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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported) December 18, 1999
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PS Group Holdings, Inc.
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(Exact Name of Registrant as Specified in Charter)
Delaware 1-7141 33-0692068
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(State or Other (Commission (IRS Employer
Jurisdiction of Incorporation) File Number) Identification No.)
4370 La Jolla Village Drive, Suite 1050, San Diego, California 92122
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(Address of Principal Executive Offices)
Registrant's telephone number, including area code (858) 642-2999
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(Former Name or Former Address, if Changed Since Last Report)
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Item 5. Other Events.
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On December 18, 1999, PS Group Holdings, Inc. (the "Company") entered into
an Agreement and Plan of Merger (the "Merger Agreement") with PSG Acquisition,
Inc. ("Acquisition Sub"), and Heritage Air Holdings Statutory Trust ("Heritage
Trust"), the parent of Acquisition Sub and a Connecticut statutory trust
controlled (through family trusts) by principals of Integrated Capital
Associates, Inc. ("ICA"). The Merger Agreement provides that, upon satisfaction
of certain conditions, Acquisition Sub will merge into the Company (the
"Merger") with the Company surviving the Merger. Upon consummation of the
Merger, each share of common stock of the Company (other than shares held in
treasury by the Company, shares owned by Acquisition Sub, Heritage Trust and
subsidiaries of the Company and shares with respect to which dissenters' rights
are properly exercised under Delaware law) will be converted into the right to
receive $12.00 in cash. The Merger Agreement is attached hereto as Exhibit 2.1
and is incorporated herein by reference.
The Merger and related expenses will be financed by two sources: (i)
approximately 20% in the form of an equity investment in Heritage Trust and (ii)
approximately 80% in the form of a one-year bridge loan of not more than
$63,131,060 from GATX Capital Corporation (the "Lender") which will be secured
by virtually all of the assets of the Company's subsidiary, PS Group, Inc.
("PSG") (other than those already subject to liens or restrictions) and secured
guarantees of the Company and PSG's subsidiary, PS Trading, Inc. The Lender's
obligation to fund the loan is subject to the conditions contained in the Loan
Agreement which is attached hereto as Exhibit 10.1 and incorporated herein by
reference.
On December 20, 1999, the Company issued a press release related to the
Merger transaction. The press release is attached hereto as Exhibit 99.1 and is
incorporated herein by this reference.
For further information with respect to the terms of the Merger, including
the conditions to consummation, the representations, warranties and covenants of
the parties, and the parties' respective termination rights, reference is made
to the full text of the Merger Agreement. The foregoing summary description of
the transaction is qualified in its entirety by reference to such exhibit.
Item 7. Financial Statements and Exhibits.
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(a) Exhibits.
Exhibit 2.1 Agreement and Plan of Merger among PS Group Holdings, Inc.,
Heritage Air Holdings Statutory Trust and PSG Acquisition, Inc., dated December
18, 1999 and Exhibit thereto.
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Exhibit 10.1 Loan Agreement between GATX Capital Corporation and PS Group,
Inc., dated December 18, 1999 and the Exhibits thereto.
Exhibit 99.1 Press Release issued by the Company on December 20, 1999.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
PS Group Holdings, Inc.
(Registrant)
Date December 22, 1999 By /s/ L.A. Guske
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Lawrence A. Guske
Vice President-Finance and Chief Financial
Officer and Authorized Officer of the
Registrant
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EXHIBIT INDEX
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Exhibit 2.1 Agreement and Plan of Merger among PS Group Holdings, Inc., Heritage Air
Holdings Statutory Trust and PSG Acquisition, Inc., dated
December 18, 1999 and Exhibit thereto.
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Exhibit 10.1 Loan Agreement between GATX Capital Corporation and PS Group, Inc. dated
December 18, 1999 and Exhibits thereto.
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Exhibit 99.1 Press Release issued by the Company on December 20, 1999.
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EXHIBIT 2.1
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AGREEMENT AND PLAN OF MERGER
Among
HERITAGE AIR HOLDINGS STATUTORY TRUST,
PSG ACQUISITION, INC.
and
PS GROUP HOLDINGS, INC.
Dated as of December 18, 1999
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TABLE OF CONTENTS
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ARTICLE I THE MERGER............................................... 1
Section 1.01. The Merger............................................... 1
Section 1.02. Effective Time; Closing.................................. 1
Section 1.03. Effect of the Merger..................................... 1
Section 1.04. Certificate of Incorporation; By-laws.................... 2
Section 1.05. Directors and Officers................................... 2
Section 1.06. Conversion of Securities................................. 2
Section 1.07. Dissenting Shares........................................ 2
Section 1.08. Surrender of Shares; Stock Transfer Books................ 3
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY............ 4
Section 2.01. Organization and Qualification; Subsidiaries............. 4
Section 2.02. Certificate of Incorporation and By-laws................. 4
Section 2.03. Capitalization........................................... 4
Section 2.04. Authority Relative to this Agreement and the Loan
Documents; Due Execution................................. 5
Section 2.05. No Conflict; Required Filings and Consents............... 5
Section 2.06. Compliance............................................... 6
Section 2.07. SEC Filings; Financial Statements........................ 6
Section 2.08. Absence of Certain Changes or Events..................... 7
Section 2.09. Absence of Litigation.................................... 7
Section 2.10. Employee Benefit Plans................................... 7
Section 2.11. Labor Matters............................................ 9
Section 2.12. Recommendation of Board of Directors; Vote Required...... 9
Section 2.13. Opinions of Financial Advisor............................ 10
Section 2.14. Accuracy of Information Supplied......................... 10
Section 2.15. Proxy Statement.......................................... 10
Section 2.16. Real Property............................................ 10
Section 2.17. Personal Property and Personal Property Leases........... 12
Section 2.18. Trademarks, Patents and Copyrights....................... 14
Section 2.19. Taxes.................................................... 14
Section 2.20. Environmental Matters.................................... 15
Section 2.21. Material Contracts....................................... 16
Section 2.22. Brokers.................................................. 18
Section 2.23. Related Party Transactions............................... 18
Section 2.24. Payments and Operations.................................. 18
Section 2.25. Prepayments; Gas Imbalances.............................. 19
Section 2.26. Oil and Gas Operations................................... 19
Section 2.27. Plugging Status.......................................... 19
Section 2.28. Exploration Activities................................... 19
Section 2.29. Governmental Regulations................................. 19
Section 2.30. U.S. Citizenship......................................... 20
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ARTICLE III REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB....................... 20
Section 3.01. Organization.................................................................. 20
Section 3.02. Authority Relative to this Agreement and the Credit Agreement; Due Execution.. 20
Section 3.03. No Conflict; Required Filings and Consents.................................... 21
Section 3.04. Proxy Statement............................................................... 21
Section 3.05. Financing..................................................................... 21
Section 3.06. Brokers....................................................................... 22
Section 3.07. Compliance.................................................................... 22
Section 3.08. Absence of Litigation......................................................... 22
Section 3.09. Accuracy of Information Supplied.............................................. 22
Section 3.10. U.S. Citizenship.............................................................. 22
Section 3.11. Change of Control............................................................. 22
ARTICLE IV CONDUCT OF BUSINESS PENDING THE MERGER........................................ 22
Section 4.01. Conduct of Business by the Company Pending the Merger......................... 22
ARTICLE V ADDITIONAL AGREEMENTS......................................................... 24
Section 5.01. Stockholders' Meeting......................................................... 24
Section 5.02. Proxy Statement............................................................... 24
Section 5.03. Access to Information; Confidentiality........................................ 25
Section 5.04. No Solicitation of Transactions............................................... 25
Section 5.05. Provisions Relating to the SERPs.............................................. 26
Section 5.06. Directors' and Officers' Indemnification and Insurance........................ 27
Section 5.07. Notification of Certain Matters............................................... 27
Section 5.08. Further Action; Commercially Reasonable Efforts............................... 28
Section 5.09. Public Announcements.......................................................... 28
Section 5.10. Certain Expenses.............................................................. 28
Section 5.11. Financing..................................................................... 28
Section 5.12. Change of Control............................................................. 28
ARTICLE VI CONDITIONS TO THE MERGER...................................................... 28
Section 6.01. Conditions to the Merger...................................................... 28
Section 6.02. Conditions to the Obligations of Parent and Merger Sub........................ 29
Section 6.03. Conditions to the Obligations of The Company.................................. 29
ARTICLE VII TERMINATION, AMENDMENT AND WAIVER............................................. 30
Section 7.01. Termination................................................................... 30
Section 7.02. Effect of Termination......................................................... 31
Section 7.03. Fees and Expenses............................................................. 31
Section 7.04. Amendment..................................................................... 32
Section 7.05. Waiver........................................................................ 32
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ARTICLE VIII GENERAL PROVISIONS....................................... 33
Section 8.01. Non-Survival of Representations, Warranties and
Agreements............................................... 33
Section 8.02. Notices.................................................. 33
Section 8.03. Certain Definitions...................................... 34
Section 8.04. Severability............................................. 34
Section 8.05. Entire Agreement; Assignment............................. 35
Section 8.06. Parties in Interest...................................... 35
Section 8.07. Specific Performance..................................... 35
Section 8.08. Governing Law/Arbitration................................ 35
Section 8.09. Headings; Glossary....................................... 36
Section 8.10. Counterparts............................................. 36
Section 8.11. Parent Guaranty.......................................... 36
Section 8.12. No Recourse.............................................. 36
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Exhibit A--Form of Amended and Restated Certificate of Incorporation of PS
Group Holdings, Inc.
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Glossary of Defined Terms
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Defined Term Location of Definition
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1998 Balance Sheet...................................... 2.07(c)
Acquisition Agreements.................................. 2.21(c)
affiliate............................................... 8.03(a)
Affiliated Group........................................ 2.19(f)
Agreement............................................... Preamble
beneficial owner........................................ 8.03(b)
Beneficiary............................................. 3.01(a)
business day............................................ 8.03(c)
Certificate of Merger................................... 1.02
Certificates............................................ 1.08(b)
Closing................................................. 1.02
Closing Date............................................ 1.02
Code.................................................... 2.10(a)
Company................................................. Preamble
Company Board........................................... Recitals
Company Common Stock.................................... 1.06(a)
Company Disclosure Schedules............................ Article II
Company Fee............................................. 7.03(a)
Company's Financial Advisor............................. 2.13
Competing Transaction................................... 5.04(b)
Confidentiality Agreement............................... 5.03(b)
control or controlled by or under common control with... 8.03(d)
Credit Agreement........................................ Recitals
DGCL.................................................... Recitals
Dissenting Shares....................................... 1.07(a)
Effective Time.......................................... 1.02
Environmental Claims.................................... 2.20(a)
Environmental Laws...................................... 2.20(a)
Environmental Permits................................... 2.20(a)
Equity Financing........................................ 3.05(b)
ERISA................................................... 2.10(a)
Exchange Act............................................ 2.05(b)
First Union............................................. 8.12
Funds................................................... Recitals
Governmental Entity..................................... 2.05(a)
Group................................................... Recitals
Hazardous Substances.................................... 2.20(a)
Indebtedness............................................ 2.21
Indemnified Parties..................................... 5.06(b)
Investors............................................... 3.05(b)
IRS..................................................... 2.10(a)
knowledge............................................... 8.03(e)
Lease Documents......................................... 2.17(c)
Leased Assets........................................... 2.17(b)
Lender.................................................. Recitals
Lessees................................................. 2.17(b)
Lien.................................................... 2.16(b)
Loan Amount............................................. Recitals
Loan Financing.......................................... Recitals
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Glossary of Defined Terms
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Defined Term Location of Definition
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Loan Signatory........................................... 2.04
Loan Signatories......................................... 2.04
Material Adverse Effect.................................. 2.01
Merger................................................... Recitals, 1.01
Merger Consideration..................................... 1.06(a)
Merger Sub............................................... Preamble
Net Revenue Interest..................................... 2.16(e)
Parent................................................... Preamble
Parent Disclosure Schedules.............................. 3.01(a)
Parent Fee............................................... 7.03(b)
Parent Financing Documents............................... 3.02
Paying Agent............................................. 1.08(a)
Paying Agent Agreement................................... 1.08(a)
Permitted Encumbrances................................... 2.16(e)
Permitted Liens.......................................... 2.16(b)
person................................................... 8.03(f)
Personal Property........................................ 2.17(a)
Plans.................................................... 2.10(a)
Preliminary Solvency Opinion............................. 2.13
Proxy Statement.......................................... 2.15
PUHCA.................................................... 2.27
Real Property............................................ 2.16(a)
Recommendation........................................... 2.12
Reserve Report........................................... 2.16(f)
SEC...................................................... 1.08(a)
SEC Reports.............................................. 2.07(a)
Securities Act........................................... 2.07(a)
SERP..................................................... 5.05(a)
SERP Policy.............................................. 5.05(b)
Shares................................................... 1.06(a)
Statex................................................... 2.16(d)
Statex Contracts......................................... 2.16(d)
Statex Lands............................................. 2.16(e)
Statex Leases............................................ 2.16(d)
Statex Properties........................................ 2.16(d)
Statex Surface Contracts................................. 2.16(d)
Statex Wells............................................. 2.16(e)
Statex Operating Agreements.............................. 2.16(d)
Statex Operating Rights.................................. 2.16(d)
Statex Working Interests................................. 2.16(d)
Stockholders' Meeting.................................... 5.01
Subject Person........................................... 8.03(g)
Subsidiary............................................... 2.01
subsidiary or subsidiaries............................... 8.03(g)
Superior Proposal........................................ 5.04(c)
Surviving Corporation.................................... 1.01
Tax or Taxes............................................. 2.19(k)(ii)
Tax Returns.............................................. 2.19(a)
Trading.................................................. Recitals
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Glossary of Defined Terms
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Defined Term Location of Definition
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Transactions............................................. Recitals
Trusts................................................... 2.17(b)
Trust Agreement.......................................... 8.12
Trust Documents.......................................... 3.01(a)
Trust Estate............................................. 8.12
Trustees................................................. 2.17(b)
WARN..................................................... 2.10(f)
Working Interest......................................... 2.16(f)
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AGREEMENT AND PLAN OF MERGER, dated as of December 18, 1999 (this
"Agreement"), among HERITAGE AIR HOLDINGS STATUTORY TRUST, a Connecticut
statutory trust ("Parent"), PSG ACQUISITION, INC., a Delaware corporation
("Merger Sub"), and PS GROUP HOLDINGS, INC., a Delaware corporation (the
"Company").
WHEREAS, Merger Sub, upon the terms and subject to the conditions of this
Agreement and in accordance with the General Corporation Law of the State of
Delaware (the "DGCL"), will merge with and into the Company (the "Merger");
WHEREAS, the Board of Directors of the Company (the "Company Board") has (i)
determined that the Merger is fair to, in the best interests of, and advisable
for, the holders of Shares (as defined in Section 1.06(a)); (ii) approved this
Agreement and the transactions contemplated hereby (the "Transactions"); and
(iii) unanimously voted to recommend that the stockholders of the Company adopt
this Agreement;
WHEREAS, Parent has taken, and as sole shareholder of Merger Sub has caused
Merger Sub to take, all necessary actions to approve this Agreement and the
transactions contemplated hereby; and
WHEREAS, concurrently herewith, PS Group Holdings, Inc. ("Group"), a wholly-
owned subsidiary of the Company, is entering into a Credit Agreement (the
"Credit Agreement") with GATX Capital Corporation (the "Lender"), dated as of
the date hereof, pursuant to which the Lender is agreeing to provide to Group
loan financing (the "Loan Financing") in an amount (the "Loan Amount") equal to
80% of the funds (the "Funds") required to consummate the Transactions and
pursuant to which Parent, the Company, Group and PS Trading, Inc. ("Trading")
will enter into certain documents securing the Loan Financing.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements herein contained, and intending to be legally bound hereby,
Parent, Merger Sub and the Company hereby agree as follows:
ARTICLE I
THE MERGER
SECTION 1.01. The Merger. Upon the terms and subject to the conditions set
forth in Article VI, and in accordance with the DGCL, at the Effective Time (as
hereinafter defined) Merger Sub shall be merged with and into the Company (the
"Merger"). As a result of the Merger, the separate corporate existence of
Merger Sub shall cease and the Company shall continue as the surviving
corporation of the Merger (the "Surviving Corporation").
SECTION 1.02. Effective Time; Closing. Unless this Agreement shall have been
terminated pursuant to Section 7.01, and subject to the satisfaction or waiver
of the conditions set forth in Article VI, the closing of the Merger (the
"Closing") shall take place as promptly as practicable (and in any event within
three business days) following the satisfaction or waiver of such conditions or
such other date as the parties hereto shall agree. At the Closing, the parties
hereto shall cause the Merger to be consummated by filing a certificate of
merger (the "Certificate of Merger") with the Secretary of State of the State
of Delaware, in such form as is required by, and executed in accordance with
the relevant provisions of, the DGCL (the date and time of such filing being
the "Effective Time"). The Closing shall be held at the offices of Shearman &
Sterling, 555 California Street, Suite 2000, San Francisco, CA 94104-1522, or
such other place as the parties may agree. The date upon which the Closing
takes place is referred to as the "Closing Date".
SECTION 1.03. Effect of the Merger. At the Effective Time, the effect of the
Merger shall be as provided in the applicable provisions of the DGCL, this
Agreement and the Certificate of Merger. Without limiting the generality of the
foregoing, and subject thereto, at the Effective Time all the property, rights,
privileges, powers and franchises of the Company and Merger Sub shall vest in
the Surviving Corporation, and
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all debts, liabilities, obligations, restrictions, disabilities and duties of
the Company and Merger Sub shall become the debts, liabilities, obligations,
restrictions, disabilities and duties of the Surviving Corporation.
SECTION 1.04. Certificate of Incorporation; By-laws. (a) The Certificate of
Merger shall specify that, at the Effective Time, the Certificate of
Incorporation of the Surviving Corporation shall be amended and restated in its
entirety to read as set forth in Exhibit A hereto.
(b) Unless otherwise determined by Parent prior to the Effective Time and
subject to Section 5.06(a), the By-laws of Merger Sub, as in effect immediately
prior to the Effective Time, shall be the By-laws of the Surviving Corporation
until thereafter amended as provided by law, the Certificate of Incorporation
of the Surviving Corporation and such By-laws.
SECTION 1.05. Directors and Officers. The directors of Merger Sub
immediately prior to the Effective Time shall be the initial directors of the
Surviving Corporation, each to hold office in accordance with the Certificate
of Incorporation and By-laws of the Surviving Corporation, and the officers of
Merger Sub immediately prior to the Effective Time shall be the initial
officers of the Surviving Corporation, in each case to hold office in
accordance with the Certificate of Incorporation and By-Laws of the Surviving
Corporation and with the DGCL until their respective successors are duly
elected or appointed and qualified.
SECTION 1.06. Conversion of Securities. At the Effective Time, by virtue of
the Merger and without any action on the part of Merger Sub, the Company or the
holders of any of the following securities:
(a) Each share of common stock, par value $1.00 per share, of the Company
("Company Common Stock;" all issued and outstanding shares of Company Common
Stock being hereinafter collectively referred to as the "Shares") issued and
outstanding immediately prior to the Effective Time (other than any Shares to
be canceled pursuant to Section 1.06(b) and any Dissenting Shares (as
hereinafter defined)) shall be canceled, shall cease to exist and shall be
converted automatically into the right to receive an amount equal to $12.00 per
Share in cash (the "Merger Consideration") payable, without interest, to the
holder of such Share, upon surrender, in the manner provided in Section 1.08,
of the certificate that formerly evidenced such Share;
(b) Each Share held in the treasury of the Company and each Share owned by
Merger Sub, Parent or any direct or indirect wholly owned subsidiary of Parent
or of the Company immediately prior to the Effective Time shall be canceled
without any conversion thereof and no payment or distribution shall be made
with respect thereto; and
(c) Each share of common stock, par value $0.01 per share, of Merger Sub
issued and outstanding immediately prior to the Effective Time shall be
converted into and exchanged for one validly issued, fully paid and
nonassessable share of common stock, par value $1.00 per share, of the
Surviving Corporation.
SECTION 1.07. Dissenting Shares. (a) Notwithstanding any provision of this
Agreement to the contrary, Shares that are outstanding immediately prior to the
Effective Time and which are held by stockholders who shall have not voted in
favor of the Merger and who shall have demanded properly in writing appraisal
for such Shares in accordance with Section 262 of the DGCL (collectively, the
"Dissenting Shares") shall not be converted into or represent the right to
receive the Merger Consideration. Such stockholders shall be entitled to
receive payment of the appraised value of such Shares held by them in
accordance with the provisions of such Section 262, except that all Dissenting
Shares held by stockholders who shall have failed to perfect or who effectively
shall have withdrawn or lost their rights to appraisal of such Shares under
such Section 262 shall thereupon be deemed to have been converted into and to
have become exchangeable for, as of the Effective Time, the right to receive
the Merger Consideration, without any interest thereon, upon surrender, in the
manner provided in Section 1.08, of the certificate or certificates that
formerly evidenced such Shares.
(b) The Company shall give Parent (i) prompt notice of any demands for
appraisal received by the Company, withdrawals of such demands, and any other
instruments served pursuant to Section 262 of the
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DGCL and received by the Company and (ii) the opportunity to direct all
negotiations and proceedings with respect to demands for appraisal under such
Section 262. The Company shall not, except with the prior written consent of
Parent, make any payment with respect to any demands for appraisal or offer to
settle or settle any such demands.
SECTION 1.08. Surrender of Shares; Stock Transfer Books. (a) Parent hereby
designates Chase Mellon Shareholder Services, LLC (or such other bank or trust
company as is reasonably acceptable to the Company) to act (pursuant to an
agreement (the "Paying Agent Agreement") to be entered into prior to the
Effective Time in form and substance reasonably satisfactory to Parent and the
Company) as agent (the "Paying Agent") for the holders of Shares in connection
with the Merger to receive the funds to which holders of Shares shall become
entitled pursuant to Section 1.06(a). At or prior to the Effective Time, Parent
or Merger Sub shall deposit with the Paying Agent the funds necessary to make
the payments contemplated by Section 1.06(a) hereof. Such funds shall be
invested by the Paying Agent as directed by the Surviving Corporation, provided
that such investments shall be in obligations of or guaranteed by the United
States of America or of any agency thereof and backed by the full faith and
credit of the United States of America, in commercial paper obligations rated
A-1 or P-1 or better by Moody's Investors Services, Inc. or Standard & Poor's
Corporation, respectively, or in deposit accounts, certificates of deposit or
banker's acceptances of, repurchase or reverse repurchase agreements with, or
Eurodollar time deposits purchased from, commercial banks with capital, surplus
and undivided profits aggregating in excess of $100 million (based on the most
recent financial statements of such bank which are then publicly available at
the United States Securities and Exchange Commission (the "SEC") or otherwise).
(b) Promptly after the Effective Time, the Surviving Corporation shall cause
to be mailed to each person who was, at the Effective Time, a holder of record
of Shares entitled to receive the Merger Consideration pursuant to Section
1.06(a) a form of letter of transmittal (which shall specify that delivery
shall be effected, and risk of loss and title to the certificates evidencing
such Shares (the "Certificates") shall pass, only upon proper delivery of the
Certificates to the Paying Agent) and instructions for use in effecting the
surrender of the Certificates pursuant to such letter of transmittal. Upon
surrender to the Paying Agent of a Certificate, together with such letter of
transmittal, duly completed and validly executed in accordance with the
instructions thereto, and such other documents as may be required pursuant to
such instructions, the holder of such Certificate shall be entitled to receive
in exchange therefor the Merger Consideration for each Share formerly evidenced
by such Certificate, and such Certificate shall then be canceled. No interest
shall accrue or be paid on the Merger Consideration payable upon the surrender
of any Certificate for the benefit of the holder of such Certificate. If
payment of the Merger Consideration is to be made to a person other than the
person in whose name the surrendered Certificate is registered on the stock
transfer books of the Company, it shall be a condition of payment that the
Certificate so surrendered shall be endorsed properly or otherwise be in proper
form for transfer and that the person requesting such payment shall have paid
all transfer and other taxes required by reason of the payment of the Merger
Consideration to a person other than the registered holder of the Certificate
surrendered or shall have established to the satisfaction of the Surviving
Corporation that such taxes either have been paid or are not applicable.
(c) At any time following the ninth month after the Effective Time, the
Surviving Corporation shall be entitled to require the Paying Agent to deliver
to it any funds which had been made available to the Paying Agent and not
disbursed to holders of Shares (including, without limitation, all interest and
other income received by the Paying Agent in respect of all funds made
available to it), and thereafter such holders shall be entitled to look to the
Surviving Corporation (subject to abandoned property, escheat and other similar
laws) only as general creditors thereof with respect to any Merger
Consideration that may be payable upon due surrender of the Certificates held
by them. Notwithstanding the foregoing, neither the Surviving Corporation nor
the Paying Agent shall be liable to any holder of a Share for any Merger
Consideration delivered in respect of such Share to a public official pursuant
to any abandoned property, escheat or other similar law.
(d) At the close of business on the day of the Effective Time, the stock
transfer books of the Company shall be closed and thereafter there shall be no
further registration of transfers of Shares on the records of the
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Company other than to give effect, in accordance with customary settlement
procedures determined by the Company's transfer agent, to sales and other
transfers of Shares that took place prior to the Effective Time. From and after
the Effective Time, the holders of Shares outstanding immediately prior to the
Effective Time shall cease to have any rights with respect to such Shares
except as otherwise provided herein or by applicable law.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY THE COMPANY
Except to the extent that any of the following representations and
warranties is qualified by a Schedule that (i) is included in the Company's
Disclosure Schedules delivered to Parent at the same time as the execution of
this Agreement and accepted by Parent under this Agreement (the "Company
Disclosure Schedules") and (ii) specifically identifies the representation and
warranty qualified by such Schedule (in which case the specified representation
and warranty shall be deemed made with such qualification), the Company hereby
represents and warrants to Parent and Merger Sub as follows:
SECTION 2.01. Organization and Qualification; Subsidiaries. Each of the
Company and each subsidiary of the Company (other than PS Group First Delaware
Trust) (a "Subsidiary") is a corporation duly organized, validly existing and
in good standing under the laws of the jurisdiction of its incorporation and
has the requisite corporate power and authority and all necessary governmental
approvals to own, lease and operate its properties and to carry on its business
as it is now being conducted, except where the failure to be so organized,
existing or in good standing or to have such power, authority and governmental
approvals would not, individually or in the aggregate, have a Material Adverse
Effect (as defined below). The Company and each Subsidiary is duly qualified or
licensed as a foreign corporation to do business, and is in good standing, in
each jurisdiction where the character of the properties owned, leased or
operated by it or the nature of its business makes such qualification or
licensing necessary, except for such failures to be so qualified or licensed
and in good standing that would not, individually or in the aggregate, have a
Material Adverse Effect. When used in connection with the Company or any
Subsidiary, the term "Material Adverse Effect" means any change or effect that
is or is reasonably likely to be materially adverse to the business,
operations, properties, condition (financial or otherwise), assets or
liabilities (including, without limitation, contingent liabilities) of the
Company and the Subsidiaries taken as a whole, in each case, excluding any
change or effect that is directly attributable to conditions generally
affecting the oil and gas industry, unless such conditions adversely affect the
Company or its Subsidiaries in a materially disproportionate manner. A true and
complete list of all the Subsidiaries, together with the jurisdiction of
incorporation of each Subsidiary and the percentage of the outstanding capital
stock of each Subsidiary owned by the Company and each other Subsidiary, is set
forth in Schedule 2.01 of the Company Disclosure Schedules. The Company does
not directly or indirectly own any equity or similar interest in, or any
interest convertible into or exchangeable or exercisable for, any equity or
similar interest in, any corporation, partnership, joint venture or other
business association or entity. PS Group First Delaware Trust, an entity wholly
owned by Group, is duly formed and validly existing as a business trust under
the laws of the State of Delaware.
SECTION 2.02. Certificate of Incorporation and By-laws. The Company has
heretofore furnished to Parent a complete and correct copy of the Certificate
of Incorporation and the By-laws or equivalent organizational documents, each
as amended to date, of the Company and each Subsidiary. Such Certificates of
Incorporation, By-laws or equivalent organizational documents are in full force
and effect. Neither the Company nor any Subsidiary is in violation of any of
the provisions of its Certificate of Incorporation, By-laws or equivalent
organizational documents.
SECTION 2.03. Capitalization. The authorized capital stock of the Company
consists of 10,500,000 shares of Company Common Stock. As of the date hereof,
(i) 6,068,313 Shares are issued and outstanding, all of which are validly
issued, fully paid and nonassessable, (ii) no shares of Company Common Stock
are held in
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the treasury of the Company and (iii) no shares of Company Common Stock are
held by the Subsidiaries. Except as set forth in this Section 2.03, there are
no options, warrants or other rights, agreements, arrangements or commitments
of any character relating to the issued or unissued capital stock of the
Company or any Subsidiary or obligating the Company or any Subsidiary to issue
or sell any shares of capital stock of, or other equity interests in, the
Company or any Subsidiary. All Shares subject to issuance as aforesaid, upon
issuance on the terms and conditions specified in the instruments pursuant to
which they are issuable, will be duly authorized, validly issued, fully paid
and nonassessable. There are no outstanding contractual obligations of the
Company or any Subsidiary to repurchase, redeem or otherwise acquire any Shares
or any capital stock of any Subsidiary or to provide funds to, or make any
investment (in the form of a loan, capital contribution or otherwise) in, any
Subsidiary or any other person. Each outstanding share of capital stock of each
Subsidiary is duly authorized, validly issued, fully paid and nonassessable and
each such share owned by the Company or another Subsidiary is free and clear of
all security interests, liens, claims, pledges, options, rights of first
refusal, agreements, limitations on the Company's or such other Subsidiary's
voting rights, charges and other encumbrances of any nature whatsoever.
SECTION 2.04. Authority Relative to this Agreement and the Loan Documents;
Due Execution. (a) The Company has all necessary power and authority to execute
and deliver this Agreement, to perform its obligations hereunder and to
consummate the Transactions. The execution and delivery of this Agreement by
the Company and the consummation of the Transactions by the Company have been
duly and validly authorized by all necessary corporate action and no other
corporate proceedings on the part of the Company are necessary to authorize
this Agreement or to consummate the Transactions (other than, with respect to
the Merger, the adoption of this Agreement by the holders of a majority of the
then outstanding Shares, and the filing and recordation of the Certificate of
Merger as required by the DGCL). This Agreement has been duly and validly
executed and delivered by the Company and, assuming the due authorization,
execution and delivery by Parent and Merger Sub, constitutes the legal, valid
and binding obligation of the Company, subject to (A) bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium and similar laws now or
hereafter in effect relating to creditors' rights generally and (B) general
principles of equity (regardless of whether considered in a proceeding at law
or in equity).
(b) Each of the Company, Group and Trading (each a "Loan Signatory" and
collectively the "Loan Signatories") has all necessary power and authority to
execute and deliver the Loan Documents (as defined in the Credit Agreement) to
which it is a party. The execution and delivery by each Loan Signatory of the
Loan Documents to which it is a party or is required to be a party, and the
performance by it of its obligations thereunder, have been duly and validly
authorized by all necessary corporation action. Each of the Loan Documents has
been, or will be when it is executed and delivered, duly executed and delivered
by whichever of the Loan Signatories is the signatory thereto, and constitutes,
or will when it is executed and delivered, constitute the Loan Signatory's
legal, valid and binding obligation, enforceable against such Loan Signatory in
accordance with its terms, subject to (A) bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium and similar laws now or
hereafter in effect relating to creditors' rights generally and (B) general
principles of equity (regardless of whether considered in a proceeding at law
or in equity).
SECTION 2.05. No Conflict; Required Filings and Consents. (a) The execution
and delivery of this Agreement by the Company do not, and the performance of
this Agreement by the Company will not, (i) conflict with or violate the
Certificate of Incorporation or By-laws of the Company or any Subsidiary,
(ii) except in immaterial respects, conflict with or violate any law, rule,
regulation, order, judgment or decree of any federal, state, local or foreign
court, governmental or regulatory body, agency or authority (a "Governmental
Entity") applicable to the Company or any Subsidiary or by which any property
or asset of the Company or any Subsidiary is bound or affected, or (iii) except
in immaterial respects, result in any breach of or constitute a default (or an
event which with notice or lapse of time or both would become a default) under,
or give to others any right of termination, amendment, acceleration or
cancellation of, or result in the creation of a lien or other encumbrance on
any property or asset of the Company or any Subsidiary pursuant to, any note,
bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation.
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(b) The execution and delivery of this Agreement by the Company does not,
and the performance of this Agreement by the Company will not, require any
consent, approval, authorization or permit of, or filing with or notification
to, any Governmental Entity, except (i) for applicable requirements, if any, of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and
filing and recordation of the Certificate of Merger as required by the DGCL and
(ii) where failure to obtain such consents, approvals, authorizations or
permits, or to make such filings or notifications, would not prevent or delay
consummation of the Merger, or otherwise prevent the Company from performing
its obligations under this Agreement.
(c) No note, bond, mortgage, indenture, contract, agreement, lease, license,
permit, franchise or other instrument or obligation of the Company or any of
its Subsidiaries or any Trustee, by its terms prohibits the Company or any of
its Subsidiaries from incurring indebtedness or granting liens on any assets of
the Company or any of its Subsidiaries.
(d) The execution and delivery of the Loan Documents by any Loan Signatory,
and the performance by such Loan Signatory of its obligations thereunder, (i)
do not, or will not when such execution, delivery and performance occur,
violate, conflict with, or constitute a default under, any provision of such
Loan Signatory's certificate of incorporation or by-laws, or any provision or
obligation under any Permit (as such term is defined in the Credit Agreement),
arbitration award, judgment, order or decree to which such Loan Signatory is a
party or by which such Loan Signatory or any of its assets are bound, (ii) do
not, or will not when executed and delivered, require the consent, waiver,
approval, license or authorization of or the giving of notice to, or filing
with, any Governmental Entity or any other Person that has not been, or will
not have been when the applicable Loan Document is executed and delivered by
such Loan Signatory, duly obtained and delivered in duly executed form to the
Lender, and which is not or will not be (as the case may be) in full force and
effect and (iii) do not, or will not (as the case may be) with or without the
giving of notice, the passage of time or both, (A) violate, conflict with or
constitute a default (or give rise to any right of termination or acceleration)
under the terms of any agreement or instrument of any nature to which such Loan
Signatory is a party or by which any of the assets of such Loan Signatory are
bound or (B) result in the creation or imposition of any Lien (as defined in
Section 2.16(b)) of any nature whatsoever on any of its assets (including any
Lease Document (as defined in Section 2.17(c)) (or any right or interest in
respect thereof) other than the Liens created by the Collateral Documents (as
such term is defined in the Credit Agreement) or (C) violate, conflict with or
constitute a default under any Requirement of Law (as such term is defined in
the Credit Agreement) applicable to such Loan Signatory or any of its
affiliates.
SECTION 2.06. Compliance. Neither the Company nor any Subsidiary is in any
material respect in conflict with, or in default or violation of, (i) any law,
rule, regulation, order, judgment or decree applicable to the Company or any
Subsidiary or by which any property or asset of the Company or any Subsidiary
is bound or affected, or (ii) any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which the Company or any Subsidiary is a party or by which the Company or
any Subsidiary or any property or asset of the Company or any Subsidiary is
bound or affected.
SECTION 2.07. SEC Filings; Financial Statements. (a) The Company has filed
all forms, reports and documents required to be filed by it with the SEC since
December 31, 1996, and has heretofore delivered to Parent, in the form filed
with the SEC, (i) its Annual Reports on Form 10-K for the fiscal years ended
December 31, 1996, 1997, and 1998, respectively, (ii) its Quarterly Reports on
Form 10-Q for the periods ended March 31, 1999 and June 30, 1999, (iii) all
proxy statements relating to the Company's meetings of stockholders (whether
annual or special) held since January 1, 1997 and (iv) all other forms, reports
and other registration statements (other than Quarterly Reports on Form 10-Q
not referred to in clause (ii) above) filed by the Company with the SEC since
January 1, 1997 (the forms, reports and other documents referred to in clauses
(i), (ii), (iii) and (iv) above being referred to herein, collectively, as the
"SEC Reports"). The SEC Reports (i) were prepared in accordance with the
requirements of the Securities Act of 1933, as amended (the "Securities Act"),
and the Exchange Act, as the case may be, and the rules and regulations
thereunder and (ii) did not at the time they were filed 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
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circumstances under which they were made, not misleading. No Subsidiary is
required to file any form, report or other document with the SEC.
(b) Each of the consolidated financial statements (including, in each case,
any notes thereto) contained in the SEC Reports was prepared in accordance with
generally accepted accounting principles applied on a consistent basis
throughout the periods indicated (except as may be indicated in the notes
thereto) and each fairly presented the consolidated financial position, results
of operations and changes in financial position of the Company and the
consolidated Subsidiaries as at the respective dates thereof and for the
respective periods indicated therein except as otherwise noted therein
(subject, in the case of unaudited statements, to normal and recurring year-end
adjustments which were not and are not expected, individually or in the
aggregate, to be material).
(c) As of the date hereof, there are no liabilities of the Company or any
Subsidiary of any kind whatsoever, whether accrued, contingent, absolute,
determined, determinable or otherwise, that are reasonably likely to be
material, other than (i) liabilities set forth on the consolidated balance
sheet of the Company and the consolidated Subsidiaries as at December 31, 1998,
including the notes thereto (the "1998 Balance Sheet"), (ii) liabilities and
obligations incurred in the ordinary course of business consistent with past
practice since December 31, 1998, (iii) liabilities reflected on the Company's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1999 and the
Company's Annual Report on Form 10-K for the year ended December 31, 1998 and
(iv) liabilities under this Agreement. As of the date hereof, there is no
pending claim by any director or officer of the Company or any Subsidiary for
indemnification by the Company or any Subsidiary, and no director or officer
has indicated to the Company or any Subsidiary his or her intention to assert
any such claim.
(d) The Company has heretofore furnished to Parent complete and correct
copies of all amendments and modifications that have not been filed by the
Company with the SEC to all agreements, documents and other instruments that
previously had been filed by the Company with the SEC and are currently in
effect.
SECTION 2.08. Absence of Certain Changes or Events. Between December 31,
1998 and the date of this Agreement, except as contemplated by this Agreement
or disclosed in any SEC Report filed since December 31, 1998 and prior to the
date of this Agreement, the Company and the Subsidiaries have conducted their
businesses only in the ordinary course and in a manner consistent with past
practice and, since December 31, 1998, there has not been (i) any Material
Adverse Effect, and (ii) none of the Company or any Subsidiary has taken any
action that, if taken after the date of this Agreement, would constitute a
breach of any of the covenants set forth in Section 4.01.
SECTION 2.09. Absence of Litigation. Except as disclosed in the SEC Reports
filed prior to the date of this Agreement, there is no claim, action,
proceeding or investigation pending or, to the knowledge of the Company,
overtly threatened against the Company or any Subsidiary, or any property or
asset of the Company or any Subsidiary, before any court, arbitrator or
administrative, governmental or regulatory authority or body, domestic or
foreign, which (i) individually or in the aggregate, is reasonably likely to
have a Material Adverse Effect or (ii) seeks to delay or prevent the
consummation of any Transaction. As of the date hereof, neither the Company nor
any Subsidiary nor any property or asset of the Company or any Subsidiary is
subject to any order, writ, judgment, injunction, decree, determination or
award of any court or Governmental Entity having, individually or in the
aggregate, a Material Adverse Effect.
SECTION 2.10. Employee Benefit Plans. (a) Schedule 2.10 of the Company
Disclosure Schedules contains a true and complete list of (i) all employee
benefit plans (within the meaning of Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")), all bonus, stock option,
stock purchase, restricted stock, incentive, deferred compensation, retiree
medical or life insurance, supplemental retirement, severance or other benefit
plans, programs or arrangements, and all employment, termination, severance or
other contracts or agreements to which the Company or any Subsidiary is a
party, with respect to which the Company or any Subsidiary has any obligation
or which are maintained, contributed to or sponsored by the Company or any
Subsidiary for the benefit of any current or former employee, officer or
director of the
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Company or any Subsidiary and (ii) each employee benefit plan for which the
Company or any Subsidiary could incur liability under Section 4069 of ERISA, in
the event such plan were terminated, or under Section 4212(c) of ERISA, or in
respect of which the Company or any Subsidiary remains secondarily liable under
Section 4204 of ERISA (collectively, the "Plans"). Each Plan is in writing and
the Company has previously furnished Parent with a true and complete copy of
each Plan and a true and complete copy of each material document prepared in
connection with each such Plan, including, without limitation, (i) a copy of
each trust or other funding arrangement, (ii) each summary plan description and
summary of material modifications, (iii) the most recently filed Internal
Revenue Service ("IRS") Form 5500, (iv) the most recently received IRS
determination letter for each such Plan, and (v) the most recently prepared
actuarial report and financial statement in connection with each such Plan.
Neither the Company nor any Subsidiary has any express or implied commitment
(i) to create, incur liability with respect to or cause to exist any other
employee benefit plan, program or arrangement, (ii) to enter into any contract
or agreement to provide compensation or benefits to any individual or (iii) to
modify, change or terminate any Plan, other than with respect to a
modification, change or termination required by ERISA or the Internal Revenue
Code of 1986, as amended (the "Code").
(b) None of the Plans is a multiemployer plan, within the meaning of Section
3(37) or 4001(a)(3) of ERISA, or a single employer pension plan, within the
meaning of Section 4001(a)(15) of ERISA, for which the Company or any
Subsidiary could incur liability under Section 4063 or 4064 of ERISA. None of
the Plans (i) provides for the payment of severance or similar-type benefits to
any person, (ii) obligates the Company or any Subsidiary to pay separation,
termination, severance or other benefits as a direct or indirect result of a
change in effective control or ownership (as defined in Section 280G(b)(2)(A)
of the Code) or (iii) obligates the Company or any Subsidiary to make any
payment or provide any benefit that could be subject to a tax under Section
4999 of the Code. None of the Plans provides for or promises retiree medical,
disability or life insurance benefits to any current or former employee,
officer or director of the Company or any Subsidiary.
(c) Each Plan which is intended to be qualified under Section 401(a) of the
Code has received a favorable determination letter from the IRS that such Plan
is so qualified, and each trust established in connection with any Plan which
is intended to be exempt from federal income taxation under Section 501(a) of
the Code has received a determination letter from the IRS that such trust is so
exempt. No fact or event has occurred since the date of any such determination
letter from the IRS that could adversely affect the qualified status of any
such Plan or the exempt status of any such trust.
(d) There has been no prohibited transaction (within the meaning of Section
406 of ERISA or Section 4975 of the Code) with respect to any Plan for which
the Company or any Subsidiary has any material liability. Neither the Company
nor any Subsidiary is currently liable or has previously incurred any liability
for any tax or penalty arising under Section 4971, 4972, 4979, 4980 or 4980B of
the Code or Section 502(c) of ERISA, and no fact or event exists which could
give rise to any such liability. Neither the Company nor any Subsidiary has
incurred any liability under, arising out of or by operation of Title IV of
ERISA (other than liability for premiums to the Pension Benefit Guaranty
Corporation arising in the ordinary course) and no fact or event exists which
could give rise to any such liability. No asset of the Company or any
Subsidiary is the subject of any lien arising under Section 302(f) of ERISA or
Section 412(n) of the Code; neither the Company nor any Subsidiary has been
required to post any security under Section 307 of ERISA or Section 401(a)(29)
of the Code; and no fact or event exists which could give rise to any such lien
or requirement to post any such security.
(e) Each Plan is now and has been operated in all material respects in
accordance with the requirements of all applicable laws, including, without
limitation, ERISA and the Code, and the Company and each Subsidiary have
performed all obligations required to be performed by them under, are not in
any material respect in default under or in violation of, and have no knowledge
of any default or violation in any material respect by any party to, any Plan.
The 1998 Balance Sheet reflects an accrual of all amounts of employer
contributions and premiums accrued but unpaid with respect to the Plans.
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(f) The Company and the Subsidiaries have not incurred any liability under,
and have complied in all respects with, the Worker Adjustment Retraining
Notification Act and the regulations promulgated thereunder ("WARN") and do not
reasonably expect to incur any such liability as a result of actions taken or
not taken prior to the Effective Time. Section 2.10(f) of the Disclosure
Schedule lists (i) all the employees terminated or laid off by the Company or
any Subsidiary during the 90 days prior to the date hereof and (ii) all the
employees of the Company or any Subsidiary who have experienced a reduction in
hours of work of more than 50% during any month during the 90 days prior to the
date hereof and describes all notices given by the Company and the Subsidiaries
in connection with WARN. The Company will, by written notice to Parent and
Merger Sub, update Section 2.10(f) of the Disclosure Schedule to include any
such terminations, layoffs and reductions in hours from the date hereof through
the Effective Time and will provide Parent and Merger Sub with any related
information which they may reasonably request.
(g) The Company has made available to Parent prior to the date of this
Agreement (i) copies of all employment agreements with officers of the Company
and each Subsidiary; (ii) copies of all severance agreements, programs and
policies of the Company with or relating to its employees; and (iii) copies of
all plans, programs, agreements and other arrangements of the Company with or
relating to its employees which contain change of control provisions.
(h) Schedule 2.10(h) of the Company Disclosure Schedules sets forth the
payment obligations of the Company and each Subsidiary with respect to benefits
payable to participants in the non-qualified supplemental retirement plans
sponsored by the Company and each Subsidiary (collectively, the "SERPs") as
listed in such Schedule 2.10(h)(i). Schedule 2.10(h)(ii) of the Company
Disclosure Schedules sets forth the most recent regularly prepared actuarial
valuation of such benefits, the assumptions underlying such valuation and the
calculation details thereof.
SECTION 2.11. Labor Matters. (a) There are no controversies pending or, to
the knowledge of the Company, threatened between the Company or any Subsidiary
and any of their respective employees, which controversies have or could have a
Material Adverse Effect.
(b) Neither the Company nor any Subsidiary is a party to any collective
bargaining agreement or other labor union contract applicable to persons
employed by the Company or any Subsidiary, nor, to the knowledge of the
Company, are there any activities or proceedings of any labor union to organize
any such employees.
(c) Neither the Company nor any Subsidiary has breached or otherwise failed
to comply with any provision of any such agreement or contract and there are no
grievances outstanding against the Company or any Subsidiary under any such
agreement or contract.
(d) There are no unfair labor practice complaints pending against the
Company or any Subsidiary before the National Labor Relations Board or any
current union representation questions involving employees of the Company or
any Subsidiary.
(e) There is no strike, slowdown, work stoppage or lockout, or, to the best
knowledge of the Company, threat thereof, by or with respect to any employees
of the Company or any Subsidiary.
SECTION 2.12. Recommendation of Board of Directors; Vote Required. The
Company Board has unanimously approved this Agreement and the Transactions and
such approval constitutes approval of the Transactions by the Company Board
under the provisions of Section 203 of the DGCL and constitutes all the action
necessary to ensure that such Section 203 does not apply to the Transactions.
To the knowledge of the Company, no other state takeover statute is applicable
to the Merger. The Company Board has determined to recommend to the Company's
stockholders (the "Recommendation") that they vote in favor of the adoption of
this Agreement. The affirmative vote of a majority of the votes that the
holders of the then-outstanding shares of Company Common Stock are entitled to
cast with respect to the adoption of this Agreement is the only vote of the
holders of any class or series of the capital stock of the Company necessary to
adopt this Agreement.
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SECTION 2.13. Opinions of Financial Advisor. The Company has received (i)
the opinion of Houlihan Lokey Howard & Zukin (the "Company's Financial
Advisor"), dated December 17, 1999, to the effect that, as of the date of such
opinion, the Merger Consideration was fair to the Company's stockholders from
a financial point of view, which opinion has not been withdrawn and (ii) the
preliminary written opinion (the "Preliminary Solvency Opinion") of the
Company's Financial Advisor, dated December 17, 1999, in connection with the
Loan Financing, which opinion has not been withdrawn and is subject to the
confirmation referred to in Section 6.03(e).
SECTION 2.14. Accuracy of Information Supplied. Neither this Agreement (as
qualified by the Company Disclosure Schedules) nor any schedule, exhibit,
written statement, list, document or certificate furnished or to be furnished
by or on behalf of the Company to Parent, Merger Sub or any of their agents or
affiliates under this Agreement, taken as a whole, contains or will contain
any untrue statement of a material fact or omits or will omit to state a
material fact necessary to make the statements contained herein or therein, in
light of the circumstances in which they are made, not misleading.
SECTION 2.15. Proxy Statement. The proxy statement to be sent to the
stockholders of the Company in connection with the Stockholders' Meeting (as
hereinafter defined) (such proxy statement, as amended or supplemented, being
referred to herein as the "Proxy Statement"), will not, at the date the Proxy
Statement (or any amendment or supplement thereto) is first mailed to
stockholders of the Company, at the time of the Stockholders' Meeting and at
the Effective Time, be false or misleading with respect to any material fact,
or omit to state any 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 are made, not misleading or necessary to
correct any statement in any earlier communication with respect to the
solicitation of proxies for the Stockholders' Meeting which shall have become
false or misleading. The Proxy Statement shall comply in all material respects
as to form with the requirements of the Exchange Act and the rules and
regulations thereunder, including without limitation Rule 14a-9.
Notwithstanding the foregoing, the Company makes no representation or warranty
with respect to any information supplied by Parent or Merger Sub or any of
their representatives which is contained in the foregoing documents.
SECTION 2.16. Real Property. (a) Schedule 2.16 of the Company Disclosure
Schedules lists all of (i) the rights in fee, licenses and concessions and
other tangible real property assets of the Company and its Subsidiaries (other
than Statex) and (ii) all Working Interests and Net Revenue Interests, in each
case, necessary to conduct their respective businesses as currently being
conducted (collectively, and together with all rights in fee, licenses and
concessions and other tangible real property assets of Statex not listed on
Schedule 2.16, the "Real Property"). The Company and the Subsidiaries have
good and marketable title to all Real Property to the extent necessary to
conduct their respective businesses as currently conducted, with only such
exceptions as, individually or in the aggregate, would not be material.
"Net Revenue Interest" means an overall interest in hydrocarbons produced
from or attributable to the Statex Wells, after deducting, except to the
extent owned by Statex, all lessors' royalties, overriding royalties,
production payments and other interests or burdens on hydrocarbons produced
therefrom.
"Statex" shall mean Statex Petroleum, Inc., a California corporation and a
subsidiary of the Company.
"Working Interest" shall mean that share of all of the costs, expenses,
burdens and obligations of any type or nature attributable to Statex's
interest in any Statex Well.
(b) Each parcel of Real Property owned or leased by the Company or any
Subsidiary (i) is owned or leased free and clear of all Liens (as hereinafter
defined), other than (A) Liens for Taxes (as defined in Section 2.19(k)(ii))
and assessments not yet past due, (B) inchoate mechanics' and materialmen's
Liens for construction in progress, (C) workmen's, repairmen's, warehousemen's
and carriers' Liens arising in the ordinary course of business of the Company
or such Subsidiary consistent with past practice, and (D) Liens and other
imperfections of title and encumbrances which, individually or in the
aggregate, would not be material
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(the items described in clauses (A) through (D) being, collectively and
together with the other items defined as Permitted Liens in Section 2.16(g),
"Permitted Liens"), and (ii) is not subject to any governmental decree or order
to be sold, is not being condemned, expropriated or otherwise taken by any
public authority with or without payment of compensation and is not, to the
Company's or any Subsidiary's knowledge, the subject of any such proposed
condemnation, expropriation or taking been proposed.
"Lien"shall mean any mortgage, pledge, hypothecation, assignment, security
interest, lien, charge or encumbrance, priority or other security agreement or
arrangement or other claim or right of any kind or nature whatsoever (including
any restriction on assignment or transfer, title retention agreement, any
lease, any filing of or agreement to give or file any financing statement under
the Uniform Commercial Code or comparable law of any jurisdiction, and any
subordination arrangement in favor of another person).
(c) All leases of Real Property leased for the use or benefit of the Company
or any Subsidiary to which the Company or any Subsidiary is a party requiring
rental payments in excess of $10,000 per lease during the period of the lease,
and all amendments and modifications thereto are in full force and effect and
have not been modified or amended, and there exists no default under any such
lease by the Company or any Subsidiary, nor any event which with notice or
lapse of time or both would constitute a default thereunder by the Company or
any Subsidiary, except as, individually or in the aggregate, would not have a
Material Adverse Effect.
(d) All of the Statex Leases, Statex Surface Contracts and Statex Contracts
that are material to the Company and the Subsidiaries, taken as a whole, are,
in all material respects, valid, subsisting and in full force and effect. There
are no existing defaults under the Statex Leases, Statex Surface Contracts and
Statex Contracts (or circumstances or events that, with the giving of notice or
lapse of time or both, would become defaults) on the part of Statex or, to the
Company's knowledge, any other party thereto (except payment defaults that
would not result in a material adverse change in the present or future
operation, value or use of the affected Statex Property), nor has any party
given, or threatened in writing to give, notice of any such defaults on the
part of Statex. Notwithstanding the foregoing, the representations and
warranties made in the preceding sentence of this Section 2.16(d) with respect
to those Statex Properties that are not operated by Statex, are made to the
Company's knowledge.
"Statex Contracts" means all contracts and agreements (excluding Statex
Leases and Statex Surface Contracts) material to the ownership, operation,
development, maintenance or use of any of the Statex Properties, or the
production, treating, gathering, transporting, storing or disposition of
hydrocarbons produced therefrom, including, without limitation, operating
agreements, unitization agreements, communitization and pooling agreements or
orders, and agreements for the sale or purchase of hydrocarbons.
"Statex Leases" means the fee mineral interests, oil, gas and mineral
leasehold interests, working interests, farmout or farming rights, royalty,
overriding royalty or other non-working or carried interests, operating rights
and other rights and interests which confer upon, or grant or convey to, Statex
(or its predecessors-in-title) the Working Interests and Net Revenue Interests
identified in Exhibits 2.16-1 and 2.16-2.
"Statex Properties" means, collectively, the Statex Leases, Statex Lands,
Statex Wells, Statex Contracts and Statex Surface Contracts.
"Statex Surface Contracts" means all fee interests, leasehold interests,
estates, easements, right-of-way, licenses, permits and other agreements
relating to the use or ownership of surface and subsurface properties and
structures which as of June 30, 1999 were owned by Statex and used or held for
use in connection with the exploration, production or development of
hydrocarbons from the Statex Wells, or for the gathering, transportation,
injection or disposal of hydrocarbons, water and other materials produced
therefrom.
(e) Exhibits 2.16-1 and 2.16-2, collectively, contain a complete list of all
Statex Wells. Statex's Net Revenue Interests, as reflected in Exhibits 2.16-1
and 2.16-2, together account for at least 97% of the current annual oil and gas
revenues of Statex. The Statex Wells identified in Exhibits 2.16-1 and 2.16-2
are located upon those Statex Lands identified for such Statex Wells in
Exhibits 2.16-1 and 2.16-2.
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"Statex Lands" means those lands described or referred to in Exhibits 2.16-
1, 2.16-2 and 2.16-3, together with such other lands as are described or
referred to in the Statex Leases.
"Statex Wells" means all oil, condensate and natural gas wells, water source
wells, and water and other types of injection or disposal wells and systems in
which Statex owns a cost bearing interest.
(f) Except to the extent that the failure of the following to be incorrect
in any respect is not, individually or in the aggregate, material to the
Company and its Subsidiaries, taken as a whole: (i) Statex has good and
marketable title to, and is possessed in, all of the Statex Lands, Statex
Leases and Statex Wells, free of all Liens other than Permitted Liens,
necessary for Statex to receive from each Statex Well no less than the Net
Revenue Interest attributable thereto in Exhibits 2.16-1 and 2.16-2, without
reduction, suspension or termination throughout the productive life of such
Statex Well; (ii) Statex's Working Interest in each Statex Well does not exceed
that attributable thereto in Exhibits 2.16-1 and 2.16-2, without a
corresponding and proportionate increase in Statex's Net Revenue Interest
applicable thereto; and (iii) Exhibits 2.16-1 and 2.16-2 contain a complete and
accurate list of the status of any "payout" balance, as of the applicable date
specified in such Exhibits, for each Statex Well that is subject to a reversion
or other adjustment at some level of cost recovery or payout (or passage of
time or other event, other than cessation of production). For purposes of the
representations and warranties set forth in this Section 2.16(f) only, the term
"Permitted Liens" shall not include those matters referred to in Section
2.16(b)(i)(D).
(g) In addition to the items defined as Permitted Liens in Section 2.16(b),
the following shall also constitute Permitted Liens under this Agreement: (i)
all agreements, instruments, documents, encumbrances and other matters
described on Schedule 2.21 of the Company Disclosure Schedules; (ii) any liens
or security interests reserved in the Statex Leases; (iii) any easements,
rights-of-way, permits, licenses, surface leases and other rights with respect
to surface operations, to the extent such matters do not interfere in any
material respect with the ownership or operation of the portion of the Statex
Properties burdened thereby; and (iv) traditional rights of reassignment
requiring notice and/or the reassignment (or granting an opportunity to receive
a reassignment) of a leasehold interest to the holders of such reassignment
rights prior to surrendering or releasing such leasehold interest.
SECTION 2.17. Personal Property and Personal Property Leases. (a) Each of
the Company and the Subsidiaries owns, directly or indirectly, or leases all
personal property (including, without limitation, equipment and machinery)
("Personal Property") material to the conduct of its respective business. All
Personal Property owned by the Company or any of its Subsidiaries and material
to the business of the Company or the applicable Subsidiary (as the case may
be) other than the Leased Assets, the sole representations and warranties of
the Company with respect to the condition of which is contained in
Section 2.17(e) below, is in reasonable repair, ordinary wear and tear
excepted. None of the Company or any of the Subsidiaries is in material default
with respect to any leases of Personal Property in which the Company or any of
the Subsidiaries is the lessee.
(b) Schedule 2.17(b) of the Company Disclosure Schedules lists all Personal
Property which is subject to leases in which the Company, any of the
Subsidiaries, or any trustees ("Trustees") of trusts (the "Trusts") in which
the Company or the Subsidiaries owns a beneficial interest, is the lessor
involving consideration paid to the Company, any Subsidiary or the Trustees of
more than $25,000 per annum (the "Leased Assets") and the respective lessees
thereof (the "Lessees"). Neither the Company nor any of its Subsidiaries holds
title to the Leased Assets, title to which Leased Assets is held by the Trusts.
(c) Schedule 2.17(c) of the Company Disclosure Schedules lists all documents
collectively embodying the contractual provisions of the leases of, the loans
relating to, and the trust arrangements covering, the Leased Assets (including
all amendments, modifications, extensions and renewals of such documents
through the date hereof) (collectively, the "Lease Documents").
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(d) Each of the Company, the Subsidiaries or the Trustees which are direct
owners of Leased Assets, as the case may be, has good, valid and marketable
title to the Leased Assets attributed to it on Schedule 2.17(b) of the Company
Disclosure Schedules, free and clear of all Liens other than (i) Permitted
Liens, (ii) the Liens disclosed on Schedule 2.17(d) of the Company Disclosure
Schedules and (iii) with respect to each Leased Asset, the Liens permitted or
created by the Lease Documents applicable to such Leased Asset, in each case,
whether or not any of such Liens also constitute Permitted Liens.
(e) The Leased Assets are in existence on the date hereof and have not
suffered any accident, incident, Casualty or Event of Loss (as such terms, or
terms of similar tenor, are defined in the Lease Documents). To the knowledge
of the Company or the Subsidiary which owns (directly or indirectly) Leased
Assets, such Leased Assets are in the condition required by the relevant Lease
Documents.
(f) No Event of Default (as such term is defined in any of the Personal
Property leases listed on Schedule 2.17(b) of the Company Disclosure Schedules)
has occurred and is now continuing with respect to the Leased Assets, and, to
the Company's knowledge, there is no condition or event that is now continuing
which, upon the giving of notice or the lapse of time, or both, would
constitute an Event of Default.
(g) None of the Company or any of the Subsidiaries is in default or breach
of any material obligations to be performed by it pursuant to the leases of
Personal Property listed on Schedule 2.17(b) of the Company Disclosure
Schedules and, to the Company's knowledge, there is no condition or event that
is now continuing which, upon the giving of notice or the lapse of time, or
both, would constitute such a default or breach by the Company or any
Subsidiary.
(h) The Lease Documents require only the consent of the parties identified
on Schedule 2.17(h) of the Company Disclosure Schedule with respect to the
completion of the Transactions.
(i) Cash Flows.
(i) Schedule 2.17(i) of the Company Disclosure Schedules sets forth a
complete and accurate schedule of rent payments and of debt payments under
the Leases related to each Leased Asset, if any.
(ii) Schedule 2.17(i) of the Company Disclosure Schedules sets forth a
complete and accurate schedule of any Special Termination Values,
Termination Values and Stipulated Loss Values (as determined in any of the
Leases), in each case for each Lease commencing for periods as of the date
hereof.
(j) Residual Sharing and Other Agreements. None of the Company or any
Subsidiary or any Trust is a party to, nor do they have any rights or
obligations in respect of, any option or residual sharing agreement, residual
guarantee or insurance agreement, remarketing agreement or deferred fee
agreement, whether denominated as such an agreement or not.
(k) Early Buyout Options, Purchase Options and Renewal Options. Schedule
2.17(h) of the Company Disclosure Schedules sets forth all early buyout
options, purchase options and renewal options under the Leases. The Company and
all Subsidiaries have satisfied their obligations, if any, under the Leases
with respect to early buyout options or purchase options which are triggered as
a result of the Transactions and none of the parties under the Leases has any
further right to purchase any item of equipment as a result of the
Transactions.
(l) Financing Statements; Filings. Schedule 2.17(l) of the Company
Disclosure Schedules sets forth a complete and accurate list of the Uniform
Commercial Code Financing Statements which have been filed by or on behalf of
the Company or any of its Subsidiaries or, to the knowledge of the Company, by
or on behalf of any Trustee as debtor with respect to the equipment subject to
the Leases, and except as otherwise noted in the footnotes to Schedule 2.17(d)
of the Company Disclosure Schedules, such Financing Statements remain in full
force and effect in the jurisdictions indicated. Financing Statements filed
against lessees/operators of the equipment subject to the Leases are not
included in the Company Disclosure Schedules. Each aircraft identified
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on Schedule 2.17(b) is duly registered in the name of the Company or one of its
subsidiaries or in the name of a Trustee acting on behalf of the Company or one
of its subsidiaries as owner under Title 49 of the United States Code and
regulations promulgated thereunder.
SECTION 2.18. Trademarks, Patents and Copyrights. The Company and the
Subsidiaries own or possess adequate licenses or other valid rights to use all
patents, patent rights, trademarks, trademark rights, trade names, trade name
rights, copyrights, servicemarks, trade secrets, applications for trademarks
and for servicemarks, know-how and other proprietary rights and information
used or held for use in connection with the business of the Company and the
Subsidiaries as currently conducted, and the Company is unaware of any
assertion or claim challenging the validity of any of the foregoing which,
individually or in the aggregate, could have a Material Adverse Effect. The
conduct of the business of the Company and the Subsidiaries as currently
conducted and as contemplated to be conducted does not and will not conflict in
any way with any patent, patent right, license, trademark, trademark right,
trade name, trade name right, service mark or copyright of any third party
that, individually or in the aggregate, could have a Material Adverse Effect.
There are no infringements of any propriety rights owned by or licensed by or
to the Company or any Subsidiary which, individually or in the aggregate, could
have a Material Adverse Effect. Neither it nor any Subsidiary has licensed or
otherwise permitted the use by any third party of any proprietary information
on terms or in a manner which, individually or in the aggregate, could have a
Material Adverse Effect.
SECTION 2.19. Taxes. (a) The Company and the Subsidiaries have timely filed
all federal income tax returns and other material tax returns, reports, forms
and other such documents ("Tax Returns") required to be filed by them and have
paid and discharged all Taxes due thereon and on all material assessments
received by them and have paid all applicable ad valorem taxes as are due,
other than such payments as are described in Section 2.19(a) of the Company
Disclosure Schedules which are being contested in good faith by appropriate
proceedings. Such Tax Returns are in all material respects true and have been
properly completed and filed in correct form. Neither the Company nor any
Subsidiary is currently being audited by, or has received a written notice
from, the IRS or any other Governmental Entity with respect to any Tax
deficiency proposed or outstanding or interest thereon or penalties in
connection therewith, nor, to the Company's knowledge, is the IRS or any other
Governmental Entity making any written threat to assert any deficiency or claim
for additional Taxes. Neither the Company nor any Subsidiary has granted any
waiver of any statute of limitations with respect to, or any extension of a
period for the assessment of, any Tax, which waiver or extension is still in
effect. The accruals and reserves for Taxes reflected in the 1998 Balance Sheet
are adequate to cover all Taxes required to be accrued through the date of such
Balance Sheet (including interest and penalties, if any, thereon) in accordance
with generally accepted accounting principles. Neither the Company nor any
Subsidiary has made an election under Section 341(f) of the Code.
(b) Neither the Company or any Subsidiary has agreed to or is required to
make any adjustments under section 481 of the Code by reason of a change of
accounting method or otherwise, which affect any Company or Subsidiary fiscal
year that has not been examined and closed by the IRS (or closed by applicable
statutes). Schedule 2.19(b) of the Company Disclosure Schedules sets forth the
tax year through which United States federal income tax returns of the Company
and the Subsidiaries have been examined and closed (or closed by applicable
statutes).
(c) None of the respective assets of the Company or any Subsidiary is
required to be treated as being owned by any person, other than the Company or
such Subsidiary, pursuant to the "safe harbor" leasing provisions of former
section 168(f)(8) of the Code.
(d) There are no liens for Taxes (other than for Taxes not yet due and
payable) upon the assets of the Company or any Subsidiary.
(e) Neither the Company nor any Subsidiary is a party to or bound by (nor
will the Company or any Subsidiary, prior to the Closing, become a party to or
be bound by) any Tax indemnity, Tax sharing or Tax allocation agreement or
arrangement.
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(f) The Company has never been a member of an affiliated group of
corporations, within the meaning of section 1504 of the Code (an "Affiliated
Group"), other than as a common parent corporation, and each of the
Subsidiaries has never been a member of an Affiliated Group except where the
Company was the common parent corporation of such Affiliated Group.
(g) None of the assets of the Company or any Subsidiary directly or
indirectly secures any debt the interest on which is tax exempt under section
103(a) of the Code.
(h) None of the assets of the Company or any Subsidiary is "tax-exempt use
property" within the meaning of section 168(h) of the Code.
(i) Neither the Company nor any Subsidiary is a party to any agreement,
contract, arrangement or plan that has resulted or would result, separately or
in the aggregate, in the payment of any "excess parachute payments" within the
meaning of section 280G of the Code or any similar provision of foreign, state
or local law.
(j) There are no outstanding rulings of, or requests for rulings with, any
Governmental Authority addressed to the Company or any Subsidiary that are, or
if issued would be, binding on the Company or any Subsidiary.
(k) As used in this Agreement:
(i) "Tax" or "Taxes" means any federal, state, county, local, foreign
and other taxes (including, without limitation, income, profits, premium,
estimated, excise, sales, use occupancy, gross receipts, franchise, ad
valorem, severance, capital levy, production, transfer, withholding,
employment, unemployment compensation, payroll and property taxes, import
duties and other governmental charges and assessments), whether or not
measured in whole or in part by net income, and including deficiencies,
interest, additions to tax or interest, and penalties with respect thereto,
and including expenses associated with contesting any proposed adjustments
related to any of the foregoing.
