plans, within the meaning of Section 3(3) of ERISA, as those provided to
employees of AirNet with comparable status and seniority as of the Closing Date.
(b) Notwithstanding the foregoing, upon the termination of any Company
Employee Plan which is subject to the provisions of Section 401(k) of the Code
(a "Company 401(k) Plan"), AirNet shall, or shall cause the Company to,
establish or
25
<PAGE>
designate, and maintain, a defined contribution plan (the "AirNet 401(k) Plan")
to provide benefits to the employees of the Company who are participants in a
Company 401(k) Plan as of the date of its termination in accordance with Section
7.07(a) ("401(k) Plan Participants"). The AirNet 401(k) Plan shall be qualified
under Section 401(a) and 401(k) of the Code and shall provide the 401(k) Plan
Participants full credit for service with the Company, its Subsidiaries and
their Affiliates for purposes of eligibility to participate and vesting. The
AirNet 401(k) Plan shall also accept rollover contributions and rollovers of any
outstanding account loan balances of the 401(k) Plan Participants from a Company
401(k) Plan.
ARTICLE VII
CONDITIONS
SECTION 7.01. Conditions to the Obligations of Each Party. The respective
obligations of the Company, the Stockholders and AirNet to consummate the
transactions contemplated by this Agreement are subject to the satisfaction of
the following conditions, any or all of which may be waived, in whole or in
part, to the extent permitted by this Agreement and by applicable law:
(a) no provision of any applicable law or regulation and no
judgment, injunction, order or decree shall prohibit the consummation of
the transactions contemplated by this Agreement; and
(b) all authorizations, consents, waivers, orders or approvals
required to be obtained, and all filings, notices or declarations required
to be made, by the Company and AirNet prior to the Closing Date shall have
been obtained from, and made with, all required governmental or regulatory
authorities except for such authorizations, consents, waivers, orders,
approvals, filings, notices or declarations the failure of which to obtain
or make would not, at or after the Closing Date, individually or in the
aggregate, have a Company Material Adverse Effect or an AirNet Material
Adverse Effect.
SECTION 7.02. Conditions to the Obligations of AirNet. The obligations of
AirNet to consummate the transactions contemplated by this Agreement are subject
to the satisfaction of the following further conditions, any or all of which may
be waived, in whole or in part, to the extent permitted by this Agreement and by
applicable law:
(a) the Stockholders shall have performed in all material respects
their respective agreements and covenants required by this Agreement to be
performed by them at or prior to the Closing Date; the representations and
warranties of the Stockholders contained in this Agreement and in
26
<PAGE>
any certificate or other writing delivered by the Stockholders pursuant
hereto, disregarding any qualifications contained therein regarding
materiality or Company Material Adverse Effect, shall be true and correct
in all material respects at and as of the Closing Date as if made at and
as of such time, and AirNet shall have received a certificate signed by
the Stockholders to the foregoing effect;
(b) since the Balance Sheet Date, there shall have been no change,
occurrence or circumstance in the business, results of operations or
condition (financial or otherwise) of the Company having or reasonably
likely to have, individually or in the aggregate, a Company Material
Adverse Effect, and AirNet shall have received a certificate of the
Stockholders to such effect;
(c) no court, arbitrator or governmental body, agency or official
shall have issued any order, and there shall not be any statute, rule or
regulation, materially restraining or prohibiting the consummation of the
transactions contemplated by this Agreement or the effective operation of
the business of the Company after the Closing Date;
(d) AirNet shall have received executed copies of the documents
specified in clauses (i) through (iii) of Section 1.03(b); and
(e) AirNet shall have received an opinion from Ropes & Gray, counsel
to the Company and the Stockholders, substantially in the form attached
hereto as Exhibit 7.02(e).
SECTION 7.03. Conditions to the Obligations of the Stockholders. The
obligations of the Stockholders to consummate the transactions contemplated
hereby are subject to the satisfaction of the following further conditions, any
or all of which may be waived, in whole or in part, to the extent permitted by
this Agreement and by applicable law:
(a) AirNet shall have performed in all material respects their
respective agreements and covenants required by this Agreement to be
performed by them at or prior to the Closing Date; the representations and
warranties of AirNet contained in this Agreement and in any certificate or
other writing delivered by AirNet pursuant hereto, disregarding any
qualifications contained therein with respect to materiality or AirNet
Material Adverse Effect, shall be true and correct in all material
respects at and as of the Closing Date as if made at and as of such time,
and the Company shall have received a certificate signed by the Chief
Executive Officer and Chief Financial Officer of AirNet to the foregoing
effect;
27
<PAGE>
(b) no court, arbitrator or governmental body, agency or official
shall have issued any order, and there shall not be any statute, rule or
regulation, materially restraining or prohibiting the consummation of the
transactions contemplated by this Agreement or the effective operation of
the business of AirNet after the Closing Date;
(c) the Stockholders shall have received evidence of the wire
transfers contemplated by clauses (i) and (ii) of Section 1.03(c) and
shall have received executed copies of the documents specified in clauses
(iii) through (v) of Section 1.03(c);
(d) the Stockholders shall have received all documents it may
reasonably request relating to the existence of AirNet and the authority
of AirNet to enter into, deliver and perform this Agreement, all in form
and substance reasonably satisfactory to the Stockholders; and
(e) the Stockholders shall have received an opinion from Vorys,
Sater, Seymour and Pease LLP, counsel to AirNet, substantially in the form
attached hereto as Exhibit 7.03(e).
28
<PAGE>
ARTICLE VIII
TERMINATION
SECTION 8.01. Termination. This Agreement may be terminated at any time
prior to the Closing Date:
(a) by mutual written consent of the Stockholders and AirNet;
(b) by the Stockholders or AirNet if the transactions contemplated
hereby have not been consummated by September 30, 1998; provided, however,
that the right to terminate this Agreement pursuant to this Section
8.01(b) shall not be available to any party whose willful failure to
perform any of its obligations under this Agreement results in the failure
of the transactions contemplated by this Agreement to be consummated by
such time;
(c) by AirNet, upon a breach of any representation, warranty,
covenant or agreement of the Stockholders, or if any representation or
warranty of the Stockholders shall become untrue, the effect of which is a
Company Material Adverse Effect, in either case such that the conditions
set forth in Section 7.02(a) would be incapable of being satisfied by
September 30, 1998 (or as otherwise extended);
(d) by the Stockholders, upon a breach of any representation,
warranty, covenant or agreement of AirNet, or if any representation or
warranty of AirNet shall become untrue, the effect of which is an AirNet
Material Adverse Effect, in either case such that the conditions set forth
in Section 7.03(a) would be incapable of being satisfied by September 30,
1998 (or as otherwise extended); or
(e) by the Stockholders or AirNet if there shall be any law or
regulation that makes consummation of the transactions contemplated by
this Agreement illegal or otherwise prohibited or if any judgment,
injunction, order or decree enjoining AirNet or the Stockholders from
consummating the transactions contemplated by this Agreement is entered
and such judgment, injunction, order or decree shall become final and
nonappealable.
SECTION 8.02. Effect of Termination. If this Agreement is terminated
pursuant to Section 8.01, this Agreement shall become void and of no effect with
no liability on the part of any party hereto, except that the agreements
contained in Sections 4.02, 5.01 and 10.03 shall survive the termination hereof;
provided, however, that nothing
29
<PAGE>
herein shall relieve any party from liability for the willful breach of any of
its representations, warranties, covenants or agreements set forth in this
Agreement.
ARTICLE IX
SURVIVAL; INDEMNIFICATION
SECTION 9.01. Survival. The covenants, agreements, representations and
warranties of the parties hereto contained in this Agreement or in any
certificate or other writing delivered pursuant hereto shall survive the Closing
Date through the period ending on the thirtieth day following the audit of the
financial results of AirNet (including the operations of the Company) for the
fiscal year ended December 31, 1998 by AirNet's independent public auditors.
Notwithstanding the preceding two sentences, any breach of a covenant,
agreement, representation or warranty in respect of which indemnity may be
sought under Section 9.02 shall survive the time at which it would otherwise
terminate pursuant to the preceding sentence, if written notice of the specific
inaccuracy or breach thereof giving rise to such right to indemnity shall have
been given to the party against whom such indemnity may be sought prior to such
time.
SECTION 9.02. Indemnification. (a) At and after the Closing Date, each of
the Stockholders hereby, severally but not jointly, indemnifies AirNet and,
effective as of the Closing Date, without duplication, the Company and their
respective Affiliates (each an "AirNet Indemnitee" against and agree to hold it
harmless from any and all damage, loss, liability and expense (including,
without limitation, reasonable expenses of investigation and reasonable
attorneys' fees and expenses in connection with any action, suit or proceeding)
(collectively, "Loss") incurred or suffered by any AirNet Indemnitee arising out
of any breach of any covenant, agreement, representation or warranty made or to
be performed by the Stockholders pursuant to this Agreement; provided that (i)
the Stockholders shall not be liable under this Section 9.02(a) unless the
aggregate amount of Losses with respect to all matters referred to in this
Section 9.02(a) (determined without regard to any materiality qualification
contained in any representations, warranty or covenant giving rise to the claim
for indemnity hereunder) exceeds $20,000 (after which point the Stockholders
will be liable under this Section 9.02(a) only for further such Losses); (ii)
any claim for Losses under this Section 9.02(a) shall be in an aggregate amount
equal to or greater than $1,000; and (iii) the Stockholders' liability under
this Section 9.02(a) shall be limited to the Escrow Shares. To the extent that
AirNet or the Company makes a claim against the Escrow Shares and such claim is
paid in AirNet Common Shares, then, for purposes of such payment, the AirNet
Common Shares shall be valued at the average closing price of the AirNet Common
Shares on the trading day immediately prior to the date such claim is paid, as
set forth in the Escrow Agreement.
30
<PAGE>
(b) At and after the Closing Date, AirNet hereby indemnifies the
Stockholders against and agrees to hold them harmless from any and all Losses
incurred or suffered by the Stockholders arising out of any covenant, agreement,
representation or warranty made or to be performed by AirNet pursuant to this
Agreement, provided that (i) AirNet shall not be liable under this Section
9.02(b) unless the aggregate amount of the Stockholders' Losses exceeds $20,000
(after which point AirNet will be liable under this Section 9.02(b) only for
further such Losses); (ii) all Losses shall be payable by AirNet in additional
AirNet Common Shares having a fair market value on the date of payment (based on
the closing price of the AirNet Common Shares on the New York Stock Exchange on
the immediately preceding trading day) equal to the amount of such Losses; (iii)
any claim for Losses under this Section 9.02(b) shall be in an aggregate amount
equal to or greater than $1,000; and (iv) AirNet's maximum liability under this
Section 9.02(b) shall not exceed 25,499 AirNet Common Shares.
SECTION 9.03. Procedures. (a) The party seeking indemnification under
Section 9.02 (the "Indemnified Party") agrees to give prompt notice to the party
against whom indemnity is sought (the "Indemnifying Party") of the Losses for
which indemnity may be sought under such Section. The Indemnifying Party may,
and at the request of the Indemnified Party shall, participate in and control
the defense of any suit, action or proceeding for which indemnity is sought
hereunder at its own expense. The Indemnifying Party shall not be liable under
Section 9.02 for any settlement effected without its consent of any claim,
litigation or proceeding in respect of which indemnity may be sought hereunder;
provided that such consent is not unreasonably withheld or delayed.
(b) The Indemnified Party shall cooperate fully in all aspects of any
matter for which indemnity is sought pursuant to this Article IX with respect to
an action brought by a third party, including, in such case, by providing
reasonable access to employees and officers (as witnesses or otherwise) and
other information.
SECTION 9.04. Exclusive Remedy. AirNet, on behalf of itself and the AirNet
Indemnitees, and the Stockholders each hereby acknowledges and agrees that, at
and after the Closing Date, the sole and exclusive remedy with respect to any
and all claims relating to, or arising out of, this Agreement or the
transactions contemplated hereby shall be pursuant to the indemnification
provisions contained in this Article IX; provided, that neither AirNet, on the
one hand, nor the Stockholders, on the other, waive any rights such party may
have against the other party pursuant to Section 10(b) under the Securities
Exchange Act of 1934, as amended, or the rules and regulations promulgated
thereunder.
SECTION 9.05. Certain Limitations. The liability of the Indemnifying Party
to the Indemnified Party, as applicable, for claims under this Agreement shall
be limited by the following:
31
<PAGE>
(a) The amount of Losses otherwise recoverable under this Article IX shall
be reduced to the extent to which any Federal, state, local or foreign tax
liabilities of the Indemnified Party is decreased by reason of any Loss in
respect of which such Indemnified Party shall be entitled to indemnity under
this Agreement.
(b) No Losses shall be recoverable by an Indemnified Party with respect to
any matter which is covered by insurance or another source of indemnification,
to the extent proceeds of such insurance or other third party indemnitor are
paid net of any costs incurred in connection with the collection thereof, the
Indemnified Party hereby agreeing to seek all reasonable remedies against all
applicable insurers or indemnitors prior to recovering any amounts hereunder.
ARTICLE X
MISCELLANEOUS
SECTION 10.01. Notices. All notices, requests and other communications to
any party hereunder shall be in writing (including telecopy, telex or similar
writing) and shall be given,
if to AirNet, to:
AirNet Systems, Inc.
3939 International Gateway
Columbus, OH 43219
Attn.: Eric P. Roy, Executive Vice President
and Chief Financial Officer
Telecopy: (614) 237-1915
with a copy to:
Ronald A. Robins, Jr.
Vorys, Sater, Seymour and Pease LLP
52 East Gay Street
Columbus, OH 43215
Telecopy: (614) 464-6350
if to the Company or the Stockholders, to:
Mercury Business Services, Inc.
61 Batterymarch Street
Boston, MA 02110
Attn.: Peter G. Salisbury
Telecopy: (617) 723-5214
32
<PAGE>
with a copy to:
Robert L. Nutt
Ropes & Gray
One International Place
Boston, MA 02110
Telecopy: (617) 951-7050
or such other address or telecopy number as such party may hereafter specify for
the purpose of notice to the other parties hereto. Each such notice, request or
other communication shall be effective (i) if given by telecopy, when such
telecopy is transmitted to the telecopy number specified in this Section 10.01
and the appropriate confirmation is received or (ii) if given by any other
means, when delivered at the address specified in this Section.
SECTION 10.02. Amendments; No Waivers. (a) Any provision of this Agreement
may be amended or waived prior to the Closing Date if, and only if, such
amendment or waiver is in writing and signed, in the case of an amendment, by
the Stockholders and AirNet or in the case of a waiver, by the party against
whom the waiver is to be effective.
(b) No failure or delay by any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by law.
SECTION 10.03. Expenses; Taxes. All costs and expenses incurred in
connection with this Agreement shall be paid by the party incurring such cost or
expense; provided, that in the event the Closing Date occurs, the costs and
expenses of the Company shall be paid by the Stockholders personally and not by
the Company. Notwithstanding the foregoing, AirNet shall pay for the reasonable
costs and expenses of the Company's independent accountants in connection with
the preparation of audited financial statements of the Company; provided, that
if the Closing Date does not occur, AirNet shall pay for only fifty percent
(50%) of such costs expenses actually incurred by the Company through the date
of termination of this Agreement up to, but not exceeding, $25,000.
Notwithstanding the foregoing, all applicable sales, use or transfer taxes, if
any, and all capital gains or income taxes of the Stockholders or the Company,
in each case, that may be due and payable as a result of this Agreement or the
transactions contemplated hereby, whether levied on the Company, any of the
Stockholders or AirNet, shall be borne by the Stockholders, other than any
Massachusetts income Tax imposed on the Company for the period commencing on
January 1, 1998 and ending on the Closing Date, which shall be borne by AirNet.
33
<PAGE>
SECTION 10.04. Headings; Definition. (a) The headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
(b) For purposes of this Agreement, the term "Knowledge" shall mean actual
knowledge.
SECTION 10.05. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible to the fullest extent
permitted by applicable law in an acceptable manner to the end that the
transactions contemplated hereby are fulfilled to the extent possible.
SECTION 10.06. Entire Agreement. This Agreement (together with the
exhibits, annexes, schedules and the other documents delivered pursuant hereto)
and the confidentiality agreements between the Company and AirNet constitute the
entire agreement of the parties and supersede all prior agreements and
undertakings, both written and oral, among the parties, or any of them, with
respect to the subject matter hereof.
SECTION 10.07. Successors and Assigns. The provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns, provided that no party may assign, delegate
or otherwise transfer any of its rights or obligations under this Agreement
without the written consent of the other parties; provided, further, that AirNet
may assign its rights, but not its obligations, under this Agreement to a
wholly-owned Subsidiary of AirNet.
SECTION 10.08. Governing Law. This Agreement shall be construed in
accordance with and governed by the law of the State of Ohio.
SECTION 10.09. Consent to Jurisdiction. The Stockholders each irrevocably
submit to the jurisdiction of any Ohio state or federal court sitting in
Franklin County, Ohio, over any suit, action or proceeding arising out of or
relating to this agreement or any related document and agree that any such suit,
action or proceeding shall be brought only in such courts. The Stockholders each
irrevocably waive, to the fullest extent permitted by law, any objection which
they may have or hereafter have to the laying of the venue of any such suit,
action or proceeding brought in such a court and
34
<PAGE>
any claim that any such suit, action or proceeding has been brought in an
inconvenient forum.
SECTION 10.10. Counterparts; Effectiveness. This Agreement may be signed
in any number of counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
This Agreement shall become effective when each party hereto shall have received
counterparts hereof signed by all of the other parties hereto.
[signature page to follow]
35
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
STOCKHOLDERS:
/s/ Peter G. Salisbury
----------------------------------------
PETER G. SALISBURY
/s/ Andrew R. Cooke
----------------------------------------
ANDREW R. COOKE
AIRNET:
AIRNET SYSTEMS, INC.
By: /s/ Gerald G. Mercer
----------------------------------------
Gerald G. Mercer
President and Chief Executive Officer
36
<PAGE>
ANNEX A
STOCKHOLDER PERCENTAGES
Peter G. Salisbury - 87.5%
Andrew R. Cooke - 12.5%
37
<PAGE>
EXHIBIT 2.4
LEASEHOLD INTEREST PURCHASE AGREEMENT
This Leasehold Interest Purchase Agreement ("Agreement") is made this
_____day of March, 1998 by and between JGM Corp, an Ohio Corporation having a
mailing address of 700 Ackerman Road, Suite 400, Columbus, Ohio 43202
("Seller"), and AirNet Systems, Inc. an Ohio Corporation having a mailing
address of 3939 International Gateway, Columbus, Ohio 43219 ("Buyer").
Background
Seller desires to sell and Buyer desires to purchase, all of Seller's
rights and title and interest in and to the leasehold interest as described on
Exhibit A attached hereto (collectively, the "Leasehold Interest") upon the
terms and conditions hereinafter set forth.
Agreement
The parties hereto, in consideration of the mutual covenants contained in
this Agreement, and intending to be legally bound, agree as follows:
1. Sale and Assignment. Seller agrees to sell and assign to Buyer, and
Buyer agrees to purchase from Seller, the Leasehold Interest. The
leasehold Interest shall include all of the right, title and
interest of Seller in and to all improvements now or hereafter
located on the Leased Premises ("Premises") and any repairs,
alterations or improvements thereto.
2. Assignment and Assumption of Lease. Gerald G. Mercer assigned to
Buyer his rights to, title and interest in, to and under the Fuel
Farm Lease between the City of Columbus and P.D.Q. Air Service,
Inc., dated August 15, 1984, Effective October 31, 1997. Assignment
and Assumption attached hereto as Exhibit B.
3. Purchase Price. The purchase price for the Leasehold Interest (the
"Purchase Price") is One Hundred Thousand Dollars ($100,000) payable
as follows:
(a) The purchase Price shall be paid at closing in cash in the
form of a company check
(b) The buyer shall deduct from the purchase price an amount equal
to an outstanding receivable from JGM Corp in the amount of
Twenty-four Thousand Dollars ($24,000).
1
<PAGE>
4. Closing. The closing of the transaction contemplated by this
Agreement (the "Closing") shall take place at the offices of the
Buyer and not later than May 31, 1998.
5. Representations and Warranties of Seller. To induce Buyer to enter
into this agreement to purchase the Leasehold Interest, Seller
represents and warrants to Buyer as follows:
(a) There are no liens, restrictions, encumbrances, easements or
other title objections affecting the premises that are prior
in lien to the assignment of the lease.
(b) There are no leases, subleases, tenancies, licenses, or other
rights of occupancy or use of any portion of the Premises.
(c) Seller is the sole legal and beneficial owner of the Leasehold
Interest.
(d) The leasehold Interest is free and clear of all liens,
security interests, encumbrances, pledges, claims of others,
or equitable interests of any kind whatsoever.
(e) All real property taxes, additions, interest and penalties,
due with respect to the Premises for calendar 1996 will have
been paid to the appropriate governmental agencies at or prior
to the date of the closing.
(f) Seller has no management, service, equipment, supply,
maintenance, concession, or other agreements with respect to
or affecting the Premises, which will be binding upon the
Buyer after the Closing.
(g) Neither Seller nor, to the Seller's knowledge, Buyer nor any
prior owner of the Premises has disposed of or released any
hazardous substance, containment, or pollutant on or in the
Premises including any release from an underground storage
tank on the Premises, liability for abatement or cleanup of
which may be imposed on Buyer under any applicable law,
ordinance, or regulation.
(h) Seller does not know of any pending or threatened condemnation
or eminent domain proceedings that would affect the Premises.
(i) No litigation or proceeding is pending or threatened relating
to Seller or the Premises, or any part thereof, or, to
Seller's knowledge, to Lessor, which could have an adverse
effect on title to or the use and enjoyment or value of the
Premises or the Leasehold Interest or any part thereof, or
which could in any way interfere with the consummation of the
Agreement. No claims are pending against Seller by any user or
the Premises, or by any other person, for which Buyer or
Lessor may be liable after Closing.
6. Contingencies. The obligation of Buyer to purchase the Leasehold
Interest is subject to the satisfaction of each of the following
conditions, any of which may be waived in whole or in part by Buyer
at or before Closing:
2
<PAGE>
(a) At the date of Closing, the warranties and representations of
Seller set forth in the Agreement shall be true and correct
(b) At the date of Closing, Seller shall have performed all of its
obligations under this Agreement.
(c) At the date of Closing, no petition in bankruptcy, insolvency
proceeding, or petition for reorganization or for appointment
of a receiver or trustee shall have been filed by or against
Seller.
If any condition specified in this section is not timely satisfied
by Seller or waived by Buyer, Buyer shall have the right to terminate this
Agreement, in which event neither Buyer nor Seller shall have any further
obligation under this agreement; provided, that termination of this Agreement
shall not be Buyer's sole remedy if Seller defaults, those additional remedies
being set forth in section 9 of this Agreement.
7. Brokers. Seller and Buyer each represents and warrants to the other
that it has not dealt with any broker or other intermediary to whom
a fee or commission is payable in connection with or relating to the
transaction which is the subject of this Agreement. Seller and Buyer
shall each defend, indemnify, and hold the other harmless from and
against any and all liability, claim, charge, or damages, including
without limitation attorney fees and court costs, incurred by the
other as a result of any breach of the foregoing representation.
8. Taxes; Prorations. There shall be no prorations of real property
taxes or utilities.
9. Casualty, Condemnation. If any portion of the Premises shall be
taken, or proposed to be taken, by condemnation or purchase in lieu
thereof, or shall be damaged by fire or other casualty, before
Closing, Seller shall immediately advise Buyer thereof, and shall
further advise Buyer of whether Seller proposes to repair and
restore the Premises, and Buyer shall thereafter have the option
exercisable through the date of Closing, to terminate this agreement
or to complete the Closing.
10. Seller's Default. If Seller shall default hereunder, Buyer shall
have the option of:
(a) canceling this Agreement, in which event Seller shall
reimburse Buyer for the cost of any title search and the
preparation of this Agreement; or
(b) exercising any rights or remedies as may be provided for or
allowed by law or in equity as a result of such default.
11. Entire Agreement. This is the entire Agreement between the parties,
and there are no other terms, obligations, covenants,
representations, or conditions, oral or otherwise, of any kind
whatsoever. Any agreement hereafter made shall be ineffective to
modify this Agreement, unless that
3
<PAGE>
agreement is in writing and signed by the party against whom
enforcement is sought.
12. Successors and Assigns. This agreement shall be binding on and shall
inure to the benefit of the parties to this Agreement and their
respective heirs, executors, administrators, legal representatives,
and assigns.
13. Governing Law. This agreement shall be governed by and construed in
accordance with the laws of the Sate of Ohio.
14. Survival. Notwithstanding any presumption to the contrary, all
covenents, representations, warranties, and indemnities contained in
the Agreement shall survive Closing.
IN WITNESS WHEREOF, Seller and Buyer have executed this Agreement as of
the date set forth above.
BUYER SELLER
AIRNET SYSTEMS, INC. JGM CORP
By: /s/ Eric P. Roy /s/ Gerald G. Mercer
-------------------------------- ----------------------------------------
Eric P. Roy By: Gerald G. Mercer
Executive Vice President President
4
<PAGE>
EXHIBIT A to
Leasehold Interest Purchase Agreement
dated March 31, 1998 by and between
JGM Corp and AirNet Systems, Inc.
Description of the Leasehold Interest
Leasehold Improvements located at the Fuel Farm at Port Columbus International
Airport including but not limited to underground fuel storage tanks, pumps, and
other plumbing.
5
<PAGE>
EXHIBIT 4
AIRNET SYSTEMS, INC.
------------------------------------------
LOAN AGREEMENT
dated as of August 1, 1998
------------------------------------------
The Lenders party hereto,
and
NBD BANK, as Agent
<PAGE>
TABLE OF CONTENTS
Article Page
- ------- ----
I. DEFINITIONS ......................................................... 1
1.1 Certain Definitions........................................... 1
1.2 Other Definitions; Rules of
Construction................................................ 10
II. THE COMMITMENTS AND THE ADVANCES..................................... 11
2.1 Commitment of the Lenders..................................... 11
2.2 Termination and Reduction of
Commitments................................................. 11
2.3 Fees.......................................................... 11
2.4 Disbursement of Advances...................................... 12
2.5 Conditions for First Disbursement............................. 13
2.6 Further Conditions for Disbursement........................... 14
2.7 Subsequent Elections as to
Borrowings; Etc............................................. 15
2.8 Limitation of Requests and Elections.......................... 15
2.9 Minimum Amounts; Limitation on
Number of Loans............................................. 15
2.10 Extension of Termination Dates................................ 15
III. PAYMENTS AND PREPAYMENTS OF ADVANCES................................. 16
3.1 Principal Payments and Prepayments............................ 16
3.2 Interest Payments............................................. 17
3.3 Letter of Credit Reimbursement
Payments.................................................... 17
3.4 Payment Method................................................ 19
3.5 No Setoff or Deduction........................................ 19
3.6 Payment on Non-Business Day;
Payment Computations........................................ 19
3.7 Additional Costs.............................................. 19
3.8 Illegality and Impossibility.................................. 20
3.9 Indemnification............................................... 21
3.10 Substitution of Lender........................................ 21
3.11 Applicable Lending Installation............................... 22
-i-
<PAGE>
Article Page
- ------- ----
IV. REPRESENTATIONS AND WARRANTIES....................................... 22
4.1 Corporate Existence and Power................................. 22
4.2 Corporate Authority........................................... 22
4.3 Binding Effect................................................ 22
4.4 Subsidiaries.................................................. 22
4.5 Litigation.................................................... 23
4.6 Financial Condition........................................... 23
4.7 Use of Advances............................................... 23
4.8 Consents, Etc................................................. 23
4.9 Taxes......................................................... 23
4.10 Title to Properties; Acquisition.............................. 23
4.11 ERISA......................................................... 24
4.12 Environmental Matters......................................... 24
4.13 No Defaults................................................... 24
4.14 No Burdensome Restriction..................................... 24
4.15 FAA Certifications............................................ 24
4.16 Airworthiness Certificates.................................... 24
V. COVENANTS ........................................................... 25
5.1 Affirmative Covenants......................................... 25
(a) Preservation of Corporate
Existence, Etc......................................... 25
(b) Compliance with Laws, Etc................................ 25
(c) Maintenance of Properties;
Insurance.............................................. 25
(d) Reporting Requirements................................... 25
(e) Accounting; Access to
Records, Books, Etc.................................... 27
(f) Further Assurances....................................... 27
5.2 Negative Covenants........................................... 27
(a) Net Worth................................................ 27
(b) Funded Debt to Ratio .................................... 27
(c) Cash Flow Coverage Ratio................................. 27
(d) Liens.................................................... 28
(e) Merger; Etc.............................................. 28
(f) Disposition of Assets, Etc............................... 29
(g) Dividends and Other Restricted
Payments............................................... 29
(h) Investment Loans and Advances............................ 29
(i) Indebtedness............................................. 29
-ii-
<PAGE>
Article Page
- ------- ----
(j) Nature of Business....................................... 30
(k) Transactions with Affiliates............................. 30
(l) Additional Covenants..................................... 30
VI. DEFAULT.............................................................. 30
6.1 Events of Default............................................. 30
6.2 Remedies...................................................... 32
VII THE AGENT AND THE LENDERS............................................ 33
7.1 Appointment and Authorization................................. 33
7.2 Agent and Affiliates.......................................... 33
7.3 Scope of Agent's Duties....................................... 34
7.4 Reliance by Agent............................................. 34
7.5 Default....................................................... 34
7.6 Liability of Agent............................................ 34
7.7 Nonreliance on Agent and
Other Lenders............................................... 34
7.8 Indemnification............................................... 35
7.9 Successor Agent............................................... 35
7.10 Sharing of Payments........................................... 36
7.11 Withholding Tax Exemption..................................... 36
VIII. MISCELLANEOUS ................................................... 37
8.1 Amendments, Etc............................................... 37
8.2 Notices....................................................... 37
8.3 No Waiver By conduct; Remedies
Cumulative.................................................. 38
8.4 Reliance on and Survival of
Various Provisions.......................................... 38
8.5 Expenses; Indemnification..................................... 38
8.6 Successors and Assigns........................................ 40
8.7 Counterparts.................................................. 42
8.8 Governing Law................................................. 42
8.9 Table of Contents and Headings................................ 42
8.10 Construction of Certain Provisions............................ 42
8.11 Integration and Severability.................................. 42
8.12 Independence of Covenants..................................... 43
8.13 Interest Rate Limitation...................................... 43
8.14 Judgment and Payment.......................................... 43
-iii-
<PAGE>
Article Page
- ------- ----
8.15 Unification of Certain Currencies............................. 43
8.16 Acknowledgments............................................... 44
8.17 Year 2000 Problem............................................. 44
8.18 Waiver of Jury Trial.......................................... 44
EXHIBITS
Exhibit A................................... Note
Exhibit B................................... Request for Advance
Exhibit C................................... Request for Conversion
Exhibit D................................... Assignment and Acceptance
SCHEDULES
Schedule 2.10............................... Extension Request
Schedule 4.4................................ Subsidiaries
Schedule 4.5................................ Litigation
Schedule 4.6................................ Contingent Liabilities
Schedule 4.12............................... Environmental Matters
Schedule 5.2(d)............................. Liens
Schedule 5.2(i)............................. Indebtedness
-iv-
<PAGE>
THIS LOAN AGREEMENT, dated as of August 1, 1998 (this "Agreement"),
is among AIRNET SYSTEMS, INC., an Ohio corporation (the "Company"), the lenders
party hereto from time to time (collectively, the "Lenders" and individually, a
"Lender") and NBD BANK, a Michigan banking corporation, as agent for the Lenders
(in such capacity, the "Agent").
INTRODUCTION
The Company desires to obtain a revolving credit facility, including
letters of credit, in the aggregate principal amount of $65,000,000, reducing to
$50,000,000, for working capital and general corporate purposes, to pay off
certain outstanding debt, make acquisitions, and purchase aircraft and
equipment, and the Lenders are willing to establish such credit facilities in
favor of the Company on the terms and conditions herein set forth.
In consideration of the premises and of the mutual agreements herein
contained, the parties hereto agree as follows:
ARTICLE I.
DEFINITIONS
1.1 Certain Definitions. As used herein the following terms shall
have the following respective meanings:
"Advance" shall mean any Loan and any Letter of Credit Advance.
"Affiliate", when used with respect to any Person shall mean any
other Person which, directly or indirectly, controls or is controlled by or is
under common control with such Person. For purposes of this definition "control"
(including the correlative meanings of the terms "controlled by" and "under
common control with"), with respect to any Person, shall mean possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of such Person, whether through the ownership of voting
securities or by contract or otherwise.
"Applicable Lending Installation" shall mean, with respect to any
Advance made by any Lender or with respect to such Lender's Commitment, the
office or branch of such Lender or of any Affiliate of such Lender located at
the address specified as the applicable lending installation for such Lender set
forth next to the name of such Lender in the signature pages hereof or any other
office or branch or Affiliate of such Lender or of any Affiliate of such Lender
hereafter selected and notified to the Company and the Agent by such Lender.
"Applicable Margin" shall mean the following margin based upon the
Funded Debt Ratio as adjusted on the first day of each fiscal quarter of the
Company based upon the Funded Debt Ratio as of the last day of the fiscal
quarter preceding the fiscal quarter most recently ended, provided, that, the
Eurodollar Rate and the Eurocurrency Rate shall not be adjusted pursuant to any
change in the Applicable Margin for any outstanding Fixed Rate Loan until after
the end of the Interest Period for such Fixed Rate Loan.
1
<PAGE>
<TABLE>
<CAPTION>
==================================================================================================================
<S> <C> <C> <C>
Funded Debt Ratio Applicable Margin for Eurodollar Applicable Margin for Applicable Margin for
Eurodollar Rate Loans Facility Fees Under Letter of Credit Fees
and Eurocurrency Rate Loans Section 2.3(a) Under Section 2.3(b)
- ------------------------------------------------------------------------------------------------------------------
less than 1.0 0.65% 0.200% 0.65%
- ------------------------------------------------------------------------------------------------------------------
greater than or equal to
1.0 but less than 2.0 0.80% 0.225% 0.80%
- ------------------------------------------------------------------------------------------------------------------
greater than 2.0 0.90% 0.250% 0.90%
==================================================================================================================
</TABLE>
"Borrowing" shall mean the aggregation of Advances, including each
Letter of Credit issuance, of the Lenders to be made to the Company, or
continuations and conversions of any Loans, made pursuant to Article II on a
single date and, in the case of any Eurodollar Rate Loans and Eurocurrency Rate
Loans, for a single Interest Period, which Borrowings may be classified for
purposes of this Agreement by reference to the type of Loans or the type of
Advance comprising the related Borrowing, e.g., a "Eurodollar Rate Borrowing" is
a Borrowing comprised of Eurodollar Rate Loans and a "Letter of Credit
Borrowing" is an Advance comprised of a single Letter of Credit.
"Business Day" shall mean (a) when such term is used in respect of a
day on which a Loan denominated in an Eligible Currency is to be made, a payment
is to be made in respect of such Loan or any other dealing in such Eligible
Currency is to be carried out pursuant to this Agreement, such term shall mean a
Eurodollar Business Day which is also a day on which banks are open for general
banking business in the city which is the principal financial center of the
country of issuance of such Eligible Currency; (b) when such term is used to
describe a day on which a borrowing, payment or interest rate determination is
to be made in respect of a Eurodollar Loan, such day shall be a Eurodollar
Business Day; and (c) when such term is used in any context in this Agreement
(including as described in the foregoing clauses (a) and (b)), such term shall
mean a day which, in addition to complying with any applicable requirements set
forth in the foregoing clauses (a) and (b), is a day other than a Saturday,
Sunday or other day on which commercial banks in Detroit or New York are
authorized or required by law to close.
"Capital Lease" of any Person shall mean any lease which, in
accordance with generally accepted accounting principles, is or should be
capitalized on the books of such Person.
"Cash Flow Coverage Ratio" shall mean, as of the last day of any
fiscal quarter of the Company and determined for the Company and its
Subsidiaries on a Consolidated basis, the ratio of (a) EBITDA plus the amount of
rent paid under operating leases, and minus the amount of capital expenditures
which are not financed by long term debt, in each case for the four consecutive
fiscal quarter period then ending, to (b) Interest Expense, plus the amount of
rent paid under operating leases, in each case as calculated for the four fiscal
quarters then ending, and plus the current portion of Funded Debt as of the last
day of such fiscal quarter.
"Change in Control" shall mean the occurrence of either of the
following (a) the acquisition by any Person, or two or more Persons acting in
concert, of beneficial ownership (within the meaning of
2
<PAGE>
Rule 13d-3 of the Securities and Exchange Commission under the Securities
Exchange Act of 1934) of 20% or more of the outstanding shares of voting stock
of the Company or (b) during any period of not greater than twelve consecutive
months beginning after the Effective Date, individuals who at the beginning of
such period constituted the Board of Directors of the Company (together with any
new directors whose election by such board of directors or whose nomination for
election by the shareholders of the Company was approved by a vote of a majority
of the directors of the Company then still in office who were either directors
at the beginning of such period or whose election or nomination for election was
previously so approved) cease for any reason to constitute a majority of the
board of directors of the Company then in office.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time, and the regulations thereunder.
"Commitment" shall mean, with respect to each Lender, the commitment
of each such Lender to make Loans and to participate in Letter of Credit
Advances made through the Agent pursuant to Section 2.1, in amounts not
exceeding in aggregate principal amount outstanding at any time the respective
commitment amounts for each such Lender set forth next to the name of each such
Lender in the signature pages hereof, as such amounts may be reduced from time
to time pursuant to Section 2.2.
"Commitment Reduction Date" shall mean the earlier to occur of
November __, 1998 or the date on which the Company incurs indebtedness in excess
of $40,000,000 in principal amount pursuant to Section 5.2(i)(vi).
"Consolidated" shall mean, when used with reference to any financial
term in this Agreement, the aggregate for two or more Persons of the amounts
signified by such term for all such Persons determined on a consolidated basis
in accordance with generally accepted accounting principles.
"Contingent Liabilities" of any Person shall mean, as of any date,
all obligations of such Person or of others for which such Person is
contingently liable, as obligor, guarantor, surety, accommodation party, partner
or in any other capacity, or in respect of which obligations such Person assures
a creditor against loss or agrees to take any action to prevent any such loss
(other than endorsements of negotiable instruments for collection in the
ordinary course of business), including without limitation all reimbursement
obligations of such Person in respect of any letters of credit, surety bonds or
similar obligations (including, without limitation, bankers acceptances) and all
obligations of such Person to advance funds to, or to purchase assets, property
or services from, any other Person for no purpose other than to maintain the
financial condition of such other Person.
"Contractual Obligation" shall mean as to any Person, any provision
of any security issued by such Person or of any agreement, instrument or other
undertaking to which such Person is a party or by which it or any of its
property is bound.
"Default" shall mean any event or condition which might become an
Event of Default with notice or lapse of time or both.
"Defaulting Lender" shall mean any Lender that fails to make
available to the Agent such Lender's Loans required to be made hereunder or
shall have not made a payment required to be made to
3
<PAGE>
the Agent hereunder. Once a Lender becomes a Defaulting Lender, such Lender
shall continue as a Defaulting Lender until such time as such Defaulting Lender
makes available to the Agent the amount of such Defaulting Lender's Loans and
all other amounts required to be paid to the Agent pursuant to this Agreement.
"Dollar Equivalent" shall mean as of any date, with respect to any
amount in a currency other than Dollars, the sum in Dollars resulting from the
conversion of such amount from such currency into Dollars at the most favorable
spot exchange rate determined by the Agent to be available to it for the
purchase of such currency with Dollars at approximately 11:00 a.m. local time of
the Applicable Lending Installation of the Agent on such date as a determination
of the Dollar Equivalent is made.
"Dollars" and "$" shall mean the lawful money of the United States
of America.
"EBITDA" shall mean, for any period, Net Income for such period plus
all amounts deducted in determining such Net Income on account of (a) Interest
Expense, (b) income taxes, and (c) depreciation and amortization expense.
"Effective Date" shall mean the effective date specified in the
final paragraph of this Agreement.
"Eligible Currency" shall mean such currency (other than Dollars)
which are approved and designated as an Eligible Currency by the Lenders,
provided that any such currency is and remains readily available, freely traded,
in which deposits are customarily offered to banks in the London interbank
market, convertible into Dollars in the international interbank market and as to
which the Dollar Equivalent may be readily calculated. If, after the designation
of any currency as an Eligible Currency, currency control or other exchange
regulations are imposed in the country in which such currency is issued with the
result that different types of such currency are introduced, or such country's
currency is, in the determination of the Agent, no longer readily available or
freely traded or as to which, in the determination of the Agent, a Dollar
Equivalent is not readily calculable, then the Agent shall promptly notify the
Company and such country's currency shall no longer be an Eligible Currency
until such time as the Lenders agree to reinstate such country's currency as an
Eligible Currency and promptly, but in any event within five (5) Business Days
of receipt of such notice from the Agent, the Company with respect to such
currency shall repay all Loans in such affected currency or convert such Loans
into Loans in Dollars or an Eligible Currency, as applicable, subject to the
other terms contained in this Agreement.
"Environmental Laws" at any date shall mean all provisions of law,
statute, ordinances, rules, regulations, judgments, writs, injunctions, decrees,
orders, awards and standards promulgated by the government of the United States
of America or any foreign government or by any state, province, municipality or
other political subdivision thereof or therein, or by any court, agency,
instrumentality, regulatory authority or commission of any of the foregoing
concerning the protection of, or regulating the discharge of substances into,
the environment.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time, and the regulations thereunder.
4
<PAGE>
"ERISA Affiliate" shall mean, with respect to any Person, any trade
or business (whether or not incorporated) which, together with such Person or
any Subsidiary of such Person, would be treated as a single employer under
Section 414 of the Code and the regulations promulgated thereunder.
"Eurocurrency Rate" shall mean, with respect to any Eurocurrency
Rate Loan and the related Interest Period, the per annum rate that is equal to
the sum of:
(a) the Applicable Margin, plus
(b) the rate per annum obtained by dividing (i) the per annum
interest rates at which deposits in the relevant Eligible Currency are offered
to the Applicable Lending Installation of the Agent by other prime banks in the
London interbank market in an amount comparable to such Eurocurrency Rate Loan
and for a period equal to such Interest Period at approximately 11:00 a.m.
London time two (2) Business Days prior to the first day of such Interest
Period, divided by (ii) an amount equal to one minus the stated maximum rate
(expressed as a decimal) of all reserve requirements (including, without
limitation, any marginal, emergency, supplemental, special or other reserves)
and other fees, charges and other requirements similar thereto or the functional
equivalent thereof which the Agent determines to be market practice to take into
account in determining the Eurocurrency Rate that are specified on the first day
of such Interest Period by the Board of Governors of the Federal Reserve System
(or any successor agency thereto) for determining the maximum reserve
requirement with respect to Eurocurrency funding (currently referred to as
"Eurocurrency liabilities" in Regulation D of such Board) maintained by a member
bank of such System or by any other governmental entity, foreign or domestic,
all as conclusively determined by the Agent (absent manifest error), such sum to
be rounded up, if necessary, to the nearest whole multiple of one sixteenth of
one percent (1/16 of 1%); provided that with respect to any Eurocurrency Rate
Loans, an alternative formula shall apply if (i) the Company and the Agent shall
have agreed to such alternative formula, and (ii) the Agent shall have
determined that such alternative formula more accurately compensates the Lenders
for the cost of maintaining reserves and similar requirements in respect of such
Eurocurrency Rate Loans.
"Eurocurrency Rate Loan" shall mean a Loan which bears interest at
the Eurocurrency Rate.
"Eurodollar Business Day" shall mean, with respect to any Eurodollar
Rate Loan, a day which is both a Business Day and a day on which dealings in
Dollar deposits are carried out in the London interbank market.
"Eurodollar Rate" shall mean, with respect to any Eurodollar Rate
Loan and the related Interest Period, the per annum rate that is equal to the
sum of:
(a) the Applicable Margin, plus
(b) the rate per annum obtained by dividing (i) the per annum rate
of interest at which deposits in Dollars for such Interest Period and in an
aggregate amount comparable to the amount of such Eurodollar Rate Loan to be
made by the Agent in its capacity as a Lender hereunder are offered to the Agent
by other prime banks in the London interbank market at approximately 11:00 a.m.
London time on the second Eurodollar Business Day prior to the first day of such
Interest Period by (ii) an amount equal to one
5
<PAGE>
minus the stated maximum rate (expressed as a decimal) of all reserve
requirements (including, without limitation, any marginal, emergency,
supplemental, special or other reserves) that are specified on the first day of
such Interest Period by the Board of Governors of the Federal Reserve System (or
any successor agency thereto) for determining the maximum reserve requirement
with respect to eurocurrency funding (currently referred to as "Eurocurrency
liabilities" in Regulation D of such Board) maintained by a member bank of such
System;
all as conclusively determined by the Agent, absent manifest error, such sum to
be rounded up, if necessary, to the nearest whole multiple of one one-hundredth
of one percent (1/100 of 1%).
"Eurodollar Rate Loan" shall mean any Loan which bears interest at
the Eurodollar Rate.
"Event of Default" shall mean any of the events or conditions
described in Section 6.1.
"FAA" shall mean, collectively, the United States Department of
Transportation and/or United States Federal Aviation Administration and/or the
Administrator of the United States Federal Aviation Administration and/or the
Secretary of Transportation or any Person, governmental department, bureau,
commission or agency succeeding to the functions of any of the foregoing.
"Federal Funds Rate" shall mean the per annum rate that is equal to
the average of the rates on overnight federal funds transactions with members of
the Federal Reserve System arranged by federal funds brokers, as published by
the Federal Reserve Bank of New York for such day, or, if such rate is not so
published for any day, the average of the quotations for such rates received by
the Agent from three federal funds brokers of recognized standing selected by
the Agent in its discretion;
all as conclusively determined by the Agent, such sum to be rounded up, if
necessary, to the nearest whole multiple of one one-hundredth of one percent
(1/100 of 1%), which Federal Funds Rate shall change simultaneously with any
change in such published or quoted rates or, when used in connection with any
Advance in any Eligible Currency, "Federal Funds Rate" shall mean, for any day,
an interest rate per annum equal to the local cost of funds rate for obligations
in such currency as determined by the Agent.
"Fixed Rate Loan" shall mean any Eurodollar Rate Loan, Eurocurrency
Rate Loan or Negotiated Rate Loan.
"Floating Rate" shall mean the per annum rate equal to the sum of
(a) the Applicable Floating Rate Margin plus (b) the greater of (i) the Prime
Rate in effect from time to time, and (ii) the sum of one-half percent (1/2%)
per annum plus the Federal Funds Rate in effect from time to time; which
Floating Rate shall change simultaneously with any change in such Prime Rate or
Federal Funds Rate, as the case may be.
"Floating Rate Loan" shall mean any Loan which bears interest at the
Floating Rate.
"Funded Debt" as of any date, shall mean: (a) all debt for borrowed
money and similar monetary obligations evidenced by bonds, notes, debentures,
Capital Lease obligations or otherwise, including without limitation obligations
in respect of the deferred purchase price of properties or assets, in each case
whether direct or indirect; (b) all liabilities secured by any Lien existing on
property owned or acquired subject thereto, whether or not the liability secured
thereby shall have been assumed; (c) all
6
<PAGE>
reimbursements obligations under outstanding letters of credit in respect of
drafts which (i) may be presented or (ii) have been presented and have not yet
been paid, and (d) all Contingent Liabilities relating to any of the obligations
of others similar in character to those described in the foregoing clauses (a)
through (c), all as determined for the Company and its Subsidiaries on a
Consolidated basis.
"Funded Debt Ratio" shall mean, as of any date, the ratio of (a)
Funded Debt as of such date to (b) EBITDA, as calculated for the four
consecutive fiscal quarters of the Company most recently ended.
"Generally Accepted Accounting Principles" shall mean generally
accepted accounting principles applied on a basis consistent with that reflected
in the financial statements referred to in Section 4.6.
"Guaranties" shall mean each guaranty executed by any Guarantor, as
amended or modified from time to time, which Guaranties shall be in form and
substance acceptable to the Agent.
"Guarantors" shall mean each present and future Subsidiary of the
Company.
"Hazardous Materials" includes, without limitation, any flammable
explosives, radioactive materials, hazardous materials, hazardous wastes,
hazardous or toxic substances or related materials defined in the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended (42
U.S.C. Sections 9601, et seq.), the Hazardous Materials Transportation Act, as
amended (49 U.S.C. Sections 1801, et seq.), the Resource Conservation and
Recovery Act, as amended (42 U.S.C. Sections 6901, et seq.) and in the
regulations adopted and publications promulgated pursuant thereto, or any other
federal, state or local government law, ordinance, rule or regulation.
"Indebtedness" of any Person shall mean, as of any date, (a) all
obligations of such Person for borrowed money, (b) all obligations of such
Person as lessee under any Capital Lease, (c) all obligations which are secured
by any Lien existing on any asset or property of such Person whether or not the
obligation secured thereby shall have been assumed by such Person (to the extent
of such Lien if such obligation is not assumed), (d) all obligations of such
Person for the unpaid purchase price for goods, property or services acquired by
such Person, except for trade accounts payable arising in the ordinary course of
business that are not past due, (e) all obligations of such Person to purchase
goods, property or services where payment therefor is required regardless of
whether delivery of such goods or property or the performance of such services
is ever made or tendered (generally referred to as "take or pay contracts"), (f)
all liabilities of such Person in respect of Unfunded Benefit Liabilities under
any Plan of such Person or of any ERISA Affiliate, (g) all obligations of such
Person in respect of any interest rate or currency swap, rate cap or other
similar transaction (valued in an amount equal to the highest termination
payment, if any, that would be payable by such Person upon termination for any
reason on the date of determination), and (h) all Contingent Liabilities.
"Interest Expense" shall mean, for any period, total interest and
related expense (including, without limitation, that portion of any Capitalized
Lease obligation attributable to interest expense in conformity with Generally
Accepted Accounting Principles, amortization of debt discount, all capitalized
interest, the interest portion of any deferred payment obligations, all
commissions, discounts and other fees and charges owed with respect to letter of
credit and bankers acceptance financing, the net costs and net payments under
any interest rate hedging, cap or similar agreement or arrangement, prepayment
charges, agency fees, administrative fees, commitment fees and capitalized
transaction costs allocated to interest
7
<PAGE>
expense) paid, payable or accrued during such period, without duplication for
any period, with respect to all outstanding Indebtedness of the Company or any
of its Subsidiaries, all as determined for the Company and its Subsidiaries on a
Consolidated basis.
"Interest Payment Date" shall mean (a) with respect to any Fixed
Rate Loan, the last day of each Interest Period with respect to such Fixed Rate
Loan and, in the case of any Interest Period exceeding three months, those days
that occur during such Interest Period at intervals of three months after the
first day of such Interest Period, and (b) in all other cases, the last Business
Day of each March, June, September and December occurring after the date hereof,
commencing with the first such Business Day occurring after the date of this
Agreement.