SECTION 2.20. Environmental Matters. (a) For purposes of this Agreement, the
following terms shall have the following meanings: (i) "Hazardous Substances"
means (A) those substances defined in or regulated under the following federal
statutes and their state counterparts, as each may be amended from time to
time, and all regulations thereunder: the Hazardous Materials Transportation
Act, the Resource Conservation and Recovery Act, the Comprehensive
Environmental Response, Compensation and Liability Act, the Clean Water Act,
the Safe Drinking Water Act, the Atomic Energy Act, the Federal Insecticide,
Fungicide, and Rodenticide Act and the Clean Air Act; (B) petroleum and
petroleum products including crude oil and any fractions thereof, asbestos or
asbestos-containing materials, and polychlorinated biphenyls; (C) natural gas,
synthetic gas, and any mixtures thereof; (D) radon; (E) any other contaminant;
and (F) any substance with respect to which a federal, state or local agency
requires environmental investigation, monitoring, reporting or remediation, or
which is otherwise regulated pursuant to any Environmental Law; (ii)
"Environmental Laws" means any federal, state or local law, statute, ordinance,
regulation, rule, code, order, common law or other requirement of law, and any
judicial or administrative interpretation thereof, including any judicial or
administrative order, consent, decree or judgment, relating to (A) releases or
threatened releases of Hazardous Substances or materials containing Hazardous
Substances; (B) the manufacture, handling, transport, use, treatment, storage
or disposal of Hazardous Substances or materials containing Hazardous
Substances; or (C) otherwise relating to pollution or protection of the
environment or the protection of human health, safety or natural resources; and
(iii) "Environmental Claims" means any and all actions, suits, demands, demand
letters, claims, liens, notices of noncompliance or violation, notices of
liability or potential liability, investigations, proceedings, consent orders
or consent agreements arising under, or asserting any claims under, or
violations of, any Environmental Law or any Environmental Permit or based on
the handling, treatment, storage, disposal, use or presence of any Hazardous
Substances.
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(b) Except as has not resulted, and would not reasonably be expected to
result, individually or in the aggregate, in a liability that is material to
the Company and its Subsidiaries taken as a whole: (i) neither the Company nor
any Subsidiary has violated, nor is in violation of, any Environmental Law or
any Environmental Permit (as defined below), and any past non-compliance with
Environmental Laws or Environmental Permits has been resolved without any
pending, ongoing or future obligation, cost or liability; (ii) none of the
properties owned or leased by the Company or any of its Subsidiaries
(including, without limitation, soils and surface and ground waters) is
contaminated with any Hazardous Substance at a concentration level or in a
quantity that is reportable under any Environmental Law or otherwise in a
manner that is reasonably expected to require investigation, remediation,
monitoring, removal or other action; (iii) neither the Company nor any of its
Subsidiaries is liable for any off-site contamination nor has any such
liability been asserted in a written notice from any Governmental Entity or in
a written claim from any third party other than a Governmental Entity against
the Company or any of its Subsidiaries and, to the Company's knowledge, there
are no circumstances that can reasonably be expected to give rise to any such
liability on the part of the Company or any Subsidiary; (iv) neither the
Company nor any of its Subsidiaries is liable under any Environmental Law
(including, without limitation, pending or threatened liens) nor has any such
liability been alleged against the Company or any of its Subsidiaries; (v) the
Company and its Subsidiaries have all permits, licenses and other
authorizations required under any Environmental Law ("Environmental Permits");
(vi) neither the Company nor any of its Subsidiaries is conducting any remedial
or other response action relating to any release or threatened release of
Hazardous Substances at any property currently or formerly owned, leased or
operated by the Company or any of its Subsidiaries or at any other site,
location or other operation, either voluntarily or pursuant to the order of any
Governmental Entity or the requirements of any Environmental Law or
Environmental Permit and any such remedial or other response action that has
been undertaken in the past by the Company or any Subsidiary has been completed
in a manner that will not require further action by the Company or any
Subsidiary to comply with Environmental Laws; (vii) there are no Environmental
Claims pending or, to the Company's knowledge, overtly threatened against the
Company, any of its Subsidiaries or any of their respective properties, and, to
the Company's knowledge, there are no circumstances that can reasonably be
expected to form the basis of any such Environmental Claim, including, without
limitation, with respect to any offsite disposal location presently or formerly
used by the Company or any of its Subsidiaries or with respect to any
facilities previously owned or operated by the Company or any of its
Subsidiaries; and (viii) neither the execution of this Agreement nor the
consummation of the transactions contemplated herein will require any remedial
or other response action related to Hazardous Substances, or any notice to or
consent of governmental authorities or third parties, pursuant to any
Environmental Law or Environmental Permit.
(c) The sole representations and warranties of the Company with respect to
environmental matters are set forth in Section 2.20. To the extent
representations and warranties in other sections of this Agreement also could
apply to environmental matters, including, but not limited to, matters related
to, arising under or concerning Environmental Laws, Environmental Permits or
Hazardous Substances, such representations shall be construed to exclude all
environmental matters and to apply to matters other than environmental matters.
SECTION 2.21. Material Contracts. Schedule 2.21 of the Company Disclosure
Schedules lists:
(a) All loan or credit agreements, notes, bonds, mortgages, indentures and
other agreements and instruments pursuant to which any Indebtedness (as defined
below) of the Company or any Subsidiary in a principal amount in excess of
$10,000 is outstanding or may be incurred, indicating (i) with respect to any
term or fixed loans, the respective principal amounts outstanding thereunder,
and (ii) whether such Indebtedness is prepayable and any applicable prepayment
or similar penalties.
(b) All agreements of the Company, any Subsidiary or any Trust currently in
effect and involving annual payments in excess of $25,000 or aggregate payments
in excess of $75,000.
(c) All agreements ("Acquisition Agreements") pursuant to which the Company
or any Subsidiary, in the last five years, has acquired, or agreed to acquire,
all or a substantial portion of the assets of or equity interests in any
corporation, partnership or other entity or any Subsidiary, division or
business thereof).
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(d) All agreements pursuant to which the Company or any Subsidiary, in the
last five years, has merged with or into, or agreed to merge with or into, an
other person excluding mergers between or among the Company and any of its
direct or indirect wholly-owned Subsidiaries.
(e) All agreements pursuant to which the Company or any Subsidiary, in the
last five years, has disposed of, or agreed to dispose of, any business or
Subsidiary or all or a substantial portion of the assets of any business or
Subsidiary.
(f) All current commitments of the Company or any Subsidiary for capital
expenditures in excess of $25,000.
(g) All agreements of the Company or any Subsidiary containing an unexpired
covenant not to compete or similar restriction applying to the Company or any
Subsidiary or affiliate or, to the Company's knowledge, any of their respective
officers or directors (other than covenants of such officers or directors not
to compete with the Company or any Subsidiary).
(h) All contracts, agreements or arrangements currently in effect with
current holders of equity interests in any Subsidiary.
(i) All agreements or arrangements to which the Company or any Subsidiary is
a party containing provisions that are currently in effect for the escrow of
any assets (including, without limitation, cash or securities) of the Company
or any Subsidiary or any other person.
(j) Any contracts or agreements (other than as listed in Schedule 2.16 of
the Company Disclosure Schedules) relating to exploration, production,
transportation and treatment of hydrocarbons, including without limitation the
Statex Contracts, involving the annual payment to or by the Company or any
Subsidiary in excess of $10,000, or the creation of joint ventures for such
purposes, or that are otherwise material to the ownership or operation of the
Statex Leases and Statex Wells and the production of hydrocarbons therefrom.
(k) Any farmins, farmouts or similar agreements containing provisions
currently in effect for the acquisition, sale or disposition of any interest in
a property.
(l) Any contracts containing provisions currently in effect for the sale,
exchange, transfer or other disposition of hydrocarbons produced from or
attributable to the Statex Lands, Statex Leases or Statex Wells for a period of
three months or more.
(m) Any agreements or arrangements containing provisions currently in effect
relating to the release or disposal of Hazardous Materials.
(n) Any contracts (other than contracts identified in clause (l) above)
containing calls on production or rights to purchase or otherwise take
production in favor of a third party. Except as set forth in Schedule 2.21 of
the Company Disclosure Schedules under the heading "Contingent Payments", the
Company has no undischarged obligations for the payment of any deferred
consideration pursuant to any Acquisition Agreement, or any undischarged
obligations to make any payment to any third party that is contingent upon the
financial performance of the Company or any Subsidiary.
(o) Any other contract or amendment thereto that would be required to be
filed as an exhibit to a Form 10-K filed by the Company with the SEC as of the
date of this Agreement and has not been so filed.
Except as set forth in Schedule 2.21 of the Company Disclosure Schedules,
each of the agreements listed in Schedule 2.21 of the Company Disclosure
Schedules is a valid and binding obligation of the Company or a Subsidiary, as
the case may be, and, to the Company's knowledge, of each other party thereto,
and each such agreement is in full force and effect in all material respects
and is enforceable by the Company or any Subsidiary in accordance with its
terms, subject to (1) bankruptcy, insolvency, reorganization, fraudulent
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conveyance, moratorium and other similar laws now or hereafter in effect
relating to creditors' rights generally and (2) general principles of equity
(regardless of whether considered in a proceeding at law or in equity). Except
as set forth in Schedule 2.21 of the Company Disclosure Schedules, there are no
existing defaults (or circumstances or events that, with the giving of notice
or lapse of time or both, would become defaults) and, to the knowledge of
Company and any Subsidiary, no person has given or threatened, in writing, to
give notice of any default, under any of the agreements listed in Schedule
2.21, other than immaterial defaults.
For purposes of this Agreement, "Indebtedness" means, with respect to any
person, without duplication, (A) all obligations of such person for borrowed
money, or with respect to deposits or advances of any kind, (B) all obligations
of such person evidenced by bonds, debenture, notes or similar instruments, (C)
all obligations of such person upon which interest charges are customarily paid
(other than trade payables incurred in the ordinary course of business), (D)
all obligations of such person under conditional sale or other title retention
agreements relating to property purchased by such person, (E) all obligations
of such person issued or assumed as the deferred purchase price of property or
services (excluding obligations of such person to creditors for raw materials,
inventory, services and supplies incurred in the ordinary course of such
person's business), (F) all lease obligations of such person capitalized on the
books and records of such person, (G) all obligations of others secured by any
lien on property or assets owned or acquired by such person, whether or not the
obligations secured thereby have been assumed, (H) all obligations of such
person under interest rate, or currency or commodity hedging, swap or similar
derivative transactions (valued at the termination value thereof), (I) all
letters of credit issued for the account of such person (excluding letters of
credit issued for the benefit of suppliers to support accounts payable to
suppliers incurred in the ordinary course of business) and (J) all guarantees
and arrangements having the economic effect of a guarantee of such person of
any indebtedness of any other person.
SECTION 2.22. Brokers. No broker, finder or investment banker (other than
the Company's Financial Advisor) is entitled to any brokerage, finder's or
other fee or commission in connection with the Transactions or the transactions
contemplated by the Loan Documents based upon arrangements made by or on behalf
of the Company or Group. The Company has heretofore furnished to Parent a
complete and correct copy of all agreements between the Company and the
Company's Financial Advisor pursuant to which such firm would be entitled to
any payment relating to the Transactions.
SECTION 2.23. Related Party Transactions. Except as set forth in the
Company's proxy statement, dated April 26, 1999, relating to the 1999 annual
meeting of the Company's stockholders, no director, officer, partner, employee,
"affiliate" or "associate" (as such terms are defined in Rule 12b-2 under the
Exchange Act) of the Company or any Subsidiary (i) has loaned or otherwise
advanced money to, or has outstanding any indebtedness or other similar
obligations to, the Company or any Subsidiary, (ii) owns any direct or indirect
interest of any kind in, or is a director, officer, employee, partner,
affiliate or associate of, or consultant or lender to, or borrower from, or has
the right to participate in the management, operations or profits of, any
person or entity which is participating in any material transaction to which
the Company or any Subsidiary is a party or (iii) is otherwise a party to any
contract, arrangement or understanding with the Company or any Subsidiary.
SECTION 2.24. Payments and Operations. There are no royalties, production
payments, net profits interests, shut-in royalties, lease rental payments,
deposits or other payments for which the Company or any Subsidiary has any
responsibility or liability that are payable (except as accrued in the SEC
Reports) or delinquent, and all such payments that are due have been timely and
properly paid (including, without limitation, any royalties due in respect of
(i) amounts received in settlement of take or pay or similar contracts or (ii)
amounts received for the sale of oil in excess of posted prices), except any
amount of royalties, production payments, net profits interests, shut-in
royalties, lease rental payments or other payments held in suspense for title
reasons and with respect to which the Company or such Subsidiary has set aside
appropriate reserves. The methods used by the Company and each Subsidiary to
calculate royalty payments comply in all material respects with the terms of
the leases, licenses and other agreements pertaining to their properties and
applicable laws and governmental orders. The Company and each Subsidiary have
complied with, performed
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and observed, and satisfied all of the material terms, conditions, obligations
and liabilities under any of the provisions of the documents of title to their
properties, or any other agreements, instruments, laws and governmental orders
relating to the properties.
SECTION 2.25. Prepayments; Gas Imbalances. Except as set forth in Schedule
2.25, neither the Company nor any Subsidiary is obligated, by virtue of a
prepayment arrangement, make-up right under a production sales contract
containing a "take or pay" or similar provision, production payment or any
other arrangement, to deliver hydrocarbons, or proceeds from the sale thereof,
attributable to any of its properties at some future time without then or
thereafter being entitled to receive payment of the contract price therefor.
Except as set forth in Schedule 2.25 of the Company Disclosure Schedules, at
September 30, 1999, neither the Company nor any Subsidiary had under any
agreement, arrangement or past event (i) any obligation to deliver any material
quantities of gas from its properties (or cash in lieu thereof) to other owners
of interests in those properties as a result of past production by the Company,
any Subsidiary or any of their predecessors in excess of the share to which
they were entitled, or (ii) any right to receive deliveries of gas from the
properties (or cash in lieu thereof) from other owners of interests in those
properties as a result of past production by the Company, any Subsidiary or any
of their predecessors of materially less than the share to which they were
entitled. Except as set forth in Schedule 2.25 of the Company Disclosure
Schedules, at September 30, 1999, neither the Company nor any Subsidiary had
any other material gas imbalances or make-up obligations (whether arising at
the wellhead, pipeline, gathering system or other level) under any agreement,
arrangement or past event.
SECTION 2.26. Oil and Gas Operations. Statex has drilled and (if completed)
completed (and, in the case of wells which were drilled and completed prior to
Statex's acquisition thereof, to Statex's knowledge such wells were drilled and
completed), operated and produced all of those wells as to which Statex is the
operator in accordance with generally accepted oil and gas field practices and
in compliance in all material respects with applicable oil and gas leases and
all applicable laws and governmental orders, except where any failures or
violations do not or would not have, individually or in the aggregate, a
Material Adverse Effect. All proceeds from the sale of oil, gas and other
hydrocarbons by Statex are being received by Statex in a timely manner and are
not being held in suspense for any reason (except for amounts, individually or
in the aggregate, not in excess of $10,000 and held in suspense in the ordinary
course of business).
SECTION 2.27. Plugging Status. All Statex Wells that have at any time been,
or are currently, required to be plugged and abandoned by the applicable
requirements of any Governmental Entity have been, or are being (as the case
may be), plugged and abandoned in all material respects in accordance with such
requirements; provided, however, that the representation and warranty in the
preceding sentence of this Section 2.27 is made to the Company's knowledge with
respect to those Statex Wells that either (i) were plugged and abandoned prior
to January 1, 1980 or (ii) as to which Statex is not, or was not when the
plugging and abandonment occurred or the requirement therefor became applicable
to the relevant Statex Well, the operator.
SECTION 2.28. Exploration Activities. Section 2.28 of the Company Disclosure
Schedules sets forth a listing of all exploration and development activities in
which the Company or any Subsidiary has elected to participate since June 30,
1999 and with respect to which the Company or any Subsidiary has expended or
committed to expend $10,000 or more. The Company has provided Parent with
materially true and complete information (to the extent the Company or any
Subsidiary has such information in its possession or has access to such
information and subject to the qualification that, in the case of such
activities where Statex is not the operator, this representation and warranty
is made only to the Company's knowledge) regarding the status and results of
all such activities, including, without limitation, well logs, results of drill
stem tests, production information and other pertinent information.
SECTION 2.29. Governmental Regulations. Neither the Company nor any
Subsidiary is an "investment company," or a company "controlled" by an
"investment company," within the meaning of the Investment Company Act of 1940,
as amended. Neither the Company nor any Subsidiary is a "holding company"
within
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the meaning of the Public Utility Holding Company Act of 1935, as amended
("PUHCA"). Neither the Company nor any Subsidiary has a similar status under
any similar state laws or regulations of the type regulating public utilities.
No consent or approval of, or other action by, the Securities and Exchange
Commission under PUHCA and the rules and regulations promulgated thereunder is
required in connection with the execution, delivery and performance of this
Agreement by the Company. Based on the Parent's representation and warranty in
the final sentence of Section 3.01(a), following the consummation of the
Transactions neither the Company nor any Subsidiary will be a "subsidiary
company" of a "holding company" or an "affiliate" of a "holding company" or a
"subsidiary company" of a "holding company" within the meaning of PUHCA.
SECTION 2.30. U.S. Citizenship. Each of the Company and its Subsidiaries is
a citizen of the United States within the meaning of Section 40102(a)(15) of
Title 49 of the United States Code.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub hereby, jointly and severally, represent and warrant
to the Company that:
SECTION 3.01. Organization. (a) Parent is a statutory trust duly organized
and validly existing under the laws of the State of Connecticut and has the
requisite power and authority and all necessary governmental approvals to own,
lease and operate its properties and to carry on its business as it is now
being conducted, as identified in Schedule 3.01(a) of the Parent Disclosure
Schedules delivered to the Company at the same time as the execution of this
Agreement and accepted by the Company under this Agreement (the "Parent
Disclosure Schedules"). Parent has furnished to the Company true and complete
copies of all documents that collectively comprise Parent's constituent or
charter documents (the "Trust Documents") and those of its sole beneficiary
(the "Beneficiary") identified on Schedule 3.01(a) of the Parent Disclosure
Schedules, none of which will have been amended without the Company's consent
prior to the Effective Time. No default or violation has occurred under such
documents. Parent is its own "ultimate parent entity" for the purposes of Title
II of the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and the rules
and regulations promulgated thereunder by the Federal Trade Commission. Parent
is not a "holding company" within the meaning of PUHCA.
(b) Merger Sub is a corporation duly organized and validly existing under
the laws of the State of Delaware and is directly wholly-owned by Parent.
Except in connection with its execution of this Agreement, Merger Sub has not
engaged in any business and, prior to the Closing, Merger Sub will not have
engaged in any business other than as necessary for the implementation of this
Agreement and the consummation of the Transactions. Parent has furnished to the
Company true and complete copies of the Certificate of Incorporation and Bylaws
of Merger Sub and no default or violation has occurred under such documents.
SECTION 3.02. Authority Relative to this Agreement and the Parent Financing
Documents; Due Execution. Each of Parent and Merger Sub has all necessary power
and authority to execute and deliver this Agreement and, in the case of Parent,
any documents (collectively, the "Parent Financing Documents") to which it is a
party relating to the Loan Financing (as defined in Section 3.05(a)) and the
Equity Financing (as defined in Section 3.05(b)), to perform its obligations
hereunder and, in the case of Parent under the Parent Financing Documents, and
to consummate the Transactions. The execution and delivery of this Agreement
and, in the case of Parent the Parent Financing Documents, by Parent and Merger
Sub and the consummation by Parent and Merger Sub of the Transactions have been
duly and validly authorized by all necessary trust or corporate action and no
other organizational proceedings on the part of Parent or Merger Sub are
necessary to authorize any of the foregoing or to consummate the Transactions
(other than, with respect to the Merger, the filing and recordation of the
Certificate of Merger as required by the DGCL). This Agreement has been duly
and validly executed and delivered by Parent and Merger Sub and, assuming the
due authorization, execution and delivery by the Company, constitutes the
legal, valid and binding obligation of each of Parent and Merger
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Sub enforceable against each of Parent and Merger Sub in accordance with its
terms, subject to (A) bankruptcy, insolvency, reorganization, fraudulent
conveyance, moratorium and similar laws now or hereafter in effect relating to
creditors' rights generally and (B) general principles of equity (regardless of
whether considered in a proceeding at law or in equity). As of the Closing, the
Parent Financing Documents will have been duly and validly executed and
delivered by Parent and, assuming the due authorization, execution and delivery
by the other parties thereto, will constitute the legal, valid and binding
obligations of Parent enforceable against Parent in accordance with their
terms, subject to (A) bankruptcy, insolvency, reorganization, fraudulent
conveyance, moratorium and similar laws now or hereafter in effect relating to
creditors' rights generally and (B) general principles of equity (regardless of
whether considered in a proceeding at law or in equity).
SECTION 3.03. No Conflict; Required Filings and Consents. (a) The execution
and delivery of this Agreement and, in the case of Parent, the Parent Financing
Documents, by Parent and Merger Sub do not, and the performance of any of the
foregoing by Parent and Merger Sub will not, (i) conflict with or violate (A)
the Trust Documents of Parent or (B) the Certificate of Incorporation or By-
laws of Merger Sub, (ii) conflict with or violate any law, rule, regulation,
order, judgment or decree applicable to Parent or Merger Sub or by which any
property or asset of either of them is bound or affected, or (iii) result in
any breach of or constitute a default (or an event which with notice or lapse
of time or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result in the
creation of a lien or other encumbrance on any property or asset of Parent or
Merger Sub pursuant to, any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which Parent or Merger Sub is a party or by which Parent or Merger Sub or
any property or asset of either of them is bound or affected.
(b) The execution and delivery of this Agreement and, in the case of Parent,
the Parent Financing Documents, by Parent and Merger Sub do not, and the
performance of any of the foregoing by Parent and Merger Sub will not, require
any consent, approval, authorization or permit of, or filing with or
notification to, any Governmental Entity, except for applicable requirements,
if any, of the Exchange Act and filing and recordation of the Certificate of
Merger as required by the DGCL.
SECTION 3.04. Proxy Statement. The information supplied by Parent and Merger
Sub for inclusion in the Proxy Statement will not, on the date the Proxy
Statement (or any amendment or supplement thereto) is first mailed to
stockholders of the Company, at the time of the Stockholders' Meeting and at
the Effective Time, contain any statement which, at such time and in light of
the circumstances under which it is made, is false or misleading with respect
to any material fact, or omits to state any material fact required to be stated
therein or necessary in order to make the statements therein not false or
misleading or necessary to correct any statement in any earlier communication
with respect to the solicitation of proxies for the Stockholders' Meeting which
shall have become false or misleading. Notwithstanding the foregoing, Parent
and Merger Sub make no representation or warranty with respect to any
information supplied by the Company or any of its representatives which is
contained in any of the foregoing documents.
SECTION 3.05. Financing. (a) The Credit Agreement (including all exhibits,
schedules, annexes and attachments thereto), which (together with such
exhibits, schedules, annexes and attachments) constitutes the sole and
exclusive agreement, arrangement or understanding between Parent, its
beneficiary, the owners of the beneficiary or any affiliate thereof and the
Lender regarding the terms and conditions on which the Loan Financing will be
provided.
(b) Schedule 3.05(b) of the Parent's Disclosure Schedules sets forth a true
and complete statement of Parent's access to an amount equal to 20% of the
Funds (the "Equity Financing").
(c) Parent has cash on hand, and will continuously have cash on hand
throughout the period prior to the Effective Time or the termination of this
Agreement under Section 7.01 and the payment (if ever payable) of the Parent
Fee (as defined in Section 7.03(b)), whichever first occurs, sufficient to pay
the Parent Fee (as defined in Section 7.03(b)). Parent has received from the
entity referred to therein a binding commitment
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(included in Schedule 3.05(c) of the Parent's Disclosure Schedules) to defray
all of Parent's and Merger Sub's expenses, in connection with their respective
formation, the maintenance of their respective existence in good standing, and
their respective expenses related to the negotiation and performance (other
than the provision of the Funds and the payment of the Parent Fee) of this
Agreement, the Credit Agreement and the Parent Financing Documents.
SECTION 3.06. Brokers. No broker, finder or investment banker is entitled to
any brokerage, finder's or other fee or commission in connection with the
Transactions based upon arrangements made by or on behalf of Parent or Merger
Sub.
SECTION 3.07. Compliance. Neither Parent nor Merger Sub is in any material
respect which would affect the ability of the Parent or the Merger Sub to
consummate the transactions in conflict with, or in default or violation of,
(i) any law, rule, regulation, order, judgment or decree applicable to Parent
or Merger Sub or by which any property or asset of Parent or Merger Sub is
bound or affected, or (ii) any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which the Parent or Merger Sub is a party or by which Parent or Merger Sub
or any property or asset of Parent or any Merger Sub is bound or affected.
SECTION 3.08. Absence of Litigation. There is no claim, action, proceeding
or investigation pending or, to the knowledge of Parent, overtly threatened
against Parent or Merger Sub, or any property or asset of Parent or Merger Sub,
before any court, arbitrator or administrative, governmental or regulatory
authority or body, domestic or foreign, which seeks to delay or prevent the
consummation of any Transactions. As of the date hereof, neither Parent nor
Merger Sub nor any property or asset of Parent or Merger Sub is subject to any
order, writ, judgment, injunction, decree, determination or award of any court
or Governmental Entity which is could prevent the consummation by the Parent or
Merger Sub of the Transactions.
SECTION 3.09. Accuracy of Information Supplied. Neither this Agreement (as
qualified by the Parent Disclosure Schedules) nor any schedule, exhibit,
written statement, list, document or certificate furnished or to be furnished
by or on behalf of the Parent or Merger Sub to the Company or any of its agents
or affiliates under this Agreement, taken as a whole, contains or will contain
any untrue statement of a material fact or omits or will omit to state a
material fact necessary to make the statements contained herein or therein, in
light of the circumstances in which they are made, not misleading.
SECTION 3.10. U.S. Citizenship. Each of Parent and Merger Sub is a citizen
of the United States within the meaning of Section 40102(a)(15) of Title 49 of
the United States Code.
SECTION 3.11. Change of Control. No "Change of Control" (as defined in the
Credit Agreement) has occurred.
ARTICLE IV
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 4.01. Conduct of Business by the Company Pending the Merger. The
Company covenants and agrees that, between the date of this Agreement and the
Effective Time, unless Parent shall otherwise agree in writing, the businesses
of the Company and the Subsidiaries shall be conducted only in, and the Company
and the Subsidiaries shall not take any action except in, the ordinary course
of business and in a manner consistent with past practice; and the Company
shall use its commercially reasonable efforts to preserve substantially intact
the business organization of the Company and the Subsidiaries, to keep
available the services of the current officers, employees and consultants of
the Company and the Subsidiaries and to preserve the current relationships of
the Company and the Subsidiaries with customers, suppliers and other persons
with which the Company or any Subsidiary has significant business relations. By
way of amplification and not limitation, except as contemplated by this
Agreement, neither the Company nor any Subsidiary shall, between the date of
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this Agreement and the Effective Time, directly or indirectly do, or propose to
do, any of the following without the prior written consent of Parent (except as
otherwise contemplated by Schedule 4.01 of the Company's Disclosure Schedules):
(a) amend or otherwise change its Certificate of Incorporation or By-laws or
equivalent organizational documents;
(b) issue, sell, pledge, dispose of, grant, encumber, or authorize the
issuance, sale, pledge, disposition, grant or encumbrance of, (i) any shares of
capital stock of any class of the Company or any Subsidiary, or any options,
warrants, convertible securities or other rights of any kind to acquire any
shares of such capital stock, or any other ownership interest (including,
without limitation, any phantom interest), of the Company or any Subsidiary or
(ii) any assets of the Company or any Subsidiary, except for sales in the
ordinary course of business and in a manner consistent with past practice, but
in no event in an aggregate amount greater than $25,000.
(c) declare, set aside, make or pay any dividend or other distribution,
payable in cash, stock, property or otherwise, with respect to any of its
capital stock;
(d) reclassify, combine, split, subdivide or redeem, purchase or otherwise
acquire, directly or indirectly, any of its capital stock;
(e) (i) acquire (including, without limitation, by merger, consolidation, or
acquisition of stock or assets) any corporation, partnership, other business
organization or any division thereof or any material amount of assets; (ii)
incur any indebtedness for borrowed money or issue any debt securities or
assume, guarantee or endorse, or otherwise as an accommodation become
responsible for, the obligations of any person, or make any loans or advances,
except in the ordinary course of business and consistent with past practice;
(iii) enter into any contract or agreement other than in the ordinary course of
business, consistent with past practice but in no event involving payments in
an aggregate amount greater than $25,000; (iv) authorize any single capital
expenditure which is in excess of $10,000 or capital expenditures which are, in
the aggregate, in excess of $30,000 for the Company and the Subsidiaries taken
as a whole; or (v) enter into or amend any contract, agreement, commitment or
arrangement with respect to the Leased Assets or any other matter set forth in
this Section 4.01(e);
(f) increase the compensation payable or to become payable to its officers
or employees, except for increases in accordance with past practices in
salaries or wages of employees of the Company or any Subsidiary who are not
officers of the Company, or grant any severance or termination pay to, or enter
into any employment or severance agreement with any director, officer or other
employee of the Company or any Subsidiary, or establish, adopt, enter into or
amend 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, officer or employee;
(g) take any action, other than reasonable and usual actions in the ordinary
course of business and consistent with past practice, with respect to
accounting policies or procedures (including, without limitation, (i)
procedures with respect to the payment of accounts payable and collection of
accounts receivable (ii) the reduction of environmental reserves, (iii) the
reduction of deferred tax liabilities due to changes in estimates, (iv) the
reduction in other reserves due to changes in accounting estimates or (v) the
reduction in other reserves);
(h) make any tax election or settle or compromise any material federal,
state, local or foreign income tax liability;
(i) pay, discharge or satisfy any claim, liability or obligation (absolute,
accrued, asserted or unasserted, contingent or otherwise), other than the
payment, discharge or satisfaction, in the ordinary course of business
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and consistent with past practice, of liabilities reflected or reserved against
in the 1998 Balance Sheet or subsequently incurred in the ordinary course of
business and consistent with past practice;
(j) to the extent (and only to the extent) to which Statex has the
contractual right under the Statex Contracts to comply, or cause compliance,
with the following, (i) allow any of the Statex Leases, Statex Lands or Statex
Wells to be developed, maintained or operated in a manner inconsistent with
prior operations, or otherwise in a manner that is not consistent with what a
reasonably prudent operator would do in the same or similar circumstances; (ii)
release or abandon any part of the Statex Properties, except in the ordinary
course of business consistent with past practices; (iii) except in the ordinary
course of business and consistent with past practices, enter into, assign,
terminate or amend, in any material respect, any Statex Lease, Statex Surface
Contract or Statex Contract; (iv) enter into any agreement for the sale or
other disposition of hydrocarbons produced from or attributable to the Statex
Properties, except (A) in the ordinary course of business consistent with past
practices, (B) at the then prevailing market price and (C) under an agreement
having a term not to exceed three (3) months; or (v) commit itself to do any of
the foregoing; or
(k) to the extent (and only to the extent) to which Statex has the
contractual right under the Statex Contracts to comply, or cause compliance,
with the following, take any actions inconsistent with the actions of a
reasonably prudent operator, which increase or fail to minimize the existing
gas imbalances and make-up obligations set forth in Section 2.25 of the Company
Disclosure Schedules.
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.01. Stockholders' Meeting. The Company, acting through the Company
Board, shall, in accordance with applicable law and the Company's Certificate
of Incorporation and By-laws, (i) duly call, give notice of, convene and hold a
special meeting of its stockholders as soon as practicable, but in no event
later than 110 days following the execution of this Agreement, for the purpose
of considering and taking action on the adoption of this Agreement (the
"Stockholders' Meeting"), which Stockholders' Meeting shall be held
notwithstanding any withdrawal, modification or change in the Recommendation
adverse to Parent and (ii) subject to a good faith determination by the Company
Board, made after receiving the advice of the Company's outside counsel, that
the Company Board's fiduciary duties under Delaware law require it to do
otherwise, (A) include in the Proxy Statement the recommendation of the Company
Board that the stockholders of the Company entitled to vote on the adoption of
this Agreement adopt this Agreement and (B) use its commercially reasonable
efforts, consistent with applicable law, to obtain such adoption. At the
Stockholders' Meeting, Parent and Merger Sub shall cause all Shares then owned
by them and their subsidiaries to be voted in favor of the adoption of this
Agreement.
SECTION 5.02. Proxy Statement. Within 25 business days following the
execution of this Agreement, with all reasonable and necessary assistance from
Parent and Merger Sub, the Company shall file the Proxy Statement with the SEC
under the Exchange Act, and shall use its commercially reasonable efforts to
have the Proxy Statement cleared by the SEC as promptly as practicable. Parent,
Merger Sub and the Company shall cooperate with each other in the preparation
of the Proxy Statement, and the Company shall promptly notify Parent of the
receipt of any comments of the SEC with respect to the Proxy Statement and of
any requests by the SEC for any amendment or supplement thereto or for
additional information and shall promptly provide to Parent copies of all
correspondence between the Company or any representative of the Company and the
SEC. The Company shall give Parent and its counsel the opportunity to review
and make comments to the Proxy Statement prior to its being filed with the SEC
and shall give Parent and its counsel the opportunity to review all amendments
and supplements to the Proxy Statement and all responses to requests for
additional information and replies to comments prior to their being filed with,
or sent to, the SEC. Each of the Company, Parent and Merger Sub agrees to use
its commercially reasonable efforts, after consultation with the other parties
hereto, to respond promptly to all such comments of and requests by the SEC and
to cause the Proxy
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Statement and all required amendments and supplements thereto to be mailed to
the holders of Shares entitled to vote at the Stockholders' Meeting at the
earliest practicable time.
SECTION 5.03. Access to Information; Confidentiality. (a) From the date
hereof to the Effective Time, the Company shall, and shall cause the
Subsidiaries and the officers, directors, employees, auditors and agents of the
Company and the Subsidiaries to, afford the officers, employees and agents of
Parent and Merger Sub, the Lender and the Investors complete access (subject to
all applicable attorney/client privileges and all restrictions of applicable
law) at all reasonable times to the officers, agents, properties, offices,
plants and other facilities, books and records of the Company and each
Subsidiary, and shall furnish Parent, Merger Sub, the Lender and the Investors
with all financial, operating and other data and information as Parent or
Merger Sub, through its officers, employees or agents, may reasonably request.
(b) All information obtained by Parent or Merger Sub pursuant to this
Section 5.03 shall be kept confidential in accordance with the confidentiality
agreement, dated June 8, 1999 (the "Confidentiality Agreement"), between the
Company and an affiliate of the Beneficiary.
(c) No investigation pursuant to this Section 5.03 shall affect any
representation or warranty in this Agreement of any party hereto or any
condition to the obligations of the parties hereto.
SECTION 5.04. No Solicitation of Transactions. (a) The Company shall not,
directly or indirectly, and shall instruct its officers, directors, employees,
subsidiaries, agents or advisors or other representatives (including, without
limitation, any investment banker, attorney or accountant retained by it), not
to, directly or indirectly, solicit, initiate or encourage (including by means
of furnishing nonpublic information), or take any other action to facilitate,
any inquiries or the making of any proposal or offer (including, without
limitation, any proposal or offer to its stockholders) that constitutes, or may
reasonably be expected to lead to, any Competing Transaction (as defined
below), or enter into or maintain or continue discussions or negotiate with any
person or entity in furtherance of such inquiries or to obtain a Competing
Transaction, or agree to or endorse any Competing Transaction, or authorize or
permit any of its officers, directors or employees or any Subsidiary, or any
investment banker, financial advisor, attorney, accountant or other
representative retained by it or any Subsidiary, to take any such action. The
Company shall notify Parent promptly if any proposal or offer, or any inquiry
or contact with any person with respect thereto, regarding a Competing
Transaction is made and shall describe to Parent in reasonable detail the terms
and conditions of such offer or proposal. The Company immediately shall cease
and cause to be terminated all existing discussions or negotiations with any
parties conducted heretofore with respect to a Competing Transaction. The
Company shall not release any third party from, or waive any provision of, any
confidentiality or standstill agreement to which it is a party. Notwithstanding
anything to the contrary in this Section 5.04, the Company Board may furnish
information to, and enter into discussions with, a person who has made an
unsolicited, written proposal or offer regarding a Competing Transaction, and
the Company Board has (i) reasonably concluded after consultation with the
Company's Financial Advisor or any successor thereto that such proposal or
offer was made in good faith and is reasonably likely, if negotiated, to lead
to a Superior Proposal (as defined below), (ii) provided written notice to
Parent of its intent to furnish information or enter into discussions with such
person at least 48 hours prior to taking any such action and (iii) obtained
from such person an executed confidentiality agreement on terms no less
favorable to the Company than those contained in the Confidentiality Agreement.
(b) A "Competing Transaction" means any of the following involving the
Company (other than the Merger and the Transactions): (i) a merger,
consolidation, share exchange, business combination or other similar
transaction; (ii) any sale, lease, exchange, transfer or other disposition of
25% or more of the assets of the Company and the Subsidiaries, taken as a
whole; (iii) a tender offer or exchange offer for 25% or more of the
outstanding voting securities of the Company; or (iv) any solicitation in
opposition to adoption of this Agreement by the Company's stockholders.
(c) A "Superior Proposal" means an unsolicited written bona fide proposal or
offer made by a third party to consummate any of the following transactions:
(i) a merger, consolidation, share exchange, business
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combination or other similar transaction involving the Company pursuant to
which the stockholders of the Company immediately preceding such transaction
hold less than 50% of the equity interest in the surviving or resulting entity
of such transaction or (ii) the acquisition by any person or group (including
by means of a tender offer or an exchange offer or a two-step transaction
involving a tender offer followed with reasonable promptness by a cash-out
merger involving the Company), directly or indirectly, of ownership of 100% of
the then outstanding shares of stock of the Company, on terms (including
conditions to consummation of the contemplated transaction) that the Company
Board determines, in its reasonable judgment (after have received the advice of
the Company's Financial Advisor or any successor thereto), to be more favorable
to the Company's stockholders than the terms of the Merger and after having
taken into account the reasonable likelihood of such party's ability to
consummate the transaction; provided, however, that any such proposal or offer
shall not be deemed to be a "Superior Proposal" if any financing required to
consummate the transaction contemplated by such proposal or offer is not
committed and is not likely, in the reasonable judgment of the Company Board
(after having received the advice of the Company's Financial Advisor or any
successor thereto), to be obtained by such third party on a timely basis; and
further provided, that, to the extent that such financing includes loan
financing, it shall not be necessary for such third party to have entered into
a definitive loan agreement in order for such loan financing to be considered
"committed" for the purposes of the foregoing provisions provided the Company
Board determines, after having received the advice of the Company's Financial
Advisor or any successor thereto, that the loan financing commitment delivered
by such third party evidences a reasonable likelihood that such third party
will be able to obtain such loan financing on a timely basis.
(d) Nothing contained in this Agreement shall prohibit (i) the Company or
the Company Board from taking and disclosing to its stockholders a position
contemplated by Rules 14d-9 and 14e-2(a) promulgated under the Exchange Act or
(ii) the Company Board from modifying or withdrawing its recommendation that
the stockholders of the Company adopt this Agreement if the Company Board
determines, after receiving the advice of the Company's outside counsel, that
the Company Board's fiduciary duties under Delaware law require it to do so.
SECTION 5.05. Provisions Relating to the SERPs. (a) Prior to the Effective
Time, the Company shall cause Group to take whatever action is necessary so
that, conditioned upon, and concurrently with, the occurrence of the Effective
Time, no further accruals of benefits to participants in the SERPs shall be
made; provided however, that Parent acknowledges that such action will not
affect either (i) the benefits that have accrued under the SERPs with respect
to all participants therein prior to the Effective Time or (ii) the provisions
of the SERPs under which the participants therein who are in active employment
at the Effective Time will be treated as eligible for early retirement benefits
as of the Effective Time for purposes of their entitlement to payments under
the SERPs.
(b) Prior to the Effective Time, Parent shall make arrangements, with an
insurance company reasonably acceptable to the Company, to purchase at Parent's
expense from such insurance company, effective at the Effective Time, one or
more group annuity insurance policies issued in the name of, and owned by, the
Company which together insure an amount equal to all payments that Group or
Statex may at any time thereafter be required to make from time to time to, or
with respect to, any participant in any of the SERPs, which policies shall
provide that (1) they shall not be subject to amendment or modification if such
amendment or modification would affect the amount insured or the terms under
which such amounts are payable, (2) they shall not be assignable except to any
successor to or assignee of the Surviving Corporation contemplated by Section
5.06(d), and (3) they shall not confer any rights on any of the participants in
the SERPs. Notwithstanding anything to the contrary in this paragraph, (i) in
no event shall Parent be obligated to make any payment to an insurer under the
terms of this paragraph prior to the Effective Time and (ii) in the event that,
prior to the Closing, Group has sold Statex in accordance with this Agreement,
the SERP Policy (as hereinafter defined) need not insure payments under any
Statex SERP. The group annuity insurance policies which together comply with
all of the foregoing requirements, to the Company's reasonable satisfaction,
are collectively referred to herein as the "SERP Policy."
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SECTION 5.06. Directors' and Officers' Indemnification and
Insurance. (a) The By-laws of the Surviving Corporation shall contain
provisions no less favorable with respect to indemnification than are set forth
in Article XV of the By-laws of the Company, which provisions shall not be
amended, repealed or otherwise modified for a period of six years from the
Effective Time in any manner that would affect adversely the rights thereunder
of individuals who at the Effective Time were directors, officers, employees,
fiduciaries or agents of the Company, unless such modification shall be
required by law.
(b) The Company shall, to the fullest extent permitted under applicable law
and regardless of whether the Merger becomes effective, indemnify and hold
harmless, and, after the Effective Time, the Surviving Corporation shall, to
the fullest extent permitted under applicable law, indemnify and hold harmless,
each present and former director, officer, employee, fiduciary and agent of the
Company and each Subsidiary (collectively, the "Indemnified Parties") against
all costs and expenses (including attorneys' fees), judgments, fines, losses,
claims, damages, liabilities and settlement amounts paid in connection with any
claim, action, suit, proceeding or investigation (whether arising before or
after the Effective Time), whether civil, criminal, administrative or
investigative, arising out of or pertaining to any action or omission in their
capacity as an officer, director, employee, fiduciary or agent, whether
occurring before or after the Effective Time, for a period of six years after
the date hereof. In the event of any such claim, action, suit, proceeding or
investigation, (i) the Company or the Surviving Corporation, as the case may
be, shall pay the reasonable fees and expenses of counsel selected by the
Indemnified Parties, which counsel shall be reasonably satisfactory to the
Company or the Surviving Corporation, promptly after statements therefor are
received and (ii) the Company and the Surviving Corporation shall cooperate in
the defense of any such matter; provided, however, that neither the Company nor
the Surviving Corporation shall be liable for any settlement effected without
its written consent (which consent shall not be unreasonably withheld); and
provided, further, that neither the Company nor the Surviving Corporation shall
be obligated pursuant to this Section 5.06(b) to pay the fees and expenses of
more than one counsel for all Indemnified Parties in any single action except
to the extent that two or more of such Indemnified Parties shall have
conflicting interests in the outcome of such action; and provided, further,
that, in the event that any claim for indemnification is asserted or made
within such six-year period, all rights to indemnification in respect of such
claim shall continue until the disposition of such claim. In addition, Parent
will cause the Surviving Corporation to comply with all indemnification
agreements in effect at the Effective Time between the Company or its
Subsidiaries and any present or former officer or director of the Company or
its Subsidiaries.
(c) Prior to the Closing, the Company shall purchase, at a price not to
exceed the amount set forth in Schedule 5.06(c) of the Company Disclosure
Schedules, a "tail" or "runoff" policy extending, for a period of six years
following the Effective Time, the directors' and officers' liability insurance
coverages currently in effect under the insurance policies maintained by the
Company.
(d) In the event the Surviving Corporation or any of its successors or
assigns (i) consolidates with or merges into any other person and shall not be
the continuing or surviving corporation or entity of such consolidation or
merger or (ii) transfers all or substantially all of its properties and assets
to any person, then, and in each such case, proper provision shall be made so
that the successors and assigns of the Surviving Corporation, or at Parent's
option, Parent, shall assume the obligations set forth in this Section 5.06.
(e) Parent shall cause the Surviving Corporation, and any successor or
assignee thereof referred to in Section 5.06(d), to perform the Surviving
Corporation's obligations under this Section 5.06.
SECTION 5.07. Notification of Certain Matters. The Company shall give prompt
notice to Parent, and Parent shall give prompt notice to the Company, of (i)
the occurrence, or non-occurrence, of any event the occurrence, or non-
occurrence, of which would be likely to cause any representation or warranty
contained in this Agreement to be untrue or inaccurate and (ii) any failure of
the Company, Parent or Merger Sub, as the case may be, 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 5.07 shall not limit or otherwise affect the remedies available
hereunder to the party receiving such notice.
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SECTION 5.08. Further Action; Commercially Reasonable Efforts. Upon the
terms and subject to the conditions hereof, each of the parties hereto shall
use its commercially reasonable efforts to take, or cause to be taken, all
appropriate action, and to do, or cause to be done, all things necessary,
proper or advisable under applicable laws and regulations to consummate and
make effective the Transactions, including, without limitation, using its
commercially reasonable efforts to obtain all licenses, permits (including,
without limitation, Environmental Permits), consents, approvals,
authorizations, qualifications and orders of Governmental Entities and parties
to contracts with the Company and its Subsidiaries as are necessary for the
consummation of the Transactions and to fulfill the conditions to the Merger.
In case at any time after the Effective Time any further action is necessary or
desirable to carry out the purposes of this Agreement, the proper officers and
directors of each party to this Agreement shall use their reasonable best
efforts to take all such action.
SECTION 5.09. Public Announcements. Parent and the Company shall consult
with each other before issuing any press release or otherwise making any public
statements with respect to this Agreement or any Transaction and shall not
issue any such press release or make any such public statement prior to such
consultation, except to the extent that the requirements of applicable law or,
in the case of the Company, its listing agreement with the New York Stock
Exchange or the Pacific Exchange, require the issuance of a press release or
the making of a public statement under circumstances in which such prior
consultation is not reasonably practicable.
SECTION 5.10. Certain Expenses. Schedule 5.10 of the Company Disclosure
Schedules sets forth the Company's good faith non-binding estimate of the
expenses it will have incurred through the Effective Time in connection with
the negotiation, execution and performance of this Agreement and the
consummation of the Merger. The Company shall use its commercially reasonable
efforts not to exceed the aggregate amount shown on Schedule 5.10. The Company
shall promptly notify Parent of any increase, or anticipated increase, in such
aggregate amount.
SECTION 5.11. Financing. (a) Parent shall use all commercially reasonable
efforts to (i) cause all transactions contemplated by the Credit Agreement to
be consummated and (ii) obtain the Equity Financing from the Investors on the
terms and conditions set forth in Schedule 3.05(b) of the Parent Disclosure
Schedules or terms materially consistent therewith.
(b) The Company shall cause Group to perform its obligations under the
Credit Agreement.
SECTION 5.12. Change of Control. Parent shall not take, or cause to be
taken, any action which would constitute a Change of Control (under and as
defined in the Credit Agreement).
ARTICLE VI
CONDITIONS TO THE MERGER
SECTION 6.01. Conditions to the Merger. The respective obligations of each
party under this Agreement to consummate the Merger shall be subject to the
satisfaction at or prior to the Effective Time of the following conditions:
(a) Stockholder Approval. This Agreement shall have been adopted by the
affirmative vote of the stockholders of the Company to the extent required by
the DGCL and the Certificate of Incorporation of the Company; and
(b) No Order. No United States or state governmental authority or other
agency or commission or United States or state court of competent jurisdiction
shall have enacted, issued, promulgated, enforced or entered any law, rule,
regulation, executive order, decree, injunction or other order (whether
temporary, preliminary or permanent) which is then in effect and has the effect
of making the acquisition of Shares by
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Parent or Merger Sub or any affiliate of either of them illegal or otherwise
restricting, preventing or prohibiting consummation of the Transactions.
SECTION 6.02. Conditions to the Obligations of Parent and Merger Sub. The
obligations of Parent and Merger Sub under this Agreement to consummate the
Merger are subject to the satisfaction of the following conditions, the
imposition of which is solely for the benefit of Parent and Merger Sub and any
one or more of which may be expressly waived by Parent, in its sole discretion,
except as otherwise required by law:
(a) Accuracy of Representations and Warranties. The representations and
warranties of the Company contained herein shall have been true and correct
when made, and shall be true and correct in all material respects at and as of
the Closing Date as though made on and as of the Closing Date (except to the
extent that any such representation and warranty shall, by its terms, have been
made as of a specific date in which case such representation and warranty shall
have been true and correct in all material respects as of such specific date).
For purposes of this Section 6.02(a), (i) the requirement that the
representations and warranties of the Company shall be true and correct in "all
material respects" is not intended to establish a different or higher
materiality standard with respect to any representation or warranty that is
already qualified by a materiality or a Material Adverse Effect standard by the
terms thereof and (ii) the satisfaction of such requirement shall take into
account all material developments that have occurred since the date of this
Agreement with respect to any condition, fact or state of affairs described in
any of the Company Disclosure Schedules (which developments shall be set forth
in the certificate referred to in the next sentence). Parent shall have
received a certificate of the Company dated the Closing Date and signed by an
officer of the Company certifying to the fulfillment of this condition;
(b) Performance of Agreements. The Company shall have performed in all
material respects all obligations and agreements and complied in all material
respects with all covenants and conditions contained in this Agreement or
otherwise contemplated hereby to be performed and complied with by it at or
prior to the Closing Date, and Parent shall have received a certificate of the
Company dated the Closing Date and signed by an officer of the Company
certifying to the fulfillment of this condition;
(c) No Material Adverse Change. Since the date hereof, there shall not have
occurred any change, condition, event, or development that has a Material
Adverse Effect;
(d) Governmental Orders. There shall not have been any action taken, or any
statute, rule, regulation, legislation, interpretation, judgment, order or
injunction enacted, entered, enforced, promulgated, amended, issued or deemed
applicable to (i) Parent, the Company or any subsidiary or affiliate of Parent
or the Company or (ii) any Transaction, by any court of competent jurisdiction
or any Governmental Entity, which (x) is reasonably likely to have a Material
Adverse Effect or (y) materially or adversely impact the economic or business
benefits to Parent of the Transactions.
(e) Consents. The consent, approval or waiver of each person whose consent
to or approval of the Transactions shall be required under any note, bond,
mortgage, indenture, deed of trust, license, lease, loan or credit agreement or
other agreement or other instrument or obligation to which the Company or any
Subsidiary is a party, or by which they or any of their respective properties
may be bound or affected shall have been obtained and shall remain in full
force effect, except where the failure to have obtained such consent, waiver or
approval, or the failure of any such consent, waiver or approval, or the
failure of any such consent, waiver or approval to be in full force and effect,
would not, individually or in the aggregate, have a Material Adverse Effect;
and
(f) All conditions (other than the consummation of the Merger) to obtaining
the Loan Financing shall have been satisfied or waived.
SECTION 6.03. Conditions to the Obligations of The Company. The obligation
of the Company to consummate the Merger is subject to the satisfaction of the
following conditions, the imposition of which is
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solely for the benefit of the Company and any one or more of which may be
expressly waived by the Company, in its sole discretion, except as otherwise
required by law:
(a) The representations and warranties of Parent and Merger Sub contained
herein shall have been true and correct in all material respects when made, and
shall be true and correct in all material respects at and as of the Closing
Date as though made on and as of the Closing Date (except to the extent that
any such representation and warranty had by its terms been made as of a
specific date, in which case such representation and warranty shall have been
true and correct in all material respects as of such specific date). For
purposes of this Section 6.03(a), the requirement that the representations and
warranties of Parent and Merger Sub shall be true and correct in "all material
respects" is not intended to establish a different or higher materiality
standard with respect to any representation or warranty that is already
qualified by a materiality or a Material Adverse Effect standard by the terms
thereof. The Company shall have received a certificate of Parent dated the
Closing Date and signed by the trustee of Parent certifying to the fulfillment
of this condition;
(b) Each of Parent and Merger Sub shall have performed in all material
respects all obligations and agreements and complied in all material respects
with all covenants and conditions contained in this Agreement to be performed
and complied with by it at or prior to the Closing Date, and the Company shall
have received a certificate of Parent dated the Closing Date and signed by an
officer of Parent certifying the fulfillment of this condition;
(c) The Paying Agent shall have received to be held in accordance with the
Paying Agent Agreement (i) at the direction of Group, as proceeds of the
initial drawdown under the Credit Agreement, an amount equal to 80% of the
Funds and (ii) from Parent, as proceeds of the Equity Financing, an amount
equal to 20% of the Funds;
(d) Parent shall have entered into a binding commitment (subject to the
Effective Time occurring) to purchase the SERP Policy; and
(e) The Company shall have received from the Company's Financial Advisor a
written opinion, dated the Closing Date, confirming, to the reasonable
satisfaction of the Company, the Preliminary Solvency Opinion.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
SECTION 7.01. Termination. This Agreement may be terminated and the Merger
and the other Transactions may be abandoned at any time prior to the Effective
Time, notwithstanding any requisite approval and adoption of this Agreement and
the transactions contemplated hereby by the stockholders of the Company:
(a) By mutual written consent duly authorized by the trustee of Parent and
by the Boards of Directors of Merger Sub and the Company;
(b) By Parent if there has been a material breach of any representation,
warranty, covenant or agreement on the part of the Company set forth in this
Agreement that, if not a willful breach and if curable, has not been cured
within 30 days following receipt by the Company of notice of such breach from
Parent and in any event prior to the date specified in Section 7.01(d);
(c) By the Company if there has been a material breach of any
representation, warranty, covenant or agreement on the part of Parent or Merger
Sub set forth in this Agreement that, if not a willful breach and if curable,
has not been cured within 30 days following receipt by Parent or Merger Sub of
notice of such breach from the Company and in any event prior to the date
specified in Section 7.01(d);
(d) By either Parent or the Company, if the Merger shall not have been
consummated before April 30, 2000 (or such later date as may be agreed to by
Parent and the Company), provided (x) that neither party may
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terminate this Agreement under this Section 7.01(d) if the failure has been
caused by such party's material breach of this Agreement and (y) such date
shall be extended at the election of Parent to May 30, 2000 in the event the
Stockholders' Meeting shall not yet have occurred;
(e) By either Parent or the Company, if the stockholders of the Company
shall have voted at the Stockholders Meeting on a motion to adopt this
Agreement, the polls shall have closed on such motion and such motion shall
have failed to receive the required vote for approval;
(f) By Parent, if (i) the Board of Directors of the Company shall withdraw,
modify or change the Recommendation in a manner adverse to Parent or shall
have resolved to do any of the foregoing; (ii) the Board of Directors of the
Company shall have recommended to the stockholders of the Company, or agreed
to enter into, a Competing Transaction; (iii) a cash tender offer (which, if
financed, shall have "committed" (as such term is used in Section 5.04(c)),
loan financing) or exchange offer for shares of capital stock of the Company
for consideration higher than the Merger Consideration that would result in
the beneficial ownership by any person or any "group" (as defined in Section
13(d) of the Exchange Act and the rules and regulations promulgated
thereunder) of more than 50% of the outstanding shares of any class of capital
stock of the Company is commenced; or (iv) any person shall have acquired
beneficial ownership or the right to acquire beneficial ownership of, or any
"group" shall have been formed that beneficially owns, or has the right to
acquire "beneficial ownership" of, more than 15% of the then-outstanding
shares of any class of capital stock of the Company; or
(g) by Parent or the Company, if a court of competent jurisdiction or other
governmental Entity shall have issued an order, decree or ruling or taken any
other action restraining, enjoining or otherwise prohibiting the consummation
of the Merger, and such order, decree, ruling or other action shall have
become final and nonappealable.
SECTION 7.02. Effect of Termination. In the event of the termination of
this Agreement pursuant to Section 7.01, this Agreement shall forthwith become
void, and there shall be no liability on the part of any party hereto, except
(i) as set forth in Sections 7.03 and 8.01 and (ii) nothing herein shall
relieve any party from liability for any willful breach hereof.
SECTION 7.03. Fees and Expenses. (a) The Company shall pay to Parent in
immediately available funds the amount of $2,500,000 (the "Company Fee") upon
the occurrence of any of the following events:
(i) the termination of this Agreement by Parent pursuant to clause (i)
or (ii) of Section 7.01(f); or
(ii) the consummation by the Company of a Competing Transaction on or
before the 12th month following the termination of this Agreement by Parent
pursuant to Section 7.01(b), it being agreed that Parent's entitlement to
the Company Fee shall be its sole and exclusive remedy in the event of
Parent's termination of this Agreement pursuant to Section 7.01(b) (other
than for willful breaches) and is intended to serve as liquidated damages
by reason of the inherent difficulty that would likely be encountered in
quantifying Parent's actual damages; or
(iii) the termination of this Agreement pursuant to Section 7.01(f)(iii)
by reason of an offer of the kind specified therein and the Company Board
shall have failed to recommend against such offer; or
(iv) the termination of this Agreement by Parent pursuant to Section
7.01(d) if, at the time of such termination, (1) the Company would not have
been entitled to terminate this Agreement under any provision of Section
7.01, (2) Parent includes, in its notice of termination, a certification
that it and Merger Sub are ready, willing and able to consummate the Merger
on the terms of this Agreement, (3) all of the conditions to the
obligations of the Company to consummate the Merger set forth in Section
6.01, Section 6.03(a) and Section 6.03(b) shall have been satisfied and (4)
Parent shall have taken all steps necessary to be in a position to satisfy
Section 6.03(d) other than the actual purchase of the SERP Policy; or
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(v) the termination of this Agreement by Parent or the Company pursuant
to Section 7.01(e) provided, at the time of such termination, (A) (1) a
proposal for a Competing Transaction shall have been publicly announced and
shall not have been publicly withdrawn or any person shall have publicly
announced its intention to make such a proposal, and (2) Parent was not
then entitled to terminate this Agreement under clause (i) or (ii) of
Section 7.01(f) or (B) Parent was entitled to terminate this Agreement
pursuant to Section 7.01(f)(iv) and the Company Board shall have approved
the beneficial ownership described in such Section.
(b) Parent shall pay to the Company in immediately available funds the
amount of $2,000,000 (the "Parent Fee") upon the occurrence of any of the
following events:
(i) the termination of this Agreement by the Company pursuant to Section
7.01(c), it being agreed that the Company's entitlement to the Parent Fee
shall be its sole and exclusive remedy in the event of such termination
(other than for willful breaches) and is intended to serve as liquidated
damages by reason of the inherent difficulty that would likely be
encountered in quantifying the Company's actual damages; or
(ii) the termination of this Agreement by the Company pursuant to
Section 7.01(d) if, at the time of such termination, (1) Parent would not
have been entitled to terminate this Agreement under any provision of
Section 7.01, (2) the Company includes, in its notice of termination, a
certification that it is ready, willing and able to consummate the Merger
on the terms of this Agreement, and (3) either (x) all of the conditions to
the obligations of Parent and Merger Sub to consummate the Merger set forth
in Sections 6.01 and 6.02 shall have been satisfied or (y) all of such
conditions shall have been satisfied except for the condition set forth in
Section 6.02(f) and the failure to satisfy such latter condition shall not
be attributable to either a breach of this Agreement by the Company or any
other event relating to the Company which, under the terms of the Credit
Agreement, is a basis for the Lender to decline to provide the Loan Amount
without being in breach of the Credit Agreement, it being agreed that such
payment shall be the Company's sole and exclusive remedy in the event of
such termination (other than for willful breaches) and is intended to serve
as liquidated damages by reason of the inherent difficulty that would
likely be encountered in quantifying the Company's actual damages.
(c) Except as set forth in this Section 7.03, all costs and expenses
incurred in connection with this Agreement and the Transactions shall be paid
by the party incurring such expenses, whether or not any Transaction is
consummated.
(d) In the event that the Company shall fail to pay the Company Fee or
Parent shall fail to pay the Parent Fee, in either case when such fee is due,
the party to whom such fee is owed shall be entitled, in addition to such fee,
to all the costs and expenses actually incurred or accrued by Parent, Merger
Sub (including, without limitation, fees and expenses of counsel) in connection
with the collection under and enforcement of this Section 7.03, together with
interest on such unpaid Fee, commencing on the date that such Fee became due,
at a rate equal to the rate of interest publicly announced by Citibank, N.A.,
from time to time, in the City of New York, as such bank's Base Rate plus 2%.
SECTION 7.04. Amendment. This Agreement may be amended by the parties hereto
by action taken by or on behalf of their respective trustee and Boards of
Directors at any time prior to the Effective Time; provided, however, that,
after the adoption of this Agreement by the stockholders of the Company, no
amendment may be made without the approval of the Company's stockholders which
would reduce the amount or change the type of consideration into which each
Share shall be converted upon consummation of the Merger or would, under the
DGCL, otherwise require the approval of the Company's stockholders. This
Agreement may not be amended except by an instrument in writing signed by the
parties hereto.
SECTION 7.05. Waiver.. At any time prior to the Effective Time, any party
hereto may (i) extend the time for the performance of any obligation or other
act of any other party hereto, (ii) waive any inaccuracy in the representations
and warranties contained herein or in any document delivered pursuant hereto
and
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(iii) waive compliance with any agreement or condition contained herein. Any
such extension or waiver shall be valid if set forth in an instrument in
writing signed by the party or parties to be bound thereby.
ARTICLE VIII
GENERAL PROVISIONS
SECTION 8.01. Non-Survival of Representations, Warranties and
Agreements. Non-Survival of Representations, Warranties and
Agreements Toc465095520 Toc470353392. The representations, warranties and
agreements in this Agreement shall terminate at the Effective Time or upon the
termination of this Agreement pursuant to Section 7.01, as the case may be,
except that: (i) the provisions of Article I, Section 5.06, the final sentence
of Section 5.08 and this Article VIII shall survive the Effective Time
indefinitely; and (ii) the provisions of Sections 5.03 and 7.03 and of this
Article VIII shall survive termination indefinitely. Nothing in this Section
8.01 is intended to conflict with, or otherwise affect, Section 7.02.
SECTION 8.02. Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly given upon receipt or, in the case of notice by
registered or certified mail, three business days after deposit with the United
States Postal Service) by delivery in person, by cable, telecopy, telegram or
telex or by registered or certified mail (postage prepaid, return receipt
requested) to the respective parties at the following addresses (or at such
other address for a party as shall be specified in a notice given in accordance
with this Section 8.02):
if to Parent:
Heritage Air Holdings Statutory Trust
c/o First Union National Bank, as trustee
10 State House Square
Hartford, CT 06103
Telecopier No.: (860) 247-1356
Attention: W. Jeffrey Kramer
with a copy to:
Bingham Dana LLP
One State Street
Hartford, CT 06103
Telecopier No: (860) 240-2800
Attention: James Scantling
if to Merger Sub:
PSG Acquisitions, Inc.
c/o Shearman & Sterling
555 California Street, Suite 2000
San Francisco, CA 94104
Telecopier No: (415) 616-1199
Attention: Christopher D. Dillon
if to the Company:
PS Group Holdings, Inc.
4370 La Jolla Village Drive, Suite 1050
San Diego, CA 92122
Telecopier No.: (858) 642-2982
Attention: Lawrence A. Guske
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with a copy to:
Heller Ehrman White & McAuliffe
525 University Avenue
Palo Alto, CA 94301
Facsimile: (650) 324-0638
Attention: Henry Lesser
SECTION 8.03. Certain Definitions. For purposes of this Agreement, the term:
(a) "affiliate" of a specified person means a person who directly or
indirectly through one or more intermediaries controls, is controlled by, or is
under common control with, such specified person;
(b) "beneficial owner" with respect to any Shares means a person who shall
be deemed to be the beneficial owner of such Shares (i) which such person or
any of its affiliates or associates (as such term is defined in Rule 12b-2
promulgated under the Exchange Act) beneficially owns, directly or indirectly,
(ii) which such person or any of its affiliates or associates has, directly or
indirectly, (A) the right to acquire (whether such right is exercisable
immediately or subject only to the passage of time), pursuant to any agreement,
arrangement or understanding or upon the exercise of consideration rights,
exchange rights, warrants or options, or otherwise, or (B) the right to vote
pursuant to any agreement, arrangement or understanding or (iii) which are
beneficially owned, directly or indirectly, by any other persons with whom such
person or any of its affiliates or associates or person with whom such person
or any of its affiliates or associates has any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or disposing of any
Shares;
(c) "business day" means any day on which the principal offices of the SEC
in Washington, D.C. are open to accept filings, or, in the case of determining
a date when any payment is due, any day on which banks are not required or
authorized to close in the City of New York;
(d) "control" (including the terms "controlled by" and "under common control
with") means the possession, directly or indirectly or as trustee or executor,
of the power to direct or cause the direction of the management and policies of
a person, whether through the ownership of voting securities, as trustee or
executor, by contract or credit arrangement or otherwise;
(e) "knowledge," when used with respect to the Company regarding any matter
related to the Company or any of its Subsidiaries (other than Statex), means
the actual knowledge of any of the Company's officers named in the Company's
definitive proxy statement referred to in Section 2.23 and, regarding any
matter related to Statex means the actual knowledge of the Company's officers
so named, and, in addition, the officers of Statex listed on Schedule 8.03 of
the Company Disclosure Schedules;
(f) "person" means an individual, corporation, partnership, limited
partnership, syndicate, person (including, without limitation, a "person" as
defined in Section 13(d)(3) of the Exchange Act), trust, association or entity
or government, political subdivision, agency or instrumentality of a
government; and
(g) "subsidiary" or "subsidiaries" of the Company, the Surviving
Corporation, Parent or any other person (the "Subject Person") means any other
person of which the Subject Person owns, directly or indirectly, 50% or more of
the stock or other equity interests the holder of which is entitled to vote
generally for the election of the board of directors or other governing body of
such other person.
SECTION 8.04. 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 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 in a
34
<PAGE>
mutually acceptable manner in order that the Transactions be consummated as
originally contemplated to the fullest extent possible.
SECTION 8.05. Entire Agreement; Assignment. This Agreement constitutes the
entire agreement among the parties with respect to the subject matter hereof
and supersedes all prior agreements and undertakings, both written and oral,
among the parties, or any of them, with respect to the subject matter hereof,
except for the Confidentiality Agreement, which shall remain in full force and
effect in accordance with its terms until the Effective Time. This Agreement
shall not be assigned by operation of law or otherwise, except that each of
Parent and Merger Sub may assign all or any of its respective rights and
obligations hereunder to any affiliate of Parent provided that such assignee
(1) undertakes to the Company in writing, at the time of such assignment, to be
bound by all of the assigning party's obligations under this Agreement, (2)
makes to the Company in writing, with respect to itself, the representations
and warranties made in this Agreement with respect to the assigning party (as
applicable, depending on whether the assigning party is Parent or Merger Sub)
as if references therein to the assigning party were references to such
assignee, and (3) confirms to the Company in writing (x) that all Company
Disclosure Schedules and all other schedules and documents delivered by the
Company to the assigning party under this Agreement prior to such assignment
shall be deemed to have been delivered to such assignee and (y) in the case of
an assignment by Parent, that the Credit Agreement and the Equity Commitment
have been amended to reflect such assignment and that true and complete copies
of such amendments have been furnished to the Company, it being agreed that no
such assignment shall relieve the assigning party of its obligations hereunder.
Notwithstanding anything to the contrary herein, from and after the Effective
Time Parent and Merger Sub shall be permitted to grant a security interest in
this Agreement to its Lenders under the Credit Agreement.
SECTION 8.06. Parties in Interest. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto, and nothing in this
Agreement, express or implied, is intended to or shall confer upon any other
person any right, benefit or remedy of any nature whatsoever under or by reason
of this Agreement, other than Section 5.06 (which is intended to be for the
benefit of, and may be enforced by, each Indemnified Party with respect to such
Indemnified Party individually).
SECTION 8.07. Specific Performance. The parties hereto agree that
irreparable damage would occur in the event any provision of this Agreement was
not performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or equity.
SECTION 8.08. Governing Law/Arbitration. This Agreement shall be governed
by, and construed in accordance with, the laws of the State of Delaware
applicable to contracts executed in and to be performed in that State. All
actions and proceedings arising out of or relating to this Agreement shall be
heard and determined in the Delaware Chancery Court; provided, that, in the
event such court does not have jurisdiction to determine such action or
proceeding, such action or proceeding shall be finally settled by binding
arbitration in San Francisco, California, under the rules of the American
Arbitration Association ("AAA") then in effect by a single arbitrator mutually
agreeable to the Company and Parent. In the event that within thirty (30) days
after submission of any dispute to arbitration, the Company and Parent do not
mutually agree on a single arbitrator, the Company, on the one hand, and
Parent, on the other hand, shall each select one arbitrator and the AAA shall
select a third arbitrator. The arbitrator(s) shall have the authority to grant
any equitable and legal remedies that would be available in any judicial
proceeding instituted to resolve a dispute. Judgment on the award rendered by
the arbitrators may be entered in any court having jurisdiction thereof. The
arbitrator(s) may award to the prevailing party, if any, as determined by the
arbitrator(s) all of its costs and fees, including AAA administrative fees,
arbitrator fees, attorneys' fees, expert fees, witness fees, travel expenses
and out of pocket expenses (including such expenses as copying, telephone,
facsimile, postage and courier fees). The parties may apply to any court of
competent jurisdiction for a temporary restraining order, preliminary
injunction or other interim or conservatory relief as necessary without breach
of this arbitration provision without any abridgment of the powers of the
arbitrator(s). The parties agree that, the provisions of applicable law
notwithstanding, they will not request and the arbitrator(s) shall have no
authority to award punitive or exemplary damages against any party.
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SECTION 8.09. Headings; Glossary. The descriptive headings and glossary
contained in this Agreement are included for convenience of reference only and
shall not affect in any way the meaning or interpretation of this Agreement.
SECTION 8.10. Counterparts. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts,
each of which when executed shall be deemed to be an original but all of which
taken together shall constitute one and the same agreement.
SECTION 8.11. Parent Guaranty. Parent hereby guarantees to the Company,
irrevocably, unconditionally and absolutely, the performance by Merger Sub (and
any assignee of Merger Sub) of all of its obligations under this Agreement.
SECTION 8.12. No Recourse. It is expressly understood and agreed that this
Agreement is executed and delivered on behalf of Parent by First Union National
Bank ("First Union"), not in its individual capacity but solely as Trustee
under the Amended and Restated Trust Agreement (Heritage Air Holdings Statutory
Trust) dated as of September 20, 1999 between First Union and the Beneficiary
named therein (the "Trust Agreement"), in the exercise of the powers and
authority conferred and vested in it as the trustee thereunder, and that each
of the representations, warranties, undertakings and agreements herein made on
the part of Parent is made solely as a representation, warranty, undertaking or
agreement of Parent and not as a personal representation, warranty, undertaking
or agreement of First Union and is made solely for the purpose of binding the
trust estate created by the Trust Agreement (the "Trust Estate") and all
persons having any claim by reason of any such representation, warranty,
undertaking or agreement shall look only to the Trust Estate for payment or
satisfaction thereof.
IN WITNESS WHEREOF, Parent, Merger Sub and the Company have caused this
Agreement to be executed as of the date first written above by their respective
officers thereunto duly authorized.
HERITAGE AIR HOLDINGS STATUTORY
TRUST
By: First Union National Bank, not
in its individual capacity but
solely as Trustee
/s/ W. Jeffrey Kramer
By: _________________________________
Name: W. Jeffrey Kramer
Title: Vice President
PSG ACQUISITION, INC.
/s/ Douglas H. Wolf
By: _________________________________
Name: Douglas H. Wolf
Title: Chief Executive Officer
PS GROUP HOLDINGS, INC., INC.
/s/ Charles E. Rickershauser, Jr.
By: _________________________________
Name: Charles E. Rickershauser, Jr.
Title: Chief Executive Officer
36
<PAGE>
EXHIBIT A
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
PS GROUP HOLDINGS, INC.
ARTICLE I
NAME
The name of the corporation is PS Group Holdings, Inc. (the "Corporation").
ARTICLE II
REGISTERED OFFICE AND REGISTERED AGENT
The address of the registered office of the Corporation in the State of
Delaware is Corporation Trust Center, 1209 Orange Street, in the City of
Wilmington, County of New Castle. The name of the registered agent of the
Corporation at such address is The Corporation Trust Company.
ARTICLE III
CORPORATE PURPOSE
The sole purpose of, and nature of business to be conducted by, the
Corporation is to (i) own and hold 100% of the issued and outstanding stock
(the "Stock") of PS Group, Inc., a Delaware corporation ("Group"), together
with such other activities as may be necessary or advisable in connection with
the ownership of the Stock, (ii) purchase and hold the SERP Policies (as such
term is defined in that certain Merger Agreement, dated as of December 18,
1999, among Heritage Air Holdings Statutory Trust, PSG Acquisition, Inc. and
PS Group Holdings, Inc. (the "Merger Agreement")), (iii) purchase and hold that
certain director and officer liability policy required by Section 5.06(c) of
the Merger Agreement (the "Tail Policy" and together with the SERP Policies,
the "Insurance Policies"), (iv) enter into and perform its obligations under
the Stock Pledge and Security Agreements (as such term is defined in that
certain Loan Agreement between GATX Capital Corporation ("Lender") and PS
Group, Inc., dated as of December 18, 1999 (the "Loan Agreement")) and
(v) enter into and perform its obligations under the Holdings Guaranty (as such
term is defined in the Loan Agreement). The Corporation shall not engage in any
business, and it shall have no purpose, unrelated to the matters discussed in
the preceding sentence and shall not acquire any real property or own assets
other than those related to the matters discussed in the preceding sentence.
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ARTICLE IV
SEPARATENESS
(1) Notwithstanding any other provision of the Certificate of Incorporation
and any other provision of law which otherwise so empowers the Corporation, the
Corporation shall not act in contravention of any of the following:
(2) The Corporation shall at all times observe the applicable legal
requirements for the recognition of the Corporation as a legal entity separate
from any Affiliates (as defined below).
(3) For so long as the debt or obligations evidenced by the Loan Agreement
and the Collateral Documents (as such term is defined in the Loan Agreement),
including any debt or obligations incurred in connection any refinancing
thereof, remain outstanding, the Corporation shall not:
(i) engage in any business or activity other than the ownership of the
Stock and the Insurance Policies and activities incidental thereto;
(ii) acquire or own any material assets other than the Stock or
Insurance Policies;
(iii) merge into or consolidate with any Person or entity or dissolve,
terminate or liquidate in whole or in part, transfer or otherwise dispose
of all or substantially all of its assets or change its legal structure
without, in each case, the prior written consent of Lender or its
successors or assigns;
(iv) fail to preserve its existence as an entity duly organized, validly
existing and in good standing (if applicable) under the laws of the
jurisdiction of its organization or formation, or, without the prior
written consent of Lender, amend, modify, terminate or fail to comply with
the provisions of this Restated Certificate of Incorporation, as same may
be further amended or supplemented, if such amendment, modification,
termination or failure to comply would adversely affect the ability of the
Corporation to perform its obligations under the Loan Agreement, the Stock
Pledge and Security Agreements and the Holdings Guaranty;
(v) own any subsidiary or make any investment in, any Person or entity
without the consent of Lender;
(vi) commingle its assets with the assets of any of its general
partners, members, shareholders, Affiliates, principals or of any other
Person or entity;
(vii) incur any debt, secured or unsecured, direct or contingent
(including guaranteeing any obligation), other than the debt incurred in
connection with the Loan Agreement, the Stock Pledge and Security
Agreements and the Holdings Guaranty;
(viii) fail to maintain its records, books of account and bank accounts
separate and apart from those of the shareholders, principals and
Affiliates of the Corporation, the Affiliates of a shareholder of the
Corporation, and any other Person or entity;
(ix) enter into any contract or agreement with any general partner,
member, shareholder, principal or Affiliate of the Corporation or any
general partner, member, principal or affiliate thereof, except upon terms
and conditions that are intrinsically fair and substantially similar to
those that would be available on an arms-length basis with third parties
other than any general partner, member, shareholder, principal or Affiliate
of the Corporation or any general partner, member, principal or affiliate
thereof;
(x) seek the dissolution or winding up in whole, or in part, of the
Corporation;
(xi) maintain its assets in such a manner that it will be costly or
difficult to segregate, ascertain or identify its individual assets from
those of any general partner, member, shareholder, principal or Affiliate
of the Corporation, or any general partner, member, shareholder, principal
or Affiliate thereof or any other Person;
38
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(xii) hold itself out to be responsible for the debts of another Person
or make its credit available to another Person;
(xiii) make any loans or advances to any third party, or pledge its
assets for the benefit of another Person, including any general partner,
member, shareholder, principal or Affiliate of the Corporation, or any
general partner, principal or affiliate thereof;
(xiv) fail to file its own tax returns;
(xv) fail to hold itself out to the public as a legal entity separate
and distinct from any other entity or Person or to conduct its business
solely in its own name in order not (A) fail to correct any
misunderstanding or to mislead others as to the identity with which such
other party is transacting business, or (B) to suggest that the Corporation
is responsible for the debts of any third party (including any general
partner, principal or Affiliate of the Corporation, or any general partner,
principal or affiliate thereof);
(xvi) fail to maintain adequate capital for the normal obligations
reasonably foreseeable in a business of its size and character and in light
of its contemplated business operations;
(xvii) pay other than fair market rent for office space;
(xviii) act other than solely in its legal name through authorized
officers and agents;
(xix) acquire any obligations or securities of its stockholders; or
(xx) fail to be qualified to do business under the applicable law of the
state in which its assets are located.
"Affiliate" means any person or entity other than the Corporation (a) which
owns beneficially, directly or indirectly, more than 50 percent of the
outstanding shares of the common stock or which is otherwise in control of the
Corporation, (b) of which more than 50 percent of the outstanding voting
securities are owned beneficially, directly or indirectly, by any person or
entity described in clause (i) above, or (iii) which is controlled by any
person or entity described in clause (i) above; provided that for the purposes
of this definition the term "control" and "controlled by" shall have meanings
assigned to them in Rule 405 under the United States Securities Act of 1933, as
amended.
"Person" means an individual, corporation, partnership, limited partnership,
syndicate, person (including, without limitation, a "person" as defined in
Section 13(d)(3) of the Exchange Act), trust, association or entity or
government, political subdivision, agency or instrumentality of a government.
ARTICLE V
CAPITAL STOCK
The total number of shares of all classes of stock that the Corporation
shall have authority to issue is [ ], all of which shall be shares of Common
Stock, par value $[ ] per share.
ARTICLE VI
INDEMNIFICATION OF DIRECTORS, OFFICERS AND OTHERS
(1) The Corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the Corporation) by reason of the
fact that he is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise,
39
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against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in, or not opposed to, the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon
a plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person seeking indemnification did not act in good faith
and in a manner which he reasonably believed to be in or not opposed to the
best interests of the Corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
(2) The Corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the Corporation to procure a judgment in its favor
by reason of the fact that he is or was a director, officer, employee or agent
of the Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Corporation and except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the Corporation unless and only to the extent that the Court of
Chancery of the State of Delaware or the court in which such action or suit was
brought shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which the Court
of Chancery or such other court shall deem proper.
(3) To the extent that a present or former director, officer, employee or
agent of the Corporation has been successful on the merits or otherwise in
defense of any action, suit or proceeding referred to in Sections (1) and (2)
of this Article VI, or in defense of any claim, issue or matter therein, he
shall be indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection therewith.
(4) Any indemnification under Sections (1) and (2) of this Article VI
(unless ordered by a court) shall be made by the Corporation only as authorized
in the specific case upon a determination that indemnification of the present
or former director, officer, employee or agent is proper in the circumstances
because he has met the applicable standard of conduct set forth in such
Sections (1) and (2). Such determination shall be made, with respect to a
person who is a director or officer at the time of such determination, (a) by
the Board of Directors of the Corporation by a majority vote of a quorum
consisting of directors who were not parties to such action, suit or
proceeding, or (b) by a committee of such directors designated by a majority
vote of such directors, even though less than a quorum, or (c) if such a quorum
is not obtainable, or, even if obtainable, a quorum of disinterested directors
so directs, by independent legal counsel in a written opinion, or (d) by the
stockholders of the Corporation.
(5) Expenses (including attorneys' fees) incurred by an officer or director
in defending any civil, criminal, administrative or investigative action, suit
or proceeding shall be paid by the Corporation in advance of the final
disposition of such action, suit or proceeding upon receipt of an undertaking
by or on behalf of such director or officer to repay such amount if it shall
ultimately be determined that he is not entitled to be indemnified by the
Corporation authorized in this Article VI.
(6) The indemnification and advancement of expenses provided by, or granted
pursuant to, the other sections of this Article VI shall not be deemed
exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under any law, by-law, agreement, vote
of stockholders or disinterested directors or otherwise, both as to action in
an official capacity and as to action in another capacity while holding such
office.
40
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(7) The Corporation may purchase and maintain insurance on behalf of any
person who is or was a director, officer, employee or agent of the Corporation,
or is or was serving at the request of the Corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise against any liability asserted against him and incurred by him
in any such capacity, or arising out of his status as such, whether or not the
Corporation would have the power to indemnify him against such liability under
the provisions of Section 145 of the General Corporation Law.
(8) For purposes of this Article VI, references to "the Corporation" shall
include, in addition to the resulting corporation, any constituent corporation
(including any constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would have had power and
authority to indemnify its directors, officers, employees or agents so that any
person who is or was a director, officer, employee or agent of such constituent
corporation, or is or was serving at the request of such constituent
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, shall stand in the same
position under the provisions of this Article VI with respect to the resulting
or surviving corporation as he would have with respect to such constituent
corporation if its separate existence had continued.
(9) For purposes of this Article VI, references to "other enterprises" shall
include employee benefit plans; references to "fines" shall include any excise
taxes assessed on a person with respect to an employee benefit plan; and
references to "serving at the request of the Corporation" shall include any
service as a director, officer, employee or agent of the Corporation which
imposes duties on, or involves service by, such director, officer, employee or
agent with respect to any employee benefit plan, its participants or
beneficiaries; and a person who acted in good faith and in a manner he
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan shall be deemed to have acted in a manner "not
opposed to the best interests of the Corporation" as referred to in this
Article VI.
(10) The indemnification and advancement of expenses provided by, or granted
pursuant to, this Article VI shall, unless otherwise provided when authorized
or ratified, continue as to a person who has ceased to be a director, officer,
employee or agent and shall inure to the benefit of the heirs, executors and
administrators of such a person.
ARTICLE VII
PERSONAL LIABILITY OF DIRECTORS
To the fullest extent permitted by the General Corporation Law as it now
exists and as it may hereafter be amended, no director of the Corporation shall
be personally liable to the Corporation or its stockholders for monetary
damages for breach of fiduciary duty as a director.
ARTICLE VIII
AMENDMENT
The Corporation reserves the right to amend, alter, change, or repeal any
provision contained in this Amended and Restated Certificate of Incorporation,
in the manner now or hereafter prescribed by statute, and all rights conferred
upon stockholders herein are granted subject to this reservation; provided,
however, that so long as the debt or obligations evidenced by the Loan
Agreement and the Collateral Documents remain outstanding, this Certificate may
not be amended, modified or otherwise altered without the prior written consent
of the Lender.
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ARTICLE IX
BY-LAWS
The Board of Directors is expressly authorized to adopt, amend, or repeal
the by-laws of the Corporation; provided, however, that so long as the debt or
obligations evidenced by the Loan Agreement and the Collateral Documents remain
outstanding, the by-laws may not be amended, modified or otherwise altered
without the prior written consent of the Lender.
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EXHIBIT 10.1
- --------------------------------------------------------------------------------
LOAN AGREEMENT
between
GATX CAPITAL CORPORATION
and
PS GROUP, INC.
Dated as of December 18, 1999
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE 1 DEFINITIONS............................................... 1
1.1 Definitions............................................... 1
1.2 Other Definitional Provisions............................. 13
1.3 Accounting Terms and Determinations....................... 13
ARTICLE 2 THE LOAN.................................................. 13
2.1 The Loan.................................................. 13
2.2 The Note.................................................. 13
2.3 Disbursement; Use of Proceeds............................. 14
2.4 Interest.................................................. 14
2.5 Principal................................................. 15
2.6 Payments.................................................. 15
2.7 Application of Payments................................... 15
2.8 Commitment Fee............................................ 16
ARTICLE 3 CLOSING CONDITIONS........................................ 16
3.1 Closing Conditions........................................ 16
ARTICLE 4 REPRESENTATIONS AND WARRANTIES............................ 19
4.1 Organization.............................................. 19
4.2 Authorization............................................. 20
4.3 Chief Executive Office; Location of Assets................ 20
4.4 Solvency.................................................. 20
4.5 Litigation................................................ 21
4.6 No Default................................................ 21
4.7 Incorporation of Certain Representations and Warranties... 21
4.8 Federal Reserve Regulations............................... 21
4.9 Subsidiary Assets......................................... 22
ARTICLE 5 AFFIRMATIVE COVENANTS..................................... 22
5.1 Performance and Enforcement............................... 22
5.2 Maintenance of Existence.................................. 22
5.3 Maintenance of Personal Property and Leased Assets........ 22
5.4 Maintenance of Records.................................... 23
5.5 Maintenance of Insurance.................................. 23
5.6 Right of Inspection....................................... 23
5.7 Reporting Requirements.................................... 24
5.8 UCC Financing Statements; Lien Searches; Other Filings.... 25
5.9 Payments of Amounts Received.............................. 26
5.10 Conduct of Business; Defaulted Leases..................... 26
</TABLE>
i
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<TABLE>
<CAPTION>
Page
----
<S> <C>
5.11 Collateral Account; Direction to Obligors................. 27
5.12 Use of Proceeds........................................... 27
5.13 Obligations and Taxes..................................... 27
5.14 Compliance With Laws...................................... 27
5.15 Further Assurances........................................ 28
ARTICLE 6 NEGATIVE COVENANTS........................................ 28
6.1 Liens..................................................... 28
6.2 Restriction on Debt....................................... 29
6.3 Restriction on Business................................... 29
6.4 Restricted Payments....................................... 30
6.5 Remarketing of Leased Assets; Contracts................... 30
6.6 Sale and Lease-Back Transactions.......................... 30
6.7 Investments, Loans and Advances........................... 30
6.8 Business Combination...................................... 31
6.9 Sales, Etc., of Assets.................................... 31
6.10 Employees and Affiliates.................................. 32
6.11 Amendments; New Agreements................................ 32
6.12 Capital Expenditures...................................... 32
6.13 Direction of Trustees..................................... 32
ARTICLE 7 EVENTS OF DEFAULT......................................... 33
7.1 Events of Default......................................... 33
7.2 Acceleration of Maturity.................................. 36
7.3 Suits for Enforcement..................................... 36
7.4 Remedies Cumulative....................................... 37
7.5 Remedies Not Waived....................................... 37
ARTICLE 8 MISCELLANEOUS............................................. 37
8.1 Amendments................................................ 37
8.2 No Waiver................................................. 37
8.3 Mutilated, Destroyed, Lost or Stolen Note................. 37
8.4 Expenses; Indemnity; Damage Waiver........................ 37
8.5 Survival.................................................. 39
8.6 Notices................................................... 39
8.7 Entire Agreement.......................................... 40
8.8 Counterparts.............................................. 40
8.9 Severability.............................................. 40
8.10 Captions.................................................. 40
8.11 Governing Law............................................. 40
8.12 Jurisdiction.............................................. 40
8.13 Waiver of Jury Trial...................................... 41
8.14 Successors and Assigns.................................... 41
8.15 No Benefit................................................ 41
</TABLE>
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<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
EXHIBITS
A Form of Note
B Form of Security Agreement
C Form of Holdings Guaranty
D Form of Trust Guaranty
E Form of Stock Pledge and Security Agreement
F Form of Form of Mortgage and Assignment of Lease
G Form of Form of Collateral Account and Pledge Agreement
H Form of Form of Subsidiary Guaranty
I Form of Form of Subsidiary Security Agreement
J Form of Borrower Stock Pledge Agreement
SCHEDULES
3.1(g)(i) Form of Opinion of Counsel (Heller, Ehrman,
White & McAuliffe)
3.1(g)(ii) Form of Opinion of Counsel (Shearman & Sterling)
3.1(g)(iii) Form of Opinion of Counsel (Bingham Dana LLP)
3.1(g)(iv) Form of Opinion of Counsel (Richards, Layton & Finger)
3.1(g)(v) Form of Opinion of Counsel (Crowe & Dunlevy)
3.1(g)(vi) Form of Opinion of Counsel (Holland & Knight)
4.3 Location of Assets
5.5 Total Loss Only Coverage Amounts
5.8 UCC-1 Financing Statements
</TABLE>
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LOAN AGREEMENT dated as of December 18, 1999 between GATX CAPITAL
CORPORATION, a Delaware corporation, and PS GROUP, INC., a Delaware corporation.
WHEREAS, PS Acquisition desires to merge with and into Holdings, and
Holdings desires to merge with and into PS Acquisition, pursuant to the terms of
the Merger Agreement and the transactions contemplated thereby;
WHEREAS, the Borrower is a wholly owned Subsidiary of Holdings and
will derive substantial benefit from the Merger;
WHEREAS, the Borrower has requested the Lender to make the Loan to the
Borrower, simultaneously with, and in order to enable the Borrower to finance,
the Merger;
NOW THEREFORE, for good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
1.1 Definitions. As used in this Agreement, except as otherwise
-----------
herein indicated, the following terms have the respective meanings set forth or
referred to below:
"Affiliate" means, with respect to any Person, any other Person that
---------
directly or indirectly controls, is controlled by, or is under common control
with, such Person. For the purposes of this definition, "control" (including
with correlative meanings the terms "controlled by" and "under common control
with"), as used with respect to any Person, shall mean the possession, directly
or indirectly, of the power to direct or cause the direction of the management
or policies of such Person, whether through the ownership of voting securities
or by contract or otherwise.
"Agreement" means this Loan Agreement, as amended from time to time.
---------
"Assignment of Lease" means the assignments of lease to be granted by
-------------------
the Borrower (or, as applicable, a Trustee) to the Lender (or a trustee for the
benefit of the Lender) assigning such Person's interest as lessor under the
Leases.
<PAGE>
2
"Available Cash" (a), as of any Business Day, means all cash received
--------------
by or for the account of the Borrower and its Subsidiaries from any and all
sources whatsoever representing Lease Payments during the period from noon on
the immediately preceding date of determination (or the Closing Date in case of
the first date of determination) to noon on the current date of determination,
including, without limitation, (i) cash proceeds (net of remarketing or other
related expenses) from the refinancing, sale or other disposition of any capital
stock or assets of the Borrower and its Subsidiaries (including insurance and
condemnation proceeds) received prior to the Maturity Date and (ii) lease
rentals (net of debt service, if applicable), in each case as and when received
by the Borrower or its Subsidiaries, (b), as of any Business Day, means all net
cash proceeds of any asset sales permitted under subsections (g) or (h) of
Section 6.9 and (c), on the date which is five (5) Business Days following the
Closing Date and on the last Business Day of each March, June, September and
December, means an amount equal to the excess, if any, of the aggregate amount
of cash and cash equivalents of the Borrower and its Subsidiaries (without
duplication of the amounts described in clauses (a) and (b) above) over the sum
----
of $615,000 plus the Environmental Reserve.
----
"Bank" means The Chase Manhattan Bank.
----
"Bankruptcy Code" means title 11 of the United States Code, 11 U.S.C.
---------------
(S)(S) 101 et seq., as amended, or any successor statute.
-- ----
"Borrower" means PS Group, Inc., a Delaware corporation.
--------
"Borrower Environmental Reserve Account" means a segregated bank
--------------------------------------
account held by the Borrower (i) upon which the Borrower may draw from time to
time, if the cash reserve contained in the PST Environmental Reserve Account
shall have been exhausted, to defray environmental expenses of PS Trading or
(ii) to satisfy the requirements of that certain letter loan agreement dated
September 22, 1995 between Bank of America National Trust and Savings
Association and the Borrower (as heretofore amended) so long as the same remain
in effect; provided, that the Borrower Environmental Reserve Account shall
--------
contain a cash reserve in an amount of not less than $1,000,000 so long as any
of the requirements described in clause (ii) above shall remain in effect.
"Borrower Stock Pledge Agreement" means the Stock Pledge Agreement to
-------------------------------
be dated the Closing Date between the Borrower and the Lender, as amended from
time to time.
"Business Day" means any day other than a Saturday or Sunday or a day
------------
on which banks in San Francisco, California or New York, New York are
<PAGE>
3
authorized by law to be closed. Any reference herein to "days" (unless Business
Days are specified) shall mean calendar days.
"Capital Expenditures" means, for any Person for any period, the sum
--------------------
of, without duplication, (a) all expenditures made, directly or indirectly, by
such Person or any of its Subsidiaries during such period for equipment, fixed
assets, real property or improvements, or for replacements or substitutions
therefor or additions thereto, that have been or should be, in accordance with
GAAP, reflected as additions to property, plant or equipment on a consolidated
balance sheet of such Person or have a useful life of more than one year plus
----
(b) the aggregate principal amount of all Debt (including under Capital Leases)
assumed or incurred in connection with any such expenditures. For purposes of
this definition, the purchase price of equipment that is purchased
simultaneously with the trade-in of existing equipment or with insurance
proceeds shall be included in Capital Expenditures only to the extent of the
gross amount of such purchase price less the credit granted by the seller of
such equipment for the equipment being traded in at such time or the amount of
such proceeds, as the case may be.
"Capital Lease", as applied to any Person, means any lease of any
-------------
property (whether real, personal or mixed) by that Person as lessee that, in
conformity with GAAP, has been or would be required to be accounted for as a
capital lease on the consolidated balance sheet of that Person.
"Cash Equivalents" means any of the following, to the extent owned by
----------------
the Borrower or any of its Subsidiaries free and clear of all Liens other than
Liens created under the Collateral Documents and having a maturity of not
greater than 360 days from the date of acquisition thereof: (a) readily
marketable direct obligations of the Government of the United States or any
agency or instrumentality thereof or obligations unconditionally guaranteed by
the full faith and credit of the Government of the United States, (b) insured
certificates of deposit of or time deposits with any commercial bank that is a
member of the Federal Reserve System, issues (or the parent of which issues)
commercial paper rated as described in clause (c) below, is organized under the
laws of the United States or any State thereof and has combined capital and
surplus of at least $1 billion or (c) commercial paper in an aggregate amount of
no more than $500,000 per issuer outstanding at any time, issued by any
corporation organized under the laws of any State of the United States and rated
at least "Prime-1" (or the then equivalent grade) by Moody's Investors Service,
Inc. or "A-1" (or the then equivalent grade) by Standard & Poor's, a division of
The McGraw-Hill Companies, Inc.
"Change in Control" means (a) the failure by The D.H. Wolf Trust and
-----------------
The Richard Buckingham Family Trust to own, directly or indirectly, beneficially
and of record, membership interests in ICA Heritage Air Holdings, LLC
("Heritage")
<PAGE>
4
representing 100% of the aggregate ordinary voting power represented by the
issued and outstanding membership interests in Heritage, (b) the failure by
Heritage, to own, directly or indirectly beneficially and of record, 100% of the
issued and outstanding beneficial interests of the Trust, (c) after the Merger,
the failure by the Trust to own, directly or indirectly, beneficially and of
record, 100% of the issued and outstanding equity interests of Holdings, (d) the
failure by Holdings to own, directly or indirectly, beneficially and of record,
100% of the issued and outstanding equity interests of the Borrower, or (e) the
occurrence of a "Change of Control" or similar event (however denominated) under
and as defined in any Debt of Heritage, the Trust, Holdings, the Borrower or any
Subsidiary in an aggregate outstanding principal amount in excess of $1,000,000.
"Closing" means the closing of the Loan made on the Closing Date.
-------
"Closing Date" means the date as of which the Loan is made as provided
------------
herein, which shall be no later than 180 days after the signing of this
Agreement.
"Code" means the Internal Revenue Code of 1986, as amended, or any
----
successor statute.
"Collateral Account" has the meaning set forth in the Collateral
------------------
Account and Pledge Agreement.
"Collateral Account and Pledge Agreement" means the Collateral Account
---------------------------------------
and Pledge Agreement to be dated the Closing Date between the Borrower and the
Lender, as amended from time to time.
"Collateral Documents" means the Security Agreement, the Stock Pledge
--------------------
and Security Agreements, the Mortgages, the Collateral Account and Pledge
Agreement, the Borrower Stock Pledge Agreement, the Subsidiary Guaranty, the
Subsidiary Security Agreement, the Trust Guaranty and the Holdings Guaranty.
"Commitment Fee" has the meaning set forth in Section 2.8.
--------------
"Company Disclosure Schedules" means the Company Disclosure Schedules
----------------------------
under the Merger Agreement.
"Contract" means any contract, agreement, indenture, note, bond,
--------
instrument, lease, guaranty, trust agreement, escrow agreement, letter of
credit, residual sharing agreement, option agreement, moratorium or other work-
out agreement, remarketing agreement, management agreement, brokerage agreement,
<PAGE>
5
consent, waiver, tax benefit transfer agreement or other binding arrangement,
whether or not in writing, and all amendments and supplements thereto.
"Debt" of any Person means, as of any date, all liabilities,
----
obligations and reserves, contingent or otherwise, which, in accordance with
GAAP, would be reflected as a liability on a balance sheet (or footnote relating
thereto) and shall also include, without duplication, (i) all obligations of
such Person for borrowed money, (ii) all payment obligations of such Person
evidenced by bonds, debentures, notes or other similar instruments, (iii) all
obligations of such Person to pay the deferred purchase price of property or
services (other than Expenses payable in the ordinary course), (iv) all payment
obligations of such Person under conditional sales or other title retention
agreements, (v) all payment obligations of such Person as lessee under Capital
Leases, (vi) all obligations of such Person to purchase securities or other prop
erty pursuant to a repurchase or similar agreement, (vii) the undrawn face
amount of any outstanding letters of credit issued for the account of such
Person, and all obligations of such Person to reimburse or prepay any other
Person in respect of amounts paid under a letter of credit, banker's acceptance
or similar instrument, (viii) all obligations (of such Person or of others)
secured by a Lien on any asset of such Person, whether or not such obligations
is assumed by such Person, and (ix) all Debt of others Guaranteed by such
Person.
"Default" means the occurrence or existence of any event or condition
-------
that with the giving of notice or the passage of time, or both, would constitute
an Event of Default.
"Default Rate" means the Prime Rate plus 3.50%.
------------
"Defaulted Lease" means, as of any date, a Lease under which there
---------------
exists as of such date any default, event of default or other circumstance of a
type (i) that would then permit, or with the giving of notice or passage of time
or both would permit, the lessor under such Lease, or any Person to whom the
lessor's rights under such Lease may have been assigned, to accelerate the
obligations of the lessee under such Lease or to foreclose or otherwise take
possession or demand the return of any material item of Leased Assets to which
such Lease relates or to terminate such Lease or to receive liquidated damages
thereunder or (ii) that provides for the automatic acceleration of the
obligations of the lessee under such Lease, the automatic termination of such
Lease or the automatic payment of liquidated damages thereunder.
"Designated Representations" has the meaning set forth in Section 4.7.
--------------------------
"Dollars" and "$" means dollars in any coin or currency of the United
------- -
States of America which, at the time of payment thereof, shall be legal tender
for public and private debt.
<PAGE>
6
"Environmental Reserve" means a cash reserve in an amount not to
---------------------
exceed $5,000,000 in the aggregate of PS Trading and the Borrower to be held in
the Environmental Reserve Accounts.
"Environmental Reserve Accounts" means, collectively, the PST
------------------------------
Environmental Reserve Account and the Borrower Environmental Reserve Account.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
-----
amended, or any successor.
"Event of Default" has the meaning set forth in Section 7.1.
----------------
"Expenses" means, with respect to the ongoing business of the Borrower
--------
and its Subsidiaries, the following (provided, however, that, with respect to
-------- -------
any Leased Assets or Lease, the following shall be treated as Expenses only to
the extent not actually paid or reimbursed by a lessee or third party):
(a) All reasonable out-of-pocket expenses (including attorneys'
fees and disbursements) incurred in connection with the Remarketing of the
Leases or Leased Assets to the extent such expenses are reasonably incurred by
the Borrower or its Subsidiaries pursuant to this Agreement, including amounts
reasonably expended to repair or recondition a Leased Asset prior to its
Remarketing;
(b) All reasonable out-of-pocket expenses (including attorneys'
fees and disbursements) incurred in the course of enforcement of lessor rights
and remedies with respect to the return condition of the Leased Assets under any
Lease;
(c) Sales taxes relating to the disposition of the Leased Assets;
(d) Reasonable fees and expenses of specialized brokers and
consultants whose assistance is required in connection with the Remarketing of
Leased Assets;
(e) All reasonable fees and expenses (including auditing,
accounting, legal, brokerage, appraisal and inspection fees and disbursements)
incurred in connection with: (i) the repossession of any Leased Assets, (ii) the
storage of any Leased Assets, (iii) claims for insurance or otherwise in respect
of any damaged, lost or destroyed Leased Assets, (iv) the enforcement of the
Borrower's rights under a Lease, and (v) the prosecution or defense of any
litigation with respect to the Leased Assets or arising in respect of the Loan
Documents or the Merger Agreement;
<PAGE>
7
(f) All taxes on or in respect of the Leased Assets (except
income taxes of Holdings or its Affiliates);
(g) Insurance premiums relating to the Leased Assets or otherwise
required pursuant to this Agreement or any Loan Document;
(h) Corporate, Uniform Commercial Code and other filing and
administrative fees incurred with respect to the Leased Assets or under the
Loan;
(i) Costs of reports and data collection requested by the
Borrower;
(j) Any liabilities to third parties with respect to the Leased
Assets in respect of which the Borrower receives any payments pursuant to any
insurance policy or indemnification provision in favor of the Borrower;
(k) Reasonable administrative costs resulting from government
regulations promulgated after the date of this Agreement with respect to the
Leased Assets;
(l) Other expenses (including, without limitation, wages and
benefits of employees and consultants) incurred in the ordinary course of
business of (i) Statex (so long as it is a Subsidiary of the Borrower) in an
amount not to exceed $500,000 per month and (ii) the Borrower and its other
Subsidiaries in an amount not to exceed $150,000 per month; and
(m) Other special or unusual costs as shall be reasonably agreed
to by the Lender and the Borrower in light of the nature of the Borrower's
requirements relating to the Leased Assets.
"GAAP" and "generally accepted accounting principles" mean generally
---- ----------------------------------------
accepted accounting principles set forth in the opinions and pronouncements of
the Accounting Principles Board of the American Institute of Certified Public
Accountants and statements and pronouncements of the Financial Accounting
Standards Board, as amended.
"Governmental Authority" means any Federal, state, local or foreign
----------------------
court, governmental or regulatory body, agency or authority.
"Guarantee" by any Person means any obligation, contingent or
---------
otherwise, of such Person directly or indirectly guaranteeing, or in any manner
providing for the payment of, any Debt of any other Person and, without limiting
the generality of the foregoing, any obligation, direct or indirect, contingent
or otherwise,
<PAGE>
8
of such Person to purchase or pay (or advance or supply funds for the purchase
or payment of) such Debt (whether arising by virtue of partnership arrangements,
by agreement to keep-well, to purchase assets, goods, securities or services, or
to take-or-pay, or to maintain financial statement conditions or otherwise). The
term "Guarantee" used as a verb has a corresponding meaning.
"Holdings" means PS Group Holdings, Inc., a Delaware corporation.
--------
"Holdings Guaranty" means the Guaranty to be dated the Closing Date
-----------------
from Holdings to the Lender, as amended from time to time.
"Lease" means each of the leases under which any Leased Assets subject
-----
to such lease are leased to a lessee.
"Lease Documents" has the meaning set forth in the Merger Agreement.
---------------
"Lease Payments" means each of the following amounts, to the extent
--------------
payable to, and actually received by or for the account or at the direction of,
the Borrower or its successors or assigns (or the Lender on behalf of the
Borrower pursuant to any of the Loan Documents): (i) all rents and all other
amounts payable under any Lease Document, including all proceeds paid by the
Obligor or lessee thereunder pursuant to a purchase option, renewal option or
termination option, all late charges or penalties and indemnity payments, or any
Guarantee or other payments made with respect to any Leased Asset subject or
pursuant to any Lease Document, (ii) all insurance, requisition, casualty and
condemnation proceeds with respect to any Lease Document or any interest therein
or with respect to any Leased Asset, regardless of whether such proceeds
resulted from events occurring on, before or after the Closing Date, (iii) the
proceeds of any Remarketing of any item of Leased Assets or any Lease Document,
(iv) all warranty payments and any other similar payments in respect of the
Leased Assets, (v) all cash or other amounts paid to or deposited in the
Collateral Account pursuant to any Loan Document, (vi) all proceeds arising from
or related to any claim, action, lawsuit or proceeding with respect to the
Leased Assets or any Lease Document, (vii) all amounts paid or payable to the
Borrower in connection with the renegotiation of any Lease Document, including
amounts paid in consideration of the granting of an option to use or purchase
Leased Assets, (viii) any amounts arising under, and paid or payable to the
Borrower with respect to any Leased Assets or Lease (including any amount
payable under indemnity provisions), (ix) any distributions of cash, securities,
obligations or other property in respect of any claim (as such term is defined
in Section 101(5) of the Bankruptcy Code) that the Borrower or any of its
Affiliates may have in connection with any Lease Document in a case under the
Bankruptcy Code or any similar proceeding in which any Obligor under any Lease
Document is a debtor (including all rights to
<PAGE>
9
adequate protection, post-petition interest, and all rights and interests under
any intercreditor or subordination arrangements or agreements), (x) any other
cash or proceeds of, or for the account of, the Borrower and arising from or
relating to the Leased Assets or any Lease Document, and (xi) all proceeds of
the foregoing and interest or other amounts earned with respect to the
foregoing.
"Leased Assets" has the meaning set forth in the Merger Agreement.
-------------
"Lender" means GATX Capital Corporation, a Delaware corporation, and
------
its successors and assigns.
"Lien" means any mortgage, pledge, hypothecation, assignment, security
----
interest, lien, judgment, charge or encumbrance, priority or other security
agreement or arrangement or other claim or right of any kind or nature
whatsoever (including any agreement to give any of the foregoing), any
conditional sale or other title retention agreement, and the filing of, or
agreement to give or file, any financing statement under the Uniform Commercial
Code or comparable law of any jurisdiction. A Person shall be deemed to own
subject to a Lien any property or asset which it has acquired or holds subject
to (i) a call or other purchase or buy-out option of another Person or (ii) the
interest of a vendor or lessor under any conditional sale agreement, capital
lease or other title retention agreement relating to such property or asset.
"Loan" means the borrowing by the Borrower from the Lender pursuant to
----
this Agreement and the Note.
"Loan Amount" has the meaning set forth in Section 2.1.
-----------
"Loan Documents" means this Agreement, the Note, and the Collateral
--------------
Documents.
"Material Adverse Effect" means any change or effect that is or is
-----------------------
reasonably likely to be materially adverse to the business, operations,
properties, condi tion (financial or otherwise), assets or liabilities
(including, without limitation, contingent liabilities) of Holdings, the
Borrower and its Subsidiaries taken as a whole, in each case, excluding any
change or effect that is directly attributable to conditions generally affecting
the oil and gas industry, unless such conditions adversely affect Holdings, the
Borrower or its Subsidiaries in a materially disproportionate manner and, as to
the Borrower and its Subsidiaries or Holdings, also means a material adverse
effect on the ability of it to perform its obligations under, or on the
enforceability of, the Loan Documents to which it is a party, or a material
adverse effect on the value of any Leased Asset or the Collateral (as defined in
the Security Agreement).
<PAGE>
10
"Maturity Date" means the earlier of (i) the date which falls one year
-------------
after the Closing Date (or such later date as the Borrower and the Lender may
agree), or (ii) the date upon which the Loan has been paid in full in cash.
"Merger" means the merger by PS Acquisition with and into Holdings.
------
"Merger Agreement" means the Merger Agreement dated of even date
----------------
herewith among PS Acquisition, the Trust and Holdings, as amended from time to
time in accordance with this Agreement.
"Merger Consideration" has the meaning set forth in the Merger
--------------------
Agreement.
"Merger Documents" means the Merger Agreement and all documents,
----------------
certificates and instruments delivered in connection with the execution thereof
or the consummation of the transactions contemplated thereby.
"Merger Expenses" means the expenses arising from the Merger described
---------------
on Schedule 5.10 of the Company Disclosure Schedules.
"Mortgaged Property" shall mean (i) DC-9-81 Aircraft bearing U.S.
------------------
Registration No. N813US and manufacturer's serial number 48093 owned by PS Group
First Delaware Trust, (ii) DC-9-82 Aircraft bearing U.S. Registration No. N815US
and manufacturer's serial number 48095 owned by PS Group First Delaware Trust,
(iii) DC-9-82 Aircraft bearing U.S. Registration No. N824US and manufacturer's
serial number 49143 owned by PS Group First Delaware Trust and (iv) DC-9-82
Aircraft bearing U.S. Registration No. N830US and manufacturer's serial number
49443 owned by PS Group First Delaware Trust.
"Mortgages" means the mortgages to be granted by the Borrower (or, as
---------
applicable, a Trustee) to the Lender (or a trustee for the benefit of the
Lender) granting Liens on the Mortgaged Property to secure the Loan and the
related Assignment of Lease contained therein.
"Note" has the meaning assigned to such term in Section 2.2.
----
"Obligor" means any Person, including any Trustee, who is or may
-------
become obligated to the Borrower under or on account of any Lease.
"Owner Trust Agreement" means each of the agreements under which the
---------------------
Borrower or its Subsidiaries is a beneficial owner of any Leased Assets subject
to such agreement.
<PAGE>
11
"Paying Agent" has the meaning set forth in the Merger Agreement.
------------
"Permit" means all permits, licenses, orders or approvals of any
------
Governmental Authority.
"Person" means an individual, a corporation, a partnership, a limited
------
partnership, a limited liability company, an unincorporated organization, an
association, a joint-stock company, a joint venture, a trust, an estate, a
Governmental Authority or other entity of any kind.
"Personal Property" has the meaning set forth in the Merger Agreement.
-----------------
"Prime Rate" shall mean that fluctuating rate of interest announced
----------
publicly by the Bank, on the first business day immediately preceding the
Closing Date, as its prime rate.
"PS Acquisition" means PSG Acquisition, Inc., a Delaware corporation
--------------
and Subsidiary of the Trust.
"PS Trading" means PS Trading, Inc., a California corporation and
----------
Subsidiary of the Borrower.
"PST Environmental Reserve Account" means a segregated bank account
---------------------------------
held by PS Trading upon which PS Trading may draw from time to time to defray
its environmental expenses.
"Remarketing", with respect to any Leased Assets, means any, or any
-----------
effort to effect any, voluntary transfer or disposition by the Borrower or any
Subsidiary of such Leased Assets or any of its interest therein, whether
directly or indirectly through the sale or other transfer of any beneficial
interest in an owner trust, including the leasing or releasing of such Leased
Assets, the renewal of the Lease with respect to such Leased Assets, the sale or
exchange of such Leased Assets for cash or other assets or property or the
disposal of such Leased Assets as scrap. The term "Remarket" used as a verb has
a corresponding meaning.
"Requirements of Law" means, as to any Person, all requirements of any
-------------------
law, rule, regulation or governmental license 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 or to which such Person or any
of its properties is subject.
<PAGE>
12
"Security Agreement" means the Security Agreement to be dated the
------------------
Closing Date between the Borrower and the Lender, as amended from time to time.
"Statex" means Statex Petroleum, Inc., a California corporation and
------
Subsidiary of the Borrower.
"Stock Pledge and Security Agreements" means each of the Stock Pledge
------------------------------------
and Security Agreements to be dated the Closing Date made by Holdings and the
Trust in favor of the Lender, each as amended from time to time.
"Subsidiary" means, as to any Person, (i) any corporation of which at
----------
least a majority of the securities having ordinary voting power for the election
of directors (other than securities having such power only by reason of the
happening of a contingency) are at the time owned, directly or indirectly, by
such Person, by one or more Subsidiaries of such Person or by such Person and
one or more Subsidiaries of such Person, or (ii) any other Person (other than a
corporation) in which the Person in question, one or more Subsidiaries of such
Person or such Person and one or more Subsidiaries of such Person, at the time,
has at least a majority ownership and voting interest; provided, however, that,
-------- -------
through the Closing, the term "Subsidiary" shall not include any owner trust in
which the Borrower holds a beneficial interest and provided, further, that after
--------- -------
the Closing Date, the term "Subsidiary" shall include any owner trust in which
the Borrower holds a beneficial interest for purposes of Sections 5.3, 5.7(d),
5.7(g), 5.8, 5.10, 5.13, 5.14 and 7.1.
"Subsidiary Guaranty" means the Subsidiary Guaranty to be dated the
-------------------
Closing Date from PS Trading to the Lender, as amended from time to time.
"Subsidiary Security Agreement" means the Subsidiary Security
-----------------------------
Agreement to be dated the Closing Date from PS Trading to the Lender, as amended
from time to time.
"Tax" means, with respect to any Person, (i) any net income, gross
---
income, gross receipts, sales, use, ad valorem, franchise, profits, license,
withholding, payroll, employment, excise, severance, stamp, occupation, premium,
property or windfall profit tax, custom duty or other tax, fee, assessment or
charge of any kind whatsoever, together with any interest and any penalty,
addition to tax or additional amount, imposed by any taxing authority (domestic,
foreign or international) on such Person and (ii) any liability of such Person
for the payment of any amount of the type described in the immediately preceding
clause (i) as a result of such Person's being a member of an affiliated,
combined or unitary group.
"Trust" means Heritage Air Holdings Statutory Trust, a Connecticut
-----
statutory trust whose sole beneficiary is ICA Heritage Air Holdings, Inc., a
Delaware
<PAGE>
13
corporation that is directly or indirectly controlled by The D.H. Wolf
Trust and The Richard Buckingham Family Trust.
"Trust Guaranty" means the Guaranty to be dated the Closing Date from
--------------
the Trust to the Lender, as amended from time to time.
"Trustee" has the meaning set forth in the Merger Agreement.
-------
1.2 Other Definitional Provisions.
-----------------------------
(a) The words "hereof," "hereto," "herein" and "hereunder" and
words of similar import, when used in this Agreement or any other Loan Document,
shall refer to this Agreement or such other Loan Document, as the case may be,
as a whole and not to any particular provision hereof or thereof.
(b) Unless expressly otherwise specified, references to Sections,
Schedules or Exhibits contained in this Agreement refer to the Sections,
Schedules or Exhibits to this Agreement.
(c) As used in this Agreement and the other Loan Documents, the
words "including" and "include" mean including without limiting the generality
of any description preceding such term.
1.3 Accounting Terms and Determinations. Unless otherwise specified
-----------------------------------
herein, all accounting terms used herein shall be interpreted and all accounting
determinations hereunder shall be made in accordance with GAAP as in effect from
time to time.
ARTICLE 2
THE LOAN
2.1 The Loan. Subject to the terms and conditions hereof and
--------
relying upon the representations, warranties, covenants and agreements herein
set forth, the Lender agrees to lend to the Borrower, and the Borrower agrees to
borrow from the Lender, in a single drawdown on the Closing Date, the Loan in
the principal amount of Sixty-Three Million One Hundred Thirty-One Thousand
Sixty Dollars ($63,131,060) less, at the Borrower's election prior to the
----
Closing Date, all or a portion of the Merger Expenses (collectively, the "Loan
----
Amount").
- ------
2.2 The Note. The obligation of the Borrower to repay the
--------
aggregate unpaid principal amount of and interest on the Loan shall be evidenced
by a
<PAGE>
14
single promissory note of the Borrower, substantially in the form of Exhibit A
to this Agreement (the "Note"). The Note shall be dated the Closing
----
Date and shall be delivered by the Borrower to the Lender in duly executed form
on the Closing Date. The Lender may, and is hereby authorized by the Borrower
to, record on its computing or other accounting records appropriate notations
regarding the Loan evidenced by the Note; provided that the failure to make or
--------
an error in making any such notation shall not limit or otherwise affect the
obligations of the Borrower hereunder or under the Note.
2.3 Disbursement; Use of Proceeds. The Loan shall be disbursed by
-----------------------------
the Lender on the Closing Date and shall be used by the Borrower for the payment
of (i) one-half of the Commitment Fee to the Lender on the Closing Date, (ii) to
the extent elected by the Borrower, a dividend to Holdings to be used by
Holdings to pay the Merger Expenses in an amount not to exceed $4,250,000 and
(iii) a dividend to Holdings to be used by Holdings to pay, the Merger
Consideration under the Merger Agreement, which Merger Consideration shall not
exceed $72,820,000 in connection with which the Borrower hereby irrevocably
instructs the Lender to remit the proceeds described in this clause (iii) to the
Paying Agent.
2.4 Interest. Commencing on the Closing Date to but excluding the
--------
date the Loan shall be paid in full in cash, the Borrower shall pay interest, to
the extent permitted by law, on the unpaid principal amount of the Loan as
follows:
(a) At the Prime Rate plus 1.50% to and excluding the Maturity
Date, and
(b) At the Default Rate from and including the Maturity Date
until all outstanding principal amounts shall be paid in full.
All computations of interest shall be made on the basis of a 365-day year (from
and including the most recent date on which interest has been paid or, if no
interest has been paid, from and including the Closing Date, through the last
day in the period for which such interest is payable). All accrued interest
hereunder and under the Note shall be payable, if paid on or prior to the
Maturity Date, solely out of Available Cash, and no penalty shall be imposed
upon the Borrower in respect of any accrued interest that remains unpaid as a
result of insufficient Available Cash; provided that (i) accrued but unpaid
--------
interest shall compound on a monthly basis and (ii) any accrued interest
existing on or after the Maturity Date shall be paid by the Borrower on demand
regardless of whether there is sufficient Available Cash to enable the Borrower
to make such payment.
<PAGE>
15
2.5 Principal.
---------
(a) Mandatory Prepayments. Except as set forth in subsection (b)
---------------------
below, prior to the Maturity Date, payments of principal shall be made solely
out of Available Cash on each Business Day after the Closing Date on which the
Borrower has Available Cash, such payment to be made under and in accordance
with Section 2.7, until the unpaid principal amount of the Loan shall be paid in
full. On the Maturity Date, the unpaid principal amount of the Loan and all
accrued and unpaid interest thereon and all other amounts due the Lender
hereunder and under the Note shall be due and payable regardless of whether
there is sufficient Available Cash to enable the Borrower to make such payment.
(b) Optional Prepayments. The outstanding principal amount of
--------------------
the Loan may be prepaid by the Borrower, in whole or in part, upon at least two
(2) Business Days' prior written notice to the Lender, without premium or
penalty; provided that (a) the Borrower pays to the Lender at the same time
--------
all interest accrued on the principal amount of the Loan to but excluding the
date of such payment and all other sums, if any, then due and payable by the
Borrower to the Lender hereunder and under the other Loan Documents, and (b)
each partial prepayment pursuant to this Section 2.5(b) shall be in an amount
which is an integral multiple of $1,000,000. Each notice of prepayment shall
specify the prepayment date and the principal amount of the Loan to be prepaid,
shall be irrevocable and shall commit the Borrower to prepay the Loan (or
portion thereof) by the amount stated therein on the date stated therein.
2.6 Payments. All payments to be made in respect of principal of or
--------
interest on the Loan or Note shall be made as provided for in Section 2.7 of
this Agreement and no later than 1:00 p.m., San Francisco, California time, on
the day when due and shall be made to the Lender, or as the Lender may otherwise
direct, from the Collateral Account in lawful money of the United States of
America and in immediately available funds. If payment is received after such
time, then for all purposes of this Agreement, such payment shall be deemed
received on the next succeeding Business Day. Whenever any payment hereunder or
under the Note shall be due on a day other than a Business Day, such payment
shall be made on the next succeeding Business Day, and such extension of time
shall be included in the computation of payment of interest. The Borrower shall
make each payment (including principal of or interest on the Loan and any fees
or other amounts) hereunder, without set-off, counterclaim or defense.
2.7 Application of Payments. (a) So long as no Event of Default
-----------------------
shall have occurred and be continuing, the Borrower shall on each Business Day
apply all Available Cash as follows: (i) first, to the payment of any out-of-
-----
pocket expenses (including reasonable attorneys' fees, disbursement and
expenses) incurred
<PAGE>
16
by the Lender in connection with the transactions contemplated by the Loan
Documents, (ii) second, to establish and maintain a $615,000 reserve for the
------
payment of Expenses, and to pay Expenses, including those advanced by the
Lender, (iii) third, to pay dividends in amounts to be approved by the Lender,
-----
(iv) fourth, to the payment of accrued and unpaid interest under the Loan
------
Agreement and the Note, (v) fifth, to the payment of any outstanding principal
-----
under the Loan Agreement and the Note, and (vi) thereafter, to any other amounts
due to Lender hereunder or under any Loan Document or Collateral Document.
(b) After the occurrence and continuation of an Event of Default,
the Lender shall on each Business Day apply all Available Cash as follows: (i)
first, to the payment of any out-of-pocket expenses (including reasonable
- -----
attorneys' fees, disbursement and expenses) incurred by the Lender in connection
with the transactions contemplated by the Loan Documents, (ii) second, to the
------
payment of accrued and unpaid interest under the Loan Agreement and the Note,
(iii) third, to the payment of any outstanding principal under the Loan
-----
Agreement and the Note, and (iv) thereafter, to any other amounts due to Lender
hereunder or under any Loan Document or Collateral Document.
2.8 Commitment Fee. The Borrower shall pay a commitment fee (the
--------------
"Commitment Fee") to the Lender in the amount of two percent (2%) of the Loan
- ---------------
Amount, which shall be fully earned on the Closing Date. The Borrower shall pay
50% of the Commitment Fee to the Lender at the Closing and 50% of the Commitment
Fee to the Lender on the earlier of (i) the first anniversary of the Closing
Date and (ii) the Maturity Date.
ARTICLE 3
CLOSING CONDITIONS
3.1 Closing Conditions. The obligation of the Lender to make the
------------------
Loan is subject to the fulfillment or waiver on or prior to the Closing Date of
the following conditions. Upon the making of the Loan at the Closing, all the
actions set forth below shall unless waived by the Lender be deemed to have
occurred, and all the conditions set forth below fulfilled, simultaneously and
concurrently with each other.
(a) Commitment Fee. One-half of the Commitment Fee shall have
--------------
been paid to the Lender.
(b) Performance; No Default. The Borrower shall have performed
-----------------------
and complied with all agreements and conditions contained herein required
<PAGE>
17
to be performed or complied with by the Borrower prior to or on the Closing
Date, no Default or Event of Default shall have occurred and be continuing and
no event that, if such event had occurred after the Closing Date, would
constitute a Default or Event of Default shall have occurred and be continuing.
(c) Correctness of Representations. The representations and
------------------------------
warranties of the Borrower and its Subsidiaries contained in Article 4 hereof
and of the Borrower and its Subsidiaries, Holdings and the Trust contained in
the other Loan Documents shall be true and correct in all material respects on
and as of the Closing Date with the same effect as though such representations
and warranties had been made on and as of the Closing Date, except in each case
such representations and warranties as are made as of another date, which shall
be true and correct in all material respects as of such date.
(d) Loan Permitted by Applicable Laws. The making of the Loan
---------------------------------
and the consummation of the transactions contemplated hereby and by the other
Loan Documents shall not be prohibited or enjoined (temporarily, preliminarily
or permanently) by any Requirement of Law with respect to the Lender.
(e) Merger Documents. All conditions to the closing under the
----------------
Merger Agreement shall have been satisfied (and no material condition to the
obligation of Holdings and PS Acquisition shall have been waived) other than the
release to the Paying Agent, in its capacity as such, of the proceeds of the
Loan (which shall have been delivered to the Paying Agent pending notification
by the Lender of such release) and the filing of the Certificate of Merger with
the Secretary of State of the State of Delaware, and the Lender shall have
received the following documents, all certified by the Borrower to be complete
and correct: (i) an executed original counterpart of the Merger Agreement, (ii)
a set of all other Merger Documents and (iii) a set of the Lease Documents. No
term or condition of the Merger Agreement originally executed by the parties
thereto and heretofore delivered to the Lender shall have been amended,
modified, supplemented or waived, expressly or by implication, except with the
Lender's prior written consent.
(f) Loan and other Documents.
------------------------
(i) The Borrower (and the applicable owner trust, with
respect to the Mortgages) shall have duly executed and delivered the Note,
the Security Agreement, the Mortgages, the Collateral Account and Pledge
Agreement and the Borrower Stock Pledge Agreement, substantially in the
forms of Exhibits A, B, F, G and J, respectively.
(ii) Holdings shall have duly executed and delivered the
Holdings Guaranty, substantially in the form of Exhibit C hereto.
<PAGE>
18
(iii) The Trust shall have duly executed and delivered the
Trust Guaranty, substantially in the form of Exhibit D hereto.
(iv) Holdings and the Trust each shall have duly executed
and delivered a Stock Pledge and Security Agreement, each substantially in
the form of Exhibit E hereto.
(v) PS Trading shall have duly executed and delivered the
Subsidiary Security Agreement and the Subsidiary Guaranty, substantially in
the forms of Exhibits H and I, respectively.
(vi) Appropriate Uniform Commercial Code financing
statements and other filings, documents or instruments as may be requested
by the Lender and which shall be necessary or, in the reasonable opinion of
Lender, desirable to obtain, protect and perfect the security interests
created by the Collateral Documents, shall have been delivered to the
Lender for filing in all appropriate jurisdictions, including California
and Connecticut.
(g) Opinions. The Lender shall have received (i) an opinion of
--------
Heller, Ehrman, White & McAuliffe, counsel to Holdings and the Borrower,
substantially in the form of Schedule 3.1(g)(i) hereto, (ii) an opinion of
Shearman & Sterling, special counsel to Holdings and the Borrower, substantially
in the form of Schedule 3.1(g)(ii) hereto, (iii) an opinion of Bingham Dana LLP,
special counsel to the Trust, substantially in the form of Schedule 3.1(g)(iii)
hereto, (iv) an opinion of Richards, Layton & Finger, special counsel to the
owner trust that owns the Mortgaged Property, substantially in the form of
Schedule 3.1(g)(iv) hereto, (v) an opinion of Crowe & Dunlevy, special counsel
for Federal Aviation Administration matters, substantially in the form of
Schedule 3.1(g)(v)hereto and (vi) an opinion of Holland & Knight, special
counsel to the Borrower, substantially in the form of Schedule 3.1(g)(vi)
hereto, each dated the Closing Date and addressed to the Lender.
(h) Certificates. The Lender shall have received certificates
------------
dated the Closing Date, of an authorized officer (or Trustee, as applicable) of
each of the Borrower and its Subsidiaries, the Trust and Holdings (i) attaching
a true and complete copy of the resolutions of their respective Board of
Directors or other governing body and/or of all documents evidencing other
necessary trust, corporate or shareholder action (in form and substance
reasonably satisfactory to the Lender and to its counsel) taken by each to
authorize the Loan Documents to which it is a party, (ii) attaching a true and
complete copy of their respective certificates of incorporation and by-laws or
certificate of formation and trust agreement, as the case may be, each as
amended to date, and (iii) setting forth the incumbency of their respective
officers or authorized signatories.
<PAGE>
19
(i) Evidence of Equity Investment. The Lender shall have
-----------------------------
received satisfactory evidence that an equity investment in Holdings equal to
at least $14,564,000 shall have been made and shall have been delivered to the
Paying Agent to pay approximately 20% of the Merger Consideration.
(j) Insurance. The Lender shall have received a copy of, or a
---------
certificate as to coverage under, the insurance policies required by Section
5.5, which, to the extent the same are available, shall be endorsed or otherwise
amended to include a "standard" lender's loss payable endorsement and to name
the Lender as additional insured, in form and substance satisfactory to the
Lender.
(k) Consents. The Borrower shall have obtained all consents
--------
referred to in Item 1 of Schedule 2.17(h) of the Company Disclosure Schedules
and the Lender shall have received satisfactory evidence thereof.
(l) Other Matters. All proceedings to be taken in connection
-------------
with the transactions contemplated by the Loan Documents and the Merger
Documents, and all documents incident thereto, shall in form and substance be
reasonably satisfactory to the Lender, and the Lender shall have received
certified or other copies of all such other documents (including audited
consolidated financial statements of Holdings and unaudited financial statements
of the Trust) or opinions of counsel as it may reasonably request.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants to the Lender as of the Closing
Date, and after giving effect to the Merger as follows, in each case as
qualified by any applicable Schedule of the Company Disclosure Schedules:
4.1 Organization. Each of Holdings and the Borrower and its
------------
Subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of its respective jurisdiction of incorporation, and has
the corporate power and authority and all necessary governmental approvals to
own, lease and operate its properties and to carry on its business as it is now
being conducted and to execute and deliver the Loan Documents to which it is a
party and consummate the transactions contemplated thereby, except where the
failure to be so organized, existing or in good standing or to have such power,
authority and governmental approvals would not, individually or in the aggregate
have a Material Adverse Effect.
<PAGE>
20
4.2 Authorization. The execution and delivery by each of Holdings
-------------
and the Borrower and its Subsidiaries of the Loan Documents to which it is a
party, and the performance by it of its obligations thereunder (i) have been
duly and validly authorized by all necessary corporate or equivalent action,
(ii) do not violate, conflict with, or constitute a default under, any provision
of its certificate of incorporation or by-laws or other constitutive documents,
or any provision or obligation under any Permit, arbitration award, judgment,
order or decree to which it is a party or by which it or any of its assets are
bound, (iii) do not require the consent, approval, authorization or permit of,
or filing with or notification of or to, any Governmental Authority, except
where the failure to obtain such consents, approvals, authorizations or permits,
or to make such filings or notifications would not prevent Holdings, the
Borrower or any of its Subsidiaries, as the case may be, from performing its
obligations under the Loan Documents and would not, individually or in the
aggregate, have a Material Adverse Effect and (iv) do not, or will not, when
executed and delivered (as the case may be), except in immaterial respects, (A)
violate, conflict with or constitute a default (or an event that with notice or
lapse of time or both would become a default) or give to others any right of
termination, amendment, acceleration or cancellation under the terms of any
agreement or instrument of any nature to which it is a party or by which any of
its assets are bound or (B) result in the creation or imposition of any Lien of
any nature whatsoever on any of its assets (including any Lease Document (or any
right or interest in respect thereof)) other than the Liens created by the
Collateral Documents or (C) violate, conflict with or constitute a default under
any Requirement of Law with respect to the Borrower and its Subsidiaries or
Holdings. Each of the Loan Documents has been duly executed and delivered by
Holdings and the Borrower and its Subsidiaries, as the case may be, and
constitutes its respective legal, valid and binding obligation, enforceable
against it in accordance with its terms, subject to the qualification that
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium or similar laws affecting the
enforcement of creditors' rights generally and general principles of equity
(regardless of whether considered in a proceeding at law or in equity).
4.3 Chief Executive Office; Location of Assets. The chief
------------------------------------------
executive office of the Borrower and its Subsidiaries is located at 4370 La
Jolla Village Drive, Suite 1050, San Diego, California 92122. Schedule 4.3
lists the locations of all of the Borrower's and its Subsidiaries' material
assets and properties (other than the Leased Assets).
4.4 Solvency. After giving effect to the transactions contemplated
--------
hereby, each of Holdings and the Borrower and its Subsidiaries is able to pay
its Debts as they mature, and owns its assets and properties whose fair market
value is greater than the amount required to pay its Debts. Each has capital
sufficient to carry
<PAGE>
21
on its business and transactions and all business and transactions in which it
is about to engage.
4.5 Litigation. Except as disclosed in the SEC Reports (as defined
----------
and qualified in the Merger Agreement) filed prior to the date of this
Agreement, there is no claim, action, proceeding, litigation, arbitration or
investigation (whether or not on appeal) pending or, to the knowledge of the
Borrower, overtly threatened against Holdings or the Borrower and its
Subsidiaries or their respective assets or properties before any court,
arbitrator or administrative, governmental or regulatory authority or body,
domestic or foreign, which, individually or in the aggregate, is reasonably
likely to have a Material Adverse Effect, or prevent the making of the Loan or
the execution, delivery or performance by the Borrower of any Loan Documents to
which it is a party.
4.6 No Default. No Default or Event of Default hereunder has
----------
occurred and is continuing and no condition or event which, had it occurred or
failed to occur after the Closing Date, would have constituted a Default or an
Event of Default.
4.7 Incorporation of Certain Representations and Warranties.
-------------------------------------------------------
(a) The Borrower hereby makes to the Lender each of the
representations and warranties of Holdings set forth in Article II of the Merger
Agreement in each case, as qualified by the Company Disclosure Schedules (the
"Designated Representations"), and such Designated Representations, as so
- ----------- ---------------
qualified, are hereby incorporated by reference herein as if set forth herein
verbatim. The Designated Representations shall have the same force and effect
as all other representations and warranties of the Borrower made herein. For
purposes of the foregoing representation, all defined terms in the Designated
Representations shall have the meaning as set forth in the Merger Agreement.
(b) The Borrower agrees that the Designated Representations shall
be construed in a consistent manner with all other representations and
warranties contained in this Agreement, but to the extent that such other
representations herein may provide the Lender greater protection, such other
representations shall govern.
4.8 Federal Reserve Regulations. The Borrower and its Subsidiaries
---------------------------
are not engaged in the business of extending credit for the purpose of
purchasing or carrying margin stock (as defined, from time to time, in
Regulation U promulgated by the Board of Governors of the Federal Reserve
System). No part of the proceeds of the Loan will be used, directly or
indirectly, for any purpose which violates any Requirements of Law.
<PAGE>
22
4.9 Subsidiary Assets. PSG Systems, Inc. and PSG Services, Inc. are
-----------------
inactive Subsidiaries of the Borrower with no assets or properties (other than
intercompany receivables) with an aggregate fair market value in excess of
$50,000.
ARTICLE 5
AFFIRMATIVE COVENANTS
All covenants contained in this Agreement shall be given independent
effect so that if a particular action or condition is not permitted by any of
such covenants, the fact that such action or condition would be permitted by an
exception to, or otherwise be 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 condition exists. Other than Sections 5.5(b), 5.6 and 5.7, the
provisions of this Article 5 shall not become effective until the Closing Date,
and a breach of the provisions of Section 5.5(b), 5.6 or 5.7 prior to the
Closing Date shall be a failure of a closing condition hereunder and not a
Default or an Event of Default. All of the provisions of this Article 5 shall
terminate at such time as the unpaid principal amount of and accrued interest on
the Note and all other amounts payable to the Lender under this Agreement and
all other Loan Documents shall have been paid in full.
5.1 Performance and Enforcement. The Borrower shall be responsible
---------------------------
for, and shall fully and completely perform and discharge, and shall cause its
Subsidiaries to perform and discharge, any and each obligation the Borrower and
its Subsidiaries now has or the Borrower and its Subsidiaries hereafter may have
under or with respect to any Loan Document or Lease Document punctually as and
when due, in accordance with the terms thereof.
5.2 Maintenance of Existence. The Borrower shall preserve and
------------------------
maintain, and cause its Subsidiaries to cause and maintain, its corporate
existence and good standing in the jurisdiction of its incorporation, and
qualify and remain qualified as a foreign corporation in each jurisdiction in
which such qualification is required, except where failure so to qualify would
not have a Material Adverse Effect.
5.3 Maintenance of Personal Property and Leased Assets. The Borrower
--------------------------------------------------
covenants and agrees that it will maintain, keep and preserve, and will cause
its Subsidiaries to maintain, keep and preserve, or cause to be maintained, kept
and preserved, all of its Personal Property and Leased Assets, necessary or
useful in the proper conduct of its business in good working order and
condition, ordinary wear and tear excepted; provided that, so long as any Leased
--------
Asset is subject to a Lease, subject to the Borrower's obligations under this
Section 5.3, the Borrower and its Subsidiaries shall not be required to
maintain, keep and preserve any Leased Asset in
<PAGE>
23
a condition better than the condition in which a lessee under any Lease returns
such Leased Asset to the Borrower.
5.4 Maintenance of Records. The Borrower covenants and agrees that
----------------------
it will keep adequate records and books of account, in which complete entries
will be made in accordance with GAAP, reflecting all dealings and transactions
in relation to the property, business and affairs of the Borrower and its
Subsidiaries.
5.5 Maintenance of Insurance.
------------------------
(a) The Borrower covenants and agrees that it will, at its own
expense, maintain or cause to be maintained insurance with financially sound and
reputable insurance companies or associations reasonably acceptable to the
Lender and naming the Lender as additional insured and loss payee (with all
proceeds thereunder being payable solely to the Collateral Account exclusive of
proceeds that are properly payable to third parties or are used to repair or
replace property which is source of such proceeds) and requiring notice to, and
the consent of, the Lender prior to cancellation, and in such amounts and
covering such risks as are usually carried by companies engaged in the same or a
similar business and similarly situated and reasonably acceptable to the Lender,
which insurance may provide for deductibility reasonably satisfactory to the
Lender from coverage thereof; provided that in any event the Borrower shall at
--------
all times maintain property insurance hereunder in an aggregate amount
sufficient to cover all accrued interest on, and the outstanding principal
balance of, the Loan; provided, further, that the Borrower shall not be required
-------- -------
to maintain insurance pursuant to this Section 5.5 to the extent that such
insurance with respect to any Leased Asset is maintained by a lessee under any
Lease.