"Interest Period" shall mean, with respect to any Eurodollar Rate
Loan or Eurocurrency Rate Loan, the period commencing on the day such Loan is
made or converted to a Eurodollar Rate Loan or Eurocurrency Rate Loan and ending
on the day which is one, two, three or six months thereafter, as the Company may
elect under Section 2.4 or 2.7, and with respect to any Negotiated Rate Loan,
the period commencing on the day such Loan is made or converted to a Negotiated
Rate Loan and ending the date agreed upon between the Company and the Lenders at
the time such Negotiated Rate Loan is made, and, with respect to any Eurodollar
Rate Loan or Eurocurrency Rate Loan, and each subsequent period commencing on
the last day of the immediately preceding Interest Period and ending on the day
which is one, two, three or six months thereafter, as the Company may elect
under Section 2.4 or 2.7, and, with respect to each Negotiated Rate Loan, each
subsequent period commencing on the last day of the immediately preceding
Interest Period and ending on the date agreed upon between the Company and the
Lenders at the time such Negotiated Rate Loan is elected to be continued as a
Negotiated Rate Loan by the Company, provided, however, that (a) any Interest
Period which commences on the last Business Day of a calendar month (or on any
day for which there is no numerically corresponding day in the appropriate
subsequent calendar month) shall end on the last Business Day of the appropriate
subsequent calendar month, (b) each Interest Period which would otherwise end on
a day which is not a Business Day shall end on the next succeeding Business Day
or, if such next succeeding Business Day falls in the next succeeding calendar
month, on the next preceding Business Day, (c) no Interest Period which would
end after the Termination Date shall be permitted and (d) any Interest Period
pertaining to a Eurocurrency Rate Loan denominated in an Eligible Currency being
replaced by the currency of the European Monetary Union that would otherwise
extend beyond the date on which such replacement becomes effective shall end on
such date.
"Letter of Credit" shall mean a standby letter of credit having a
stated expiry date or a date upon which the draft must be reimbursed not later
than twelve months after the date of issuance and not later than the fifth
Business Day before the Termination Date issued by the Agent on behalf of the
Lenders for the account of the Company under an application and related
documentation acceptable to the Agent requiring, among other things, immediate
reimbursement by the Company to the Agent in respect of all drafts or other
demand for payment honored thereunder and all expenses paid or incurred by the
Agent relative thereto.
"Letter of Credit Advance" shall mean any issuance of a Letter of
Credit under Section 2.4 made pursuant to Section 2.1(b) in which each Lender
acquires a pro rata risk participation pursuant to Section 2.4(d).
"Letter of Credit Documents" shall have the meaning ascribed thereto
in Section 3.3(b).
8
<PAGE>
"Lien" shall mean any pledge, assignment, hypothecation, mortgage,
security interest, deposit arrangement, option, conditional sale or title
retaining contract, sale and leaseback transaction, financing statement filing,
lessor's or lessee's interest under any lease, subordination of any claim or
right, or any other type of lien, charge, encumbrance, preferential arrangement
or other claim or right.
"Loan" shall mean any borrowing under Section 2.4 evidenced by the
Notes and made pursuant to Section 2.1(a). Any such Loan or portion thereof may
also be denominated as a Floating Rate Loan, a Eurocurrency Rate Loan or a
Eurodollar Rate Loan and such Loans are referred to herein as "types" of Loans.
"Loan Documents" shall mean, collectively, this Agreement, the
Notes, the Guarantors, all agreements evidencing or relating to any swap
obligations owing by the Company to the Lender at any time and all other
agreements, instruments and documents executed pursuant thereto at any time, in
each case as amended or modified from time to time.
"Material Adverse Effect" shall mean a material adverse effect on
(a) the business, assets, operations, prospects or condition (financial or
otherwise) of the Company, or any Guarantor, (b) the ability of the Company to
perform its obligations under any Loan Document, or (c) the validity or
enforceability of any Loan Document or the rights or remedies of the Agent or
the Lenders under any Loan Document.
"Multiemployer Plan" shall mean any "multiemployer plan" as defined
in Section 4001(a)(3) of ERISA or Section 414(f) of the Code.
"Negotiated Rate" shall mean, with respect to any Negotiated Rate
Loan, the rate per annum agreed upon between the Company and the Lenders at the
time such Negotiated Rate Loan is made.
"Negotiated Rate Loan" shall mean any Loan which bears interest at
the Negotiated Rate.
"Net Income" shall means for any period, the Consolidated net income
(or loss) of the Company and its Subsidiaries for such period taken as a single
accounting period, determined in accordance with Generally Accepted Accounting
Principles; provided that in determining Consolidated Net Income there shall be
excluded, without duplication: (a) the income of any Person in which any Person
other than the Company has a joint interest or partnership interest, except to
the extent of the amount of dividends or other distributions actually paid to
the Company by such Person during such period, (b) the proceeds of any insurance
policy, (c) gains from the sale, exchange, transfer or other disposition of
property or assets not in the ordinary course of business of the Company and its
Subsidiaries and related tax effects in accordance with Generally Accepted
Accounting Principles, and (d) any other extraordinary or non-recurring gains of
the Company or any of its Subsidiaries, and related tax effects in accordance
with Generally Accepted Accounting Principles.
"Net Worth" of any Person shall mean, as of any date, the amount of
any capital stock, paid in capital and similar equity accounts plus (or minus in
the case of a deficit) the capital surplus and retained earnings of such Person
and the amount of any foreign currency translation adjustment account shown as a
capital account of such Person.
9
<PAGE>
"Note" shall mean any promissory note of the Company evidencing the
Loans, in substantially the form annexed hereto as Exhibit A, as amended or
modified from time to time and together with any promissory note or notes issued
in exchange or replacement therefor.
"Overdue Rate" shall mean (a) in respect of principal of Floating
Rate Loans, a rate per annum that is equal to the sum of three percent (3%) per
annum plus the Floating Rate, (b) in respect of principal of Fixed Rate Loans or
Eurocurrency Rate Loans, a rate per annum that is equal to the sum of three
percent (3%) per annum plus the per annum rate in effect thereon until the end
of the then current Fixed Interest Period for such Loan and, thereafter, a rate
per annum that is equal to the sum of three percent (3%) per annum plus the
Floating Rate, and (c) in respect of other amounts payable by the Company
hereunder (other than interest), a per annum rate that is equal to the sum of
three percent (3%) per annum plus the Floating Rate.
"PBGC" shall mean the Pension Benefit Guaranty Corporation and any
entity succeeding to any or all of its functions under ERISA.
"Permitted Currency" shall mean Dollars or any Eligible Currency.
"Permitted Liens" shall mean Liens permitted by Section 5.2(e)
hereof.
"Person" shall include an individual, a corporation, an association,
a partnership, a trust or estate, a joint stock company, an unincorporated
organization, a joint venture, a trade or business (whether or not
incorporated), a government (foreign or domestic) and any agency or political
subdivision thereof, or any other entity.
"Plan" shall mean, with respect to any Person, any pension plan
(including a Multiemployer Plan) subject to Title IV of ERISA or to the minimum
funding standards of Section 412 of the Code which has been established or
maintained by such Person, any Subsidiary of such Person or any ERISA Affiliate,
or by any other Person if such Person, any Subsidiary of such Person or any
ERISA Affiliate could have liability with respect to such pension plan.
"Prime Rate" shall mean the per annum rate announced by the Agent
from time to time as its "prime rate" (it being acknowledged that such announced
rate may not necessarily be the lowest rate charged by the Agent to any of its
customers); which Prime Rate shall change simultaneously with any change in such
announced rate or, when used in connection with any Advance denominated in any
Eligible Currency, "Prime Rate" shall mean the correlative floating rate of
interest customarily applicable to similar extensions of credit to corporate
borrowers denominated in such currency in the country of issue, as determined by
the Agent, which Prime Rate shall change simultaneously with any change in such
announced or established rates.
"Prohibited Transaction" shall mean any transaction involving any
Plan which is proscribed by Section 406 of ERISA or Section 4975 of the Code.
"Reportable Event" shall mean a reportable event as described in
Section 4043(b) of ERISA including those events as to which the thirty (30) day
notice period is waived under Part 2615 of the regulations promulgated by the
PBGC under ERISA.
10
<PAGE>
"Required Lenders" shall mean Lenders holding not less than (i)
66-2/3% percent of the aggregate principal amount of the Advances then
outstanding or (ii) 66-2/3% percent of the Commitments if no Advances are then
outstanding.
"Requirement of Law" shall mean as to any Person, the certificate of
incorporation and by-laws or other organizational or governing documents of such
Person, and any law, treaty, rule or regulation or determination of an
arbitrator or a court or other governmental authority, in each case applicable
to or binding upon such Person or any of its property to which such Person or
any of its property is subject.
"Subsidiary" of any Person shall mean any other Person (whether now
existing or hereafter organized or acquired) in which (other than directors
qualifying shares required by law) at least a majority of the securities or
other ownership interests of each class having ordinary voting power or
analogous right (other than securities or other ownership interests which have
such power or right only by reason of the happening of a contingency), at the
time as of which any determination is being made, are owned, beneficially and of
record, by such Person or by one or more of the other Subsidiaries of such
Person or by any combination thereof. Unless otherwise specified, reference to
"Subsidiary" shall mean a Subsidiary of the Company.
"Termination Date" shall mean the earlier to occur of (a) the date
five years after the date of this Agreement or such later date as the
Termination Date may be extended pursuant to Section 2.10 and (b) the date on
which the Commitments shall be terminated pursuant to Section 2.2 or 6.2.
"Total Liabilities" of any Person shall mean, as of any date, all
obligations which, in accordance with Generally Accepted Accounting Principles,
are or should be classified as liabilities on a balance sheet of such Person and
all Contingent Liabilities of such Person.
"Unfunded Benefit Liabilities" shall mean, with respect to any Plan
as of any date, the amount of the unfunded benefit liabilities determined in
accordance with Section 4001(a)(18) of ERISA.
1.2 Other Definitions; Rules of Construction. As used herein, the
terms "Agent", "Lenders", "Company" and "this Agreement" shall have the
respective meanings ascribed thereto in the introductory paragraph of this
Agreement. Such terms, together with the other terms defined in Section 1.1,
shall include both the singular and the plural forms thereof and shall be
construed accordingly. All computations required hereunder and all financial
terms used herein shall be made or construed in accordance with Generally
Accepted Accounting Principles unless such principles are inconsistent with the
express requirements of this Agreement; provided that, if the Company notifies
the Agent that the Company wishes to amend any covenant in Article V to
eliminate the effect of any change in Generally Accepted Accounting Principles
in the operation of such covenant (or if the Agent notifies the Company that the
Required Lenders wish to amend Article V for such purpose), then the Company's
compliance with such covenant shall be determined on the basis of Generally
Accepted Accounting Principles in effect immediately before the relevant change
in Generally Accepted Accounting Principles became effective, until either such
notice is withdrawn or such covenant is amended in a manner satisfactory to the
Company and the Required Lenders. Use of the terms "herein", "hereof", and
"hereunder" shall be deemed references to this Agreement in its entirety and not
to the Section or clause in which such term appears. References to
11
<PAGE>
"Sections" and "subsections" shall be to Sections and subsections, respectively,
of this Agreement unless otherwise specifically provided.
ARTICLE II.
THE COMMITMENTS AND THE ADVANCES
2.1 Commitment of the Lenders.
(a) Advances. Each Lender agrees, for itself only, subject to
the terms and conditions of this Agreement, to make Loans in any Permitted
Currency to the Company pursuant to Section 2.4 and to participate in Letters of
Credit from time to time from and including the Effective Date to but excluding
the Termination Date, not to exceed in aggregate principal amount at any time
outstanding the amount determined pursuant to Section 2.1(b).
(b) Limitation on Amount of Advances. Notwithstanding anything
in this Agreement to the contrary, (i) the Dollar Equivalent of the aggregate
principal amount of the Advances made or participated in by any Lender at any
time outstanding shall not exceed the amount of the Commitment of such Lender as
of such time, (ii) the Dollar Equivalent of the aggregate amount of all Advances
at any time outstanding shall not exceed the aggregate amount of the Commitments
as of such time and (iii) the aggregate principal amount of all Letter of Credit
Advances outstanding at any time shall not exceed $3,000,000.
2.2 Termination and Reduction of Commitments. (a) The Company shall
have the right to terminate or reduce the Commitments at any time and from time
to time at its option, provided that (i) the Company shall give notice of such
termination or reduction to the Agent (with sufficient executed copies for each
Lender) specifying the amount and effective date thereof, (ii) each partial
reduction of the Commitments shall be in a minimum amount of $2,000,000 and in
an integral multiple of $2,000,000 and shall reduce the Commitments of all of
the Lenders proportionately in accordance with the respective commitment amounts
for each such Lender set forth in the signature pages hereof next to name of
each such Lender, (iii) no such termination or reduction shall be permitted with
respect to any portion of the Commitments as to which a request for a Advance
pursuant to Section 2.4 is then pending and (iv) the Commitments may not be
terminated if any Advances are then outstanding and may not be reduced below the
principal amount of the Advances then outstanding. The Commitments or any
portion thereof terminated or reduced pursuant to this Section 2.2, whether
optional or mandatory, may not be reinstated.
(b) For purposes of this Agreement, a Letter of Credit Advance
(i) shall be deemed outstanding in an amount equal to the sum of the maximum
amount available to be drawn under the related Letter of Credit on or after the
date of determination and on or before the stated expiry date thereof plus the
amount of any draws under such Letter of Credit that have not been reimbursed as
provided in Section 3.3 and (ii) shall be deemed outstanding at all times on and
before such stated expiry date or such earlier date on which all amounts
available to be drawn under such Letter of Credit have been fully drawn, and
thereafter until all related reimbursement obligations have been paid pursuant
to Section 3.3. As provided in Section 3.3, upon each payment made by the Agent
in respect of any draft or other demand for payment under any Letter of Credit,
the amount of any Letter of Credit Advance outstanding immediately prior to such
payment
12
<PAGE>
shall be automatically reduced by the amount of each Loan deemed advanced in
respect of the related reimbursement obligation of the Company.
2.3 Fees. (a) The Company agrees to pay to each Lender a facility
fee on the daily average amount of its Commitment for the period from the
Effective Date to but excluding the Termination Date at a rate equal to the
Applicable Margin. Accrued facility fees shall be payable quarterly in arrears
on the last Business Day of each March, June, September and December, commencing
on the first such Business Day occurring after the Effective Date, and on the
Termination Date.
(b) On or before the date of issuance of any Letter of Credit,
the Company agrees (i) to pay to the Lenders a fee computed at the rate of the
Applicable Margin of the maximum amount available to be drawn from time to time
under such Letter of Credit for the period from and including the date of
issuance of such Letter of Credit to and including the stated expiry date of
such Letter of Credit, and (ii) to pay an additional fee to the Agent for its
own account computed at the rate of 0.125% per annum of such maximum amount for
such period. Such fees are nonrefundable and the Company shall not be entitled
to any rebate of any portion thereof if such Letter of Credit does not remain
outstanding through its stated expiry date or for any other reason. The Company
further agrees to pay to the Agent, on demand, such other customary
administrative fees, charges and expenses of the Agent in respect of the
issuance, negotiation, acceptance, amendment, transfer and payment of such
Letter of Credit or otherwise payable pursuant to the application and related
documentation under which such Letter of Credit is issued.
(c) The Company agrees to pay to the Agent such fees in such
amounts as may from time to time be agreed upon by the Company and the Agent and
to pay to the Lenders such fee as may be agreed upon by the Company and the
Agent.
2.4 Disbursement of Advances. (a) The Company shall give the Agent
notice of its request for each Advance in substantially the form of Exhibit B
hereto not later than 10:00 a.m. Detroit time (i) three Eurodollar Business Days
prior to the date such Advance is requested to be made if such Advance is to be
made as a Eurodollar Rate Loan or Eurocurrency Rate Loan, (ii) five Business
Days prior to the date any Letter of Credit Advance is requested to be made, and
(iii) one Business Day prior to the date such Advance is requested to be made in
all other cases, which notice shall specify whether a Eurodollar Rate Loan,
Eurocurrency Rate Loan, a Negotiated Rate Loan or Floating Rate Loan or a Letter
of Credit Advance is requested and, in the case of each requested Fixed Rate
Loan, the Interest Period to be initially applicable to such Loan and, in the
case of each Eurocurrency Rate Loan the Permitted Currency of such Loan and, in
the case of each Letter of Credit Advance, such information as may be necessary
for the issuance thereof by the Agent. The Agent, not later than the Business
Day next succeeding the day such notice is given, shall provide notice of such
requested Advance to each Lender. Subject to the terms and conditions of this
Agreement, the proceeds of each such requested Loan shall be made available to
the Company by depositing the proceeds thereof in immediately available funds,
in an account maintained and designated by the Company at the Applicable Lending
Installation of the Agent or as otherwise agreed to between the Agent and the
Company. Subject to the terms and conditions of this Agreement, the Agent shall,
on the date any Letter of Credit Advance is requested to be made, issue the
related Letter of Credit on behalf of the Lenders for the account of the
Company. Notwithstanding anything herein to the contrary, (a) the Agent may
decline to issue any requested Letter of Credit on the basis that the
beneficiary, the purpose of issuance or the terms or the conditions of drawing
are contrary to a policy of the Agent and (b) Loans denominated in any Permitted
Currency other than Dollars may only be made as Eurocurrency Rate Loans.
13
<PAGE>
(b) Each Lender, on the date any Borrowing in the form of a
Loan is requested to be made, shall make its pro rata share of such Borrowing
available in immediately available, freely transferable, cleared funds for
disbursement to the Company pursuant to the terms and conditions of this
Agreement at the principal office of the Agent. Unless the Agent shall have
received notice from any Lender prior to the date such Borrowing is requested to
be made under this Section 2.4 that such Lender will not make available to the
Agent such Lender's pro rata portion of such Borrowing, the Agent may assume
that such Lender has made such portion available to the Agent on the date such
Borrowing is requested to be made in accordance with this Section 2.4. If and to
the extent such Lender shall not have so made such pro rata portion available to
the Agent, the Agent may (but shall not be obligated to) make such amount
available to the Company, and such Lender and the Company severally agree to pay
to the Agent forthwith on demand such amount together with interest thereon, for
each day from the date such amount is made available to the Company by the Agent
until the date such amount is repaid to the Agent, at the Federal Funds Rate in
the case of any Lender and at the interest rate applicable to such Advance in
the case of the Company. If such Lender shall pay such amount to the Agent
together with interest, such amount so paid shall constitute a Loan by such
Lender as a part of such the related Borrowing for purposes of this Agreement.
The failure of any Lender to make its pro rata portion of any such Borrowing
available to the Agent shall not relieve any other Lender of its obligations to
make available its pro rata portion of such Borrowing on the date such Borrowing
is requested to be made, but no Lender shall be responsible for failure of any
other Lender to make such pro rata portion available to the Agent on the date of
any such Borrowing.
(c) All Loans made under this Section 2.4 shall be evidenced
by the Notes, and all such Loans shall be due and payable and bear interest as
provided in Article III. Each Lender is hereby authorized by the Company to
record on the schedule attached to the Notes, or in its books and records, the
date, amount and type of each Loan and the duration of the related Interest
Period (if applicable), the amount of each payment or prepayment of principal
thereon, and the other information provided for on such schedule, which schedule
or books and records, as the case may be, shall constitute prima facie evidence
of the information so recorded, provided, however, that failure of any Lender to
record, or any error in recording, any such information shall not relieve the
Company of its obligation to repay the outstanding principal amount of the
Loans, all accrued interest thereon and other amounts payable with respect
thereto in accordance with the terms of the Notes and this Agreement. Subject to
the terms and conditions of this Agreement, the Company may borrow Loans under
this Section 2.4 and under Section 3.3, prepay Loans pursuant to Section 3.1 and
reborrow Loans under this Section 2.4 and under Section 3.3.
(d) Nothing in this Agreement shall be construed to require or
authorize any Lender to issue any Letter of Credit, it being recognized that the
Agent has the sole obligation under this Agreement to issue Letters of Credit on
behalf of the Lenders, and the Commitment of each Lender with respect to Letter
of Credit Advances is expressly conditioned upon the Agent's performance of such
obligations. Upon such issuance by the Agent, each Lender shall automatically
acquire a pro rata risk participation interest in such Letter of Credit Advance
based on the amount of its respective Commitment. If the Agent shall honor a
draft or other demand for payment presented or made under any Letter of Credit,
the Agent shall provide notice thereof to each Lender on the date such draft or
demand is honored unless the Company shall have satisfied its reimbursement
obligation under Section 3.3 by payment to the Agent on such date. Each Lender,
on such date, shall make its pro rata share of the amount paid by the Agent
available in immediately available funds at the principal office of the Agent
for the account of the Agent. If
14
<PAGE>
and to the extent such Lender shall not have made such pro rata portion
available to the Agent, such Lender and the Company severally agree to pay to
the Agent forthwith on demand such amount together with interest thereon, for
each day from the date such amount was paid by the Agent until such amount is so
made available to the Agent at a per annum rate equal to the Federal Funds Rate.
If such Lender shall pay such amount to the Agent together with such interest,
such amount so paid shall constitute a Loan by such Lender as part of the
Borrowing disbursed in respect of the reimbursement obligation of the Company
under Section 3.3 for purposes of this Agreement. The failure of any Lender to
make its pro rata portion of any such amount paid by the Agent available to the
Agent shall not relieve any other Lender of its obligation to make available its
pro rata portion of such amount, but no Lender shall be responsible for failure
of any other Lender to make such pro rata portion available to the Agent.
2.5 Conditions for First Disbursement. The obligation of the Lenders
to make the first Advance hereunder is subject to receipt by each Lender and the
Agent of the following documents and completion of the following matters, in
form and substance satisfactory to each Lender and the Agent:
(a) Charter Documents. Certificates of recent date of the
appropriate authority or official of the Company's and each Guarantor's state of
incorporation (listing all charter documents on file in that office if such
listing is available) and certifying as to the good standing and corporate
existence of the Company and together with copies of such charter documents
certified as of a recent date by such authority or official;
(b) By-Laws and Corporate Authorizations. Copies of the
by-laws of the Company and each Guarantor and together with all authorizing
resolutions and evidence of other corporate action taken by the Company and each
Guarantor to authorize the execution, delivery and performance by the Company
Guarantor of the Loan Documents and the consummation by the Company Guarantor of
the transactions contemplated hereby, certified as true and correct as of the
Effective Date by a duly authorized officer of the Company and each Guarantor;
(c) Incumbency Certificate. Certificates of incumbency of the
Company and each Guarantor containing, and attesting to the genuineness of, the
signatures of those officers authorized to act on behalf of the Company and each
Guarantor in connection with the Loan Documents and the consummation by the
Company and each Guarantor of the transactions contemplated hereby, certified as
true and correct as of the Effective Date by a duly authorized officer of the
Company and each Guarantor;
(d) Notes. The Notes duly executed on behalf of the Company
for each Lender;
(e) Legal Opinions. The favorable written opinion of counsel
for the Company and the Guarantors in the form and substance acceptable to the
Agent;
(f) Fees. The fees required to be paid as of the Effective
Date under Section 2.3;
(g) Payment of Indebtedness. Simultaneously with the first
Advance hereunder, the Company shall have paid in full all indebtedness and
liabilities outstanding pursuant to the Loan Agreement between the Company, the
banks party thereto and NBD Bank, as agent, dated June 5,
15
<PAGE>
1996, as amended, (the "Previous Loan Agreement"), and any other indebtedness
required by the Agent, and the Company hereby terminates any commitment to lend
under the Previous Loan Agreement;
(h) Guaranties. The Guaranties duly executed on behalf of each
Guarantor; and
(i) Appraisals. Appraisals requested by the Agent, in form and
substance and performed by an independent third party appraiser acceptable to
the Agent.
2.6 Further Conditions for Disbursement. The obligation of the
Lenders to make any Advance (including the first Advance), or any continuation
or conversion under Section 2.7 is further subject to the satisfaction of the
following conditions precedent:
(a) The representations and warranties contained in Article IV
hereof shall be true and correct on and as of the date such Advance is made
(both before and after such Advance is made) as if such representations and
warranties were made on and as of such date;
(b) No Default or Event of Default shall exist or shall have
occurred and be continuing on the date such Advance is made (whether before or
after such Advance is made);
(c) In the case of any Letter of Credit Advance, the Company
shall have delivered to the Agent an application for the related Letter of
Credit and other related documentation requested by and acceptable to the Agent
appropriately completed and duly executed on behalf of the Company.
The Company shall be deemed to have made a representation and warranty to the
Lenders at the time of the making of, and the continuation or conversion of,
each Advance to the effects set forth in clauses (a) and (b) of this Section
2.6. For purposes of this Section 2.6 the representations and warranties
contained in Section 4.6 hereof shall be deemed made with respect to both the
financial statements referred to therein and the most recent financial
statements delivered pursuant to Section 5.1(d)(ii) and (iii).
2.7 Subsequent Elections as to Loans. The Company may elect (a) to
continue a Fixed Rate Loan, or a portion thereof, as a Fixed Rate Loan or (b) to
convert a Fixed Rate Loan, or a portion thereof, to a Loan of another type or
(c) to convert a Floating Rate Loan, or a portion thereof, to a Fixed Rate Loan
in each case by giving notice thereof to the Agent in substantially the form of
Exhibit C hereto not later than 10:00 a.m. Detroit time four Eurodollar Business
Days prior to the date any such continuation of or conversion to a Fixed Rate
Loan is to be effective and not later than 10:00 a.m. Detroit time one Business
Day prior to the date such continuation or conversion is to be effective in all
other cases, provided that an outstanding Fixed Rate Loan may only be converted
on the last day of the then current Interest Period with respect to such Loan,
and provided, further, if a continuation of a Loan as, or a conversion of a Loan
to, a Fixed Rate Loan is requested, such notice shall also specify the Interest
Period to be applicable thereto upon such continuation or conversion. The Agent,
not later than the Business Day next succeeding the day such notice is given,
shall provide notice of such election to the Lenders. If the Company shall not
timely deliver such a notice with respect to any outstanding Eurodollar Rate
Loan or Negotiated Rate Loan, the Company shall be deemed to have elected to
convert such Fixed Rate Loan to a Floating Rate Loan on the last day of the then
current Interest Period with respect to such Loan. If the Company shall not
timely deliver such
16
<PAGE>
notice with respect to any outstanding Eurocurrency Rate Loan, the Company shall
be deemed to have elected to convert such Eurocurrency Rate Loan to a
Eurocurrency Rate Loan with an Interest Period of one month on the last day of
the then current Interest Period with respect to such Eurocurrency Rate Loan.
2.8 Limitation of Requests and Elections. Notwithstanding any other
provision of this Agreement to the contrary, if, upon receiving a request for a
Eurodollar Rate Loan pursuant to Section 2.4, or a request for a continuation of
a Eurodollar Rate Loan as a Eurodollar Rate Loan of the then existing type, or a
request for a conversion of a Floating Rate Loan to a Eurodollar Rate Loan
pursuant to Section 2.7, (a) in the case of any Eurodollar Rate Loan, deposits
in Dollars for periods comparable to the Interest Period elected by the Company
are not available to any Lender in the London interbank market, or (b) the
Eurodollar Rate will not adequately and fairly reflect the cost to any Lender of
making, funding or maintaining the related Eurodollar Rate Loan, or (c) by
reason of national or international financial, political or economic conditions
or by reason of any applicable law, treaty or other international agreement,
rule or regulation (whether domestic or foreign) now or hereafter in effect, or
the interpretation or administration thereof by any governmental authority
charged with the interpretation or administration thereof, or compliance by any
Lender with any guideline, request or directive of such authority (whether or
not having the force of law), including without limitation exchange controls, it
is impracticable, unlawful or impossible for, or shall limit or impair the
ability of, (i) any Lender to make or fund the relevant Loan or to continue such
Loan as a Loan of the then existing type or to convert a Loan to such a Loan or
(ii) the Company to make or any Lender to receive any payment under this
Agreement at the place specified for payment hereunder or to freely convert any
amount paid into Dollars at market rates of exchange or to transfer any amount
paid or so converted to the address of its principal office specified in Section
8.2, then the Company shall not be entitled, so long as such circumstances
continue, to request a Loan of the affected type pursuant to Section 2.4 or a
continuation of or conversion to a Loan of the affected type pursuant to Section
2.7. In the event that such circumstances no longer exist, the Lenders shall
again consider requests for Loans of the affected type pursuant to Section 2.4,
and requests for continuations of and conversions to Loans of the affected type
pursuant to Section 2.7.
2.9 Minimum Amounts; Limitation on Number of Loans; Etc. Except for
(a) Advances which exhaust the entire remaining amount of the Commitments, and
(b) payments required pursuant to Section 3.1(c) or Section 3.8, each Advance
and each continuation or conversion pursuant to Section 2.7 and each prepayment
thereof shall be in a minimum amount of $1,000,000 and in integral multiples of
$100,000 in case of each Fixed Rate Loan, in the minimum amount of $50,000 and
in integral multiples of $10,000 in the case of Floating Rate Loans and in the
minimum amount of $100,000 in the case of Letter of Credit Advances.
2.10 Extension of Termination Dates. The Termination Date may be
extended as set forth in this Section 2.10.
(a) Notwithstanding anything contained in this Agreement to
the contrary, not later than December 1 of each year, commencing March 1, 1997,
the Company may, by delivery of a duly completed extension request to the Agent
in the form of Schedule 2.10 hereto (an "Extension Request"), irrevocably
request that each Lender extend the Termination Date for a one year period.
(b) (i) The Agent shall, promptly after receipt of any such
Extension Request pursuant to subsection (a) above, notify each Lender by
providing them a copy of such Extension Request.
17
<PAGE>
(ii) Each Lender shall, on or before the first January
15 following receipt of the Extension Request notify the Agent whether it
consents to the request of the Company set forth in such Extension Request, such
consent to be in the sole discretion of such Lender. If any Lender does not so
notify the Agent of its decision such Lender shall be deemed not to have
consented to such request of the Company.
(iii) The Agent shall promptly notify the Company which
Lenders have consented to such request (a "Consenting Lender"). If the Agent
does not so notify the Company on or before the first February 28 following such
Extension Request, the Agent shall be deemed to have notified the Company that
the Lenders have not consented to the Company's request.
(iv) Each Lender that elects not to extend the requested
Termination Date(s) or fails to so notify the Agent of such consent (a
"Non-Consenting Lender") hereby agrees that if any other Lender or financial
institution acceptable to the Company and the Agent offers to purchase such
Non-Consenting Lender's Commitment(s) for a purchase price equal to the sum of
all amounts then owing with respect to the Loans and all other amounts accrued
for the account of such Non-Consenting Lender and any amounts which may become
owing as a result of such purchase under Section 3.9, such Non-Consenting Lender
will, promptly or upon the existing Termination Date(s) for such Non-Consenting
Lender, as elected by the Company, assign, sell and transfer all of its right,
title and obligations with respect to the foregoing to such other Lender or
financial institution pursuant to and on the terms specified in the form of
Assignment and Acceptance attached hereto as Exhibit E.
(v) Notwithstanding anything herein to the contrary, the
Termination Date(s) will not be extended if the aggregate Commitments of each
Consenting Lender plus the additional Commitments of each Lender or other
financial institution replacing any Non-Consenting Lender pursuant to clause
(iv) above and agreeing to the Extension Request does not equal 100% of the then
existing aggregate Commitments. If the Termination Date(s) are extended
hereunder, it will not be extended for the Non-Consenting Lenders, and each
Non-Consenting Lender's Commitment(s) shall remain in effect and not be
terminated until the Termination Date(s) that is then in effect for it subject
to the purchase of such Non-Consenting Lender's Commitment pursuant to clause
(iv) above.
ARTICLE III.
PAYMENTS AND PREPAYMENTS OF ADVANCES
3.1 Principal Payments and Prepayments.
(a) Unless earlier payment is required under this Agreement,
the Company shall pay to the Lenders on the Termination Date the entire
outstanding principal amount of the Advances.
(b) The Company may at any time and from time to time prepay
all or a portion of the Loans, without premium or penalty, provided that (i) the
Company may not prepay any portion of any Loan as to which an election for a
continuation of or a conversion to a Fixed Rate Loan is pending pursuant to
Section 2.4, and (ii) unless earlier payment is required under this Agreement,
any Fixed Rate Loan may only be prepaid on the last day of the then current
Interest Period with respect to such Loan.
18
<PAGE>
Upon the giving of such notice, the aggregate principal amount of such Loan or
portion thereof so specified in such notice, together with such accrued interest
and other amounts, shall become due and payable on the specified prepayment
date.
(c) Anytime that the Dollar Equivalent of the aggregate
principal amount of the Advances exceeds the amount allowed by Section 2.1(b),
the Company shall prepay the Loans by an amount equal to such excess and, if a
deficiency still remains after all Loans have has been paid in full, the Company
will provide cash collateral in a manner and by written agreement satisfactory
to the Agent to secure the outstanding Letters of Credit in an amount equal to
the remaining deficiency.
3.2 Interest Payments. The Company shall pay interest to the Lenders
on the unpaid principal amount of each Loan, for the period commencing on the
date such Loan is made until such Loan is paid in full, on each Interest Payment
Date and at maturity (whether at stated maturity, by acceleration or otherwise),
and thereafter on demand, at the following rates per annum:
(a) During such periods that such Loan is a Floating Rate
Loan, the Floating Rate.
(b) During such periods that such Loan is a Eurodollar Rate
Loan, the Eurodollar Rate applicable to such Loan for each related Interest
Period.
(c) During such periods that such Loan is a Eurocurrency Rate
Loan, the Eurocurrency Rate applicable to such Loan for each related
Eurocurrency Interest Period.
(d) During such periods that such Loan is a Negotiated Rate
Loan, the Negotiated Rate applicable to such Loan for each related Interest
Period.
Notwithstanding the foregoing paragraphs (a), (b), (c) and (d), the Company
shall pay interest on demand by the Agent at the Overdue Rate on the outstanding
principal amount of any Loan and any other amount payable by the Company
hereunder (other than interest) at any time on or after an Event of Default if
required in writing by the Required Lenders.
3.3 Letter of Credit Reimbursement Payments. (a) (i) The Company
agrees to pay to the Lenders, on the day on which the Agent shall honor a draft
or other demand for payment presented or made under any Letter of Credit, an
amount equal to the amount paid by the Agent in respect of such draft or other
demand under such Letter of Credit and all expenses paid or incurred by the
Agent relative thereto. Unless the Company shall have made such payment to the
Lenders on such day, upon each such payment by the Agent, the Agent shall be
deemed to have disbursed to the Company, and the Company shall be deemed to have
elected to satisfy its reimbursement obligation by, a Loan bearing interest at
the Floating Rate for the account of the Lenders in an amount equal to the
amount so paid by the Agent in respect of such draft or other demand under such
Letter of Credit. Such Loan shall be disbursed notwithstanding any failure to
satisfy any conditions for disbursement of any Loan set forth in Article II
hereof and, to the extent of the Loan so disbursed, the reimbursement obligation
of the Company under this Section 3.3 shall be deemed satisfied; provided,
however, that nothing in this Section 3.3 shall be deemed to constitute a waiver
of any Default or Event of Default caused by the failure to the conditions for
disbursement or otherwise.
19
<PAGE>
(ii) If, for any reason (including without limitation as
a result of the occurrence of an Event of Default with respect to the Company
pursuant to Section 6.1(h)), Floating Rate Loans may not be made by the Lenders
as described in Section 3.3(a)(i), then (A) the Company agrees that each
reimbursement amount not paid pursuant to the first sentence of Section
3.3(a)(i) shall bear interest, payable on demand by the Agent, at the interest
rate then applicable to Floating Rate Loans, and (B) effective on the date each
such Floating Rate Loan would otherwise have been made, each Lender severally
agrees that it shall unconditionally and irrevocably, without regard to the
occurrence of any Default or Event of Default, in lieu of deemed disbursement of
Loans, to the extent of such Lender's Commitment, purchase a participating
interest in each reimbursement amount. Each Lender will immediately transfer to
the Agent, in same day funds, the amount of its participation. Each Lender shall
share on a pro rata basis (calculated by reference to its Commitment) in any
interest which accrues thereon and in all repayments thereof. If and to the
extent that any Lender shall not have so made the amount of such participating
interest available to the Agent, such Lender and the Company severally agree to
pay to the Agent forthwith on demand such amount together with interest thereon,
for each day from the date of demand by the Agent until the date such amount is
paid to the Agent, at (x) in the case of the Company, the interest rate then
applicable to Floating Rate Loans and (y) in the case of such Lender, the
Federal Funds Rate.
(b) The reimbursement obligation of the Company under this
Section 3.3 shall be absolute, unconditional and irrevocable and shall remain in
full force and effect until all obligations of the Company to the Lenders
hereunder shall have been satisfied, and such obligations of the Company shall
not be affected, modified or impaired upon the happening of any event, including
without limitation, any of the following, whether or not with notice to, or the
consent of, the Company:
(i) Any lack of validity or enforceability of any Letter
of Credit or any documentation relating to any Letter of Credit or to any
transaction related in any way to such Letter of Credit (the "Letter of Credit
Documents");
(ii) Any amendment, modification, waiver, consent, or
any substitution, exchange or release of or failure to perfect any interest in
collateral or security, with respect to any of the Letter of Credit Documents;
(iii) The existence of any claim, setoff, defense or
other right which the Company may have at any time against any beneficiary or
any transferee of any Letter of Credit (or any Persons or entities for whom any
such beneficiary or any such transferee may be acting), the Agent or any Lender
or any other Person or entity, whether in connection with any of the Letter of
Credit Documents, the transactions contemplated herein or therein or any
unrelated transactions;
(iv) Any draft or other statement or document presented
under any Letter of Credit proving to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein being untrue or inaccurate
in any respect;
(v) Payment by the Agent to the beneficiary under any
Letter of Credit against presentation of a documents which do not comply with
the terms of the Letter of Credit, including failure of any documents to bear
any reference or adequate reference to such Letter of Credit;
20
<PAGE>
(vi) Any failure, omission, delay or lack on the part of
the Agent or any Lender or any party to any of the Letter of Credit Documents to
enforce, assert or exercise any right, power or remedy conferred upon the Agent,
any Lender or any such party under this Agreement or any of the Letter of Credit
Documents, or any other acts or omissions on the part of the Agent, any Lender
or any such party;
(vii) Any other event or circumstance that would, in the
absence of this clause, result in the release or discharge by operation of law
or otherwise of the Company from the performance or observance of any
obligation, covenant or agreement contained in this Section 3.3.
No setoff, counterclaim, reduction or diminution of any obligation or any
defense of any kind or nature which the Company has or may have against the
beneficiary of any Letter of Credit shall be available hereunder to the Company
against the Agent or any Lender. Nothing in this Section 3.3 shall limit the
liability, if any, of the Lenders to the Company pursuant to Section 8.5.
3.4 Payment Method. (a) All payments to be made by the Company
hereunder will be made to the Agent for the account of the Lenders in Dollars
and in immediately available, freely transferable, cleared funds not later than
1:00 p.m. at the principal office of the Agent specified in Section 8.2.
Payments received after 1:00 p.m. at the place for payment shall be deemed to be
payments made prior to 1:00 p.m. at the place for payment on the next succeeding
Business Day. The Company hereby authorizes the Agent to charge its account with
the Agent in order to cause timely payment of amounts due hereunder to be made
(subject to sufficient funds being available in such account for that purpose).
(b) At the time of making each such payment, the Company
shall, subject to the other terms and conditions of this Agreement, specify to
the Agent that Loan or other obligation of the Company hereunder to which such
payment is to be applied. In the event that the Company fails to so specify the
relevant obligation or if an Event of Default shall have occurred and be
continuing, the Agent may apply such payments as it may determine in its sole
discretion.
(c) On the day such payments are deemed received, the Agent
shall remit to the Lenders their pro rata shares of such payments in immediately
available funds to the Lenders at their respective address in the United States
specified for notices pursuant to Section 8.2. In the case of payments of
principal and interest on any Borrowing, such pro rata shares shall be
determined with respect to each such Lender by the ratio which the outstanding
principal balance of its Loan included in such Borrowing bears to the
outstanding principal balance of the Loans of all of the Lenders included in
such Borrowing, and in the case of fees paid pursuant to Section 2.3 and other
amounts payable hereunder (other than the Agent's fees payable pursuant to
Section 2.3(d) and amounts payable to any Lender under Section 3.7), such pro
rata shares shall be determined with respect to each such Lender by the ratio
which the Commitment of such Lender bears to the Commitments of all the Lenders.
3.5 No Setoff or Deduction. All payments of principal of and
interest on the Loans and other amounts payable by the Company hereunder shall
be made by the Company without setoff or counterclaim, and, subject to the next
succeeding sentence, free and clear of, and without deduction or withholding
for, or on account of, any present or future taxes, levies, imposts, duties,
fees, assessments, or other charges of whatever nature, imposed by any
governmental authority, or by any department, agency or other political
subdivision or taxing authority. If any such taxes, levies, imposts, duties,
fees, assessments or
21
<PAGE>
other charges are imposed, the Company will pay such additional amounts as may
be necessary so that payment of principal of and interest on the Loans and other
amounts payable hereunder, after withholding or deduction for or on account
thereof, will not be less than any amount provided to be paid hereunder and, in
any such case, the Company will furnish to the Lenders certified copies of all
tax receipts evidencing the payment of such amounts within 45 days after the
date any such payment is due pursuant to applicable law.
3.6 Payment on Non-Business Day; Payment Computations. Except as
otherwise provided in this Agreement to the contrary, whenever any installment
of principal of, or interest on, any Loan or any other amount due hereunder
becomes due and payable on a day which is not a Business Day, the maturity
thereof shall be extended to the next succeeding Business Day and, in the case
of any installment of principal, interest shall be payable thereon at the rate
per annum determined in accordance with this Agreement during such extension.
Computations of interest and other amounts due under this Agreement shall be
made on the basis of a year of 360 days for the actual number of days elapsed,
including the first day but excluding the last day of the relevant period.
3.7 Additional Costs. (a) In the event that any applicable law,
treaty or other international agreement, rule or regulation (whether domestic or
foreign) now or hereafter in effect and whether or not presently applicable to
any Lender or the Agent, or any interpretation or administration thereof by any
governmental authority charged with the interpretation or administration
thereof, or compliance by any Lender or the Agent with any guideline, request or
directive of any such authority (whether or not having the force of law), shall
(a) affect the basis of taxation of payments to any Lender or the Agent of any
amounts payable by the Company under this Agreement (other than taxes imposed on
the overall net income of any Lender or the Agent, by the jurisdiction, or by
any political subdivision or taxing authority of any such jurisdiction, in which
any Lender or the Agent, as the case may be, has its principal office), or (b)
shall impose, modify or deem applicable any reserve, special deposit or similar
requirement against assets of, deposits with or for the account of, or credit
extended by any Lender or the Agent, or (c) shall impose any other condition
with respect to this Agreement, or any of the Commitments, the Notes or the
Loans or any Letter of Credit, and the result of any of the foregoing is to
increase the cost to any Lender or the Agent, as the case may be, of making,
funding or maintaining any Fixed Rate Loan or any Letter of Credit or to reduce
the amount of any sum receivable by any Lender or the Agent, as the case may be,
thereon, then the Company shall pay to such Lender or the Agent, as the case may
be, from time to time, upon request by such Lender (with a copy of such request
to be provided to the Agent) or the Agent, additional amounts sufficient to
compensate such Lender or the Agent, as the case may be, for such increased cost
or reduced sum receivable to the extent, in the case of any Fixed Rate Loan,
such Lender or the Agent is not compensated therefor in the computation of the
interest rate applicable to such Fixed Rate Loan. A statement as to the amount
of such increased cost or reduced sum receivable, prepared in good faith and in
reasonable detail by such Lender or the Agent, as the case may be, and submitted
by such Lender or the Agent, as the case may be, to the Company, shall be
conclusive and binding for all purposes absent manifest error in computation.
(b) In the event that any applicable law, treaty or other
international agreement, rule or regulation (whether domestic or foreign) now or
hereafter in effect and whether or not presently applicable to any Lender or the
Agent, or any interpretation or administration thereof by any governmental
authority charged with the interpretation or administration thereof, or
compliance by any Lender or the Agent with any guideline, request or directive
of any such authority (whether or not having the force of law), including any
risk-based capital guidelines, affects or would affect the amount of capital
22
<PAGE>
required or expected to be maintained by such Lender or the Agent (or any
corporation controlling such Lender or the Agent) and such Lender or the Agent,
as the case may be, determines that the amount of such capital is increased by
or based upon the existence of such Lender's or the Agent's obligations
hereunder and such increase has the effect of reducing the rate of return on
such Lender's or the Agent's (or such controlling corporation's) capital as a
consequence of such obligations hereunder to a level below that which such
Lender or the Agent (or such controlling corporation) could have achieved but
for such circumstances (taking into consideration its policies with respect to
capital adequacy), then the Company shall pay to such Lender or the Agent, as
the case may be, from time to time, upon request by such Lender (with a copy of
such request to be provided to the Agent) or the Agent, additional amounts
sufficient to compensate such Lender or the Agent (or such controlling
corporation) for any increase in the amount of capital and reduced rate of
return which such Lender or the Agent reasonably determines to be allocable to
the existence of such Lender's or the Agent's obligations hereunder. A statement
as to the amount of such compensation, prepared in good faith and in reasonable
detail by such Lender or the Agent, as the case may be, and submitted by such
Lender or the Agent to the Company, shall be conclusive and binding for all
purposes absent manifest error in computation. Such Lender or the Agent may, at
its option, specify that such amounts be paid by way of an increase in the
commitment fees payable by the Company pursuant to Section 2.3(a).
3.8 Illegality and Impossibility. In the event that any applicable
law, treaty or other international agreement, rule or regulation (whether
domestic or foreign) now or hereafter in effect and whether or not presently
applicable to any Lender, or any interpretation or administration thereof by any
governmental authority charged with the interpretation or administration
thereof, or compliance by any Lender with any guideline, request or directive of
such authority (whether or not having the force of law), including without
limitation exchange controls, shall make it unlawful or impossible for any
Lender to maintain any Loan under this Agreement, (b) shall make it
impracticable, unlawful or impossible for, or shall in any way limit or impair
ability of, the Company to make or any Lender to receive any payment under this
Agreement at the place specified for payment hereunder, the Company shall upon
receipt of notice thereof from such Lender, repay in full the then outstanding
principal amount of each Loan so affected, together with all accrued interest
thereon to the date of payment and all amounts owing to such Lender under
Section 3.8, (a) on the last day of the then current Interest Period applicable
to such Loan if such Lender may lawfully continue to maintain such Loan to such
day, or (b) immediately if such Lender may not continue to maintain such Loan to
such day.
3.9 Indemnification. If the Company makes any payment of principal
with respect to any Fixed Rate Loan on any other date than the last day of the
Interest Period applicable thereto (whether pursuant to Section 3.1(c), Section
3.7, Section 6.2 or otherwise), or if the Company fails to borrow any Fixed Rate
Loan after notice has been given to the Lenders in accordance with Section 2.4,
or if the Company fails to make any payment of principal or interest in respect
of a Fixed Rate Loan when due, the Company shall reimburse each Lender on demand
for any resulting loss or expense incurred by each such Lender, including
without limitation any loss incurred in obtaining, liquidating or employing
deposits from third parties, whether or not such Lender shall have funded or
committed to fund such Loan. A statement as to the amount of such loss or
expense, prepared in good faith and in reasonable detail by such Lender and
submitted by such Lender to the Company, shall be conclusive and binding for all
purposes absent manifest error in computation. Calculation of all amounts
payable to such Lender under this Section 3.9 shall be made as though such
Lender shall have actually funded or committed to fund the relevant Fixed Rate
Loan through the purchase of an underlying deposit in an amount equal to the
amount of such Loan in the relevant market and having a maturity comparable to
the related Interest Period; provided, however, that such Lender
23
<PAGE>
may fund any Fixed Rate Loan in any manner it sees fit and the foregoing
assumption shall be utilized only for the purpose of calculation of amounts
payable under this Section 3.9.
3.10 Substitution of Lender. If (i) the obligation of any Lender to
make or maintain Fixed Rate Loans has been suspended pursuant to Section 3.8
when not all Lenders' obligations have been suspended (ii) any Lender has
demanded compensation under Section 3.7 when not all Lender's have or (iii) any
Lender is a Defaulting Lender, the Company shall have the right, if no Default
or Event of Default then exists, to replace such Lender (a "Replaced Lender")
with one or more other lenders (collectively, the "Replacement Lender")
acceptable to the Agent, provided that (x) at the time of any replacement
pursuant to this Section 3.10, the Replacement Lender shall enter into one or
more Assignment and Acceptances, pursuant to which the Replacement Lender shall
acquire the Commitments and outstanding Advances and other obligations of the
Replaced Lender and, in connection therewith, shall pay to the Replaced Lender
in respect thereof an amount equal to the sum of (A) the amount of principal of,
and all accrued interest on, all outstanding Loans of the Replaced Lender, (B)
the amount of all accrued, but theretofore unpaid, fees owing to the Replaced
Lender under Section 2.3 and (C) the amount which would be payable by the
Company to the Replaced Lender pursuant to Section 3.9 or 3.11 if the Borrowers
prepaid at the time of such replacement all of the Loans of such Replaced Lender
outstanding at such time and (y) all obligations of the Company then owing to
the Replaced Lender (other than those specifically described in clause (x) above
in respect of which the assignment purchase price has been, or is concurrently
being, paid) shall be paid in full to such Replaced Lender concurrently with
such replacement. Upon the execution of the respective Assignment and
Acceptances, the payment of amounts referred to in clauses (x) and (y) above
and, if so requested by the Replacement Lender, delivery to the Replacement
Lender of the appropriate Note or Notes executed by the Company, the Replacement
Lender shall become a Lender hereunder and the Replaced Lender shall cease to
constitute a Lender hereunder. The provisions of this Agreement (including
without limitation Sections 3.9 and 8.5) shall continue to govern the rights and
obligations of a Replaced Lender with respect to any Loans made or any other
actions taken by such lender while it was a Lender. Nothing herein shall release
any Defaulting Lender from any obligation it may have to the Company, the Agent
or any other Lender. Each Lender agrees to take such actions, at the Company's
expense, as may be reasonably necessary to effect the foregoing if it shall
become a Replaced Lender.
3.11 Applicable Lending Installation. Each Lender and the Agent may
make and books its Loans and, in the case of the Agent, issue Letters of Credit,
at any Applicable Lending Installation(s) selected by such Lender or the Agent,
as the case may be, and each Lender and the Agent may change its Applicable
Lending Installation(s) from time to time. Each Lender may, by written notice to
the Agent and the applicable Borrower, designate one or more Applicable Lending
Installations which are to make and book Loans and for whose account Loan
payments are to be made. The Agent may, by written notice to the applicable
Borrower, designate one or more Applicable Lending Installations which are to
issue and book Letters of Credit and for whose accounts Loan payments and Letter
of Credit reimbursements are to be made and through which its functions are to
be performed. All terms of this Agreement shall apply to any such Applicable
Lending Installation(s) and the Notes shall be deemed held by each Lender and
the Agent, as the case may be, for the benefit of such Applicable Lending
Installation.
ARTICLE IV.
24
<PAGE>
REPRESENTATIONS AND WARRANTIES
The Company represents and warrants to the Lenders and the Agent
that:
4.1 Corporate Existence and Power. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Ohio, and is duly qualified to do business, and is in good standing, in all
additional jurisdictions where such qualification is necessary under applicable
law, except where the failure to be so qualified would not have a Material
Adverse Effect. The Company and each Guarantor has all requisite corporate power
to own or lease the properties used in its business and to carry on its business
as now being conducted and as proposed to be conducted, and to execute and
deliver the Loan Documents to which it is a party and to engage in the
transactions contemplated by the Loan Documents.