(b) The Borrower covenants further to secure and maintain total
loss only coverage in the amounts set forth on Schedule 5.5 on or before the
Closing Date, and thereafter in form and substance satisfactory to the Lender.
The Borrower agrees to use commercially reasonable efforts to cause the Lender
to be named as an additional insured and loss payee under all liability,
property and total loss only insurance policies with respect to the Leased
Assets.
5.6 Right of Inspection. The Borrower shall, upon receipt of prior
-------------------
reasonable notice, during business hours, permit the Lender (at its own
expense), or any duly authorized agent or representative thereof, to examine and
make copies and abstracts from the records and books of account of the Borrower
and its Subsidiaries, visit and physically inspect, during business hours, any
Personal Property or Leased Asset, to the extent that the Borrower or such
Subsidiary has such rights, under applicable Lease Documents or otherwise, and
to discuss the affairs, finances and accounts of the Borrower with any of its
officers and directors and the Borrower's
<PAGE>
24
independent accountants. The Borrower shall diligently exercise such rights to
obtain information as it may have pursuant to the Lease Documents.
5.7 Reporting Requirements. The Borrower shall furnish or cause to be
----------------------
furnished to the Lender:
(a) Annual Financial Statements: as soon as available and in any
---------------------------
event within 120 days after the end of each fiscal year of the Borrower and its
Subsidiaries, consolidated balance sheets of the Borrower and its Subsidiaries
as of the end of such fiscal year and the related statements of income,
stockholder's equity and cash flow of each of the Borrower and its Subsidiaries
for such fiscal year, all in reasonable detail and, commencing with the fiscal
year ending on December 31, 1999, stating in comparative form the respective
figures for the corresponding date and period in the prior fiscal year, prepared
in accordance with GAAP and accompanied by an unqualified opinion thereon by a
firm of independent certified public accountants of recognized national standing
selected by the Borrower;
(b) Quarterly Financial Statements: as soon as available and
------------------------------
in any event within 45 days after the end of each of the first three quarters of
each fiscal year of the Borrower, a consolidated balance sheet of the Borrower
and its Subsidiaries as of the end of such quarter and the related statements of
income, stockholder's equity and cash flow of the Borrower and its Subsidiaries
unaudited for the period commencing at the end of the previous fiscal year and
ending with the end of such quarter, all in reasonable detail, commencing with
the fiscal quarter ending on March 31, 2000, and all prepared in accordance with
GAAP, but without detailed footnotes, and certified (subject to year-end
adjustments) by the chief financial officer of the Borrower;
(c) Certificate of No Default: within 30 days after the end of
-------------------------
each quarter, a certificate of the chief financial officer of the Borrower and
its Subsidiaries certifying that, in making such examination or investigation as
in the opinion of such officer is necessary to enable such officer to express an
informed opinion with respect thereto, such officer has obtained no actual
knowledge of any condition or event which constitutes (or, before the Closing,
would have constituted had the Closing already occurred) a Default, an Event of
Default or a Defaulted Lease, or if such officer shall have obtained knowledge
of any such condition or event, specifying in such certificate each such
condition or event of which such officer has knowledge and the nature and status
thereof;
(d) Notice of Litigation: promptly after the commencement
--------------------
thereof, written notice of all actions, suits and proceedings before any
Governmental Authority brought by or against the Borrower or any of its
Subsidiaries that relate to
<PAGE>
25
any Merger Document, Personal Property, Leased Asset or Lease Document or that,
if adversely determined, could have a Material Adverse Effect;
(e) Notice of Defaults, Events of Default or Defaulted Leases: as
---------------------------------------------------------
soon as possible and in any event within ten days after obtaining actual
knowledge of the occurrence of any Default or Event of Default or the existence
of a Defaulted Lease, an officer's certificate of the Borrower setting forth the
details of such Default, Event of Default or Defaulted Lease and the action
which is proposed to be taken by the Borrower with respect thereto;
(f) Portfolio Status Reports: on or about the fifteenth day of
------------------------
each calendar quarter, the following information with respect to the Leases: (i)
an aging report, (ii) a remittance report (which may be in the form regularly
prepared by the Borrower or any other Person acting on its behalf for the
Borrower's internal use), (iii) a report describing (A) any notice received from
a lessee under any Lease as to any casualties or early termination or the
exercise of any option under a Lease, and (B) any default of any nature by any
Obligor of which the Borrower has had at least ten days' actual knowledge, and
(iv) any other report prepared by the Borrower or any other Person acting on its
behalf relating to any Lease or any Leased Asset; and
(g) General Information: such other information respecting the
-------------------
condition or operations, financial or otherwise, of the Borrower or its
Subsidiaries as the Lender may from time to time reasonably request.
5.8 UCC Financing Statements; Lien Searches; Other Filings.
------------------------------------------------------
(a) The Borrower and its Subsidiaries shall each execute and
deliver (or cause to be executed and delivered) to the Lender, upon the
reasonable request of the Lender, and cause to be filed, appropriate Uniform
Commercial Code financing statements and other filings, documents and
instruments as may be necessary or, in the reasonable opinion of the Lender,
desirable to obtain, protect and perfect the security interests created by the
Collateral Documents, including the UCC-1 financing statements set forth on
Schedule 5.8.
(b) Upon request by the Lender, the Borrower shall order UCC lien
searches with respect to the Borrower and its Subsidiaries in all jurisdictions
in which Personal Property or Leased Assets may be located. The results of such
searches shall be sent to the Lender. The Lender, from time to time, may cause
Lien searches to be conducted. In the event that any Lien search (whether
ordered by the Borrower or the Lender) fails to evidence the due filing of any
statement required to be filed pursuant to Section 5.8(a) hereof, the Borrower
shall
<PAGE>
26
diligently investigate and take action to correct such situation within ten days
thereafter.
(c) In the event that any Lien search made pursuant to Section
5.8(b) hereof (whether ordered by the Borrower or the Lender) evidences any
filing securing or purporting to secure or encumber the Borrower's interest in
any Personal Property, Lease or any Leased Asset subject thereto (other than
such filings as are made pursuant to Section 5.8(a) hereof or pursuant to any of
the Lease Documents), the Borrower shall diligently seek to have such Lien
discharged and filing terminated.
5.9 Payments of Amounts Received. The Borrower shall hold any and
----------------------------
all Lease Payments received in trust for the Lender and shall (i) deliver to the
Lender any non-cash Lease Payment as promptly as practicable in the form in
which such non-cash Lease Payment is received and (ii) remit all cash Lease
Payments promptly to the Collateral Account.
5.1 Conduct of Business; Defaulted Leases.
-------------------------------------
(a) The Borrower covenants and agrees that it will, and will
cause its Subsidiaries to, (a) enforce all of its rights and remedies under each
Lease and use its reasonable efforts to cause each of the other parties thereto
to perform its obligations thereunder (in each case consistent with prevailing
industry practice), and (b) during the continuance of any Event of Default (and
without limiting the Lender's rights under any other Loan Document), comply in
all material respects with all directions of the Lender to the Borrower to
enforce all of the Borrower's and its Subsidiaries' rights and remedies under
each of the Lease Documents against the other parties thereto, to perform its
obligations thereunder and to cause each of the other parties thereto to perform
its obligations thereunder, in each case, to the extent that the Lender shall,
in its reasonable judgment, deem necessary to enforce or preserve its rights
under such documents (other than directions that would be contrary to law).
(b) If the Lender shall reasonably determine that it is neces
sary or advisable for the Borrower to incur an out-of-pocket expense to enforce
any of the Borrower's rights and remedies under any Lease Documents, to perform
its obliga tions thereunder, to cause any of the other parties thereto to
perform its obligations thereunder or otherwise to protect the Borrower's and
its Subsidiaries' interests therein or in any Personal Property or Leased Assets
related thereto (including any payment to cure a default by the lessee of a
Defaulted Lease with respect to such lessee's financing arrangements or any
payment to maintain or acquire insurance coverage with respect to Leased
Assets), the Lender may request the Borrower to incur, or reimburse the Lender
for, such expense. If the Borrower does not promptly comply with the Lender's
request, then, the Lender may elect to incur
<PAGE>
27
such expense on behalf of the Borrower, in which case the amount expended by the
Lender shall be added to and treated and reimbursed to the Lender as an Expense.
5.11 Collateral Account; Direction to Obligors.
-----------------------------------------
(a) On or immediately after the Closing Date, the Lender shall
open or cause to be opened the Collateral Account and the Borrower shall (i)
make arrangements for the transfer of all monies received in any of its deposit
accounts to the Collateral Account on a daily basis and (ii) give irrevocable
notice to each owner (including any Trustee) of any Leased Assets instructing
that all future proceeds or payments relating to the Leased Assets payable to
the Borrower or its Subsidiaries (or any Trustee) shall be paid directly to the
Collateral Account.
(b) Upon the opening of the Collateral Account, the Borrower
shall deliver an opinion of counsel in form and substance reasonably
satisfactory to the Lender, with respect to the creation and perfection of a
valid security interest in favor of the Lender with respect to the right, title
and interest of the Borrower in such Collateral Account, and, after the
occurrence and continuation of an Event of Default, shall direct each Obligor
designated by the Lender to make all Lease Payments due from it to the Borrower
under any Lease Document directly to the Collateral Account.
5.12 Use of Proceeds. The proceeds of the Loan shall be used by the
---------------
Borrower as specified in Section 2.3.
5.13 Obligations and Taxes. The Borrower shall, and shall cause each
---------------------
of its Subsidiaries to, pay its material Debt and other material obligations
promptly and in accordance with their terms and pay and discharge promptly when
due all material Taxes, assessments and governmental charges or levies imposed
upon it or upon its income or profits or in respect of its property, before the
same shall become delinquent or in default, as well as all lawful claims for
labor, materials and supplies or otherwise that, if unpaid, might give rise to a
Lien upon such properties or any part thereof; provided, however, that such
-------- -------
payment and discharge shall not be required with respect to any such Tax,
assessment, charge, levy or claim so long as the validity or amount thereof
shall be contested in good faith by appropriate proceedings and adequate
reserves shall have been set aside on its books with respect thereto in
accordance with GAAP and such contest operates to suspend collection of the
contested obligation, tax, assessment or charge and enforcement of a Lien.
5.14 Compliance With Laws. The Borrower shall comply, and shall cause
--------------------
each of its Subsidiaries to comply, in all material respects, with all
Requirements of Law and all other applicable laws, rules, regulations and
orders,
<PAGE>
28
including, without limitation, compliance with all applicable Environmental Laws
(as defined in the Merger Agreement).
5.15 Further Assurances. The Borrower shall, at the Lender's request,
------------------
do, execute, acknowledge, deliver, file and record all further acts,
supplements, mortgages, security agreements, conveyances, assignments,
transfers, documents and other assurances necessary or advisable in the
reasonable judgment of the Lender to further effectuate the purposes and carry
out the terms and intent of any of the Loan Documents or the Merger Documents or
to enable the Lender to exercise and enforce any of its rights or remedies under
any of the Loan Documents.
ARTICLE 6
NEGATIVE COVENANTS
All covenants contained in this Agreement shall be given independent
effect so that if a particular action or condition is not permitted by any of
such covenants, the fact that such action or condition would be permitted by an
exception to, or otherwise be 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 condition exists. Other than Section 6.5, 6.9 or 6.11, the provisions
of this Article 6 shall not become effective until the Closing Date and a breach
of the provisions of Section 6.5, 6.9 or 6.11 prior to the Closing Date shall be
a failure of a closing condition hereunder and not a Default or an Event of
Default. All of the provisions of this Article 6 shall terminate at such time
as the unpaid principal amount of and accrued interest on the Note and all other
amounts payable to the Lender under this Agreement and all other Loan Documents
shall have been indefeasibly paid in full.
6.1 Liens. The Borrower shall not create, incur, assume or suffer to
-----
exist, or allow or permit any of its Subsidiaries (or any Trustee with respect
to the Leased Assets or the beneficial interest in any owner trust) to create,
incur, assume or suffer to exist, any Lien after the date hereof upon, or with
respect to, any of its properties or assets now owned or hereafter acquired,
except:
(a) Liens created by the Collateral Documents;
(b) As to any Leased Asset, Liens created by or expressly
permitted under the applicable Lease Documents (as in effect on the Closing
Date);
(c) Liens for Taxes incurred in the ordinary course of business
which are not yet due and payable or, if due and payable, are being
<PAGE>
29
contested in good faith by appropriate proceedings and for which appropriate
reserves have been established and are maintained;
(d) Statutory liens, such as mechanic's, materialmen's, maritime,
landlord's, warehousemen's and carrier's Liens, and other similar Liens,
securing obligations incurred in the ordinary course of business which are not
past due for more than 60 days, or which are being contested in good faith by
appropriate proceedings and for which appropriate reserves have been established
and are maintained;
(e) pledges or deposits to secure obligations incurred in the
ordinary course of business under workers' compensation laws, unemployment
insurance or other similar social security legislation (other than in respect of
employee benefit plans subject to ERISA) or to secure public or statutory
obligations;
(f) Liens securing the performance of, or payment in respect of,
bids, tenders, government contracts (other than for the repayment of borrowed
money), surety and appeal bonds and other obligations of a similar nature
incurred in the ordinary course of business;
(g) easements, rights of way, zoning restrictions and other
encumbrances and survey exceptions, title irregularities and other similar
restrictions on title to, or the use of, real property that do not, either
individually or in the aggregate, (i) materially detract from the value of such
real property or (ii) materially and adversely affect the use of such real
property for its intended purposes or the conduct of the business of the
Borrower and its Subsidiaries in the ordinary course;
(h) existing Liens on the Closing Date listed on Schedule 2.05(c)
of the Company Disclosure Schedules; and
(i) other Liens securing Debt outstanding in an aggregate
principal amount not to exceed $250,000; provided that no such Lien shall extend
--------
to or cover any Collateral (as defined in the Security Agreement) or Pledged
Assets.
6.2 Restriction on Debt. The Borrower and its Subsidiaries shall
-------------------
not issue, assume or otherwise incur or suffer to exist any Debt, except for
Debts under the Loan Documents and Lease Documents and Debts secured by Liens
permitted under Section 6.1 above.
6.3 Restriction on Business. The Borrower shall engage in no
-----------------------
business or activity other than owning and managing its interests in, and shall
not become bound by or subject to or obtain an interest in any property other
than, the Personal Property, the Leased Assets and the Lease Documents. The
Borrower shall
<PAGE>
30
not permit any of its Subsidiaries to make any material change in the nature of
its business as carried on at the date hereof.
6.4 Restricted Payments. Until all principal, interest, fees and
-------------------
other amounts due and payable under the Loan Documents have been paid in full,
except as set forth in Section 2.7, the Borrower and its Subsidiaries shall not
declare or pay any dividend or make any other distribution on or in respect of
the Borrower's capital stock or make any payment to any of the direct or
indirect holders (in their capacities as such) of capital stock of the Borrower
or purchase, redeem or otherwise retire for value any of the capital stock of
the Borrower.
6.5 Remarketing of Leased Assets; Contracts. Other than the
---------------------------------------
releasing (but not the sale or other disposition) of Leased Assets prior to the
Closing Date by IAMG (Europe) Limited ("IAMG") pursuant to that certain
Engagement Agreement, dated November 5, 1999, between IAMG and the Borrower in
effect on the date hereof, the Borrower and its Subsidiaries shall not Remarket
any Lease or Leased Assets, or enter into, amend or modify any material
Contract, without the prior written consent of the Lender.
6.6 Sale and Lease-Back Transactions. The Borrower and its
--------------------------------
Subsidiaries shall not enter into any arrangement, directly or indirectly, with
any Person whereby it shall sell or transfer any property, real or personal,
used or useful in its business, whether now owned or hereafter acquired, and
thereafter rent or lease such property or other property which it intends to use
for substantially the same purpose or purposes as the property being sold or
transferred.
6.7 Investments, Loans and Advances. The Borrower and its
-------------------------------
Subsidiaries shall not purchase, hold or acquire any equity interests, evidences
of indebtedness or other securities of, make or permit to exist any loans or
advances to, or make or permit to exist any investment or any other interest in,
any other Person, other than:
(a) existing investments by the Borrower in its Subsidiaries;
(b) loans and advances to employees in the ordinary course of the
business of the Borrower and its Subsidiaries as presently conducted in an
aggregate principal amount not to exceed $25,000 at any time outstanding;
(c) investments by the Borrower and its Subsidiaries in account
debtors received in connection with the bankruptcy or reorganization, or in
settlement of the delinquent obligations of financially troubled suppliers or
customers, in the ordinary course of business and in accordance with applicable
collection and credit policies established by the Borrower or such Subsidiary,
as the case may be;
<PAGE>
31
(d) investments by the Borrower and its Subsidiaries in Cash
Equivalents; and
(e) existing investments on the Closing Date listed on Schedule
2.01 of the Company Disclosure Schedules.
6.8 Business Combination. Except with respect to the Merger, the
--------------------
Borrower and its Subsidiaries shall not change its name, merge or consolidate
with any Person, acquire or establish any Subsidiary, or amend its certificate
of incorporation or by-laws. The Borrower and its Subsidiaries shall not change
the location of its chief executive office without giving 30 days prior written
notice to the Lender.
6.9 Sales, Etc., of Assets. The Borrower shall not sell, lease,
----------------------
transfer or otherwise dispose of, or permit any of its Subsidiaries to sell,
lease, transfer or otherwise dispose of, any assets, or grant any option or
other right to purchase, lease or otherwise acquire any assets, except:
(a) sales of assets (other than Leased Assets) in the ordinary
course of its business;
(b) sales or other dispositions for cash of equipment (other than
Leased Assets) in the ordinary course of business that is obsolete or no longer
useable by or useful to the Borrower or its Subsidiaries in its business;
(c) sales or exchanges of any equipment (other than Leased
Assets) so long as the purpose of such sale or exchange is to acquire
replacement items of equipment which are the functional equivalent of the items
of equipment so sold or exchange; provided that the consideration received
--------
shall not include promissory notes exceeding ten percent (10%) of the value of
the equipment so sold;
(d) dispositions for cash not otherwise covered in clauses (a),
(b) and (c) not exceeding $250,000 in any fiscal year;
(e) sales of Leased Assets pursuant to any option or other right
to purchase of any lessee under the Leases;
(f) dispositions of assets prior to the Closing Date on terms
acceptable to the Lender (including, without limitation, the reduction of the
Loan Amount);
(g) dispositions of assets or stock of Statex on the terms set
forth in paragraphs 1 through 3 of that certain letter of intent dated
<PAGE>
32
November 24, 1999 among the Borrower, Holdings, Dhar Carman and B. Andrew
Wilkinson; and
(h) dispositions of PS Trading's interests in certain storage
tanks and leases located at the Oakland airport on terms acceptable to the
Lender (including, without limitation, the reduction of the Loan Amount).
6.10 Employees and Affiliates. The Borrower shall not (a) have any
------------------------
paid employees or consultants earning in excess of $60,000 per annum except as
heretofore disclosed to the Lender nor a payroll that exceeds $5,000 per week,
(b) pay director's fees or other remuneration to or reimburse the expenses of
any of its directors or officers, or (c) pay to or reimburse any Affiliate of
the Borrower and its Subsidiaries for services rendered by such Affiliate to the
Borrower and its Subsidiaries; provided, however, that the foregoing
-------- -------
restrictions shall not apply to (i) transactions between Subsidiaries of the
Borrower, or among the Borrower and its Subsidiaries, in each case in the
ordinary course of business on arms-length terms, (ii) payment or reimbursement
of any amount attributable to corporate overhead (including, without limitation,
director and officer insurance and claims properly made by a director or officer
for reimbursement or indemnification) or (iii) transactions approved by the
Lender.
6.11 Amendments; New Agreements. Except as and to the extent
--------------------------
expressly permitted or contemplated by this Agreement or the Loan Documents or
required by any applicable Lease Document or any Requirement of Law, the
Borrower shall not (a) enter into or agree to any amendment, supplement or
modification of any of the Lease Documents or the Merger Documents, or waive or
agree to waive any term, provision or condition thereof or (b) enter into or
agree to any Contract affecting, directly or indirectly, the Borrower's or its
Subsidiaries' ownership interest in any Leased Asset or relating directly or
indirectly to Lease Payments; provided, however, that the Borrower may enter
-------- -------
into an amendment of the Lease Documents with respect to aircraft N305AW solely
to reflect a change in the owner trustee.
6.12 Capital Expenditures. The Borrower and its Subsidiaries shall
--------------------
not make any Capital Expenditures, except (a) Capital Expenditures of the
Borrower and its Subsidiaries (other than Statex) in an aggregate amount not to
exceed $500,000 in any fiscal year and (b) Capital Expenditures of Statex in the
amounts set forth on Exhibit 2.28-1 to Schedule 2.28 of the Company Disclosure
Schedules.
6.13 Direction of Trustees. The Borrower and its Subsidiaries shall
---------------------
not direct or permit any Trustee to take any action, or enter into any agreement
or Contract, which would violate any term or provision of this Agreement or any
Loan Document if such action had been taken, or such agreement or Contract had
been
<PAGE>
33
entered into, by the Borrower or any of its Subsidiaries; provided, that the
--------
trust shall not be required to take any action, or be prohibited from taking any
action, which would be inconsistent with its obligations or duties under any
applicable Lease Document.
ARTICLE 7
EVENTS OF DEFAULT
7.1 Events of Default. Each of the following events shall constitute
-----------------
an "Event of Default" hereunder:
(a) the Borrower shall fail to pay, or cause to be paid, when due
any principal of or interest on the Loan or any other amount payable under this
Agreement or any Loan Document, and such failure shall not have been remedied
within five days after notice that the same shall have become due; provided that
--------
no such notice shall be required in respect of any amounts that become due and
payable on the Maturity Date;
(b) the Borrower shall fail to perform or observe any covenant or
agreement in Section 5.2, 5.3, 5.5, 5.7(e), 5.9, 5.10, 5.11, 5.12 or 5.13 or
Article 6 and any such failure shall remain unremedied for five Business Days
after the Lender shall have given the Borrower written notice thereof;
(c) the Borrower or its Subsidiaries shall fail to perform or
observe any other covenant or agreement contained in any Loan Document or in the
Merger Documents, on its part to be performed or observed and any such failure
shall remain unremedied for ten Business Days after the Lender shall have given
the Borrower notice thereof; or an "Event of Default" shall occur and be
continuing under, and as respectively defined in, any Loan Document, or any Loan
Document shall fail to remain in full force and effect;
(d) any representation or warranty made or confirmed by the
Borrower and its Subsidiaries or Holdings at the Closing Date, on the date of
the Merger, or otherwise under, or in any notice given pursuant to any express
requirement of, any Loan Document shall prove to have been incorrect in any
material respect when made or confirmed;
(e) either Holdings, the Borrower or any Subsidiary shall (i)
fail to pay any principal or interest, regardless of amount, due in respect of
any one or more items of Debt in a principal amount in excess of $1,000,000 in
the aggregate, when and as the same shall become due and payable, or (ii) fail
to observe
<PAGE>
34
or perform any other term, covenant, condition or agreement contained in any
agreement or instrument evidencing or governing any such Debt if the effect of
any failure referred to in this clause (ii) is to cause, or to permit the holder
or holders of such Debt or a trustee on its or their behalf (with or without the
giving of notice, the lapse of time or both) to cause, such Debt to become due
prior to its stated maturity;
(f) either the Borrower or any of its Subsidiaries or Holdings
shall generally not pay its debts as such debts 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 any proceeding shall be instituted
by or against the Borrower or any such Subsidiary or Holdings 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 of debtors, or seeking the entry of an order for relief
or the appointment of a receiver, trustee, or other similar official for it or
for any substantial part of its property, and any such proceeding instituted
against the Borrower or any such Subsidiary or Holdings shall remain undismissed
and unstayed for a period of 60 consecutive days;
(g) any judgment or order (other than one with respect to a (x)
non-recourse Debt or (y) Lien permitted by Section 6.1(a) hereof) for the
payment of money in excess of $100,000 shall be rendered against the Borrower or
any of its Subsidiaries or Holdings and there shall be any period of 30
consecutive days during which neither (i) such judgment or order shall have been
discharged or bonded nor (ii) a stay of enforcement of such judgment or order,
by reason of a pending appeal or otherwise, shall be in effect;
(h) the Borrower shall fail to comply with any demand, as soon as
practicable but in no event later than ten days after such demand, by the Lender
pursuant to Section 5.15 hereof or the Collateral Documents to perform such acts
and execute, acknowledge and deliver, from time to time, such financing
statements and other instruments as may be required by the Lender to cause the
Collateral Documents to be fully effective as to all collateral thereunder or to
protect or better assure the security interest granted thereby or contemplated
thereunder; or
(i) (i) any Termination Event shall occur with respect to any
Benefit Plan of Holdings, the Borrower or any ERISA Affiliate of Holdings or the
Borrower, (ii) any Accumulated Funding Deficiency, whether or not waived, shall
exist with respect to any Benefit Plan of Holdings, the Borrower or any ERISA
Affiliate of Holdings or the Borrower, (iii) Holdings or the Borrower shall
incur any liability with respect to a Prohibited Transaction, (iv) Holdings, the
Borrower or any ERISA Affiliate of Holdings or the Borrower shall fail to pay
when due any amount owed to a Multiemployer Benefit Plan as a result of such
Person's complete or partial
<PAGE>
35
withdrawal (as described in ERISA Section 4203 or 4205) from such Multiemployer
Benefit Plan, (v) Holdings, the Borrower or any ERISA Affiliate of Holdings or
the Borrower shall fail to pay when due any amount (other than an amount
described in clause (iv) above or ERISA Section 4007) that is payable by it to
the PBGC or to a Benefit Plan of Holdings, the Borrower or any ERISA Affiliate
of Holdings or the Borrower under Title IV of ERISA, or (vi) a proceeding shall
be instituted by a fiduciary of any Multiemployer Benefit Plan against Holdings,
the Borrower or any ERISA Affiliate of Holdings or the Borrower to enforce ERISA
Section 515 and such proceeding shall not have been dismissed within 30 days
thereafter, except that no event or condition referred to in clauses (i) through
(iii), (v) and (vi) shall constitute an Event of Default if it, together with
all other such events or conditions at the time existing, has not caused, or in
the reasonable and good faith determination of the Lender will not cause,
Holdings, the Borrower and the ERISA Affiliates of Holdings and the Borrower,
taken as a whole to incur liabilities to any Benefit Plan, the PBGC or any other
Person (calculated after giving effect to the tax consequences thereof) in
excess of $100,000, and except that no event or condition referred to in clause
(iv) shall constitute an Event of Default if it, together with all other such
events or conditions at the time existing, has not caused, and in the reasonable
and good faith estimation of the Lender will not cause, Holdings, the Borrower
and the ERISA Affiliates of Holdings, and the Borrower taken as a whole to be
obligated to pay one or more Multiemployer Benefit Plans annual payments in
excess of $100,000. For purposes of this Section 7.1(i) the following defined
terms are used with the following meanings:
"Accumulated Funding Deficiency" has the meaning ascribed to that
------------------------------
term in Section 302 of ERISA.
"Benefit Plan" of any Person, means, at any time, any employee
------------
benefit plan subject to Title IV of ERISA or Code Section 412 (excluding a
Multiemployer Benefit Plan), the funding requirements of which (under
Section 302 of ERISA or Section 412 of the Code) are, or at any time within
five years immediately preceding the time in question were, in whole or in
part, the responsibility of such Person or an ERISA Affiliate of such
Person, and with respect to which such Person has or could reasonably be
expected to have liability under Title IV of ERISA or Section 412 of the
Code.
"ERISA Affiliate" means, with respect to any Person, any other
---------------
Person, including a Subsidiary or other Affiliate of such first Person,
that is a member of any group of organizations within the meaning of Code
Sections 414(b), (c), (m) or (o) of which such first Person is a member.
"Multiemployer Benefit Plan" means any multiemployer plan as
--------------------------
defined in Section 4001(a)(3) of ERISA.
<PAGE>
36
"PBGC" means the Pension Benefit Guaranty Corporation.
----
"Prohibited Transaction" means any transaction that is prohibited
----------------------
under Code Section 4975 or ERISA Section 406 and not exempt under Code
Section 4975, ERISA Section 408 or an administrative exemption of the
Department of Labor.
"Termination Event" means, with respect to any Benefit Plan, (i)
-----------------
any Reportable Event described in ERISA Section 4043 with respect to such
Benefit Plan for which the thirty-day notification requirement to the PBGC
has not been waived, (ii) the termination of such Benefit Plan, or the
filing of a notice of intent to terminate such Benefit Plan, or the
treatment of any amendment to such Benefit Plan as a termination under
ERISA Section 4041(e), (iii) the institution of proceedings to terminate
such Benefit Plan under ERISA Section 4042 or (iv) the appointment of a
trustee to administer such Benefit Plan under ERISA Section 4042; or
(j) any security interest purported to be created by any
Collateral Document shall cease to be, or shall be asserted by Holdings, the
Trust, the Borrower or any Subsidiary not to be, a valid, perfected, first
priority (except as otherwise expressly provided in this Agreement or such
Collateral Document) security interest in the securities, assets or properties
covered thereby; or
(k) there shall have occurred a Change of Control.
7.2 Acceleration of Maturity. If an Event of Default shall occur and
------------------------
be continuing, the Lender may declare the unpaid principal amount of and all
accrued interest on the Loan and the Note and all other amounts payable to it
under this Agreement or the Note to be forthwith due and payable, whereupon the
unpaid principal amount of and all accrued interest on the Loan and the Note and
all such other amounts shall become and be forthwith due and payable, without
presentment, demand, protest or further notice of any kind, all of which are
hereby expressly waived by the Borrower; provided that in the case of any of the
--------
Events of Default specified in Section 7.1(f) hereof, without any notice to
the Borrower or Holdings or any other act by the Lender, the unpaid principal
amount of and all accrued interest on the Loan and the Note and all other
amounts payable under this Agreement or the Note shall become immediately due
and payable, without presentment, demand, protest or further notice of any kind,
all of which are hereby expressly waived by the Borrower.
7.3 Suits for Enforcement. In case any one or more Events of Default
---------------------
shall occur and be continuing, the Lender may proceed to protect and enforce its
rights either by suit in equity or by action at law, or by enforcing its rights
under
<PAGE>
37
the Security Agreement, or by other appropriate proceedings, whether for the
specific performance of any covenant or agreement contained in this Agreement or
any other Loan Document or for an injunction against a violation of any of the
terms hereof or thereof, or to recover damages for the breach thereof, or in aid
of the exercise of any power granted herein or therein, or proceed to enforce
the payment of the Note or to enforce any other legal or equitable right of the
Lender.
7.4 Remedies Cumulative. No right, power or remedy herein or in the
-------------------
Note or any other Loan Document conferred upon the Lender is intended to be
exclusive of any other right, power or remedy and each and every such remedy
shall be cumulative and shall be in addition to every other right, power or
remedy given hereunder, or now or hereafter existing at law or in equity or by
statute or otherwise.
7.5 Remedies Not Waived. No course of dealing among the parties
-------------------
hereto or any delay or omission on the part of any party hereto in exercising
any rights hereunder or under the Note or any other Loan Document shall operate
as a waiver of any rights of any party hereto.
ARTICLE 8
MISCELLANEOUS
8.1 Amendments. No amendment or waiver of any provision of this
----------
Agreement or any other Loan Document, nor consent to any departure by any party
therefrom, shall in any event be effective unless the same shall be in writing
and signed by each of the parties thereto and such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given.
8.2 No Waiver. No failure on the part of any party to exercise, and
---------
no delay in exercising, any right under any Loan Document shall operate as a
waiver thereof; nor shall any single or partial exercise of any right under any
Loan Document preclude any other or further exercise thereof or the exercise of
any other right.
8.3 Mutilated, Destroyed, Lost or Stolen Note. If the Note shall
-----------------------------------------
become mutilated, destroyed, lost or stolen, the Borrower shall, upon the
written request of the Lender, issue and deliver in replacement therefor a new
Note, in the same original principal amount, dated the same date and designated
as issued in connection with this Agreement, as the Note so mutilated,
destroyed, lost or stolen.
8.4 Expenses; Indemnity; Damage Waiver. (a) From and after the
----------------------------------
Closing Date, the Borrower shall pay (i) all reasonable out-of-pocket expenses
<PAGE>
38
incurred by the Lender and its Affiliates, including the reasonable fees,
charges and disbursements of counsel for the Lender, in connection with the
preparation and administration of the Loan Documents or any amendments,
modifications or waivers of the provisions thereof (whether or not the
transactions contemplated hereby or thereby shall be consummated), and (ii) all
reasonable out-of-pocket expenses incurred by the Lender, in connection with the
enforcement or protection of its rights in connection with the Loan Documents,
including its rights under this Section 8.4, or in connection with the Loan made
hereunder, including all such reasonable out-of-pocket expenses incurred during
any workout, restructuring or negotiations in respect of such Loans.
(b) From and after the Closing Date, the Borrower shall indemnify
the Lender, and its Affiliates (each such Person being called an "Indemnitee")
----------
against, and hold each Indemnitee harmless from, any and all losses, claims,
damages, liabilities and related expenses, including the reasonable fees,
charges and disbursements of any counsel for any Indemnitee, incurred by or
asserted against any Indemnitee arising out of, in connection with, or as a
result of (i) the execution or delivery of any Loan Document or any agreement or
instrument contemplated thereby, the performance by the parties hereto of their
respective obligations hereunder or the consummation of the transactions
contemplated hereby, (ii) the Loan or the use of the proceeds therefrom, (iii)
any actual or alleged presence or release of hazardous materials on or from any
property owned or operated by the Borrower or its Subsidiaries, or any
environmental liability related in any way to the Borrower or its Subsidiaries,
or (iv) any actual or prospective claim, litigation, investigation or proceeding
relating to any of the foregoing, whether based on contract, tort or any other
theory and regardless of whether any Indemnitee is a party thereto; provided
--------
that such indemnity shall not, as to any Indemnitee, be available to the extent
that such losses, claims, damages, liabilities or related expenses are
determined by a court of competent jurisdiction by final and nonappealable
judgment to have resulted from the gross negligence or willful misconduct of
such Indemnitee.
(c) The Borrower acknowledges that the Lender does not have any
fiduciary relationship with or fiduciary duty to the Borrower or its
Subsidiaries arising out of or in connection with any Loan Document and the
relationship between the Lender, on the one hand, and the Borrower and its
Subsidiaries, on the other hand, in connection therewith is solely that of
debtor and creditor. To the extent permitted by applicable law, the Borrower
shall not assert, and the Borrower hereby waives, any claim against any
Indemnitee, on any theory of liability, for special, indirect, consequential or
punitive damages (as opposed to direct or actual damages) arising out of, in
connection with, or as a result of, this Agreement, any agreement or instrument
contemplated hereby, or the transactions contemplated hereby.
<PAGE>
39
(d) All amounts due under this Section 8.4 shall be payable
promptly after written demand therefor.
8.5 Survival. All covenants, agreements, representations and
--------
warranties contained in this Agreement, any other Loan Document, and any and
each other agreement or instrument delivered hereunder or thereunder pursuant to
an express requirement contained herein or therein shall survive the execution
and delivery of this Agreement, such Loan Document and each such other agreement
or instrument regardless of any investigation made by or on behalf of the Lender
or any indemnified Person, and, except as otherwise provided herein, shall
continue in effect until the unpaid principal of and accrued interest on the
Loan and all other amounts payable under this Agreement or any other Loan
Document shall have been paid in full.
8.6 Notices. All notices, requests, demands, consents and other
-------
communications to or upon the parties to this Agreement shall be in writing and
shall be delivered by hand or sent by facsimile transmission or other written
telecommunication or deposited in the mail by first-class registered or
certified mail, return-receipt requested, postage prepaid, addressed as follows:
Borrower: PS Group, Inc.
4370 La Jolla Drive
Suite 1050
San Diego, CA 92122
Attention: Chief Executive Officer
Telecopier: 619-642-1955
Holdings: PS Group Holdings, Inc.
4370 La Jolla Drive
Suite 1050
San Diego, CA 92122
Attention: Chief Financial Officer
Telecopier: 619-642-1955
Lender: GATX Capital Corporation
Four Embarcadero Center
Suite 2200
San Francisco, California 94111
Attention: Fred Vaske
Telecopier: 415-955-3449
<PAGE>
40
or to such other Person or address as may be hereafter designated in writing by
the respective parties hereto by notice similarly given. All notices shall be
effective upon receipt thereof.
8.7 Entire Agreement. This Agreement and the other Loan Documents
----------------
contain the entire agreement between the parties with respect to the subject
matter hereof and supersedes all prior agreements and understandings relating
thereto. The schedules and exhibits attached to this Agreement constitute a part
of this Agreement and are incorporated herein by reference as if set forth in
full in the main body of this Agreement.
8.8 Counterparts. This Agreement may be executed by the parties
------------
hereto in two or more counterparts, and by separate parties on separate
counterparts, each of which when so executed and delivered shall be an original,
but all of which together shall constitute one and the same instrument.
8.9 Severability. Any provision of this Agreement or any of the
------------
other Loan Documents which is prohibited or unenforceable in any jurisdiction
shall, as to such jurisdiction, be ineffective to the extent of such prohibition
or unenforceability without invalidating the remaining provisions hereof, and
any such prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other jurisdiction.
8.10 Captions. The table of contents and the captions in this
--------
Agreement are for convenience of reference only and shall not modify, define,
expand or limit any of the terms or provisions hereof.
8.11 Governing Law. This Agreement and the other Loan Documents and
-------------
the rights and obligations of the parties hereunder and thereunder shall in all
respects be governed by, and construed in accordance with, the laws of the State
of New York applicable to agreements made and to be performed entirely within
such state.
8.12 Jurisdiction
------------
(a) Each of the parties hereto hereby irrevocably submits to the
jurisdiction of any New York state court in New York County or any United States
federal court in the Southern District of New York over any action or proceeding
arising out of or relating to any of the Loan Documents, and each of the parties
hereto hereby irrevocably agrees that all claims in respect of such action or
proceeding may be heard and determined in such New York state or federal court.
The Borrower irrevocably appoints Integrated Capital Associates of New York,
Inc., which currently maintains an office in New York situated at 101 East 52nd
Street,
<PAGE>
41
New York, New York, 10022, as its agent to receive service of process or other
legal summons for purposes of any such action or proceeding. The Borrower
further irrevocably consents to the service of process in any such action or
proceeding by the mailing of copies thereof by registered or certified mail,
postage prepaid, return receipt requested, to it at its address as provided for
notices hereunder.
(b) Nothing in this Section 8.12 shall affect the right of the
parties hereto to serve legal process in any other manner permitted by law or
affect the right of the parties hereto to bring any action or proceeding in the
courts of any other jurisdiction.
8.13 Waiver of Jury Trial. The Borrower and the Lender each
--------------------
irrevocably waives all right to trial by jury in any action, proceeding or
counterclaim (whether based on contract, tort or otherwise) arising out of or
relating to any of the Loan Documents, the Loan or the actions of the Lender in
the negotiation, administration, performance or enforcement thereof.
8.14 Successors and Assigns. This Agreement shall be binding upon and
----------------------
shall inure to the benefit of the parties hereto and their respective successors
and permitted assigns. Neither this Agreement nor any other Loan Document may
be assigned by the Borrower, and any such attempted assignment by the Borrower
shall be void.
8.15 No Benefit. Nothing expressed or implied herein is intended or
----------
shall be construed to confer upon any person other than the parties hereto and
their successors and permitted assigns any right, remedy or claim under or by
reason of this Agreement.
[Signature Page Follows]
<PAGE>
42
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and their respective officers thereunto duly authorized as of
the day and year first above written.
GATX CAPITAL CORPORATION
By: /s/ Thomas C. Nord
------------------------------------
Name: Thomas C. Nord
Title: Vice President
PS GROUP, INC.
By: /s/ Charles E. Rickershauser Jr.
------------------------------------
Name: Charles E. Rickershauser Jr.
Title: Chief Executive Officer
[LOAN AGREEMENT]
<PAGE>
EXHIBIT A
PROMISSORY NOTE
[$63,131,060] __________, 2000
FOR VALUE RECEIVED, the undersigned, PS GROUP, INC., a __________
corporation (the "Borrower"), HEREBY PROMISES to pay to GATX CAPITAL
CORPORATION, a Delaware corporation (the "Lender"), the principal sum of [SIXTY-
THREE MILLION ONE HUNDRED THIRTY-ONE THOUSAND SIXTY DOLLARS ($63,131,060)] on
the dates set forth in, and subject to the terms and conditions of, the Loan
Agreement (as defined below). Unless otherwise indicated herein, all
capitalized terms used herein shall have the meanings set forth in the Loan
Agreement.
The Borrower hereby promises to pay interest to the Lender on the
unpaid principal amount of the Loan from and including the date hereof through
but excluding the date on which such principal amount is paid in full, at such
interest rates as are specified in the Loan Agreement, on each Business Day
subject to the terms and conditions of the Loan Agreement, and on the Maturity
Date.
This Note is the Note referred to in, and is entitled to the benefits
of, the Loan Agreement dated as of December 18, 1999 (as amended, modified or
supplemented from time to time, the "Loan Agreement"), between the Borrower and
the Lender. The Loan Agreement contains provisions for acceleration of the
maturity hereof upon the happening of certain stated events and also for
prepayments on account of principal hereof prior to the Maturity Date upon the
terms and conditions therein specified.
This Note and the obligation of the Borrower to repay the unpaid
principal amount of the Loan and interest on the Loan and all other amounts due
the Lender under the Loan Agreement is secured by the Collateral Documents.
This Note is entitled to the benefits of the Loan Agreement and the Collateral
Documents.
The Lender is hereby irrevocably authorized to endorse on the schedule
attached hereto (or any continuation thereof) appropriate notations to evidence
the date and amount of each payment of principal made by the Borrower with
respect thereto; provided that the failure of the Lender to make any such
--------
endorsement shall not affect the obligations of the Borrower hereunder.
Presentment for payment, demand, notice of protest and all other
demands and notices, of any kind in connection with the execution, delivery and
performance of this Note are hereby waived.
This Note shall be governed by, and construed and interpreted in
accordance with, the laws of the State of New York.
<PAGE>
2
IN WITNESS WHEREOF, the Borrower has caused this Note to be duly
executed by one of its officers thereunto duly authorized on the date hereof.
PS GROUP, INC.
By:
------------------------------
Name:
Title:
[PROMISSORY NOTE]
<PAGE>
REPAYMENTS OF PRINCIPAL
<TABLE>
<CAPTION>
================================================================================
Amount of Unpaid Principal Notation
Date Principal Repaid Balance Made by
================================================================================
<S> <C> <C> <C>
_________, 2000 -0- $63,131,060
- --------------------------------------------------------------------------------
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- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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</TABLE>
<PAGE>
EXHIBIT B
- --------------------------------------------------------------------------------
SECURITY AGREEMENT
between
PS GROUP, INC.
and
GATX CAPITAL CORPORATION,
as Secured Party
Dated as of ________ __, 2000
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
<S> <C>
GRANTING CLAUSE................................................... 1
ARTICLE I
COLLATERAL ACCOUNT........................................... 4
ARTICLE II
POSSESSION, USE AND RELEASE OF PROPERTY...................... 5
2.2 Release; Termination of Lien........................... 5
2.3 Protection of Purchaser................................ 6
ARTICLE III
DEFAULTS..................................................... 6
3.1 Secured Party's Rights................................. 6
3.2 Waiver by Debtor....................................... 7
3.3 Effect of Sale......................................... 8
3.4 Application of Proceeds................................ 8
3.5 Discontinuance of Remedies............................. 8
3.6 Cumulative Remedies.................................... 8
ARTICLE IV
COVENANTS AND WARRANTIES OF THE DEBTOR...................... 9
4.2 Further Assurances.................................... 9
4.3 After-Acquired Property............................... 9
4.4 Recordation and Filing................................ 10
4.5 Power of Attorney in Respect of the Collateral........ 10
4.6 Certain Actions....................................... 10
4.7 Executive Offices; Location of Assets................. 11
4.8 Excluded Aircraft..................................... 11
ARTICLE V
MISCELLANEOUS............................................... 11
5.1 No Presentment........................................ 11
5.2 Secured Party's Right to Cure......................... 11
5.3 Security Interest Absolute............................ 12
5.4 Amendments............................................ 12
5.5 No Waiver............................................. 12
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
Page
<S> <C>
5.6 Notices............................................... 13
5.7 Counterparts.......................................... 13
5.8 Severability.......................................... 13
5.9 Captions.............................................. 13
5.10 Governing Law......................................... 13
5.11 Successors and Assigns................................ 13
</TABLE>
ii
<PAGE>
SECURITY AGREEMENT dated as of _________, 2000 from PS GROUP, INC., a
Delaware corporation (the "Debtor"), to GATX CAPITAL CORPORATION, a Delaware
corporation (the "Lender" or the "Secured Party").
The Debtor and the Lender have entered into a Loan Agreement (the
"Loan Agreement"), dated as of December 18, 1999. The Debtor is granting
certain security interests to the Lender. Defined terms used and not defined
herein have the meanings set forth in the Loan Agreement.
The parties agree as follows:
GRANTING CLAUSE
---------------
The Debtor, in consideration of the premises and of the sum of Ten
Dollars received by the Debtor from the Secured Party and other good and
valuable consideration, receipt whereof is hereby acknowledged, and in order to
secure the payment of all sums now or hereafter owing (including any future
advances) to the Lender by Debtor under and pursuant to the Loan Documents to
which the Lender is a party or a beneficiary, including the Note (together, the
"Lender Documents"), and the performance and observance of all of the Debtor's
covenants and conditions contained in the Lender Documents (collectively, the
"Indebtedness"), does, subject to the last paragraph of this GRANTING CLAUSE,
hereby convey, mortgage, assign, pledge and grant to the Secured Party, its
successors and assigns, a first priority security interest in, all and singular,
of the Debtor's right, title and interest in and to all of its equipment,
inventory, accounts, (except the Borrower Environmental Reserve Account, which
is expressly excluded from the Collateral (as hereinafter defined) hereunder)
accounts receivable, contract rights, chattel paper, instruments, investment
property, drafts and other assets of any kind, and general intangibles,
including, without limitation, the following described properties, rights,
interests and privileges (all of which properties hereby conveyed, mortgaged,
assigned, pledged and granted or intended to be so conveyed, mortgaged,
assigned, pledged and granted are hereinafter collectively referred to as the
"Collateral," provided that "Collateral" shall not include any properties
--------
released pursuant to Section 2.2 hereof):
(1) Trust Collateral. All right, title, interest, claims and demands
----------------
of the Debtor in, to and under each of the Owner Trust Agreements together with
income, profits and avails thereof and together with all rights, powers,
privileges, options and other benefits of the Debtor thereunder.
(2) Lease Collateral. All right, title, interest, claims and demands
----------------
of the Debtor in the Leased Assets, to and under each Lease, all other Lease
Documents relating thereto (including all tax indemnification agreements),
together with Lease Payments in respect of the Leases and all rights, powers,
privileges, options and other benefits of the Debtor as lessor under the Leases,
including:
<PAGE>
2
(a) the right to Lease Payments;
(b) the right to make all waivers and agreements and to enter
into any amendments relating to the Leases or any provision thereof; and
(c) the right to take any action permitted under any Lease or by
law upon the occurrence of a default or an event of default under the Leases or
an event which, with the lapse of time or the giving of notice, or both, would
constitute a default or an event of default under such Lease, including the
commencement, prosecution and settlement of legal, administrative or other
proceedings, and to do any and all other things whatsoever which the Debtor or
any lessor is or may be entitled to do under any Lease.
(3) Equipment Collateral. All right, title, interest, claims and
--------------------
demands of the Debtor in and to each and every item of aircraft, equipment,
vehicles, rolling stock, plants, fixtures or personal property which is subject
to a Lease (all of which shall remain subject to the lien of this Security
Agreement until specifically released pursuant to Section 2.2 hereof, whether or
not such Lease is terminated or cancelled and whether or not any such aircraft,
equipment, vehicles, rolling stock, plants, fixtures and personal property is
thereafter purported to be sold, destroyed, released, subleased, assigned,
conveyed, transferred to otherwise disposed of); together with all accessories,
equipment, parts and appurtenances appertaining or attached to any such
aircraft, equipment, vehicles, rolling stock, plants, fixtures or personal
property, whether now owned or hereafter acquired, except such thereof as remain
the property of the lessees under the Leases, and all substitutions, renewals or
replacements of and additions, improvements, accessions and accumulations to any
and all of such aircraft, equipment, vehicles, rolling stock, plants, fixtures
or personal property (collectively, the "Equipment") except such thereof as
remain the property of the lessees, together with all Lease Payments in respect
of the Equipment.
(4) Miscellaneous Collateral. (a) All guaranties, security deposits,
------------------------
escrow deposits, letters of credit and additional collateral granted to Debtor
under any Lease and (b) all issues, distributions, income, profits and avails
therefrom and proceeds thereof, including any amounts payable under limited
recourse or guaranty agreements.
(5) Account Collateral. All right, title, interest, claims and
------------------
demands of the Debtor in and to all amounts in, and all investments of and
proceeds from, the Collateral Account and the Collateral Account Proceeds (as
defined in the Collateral Account and Pledge Agreement).
(6) Proceeds. All proceeds of any and all of the foregoing (including
--------
proceeds which constitute property of the types described in clauses (1) through
(5) above) and, to the extent not otherwise included, all payments under
insurance (whether or not the Secured Party is the loss payee thereof), or any
<PAGE>
3
indemnity, warranty or guaranty, payable by reason of loss or damage to or
otherwise with respect to any of the foregoing items.
Anything herein contained to the contrary notwithstanding:
(a) The foregoing security interest granted pursuant to this
GRANTING CLAUSE shall not be effective for any item of Collateral to the extent
that such grant would (i) violate any clause in any Contract or Requirement of
Law prohibiting such grant of a security interest, (ii) be based on any Contract
or Requirement of Law or otherwise require the consent of any Person which has
not been granted, (iii) relate to any Excluded Aircraft or (iv) relate to any
Other Excluded Collateral ; provided, however, that if the Lease Documents
-------- -------
relating to such Excluded Aircraft or the documents relating to such Other
Excluded Collateral no longer prohibit the Lender from obtaining a security
interest in such Excluded Aircraft or Other Excluded Collateral, the Collateral
shall include such Excluded Aircraft or Other Excluded Collateral. For purposes
of this GRANTING CLAUSE, "Excluded Aircraft" shall mean and include all right,
title, interest, claims and demands of the Debtor in, to and under (i) that
certain Trust Agreement dated as of October 4, 1988 between Borrower, as trustor
and beneficiary, and Meridian Trust Company, as owner trustee, as amended,
supplemented and assigned to date, and the assets constituting the trust estate
thereunder, including, without limitation, (A) the Boeing 737-3G7 aircraft
bearing U.S. Registration No. N305AW and the engines, parts, components, and
records relating thereto (collectively, "Aircraft N305AW"), and (B) any and all
leases of Aircraft N305AW and other contractual arrangements (including tax
indemnification agreements) pertaining to Debtor's right, title and interest in
Aircraft N305AW, (ii) that certain Trust Agreement 841 dated as of August 25,
1987 between Borrower, as trustor and beneficiary, and Wilmington Trust Company,
as owner trustee, as amended, supplemented and assigned to date, and the assets
constituting the trust estate thereunder, including, without limitation, (A) the
DC-9-82 aircraft bearing U.S. Registration No. N15841 and manufacturer's serial
number 49581 and the engines, parts, components and records relating thereto
(collectively, "Aircraft N15841"), and (B) any and all leases of Aircraft
N315841 and other contractual arrangements (including tax indemnification
agreements) pertaining to Debtor's right, title and interest in Aircraft N15841,
(iii) that certain Trust Agreement 353 dated as of November 19, 1987 between
Borrower, as trustor and beneficiary, and First Security Bank, National
Association (as successor to Meridian Trust Company), as owner trustee, as
amended, supplemented and assigned to date, and the assets constituting the
trust estate thereunder, including, without limitation, (A) the Boeing 737-3TO
aircraft bearing U.S. Registration No. N70353 and manufacturer's serial number
23591 and the engines, parts, components and records relating thereto
(collectively, "Aircraft N70353"), and (B) any and all leases of Aircraft N70353
and other contractual arrangements (including tax indemnification agreements)
pertaining to Debtor's right, title and interest in Aircraft N70353, and (iv)
that certain Trust Agreement dated as of April 1, 1986 between Debtor, as
successor in interest to North American Aircraft Finance Corporation, as trustor
and
<PAGE>
4
beneficiary, and State Street Bank and Trust Company, as successor in interest
to The Connecticut National Bank, as owner trustee, and the assets constituting
the trust estate thereunder, including, without limitation, (A) the DC-9-82
aircraft bearing U.S. Registration No. N829US and manufacturer's serial number
49429 and the engines, parts, components and records relating thereto ("Aircraft
N829US"), and (B) any and all leases of Aircraft N829US and other contractual
arrangements (including tax indemnification agreements) pertaining to Debtor's
right, title and interest in Aircraft N829US. For purposes of this GRANTING
CLAUSE, "Other Excluded Collateral" shall mean and include all right, title,
interest, claims and demands of the Debtor in, to and under (i) each of the
items shown on Company Disclosure Schedule 2.16(a)(2), (ii) the cash and
securities in an amount of $1,000,000, posted by the Debtor in favor of Bank of
America National Trust and Savings Association pursuant to that certain letter
agreement described more fully in Item 2 of Schedule 2.05(c) of the Company
Disclosure Schedule, and (iii) the cash and securities in an amount of $600,000,
constituting "Collateral" under that certain Pledge Agreement for the benefit of
TJX Companies, as successor to Zayre Corp. and Newton Buying Corp., described
more fully in Item 3 of Schedule 2.05(c) of the Company Disclosure Schedule.
(b) The Debtor shall remain liable under the Leases, the
Contracts to which it is a party and the Merger Agreement to perform all of its
obligations thereunder, all in accordance with and pursuant to the respective
terms and provisions thereof, and the Secured Party shall have no obligation or
liability under any Lease or any such Contract or Merger Agreement by reason of
or arising out of the foregoing grant, nor shall the Secured Party be required
or obligated in any manner to perform or fulfill any of the obligations of the
Debtor pursuant to such instruments, or to make any payment, or to make any
inquiry as to the nature or sufficiency of any payment received by the Secured
Party or the Debtor or to present or file any claim, or to take any action to
collect or enforce the payment of any amounts which may have been assigned to
the Secured Party or the Debtor or to which they or it may be entitled at any
time.
The parties hereto further agree:
ARTICLE I
COLLATERAL ACCOUNT
------------------
As security for the prompt and complete payment (whether at stated
maturity, by acceleration or otherwise) of the Indebtedness, the Debtor hereby
delivers, deposits, sets over, confirms, assigns and pledges to, and grants to
the Secured Party a continuing possessory lien and security interest in, the
Collateral Account and the Collateral Account Proceeds, subject to and in
accordance with the Collateral Account and Pledge Agreement.
<PAGE>
5
ARTICLE II
POSSESSION, USE AND RELEASE OF PROPERTY
---------------------------------------
2.1 Possession.
----------
(a) Unless an Event of Default shall have occurred and be
continuing, the Debtor shall be free to remain in full and exclusive possession,
enjoyment, use and control of the Collateral (except for the Collateral Account
and possession of the original executed copies of the Leases and Owner Trust
Agreements, (other than with respect to the Excluded Aircraft) all of which have
been delivered to the Secured Party at the Closing) and to manage, operate,
exercise its rights in and use the same and each part thereof with the rights
and franchises appertaining thereto; provided that the possession, enjoyment,
--------
control and use of the Collateral shall at all times be subject to the
observance and performance of the terms of the Loan Documents.
(b) The Debtor covenants and agrees that in the event any monies
or payments shall be paid to or distributed to the Debtor in respect of the
Collateral, the Debtor will receive and hold the same in trust for the Secured
Party, and will promptly upon receipt thereof deposit or cause to be deposited
such monies or payments in the Collateral Account in accordance with Section 2.3
hereof.
(c) Notwithstanding anything to the contrary set forth in this
Security Agreement or any of the other Loan Documents, so long as no "Event of
Default" (as defined in any applicable Lease) has occurred and is continuing,
the Secured Party hereby acknowledges and agrees that its rights hereunder and
thereunder shall be subject and subordinate to the rights of the lessee under
the applicable Lease with respect to each aircraft, including, without
limitation, lessee's right of quiet enjoyment thereunder, the lessee's right to
renew such Lease, and lessee's right to purchase the aircraft on the terms
specified in the applicable Lease. Without limiting the generality of the
foregoing, the Secured Party expressly agrees that, so long as no "Event of
Default" (as defined in the applicable Lease) shall have occurred and be
continuing under that Lease, Secured Party shall not disturb (or permit any
person acting by, through or under Secured Party to disturb) lessee's or any
sublessee's right peacefully and quietly to hold, possess and use that aircraft
pursuant to the applicable Lease.
2.2 Release; Termination of Lien.
----------------------------
(a) At any time on or after the occurrence of an event of loss
under or early termination with respect to a Lease, or sale, assignment,
transfer or other disposition of, Leased Assets subject to a Lease, approved in
writing by the Secured Party, the Secured Party shall, on the request and at the
expense of the
<PAGE>
6
Debtor, release from the lien of this Security Agreement all its
right, title and interest in and to such Leased Assets; provided that delivery
--------
of the release instruments shall be made against payment into the Collateral
Account of all proceeds of insurance covering such event of loss and all
payments from lessees or others on account of such early termination and all
proceeds of such sale, assignment, transfer or other disposition or such
purchase.
(b) At any time after the payment and discharge in full of all of
the Debtor's obligations under the Lender Documents, the Secured Party shall, at
the expense of the Debtor, release the lien of this Security Agreement with
respect to, and all its other right, title and interest in, any and all
Collateral then subject to this Security Agreement.
(c) On the request and at the expense of the Debtor, the Secured
Party shall execute such further documents and take such further actions as may
be necessary to effectuate the releases contemplated by Sections 2.2(a) and (b)
hereof, including duly executing and delivering to the Debtor termination
statements for filing in all relevant jurisdictions under the Uniform Commercial
Code.
2.3 Protection of Purchaser. No purchaser in good faith of property
-----------------------
purporting to be released hereunder shall be bound to ascertain the authority of
the Secured Party to execute the release, or to inquire as to any facts required
by the provisions hereof for the exercise of such authority; nor shall any
purchaser in good faith of any item of Collateral be under obligation to
ascertain or inquire into the conditions upon which any such sale is hereby
authorized.
ARTICLE III
DEFAULTS
--------
3.1 Secured Party's Rights. The Debtor agrees that when any Event of
----------------------
Default has occurred and is continuing hereunder, the Secured Party shall have
the rights, options and remedies of a secured party, and the Debtor shall have
the duties of a debtor, under the Uniform Commercial Code of New York
(regardless of whether such Code or a law similar thereto has been enacted in a
jurisdiction wherein the rights or remedies are asserted) and without limiting
the foregoing, the Secured Party may exercise any one or more or all of the
remedies hereinafter set forth, in any order:
(a) Subject to the rights of the lessees under the Leases, the
Secured Party, personally or by agents or attorneys, shall have the right
(subject to compliance with any applicable mandatory legal requirements) to take
immediate possession of the Collateral, or any portion thereof, and for that
purpose may pursue the same wherever it may be found, and may enter any premises
of the Debtor, with
<PAGE>
7
or without notice, demand, process of law or legal procedure, to the extent
permitted by applicable law, and search for, take possession of, remove, keep
and store the same, or use and operate or lease the same until sold (the Secured
Party shall give notice to the Debtor of such action);
(b) Subject to the rights of the lessees under the Leases, the
Secured Party shall have the right (subject to compliance with any mandatory
legal requirements), either with or without taking possession and either before
or after taking possession, and without instituting any legal proceedings
whatsoever, and having first given such notice of such sale by registered mail
to the Debtor as is required by law, to sell and dispose of the Collateral, or
any part thereof, at private or public sale or at public auction to the highest
bidder, in one lot as an entirety or in separate lots, and either for cash or on
credit and on such terms as the Secured Party may determine, and at any place
(whether or not it be the location of the Collateral or any part thereof)
designated in the notice referred to above; provided that any such sale shall be
--------
held in a commercially reasonable manner. Any such sale or sales may be
adjourned from time to time by announcement at the time and place appointed for
such sale or sales, or for any such adjourned sale or sales, without further
published notice, and the Debtor, the Secured Party or any of their Affiliates,
may bid and become the purchaser at any such sale;
(c) Subject to the rights of the lessees under the Leases, the
Secured Party may proceed to protect and enforce this Security Agreement and the
other Lender Documents by suit or suits or proceedings in equity, at law or in
bankruptcy, and whether for the specific performance of any covenant or
agreement herein contained or in execution or aid of any power herein granted;
or for foreclosure hereunder, or for the appointment of a receiver or receivers
for the mortgaged property or any part thereof, or for the recovery of judgment
for the Indebtedness or for the enforcement of any other proper, legal or
equitable remedy available under applicable law; and
(d) Subject to the rights of the lessees under the Leases, the
Secured Party may (without the necessity of taking any of the actions referred
to in paragraphs (a) through (c) above) proceed to exercise all rights,
privileges and remedies of the Debtor under the Lease Documents, and may
exercise all such rights and remedies either in the name of the Secured Party or
in the name of the Debtor, or both, for the use and benefit of the Secured
Party.
3.2 Waiver by Debtor. To the extent permitted by law, the Debtor
----------------
covenants that it will not at any time insist upon or plead, or in any manner
whatever claim or take any benefit or advantage of, any stay or extension law
now or at any time hereafter in force, nor claim, take nor insist upon any
benefit or advantage of or from any law now or hereafter in force providing for
the valuation or appraisement of the Collateral or any part thereof prior to any
sale or sales thereof to be made pursuant to any provision herein contained, or
to the decree, judgment or order of any
<PAGE>
8
court of competent jurisdiction; nor, after such sale or sales, claim or
exercise any right under any statute now or hereafter made or enacted by any
state or otherwise to redeem the property so sold or any part thereof, and, to
the full extent legally permitted, except as to rights expressly provided
herein, hereby expressly waives for itself and on behalf of each and every
person all benefit and advantage of any such law or laws, and covenants that it
will not invoke or utilize any such law or laws or otherwise hinder, delay or
impede the execution of any power herein granted and delegated to the Secured
Party, but will suffer and permit the execution of every such power as though no
such power, law or laws had been made or enacted.
3.3 Effect of Sale. Any sale, whether under any power of sale hereby
--------------
given or by virtue of judicial proceedings, shall operate to divest all right,
title, interest, claim and demand whatsoever, either at law or in equity, of the
Debtor in and to the property sold, shall be a perpetual bar, both at law and in
equity, against the Debtor, its successors and assigns, and against any and all
persons claiming the property sold or any part thereof under, by or through the
Debtor, its successors or assigns (subject to the then existing rights, if any,
of the lessees under the Leases or other Persons with respect to the other
Collateral).
3.4 Application of Proceeds. The proceeds of the Collateral, or any
-----------------------
part thereof, and the proceeds of any remedy hereunder (as well as any other
amounts of any kind held by the Secured Party at the time of or received by the
Secured Party after the occurrence of an Event of Default hereunder) shall be
paid to and applied in accordance with Section 2.7(b) of the Loan Agreement.
3.5 Discontinuance of Remedies. In case the Secured Party shall have
--------------------------
proceeded to enforce any right under this Security Agreement by foreclosure,
sale, entry or otherwise, and such proceedings shall have been discontinued or
abandoned for any reason or shall have been determined adversely, then and in
every such case the Debtor and the Secured Party shall be restored to their
former position with their former rights hereunder with respect to the
Collateral and all rights, remedies and powers of the Secured Party shall
continue as if no such proceedings had been instituted.
3.6 Cumulative Remedies. No delay or omission of the Secured Party
-------------------
to exercise any right or power arising from any default on the part of the
Debtor, shall exhaust or impair any such right or power, or prevent its exercise
during the continuance of such default. No waiver by the Secured Party, whether
such waiver is full or partial, shall extend to or be taken to affect any
subsequent default, or to impair the rights resulting therefrom, except as may
be otherwise provided herein. No remedy hereunder is intended to be exclusive
of any other remedy but each and every remedy shall be cumulative and in
addition to any and every other remedy given hereunder or otherwise existing.
The giving, taking or enforcement of any other or additional security,
collateral or guaranty for the payment of the Indebtedness shall not operate to
prejudice, waive or affect the security of this
<PAGE>
9
Security Agreement or any rights, powers or remedies hereunder, nor shall the
Secured Party be required to first look to, enforce or exhaust such other or
additional security, collateral or guaranties.
ARTICLE IV
COVENANTS AND WARRANTIES OF THE DEBTOR
--------------------------------------
The Debtor warrants to and covenants and agrees with the Secured Party
as follows:
4.1 Debtor's Duties. The Debtor covenants and agrees to perform,
---------------
abide by and to be governed and restricted by each and all of the terms,
provisions, restrictions, covenants and agreements set forth in the Lender
Documents, and in each supplement thereto or amendment thereof which may at any
time or from time to time be executed and delivered by the parties thereto or
their successors and assigns, to the same extent as though each and all of said
terms, provisions, restrictions, covenants and agreements were fully set out
herein and as though any amendment or supplement to the Lender Documents were
fully set out in an amendment or supplement to this Security Agreement. The
Debtor undertakes to perform only such duties as are expressly and specifically
set forth herein and in the other Lender Documents and no implied obligations or
covenants shall be read into this Security Agreement or any other Lender
Documents against the Debtor.
4.2 Further Assurances. The Debtor hereby covenants and agrees that
------------------
it shall (i) upon request by the Secured Party, cooperate with the Secured Party
to obtain third-party consents in connection with the security interest granted
hereunder, (ii) perform such acts and execute, acknowledge and deliver, from
time to time, such financing statements and other instruments as may reasonably
be required by the Secured Party to perfect or better assure this Security
Agreement and the security interests created hereby (including, without
limitation, with respect to any Excluded Aircraft and Other Excluded Collateral
which becomes Collateral pursuant to the terms of this Agreement), and file or
record the same in the public records specified by the Secured Party, (iii) keep
or cause to be kept accurate and complete records and books of account and make
or cause to be made the same available for the Secured Party's inspection and
transcription at any time upon reasonable advance notice and during business
hours, (iv) forward copies of all notices or other communication it receives
under the Lease Documents to the Secured Party, and (v) take no action and give
no consent, waiver or ratification which could impair the value of the
Collateral or would be inconsistent with any of the provisions of this Security
Agreement, the Note, the other Loan Documents and the Lease Documents.
4.3 After-Acquired Property. Any and all property described or
-----------------------
referred to in the GRANTING CLAUSE hereof which is hereafter acquired, or which
<PAGE>
10
previously constituted an Excluded Aircraft or Other Excluded Collateral, shall
ipso facto and without any further conveyance, assignment or act on the part of
- ---- -----
the Debtor or the Secured Party, become and be subject to the security interest
herein granted as fully and completely as though specifically described herein.
4.4 Recordation and Filing. The Debtor will cause all continuation
----------------------
statements and similar notices required by applicable law, and, if requested by
Secured Party, this Security Agreement and any financing statements at all times
to be kept, recorded and filed in such manner and in such place as may be
required by law in order to fully preserve and protect the rights of the Secured
Party hereunder.