4.2 Corporate Authority. The execution, delivery and performance by
the Company and each Guarantor of the Loan Documents have been duly authorized
by all necessary corporate action and are not in contravention of any law, rule
or regulation, or any judgment, decree, writ, injunction order or award of any
arbitrator, court or governmental authority, or of the terms of the Company's or
any Guarantor's charter or by-laws, or of any contract or undertaking to which
the Company or any Guarantor is a party or by which the Company or any Guarantor
or their respective property may be bound or affected or result in the
imposition of any Lien except for Permitted Liens.
4.3 Binding Effect. Each Loan Document to which it is a party is the
legal, valid and binding obligation of the Company and each Guarantor
enforceable against the Company and each Guarantor in accordance with their
respective terms.
4.4 Subsidiaries. Schedule 4.4 hereto correctly sets forth the
corporate name, jurisdiction of incorporation and ownership of each Subsidiary
of the Company. Each such Subsidiary and each corporation becoming a Subsidiary
of the Company after the date hereof is and will be a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation and is and will be duly qualified to do business
in each additional jurisdiction where such qualification is or may be necessary
under applicable law, except where the failure to be so qualified would not have
a Material Adverse Effect. Each Subsidiary of the Company has and will have all
requisite corporate power to own or lease the properties used in its business
and to carry on its business as now being conducted and as proposed to be
conducted. All outstanding shares of capital stock of each class of each
Subsidiary of the Company have been and will be validly issued and are and will
be fully paid and nonassessable and, except as otherwise indicated in Schedule
4.4 hereto or disclosed in writing to the Lender from time to time, are and will
be owned, beneficially and of record, by the Company or another Subsidiary of
the Company free and clear of any Liens, except for Permitted Liens.
4.5 Litigation. Except as set forth in Schedule 4.5 hereto, there is
no action, suit or proceeding pending or, to the best of the Company's
knowledge, threatened against or affecting the Company or any of its
Subsidiaries before or by any court, governmental authority or arbitrator, which
if adversely decided might result, either individually or collectively, in any
Material Adverse Effect and, to the best of the Company's knowledge, there is no
basis for any such action, suit or proceeding.
25
<PAGE>
4.6 Financial Condition. The Consolidated balance sheet of the
Company and its Subsidiaries and the Consolidated statements of income, and cash
flow of the Company and its Subsidiaries for the fiscal year ended December 31,
1997 and reported on by Ernst & Young LLP, independent certified public
accountants, and the interim Consolidated balance sheet and interim Consolidated
statements of income, and cash flow of the Company and its Subsidiaries, as of
or for the three month period ended on March 31, 1998, copies of which have been
furnished to the Lenders, fairly present, and the financial statements of the
Company and its Subsidiaries delivered pursuant to Section 5.1(d) will fairly
present, the Consolidated financial position of the Company and its Subsidiaries
as at the respective dates thereof, and the Consolidated results of the
operations of the Company and its Subsidiaries for the respective periods
indicated, all in accordance with Generally Accepted Accounting Principles
consistently applied (subject, in the case of said interim statements, to
year-end audit adjustments and the absence of footnotes). There has been no
Material Adverse Effect since December 31, 1997. There is no material Contingent
Liability of the Company or any of its Subsidiaries that is not reflected in
such financial statements or in the notes thereto. All Contingent Liabilities of
the Company and its Subsidiaries as of the Effective Date are listed on Schedule
4.6 hereto.
4.7 Use of Loans. The Company will use the proceeds of the Loans to
pay off the indebtedness described in Section 2.5(g), to make acquisitions, to
purchase aircraft and other equipment and for working capital and other general
corporate purposes. Neither the Company nor any of its Subsidiaries extends or
maintains, in the ordinary course of business, credit for the purposes, whether
immediate, incidental, or ultimate, of buying or carrying margin stock (within
the meaning of Regulations G, T, U or X of the Board of Governors of the Federal
Reserve System), and no part of the proceeds of any Loan will be used for the
purpose, whether immediate, incidental, or ultimate, of buying or carrying any
such margin stock or maintaining or extending credit to others for such purpose.
After applying the proceeds of each Loan, such margin stock will not constitute
more than 25% of the value of the assets (either of the Company alone or of the
Company and its Subsidiaries on a Consolidated basis) that are subject to any
provisions of this Agreement that may cause the Advances to be deemed secured,
directly or indirectly, by margin stock.
4.8 Consents, Etc. No consent, approval or authorization of or
declaration, registration or filing with any governmental authority or any
nongovernmental Person or entity, including without limitation any creditor,
lessor or stockholder of the Company or any of its Subsidiaries, is required on
the part of the Company in connection with the execution, delivery and
performance of the Loan Documents or the transactions contemplated hereby or as
a condition to the legality, validity or enforceability of the Loan Documents.
4.9 Taxes. The Company and its Subsidiaries have filed all tax
returns (federal, state and local) required to be filed and have paid all taxes
shown thereto to be due, including interest and penalties, or have established
adequate financial reserves on their respective books and records for payment
thereof. Neither the Company nor any of its Subsidiaries knows of any actual or
proposed tax assessment or any basis therefor, and no extension of time for the
assessment of deficiencies in any federal or state tax has been granted by the
Company or any Subsidiary.
4.10 Title to Properties. Except as otherwise disclosed in the
latest year end balance sheet delivered pursuant to Section 4.6 or 5.1(d) of
this Agreement, the Company or one or more of its Subsidiaries have good and
marketable fee simple title to all of the real property, and a valid and
indefeasible ownership interest in all of the other properties and assets
reflected in said balance sheet or
26
<PAGE>
subsequently acquired by the Company or any Subsidiary. All of such properties
and assets are free and clear of any Lien, except for Permitted Liens.
4.11 ERISA. The Company, its Subsidiaries, their ERISA affiliates
and their respective Plans are in compliance in all material respects with those
provisions of ERISA and of the Code which are applicable with respect to any
Plan. No Prohibited Transaction and no Reportable Event has occurred with
respect to any such Plan. None of the Company, any of its Subsidiaries or any of
their ERISA Affiliates is an employer with respect to any Multiemployer Plan.
The Company, its Subsidiaries and their ERISA Affiliates have met the minimum
funding requirements under ERISA and the Code with respect to each of their
respective Plans, if any, and have not incurred any liability to the PBGC of any
Plan. The execution, delivery and performance of this Agreement the Notes does
not constitute a Prohibited Transaction. There is no material unfunded benefit
liability, determined in accordance with Section 4001(a)(18) of ERISA, with
respect to any Plan of the Company, its Subsidiaries or their ERISA Affiliates.
4.12 Environmental and Safety Matters. The Company and each
Subsidiary is in substantial compliance with all material federal, state and
local laws, ordinances and regulations relating to safety and industrial hygiene
or to the environmental condition, including without limitation all
Environmental Laws in jurisdictions in which the Company or any Subsidiary owns
or operates, or has owned or operated, a facility or site, or arranges or has
arranged for disposal or treatment of hazardous substances, solid waste, or
other wastes, accepts or has accepted for transport any hazardous substances,
solid wastes or other wastes or holds or has held any interest in real property
or otherwise. Except as disclosed on Schedule 4.12, no demand, claim, notice,
suit, suit in equity, action, administrative action, investigation or inquiry
whether brought by any governmental authority, private Person or entity or
otherwise, arising under, relating to or in connection with any Environmental
laws is pending or threatened against the Company or any of its Subsidiaries,
any real property in which the Company or any such Subsidiary holds or has held
an interest or any past or present operation of the Company or any Subsidiary.
Neither the Company nor any of its Subsidiaries (a) is the subject of any
federal or state investigation evaluating whether any remedial action is needed
to respond to a release of any toxic substances, radioactive materials,
hazardous wastes or related materials into the environment, (b) has received any
notices of any toxic substances, radioactive materials, hazardous waste or
related materials in, or upon any of its properties in violation of any
Environmental Laws, or (c) knows of any basis for such investigation, notice or
violation, except as disclosed on Schedule 4.12 hereto, and as to such matters
disclosed on such Schedule, none will have a Material Adverse Effect. Except as
disclosed on Schedule 4.12, to the best of the knowledge of the Company after
due inquiry, no release, threatened release or disposal of hazardous waste,
solid waste or other wastes is occurring or has occurred on, under or to any
real property in which the Company or any of its Subsidiaries holds any interest
or performs any of its operations, in violation of any Environmental Law.
4.13 No Default. Neither the Company nor any Subsidiary is in
default or has received any written notice of default under or with respect to
any of its Contractual Obligations in any respect which could have a Material
Adverse Effect. No Default or Event of Default has occurred and is continuing.
4.14 No Burdensome Restrictions. No Requirement of Law or
Contractual Obligation applicable to the Company or any Subsidiary could have a
Material Adverse Effect on the financial condition or business of the Company
and its Subsidiaries.
27
<PAGE>
4.15 FAA Certifications. The Company is, and at all times will be a
"Citizen of the United States" as defined in Section 40102(a)(15) of 490 U.S.C.,
an air carrier as to which the provisions of Section 1110 of the United States
Bankruptcy Code apply, and an air carrier certificated under Sections 41102(a)
and 44705 of 49 U.S.C.
4.16 Airworthiness Certificates. An airworthiness certificate has
been duly issued for each of the aircraft of the Company, all such airworthiness
certificates are in full force and effect, each aircraft is in such operating
condition, except for such repairs and maintenance in the ordinary course of
business, as may be required to permit each such aircraft to be utilized in
commercial charter operations and otherwise in material compliance with all
applicable laws and regulations.
ARTICLE V.
COVENANTS
5.1 Affirmative Covenants. The Company covenants and agrees that,
until the Termination Date and thereafter until payment in full of the principal
of and accrued interest on the Notes and the payment and performance of all
other obligations and liabilities of the Company under the Loan Documents,
unless the Required Lenders shall otherwise consent in writing, it shall, and
shall cause each of its Subsidiaries to:
(a) Preservation of Corporate Existence, Etc. Do or cause to
be done all things necessary to preserve, renew and keep in full force and
effect its legal existence and its qualification as a foreign corporation in
good standing in each jurisdiction in which such qualifications is necessary
under applicable law, except where the failure to be so qualified would not have
a Material Adverse Effect and the rights, licenses, permits (including those
required under Environmental Laws and those required by the FAA), franchises,
patents, copyrights, trademarks and trade names material to the conduct of its
businesses; and defend all of the foregoing against all claims, actions,
demands, suits or proceedings at law or in equity or by or before any
governmental instrumentality or other agency or regulatory authority.
(b) Compliance with Laws, Etc. Comply in all material respects
with all applicable laws, rules, regulations and orders of any governmental
authority, whether federal, state, local or foreign (including without
limitation ERISA, the Code, FAA regulations and Environmental Laws), in effect
from time to time, except where the failure to so comply would not have a
Material Adverse Effect; and pay and discharge promptly when due all taxes,
assessments and governmental charges or levies imposed upon it or upon its
income, revenues or property, before the same shall become delinquent or in
default, as well as all lawful claims for labor, materials and supplies or
otherwise, which, if unpaid, might give rise to Liens upon such properties or
any portion thereof, except to the extent that payment of any of the foregoing
is then being contested in good faith by appropriate legal proceedings and with
respect to which adequate financial reserves have been established on the books
and records of the Company or such Subsidiary.
(c) Maintenance of Properties; Insurance. Maintain, preserve
and protect all property that is material to the conduct of the business, as
such business exists from time to time, of the Company or any of its
Subsidiaries and keep such property in good repair, working order and condition
and from time to time make, or cause to be made all needful and proper repairs,
renewals, additions, improvements and replacements thereto necessary in order
that the business carried on in connection
28
<PAGE>
therewith may be properly conducted at all times in accordance with customary
and prudent business practices for similar businesses; and maintain in full
force and effect insurance with responsible and reputable insurance companies or
associations in such amounts, on such terms and covering such risks, including
fire and other risks insured against by extended coverage, with such deductibles
and self insurance amounts as is usually carried by companies engaged in similar
businesses and of similar sizes and owning similar properties similarly situated
and maintain in full force and effect public liability insurance, insurance
against claims for Personal injury or death or property damage occurring in
connection with any of its activities or any of any properties owned, occupied
or controlled by it, in such amount as it shall reasonably deem necessary, and
maintain such other insurance as may be required by law or as may be reasonably
requested by the Required Lenders for purposes of assuring compliance with this
Section 5.1(c).
(d) Reporting Requirements. Furnish to the Lenders and the
Agent the following:
(i) Promptly and in any event within three calendar days
after becoming aware of the occurrence of (A) any Event of Default or any event
or condition which, with notice or lapse of time, or both, would constitute an
Event of Default, (B) the commencement of any material litigation against, by or
affecting the Company or any of its Subsidiaries, and any material developments
therein, (C) entering into any material contract or undertaking that is not
entered into in the ordinary course of business, (D) any formal investigation or
enforcement action by the FAA, or by (E) any development in the business or
affairs of the Company or any of its Subsidiaries which has resulted in or which
is likely in the reasonable judgment of the Company, to result in a Material
Adverse Effect, a statement of the chief financial officer or controller of the
Company setting forth details of such Event of Default or such event or
condition or such litigation and the action which the Company or such
Subsidiary, as the case may be, has taken and proposes to take with respect
thereto;
(ii) As soon as available and in any event within 45
days after the end of each of the first three fiscal quarters of each fiscal
year of the Company, the Consolidated and consolidating balance sheet of the
Company and its Subsidiaries as of the end of such quarter, and the related
Consolidated and consolidating statements of income for the period commencing at
the end of the previous fiscal year and ending with the end of such quarter,
setting forth in each case in comparative form the corresponding figures for the
corresponding date or period of the preceding fiscal year, all in reasonable
detail and duly certified (subject to year-end audit adjustments) by the chief
financial officer or controller of the Company as having been prepared in
accordance with Generally Accepted Accounting Principles, together with a
certificate of the chief financial officer or controller of the Company stating
(A) that no Event of Default or Default has occurred and is continuing or, if an
Event of Default or Default has occurred and is continuing, a statement setting
forth the details thereof and the action which the Company has taken and
proposes to take with respect thereto, (B) that a computation (which computation
shall accompany such certificate and shall be in reasonable detail) showing
compliance with Section 5.2(a), (b) and (c) hereof is in conformity with the
terms of this Agreement, and (C) that there have been no substantive changes in
Schedule 4.12;
(iii) As soon as available and in any event within 90
days after the end of each fiscal year of the Company, a copy of the
Consolidated and consolidating balance sheet of the Company and its Subsidiaries
as of the end of such fiscal year and the related Consolidated and consolidating
statements of income and the Consolidated statement of cash flow of the Company
and its
29
<PAGE>
Subsidiaries for such fiscal year, with a customary audit report of Ernst &
Young LLP, or other independent certified public accountants selected by the
Company and acceptable to the Required Lenders, without qualifications
unacceptable to the Required Lenders, together with a certificate of such
accountants stating that they have reviewed this Agreement and stating further
whether, in the course of their review of such financial statements, they have
become aware of any Event of Default or any Default, and together with a
computation by the Company (which computation shall accompany such certificate
and shall be in reasonable detail) showing compliance with Section 5.2 (a), (b)
and (c) hereof is in conformity with the terms of this Agreement;
(iv) Promptly after the sending or filing thereof,
copies of all reports, proxy statements and financial statements which the
Company or any of its Subsidiaries sends to or files with any of their
respective security holders or any securities exchange or the Securities and
Exchange Commission or any successor agency thereof;
(v) Promptly and in any event within 10 calendar days
after receiving or becoming aware thereof (A) a copy of any notice of intent to
terminate any Plan of the Company, its Subsidiaries or any ERISA Affiliate filed
with the PBGC, (B) a statement of the chief financial officer or controller of
the Company setting forth the details of the occurrence of any Reportable Event
with respect to any such Plan, (C) a copy of any notice that the Company, any of
its Subsidiaries or any ERISA Affiliate may receive from the PBGC relating to
the intention of the PBGC to terminate any such Plan or to appoint a trustee to
administer any such Plan, or (D) a copy of any notice of failure to make a
required installment or other payment within the meaning of Section 412(n) of
the Code or Section 302(f) of ERISA with respect to any such Plan;
(vi) Promptly and in any event within ten days after
receipt, a copy of any management letter or comparable analysis prepared by the
auditors for the Company or any of its Subsidiaries;
(vii) Promptly upon the request of the Agent, current
appraisals, in form satisfactory to the Agent and performed by an independent
third party appraiser acceptable to the Agent, of such aircraft of the Company
and its Subsidiaries as requested by the Agent; and
(viii) Promptly, such other information respecting the
business, properties, operations or condition, financial or otherwise, of the
Company or any of it Subsidiaries as any Lender or the Agent may from time to
time reasonably request.
(e) Accounting; Access to Records, Books, Etc. Maintain a
system of accounting established and administered in accordance with sound
business practices to permit preparation of financial statements in accordance
with Generally Accepted Accounting Principles and to comply with the
requirements of this Agreement and, at any reasonable time and from time to
time, permit any Lender or the Agent or any agents or representatives thereof to
examine and make copies of and abstracts from the records and books of account
of, and visit the properties of, the Company and its Subsidiaries, and to
discuss the affairs, finances and accounts of the Company and its Subsidiaries
with their respective directors, officers, employees and independent auditors,
and by this provision the Company does hereby authorize such Persons to discuss
such affairs, finances and accounts with any Lender or the Agent.
30
<PAGE>
(f) Further Assurances. Will execute and deliver, or cause to
be executed and delivered within 30 days after request therefor by the Required
Lenders or the Agent, a Guaranty for each Subsidiary of the Company, whether now
existing or hereafter arising or formed, and all further instruments and
documents and take all further action that may be necessary or desirable, or
that the Agent may request, in order to give effect to, and to aid in the
exercise and enforcement of the rights and remedies of the Lenders and the Agent
under, the Loan Documents. In addition, the Company agrees to deliver to the
Agent and the Lenders from time to time upon the acquisition or creation of any
Subsidiary not listed in Schedule 4.4 hereto supplements to Schedule 4.4 such
that such Schedule, together with such supplements, shall at all times
accurately reflect the information provided for thereon.
5.2 Negative Covenants. Until the Termination Date and thereafter
until payment in full of the principal of and accrued interest on the Notes and
the payment and performance of all other obligations and liabilities of the
Company under the Loan Documents, the Company agrees that, unless the Required
Lenders shall otherwise consent in writing it shall not, and shall not permit
any of its Subsidiaries to:
(a) Net Worth. Permit or suffer the Consolidated Net Worth of
the Company and its Subsidiaries at any time to be less than the sum of (i)
$70,000,000, plus (ii) 50% of the Consolidated net income of the Company and its
Subsidiaries, commencing with the fiscal year ending December 31, 1998, provided
that, if such net income is negative in any fiscal year of the Company, the
amount added for such fiscal year shall be zero and such amount shall not reduce
the amount added pursuant to any other fiscal year.
(b) Funded Debt Ratio. Permit or suffer the Funded Debt Ratio
to exceed 2.50 to 1.00 at any time.
(c) Cash Flow Coverage Ratio. Permit or suffer the Cash Flow
Coverage Ratio to be less than 1.20 to 1.00 as of the end of any fiscal quarter
thereafter.
(d) Liens. Create, incur or suffer to exist any Lien on any of
the assets, rights, revenues or property, real, Personal or mixed, tangible or
intangible, whether now owned or hereafter acquired, of the Company or any of
its Subsidiaries, other than:
(i) Liens for taxes not delinquent or for taxes being
contested in good faith by appropriate proceedings and as to which adequate
financial reserves have been established on its books and records;
(ii) Liens (other than any Lien imposed by ERISA)
created and maintained in the ordinary course of business which do not secure
obligations for borrowed money and are not material in the aggregate and which
would not have a Material Adverse Effect and which constitute (A) pledges or
deposits under worker's compensation laws, unemployment insurance laws or
similar legislation, (B) good faith deposits in connection with bids, tenders,
contracts or leases to which the Company or any of its Subsidiaries is a party
for a purpose other than borrowing money or obtaining credit, including rent
security deposits, (C) Liens imposed by law, such as those of carriers,
warehousemen and mechanics, if payment of the obligation secured thereby is not
yet due, (D) Liens securing taxes, assessments or other governmental charges or
levies not yet subject to penalties for nonpayment, except to the extent such
Liens
31
<PAGE>
arise from nonpayment of any of such taxes or other assessments and governmental
charges if such payment is then being contested in good faith by appropriate
legal proceedings and with respect to which adequate financial reserves have
been established on the books and records of the Company, and (E) pledges or
deposits to secure public or statutory obligations of the Company or any of its
Subsidiaries, or surety, customs or appeal bonds to which the Company or any of
its Subsidiaries is a party;
(iii) Liens affecting real property which constitute
minor survey exceptions or defects or irregularities in title, minor
encumbrances, easements or reservations of, or rights of others for, rights of
way, sewers, electric lines, telegraph and telephone lines and other similar
purposes, or zoning or other restrictions as to the use of such real property,
provided that all of the foregoing, in the aggregate, do not at any time
materially detract from the value of said properties or materially impair their
use in the operation of the businesses of the Company or any of its
Subsidiaries;
(iv) Each Lien existing on the Effective Date and
described in Schedule 5.2(d) hereof, but no extension or renewal thereof shall
be permitted; and
(v) Any Lien created to secure payment of a portion of
the purchase price of, or existing at the time of acquisition of, any tangible
fixed asset acquired by the Company or any of its Subsidiaries may be created or
suffered to exist upon such fixed asset if the outstanding principal amount of
the Indebtedness secured by such Lien does not at any time exceed the purchase
price paid by the Company or such Subsidiary for such fixed asset and the
aggregate principal amount of all Indebtedness secured by such Liens does not
exceed $250,000; provided that such Lien does not encumber any other asset at
any time owned by the Company or such Subsidiary, and provided, further, that
not more than one such Lien shall encumber such fixed asset at any one time.
(e) Acquisitions; Merger; Etc. Purchase or otherwise acquire,
whether in one or a series of transactions, all or a substantial portion of the
business, assets, rights, revenues or property, real, Personal, or mixed,
tangible or intangible, of any Person, or all or a substantial portion of the
capital stock of or other ownership interest in any other Person; nor merge or
consolidate or amalgamate with any other Person or take any other action having
a similar effect, nor enter into any joint venture or similar arrangement with
any other Person, provided, however, that this Section 5.2(e) shall not prohibit
any of the foregoing transactions described in this Section 5.2(e) if each of
the following conditions is satisfied: (i) the Company shall be the surviving or
continuing corporation thereof, (ii) immediately after such merger or
acquisition or other transaction, no Default or Event of Default shall exist or
shall have occurred and be continuing and, prior to the consummation of such
merger or acquisition or other transaction, the Company shall have provided to
the Lenders an opinion of counsel and a certificate of the chief financial
officer or controller of the Company (attaching computations to demonstrate
compliance with all financial covenants hereunder after giving effect to such
merger or acquisition and attaching such pro forma financial statements as may
be reasonably requested by the Agent), each stating that such merger or
acquisition or other transaction complies with this Section 5.2(e) and that any
other conditions under this Agreement relating to such transaction have been
satisfied, (iii) the board of directors of the corporation with which the
Company or its Subsidiaries is involved in such transaction has approved the
transaction, (iv) immediately after the consummation of such merger or
acquisition or other transaction, the Company shall be able to borrow, but has
not borrowed, at least $10,000,000 in Advances under Section 2.1(a), on a pro
forma basis acceptable to the Agent, and (v) if any such merger, acquisition or
other transaction involves aggregate consideration paid
32
<PAGE>
or payable in excess of $10,000,000, the Required Lenders shall have approved in
writing such merger, acquisition or other transaction.
(f) Disposition of Assets; Etc. Sell, lease, license,
transfer, assign or otherwise dispose of any its business, assets, rights,
revenues or property, real, Personal or mixed, tangible or intangible, whether
in one or a series of transactions, other than inventory sold in the ordinary
course of business upon customary credit terms and sales of scrap or obsolete
material or equipment, provided, however that this Section 5.2(f) shall not
prohibit any such sale, lease, license, transfer, assignment or other
disposition if the aggregate book value (disregarding any write-downs of such
book value other than ordinary depreciation and amortization) of all of the
business, assets, rights, revenues and property disposed of after the date of
this Agreement shall be less than $2,500,000 in the aggregate for any calendar
year and if, immediately after such transaction, no Default or Event of Default
shall exist or shall have occurred and be continuing.
(g) Dividends and Other Restricted Payments. Make, pay,
declare or authorize any dividend, payment or other distribution in respect of
any class of its capital stock or any dividend, payment or distribution in
connection with the redemption, purchase, retirement or other acquisition,
directly or indirectly, of any shares of its capital stock other than such
dividends, payments or other distributions to the extent payable solely in
shares of the capital stock of the Company, if a Default or Event of Default
shall exist or shall have occurred and be continuing, or would be caused
thereby. For purposes of this Section 5.2(g), "capital stock" shall include
capital stock and any securities exchangeable for or convertible into capital
stock and any warrants, rights or other options to purchase or otherwise acquire
capital stock or such securities.
(h) Loans and Advances. Make any loan or advance of any of its
funds or property or make any other extension of credit to any Person other than
(i) advances by the Company to any of its Subsidiaries, (ii) advances by any
Subsidiary of the Company to the Company or to another Subsidiary of the
Company, and (iii) extensions of trade credit made in the ordinary course of
business on customary credit terms and commission, travel and similar advances
made to officers and employees in the ordinary course of business.