4.5 Power of Attorney in Respect of the Collateral. The Debtor does
----------------------------------------------
hereby irrevocably constitute and appoint the Secured Party and all Persons
designated by the Secured Party for that purpose its true and lawful attorney-
in-fact with full irrevocable power and authority in the place and stead of the
Debtor and in the name of the Debtor or in its own name, if an Event of Default
has occurred and is continuing (a) to execute, deliver and file appropriate
Uniform Commercial Code Financing Statements and other documents and instruments
as may be necessary or, in the reasonable opinion of the Secured Party,
desirable to obtain, protect and perfect the security interests created
hereunder, (b) to ask, demand, collect, receive, receipt for, sue for, compound
and give acquittance for any and all rents, issues, profits, avails,
distributions, income, payment draws and other sums which are assigned under the
GRANTING CLAUSE hereof with full power to settle, adjust or compromise any claim
thereunder as fully as if it were the Debtor itself, (c) to receive payment of
and to endorse the Debtor's name to any items of Collateral (including checks,
drafts or other orders for the payment of money) that come into the Secured
Party's possession or under the Secured Party's control (including any amounts
in the Collateral Account), (d) to make all demands, consents and waivers, or
take any other action with respect to, the Collateral, (e) to make all
withdrawals from the Collateral Account, (f) to otherwise act with respect
thereto as though it were the outright owner of the Collateral, and (g) in its
discretion to file any claim or take any other action or proceedings, either in
its own name or in the name of the Debtor or otherwise, which the Secured Party
may deem necessary or appropriate to protect and preserve the right, title and
interest of the Secured Party in and to the Collateral and the security intended
to be afforded hereby. The appointment of the Secured Party as the Debtor's
attorney-in-fact and the Secured Party's rights and powers are coupled with an
interest and are irrevocable until the unpaid principal amount of and accrued
interest on the Note and all other amounts payable under the Lender Documents
shall have been paid in full.
4.6 Certain Actions. Until the payment in full of all Indebtedness
---------------
and to the extent necessary or appropriate to effectuate the purposes and carry
out the terms and intent of the Lender Documents, the Secured Party shall have
the right, subject to the terms of the Collateral Account and Pledge Agreement,
to the exclusion of the Debtor to (i) make all demands, consents and waivers, or
take any other action
<PAGE>
11
with respect to, the Collateral Account Proceeds, (ii) accept the payment of any
interest, principal or other amounts payable under or in connection with the
Collateral Account Proceeds, (iii) commence any actions to enforce the
Collateral Account Proceeds, (iv) make all withdrawals from the Collateral
Account, and (v) otherwise act with respect to the Collateral Account Proceeds
as though it were the outright owner thereof.
4.7 Executive Offices; Location of Assets. The principal place of
-------------------------------------
business and chief executive office of the Debtor is: 4370 La Jolla Village
Drive, Suite 1050, San Diego, California 92122, or such other location of which
Debtor shall have given the Secured Party 30 days' prior written notice.
Schedule 4.3 of the Loan Agreement lists the locations of all of the Debtor's
material assets and properties (other than the Leased Assets).
4.8 Excluded Aircraft. Upon the request of the Lender, after the
-----------------
Closing Date, the Debtor covenants and agrees to use its best efforts, in
consultation with the Lender giving due regard to strategic considerations, to
(a) seek the consent of each Person required by the Lease Documents relating to
each Excluded Aircraft to the grant of a second priority lien in favor of the
Lender with respect to such Excluded Aircraft and/or (b) arrange for the
satisfaction of all outstanding Debt, and the release of all liens, with respect
to aircraft N305AW and for the grant of a first priority security interest and
Mortgage in favor of the Lender with respect to such aircraft. In the event the
Lender makes a request pursuant to clause (b) above, the Lender agrees to make
appropriate adjustments to Section 2.7 of the Loan Agreement to effect the
repayment of Debt with respect to aircraft N305AW as contemplated in clause
4.8(b) above.
ARTICLE V
MISCELLANEOUS
-------------
5.1 No Presentment. Debtor hereby waives presentment, protest,
--------------
notice of protest, notice of dishonor, and notice of nonpayment with respect to
any proceeds to which the Secured Party is entitled hereunder and any rights to
direct the application of payments for security for the Indebtedness except as
otherwise provided in the Lender Documents, and the Debtor also hereby waives
any right to require proceedings against others or to require exhaustion of
security.
5.2 Secured Party's Right to Cure. In the event the Debtor should
-----------------------------
fail to do any act as herein provided or in any other Lender Document, the
Secured Party may, but has no obligation to do so, without notice to the Debtor,
and without releasing the Debtor from any obligation hereof, make or do such act
in such manner and to such extent as the Secured Party may deem necessary to
protect the Collateral,
<PAGE>
12
including the defense of any action purporting to affect the Collateral or the
rights or powers of the Secured Party hereunder.
5.3 Security Interest Absolute. The security interest, rights of the
--------------------------
Secured Party and obligations of the Debtor granted or created under this
Security Agreement shall be absolute and unconditional irrespective of:
(i) Any lack of validity or enforceability in whole or in part
of this Security Agreement, the Loan Agreement or any other Lender
Document, any Lease Documents or any other agreement or instrument executed
or delivered in connection herewith or therewith;
(ii) Any change in the time, manner or place of payment of, or
in any other term of, any Note, or any other amendment or waiver of, or any
consent to any departure from, the terms of this Security Agreement, the
Loan Agreement, any other Lender Document, any Lease Documents or any other
instrument executed or delivered in connection herewith or therewith;
(iii) Any exchange, release or nonperfection of any other
collateral, or any release, amendment or waiver of, or consent to departure
from, any guaranty, for all or any of the Indebtedness;
(iv) Any other circumstance which might otherwise constitute a
defense available to, or a discharge of the Debtor in respect of, any
Lender Document or the Indebtedness; or
(v) Any name change or merger, consolidation or other business
combination (including the Merger) involving or with respect to the Debtor.
5.4 Amendments. No amendment or waiver of any provision of this
----------
Security Agreement, nor consent to any departure by any party, shall in any
event be effective unless the same shall be in writing and signed by each of the
parties and such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given.
5.5 No Waiver. No failure on the part of any party to exercise, and
---------
no delay in exercising, any right under this Security Agreement shall operate as
a waiver thereof; nor shall any single or partial exercise of any right
hereunder preclude any other or further exercise thereof or the exercise of any
other right.
<PAGE>
13
5.6 Notices. All notices, requests, demands, consents and other
-------
communications to or upon the parties to this Security Agreement shall be given
pursuant to Section 8.6 of the Loan Agreement.
5.7 Counterparts. This Security Agreement may be executed by the
------------
parties hereto in two or more counterparts, and by separate parties on separate
counterparts, each of which when so executed and delivered shall be an original,
but all of which together shall constitute one and the same instrument.
5.8 Severability. Any provision of this Security Agreement which is
------------
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
5.9 Captions. The table of contents and the captions in this
--------
Security Agreement are for convenience of reference only and shall not modify,
define, expand or limit any of the terms or provisions hereof.
5.10 Governing Law. This Security Agreement and the rights and
-------------
obligations of the parties hereunder shall in all respects be governed by, and
construed in accordance with, the laws of the State of New York applicable to
agreements made and to be performed entirely within such state.
5.11 Successors and Assigns. This Security Agreement shall be
----------------------
binding upon and shall inure to the benefit of the parties hereto and their
respective successors and permitted assigns. This Security Agreement may not be
assigned by the Debtor, and any such attempted assignment shall be void.
IN WITNESS WHEREOF, the parties hereto have caused this Security
Agreement to be duly executed by their respective officers thereunto duly
authorized as of the day and year first above written.
PS GROUP, INC.
By:___________________________________
Name:
Title:
GATX CAPITAL CORPORATION
<PAGE>
14
By:___________________________________
Name:
Title:.
[SECURITY AGREEMENT]
<PAGE>
EXHIBIT C
PARENT GUARANTY dated as of _________, 2000 by PS Group Holdings,
Inc., a Delaware corporation (the "Guarantor"), in favor of GATX Capital
Corporation, a Delaware corporation (the "Beneficiary").
The Beneficiary has entered into a Loan Agreement dated as of December
18, 1999 with PS Group, Inc., a Delaware corporation (the "Borrower").
The Guarantor is the owner of 100% of the capital stock of the
Borrower.
The Beneficiary has required, as a condition precedent to making the
loan to the Borrower under the Loan Agreement, that the Guarantor execute and
deliver this Guaranty. The Beneficiary would not make the loan but for the
execution and delivery of this Guaranty by the Guarantor.
In furtherance of the business purposes of the Guarantor, the
Guarantor desires to irrevocably and unconditionally guaranty all of the
obligations of the Borrower under the Loan Documents (as hereafter defined).
The Guarantor agrees as follows:
1. Definitions. Capitalized terms not otherwise defined in this
-----------
Guaranty have the meanings ascribed to them in the Loan Agreement.
2. The Guaranty. The Guarantor hereby irrevocably guaranties (i) the
------------
due and punctual payment in full (in immediately available funds) when due
(whether at stated maturity, upon acceleration, demand or otherwise, including
amounts that would become due but for the operation of the automatic stay under
Section 362(a) of the Bankruptcy Code, or any successor provision), of any and
all sums, whether of principal, interest (including any interest payable
subsequent to a default), fees, expenses, indemnities and other amounts
(including all fees and disbursements of counsel to the Beneficiary), payable by
the Borrower pursuant to or arising under, out of or in connection with the Loan
Documents, whether direct or indirect, absolute or contingent, due or to become
due, now existing or hereafter incurred, and (ii) the prompt and complete
performance by the Borrower of all other terms and provisions of the Loan
Documents (the obligations to pay all such sums and perform all such terms and
provisions are hereafter collectively referred to as the "Guarantied
Obligations"). The Guarantor acknowledges that there are no conditions
whatsoever to the effectiveness of this Guaranty.
3. Liability of the Guarantor. The Guarantor agrees that its
--------------------------
obligations hereunder are irrevocable, continuing, absolute, independent and
unconditional and shall not be affected by any circumstance whatsoever (other
than the payment in full and the complete performance of the Guarantied
Obligations) which may constitute a defense or a legal or equitable discharge
(whether in whole or in part) of a guarantor or surety, whether foreseen or
unforeseen and whether similar
<PAGE>
or dissimilar to any circumstance described in this Guaranty. In furtherance of
the foregoing and without limiting the generality thereof, the Guarantor agrees
as follows:
(a) Guaranty of Payment. This Guaranty is a guaranty of payment
-------------------
and performance, and not of collection only. The Guarantor waives any
requirement that the Beneficiary, as a condition of payment by the Guarantor,
(i) proceed against the Borrower, any other guarantor of the Guarantied
Obligations or any other Person, (ii) proceed against or exhaust any security
received from the Borrower, any other guarantor of the Guarantied Obligations or
any other Person, (iii) proceed against or have resort to any balance of any
deposit account or credit on the books of the Beneficiary in favor of the
Borrower, any other guarantor of the Guarantied Obligations or any other Person,
or (iv) pursue any other remedy whatsoever in the power of the Beneficiary.
(b) Continuing Guaranty. This Guaranty shall remain in full
-------------------
force and effect until all of the Guarantied Obligations have been completely
performed and paid in full, notwithstanding that from time to time prior thereto
the Borrower may be free from any of the Guarantied Obligations. The Guarantor's
payment of a portion, but not all, of the Guarantied Obligations shall in no
way limit, affect, modify or abridge the Guarantor's liability for any portion
of the Guarantied Obligations that has not been completely performed or
indefeasibly paid in full.
(c) Absolute and Unconditional Guaranty. This Guaranty and the
-----------------------------------
obligations of the Guarantor hereunder are not subject to any reduction,
limitation, impairment, discharge or termination for any reason (other than the
complete performance and the indefeasible payment in full of the Guarantied
Obligations), including the occurrence of any one or more of the following,
whether or not the Guarantor shall have had notice or knowledge of any of them:
(i) any change in the manner, place or terms of payment
(including the currency thereof) of any of the Guarantied Obligations;
(ii) any settlement, compromise, release or discharge of, or
acceptance or refusal of any offer of performance with respect to, or
substitutions for, the Guarantied Obligations or any agreement relating thereto
or any subordination of the payment of the Guarantied Obligations to the payment
of any other obligations;
(iii) any rescission, waiver, extension, renewal, alteration,
amendment or modification of, or any consent to departure from, any of the terms
or provisions (including provisions relating to Events of Default) of the
Guarantied Obligations or any agreement relating thereto, or any other
guaranties or security for the Guarantied Obligations, in each case whether or
not in accordance with the terms thereof;
<PAGE>
(iv) the Guarantied Obligations, this Guaranty or any other
agreement relating thereto at any time being found to be illegal, invalid or
unenforceable in any respect or any provision of applicable law or regulation
purporting to prohibit the payment by the Borrower of any of the Guarantied
Obligations;
(v) any request or acceptance of other guaranties of the
Guarantied Obligations or the taking and holding of any security for the payment
of the Guarantied Obligations, this Guaranty, or any other guaranty of the
Guarantied Obligations or any release, impairment, surrender, exchange,
substitution, compromise, settlement, rescission or subordination thereof;
(vi) any failure to perfect or continue perfection of a
security interest in any collateral which secures any of the Guarantied
Obligations; or any enforcement and application of any security now or hereafter
held by the Beneficiary in respect of this Guaranty or the Guarantied
Obligations and any direction of the order or manner of sale thereof, or the
exercise of any other right or remedy that the Beneficiary may have with respect
to any such security, as the Beneficiary in its sole discretion may determine,
including foreclosure on any such security pursuant to one or more judicial or
nonjudicial sales;
(vii) any failure or omission to exercise, assert or enforce,
or any agreement or election not to assert or enforce, or the stay or enjoining,
by order of court, by operation of law or otherwise, of the exercise or
enforcement of, any claim or demand or any right, power or remedy (whether
arising under the Loan Documents, at law, in equity or otherwise) with respect
to the Guarantied Obligations or any agreement relating thereto, or with respect
to any other guaranties of or any security for the payment of the Guarantied
Obligations;
(viii) any change in, or reorganization of, the corporate
structure of the Borrower or any of its Subsidiaries or any dissolution,
termination, consolidation or merger or sale or other disposition, whether or
not for fair consideration, of all or substantially all of the assets of any of
the foregoing or any consent of the Beneficiary thereto or to any restructuring
of the Guarantied Obligations;
(ix) the election by the Beneficiary in any proceeding
instituted under the Bankruptcy Code of the application of Section 1111(b)(2) of
the Bankruptcy Code; any borrowing or grant of a security interest by the
Borrower, as debtor-in-possession, under Section 364 of the Bankruptcy Code; or
the disallowance under Section 502 of the Bankruptcy Code of all or any portion
of the claims of the Beneficiary for repayment of the Guarantied Obligations;
(x) any name change or merger, consolidation or other
business combination (including the Merger) involving or with respect to the
Borrower or the Guarantor; or
<PAGE>
(xi) any other act or thing or omission, or delay to do any
other act or thing, which may or might in any manner or to any extent vary the
risk of the Guarantor as an obligor in respect of the Guarantied Obligations.
4. Waivers of Notices and Defenses. The Guarantor hereby waives, for
-------------------------------
the benefit of the Beneficiary:
(i) any defense arising by reason of the incapacity, lack of
authority or any disability of the Borrower;
(ii) any notice of the creation, renewal, extension or
accrual of any of the Guarantied Obligations and notice of or proof of reliance
by the Beneficiary upon this Guaranty or acceptance of this Guaranty (the
Guarantied Obligations and all dealings between the Borrower and the Guarantor,
on the one hand, and the Beneficiary, on the other hand, being conclusively
deemed to have been created, incurred or conducted in reliance upon this
Guaranty);
(iii) any setoff or counterclaim, any demand for performance,
notice of nonperformance, diligence, presentment, protest, notice of protest,
notice of dishonor, notice of Defaults or Events of Default, notice of any
amendment, renewal, extension or modification of the Guarantied Obligations or
any agreement related thereto, notice that any portion of the Guarantied
Obligations is due, notice of any collection proceedings, and notice of any
other fact which might increase the risk of the Guarantor;
(iv) any defense based upon any statute or rule of law that
provides that the obligation of a surety cannot be larger in amount or in other
respects more burdensome than that of the principal;
(v) any benefit of, or any right to participate in, or any
notices of exchange, sale, surrender or other handling of, any security or
collateral given to the Beneficiary (whether directly or indirectly) to secure
payment or performance of the Guarantied Obligations or any other liability of
the Borrower to the Beneficiary; and
(vi) to the fullest extent permitted by law, any other defenses
or benefits that may be derived from or afforded by law which limit the
liability of, or exonerate, guarantors or sureties, or which may conflict with
the terms of this Guaranty, including failure of consideration, breach of
warranty, statute of frauds, statute of limitations, accord and satisfaction,
and usury.
5. Bankruptcy and Related Matters.
------------------------------
(a) No Proceedings Against Borrower. So long as any of the
-------------------------------
Guarantied Obligations remain outstanding, the Guarantor shall not, without the
prior
<PAGE>
written consent of the Beneficiary, commence or join with any other Person
in commencing any bankruptcy, liquidation, reorganization or insolvency
proceedings of, or against, the Borrower.
(b) Guarantor Remains Obligated. The obligations of the Guarantor
---------------------------
under this Guaranty shall not be reduced, limited, impaired, discharged,
deferred, suspended or terminated by any proceeding or action, voluntary or
involuntary, involving the bankruptcy, insolvency, receivership, reorganization,
marshaling of assets, assignment for the benefit of creditors, composition with
creditors, readjustment, liquidation or arrangement of the Borrower or similar
proceedings or actions or by any defense which the Borrower may have by reason
of the order, decree or decision of any court or administrative body resulting
from any such proceeding or action. Without limiting the generality of the
foregoing, the Guarantor's liability shall extend to all amounts and obligations
that constitute the Guarantied Obligations and would be owed by the Borrower but
for the fact that they are unenforceable or not allowable due to the existence
of any such proceeding or action.
(c) Stay of Acceleration. The Guarantor agrees that, notwithstanding
--------------------
anything to the contrary herein, if, after the occurrence and during the
continuance of an Event of Default, the Beneficiary is prevented by applicable
law from exercising its rights to accelerate the maturity of the Guarantied
Obligations, to collect interest on the Guarantied Obligations or to enforce or
exercise any other right or remedy with respect to the Guarantied Obligations,
or the Beneficiary is prevented from taking any action to realize on any
security or collateral or is prevented from collecting any of the Guarantied
Obligations, the Guarantor shall pay to the Beneficiary upon demand therefor the
amount that would otherwise have been due and payable had such rights and
remedies been permitted to be exercised by the Beneficiary.
(d) Post-Petition Interest. Pursuant to, and without limiting, the
----------------------
foregoing, the Guarantor acknowledges and agrees that any interest on any
portion of the Guarantied Obligations which accrues after the commencement of
any proceeding or action referred to in Section 5(b) (or, if interest on any
portion of the Guarantied Obligations ceases to accrue by operation of law by
reason of the commencement of such proceeding or action, such interest as would
have accrued on such portion of the Guarantied Obligations if such proceedings
or actions had not been commenced) shall be included in the Guarantied
Obligations, it being the intention of the Guarantor and the Beneficiary that
the Guarantied Obligations shall be determined without regard to any rule of law
or order which may relieve the Borrower of any portion of such Guarantied
Obligations. The Guarantor will permit any trustee in bankruptcy, receiver,
debtor in possession, assignee for the benefit of creditors or similar person to
pay the Beneficiary, or allow the claim of the Beneficiary, in respect of, any
such interest accruing after the date on which such proceeding is commenced.
<PAGE>
(e) Reinstatement of Guaranty. Notwithstanding anything to the
-------------------------
contrary contained herein, in the event that all or any portion of the
Guarantied Obligations are paid by the Borrower, the obligations of the
Guarantor hereunder shall continue and remain in full force and effect or be
reinstated, as the case may be, if all or any part of such payment are rescinded
or recovered, directly or indirectly, from the Beneficiary as a preference,
fraudulent transfer or otherwise, and any such payments which are so rescinded
or recovered shall constitute Guarantied Obligations for all purposes under this
Guaranty.
6. No Subrogation. Notwithstanding any payment or payments made by
--------------
the Guarantor hereunder, or any set-off or application of funds of the Guarantor
by the Beneficiary, the Guarantor hereby irrevocably waives any claim or other
rights that it may now or hereafter acquire against the Borrower or any other
insider guarantor that arise from the existence, payment, performance or
enforcement of the Guarantor's obligations under this Guaranty or any other Loan
Document, including any right of subrogation, reimbursement, exoneration,
contribution or indemnification and any right to participate in any claim or
remedy of the Beneficiary against the Borrower or any other insider guarantor or
any collateral security, whether or not such claim, remedy or right arises in
equity or under contract, statute or common law, including the right to take or
receive from the Borrower or any other insider guarantor, directly or
indirectly, in cash or other property or by set-off or in any other manner,
payment or security on account of such claim, remedy or right. If any amount
shall be paid to the Guarantor in violation of the preceding sentence, such
amount shall be held by the Guarantor in trust for the Beneficiary, segregated
from other funds of the Guarantor, and shall, forthwith upon receipt by the
Guarantor, be turned over to the Beneficiary in the exact form received by the
Guarantor (duly endorsed by the Guarantor to the Beneficiary, if so requested by
the Beneficiary), to be applied against the Guarantied Obligations, whether
matured or unmatured, in such order as the Beneficiary may determine.
7. Subordination of Other Obligations. The Guarantor hereby agrees
----------------------------------
that any indebtedness of the Borrower now or hereafter held by the Guarantor is
hereby subordinated in right of payment to the Guarantied Obligations, and any
such indebtedness of the Borrower to the Guarantor collected or received by the
Guarantor after an Event of Default has occurred and is continuing shall be held
in trust for the Beneficiary and shall forthwith be paid over to the Beneficiary
to be credited and applied against the Guarantied Obligations without in any way
affecting, impairing or limiting the liability of the Guarantor under this
Guaranty.
8. Setoff; Security Arrangements.
-----------------------------
(a) Setoff. In addition to any rights and remedies of the
------
Beneficiary provided by law or otherwise, upon the occurrence of an Event of
Default and acceleration of the obligations owing in connection with the Loan
Documents or any other Default in the payment of any principal or interest owed
thereunder, the
<PAGE>
Beneficiary shall have the right, without prior notice to the Guarantor, any
such notice being expressly waived to the extent permitted by applicable law, to
set off and apply against any indebtedness or other amounts due under the Loan
Documents, whether matured or unmatured, of the Guarantor to the Beneficiary,
any and all deposits (whether general or special, time or demand, provisional or
final, and regardless of whether denominated in dollars or in any other
currency) and other amounts owing from the Beneficiary to the Guarantor, whether
matured or unmatured, at, or at any time after, the happening of any of the
above-mentioned events, and such right of set-off may be exercised by the
Beneficiary against the Guarantor or against any trustee in bankruptcy, debtor
in possession, assignee for the benefit of creditors, receiver, custodian or
execution, judgment of attachment creditor of the Guarantor, or against anyone
else claiming through or against the Guarantor or such trustee in bankruptcy,
debtor in possession, assignee for the benefit of creditors, receivers, or
execution, judgment or attachment creditor, notwithstanding the fact that such
right of set-off shall not have been exercised by the Beneficiary prior to the
making, filing or issuance, or service upon the Beneficiary of, or of notice of,
any such petition, assignment for the benefit of creditors, appointment or
application for the appointment of a receiver, or issuance of execution,
subpoena, order or warrant. The Beneficiary agrees promptly to notify the
Guarantor after any such set-off and application made by the Beneficiary,
provided that the failure to give such notice shall not affect the validity of
- --------
such set-off and application.
(b) Security Arrangements. The Guarantor has granted to the
---------------------
Beneficiary a security interest in the collateral subject to the Collateral
Documents to which it is a party as collateral security for the Guarantied
Obligations and such other obligations as are therein specified. Reference is
hereby made to the Collateral Documents for more complete descriptions of the
terms and provisions thereof.
9. Representations and Warranties. The Guarantor hereby represents
------------------------------
and warrants to the Beneficiary that:
(a) Existence and Power. The Guarantor is a corporation duly
-------------------
organized, validly existing and in good standing under the laws of Delaware; has
all corporate power and all material governmental licenses, authorizations,
consents and approvals required to own its property and to carry on its business
as now conducted and proposed to be conducted except where the failure to be so
organized, existing or in good standing or to have such power would not have a
Material Adverse Effect; and is qualified to do business in all jurisdictions in
which such qualification is necessary and where failure so to qualify would have
a Material Adverse Effect.
(b) Authorization; No Contravention. As qualified by Schedule
-------------------------------
2.05(d) of the Company Disclosure Schedules, the execution, delivery and
performance by the Guarantor of this Guaranty and each other Loan Document to
which it is a party, and the granting of Liens and the perfection thereof
pursuant
<PAGE>
thereto, are within the Guarantor's corporate power, have been duly authorized
by all necessary corporate action, and, except in immaterial respects (i)
require no action by or in respect of, filing with or notice to, any
Governmental Authority and (ii) do not contravene, or constitute a default
under, or require the consent of any creditor, stockholder or other person
under, any provision of applicable law or regulation or of the certificate of
incorporation or by-laws of the Guarantor or of any agreement, judgment,
injunction, order, decree or other instrument binding upon the Guarantor or its
Subsidiaries or to which any of their respective assets are subject, or result
in the creation or imposition of any Lien on any asset of the Guarantor or any
of its Subsidiaries except as provided in the Loan Documents.
(c) Binding Obligation. This Guaranty and each other Loan
------------------
Document to which the Guarantor is a party has been duly and validly executed
and delivered by the Guarantor and constitutes the legal, valid and binding
obligation of the Guarantor enforceable against the Guarantor in accordance with
its terms, except as the enforceability thereof may be limited by (A)
bankruptcy, insolvency, moratorium, fraudulent conveyance or other similar laws
affecting the enforcement of creditors' rights generally and (B) by equitable
principles relating to the availability of equitable remedies (regardless of
whether considered in a proceeding at law or in equity).
(d) Not an Investment Company or Holding Company. The Guarantor
--------------------------------------------
is not an "investment company" within the meaning of the Investment Company Act
of 1940, as amended, or a "holding company" within the meaning of the Public
Utility Holding Company Act of 1935, as amended.
(e) Relationship to the Borrower. The Guarantor is the owner of
----------------------------
100% of the issued and outstanding capital stock of the Borrower; the agreement
of the Beneficiary to make the Loan to the Borrower is of substantial and
material benefit to the Guarantor; and the Guarantor has reviewed and approved
copies of the Loan Documents and is fully informed of the remedies the
Beneficiary may pursue upon the occurrence of an Event of Default in any Loan
Document.
(f) Incorporation of Certain Representations and Warranties from
------------------------------------------------------------
the Loan Agreement. As qualified by any applicable Schedule of the Company
- ------------------
Disclosure Schedules, the Guarantor represents and warrants that all
representations and warranties relating to it contained in, and as qualified in,
the Loan Agreement are true and correct.
<PAGE>
10. Covenants.
---------
(a) Financial Condition of the Borrower. The Guarantor agrees
-----------------------------------
that the Beneficiary shall have no obligation to disclose or discuss with the
Guarantor their assessment, or the Guarantor's assessment, of the financial
condition of the Borrower. The Guarantor represents and warrants that it has
adequate means to obtain information from the Borrower on a continuing basis
concerning the financial condition of the Borrower and the Borrower's ability to
perform its obligations under the Loan Documents, and the Guarantor covenants
and agrees to keep informed of the financial condition of the Borrower and of
all circumstances bearing upon the risk of nonpayment of the Guarantied
Obligations. The Guarantor hereby waives and relinquishes any duty on the part
of the Beneficiary to disclose any matter, fact or thing relating to the
business, operations or conditions of the Borrower, whether now known or
hereafter known by the Beneficiary.
(b) Notice of Events. As soon as the Guarantor obtains knowledge
----------------
thereof, the Guarantor shall give the Beneficiary written notice of any
condition or event which has resulted or might reasonably be expected to result
in (i) a Material Adverse Effect on the Guarantor or (ii) a breach of, or
noncompliance by the Guarantor with, any term, condition or covenant contained
herein or in any other Loan Document.
11. Events of Default.
-----------------
(a) Events of Default. Each of the following events shall
-----------------
constitute an "Event of Default" hereunder:
(i) the Guarantor shall fail to perform or observe any
covenant or agreement contained in this Guaranty or in the Merger Documents, on
its part to be performed or observed and any such failure shall remain
unremedied for ten Business Days after the Beneficiary shall have given the
Guarantor notice thereof; or an "Event of Default" shall occur and be continuing
under, and as respectively defined in, the Loan Agreement or any other Loan
Document;
(ii) any representation or warranty made or confirmed by the
Guarantor at the Closing Date, on the date of the Merger, or otherwise under, or
in any notice given pursuant to any express requirement of, this Guaranty or any
other Loan Document shall prove to have been incorrect in any material respect
when made or confirmed;
(iii) the Guarantor shall (i) fail to pay any principal or
interest, regardless of amount, due in respect of any one or more items of Debt
in a
<PAGE>
principal amount in excess of $1,000,000 in the aggregate, when and as the
same shall become due and payable, or (ii) fail to observe or perform any other
term, covenant, condition or agreement contained in any agreement or instrument
evidencing or governing any such Debt if the effect of any failure referred to
in this clause (ii) is to cause, or to permit the holder or holders of such Debt
or a trustee on its or their behalf (with or without the giving of notice, the
lapse of time or both) to cause, such Debt to become due prior to its stated
maturity;
(iv) the Guarantor shall generally not pay its debts as such
debts 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
any proceeding shall be instituted by or against the Guarantor 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 of debtors, or seeking the entry of an order for relief
or the appointment of a receiver, trustee, or other similar official for it or
for any substantial part of its property, and any such proceeding instituted
against the Guarantor shall remain undismissed and unstayed for a period of 60
consecutive days; or
(v) any judgment or order (other than one with respect to a (x)
non-recourse Debt or (y) Lien permitted by Section 6.1(a) of the Loan Agreement)
for the payment of money in excess of $100,000 shall be rendered against the
Guarantor and there shall be any period of 30 consecutive days during which
neither (i) such judgment or order shall have been discharged or bonded nor (ii)
a stay of enforcement of such judgment or order, by reason of a pending appeal
or otherwise, shall be in effect.
(b) Acceleration of Maturity. If an Event of Default shall occur and
------------------------
be continuing, the Beneficiary may declare the unpaid principal amount of and
all accrued interest on the Loan and the Note and all other amounts payable to
it under the Loan Agreement or the Note to be forthwith due and payable,
whereupon the unpaid principal amount of and all accrued interest on the Loan
and the Note and all such other amounts shall become and be forthwith due and
payable; provided that in the case of any of the Events of Default specified in
--------
Section 11(a)(iv) hereof, without any notice to the Guarantor or any other act
by the Beneficiary, the unpaid principal amount of and all accrued interest on
the Loan and the Note and all other amounts payable under the Loan Agreement or
the Note shall become immediately due and payable.
(c) Suits for Enforcement. In case any one or more Events of Default
---------------------
shall occur and be continuing, the Beneficiary may proceed to protect and
<PAGE>
enforce its rights either by suit in equity or by action at law, or by enforcing
its rights under the Security Agreement or this Guaranty, or by other
appropriate proceedings, whether for the specific performance of any covenant or
agreement contained in this Guaranty or any other Loan Document or for an
injunction against a violation of any of the terms hereof or thereof, or to
recover damages for the breach thereof, or in aid of the exercise of any power
granted herein or therein, or proceed to enforce the payment of the Note or to
enforce any other legal or equitable right of the Beneficiary.
(d) Remedies Cumulative. No right, power or remedy herein or in
-------------------
the Note or any other Loan Document conferred upon the Beneficiary is intended
to be exclusive of any other right, power or remedy and each and every such
remedy shall be cumulative and shall be in addition to every other right, power
or remedy given hereunder, or now or hereafter existing at law or in equity or
by statute or otherwise.
(e) Remedies Not Waived. No course of dealing among the parties
-------------------
hereto or any delay or omission on the part of any party hereto in exercising
any rights hereunder or under the Note or any other Loan Document shall operate
as a waiver of any rights of any party hereto.
12. Miscellaneous.
-------------
(a) Survival of Warranties. All agreements, representations and
----------------------
warranties made herein shall survive the execution and delivery of this
Guaranty, the making of the Loan and the execution and delivery of the other
Loan Documents.
(b) Notices. All notices, requests and other communications to
-------
any party hereunder shall be in writing and shall be given pursuant to Section
8.6 of the Loan Agreement.
(c) No Waivers. No failure or delay by the Beneficiary in
----------
exercising any right, power or privilege hereunder or under any other Loan
Document 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.
(d) Expenses. The Guarantor agrees to pay, or cause to be paid,
--------
on demand, and to save the Beneficiary harmless against liability for, any and
all costs and expenses (including reasonable fees and disbursements of counsel
and fees, costs and expenses incurred in connection with any bankruptcy
proceeding)
<PAGE>
incurred or expended by the Beneficiary in connection with the enforcement,
amendment, modification or waiver of or preservation of any rights under this
Guaranty and under any other Loan Document and the collection of amounts payable
hereunder and thereunder and obtaining advice of counsel in respect hereof or
thereof, and until so paid, such fees, costs, disbursements and expenses shall
be added to, and constitute, Guarantied Obligations.
(e) Amendments and Waivers. This writing is intended by the
----------------------
Guarantor and the Beneficiary as the final expression of this Guaranty and is
also intended as a complete statement of the terms of their agreement with
respect to the matters covered hereby. No amendment, modification, termination
or waiver of any provision of this Guaranty, or consent to any departure by the
Guarantor therefrom, shall in any event be effective without the written consent
of the Beneficiary.
(f) Successors and Assigns. This Guaranty is a continuing
----------------------
guaranty and shall be binding upon the Guarantor and its successors and
assigns; provided that the Guarantor may not assign this Guaranty or any of
--------
the rights or obligations of the Guarantor hereunder without the prior written
consent of the Beneficiary. This Guaranty shall inure to the benefit of the
Beneficiary and its successors and assigns.
(g) Applicable Law. This Guaranty shall be construed in
--------------
accordance with and governed by the law of the State of New York applicable to
agreements made and to be performed entirely within such state.
(h) Jurisdiction.
------------
(i) Any action or proceeding against the guarantor relating
in any way to this Guaranty or any other Loan Document may be brought and
enforced in the courts of the State of New York or of the United States for the
Southern District of New York, and the Guarantor irrevocably consents to the
jurisdiction of each such court in respect of any such action or proceeding. The
Guarantor irrevocably appoints Integrated Capital Associates of New York, Inc.,
which currently maintains an office in New York State situated at 101 East 52nd
Street, New York, New York 10022, as its agent to receive service of process or
other legal summons for purposes of any such action or proceeding. The Guarantor
further irrevocably consents to the service of process in any such action or
proceeding by the mailing of copies thereof by registered or certified mail,
postage prepaid, return receipt requested, to the guarantor at its address as
provided for notices hereunder. The foregoing shall not limit the right of the
Beneficiary to serve process in any other manner permitted by law or to bring
any action or proceeding, or to obtain execution of any judgment, in any other
jurisdiction.
<PAGE>
(ii) The Guarantor hereby irrevocably waives any objection
that it may now or hereafter have to the laying of venue of any action or
proceeding arising under or relating to this Guaranty or any other Loan Document
in any court located in the borough of Manhattan, city and state of New York, or
located in any other jurisdiction chosen by the beneficiary in accordance with
clause (i) of this subsection, and hereby further irrevocably waives any claim
that a court located in the borough of Manhattan, city and state of New York is
not a convenient forum for any such action or proceeding.
(i) Severability. If any provision in or obligation under this
------------
Guaranty shall be invalid, illegal or unenforceable in any jurisdiction, the
validity, legality and enforceability of the remaining provisions or
obligations, or of such provision or obligation in any other jurisdiction, shall
not in any way be affected or impaired thereby.
(j) Interpretation. Section headings in this Guaranty are included
--------------
herein for convenience of reference only and shall not constitute a part of this
Guaranty for any other purpose or be given any substantive effect.
(k) Further Assurances. At any time or from time to time, upon the
------------------
request of the Beneficiary, the Guarantor shall execute and deliver such further
documents and do such other acts and things as the Beneficiary may reasonably
request in order to effect fully the purposes of this Guaranty.
<PAGE>
IN WITNESS WHEREOF, the Guarantor has executed this Guaranty by its
duly authorized officer as of the date first above written.
PS GROUP HOLDINGS, INC.
By:_______________________________________
Name:
Title:
[PARENT GUARANTY]
<PAGE>
EXHIBIT D
GUARANTY dated as of __________, 2000 by Heritage Air Holdings
Statutory Trust, a Connecticut statutory trust (the "Guarantor"), in favor of
GATX Capital Corporation, a Delaware corporation (the "Beneficiary").
The Lender has entered into a Loan Agreement dated as of December 18,
1999 with PS Group, Inc., a Delaware corporation (the "Borrower").
Upon consummation of the Merger, the Guarantor will own 100% of the
capital stock of PS Group Holdings, Inc., a Delaware corporation, which owns
100% of the capital stock of the Borrower.
The Beneficiary has required, as a condition precedent to entering
into the Loan Agreement, that the Guarantor execute and deliver this Guaranty.
The Beneficiary would not enter into such agreements but for the execution and
delivery of this Guaranty by the Guarantor.
In furtherance of the business affairs of the Guarantor, the Guarantor
desires to irrevocably and unconditionally guaranty all of the obligations of
the Borrower under the Loan Documents (as hereafter defined).
The Guarantor agrees as follows:
1. Definitions. Capitalized terms not otherwise defined in this
-----------
Guaranty have the meanings ascribed to them in the Loan Agreement.
2. The Guaranty. The Guarantor hereby irrevocably guaranties (i)
------------
the due and punctual payment in full (in immediately available funds) when due
(whether at stated maturity, upon acceleration, demand or otherwise, including
amounts that would become due but for the operation of the automatic stay under
Section 362(a) of the Bankruptcy Code, or any successor provision), of any and
all sums, whether of principal, interest (including any interest payable
subsequent to a default), fees, expenses, indemnities and other amounts
(including all fees and disbursements of counsel to the Beneficiary), payable by
the Borrower pursuant to or arising under, out of or in connection with the Loan
Documents, whether direct or indirect, absolute or contingent, due or to become
due, now existing or hereafter incurred, and (ii) the prompt and complete
performance by the Borrower of all other terms and provisions of the Loan
Documents (the obligations to pay all such sums and perform all such terms and
provisions are hereafter collectively referred to as the "Guarantied
Obligations"). The Guarantor acknowledges that there are no conditions
whatsoever to the effectiveness of this Guaranty.
3. Liability of the Guarantor. The Guarantor agrees that its
--------------------------
obligations hereunder are irrevocable, continuing, absolute, independent and
unconditional and shall not be affected by any circumstance whatsoever (other
than the payment in full and the complete performance of the Guarantied
Obligations) which may constitute a defense or a legal or equitable discharge
(whether in whole or
<PAGE>
in part) of a guarantor or surety, whether foreseen or unforeseen and whether
similar or dissimilar to any circumstance described in this Guaranty. In
furtherance of the foregoing and without limiting the generality thereof, the
Guarantor agrees as follows:
3.1 Guaranty of Payment. This Guaranty is a guaranty of payment and
-------------------
performance, and not of collection only. The Guarantor waives any requirement
that the Beneficiary, as a condition of payment by the Guarantor, (i) proceed
against the Borrower, any other guarantor of the Guarantied Obligations or any
other Person, (ii) proceed against or exhaust any security received from The
Borrower, any other guarantor of the Guarantied Obligations or any other Person,
(iii) proceed against or have resort to any balance of any deposit account or
credit on the books of the Beneficiary in favor of the Borrower, any other
guarantor of the Guarantied Obligations or any other Person, or (iv) pursue any
other remedy whatsoever in the power of the Beneficiary.
3.2 Continuing Guaranty. This Guaranty shall remain in full force
-------------------
and effect until all of the Guarantied Obligations have been completely
performed and paid in full, notwithstanding that from time to time prior thereto
the Borrower may be free from any of the Guarantied Obligations. The Guarantor's
payment of a portion, but not all, of the Guarantied Obligations shall in no
way limit, affect, modify or abridge the Guarantor's liability for any portion
of the Guarantied Obligations that has not been completely performed or paid in
full.
3.3 Absolute and Unconditional Guaranty. This Guaranty and the
-----------------------------------
obligations of the Guarantor hereunder are not subject to any reduction,
limitation, impairment, discharge or termination for any reason (other than the
complete performance and the payment in full of the Guarantied Obligations),
including the occurrence of any one or more of the following, whether or not the
Guarantor shall have had notice or knowledge of any of them:
(i) any change in the manner, place or terms of payment
(including the currency thereof) of any of the Guarantied Obligations;
(ii) any settlement, compromise, release or discharge of, or
acceptance or refusal of any offer of performance with respect to, or
substitutions for, the Guarantied Obligations or any agreement relating thereto
or any subordination of the payment of the Guarantied Obligations to the payment
of any other obligations;
(iii) any rescission, waiver, extension, renewal, alteration,
amendment or modification of, or any consent to departure from, any of the terms
or provisions (including provisions relating to Events of Default) of the
Guarantied Obligations or any agreement relating thereto, or any other
guaranties or security for the Guarantied Obligations, in each case whether or
not in accordance with the terms thereof;
(iv) the Guarantied Obligations, this Guaranty or any other
agreement relating thereto at any time being found to be illegal, invalid or
<PAGE>
unenforceable in any respect or any provision of applicable law or regulation
purporting to prohibit the payment by the Borrower of any of the Guarantied
Obligations;
(v) any request or acceptance of other guaranties of the
Guarantied Obligations or the taking and holding of any security for the payment
of the Guarantied Obligations, this Guaranty, or any other guaranty of the
Guarantied Obligations or any release, impairment, surrender, exchange,
substitution, compromise, settlement, rescission or subordination thereof;
(vi) any failure to perfect or continue perfection of a
security interest in any collateral which secures any of the Guarantied
Obligations; or any enforcement and application of any security now or hereafter
held by the Beneficiary in respect of this Guaranty or the Guarantied
Obligations and any direction of the order or manner of sale thereof, or the
exercise of any other right or remedy that the Beneficiary may have with respect
to any such security, as the Beneficiary in its sole discretion may determine,
including foreclosure on any such security pursuant to one or more judicial or
nonjudicial sales;
(vii) any failure or omission to exercise, assert or enforce,
or any agreement or election not to assert or enforce, or the stay or enjoining,
by order of court, by operation of law or otherwise, of the exercise or
enforcement of, any claim or demand or any right, power or remedy (whether
arising under the Loan Documents, at law, in equity or otherwise) with respect
to the Guarantied Obligations or any agreement relating thereto, or with respect
to any other guaranties of or any security for the payment of the Guarantied
Obligations;
(viii) any change in, or reorganization of, the corporate
structure of the Borrower or any of its Subsidiaries or any dissolution,
termination, consolidation or merger or sale or other disposition, whether or
not for fair consideration, of all or substantially all of the assets of any of
the foregoing or any consent of the Beneficiary thereto or to any restructuring
of the Guarantied Obligations;
(ix) the election by the Beneficiary in any proceeding
instituted under the Bankruptcy Code of the application of Section 1111(b)(2) of
the Bankruptcy Code; any borrowing or grant of a security interest by the
Borrower, as debtor-in-possession, under Section 364 of the Bankruptcy Code; or
the disallowance under Section 502 of the Bankruptcy Code of all or any portion
of the claims of the Beneficiary for repayment of the Guarantied Obligations;
(x) any name change or merger, consolidation or other business
combination (including the Merger) involving or with respect to the Borrower; or
(xi) any other act or thing or omission, or delay to do any
other act or thing, which may or might in any manner or to any extent vary the
risk of the Guarantor as an obligor in respect of the Guarantied Obligations.
<PAGE>
4. Waivers of Notices and Defenses. The Guarantor hereby waives,
-------------------------------
for the benefit of the Beneficiary:
(i) any defense arising by reason of the incapacity, lack
of authority or any disability of the Borrower;
(ii) any notice of the creation, renewal, extension or
accrual of any of the Guarantied Obligations and notice of or proof of reliance
by the Beneficiary upon this Guaranty or acceptance of this Guaranty (the
Guarantied Obligations and all dealings between the Borrower and the Guarantor,
on the one hand, and the Beneficiary, on the other hand, being conclusively
deemed to have been created, incurred or conducted in reliance upon this
Guaranty);
(iii) any setoff or counterclaim, any demand for
performance, notice of nonperformance, diligence, presentment, protest, notice
of protest, notice of dishonor, notice of Defaults or Events of Default, notice
of any amendment, renewal, extension or modification of the Guarantied
Obligations or any agreement related thereto, notice that any portion of the
Guarantied Obligations is due, notice of any collection proceedings, and notice
of any other fact which might increase the risk of the Guarantor;
(iv) any defense based upon any statute or rule of law
that provides that the obligation of a surety cannot be larger in amount or in
other respects more burdensome than that of the principal;
(v) any benefit of, or any right to participate in, or
any notices of exchange, sale, surrender or other handling of, any security or
collateral given to the Beneficiary (whether directly or indirectly) to secure
payment or performance of the Guarantied Obligations or any other liability of
the Borrower to the Beneficiary; and
(vi) to the fullest extent permitted by law, any other
defenses or benefits that may be derived from or afforded by law which limit the
liability of, or exonerate, guarantors or sureties, or which may conflict with
the terms of this Guaranty, including failure of consideration, breach of
warranty, statute of frauds, statute of limitations, accord and satisfaction,
and usury.
5. Bankruptcy and Related Matters.
------------------------------
5.1 No Proceedings Against the Borrower. So long as any of the
------------------------------------
Guarantied Obligations remain outstanding, the Guarantor shall not, without the
prior written consent of the Beneficiary, commence or join with any other Person
in commencing any bankruptcy, liquidation, reorganization or insolvency
proceedings of, or against, the Borrower.
5.2 Guarantor Remains Obligated. The obligations of the
---------------------------
Guarantor under this Guaranty shall not be reduced, limited, impaired,
discharged,
<PAGE>
deferred, suspended or terminated by any proceeding or action, voluntary or
involuntary, involving the bankruptcy, insolvency, receivership, reorganization,
marshalling of assets, assignment for the benefit of creditors, composition with
creditors, readjustment, liquidation or arrangement of the Borrower or similar
proceedings or actions or by any defense which the Borrower may have by reason
of the order, decree or decision of any court or administrative body resulting
from any such proceeding or action. Without limiting the generality of the
foregoing, the Guarantor's liability shall extend to all amounts and obligations
that constitute the Guarantied Obligations and would be owed by the Borrower but
for the fact that they are unenforceable or not allowable due to the existence
of any such proceeding or action.
5.3 Stay of Acceleration. The Guarantor agrees that,
--------------------
notwithstanding anything to the contrary herein, if, after the occurrence and
during the continuance of an Event of Default, the Beneficiary is prevented by
applicable law from exercising its rights to accelerate the maturity of the
Guarantied Obligations, to collect interest on the Guarantied Obligations or to
enforce or exercise any other right or remedy with respect to the Guarantied
Obligations, or the Beneficiary is prevented from taking any action to realize
on any security or collateral or is prevented from collecting any of the
Guarantied Obligations, the Guarantor shall pay to the Beneficiary upon demand
therefor the amount that would otherwise have been due and payable had such
rights and remedies been permitted to be exercised by the Beneficiary.
5.4 Post-Petition Interest. Pursuant to, and without limiting,
----------------------
the foregoing, the Guarantor acknowledges and agrees that any interest on any
portion of the Guarantied Obligations which accrues after the commencement of
any proceeding or action referred to in Section 5.2 (or, if interest on any
portion of the Guarantied Obligations ceases to accrue by operation of law by
reason of the commencement of such proceeding or action, such interest as would
have accrued on such portion of the Guarantied Obligations if such proceedings
or actions had not been commenced) shall be included in the Guarantied
Obligations, it being the intention of the Guarantor and the Beneficiary that
the Guarantied Obligations shall be determined without regard to any rule of law
or order which may relieve the Borrower of any portion of such Guarantied
Obligations. The Guarantor will permit any trustee in bankruptcy, receiver,
debtor in possession, assignee for the benefit of creditors or similar person to
pay the Beneficiary, or allow the claim of the Beneficiary, in respect of, any
such interest accruing after the date on which such proceeding is commenced.
5.5 Reinstatement of Guaranty. Notwithstanding anything to the
-------------------------
contrary contained herein, in the event that all or any portion of the
Guarantied Obligations are paid by the Borrower, the obligations of the
Guarantor hereunder shall continue and remain in full force and effect or be
reinstated, as the case may be, if all or any part of such payment are rescinded
or recovered, directly or indirectly, from the Beneficiary as a preference,
fraudulent transfer or otherwise, and any such payments which are so rescinded
or recovered shall constitute Guarantied Obligations for all purposes under this
Guaranty.
<PAGE>
6. No Subrogation. Notwithstanding any payment or payments made by
--------------
the Guarantor hereunder, or any set-off or application of funds of the Guarantor
by the Beneficiary, the Guarantor hereby irrevocably waives any claim or other
rights that he may now or hereafter acquire against the Borrower or any other
insider guarantor that arise from the existence, payment, performance or
enforcement of the Guarantor's obligations under this Guaranty or any other Loan
Document, including any right of subrogation, reimbursement, exoneration,
contribution or indemnification and any right to participate in any claim or
remedy of the Beneficiary against the Borrower or any other insider guarantor or
any collateral security, whether or not such claim, remedy or right arises in
equity or under contract, statute or common law, including the right to take or
receive from the Borrower or any other insider guarantor, directly or
indirectly, in cash or other property or by set-off or in any other manner,
payment or security on account of such claim, remedy or right. If any amount
shall be paid to the Guarantor in violation of the preceding sentence, such
amount shall be held by the Guarantor in trust for the Beneficiary, segregated
from other funds of the Guarantor, and shall, forthwith upon receipt by the
Guarantor, be turned over to the Beneficiary in the exact form received by the
Guarantor (duly endorsed by the Guarantor to the Beneficiary, if so requested by
the Beneficiary), to be applied against the Guarantied Obligations, whether
matured or unmatured, in such order as the Beneficiary may determine.
7. Subordination of Other Obligations. The Guarantor hereby agrees
----------------------------------
that any indebtedness of the Borrower now or hereafter held by the Guarantor is
hereby subordinated in right of payment to the Guarantied Obligations, and any
such indebtedness of the Borrower to the Guarantor collected or received by the
Guarantor after an Event of Default has occurred and is continuing shall be held
in trust for the Beneficiary and shall forthwith be paid over to the Beneficiary
to be credited and applied against the Guarantied Obligations without in any way
affecting, impairing or limiting the liability of the Guarantor under this
Guaranty.
8. Setoff; Security Arrangements.
-----------------------------
8.1 Setoff. In addition to any rights and remedies of the
------
Beneficiary provided by law or otherwise, upon the occurrence of an Event of
Default and acceleration of the obligations owing in connection with the Loan
Documents or any other Default in the payment of any principal or interest owed
thereunder, the Beneficiary shall have the right, without prior notice to the
Guarantor, any such notice being expressly waived to the extent permitted by
applicable law, to set off and apply against any indebtedness or other amounts
due under the Loan Documents, whether matured or unmatured, of the Guarantor to
the Beneficiary, any and all deposits (whether general or special, time or
demand, provisional or final, and regardless of whether denominated in dollars
or in any other currency) and other amounts owing from the Beneficiary to the
Guarantor, whether matured or unmatured, at, or at any time after, the happening
of any of the above-mentioned events, and such right of set-off may be exercised
by the Beneficiary against the Guarantor or against any trustee in bankruptcy,
debtor in possession, assignee for the benefit of creditors, receiver, custodian
or execution, judgment of attachment creditor
<PAGE>
of the Guarantor, or against anyone else claiming through or against the
Guarantor or such trustee in bankruptcy, debtor in possession, assignee for the
benefit of creditors, receivers, or execution, judgment or attachment creditor,
notwithstanding the fact that such right of set-off shall not have been
exercised by the Beneficiary prior to the making, filing or issuance, or service
upon the Beneficiary of, or of notice of, any such petition, assignment for the
benefit of creditors, appointment or application for the appointment of a
receiver, or issuance of execution, subpoena, order or warrant. The Beneficiary
agrees promptly to notify the Guarantor after any such set-off and application
made by the Beneficiary, provided that the failure to give such notice shall not
--------
affect the validity of such set-off and application.
8.2 Security Arrangements. The Guarantor has granted to the
---------------------
Beneficiary a security interest in the collateral subject to the Collateral
Documents to which it is a party as collateral security for the Guarantied
Obligations and such other obligations as are therein specified. Reference is
hereby made to the Collateral Documents for more complete descriptions of the
terms and provisions thereof.
9. Representations and Warranties. The Guarantor hereby represents
------------------------------
and warrants to the Beneficiary that:
9.1 No Contravention. The execution, delivery and performance
----------------
by the Guarantor of this Guaranty require no action by or in respect of, filing
with or notice to, any Governmental Authority and do not contravene, or
constitute a default under, or require the consent of any creditor or other
person under, any provision of applicable law or regulation or of any agreement,
judgment, injunction, order, decree or other instrument binding upon the
Guarantor or to which any of his assets are subject, or result in the creation
or imposition of any Lien on any asset of the Guarantor.
9.2 Binding Obligation. This Guaranty has been duly and validly
------------------
executed and delivered by the Guarantor and constitutes the legal, valid and
binding obligation of the Guarantor enforceable against the Guarantor in
accordance with its terms, except as the enforceability thereof may be limited
by bankruptcy, insolvency or other similar laws affecting the enforcement of
creditors' rights generally and by equitable principles relating to the
availability of equitable remedies.
9.3 Relationship to Parent and the Borrower. Upon consummation
---------------------------------------
of the Merger, the Guarantor will own 100% of the capital stock of PS Group
Holdings, Inc., a Delaware corporation, which owns 100% of the capital stock of
the Borrower; the agreement of the Beneficiary to make the Loan to the Borrower
is of substantial and material benefit to the Guarantor; and the Guarantor has
reviewed and approved copies of the Loan Documents and is fully informed of the
remedies the Beneficiary may pursue upon the occurrence of an Event of Default
in any Loan Document.
<PAGE>
9.4 Citizenship. The Guarantor is a "citizen of the United
-----------
States" within the meaning of Section 101(16) of the Federal Aviation Act of
1958, as amended.
9.5 Incorporation of Certain Representations and Warranties from
------------------------------------------------------------
the Merger Agreement.
- --------------------
(i) The Guarantor hereby makes to the Beneficiary each of
the representations and warranties of the Guarantor set forth in Article III of
the Merger Agreement, in each case, as qualified by the Company Disclosure
Schedules (the "Designated Representations"), and such Designated
Representations, as qualified, are hereby incorporated by reference herein as if
set forth herein verbatim. The Designated Representations shall have the same
force and effect as all other representations and warranties of the Guarantor
made herein. For purposes of the foregoing representation, all defined terms in
the Designated Representations shall have the meaning as set forth in the Merger
Agreement.
(ii) The Guarantor agrees that the Designated
Representations shall be construed in a consistent manner with all other
representations and warranties contained in this Guaranty, but to the extent
that such other representations herein may provide the Beneficiary greater
protection, such other representations shall govern.
10. Covenants.
---------
10.1 Financial Condition of the Borrower. The Guarantor agrees
-----------------------------------
that the Beneficiaries shall have no obligation to disclose or discuss with the
Guarantor their assessment, or the Guarantor's assessment, of the financial
condition of the Borrower. The Guarantor represents and warrants that it has
adequate means to obtain information from the Borrower on a continuing basis
concerning the financial condition of the Borrower and the Borrower's ability to
perform its obligations under the Loan Documents, and the Guarantor covenants
and agrees to keep informed of the financial condition of the Borrower and of
all circumstances bearing upon the risk of nonpayment of the Guarantied
Obligations. The Guarantor hereby waives and relinquishes any duty on the part
of the Beneficiary to disclose any matter, fact or thing relating to the
business, operations or conditions of the Borrower, whether now known or
hereafter known by the Beneficiary.
10.2 Notice of Events. As soon as the Guarantor obtains
----------------
knowledge thereof, the Guarantor shall give the Beneficiary written notice of
any condition or event which has resulted or might reasonably be expected to
result in (i) a Material Adverse Effect on the Guarantor or (ii) a breach of, or
noncompliance by the Parent with, any term, condition or covenant contained
herein or in any other Loan Document.
<PAGE>
11. Events of Default.
-----------------
11.1 Events of Default. Each of the following events shall
-----------------
constitute an "Event of Default" hereunder:
(a) the Guarantor shall fail to perform or observe any
covenant or agreement contained in this Guaranty or in the Merger Documents, on
its part to be performed or observed and any such failure shall remain
unremedied for [ten] Business Days after the Beneficiary shall have given the
Guarantor notice thereof; or an "Event of Default" shall occur and be continuing
under, and as respectively defined in, the Loan Agreement or any other Loan
Document;
(b) any representation or warranty made or confirmed by the
Guarantor at the Closing Date, on the date of the Merger, or otherwise under, or
in any notice given pursuant to any express requirement of, this Guaranty or any
other Loan Document shall prove to have been incorrect in any material respect
when made or confirmed;
(c) the Guarantor shall (i) fail to pay any principal or
interest, regardless of amount, due in respect of any one or more items of Debt
in a principal amount in excess of $1,000,000 in the aggregate, when and as the
same shall become due and payable, or (ii) fail to observe or perform any other
term, covenant, condition or agreement contained in any agreement or instrument
evidencing or governing any such Debt if the effect of any failure referred to
in this clause (ii) is to cause, or to permit the holder or holders of such Debt
or a trustee on its or their behalf (with or without the giving of notice, the
lapse of time or both) to cause, such Debt to become due prior to its stated
maturity;
(d) the Guarantor shall generally not pay its debts as such
debts 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
any proceeding shall be instituted by or against the Guarantor 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 of debtors, or seeking the entry of an order for relief
or the appointment of a receiver, trustee, or other similar official for it or
for any substantial part of its property, and any such proceeding instituted
against the Guarantor shall remain undismissed and unstayed for a period of 60
consecutive days; or
(e) any judgment or order (other than one with respect to a
(x) non-recourse Debt or (y) Lien permitted by Section 6.1(a) of the Loan
Agreement) for the payment of money in excess of $100,000 shall be rendered
against the Guarantor and there shall be any period of 30 consecutive days
during which
<PAGE>
neither (i) such judgment or order shall have been discharged or bonded nor (ii)
a stay of enforcement of such judgment or order, by reason of a pending appeal
or otherwise, shall be in effect.
11.2 Acceleration of Maturity. If an Event of Default shall
------------------------
occur and be continuing, the Beneficiary may declare the unpaid principal amount
of and all accrued interest on the Loan and the Note and all other amounts
payable to it under the Loan Agreement or the Note to be forthwith due and
payable, whereupon the unpaid principal amount of and all accrued interest on
the Loan and the Note and all such other amounts shall become and be forthwith
due and payable; provided that in the case of any of the Events of Default
--------
specified in Section 11.1(d) hereof, without any notice to the Guarantor or any
other act by the Beneficiary, the unpaid principal amount of and all accrued
interest on the Loan and the Note and all other amounts payable under the Loan
Agreement or the Note shall become immediately due and payable.
11.3 Suits for Enforcement. In case any one or more Events of
---------------------
Default shall occur and be continuing, the Beneficiary may proceed to protect
and enforce its rights either by suit in equity or by action at law, or by
enforcing its rights under the Security Agreement or this Guaranty, or by other
appropriate proceedings, whether for the specific performance of any covenant or
agreement contained in this Guaranty or any other Loan Document or for an
injunction against a violation of any of the terms hereof or thereof, or to
recover damages for the breach thereof, or in aid of the exercise of any power
granted herein or therein, or proceed to enforce the payment of the Note or to
enforce any other legal or equitable right of the Beneficiary.
11.4 Remedies Cumulative. No right, power or remedy herein or
-------------------
in the Note or any other Loan Document conferred upon the Beneficiary is
intended to be exclusive of any other right, power or remedy and each and every
such remedy shall be cumulative and shall be in addition to every other right,
power or remedy given hereunder, or now or hereafter existing at law or in
equity or by statute or otherwise.
11.5 Remedies Not Waived. No course of dealing among the
-------------------
parties hereto or any delay or omission on the part of any party hereto in
exercising any rights hereunder or under the Note or any other Loan Document
shall operate as a waiver of any rights of any party hereto.
12. Miscellaneous.
-------------
12.1 Survival of Warranties. All agreements, representations
----------------------
and warranties made herein shall survive the execution and delivery of this
Guaranty, the making of the Loan and the execution and delivery of the other
Loan Documents.
<PAGE>
12.2 Notices. All notices, requests and other communications to
-------
any party hereunder shall be in writing and shall be given pursuant to Section
8.6 of the Loan Agreement and if to the Guarantor c/o the Borrower at such
address as if set forth in Section 8.6 of the Loan Agreement.
12.3 No Waivers. No failure or delay by the Beneficiary in
----------
exercising any right, power or privilege hereunder or under any other Loan
Document 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.
12.4 Expenses. The Guarantor agrees to pay, or cause to be
--------
paid, on demand, and to keep the Beneficiaries harmless against liability for,
any and all costs and expenses (including reasonable fees and disbursements of
counsel and fees, costs and expenses incurred in connection with any bankruptcy
proceeding) incurred or expended by any Beneficiary in connection with the
enforcement, amendment, modification or waiver of or preservation of any rights
under this Guaranty and under any other Loan Document and the collection of
amounts payable hereunder and thereunder and obtaining advice of counsel in
respect hereof or thereof, and until so paid, such fees, costs, disbursements
and expenses shall be added to, and constitute, Guarantied Obligations.
12.5 Amendments and Waivers. This writing is intended by the
----------------------
Guarantor and the Beneficiaries as the final expression of this Guaranty and is
also intended as a complete statement of the terms of their agreement with
respect to the matters covered hereby. No amendment, modification, termination
or waiver of any provision of this Guaranty, or consent to any departure by the
Guarantor therefrom, shall in any event be effective without the written consent
of each Beneficiary.
12.6 Successors and Assigns. This Guaranty is a continuing
----------------------
guaranty and shall be binding upon the Guarantor and its successors and assigns;
provided that the Guarantor may not assign this Guaranty or any of the rights or
- --------
obligations of the Guarantor hereunder without the prior written consent of the
Beneficiary. This Guaranty shall inure to the benefit of each Beneficiary and
its successors and assigns.
12. Applicable Law. This Guaranty shall be construed in
--------------
accordance with and governed by the law of the State of New York applicable to
agreements made and to be performed entirely within such state.
<PAGE>
12.8 Jurisdiction.
------------
(a) Any action or proceeding against the guarantor relating
in any way to this guaranty or any other loan document may be brought and
enforced in the courts of the State of New York or of the United States for the
Southern District of New York, and the Guarantor irrevocably consents to the
jurisdiction of each such court in respect of any such action or proceeding. The
Guarantor irrevocably appoints Integrated Capital Associates of New York, Inc.,
which currently maintains an office in New York State situated at 101 East 52nd
Street, New York, New York 10022, as its agent to receive service of process or
other legal summons for purposes of any such action or proceeding. The Guarantor
further irrevocably consents to the service of process in any such action or
proceeding by the mailing of copies thereof by registered or certified mail,
postage prepaid, return receipt requested, to the guarantor at its address as
provided for notices hereunder. The foregoing shall not limit the right of the
beneficiary to serve process in any other manner permitted by law or to bring
any action or proceeding, or to obtain execution of any judgment, in any other
jurisdiction.
(b) The Guarantor hereby irrevocably waives any objection
that it may now or hereafter have to the laying of venue of any action or
proceeding arising under or relating to this Guaranty or any other Loan Document
in any court located in the Borough of Manhattan, City and State of New York, or
located in any other jurisdiction chosen by the beneficiary in accordance with
clause (a) of this subsection, and hereby further irrevocably waives any claim
that a court located in the Borough of Manhattan, City and State of New York is
not a convenient forum for any such action or proceeding.
12.9 Severability. If any provision in or obligation under this
------------
Guaranty shall be invalid, illegal or unenforceable in any jurisdiction, the
validity, legality and enforceability of the remaining provisions or
obligations, or of such provision or obligation in any other jurisdiction, shall
not in any way be affected or impaired thereby.
12.10 Interpretation. Section headings in this Guaranty are
--------------
included herein for convenience of reference only and shall not constitute a
part of this Guaranty for any other purpose or be given any substantive effect.
12.11 Further Assurances. At any time or from time to time, upon
------------------
the request of a Beneficiary, the Guarantor shall execute and deliver such
<PAGE>
further documents and do such other acts and things as such Beneficiary may
reasonably request in order to effect fully the purposes of this Guaranty.
12.12 First Union. It is expressly understood and agreed that
-----------
this Guaranty is executed and delivered by First Union National Bank ("First
Union"), not in its individual capacity but solely as Trustee under the Trust
Agreement (Heritage Air Holdings Statutory Trust) dated as of September 20, 1999
(the "Trust Agreement"), in the exercise of the powers and authority conferred
and vested in it as the Trustee thereunder, and each of the representations,
warranties, undertakings and agreements herein made on the part of the Trust is
made and intended not as a representation, warranty, undertaking or agreement by
First Union but is made and intended for the purpose of binding only the trust
estate created by the Trust Agreement (the "Trust Estate"), and all persons
having any claim against First Union or the Trust by reason of the transactions
contemplated by this Guaranty shall look only to the Trust Estate for payment or
satisfaction thereof.
IN WITNESS WHEREOF, the Guarantor has executed this Guaranty by its
duly authorized officer as of the date first above written.
HERITAGE AIR HOLDINGS STATUTORY
TRUST
By: First Union National Bank, not in its
individual capacity but solely as its
Trustee
By:_______________________________________
Name:
Title:
[TRUST GUARANTY]
<PAGE>
EXHIBIT E
STOCK PLEDGE AND SECURITY AGREEMENT dated as of ________, 2000 from
PS GROUP HOLDINGS, INC., a Delaware corporation (the "Pledgor"), to GATX CAPITAL
CORPORATION, a Delaware corporation (the "Lender" or "Pledgee").
PS Group, Inc., a Delaware corporation (the "Borrower") and the Lender
have entered into a Loan Agreement (the "Loan Agreement"), dated as of December
18, 1999. The Pledgor is pledging the Pledged Stock (as defined below) and
granting a security in the Collateral (as defined below) to the Pledgee.
Defined terms used and not defined herein have the meanings set forth
in the Loan Agreement or, unless the context otherwise requires, those set forth
in the Uniform Commercial Code of New York.
The parties agree as follows:
1. Grant of Security Interest. The Pledgor, in consideration of the
--------------------------
premises and of the sum of Ten Dollars received by the Pledgor from the Secured
Party and other good and valuable consideration, receipt whereof is hereby
acknowledged, and in order to secure the payment of all sums now or hereafter
owing to the Lender by Pledgor under and pursuant to the Lender Documents (as
defined in Section 2 below), and the performance and observance of all of the
Debtor's covenants and conditions contained in the Lender Documents (the
"Indebtedness"), does, subject to the last paragraph of this GRANTING CLAUSE,
hereby convey, mortgage, assign, pledge and grant to the Secured Party, its
successors and assigns, a first priority security interest in, all and singular,
of the Debtor's right, title and interest in and to all of its equipment,
inventory, accounts, accounts receivable, contract rights, chattel paper,
instruments, investment property, drafts and other assets of any kind, and
general intangibles, including, without limitation, the following described
properties, rights, interests and privileges (all of which properties hereby
conveyed, mortgaged, assigned, pledged and granted or intended to be so
conveyed, mortgaged, assigned, pledged and granted are hereinafter collectively
referred to as the "Collateral"; provided, that the Collateral shall not include
--------
any of the Pledgor's right, title and interest in and to the SERP Policy (as
defined in the Merger Agreement):
(a) Proceeds. All proceeds of any and all of the foregoing
--------
(including proceeds which constitute property of the types described in clause 1
above) and, to the extent not otherwise included, all payments under insurance
(whether or not the Secured Party is the loss payee thereof), or any indemnity,
warranty or guaranty, payable by reason of loss or damage to or otherwise with
respect to any of the foregoing items.
(i) The foregoing security interest granted pursuant to
this GRANTING CLAUSE shall not be effective for any item of Collateral to the
extent that such grant would (A) violate any clause in any Contract, or
Requirement of Law
<PAGE>
2
prohibiting such grant of a security interest or (B) be based on any Contract or
Requirement of Law or otherwise, require the consent of any Person the failure
to obtain which would result in a default under each Contract or Lease.
(ii) Anything herein contained to the contrary
notwithstanding, the Pledgor shall remain liable under the Contracts to which it
is a party to perform all of its obligations thereunder, all in accordance with
and pursuant to the respective terms and provisions thereof, and the Secured
Party shall have no obligation or liability under any such Contract by reason of
or arising out of the foregoing grant, nor shall the Secured Party be required
or obligated in any manner to perform or fulfill any of the obligations of the
Pledgor pursuant to such instruments, or to make any payment, or to make any
inquiry as to the nature or sufficiency of any payment received by the Secured
Party or the Pledgor or to present or file any claim, or to take any action to
collect or enforce the payment of any amounts which may have been assigned to
the Secured Party or the Pledgor or to which they or it may be entitled at any
time.