(i) Indebtedness. Create, incur, assume or in any manner
become liable in respect of, or suffer to exist, any Indebtedness other than:
(i) The Advances;
(ii) The Indebtedness described in Schedule 5.2(i)
hereto, but no increase in the amount thereof or extension thereof shall be
permitted;
(iii) Indebtedness in aggregate outstanding principal
amount not exceeding $250,000 which is secured by one or more liens permitted by
Section 5.2(d)(v) hereof;
(iv) Indebtedness of any Subsidiary of the Company owing
to the Company or to any other Subsidiary of the Company;
33
<PAGE>
(v) Other Indebtedness of the Company or any of its
Subsidiaries owing to NBD Bank or its Affiliates; and
(vi) Other Indebtedness of the Company in aggregate
amount not to exceed $50,000,000 and subject to such covenants, defaults, and
other terms and conditions reasonably satisfactory to the Agent; provided that,
prior to incurring any such Indebtedness, the Company shall demonstrate to the
satisfaction of the Agent that it will be in compliance with all covenants and
other terms and conditions contained in this Agreement and that no Default or
Event of Default exists or would be caused thereby.
(j) Nature of Business. Make any substantial change in the
nature of its business from that engaged in on the date of this Agreement or
engage in any other businesses other than those in which it is engaged on the
date of this Agreement.
(k) Transactions with Affiliates. Enter into, become a party
to, or become liable in respect of, any contract or undertaking with any
Affiliate except in the ordinary course of business and on terms not less
favorable to the Company or such Subsidiary than those which could be obtained
if such contract or undertaking were an arms length transaction with a Person
other than an Affiliate.
(l) Additional Covenants. Additional Covenants. If at any time
the Company or any Subsidiary shall enter into or be a party to any instrument
or agreement, including all such instruments or agreements in existence as of
the date hereof and all such instruments or agreements entered into after the
date hereof, relating to or amending any terms or conditions applicable to any
of its Indebtedness which includes covenants, terms, conditions or defaults not
substantially provided for in this Agreement or more favorable to the lender or
lenders thereunder than those provided for in this Agreement, then the Company
shall promptly so advise the Agent and the Lenders. Thereupon, if the Agent
shall request, upon notice to the Company, the Agent and the Lenders shall enter
into an amendment to this Agreement or an additional agreement (as the Agent may
request), providing for substantially the same covenants, terms, conditions and
defaults as those provided for in such instrument or agreement to the extent
required and as may be selected by the Agent.
ARTICLE VI.
DEFAULT
6.1 Events of Default. The occurrence of any one of the following
events or conditions shall be deemed an "Event of Default" hereunder unless
waived pursuant to Section 8.1:
(a) Nonpayment. The Company shall fail to pay when due any
principal of the Advances or, within five days after becoming due, shall fail to
pay any interest on the Notes or any fees or any other amount payable hereunder;
or
(b) Misrepresentation. Any representation or warranty made by
the Company in Article IV hereof or in any other certificate, report, financial
statement or other document furnished by or on behalf of the Company in
connection with this Agreement, shall prove to have been incorrect in any
material respect when made or deemed made; or
34
<PAGE>
(c) Certain Covenants. The Company shall fail to perform or
observe any term, covenant or agreement contained in Article V hereof, and any
such failure shall remain unremedied for 10 calendar days after notice thereof
shall have been given to the Company by the Agent; or
(d) Other Defaults. The Company or any Guarantor shall fail to
perform or observe any other term, covenant or agreement contained in any Loan
Document, and any such failure shall remain unremedied for 15 calendar days
after notice thereof shall have been given to the Company by the Agent; or
(e) Cross Default. The Company or any of its Subsidiaries
shall fail to pay any part of the principal of, the premium, if any, or the
interest on, or any other payment of money due under any of its Indebtedness
(other than Indebtedness hereunder), beyond any period of grace provided with
respect thereto, which individually or together with other such Indebtedness as
to which any such failure exists has an aggregate outstanding principal amount
in excess of $2,000,000; or if the Company or any of its Subsidiaries fails to
perform or observe any other term, covenant or agreement contained in any
agreement, document or instrument evidencing or securing any such Indebtedness
having such aggregate outstanding principal amount, or under which any such
Indebtedness was issued or created, beyond any period of grace, if any, provided
with respect thereto if the effect of such failure is to cause or permit the
holders of such Indebtedness (or trustee on behalf of such holders) to cause
payment in respect of such Indebtedness to become due prior to its due date; or
(f) Judgments. One or more Judgments or orders for the payment
of money in an aggregate amount of $2,000,000 shall be rendered against the
Company or any of its Subsidiaries, or any other judgment or order (whether or
not for the-payment of money) shall be rendered against or shall affect the
Company or any of its Subsidiaries which causes or could cause a Material
Adverse Effect, and either (i) such judgment or order shall have remained
unsatisfied and the Company or such Subsidiary shall not have taken action
necessary to stay enforcement thereof by reason of pending appeal or otherwise,
prior to the expiration of the applicable period of limitations for taking such
action or, if such action shall have been taken, a final order denying such stay
shall have been rendered, or (ii) enforcement proceedings shall have been
commenced by any creditor upon any such judgment or order; or
(g) ERISA. The occurrence of a Reportable Event that results
in or could result in liability of the Company, any Subsidiary of the Company or
their ERISA Affiliates to the PBGC or to any Plan and such Reportable Event is
not corrected within sixty (60) days after the occurrence thereof; or the
occurrence of any Reportable Event which could constitute grounds for
termination of any Plan of the Company, its Subsidiaries or their ERISA
Affiliates by the PBGC or for the appointment by the appropriate United States
District Court of a trustee to administer any such Plan and such Reportable
Event is not corrected within sixty (60) days after the occurrence thereof; or
the filing by the Company, any Subsidiary of the Company or any of their ERISA
Affiliates of a notice of intent to terminate a Plan or the institution of other
proceedings to terminate a Plan; or the Company, any Subsidiary of the Company
or any of their ERISA Affiliates shall fail to pay when due any liability to the
PBGC or to a Plan; or the PBGC shall have instituted proceedings to terminate,
or to cause a trustee to be appointed to administer, any Plan of the Company,
its Subsidiaries or their ERISA Affiliates; or any Person engages in a
Prohibited Transaction with respect to any Plan which results in or could result
in liability of the Company, any Subsidiary of the Company, any of their ERISA
Affiliates, any Plan of the Company, its Subsidiaries or their ERISA
35
<PAGE>
Affiliates or fiduciary of any such Plan; or failure by the Company, any
Subsidiary of the Company or any of their ERISA Affiliates to make a required
installment or other payment to any Plan within the meaning of Section 302(f) of
ERISA or Section 412(n) of the Code that results in or could result in liability
of the Company, any Subsidiary of the Company or any of their ERISA Affiliates
to the PBGC or any Plan; or the withdrawal of the Company, any of its
Subsidiaries or any of their ERISA Affiliates from a Plan during a plan year in
which it was a "substantial employer" as defined in Section 4001(a) (2) of
ERISA; or the Company, any of its Subsidiaries or any of their ERISA Affiliates
becomes an employer with respect to any Multiemployer Plan without the prior
written consent of the Required Lenders; or
(h) Insolvency, Etc. The Company or any of its Subsidiaries
shall be dissolved or liquidated (or any judgment, order or decree therefor
shall be entered), or shall generally not pay its debts as they become due, or
shall admit in writing its inability to pay its debts generally, or shall make a
general assignment for the benefit of creditors, or shall institute, or there
shall be instituted against the Company or any of its Subsidiaries, any
proceeding or case seeking to adjudicate it a bankrupt or insolvent or seeking
liquidation, winding up, reorganization, arrangement, adjustment, protection,
relief or composition of it or its debts under any law relating to bankruptcy,
insolvency or reorganization or relief or protection of debtors or seeking the
entry of an order for relief, or the appointment of a receiver, trustee,
custodian or other similar official for it or for any substantial part of its
assets, rights, revenues or property, and, if such proceeding is instituted
against the Company or such Subsidiary and is being contested by the Company or
such Subsidiary, as the case may be, in good faith by appropriate proceedings,
such proceeding shall remain undismissed or unstayed for a period of 60 days: or
the Company or such Subsidiary shall take any action (corporate or other) to
authorize or further any of the actions described above in this subsection;
(i) Change in Control. Any Change in Control shall occur; or
(j) Loan Documents. Any material provision of any Loan
Document shall at any time for any reason cease to be valid and binding and
enforceable against any obligor thereunder, or the validity, binding effect or
enforceability thereof shall be contested by any Person, or any obligor, shall
deny that it has any or further liability or obligation thereunder, or any Loan
Document shall be terminated invalidated or set aside, or be declared
ineffective or inoperative or in any way cease to give or provide to the Lenders
and the Agent the benefits purported to be created thereby; or
(k) Laws and Regulations. Any material violation of the 49
U.S.C. or any FAA regulation applicable to the Company or the Guarantor or to
any aircraft owned and/or operated by the Company or Guarantor or to any
aircraft owned and/or operated by the Company or the Guarantor is not cured
within 30 days; provided, however, that no Event of Default under this clause
(k) shall be deemed to exist if the Company and the Guarantors have commenced
and diligently pursued appropriate action to cure such violation and such
default may be and is cured within 30 days after such 30 day grace period;
provided, further, that among other material violations, any violation resulting
in a formal investigation or an enforcement action by the FAA shall be presumed
material.
6.2 Remedies.
(a) Upon the occurrence and during the continuance of any
Event of Default, the Agent may and, upon being directed to do so by the
Required Lenders, shall by notice to the Company
36
<PAGE>
(i) terminate the Commitments or (ii) declare the outstanding principal of, and
accrued interest on, the Notes, all unpaid reimbursement obligations in respect
of drawings under Letters of Credit and all other amounts owing under this
Agreement to be immediately due and payable, or (iii) demand immediate delivery
of cash collateral, and the Company agrees to deliver such cash collateral upon
demand, in an amount equal to the maximum amount that may be available to be
drawn at any time prior to the stated expiry of all outstanding Letters of
Credit, or any one or more of the foregoing, whereupon the Commitments shall
terminate forthwith and all such amounts, including such cash collateral, shall
become immediately due and payable, provided that in the case of any event or
condition described in Section 6.1(h) with respect to the Company, the
Commitments shall automatically terminate forthwith and all such amounts,
including such cash collateral, shall automatically become immediately due and
payable without notice; in all cases without demand, presentment, protest,
diligence, notice of dishonor or other formality, all of which are hereby
expressly waived. Such cash collateral delivered in respect of outstanding
Letters of Credit shall be deposited in a special cash collateral account to be
held by the Agent as collateral security for the payment and performance of the
Company's obligations under this Agreement to the Lenders and the Agent.
(b) The Agent may and, upon being directed to do so by the
Required Lenders, shall, in addition to the remedies provided in Section 6.2(a),
exercise and enforce any and all other rights and remedies available to it,
whether arising under the Loan Documents or under applicable law, in any manner
deemed appropriate by the Agent, including suit in equity, action at law, or
other appropriate proceedings, whether for the specific performance (to the
extent permitted by law) of any covenant or agreement contained in any Loan
Document or in aid of the exercise of any power granted in any Loan Document.
(c) Upon the occurrence and during the continuance of any
Event of Default, each Lender may at any time and from time to time, without
notice to the Company (any requirement for such notice being expressly waived by
the Company set off and apply against any and all of the obligations of the
Company now or hereafter existing under this Agreement, Whether owing to such
Lender or any other Lender or the Agent, any and all deposits (general or
special, time or demand, provisional or final) at any time held and other
indebtedness at any time owing by such Lender to or for the credit or the
account of the Company and any property of the Company from time to time in
possession of such Lender, irrespective of whether or not such Lender shall have
made any demand hereunder and although such obligations may be contingent and
unmatured. The Company hereby grants to the Lenders and the Agent a lien on and
security interest in all such deposits, indebtedness and property as collateral
security for the payment and performance of the obligations of the Company under
the Loan Documents. The rights of such Lender under this Section 6.2(c) are in
addition to other rights and remedies (including, without limitation, other
rights of setoff) which such Lender may have.
(d) Notwithstanding anything herein to the contrary, no
payments of principal, interest or fees delivered to the Agent for the account
of any Defaulting Lender shall be delivered by the Agent to such Defaulting
Lender. Instead, such payments shall, for so long as such Defaulting Lender
shall be a Defaulting Lender, be held by the Agent, and the Agent is hereby
authorized and directed by all parties hereto to hold such funds in escrow and
apply such funds as follows:
(i) First, if applicable to any payments due from such
Defaulting Lender to the Agent, and
37
<PAGE>
(ii) Second, to Loans required to be made by such
Defaulting Lender on any borrowing date to the extent such Defaulting Lender
fails to make such Loans.
Notwithstanding the foregoing, upon the termination of all Commitments and the
payment and performance of all of the Advances and other obligations owing
hereunder (other than those owing to a Defaulting Lender), any funds then held
in escrow by the Agent pursuant to the preceding sentence shall be distributed
to each Defaulting Lender, pro rata in proportion to amounts that would be due
to each Defaulting Lender but for the fact that it is a Defaulting Lender.
ARTICLE VII.
THE AGENT AND THE LENDERS
7.1 Appointment and Authorization. Each Lender hereby irrevocably
appoints and authorizes the Agent to take such action as agent on its behalf and
to exercise such powers under the Loan Documents as are delegated to the Agent
by the terms hereof or thereof, together with all such powers as are reasonably
incidental thereto. The provisions of this Article VII are solely for the
benefit of the Agent and the Lenders, and the Company shall not have any rights
as a third party beneficiary of any of the provisions hereof. In performing its
functions and duties under this Agreement, the Agent shall act solely as agent
of the Lenders and does not assume and shall not be deemed to have assumed any
obligation towards or relationship of agency or trust with or for the Company.
7.2 Agent and Affiliates. NBD Bank in its capacity as a Lender
hereunder shall have the same rights and powers hereunder as any other Lender
and may exercise or refrain from exercising the same as though it were not the
Agent. NBD Bank and its affiliates may (without having to account therefor to
any Lender) accept deposits from, lend money to, and generally engage in any
kind of banking, trust, financial advisory or other business with the Company,
or any of its respective Subsidiaries as if it were not acting as Agent
hereunder, and may accept fees and other consideration therefor without having
to account for the same to the Lenders.
7.3 Scope of Agent's Duties. The Agent shall have no duties or
responsibilities except those expressly set forth herein, and shall not, by
reason of this Agreement, have a fiduciary relationship with any Lender, and no
implied covenants, responsibilities, duties, obligations or liabilities shall be
read into this Agreement or shall otherwise exist against the Agent. As to any
matters not expressly provided for by the Loan Documents (including, without
limitation, collection and enforcement actioned under the Notes), the Agent
shall not be required to exercise any discretion or take any action, but the
Agent shall take such action or omit to take any action pursuant to the
reasonable written instructions of the Required Lenders and may request
instructions from the Required Lenders. The Agent shall in all cases be fully
protected in acting, or in refraining from acting, pursuant to the written
instructions of the Required Lenders (or all of the Lenders, as the case may be,
in accordance with the requirements of this Agreement), which instructions and
any action or omission pursuant thereto shall be binding upon all of the
Lenders; provided, however, that the Agent shall not be required to act or omit
to act if, in the judgment of the Agent, such action or omission may expose the
Agent to Personal liability or is contrary to any Loan Document or applicable
law.
38
<PAGE>
7.4 Reliance by Agent. The Agent shall be entitled to rely upon any
certificate, notice, document or other communication (including any cable,
telegram, telex, facsimile transmission or oral communication) believed by it to
be genuine and correct and to have been sent or given by or on behalf of a
proper Person. The Agent may treat the payee of any Note as the holder thereof
unless and until the Agent receives written notice of the assignment thereof
pursuant to the terms of this Agreement signed by such payee and the Agent
receives the written agreement of the assignee that such assignee is bound
hereby to the same extent as if it had been an original party hereto. The Agent
may employ agents (including without limitation collateral agents) and may
consult with legal counsel (who may be counsel for the Company), independent
public accountants and other experts selected by it and shall not be liable to
the Lenders, except as to money or property received by it or its authorized
agents, for the negligence or misconduct of any such agent selected by it with
reasonable care or for any action taken or omitted to be taken by it in good
faith in accordance with the advice of such counsel, accountants or experts.
7.5 Default. The Agent shall not be deemed to have knowledge of the
occurrence of any Default or Event of Default, unless the Agent has received
written notice from a Lender or the Company specifying such Default or Event of
Default and stating that such notice is a "Notice of Default". In the event that
the Agent receives such a notice, the Agent shall give written notice thereto to
the Lenders.
7.6 Liability of Agent. Neither the Agent nor any of its directors,
officers, agents, or employees shall be liable to the Lenders for any action
taken or not taken by it or them in connection herewith with the consent or at
the request of the Required Lenders or in the absence of its or their own gross
negligence or willful misconduct. Neither the Agent nor any of its directors,
officers, agents or employees shall be responsible for or have any duty to
ascertain, inquire into or verify (i) any recital, statement, warranty or
representation contained in any Loan Document, or in any certificate, report,
financial statement or other document furnished in connection with this
Agreement, (ii) the performance or observance of any of the covenants or
agreements of the Company, (iii) the satisfaction of any condition specified in
Article II hereof, or (iv) the validity, effectiveness, legal enforceability,
value or genuineness of any Loan Documents or any collateral subject thereto or
any other instrument or document furnished in connection herewith.
7.7 Nonreliance on Agent and Other Lenders. Each Lender acknowledges
and agrees that it has, independently and without reliance on the Agent or any
other Lender, and based on such documents and information as it has deemed
appropriate, made its own credit analysis of the Company and its Subsidiaries
decision to enter into this Agreement and that it will, independently and
without reliance upon the Agent or any other Lender, and based on such documents
and information as it shall deem appropriate at the time, continue to make its
own analysis and decision in taking or not taking action under this Agreement.
The Agent shall not be required to keep itself informed as to the performance or
observance by the Company of the Loan Documents or any other documents referred
to or provided for herein or to inspect the properties or books of the Company
or any Subsidiary and, except for notices, reports and other documents and
information expressly required to be furnished to the Lenders by the Agent
hereunder, the Agent shall not have any duty or responsibility to provide any
Lender with any information concerning the affairs, financial condition or
business of the Company, or any of its Subsidiaries which may come into the
possession of the Agent or any of its Affiliates.
7.8 Indemnification. The Lenders agree to indemnify the Agent (to
the extent not reimbursed by the Company, but without limiting any obligation of
the Company to make such
39
<PAGE>
reimbursement), ratably according to the respective principal amounts of the
Advances then outstanding made by each of them (or if no Advances are at the
time outstanding, ratably according to the respective amounts of their
Commitments), from and against any and all claims, damages, losses, liabilities,
costs or expenses of any kind or nature whatsoever (including, without
limitation, fees and disbursements of counsel) which may be imposed on, incurred
by, or asserted against the Agent in any way relating to or arising out of this
Agreement or the transactions contemplated hereby or any action taken or omitted
by the Agent under this Agreement, provided, however, that no Lender shall be
liable for any portion of such claims, damages, losses, liabilities, costs or
expenses resulting from the Agent's gross negligence or willful misconduct.
Without limitation of the foregoing, each Lender agrees to reimburse the Agent
promptly upon demand for its ratable share of any out-of-pocket expenses
(including without limitation fees and expenses of counsel) incurred by the
Agent in connection with the preparation, execution, delivery, administration,
modification, amendment or enforcement (whether through negotiations, legal
proceedings or otherwise) of, or legal advice in respect of rights or
responsibilities under, this Agreement, to the extent that the Agent is not
reimbursed for such expenses by the Company but without limiting the obligation
of the Company to make such reimbursement. Each Lender agrees to reimburse the
Agent promptly upon demand for its ratable share of any amounts owing to the
Agent by the Lenders pursuant to this Section. If the indemnity furnished to the
Agent under this Section shall, in the judgment of the Agent, be insufficient or
become impaired, the Agent may call for additional indemnity from the Lenders
and cease, or not commence, to take any action until such additional indemnity
is furnished.
7.9 Successor Agent. The Agent may resign as such at any time upon
ten days' prior written notice to the Company and the Lenders. In the event of
any such resignation, the Required Lenders shall, by an instrument in writing
delivered to the Company and the Agent, appoint a successor, which shall be a
commercial Lender organized under the laws of the United States or any State
thereof and having a combined capital and surplus of at least $500,000,000. If a
successor is not so appointed or does not accept such appointment before the
Agent's resignation becomes effective, the retiring Agent may appoint a
temporary successor to act until such appointment by the Required Lenders is
made and accepted or if no such temporary successor is appointed as provided
above by the retiring Agent, the Required Lenders shall thereafter perform all
the duties of the Agent hereunder until such appointment by the Required Lenders
is made and accepted. Any successor to the Agent shall execute and deliver to
the Company and the Lenders an instrument accepting such appointment and
thereupon such successor Agent, without further act, deed, conveyance or
transfer shall become vested with all of the properties, rights, interests,
powers, authorities and obligations of its predecessor hereunder with like
effect as if originally named as Agent hereunder. Upon request of such successor
Agent, the Company and the retiring Agent shall execute and deliver such
instruments of conveyance, assignment and further assurance and do such other
things as may reasonably be required for more fully and certainly vesting and
confirming in such successor Agent all such properties, rights, interests,
powers, authorities and obligations. The provisions of this Article VII shall
thereafter remain effective for such retiring Agent with respect to any actions
taken or omitted to be taken by such Agent while acting as the Agent hereunder.
7.10 Sharing of Payments. The Lenders agree among themselves that,
in the event that any Lender shall obtain payment in respect of any Advance or
any other obligation owing to the Lenders under this Agreement through the
exercise of a right of set-off, Lender's lien, counterclaim or otherwise in
excess of its ratable share of payments received by all of the Lenders on
account of the Advances and other obligations (or if no Advances are
outstanding, ratably according to the respective amounts of the Commitments),
such Lender shall promptly purchase from the other Lenders participation in such
Advances
40
<PAGE>
and other obligations in such amounts, and make such other adjustments from time
to time, as shall be equitable to the end that all of the Lenders share such
payment in accordance with such ratable shares. The Lenders further agree among
themselves that if payment to a Lender obtained by such Lender through the
exercise of a right of set-off, Lender's lien, counterclaim or otherwise as
aforesaid shall be rescinded or must otherwise be restored, each Lender which
shall have shared the benefit of such payment shall, by repurchase of
participation theretofore sold, return its share of that benefit to each Lender
whose payment shall have been rescinded or otherwise restored. The Company
agrees that any Lender so purchasing such a participation may, to the fullest
extent permitted by law, exercise all rights of payment, including set-off,
Lender's lien or counterclaim, with respect to such participation as fully as if
such Lender were a holder of such Advance or other obligation in the amount of
such participation. The Lenders further agree among themselves that, in the
event that amounts received by the Lenders and the Agent hereunder are
insufficient to pay all such obligations or insufficient to pay all such
obligations when due, the fees and other amounts owing to the Agent in such
capacity shall be paid therefrom before payment of obligations owing to the
Lenders under this Agreement. Except as otherwise expressly provided in this
Agreement, if any Lender or the Agent shall fail to remit to the Agent or any
other Lender an amount payable by such Lender or the Agent to the Agent or such
other Lender pursuant to this Agreement on the date when such amount is due,
such payments shall be made together with interest thereon for each date from
the date such amount is due until the date such amount is paid to the Agent or
such other Lender at a rate per annum equal to the rate at which borrowings are
available to the payee in its overnight federal funds market. It is further
understood and agreed among the Lenders and the Agent that if the Agent shall
engage in any other transactions with the Company and shall have the benefit of
any collateral or security therefor which does not expressly secure the
obligations arising under this Agreement except by virtue of a so-called dragnet
clause or comparable provision, the Agent shall be entitled to apply any
proceeds of such collateral or security first in respect of the obligations
arising in connection with such other transaction before application to the
obligations arising under this Agreement.
7.11 Withholding Tax Exemption. At least five Business Days prior to
the first date on which interest or fees are payable hereunder for the account
of any Lender, each Lender that is not incorporated under the laws of the United
States of America, or a state thereof, agrees that it will deliver to each of
the Company and the Agent two duly completed copies of United States Internal
Revenue Service Form 1001 or 4224, certifying in either case that such Lender is
entitled to receive payments under this Agreement and the Notes without
deduction or withholding of any United States federal income taxes. Each Lender
which so delivers a Form 1001 or 4224 further undertakes to deliver to each of
the Company and the Agent two additional copies of such form (or a successor
form) on or before the date that such form expires (currently, three successive
calendar years for Form 1001 and one calendar year for Form 4224) or becomes
obsolete or after the occurrence of any event requiring a change in the most
recent forms so delivered by it, and such amendments thereto or extensions or
renewals thereof as may be reasonably requested by the Company or the Agent, in
each case certifying that such Lender is entitled to receive payments under this
Agreement and the Notes without deduction or withholding of any United States
federal income taxes, unless an event (including without limitation any change
in treaty, law or regulation) has occurred prior to the date on which any such
delivery would otherwise be required which renders all such forms inapplicable
or which would prevent such Lender from duly completing and delivering any such
form with respect to it and such Lender advises the Company and the Agent that
it is not capable of receiving payments without any deduction or withholding of
United States federal income tax. Each Lender will promptly execute such other
documents with respect to withholding or similar taxes in any jurisdiction other
than United States or any State thereof if required to do so to avoid any such
withholding tax or similar tax, provided that
41
<PAGE>
such Lender is legally entitled to do so and such Lender would not be materially
prejudiced thereby. Each such Lender delivering such forms shall indemnify the
Company and the Agent, and hold harmless the Company and the Agent from, all
losses and damages suffered by the Company or the Agent for any inaccuracies in
any such forms.
ARTICLE VIII.