2. Pledge. In consideration of the Lender's making the Loan to the
------
Borrower pursuant to the Loan Agreement, the Pledgor hereby assigns, transfers
and pledges to the Pledgee, and grants to the Pledgee a first priority security
interest in, all of the Pledgor's right, title and interest in, to and under
that number of issued and outstanding shares of the capital stock of each entity
set forth on Schedule I hereto, and the certificates representing such capital
stock or securities together with all dividends, distributions and any other
certificates from time to time issued, and all rights to receive the same, in
respect thereof or in exchange therefor (collectively, together with the
proceeds thereof, the "Pledged Stock"), to secure the prompt and complete
payment and performance of all of the obligations (collectively, the
"Obligations") of the Pledgor or the Borrower under the Loan Documents to which
the Lender is a party or a beneficiary, including the Note (together, the
"Lender Documents"), on and subject to the terms and conditions herein and
therein contained.
3. Term. The pledge hereunder of the Pledged Stock shall terminate
----
and be of no further force or effect upon the payment and satisfaction in full
of all of the Obligations, and the Pledgee shall forthwith assign, transfer and
deliver, against receipt, any remaining Pledged Stock and money, assets or other
property received in respect thereof, to the Pledgor or to another on the order
of the Pledgor, as the case may be.
4. Delivery.
--------
(a) In furtherance of the pledge and assignment referred to in
Section 2 of this Agreement, the Pledgor hereby (a) delivers to the Pledgee
certificates representing the Pledged Stock, together with duly executed blank
stock powers relating thereto and (b) agrees to deliver or cause the Borrower or
their successors to deliver to the Pledgee, promptly after the issuance thereof,
any and all replacement certificates in respect of the certificates delivered
pursuant to clause (a)
<PAGE>
3
above from time to time issued by the Borrower, or any successor, which
certificates shall be part of the Pledged Stock, and certificates representing
any additional shares of capital stock of any class of the Borrower, or any
successor, and any other security issued or received by the Borrower, in respect
thereof, together with duly executed blank stock powers with such signatures
properly guaranteed.
(b) The Pledgee hereby acknowledges receipt of the certificates
and the stock powers referred to in Section 4(a), and agrees to hold, release,
and dispose of the same in accordance with this Agreement.
5. Transfer, Voting Power, Dividends.
---------------------------------
(a) The Pledgee may have the Pledged Stock registered in its name
or in the name of its nominee if an Event of Default shall occur and be
continuing (or if the Pledgee is required to do so by any regulatory authority
or otherwise). Such Pledged Stock as so registered shall remain subject to this
Agreement.
(b) (i) Unless and until an Event of Default shall occur and
be continuing (the period during which any Event of Default shall so continue
being herein called a "Default Period"), the Pledgor shall be entitled to
exercise all powers of voting and consent pertaining to the Pledged Stock owned
by it or any part thereof, for all purposes not inconsistent with the terms of
this Agreement and any other Lender Document.
(ii) To permit the Pledgor to exercise such powers of
voting or consent, the Pledgee shall, if necessary, upon the written request of
the Pledgor, from time to time execute and deliver to the Pledgor appropriate
proxies.
(iii) During any Default Period, the Pledgee or its nominee
or nominees shall have the sole and exclusive right to exercise all powers of
voting or consent pertaining to the Pledged Stock or any part thereof.
(c) (i) All payments, distributions or dividends, in
securities, property or cash, including dividends representing stock or
liquidating dividends or a distribution or return of capital upon or in respect
of the Pledged Stock or any part thereof or resulting from a split-up, revision
or reclassification of the Pledged Stock or any part thereof or received in
exchange for the Pledged Stock or any part thereof as a result of a merger,
consolidation or otherwise, shall be paid or delivered directly to the Pledgee
immediately upon receipt thereof (accompanied by appropriate undated stock
powers duly executed in blank or, at the request of the Pledgee, registered in
the nominee's name), and shall be retained by the Pledgee as part of the Pledged
Stock.
(ii) In case any money shall be paid to the Pledgor on
account of any dividend or other distribution upon or in respect of the Pledged
Stock
<PAGE>
4
or any part thereof, such money shall be immediately paid to the Collateral
Account [Lender].
(iii) In order to permit the Pledgee to receive all payments
and distributions to which it may be entitled under clause (a) above, the
Pledgor shall, if necessary, upon the written request of the Pledgee, from time
to time execute and deliver to the Pledgee appropriate dividend or payment
orders.
(iv) All cash and other property paid to and retained by
the Pledgee pursuant to this Section 5(c) shall be held by it until applied as
herein provided as additional collateral security pledged under and subject to
this Agreement.
6. Remedies. If an Event of Default shall occur and be continuing,
--------
in addition to any rights and remedies which may be available to a secured party
under the Uniform Commercial Code as in effect at the time in New York (the
"Uniform Commercial Code"), the following provisions shall apply:
(a) The Pledgee may, without being required to give any notice
except as hereinafter provided or as may be required by law, apply the cash, if
any, then held by it as collateral security hereunder or in the Collateral
Account to the payment of the Obligations and, if there shall be no such cash or
the cash so applied shall be insufficient to pay in full all such Obligations,
sell the Pledged Stock, or any part thereof, at public or private sale, for
cash, upon credit or for future delivery, and at such price or prices as the
Pledgee may deem satisfactory, and the Pledgee may be the purchaser of any or
all of the Pledged Stock so sold and thereafter hold the same absolutely, free
from any right or claim of whatsoever kind.
(b) The Pledgee is authorized, at any such sale, if it deems it
advisable so to do, to restrict the prospective bidders or purchasers to persons
who will represent and agree that they are purchasing for their own account, for
investment, and not with a view to the distribution or sale of any of the
Pledged Stock.
(c) Upon any such sale the Pledgee shall have the right to
deliver, assign and transfer to the purchaser thereof the Pledged Stock so sold.
Each purchaser (including the Pledgee) at any such sale shall hold the property
sold, absolutely, free from any claim or right of whatsoever kind, including any
equity or rights of redemption, of the Pledgor who owns such Pledged Stock, who
hereby specifically waives, unless otherwise prohibited by law, as against any
such purchaser all rights of redemption, stay or appraisal which it has or may
have under any rule of law or statute now existing or hereafter adopted.
(d) The Pledgee shall give the Pledgor such period of notice as
is required by law by mail or telegram (or by hand delivery) of its intention to
make any such public or private sale, which notice shall specify, to the extent
known
<PAGE>
5
by Pledgee, the terms of sale intended. Such notice of public sale shall state
the time and place fixed for such sale.
(e) Any such public sale shall be held at such time or times
within ordinary business hours and at such place or places as the Pledgee may
fix in the notice of such sale. At any such sale the Pledged Stock may be sold
in one lot as an entirety or in separate parcels, as the Pledgee may determine.
(f) The Pledgee shall not be obligated to make any sale pursuant
to any such notice. The Pledgee may, without notice or publication, adjourn any
public or private sale or cause the same to be adjourned from time to time by
announcement at the time and place fixed for the sale, and such sale may be made
at any time or place to which the same may be so adjourned.
(g) In case of any sale of all or any part of the Pledged Stock
for future delivery, the Pledged Stock so sold must be retained by the Pledgee
until the selling price is paid by the purchaser thereof, but the Pledgee shall
not incur any liability in case of the failure of such purchaser to take up and
pay for the Pledged Stock so sold and, in case of any such failure, such Pledged
Stock may again be sold upon like notice.
(h) The Pledgee, instead of, or in addition to, exercising the
power of sale herein conferred upon it, may proceed by a suit or suits at law or
in equity to foreclose the pledge and sell the Pledged Stock, or any portion
thereof, under a judgment or decree of a court or courts of competent
jurisdiction.
7. Information. If the Pledgee determines to exercise its right to
-----------
sell all or any of the Pledged Stock, upon written request, the Pledgor shall
from time to time furnish and cause the Borrower to furnish to the Pledgee all
such information as the Pledgee may reasonably request with respect to the
Pledged Stock, the Borrower and the Borrower's properties, assets and
liabilities.
8. General. The following provisions shall apply to the Pledged
-------
Stock and this Agreement generally:
(a) Private Sale. The Pledgee shall incur no liability as a
------------
result of the sale of the Pledged Stock, or any part thereof, at any private
sale permitted by this Agreement or under applicable law; provided that the
--------
Pledgee shall act in a commercially reasonable manner. Subject to the
immediately preceding sentence, the Pledgor hereby waives, to the fullest extent
permitted by law, any claims against the Pledgee arising by reason of the fact
that the price at which any security may have been sold at such private sale was
less than the price which might have been obtained at a public sale or was less
than the aggregate amount of the Obligations, even if the Pledgee accepts the
first offer received and does not offer such Pledged Stock to more than one
offeree.
<PAGE>
6
(b) Application of Proceeds. The proceeds of any sale of all or
-----------------------
any part of the Pledged Stock, and any other cash at the time held by the
Pledgee under this Agreement or in the Collateral Account, shall be applied by
the Pledgee in accordance with Section 2.7 of the Loan Agreement as in effect
immediately prior to the completion of such sale.
As used in this Agreement, "proceeds" of the Pledged Stock shall mean
cash, securities and other property realized in respect of, and distributions in
kind of, the Pledged Stock, including any received under any reorganization,
liquidation or adjustment of debt of the Pledgor or any issuer of securities
included in the Pledged Stock.
(c) Attorney-in-Fact. The Pledgee is hereby appointed the
----------------
attorney-in-fact of the Pledgor, for the sole use and benefit of the Pledgee at
the expense of the Pledgor, to the extent permitted by law:
(i) for any period not a Default Period, to sign documents
and take any other actions to perfect, promote and protect its security interest
in the Pledged Stock consistent with the terms of this Agreement; and
(ii) during a Default Period, to carry out the provisions
of this Agreement and take any action and execute any instruments which the
Pledgee may reasonably deem necessary or advisable to accomplish the purposes
hereof.
The appointment of the Pledgee as attorney-in-fact is irrevocable and
coupled with an interest. Without limiting the generality of the foregoing,
during a Default Period, the Pledgee shall have the right and power with respect
to all or any of the Pledged Stock (i) to exercise any election pursuant to
Section 338(h)(10) of the Code, (ii) to demand, sue for, collect, receive and
give acquittance for any and all monies due or to become due upon or by virtue
thereof, (iii) to settle, compromise, compound, prosecute or defend any action
or proceeding with respect thereto, (iv) to sell, transfer, assign or otherwise
deal in or with the same or the proceeds or avails thereof, as fully and
effectually as if the agent were the absolute owner thereof, and (v) to extend
the time of payment of any or all thereof and to make any allowance and other
adjustments with references thereto; provided that the Pledgee as attorney-in-
--------
fact or its agent shall give the Pledgor such period of notice as is required by
law of the time and place of any sale or other intended disposition of any of
the Pledged Stock.
(d) Limitation on Duty of the Pledgee. Beyond the exercise of
---------------------------------
reasonable care in the custody thereof, the Pledgee shall have no duty as to any
Pledged Stock in its possession or control or in the possession or control of
any agent or bailee or any income thereon or as to the preservation of rights
against prior parties or any other rights pertaining thereto. The Pledgee shall
be deemed to have exercised reasonable care in the custody and preservation of
the Pledged Stock in its possession if the Pledged Stock is accorded treatment
substantially equal to that which
<PAGE>
7
it accords its own property. Subject to the preceding sentence, the Pledgee
shall not be liable or responsible for any loss or damage to any of the Pledged
Stock, or for any diminution in the value thereof, by reason of the act or
omission of any agent or bailee selected by the Pledgee in good faith.
(e) Concerning the Pledgee. The Pledgor agrees with the Pledgee
----------------------
as follows:
(i) The Pledgee is authorized to take all such action as
is provided to be taken by it hereunder and all other action reasonably
incidental thereto. As to any matters not expressly provided for herein
(including the timing and methods of realization upon the Pledged Stock and any
waivers or amendments of the provisions hereof), the Pledgee shall, subject to
applicable laws, act or refrain from acting in accordance with its discretion;
(ii) Neither the Pledgee nor any of its directors,
officers, attorneys, agents or employees shall be liable for any action taken or
omitted to be taken by it, or by them on its behalf, under this Agreement or in
respect of any of the Pledged Stock or otherwise in connection with any of the
foregoing, except for its or their own gross negligence or willful misconduct;
(iii) In connection with its duties as the Pledgee under
this Agreement, the Pledgee shall be entitled to rely on any paper or document
reasonably believed by it to be genuine and correct and, in respect of legal
matters, upon the opinion of legal counsel selected by it, and any action taken
or omitted in good faith by the Pledgee in accordance with the opinion of such
counsel shall be fully justified and protected from liability;
(iv) The Pledgee shall not be responsible for the
genuineness, validity, or effectiveness of any of the Pledged Stock nor shall it
be liable because of any invalidity of the security provisions hereof, whether
arising from law or by reason of any action or omission to act on its part, nor
shall the Pledgee be bound to ascertain or inquire as to the performance or
observance of any of the terms of this Agreement by the Pledgor; and
(v) The Pledgee may employ agents and attorneys-in-fact
selected in good faith and shall not be answerable, except as to money or
securities received by it or its authorized agents, for the default or
misconduct of any such agents or attorneys-in-fact selected in good faith.
9. Representations, Warranties and Covenants. The Pledgor hereby
-----------------------------------------
represents and warrants to and covenants with the Pledgee that:
(a) The Pledgor has full corporate power, authority and legal
right and capacity to incur and perform its obligations hereunder;
<PAGE>
8
(b) This Agreement constitutes the legal, valid and binding
obligation of the Pledgor, enforceable in accordance with its terms, except as
the enforceability thereof may be limited by (A) bankruptcy, insolvency,
moratorium, fraudulent conveyance or other similar laws affecting the
enforcement of creditors' rights generally and (B) by equitable principles
relating to the availability of equitable remedies (regardless of whether
considered in a proceeding at law or in equity);
(c) As qualified by any applicable Schedule of the Company
Disclosure Schedules, the representations and warranties set forth in the Loan
Documents relating to the Pledgor are true and accurate subject to the
limitations set forth therein;
(d) The Pledged Stock together constitutes all of the issued and
outstanding shares of capital stock of the Borrower;
(e) So long as the Obligations remain outstanding, the Pledgor at
all times will be the sole direct or indirect beneficial owner of the Pledged
Stock pledged by it or to be pledged by it hereunder;
(f) This Agreement grants to Pledgee a first priority lien upon
and first priority perfected security interest in the Pledged Stock subject to
no other Lien (whether prior, equal or junior) or security interest. Without
limiting the generality of the foregoing, the Pledgor may not sell, assign,
transfer, pledge, hypothecate, gift, devise, incur, create or permit the
creation of a Lien over, or otherwise dispose of (a "transfer") any or all of
the Pledgor's interest in the Pledged Stock without the prior written consent of
the Pledgee. If any such consent is given, a transfer will be subject to
satisfaction of the following conditions: (i) receipt of an opinion in form and
substance reasonably satisfactory to the Pledgee from counsel acceptable to the
Pledgee covering such matters as the Pledgee may reasonably request, including
opinions to the effect that the transferee shall be owner of the Pledged Stock
for tax purposes, that any and all of the Obligations shall be enforceable
against such transferee and that nothing in such transfer shall impair, hinder
or otherwise limit the enforceability of the Lender Documents against the
Borrower or the Pledgor or of the Pledgee's rights thereunder, and (ii)
execution of such documents and taking of such actions by the Pledgor, the
Borrower and such transferee to, among other things, confirm, acknowledge or
assume, as the case may be, their respective obligations under the Lender
Documents; and
(g) As qualified by Schedules 2.05(a) and 2.05(d) of the Company
Disclosure Schedules, the Pledgor's Obligations hereunder shall not be affected
in any way by any name change or merger, consolidation or other business
combination (including the Merger) involving or with respect to the Pledgor or
the Borrower.
<PAGE>
9
10. Indemnification. The Pledgor agrees to indemnify and hold
---------------
harmless the Pledgee and its officers, directors, employees and agents from and
against any and all liabilities, losses, damages, costs and expenses of any kind
(including fees, disbursements and other charges of counsel (including allocated
costs of in-house counsel) in connection with any investigative, administrative
or judicial proceeding, whether or not such indemnified person is a party
thereto) that may be suffered or incurred by any such indemnified person,
relating to or arising out of this Agreement, the exercise by the Pledgee of any
right or remedy hereunder, or any actual or proposed use of proceeds of the
Loan, and the Pledgor agrees to reimburse each indemnified person from time to
time upon demand for any such liabilities, losses, damages, costs and expenses;
provided that no indemnified person shall have the right to be indemnified
- --------
hereunder for its own gross negligence or willful misconduct as determined by a
court of competent jurisdiction. The foregoing indemnity shall survive the
termination of this Agreement, and not be affected by any investigation or
actual or constructive knowledge of any indemnified person.
11. Further Assurances. The Pledgor agrees that, from time to time
------------------
upon the written request of the Pledgee, it will execute and deliver such
further documents and do such other acts and things as the Pledgee may
reasonably request in order fully to effect the purposes of this Agreement.
12. Successors and Assigns. This Agreement shall be binding upon and
----------------------
shall inure to the benefit of the parties hereto and their respective successors
and permitted assigns. This Agreement may not be assigned by the Pledgor, and
any such attempted assignment shall be void.
13. Miscellaneous
-------------
(a) Amendments. No amendment or waiver of any provision of this
----------
Agreement, nor consent to any departure by any party, shall in any event be
effective unless the same shall be in writing and signed by each of the parties
hereto and such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given.
(b) No Waiver. No failure on the part of any party to exercise,
---------
and no delay in exercising, any right hereunder shall operate as a waiver
hereof; nor shall any single or partial exercise of any right hereunder preclude
any other or further exercise thereof or the exercise of any other right.
(c) Notices. All notices, requests, demands, consents and other
-------
communications to or upon the parties to this Agreement shall be in writing and
shall be delivered by hand or sent by facsimile transmission or other written
telecommunication or deposited in the mail by first-class registered or
certified mail, return-receipt requested, postage prepaid, addressed as follows:
<PAGE>
10
Pledgor: 4370 La Jolla Village Drive
Suite 1050
San Diego, CA 92122
Attention: Chief Financial Officer
Telecopier: 619-642-1955
Pledgee: Four Embarcadero Center
Suite 2200
San Francisco, California 94111
Attention: Fred Vaske
Telecopier: 415-955-3200
or to such other address as may be hereafter designated in writing by the
respective parties hereto by notice similarly given. All notices shall be
effective upon receipt thereof.
(d) Counterparts. This Agreement may be executed by the parties
------------
hereto in two or more counterparts, and by separate parties on separate
counterparts, each of which when so executed and delivered shall be an original,
but all of which together shall constitute one and the same instrument.
(e) Severability. Any provision of this Agreement which is
------------
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
(f) Captions. The table of contents and the captions in this
--------
Agreement are for convenience of reference only and shall not modify, define,
expand or limit any of the terms or provisions hereof.
(g) Governing Law. This Agreement and the rights and obligations
-------------
of the parties hereunder shall in all respects be governed by, and construed in
accordance with, the laws of the State of New York applicable to agreements made
and to be performed within such State.
(h) Jurisdiction.
------------
(i) Each of the parties hereto hereby irrevocably submits
to the jurisdiction of any New York State court in New York County or any United
States federal court in the Southern District of New York over any action or
proceeding arising out of or relating to this Agreement, and each of the parties
hereto hereby irrevocably agrees that all claims in respect of such action or
proceeding may be heard and determined in such New York state or federal court.
The Pledgor
<PAGE>
11
irrevocably appoints Integrated Capital Associates of New York, Inc., which
currently maintains an office in New York state situated at 101 East 52nd
Street, New York, New York, 10022, as its agent to receive service of process or
other legal summons for purposes of any such action or proceeding. The Pledgor
further irrevocably consents to the service of process in any such action or
proceeding by the mailing of copies thereof by registered or certified mail,
postage prepaid, return receipt requested, to it at its address as provided for
notices hereunder.
(ii) Nothing in this section 13(h) shall affect the right
of the parties hereto to serve legal process in any other manner permitted by
law or affect the right of the parties hereto to bring any action or proceeding
in the courts of any other jurisdiction.
<PAGE>
12
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the day and year first above written.
PS GROUP HOLDINGS, INC.
By:___________________________
Name:
Title:
[STOCK PLEDGE AND SECURITY AGREEMENT]
<PAGE>
13
Schedule I
<TABLE>
<CAPTION>
Pledgor Issuer Number of Ownership
- ------- ------ Shares Pledged Percentage
-------------- -----------
<S> <C> <C> <C>
PS Group Holdings, Inc. PS Group, Inc. ____ 100%
- -------------------------------------------------------------------------
</TABLE>
<PAGE>
EXHIBIT E
STOCK PLEDGE AND SECURITY AGREEMENT dated as of ________, 2000 from
HERITAGE AIR HOLDINGS STATUTORY TRUST, a Connecticut statutory trust (the
"Pledgor"), to GATX CAPITAL CORPORATION, a Delaware corporation (the "Lender" or
"Pledgee").
PS Group, Inc., a Delaware corporation (the "Borrower"), and the
Lender have entered into a Loan Agreement (the "Loan Agreement"), dated as of
December 18, 1999. The Pledgor is pledging the Pledged Stock (as defined below)
and granting a security interest in the Collateral (as defined below) to the
Pledgee.
Defined terms used and not defined herein have the meanings set forth
in the Loan Agreement or, unless the context otherwise requires, those set forth
in the Uniform Commercial Code of New York.
The parties agree as follows:
1. Grant of Security Interest. The Pledgor, in consideration of the
--------------------------
premises and of the sum of Ten Dollars received by the Pledgor from the Secured
Party and other good and valuable consideration, receipt whereof is hereby
acknowledged, and in order to secure the payment of all sums now or hereafter
owing to the Lender by Pledgor under and pursuant to the Lender Documents (as
defined in Section 2 below), and the performance and observance of all of the
Debtor's covenants and conditions contained in the Lender Documents (the
"Indebtedness"), does, subject to the last paragraph of this GRANTING CLAUSE,
hereby convey, mortgage, assign, pledge and grant to the Secured Party, its
successors and assigns, a first priority security interest in, all and singular,
of the Debtor's right, title and interest in and to all of its equipment,
inventory, accounts, accounts receivable, contract rights, chattel paper,
instruments, investment property, drafts and other assets of any kind, and
general intangibles, including, without limitation, all proceeds of any and all
of the foregoing and, to the extent not otherwise included, all payments under
insurance (whether or not the Secured Party is the loss payee thereof), or any
indemnity, warranty or guaranty, payable by reason of loss or damage to or
otherwise with respect to any of the foregoing items (all of which properties
hereby conveyed, mortgaged, assigned, pledged and granted or intended to be so
conveyed, mortgaged, assigned, pledged and granted are hereinafter collectively
referred to as the "Collateral"). The foregoing security interest granted
pursuant to this GRANTING CLAUSE shall not be effective for any item of
Collateral to the extent that such grant would (A) violate any clause in any
Contract, or Requirement of Law prohibiting such grant of a security interest or
(B) be based on any Contract or Requirement of Law or otherwise, require the
consent of any Person the failure to obtain which would result in a default
under each Contract or Lease.
<PAGE>
2
2. Pledge. In consideration of the Lender's making the Loan to the
------
Borrower pursuant to the Loan Agreement, the Pledgor hereby assigns, transfers
and pledges to the Pledgee, and grants to the Pledgee a first priority security
interest in, all of the Pledgor's right, title and interest in, to and under
that number of issued and outstanding shares of the capital stock of each entity
set forth on Schedule I hereto, and the certificates representing such capital
stock or securities together with all dividends, distributions and any other
certificates from time to time issued, and all rights to receive the same, in
respect thereof or in exchange therefor (collectively, together with the
proceeds thereof, the "Pledged Stock"), to secure the prompt and complete
payment and performance of all of the obligations (collectively, the
"Obligations") of the Pledgor, the Parent or the Borrower under the Loan
Documents to which the Lender is a party or a beneficiary, including the Note
(together, the "Lender Documents"), on and subject to the terms and conditions
herein and therein contained.
3. Term. The pledge hereunder of the Pledged Stock shall terminate
----
and be of no further force or effect upon the payment and satisfaction in full
of all of the Obligations, and the Pledgee shall forthwith assign, transfer and
deliver, against receipt, any remaining Pledged Stock and money, assets or other
property received in respect thereof, to the Pledgor or to another on the order
of the Pledgor, as the case may be.
4. Delivery.
--------
(a) In furtherance of the pledge and assignment referred to in
Section 2 of this Agreement, the Pledgor hereby (a) delivers to the Pledgee
certificates representing the Pledged Stock, together with duly executed blank
stock powers relating thereto and (b) agrees to deliver or cause the Parent or
their successors to deliver to the Pledgee, promptly after the issuance thereof,
any and all replacement certificates in respect of the certificates delivered
pursuant to clause (a) above from time to time issued by the Parent, or any
successor, which certificates shall be part of the Pledged Stock, and
certificates representing any additional shares of capital stock of any class of
the Parent, or any successor, and any other security issued or received by the
Parent, in respect thereof, together with duly executed blank stock powers with
such signatures properly guaranteed.
(b) The Pledgee hereby acknowledges receipt of the certificates
and the stock powers referred to in Section 4(a), and agrees to hold, release,
and dispose of the same in accordance with this Agreement.
5. Transfer, Voting Power, Dividends.
---------------------------------
(a) The Pledgee may have the Pledged Stock registered in its name
or in the name of its nominee if an Event of Default shall occur and be
continuing (or if the Pledgee is required to do so by any regulatory authority
or
<PAGE>
3
otherwise). Such Pledged Stock as so registered shall remain subject to this
Agreement.
(b) (i) Unless and until an Event of Default shall occur and be
continuing (the period during which any Event of Default shall so continue being
herein called a "Default Period"), the Pledgor shall be entitled to exercise all
powers of voting and consent pertaining to the Pledged Stock owned by it or any
part thereof, for all purposes not inconsistent with the terms of this Agreement
and any other Lender Document.
(ii) To permit the Pledgor to exercise such powers of
voting or consent, the Pledgee shall, if necessary, upon the written request of
the Pledgor, from time to time execute and deliver to the Pledgor appropriate
proxies.
(iii) During any Default Period, the Pledgee or its nominee
or nominees shall have the sole and exclusive right to exercise all powers of
voting or consent pertaining to the Pledged Stock or any part thereof.
(c) (i) All payments, distributions or dividends, in securities,
property or cash, including dividends representing stock or liquidating
dividends or a distribution or return of capital upon or in respect of the
Pledged Stock or any part thereof or resulting from a split-up, revision or
reclassification of the Pledged Stock or any part thereof or received in
exchange for the Pledged Stock or any part thereof as a result of a merger,
consolidation or otherwise, shall be paid or delivered directly to the Pledgee
immediately upon receipt thereof (accompanied by appropriate undated stock
powers duly executed in blank or, at the request of the Pledgee, registered in
the nominee's name), and shall be retained by the Pledgee as part of the Pledged
Stock.
(ii) In case any money shall be paid to the Pledgor on
account of any dividend or other distribution upon or in respect of the Pledged
Stock or any part thereof, such money shall be immediately paid to the
Collateral Account.
(iii) In order to permit the Pledgee to receive all payments
and distributions to which it may be entitled under clause (a) above, the
Pledgor shall, if necessary, upon the written request of the Pledgee, from time
to time execute and deliver to the Pledgee appropriate dividend or payment
orders.
(iv) All cash and other property paid to and retained by
the Pledgee pursuant to this Section 5(c) shall be held by it until applied as
herein provided as additional collateral security pledged under and subject to
this Agreement.
6. Remedies. If an Event of Default shall occur and be continuing,
--------
in addition to any rights and remedies which may be available to a secured party
under the Uniform Commercial Code as in effect at the time in New York (the
"Uniform Commercial Code"), the following provisions shall apply:
<PAGE>
4
(a) The Pledgee may, without being required to give any notice
except as hereinafter provided or as may be required by law, apply the cash, if
any, then held by it as collateral security hereunder or in the Collateral
Account to the payment of the Obligations and, if there shall be no such cash or
the cash so applied shall be insufficient to pay in full all such Obligations,
sell the Pledged Stock, or any part thereof, at public or private sale, for
cash, upon credit or for future delivery, and at such price or prices as the
Pledgee may deem satisfactory, and the Pledgee may be the purchaser of any or
all of the Pledged Stock so sold and thereafter hold the same absolutely, free
from any right or claim of whatsoever kind.
(b) The Pledgee is authorized, at any such sale, if it deems it
advisable so to do, to restrict the prospective bidders or purchasers to persons
who will represent and agree that they are purchasing for their own account, for
investment, and not with a view to the distribution or sale of any of the
Pledged Stock.
(c) Upon any such sale the Pledgee shall have the right to
deliver, assign and transfer to the purchaser thereof the Pledged Stock so sold.
Each purchaser (including the Pledgee) at any such sale shall hold the property
sold, absolutely, free from any claim or right of whatsoever kind, including any
equity or rights of redemption, of the Pledgor who owns such Pledged Stock, who
hereby specifically waives, unless otherwise prohibited by law, as against any
such purchaser all rights of redemption, stay or appraisal which it has or may
have under any rule of law or statute now existing or hereafter adopted.
(d) The Pledgee shall give the Pledgor such period of notice as
is required by law by mail or telegram (or by hand delivery) of its intention to
make any such public or private sale, which notice shall specify, to the extent
known by Pledgee, the terms of sale intended. Such notice of public sale shall
state the time and place fixed for such sale.
(e) Any such public sale shall be held at such time or times
within ordinary business hours and at such place or places as the Pledgee may
fix in the notice of such sale. At any such sale the Pledged Stock may be sold
in one lot as an entirety or in separate parcels, as the Pledgee may determine.
(f) The Pledgee shall not be obligated to make any sale pursuant
to any such notice. The Pledgee may, without notice or publication, adjourn any
public or private sale or cause the same to be adjourned from time to time by
announcement at the time and place fixed for the sale, and such sale may be made
at any time or place to which the same may be so adjourned.
(g) In case of any sale of all or any part of the Pledged Stock
for future delivery, the Pledged Stock so sold must be retained by the Pledgee
until the selling price is paid by the purchaser thereof, but the Pledgee shall
not incur any liability in case of the failure of such purchaser to take up and
pay for the
<PAGE>
5
Pledged Stock so sold and, in case of any such failure, such Pledged Stock may
again be sold upon like notice.
(h) The Pledgee, instead of, or in addition to, exercising the
power of sale herein conferred upon it, may proceed by a suit or suits at law or
in equity to foreclose the pledge and sell the Pledged Stock, or any portion
thereof, under a judgment or decree of a court or courts of competent
jurisdiction.
7. Information. If the Pledgee determines to exercise its right to
-----------
sell all or any of the Pledged Stock, upon written request, the Pledgor shall
from time to time furnish and cause the Parent to furnish to the Pledgee all
such information as the Pledgee may reasonably request with respect to the
Pledged Stock, the Parent and the Parent's properties, assets and liabilities.
8. General. The following provisions shall apply to the Pledged
-------
Stock and this Agreement generally:
(a) Private Sale. The Pledgee shall incur no liability as a
------------
result of the sale of the Pledged Stock, or any part thereof, at any private
sale permitted by this Agreement or under applicable law; provided that the
--------
Pledgee shall act in a commercially reasonable manner. Subject to the
immediately preceding sentence, the Pledgor hereby waives, to the fullest extent
permitted by law, any claims against the Pledgee arising by reason of the fact
that the price at which any security may have been sold at such private sale was
less than the price which might have been obtained at a public sale or was less
than the aggregate amount of the Obligations, even if the Pledgee accepts the
first offer received and does not offer such Pledged Stock to more than one
offeree.
(b) Application of Proceeds. The proceeds of any sale of all or
-----------------------
any part of the Pledged Stock, and any other cash at the time held by the
Pledgee under this Agreement or in the Collateral Account, shall be applied by
the Pledgee in accordance with Section 2.7 of the Loan Agreement as in effect
immediately prior to the completion of such sale.
As used in this Agreement, "proceeds" of the Pledged Stock shall mean
cash, securities and other property realized in respect of, and distributions in
kind of, the Pledged Stock, including any received under any reorganization,
liquidation or adjustment of debt of the Pledgor or any issuer of securities
included in the Pledged Stock.
(c) Attorney-in-Fact. The Pledgee is hereby appointed the
----------------
attorney-in-fact of the Pledgor, for the sole use and benefit of the Pledgee at
the expense of the Pledgor, to the extent permitted by law:
<PAGE>
6
(i) for any period not a Default Period, to sign documents
and take any other actions to perfect, promote and protect its security interest
in the Pledged Stock consistent with the terms of this Agreement; and
(ii) during a Default Period, to carry out the provisions
of this Agreement and take any action and execute any instruments which the
Pledgee may reasonably deem necessary or advisable to accomplish the purposes
hereof.
The appointment of the Pledgee as attorney-in-fact is irrevocable and
coupled with an interest. Without limiting the generality of the foregoing,
during a Default Period, the Pledgee shall have the right and power with respect
to all or any of the Pledged Stock (i) to exercise any election pursuant to
Section 338(h)(10) of the Code, (ii) to demand, sue for, collect, receive and
give acquittance for any and all monies due or to become due upon or by virtue
thereof, (iii) to settle, compromise, compound, prosecute or defend any action
or proceeding with respect thereto, (iv) to sell, transfer, assign or otherwise
deal in or with the same or the proceeds or avails thereof, as fully and
effectually as if the agent were the absolute owner thereof, and (v) to extend
the time of payment of any or all thereof and to make any allowance and other
adjustments with references thereto; provided that the Pledgee as attorney-in-
--------
fact or its agent shall give the Pledgor such period of notice as is required by
law of the time and place of any sale or other intended disposition of any of
the Pledged Stock.
(d) Limitation on Duty of the Pledgee. Beyond the exercise of
---------------------------------
reasonable care in the custody thereof, the Pledgee shall have no duty as to any
Pledged Stock in its possession or control or in the possession or control of
any agent or bailee or any income thereon or as to the preservation of rights
against prior parties or any other rights pertaining thereto. The Pledgee shall
be deemed to have exercised reasonable care in the custody and preservation of
the Pledged Stock in its possession if the Pledged Stock is accorded treatment
substantially equal to that which it accords its own property. Subject to the
preceding sentence, the Pledgee shall not be liable or responsible for any loss
or damage to any of the Pledged Stock, or for any diminution in the value
thereof, by reason of the act or omission of any agent or bailee selected by the
Pledgee in good faith.
(e) Concerning the Pledgee. The Pledgor agrees with the Pledgee
----------------------
as follows:
(i) The Pledgee is authorized to take all such action as
is provided to be taken by it hereunder and all other action reasonably
incidental thereto. As to any matters not expressly provided for herein
(including the timing and methods of realization upon the Pledged Stock and any
waivers or amendments of the provisions hereof), the Pledgee shall, subject to
applicable laws, act or refrain from acting in accordance with its discretion;
<PAGE>
7
(ii) Neither the Pledgee nor any of its directors,
officers, attorneys, agents or employees shall be liable for any action taken or
omitted to be taken by it, or by them on its behalf, under this Agreement or in
respect of any of the Pledged Stock or otherwise in connection with any of the
foregoing, except for its or their own gross negligence or willful misconduct;
(iii) In connection with its duties as the Pledgee under
this Agreement, the Pledgee shall be entitled to rely on any paper or document
reasonably believed by it to be genuine and correct and, in respect of legal
matters, upon the opinion of legal counsel selected by it, and any action taken
or omitted in good faith by the Pledgee in accordance with the opinion of such
counsel shall be fully justified and protected from liability;
(iv) The Pledgee shall not be responsible for the
genuineness, validity, or effectiveness of any of the Pledged Stock nor shall it
be liable because of any invalidity of the security provisions hereof, whether
arising from law or by reason of any action or omission to act on its part, nor
shall the Pledgee be bound to ascertain or inquire as to the performance or
observance of any of the terms of this Agreement by the Pledgor; and
(v) The Pledgee may employ agents and attorneys-in-fact
selected in good faith and shall not be answerable, except as to money or
securities received by it or its authorized agents, for the default or
misconduct of any such agents or attorneys-in-fact selected in good faith.
9. Representations, Warranties and Covenants. The Pledgor hereby
-----------------------------------------
represents and warrants to and covenants with the Pledgee that:
(a) The Pledgor has full power, authority and legal right and
capacity to incur and perform its obligations hereunder;
(b) This Agreement constitutes the legal, valid and binding
obligation of the Pledgor, enforceable in accordance with its terms;
(c) The representations and warranties set forth in the Loan
Documents relating to the Pledgor are true and accurate subject to the
limitations set forth therein;
(d) The Pledged Stock together constitutes all of the issued and
outstanding shares of capital stock of the Parent;
(e) So long as the Obligations remain outstanding, the Pledgor at
all times will be the sole direct or indirect beneficial owner of the Pledged
Stock pledged by it or to be pledged by it hereunder;
<PAGE>
8
(f) This Agreement grants to Pledgee a first priority lien upon
and first priority perfected security interest in the Pledged Stock subject to
no other Lien (whether prior, equal or junior) or security interest. Without
limiting the generality of the foregoing, the Pledgor may not sell, assign,
transfer, pledge, hypothecate, gift, devise, incur, create or permit the
creation of a Lien over, or otherwise dispose of (a "transfer") any or all of
the Pledgor's interest in the Pledged Stock without the prior written consent of
the Pledgee. If any such consent is given, a transfer will be subject to
satisfaction of the following conditions: (i) receipt of an opinion in form and
substance reasonably satisfactory to the Pledgee from counsel acceptable to the
Pledgee covering such matters as the Pledgee may reasonably request, including
opinions to the effect that the transferee shall be owner of the Pledged Stock
for tax purposes, that any and all of the Obligations shall be enforceable
against such transferee and that nothing in such transfer shall impair, hinder
or otherwise limit the enforceability of the Lender Documents against the
Parent, the Borrower or the Pledgor or of the Pledgee's rights thereunder, and
(ii) execution of such documents and taking of such actions by the Pledgor, the
Parent, the Borrower and such transferee to, among other things, confirm,
acknowledge or assume, as the case may be, their respective obligations under
the Lender Documents; and
(g) The Pledgor's Obligations hereunder shall not be affected in
any way by any name change or merger, consolidation or other business
combination (including the Merger) involving or with respect to the Parent or
the Borrower.
10. Indemnification. The Pledgor agrees to indemnify and hold
---------------
harmless the Pledgee and its officers, directors, employees and agents from and
against any and all liabilities, losses, damages, costs and expenses of any kind
(including fees, disbursements and other charges of counsel (including allocated
costs of in-house counsel) in connection with any investigative, administrative
or judicial proceeding, whether or not such indemnified person is a party
thereto) that may be suffered or incurred by any such indemnified person,
relating to or arising out of this Agreement, the exercise by the Pledgee of any
right or remedy hereunder, or any actual or proposed use of proceeds of the
Loan, and the Pledgor agrees to reimburse each indemnified person from time to
time upon demand for any such liabilities, losses, damages, costs and expenses;
provided that no indemnified person shall have the right to be indemnified
- --------
hereunder for its own gross negligence or willful misconduct as determined by a
court of competent jurisdiction. The foregoing indemnity shall survive the
termination of this Agreement, and not be affected by any investigation or
actual or constructive knowledge of any indemnified person.
11. Further Assurances. The Pledgor agrees that, from time to time
------------------
upon the written request of the Pledgee, it will execute and deliver such
further documents and do such other acts and things as the Pledgee may
reasonably request in order fully to effect the purposes of this Agreement.
<PAGE>
9
12. Successors and Assigns. This Agreement shall be binding upon and
----------------------
shall inure to the benefit of the parties hereto and their respective successors
and permitted assigns. This Agreement may not be assigned by the Pledgor, and
any such attempted assignment shall be void.
13. Miscellaneous.
-------------
(a) Amendments. No amendment or waiver of any provision of this
-----------
Agreement, nor consent to any departure by any party, shall in any event be
effective unless the same shall be in writing and signed by each of the parties
hereto and such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given.
(b) No Waiver. No failure on the part of any party to exercise,
---------
and no delay in exercising, any right hereunder shall operate as a waiver
hereof; nor shall any single or partial exercise of any right hereunder preclude
any other or further exercise thereof or the exercise of any other right.
(c) Notices. All notices, requests, demands, consents and other
-------
communications to or upon the parties to this Agreement shall be in writing and
shall be delivered by hand or sent by facsimile transmission or other written
telecommunication or deposited in the mail by first-class registered or
certified mail, return-receipt requested, postage prepaid, addressed as follows:
Pledgor: c/o First Union National Bank, as Trustee
10 State House Square
Hartford, Connecticut 06103
Attention: W. Jeffrey Kramer
Telecopier: (860) 247-1356
Pledgee: Four Embarcadero Center
Suite 2200
San Francisco, California 94111
Attention: Fred Vaske
Telecopier: 415-955-3200
or to such other address as may be hereafter designated in writing by the
respective parties hereto by notice similarly given. All notices shall be
effective upon receipt thereof.
(d) Counterparts. This Agreement may be executed by the parties
------------
hereto in two or more counterparts, and by separate parties on separate
counterparts, each of which when so executed and delivered shall be an original,
but all of which together shall constitute one and the same instrument.
<PAGE>
10
(e) Severability. Any provision of this Agreement which is
------------
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
(f) Captions. The table of contents and the captions in this
--------
Agreement are for convenience of reference only and shall not modify, define,
expand or limit any of the terms or provisions hereof.
(g) Governing Law. This Agreement and the rights and obligations
-------------
of the parties hereunder shall in all respects be governed by, and construed in
accordance with, the laws of the State of New York applicable to agreements made
and to be performed within such State.
(h) Jurisdiction.
------------
(i) Each of the parties hereto hereby irrevocably submits
to the jurisdiction of any New York State court in New York County or any United
States federal court in the Southern District of New York over any action or
proceeding arising out of or relating to this Agreement, and each of the parties
hereto hereby irrevocably agrees that all claims in respect of such action or
proceeding may be heard and determined in such New York state or federal court.
The Pledgor irrevocably appoints Integrated Capital Associates of New York,
Inc., which currently maintains an office in New York state situated at 101 East
52nd Street, New York, New York, 10022, as its agent to receive service of
process or other legal summons for purposes of any such action or proceeding.
The Pledgor further irrevocably consents to the service of process in any such
action or proceeding by the mailing of copies thereof by registered or certified
mail, postage prepaid, return receipt requested, to it at its address as
provided for notices hereunder.
(ii) Nothing in this Section 13(h) shall affect the right
of the parties hereto to serve legal process in any other manner permitted by
law or affect the right of the parties hereto to bring any action or proceeding
in the courts of any other jurisdiction.
(i) First Union. It is expressly understood and agreed that this
-----------
Agreement is executed and delivered by First Union National Bank ("First
Union"), not in its individual capacity but solely as Trustee under the Trust
Agreement (Heritage Air Holdings Statutory Trust) dated as of September 20, 1999
(the "Trust Agreement"), in the exercise of the powers and authority conferred
and vested in it as the Trustee thereunder, and each of the undertakings and
agreements herein made on the part of the Trust is made and intended not as an
undertaking and agreement by First Union but is made and intended for the
purpose of binding only the trust estate created by the Trust Agreement (the
"Trust Estate"), and all persons
<PAGE>
11
having any claim against First Union or the Trust by reason of the transactions
contemplated by this Agreement shall look only to the Trust Estate for payment
or satisfaction thereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the day and year first above written.
HERITAGE AIR HOLDINGS STATUTORY
TRUST
By: First Union National Bank, not in its
individual capacity but solely as its Trustee
By:_________________________________
Name:
Title:
[TRUST STOCK PLEDGE AND SECURITY AGREEMENT]
<PAGE>
12
Schedule I
<TABLE>
<CAPTION>
Pledgor Issuer Number of Ownership
- ------- ------ Shares Pledged Percentage
-------------- ----------
<S> <C> <C> <C>
Heritage Air Holdings PS Group Holdings, Inc. ____ 100%
Statutory Trust
- --------------------------------------------------------------------------------
</TABLE>
<PAGE>
EXHIBIT F
================================================================================
FORM OF MORTGAGE AND SECURITY AGREEMENT [N ]
Dated as of _______ __, ____
Between
PS GROUP FIRST DELAWARE TRUST
as Mortgagor,
and
GATX CAPITAL CORPORATION,
as Mortgagee,
Relating to One ___________ Model _______ Aircraft,
with U.S. Registration Mark N______ and Manufacturer's Serial No. ______ with
Two __________ Model _______ Engines Bearing Manufacturer's
Serial Nos. _______ and _______
and certain interests of the Mortgagor in and to the Aircraft Lease Agreement,
dated _______ __, ___ between the Mortgagor as Lessor and ______ as Lessee.
================================================================================
<PAGE>
MORTGAGE AND SECURITY AGREEMENT [N______]
-----------------------------------------
MORTGAGE AND SECURITY AGREEMENT [N______] (the "Agreement") dated as of
---------
_________ __, ____, between PS GROUP FIRST DELAWARE TRUST, a Delaware business
trust (the "Mortgagor"), and GATX CAPITAL CORPORATION (the "Mortgagee").
--------- ---------
WITNESSETH
----------
WHEREAS, [PS] Group, Inc. and Wilmington Trust Company have entered into
that certain PS Group First Delaware Trust Agreement dated as of June 15, 1993
(the "Trust Agreement"), pursuant to which Mortgagor was created, with [PS]
Group, Inc. as the sole beneficiary;
WHEREAS, to finance the merger by Delivery Acquisition, Inc. with and
into [PS] Group Holdings, Inc., the parent company of [PS] Group, Inc., [PS]
Group, Inc. (the "Borrower") has entered into that certain Loan Agreement dated
--------
as of _______ __, 1999 (the "Loan Agreement") between Borrower and the
--------------
Mortgagee, as lender (the "Lender") pursuant to which Lender is to make a single
------
Loan to Borrower as provided therein, which Loan shall be evidenced by the Note
(capitalized terms are used as defined in Section 5.17 below);
WHEREAS, the Borrower has agreed to secure its Obligations under the
Operative Documents by directing the Mortgagor pursuant to the Trust Agreement
to grant to the Mortgagee a mortgage Lien on its interest in the Aircraft and a
security interest in its rights under the Lease and on certain other property
and rights included in the Collateral (as hereinafter defined);
WHEREAS, the Mortgagor has agreed to secure the Obligations of the Borrower
under the Operative Documents by granting to the Mortgagee a Lien on the
Collateral;
WHEREAS, the Mortgagor is executing and delivering this Agreement in order
to create in favor of the Mortgagee a valid and perfected security interest in
the property described herein, which security interest shall secure (i) the
prompt indefeasible payment of the Obligations of the Borrower evidenced by or
arising under the Operative Documents and (ii) the timely and faithful
performance and observance by the Borrower of all its agreements, promises and
covenants undertaken by it in the Operative Documents; and
WHEREAS, this Agreement is being filed for recordation with the Federal
Aviation Administration.
NOW, THEREFORE, in order to (a) induce the Mortgagee to enter into the Loan
Agreement and (b) secure the prompt payment and performance of all the
Obligations of the Borrower, the Mortgagor and the Mortgagee hereby agree as
follows:
ARTICLE I
SECURITY INTEREST
Section 1.01 Granting of Security Interest.
-----------------------------
<PAGE>
The Mortgagor does hereby transfer, convey, mortgage, hypothecate, assign
and grant a security interest to the Mortgagee in the following collateral
(collectively the "Collateral") attaching on the date of delivery of this
----------
Agreement or hereafter as security for the Obligations:
(a) one ___________ Model ______ Aircraft Airframe, bearing U.S.
registration mark N______ and manufacturer's serial no. ______ and the two
__________ Model ______ engines installed thereon bearing, respectively,
manufacturer's serial numbers ______ and _____, each of which has more than 750
rated takeoff horsepower and all Parts, whether or not any Parts or components
may from time to time not be installed on such Airframe or any such engine or
may be installed in any other airframe or any other aircraft (such airframe
being referred to herein as the "Airframe" and each such engine, including any
--------
replacement engine substituted therefor pursuant to the Lease, as an "Engine",
------
and the Airframe and the two Engines, including any such replacement Engine,
together with all Parts constituting the "Aircraft"), and whether or not any
--------
such original or replacement Engines may from time to time no longer be
installed on the Airframe or may be installed on any other airframe or any other
aircraft;
(b) all proceeds from the sale or other disposition of, all
proceeds of insurance due to the Mortgagor on, and all proceeds of any
Condemnation due to the Mortgagor with respect to, any of the equipment
described in clause (a) above;
(c) all the Mortgagor's right, title and interest, present and
future, in and to the technical documents, manuals, log books and records that
relate to the Aircraft;
(d) all warranties, service contracts and product agreements of
any manufacturer of the Aircraft, all maintenance and overhaul agency agreements
relating to the Aircraft and all agreements of any subcontractor, supplier or
vendor of any part of the Aircraft, to the extent assignable or enforceable, and
any and all other warranties, service contracts and product agreements in
respect of any of the Aircraft whether now existing or hereafter acquired;
(e) all the Mortgagor's right, title and interest in the Lease
which has heretofore been recorded with the FAA and is described in Annex I
hereto (including, without limitation, the right to receive all amounts of Basic
Rent, insurance proceeds, Condemnation proceeds, requisition, indemnity and
other payments of any kind provided under the Lease and any and all rights to
amend, waive, modify and give notices, approvals and consents related thereto),
all other rights and property included therein together with all payments,
including without limitation all Rent, damages, expenses, indemnities and other
amounts due to the Mortgagor (or any person claiming by, through or under the
Mortgagor) thereunder;
(f) all monies and securities deposited or required to be
deposited with the Mortgagee or the Mortgagor in respect of the Aircraft
pursuant to any term of this Agreement, the Loan Agreement or the Lease;
(g) all rents, monthly installment payments, issues, profits,
revenues and other income of the property intended, subjected or required to be
subjected to the Lien of this Agreement hereby or by any supplement to this
Agreement in form and substance satisfactory to the Mortgagee (a "Mortgage
--------
Supplement"), including, without limitation, the Lease, and all of the estate,
- ----------
right, title and interest of every nature whatsoever of the Mortgagor in and to
the same and every part thereof;
<PAGE>
(h) all substitutions, replacements and renewals of all property
subjected or required to be subjected to the Lien of this Agreement and all
property that hereafter becomes physically attached to or incorporated in all
property subjected or required to be subjected to the Lien of this Agreement, in
each case to the extent the same is now owned by the Mortgagor or shall
hereafter be owned by it;
(i) all general intangibles and contract rights of, from, in or
related to the Aircraft and all the estate, right, title and interest of every
nature whatsoever of the Mortgagor, at law or in equity, in and to the foregoing
Collateral; and
(j) all proceeds, howsoever arising, of the foregoing;
BUT EXCLUDING, HOWEVER, any of the foregoing which constitute Excluded Payments,
as defined in Section 1.02(a),
TO HAVE AND TO HOLD the Collateral unto the Mortgagee, and its successors and
assigns, as security for
(i) the due and punctual payment in full of the Obligations of
the Mortgagor and the Borrower; and
(ii) the timely performance and observance of all agreements,
promises and covenants undertaken by the Mortgagor hereunder and the
Borrower under the Loan Agreement and the other Operative Documents;
PROVIDED, HOWEVER, that, and these presents are subject to the
condition that, this Agreement and the rights hereby granted to the
Mortgagee shall cease and terminate at such time as (i) the Borrower shall
have paid or caused to be paid in full all sums, together with interest
thereon, owing or outstanding or that may be due and payable by the
Borrower to the Mortgagee under the Loan Agreement and the Note, and the
Mortgagor shall have paid or caused to be paid in full all sums, together
with interest thereon, owing or outstanding or that may be due and payable
by the Mortgagor under this Agreement or (ii) so long as no Event of
Default shall have occurred and be continuing, if the Borrower, upon the
occurrence of any of the events permitting prepayment, as described in
Section [ ] of the Loan Agreement, shall have paid or caused to be paid in
full (A) that portion of the then outstanding principal amount of the Note
to the extent required by Section [ ] of the Loan Agreement, (B) interest
thereon to the date of payment, (C) break-funding costs, if any, and (D) an
amount equal to any other outstanding Obligations of the Borrower then due
and payable under the Operative Documents. Upon the termination of this
Agreement pursuant to the preceding sentence, the Mortgagee shall execute
and deliver to the Mortgagor, at the expense of the Mortgagor, such
instruments of satisfaction and discharge as may be appropriate (without,
however, being under any independent duty to cause such instruments to be
filed or recorded in the public records wherein this Agreement shall have
been filed and/or recorded, other than to reasonably cooperate with the
Mortgagee in accomplishing such filings and/or recordations).
Section 1.02 Certain Retained Rights.
-----------------------
<PAGE>
Notwithstanding any other provisions of this Agreement, including Section
1.01, the following rights shall be reserved to the Mortgagor under the Lease,
but only to the extent described herein:
(a) the Mortgagor shall at all times retain all rights, to the
exclusion of the Mortgagee, (i) to payments (collectively, "Excluded Payments")
-----------------
in respect of (A) indemnities and similar obligations payable by the Lessee to
the Mortgagor, or any officer, director, employee, or agent of the Mortgagor or
other indemnitee other than the Mortgagee, as defined in the Lease, pursuant to
the Lease and (B) proceeds of public liability insurance in respect of the
Aircraft payable as a result of insurance claims paid to, or losses suffered by
Mortgagor, or any officer, director, employee, or agent of the Mortgagor or
other indemnitee other than the Mortgagee, or the Lessee, and to commence an
action at law to obtain such Excluded Payments (but not from the Collateral) and
(ii) with respect to insurance maintained for its own account as the lessor
under the Lease;
(b) the Mortgagor shall have the right, so long as no Event of
Default shall have occurred and be continuing pursuant to Section [ ] of the
Loan Agreement or shall have been declared, (i) to receive from the Lessee (and
to make requests to the Lessee for) all notices, certificates, reports, filings,
opinions of counsel and other documents and all information that the Lessee is
permitted or required to give or furnish to the Mortgagor pursuant to any
Operative Document and (ii) to exercise inspection rights pursuant to the Lease;
(c) so long as no Event of Default shall have occurred and be
continuing pursuant to Section [ ] of the Loan Agreement or shall have been
declared, the Mortgagor shall have the right together with the Mortgagee (A) to
approve as satisfactory any local legal counsel to render services for or issue
opinions to or for the Mortgagor pursuant to express provisions of the Operative
Documents, (B) to consent to and approve pursuant to the Lease any sublease not
expressly permitted by the Lease, and (C) to grant any consent requested under
the Lease by the Lessee;
(d) so long as no Event of Default shall have occurred and be
continuing pursuant to Section [ ] of the Loan Agreement or shall have been
declared, the Mortgagor shall have the non-exclusive right to exercise all other
rights of the Mortgagor, as lessor under the Lease, not expressly enumerated in
clauses (a), (b) and (c) including, (i) to seek specific performance of the
covenants of the Lessee under the Lease relating to the protection, insurance,
maintenance, possession and use of the Aircraft, (ii) to maintain separate
insurance with respect to the Aircraft and (iii) to request further assurances
pursuant to the Lease.
All rights, powers and privileges herein reserved for the Mortgagor shall
be defined as "Reserved Powers" for the purposes of this Agreement. The
---------------
Mortgagor shall not exercise any Reserved Power in any manner that would
materially diminish, restrict or encumber the rights of the Mortgagee, including
the rights available to the Mortgagee upon the occurrence of any Default or
Event of Default. Notwithstanding the foregoing, the Mortgagee shall at all
times, to the exclusion of the Mortgagor and subject only to the provisions of
Section 2.04 hereof, be entitled to exercise the remedies set forth in Article
II hereof to the extent provided therein.
Section 1.03 Certain Releases of Lien.
------------------------
<PAGE>
(a) Subject to the terms and provisions of the Lease and the
rights of the Lessee therein provided in respect of the Engines, so long as no
Event of Default shall have occurred and be continuing, and, if the Aircraft is
subject to the Lease, if all Rent (other than Rent that constitutes a payment in
respect of Excluded Payments), including Stipulated Loss Value/Stipulated Loss
and Termination Value (as such term is defined in the Lease), if applicable,
then due and owing under the Lease shall have been paid in full, the Mortgagee
will release from the Lien of this Agreement any Engine, to the extent that
Mortgagor is required by the provisions of the Lease to transfer the Engine free
of the Lien of this Agreement; provided, however, that in such case, the
Mortgagor shall also have complied with the provisions of paragraph (b) of this
Section in respect thereof.
(b) At any time and from time to time prior to the expiration of
the Term or the release of the Lien of this Agreement pursuant to this Section
1.03, upon the transfer by the Mortgagor of an Engine in accordance with the
express terms of the Lease, the Mortgagee shall in each case, upon the written
request of the Mortgagor and provided that no Event of Default under such Lease
(as defined therein, other than Lessee's failure to make any payment in respect
of Excluded Payments) or any Event of Default under the Loan Agreement shall
have occurred and be continuing, execute and deliver to or as directed in
writing by the Mortgagor an appropriate instrument releasing such Engine from
the Lien of this Agreement and the Mortgagee shall execute and deliver such
instrument as aforesaid upon a written request from the Mortgagor, requesting
such release and describing the Engine so to be released and, only upon receipt
by or deposit with the Mortgagee of the following (each in form and substance
satisfactory to the Mortgagee):
(i) A certificate signed by an authorized officer of the
Mortgagor stating the following:
(A) a description of an Engine to be released,
which shall be identified by manufacturer's serial number;
(B) a description of the replacement Engine to be
received as consideration for the original Engine to be released
pursuant to the provisions of the Lease;
(C) that no Event of Default under the Loan
Agreement or the Lease has occurred that has not been remedied or
waived and that neither the Mortgagor nor the Lessee will be in
default, by the making and granting of the request for release, in
the performance of any of the terms and covenants of the Lease or
any other Operative Document; and
(D) that the release of the original Engine so to
be released will not be inconsistent with any of the provisions of
this Agreement or the Lease.
(ii) The appropriate instruments transferring title to the
replacement Engine to be received as consideration for the Engine to be
released to the Mortgagor, subjecting such replacement Engine to the Lease
and subjecting such replacement Engine to the
<PAGE>
Lien of this Agreement including, without limitation, any Mortgage
Supplement if so required by the Mortgagee.
(iii) Upon the request of the Mortgagee, an opinion of
counsel to the Mortgagor, or at the option of the Mortgagor of counsel to the
Lessee, satisfactory to the Mortgagee:
(A) (1) that such replacement Engine has been
validly subjected to the Lien of this Agreement and to the Lease
and is free of any other Liens of record at the FAA except as such
may be described in such opinion and are reasonably acceptable to
the Mortgagee, (2) that the instruments subjecting such replacement
Engine to the Lease and to the Lien of this Agreement have been
duly filed for recordation pursuant to the Aviation Act, as
applicable, and (3) that no further action or filing or recording
of any document is necessary or advisable in order to establish the
title of the Mortgagor to, and to establish and perfect, as
applicable, the Lien of this Agreement on, such replacement Engine.
(B) In the event of the substitution of a
replacement Engine pursuant to the Loan Agreement or the Lease, all
provisions of this Agreement relating to the original Engine shall
be applicable to such replacement Engine with the same force and
effect as if such replacement Engine were the same engine, as the
original Engine.
Section 1.04 No Liability of Mortgagee.
-------------------------
It is expressly agreed that anything herein contained to the contrary
notwithstanding, the Mortgagor shall remain liable under the other Operative
Documents to perform all of the obligations assumed by it thereunder, all in
accordance with and pursuant to the terms and provisions thereof, and the
Mortgagee shall not have any obligation or liability under the other Operative
Documents by reason of or arising out of the security interest created
hereunder, nor shall the Mortgagee be required or obligated in any manner to
perform or fulfill any obligations of the Mortgagor under or pursuant to the
other Operative Documents to make any payment (except pursuant to the express
terms of Article II), or to make any inquiry as to the nature or sufficiency of
any payment received by it, or present or file any claim, or take any action to
collect or enforce the payment of any amounts that may have been assigned to it
or to which it may be entitled at any time or times.
Section 1.05 Liability of Mortgagor.
----------------------
The Mortgagor hereby agrees that the Mortgagee may proceed directly against it
in connection with its liability hereunder without first proceeding to enforce
its rights against the Collateral. Mortgagor hereby authorizes the Mortgagee to
exercise in any order any right or remedy it might have, including, without
limitation, any right of judicial foreclosure or power of sale of the
Collateral, with respect to the obligations incurred hereunder. All rights,
powers and remedies of the Mortgagee hereunder and under the other Operative
Documents are cumulative and not alternative and are in addition to all rights,
powers and remedies given to the Mortgagee by Applicable Law.
Section 1.06 No Segregation of Monies; No Interest.
-------------------------------------
Subject to the rights, if any, of the Lessee under the Lease with respect to
monies constituting deposits under the Lease which may, under the circumstances
specified therein, be repaid to the
<PAGE>
Lessee ("Lessee Deposits"), monies received by the Mortgagee hereunder need not
---------------
be segregated in any manner except to the extent required by Applicable Law or
the Lease, and may be deposited under such general conditions as may be
prescribed by Applicable Law, and the Mortgagee shall not be liable for any
interest thereon (unless otherwise provided in the Lease); provided that, to the
extent such information is or was available to the Mortgagee, any payments
received or applied hereunder by the Mortgagee shall be accounted for by the
Mortgagee so that any portion thereof paid or applied pursuant hereto shall be
identifiable as to the source thereof.
Section 1.07 Lessee's Quiet Enjoyment.
------------------------
Mortgagee hereby agrees that its rights hereunder are subject and
subordinate to the rights of the Lessee under the Lease, including, without
limitation, Lessee's right of quiet enjoyment pursuant to Section [ ] of the
Lease, Lessee's right to purchase the Aircraft pursuant to Section [ ]
thereof, and Lessee's right to renew the Lease pursuant to Section ___ thereof
and that, notwithstanding any other provision of this Agreement, it will not
take any action contrary to the rights of Lessee set forth in the Lease. The
Mortgagee hereby acknowledges that, if the Lease provides for the Lessee to have
a continuing right in any Lessee Deposits, the rights of the Mortgagee with
respect to such monies are subject to such rights of the Lessee.
ARTICLE II
EVENTS OF DEFAULT; DISPOSITION OF COLLATERAL AND
APPLICATION OF PROCEEDS
Section 2.01 Judicial Proceedings, etc., Following Event of Default.
------------------------------------------------------
If any Event of Default shall occur and be continuing, then, and in any such
event, the Mortgagee may, subject to Sections [ ] of the Loan Agreement,
Section 1.07 hereof and the last paragraph of this Section 2.01, forthwith upon
notice to the Mortgagor (it being understood and agreed that such provision of
notice to the Mortgagor shall not be deemed to limit or otherwise restrict the
Mortgagee's rights and remedies hereunder or under any other agreement):
(a) apply to a court of competent jurisdiction to obtain specific
performance or observance by the Mortgagor of any covenant, agreement or
undertaking on the part of the Mortgagor hereunder that the Mortgagor shall have
failed to observe or perform or to obtain to aid in the execution of any power
granted herein; and/or
(b) proceed to foreclose against the Collateral or any part thereof
pursuant to this Agreement, and according to the Applicable Law of the
jurisdiction or jurisdictions in which such Collateral or part thereof shall at
the time be located, by doing any one or more or all of the acts described in
Section 2.02 and/or the following acts, as the Mortgagee, in its sole and
complete discretion (acting in good faith), may then elect to:
(i) exercise all the rights and remedies, in foreclosure and
otherwise, available to it as a mortgagee and secured party under the
provisions of Applicable Law;
(ii) institute legal proceedings to foreclose upon and against the
security interest granted in and by this Agreement, to recover judgment for
all amounts then due
<PAGE>
and owing as indebtedness secured hereby, and to collect the same out of
any of the Collateral or the proceeds of any sale thereof;
(iii) institute legal proceedings for the sale, under the
judgment or decree of any court of competent jurisdiction, of any or all of
the Collateral;
(iv) without regard to the adequacy of the Collateral for the
Loan Agreement or any other agreement between the Mortgagee and the
Mortgagor and their Affiliates, by virtue of this Agreement or otherwise,
or any other collateral or other security or to the solvency of the
Mortgagor, institute legal proceedings for the appointment of a receiver or
receivers pending foreclosure hereunder or for the sale of any of the
Collateral under the order of a court of competent jurisdiction or under
other legal process; or
(v) personally, or by agents or attorneys, enter upon any
premises where the Collateral or any part thereof may then be located, and
take possession of all or any part thereof or render it unusable; and
without being responsible for loss or damage to such Collateral, hold,
store and keep idle, or lease, operate or otherwise use or permit the use
of, the same or any part thereof, for such time and upon such terms as the
Mortgagee may in its sole and complete discretion deem to be in its own
best interests, and demand, collect and retain all hire, earnings and other
sums due and to become due in respect of the same from any party
whomsoever, accounting for net earnings, if any, arising from such use and
charging against all receipts from the use of the same or from the sale
thereof, by court proceedings or pursuant to Section 2.02, all other costs,
expenses, charges, damages and other losses resulting from such use in good
faith.
All expenses of obtaining any such judgment, bringing any such legal proceeding
or of pursuing, searching for and taking the Collateral shall, until paid, be
secured by the Lien of this Agreement.
It is further understood and agreed that if the Mortgagee shall proceed to
foreclose the Lien of this Agreement, it shall, to the extent that it is then
entitled to do so under the Lease, and is not then stayed or prevented from
doing so by operation of law, and in addition to any other remedies it may elect
to exercise under the Lease, concurrently proceed (to the extent it has not
already done so) to exercise one or more of its remedies referred to in clauses
[ ] through [ ] of Article [ ] of the Lease as it shall determine in its good
faith discretion; provided that, if the Mortgagee is so stayed or prevented by
--------
operation of law as a result of a case or proceeding under Chapter 11 of the
Bankruptcy Code in respect of the Lessee's bankruptcy, and so long as no Event
of Default has occurred and is continuing other than as a result of an Event of
Default under and as defined in the Lease, the Mortgagee will not foreclose the
Lien of this Agreement until the earlier of: (a) the expiration of the Section
1110 Period (as hereinafter defined), or (b) actual repossession of the
Aircraft. For purposes hereof, the term "Section 1110 Period" means the 60-day
-------------------
period from the date of the order for relief under such case or proceeding as
provided in Section 1110(a) of the Bankruptcy Code, as such period may be
extended by the Mortgagor, with the prior written consent of the Mortgagee, and
the bankruptcy trustee of the Lessee pursuant to Section 1110(b) thereof.
Section 2.02 Delivery of Collateral, Power of Sale, etc.
------------------------------------------
If the Mortgagee should elect to foreclose upon and against the security
interest created in and by this Agreement pursuant to and subject to the
conditions set forth in Section 2.01 above, the Mortgagor shall, upon written
demand of the Mortgagee, deliver to the Mortgagee all
<PAGE>
or any part of the Collateral at such time or times and place or places as the
Mortgagee may specify; and the Mortgagee is hereby authorized and empowered, in
accordance with Applicable Law and without being responsible for loss or damage
to such Collateral incurred other than solely by reason of the Mortgagee's gross
negligence or willful misconduct, to enter upon any premises where the
Collateral or any part thereof may be located and take possession of and remove
the same. The Mortgagee may sell and dispose of, or cause to be sold and
disposed of, all or any part of the Collateral at one or more public or private
sales, at such places and times and on such terms and conditions as the
Mortgagee may deem fit in good faith, with or without any previous demand to the
Mortgagor or any other person, or advertisement of any such sale or other
disposal upon notice to the Mortgagor (it being understood and agreed that such
provision of notice to the Mortgagor shall not be deemed to limit or otherwise
restrict the Mortgagee's rights and remedies hereunder or under any other
agreement); and for the aforesaid purpose, any other notice of sale, any
advertisement and other notice or demand, any right of equity of redemption and
any obligation of a prospective purchaser to inquire as to the power and
authority of the Mortgagee to sell or the application by the Mortgagee of the
proceeds of sale or otherwise that would otherwise be required by, or available
to the Mortgagor under, Applicable Law are hereby expressly waived by the
Mortgagor to the fullest extent permitted by such Applicable Law. In the event
that any mandatory requirement of Applicable Law shall obligate the Mortgagee to
give different, additional or prior notice to the Mortgagor of any of the
foregoing acts, the Mortgagor hereby agrees that, to the extent permitted by
Applicable Law, a written notice sent to it by mail or by telex, so as
reasonably to be expected to be delivered to the Mortgagor at least ten (10)
Business Days before the date of any such act shall be deemed to be reasonable
notice of such act and, specifically, reasonable notification of the time after
which any private sale or other disposition intended to be made hereunder is to
be made.