MISCELLANEOUS
8.1 Amendments, Etc. (a) No amendment, modification, termination or
waiver of any provision of any Loan Document nor any consent to any departure
therefrom shall be effective unless the same shall be in writing and signed by
the Company and Required Lenders and, to the extent any rights or duties of the
Agent may be affected thereby, the Agent, provided, however, that no such
amendment, modification, termination, waiver or consent shall, without the
consent of the Agent and all of the Lenders, (i) authorize or permit the
extension of time for, or any reduction of the amount of, any payment of the
principal of, or interest on, the Notes or any Letter of Credit reimbursement
obligation, or any fees or other amount payable hereunder, or (ii) amend, extend
or terminate the respective Commitments of any Lender set forth on the signature
pages hereof or the definition of Required Lenders.
42
<PAGE>
(b) Any such amendment, waiver or consent shall be effective
only in the specific instance and for the specific purpose for which given.
(c) Notwithstanding anything herein to the contrary, no
Defaulting Lender shall be entitled to vote (whether to consent or to withhold
its consent) with respect to any amendment, modification, termination or waiver
of any provision of this Agreement or any departure therefrom or any direction
from the Lenders to the Agent, and, for purposes of determining the Required
Lenders at any time when any Lender is in default under this Agreement, the
Commitments and Advances of such defaulting Lenders shall be disregarded.
8.2 Notices. (a) Except as otherwise provided in Section 8.2(c)
hereof, all notices and other communications hereunder shall be in writing and
shall be delivered or sent to the Company at 3939 International Gateway,
Columbus, Ohio 43219, Attention: Chief Financial Officer or Controller,
Facsimile No. (614) 238-1969, Telephone No. (614) 237-9777, and to the Agent and
the Lenders at the respective addresses for notices set forth on the signatures
pages hereof, or to such other address as may be designated by the Company, the
Agent or any Lender by notice to the other parties hereto. All notices and other
communications shall be deemed to have been given at the time of actual delivery
thereof to such address, or, unless sooner delivered, (i) if sent by certified
or registered mail, postage prepaid, to such address, on the third day after the
date of mailing, (ii) if sent by telex, upon receipt of the appropriate
answerback, or (iii) if sent by facsimile transmission, upon confirmation of
receipt by telephone at the number specified for confirmation, provided,
however, that notices to the Agent shall not be effective until received.
(b) Notices by the Company to the Agent with respect to
terminations or reductions of the Commitments pursuant to Section 2.2, requests
for Advances pursuant to Section 2.4, requests for continuations or conversions
of Loans pursuant to Section 2.7 and notices of prepayment pursuant to Section
3.1 shall be irrevocable and binding on the Company.
(c) Any notice to be given by the Company to the Agent
pursuant to Sections 2.4, 2.7 or 3.1 and any notice to be given by the Agent or
any Lender hereunder, may be given by telephone, and all such notices given by
the Company must be immediately confirmed in writing in the manner provided in
Section 8.2(a). Any such notice given by telephone shall be deemed effective
upon receipt thereof by the party to whom such notice is to be given. The
Company shall indemnify and hold harmless the Lenders and the Agent from any and
all losses, damages, liabilities and claims arising from their good faith
reliance on any such telephone notice.
8.3 No Waiver By Conduct; Remedies Cumulative. No course of dealing
on the part of the Agent or any Lender, nor any delay or failure on the part of
the Agent or any Lender in exercising any right, power or privilege hereunder
shall operate as a waiver of such right, power or privilege or otherwise
prejudice the Agent's or such Lender's rights and remedies hereunder; nor shall
any single or partial exercise thereof preclude any further exercise thereof or
the exercise of any other right, power or privilege. No right or remedy
conferred upon or reserved to the Agent or any Lender under any Loan Document is
intended to be exclusive of any other right or remedy, and every right and
remedy shall be cumulative and in addition to every other right or remedy
granted thereunder or now or hereafter existing under any applicable law. Every
right and remedy granted by any Loan Document or by applicable law to the Agent
or any Lender may be exercised from time to time and as often as may be deemed
expedient by the Agent or any Lender and, unless contrary to the express
provisions of any Loan Document, irrespective of the occurrence or continuance
of any Default or Event of Default.
50
<PAGE>
8.4 Reliance on and Survival of Various Provisions. All terms,
covenants, agreements, representations and warranties of the Company made herein
or in any other Loan Document or in any certificate, report, financial statement
or other document furnished by or on behalf of the Company in connection with
this Agreement shall be deemed to be material and to have been relied upon by
the Lenders, notwithstanding any investigation heretofore or hereafter made by
any Lender or on such Lender's behalf, and those covenants and agreements of the
Company set forth in Section 3.7, 3.9 and 8.5 hereof shall survive the repayment
in full of the Advances and the termination of the Commitments.
8.5 Expenses; Indemnification. (a) The Company agrees to pay, or
reimburse the Agent for the payment of, on demand, (i) the reasonable fees and
expenses of counsel to the Agent, including without limitation the fees and
expenses of Dickinson Wright PLLC, in connection with the preparation,
execution, delivery and administration of the Loan Documents and in connection
with advising the Agent as to its rights and responsibilities with respect
thereto, and in connection with any amendments, waivers or consents in
connection therewith, and (ii) all stamp and other taxes and fees payable or
determined to be payable in connection with the execution, delivery, filing or
recording of the Loan Documents (or the verification of filing, recording,
perfection or priority thereof) or the consummation of the transactions
contemplated hereby, and any and all liabilities with respect to or resulting
from any delay in paying or omitting to pay such taxes or fees, and (iii) all
reasonable costs and expenses of the Agent and the Lenders (including reasonable
fees and expenses of counsel and whether incurred through negotiations, legal
proceedings or otherwise)) in connection with any Default or Event of Default or
the enforcement of, or the exercise or preservation of any rights under, the
Loan Documents or in connection with any refinancing or restructuring of the
credit arrangements provided under this Agreement and (iv) all reasonable costs
and expenses of the Agent and the Lenders (including reasonable fees and
expenses of counsel) in connection with any action or proceeding relating to a
court order, injunction or other process or decree restraining or seeking to
restrain the Agent from paying any amount under, or otherwise relating in any
way to, any Letter of Credit and any and all costs and expenses which any of
them may incur relative to any payment under any Letter of Credit.
(b) The Company hereby indemnifies and agrees to hold harmless
the Lenders and the Agent, and their respective officers, directors, employees
and agents, harmless from and against any and all claims, damages, losses,
liabilities, costs or expenses of any kind or nature whatsoever which the
Lenders or the Agent or any such Person may incur or which may be claimed
against any of them by reason of or in connection with any Letter of Credit, and
neither any Lender nor the Agent or any of their respective officers, directors,
employees or agents shall be liable or responsible for: (i) the use which may be
made of any Letter of Credit or for any acts or omissions of any beneficiary in
connection therewith; (ii) the validity, sufficiency or genuineness of documents
or of any endorsement thereon, even if such documents should in fact prove to be
in any or all respects invalid, insufficient, fraudulent or forged; (iii)
payment by the Agent to the beneficiary under any Letter of Credit against
presentation of documents which do not comply with the terms of any Letter of
Credit, including failure of any documents to bear any reference or adequate
reference to such Letter of Credit; (iv) any error, omission, interruption or
delay in transmission, dispatch or delivery of any message or advice, however
transmitted, in connection with any Letter of Credit; or (v) any other event or
circumstance whatsoever arising in connection with any Letter of Credit;
provided, however, that the Company shall not be required to indemnify the
Lenders and the Agent and such other Persons, and the Lenders shall be liable to
the Company to the extent, but only to the extent, of any direct, as opposed to
consequential or incidental, damages suffered by the Company which were caused
by (A) the Agent's wrongful dishonor of any Letter of Credit after the
presentation to it by the beneficiary thereunder of a draft or other demand for
payment and other documentation strictly complying with the terms and conditions
of such Letter of Credit, or (B) the Agent's payment by the Agent to the
beneficiary under any Letter of Credit against presentation of documents which
do not comply with the terms of the Letter of
51
<PAGE>
Credit to the extent, but only to the extent, that such payment constitutes
gross negligence of wilful misconduct of the Agent. It is understood that in
making any payment under a Letter of Credit the Agent will rely on documents
presented to it under such Letter of Credit as to any and all matters set forth
therein without further investigation and regardless of any notice or
information to the contrary, and such reliance and payment against documents
presented under a Letter of Credit substantially complying with the terms
thereof shall not be deemed gross negligence or wilful misconduct of the Agent
in connection with such payment. It is further acknowledged and agreed that the
Company may have rights against the beneficiary or others in connection with any
Letter of Credit with respect to which the Lenders are alleged to be liable and
it shall be a precondition of the assertion of any liability of the Lenders
under this Section that the Company shall first have exhausted all remedies in
respect of the alleged loss against such beneficiary and any other parties
obligated or liable in connection with such Letter of Credit and any related
transactions.
(c) In consideration of the execution and delivery of this
Agreement by each Lender and the extension of the Commitments, the Company
hereby indemnifies, exonerates and holds the Agent, each Lender and each of
their respective officers, directors, employees and agents (collectively, the
"Indemnified Parties") free and harmless from and against any and all actions,
causes of action, suits, losses, costs, liabilities and damages, and expenses
incurred in connection therewith (irrespective of whether any such Indemnified
Party is a party to the action for which indemnification hereunder is sought),
including reasonable attorneys' fees and disbursements (collectively, the
"Indemnified Liabilities"), incurred at any time by the Indemnified Parties or
any of them as a result of, or arising out of, or relating to:
(i) any transaction financed or to be financed in whole
or in part, directly or indirectly, with the proceeds of any Advance;
(ii) the entering into and performance of this Agreement
and any other agreement or instrument executed in connection herewith by any of
the Indemnified Parties (including any action brought by or on behalf of the
Company as the result of any determination by the Required Lenders not to fund
any Advance);
(iii) any investigation, litigation or proceeding
related to any acquisition or proposed acquisition by the Company or any of its
Subsidiaries of any portion of the stock or assets of any Person, whether or not
the Agent or such Lender is party thereto;
(iv) any investigation, litigation or proceeding related
to any environmental cleanup, audit, compliance or other matter relating to the
protection of the environment or the release by the Company or any of its
Subsidiaries of any Hazardous Material; or
(v) the presence on or under, or the escape, seepage,
leakage, spillage, discharge, emission, discharging or releasing from, any real
property owned or operated by the Company or any of its Subsidiaries of any
Hazardous Material (including any losses, liabilities, damages, injuries, costs,
expenses or claims asserted or arising under any Environmental Law), regardless
of whether caused by, or within the control of, the Company or such Subsidiary,
except for any such Indemnified Liabilities arising for the account of a
particular Indemnified Party by reason of the activities of the Indemnified
Party on the property of the Company conducted subsequent to a foreclosure on
such property by the Lenders or by reason of the relevant Indemnified Party's
gross negligence or willful misconduct or breach of this Agreement, and if and
to the extent that the foregoing undertaking may be unenforceable for any
reason, the Company hereby agrees to make the maximum contribution to the
payment and satisfaction of each of the Indemnified Liabilities which is
permissible under applicable law. The Company shall be obligated to indemnify
the Indemnified Parties for all Indemnified Liabilities subject to and pursuant
to the
52
<PAGE>
foregoing provisions, regardless of whether the Company or any of its
Subsidiaries had knowledge of the facts and circumstances giving rise to such
Indemnified Liability.
8.6 Successors and Assigns. (a) This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and assigns, provided that the Company may not, without the prior consent of the
Lenders, assign its rights or obligations under any Loan Document and the
Lenders shall not be obligated to make any Advance hereunder to any entity other
than the Company.
(b) Any Lender may sell to any financial institution or
institutions, and such financial institution or institutions may further sell, a
participation interest (undivided or divided) in, the Advances and such Lender's
rights and benefits under the Loan Documents, and to the extent of that
participation interest such participant or participants shall have the same
rights and benefits against the Company under Section 3.7, 3.9 and 6.2(c) as it
or they would have had if such participant or participants were the Lender
making the Advances to the Company hereunder, provided, however, that (i) such
Lender's obligations under this Agreement shall remain unmodified and fully
effective and enforceable against such Lender, (ii) such Lender shall remain
solely responsible to the other parties hereto for the performance of such
obligations, (iii) such Lender shall remain the holder of its Notes for all
purposes of this Agreement, (iv) the Company, the Agent and the other Lenders
shall continue to deal solely and directly with such Lender in connection with
such Lender's rights and obligations under this Agreement, and (v) such Lender
shall not grant to its participant any rights to consent or withhold consent to
any action taken by such Lender or the Agent under this Agreement other than
action requiring the consent of all of the Lenders hereunder.
(c) The Agent from time to time in its sole discretion may
appoint agents for the purpose of servicing and administering this Agreement and
the transactions contemplated hereby and enforcing or exercising any rights or
remedies of the Agent provided under the Loan Documents or otherwise. In
furtherance of such agency, the Agent may from time to time direct that the
Company provide notices, reports and other documents contemplated by this
Agreement (or duplicates thereof) to such agent. The Company hereby consents to
the appointment of such agent and agrees to provide all such notices, reports
and other documents and to otherwise deal with such agent acting on behalf of
the Agent in the same manner as would be required if dealing with the Agent
itself.
(d) Each Lender may, with the prior written consent of the
Company (which shall not be unreasonably withheld and shall not be required if
an Event of Default has occurred and is continuing or if such assignment is to
another Lender) and the Agent, assign to one or more Lenders or other entities
all or a portion of its rights and obligations under this Agreement (including,
without limitation, all or a portion of its Commitment, the Advances owing to it
and the Note or Notes held by it); provided, however, that (i) each such
assignment shall be of a uniform, and not a varying, percentage of all rights
and obligations, (ii) except in the case of an assignment of all of a Lender's
rights and obligations under this Agreement, (A) the amount of the Commitment of
the assigning Lender being assigned pursuant to each such assignment (determined
as of the date of the Assignment and Acceptance with respect to such assignment)
shall in no event be less than $5,000,000, and in integral multiples of
$1,000,000 thereafter, or such lesser amount as the Company and the Agent may
consent to and (B) after giving effect to each such assignment, the amount of
the Commitment of the assigning Lender shall in no event be less than
$5,000,000, (iii) the parties to each such assignment shall execute and deliver
to the Agent, for its acceptance and recording in the Register, an Assignment
and Acceptance in the form of Exhibit D hereto (an "Assignment and Acceptance"),
together with any Note or Notes subject to such assignment and a processing and
recordation fee of $3,000, and (iv) any Lender may without the consent of the
Company or the Agent, and without paying any fee, assign to any Affiliate of
such Lender all of its rights and obligations under this Agreement. Upon such
execution, delivery, acceptance and recording, from and after the
53
<PAGE>
effective date specified in such Assignment and Acceptance, (x) the assignee
thereunder shall be a party hereto and, to the extent that rights and
obligations hereunder have been assigned to it pursuant to such Assignment and
Acceptance, have the rights and obligations of a Lender hereunder and (y) the
Lender assignor thereunder shall, to the extent that rights and obligations
hereunder have been assigned by it pursuant to such Assignment and Acceptance,
relinquish its rights and be released from its obligations under this Agreement
(and, in the case of an Assignment and Acceptance covering all of the remaining
portion of an assigning Lender's rights and obligations under this Agreement,
such Lender shall cease to be a party hereto).
(e) By executing and delivering an Assignment and Acceptance,
the Lender assignor thereunder and the assignee thereunder confirm to and agree
with each other and the other parties hereto as follows: (i) other than as
provided in such Assignment and Acceptance, such assigning Lender makes no
representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with this
Agreement or the execution, legality, validity, enforceability, genuineness,
sufficiency or value of this Agreement or any other instrument or document
furnished pursuant hereto; (ii) such assigning Lender makes no representation or
warranty and assumes no responsibility with respect to the financial condition
of the Company or the performance or observance by the Company of any of its
obligations under this Agreement or any other instrument or document furnished
pursuant hereto; (iii) such assignee confirms that it has received a copy of
this Agreement, together with copies of the financial statements referred to in
Section 4.6 and such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into such
Assignment and Acceptance; (iv) such assignee will, independently and without
reliance upon the Agent, such assigning Lender or any other Lender and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
this Agreement; (v) such assignee appoints and authorizes the Agent to take such
action as agent on its behalf and to exercise such powers and discretion under
this Agreement as are delegated to the Agent by the terms hereof, together with
such powers and discretion as are reasonably incidental thereto; and (vi) such
assignee agrees that it will perform in accordance with their terms all of the
obligations that by the terms of this Agreement are required to be performed by
it as a Lender.
(f) The Agent shall maintain at its address designated on the
signature pages hereof a copy of each Assignment and Acceptance delivered to and
accepted by it and a register for the recordation of the names and addresses of
the Lenders and the Commitment of, and principal amount of the Advances owing
to, each Lender from time to time (the "Register"). The entries in the Register
shall be conclusive and binding for all purposes, absent manifest error, and the
Company, the Agent and the Lenders may treat each Person whose name is recorded
in the Register as a Lender hereunder for all purposes of this Agreement. The
Register shall be available for inspection by the Company or any Lender at any
reasonable time and from time to time upon reasonable prior notice.
(g) Upon its receipt of an Assignment and Acceptance executed
by an assigning Lender and an assignee, together with any Note or Notes subject
to such assignment, the Agent shall, if such Assignment and Acceptance has been
completed, (i) accept such Assignment and Acceptance, (ii) record the
information contained therein in the Register and (iii) give prompt notice
thereof to the Company. Within five Business Days after its receipt of such
notice, the Company shall execute and deliver to the Agent in exchange for the
surrendered Note or Notes a new Note to the order of such assignee in an amount
equal to the Commitment assumed by it pursuant to such Assignment and Acceptance
and, if the assigning Lender has retained a Commitment hereunder, a new Note to
the order of the assigning Lender in an amount equal to the Commitment retained
by it hereunder. Such new Note or Notes shall be in an aggregate principal
amount equal to the aggregate principal amount of such surrendered Note or
Notes, shall
54
<PAGE>
be dated the effective date of such Assignment and Acceptance and
shall otherwise be in substantially the form of Exhibit D hereto.
(h) The Company shall not be liable for any costs or expenses
of any Lender in effectuating any participation or assignment under this Section
8.6.
(i) The Lenders may, in connection with any assignment or
participation or proposed assignment or participation pursuant to this Section
8.6, disclose to the assignee or participant or proposed assignee or participant
any information relating to the Company.
(j) Notwithstanding any other provision set forth in this
Agreement, any Lender may at any time create a security interest in, or assign,
all or any portion of its rights under this Agreement (including, without
limitation, the Loans owing to it and the Note or Notes held by it) in favor of
any Federal Reserve Lender in accordance with Regulation A of the Board of
Governors of the Federal Reserve System; provided that such creation of a
security interest or assignment shall not release such Lender from its
obligations under this Agreement.
8.7 Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument, and any of the parties hereto may execute this Agreement by signing
any such counterpart.
8.8 Governing Law. This Agreement is a contract made under, and
shall be governed by and construed in accordance with, the law of the State of
Michigan applicable to contracts made and to be performed entirely within such
State and without giving effect to choice of law principles of such State. The
Company and the Lenders further agree that any legal or equitable action or
proceeding with respect to the Loan Documents or the transactions contemplated
hereby shall be brought in any court of the State of Michigan, or in any court
of the United States of America sitting in Michigan, and the Company and the
Lenders hereby submit to and accept generally and unconditionally the
jurisdiction of those courts with respect to its Person and property, and, in
the case of the Company irrevocably appoints its chief financial officer as its
agent for service of process and irrevocably consents to the service of process
in connection with any such action or proceeding by Personal delivery to such
agent or to the Company or by the mailing thereof by registered or certified
mail, postage prepaid to the Company or such Guarantor at its address for
notices pursuant to Section 8.2. Nothing in this paragraph shall affect the
right of the Lenders and the Agent to serve process in any other manner
permitted by law or limit the right of the Lenders or the Agent to bring any
such action or proceeding against the Company or property in the courts of any
other jurisdiction. The Company and the Lenders hereby irrevocably waives any
objection to the laying of venue of any such action or proceeding in the above
described courts.
8.9 Table of Contents and Headings. The table of contents and the
headings of the various subdivisions hereof are for the convenience of reference
only and shall in no way modify any of the terms or provisions hereof.
8.10 Construction of Certain Provisions. If any provision of this
Agreement refers to any action to be taken by any Person, or which such Person
is prohibited from taking, such provision shall be applicable whether such
action is taken directly or indirectly by such Person, whether or not expressly
specified in such provision.
8.11 Integration and Severability. The Loan Documents embody the
entire agreement and understanding between the Company, the Guarantors, the
Agent and the Lenders, and supersede all
55
<PAGE>
prior agreements and understandings, relating to the subject matter hereof. In
case any one or more of the obligations of the Company under the Loan Documents
shall be invalid, illegal or unenforceable in any jurisdiction, the validity,
legality and enforceability of the remaining obligations of the Company shall
not in any way be affected or impaired thereby, and such invalidity, illegality
or unenforceability in one jurisdiction shall not affect the validity, legality
or enforceability of the obligations of the Company under any Loan Document in
any other jurisdiction.
8.12 Independence of Covenants. All covenants hereunder shall be
given independent effect so that if a particular action or condition is not
permitted by any such covenant, the fact that it would be permitted by an
exception to, or would be otherwise within the limitations of, another covenant
shall not avoid the occurrence of a Default or an Event of Default if such
action is taken or such condition exists.
8.13 Interest Rate Limitation. Notwithstanding any provisions of any
Loan Document, in no event shall the amount of interest paid or agreed to be
paid by the Company exceed an amount computed at the highest rate of interest
permissible under applicable law. If, from any circumstances whatsoever,
fulfillment of any provision of any Loan Document at the time performance of
such provision shall be due, shall involve exceeding the interest rate
limitation validly prescribed by law which a court of competent jurisdiction may
deem applicable hereto, then, ipso facto, the obligations to be fulfilled shall
be reduced to an amount computed at the highest rate of interest permissible
under applicable law, and if for any reason whatsoever any Lender shall ever
receive as interest an amount which would be deemed unlawful under such
applicable law such interest shall be automatically applied to the payment of
principal of the Advances outstanding hereunder (whether or not then due and
payable) and not to the payment of interest, or shall be refunded to the Company
if such principal and all other obligations of the Company to the Lenders have
been paid in full.
8.14 Judgment and Payment.
(a) If, for the purpose of obtaining judgment in any court, it is
necessary to convert a sum owing hereunder by the Company in one currency into
another currency, the Company agrees, to the fullest extent that it may
effectively do so, that the rate of exchange used shall be that at which in
accordance with normal banking procedures in the relevant jurisdiction the Agent
could purchase the first currency with such other currency for the first
currency on the Business Day immediately preceding the day on which the final
judgment is given.
(b) The obligations of the Company in respect of any sum due in
Dollars to any party hereto or any holder of the obligations owing hereunder
(the "Applicable Creditor") shall, notwithstanding any payment obligation or
judgment in a currency (the "Payment Currency") other than Dollars, be
discharged only to the extent that, on the Business Day following receipt by the
Applicable Creditor of any sum adjudged to be so due in the Payment Currency,
the Applicable Creditor may in accordance with normal banking procedures in the
relevant jurisdiction purchase Dollars with the Payment Currency; if the amount
of Dollars so purchased is less than the sum originally due to the Applicable
Creditor in Dollars, the Company agrees, as a separate obligation and
notwithstanding any such judgment, to indemnify the Applicable Creditor against
such loss. The obligations of the Company contained in this Section 8.14 shall
survive the termination of this Agreement and the payment of all other amounts
owing hereunder.
8.15 Unification of Certain Currencies. Notwithstanding the
commencement of the third stage of European Monetary Union ("EMU") (which as of
the date of this Agreement is scheduled to occur on January 1, 1999), all
Advances denominated in any Eligible Currency shall continue to be so
56
<PAGE>
denominated, interest rates with respect to Eurocurrency Rate Loans denominated
in any Eligible Currency shall continue to be determined by reference to such
Permitted Currency in accordance with the procedures specified in the definition
of "Eurocurrency Rate", all calculations with respect to Advances outstanding in
any Eligible Currency shall continue to be made in units of such currency, and
the obligations of the Company with respect to payments of principal and
interest on Advances outstanding in any Eligible Currency shall continue to be
payable in such currency, all without regard to the conversion rates or rounding
rules referred to in European Council Regulation 96/0249 (CNS). Following the
commencement of the third stage of EMU and prior to the first issuance of
euro-bank notes by the European Central Bank pursuant to Article 105A(1) of the
Treaty Establishing the European Community, as amended, (which as of the date of
this Agreement is scheduled to occur on January 1, 2002) the Company and the
Lenders agree to negotiate in good faith an amendment to this Agreement,
satisfactory in form and substance to the Company and the Lenders to modify this
Agreement in light of EMU.
8.16 Acknowledgments. The Company hereby acknowledges that:
(a) it has been advised by counsel in the negotiation,
execution and delivery of this Agreement and the other Loan Documents;
(b) none of the Agent or any Lender has any fiduciary
relationship with or duty to such Borrower arising out of or in connection with
this Agreement or any of the other Loan Documents, and the relationship between
the Agent and the Lenders, on the one hand, and the Borrowers, on the other
hand, in connection herewith or therewith is solely that of debtor and creditor;
and
(c) no joint venture is created hereby or by the other Loan
Documents or otherwise exists by virtue of the transactions contemplated hereby
among the Lenders or among the Borrowers and the Lenders.
8.17 Year 2000 Problem. The Company and its Subsidiaries have
reviewed the areas within their business and operations which could be adversely
affected by, and have developed or are developing a program to address on a
timely basis, the "Year 2000 Problem" (that is, the risk that computer
applications used by the Company and its Subsidiaries may be unable to recognize
and perform properly date-sensitive functions involving certain dates prior to
and any date after December 31, 1999). Based on such review and program, the
company reasonably believes that the "Year 2000 Problem" will not have a
Material Adverse Effect.