Section 2.03 Right to Possession etc.
-----------------------
(a) To the fullest extent the Mortgagor may lawfully agree, the right
of the Mortgagee to take possession of and/or sell any of the Collateral in
compliance with the provisions of this Article II shall not be affected by the
provisions of any applicable reorganization or other similar law of any
jurisdiction; and the Mortgagor shall not take advantage of any such law or
agree to allow any agent, assignee or other party to take advantage of such law
in its place, to which end the Mortgagor, for itself and all who may claim
through it, as far as it or they now or hereafter lawfully may do so, hereby
waives, to the fullest extent permitted under Applicable Law, any rights or
defenses arising under any such law, and all rights to have the Collateral
marshaled upon any foreclosure hereof, and hereby agrees that any court having
jurisdiction to foreclose upon and against the security interest created in this
Agreement may order the sale of the Collateral subject to such jurisdiction as
an entirety or severally.
(b) The Mortgagee shall not have any duty or obligation to use,
operate, store, lease, control, manage, sell, dispose of or otherwise deal with
the Aircraft or any other part of the Collateral, or otherwise to take or
refrain from taking any action under, or in connection with, this Agreement or
the Lease (provided, however, that Mortgagee shall comply with the terms and
provisions of the Lease if exercising the remedies of Mortgagor, as lessor
thereunder). If an Event of Default shall occur and be continuing and the
Mortgagee shall have obtained possession of or title to the Aircraft or any
Engines, the Mortgagee shall not be obligated to use or operate such Aircraft or
Engines or cause such Aircraft or Engines to be used or operated directly or
<PAGE>
indirectly by itself or through agents or other representatives or to lease,
license or otherwise permit or provide for the use or operation of such Aircraft
or Engines by any other person unless the Mortgagee shall have been able to
obtain insurance in kinds, at rates and in amounts satisfactory to it in its
reasonable opinion to protect the Collateral and the Mortgagee against any and
all liability for loss or damage to such Aircraft or Engines and for public
liability and property damage resulting from use or operation of such Aircraft
or Engines and funds are available in the Collateral to pay for all such
insurance or, in lieu of such insurance, the Mortgagee is furnished with
indemnification from any other person upon terms and in amounts satisfactory to
the Mortgagee in its sole discretion to protect the Collateral and the
Mortgagee, both as Mortgagee and individually, against any and all such
liabilities.
Section 2.04 Application of Proceeds.
-----------------------
(a) All proceeds received by the Mortgagee under or pursuant to this
Agreement, and all amounts received by the Mortgagee pursuant to the Loan, shall
be applied in the first place to pay all such payments, disbursements, expenses
and losses whatsoever (together with interest thereon as hereinbefore provided
for) as may have been incurred by the Mortgagee in or about or incidental to the
exercise by the Mortgagee of the rights and powers specified in this Agreement,
and the balance shall be applied or retained for application in accordance with
Section 2.7 of the Loan Agreement.
Nothing in this Agreement shall limit the right of the Mortgagee to proceed
against the Borrower if the proceeds received by the Mortgagee under this
Agreement, the Loan Agreement or the Operative Documents shall be insufficient
to pay in full the amounts then due and payable to the Mortgagee and as set
forth above in this Section 2.04.
(b) The Mortgagee acknowledges and agrees that all payments of Basic
Rent and other amounts required to be made by Lessee under the Lease (other than
Excluded Payments) are paid by the Lessee directly to the Borrower, such
payments to be held by the Borrower in trust for the Mortgagee and promptly upon
receipt thereof deposited by the Borrower in the Collateral Account in
accordance with the terms of the Loan Agreement, the Security Agreement and the
Collateral Account and Pledge Agreement. Any amount of any payment of Basic
Rent or of any other payments required to be made by Lessee under the Lease
received by the Mortgagor to which the Borrower is entitled pursuant to the
Lease shall be held in trust for the Mortgagee, and Mortgagor shall promptly
upon receipt thereof pay over such amounts to the Cash Collateral Account
maintained by the Borrower.
(c) If an Event of Default shall have occurred and be continuing, all
payments received by the Mortgagee under the Loan Agreement or under the Lease
after an Event of Loss has occurred to the Aircraft shall be held as part of the
Collateral until there is no Event of Default continuing, and thereafter all
such payments shall be applied as contemplated in this Agreement or in the Loan
Agreement.
(d) Subject to the terms and conditions of this Agreement, the
Mortgagee shall distribute to the Mortgagor or any other Person entitled thereto
any payments in respect of Excluded Payments received by the Mortgagee promptly
upon receipt thereof by the Mortgagee.
(e) All amounts from time to time distributable under this Section
2.04 by the Mortgagee to the Mortgagor shall be paid by the Mortgagee to the
Mortgagor at its office specified in Section 5.11 and, to the extent so timely
received, in funds of the same type as received.
<PAGE>
Section 2.05 Matters Involving Manner of Sale.
--------------------------------
(a) At any sale pursuant to this Article II, whether by virtue of
judicial proceedings contemplated in Section 2.01 or under the power of sale
granted in Section 2.02, it shall not be necessary for the Mortgagee or a public
officer under order of a court to have present physical or constructive
possession of the Collateral to be sold. The recitals contained in any
conveyances and receipts made and given by the Mortgagee in good faith or such
public officer to any purchaser at any sale made pursuant to this Agreement
shall, to the extent permitted by Applicable Law, conclusively establish the
truth and accuracy of the matters therein stated (including, without limiting
the generality of the foregoing, the amounts due and payable under the Loan
Agreement, the other Operative Documents and any other indebtedness secured
hereby, the accrual and nonpayment thereof and advertisement and conduct of such
sale in the manner provided herein and by Applicable Law) other than in the case
of manifest error; and all prerequisites to such sale shall be presumed to have
been satisfied and performed.
(b) At any sale or sales made pursuant to this Article II, the
Mortgagee or its agents may bid for or purchase, free from any right or equity
of redemption in favor of the Mortgagor and any person claiming by, through or
under it (all such rights being in this Article II waived and released), any
part of or all the Collateral offered for sale, and may make payment on account
thereof by using any claim for moneys then due and payable to the Mortgagee by
the Mortgagor as a credit against the purchase price, and the Mortgagee, upon
compliance with the terms of sale, may hold, retain and dispose of such
Collateral without further accountability therefor to the Mortgagor or any third
party, except as expressly required by Applicable Law or in the Lease with
respect to Lessee Deposits. In any such sale the Mortgagee shall not be
obligated to make any representations or warranties with respect to the
Collateral or any part thereof, and, except as may be provided in the Lease with
respect to Lessee Deposits, the Mortgagee shall not be chargeable with any of
the obligations or liabilities of the Mortgagor with respect thereto. The
Mortgagor hereby agrees (i) that it will indemnify and hold the Mortgagee
harmless from and against any and all claims with respect to the Collateral
asserted before the taking of actual possession or control thereof by the
Mortgagee or its agents pursuant to this Article II, or arising out of any act
of, or omission to act on the part of, any party other than the Mortgagee or any
of its agents prior to such taking of actual possession or control by the
Mortgagee, or arising out of any act of, or omission to act on the part of, the
Mortgagor or any person claiming by, through or under the Mortgagor or any of
its Affiliates or agents before or after the commencement of such actual
possession or control by the Mortgagee or any of its agents; and (ii) that the
Mortgagee shall have no liability or obligation arising out of any such claim.
(c) Nothing herein contained shall be deemed to impair in any manner
the absolute right of the Mortgagee to sell and convey title to the Collateral
to the purchaser(s) at such sale(s) or to grant options with respect to or
otherwise to realize upon all or such portion of the Collateral, at such time,
and in such order, as it may elect in its sole and complete discretion in good
faith, or to enforce any one or more remedies relative hereto either
successively or concurrently; and the Mortgagor hereby agrees that the security
interest, options and other rights hereby given to the Mortgagee shall remain
unimpaired and unprejudiced until all the Collateral shall have been sold or
this Agreement shall otherwise have ceased to be of any force or effect
according to its terms, and that the enforcement of any right or remedy shall
not operate to bar or
<PAGE>
estop the Mortgagee from exercising any other right or remedy available
hereunder or under any other agreement between the Mortgagee and any of its
Affiliates, on the one hand, and the Mortgagor, any person claiming by, through
or under the Mortgagor and their Affiliates on the other hand, or otherwise,
available at law, in equity or otherwise.
ARTICLE III
REPRESENTATIONS, WARRANTIES AND COVENANTS
Section 3.01 Representations and Warranties.
------------------------------
(a) The Mortgagor represents and warrants to the Mortgagee that all
things necessary to make this Agreement the legal, valid and binding obligation
of the Mortgagor (subject to (i) bankruptcy, insolvency, reorganization,
fraudulent conveyance, moratorium and similar laws now or hereafter in effect
relating to creditors' rights generally and (ii) general principles of equity
(regardless of whether considered in a proceeding at law or in equity)),
enforceable in accordance with its terms, for the uses and purposes herein set
forth, against the Mortgagor, have been done and performed and have happened.
(b) The Mortgagor does hereby warrant and represent that it has not
assigned or pledged, and hereby covenants that it will not assign or pledge, so
long as the assignment hereunder shall remain in effect, any of its right, title
or interest hereby or thereby assigned, to anyone other than the Mortgagee,
enter into or consent to any agreement amending or supplementing the Lease or
any other Operative Document the effect of which would have a Material Adverse
Effect on the Mortgagee, and that it will not, except as provided in this
Agreement, accept any payment directly from the Lessee (except with respect to
Excluded Payments), or any other account debtor or other person in respect of
any obligation at the time constituting part of the Collateral.
(c) The Mortgagor does hereby ratify and confirm the Lease and does
hereby agree that so long as this Agreement shall remain in effect it shall not,
except as expressly permitted hereby or by the prior written consent of the
Mortgagee, take or omit to take any action, the taking or omission of which
might result in any waiver, amendment, alteration or impairment of any of the
Operative Documents in a manner materially adversely affecting the Mortgagor.
(d) The Mortgagor represents and warrants to the Mortgagee that the
execution and delivery by the Mortgagor of this Agreement and the performance by
it of its obligations hereunder (i) have been duly and validly authorized by all
necessary action, (ii) do not violate, conflict with, or constitute a default
under, any provision of its constitutive documents, or any provision or
obligation under any Permit, arbitration award, judgment, order or decree to
which it is a party or by which it or any of its assets are bound, (iii) do not
require the consent, approval, authorization or permit of, or filing with or
notification of or to, any Governmental Authority, except where the failure to
obtain such consents, approvals, authorizations or permits, or to make such
filings or notifications would not prevent the Mortgagor from performing its
obligations under this Agreement and would not, individually or in the
aggregate, have a Material Adverse Effect and (iv) do not, except in immaterial
respects, (A) violate, conflict with or constitute a default (or an event that
with notice or lapse of time or both would become a default) or give to others
any right of termination, amendment, acceleration or cancellation under the
terms of any agreement or instrument of any nature to which it is a party or by
which any of its assets are bound or (B) result in the creation or imposition of
any Lien of any nature
<PAGE>
whatsoever on any of its assets (including any Lease Document (or any right or
interest in respect thereof)) other than the Liens created by this Agreement or
(C) violate, conflict with or constitute a default under any Requirement of Law
with respect to the Mortgagor.
Section 3.02 Covenants.
---------
(a) So long as this Agreement remains in effect the Mortgagor shall
duly observe and perform its obligations under this Agreement and the other
Operative Documents, including, without limitation, the Lease, and pay to the
Mortgagee all amounts due and owing by it hereunder and under the provisions of
the Operative Documents. All such covenants are specifically incorporated
herein and made a part hereof.
(b) The Mortgagor and the Mortgagee agree each for itself for the
benefit of any lessor, conditional seller, indenture trustee or secured party of
any engine leased to or purchased by Mortgagor or any lessee subject to a lease,
conditional sale, trust indenture, or other security agreement that neither it
nor its successors and assigns will acquire or claim, as against such lessor,
conditional seller, indenture trustee or secured party, any right, title or
interest in any such engine as the result of such engine being installed on the
Airframe at any time while such engine is subject to such lease, conditional
sale, trust indenture or other security agreement and owned by such lessor or
seller or subject to a trust indenture or security interest in favor of such
indenture trustee or secured party; provided, that such agreement of Mortgagor
and Mortgagee shall not be for the benefit of any lessor, conditional seller,
indenture trustee or secured party of any such engines unless such lessor,
conditional seller, indenture trustee or secured party has agreed to
substantially the same extent as provided above (which agreement may be
contained in such lease, conditional sale or other security agreement) that
neither it nor its successors or assigns will acquire, as against Mortgagor or
Mortgagee, any right, title or interest in any engine as a result of such engine
being installed on any airframe owned by, leased to or held under any lease,
conditional sale, trust indenture security agreement by such lessor, conditional
seller, indenture trustee or secured party.
ARTICLE IV
[NOT USED]
ARTICLE V
MISCELLANEOUS
Section 5.01 Performance by Mortgagee.
------------------------
If the Mortgagor shall fail to maintain, or cause to be maintained, any
insurance required to be carried pursuant to the Loan Agreement or the Lease,
the Mortgagee may obtain the same for the account of the Mortgagor; and the
Mortgagor shall pay to the Mortgagee interest (to the extent permitted by
Applicable Law) at the Default Rate, computed on the basis of a 360-day year and
the actual number of days elapsed, on the amount of any such payment from the
date made until the date reimbursed by the Mortgagor pursuant hereto. If the
Mortgagor shall fail in a timely and effective manner to take and complete any
other action that it has herein undertaken to perform, strictly in accordance
with the provisions hereof, the Mortgagee may do or cause the
<PAGE>
same to be done; and there shall be added to the indebtedness secured hereby any
loss, cost or expense incurred by or on behalf of the Mortgagee in curing such
default or failure, or caused to be suffered by Mortgagee through the
incorrectness or breach of any of the covenants, agreements, representations or
warranties of the Mortgagor herein or by any other default of the Mortgagor
hereunder; and all sums so lost or expended shall be payable on demand and shall
bear interest as provided in the first sentence of this Section 5.01, and the
Mortgagee shall be subrogated to all the rights against the Mortgagor of any
person to whom it shall have made any payment or payments under the foregoing
authority.
Section 5.02 Power of Attorney.
-----------------
The Mortgagor hereby irrevocably appoints the Mortgagee, and its successors
and assigns, the true and lawful attorney of the Mortgagor (with the full power
of substitution), in the name and place and at the expense of the Mortgagor, (i)
to give any necessary receipts or acquittance for amounts collected or received
pursuant to Article II hereof, (ii) to make all necessary transfers of all or
any part of the Collateral in connection with any sale or other disposition
thereof made pursuant to such Article II, (iii) to execute and deliver for value
all necessary instruments of negotiation, assignment and transfer, (iv) to
employ legal counsel and to appear in its name in any court in any jurisdiction
to contest and compromise and discharge any alleged Lien, charge or other
encumbrance asserted against any of the Collateral, in any manner and by any
means that shall to it or them, in its or their sole and complete discretion,
seem proper; provided, however, that any such undertaking on the part of the
Mortgagee shall not qualify in any manner or to any extent or degree the
obligation of the Mortgagor so to defend its title to, and the security interest
of the Mortgagee in, the Collateral and every part thereof and (v) to file and
record such copies or memoranda hereof and financing statements, continuation
statements and other instruments or documents with respect to the security
interest created hereby as the Mortgagee may deem desirable fully to protect its
interest hereunder, and for such purpose the Mortgagor hereby authorizes the
Mortgagee to effect any such filings or recordings without the signature of the
Mortgagor to the extent permitted by Applicable Law, the Mortgagor hereby
ratifying and confirming all that its said attorney shall lawfully do hereunder
and pursuant hereto and acknowledging that its said attorney shall have no duty,
by virtue of this Section 5.02 or at the risk of otherwise waiving or qualifying
the obligation of the Mortgagor to do so, to do any of the above acts.
Section 5.03 Waiver, etc., by Mortgagor.
--------------------------
To the fullest extent that it may now and hereafter lawfully so agree, the
Mortgagor hereby agrees that it shall not at any time plead, claim or take the
benefit of any appraisement, valuation, extension, moratorium, redemption or
other law now or hereafter in effect in any jurisdiction in order to prevent or
delay the enforcement of any provision of this Agreement or the indebtedness or
agreements secured hereby, or the absolute sale of any portion of or all the
Collateral to any purchaser at any sale under Article II hereof; and the
Mortgagor, for itself and all who may claim through it, to the fullest extent
that it or they now and hereafter may lawfully so agree, hereby waives the
benefit of all such laws. Any sale of, grant of options to purchase or other
realization against all or any part of the Collateral shall operate to divest
(in the case of any options, on their exercise) all right, title and interest,
at law, in equity and otherwise, of the Mortgagor in and to the Collateral so
sold, optioned or realized upon, and shall be a perpetual bar, at law, in equity
and otherwise, against the Mortgagor and against any and all persons claiming or
attempting to claim the Collateral so sold, optioned or realized upon, or any
part thereof, from, through or under the Mortgagor. No delay on the part of the
Mortgagee in exercising any power of sale, Lien or option, or any other right or
remedy hereunder, or
<PAGE>
otherwise, and no notice or demand that may be given to or made upon the
Mortgagor with respect to any such power, right or remedy, shall constitute a
waiver thereof or limit or impair the right of the Mortgagee to take any other
or similar action or to exercise any power of sale, Lien or option, or any other
right or remedy granted in this Agreement or in any other agreement secured
hereby or otherwise available to the Mortgagee; nor shall any single or partial
exercise of any such power, right or remedy preclude any other or further
exercise thereof, or the exercise of any power, right or remedy granted in this
Agreement or otherwise available to the Mortgagee, or prejudice its rights
against the Mortgagor, or the Lessee in any respect. Each and every remedy of
the Mortgagee shall, to the extent permitted by Applicable Law, be cumulative
and in addition to any other remedy granted hereunder or now or hereafter
available to it at law, in equity or otherwise.
Section 5.04 Amendment; Waivers etc.
----------------------
Neither this Agreement nor any provision hereof may be amended, modified,
waived or discharged except in writing signed by the parties hereto. No waiver
by the Mortgagee of any breach or default of or by (i) the Borrower under the
Loan Agreement or (ii) the Mortgagor under this Agreement, any other Operative
Document, any other agreement or indebtedness secured hereby, or otherwise,
shall be deemed a waiver of any other or similar, previous or subsequent breach
or default.
Section 5.05 Mortgagor's Obligations Absolute.
--------------------------------
The obligations of the Mortgagor under this Agreement shall be absolute and
unconditional and shall remain in full force and effect without regard to, and
shall not be released, discharged or in any way affected by: (i) any amendment
to, modification of, supplement to or extension or renewal of the Note, the Loan
Agreement, the Operative Documents, or the Lease, or any other agreement or
indebtedness secured hereby, or any resort to or release of any part of the
Collateral or any other collateral now or hereafter held as security for the
payment thereof; (ii) any exercise or nonexercise of any power, right or remedy
granted under this Agreement, the Loan Agreement, any other Operative Document,
or the Lease, or any other agreement or indebtedness secured hereby, or
available under any Applicable Law, or any waiver, consent, extension,
indulgence or other action or inaction in respect of any thereof; (iii) any
insolvency, bankruptcy, reorganization, arrangement, liquidation, winding-up or
similar proceeding of or affecting the Mortgagor, the Borrower or the Lessee or
(iv) any other act or omission or delay to do any other act that may vary the
risk of the Mortgagor or the Lessee or otherwise operate as a discharge of the
obligations of the Mortgagor hereunder, or the Lessee under any agreement with
the Mortgagee or otherwise. This Agreement shall continue to be effective or
shall be reinstated, as the case may be, if at any time payment (or any part
thereof) of the indebtedness secured hereby is rescinded or must otherwise be
restored or returned by the Mortgagee upon the insolvency, bankruptcy or
reorganization of the Mortgagor or the Borrower or otherwise, as though such
payment had not been made.
Section 5.06 Successors and Assigns.
----------------------
The Mortgagor may not assign nor transfer any of its rights or
obligations under this Agreement without the prior written consent of the
Mortgagee, and no such assignment or transfer of any such obligation shall
relieve the Mortgagor thereof unless the Mortgagee shall
<PAGE>
have consented to such release in a writing specifically referring to the
obligation from which the Mortgagor is to be released. The Mortgagee may assign
or transfer its rights and obligations under this Agreement in connection with a
corresponding assignment of its rights, title and interests under the Loan
Agreement and the Note. All the terms, provisions, conditions and covenants
herein contained shall be binding upon and shall inure to the benefit of the
Mortgagor, the Mortgagee and their respective successors, assigns and
transferees.
Section 5.07 Severability.
------------
This Agreement is intended to comply with the laws of the jurisdiction or
jurisdictions wherein it is to be enforced, and any provisions hereof not so
complying shall be deemed to be modified accordingly in the manner and to the
extent that shall best effect the intentions and purposes reflected in and
contemplated by this Agreement. Any provision of this Agreement prohibited by
the laws of any jurisdiction shall, as to such jurisdiction, be ineffective to
the extent of such prohibition, or modified to conform with such laws, without
invalidating the remaining provisions hereof; and any such prohibition in any
jurisdiction shall not invalidate such provisions in any other jurisdiction. Any
impairment or invalidity, under the laws of any jurisdiction, of this Agreement,
in its aspect as security for any portion of the indebtedness of the Mortgagor
to the Mortgagee, hereunder or under the Loan Agreement or the Operative
Documents, for any portion of any other indebtedness or obligation secured
hereby, shall not impair or invalidate this Agreement as security for any other
portion thereof.
Section 5.08 Governing Law.
-------------
THIS AGREEMENT SHALL, PURSUANT TO NEW YORK GENERAL OBLIGATIONS LAW
SECTION 5-1401, BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK.
Section 5.09 Consent to Jurisdiction; Process Agent, etc.
-------------------------------------------
(a) The Mortgagor hereby irrevocably submits to the jurisdiction of
any New York State or Federal court sitting in New York City in any action or
proceeding arising out of or relating to this Agreement or any other Operative
Document, and the Mortgagor hereby irrevocably agrees that all claims in respect
of such action or proceeding may be heard and determined in such New York State
court or, to the extent permitted by law, in such Federal court. The Mortgagor
hereby irrevocably waives to the fullest extent it may effectively do so, the
defense of an inconvenient forum to the maintenance of such action or
proceeding.
(b) The Mortgagor hereby appoints the Process Agent as its agent to
receive on its behalf and in respect of its property service of copies of the
summons and complaint and any other process that may be served in any such
action or proceeding. Such service may be made by mailing or delivering a copy
of such process to the Mortgagor in care of the Process Agent at the Process
Agent's address set forth herein, and the Mortgagor hereby irrevocably
authorizes and directs the Process Agent to accept such service on its behalf.
As an alternative method of service, the Mortgagor also irrevocably consents to
the service of any and all process in any such action or proceeding by the
mailing of copies of such process to it at its address specified in Section
5.11. The Mortgagor agrees that a final judgment in any such action or
proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on the judgment or in any other manner provided by law.
<PAGE>
(c) Nothing in this Section 5.09 shall affect the right of any other
party to serve legal process in any other manner permitted by law or affect the
right of any other party to bring any action or proceeding against the Mortgagor
or its properties in the courts of other jurisdictions.
(d) To the extent that the Mortgagor has or hereafter may acquire any
immunity from jurisdiction of any court or from any legal process (whether
through service or notice, attachment prior to judgment, attachment in aid of
execution or otherwise) with respect to itself or its property, the Mortgagor
hereby irrevocably waives such immunity in respect of its obligations under this
Agreement and the other Operative Documents.
Section 5.10 Further Assurances.
------------------
At any time and from time to time, upon the request of the Mortgagee, the
Mortgagor shall promptly and duly execute and deliver any and all such further
instruments and documents as the Mortgagee may reasonably deem desirable in
obtaining the full benefits of security interests and assignments created or
intended to be created hereby and of the rights and powers granted herein. Upon
the instructions at any time and from time to time of the Mortgagee, the
Mortgagor will execute and file any supplement to this Agreement, any financing
statement (and any continuation statement with respect to any financing
statement) or any other similar document relating to the security interests and
assignments created by this Agreement and the Operative Documents as may be
specified in such instructions.
Section 5.11 Notices.
-------
All notices, requests and other communications to any party hereunder shall
be in writing (including prepaid overnight courier, telecopy transmission or
telex) and shall be given to such party at its address or telecopy number set
forth below or at such other address or telecopy number as such party may
hereafter specify for that purpose by notice to the other parties. All written
notices and communications shall be sent by registered or certified mail,
postage pre-paid, return receipt requested, by pre-paid telex or telecopier, or
delivered by hand. Each such notice, request or other communication shall be
effective (i) if given by telecopy or telex, when such telecopy or telex is
transmitted to the telecopy or telex number and telephonic confirmation of
receipt thereof is obtained or (ii) if given by mail, or prepaid overnight
courier on the date received at the address, and (iii) if given by hand
delivery, when left at the address of the addressee addressed as above provided,
except that notices of a change of address, telex or telecopier number shall not
be effective, until physically received by an officer of the Mortgagee in such
unit as may be responsible, at the time, for the administration of this
Agreement not later than 10:00 a.m., New York time, on any day if such day is to
count as a Business Day for the purpose of determining the adequacy of any
notice to the Mortgagee hereunder.
<PAGE>
If to the Mortgagor:
PS Group First Delaware Trust
c/o Wilmington Trust Company
Rodney Square North
North Market Street
Wilmington, DE 19890-0001
Telecopy: (302) 651-8882
Attention: Corporate Trust Administration
with a copy to:
PS Group, Inc.
4370 La Jolla Village Drive
Suite 1050
San Diego, CA 92122
Telecopy: (858) 642-1955
Attention: Chief Financial Officer
If to the Mortgagee:
GATX Capital Corporation
Four Embarcadero Center
Suite 2200
San Francisco, California 94111
Telecopy: 415-955-3449
Attention: Fred Vaske
Section 5.12 Liability of Mortgagee.
----------------------
The Mortgagee shall not be answerable or accountable under any
circumstances, except for its own willful misconduct or gross negligence.
Section 5.13 Absence of Certain Duties.
-------------------------
The Mortgagee shall have no duty (i) to see to any registration of the
Aircraft or any recording or filing of the Lease or of this Agreement or any
other document, or to see to the maintenance of any such registration, recording
or filing, (ii) to see to any insurance on the Aircraft or to effect or maintain
any such insurance, whether or not the Lessee shall be in default with respect
thereto, (iii) to see to the payment or discharge of any tax, assessment or
other governmental charge or any Lien or encumbrance of any kind owing with
respect to, assessed or levied against, any part of the Collateral, (iv) to
confirm, verify or inquire into the failure to receive any financial statements
of the Lessee or (v) to inspect the Aircraft at any time or ascertain or inquire
as to the performance or observance of any of the Lessee's covenants under the
Lease with respect to the Aircraft.
Section 5.14 Counterparts.
------------
<PAGE>
This Agreement may be executed in any number of counterparts, each of which
shall be an original, but all of which when taken together shall constitute one
and the same instrument.
Section 5.15 Entire Agreement.
----------------
This Agreement and the other Operative Documents embody the entire
agreement between the Mortgagor and the Mortgagee relating to the subject matter
hereof.
Section 5.16 Limitation of Liability.
-----------------------
Notwithstanding anything contained herein to the contrary, this instrument
has been executed by Wilmington Trust Company, not in its individual capacity
but solely in capacity as trustee of the Mortgagor, and in no event shall
Wilmington Trust Company in its individual capacity have any liability for the
representations, warranties, covenants, agreements or other obligations of the
Mortgagor hereunder, as to all of which recourse shall be had solely to the
assets of the Mortgagor. For all purposes of this Agreement, in the performance
of any duties or obligations of the Mortgagor hereunder, the Owner Trustee shall
be subject to, and entitled to the benefits of, the terms and provisions of the
Trust Agreement.
Section 5.17 Definitions and Construction.
----------------------------
As used herein, the following terms shall have the meanings respectively
set forth after each (with any capitalized terms used herein and not otherwise
defined herein having the meanings assigned to such terms in the Loan
Agreement):
"Agreement" means this Mortgage and Security Agreement, as the same may be
---------
modified, amended or supplemented from time to time.
"Aircraft" has the meaning set forth in Section 1.01(a) of this Agreement.
--------
"Airframe" has the meaning set forth in Section 1.01(a) of this Agreement.
--------
"Applicable Law" means all applicable provisions of all constitutions,
--------------
treaties, statutes, rules, regulations, directives and orders of governmental
bodies and all decisions, orders, judgments and decrees of all courts (whether
at law or in equity) and arbitrators.
"Aviation Act" shall mean the United States Federal Aviation Act of 1958,
------------
as amended, as recodified in Title 49 of the United States Code.
"Bankruptcy Code" shall mean the Bankruptcy Reform Act of 1978, as amended
---------------
from time to time, and any successor statute of similar import, together with
the rules thereunder, in each case in effect form time to time. Reference to
sections of the Bankruptcy code shall be construed to also refer to any
successor sections.
"Basic Rent" means the rent payable on a periodic basis for the Aircraft
----------
pursuant to a Lease, but does not include security deposits or maintenance
reserves.
"Borrower" means [PS] Group, Inc., a Delaware corporation.
--------
<PAGE>
"Collateral" has the meaning set forth in Section 1.01 of this Agreement.
----------
"Collateral Account" has the meaning set forth in the Collateral Account
------------------
and Pledge Agreement.
"Collateral Account and Pledge Agreement" means the Collateral Account and
---------------------------------------
Pledge Agreement to be dated the Closing Date between the Borrower and the
Mortgagee, as amended from time to time.
"Condemnation" has the meaning set forth in Section 4.01 of this Agreement.
------------
"Engine" has the meaning set forth in Section 1.01(b) of this Agreement.
------
"Event of Loss" means (i) if an Aircraft is not subject to a Lease, any of
-------------
the following events: (x) the actual or constructive total loss of an Aircraft
or the agreed or compromised total loss of an Aircraft; (y) any capture,
condemnation, confiscation, requisition, purchase, seizure or forfeiture of, or
any taking for use or of title to, an Aircraft, in each case, that shall have
resulted in the loss of possession or title of an Aircraft by [ ] (other than a
requisition for use by the United States Government) and (ii), if an Aircraft is
subject to a Lease, any event defined as an "Event of Loss," "Casualty
Occurrence" or similar term in such Lease. An Event of Loss shall be deemed to
have occurred (i) if an Aircraft is not subject to a Lease, (x) in the event of
an actual loss of an Aircraft, on the date of such loss; (y) in the event of
damage which results in a constructive or compromised or arranged total loss of
an Aircraft, on the date of the event giving rise to such damage; (z) in the
case of any event referred to in clause (i)(y) above, on the date of the
occurrence of such event, and (ii) if the Aircraft is subject to a Lease, at
such times as are set forth in such Lease of an Aircraft for the foregoing
events.
"Excluded Payments" has the meaning set forth in Section 1.02(a) of this
-----------------
Agreement.
"FAA" means the United States Federal Aviation Administration and any
---
successor agency.
"Lease" means the Lease Agreement, dated as of [ ], among the Mortgagor and
-----
the Lessee, with respect to the Aircraft, as more particularly described in
Annex I attached hereto, as hereafter amended, modified or supplemented from
time to time in accordance with the Loan Agreement.
"Lessee" means US Airways, Inc.
------
"Lessee Deposits" has the meaning set forth in Section 1.06 of this
---------------
Agreement.
"Loan Agreement" has the meaning set forth in the recitals of this
--------------
Agreement.
"Material Adverse Effect" means (i) with respect to any Person, a
-----------------------
materially adverse effect on such Person's business, assets, liabilities,
financial condition, results of operations or business prospects, (ii) with
respect to any contract or any other obligation, a materially adverse effect, as
to any party thereto, upon the binding nature, validity or enforceability
thereof and (iii) with respect to this Agreement, the Loan Agreement or the
other Operative Documents, an adverse effect, WHETHER OR NOT MATERIAL, on the
binding nature, validity or enforceability thereof as obligations of the
Mortgagor.
<PAGE>
"Mortgage Supplement" has the meaning set forth in Section 1.01(g).
-------------------
"Mortgagee" means GATX Capital Corporation, a Delaware corporation, and its
---------
successors and assigns.
"Mortgagee Amounts" has the meaning set forth in Section 2.04(b).
-----------------
"Mortgagor" means PS Group First Delaware Trust, a Delaware business trust.
---------
"Obligations" means all liabilities and obligations, including but not
-----------
limited to, all principal, interest, premium, if any, fees, expenses and other
obligations set forth in this Agreement, the Loan Agreement, the Note and the
other Operative Documents of every nature of the Mortgagor and the Borrower from
time to time owed to the Mortgagee, in each case, whether now existing or
hereafter arising, absolute or contingent, joint and/or several, secured or
unsecured, direct or indirect, expressed or implied in law, contractual or
tortious, liquidated or unliquidated, at law or in equity, or otherwise and any
and all costs of collection and/or reasonable attorneys' fees incurred in
connection therewith.
"Operative Documents" means, without duplication, each of the Loan
-------------------
Agreement, this Agreement, the Lease, the Note and each other document,
instrument or agreement delivered in accordance with any of the foregoing.
"Parts" means (i) all appliances, parts, instruments, appurtenances,
-----
accessories, furnishings and other equipment of whatever nature (other than
complete Engines or engines) which may from time to time be incorporated or
installed in or attached to any Airframe or Engine; and (ii) any replacement
Part which may from time to time be substituted for a Part leased under the
Lease; and all such appliances, parts, instruments, appurtenances, accessories,
furnishings and other equipment removed from such Airframe or Engine, so long as
title thereto or any interest therein shall remain vested with Mortgagor.
"Process Agent" means Integrated Capital Associates, which currently
-------------
maintains an office in New York situated at 101 East 52/nd/ Street, New York, NY
10022.
"Rent" means Basic Rent and all other amounts (other than Excluded
----
Payments), payable by the Lessee under the Lease.
"Representation and Warranty" means any representation or warranty made
---------------------------
pursuant to or under (a) Section 3.01 or any other provision of this Agreement
or (b) any amendment to, or waiver of rights under this Agreement, WHETHER OR
NOT, IN THE CASE OF ANY REPRESENTATION OR WARRANTY REFERRED TO IN CLAUSE (a) OR
(b) OF THIS DEFINITION (EXCEPT, IN EACH CASE, TO THE EXTENT OTHERWISE EXPRESSLY
PROVIDED), THE INFORMATION THAT IS THE SUBJECT MATTER THEREOF IS WITHIN THE
KNOWLEDGE OF THE MORTGAGOR.
"Reserved Powers" has the meaning set forth in Section 1.02 of this
---------------
Agreement.
"Security Agreement" means the Security agreement to be dated the Closing
------------------
Date between the Borrower and the Mortgagee, as amended from time to time.
<PAGE>
"Term" means the term, for which the Aircraft is leased pursuant to the
----
Lease.
Any term used in this Agreement and not specifically defined in this Agreement
that is defined in the Loan Agreement shall have the meaning ascribed to such
term in the Loan Agreement. Unless the context of this Agreement clearly
requires otherwise, references to the plural include the singular and to the
singular include the plural, the part includes the whole, the terms "include"
and "including" are not limiting, and the term "or" has, except where otherwise
indicated, the inclusive meaning represented by the phrase "and/or." The words
"hereof," "herein," "hereby," "hereunder," and other similar terms in this
Agreement refer to this Agreement as a whole and not exclusively to any
particular provision of this Agreement. Article, section, subsection, exhibit,
and schedule references are to this Agreement unless otherwise specified. All
of the exhibits or schedules attached to this Agreement, shall be deemed
incorporated herein by reference. Any reference in this Agreement to any other
document, agreement, instrument, or applicable law includes any and all
alterations, amendments, extensions, modifications, renewals, or supplements
thereto or thereof, as applicable. Neither this Agreement nor any uncertainty
or ambiguity contained herein shall be construed or resolved against Mortgagee
or Mortgagor, whether under any rule of construction or otherwise. In the event
of any direct conflict between the express terms and provisions of this
Agreement and those of the Loan Agreement, the terms and provisions of the Loan
Agreement shall control.
[Remainder of page intentionally left blank]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have, by their indicated officers
thereunto duly authorized, caused this Mortgage and Security Agreement [N ]
to be executed as of the day and year first above written and to be delivered in
the State of New York.
Mortgagor,
PS GROUP FIRST DELAWARE TRUST
By: Wilmington Trust Company, not in
its individual capacity but solely as trustee
By:_______________________________________
Name:
Title:
Mortgagee,
GATX CAPITAL CORPORATION
By:______________________________________
Name:
Title:
<PAGE>
ANNEX I
-------
[FORM OF DESCRIPTION OF LEASE]
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I
SECURITY INTEREST
<TABLE>
<CAPTION>
<S> <C> <C>
Section 1.01 Granting of Security Interest........................... 2
Section 1.02 Certain Retained Rights................................. 4
Section 1.03 Certain Releases of Lien................................ 5
Section 1.04 No Liability of Mortgagee............................... 6
Section 1.05 Liability of Mortgagor.................................. 6
Section 1.06 No Segregation of Monies; No Interest................... 7
Section 1.07 Lessee's Quiet Enjoyment................................ 7
ARTICLE II
EVENTS OF DEFAULT; DISPOSITION OF
COLLATERAL AND APPLICATION OF PROCEEDS
Section 2.01 Judicial Proceedings, etc., Following Event of Default.. 7
Section 2.02 Delivery of Collateral, Power of Sale, etc.............. 9
Section 2.03 Right to Possession etc................................. 9
Section 2.04 Application of Proceeds................................. 10
Section 2.05 Matters Involving Manner of Sale........................ 11
ARTICLE III
REPRESENTATIONS, WARRANTIES AND COVENANTS
Section 3.01 Representations and Warranties.......................... 12
Section 3.02 Covenants............................................... 13
ARTICLE V
MISCELLANEOUS
Section 5.01 Performance by Mortgagee................................ 13
Section 5.02 Power of Attorney....................................... 14
Section 5.03 Waiver, etc., by Mortgagor.............................. 14
Section 5.04 Amendment; Waivers etc.................................. 15
Section 5.05 Mortgagor's Obligations Absolute........................ 15
Section 5.06 Successors and Assigns.................................. 16
Section 5.07 Severability............................................ 16
Section 5.08 Governing Law........................................... 16
Section 5.09 Consent to Jurisdiction; Process Agent, etc............. 16
Section 5.10 Further Assurances...................................... 17
Section 5.11 Notices................................................. 17
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Section 5.12 Liability of Mortgagee.................................. 18
Section 5.13 Absence of Certain Duties............................... 18
Section 5.14 Counterparts............................................ 19
Section 5.15 Entire Agreement........................................ 19
Section 5.16 Limitation of Liability................................. 19
Section 5.17 Definitions and Construction............................ 19
Annex I Definition of Terms
</TABLE>
<PAGE>
EXHIBIT G
COLLATERAL ACCOUNT AND PLEDGE AGREEMENT
between
PS GROUP, INC.
and
GATX CAPITAL CORPORATION,
as Lender
Dated as of _____________, 2000
<PAGE>
s
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I COLLATERAL ACCOUNT............................................................ 1
A. Establishment................................................................. 1
B. Pledge and Grant of Security Interest......................................... 1
C. Deposits...................................................................... 2
D. Transfers and Other Liens..................................................... 2
E. Investment.................................................................... 2
F. Duty of Care.................................................................. 2
G. Remedies Upon Default......................................................... 3
ARTICLE II INDEMNIFICATION; APPLICATION OF PROCEEDS;
REMEDIES...................................................................... 3
ARTICLE III COVENANTS AND WARRANTIES OF THE DEBTOR........................................ 3
A. Further Assurances............................................................ 3
B. Power of Attorney............................................................. 4
C. Certain Actions............................................................... 4
D. Executive Offices............................................................. 4
ARTICLE IV MISCELLANEOUS................................................................. 5
A. Security Interest Absolute.................................................... 5
B. Continuing Security Interest.................................................. 5
C. Survival...................................................................... 5
D. Amendments.................................................................... 6
E. No Waiver..................................................................... 6
F. Notices....................................................................... 6
G. Counterparts.................................................................. 6
H. Severability.................................................................. 6
I. Captions...................................................................... 6
J. GOVERNING LAW................................................................. 6
K. Successors and Assigns........................................................ 6
</TABLE>
i
<PAGE>
COLLATERAL ACCOUNT AND PLEDGE AGREEMENT dated as of _____________,
2000 between PS GROUP, INC., a Delaware corporation (the "Debtor") and GATX
CAPITAL CORPORATION, a Delaware corporation (the "Lender").
The Debtor and the Lender have entered into a Loan Agreement (the
"Loan Agreement"), dated as of December 18, 1999. Pursuant to a Security
Agreement dated as of ________ __, 2000, from the Debtor to the Lender (the
"Security Agreement"), the Debtor is granting certain security interests to the
Lender. Defined terms used and not defined herein have the meanings set forth in
the Loan Agreement.
To secure (x) the payment of all sums now or hereafter owing to the
Lender by the Debtor under the Loan Documents to which the Lender is a party or
a beneficiary (the "Lender Documents," including the Note) and (y) the
performance and observance of all of the Debtor's covenants and conditions
contained in the Lender Documents (the "Indebtedness"), the Debtor has
established for the benefit of the Lender an account and has agreed to deposit
or cause to be deposited certain sums in such account and to pledge to the
Lender all of its right, title and interest in and to all amounts in, and all
investments of and proceeds from, such account. The Lender and the Debtor wish
to set forth the terms regarding the account, and the use and control of the
proceeds therein, all in accordance with the terms and provisions of this
Agreement.
The parties agree as follows:
ARTICLE I
COLLATERAL ACCOUNT
------------------
A. Establishment. The [Lender] shall establish an account (the
-------------
"Collateral Account") entitled "GATX MAILBOX" with Bank of America, Dallas,
Texas 75202 (ABA #111-000-012), Account No. 3751463469. Subject to the
provisions of this Agreement, the Lender shall have sole dominion and control
over the Collateral Account and, after the occurrence and continuation of an
Event of Default, shall have sole authority to make withdrawals therefrom, and
the Collateral Account shall be maintained and administered by the Lender.
B. Pledge and Grant of Security Interest. As security for the
-------------------------------------
prompt and complete payment (whether at stated maturity, by acceleration or
otherwise) of the Indebtedness, the Debtor hereby delivers, deposits, sets over,
confirms, assigns and pledges to, and grants to the Lender, a continuing
possessory lien and security interest in the Collateral Account and the
following (collectively the "Collateral Account Proceeds"):
<PAGE>
2
(i) All Available Cash deposited in the Collateral Account on
or after the Closing;
(ii) All amounts now or hereafter on deposit in the Collateral
Account;
(iii) All Investments (as hereinafter defined) and all other
amounts earned on amounts deposited in the Collateral Account or on
Investments; and
(iv) All cash and non-cash proceeds of the foregoing.
C. Deposits. The Debtor shall deposit, or cause to be deposited, in
--------
the Collateral Account all Available Cash received by the Debtor. To the extent
that any Lease Payments are received by the Debtor in a form other than cash,
Debtor will transfer such non-cash Lease Payments to the Lender in the form in
which it is received as promptly as practicable.
D. Transfers and Other Liens. Except as permitted hereunder, the
-------------------------
Debtor shall not sell, transfer, encumber, hypothecate or otherwise dispose of,
or grant any option with respect to, any of the Collateral Account Proceeds, or
create or permit to exist any lien, security interest, or other charge or
encumbrance upon any of the Collateral Account Proceeds, except for the pledge
and security interest granted under this Agreement.
E. Investment. The Debtor or the Lender, as the case may be, shall
----------
to the extent practicable invest, on a daily basis, all or any portion of the
Collateral Account Proceeds in one or more of the following investments
(collectively, the "Investments"):
(i) Obligations issued by or guaranteed as to principal and
interest by the United States government, its agencies and
instrumentalities;
(ii) Time deposits, negotiable certificates of deposit,
bankers' acceptances and short-term notes of banks (domestic or Canadian)
having total assets in excess of $1 billion; and
(iii) Short-term obligations of domestic issuers which at the
time of investment are (a) rated A-1 or A-2 by Standard & Poor's
Corporation or P-1 or P-2 by Moody's Investors Service, Inc., or (b) if not
rated, issued by a Person which at the date of investment has any
outstanding debt securities rated at least A by Standard & Poor's or A by
Moody's.
F. Duty of Care. Other than the exercise of reasonably prudent care
------------
to assure the safe custody of the Collateral Account Proceeds while held
<PAGE>
3
hereunder, the Lender shall have no duty or liability to preserve rights
pertaining thereto and shall be relieved of all responsibility for the
Collateral Account Proceeds upon disbursement of the Collateral Account Proceeds
in accordance with Section 2.7 of the Loan Agreement. The Lender shall be
deemed to have exercised reasonably prudent care in the custody and preservation
of the Collateral Account Proceeds in its possession if the Collateral Account
Proceeds are accorded treatment substantially equal to that which it accords its
own property. Without limiting the generality of the foregoing, neither the
Lender nor any of its respective directors, officers, agents or employees shall
be liable (i) for any failure to invest or reinvest any cash in the Collateral
Account in the absence of its or their own gross negligence or willful
misconduct or for any losses incurred by reason of Investments made in
accordance with Section 1.6 or (ii) for any action taken or omitted to be taken
by the Lender in accordance with any instructions or other notice which the
Lender believes in good faith to be properly given by the Debtor hereunder.
G. Remedies Upon Default. Upon the occurrence of an Event of
---------------------
Default, the Lender may (in addition to any other rights or remedies under this
Agreement, at law or otherwise) retain for its own account or otherwise sell or
dispose of all or any portion of the Collateral Account Proceeds in one or more
public or private sales, and, in each case, apply such Collateral Account
Proceeds or the proceeds therefrom in accordance with Section 2.7 of the Loan
Agreement.
ARTICLE II
USE AND APPLICATION OF PROCEEDS
-------------------------------
Except after the occurrence and during the continuance of an Event of
Default, the proceeds of the Collateral Account Proceeds, or any part thereof,
may be used by the Borrower in the ordinary course of its business in accordance
with the Loan Agreement; provided, however, that all Collateral Account Proceeds
-------- -------
which constitute Available Cash shall be applied by the Debtor in accordance
with Section 2.7(a) of the Loan Agreement.
ARTICLE III
COVENANTS AND WARRANTIES OF THE DEBTOR
--------------------------------------
The Debtor warrants to and covenants and agrees with the Lender as
follows:
A. Further Assurances. The Debtor hereby covenants and agrees that
------------------
it shall (i) perform such acts and execute, acknowledge and deliver, from time
to time, such financing statements and other instruments as may be reasonably
required
<PAGE>
4
by the Lender to perfect or better assure this Agreement and the security
interests created hereby, and file or record the same in the public records
specified by the Lender and (ii) upon request of the Lender, execute and deliver
all further instruments and documents, and take all further action, that may be
necessary or desirable in the Lender's reasonable opinion to further perfect and
protect any security interest granted or purported to be granted hereby, to
enable the Lender to exercise and enforce its rights and remedies hereunder with
respect to the Collateral Account Proceeds or to effectuate the purpose and
intent of this Agreement.
B. Power of Attorney. The Debtor does hereby irrevocably constitute
-----------------
and appoint the Lender and all Persons designated by the Lender for that purpose
its true and lawful attorney-in-fact with full irrevocable power and authority
in the place and stead of the Debtor and in the name of the Debtor or in its own
name, after the occurrence and continuation of an Event of Default, (i) to
receive payment of and to endorse the Debtor's name to any of the Collateral
Account Proceeds (including checks, drafts or other orders for the payment of
money) that come into the Lender's possession or under the Lender's control
(including any amounts in the Collateral Account), (ii) to make all demands,
consents and waivers, or take any other action with respect to, the Collateral
Account Proceeds, (iii) to make all withdrawals from the Collateral Account,
(iv) to otherwise act with respect thereto as though it were the outright owner
of the Collateral Account Proceeds, and (v) in its discretion to file any claim
or take any other action or proceedings, either in its own name or in the name
of the Debtor or otherwise, which the Lender may deem necessary or appropriate
to protect and preserve the right, title and interest of the Lender in and to
the Collateral Account Proceeds and the security intended to be afforded hereby.
The appointment of the Lender as the Debtor's attorney-in-fact and the Lender's
rights and powers are coupled with an interest and are irrevocable until all
Indebtedness owed to such Lender shall have been paid in full.
C. Certain Actions. Until the payment in full of all of the
---------------
Indebtedness owed to it, the Lender shall have the right to the exclusion of the
Debtor to, after the occurrence and continuation of an Event of Default, (i)
make all demands, consents and waivers, or take any other action with respect
to, the Collateral Account Proceeds, (ii) accept the payment of any interest,
principal or other amounts payable under or in connection with the Collateral
Account Proceeds, (iii) commence any actions to enforce the Collateral Account
Proceeds, (iv) make all withdrawals from the Collateral Account, and (v)
otherwise act with respect to the Collateral Account Proceeds as though it were
the outright owner thereof.
D. Executive Offices. The principal place of business and chief
-----------------
executive office of the Debtor is: 4370 La Jolla Village Drive, Suite 1050, San
Diego, CA 92122, or such other location of which Debtor shall have given the
Lender 30 days' prior written notice.
<PAGE>
5
ARTICLE IV
MISCELLANEOUS
-------------
A. Security Interest Absolute. The security interest, rights of the
--------------------------
Lender and obligations of the Debtor granted or created under this Agreement
shall be absolute and unconditional irrespective of:
(i) Any lack of validity or enforceability in whole or in part
of this Agreement, the Loan Agreement, any other Lender Document, or any
other agreement or instrument executed or delivered in connection herewith
or therewith;
(ii) Any change in the time, manner or place of payment of, or
in any other term of, the Loan Agreement, any other Lender Document, or any
other amendment or waiver of, or any consent to any departure from, such
agreement or any other instrument executed or delivered in connection
herewith or therewith;
(iii) Any exchange, release or nonperfection of any other
collateral, or any release, amendment or waiver of, or consent to departure
from, any guaranty, for all or any of the Indebtedness;
(iv) Any other circumstance which might otherwise constitute a
defense available to, or a discharge of the Debtor in respect of, any
Indebtedness; or
(v) Any name change or merger, consolidation or other business
combination (including the Merger) involving or with respect to the Debtor.
B. Continuing Security Interest. This Agreement creates a
----------------------------
continuing security interest in the Collateral Account Proceeds and shall be
binding upon the Debtor, its successors and assigns, and inure, together with
the rights and remedies of the Lender hereunder, to the benefit of the Lender
and each of them and their respective successors, transferees and assigns.
C. Survival. All covenants, agreements, representations and
--------
warranties contained in this Agreement and any and each other agreement or
instrument delivered pursuant hereto shall survive the execution and delivery of
this Agreement and shall continue in effect until all Indebtedness shall have
been paid in full.
<PAGE>
6
D. Amendments. No amendment or waiver of any provision of this
-----------
Agreement, nor consent to any departure by any party, shall in any event be
effective unless the same shall be in writing and signed by each of the parties
and such waiver or consent shall be effective only in the specific instance and
for the specific purpose for which given.
E. No Waiver. No failure on the part of any party to exercise, and
---------
no delay in exercising, any right under this Agreement shall operate as a waiver
thereof; nor shall any single or partial exercise of any right hereunder
preclude any other or further exercise thereof or the exercise of any other
right.
F. Notices. All notices, requests, demands, consents and other
-------
communications to or upon the parties to this Agreement with respect to the
Lender shall be given pursuant to Section 8.6 of the Loan Agreement.
G. Counterparts. This Agreement may be executed by the parties
------------
hereto in two or more counterparts, and by separate parties on separate
counterparts, each of which when so executed and delivered shall be an original,
but all of which together shall constitute one and the same instrument.
H. Severability. Any provision of this Agreement which is
------------
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
I. Captions. The table of contents and the captions in this
--------
Agreement are for convenience of reference only and shall not modify, define,
expand or limit any of the terms or provisions hereof.
J. GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF
-------------
THE PARTIES HEREUNDER SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE
AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE.
K. Successors and Assigns. This Agreement shall be binding upon and
----------------------
shall inure to the benefit of the parties hereto and their respective successors
and permitted assigns. This Agreement may not be assigned by the Debtor, and
any such attempted assignment shall be void.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective officers thereunto duly authorized as of
the day and year first above written.
<PAGE>
7
PS GROUP, INC.
By:___________________________________
Name:
Title:
GATX CAPITAL CORPORATION
By:___________________________________
Name:
Title:
<PAGE>
8
[COLLATERAL ACCOUNT AND PLEDGE AGREEMENT]
<PAGE>
EXHIBIT H
SUBSIDIARY GUARANTY dated as of _________, 1999 by PS Trading, Inc., a
California corporation (the "Guarantor"), in favor of GATX Capital Corporation,
a Delaware corporation (the "Beneficiary").
The Beneficiary has entered into a Loan Agreement dated as of December
18, 1999 with PS Group, Inc., a Delaware corporation (the "Borrower").
The Borrower is the owner of 100% of the capital stock of the
Guarantor.
The Beneficiary has required, as a condition precedent to making the
loan to the Borrower under the Loan Agreement, that the Guarantor execute and
deliver this Guaranty. The Beneficiary would not make the loan but for the
execution and delivery of this Guaranty by the Guarantor.
In furtherance of the business purposes of the Guarantor, the
Guarantor desires to irrevocably and unconditionally guaranty all of the
obligations of the Borrower under the Loan Documents (as hereafter defined).
The Guarantor agrees as follows:
1. Definitions. Capitalized terms not otherwise defined in this
-----------
Guaranty have the meanings ascribed to them in the Loan Agreement.
2. The Guaranty.
------------
(a) The Guarantor hereby irrevocably guaranties (i) the due and
punctual payment in full (in immediately available funds) when due (whether at
stated maturity, upon acceleration, demand or otherwise, including amounts that
would become due but for the operation of the automatic stay under Section
362(a) of the Bankruptcy Code, or any successor provision), of any and all sums,
whether of principal, interest (including any interest payable subsequent to a
default), fees, expenses, indemnities and other amounts (including all fees and
disbursements of counsel to the Beneficiary), payable by the Borrower pursuant
to or arising under, out of or in connection with the Loan Documents, whether
direct or indirect, absolute or contingent, due or to become due, now existing
or hereafter incurred, and (ii) the prompt and complete performance by the
Borrower of all other terms and provisions of the Loan Documents (the
obligations to pay all such sums and perform all such terms and provisions are
hereafter collectively referred to as the "Guarantied Obligations"). The
Guarantor acknowledges that there are no conditions whatsoever to the
effectiveness of this Guaranty.
(b) Anything contained in this Guaranty to the contrary
notwithstanding, (i) the obligations of the Guarantor hereunder shall be limited
to a maximum aggregate amount equal to the greatest amount that would not render
the Guarantor's obligations hereunder subject to avoidance as a fraudulent
transfer or
<PAGE>
2
conveyance under Section 548 of Title 11 of the United States Code or any
provisions of applicable state law (collectively, the "Fraudulent Transfer
Laws"), in each case after giving effect to all other liabilities of the
Guarantor, contingent or otherwise, that are relevant under the Fraudulent
Transfer Laws (specifically excluding, however, any liabilities of the Guarantor
(A) in respect of intercompany indebtedness to the Borrower or Affiliates of the
Borrower to the extent that such indebtedness would be discharged in an amount
equal to the amount paid by the Guarantor hereunder and (B) under any Guarantee
of senior unsecured indebtedness or Debt subordinated in right of payment to the
Guarantied Obligations which Guarantee contains a limitation as to maximum
amount similar to that set forth in this paragraph, pursuant to which the
liability of the Guarantor hereunder is included in the liabilities taken into
account in determining such maximum amount) and after giving effect as assets to
the value (as determined under the applicable provisions of the Fraudulent
Transfer Laws) of any rights to subrogation, contribution, reimbursement,
indemnity or similar rights of the Guarantor pursuant to (I) applicable law or
(II) any agreement providing for an equitable allocation among the Guarantor and
other Affiliates of the Borrower of obligations arising under Guarantees by such
parties; and (ii) the Beneficiary agrees that it shall not have any recourse
against the PST Environmental Reserve Account.
3. Liability of the Guarantor. The Guarantor agrees that its
--------------------------
obligations hereunder are irrevocable, continuing, absolute, independent and
unconditional and shall not be affected by any circumstance whatsoever (other
than the payment in full and the complete performance of the Guarantied
Obligations) which may constitute a defense or a legal or equitable discharge
(whether in whole or in part) of a guarantor or surety, whether foreseen or
unforeseen and whether similar or dissimilar to any circumstance described in
this Guaranty. In furtherance of the foregoing and without limiting the
generality thereof, the Guarantor agrees as follows:
(a) Guaranty of Payment. This Guaranty is a guaranty of payment and
-------------------
performance, and not of collection only. The Guarantor waives any requirement
that the Beneficiary, as a condition of payment by the Guarantor, (i) proceed
against the Borrower, any other guarantor of the Guarantied Obligations or any
other Person, (ii) proceed against or exhaust any security received from the
Borrower, any other guarantor of the Guarantied Obligations or any other Person,
(iii) proceed against or have resort to any balance of any deposit account or
credit on the books of the Beneficiary in favor of the Borrower, any other
guarantor of the Guarantied Obligations or any other Person, or (iv) pursue any
other remedy whatsoever in the power of the Beneficiary.
(b) Continuing Guaranty. This Guaranty shall remain in full force and
-------------------
effect until all of the Guarantied Obligations have been completely performed
and paid in full, notwithstanding that from time to time prior thereto the
Borrower may be free from any of the Guarantied Obligations. The Guarantor's
payment of a portion, but not all, of the Guarantied Obligations shall in no way
limit,
<PAGE>
3
affect, modify or abridge the Guarantor's liability for any portion of the
Guarantied Obligations that has not been completely performed or paid in full.
(c) Absolute and Unconditional Guaranty. This Guaranty and the
-----------------------------------
obligations of the Guarantor hereunder are not subject to any reduction,
limitation, impairment, discharge or termination for any reason (other than the
complete performance and the payment in full of the Guarantied Obligations),
including the occurrence of any one or more of the following, whether or not the
Guarantor shall have had notice or knowledge of any of them:
(i) any change in the manner, place or terms of payment (including
the currency thereof) of any of the Guarantied Obligations;
(ii) any settlement, compromise, release or discharge of, or
acceptance or refusal of any offer of performance with respect to, or
substitutions for, the Guarantied Obligations or any agreement relating thereto
or any subordination of the payment of the Guarantied Obligations to the payment
of any other obligations;
(iii) any rescission, waiver, extension, renewal, alteration, amendment
or modification of, or any consent to departure from, any of the terms or
provisions (including provisions relating to Events of Default) of the
Guarantied Obligations or any agreement relating thereto, or any other
guaranties or security for the Guarantied Obligations, in each case whether or
not in accordance with the terms thereof;
(iv) the Guarantied Obligations, this Guaranty or any other agreement
relating thereto at any time being found to be illegal, invalid or unenforceable
in any respect or any provision of applicable law or regulation purporting to
prohibit the payment by the Borrower of any of the Guarantied Obligations;
(v) any request or acceptance of other guaranties of the Guarantied
Obligations or the taking and holding of any security for the payment of the
Guarantied Obligations, this Guaranty, or any other guaranty of the Guarantied
Obligations or any release, impairment, surrender, exchange, substitution,
compromise, settlement, rescission or subordination thereof;
(vi) any failure to perfect or continue perfection of a security
interest in any collateral which secures any of the Guarantied Obligations; or
any enforcement and application of any security now or hereafter held by the
Beneficiary in respect of this Guaranty or the Guarantied Obligations and any
direction of the order or manner of sale thereof, or the exercise of any other
right or remedy that the Beneficiary may have with respect to any such security,
as the Beneficiary in its sole discretion may determine, including foreclosure
on any such security pursuant to one or more judicial or nonjudicial sales;
<PAGE>
4
(vii) any failure or omission to exercise, assert or enforce, or any
agreement or election not to assert or enforce, or the stay or enjoining, by
order of court, by operation of law or otherwise, of the exercise or enforcement
of, any claim or demand or any right, power or remedy (whether arising under the
Loan Documents, at law, in equity or otherwise) with respect to the Guarantied
Obligations or any agreement relating thereto, or with respect to any other
guaranties of or any security for the payment of the Guarantied Obligations;
(viii) any change in, or reorganization of, the corporate structure of
the Borrower or any of its Subsidiaries or any dissolution, termination,
consolidation or merger or sale or other disposition, whether or not for fair
consideration, of all or substantially all of the assets of any of the
foregoing or any consent of the Beneficiary thereto or to any restructuring of
the Guarantied Obligations;
(ix) the election by the Beneficiary in any proceeding instituted
under the Bankruptcy Code of the application of Section 1111(b)(2) of the
Bankruptcy Code; any borrowing or grant of a security interest by the Borrower,
as debtor-in-possession, under Section 364 of the Bankruptcy Code; or the
disallowance under Section 502 of the Bankruptcy Code of all or any portion of
the claims of the Beneficiary for repayment of the Guarantied Obligations;
(x) any name change or merger, consolidation or other business
combination (including the Merger) involving or with respect to the Borrower or
the Guarantor; or
(xi) any other act or thing or omission, or delay to do any other
act or thing, which may or might in any manner or to any extent vary the risk of
the Guarantor as an obligor in respect of the Guarantied Obligations.
4. Waivers of Notices and Defenses. The Guarantor hereby waives, for the
-------------------------------
benefit of the Beneficiary:
(i) any defense arising by reason of the incapacity, lack of
authority or any disability of the Borrower;
(ii) any notice of the creation, renewal, extension or accrual of
any of the Guarantied Obligations and notice of or proof of reliance by the
Beneficiary upon this Guaranty or acceptance of this Guaranty (the Guarantied
Obligations and all dealings between the Borrower and the Guarantor, on the one
hand, and the Beneficiary, on the other hand, being conclusively deemed to have
been created, incurred or conducted in reliance upon this Guaranty);
(iii) any setoff or counterclaim, any demand for performance, notice
of nonperformance, diligence, presentment, protest, notice of protest, notice of
dishonor, notice of Defaults or Events of Default, notice of any
<PAGE>
5
amendment, renewal, extension or modification of the Guarantied Obligations or
any agreement related thereto, notice that any portion of the Guarantied
Obligations is due, notice of any collection proceedings, and notice of any
other fact which might increase the risk of the Guarantor;
(iv) any defense based upon any statute or rule of law that provides
that the obligation of a surety cannot be larger in amount or in other respects
more burdensome than that of the principal;
(v) any benefit of, or any right to participate in, or any notices
of exchange, sale, surrender or other handling of, any security or collateral
given to the Beneficiary (whether directly or indirectly) to secure payment or
performance of the Guarantied Obligations or any other liability of the Borrower
to the Beneficiary; and
(vi) to the fullest extent permitted by law, any other defenses or
benefits that may be derived from or afforded by law which limit the liability
of, or exonerate, guarantors or sureties, or which may conflict with the terms
of this Guaranty, including failure of consideration, breach of warranty,
statute of frauds, statute of limitations, accord and satisfaction, and usury.
5. Bankruptcy and Related Matters.
------------------------------
(a) No Proceedings Against Borrower. So long as any of the Guarantied
-------------------------------
Obligations remain outstanding, the Guarantor shall not, without the prior
written consent of the Beneficiary, commence or join with any other Person in
commencing any bankruptcy, liquidation, reorganization or insolvency proceedings
of, or against, the Borrower.
(b) Guarantor Remains Obligated. The obligations of the Guarantor under
---------------------------
this Guaranty shall not be reduced, limited, impaired, discharged, deferred,
suspended or terminated by any proceeding or action, voluntary or involuntary,
involving the bankruptcy, insolvency, receivership, reorganization, marshaling
of assets, assignment for the benefit of creditors, composition with creditors,
readjustment, liquidation or arrangement of the Borrower or similar proceedings
or actions or by any defense which the Borrower may have by reason of the order,
decree or decision of any court or administrative body resulting from any such
proceeding or action. Without limiting the generality of the foregoing, the
Guarantor's liability shall extend to all amounts and obligations that
constitute the Guarantied Obligations and would be owed by the Borrower but for
the fact that they are unenforceable or not allowable due to the existence of
any such proceeding or action.
(c) Stay of Acceleration. The Guarantor agrees that, notwithstanding
--------------------
anything to the contrary herein, if, after the occurrence and during the
<PAGE>
6
continuance of an Event of Default, the Beneficiary is prevented by applicable
law from exercising its rights to accelerate the maturity of the Guarantied
Obligations, to collect interest on the Guarantied Obligations or to enforce or
exercise any other right or remedy with respect to the Guarantied Obligations,
or the Beneficiary is prevented from taking any action to realize on any
security or collateral or is prevented from collecting any of the Guarantied
Obligations, the Guarantor shall pay to the Beneficiary upon demand therefor the
amount that would otherwise have been due and payable had such rights and
remedies been permitted to be exercised by the Beneficiary.
(d) Post-Petition Interest. Pursuant to, and without limiting, the
----------------------
foregoing, the Guarantor acknowledges and agrees that any interest on any
portion of the Guarantied Obligations which accrues after the commencement of
any proceeding or action referred to in Section 5(b) (or, if interest on any
portion of the Guarantied Obligations ceases to accrue by operation of law by
reason of the commencement of such proceeding or action, such interest as would
have accrued on such portion of the Guarantied Obligations if such proceedings
or actions had not been commenced) shall be included in the Guarantied
Obligations, it being the intention of the Guarantor and the Beneficiary that
the Guarantied Obligations shall be determined without regard to any rule of law
or order which may relieve the Borrower of any portion of such Guarantied
Obligations. The Guarantor will permit any trustee in bankruptcy, receiver,
debtor in possession, assignee for the benefit of creditors or similar person to
pay the Beneficiary, or allow the claim of the Beneficiary, in respect of, any
such interest accruing after the date on which such proceeding is commenced.
(e) Reinstatement of Guaranty. Notwithstanding anything to the
-------------------------
contrary contained herein, in the event that all or any portion of the
Guarantied Obligations are paid by the Borrower, the obligations of the
Guarantor hereunder shall continue and remain in full force and effect or be
reinstated, as the case may be, if all or any part of such payment are rescinded
or recovered, directly or indirectly, from the Beneficiary as a preference,
fraudulent transfer or otherwise, and any such payments which are so rescinded
or recovered shall constitute Guarantied Obligations for all purposes under this
Guaranty.
6. No Subrogation. Notwithstanding any payment or payments made by the
--------------
Guarantor hereunder, or any set-off or application of funds of the Guarantor by
the Beneficiary, the Guarantor hereby irrevocably waives any claim or other
rights that it may now or hereafter acquire against the Borrower or any other
insider guarantor that arise from the existence, payment, performance or
enforcement of the Guarantor's obligations under this Guaranty or any other Loan
Document, including any right of subrogation, reimbursement, exoneration,
contribution or indemnification and any right to participate in any claim or
remedy of the Beneficiary against the Borrower or any other insider
<PAGE>
7
guarantor or any collateral security, whether or not such claim, remedy or right
arises in equity or under contract, statute or common law, including the right
to take or receive from the Borrower or any other insider guarantor, directly or
indirectly, in cash or other property or by set-off or in any other manner,
payment or security on account of such claim, remedy or right. If any amount
shall be paid to the Guarantor in violation of the preceding sentence, such
amount shall be held by the Guarantor in trust for the Beneficiary, segregated
from other funds of the Guarantor, and shall, forthwith upon receipt by the
Guarantor, be turned over to the Beneficiary in the exact form received by the
Guarantor (duly endorsed by the Guarantor to the Beneficiary, if so requested by
the Beneficiary), to be applied against the Guarantied Obligations, whether
matured or unmatured, in such order as the Beneficiary may determine.