8.18 WAIVER OF JURY TRIAL. THE LENDERS, THE AGENT AND THE COMPANY,
AFTER CONSULTING OR HAVING HAD THE OPPORTUNITY TO CONSULT WITH COUNSEL,
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHT EITHER OF THEM MAY HAVE
TO A TRIAL BY JURY IN ANY LITIGATION BASED UPON OR ARISING OUT OF ANY LOAN
DOCUMENTS OR ANY RELATED INSTRUMENT OR AGREEMENT OR ANY OF THE TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT OR ANY COURSE OF CONDUCT, DEALING, STATEMENTS
(WHETHER ORAL OR WRITTEN) OR ACTIONS OF ANY OF THEM. NEITHER ANY LENDER, THE
AGENT, NOR THE COMPANY SHALL SEEK TO CONSOLIDATE, BY COUNTERCLAIM OR OTHERWISE,
ANY SUCH ACTION IN WHICH A JURY TRIAL HAS BEEN WAIVED WITH ANY OTHER ACTION IN
WHICH A JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED. THESE PROVISIONS SHALL NOT
BE DEEMED TO HAVE BEEN MODIFIED IN ANY RESPECT OR RELINQUISHED BY ANY PARTY
HERETO EXCEPT BY A WRITTEN INSTRUMENT EXECUTED BY SUCH PARTY.
57
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered as of the day and year first above written, which
shall be the Effective Date of this Agreement.
AIRNET SYSTEMS, INC.
By /s/ William R. Sumser
--------------------------------------
Its Vice President, Finance
-------------------------------------
58
<PAGE>
Address for Notices: NBD BANK, as a Lender
and as Agent
611 Woodward Avenue By /s/ Winifred S. Pinet
Detroit, Michigan 48226 --------------------------------------
Its First Vice President
-------------------------------------
Attention: Michigan Banking Division
Facsimile No.: (313) 225-2290
Telephone No.:(313) 225-2227
Commitment amount for the period from and including the Effective Date
but excluding the commitment Reduction Date: $36,400,000
Commitment amount for the period from and including the Commitment
Reduction Date to and including the Termination Date: $28,000,000
Percentage of
Total Commitments: 56.00%
59
<PAGE>
Address for Notices: BANK ONE, N.A.
100 East Broad Street By /s/ D. Clark
Columbus, Ohio 43215 --------------------------------------
Its Vice President
-------------------------------------
Attention: Christopher J. Gage
Facsimile No.: (614) ___-____
Telephone No.:(614) 248-5510
Commitment amount for the period from and including the Effective Date
to but excluding the Commitment Reduction Date: $9,100,000
Commitment amount for the period from and including the Commitment
Reduction Date to and including the Termination Date: $7,000,000
Percentage of
Total Commitments: 14.00%
60
<PAGE>
Address for Notices: KEYBANK NATIONAL ASSOCIATION
127 Public Square By /s/ Brendan A. Lawlor
Cleveland, Ohio 44114 --------------------------------------
Its Assistant Vice President
-------------------------------------
Attention: Brendan Lawlor
Facsimile No.: (216) 689-4981
Telephone No.:(216) 689-5642
Commitment amount for the period from and including the Effective Date
to but excluding the Commitment Reduction Date: $19,500,000
Commitment amount for the period from and including the Commitment
Reduction Date to and including the Termination Date: $15,000,000
Percentage of
Total Commitments: 30.00%
61
<PAGE>
List of Exhibits and Schedules to
Form of Loan Agreement dated as of August 1, 1998,
among AirNet Systems, Inc., the Lenders
Party Thereto and NBD Bank, as Agent
Exhibit
- -------
A Note
B Request for Advance
C Request for Continuation or Conversion of Loan
D Assignment and Acceptance
Schedule
- --------
2.10 Extension Request
4.4 Subsidiaries
4.5 Litigation
4.6 Contingent Liabilities
4.12 Environmental matters
5.2 (d) Liens
5.2 (i) Indebtedness
Note: these exhibits and schedules are not being filed herewith. AirNet Systems,
Inc. agrees to furnish a copy of any omitted Exhibit or Schedule to the
Securities and Exchange Commission upon request.
62
<PAGE>
EXHIBIT 10.2
CONFIDENTIAL AGREEMENT
This Agreement is entered by and between Donald D. Strench ("Strench") and
AirNet Systems, Inc., an Ohio corporation ("AirNet").
WHEREAS, Strench is currently employed by, and is an officer of, AirNet;
WHEREAS, AirNet desires to continue to employ Strench to perform certain
functions for AirNet at and after the Effective Date (as defined below);
WHEREAS, AirNet and Strench desire to enter into an agreement to establish
the rights and obligations of Strench and AirNet in such employment
relationship;
NOW, THEREFORE, in consideration of the mutual promises and other good and
valuable consideration contained herein, the parties agree as follows:
1. Strench will continue to satisfactorily discharge such duties and
responsibilities as may be reasonably assigned to him by AirNet's
Chief Executive Officer and, provided he does so, shall remain
employed by AirNet with the title of Vice President until the date
Strench resigns from AirNet ("Resignation Date"). Strench agrees to
resign from AirNet upon the earlier of (i) six (6) months after
receipt of a Resignation Request from AirNet pursuant to Section 2
below or (ii) the date Strench commences comparable or satisfactory
employment elsewhere. On the Resignation Date, Strench shall resign
from all positions held at AirNet and AirNet shall, within a
reasonable time before or after the Resignation Date, issue a press
release announcing Strench's resignation.
2. At any time following six (6) months after the Effective Date of
this Agreement as defined below, and upon six (6) months prior
written notice, AirNet may request Strench to resign from AirNet
("Resignation Request"), and Strench shall resign from AirNet.
During the notice period, Strench shall retain his then current
title and reporting relationship and continue to receive his then
current compensation but shall be under no obligation with respect
to performance of any duties or responsibilities related to his
employment at AirNet.
3. On or after the Effective Date of this Agreement, and upon two (2)
weeks prior written notice from Strench to AirNet ("Notice of
Resignation"), Strench may resign from AirNet.
1
<PAGE>
4. Upon the later of (i) August 28, 1998 or (ii) three (3) business
days following the Effective Date of this Agreement, AirNet agrees
to pay to Strench the sum of Two Hundred Thousand Dollars
($200,000.00) as a transaction bonus (the "Bonus") for Strench's
role in the Quick acquisition transaction. Any public acknowledgment
of this payment shall characterize such payment as a "bonus" based
on performance and not as a termination payment.
5. Separate and apart from the Bonus, AirNet agrees to continue to pay
Strench no less than his current compensation until the earlier of
(i) the date on which a Resignation Request is delivered to Strench
in accordance with Section 2 above or (ii) the Resignation Date.
6. Upon delivery of a Resignation Request to Strench in accordance with
Section 2 above, AirNet shall pay Strench the sum of One Hundred
Five Thousand Dollars ($105,000.00) payable in installments of Eight
Thousand Seventy Six Dollars and Ninety-Two Cents ($8,076.92) every
two weeks in accordance with the AirNet payroll schedule for a
period of thirteen (13 pay periods). Any public acknowledgment of
this payment shall characterize such payment as "salary" and not as
a termination payment.
7. In the event Strench provides AirNet with a Resignation Notice
within one (1) year of the Effective Date of this Agreement, then,
within three (3) business days, AirNet shall pay to Strench the lump
sum of One Hundred Five Thousand Dollars ($105,000.00) less any
payments made by AirNet subsequent to delivery of a Resignation
Request to Strench in accordance with Section 2 above and as set
forth in Section 6 above. Any public acknowledgment of this payment
shall characterize such payment as a "bonus" based on performance
and not as a termination payment.
8. If Strench elects to exercise any of his AirNet stock options, he
must do so no later than ninety (90) days following the Resignation
Date. Strench shall not be subject to any AirNet purchase/sale
"windows" following receipt of a Resignation Request from AirNet or
a Resignation Notice and shall be indemnified by AirNet for any
charges or claims arising from such exercise of such options or the
sale of his AirNet stock.
9. Strench may maintain his current office at AirNet until ninety (90)
days following receipt of a Resignation Request from AirNet. Strench
may also retain his phone number, voice mail box, and electronic
mail box at or through AirNet until the Resignation Date. Strench
shall retain the privilege to "fly the system" at AirNet until the
Resignation Date.
2
<PAGE>
10. Strench shall purchase his personal computer equipment, facsimile
machine and cellular phone for the sum of Three Thousand Dollars
($3,000.00), which is the estimated fair market value of such
equipment. The cellular phone contract for Strench's cellular phone,
which is under AirNet's name, shall be terminated upon the
resignation date. Until that time, AirNet shall continue to be
responsible for all of Strench's associated cellular phone charges
consistent with past practice.
11. All other current benefits of Strench's employment with AirNet,
including group health insurance, shall be continued until the
Resignation Date, at which time all compensation and benefits from
AirNet to Strench shall cease, except as otherwise provided in this
Agreement.
12. In consideration of the above payments and promises, which are in
addition to what Strench would otherwise be entitled absent this
Agreement, Strench releases and forever discharges AirNet, and
AirNet's subsidiaries and all affiliated corporations, and AirNet's
directors, agents, shareholders, predecessors, successors, employees
and assigns, from any and all actions and causes of action with
respect to any matter or thing occurring prior to the Effective Date
hereof, including without limitation, any aspect of Strench's
employment by, or separation from, AirNet, including but not limited
to any and all claims under any federal, state, or local statute
dealing with any type of discrimination in employment, and any claim
for breach or contract or implied contract. Further, Strench
covenants not to sue AirNet and agrees to never commence, maintain,
or prosecute any action, lawsuit, claim, charge, or grievance
against AirNet or any affiliate of AirNet based upon any claim or
cause of action which Strench has released in this Agreement.
13. AirNet and Strench agree that the negotiation and terms of this
Agreement are strictly confidential and shall not be reported,
divulged, publicized or in any way revealed to any person,
corporation, agency or entity not a party to this Agreement, except:
(a) as required by law and then only to the extent required by law;
(b) to Strench's attorney or financial consultant; or (c) as
otherwise may be agreed to by the parties.
14. In accordance with the Older Workers Benefit Protection Act, Strench
acknowledges and agrees that: (1) he has been advised to consult
with a person of his choice, including an attorney, prior to
executing this Agreement; (2) he has had at least twenty-one (21)
days from the date of receipt a draft of this Agreement to consider
signing it; (3) the Agreement is written in clear and understandable
language and Strench fully understands the terms hereof; and (4)
after Strench signs this Agreement, he has seven (7) days from that
date to change his mind and revoke the Agreement. To revoke the
Agreement, Strench must clearly communicate his revocation decision
to AirNet's Chief Executive Officer within the seven day period.
Strench understands and agrees that should he revoke the Agreement
as set forth above, AirNet's obligations under this
3
<PAGE>
Agreement will be null and void. If Strench does not revoke the
Agreement pursuant to this Section 14, the Agreement shall be deemed
in full force and effect as of the eighth (8th) day following
execution of the Agreement (the "Effective Date").
15. The terms of the Agreement consisting of four (4) pages, shall
supersede any and all prior agreements of the parties, whether
written or verbal, and are contractual in nature. The Agreement
shall be subject to Ohio law, and may not be modified except by
writing signed by Strench and AirNet's Chief Executive Officer.
IN WITNESS WHEREOF, the undersigned voluntarily and knowingly
signed this Agreement this 6th day of August, 1998.
WITNESSED:
/s/ William R. Sumser /s/ Donald D. Strench
----------------------------- ---------------------------------
Donald D. Strench
/s/ Ann Mancuso
-----------------------------
IN WITNESS WHEREOF, the undersigned duly authorized officer of
AirNet Systems, Inc. voluntarily and knowingly signed this Agreement
this 6th day of August, 1998.
WITNESSED: AIRNET SYSTEMS, INC.
/s/ William R. Sumser By: /s/ JGM
----------------------------- ------------------------------
/s/ Ann Mancuso Its: CEO
----------------------------- -----------------------------
- --------------------------------------------------------------------------------
4
<PAGE>
EXHIBIT 10.3
AGREEMENT
THIS AGREEMENT, made and entered into as of the 1st day of January,
1999, by and between AirNet Systems, Inc., an Ohio corporation having its
principal place of business at 3939 International Gateway, Columbus, Ohio 43219
("AirNet"), and Eric P. Roy, an individual residing at 5626 Loch More Court
West, Dublin, Ohio 43017 ("Roy").
WHEREAS, Roy has served as AirNet's Executive Vice President, Chief
Financial Officer and Chief Operating Officer and also has served as a Director
of AirNet; and
WHEREAS, effective January 1, 1999, Roy is resigning from all of the
foregoing positions; and
WHEREAS, AirNet wishes to accept Roy's resignation and to enter into
an agreement in accordance with the following terms and conditions.
NOW, THEREFORE, the parties hereto, intending to be legally bound,
hereby agree as follows:
1. AirNet shall pay to Roy the amount of $583,125.00, half of which
shall be paid on January 4, 1999 and the remaining $291,562.50 will be paid as
follows: (A) 10 consecutive monthly installments of $26,505.68 commencing on
February 1, 1999; and (B) a final payment of $26,505.68 on December 1, 1999.
1
<PAGE>
2. All of the AirNet options owned by Roy which are vested as of
January 1, 1999 will be exercisable by Roy until December 31, 1999.
3. For good and valuable consideration, Roy agrees for a period of
two (2) years, commencing on January 1, 1999 and ending on December 31, 2000,
that he will not act as a consultant, manager, officer, director, shareholder,
agent, owner, partner, employee or be affiliated in any other way with any
business that competes with AirNet within the United States. This prohibition
shall not preclude Roy from owning stock in any competitive company whose stock
is publicly traded, provided Roy does not own more than 1% of the total
outstanding stock of such company. The parties agree that $100,000.00 of the
total consideration being paid to Roy hereunder shall be allocated to Roy's
agreements set forth in this paragraph 3.
4. Roy covenants and agrees that he shall hold in confidence all of
the confidential and proprietary information which he possesses concerning the
business of AirNet and he shall never, directly or indirectly, disclose,
disseminate or supply any of such information to any person, firm or
corporation, other than officers, directors and other employees of AirNet,
unless directed by AirNet to do so in writing. Such information shall involve
all financial information, customer lists, pricing information, projections,
business plans, sales and marketing information and plans, and all non-public
information concerning AirNet's business.
5. AirNet, for its successors and assigns, agrees to release and
forever discharge Roy from any and all claims, demands, judgments, actions,
causes of action, expenses, costs, attorneys' fees, and liabilities of any kind
whatsoever, whether known
2
<PAGE>
or unknown, vested or contingent, in law, equity, or otherwise, which AirNet may
have had, now has or may ever have as a result of any action or non-action prior
to January 1, 1999.
3
<PAGE>
6. Roy agrees not to at any time talk about, write about, or
otherwise publicize or disclose to any third party the terms of this Agreement
or any fact concerning its negotiation, execution or implementation, except with
(1) an attorney, accountant, or other advisor engaged by Roy to advise him; (2)
the Internal Revenue Service or other governmental agency; and (3) his immediate
family, providing that all such persons agree in advance to keep said
information confidential and not to disclose it to others. Nothing in this
paragraph shall be construed to prohibit Roy from disclosing to potential
employers the existence of this Agreement and the general nature of its
provisions.
7. In consideration of the receipt of the sums and covenants stated
herein, Roy does hereby, on behalf of himself, his heirs, administrators,
executors, agents, and assigns, forever release and discharge AirNet and its
agents, parents, subsidiaries, affiliates, officers, directors, employees,
successors, and assigns ("Released Parties"), from any and all claims, demands,
judgments, actions, causes of action, damages, expenses, costs, attorneys' fees,
and liabilities of any kind whatsoever, whether known or unknown, vested or
contingent, in law, equity or otherwise, which Roy has ever had, now has, or may
hereafter have against said Released Parties for or on account of any matter,
cause or thing whatsoever which has occurred prior to the date Roy signed this
Agreement, including, without limitation of the generality of the foregoing, any
and all claims which are related to Roy's employment with AirNet and his
resignation thereof, and any and all rights which Roy has or may
4
<PAGE>
have under the federal and state statutes which regulate employment, and the
laws of contract, torts, and other subjects.
8. Each of the parties hereto further states and represents that he
or it has carefully read the foregoing Agreement and knows the contents thereof,
and that he or it has executed the same as his or its own free act and deed.
9. This Agreement may be executed in one or more counterparts, and
any executed copy of this Agreement shall be valid and have the same force and
effect as the originally-executed Agreement.
10. This Agreement shall be governed by and construed and enforced
in accordance with the laws of the State of Ohio. If any provision or provisions
hereof shall at any time be found or declared invalid or unenforceable, such
finding or declaration shall not impair the remaining provisions hereof, but the
same shall remain valid and enforceable.
11. Roy's obligations and agreements under this Agreement shall be
binding on Roy's heirs, executors, legal representatives and assigns and shall
inure to the benefit of any successors and assigns of AirNet. AirNet may, at any
time, assign this Agreement or any of its rights or obligations arising
hereunder to any party.
12. This Agreement constitutes the entire agreement between the
parties hereto in respect of the subject matter hereof and this Agreement
supersedes all prior and contemporaneous agreements between the parties hereto
in connection with the subject matter hereof, except as otherwise provided
herein. No change, termination or
5
<PAGE>
attempted waiver of any of the provisions of this Agreement shall be binding on
any party hereto unless in writing and signed by the party affected.
13. The failure of any party hereto to enforce at any time any of
the provisions of this Agreement shall in no way be construed to be a waiver of
any such provisions, nor in any way to affect the validity of this Agreement or
any part thereof or the right of any party thereof to enforce each and every
such provision. No waiver or any breach of this Agreement shall be held to be a
waiver of any other or subsequent breach.
IN WITNESS WHEREOF, AirNet and Roy have executed this Agreement as
of the date first above written.
AIRNET SYSTEMS, INC.
By: /s/ Gerald G. Mercer
-------------------------------------
/s/ Eric P. Roy
----------------------------------------
Eric P. Roy
6
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF AIRNET SYSTEMS, INC.
Name of Subsidiary State of Incorporation
- ------------------ ----------------------
Float Control, Inc. Michigan
Mercury Business Services, Inc. Massachusetts
1
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Annual Report (Form 10-K)
of AirNet Systems, Inc. of our report dated February 17, 1999, included in the
1998 Annual Report to Shareholders of AirNet Systems, Inc.
Our audits also included the financial statement schedule of AirNet Systems,
Inc. listed in Item 14(a)(2) and 14(d). This schedule is the responsibility of
the Company's management. Our responsibility is to express an opinion based on
our audits. In our opinion, the financial statement schedule referred to above,
when considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
We also consent to the incorporation by reference in the Registration Statements
(Form S-8 No. 333-08189 and No. 333-62659) pertaining to the AirNet Systems,
Inc. Amended and Restated 1996 Incentive Stock Plan and the Registration
Statement (Form S-8 No. 333-43605) pertaining to the AirNet Systems, Inc.
Retirement Savings Plan of our report dated February 17, 1999, with respect to
the consolidated financial statements incorporated herein by reference, and our
report included in the preceding paragraph with respect to the financial
statement schedule included in this Annual Report (Form 10-K) of AirNet Systems,
Inc.
/s/ Ernst & Young LLP
- ---------------------
Columbus, Ohio
March 29, 1999
1
<PAGE>
EXHIBIT 24
POWERS OF ATTORNEY
1
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned officer and/or director of
AirNet Systems, Inc., an Ohio Corporation (the "Company"), which is about to
file with the Securities and Exchange Commission, Washington, D.C., under the
provisions of the Securities Exchange Act of 1934, as amended, the Annual Report
on Form 10-K for the fiscal year ended December 31, 1998, hereby constitutes and
appoints Gerald G. Mercer and William R. Sumser as 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 both the Annual Report on Form 10-K and any and all
amendments and documents related thereto, and to file the same, with any and all
exhibits, financial statements and schedules related thereto, and other
documents in connection therewith, with the Securities and Exchange Commission
and the New York Stock Exchange, and grants unto each of said attorneys-in-fact
and agents, and substitute or substitutes, 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 and thereby ratifies and confirms all things that each of the said
attorneys-in-fact and agents, or their substitute or substitutes, may lawfully
do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand as of this __th
day of March, 1999.
/s/ Gerald G. Mercer
----------------------------------------
Gerald G. Mercer
2
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned officer and/or director of
AirNet Systems, Inc., an Ohio Corporation (the "Company"), which is about to
file with the Securities and Exchange Commission, Washington, D.C., under the
provisions of the Securities Exchange Act of 1934, as amended, the Annual Report
on Form 10-K for the fiscal year ended December 31, 1998, hereby constitutes and
appoints Gerald G. Mercer and William R. Sumser as 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 both the Annual Report on Form 10-K and any and all
amendments and documents related thereto, and to file the same, with any and all
exhibits, financial statements and schedules related thereto, and other
documents in connection therewith, with the Securities and Exchange Commission
and the New York Stock Exchange, and grants unto each of said attorneys-in-fact
and agents, and substitute or substitutes, 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 and thereby ratifies and confirms all things that each of the said
attorneys-in-fact and agents, or their substitute or substitutes, may lawfully
do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand as of this __th
day of March, 1999.
/s/ William R. Sumser
----------------------------------------
William R. Sumser
3
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned officer and/or director of
AirNet Systems, Inc., an Ohio Corporation (the "Company"), which is about to
file with the Securities and Exchange Commission, Washington, D.C., under the
provisions of the Securities Exchange Act of 1934, as amended, the Annual Report
on Form 10-K for the fiscal year ended December 31, 1998, hereby constitutes and
appoints Gerald G. Mercer and William R. Sumser as 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 both the Annual Report on Form 10-K and any and all
amendments and documents related thereto, and to file the same, with any and all
exhibits, financial statements and schedules related thereto, and other
documents in connection therewith, with the Securities and Exchange Commission
and the New York Stock Exchange, and grants unto each of said attorneys-in-fact
and agents, and substitute or substitutes, 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 and thereby ratifies and confirms all things that each of the said
attorneys-in-fact and agents, or their substitute or substitutes, may lawfully
do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand as of this __th
day of March, 1999.
/s/ Roger D. Blackwell
----------------------------------------
Roger D. Blackwell
4
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned officer and/or director of
AirNet Systems, Inc., an Ohio Corporation (the "Company"), which is about to
file with the Securities and Exchange Commission, Washington, D.C., under the
provisions of the Securities Exchange Act of 1934, as amended, the Annual Report
on Form 10-K for the fiscal year ended December 31, 1998, hereby constitutes and
appoints Gerald G. Mercer and William R. Sumser as 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 both the Annual Report on Form 10-K and any and all
amendments and documents related thereto, and to file the same, with any and all
exhibits, financial statements and schedules related thereto, and other
documents in connection therewith, with the Securities and Exchange Commission
and the New York Stock Exchange, and grants unto each of said attorneys-in-fact
and agents, and substitute or substitutes, 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 and thereby ratifies and confirms all things that each of the said
attorneys-in-fact and agents, or their substitute or substitutes, may lawfully
do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand as of this __th
day of March, 1999.
/s/ Tony C. Canonie, Jr.
----------------------------------------
Tony C. Canonie, Jr.
5
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned officer and/or director of
AirNet Systems, Inc., an Ohio Corporation (the "Company"), which is about to
file with the Securities and Exchange Commission, Washington, D.C., under the
provisions of the Securities Exchange Act of 1934, as amended, the Annual Report
on Form 10-K for the fiscal year ended December 31, 1998, hereby constitutes and
appoints Gerald G. Mercer and William R. Sumser as 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 both the Annual Report on Form 10-K and any and all
amendments and documents related thereto, and to file the same, with any and all
exhibits, financial statements and schedules related thereto, and other
documents in connection therewith, with the Securities and Exchange Commission
and the New York Stock Exchange, and grants unto each of said attorneys-in-fact
and agents, and substitute or substitutes, 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 and thereby ratifies and confirms all things that each of the said
attorneys-in-fact and agents, or their substitute or substitutes, may lawfully
do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand as of this __th
day of March, 1999.
/s/ Russell M. Gertmenian
----------------------------------------
Russell M. Gertmenian
6
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned officer and/or director of
AirNet Systems, Inc., an Ohio Corporation (the "Company"), which is about to
file with the Securities and Exchange Commission, Washington, D.C., under the
provisions of the Securities Exchange Act of 1934, as amended, the Annual Report
on Form 10-K for the fiscal year ended December 31, 1998, hereby constitutes and
appoints Gerald G. Mercer and William R. Sumser as 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 both the Annual Report on Form 10-K and any and all
amendments and documents related thereto, and to file the same, with any and all
exhibits, financial statements and schedules related thereto, and other
documents in connection therewith, with the Securities and Exchange Commission
and the New York Stock Exchange, and grants unto each of said attorneys-in-fact
and agents, and substitute or substitutes, 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 and thereby ratifies and confirms all things that each of the said
attorneys-in-fact and agents, or their substitute or substitutes, may lawfully
do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand as of this __th
day of March, 1999.
/s/ J. F. Keeler, Jr.
----------------------------------------
J. F. Keeler, Jr.
7
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE AIRNET
SYSTEMS, INC. ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1998
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 1,142
<SECURITIES> 0
<RECEIVABLES> 15,531
<ALLOWANCES> 290
<INVENTORY> 9,386
<CURRENT-ASSETS> 31,508
<PP&E> 131,782
<DEPRECIATION> 55,956
<TOTAL-ASSETS> 122,962
<CURRENT-LIABILITIES> 12,943
<BONDS> 0
0
0
<COMMON> 128
<OTHER-SE> 69,546
<TOTAL-LIABILITY-AND-EQUITY> 122,962
<SALES> 1,366
<TOTAL-REVENUES> 113,681
<CGS> 853
<TOTAL-COSTS> 82,793
<OTHER-EXPENSES> 19,352
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,336
<INCOME-PRETAX> 9,347
<INCOME-TAX> 3,711
<INCOME-CONTINUING> 5,636
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,636
<EPS-PRIMARY> .46
<EPS-DILUTED> .46
</TABLE>