7. Subordination of Other Obligations. The Guarantor hereby agrees
----------------------------------
that any indebtedness of the Borrower now or hereafter held by the Guarantor is
hereby subordinated in right of payment to the Guarantied Obligations, and any
such indebtedness of the Borrower to the Guarantor collected or received by the
Guarantor after an Event of Default has occurred and is continuing shall be held
in trust for the Beneficiary and shall forthwith be paid over to the Beneficiary
to be credited and applied against the Guarantied Obligations without in any way
affecting, impairing or limiting the liability of the Guarantor under this
Guaranty.
8. Setoff; Security Arrangements.
-----------------------------
(a) Setoff. In addition to any rights and remedies of the
------
Beneficiary provided by law or otherwise, upon the occurrence of an Event of
Default and acceleration of the obligations owing in connection with the Loan
Documents or any other Default in the payment of any principal or interest owed
thereunder, the Beneficiary shall have the right, without prior notice to the
Guarantor, any such notice being expressly waived to the extent permitted by
applicable law, to set off and apply against any indebtedness or other amounts
due under the Loan Documents, whether matured or unmatured, of the Guarantor to
the Beneficiary, any and all deposits (whether general or special, time or
demand, provisional or final, and regardless of whether denominated in dollars
or in any other currency) and other amounts owing from the Beneficiary to the
Guarantor, whether matured or unmatured, at, or at any time after, the happening
of any of the above-mentioned events, and such right of set-off may be exercised
by the Beneficiary against the Guarantor or against any trustee in bankruptcy,
debtor in possession, assignee for the benefit of creditors, receiver, custodian
or execution, judgment of attachment creditor of the Guarantor, or against
anyone else claiming through or against the Guarantor or such trustee in
bankruptcy, debtor in possession, assignee for the benefit of creditors,
receivers, or execution, judgment or attachment creditor, notwithstanding the
fact that such right of set-off shall not have been exercised by the Beneficiary
prior to the making, filing or issuance, or service upon the Beneficiary of, or
of notice of, any such petition, assignment for the benefit of creditors,
appointment or application for the appointment of a receiver, or issuance of
execution, subpoena, order or warrant. The Beneficiary agrees promptly to notify
the Guarantor after any such set-off and
<PAGE>
8
application made by the Beneficiary, provided that the failure to give such
--------
notice shall not affect the validity of such set-off and application.
(b) Security Arrangements. The Guarantor has granted to the
---------------------
Beneficiary a security interest in the collateral subject to the Collateral
Documents to which it is a party as collateral security for the Guarantied
Obligations and such other obligations as are therein specified. Reference is
hereby made to the Collateral Documents for more complete descriptions of the
terms and provisions thereof.
9. Representations and Warranties. The Guarantor hereby represents
------------------------------
and warrants to the Beneficiary that:
(a) Existence and Power. The Guarantor is a corporation duly organized
-------------------
validly existing and in good standing under the laws of California; has all
corporate power and all material governmental licenses, authorizations, consents
and approvals required to own its property and to carry on its business as now
conducted and proposed to be conducted except where the failure to be so
organized, existing or in good standing or to have such power would not have a
Material Adverse Effect; and is qualified to do business in all jurisdictions in
which such qualification is necessary and where failure so to qualify would have
a Material Adverse Effect.
(b) Authorization; No Contravention. The execution, delivery and
-------------------------------
performance by the Guarantor of this Guaranty and each other Loan Document to
which it is a party, and the granting of Liens and the perfection thereof
pursuant thereto, are within the Guarantor's corporate power, have been duly
authorized by all necessary corporate action, and, except in immaterial respects
(i) require no action by or in respect of, filing with or notice to, any
Governmental Authority and (ii) do not contravene, or constitute a default
under, or require the consent of any creditor, stockholder or other person
under, any provision of applicable law or regulation or of the certificate of
incorporation or by-laws of the Guarantor or of any agreement, judgment,
injunction, order, decree or other instrument binding upon the Guarantor or its
Subsidiaries or to which any of their respective assets are subject, or result
in the creation or imposition of any Lien on any asset of the Guarantor or any
of its Subsidiaries except as provided in the Loan Documents.
(c) Binding Obligation. This Guaranty and each other Loan Document to
------------------
which the Guarantor is a party has been duly and validly executed and delivered
by the Guarantor and constitutes the legal, valid and binding obligation of the
Guarantor enforceable against the Guarantor in accordance with its terms, except
as the enforceability thereof may be limited by (A) bankruptcy, insolvency,
morato-
<PAGE>
9
rium, fraudulent conveyance or other similar laws affecting the enforcement of
creditors' rights generally and (B) by equitable principles relating to the
availability of equitable remedies (regardless of whether considered in a
proceeding at law or in equity).
(d) Not an Investment Company or Holding Company. The Guarantor is
--------------------------------------------
not an "investment company" within the meaning of the Investment Company Act of
1940, as amended, or a "holding company" within the meaning of the Public
Utility Holding Company Act of 1935, as amended.
(e) Relationship to the Borrower. The Borrower is the owner of 100%
----------------------------
of the issued and outstanding capital stock of the Guarantor; the agreement of
the Beneficiary to make the Loan to the Borrower is of substantial and material
benefit to the Guarantor; and the Guarantor has reviewed and approved copies of
the Loan Documents and is fully informed of the remedies the Beneficiary may
pursue upon the occurrence of an Event of Default in any Loan Document.
(f) Incorporation of Certain Representations and Warranties from
------------------------------------------------------------
the Loan Agreement. As qualified by any applicable Schedule of the Company
- ------------------
Disclosure Schedules, the Guarantor represents and warrants that all
representations and warranties relating to it contained in, and as qualified in,
the Loan Agreement are true and correct.
10. Covenants.
---------
(a) Financial Condition of the Borrower. The Guarantor agrees that
-----------------------------------
the Beneficiary shall have no obligation to disclose or discuss with the
Guarantor their assessment, or the Guarantor's assessment, of the financial
condition of the Borrower. The Guarantor represents and warrants that it has
adequate means to obtain information from the Borrower on a continuing basis
concerning the financial condition of the Borrower and the Borrower's ability to
perform its obligations under the Loan Documents, and the Guarantor covenants
and agrees to keep informed of the financial condition of the Borrower and of
all circumstances bearing upon the risk of nonpayment of the Guarantied
Obligations. The Guarantor hereby waives and relinquishes any duty on the part
of the Beneficiary to disclose any matter, fact or thing relating to the
business, operations or conditions of the Borrower, whether now known or
hereafter known by the Beneficiary.
(b) Notice of Events. As soon as the Guarantor obtains knowledge
----------------
thereof, the Guarantor shall give the Beneficiary written notice of any
condition or event which has resulted or might reasonably be expected to result
in (i) a Material Adverse Effect on the Guarantor or (ii) a breach of, or
noncompliance
<PAGE>
10
by the Guarantor with, any term, condition or covenant contained herein or in
any other Loan Document.
11. Events of Default.
-----------------
(a) Events of Default. Each of the following events shall constitute
-----------------
an "Event of Default" hereunder:
(i) the Guarantor shall fail to perform or observe any covenant
or agreement contained in this Guaranty or in the Merger Documents, on its part
to be performed or observed and any such failure shall remain unremedied for
[ten] Business Days after the Beneficiary shall have given the Guarantor notice
thereof; or an "Event of Default" shall occur and be continuing under, and as
respectively defined in, the Loan Agreement or any other Loan Document;
(ii) any representation or warranty made or confirmed by the
Guarantor at the Closing Date, on the date of the Merger, or otherwise under, or
in any notice given pursuant to any express requirement of, this Guaranty or any
other Loan Document shall prove to have been incorrect in any material respect
when made or confirmed;
(iii) the Guarantor shall (i) fail to pay any principal or
interest, regardless of amount, due in respect of any one or more items of Debt
in a principal amount in excess of $1,000,000 in the aggregate, when and as the
same shall become due and payable, or (ii) fail to observe or perform any other
term, covenant, condition or agreement contained in any agreement or instrument
evidencing or governing any such Debt if the effect of any failure referred to
in this clause (ii) is to cause, or to permit the holder or holders of such Debt
or a trustee on its or their behalf (with or without the giving of notice, the
lapse of time or both) to cause, such Debt to become due prior to its stated
maturity;
(iv) the Guarantor shall generally not pay its debts as such
debts 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
any proceeding shall be instituted by or against the Guarantor 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 of debtors, or seeking the entry of an order for relief
or the appointment of a receiver, trustee, or other similar official for it or
for any substantial part of its property, and any such proceeding instituted
against the Guarantor shall remain undismissed and unstayed for a period of 60
consecutive days; or
<PAGE>
11
(v) any judgment or order (other than one with respect to a (x)
non-recourse Debt or (y) Lien permitted by Section 6.1(a) of the Loan Agreement)
for the payment of money in excess of $100,000 shall be rendered against the
Guarantor and there shall be any period of 30 consecutive days during which
neither (i) such judgment or order shall have been discharged or bonded nor (ii)
a stay of enforcement of such judgment or order, by reason of a pending appeal
or otherwise, shall be in effect.
(b) Acceleration of Maturity. If an Event of Default shall occur and
------------------------
be continuing, the Beneficiary may declare the unpaid principal amount of and
all accrued interest on the Loan and the Note and all other amounts payable to
it under the Loan Agreement or the Note to be forthwith due and payable,
whereupon the unpaid principal amount of and all accrued interest on the Loan
and the Note and all such other amounts shall become and be forthwith due and
payable; provided that in the case of any of the Events of Default specified in
--------
Section 11(a)(iv) hereof, without any notice to the Guarantor or any other act
by the Beneficiary, the unpaid principal amount of and all accrued interest on
the Loan and the Note and all other amounts payable under the Loan Agreement or
the Note shall become immediately due and payable.
(c) Suits for Enforcement. In case any one or more Events of Default
---------------------
shall occur and be continuing, the Beneficiary may proceed to protect and
enforce its rights either by suit in equity or by action at law, or by enforcing
its rights under the Security Agreement or this Guaranty, or by other
appropriate proceedings, whether for the specific performance of any covenant or
agreement contained in this Guaranty or any other Loan Document or for an
injunction against a violation of any of the terms hereof or thereof, or to
recover damages for the breach thereof, or in aid of the exercise of any power
granted herein or therein, or proceed to enforce the payment of the Note or to
enforce any other legal or equitable right of the Beneficiary.
(d) Remedies Cumulative. No right, power or remedy herein or in the
-------------------
Note or any other Loan Document conferred upon the Beneficiary is intended to be
exclusive of any other right, power or remedy and each and every such remedy
shall be cumulative and shall be in addition to every other right, power or
remedy given hereunder, or now or hereafter existing at law or in equity or by
statute or otherwise.
(e) Remedies Not Waived. No course of dealing among the parties
-------------------
hereto or any delay or omission on the part of any party hereto in exercising
any rights hereunder or under the Note or any other Loan Document shall operate
as a waiver of any rights of any party hereto.
<PAGE>
12
12. Miscellaneous.
-------------
(a) Survival of Warranties. All agreements, representations and
----------------------
warranties made herein shall survive the execution and delivery of this
Guaranty, the making of the Loan and the execution and delivery of the other
Loan Documents.
(b) Notices. All notices, requests and other communications to any
-------
party hereunder shall be in writing and shall be given pursuant to Section 8.6
of the Loan Agreement.
(c) No Waivers. No failure or delay by the Beneficiary in exercising
----------
any right, power or privilege hereunder or under any other Loan Document 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.
(d) Expenses. The Guarantor agrees to pay, or cause to be paid, on
--------
demand, and to save the Beneficiary harmless against liability for, any and all
costs and expenses (including reasonable fees and disbursements of counsel and
fees, costs and expenses incurred in connection with any bankruptcy proceeding)
incurred or expended by the Beneficiary in connection with the enforcement,
amendment, modification or waiver of or preservation of any rights under this
Guaranty and under any other Loan Document and the collection of amounts payable
hereunder and thereunder and obtaining advice of counsel in respect hereof or
thereof, and until so paid, such fees, costs, disbursements and expenses shall
be added to, and constitute, Guarantied Obligations.
(e) Amendments and Waivers. This writing is intended by the Guarantor
----------------------
and the Beneficiary as the final expression of this Guaranty and is also
intended as a complete statement of the terms of their agreement with respect to
the matters covered hereby. No amendment, modification, termination or waiver
of any provision of this Guaranty, or consent to any departure by the Guarantor
therefrom, shall in any event be effective without the written consent of the
Beneficiary.
(f) Successors and Assigns. This Guaranty is a continuing guaranty
----------------------
and shall be binding upon the Guarantor and its successors and assigns; provided
--------
that the Guarantor may not assign this Guaranty or any of the rights or
obligations of the Guarantor hereunder without the prior written consent of the
Beneficiary. This Guaranty shall inure to the benefit of the Beneficiary and
its successors and assigns.
<PAGE>
13
(g) Applicable Law. This Guaranty shall be construed in accordance with
--------------
and governed by the law of the State of New York applicable to agreements made
and to be performed entirely within such state.
(h) Jurisdiction.
------------
(i) Any action or proceeding against the guarantor relating in any
way to this Guaranty or any other Loan Document may be brought and enforced in
the courts of the State of New York or of the United States for the Southern
District of New York, and the Guarantor irrevocably consents to the jurisdiction
of each such court in respect of any such action or proceeding. The Guarantor
irrevocably appoints Integrated Capital Associates of New York, Inc., which
currently maintains an office in New York State situated at 101 East 52nd
Street, New York, New York 10022, as its agent to receive service of process or
other legal summons for purposes of any such action or proceeding. The Guarantor
further irrevocably consents to the service of process in any such action or
proceeding by the mailing of copies thereof by registered or certified mail,
postage prepaid, return receipt requested, to the guarantor at its address as
provided for notices hereunder. The foregoing shall not limit the right of the
beneficiary to serve process in any other manner permitted by law or to bring
any action or proceeding, or to obtain execution of any judgment, in any other
jurisdiction.
(ii) The Guarantor hereby irrevocably waives any objection that it
may now or hereafter have to the laying of venue of any action or proceeding
arising under or relating to this Guaranty or any other Loan Document in any
court located in the borough of Manhattan, city and state of New York, or
located in any other jurisdiction chosen by the beneficiary in accordance with
clause (i) of this subsection, and hereby further irrevocably waives any claim
that a court located in the borough of Manhattan, city and state of New York is
not a convenient forum for any such action or proceeding.
(i) Severability. If any provision in or obligation under this Guaranty
------------
be invalid, illegal or unenforceable in any jurisdiction, the validity, legality
and enforceability of the remaining provisions or obligations, or of such
provision or obligation in any other jurisdiction, shall not in any way be
affected or impaired thereby.
(j) Interpretation. Section headings in this Guaranty are included herein
--------------
for convenience of reference only and shall not constitute a part of this
Guaranty for any other purpose or be given any substantive effect.
<PAGE>
14
(k) Further Assurances. At any time or from time to time, upon the
------------------
request of the Beneficiary, the Guarantor shall execute and deliver such further
documents and do such other acts and things as the Beneficiary may reasonably
request in order to effect fully the purposes of this Guaranty.
IN WITNESS WHEREOF, the Guarantor has executed this Guaranty by its
duly authorized officer as of the date first above written.
PS TRADING, INC.
By:_______________________________________
Name:
Title:
GATX CAPITAL CORPORATION
By:_______________________________________
Name:
Title:
[SUBSIDIARY GUARANTY]
<PAGE>
EXHIBIT I
- --------------------------------------------------------------------------------
SUBSIDIARY SECURITY AGREEMENT
between
PS TRADING, INC.
and
GATX CAPITAL CORPORATION,
as Secured Party
Dated as of ________ __, 1999
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
GRANTING CLAUSE............................................................. 1
ARTICLE I
POSSESSION, USE AND RELEASE OF PROPERTY................................ 2
1.1 Possession........................................................ 2
1.2 Release; Termination of Lien...................................... 2
1.3 Protection of Purchaser........................................... 2
1.4 Indemnification................................................... 3
ARTICLE II
DEFAULTS............................................................... 3
2.1 Secured Party's Rights............................................ 3
2.2 Waiver by Debtor.................................................. 4
2.3 Effect of Sale.................................................... 5
2.4 Application of Proceeds........................................... 5
2.5 Discontinuance of Remedies........................................ 5
2.6 Cumulative Remedies............................................... 5
ARTICLE III
COVENANTS AND WARRANTIES OF THE DEBTOR................................. 6
3.1 Debtor's Duties................................................... 6
3.2 Further Assurances................................................ 6
3.3 After-Acquired Property........................................... 6
3.4 Recordation and Filing............................................ 6
3.5 Power of Attorney in Respect of the Collateral.................... 7
3.6 Certain Actions................................................... 7
3.7 Executive Offices; Location of Assets............................. 8
ARTICLE IV
MISCELLANEOUS.......................................................... 8
4.1 No Presentment.................................................... 8
4.2 Secured Party's Right to Cure..................................... 8
4.3 Security Interest Absolute........................................ 8
4.4 Amendments........................................................ 9
4.5 No Waiver......................................................... 9
4.6 Notices........................................................... 9
4.7 Counterparts...................................................... 9
4.8 Severability...................................................... 9
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
4.9 Captions......................................................... 10
4.10 Governing Law.................................................... 10
4.11 Successors and Assigns........................................... 10
GRANTING CLAUSE............................................................ 1
ARTICLE I POSSESSION, USE AND RELEASE OF PROPERTY........................ 2
A. Possession..................................................... 2
B. Release; Termination of Lien................................... 2
C. Protection of Purchaser........................................ 3
D. Indemnification................................................ 3
ARTICLE II DEFAULTS....................................................... 3
A. Secured Party's Rights......................................... 3
B. Waiver by Debtor............................................... 4
C. Effect of Sale................................................. 5
D. Application of Proceeds........................................ 5
E. Discontinuance of Remedies..................................... 5
F. Cumulative Remedies............................................ 5
ARTICLE III COVENANTS AND WARRANTIES OF THE DEBTOR......................... 6
A. Debtor's Duties................................................ 6
B. Further Assurances............................................. 6
C. After-Acquired Property........................................ 6
D. Recordation and Filing......................................... 6
E. Power of Attorney in Respect of the Collateral................. 7
F. Certain Actions................................................ 7
G. Executive Offices.............................................. 8
ARTICLE IV MISCELLANEOUS.................................................. 8
A. No Presentment................................................. 8
B. Secured Party's Right to Cure.................................. 8
C. Security Interest Absolute..................................... 8
D. Amendments..................................................... 9
E. No Waiver...................................................... 9
F. Notices........................................................ 9
G. Counterparts................................................... 9
H. Severability................................................... 9
I. Captions....................................................... 10
J. Governing Law.................................................. 10
K. Successors and Assigns......................................... 10
</TABLE>
ii
<PAGE>
EXHIBIT I
SUBSIDIARY SECURITY AGREEMENT dated as of _________, 2000 from PS
TRADING, INC., a California corporation (the "Debtor"), to GATX CAPITAL
CORPORATION, a Delaware corporation (the "Lender" or the "Secured Party").
PS Group, Inc., a Delaware corporation (the "Borrower") and the Lender
have entered into a Loan Agreement (the "Loan Agreement"), dated as of December
18, 1999. The Debtor is a wholly-owned Subsidiary of the Borrower and is
granting certain security interests to the Lender to secure the Loan made to the
Borrower under the Loan Agreement. Defined terms used and not defined herein
have the meanings set forth in the Loan Agreement.
The parties agree as follows:
GRANTING CLAUSE
---------------
The Debtor, in consideration of the premises and of the sum of Ten
Dollars received by the Debtor from the Secured Party and other good and
valuable consideration, receipt whereof is hereby acknowledged, and in order to
secure the payment of all sums now or hereafter owing (including any future
advances) to the Lender by the Borrower under and pursuant to the Loan Documents
to which the Lender is a party or a beneficiary, including the Note (together,
the "Lender Documents"), and the performance and observance of all of the
Borrower's covenants and conditions contained in the Lender Documents
(collectively, the "Indebtedness"), does, subject to the last paragraph of this
GRANTING CLAUSE, hereby convey, mortgage, assign, pledge and grant to the
Secured Party, its successors and assigns, a first priority security interest
in, all and singular, of the Debtor's right, title and interest in and to all of
its equipment, inventory, accounts (except the PST Environmental Reserve
Account, which is expressly excluded from the Collateral (as hereinafter
defined) hereunder), accounts receivable, contract rights, chattel paper,
instruments, investment property, drafts and other assets of any kind, and
general intangibles, including, without limitation, all proceeds of any and all
of the foregoing and, to the extent not otherwise included, all payments under
insurance (whether or not the Secured Party is the loss payee thereof), or any
indemnity, warranty or guaranty, payable by reason of loss or damage to or
otherwise with respect to any of the foregoing items (all of which properties
hereby conveyed, mortgaged, assigned, pledged and granted or intended to be so
conveyed, mortgaged, assigned, pledged and granted are hereinafter collectively
referred to as the "Collateral").
<PAGE>
2
The parties hereto further agree:
The foregoing security interest granted pursuant to this GRANTING CLAUSE shall
not be effective for any item of Collateral to the extent that such grant would
(A) violate any clause in any Contract, or Requirement of Law prohibiting such
grant of a security interest or (B) be based on any Contract or Requirement of
Law or otherwise, require the consent of any Person the failure to obtain which
would result in a default under each Contract or Lease.
ARTICLE I
POSSESSION, USE AND RELEASE OF PROPERTY
---------------------------------------
1.1 Possession.
----------
(a) Unless an Event of Default shall have occurred and be continuing,
the Debtor shall be free to remain in full and exclusive possession, enjoyment,
use and control of the Collateral and to manage, operate, exercise its rights in
and use the same and each part thereof with the rights and franchises
appertaining thereto; provided that the possession, enjoyment, control and use
--------
of the Collateral shall at all times be subject to the observance and
performance of the terms of the Loan Documents.
(b) The Debtor covenants and agrees that in the event any monies or
payments shall be paid to or distributed to the Debtor in respect of the
Collateral, the Debtor will receive and hold the same in trust for the Secured
Party, and will promptly upon receipt thereof deposit or cause to be deposited
such monies or payments in the Collateral Account in accordance with Section 1.3
hereof.
1.2 Release; Termination of Lien.
----------------------------
(a) At any time after the payment and discharge in full of all of the
Debtor's obligations under the Lender Documents, the Secured Party shall, at the
expense of the Debtor, release the lien of this Subsidiary Security Agreement
with respect to, and all its other right, title and interest in, any and all
Collateral then subject to this Subsidiary Security Agreement.
(b) On the request and at the expense of the Debtor, the Secured Party
shall execute such further documents and take such further actions as may be
necessary to effectuate the releases contemplated by Section 1.2(a) hereof,
including duly executing and delivering to the Debtor termination statements for
filing in all relevant jurisdictions under the Uniform Commercial Code.
1.3 Protection of Purchaser. No purchaser in good faith of property
-----------------------
purporting to be released hereunder shall be bound to ascertain the authority of
the
<PAGE>
3
Secured Party to execute the release, or to inquire as to any facts required
by the provisions hereof for the exercise of such authority; nor shall any
purchaser in good faith of any item of Collateral be under obligation to
ascertain or inquire into the conditions upon which any such sale is hereby
authorized.
1.4 Indemnification. The Debtor agrees to indemnify and hold
---------------
harmless the Secured Party and its officers, directors, employees and agents
from and against any and all liabilities, losses, damages, costs and expenses of
any kind (including fees, disbursements and other charges of counsel in
connection with any investigative, administrative or judicial proceeding,
whether or not such indemnified person is a party thereto) that may be suffered
or incurred by any such indemnified person, relating to or arising out of this
Subsidiary Security Agreement or any other Lender Document, the exercise by the
Secured Party of any right or remedy hereunder or thereunder, or any actual or
proposed use of proceeds of the Loan, and the Debtor agrees to reimburse each
indemnified person from time to time upon demand for any such liabilities,
losses, damages, costs and expenses; provided that no indemnified person shall
--------
have the right to be indemnified hereunder for its own gross negligence or
willful misconduct as determined by a court of competent jurisdiction. The
foregoing indemnity shall survive the termination of this Subsidiary Security
Agreement, and not be affected by any investigation or actual or constructive
knowledge of any indemnified person.
ARTICLE II
DEFAULTS
--------
2.1 Secured Party's Rights. The Debtor agrees that when any Event of
----------------------
Default has occurred and is continuing hereunder, the Secured Party shall have
the rights, options and remedies of a secured party, and the Debtor shall have
the duties of a debtor, under the Uniform Commercial Code of New York
(regardless of whether such Code or a law similar thereto has been enacted in a
jurisdiction wherein the rights or remedies are asserted) and without limiting
the foregoing, the Secured Party may exercise any one or more or all of the
remedies hereinafter set forth, in any order:
(a) The Secured Party, personally or by agents or attorneys,
shall have the right (subject to compliance with any applicable mandatory legal
requirements) to take immediate possession of the Collateral, or any portion
thereof, and for that purpose may pursue the same wherever it may be found, and
may enter any premises of the Debtor, with or without notice, demand, process of
law or legal procedure, to the extent permitted by applicable law, and search
for, take possession of, remove, keep and store the same, or use and operate or
lease the same until sold (the Secured Party shall give notice to the Debtor of
such action);
<PAGE>
4
(b) The Secured Party shall have the right (subject to compliance with
any mandatory legal requirements), either with or without taking possession and
either before or after taking possession, and without instituting any legal
proceedings whatsoever, and having first given such notice of such sale by
registered mail to the Debtor as is required by law, to sell and dispose of the
Collateral, or any part thereof, at private or public sale or at public auction
to the highest bidder, in one lot as an entirety or in separate lots, and either
for cash or on credit and on such terms as the Secured Party may determine, and
at any place (whether or not it be the location of the Collateral or any part
thereof) designated in the notice referred to above; provided that any such sale
--------
shall be held in a commercially reasonable manner. Any such sale or sales may
be adjourned from time to time by announcement at the time and place appointed
for such sale or sales, or for any such adjourned sale or sales, without further
published notice, and the Debtor, the Secured Party or any of their Affiliates,
may bid and become the purchaser at any such sale;
(c) The Secured Party may proceed to protect and enforce this
Subsidiary Security Agreement and the other Lender Documents by suit or suits or
proceedings in equity, at law or in bankruptcy, and whether for the specific
performance of any covenant or agreement herein contained or in execution or aid
of any power herein granted; or for foreclosure hereunder, or for the
appointment of a receiver or receivers for the mortgaged property or any part
thereof, or for the recovery of judgment for the Indebtedness or for the
enforcement of any other proper, legal or equitable remedy available under
applicable law; and
(d) The Secured Party may (without the necessity of taking any of the
actions referred to in paragraphs (a) through (c) above) proceed to exercise all
rights, privileges and remedies of the Debtor in and to the Collateral, and may
exercise all such rights and remedies either in the name of the Secured Party or
in the name of the Debtor, or both, for the use and benefit of the Secured
Party.
2.2 Waiver by Debtor. To the extent permitted by law, the Debtor
----------------
covenants that it will not at any time insist upon or plead, or in any manner
whatever claim or take any benefit or advantage of, any stay or extension law
now or at any time hereafter in force, nor claim, take nor insist upon any
benefit or advantage of or from any law now or hereafter in force providing for
the valuation or appraisement of the Collateral or any part thereof prior to any
sale or sales thereof to be made pursuant to any provision herein contained, or
to the decree, judgment or order of any court of competent jurisdiction; nor,
after such sale or sales, claim or exercise any right under any statute now or
hereafter made or enacted by any state or otherwise to redeem the property so
sold or any part thereof, and, to the full extent legally permitted, except as
to rights expressly provided herein, hereby expressly waives for itself and on
behalf of each and every person all benefit and advantage of any such law or
laws, and covenants that it will not invoke or utilize any such law or laws or
otherwise hinder, delay or impede the execution of any power herein granted and
<PAGE>
5
delegated to the Secured Party, but will suffer and permit the execution of
every such power as though no such power, law or laws had been made or enacted.
2.3 Effect of Sale. Any sale, whether under any power of sale hereby
--------------
given or by virtue of judicial proceedings, shall operate to divest all right,
title, interest, claim and demand whatsoever, either at law or in equity, of the
Debtor in and to the property sold, shall be a perpetual bar, both at law and in
equity, against the Debtor, its successors and assigns, and against any and all
persons claiming the property sold or any part thereof under, by or through the
Debtor, its successors or assigns (subject to the then existing rights, if any,
of Persons with respect to the Collateral).
2.4 Application of Proceeds. The proceeds of the Collateral, or any
-----------------------
part thereof, and the proceeds of any remedy hereunder (as well as any other
amounts of any kind held by the Secured Party at the time of or received by the
Secured Party after the occurrence of an Event of Default hereunder) shall be
paid to and applied in accordance with Section 2.7 of the Loan Agreement.
2.5 Discontinuance of Remedies. In case the Secured Party shall have
--------------------------
proceeded to enforce any right under this Subsidiary Security Agreement by
foreclosure, sale, entry or otherwise, and such proceedings shall have been
discontinued or abandoned for any reason or shall have been determined
adversely, then and in every such case the Debtor and the Secured Party shall be
restored to their former position with their former rights hereunder with
respect to the Collateral and all rights, remedies and powers of the Secured
Party shall continue as if no such proceedings had been instituted.
2.6 Cumulative Remedies. No delay or omission of the Secured Party
-------------------
to exercise any right or power arising from any default on the part of the
Debtor, shall exhaust or impair any such right or power, or prevent its exercise
during the continuance of such default. No waiver by the Secured Party, whether
such waiver is full or partial, shall extend to or be taken to affect any
subsequent default, or to impair the rights resulting therefrom, except as may
be otherwise provided herein. No remedy hereunder is intended to be exclusive
of any other remedy but each and every remedy shall be cumulative and in
addition to any and every other remedy given hereunder or otherwise existing.
The giving, taking or enforcement of any other or additional security,
collateral or guaranty for the payment of the Indebtedness shall not operate to
prejudice, waive or affect the security of this Subsidiary Security Agreement or
any rights, powers or remedies hereunder, nor shall the Secured Party be
required to first look to, enforce or exhaust such other or additional security,
collateral or guaranties.
<PAGE>
6
ARTICLE III
COVENANTS AND WARRANTIES OF THE DEBTOR
--------------------------------------
The Debtor warrants to and covenants and agrees with the Secured Party
as follows:
3.1 Debtor's Duties. The Debtor covenants and agrees to perform,
---------------
abide by and to be governed and restricted by each and all of the terms,
provisions, restrictions, covenants and agreements set forth in the Lender
Documents, and in each supplement thereto or amendment thereof which may at any
time or from time to time be executed and delivered by the parties thereto or
their successors and assigns, to the same extent as though each and all of said
terms, provisions, restrictions, covenants and agreements were fully set out
herein and as though any amendment or supplement to the Lender Documents were
fully set out in an amendment or supplement to this Subsidiary Security
Agreement. The Debtor undertakes to perform only such duties as are expressly
and specifically set forth herein and in the other Lender Documents and no
implied obligations or covenants shall be read into this Subsidiary Security
Agreement or any other Lender Documents against the Debtor.
3.2 Further Assurances. The Debtor hereby covenants and agrees that
------------------
it shall (i) upon request by the Secured Party, cooperate with the Secured Party
to obtain third-party consents in connection with the security interest granted
hereunder, (ii) perform such acts and execute, acknowledge and deliver, from
time to time, such financing statements and other instruments as may be required
by the Secured Party to perfect or better assure this Subsidiary Security
Agreement and the security interests created hereby, and file or record the same
in the public records specified by the Secured Party, (iii) keep or cause to be
kept accurate and complete records and books of account and make or cause to be
made the same available for the Secured Party's inspection and transcription at
any time upon reasonable advance notice and during business hours, (iv) forward
copies of all notices or other communication it receives with respect to any
Collateral, and (v) take no action and give no consent, waiver or ratification
which could impair the value of the Collateral or would be inconsistent with any
of the provisions of this Subsidiary Security Agreement, the Note and the other
Loan Documents.
3.3 After-Acquired Property. Any and all property described or
-----------------------
referred to in the GRANTING CLAUSE hereof which is hereafter acquired shall ipso
----
facto and without any further conveyance, assignment or act on the part of the
- -----
Debtor or the Secured Party, become and be subject to the security interest
herein granted as fully and completely as though specifically described herein.
3.4 Recordation and Filing. The Debtor will cause all continuation
----------------------
statements and similar notices required by applicable law, and, if requested by
Secured Party, this Subsidiary Security Agreement and any financing statements
at all
<PAGE>
7
times to be kept, recorded and filed in such manner and in such place as may be
required by law in order to fully preserve and protect the rights of the Secured
Party hereunder.
3.5 Power of Attorney in Respect of the Collateral. The Debtor does
----------------------------------------------
hereby irrevocably constitute and appoint the Secured Party and all Persons
designated by the Secured Party for that purpose its true and lawful attorney-
in-fact with full irrevocable power and authority in the place and stead of the
Debtor and in the name of the Debtor or in its own name, (a) to seek and obtain
such third-party consents as the Secured Party deems necessary or appropriate in
connection with the grant of the security interests hereunder and take all
necessary or appropriate action incidental thereto; and (b) if an Event of
Default has occurred and is continuing (i) to execute, deliver and file
appropriate Uniform Commercial Code Financing Statements and other documents and
instruments as may be necessary or, in the reasonable opinion of the Secured
Party, desirable to obtain, protect and perfect the security interests created
hereunder, (ii) to ask, demand, collect, receive, receipt for, sue for, compound
and give acquittance for any and all rents, issues, profits, avails,
distributions, income, payment draws and other sums which are assigned under the
GRANTING CLAUSE hereof with full power to settle, adjust or compromise any claim
thereunder as fully as if it were the Debtor itself, (iii) to receive payment of
and to endorse the Debtor's name to any items of Collateral (including checks,
drafts or other orders for the payment of money) that come into the Secured
Party's possession or under the Secured Party's control (including any amounts
in the Collateral Account), (iv) to make all demands, consents and waivers, or
take any other action with respect to, the Collateral, (v) to make all
withdrawals from the Collateral Account, (vi) to otherwise act with respect
thereto as though it were the outright owner of the Collateral, and (vii) in its
discretion to file any claim or take any other action or proceedings, either in
its own name or in the name of the Debtor or otherwise, which the Secured Party
may deem necessary or appropriate to protect and preserve the right, title and
interest of the Secured Party in and to the Collateral and the security intended
to be afforded hereby. The appointment of the Secured Party as the Debtor's
attorney-in-fact and the Secured Party's rights and powers are coupled with an
interest and are irrevocable until the unpaid principal amount of and accrued
interest on the Note and all other amounts payable under the Lender Documents
shall have been paid in full.
3.6 Certain Actions. The Debtor shall not during the term of this
---------------
Subsidiary Security Agreement, unless specifically permitted under this
Subsidiary Security Agreement, make any demands, waivers or consents, or take
any other actions with respect to, nor accept any payments of any interest,
principal or other amounts payable under or in connection with the Collateral
Account Proceeds without, in any such case, the express prior written consent of
the Secured Party. Until the payment in full of all Indebtedness and to the
extent necessary or appropriate to effectuate the purposes and carry out the
terms and intent of the Lender Documents, the Secured Party shall have the right
to the exclusion of the Debtor to
<PAGE>
8
(i) make all demands, consents and waivers, or take any other action with
respect to, the Collateral Account Proceeds, (ii) accept the payment of any
interest, principal or other amounts payable under or in connection with the
Collateral Account Proceeds, (iii) commence any actions to enforce the
Collateral Account Proceeds, (iv) make all withdrawals from the Collateral
Account, and (v) otherwise act with respect to the Collateral Account Proceeds
as though it were the outright owner thereof.
3.7 Executive Offices; Location of Assets. The principal place of
-------------------------------------
business and chief executive office of the Debtor is: 4370 La Jolla Village
Drive, Suite 1050, San Diego, California 92122, or such other location of which
Debtor shall have given the Secured Party 30 days' prior written notice.
Schedule 4.3 to the Loan Agreement lists the location of all of the Debtor's
material assets and properties (other than the Leased Assets).
ARTICLE IV
MISCELLANEOUS
-------------
4.1 No Presentment. Debtor hereby waives presentment, protest,
--------------
notice of protest, notice of dishonor, and notice of nonpayment with respect to
any proceeds to which the Secured Party is entitled hereunder and any rights to
direct the application of payments for security for the Indebtedness except as
otherwise provided in the Lender Documents, and the Debtor also hereby waives
any right to require proceedings against others or to require exhaustion of
security.
4.2 Secured Party's Right to Cure. In the event the Debtor should
-----------------------------
fail to do any act as herein provided or in any other Lender Document, the
Secured Party may, but has no obligation to do so, without notice to the Debtor,
and without releasing the Debtor from any obligation hereof, make or do such act
in such manner and to such extent as the Secured Party may deem necessary to
protect the Collateral, including the defense of any action purporting to affect
the Collateral or the rights or powers of the Secured Party hereunder.
4.3 Security Interest Absolute. The security interest, rights of the
--------------------------
Secured Party and obligations of the Debtor granted or created under this
Subsidiary Security Agreement shall be absolute and unconditional irrespective
of:
(i) Any lack of validity or enforceability in whole or in part
of this Subsidiary Security Agreement, the Loan Agreement or any other
Lender Document or any other agreement or instrument executed or delivered
in connection herewith or therewith;
(ii) Any change in the time, manner or place of payment of, or
in any other term of, any Note, or any other amendment or waiver of,
<PAGE>
9
or any consent to any departure from, the terms of this Subsidiary Security
Agreement, the Loan Agreement, any other Lender Document, or any other
instrument executed or delivered in connection herewith or therewith;
(iii) Any exchange, release or nonperfection of any other
collateral, or any release, amendment or waiver of, or consent to departure
from, any guaranty, for all or any of the Indebtedness;
(iv) Any other circumstance which might otherwise constitute a
defense available to, or a discharge of the Debtor in respect of, any
Lender Document or the Indebtedness; or
(v) Any name change or merger, consolidation or other business
combination (including the Merger) involving or with respect to the
Borrower or Debtor.
4.4 Amendments. No amendment or waiver of any provision of this
-----------
Subsidiary Security Agreement, nor consent to any departure by any party, shall
in any event be effective unless the same shall be in writing and signed by each
of the parties and such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given.
4.5 No Waiver. No failure on the part of any party to exercise, and
---------
no delay in exercising, any right under this Subsidiary Security Agreement shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right hereunder preclude any other or further exercise thereof or the exercise
of any other right.
4.6 Notices. All notices, requests, demands, consents and other
-------
communications to or upon the parties to this Subsidiary Security Agreement
shall be given pursuant to Section 8.6 of the Loan Agreement. The Debtor
hereby designates the Borrower as its agent to receive any such notices.
4.7 Counterparts. This Subsidiary Security Agreement may be executed
------------
by the parties hereto in two or more counterparts, and by separate parties on
separate counterparts, each of which when so executed and delivered shall be an
original, but all of which together shall constitute one and the same
instrument.
4.8 Severability. Any provision of this Subsidiary Security
------------
Agreement which is prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
<PAGE>
10
4.9 Captions. The table of contents and the captions in this
--------
Subsidiary Security Agreement are for convenience of reference only and shall
not modify, define, expand or limit any of the terms or provisions hereof.
4.10 Governing Law. This Subsidiary Security Agreement and the rights
-------------
and obligations of the parties hereunder shall in all respects be governed by,
and construed in accordance with, the laws of the State of New York applicable
to agreements made and to be performed entirely within such state.
4.11 Successors and Assigns. This Subsidiary Security Agreement shall
----------------------
be binding upon and shall inure to the benefit of the parties hereto and their
respective successors and permitted assigns. This Subsidiary Security Agreement
may not be assigned by the Debtor, and any such attempted assignment shall be
void.
<PAGE>
11
IN WITNESS WHEREOF, the parties hereto have caused this Subsidiary
Security Agreement to be duly executed by their respective officers thereunto
duly authorized as of the day and year first above written.
PS TRADING, INC.
By:___________________________________
Name:
Title:
GATX CAPITAL CORPORATION
By:___________________________________
Name:
Title:.
[SUBSIDIARY SECURITY AGREEMENT]
<PAGE>
EXHIBIT J
BORROWER STOCK PLEDGE AGREEMENT dated as of ________, 2000 from PS
GROUP, INC., a Delaware corporation (the "Pledgor"), to GATX CAPITAL
CORPORATION, a Delaware corporation (the "Lender" or "Pledgee").
The Pledgor and the Lender have entered into a Loan Agreement (the
"Loan Agreement"), dated as of December 18, 1999. The Pledgor is pledging the
Pledged Stock (as defined below) to the Pledgee.
Defined terms used and not defined herein have the meanings set forth
in the Loan Agreement or, unless the context otherwise requires, those set forth
in the Uniform Commercial Code of New York.
The parties agree as follows:
1. Pledge. In consideration of the Lender's making the Loan to the
------
Pledgor pursuant to the Loan Agreement, the Pledgor hereby assigns, transfers
and pledges to the Pledgee, and grants to the Pledgee a first priority security
interest in, all of the Pledgor's right, title and interest in, to and under
that number of issued and outstanding shares of the capital stock of each entity
set forth on Schedule I hereto (except to the extent that any such entity shall
have previously been sold in accordance with Section 6.9(g) of the Loan
Agreement), and the certificates representing such capital stock or securities
together with all dividends, distributions and any other certificates from time
to time issued, and all rights to receive the same, in respect thereof or in
exchange therefor (collectively, together with the proceeds thereof, the
"Pledged Stock"), to secure the prompt and complete payment and performance of
all of the obligations (collectively, the "Obligations") of the Pledgor under
the Loan Documents to which the Lender is a party or a beneficiary, including
the Note (together, the "Lender Documents"), on and subject to the terms and
conditions herein and therein contained.
2. Term. The pledge hereunder of the Pledged Stock shall terminate
----
and be of no further force or effect upon the payment and satisfaction in full
of all of the Obligations, and the Pledgee shall forthwith assign, transfer and
deliver, against receipt, any remaining Pledged Stock and money, assets or other
property received in respect thereof, to the Pledgor or to another on the order
of the Pledgor, as the case may be.
3. Delivery.
--------
3.1 In furtherance of the pledge and assignment referred to
in Section 1 of this Agreement, the Pledgor hereby (a) delivers to the Pledgee
certificates representing the Pledged Stock, together with duly executed blank
stock powers relating thereto and (b) agrees to deliver or cause each of its
Subsidiaries or their successors to deliver to the Pledgee, promptly after the
issuance thereof, any and all replacement certificates in respect of the
certificates delivered pursuant to
<PAGE>
2
clause (a) above from time to time issued by any Subsidiary, or any successor,
which certificates shall be part of the Pledged Stock, and certificates
representing any additional shares of capital stock of any class of any
Subsidiary, or any successor, and any other security issued or received by such
Subsidiary, in respect thereof, together with duly executed blank stock powers
with such signatures properly guaranteed.
3.2 The Pledgee hereby acknowledges receipt of the certificates
and the stock powers referred to in Section 3.1, and agrees to hold, release,
and dispose of the same in accordance with this Agreement.
4. Transfer, Voting Power, Dividends.
---------------------------------
4.1 The Pledgee may have the Pledged Stock registered in its
name or in the name of its nominee if an Event of Default shall occur and be
continuing (or if the Pledgee is required to do so by any regulatory authority
or otherwise). Such Pledged Stock as so registered shall remain subject to this
Agreement.
4.2 (a) Unless and until an Event of Default shall occur and be
continuing (the period during which any Event of Default shall so continue being
herein called a "Default Period"), the Pledgor shall be entitled to exercise all
powers of voting and consent pertaining to the Pledged Stock owned by it or any
part thereof, for all purposes not inconsistent with the terms of this Agreement
and any other Lender Document.
(b) To permit the Pledgor to exercise such powers of voting
or consent, the Pledgee shall, if necessary, upon the written request of the
Pledgor, from time to time execute and deliver to the Pledgor appropriate
proxies.
(c) During any Default Period, the Pledgee or its nominee
or nominees shall have the sole and exclusive right to exercise all powers of
voting or consent pertaining to the Pledged Stock or any part thereof.
4.3 (a) All payments, distributions or dividends, in
securities, property or cash, including dividends representing stock or
liquidating dividends or a distribution or return of capital upon or in respect
of the Pledged Stock or any part thereof or resulting from a split-up, revision
or reclassification of the Pledged Stock or any part thereof or received in
exchange for the Pledged Stock or any part thereof as a result of a merger,
consolidation or otherwise, shall be paid or delivered directly to the Pledgee
immediately upon receipt thereof (accompanied by appropriate undated stock
powers duly executed in blank or, at the request of the Pledgee, registered in
the nominee's name), and shall be retained by the Pledgee as part of the Pledged
Stock.
<PAGE>
3
(b) In case any money shall be paid to the Pledgor on account
of any dividend or other distribution upon or in respect of the Pledged Stock or
any part thereof, such money shall be immediately paid to the Collateral Account
[Lender].
(c) In order to permit the Pledgee to receive all payments and
distributions to which it may be entitled under clause (a) above, the Pledgor
shall, if necessary, upon the written request of the Pledgee, from time to time
execute and deliver to the Pledgee appropriate dividend or payment orders.
(d) All cash and other property paid to and retained by the
Pledgee pursuant to this Section 4.3 shall be held by it until applied as herein
provided as additional collateral security pledged under and subject to this
Agreement.
5. Remedies.
--------
If an Event of Default shall occur and be continuing, in addition
to any rights and remedies which may be available to a secured party under the
Uniform Commercial Code as in effect at the time in New York (the "Uniform
Commercial Code"), the following provisions shall apply:
(a) The Pledgee may, without being required to give any notice
except as hereinafter provided or as may be required by law, apply the cash, if
any, then held by it as collateral security hereunder or in the Collateral
Account to the payment of the Obligations and, if there shall be no such cash or
the cash so applied shall be insufficient to pay in full all such Obligations,
sell the Pledged Stock, or any part thereof, at public or private sale, for
cash, upon credit or for future delivery, and at such price or prices as the
Pledgee may deem satisfactory, and the Pledgee may be the purchaser of any or
all of the Pledged Stock so sold and thereafter hold the same absolutely, free
from any right or claim of whatsoever kind.
(b) The Pledgee is authorized, at any such sale, if it deems it
advisable so to do, to restrict the prospective bidders or purchasers to persons
who will represent and agree that they are purchasing for their own account, for
investment, and not with a view to the distribution or sale of any of the
Pledged Stock.
(c) Upon any such sale the Pledgee shall have the right to
deliver, assign and transfer to the purchaser thereof the Pledged Stock so sold.
Each purchaser (including the Pledgee) at any such sale shall hold the property
sold, absolutely, free from any claim or right of whatsoever kind, including any
equity or rights of redemption, of the Pledgor who owns such Pledged Stock, who
hereby specifically waives, unless otherwise prohibited by law, as against any
such purchaser all rights of redemption, stay or appraisal which it has or may
have under any rule of law or statute now existing or hereafter adopted.
<PAGE>
4
(d) The Pledgee shall give the Pledgor such period of notice as
is required by law by mail or telegram (or by hand delivery) of its intention to
make any such public or private sale, which notice shall specify, to the extent
known by Pledgee, the terms of sale intended. Such notice of public sale shall
state the time and place fixed for such sale.
(e) Any such public sale shall be held at such time or times
within ordinary business hours and at such place or places as the Pledgee may
fix in the notice of such sale. At any such sale the Pledged Stock may be sold
in one lot as an entirety or in separate parcels, as the Pledgee may determine.
(f) The Pledgee shall not be obligated to make any sale
pursuant to any such notice. The Pledgee may, without notice or publication,
adjourn any public or private sale or cause the same to be adjourned from time
to time by announcement at the time and place fixed for the sale, and such sale
may be made at any time or place to which the same may be so adjourned.
(g) In case of any sale of all or any part of the Pledged Stock
for future delivery, the Pledged Stock so sold must be retained by the Pledgee
until the selling price is paid by the purchaser thereof, but the Pledgee shall
not incur any liability in case of the failure of such purchaser to take up and
pay for the Pledged Stock so sold and, in case of any such failure, such Pledged
Stock may again be sold upon like notice.
(h) The Pledgee, instead of, or in addition to, exercising the
power of sale herein conferred upon it, may proceed by a suit or suits at law or
in equity to foreclose the pledge and sell the Pledged Stock, or any portion
thereof, under a judgment or decree of a court or courts of competent
jurisdiction.
6. Information. If the Pledgee determines to exercise its right to
-----------
sell all or any of the Pledged Stock, upon written request, the Pledgor shall
from time to time furnish and cause its Subsidiaries to furnish to the Pledgee
all such information as the Pledgee may reasonably request with respect to the
Pledged Stock, the Subsidiaries and the Subsidiaries' properties, assets and
liabilities.
7. General. The following provisions shall apply to the Pledged
-------
Stock and this Agreement generally:
7.1 Private Sale. The Pledgee shall incur no liability as a
------------
result of the sale of the Pledged Stock, or any part thereof, at any private
sale permitted by this Agreement or under applicable law; provided that the
--------
Pledgee shall act in a commercially reasonable manner. Subject to the
immediately preceding sentence, the Pledgor hereby waives, to the fullest extent
permitted by law, any claims against the Pledgee arising by reason of the fact
that the price at which any security may have been sold at such private sale was
less than the price which might
<PAGE>
5
have been obtained at a public sale or was less than the aggregate amount of the
Obligations, even if the Pledgee accepts the first offer received and does not
offer such Pledged Stock to more than one offeree.
7.2 Application of Proceeds. The proceeds of any sale of all or
-----------------------
any part of the Pledged Stock, and any other cash at the time held by the
Pledgee under this Agreement or in the Collateral Account, shall be applied by
the Pledgee in accordance with Section 2.7 of the Loan Agreement as in effect
immediately prior to the completion of such sale.
As used in this Agreement, "proceeds" of the Pledged Stock shall mean
cash, securities and other property realized in respect of, and distributions in
kind of, the Pledged Stock, including any received under any reorganization,
liquidation or adjustment of debt of the Pledgor or any issuer of securities
included in the Pledged Stock.
7.3 Attorney-in-Fact. The Pledgee is hereby appointed the
----------------
attorney-in-fact of the Pledgor, for the sole use and benefit of the Pledgee at
the expense of the Pledgor, to the extent permitted by law:
(a) for any period not a Default Period, to sign documents
and take any other actions to perfect, promote and protect its security interest
in the Pledged Stock consistent with the terms of this Agreement; and
(b) during a Default Period, to carry out the provisions of
this Agreement and take any action and execute any instruments which the Pledgee
may reasonably deem necessary or advisable to accomplish the purposes hereof.
The appointment of the Pledgee as attorney-in-fact is irrevocable and
coupled with an interest. Without limiting the generality of the foregoing,
during a Default Period, the Pledgee shall have the right and power with respect
to all or any of the Pledged Stock (i) to exercise any election pursuant to
Section 338(h)(10) of the Code, (ii) to demand, sue for, collect, receive and
give acquittance for any and all monies due or to become due upon or by virtue
thereof, (iii) to settle, compromise, compound, prosecute or defend any action
or proceeding with respect thereto, (iv) to sell, transfer, assign or otherwise
deal in or with the same or the proceeds or avails thereof, as fully and
effectually as if the agent were the absolute owner thereof, and (v) to extend
the time of payment of any or all thereof and to make any allowance and other
adjustments with references thereto; provided that the Pledgee as attorney-in-
--------
fact or its agent shall give the Pledgor such period of notice as is required by
law of the time and place of any sale or other intended disposition of any of
the Pledged Stock.
7.4 Limitation on Duty of the Pledgee. Beyond the exercise of
---------------------------------
reasonable care in the custody thereof, the Pledgee shall have no duty as to any
<PAGE>
6
Pledged Stock in its possession or control or in the possession or control of
any agent or bailee or any income thereon or as to the preservation of rights
against prior parties or any other rights pertaining thereto. The Pledgee shall
be deemed to have exercised reasonable care in the custody and preservation of
the Pledged Stock in its possession if the Pledged Stock is accorded treatment
substantially equal to that which it accords its own property. Subject to the
preceding sentence, the Pledgee shall not be liable or responsible for any loss
or damage to any of the Pledged Stock, or for any diminution in the value
thereof, by reason of the act or omission of any agent or bailee selected by the
Pledgee in good faith.
7.5 Concerning the Pledgee. The Pledgor agrees with the Pledgee
----------------------
as follows:
(a) The Pledgee is authorized to take all such action as is
provided to be taken by it hereunder and all other action reasonably incidental
thereto. As to any matters not expressly provided for herein (including the
timing and methods of realization upon the Pledged Stock and any waivers or
amendments of the provisions hereof), the Pledgee shall, subject to applicable
laws, act or refrain from acting in accordance with its discretion;
(b) Neither the Pledgee nor any of its directors, officers,
attorneys, agents or employees shall be liable for any action taken or omitted
to be taken by it, or by them on its behalf, under this Agreement or in respect
of any of the Pledged Stock or otherwise in connection with any of the
foregoing, except for its or their own gross negligence or willful misconduct;
(c) In connection with its duties as the Pledgee under this
Agreement, the Pledgee shall be entitled to rely on any paper or document
reasonably believed by it to be genuine and correct and, in respect of legal
matters, upon the opinion of legal counsel selected by it, and any action taken
or omitted in good faith by the Pledgee in accordance with the opinion of such
counsel shall be fully justified and protected from liability;
(d) The Pledgee shall not be responsible for the
genuineness, validity, or effectiveness of any of the Pledged Stock nor shall it
be liable because of any invalidity of the security provisions hereof, whether
arising from law or by reason of any action or omission to act on its part, nor
shall the Pledgee be bound to ascertain or inquire as to the performance or
observance of any of the terms of this Agreement by the Pledgor; and
(e) The Pledgee may employ agents and attorneys-in-fact
selected in good faith and shall not be answerable, except as to money or
securities received by it or its authorized agents, for the default or
misconduct of any such agents or attorneys-in-fact selected in good faith.
<PAGE>
7
8. Representations, Warranties and Covenants. The Pledgor hereby
-----------------------------------------
represents and warrants to and covenants with the Pledgee that:
(a) The Pledgor has full corporate power, authority and legal
right and capacity to incur and perform its obligations hereunder;
(b) As qualified by Schedule 2.05(d) of the Company Disclosure
Schedules, this Agreement constitutes the legal, valid and binding obligation of
the Pledgor, enforceable in accordance with its terms, except as the
enforceability thereof may be limited by (A) bankruptcy, insolvency, moratorium,
fraudulent conveyance or other similar laws affecting the enforcement of
creditors' rights generally and (B) by equitable principles relating to the
availability of equitable remedies (regardless of whether considered in a
proceeding at law or in equity).
(c) The representations and warranties set forth in the Loan
Agreement relating to the Pledgor are true and accurate subject to the
limitations set forth therein;
(d) The Pledged Stock together constitutes all of the issued and
outstanding shares of capital stock of each of the Subsidiaries of the Pledgor;
(e) So long as the Obligations remain outstanding, the Pledgor at
all times will be the sole direct or indirect beneficial owner of the Pledged
Stock pledged by it or to be pledged by it hereunder;
(f) This Agreement grants to Pledgee a first priority lien upon
and first priority perfected security interest in the Pledged Stock subject to
no other Lien (whether prior, equal or junior) or security interest. Without
limiting the generality of the foregoing, the Pledgor may not sell, assign,
transfer, pledge, hypothecate, gift, devise, incur, create or permit the
creation of a Lien over, or otherwise dispose of (a "transfer") any or all of
the Pledgor's interest in the Pledged Stock without the prior written consent of
the Pledgee. If any such consent is given, a transfer will be subject to
satisfaction of the following conditions: (i) receipt of an opinion in form and
substance reasonably satisfactory to the Pledgee from counsel acceptable to the
Pledgee covering such matters as the Pledgee may reasonably request, including
opinions to the effect that the transferee shall be owner of the Pledged Stock
for tax purposes, that any and all of the Obligations shall be enforceable
against such transferee and that nothing in such transfer shall impair, hinder
or otherwise limit the enforceability of the Lender Documents against the
Pledgor or of the Pledgee's rights thereunder, and (ii) execution of such
documents and taking of such actions by the Pledgor and such transferee to,
among other things, confirm, acknowledge or assume, as the case may be, their
respective obligations under the Lender Documents; and
<PAGE>
8
(g) the Pledgor's Obligations hereunder shall not be
affected in any way by any name change or merger, consolidation or other
business combination (including the Merger) involving or with respect to the
Pledgor.
9. Further Assurances. The Pledgor agrees that, from time to time
------------------
upon the written request of the Pledgee, it will execute and deliver such
further documents and do such other acts and things as the Pledgee may
reasonably request in order fully to effect the purposes of this Agreement.
10. Successors and Assigns. This Agreement shall be binding upon and
----------------------
shall inure to the benefit of the parties hereto and their respective successors
and permitted assigns. This Agreement may not be assigned by the Pledgor, and
any such attempted assignment shall be void.
11. Miscellaneous.
-------------
11.1 Amendments. No amendment or waiver of any provision of this
-----------
Agreement, nor consent to any departure by any party, shall in any event be
effective unless the same shall be in writing and signed by each of the parties
hereto and such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given.
11.2 No Waiver. No failure on the part of any party to exercise,
---------
and no delay in exercising, any right hereunder shall operate as a waiver
hereof; nor shall any single or partial exercise of any right hereunder preclude
any other or further exercise thereof or the exercise of any other right.
11.3 Notices. All notices, requests, demands, consents and other
-------
communications to or upon the parties to this Agreement shall be in writing and
shall be delivered by hand or sent by facsimile transmission or other written
telecommunication or deposited in the mail by first-class registered or
certified mail, return-receipt requested, postage prepaid, addressed as follows:
Pledgor: 4730 La Jolla Drive
Suite 1050
San Diego, CA 92122
Attention: Chief Financial Officer
Telecopier: (619) 642-1955
Pledgee: Four Embarcadero Center
Suite 2200
San Francisco, California 94111
Attention: Fred Vaske
Telecopier: 415-955-3200
<PAGE>
9
or to such other address as may be hereafter designated in writing by the
respective parties hereto by notice similarly given. All notices shall be
effective upon receipt thereof.
11.4 Counterparts. This Agreement may be executed by the parties
------------
hereto in two or more counterparts, and by separate parties on separate
counterparts, each of which when so executed and delivered shall be an original,
but all of which together shall constitute one and the same instrument.
11.5 Severability. Any provision of this Agreement which is
------------
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
11.6 Captions. The table of contents and the captions in this
--------
Agreement are for convenience of reference only and shall not modify, define,
expand or limit any of the terms or provisions hereof.
11.7 Governing Law. This Agreement and the rights and
-------------
obligations of the parties hereunder shall in all respects be governed by, and
construed in accordance with, the laws of the State of New York applicable to
agreements made and to be performed within such State.
11.8 Jurisdiction.
------------
(a) Each of the parties hereto hereby irrevocably submits to
the jurisdiction of any New York state court in New York County or any United
States federal court in the Southern District of New York over any action or
proceeding arising out of or relating to this Agreement, and each of the parties
hereto hereby irrevocably agrees that all claims in respect of such action or
proceeding may be heard and determined in such New York state or federal court.
The Pledgor irrevocably appoints Integrated Capital Associates of New York,
Inc., which currently maintains an office in New York state situated at 101 East
52nd Street, New York, New York, 10022, as its agent to receive service of
process or other legal summons for purposes of any such action or proceeding.
The Pledgor further irrevocably consents to the service of process in any such
action or proceeding by the mailing of copies thereof by registered or certified
mail, postage prepaid, return receipt requested, to it at its address as
provided for notices hereunder.
(b) Nothing in this Section 128 shall affect the right of
the parties hereto to serve legal process in any other manner permitted by law
or affect the right of the parties hereto to bring any action or proceeding in
the courts of any other jurisdiction.
<PAGE>
10
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the day and year first above written.
PS GROUP, INC.
By:___________________________
Name:
Title:
[BORROWER STOCK PLEDGE AGREEMENT]
<PAGE>
11
Schedule I
<TABLE>
<CAPTION>
Pledgor Issuer Number of Ownership
- ------- ------ Shares Pledged Percentage
-------------- -----------
<S> <C> <C> <C>
PS Group, Inc. Statex Petroleum, Inc. ____ 100%
PS Group, Inc. PS Trading, Inc. ____ 100%
PS Group, Inc. PSG Services, Inc. ____ 100%
PS Group, Inc. PSG Systems, Inc. ____ 100%
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
EXHIBIT 99.1
[PS GROUP HOLDINGS, INC. PRESS RELEASE LETTERHEAD]
--------------------------------------------------
FOR IMMEDIATE RELEASE
Contact: Lawrence E. Dennedy
Senior Vice President
MacKenzie Partners, Inc.
(212) 929-5239
PS GROUP HOLDINGS TO BE ACQUIRED FOR $12 PER SHARE
IN TRANSACTION ORGANIZED BY
INTEGRATED CAPITAL ASSOCIATES
GATX Capital to provide loan financing for transaction
PS Group Holdings also announces letter of intent to sell
its Statex oil and gas subsidiary to management
SAN DIEGO, CA -- December 20, 1999 -- PS Group Holdings, Inc. (NYSE:PSG)
announced today that it has entered into a definitive merger agreement under
which it will be acquired for $12 per share. The transaction is expected to
close by the end of April 2000.
Through subsidiaries, PS Group Holdings operates in three reportable
segments: through PS Group, Inc. it engages in aircraft leasing; through PS
Trading, Inc. it engages in fuel storage and distribution (principally at two
California airports); and through Statex Petroleum, Inc. it engages in oil and
gas production and development.
The transaction has been organized by Integrated Capital Associates, Inc.,
whose principals will be providing (through family trusts) equity financing for
20% of the approximately $73 million total acquisition price. The merger
agreement has been entered into with a newly-formed entity controlled by ICA's
principals.
ICA is a private investment and merchant banking firm which has, for
fifteen years, managed and invested in restructuring and leasing transactions
with a total market value in excess of $7 billion, including $2 billion
involving companies owning aircraft or oil and gas properties.
Concurrently with the signing of the merger agreement, PS Group, Inc. has
entered into a definitive loan agreement with GATX Capital Corporation. Under
the loan agreement, which will fund at the closing of the merger, GATX Capital
will finance 80% of the total acquisition price in the form of a one-year loan
secured by the assets of PS Group and guaranteed by PS Group Holdings.
<PAGE>
GATX Capital provides asset-based financing, structures transactions for
investment by itself and other lessors, and manages lease portfolios for third
parties. In this transaction, it has called on the expertise of its Air and
Corporate Finance Groups. GATX Capital and ICA have participated together in a
number of transactions.
Houlihan, Lokey, Howard & Zukin Advisors has rendered an opinion to the PS
Group Holdings Board as to the fairness of the $12 per share price to the
shareholders of the company from a financial point of view. Lazard Freres & Co.
LLC has provided financial advisory services to ICA in connection with the
transaction.
The merger is subject to conditions customary for a transaction of this
nature, including approval of the PS Group Holdings shareholders and the funding
of the GATX Capital loan.
The merger agreement calls for PS Group Holdings to acquire at closing an
insurance policy to fund the obligations of PS Group and Statex to their
retirees. The insurance policy will not be included in the collateral securing
the GATX Capital loan.
PS Group Holdings will be filing the full texts of the merger and loan
agreements with the Securities and Exchange Commission on a Form 8-K Current
Report within the next few days.
Separately, PS Group Holdings announced that it has entered into a non-
binding letter of intent for PS Group to sell Statex to Statex's management.
The letter of intent contemplates that Statex will be sold for cash, an
assumption of bank debt and certain contingent future payments. The transaction
is subject to the finalizing of a financing commitment and the signing of
definitive acquisition and financing loan agreements. PS Group has agreed not
to solicit other purchasers during a specified period while Statex explores the
availability of financing and, if acceptable financing is committed, while the
parties negotiate definitive terms. The Statex transaction will not be
conditioned on the closing of the PS Group Holdings/ICA merger and the sale of
Statex is not a condition to the merger. If the Statex transaction is completed
before the merger closes, and based on PS Group Holdings' current investment in
Statex, PS Group Holdings will record a net loss of approximately $.7 million,
or $(.11) per share.
Charles E. Rickershauser, Jr., the Chairman and CEO of PS Group Holdings,
stated:
"The Board is very gratified that we have reached these agreements with ICA
and GATX Capital. This transaction represents the culmination of our plan
to address the long-term future of the company in the most advantageous way
for our stockholders.
2
<PAGE>
Just a few years ago, we were facing substantial financial difficulties.
We have fortunately been able to address them effectively by paying off our
bank debt, divesting non-core businesses, and selling a number of the
aircraft in our portfolio. Through these divestitures and sales, we have
been able to make effective use of all of our substantial net operating
loss carry-forwards and much of our investment tax credits. This process
has also enabled us, in the past four years, to distribute to our
stockholders a total of $10 per share. Now, we are able to deliver them an
opportunity to monetize their entire investment in the near term.
We are also pleased at the prospect that the management of Statex may be in
a position to acquire and continue its oil and gas operations."
Douglas Wolf, Chief Executive Officer of ICA, said:
"The current PS Group Holdings executive team has done an excellent job of
maximizing the financial viability of the company. ICA is excited by the
prospect of taking over where they have left off. We and our affiliates
have a long history of acquiring companies with valuable portfolios of
tangible assets. Our acquisitions are often followed by a financial re-
engineering of the acquired company and/or a re-positioning of the company
to enable it to sell or manage its assets in an efficient manner."
Dean Bonomo, Managing Director of Corporate Finance at GATX Capital
Corporation, noted:
"GATX is very excited about this attractive financing opportunity and
continuing our long-standing relationship with ICA. This transaction
demonstrates our ability to provide acquisition financing for selected
industries and develop creative solutions to serve our key business
relationships."
PS Group Holdings Common Stock Transfer Restrictions
- ----------------------------------------------------
There are certain restrictions imposed on the transfer of common shares of
PS Group Holdings. In general, and subject to an exemption for certain
dispositions of shares by persons who were "pre-existing 5% shareholders" (as
defined in PS Group Holdings' Restated Certificate of Incorporation) on June 5,
1996, the transfer restrictions prohibit, without prior approval of the Board of
Directors, the direct or indirect disposition or acquisition of any stock of PS
Group Holdings by or to any holder who owns, or would, as a result thereof, own
(either directly or through the tax attribution rules) 5% or more of the stock
upon such acquisition. These restrictions were imposed in order to help
preserve PS Group Holdings' net operating loss carry forwards ("NOL's") and
unused ITC's and other tax benefits by decreasing the risk of an "ownership
change"
3
<PAGE>
for federal income tax purposes. At the time these restrictions were imposed, PS
Group Holdings had substantial NOL's and unused ITC's. It is estimated that with
the sale of aircraft earlier in 1999, these NOL's have been completely utilized,
but unused ITC's and other tax benefits still remain. The transfer restrictions,
by their terms, are scheduled to expire immediately following the conclusion of
PS Group Holdings' Annual Meeting of Stockholders in the year 2000, unless the
stockholders pass a resolution extending such expiration date.
Forward-Looking Statements
- --------------------------
The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for forward-looking statements. Certain information included in this
release may be deemed forward-looking, such as: the contemplated closing of the
proposed merger and related financing announced in this release; the proposed
sale of Statex announced in this release and the effect of such sale if it
occurs, on the financial statements of PS Group Holdings; and the availability
of certain tax benefits, the amount of tax benefits that will be used with
aircraft sales in 1999, and the estimated amounts of remaining tax benefits as
of December 31, 1999. Investors are cautioned that all forward-looking
statements involve risks and uncertainties, including, but not limited to: the
possibility that the proposed merger announced in this release will not close;
the possibility that the non-binding letter of intent regarding the proposed
sale of Statex announced in the release will not lead to a definitive agreement
or a completed transaction; the efficacy of the transfer restrictions on PS
Group Holdings' common stock in preserving the company's remaining tax benefits,
the company's ability to realize such benefits, and the possible effect on the
availability of such benefits if stockholders of PS Group Holdings do not vote
to extend such transfer restrictions beyond their scheduled expiration in the
year 2000; and the possibility that the amount of tax benefits actually used in
the 1999 aircraft sales and the amounts of remaining tax benefits as of December
31, 1999 will be different than the amounts estimated. Should any of such risks
or uncertainties materialize or should other assumptions prove incorrect actual
results or outcomes may vary materially from those contemplated in such forward-
looking statements. PS Group Holdings does not undertake to publicly update or
revise its forward-looking statements.
4
